Rajan Dilipbhai Desai, Nadiad V. The Asstt. Commissioner of Income Tax, Kheda Circle, Nadiad

ITA 1874/AHD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8988 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: S N DIVATIA
• Keywords: Principle of natural justice; Peak credit; Reasonable cause

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. NOS. 1874 TO 1880/AHD/2016 ( ASSESSMENT YEARS : 2003-04 TO 2009-10) RAJAN DILIPBHAI DESAI 9, NAIROBI COLONY, COLLEGE ROAD, NADIAD - 387001 / VS. ACIT KHEDA CIRCLE, AAYKAR BHAVAN, PIJ ROAD, NADIAD - 387002 / / PAN/GIR NO. : ABUPD9951C ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA & SHRI MEHUL TALERA, A.R. / RESPONDENT BY : SHRI S. K. DEV, D.R. DATE OF HEARING 11/10/2018 !'# / DATE OF PRONOUNCEMENT 16/10/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS AT THE INSTANCE OF ASSESSEE A RISE FROM THE RESPECTIVE ORDERS OF THE CIT(A) AGAINST RESPECTIVE ASSESSMENT ORDERS FOR DIFFERENT ASSESSMENT YEARS AS TABULATED BELOW: ITA NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS PENALTY ORDER DATED AOS ORDER UNDER SECTION 1874/AHD/16 RAJAN DILIPBHAI DESAI 2003-04 25.04.2016 28.03.2014 271(1)(C) OF THE INCOME TAX ACT, 1961 ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 2 - 1875/AHD/16 -DO- 2004-05 -DO- -DO- -DO- 1876/AHD/16 -DO- 2005-06 -DO- -DO- -DO- 1877/AHD/16 -DO- 2006-07 -DO- -DO- -DO- 1878/AHD/16 -DO- 2007-08 -DO- -DO- -DO- 1879/AHD/16 -DO- 2008-09 -DO- -DO- -DO- 1880/AHD/16 -DO- 2009-10 -DO- -DO- -DO- 2. AS NOTED ABOVE, THE CAPTIONED APPEALS ARE BUNCH OF SEVEN APPEALS CONCERNING ASSESSMENT YEARS 2003-04 TO 2009 -10. AS CLAIMED ON BEHALF OF THE ASSESSEE, THE FACTS ARE SIMILAR AN D COMMON ISSUES ARE INVOLVED IN ALL THE SEVEN ASSESSMENT YEARS AND THER EFORE ALL THE APPEALS WERE HEARD TOGETHER AND DISPOSED OF BY COMM ON ORDER. ITA NO. 1874/AHD/2016 (AY 2003-04) 3. WE SHALL FIRST TAKE UP ITA NO. 1874/AHD/2016 CON CERNING AY 2003-04. 4. BY WAY OF ITS GROUNDS OF APPEAL, THE ASSESSEE HA S SOUGHT TO ASSAIL THE ORDER OF THE REVENUE AUTHORITIES IN IMPO SING PENALTY UNDER S.271(1)(C) ON ADDITIONS/DISALLOWANCES MADE TOWARDS ; (A) INTEREST AND REMUNERATION RECEIVED FROM SAGAR DEVELOPERS AMOUNTI NG TO RS.65,990/- AND (B) INTEREST INCOME ACCRUED ON INVE STMENT OF FIXED DEPOSITS AND KISAN VIKAS PATRA AMOUNTING TO RS.11,4 85/-. 5. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE MADE FOLLOWING SUBMISSIONS: (I) THE LEARNED AR POINTED OUT FROM THE PENALTY ORD ER PASSED UNDER S.271(1)(C) OF THE ACT THAT THE ASSESSEE HAS BEEN C HARGED FOR BOTH DEFAULTS NAMELY CONCEALING THE PARTICULARS OF INCOM E AND FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS BEEN ACCORDINGLY MADE LIABLE FOR PENALTY UNDER S.271(1)(C) OF THE AC T ON BOTH COUNTS WHICH IS NOT PERMISSIBLE IN LAW IN VIEW OF THE DECI SION OF THE HONBLE ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 3 - HIGH COURT IN THE CASE OF SNITA TRANSPORT (P.) LTD. VS. ACIT (2014) 42 TAXMANN.COM 54 (GUJ); MANJUNATHA COTTON & GINNING F ACTORY [2013] 359 ITR 565 (KARNATAKA) AND CIT VS. SSAS EMERALD M EADOWS ITA NO.380 OF 2015 JUDGMENT DATED 23.11.2015. THE LEAR NED AR IN SHORT CONTENDED THAT THE PENALTY ORDER PASSED BY THE AO I S VITIATED ON ACCOUNT OF VAGUE DESCRIPTION TOWARDS CHARGE OF PENA LTY OWING TO INVOCATION OF BOTH THE GROUNDS WHICH ARE MUTUALLY E XCLUSIVE. (II) ON MERITS, THE LEARNED AR SUBMITTED THAT INTER EST OF FIXED DEPOSITS AND KISAN VIKASH PATRA HAS REMAINED TO BE TAKEN INTO ACCOUNT DUE TO INADVERTENT ERROR WITHOUT ANY MALAFIDE. THE INCOME WAS MERELY ACCRUED AND WAS NOT RECEIVED BY THE ASSESSEE PER SE WITH REFERENCE TO THE ADDITIONS MADE IN RESPECT OF INTEREST AND REMUN ERATION RECEIVABLE FROM PARTNERSHIP FIRM SAGAR DEVELOPERS. THE LEARNE D AR NEXT SUBMITTED THAT HE WAS MERELY A NAMESAKE PARTNER WHO REPLACED HIS BROTHER IN THE PARTNERSHIP FIRM AS A PARTNER ON THE DEATH OF HIS BROTHER. THE LEARNED AR ALSO SUBMITTED THAT HE WAS NOT AWARE OF ANY INCOME OF SUCH TYPE AS HE WAS NOT PARTICIPATING IN THE PARTNE RSHIP ACTIVITY AND DO NOT INTER INTO ANY TRANSACTION WITH THE PARTNERSHIP FIRM. THE LEARNED AR ACCORDINGLY SUBMITTED THAT NOTWITHSTANDING ADDIT ION CONFIRMED BY THE ITAT IN QUANTUM PROCEEDINGS, THE IMPOSITION OF PENALTY IS TOTALLY UNJUSTIFIED HAVING REGARD TO THE CIRCUMSTANCES NARR ATED ABOVE. 6. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE CIT(A) AND AO TOWARDS IMPOSITION OF PENALTY. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE SHALL FIRST ADDRESS THE LEGAL OBJECTION RAISED ON BEHALF OF THE ASSESSEE FOR VALIDITY OF PENALTY IMPOSED. WITH REFERENCE TO SUC H LEGAL OBJECTIONS THAT THE AO WAS AMBIVALENT REGARDING THE IMPOSITION OF PENALTY AND INVOKED BOTH LIMBS, NAMELY (I) CONCEALMENT OF PARTI CULARS OF INCOME ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 4 - AS WELL AS (II) FURNISHING OF INACCURATE PARTICULAR S OF INCOME, WE MAY RECORD THAT ALTHOUGH IN THE PENALTY ORDER, THE AO D ID MENTION IMPOSITION OF PENALTY ON BOTH COUNTS, WE DO NOT SEE ANY FATAL INFIRMITY IN SUCH ACTION IN THE GIVEN FACTS OF THE CASE. THE RE CAN BE NO QUARREL TO THE PROPOSITION THAT THE CHARGE AGAINST THE ASSE SSEE SHOULD BE SPECIFIC TO ENABLE THE ASSESSEE TO MEET THE GROUNDS . HOWEVER, IN THE SAME VEIN THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES, BOTH THE LIMBS MAY BE OVERLAPPING. IN THE INSTANT CASE, THERE DOES NOT APPEAR TO BE ANY VAGUENESS AND AMBIG UITY ON THE EXACT CHARGES IN VIEW OF THE STRIKING AND GROSS FACTS OF ESCAPEMENT OF INCOME OWING TO THE CONDUCT OF THE ASSESSEE. THE T OTAL OMISSION TO INCLUDE INTEREST INCOME ON FIXED DEPOSITS AND KISAN VIKASH PATRA BEARS THE CHARACTER OF CONCEALMENT AS WELL AS INACC URATE PARTICULARS OF INCOME IN THIS REGARD. THE HONBLE GUJARAT HIGH CO URT IN THE CASE OF A.M. SHAH & CO. VS. CIT [2000] 238 ITR 415 (GUJ) HA S OBSERVED THAT THERE CANNOT BE A STRAIGHT JACKET FORMULA FOR DETEC TION OF THIS DEFAULTS OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME AND INDEED CONCEALMENT OF PARTICULARS OF INCOME AND INA CCURATE PARTICULARS OF INCOME MAY AT TIMES OVERLAP. THE ASSESSEE HAS N OT CHALLENGED THIS TECHNICAL OBJECTION AT ANY STAGE OF THE PROCEEDINGS BELOW BEFORE COMING TO THE TRIBUNAL. SUFFICIENT OPPORTUNITIES W ERE GIVEN TO ASSESSEE TO DEMONSTRATE THE MERITS OF ADDITIONS/DIS ALLOWANCES FROM THE PERSPECTIVE OF PENALTY PROCEEDINGS. THEREFORE, THE ASSESSEE CANNOT PLEAD ANY IMPEDIMENT TO FACILITATE HIS DEFENSE, IF ANY ON SUCH HYPER TECHNICAL GROUND. 7. AN OMISSION TO DECLARE A RECEIPT CANNOT BE HELD TO BE BONAFIDE ERROR. THE GROSS NEGLECT OR RECKLESS DISREGARD OF THE PROVISIONS OF LAW ALSO AMOUNTS TO CONSCIOUS CONCEALMENT. THE PENALTY PROVISION UNDER S.271(1)(C) OF THE ACT PROVIDES REMEDY FOR LOSS OF REVENUE IN SUCH A SITUATION. WHERE THE RETURN HAS BEEN FILED WHEREIN THE ASSESSEE FAILED ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 5 - TO INCLUDE INCOME EARNED FOUND TO BE BELONGING TO T HE ASSESSEE WITHOUT ANY REASONABLE CAUSE, THE ASSESSEE CANNOT T AKE SHELTER OF SUCH TECHNICAL PLEA. RULES OF NATURAL JUSTICE CANNOT BE IMPRISONED IN ANY STRAIGHT JACKET FORMULA. THE OPPORTUNITIES WERE GI VEN BY AO TO ASSESSEE TO DEFEND ITS CASE. THE ASSESSEE HAS NOT SHOWN ITS INABILITY TO PRESENT ITS DEFENSE. HAVING TAKEN NOTE OF VARIOUS DECISIONS CITED ON BEHALF OF THE ASSESSEE, WE, HOWEVER, FIND THAT NONE OF THE DECISION COMPARES WITH A SITUATION IN HAND WHERE THE ALLEGAT ION HAD BEEN MADE ON BOTH COUNTS AND NOT IN ALTERNATIVE. IT IS NOT A CASE OF SITUATION OF AND/OR BUT CONTEMPLATE THE SITUATION WHERE THE NO N-DISCLOSURE OF INCOME IS PALPABLE. NEEDLESS TO SAY, THE OBSERVATI ONS OF THE COURTS ARE NEITHER TO BE READ AS EUCLIDS THEOREMS AND READ AS PROVISIONS OF THE STATUTE AND CANNOT BE APPLIED DE HORS THE FACTS OF THE GIVEN CASE. THE NON-INCLUSION OF INCOME IS OSTENSIBLE. THEREFO RE, TECHNICAL PLEA RAISED ON BEHALF OF THE ASSESSEE IN OUR CONSIDERED VIEW, CARRIES NO SUBSTANCE AND THEREFORE REJECTED. 8. WE NOW TURN TO THE DISCUSSION ON MERITS. ONE OF THE GROUNDS FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT IS TOWARDS NON DISCLOSURE OF VARIOUS AMOUNTS OF REMUNERATION AND I NTEREST FROM PARTNERSHIP FIRM M/S. SAGAR DEVELOPERS. IT WAS OBS ERVED BY THE AO THAT THE ASSESSEE HAS NOT DISCLOSED THE INCOME DERI VED FROM PARTNERSHIP FIRM BY WAY OF INTEREST AND REMUNERATIO N IN ITS RETURN OF INCOME FOR VARIOUS ASSESSMENT YEARS BETWEEN AY 2003 -04 TO 2009-10 TABULATED AS UNDER: ASSESSMENT YEAR REMUNERATION INTEREST TOTAL 2003-04 19812 46178 65990 2004-05 18015 54442 72457 2005-06 19630 63419 83049 2006-07 34916 73857 108773 2007-08 31914 78638 110552 2008-09 54194 67696 121890 2009-10 62220 85117 147337 ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 6 - 9. IT IS THE CASE ON BEHALF OF THE ASSESSEE THAT IT COULD NOT DECLARE THE SAID INCOME SINCE THE ASSESSEE WAS NOT FURNISHE D WITH THE COPY OF HIS ACCOUNT WITH THE SAID FIRM IN SPITE OF THE REPE ATED REQUEST ON ACCOUNT OF DIFFERENCES. IT WAS POINTED OUT THAT TH E ENTRIES TOWARDS REMUNERATION AND INTEREST WERE SIMPLY BEING CREDITE D TO THE ACCOUNT OF THE ASSESSEE WITHOUT ANY ACTUAL PAYMENT AND IT IS O NLY IN AY 2007-08, SOME AMOUNTS WERE PAID BY THE FIRM. IT IS THUS CLA IMED ON BEHALF OF THE ASSESSEE THAT IN THE ABSENCE OF SPECIFIC DETAIL S THE ASSESSEE WAS NOT IN A POSITION TO DECLARE THE AFORESAID INCOME. IN THIS REGARD, WE FIND THAT WHILE THE ADDITIONS IN THE QUANTUM PROCEEDINGS HAVE BEEN CONFIRMED, THE CO-ORDINATE BENCH ALSO NOTED THE CON TENTION OF THE ASSESSEE THAT IT WAS NOT AWARE OF SUCH INCOME ACCRU ED IN ITS HANDS. WE FIND THAT MITIGATING CIRCUMSTANCES EXIST FOR NOT INCLUDING THE INCOME TOWARDS REMUNERATION AND INTEREST FROM PARTN ERSHIP FIRM WHICH WERE NOT ACTUALLY RECEIVED. THE ASSESSEE HAS TAKEN CONSISTENT POSITION TOWARDS ITS LACK OF AWARENESS ON THE POINT. THEREF ORE, PENALTY TOWARDS SUCH ADDITION IN OUR VIEW IS NOT JUSTIFIED. THE OR DER OF THE CIT(A) ACCORDINGLY IS SET ASIDE ON THIS SCORE AND THE AO I S DIRECTED TO DELETE THE PENALTY IMPOSED ON ADDITION TOWARDS REMUNERATIO N AND INTEREST INCOME RECEIVED FROM PARTNERSHIP FIRM IN ALL THE AS SESSMENT YEARS IN APPEAL. 10. WE SHALL NOW ADVERT TO ANOTHER ADDITION TOWARDS INTEREST INCOME FROM FIXED DEPOSITS AND KISAN VIKASH PATRA. IT WAS THE CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT IT DESIRED TO SHOW THE INTEREST INCOME ON RECEIPT BASIS INSTEAD OF ON ACCRUAL BASIS. NOTW ITHSTANDING, THE ASSESSEE HAS FAILED TO DEMONSTRATE THAT THE INTERES T INCOME ON SUCH INVESTMENTS HAVE ACTUALLY BEEN ACCOUNTED FOR ON REC EIPT BASIS IN SUBSEQUENT ASSESSMENT YEAR. THE ASSESSEE HAS FAILE D TO SHOW ANY VALID REASONS BEFORE THE CO-ORDINATE BENCH IN QUANT UM PROCEEDINGS EITHER. THEREFORE, WE ARE NOT INCLINED TO INTERFER E WITH THE ORDER OF ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 7 - THE CIT(A) ON THIS SCORE. ACCORDINGLY, THE PLEA OF THE ASSESSEE FOR NON-IMPOSITION OF PENALTY OF INTEREST EARNED ON FIX ED DEPOSITS IS DECLINED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1875/AHD/2016 (AY 2004-05) 12. THE PENALTY IMPOSED BY THE REVENUE AUTHORITIES TOWARDS ADDITION ON ACCOUNT OF INTEREST AND REMUNERATION RE CEIVED FROM M/S. SAGAR DEVELOPERS IS DELETED IN PARITY WITH THE DISC USSIONS IN EARLIER PARAGRAPHS. 13. THE PENALTY ON INTEREST INCOME EARNED ON FIXED DEPOSITS AND KISAN VIKASH PATRA IS SUSTAINED IN PARITY WITH AY 2 003-04 (SUPRA). 14. THE PENALTY IN THE INSTANT ASSESSMENT YEAR HAS ALSO BEEN IMPOSED BY THE REVENUE AUTHORITIES ON ADDITION OF RS.4,93,0 00/- AS A RESULT OF MATERIAL IMPOUNDED DURING SEARCH. A READING OF THE ORDER OF THE APPELLATE TRIBUNAL IN QUANTUM PROCEEDINGS IN ITA NO .182/AHD/2013 ORDER DATED 09.06.2017 SHOWS THAT THE ASSESSEE HAD CATEGORICALLY ADMITTED THE CONTENTS OF LOOSE PAPER (ANNEXURE 2 PA GE NO.20) IN A STATEMENT UNDER S.132(4) OF THE ACT FOUND AT THE TI ME OF SEARCH AS RELATED TO HIM. IT WAS THUS OBSERVED BY THE CO-ORD INATE BENCH THAT THE CLAIM OF THE ASSESSEE THAT LOOSE SHEET DOES NOT BEL ONG TO THE ASSESSEE AS WITHOUT ANY CREDENCE. THE ALTERNATIVE CLAIM OF PEAK CREDIT BASIS WAS ALSO DENIED DUE TO FAILURE OF THE ASSESSEE TO D EMONSTRATE THE RELEVANT FACTUAL ASPECTS. WE ALSO NOTICE THAT THE ASSESSEE HAS NOT READILY ACCEPTED THE ADDITION BUT HAS CONTESTED WIT HOUT ANY SUCCESS. IN PARITY WITH THE CLEAR OBSERVATION OF THE CO-ORDI NATE BENCH IN QUANTUM PROCEEDINGS, IT CLEARLY FOLLOWS THE ASSESSE E CANNOT ESCAPE THE CLUTCHES ON PENALTY ON ADDITION MADE BASED ON TANGI BLE EVIDENCES ITA NOS. 1874 TO 1880/AHD/16 [RAJAN DILIPBHAI DESAI ] A.YS. 2003-04 TO 2009-10 - 8 - FOUND IN THE COURSE OF SEARCH. THUS, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) SUSTAINING THE PENALTY IN THIS REGARD. 15. ALL OTHER CAPTIONED APPEALS OF THE ASSESSEE FOR AYS 05-06 TO 09- 10 ALSO, THE ASSESSEE SEEKS RELIEF FROM IMPOSITION OF PENALTY PROCEEDINGS ON SIMILAR ADDITION NAMELY; (I) INTERES T AND REMUNERATION FROM PARTNERSHIP FIRM SAGAR DEVELOPERS, (II) INTERE ST INCOME FROM FIXED DEPOSITS ETC. AND (III) ADDITIONS MADE AS PER THE LOOSE SHEET FOUND IN THE COURSE OF SEARCH. OUR OBSERVATIONS IN AY 2003-04 AND 2004-05 WOULD APPLY MUTATIS MUTANDI TO ALL OTHER APPEALS. ACCORDINGLY, THE PENALTY IMPOSED ON REMUNERATION AN D INTEREST FROM SAGAR DEVELOPERS IS DIRECTED TO BE DELETED WHEREAS NO INTERFERENCE IS MADE WITH THE IMPOSITION OF PENALTY MADE ON OTHER A DDITIONS. 16. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 16/10/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- & / REVENUE 2 / ASSESSEE ( ) *+ , / CONCERNED CIT 4 ,- / CIT (A) / 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7 289 : / GUARD FILE. BY ORDER / 4 / 5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 16/10/2018