M/s. Devgiri Engineering, Pune V. Deputy Commissioner of Income-tax,

ITA 1729/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9153 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 16-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure
• Section: 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS. 1728 & 1729/PUN/2014 / ASSESSMENT YEARS : 2008-09 & 2009-10 M/S. DEVGIRI ENGINEERING, B-5, SONAL RESIDENCY, IDEAL COLONY, KOTHRUD ROAD, PUNE 411 038 PAN :AAFFD6124R . /APPELLANT V/S DC IT, CENTRAL CIRCLE - 2( 1 ) , PUNE . /RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI ACHAL SHARMA, ADDL.CIT / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 2 APPEALS UNDER CONSIDERATION AGAINST THE COMMON ORDER OF CIT(A) CENTRAL, PUNE DATED 08-07-2014 FOR THE TWO D IFFERENT ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. 2. THE ISSUE IN BOTH THE APPEALS RELATE TO THE CORR ECTNESS OF THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT. ITA NO.1728/PUN/2014 ASSESSMENT YEAR 2008-09 : 3. TO START WITH WE SHALL TAKE UP THE APPEAL FOR A. Y. 2008-09. THE GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED AS UND ER : / DATE OF HEARING :13.07.2017 / DATE OF PRONOUNCEMENT: 26.07.2017 2 ITA NOS.1728 & 1729/PUN/2014 1. THE LEARNED CIT(A)-CENTRAL ERRED IN LAW AND ON F ACTS IN CONFIRMING LEVY OF PENALTY BY AO OF RS . 31,28,667/- U/S.271(1)(C) R . W. EXPLANATION 5A THERETO OF THE ITA, 1961 ON THE ALLEGED CONCEALED I NCOME OF RS. 92,04,670. THE LEARNED CIT(A)-CENTRAL AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THERE WAS NO ANY REAL INCOME WHICH WAS NOT OFF ERED TO TAX BY THE APPELLANT. 2. THE LEARNED CIT(A)-CENTRAL ERRED IN LAW AND ON F ACTS I N HOLDING THAT EXPENSES DISALLOWABLE U/S. 37 READ WITH EXPLANATION THERETO, ARE COVERED UNDER EXPLANATION-5A TO SECTION 271 (1)(C), WITHOUT APPRECIATING THE DIFFERENCE IN PHRASEOLOGY BETWEEN VARIOUS RELATED S ECTIONS SUCH AS SECTION 271AAA, SECTION 158B(B), ETC. 3. THE LEARNED CIT(A) CENTRAL ERRED IN LAW AND ON F ACTS IN JUSTIFYING CONCEALMENT OF INCOME UNDER MAIN SECTION 271(1)(C) WITHOUT APPRECIATING THAT THE LEARNED AO HAS LEVIED THE CONCEALMENT PENA LTY EXPLANATION 5A OF SECTION 271(1)(C ). THE LEARNED CIT(A)-CENTRAL OUGHT TO HAVE APPRECIATE D THAT SATISFACTION UNDER EXPLANATION 5A IS OF A DIFF ERENT NATURE THAN SATISFACTION UNDER THE MAIN SECTION 271 (1)(C), CON SIDERING THE ONUS OF JUSTIFICATION OF CONCEALMENT. 4. LEARNED CIT(A)-CENTRAL ERRED IN LAW AND ON FACTS IN DISMISSING RELIANCE OF THE APPELLANT ON THE RATIO IN THE CASE OF M/S MULAY CONSTRUCTIONS P LTD. - ITA NO. 116-119/PN/2012 BY OBSERVING THAT THE SEARCH IN THE SAID CASE OF M/S MULAY CONSTRUCTIONS P LTD TOOK PLACE MU CH PRIOR TO 116/2007 . THE LEARNED CIT(A)-CENTRAL OUGHT TO HAVE APPRECIATE D THAT THE SEARCH IN THE CASE OF M/S MULAY CONSTRUCTIONS P LTD TOOK PLACE ON 10/10/2007, I.E. MUCH AFTER 116/2007 AND AS SUCH , RATIO EMANATING THERETO IS APPLICABLE IN APPELLANT ' S CASE. 5. ALTERNATIVELY AND WITHOUT PREJUDICE THE LD.CIT(A ) CENTRAL ERRED IN LAW AND ON FACTS IN NOT APPRECIATING FACT THAT THERE WA S NO ACTUAL SEARCH IN THE APPELLANTS CASE AND HENCE, INVOKING EXPLANATION 5A TO SECTION 271(1)(C) AS BAD IN LAW. 6. THE APPELLANT CRAVES LEAVE TO ADD/MODIFY/DELETE AMEND ALL/ANY OF THE GROUNDS OF APPEAL. 3. THE ASSESSEE ALSO FILED AN ADDITIONAL GROUND, CL AIMED TO BE A LEGAL ONE IN NATURE, AND THE SAME READS AS UNDER : 7. THE LEARNED AO & LEARNED CIT(A)-CENTRAL ERRED IN LAW AND ON FACTS IN CONFIRMING LEVY OF PENALTY U/S 271(1)(C) R.W. EXPLA NATION 5A THERETO OF THE ITA, 1961 WITHOUT APPRECIATING FACT THAT LEARNED AO RECORDED SATISFACTION WITH RESPECT BOTH THE LIMBS, I.E. 'CONCEALING PARTI CULARS OF INCOME' AS WELL AS 'FURNISHING INACCURATE PARTICULARS OF INCOME' WITH RESPECT TO SAME ADDITION. LEARNED I-T AUTHORITIES ERRED IN NOT SPECIFYING ANY PARTICULAR LIMB OUT OF THE TWO LIMBS FOR JUSTIFYING THE PENALTY. 4. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE IS A FIRM ENGAGED IN IRRIGATION CONTRACTS. SEARCH AND SEIZURE ACTION U/ S.132 TOOK PLACE IN THE CASE OF SHRADDHA GROUP ON 08-09-2010. SUBSEQUENT TO THIS , CONSEQUENTIAL SEARCH AND SEIZURE WAS CARRIED OUT IN THE PREMISES OF M/S. N.N.K. CONSTRUCTIONS, 3 ITA NOS.1728 & 1729/PUN/2014 UNIGLORY INFRA PROJECTS PVT. LTD., DEVGIRI ENGINEER ING AND SOPAN D. PATIL. IN THE PROCESS, THE ASSESSEE WAS ALSO COVERED. ASSESS EE FILED THE RETURN OF INCOME ON 23-02-2012 DISCLOSING TOTAL INCOME OF RS. 1,69,30,330/-. AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE AS RS.2,6 1,35,000/-. 5. IN CONNECTION WITH THE ADDITIONAL GROUND, LD. CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME IS LEGAL IN NATURE AND DOES NOT CALL FOR INVESTIGATION TO THE FACTS. ELABORATING ON THE MERITS ON THIS LE GAL ISSUE, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ASSESSMEN T ORDER OF THE AO DATED 25-03-13 AND SUBMITTED THAT THE AO MADE SOLITARY AD DITION OF RS.92,04,670/- FOR THE A.Y. 2008-09 ON ACCOUNT OF BOGUS PURCHASES. ON THIS ADDITION, AO INITIATED PENALTY AND RELEVANT SATISFACTION OF THE AO IN THIS REGARD IS GIVEN IN PARA 6 AND THE RELEVANT LINES READ AS UNDER : 6. THE ADDITIONAL INCOME DISCLOSED OF RS.92,04,670 /- IS MAINLY ON ACCOUNT OF INFLATED PURCHASES. WHILE FILING THE RE VISED RETURN OF INCOME, THE ASSESSEE HAS CAME CLEAR AND HENCE THE INCOME SHOWN IS ACCEPTED. HOWEVER, ON THE FACTS THERE IS A CONCEALMENT OF INC OME OR FURNISHING INACCURATE PARTICULARS OF INCOME. FOR THIS PURPOSE PROVISIONS CONTAINED IN EXPLANATION 5A OF SEC.271(1 )(C) ARE SQUARELY APPLICABLE. HENCE, PENAL PROCEEDINGS U/S.274 R.W.S . 271(1)(C) IS INITIATED SEPARATELY. 6. EXPLAINING THE ABOVE, LD. COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE AO IS NOT CLEAR AS TO WHICH OF THE TWO LIMBS OF CLA USE (C) OF SECTION 271(1) OF THE ACT IS PARTICULARLY APPLICABLE TO THE ADDITION OF RS.92,04,670/-. THEREFORE, AO MENTIONED BOTH THE LIMBS WITH THE CON JUNCTION OR. REFERRING TO THE PENALTY NOTICE U/S.274 R.W.S. SECTION 271(1) (C) OF THE ACT, THE LD. COUNSEL SUBMITTED THAT BOTH THE NOTICES AT PAGES 15 AND 16 OF THE PAPER BOOK AGAIN REFER TO THE FOLLOWING EXPRESSION IN THE SAID NOTICE. THE EXPRESSION READS AS UNDER : WHEREAS IN THE COURSE OF PROCEEDINGS ME FOR THE A .Y. 2008-09, IT APPEARS TO ME THAT YOU : 4 ITA NOS.1728 & 1729/PUN/2014 HAVE CONCEALED THE PARTICULARS OF YOUR INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 7. REFERRING TO THE ABOVE EXPRESSION, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO INITIATED PENALTY PROCEEDINGS FOR BOTH THE OFFENCES SPECIFIED IN CLAUSE (C) TO SECTION 271(1) OF THE AC T. SAME IS THE DEVIATION FROM THE ORIGINAL SATISFACTION GIVEN IN THE ASSESSM ENT ORDER OF THE AO. FINALLY, REFERRING TO THE PENALTY ORDER PASSED BY T HE AO ON 27-09-2013, LD. COUNSEL FOR THE ASSESSEE READ OUT THE RELEVANT LINE S TO DEMONSTRATE THE CONFUSION AND THE VAGUENESS EXISTING IN THE MIND OF THE AO. REFERRING TO PARA 11 OF THE PENALTY ORDER, LD. COUNSEL FOR THE A SSESSEE READ OUT THE FOLLOWING EXPRESSIONS : 11. THIS CLEARLY SHOWS THAT THERE WAS A CONCEALMEN T OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME IN THE CASE OF THE ASSESSEE. LEAVING THIS APART AS THE SEARCH HAS BEEN INITIATED IN THE CASE OF THE ASSESSEE AFTER 01-06-2007 THE PROVISION OF EXPLANAT ION 5A TO SEC.271(1)(C) ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THEREFORE ON FACTS THERE IS A DEEMED CONCEALMENT ALSO. 8. NARRATING THE ABOVE AND FINDING FAULT WITH THE A BOVE EXPRESSIONS, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO CANN OT LEVY THE PENALTY ON AN ADDITION FOR BOTH THE LIMBS OF CLAUSE (C) OF SEC TION 271(1) OF THE ACT. AO ALSO RAISED THE THIRD ASPECT OF DEEMED CONCEALMENT IN THE PENALTY ORDER WITHOUT MEANING THE IMPLICATIONS THEREOF. TO SUM U P, THE ABOVE 3 TYPES OF SATISFACTIONS OF THE AO, LD. COUNSEL ARGUED THAT TH E AO HAS NOT APPLIED HIS MIND TO THE PROPER LIMB FOR WHICH THE PENALTY U/S.2 71(1)(C) OF THE ACT ARE LEVIED. THE VAGUENESS IS OBVIOUS FROM THE PENALTY ORDER IN GENERAL AND CONTENTS OF PARA 11 IN PARTICULAR. 9. ON HEARING BOTH THE PARTIES, WE FIND THE ABOVE E XTRACTS FROM (1) ASSESSMENT ORDER, (2) THE NOTICE 274 R.W.S. 271(1)( C) OF THE ACT; AND (3) THE PENALTY ORDER OF THE AO, WE ARE OF THE OPINION THAT THE AO HAS REALLY NOT APPLIED HIS MIND TO THE CORRECT LIMB FOR WHICH THE PENALTY SHOULD BE LEVIED. 5 ITA NOS.1728 & 1729/PUN/2014 USE OF THE EXPRESSIONS OR AND AND AT DIFFERENT ORDERS IN ASSESSMENT ORDER AND THE PENALTY ORDER RESPECTIVELY ALSO SUGGEST VAG UENESS IN THE MIND OF THE AO AND ALSO SUGGEST THE LACK OF APPLICATION OF MIND ON THE PART OF THE AO TO THE LIMB TO WHICH THE AO PROPOSED TO LEVY THE PENAL TY U/S.271(1)(C) OF THE ACT. THEREFORE, WE ARE OF THE OPINION THAT THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE SHOULD BE ADMITTED AND ADJUDICATED IN FAVOUR OF THE ASSESSEE. CONSIDERING THE SAME THE ADJUDICATION OF GROUNDS O N MERITS OF THE PENALTY MERELY BECOMES AN ACADEMIC EXERCISE, THEREFORE, THE SAME IS DISMISSED AS ACADEMIC. ACCORDINGLY, ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THE ORIGINAL GROUNDS ARE DISMISSED AS ACADEMIC. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO. 1729/PUN/2014 ASSESSMENT YEAR 2009-10 : 11. THE FACTS ARE IDENTICAL, GROUNDS AND ADDITIONAL GROUND ARE ALSO SIMILAR, EXPLANATIONS ARE SAME AND ARGUMENTS AND COUNTER ARG UMENTS ARE ALSO COMMON TO THE ONE WHICH WE HAVE ALREADY DISCUSSED I N CONNECTION WITH A.Y. 2008-09. CONSIDERING THE SAME, WE ARE OF THE VIEW THAT OUR CONCLUSIONS BOTH ON THE GROUNDS AND ADDITIONAL GROUNDS ARE EQUA LLY RELEVANT FOR THE A.Y. 2009-10 TOO. THEREFORE, ALL THE GROUNDS RAISED IN THIS ASSESSMENT YEAR ARE DISMISSED AS ACADEMIC AND THE ADDITIONAL GROUND RAI SED BY THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JULY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 26 TH JULY, 2017. 6 ITA NOS.1728 & 1729/PUN/2014 / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) CENTRAL , PUNE 4. CIT CENTRAL, PUNE 5. , , A BENCH PUNE; 6. / GUARD FILE.