Sitaram Bhondave, Pune V. Income-tax Officer, Ward - 4(4), Pune

ITA 1646/PUN/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1002 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 12-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Keywords: Salary income; Initiation of penalty proceedings; Revised return; Set aside; Capital Gains
• Section: 271(1)(c); 143(3); 274; 154

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1646/PUN/2018 / ASSESSMENT YEAR : 2007-08 MR. SITARAM BHONDAVE, FLAT NO.K 201, MAGARPATTA, HADAPSAR, PUNE 41 013. PAN : AGAPB7238B. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 4(4), PUNE. . / RESPONDENT ASSESSEE BY : SHRI KRISHNA GUJARATHI. REVENUE BY : SHRI M.K. VERMA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE O RDER OF COMMISSIONER OF INCOME TAX (A) 3, PUNE DATED 01.08.201 8 FOR THE ASSESSMENT YEAR 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY AND OTH ER SOURCES. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2007- 08 ON 31.07.2007 DECLARING TOTAL INCOME AT RS.89,120/-. ASSESS EE THEREAFTER REVISED RETURN OF INCOME ON 26.05.2008 DECLARIN G TOTAL / DATE OF HEARING : 15.07.2019 / DATE OF PRONOUNCEMENT: 06.09.2019 2 INCOME AT RS.1,89,360/-. THE CASE WAS SELECTED FOR SCRU TINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT V IDE ORDER DT.29.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.4,05,36,819/-. THEREAFTER AN ORDER U/S 154 OF THE ACT WAS PASSED ON 19.01.2010 WHEREIN THE TOTAL INCOME WAS REVISED AT RS.3,90,85,384/-. WHILE ARRIVING AT THE AFORESAID TOTAL INCOME, THE ADDITIONS WERE MADE ON ACCOUNT OF UNEXPLAINED DEPOSITS AG GREGATING TO RS.18 LAKHS AND RS.3,53,17,469/- ON ACCOUNT OF LONG TERM C APITAL GAINS. AGGRIEVED BY THE QUANTUM ORDER OF AO, ASSESSEE CARRIED THE MATTER IN APPELLATE PROCEEDINGS. AFTER GIVING EFFECT TO THE RELIEF GRANTED IN APPELLATE PROCEEDINGS, THE ADDITION ON ACCOUNT OF CASH DEPOSITS WAS FINALLY MADE AT RS.14,25,041/- AND ON ACCOUNT OF LONG TERM CAPITAL GAINS OF RS.72,68,135/-. ON THE AFORESAID ADDITIONS, AO VIDE P ENALTY ORDER DATED 29.09.2017 PASSED U/S 271(1)(C) OF THE ACT LEV IED PENALTY OF RS.21,05,148/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 01.08.2018 (IN APPEAL NO.PN/CIT(A)-3/WD 4(4), PN/166/2017-18) DISMISSED THE APPEA L OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE HONOURABLE CIT (A) - 3 , PUNE HAS ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 21 , 05 , 1481- MADE BY THE LEARNED ASSESSING OFFICER WITHOUT CLEARLY AND EXPLICITLY SPECIFY I NG THE REASON FOR INITIATING 1 LEVYING THE PENALTY, NOT IN THE NOTICE, NOR IN THE ORDER IMPOSING PENALT Y . THE APPELLANT REQUESTS YOUR HONOUR THAT THE PENALTY ORDER BE ANNU LLED AND QUASHED AS BEING VOID AB INITIO BY APPRECIATING THAT THERE WAS NO CLARITY OF THE RELEVANT CLAUSE UNDER WHICH PENALTY WAS SOUGHT TO BE IMPOSED AT THE TIME OF INITIATION OF PENALTY PROCEE DINGS . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE HONOURABLE CIT (A) - 3 , PUNE HAS ERRED IN CONFIRMING THE LEVY OF PENALTY PASSED BY THE LEARNED ASSESSING OFFICER U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961 LEVYING PENALTY OF RS . 21 , 05 , 148/- FOR WHICH THE PROCEEDINGS WERE INITIATED BY THE LEARNED ASSESSING OFFICER BEF ORE PASSING OF ORDER GIVING EFFECT TO THE HONOURABLE ITAT , PUNE BENCH DECISION . THE APPELLANT REQUESTS YOUR HONOUR THAT THE PENALTY ORDER BE ANNU LLED AND QUASHED AS BEING VOID AB INITIO BY APPRECIATING THAT THERE WAS NO CLARITY OF THE 3 RELEVANT CLAUSE UNDER ' WHICH PENALTY WAS SOUGHT TO BE IMPOSED AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE HONOURABLE CIT (A ) - 3 , PUNE HAS ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS . 21 , 05 , 148/- WITHOU T APPRECIATING ALL THE FACTS OF THE CASE IN THE PROPE R PERSPECTIVE . THE HONOURABLE CIT (A) - 3, HAS FAILED TO APPRECIAT E THAT THERE WAS NO CONCEALMENT OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME BY THE APPELLANT. THE APPELLANT REQUESTS YOU R HONOUR THAT THE PENALTY ORDER BE QUASHED AND THE PENALTY IMPOSED BE DELETED . 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW , HONOURABLE CIT ( A ) - 3 , PUNE ERRED IN CONFIRMING THE PENALTY ORDER PASSED B Y THE LEARNED ASSESS I NG OFFICER AS THE LEARNED ASSESSING OFFICER OUGHT N OT TO HAVE LEVIED PENALTY U/S 271 (1)(C) OF THE ACT SINCE THE INITIATION OF PENALTY PROCEEDINGS IS BAD IN LAW AS THE LEARNED ASSESSING OFFICER HAS NOT SPECIFICALLY RECORDED SATISFACTION AS TO WHETHER IT IS A CASE OF ' CONCEALMENT OF INCOME ' OR ' FURNISHING INACCURATE PARTICULARS OF INCOME ' IN THE NOTICE U/S 274 R . W.S. 271(1)(C) AND THE LEARNED ASSESSING OFF I CER HAS NOT EXPLICITLY MENTIONED WHICH LIMB THE PENALTY PROCEEDINGS ARE I NITIATED FOR . THE APPELLANT HEREBY PRAYS THAT INITIATION OF PENAL TY BE TREATED AS VOID AB IN I TIO AND DELETE THE PENA L TY LEVIED U/S 271 (1)(C) OF THE INCOME TAX ACT , 1961 OF RS . 21,05 , 148/- 3. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHE R. 4. BEFORE US, LD.A.R. WITH RESPECT TO LEVY OF PENALTY ON ADD ITION OF RS.72,68,135/- ON ACCOUNT OF CAPITAL GAINS SUBMITTED THAT AO IS NOT CLEAR IN RECORDING SATISFACTION AS TO WHETHER THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME, MORE SO HE HAS RECORDED SATISFACTION FOR CONCEALMENT OF IN COME AS WELL AS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND IN S UPPORT OF HIS CONTENTION, HE POINTED TO PARA NO.14 OF THE ASSES SMENT ORDER. THEREAFTER, HE SUBMITTED THAT IN THE PENALTY ORDER, AO H AS LEVIED PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE THEREFORE, RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. SAMSON PERINCHERY REPORTED IN (2017) 392 ITR 4 (BOM) SUBMITTED THAT IN THE ABSENCE OF PROPER SHOW CAUSE NOT ICE TO ASSESSEE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED AND THEREFORE URGED THAT PENALTY LEVIED BY AO BE DELETED. WITH RESPECT TO ADDITION ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS OF RS.14.25 LAKHS (ROUNDED OFF) LD.A.R . FAIRLY 4 SUBMITTED THAT IT IS NOT A CASE WHERE THE LIMB ISSUE OF P ENALTY IS INVOLVED. HOWEVER, ON MERITS, HE SUBMITTED THAT ALL THE REQ UIRED DETAILS WERE FURNISHED BY THE ASSESSEE AND MERELY BECAUSE THE ADDITION HAS BEEN UPHELD, IT IS NOT NECESSARY PENALTY ON SUCH AMOUNT BE LEVIED AND IN VIEW OF THE FACT THAT PENALTY AND ASSESSMENT PROCEEDIN GS ARE DISTINCT AND SEPARATE. HE THEREFORE SUBMITTED THAT THE PENALTY BE DELETED. LD. D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND L D.CIT(A). LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. BEFORE US, LD.A.R. SUBMITTED THAT W HILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT, AO HAD MADE ADDITION OF RS.72,68,135/- ON ACCOUNT OF LONG TERM CAPITAL GAINS. THE PERUSAL OF ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT REVEALS THAT IN THE ASSESSMENT ORDER AO HAD NOT RECORDED CLEAR SATISFACTION AS TO WHETHER ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME O R HAD CONCEALED PARTICULARS OF INCOME, MORE SO HE HAS RECORD ED SATISFACTION FOR CONCEALMENT OF INCOME AS WELL AS FOR FURNISHING OF INACCU RATE PARTICULARS OF INCOME. THEREAFTER, IN THE PENALTY ORDER PAS SED U/S 271(1)(C) OF THE ACT, AO HAD LEVIED PENALTY FOR FURNISHING OF I NACCURATE PARTICULARS OF INCOME. IT IS A SETTLED LAW THAT WHILE LEVYING PENALTY, THE AO HAS TO RECORD CLEAR SATISFACTION AND THEREAFTER COME TO A FINDING IN RESPECT OF ONE OF THE LIMBS, WHICH IS SPECIFIED UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST STEP IS TO RECORD SATISFACTION WHILE COM PLETING THE ASSESSMENT AS TO WHETHER THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED HIS INCOME. THEREAFTER, NOTICE U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT IS TO BE ISSUED T O THE 5 ASSESSEE. THE ASSESSING OFFICER THEREAFTER HAS TO LEVY P ENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR NON-SATISFACTION OF EITHER OF T HE LIMBS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS T O COME TO A FINDING AS TO WHETHER THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMB AY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY (SUPRA) HELD THAT WHERE INITIATION OF PENALTY IS ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 6. CONSIDERING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SAMSO N PERINCHERY (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE BASIC CONDITION FOR LEVY OF PENALTY HAS NOT BEEN FULFILLED AND THAT THE PENALTY ORDER SUFFERS FROM NON-EXERCISING OF JURISDICTION POW ER AND THEREFORE PENALTY ORDER CANNOT BE UPHELD. WE ACCORDINGLY SET ASIDE THE PENALTY ORDER PASSED BY AO. 7. NOW WE TAKE UP THE ISSUE WITH RESPECT TO LEVY OF PENA LTY U/S 271(1)(C) OF THE ACT ON THE ADDITION OF RS.14.25 LAKHS (ROUNDED OFF) ON ACCOUNT OF CASH DEPOSITS OF MADE BY THE ASSESSEE WHICH WERE TREATED AS UNEXPLAINED. 8. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLANATION-1 TO SECTION 271(1)(C) ARE THAT: (I) THE PERSON FAILS TO OFFER THE EXPLANATION, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE LD.CI T(A) OR THE LD.CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH H E IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANA TION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY 6 HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLAN ATION-1 TO SECTION 271(1)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED, FOR THE PURPOSES OF CLAUS E (C) OF SECTION 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO P ROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO T HE SAME HAVE BEEN DISCLOSED BY HIM, THEN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. 9. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASSESSME NT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MA DE WOULD AMOUNT TO CONCEALMENT OF PARTICULARS, OF INCOME. IT IS WELL SE TTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITION MAD E IN THE ASSESSMENT CASE OF THE ASSESSEE IS DIFFERENT FROM THE PEN ALTY IMPOSED ON ACCOUNT OF CONCEALMENT OF INCOME OR FILING INACCURATE PAR TICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY B E MADE IN THE ASSESSMENT PROCEEDINGS ON THE PREPONDERANCE OF PR OBABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(1)(C) OF THE ACT ON THE PREPONDERANCE OF PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLAIM OF EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLA TED TO REDUCE ITS TAX LIABILITY. FURTHER MERELY BECAUSE ADDITIONS HAVE CON FIRMED IN APPEAL OR NO APPEAL HAS BEEN FILED BY ASSESSEE AGAINST AD DITIONS MADE, 7 IT CANNOT BE THE SOLE GROUND FOR COMING TO THE CONCLUSION THAT ASSESSEE HAS CONCEALED ANY INCOME. BEFORE US, LD.A.R. HAS GIVEN THE REASONS AND THE FACTS WHICH HAD RESULTED INTO ADDITION. THESE SUBMISSIONS H AVE NOT BEEN CONTROVERTED BY THE REVENUE. FURTHER, THERE IS NOTHING ON RECORD TO DEMONSTRATE THAT ASSESSEE HAD FILED INACCURAT E PARTICULARS OF INCOME OR HAD CONCEALED THE PARTICULARS OF INCOME. WE FURTH ER FIND THAT HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PET RO PRODUCTS PVT. LTD. REPORTED AT (2010) 322 ITR 158 (SC) HELD THAT A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME O F THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT T O THE INACCURATE PARTICULARS. 10. CONSIDERING THE AFORESAID FACTS AND RELYING ON THE FOR ESAID JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT V S. RELIANCE PETRO PRODUCTS PVT. LTD. (SUPRA), WE ARE OF THE VIEW THA T IN THE PRESENT CASE NO CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT H AS BEEN MADE OUT. WE THUS DIRECT THE DELETION OF PENALTY U/S. 271(1)(C) OF T HE ACT. THUS, THE GROUNDS OF ASSESSEE ARE ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 6 TH DAY OF SEPTEMBER, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 6 TH SEPTEMBER, 2019. YAMINI 8 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-3, PUNE. PR.CIT-2, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.