Rajan Sethi, New Delhi V. ITO(E), New Delhi

ITA 1746/DEL/2012

• Counselvise Citation: 174620114 RSA 2012
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 14-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRISELLA SINGEIT
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI RP TOLANI, JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO. 1746/DEL/2012 ASSESSMENT YEAR 2007-08 MR.RAJAN SETHI VS. ITO(E), WARD 22(3) SHOP NO.6, COMMUNITY CENTRE NEW DELHI NEW FRIENDS COLONY NEW DELHI 110 065 PAN: AAUPS 8901L (APPELLANT) (RESPONDENT) APPELLANT BY:- SH.R.S.SINGHVI, FCA RESPONDENT BY:- MS.PRISELLA SINGEIT, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXIII DT. 05.01.2012, WHEREIN A PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INC OME TAX ACT, 1961 WAS CONFIRMED. 2. FACTS IN BRIEF:- THE FACTS OF THE CASE AS BROUGHT OUT AT PARA 2 OF THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER IS EXTRACTED FOR READY REFERENCE. THE APPELLANT FILED HIS RETURN OF INCOME FOR THE A SSESSMENT YEAR 2007-08 ON 26.10.2007 DISCLOSING AN INCOME OF RS. 1 4,14,380/-. THE APPELLANT DERIVES INCOME FROM BUSINESS OF TRADI NG OF MEDICINE IN THE PROPRIETORSHIP CONCERN, M/S. SETHI SONS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT WAS ASKED TO EXPLAIN SOURCE OF ADDITION TO CAPITAL OF RS. 11,04,072/-, A PPEARING IN THE BALANCE SHEET. IN RESPONSE THEREOF, THE APPELLANT E XPLAINED THAT THE SAID AMOUNT WAS RECEIVED ON MATURITY OF A RECUR RING DEPOSIT ITA 17 46/DEL/2012 PAGE 2 OF 5 ASSESSMENT YEAR 2007-08 MR.RAJAN SETHI ACCOUNT WITH BANK OF INDIA. THE ASSESSING OFFICER N OTICED THAT THE INTEREST AMOUNT OF RS. 2,04,072/- RECEIVED ON MATUR ITY OF THE DEPOSIT HAD NOT BEEN OFFERED TO TAX IN THE RETURN O F INCOME FILED. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) ON 02 .12.2009, THE INTEREST AMOUNT OF RS. 2,04,072/- WAS ADDED AS INCO ME FROM OTHER SOURCES AND PENALTY PROCEEDINGS WERE INITIATED UNDE R SECTION 271(1)(C) FOR CONCEALMENT OF INCOME. IN RESPONSE TO SHOW CAUSE NOTICE OF PENALTY UNDER SECTION 271(1)(C) ISSUED ON 02.12.2009 AND FURTHER SHOW CAUSE NOTICE ISSUED IN JUNE,2010 A REP LY WAS FILED ON 21.06.2010. IT WAS SUBMITTED THAT THE INTEREST WAS NOT INCLUDED IN THE RETURN OF INCOME THROUGH OVERSIGHT. IT WAS ALSO EXPLAINED THAT THE RECURRING DEPOSIT ACCOUNT HAD BEEN DISCLOSED IN THE BALANCE SHEET, HENCE, THERE WAS NO CONCEALMENT OF PARTICULA RS OF INCOME. THE ASSESSING OFFICER HELD THAT WITH THE INSERTION OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, T HE BURDEN OF PROVING THAT THERE WAS NO CONCEALMENT, HAD BEEN SHI FTED FROM THE REVENUE TO THE ASSESSEE. RELYING ON THE JUDGEMENT O F THE APEX COURT IN THE CASE OF UNION OF INDIA VS. DHARAMENDR A TEXTILE PROCESSORS [2008] 166 TAXMAN 65, THE ASSESSING OFF ICER HELD THAT MENS REA IS NOT A PRE-REQUISITE FOR ATTRACTION OF C IVIL LIABILITY OF PENALTY UNDER SECTION 271(1)(C). PENALTY UNDER SEC TION 271(1)(C) WAS ACCORDINGLY LEVIED FOR CONCEALMENT OF INCOME OF RS.2,04,072/- AT 100% OF THE TAX SOUGHT TO BE EVADED, WHICH WORKE D OUT TO RS.68,689/-. AGGRIEVED, THE APPELLANT HAS FILED TH IS APPEAL. 3. THE FIRST APPELLATE AUTHORITY CONFIRMED THE PENA LTY ON THE GROUND THAT THE ASSESSEE FURNISHED THE DETAILS ONLY AFTER A QUERY WAS RAISED DURING THE SCRUTINY ASSESSMENT PROCEEDINGS REGARDIN G THE SOURCE OF ADDITION MADE TO THE PROPRIETORS CAPITAL ACCOUNT. HE HELD THAT THE DUTY ENJOINS THE ASSESSEE TO MAKE A CORRECT DISCLOSURE O F HIS INCOME. HE REJECTED THE OTHER CONTENTIONS OF THE ASSESSEE AND HELD THAT THERE IS NO REASONABLE EXPLANATION GIVEN BY THE ASSESSEE. AGGR IEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.COUNSEL FOR THE ASSESSEE MR RS SINGHVI SU BMITTED THAT A BONAFIDE AND INADVERTENT MISTAKE OCCURRED AND THAT THERE WAS NO ITA 17 46/DEL/2012 PAGE 3 OF 5 ASSESSMENT YEAR 2007-08 MR.RAJAN SETHI INTENTION TO CONCEAL THE INCOME AND THAT THIS IS CL EAR FROM THE FACT THAT THE RECURRING DEPOSIT (RD) ACCOUNT WITH BANK OF IND IA WAS DISCLOSED IN THE BALANCE SHEET YEAR AFTER YEAR. HE FURTHER SUBM ITTED THAT INTEREST ACCRUES YEAR AFTER YEAR AND THE ASSESSEE, ON REALI ZING HIS MISTAKE AGREED FOR TAXING THE ENTIRE INTEREST IN THE YEAR OF MATUR ITY. HE RELIED UPON THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF PRICE WATERHOUSE COOPERS P.LTD. VS CIT, CALCUTTA I CIVIL APPEAL NO. 6924/2012 JUDGEMENT DT. 25 TH SEPTEMBER,2012. 5. THE LD.D.R. MS.PRECILLA SINGEIT ON THE OTHER HAN D OPPOSED THE CONTENTION OF THE ASSESSEE AND SUBMITTED THAT THE I NCOME FROM INTEREST WAS DETECTED BY THE ASSESSING OFFICER. SHE RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE COMMISSION ER OF INCOME TAX (APPEALS). 6. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT TH E ASSESSEE HAS BEEN REGULARLY DISCLOSING RECURRING DEPOSIT ACCOUNT WITH BANK OF INDIA IN THE BALANCE SHEET. INTEREST ACCRUES YEAR AFTER YEAR. IN THIS CASE, WE ARE OF THE OPINION THAT THE ASSESSEE, WHILE ADDING THE MAT URITY PROCEEDS TO ITS BALANCE SHEET, INADVERTENTLY OMITTED TO DECLARE THE INTEREST ON THE RECURRING DEPOSIT AS INCOME. HAD NOT THE ASSESSEE VERBALLY AGREED TO THE ADDITION OF INTEREST ON RECEIPT BASIS, THE ASSESSIN G OFFICER SHOULD HAVE ADDED INTEREST ONLY ON ACCRUAL BASIS BY REOPENING E ARLIER YEARS ITA 17 46/DEL/2012 PAGE 4 OF 5 ASSESSMENT YEAR 2007-08 MR.RAJAN SETHI ASSESSMENTS. THE FACT THAT THIS IS A BONAFIDE MIST AKE IS EVIDENT FROM THE FOLLOWING OBSERVATIONS OF THE COMMISSIONER OF I NCOME TAX (APPEALS):- I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS. THERE CAN BE NO DOUBT THAT THE PRIMARY RESPONSIBILITY OF DISC LOSING THE COMPLETE PARTICULARS OF INCOME AND OF PAYING TAX ON EACH ITEM OF INCOME LIES WITH THE ASSESSEE, AND IS NORMALLY D ISCHARGED WITH THE FILING OF RETURN OF INCOME. THE DUTY ENJOI NED ON THE ASSESSEE TO MAKE A CORRECT DISCLOSURE OF HIS INCOME CASTS A NEGATIVE BURDEN ON THE ASSESSEE TO PROVE THAT CONCE ALMENT WAS NOT INTENDED. IN THE FACTS OF THIS CASE, THE AP PELLANT HAS FILED A RETURN OF INCOME ACCOMPANIED BY AUDITED STA TEMENT OF ACCOUNTS AND IT HAS TO BE PRESUMED THAT HE HAD ACCE SS TO EXPERT LEGAL ADVICE FOR FILING OF THE RETURN OF INC OME. THE ADDITION TO CAPITAL OF RS. 11,04,072/- IS PART OF T HE AUDITED BALANCE SHEET AND SHOULD HAVE ORDINARILY CALLED FO R A QUERY FROM THE AUDITOR. THERE CAN BE NO TWO OPINIONS REGARDING THE TRUTH THAT THE INTEREST INCOME OF RS. 2,04,072/- WA S LIABLE FOR TAX, AND THAT THE TAXABLE INCOME WOULD HAVE ESCAPED TAXATION, BUT FOR THE SCRUTINY ASSESSMENT PROCEEDIN GS. IT IS ALSO A MATTER OF CONCERN THAT THE BANK IN QUESTION FAILED TO DEDUCT TAX ON THE INTEREST AMOUNT OF RS. 2,04,072/- WHICH WAS PAID IN ONE TRANCHE AT THE TIME OF MATURITY OF THE RECURRING DEPOSIT. THE APPELLANT'S' CONTENTION THAT THE ISSUE OF INTEREST WAS DISCLOSED SUO MOTO IS NOT BORNE OUT BY THE RECORD, AS THE APPELLANT FURNISHED THE DETAILS ONLY AFTER Q UERY WAS RAISED DURING THE SCRUTINY ASSESSMENT PROCEEDINGS R EGARDING THE SOURCE OF ADDITION MADE TO THE PROPRIETOR'S CAP ITAL ACCOUNT. (EMPHASIS OURS) 7. THE HONBLE S.C. IN THE CASE OF PRICE WATER HOUS E COOPERS P.LTD. (SUPRA) HELD THAT WHEN A BONAFIDE INADVERTENT ERROR HAPPENS, IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. APPLY ING THE PROPOSITION TO THE FACTS OF THE CASE WE CANCEL THE PENALTY LEVIED AND ALLOW THE APPEAL OF THE ASSESSEE. ITA 17 46/DEL/2012 PAGE 5 OF 5 ASSESSMENT YEAR 2007-08 MR.RAJAN SETHI 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER,2012. SD/- SD/- (R.P.TOLANI ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 26 TH NOVEMBER, 2012 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER DY. REGISTRAR 1. DATE OF DICTATION: 2. DRAFT PLACED BEFORE THE AUTHOR ON: 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR.P.S. ON: 6. DATE OF PRONOUNCEMENT : 7. FILE SENT TO BENCH CLERK ON : 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON: