M/s. Babubhai Cloth Store, Nashik V. Additional Commissioner of Income-tax,

ITA 1727/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5837 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-01-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , ! BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO.1727/PUN/2016 / ASSESSMENT YEAR : 2007-08 M/S. BABUBHAI CLOTH STORE, BABUBHAI VILLA, KULKARNI COLONY, SHARANPUR ROAD, NASHIK 422 002 PAN : AADFB4642E /APPELLANT VS. ADDL.CIT, RANGE-1, NASHIK . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI SANJEEV GHEI / DATE OF HEARING : 29.01.2019 / DATE OF PRONOUNCEMENT: 30.01.2019 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF C IT(A)-1, NASHIK, DATED 09-06-2016 FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED, RELEVANT FACTS INCLUDE, THAT THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF SUPPLY OF CLOTH TO SECURITY P RESS, NASHIK FOR BINDING CLOTH, GOLD FOIL, ULTRA VIOLET THREAD ETC. DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME COMPUTING TAXABLE FRINGE BENEFIT OF RS.1,11,404/-. IN THE ASSESSMENT, AO NOTICED TH AT ASSESSEE CLAIMED VARIOUS EXPENSES VIZ. (1) SALES PROMOTION EXPENSES; (2 ) HOSPITALITY; (3) EMPLOYEES WELFARE; (4) REPAIRS RUNNING MAINTENANCE OF MOTO RS CARS; (5) ITA NO.1727/PUN/2016 M/S. BABUBHAI CLOTH STORES 2 TELEPHONE/MOBILE BILLS; AND (6) TOURS AND TRAVELS AND THE TAX ATION OF FRINGE BENEFIT TAX WAS THE ISSUE. IN THE ASSESSMENT U/S .115WE(3) OF THE INCOME-TAX ACT, 1961, THE AO MADE CERTAIN ADDITIONS ON T HE ABOVE CLAIMS OF THE ASSESSEE AND WORKED OUT THE FRINGE BENEFIT AT RS .4,27,070/-. FURTHER, INVOKING THE PROVISIONS OF SECTION 271(1)(D) OF THE AC T, THE AO LEVIED PENALTY OF RS.1,05,859/- IN THE HANDS OF THE ASSESSEE. 3. AGGRIEVED WITH THE FINDINGS OF AO, THE ASSESSEE FILED AN A PPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE ASSESSEE REMAINED UN SUCCESSFUL BEFORE THE FIRST APPELLATE AUTHORITY TOO FOR WANT OF PROSECUTION. NOW THE ASSESSEE HAS APPROACHED THE TRIBUNAL BY RAISING FOLLOWING GROUNDS : 1. THE APPEAL PERTAINS TO THE PENALTY U/S. 271(1)(D) FOR THE ADDITIONS MADE ON ACCOUNT OF FBT U/ S. 115WE (3) OF THE I.T. ACT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE HON. AO AS WELL AS CIT APPEAL-I HAD ERRED AND LEVIED AND DISMISSED THE PENALTY APPEAL OF THE APPELLANT RESPE CTIVELY. INSPITE, OF THE FACT, THAT THE QUANTUM APPEAL HAD BEEN CONTE STED BY THE APPELLANT. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE HON. AO AS WELL AS CIT APPEAL-I HAD ERRED AND LEVIED AND DISMISSED THE PENALTY APPEAL OF THE APPELLANT RESPE CTIVELY, ON THE ADDITION ON ACCOUNT IN FBT U/S. 115WE (3) OF THE I.T. ACT WHICH WAS BASED ENTIRELY ON THE EXPENSES MADE & INCURRED BY THE PARTNERS OF THE FIRM FOR THE BUSINESS PURPOSE. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE HON. AO AS WELL AS CIT APPEAL-I HAD ERRED AND IGNOR ED THE PRINCIPAL FACTS OF LEVY OF FBT & SUBSEQUENTLY PENALTY ON IT, WHICH IS PARTICULARLY BASED ON THE EMPLOYER, EMPLOYEE REL ATION & EXPENDITURE MADE THEREON, AND THE PENALTY WAS LEVIE D ON THE ADDITION OF EXPENDITURE WHICH WERE INCURRED BY THE PARTNERS WHO ARE THE REAL OWNERS OF THE BUSINESS AND THERE IS NO KIND OF EMPLOYER, EMPLOYEE RELATION BETWEEN THE FIRM AND PA RTNER. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE HON. CIT APPEAL-I HAD ERRED AND DISMISSED THE PENAL TY APPEAL FOR NON-ATTENDANCE IGNORING THE FACT THAT THE APPELLANT HAD RESPONDED AND MADE PARTIAL SUBMISSION AT LEAST 8 TIMES IN WRI TING BEFORE THE AUTHORITY AND WHICH HAS BEEN MENTIONED IN THE DISMI SSAL ORDER. ITA NO.1727/PUN/2016 M/S. BABUBHAI CLOTH STORES 3 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW THE HON. AO AS WELL AS CIT APPEAL-1 HAD ERRED AND LEVIE D AND DISMISSED THE APPEAL WITHOUT CONSIDERING THE FACT TH AT IN THE JUDICIAL COURT OF LAW A LENIENT VIEW HAD BEEN TAKEN IN FAVOUR OF THE APPELLANT UNDER SIMILAR CIRCUMSTANCES. 7. PRAYER : THE HON. APPELLATE AUTHORITY IS SINCERE LY REQUESTED A. THE APPEAL MAY PLEASE BE ALLOWED. B. THE PENALTY MAY PLEASE BE WAIVED C. THE APPELLANT MAY PLEASE BE GIVEN A CHANCE OF PERSO NAL HEARING. D. THE APPELLANT MAY PLEASE BE ALLOWED TO SUBMIT HIS CONTENTION BEFORE OR DURING THE HEARING OF THE APPE AL. E. ANY OTHER RELIEF MAY PLEASE BE ALLOWED AS THE APPEL LATE AUTHORITY MAY DEEM IT. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL. 4. BEFORE US, THERE IS NONE TO REPRESENT THE CASE OF TH E ASSESSEE DESPITE SERVICE OF NOTICE. HOWEVER, CONSIDERING THE FACTUAL MATRIX OF THE CASE, AND THE ORDERS OF THE REVENUE AND THE AVAILABILITY OF ASSISTANC E OF THE LD. DR, WE PROCEED TO ADJUDICATE THE CASE. 5. LD. DR FOR THE REVENUE VEHEMENTLY DEFENDED THE ORD ER CONFIRMING LEVY OF PENALTY. FURTHER, LD. DR SUBMITTED THAT PENALTY U/S .271(1)(D) OF THE ACT WAS LEVIED ON THE ASSESSEE FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. LD. DR SUBMITTED THAT, WHILE LEVYING PENALTY U/S.271(1)(C ), THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED THAT THE PEN ALTY IS BEING LEVIED FOR FILING OF INACCURATE PARTICULARS OF INCOME. THERE IS N O AMBIGUITY OR VAGUENESS IN THE MIND OF ASSESSING OFFICER WHILE LEVY OF PENALTY. 6. WE HAVE HEARD THE LD. DR AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON CAREFUL CIRCUMSPECTION OF THE ASSESSMENT AND PE NALTY ORDERS, WE FIND THAT THIS IS A CASE WHERE THE AO FAILED TO RECORD PROPER SATISFACTION WHILE INITIATING THE PENALTY PROCEEDINGS AND LEVYING THE PENA LTY. WE PROCEED TO ADJUDICATE THE ISSUE RELATING TO RECORDING OF PROPER S ATISFACTION BY THE ITA NO.1727/PUN/2016 M/S. BABUBHAI CLOTH STORES 4 AO. IN THIS CONNECTION, WE PERUSED THE ASSESSMENT ORDE R DATED 18-12- 2009 AND FIND THE SATISFACTION RECORDED BY THE AO FOR INITIA TING THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTIO N. THEREFORE, THE SAME IS REPRODUCED AS UNDER : 4............. ................... PENALTY PROCEEDINGS U/S.271(1)(D) ARE BEING INITIAT ED SEPARATELY . 6.1 WE ALSO PERUSED THE PENALTY ORDER DATED 28-03-2013 AND FIND THE SATISFACTION RECORDED BY THE AO FOR LEVYING THE PENALTY U/ S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THE SAID SATISFACTION READS AS UNDER: 5. ....................... ........................................ IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, I AM OF THE CONSIDERED OPIN ION THAT THIS IS A FIT CASE FOR LEVY OF PENALTY IN TERMS OF EXPLANATION 1 TO SECTION 271(1)(D) OF THE IT ACT, 1961, FOR FILING OF INACCURATE PARTICULARS OF FRINGE BENEFIT TAX. FROM THE ABOVE, IT IS EVIDENT THAT AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT, AO HAS NOT MENTIONED ANY LIMB. HOWEVER, AT THE TIME OF LEVY OF PENALTY, THE AO MENTIONED THAT THIS IS A FIT CASE FOR LEVY OF PENALTY IN TERMS OF EXPLANATION 1 TO SECTIO N 271(1)(D) OF THE IT ACT, 1961, FOR FILING OF INACCURATE PARTICULARS . THIS MANNER OF RECORDING OF SATISFACTION SUGGESTS THE EXISTENCE OF AMBIGU ITY WITH REFERENCE TO APPLICABILITY OF SPECIFIC LIMB. IT IS A SETTLED LEGAL PROPOSITION THAT THE AO IS UNDER OBLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THIS VIEW OF OURS IS FORTIFIED BY THE JUDGMENT IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (201 7) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH CO URT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 I TR 565. IN VIEW OF THE ABOVE DELIBERATION ON THIS ISSUE, WITHOUT GOING INTO THE MERITS OF THE ITA NO.1727/PUN/2016 M/S. BABUBHAI CLOTH STORES 5 PENALTY, WE ARE OF THE OPINION THAT THE PENALTY ORDER IS LIA BLE TO BE QUASHED ON THIS LEGAL ISSUE. THUS, THE ORDER OF CIT(A) IS SET-AS IDE AND DIRECT THE AO TO DELETE THE PENALTY ON TECHNICAL GROUNDS. IN VIEW OF THIS DECISION, THE ADJUDICATION OF GROUNDS ON MERITS BECOMES AN ACADEMIC EX ERCISE ONLY. HENCE, THEY ARE DISMISSED AS SUCH. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED ON TECHNICALITIES. ORDER PRONOUNCED ON THIS 30 TH DAY OF JANUARY, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 30 TH JANUARY, 2019 SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-1, NASHIK 4. / THE PR.CIT-1, NASHIK 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.