RAMESHKUMAR D.RAWAL, MUMBAI V. ITO 14(1)(2), MUMBAI

ITA 1651/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1938 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI RAJESH KUMAR, AM ITA NO. 1651 /MUM/201 5 (A.Y: 2004 - 05 ) SHRI RAMESHKUMAR D. RAWAL 11, 3 RD FLOOR, OVALWADI, VITHALWADI, MUMBAI - 400002 PAN NO.AABPR3423R VS. ITO 14(1) (2), MUMBAI APPELLANT .. RESPONDENT ASSESSEE BY .. NONE REVENUE BY .. B.S BIST, SR. DR DATE OF HEARING .. 08 - 11 - 2016 DATE OF PRONOUNCEMENT .. 08 - 1 1 - 2016 O R D E R PER MAHAVIR SINGH , JM : THIS APPEAL BY THE ASSESSEE IS ARISING OU T OF THE ORDER OF CIT (A) - 25 , MUMBAI IN APPEAL NO . CIT (A ) - 25/IT - 62/14(1)2/09 - 10 DATED 2 8 - 12 - 11 . THE ASSESSMENT WAS FRAMED BY ITO WARD 14(1)(2), MUMBAI FOR THE AY 20 04 - 05 VIDE ORDER DATED 2 0 - 12 - 20 06 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) . THE PENALTY UNDER THIS DISPUTE WAS LEVIED BY ITO WARD 14(1)(2) U/S 271(1) (C) OF THE ACT VIDE HIS ORDER DATED 21 - 04 - 2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT (A) CONFIRMING THE LEVY OF PENALTY U/S 271 (1) (C) EX - PART E. FOR THIS ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS AS NO. 1 & 2 AS UNDER : - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. ERRED IN LEVYING PENALTY AMOUNTING TO RS. 1,63,323 U/S 271(1) ON THE BASIS OF NON - ATTENDANCE OF HEARING BY THE APPELLANT. 2. THE LEARNED CIT (A) ALSO ERRED IN CONFIRMING THE SAME BY OVERLOOKING ALL THE FACTS MENTIONED BEFORE HIM. 3. WE HAVE HEARD LD. SR. DR AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND TH AT THE CIT (A) S ORDER IS EX - PART E AND WITHOUT ANY REASONS. ITA NO. 1651 / MUM/2015 2 4. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION BY DISALLOWING EXPENSES AMOUNTING TO RS.6 , 23,890 / - . WE FIND THAT THE ASSESSEE THE CIT (A) ALLOWED OPPORTUNITIES TO THE ASSESSEE AND THE LAST NOTICE WAS ISSUED AND SERVED BY TH E AO AS PER DIRECTION OF THE CIT (A) FIXING HEARING ON 21 - 12 - 2011 BY AFFIXTURE AT THE ADDRESS AVAILABLE ON RECORD. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE AFORESAID DATE OF HEARING. EVEN, NEITHER THERE WAS ANY COMMUNICATION ON THE PART OF T HE ASSESSEE REGARDING ANY CHANGE OF ADDRESS NOR ANY WRITTEN SUBMISSION WAS FILED ALONG WITH THE APPEAL. ACCORDINGLY, THE CIT (A) UPHELD THE ACTION OF THE A O IN LEVYING THE PENALTY OF RS.1,63,323/ - AND DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING IN P ARA 4 AND 5 OF THE APPELLATE ORDER AS UNDER: - 4. DURING THE COURSE OF APPELLATE PROCEEDINGS, THERE WAS NO ATTEMPT ON THE PART OF THE ASSESSEE TO REBUT THE FINDINGS OF THE AO AND ALSO TO ESTABLISH THAT PENALTY WAS NOT LEVIABLE. IN THIS REGARD, THE DECISION S OF HONBLE SUPREME COURT EXTRACTED AND REPRODUCED HEREAFTER PROVIDE NECESSARY GUIDANCE. 1. K.P. MADHUSUDHANAN VS. CIT - 251 ITR 99 SC PENALTY UNDER S. 271(1) (C) - EXPLANATION TO S. 271(1) (C) IS A PART OF S. 271 - WHEN THE ITO OR THE AAC ISSUES A NOTICE U/ S 271, HE MAKES THE ASSESSEE AWARE THAT THE PROVISIONS THEREOF INCLUDING THE EXPLANATION ARE TO BE USED AGAINST HIM THEREFORE, THE ASSESSEE IS PUT TO NOTICE THAT IF HE DOES NOT PROVE, IN THE CIRCUMSTANCES STATED IN THE EXPLANATION, THAT HIS FAILURE TO RETU RN HIS CORRECT INCOME WAS NOT DUE TO FRAUD OR NEGLECT, HE SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF NO EXPRESS INVOCATION OF THE EXPLANATION TO SECTION 271 IN THE NOTICE U/S 271 IS NECESSARY FOR APPLYING THE PROVISIONS OF THE EXPLANATION AFTER THE INTRODUCTION OF EXPLANATION, THERE IS NO QUESTION OF PROOF OF MENS REA. THE LAW LAID DOWN IN THE CASE OF SIR SHADILAL SUGAR 8A, GEN. MILLS LTD. AS WELL AS ANWARALI NO LONGER GOOD LAW. 2. UOI V. DHARME NDRA TEXTILE PROCESSORS (SC) 295 ITR 244 . WE ARE OF THE VIEW THAT THERE IS A CONFLICT OF OPINIONS BETWEEN THE JUDGMENTS OF THE DIVISION BENCH OF THIS COURT IN THE CASE OF DILIP N. SHROFF ON THE ONE HAND AND ON THE OTHER HAND WE HAVE ANOTHER JUDGMENT OF TH IS COURT IN THE CASE OF CHAIRMAN, SEBI V. SHRIRAM MUTUAL FUND [2006] 5 SCC 361. SECONDLY, IT MAY BE POINTED OUT THAT THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(1) (C) READ WITH THE EXPLANATIONS QUOTED ABOVE INDICATES THAT THE SAID SECTION HAS BEEN ENAC TED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE ITA NO. 1651 / MUM/2015 3 PENALTY UNDER THE SAID SECTION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING THE CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276 C OF THE ACT. WHILE CONSIDERING AN APPEAL AGAINST AN ORDER MADE UNDER SECTION 271 (1)(C) WHAT IS REQUIRED TO BE EXAMINED IS THE RECORD WHICH THE OFFICER IMPOSING THE PENALTY HAD BEFORE HIM AN IF THAT RECORD CAN SUSTAIN THE FINDING THAT THERE HAD BEEN CONCEA LMENT, THAT WOULD BE SUFFICIENT TO SUSTAIN THE PENALTY. KEEPING IN MIND THESE TWO C IRC UMSTANCES, WE ARE OF THE VIEW THAT THE JUDGMENT OF THE DIVISION BENCH IN T HE CASE OF DILIP N. SHROFF V. JOINT CIT [2007] NEEDS CONSIDERATION. THE EXPLANATIONS ADDED TO SE CTION 271(1)(C) IN THEIR ENTIRELY ALSO INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE TILING RETURNS. THE JUDGMENT IN DILIP N. SHROFF CASE HAS ALSO NOT CONSIDERE D THE PROVISIONS OF SECTIO N 276 C OF THE INCOME TAX ACT. THEREFORE, IN OUR VIEW, THE JUDGMENT IN THE CASE OF DILIP N. SHROFF NEEDS RECONSIDERATION BY THE LARGER BENCH. APART FROM ABOVE REFERRED JUDICIAL PRONOUNCEMENTS OF THE HONBLE SUPREME COURT, THE DECISION OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ZOOM COMMUNICATION PVT. LTD. [233 CTR 465] [191 TAXMAN 179] ON CONCEALMENT PENALTY U/S 271(1)(C)PROVIDES NECESSARY GUIDANCE AS DECISION IS RENDERED AFTER CONSIDERATION OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF REL IANCE PETROPRODUCTS PVT. LTD. FOR READY REFERENCE, RELEVANT EXTRACT OF THE DECISION IS REPRODUCED AS UNDER: IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH IS INCORRECT, IN LAW, WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCOME OF THE ASSESSEE , BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT, IN LAW, IS MALA FIDE THE EXPLANATION 1 TO SECTION 271(1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. [PARA 1 9] THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME - TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW, BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271 (1)(C). IF ONE TAKES THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDAT ION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONA FIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO THE UNSCRUPULOUS ASSESSEE TO MAKE WHOLLY UNTENABLE AND UNSUSTAIN ABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF ASSESSMENT UNDER SECTION 143(1) AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, TH EY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH, IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS, WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALA FIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM, WOULD GET AWAY WITHOUT P AYING ITA NO. 1651 / MUM/2015 4 THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PIERCED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. [PARA 20] HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSS ED IN ABOVE AND FACTS AND FINDINGS DISCUSSED IN THE ASSESSMENT ORDER, APPELLATE ORDER IN QUANTUM, AND INSTANT PENALTY ORDER THE ASSESSEES APPEAL REQUIRES TO BE DISMISSED AND IS DONE SO. 5. IN THE RESULT, FOR STATISTICAL PURPOSE, APPEAL FILED BY THE APPELL ANT IS TREATED IS DISMISSED. [PARA 4 AND 5 OF CIT(A)S ORDER] 5. WE FIND THAT THE ORDER PASSED BY CIT (A) CONFIRMING LEVY OF PENALTY U/S 271 (1) (C) OF THE ACT IS EX - PARTE. IN OUR VIEW, IN THE INTEREST OF JUSTICE AND FAIR PLAY, ONE MORE OPPORTUNITY SHOULD BE PROVIDE TO THE ASSESSEE TO REPRESENT HIS CASE. ACCORDINGLY, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO ALLOW ONE MORE OPPORTUNITY TO THE ASSESSEE TO REPRESENT HIS CASE. WE ARE CONSCIOUS THAT ASSESSEES ATTITUDE IS TOTALLY NEGLIGENT A ND UNCOOPERATIVE. HOWEVER, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 - 1 1 - 2016 . SD/ SD/ (RAJESH KUMAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 08 - 11 - 2016 SUDIP SARKAR/SR.PS COPY OF THE ORDER FORW ARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//