Mr. Kulwant Singh, Morinda V. ITO, W-2(4), Ropar

ITA 1536/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9705 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARJINDER SINGH
• Assessee Lawyers: NEERAJ ARORA
• Keywords: Business income; Source of fund; Difference of opinion; Corroborative evidences; Set aside
• Section: 271(1)(c)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH SMC CHANDIGARH , ! BEFORE: SMT. DIVA SINGH, JM ./ ITA NOS. 1535 & 1536/CHD/2018 !' # $# / A.Y. : 2007-08 & 2008-09 SHRI KULWANT SINGH, HOUSE NO. 229/3, BASSI ROAD, MORINDA. VS THE ITO, WARD 2(4), ROPAR. ./ PAN NO: AMOPS7627M / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI NEERAJ ARORA / REVENUE BY : SHRI HARJINDER SINGH, ADDL. CIT / DATE OF HEARING : 23.05.2019 !'#$%& / DATE OF PRONOUNCEMENT : 28.06.2019 %&/ ORDER IN BOTH THE PRESENT APPEALS FILED BY THE ASSESSEE, THE CORRECTNESS OF THE SEPARATE ORDERS DATED 17.09.2016 OF CIT(A)-1, CHAND IGARH PERTAINING TO 2007- 08 AND 2008-09 ASSESSMENT YEARS IS ASSAILED ON IDEN TICAL GROUNDS WHEREIN THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT BY THE ASS ESSING OFFICER HAS BEEN CONFIRMED IN APPEAL BY THE CIT(A). 2. IT WAS COMMON STAND OF THE PARTIES BEFORE THE BE NCH THAT THE ARGUMENTS ADVANCED IN ITA 1535/CHD/2018 WOULD FULLY APPLY TO THE FACTS, CIRCUMSTANCES AND THE PRAYER IN ITA 1536/CHD/2018 A LSO. 3. THE LD. AR INVITING ATTENTION TO THE FACTS SUBMI TTED THAT THE ASSESSEE WAS A LABOUR CONTRACTOR WHO WAS CALLED UPON TO EXPLAIN THE DEPOSITS MADE IN HIS SAVING BANK ACCOUNT NO. 5ASB14031447 IN CENTURIAL B ANK OF PUNJAB LTD. AT MORINDA RS. 12,32,500/- IN 2007-08 ASSESSMENT YEAR AND RS. 12,20,000/- IN 2008-09 ASSESSMENT YEAR. IT WAS SUBMITTED THAT THE ASSESSEE ACCEPTED THAT THESE EMANATED FROM CONTRACT WORK WHICH HAD BEEN OM ITTED TO BE DISCLOSED. ITA 1535 & 1536/CHD/2018 A.Y. 2007-08 & 2008-09 PAGE 2 OF 6 ACCORDINGLY, IT WAS REQUESTED THAT THESE AMOUNTS BE TAXED @ 8% SINCE THESE WERE CONTRACT RECEIPTS. THE EXPLANATION OFFERED, I T WAS SUBMITTED, WAS NOT ACCEPTED. BEFORE THE CIT(A) PART RELIEF WAS GRANTE D. AS A RESULT OF THESE ADDITIONS MADE, PENALTY PROCEEDINGS WERE INITIATED. 4. REFERRING TO THE RECORD IT WAS SUBMITTED BY THE LD. AR THAT ADMITTEDLY THE ASSESSEE HAD MADE A PRAYER IN THE QUANTUM PROCE EDINGS THAT THE GROSS RECEIPTS NOTICED IN THE BANK ACCOUNT MAY BE TAXED I N TERMS OF SECTION 44AD. THE SAID PRAYER, IT WAS SUBMITTED, WAS NOT ACCEPTED BY THE CIT(A) AND THE AO. ACCORDINGLY, IT WAS ARGUED THAT THE ADDITION HAS BE EN MADE ON ACCOUNT OF THIS DIFFERENCE OF OPINION ON HOW THE AMOUNT WAS TO BE T AXED. THE ADDITION, IT WAS STATED IS AN ESTIMATED ADDITION. ACCORDINGLY, IT WA S HIS SUBMISSION THAT IT CANNOT BE THE BASIS OF PENALTY U/S 271(1)(C) OF THE ACT. 4.1 IT WAS ARGUED THAT SINCE THE ADDITION MADE AND SUSTAINED IS ON A MATTER OF DIFFERENCE OF OPINION, THE PENALTY HAS BEEN WRON GLY LEVIED. 5. THE LD. AR WAS REQUIRED TO READ THE RELEVANT FIN DINGS IN THE QUANTUM AND PENALTY PROCEEDINGS WHICH CONSISTENTLY BRING OU T THE FACT THAT BOTH IN THE QUANTUM PROCEEDINGS AND THE PENALTY PROCEEDINGS THA T DESPITE AN OPPORTUNITY, THE ASSESSEE STATED TO BE A LABOUR CONTRACTOR WAS U NABLE TO DEMONSTRATE THAT THESE DEPOSITS WERE FROM CONTRACT RECEIPTS. THE LD. AR PLEADED FOR AN OPPORTUNITY TO BRING SUPPORTING EVIDENCES ON RECORD STATING THAT THE LABOUR CONTRACTOR BEING IGNORANT ABOUT THE LEGAL NUANCES M AY NOT HAVE UNDERSTOOD THE NEED AND NECESSITY TO PLACE SUPPORTING EVIDENCE S ON RECORD. 6. THE LD. SR.DR SUBMITTED THAT ADMITTEDLY MORE THA N SUFFICIENT OPPORTUNITY HAS BEEN GIVEN AND EVEN TODAY, THERE IS NO EVIDENCE ON RECORD ON THE BASIS OF WHICH IT IS BEING PLEADED THAT THE MAT TER MAY BE REMANDED. 7. THE LD. AR ADDRESSING THE DEPARTMENTAL OBJECTION INVITED ATTENTION TO THE FACT THAT THE ASSESSEE WAS A SMALL TIME LABOUR CONT RACTOR AND MAY NOT HAVE UNDERSTOOD THE NEED FOR PLACING SUPPORTING EVIDENCE S ON RECORD. 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. FOR THE SAKE OF COMPLETENESS, IT IS APPROPR IATE TO BRING OUT THE FACT THAT BEFORE THE AO IN THE QUANTUM PROCEEDINGS, THE ASSES SEE DID NOT FILE ANY ITA 1535 & 1536/CHD/2018 A.Y. 2007-08 & 2008-09 PAGE 3 OF 6 SUPPORTING EVIDENCES TO SHOW THAT THESE WERE CONTRA CT RECEIPTS. EVEN BEFORE THE CIT(A), THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO FILE SUPPORTING EVIDENCES. THE RELEVANT EXTRACTS OF THE RESPECTIVE ORDERS OF THESE TWO ASSESSMENT YEARS IS REPRODUCED. IN 2007-08 ASSESSM ENT YEAR THE CIT(A) GRANTED PART RELIEF HOLDING AS UNDER: 5 .................... THE APPELLANT HAD DECLARED GROSS RECEIPTS OF RS. 18,900/- ONLY IN THE RETURN OF INCOME AND SO THE EXPLANATION OF THE APPELLANT THAT THE AMOUNT OF RS. 12,32,500/- WAS CONTRACT RECEIPTS DOES NOT HOLD WATER, SINCE THE AM OUNT IS TOO LARGE TO HAVE BEEN OMITTED FROM RECEIPTS. THEREFORE, THESE CASH DEPOSITS CANNO T BE TREATED AS CONTRACT RECEIPTS AND NO PROFIT RATE CAN BE APPLIED TO THESE DEPOSITS . HOWEVER, THERE IS SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL THAT BENEFIT OF WITHDRAWALS SHOULD BE GIVEN. A PERUSAL OF THE CASH FLOW STATEMENT SUBMITTED BY THE LD. COUNSEL REVEALS THAT THE AMOUNTS WITHDRAWN HAVE BEEN DEPOSITED IN THE BANK WITHIN THE SAME MONTH AND SO IT WOULD BE APPROPRIATE TO TAX THE PEAK AMOUNT IN THE BANK ACCOUNT, WHICH IS RS. 10,42,500/ - . THIS AMOUNT HAS TO BE TAXED U/S 69A OF THE INCOME-TAX ACT, AND ADDITION MADE BY THE ASS ESSING OFFICER IS ACCORDINGLY REDUCED TO RS, 10,42,500/- . THE APPELLANT GETS RELIEF OF RS. 1,90,000/-( RS. 12,32,500/- - RS. 10,42,500/- ) . GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE PA RTLY ALLOWED.' (EMPHA SIS SUPPLIED) 8.1 SIMILARLY IN 2008-09 ASSESSMENT YEAR, THE ASSES SEE IN APPEAL BEFORE THE CIT(A) IN THE QUANTUM PROCEEDINGS SUCCEEDED PARTLY ON THE SAME PRINCIPLE I.E. ON THE BENEFIT OF WITHDRAWALS MADE. THE RELEVANT FI NDINGS OF THE CIT(A) ARE REPRODUCED HEREUNDER: 5. ...................... ' THE APPELLANT HAD DECL ARED GROSS RECEIPTS OF RS. 1,19,400/- ONLY IN THE RETURN OF INCOME AND SO THE EXPLANATION OF THE APPE LLANT THAT THE AMOUNT OF RS. 12,20,000/- WAS CONTRACT RECEIPTS DOES NOT HOLD WATER, SINCE THE AM OUNT IS TOO LARGE TO HAVE BEEN OMITTED FROM RECEIPTS. THEREFORE, THESE CASH DEPOSI TS CANNOT BE TREATED AS CONTRACT RECEIPTS AND NO PROFIT RATE CAN BE APPLIED TO THESE DEPOSITS . HOWEVER, THERE IS SUBSTANCE IN THE ARGUMENT OF THE LD. COUNSEL THAT BENEFIT OF WITHDRA WALS SHOULD BE GIVEN. A PERUSAL OF THE CASH FLOW STATEMENT SUBMITTED BY THE LD. COUNSEL RE VEALS THAT THE AMOUNTS WITHDRAWN HAVE BEEN DEPOSITED IN THE BANK WITHIN THE SAME MONTH AND SO IT WOULD BE APPROPRIATE TO TAX THE PEAK AMOUNT IN THE BANK ACCOUNT, WHICH IS RS. 8 ,40,000/- . THIS AMOUNT HAS TO BE TAXED U/S 69A OF THE INCOME-TAX ACT, AND ADDITION MADE BY THE ASSESSING OFFICER IS ACCORDINGLY REDUCED TO RS. 8,40,000/- . THE APPELLANT GETS RELI EF OF RS. 3,80,000/- ( RS. 12,20,000/- - RS. 8,40,000/-) . GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE PARTLY ALLOWED.' ( EMPHASIS SUPPLIED) 8.2 IT IS EVIDENT THAT CONSISTENTLY IN THE QUANTUM PROCEEDINGS, THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO SUBSTANTIATE ITS CLA IM THAT THESE WERE HIS CONTRACT RECEIPTS. THESE ORDERS ARE ACCEPTED AND NOT FURTHE R CHALLENGED BEFORE THE ITAT. IN THE PENALTY PROCEEDINGS BEFORE THE AO, NO EVIDENCES WERE FILED AND IT WAS ARGUED THAT ESTIMATED ADDITION ON A DIFFERENCE OF OPINION CANNOT BE THE ITA 1535 & 1536/CHD/2018 A.Y. 2007-08 & 2008-09 PAGE 4 OF 6 BASIS OF PENALTY U/S 271(1)(C) OF THE ACT. SIMILAR LY BEFORE THE CIT(A), SAME ARGUMENT WAS REPEATED WHICH WAS DISMISSED HOLDING A S UNDER : 4.2 I HAVE PERUSED THE PENALTY ORDER AND EXAMIN ED THE REPLY OF THE ASSESSEE. AS PER FACTS OF THIS CASE, THE APPELLANT IS A LABOUR CONTRACTOR AND HAS SHOWN GROSS RECEIPTS OF ONLY RS. 18,900/- WHILE THE DEPOSITS ON VARIOUS DATES IN HIS CENTURION BANK OF PUNJAB LTD, MORINDA ACCOUNT TOTALING TO RS. 12,32,500/-. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE APPELLANT CLAIMED THAT THE BANK DEPOSITS REPRESENTE D HIS BUSINESS RECEIPTS WHICH WERE OMITTED TO BE DISCLOSED AND ONLY 8% OF THAT SHOULD BE TAXED. THE ASSESSING OFFICER DID NOT AGREE WITH HIS CONTENTION OF THE APPELLANT. THE APPELLANT HAS NOT BEEN ABLE TO GIVE ANY EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE AMOUNT RE PRESENTS HIS BUSINESS RECEIPTS . THE ASSESSING OFFICER TREATED THE ENTIRE CASH DEPOSIT O F RS. 12,32,500/- AS UNDISCLOSED INCOME OF THE APPELLANT. THE LD. CIT (APPEALS), AGREED WIT H THE STAND OF THE ASSESSING OFFICER WHILE CONFIRMING THE ADDITION BUT GAVE BENEFIT FOR CASH W ITHDRAWAL TREATING IT TO BE REDEPOSITED AND TREATED THE PEAK DEPOSITS OF RS. 10,42,500/- AS INCOME OF THE APPELLANT. 4.2.1 IN THE PRESENT APPEAL, THE LD. AR HAS AGAIN REITERA TED THAT DEPOSITS REPRESENT ASSESSEE'S CONTRACTUAL RECEIPTS AND PROFIT SHOULD B E ESTIMATED U/S 44 AD OF THE ACT. THE APPELLANT HAS NOT BEEN ABLE TO PROVE IN ANY MANNER WHATSOEVER THAT THE BANK DEPOSITS REPRESENTED BUSINESS RECEIPTS. THE APPELLANT FAILED TO DISCLOSE THE DEPOSITS IN BANK ACCOUNT BEFORE THE DEPARTMENT BUT IS TRYING TO TREAT THEM A S BUSINESS RECEIPTS TO TAKE BENEFIT OF G.P. RATE. (EMPHASIS SUPPLIED) 8.3 THE DECISIONS RELIED UPON BY THE ASSESSEE IN TH E CASES OF (I)HARI GOPAL SINGH VS. CIT (2002) 258 ITR 85(P&H) (II) CIT VS. A ERO TRADERS PVT. LTD. (2010) 322 ITR 316) (III) CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 WERE HELD TO BE DISTINGUISHABLE BY THE CIT(A) AND H E CONCLUDED IN PARA 4.2.3 THAT IN THE INSTANT CASE THE APPELLANT FAILED TO DISCLOSE THE DETAILS AND SOURCE OF CASH DEPOSITS IN ITS BANK ACCOUNT WHICH WERE ONL Y FOUND OUT BY INVESTIGATION CARRIED OUT AND WERE FLAGGED BY AIR I NFORMATION FROM THE BANKS. IT WAS NOTICED THAT THE ASSESSEE HAD ALREADY FILED ITS RETURN WITHOUT DISCLOSING THE CASH DEPOSITS IN THE BANK AND HAD SHOWN AN ESTIMATED PROFIT OF RS. 9,600/- ON GROSS RECEIPTS OF RS. 18,900/- IN 2007-0 8 ASSESSMENT YEAR AND RETURNED AN INCOME OF RS. 1,13,360/- IN 2008-09 ASS ESSMENT YEAR. RELYING UPON DECISION OF THE HON'BLE DELHI HIGH COURT IN TH E CASE OF M/S ZOOM COMMUNICATION (P) LTD. (327 ITR 510) PENALTY ORDER WAS CONFIRMED. SIMILAR IS THE FACTUAL AND LEGAL POSITION TAKEN INTO ACCOUNT B Y THE CIT(A) IN ITA 1536/CHD/2018. 8.4 CONSIDERING THE FACTS, CIRCUMSTANCES AND THE AR GUMENTS IN THE AFORESAID FACTUAL BACKGROUND, I AM OF THE VIEW THAT WITHOUT P LACING THE NECESSARY ITA 1535 & 1536/CHD/2018 A.Y. 2007-08 & 2008-09 PAGE 5 OF 6 EVIDENCES ON RECORD, THE ASSESSEE'S CLAIM IS NOT AL LOWABLE. NO DOUBT SIMPLY BECAUSE THE ADDITIONS HAVE BEEN CONFIRMED, LEVY OF PENALTY IS NOT AUTOMATIC. IT IS EQUALLY WELL SETTLED THAT THE EXPLANATION OFFERE D IN THE PENALTY PROCEEDINGS HAS TO BE CONSIDERED IN THE CONTEXT OF THE PENAL PR OVISIONS AND THE ASSESSEE CAN WELL ASSAIL THE ORDER RELYING ON ARGUMENTS AND FACTS WHICH MAY NOT HAVE BEEN CANVASSED IN THE QUANTUM PROCEEDINGS. HOWEVER , IN THE FACTS OF THE PRESENT CASE, THE LEGAL ARGUMENTS ADVANCED ARE NOT APPLICABLE AS THE PENALTY HAS NOT BEEN LEVIED ON ESTIMATED ADDITION NOR IS IT A CASE OF DIFFERENCE OF OPINION, IT IS PURELY AND SIMPLY A CASE WHERE THE S TATED CLAIM THAT THESE WERE CONTRACT RECEIPTS HAS REMAINED UNPROVED. IN THE SAID BACKGROUND BEING LIVE TO THE DEPARTMENTAL CONCERNS THAT THE DEPOSITS IN THE BANK ACCOUNT NEED TO BE ADDRESSED SPECIALLY IN THE CONTEXT OF THE PRESENT T IMES WHEREIN THE ASSESSEE WHO IS STATED TO BE A LABOUR CONTRACTOR IN THE YEAR S UNDER CONSIDERATION AND IS ALSO CLAIMED TO BE IGNORANT, I FIND, WOULD BE MOST VULNERABLE TO THE POSSIBLE MISUSE AND ABUSE OF HIS BANK ACCOUNT BY ANTI NATION AL ELEMENTS TO WHICH A BORDER STATE IS VULNERABLE. ACCORDINGLY, THE NAIVE PLEA THAT THE DEPOSITS NECESSARILY ARE BUSINESS RECEIPTS AS HE HAS NO OTHE R SOURCES OF INCOME BY ITSELF CANNOT BE ACCEPTED EVEN IN THE INTERESTS OF SUBSTAN TIAL JUSTICE QUA THE ASSESSEE WHO I AM CONSCIOUS IS STATED TO BE A LABOU R CONTRACTOR AND THUS, PRESUMED TO BE IGNORANT/NOT WELL ADVISED MAY NEED A SSISTANCE TO BE TAX COMPLIANT. HOWEVER, WHEN THE COMMON GOOD AND WELFARE OF THE SO CIETY IS PITTED AGAINST THE INDIVIDUAL COSTS AND LIBERTIES, THE COMMON GOOD AND WELFARE OF THE SOCIETY WINS HANDS DOWN. THE INDIVIDUAL CON CERNS NECESSARILY NEED TO BEND. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE NE EDS TO DEMONSTRATE THAT THESE WERE BUSINESS RECEIPTS. IN ORDER TO ADDRESS T HE ISSUE, IT MAY BE APPROPRIATE TO ADDRESS THE PAST HISTORY OF THE ASSE SSEE ON HIS NATURE OF ACTIVITY ETC. OVER THE YEARS. IN CASE THE ASSESSEE IS ABLE TO DEMONSTRATE BY WAY OF SUPPORTING EVIDENCES ETC. FOR INSTANCE FILING AFFID AVITS ETC. OF RESPONSIBLE PEOPLE WHERE AND FOR WHOM HE IS STATED TO HAVE PERFORMED H IS WORK, THE TAX AUTHORITIES IN SUCH AN EVENTUALITY CAN THEN WELL CO NSIDER THE FEASIBILITY OF ALLOWING RELIEF IN THE PENALTY PROCEEDINGS. AS SUC H AN EVENTUALITY WILL ENABLE THE TAX AUTHORITIES TO CONSIDER THE PRAYER CONSISTE NTLY MADE THAT THE AMOUNT SHOULD HAVE BEEN TAXED U/S 44AD. IN SUCH AN EVENTU ALITY, THE PRAYER IN THE ITA 1535 & 1536/CHD/2018 A.Y. 2007-08 & 2008-09 PAGE 6 OF 6 PENALTY PROCEEDINGS MAY QUALIFY TO BE A VALID ARGUM ENT JUSTIFYING THE QUASHING OF THE PENALTY ORDERS. HOWEVER, THE OCCASION TO MA KE SUCH A PRAYER WOULD ONLY ARISE AFTER THE ASSESSEE MEETS THE BAR FIRST I .E. THE ASSESSEE NEEDS NECESSARILY TO DEMONSTRATE THAT THESE WERE CONTRACT RECEIPTS. 9. ACCORDINGLY, IN THESE PECULIAR FACTS AND CIRCUMS TANCES, IN THE INTEREST OF SUBSTANTIAL JUSTICE, ACCEPTING THE PRAYER OF THE L D. AR MADE ON BEHALF OF THE ASSESSEE, THE IMPUGNED ORDER IS SET ASIDE BACK TO T HE FILE OF THE CIT(A). WHILE SO DOING IT IS MADE CLEAR THAT IN THE EVENTUALITY O F ABUSE OF THE TRUST REPOSED IN THE ASSESSEE, THE CIT(A) WOULD BE AT LIBERTY TO PAS S AN ORDER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. ANY FRESH EVIDENCE TH E ASSESSEE SEEKS TO FILE IS DIRECTED TO BE ADMITTED AND IN CASE IT IS FOUND TO BE NOT SUFFICIENT OR INCOMPLETE, THE LD. CIT(A) WOULD BE FREE TO GIVE AN Y SUITABLE DIRECTION FOR PRODUCTION OF NECESSARY EVIDENCES CONSIDERED RELE VANT FOR ADDRESSING THE ISSUES. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 10. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE ,2019. SD/- ( ) (DIVA SINGH) ! / JUDICIAL MEMBER ) ' '( )* +*% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. , / CIT 4. , ( )/ THE CIT(A) 5. *-. / , /& , 012.3 / DR, ITAT, CHANDIGARH 6. .2 4 / GUARD FILE '( / BY ORDER, 5 / ASSISTANT REGISTRAR