RAMESH VALLABHDAS KAPADIA, MUMBAI V. ITO 25(2)(4), MUMBAI

ITA 1892/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3795 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Earning of tax free income
• Section: 143(3); 133(6); 68; 144

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H, MUMBAI ! . '# , % &'( & BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM & ./I.T.A. NO.1891/M/2012 (AY:2003-04) & ./I.T.A. NO.1892/M/2012 (AY:2004-05) SHRI RAMESH VALLABHDAS KAPADIA, C/O. M/S. SUPREME ENTERPRISES, A-6, MOTINAGAR, ROSHAN NAGAR LANE, BORIVALI (W), MUMBAI-400092. / VS. INCOME TAX OFFICER-25(2)(4), MUMBAI. () % & ./PAN : AIFPK 0277 Q ( )* /APPELLANT) .. ( +,)* / RESPONDENT) )* - . & / APPELLANT BY : SHRI D.V. LAKHANI +,)* - . & / RESPONDENT BY : SHRI MANOJ KUMAR, CIT-DR & - /% /DATE OF HEARING : 10.4.2013 01 - /% /DATE OF PRONOUNCEMENT : 15.5.2013 '2 '2 '2 '2 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH OF THEM ARE FILED BY THE ASSESSEE AGAINST THE TWO SEPARATE ORDERS OF CIT (A) -35, MUMBAI COMMONLY DATED 23.1.2012 FOR THE AYS 2003-04 AND 2004-05. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS ARE CLUBBED AND DISPOSED OF IN THIS CONSOLI DATED ORDER. 2. IN BOTH THE APPEALS, ASSESSEE RAISED THE SIMILAR GROUNDS AND THE ONLY VARIATION IS IN FIGURES RELATING TO THE AMOUNT OF P ENALTY LEVIED. THEREFORE, WE SHALL TAKE UP THE GROUNDS RAISED IN THE APPEAL FOR THE YE AR 2003-04 WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE APPELLANTS PRAYS THAT THE PENALTY LEVIED U/S 271(1)(C) AT RS. 28,547/- MA Y BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT PRAYS THAT THE LD ASSESSING OFFICER AS WELL AS THE LD CIT (A) HAS IGN ORED THE FACTS AND ERRONEOUSLY HAS 2 HELD THAT THE APPELLANT HAS FURNISHED INACCURATE PA RTICULARS OF INCOME. THE CONCLUSION REACHED BY BOTH THE AUTHORITIES IS NOT JUSTIFIED. 3. THE APPELLANT PRAYS THAT PENALTY LEVIED U/S 271( 1)(C) AT RS. 28,547/- MAY BE DELETED. 3. THE ISSUE RAISED IN THE GROUNDS RELATES TO THE P ENALTY LEVIED U/S 271(1)(C) OF THE ACT IN RESPECT OF THE AGRICULTURAL INCOME CLAIM ED IN THE RETURNS BY THE ASSESSEE IE FOR THE AY 2003-04 AMOUNTING TO RS. 3,62,400/- A ND FOR THE AY 2004-05 OF RS. 4,66,000/-. 4. WE SHALL TAKE UP THE FACTS RELEVANT FOR THE AY 2 003-04 FOR THE SAKE OF CONVENIENCE. ASSESSEE IS A PROPRIETOR OF M/S. SUPR EME ENTERPRISES, ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS, STEEL, TEXTILE ET C. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 58,315/- A ND REPORTED EXEMPT AGRICULTURAL INCOME OF RS. 3,62,400/-. AO COMPLETED THE EX-PARTE ASSESSMENT U/S 144 R.W.S 143(3) OF THE ACT DETERMINING THE TOTAL I NCOME AT RS. 3,09,690/-. DURING THE ASSESSMENT PROCEEDINGS, AO TREATED THE AGRICULT URAL INCOME TO THE EXTENT OF RS. 1,81,200/- (50% OF THE ORIGINAL CLAIM) AS UNEXPLAIN ED CASH CREDIT U/S 68 OF THE ACT. MATTER TRAVELLED TO THE TRIBUNAL WHO PASSED AN ORDE R VIDE ITA NO.4252/M/2006 DATED 20.7.2007 RESTORING THE MATTER TO THE FILES O F THE AO FOR FRESH ASSESSMENT. IN THE SET ASIDE ASSESSMENT DATED 4.9.2008, AO REPEATE D THE SAME ADDITIONS IE TREATING 50% OF THE CLAIM OF THE AGRICULTURAL INCOM E AS AN NON-EXEMPT INCOME. HOWEVER, IN THE FIRST APPELLATE PROCEEDINGS FOR THE SECOND TIME, THE CIT (A) GRANTED PART RELIEF TO THE ASSESSEE BY CONSIDERING ONLY RS. 1,29,000/- AS THE NON-EXEMPT INCOME AGAINST RS. 1,81,000/- ADDED BY THE AO. LAT ER DURING THE PROCEEDINGS BEFORE ITAT, ON MERITS OF SAID ADDITION, NON-EXEMPT INCOME IS PLACED AT RS. 90,600/- IE 25% OF THE ORIGINAL CLAIM MADE IN THE RETURN OF INCOME AND THUS, 75% OF THE CLAIM WAS ALLOWED AS AGRICULTURAL INCOME. IN RESPEC T OF THIS ADDITION, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED AND LEVIED AMOUNTING TO RS. 28,547/- IE 100% OF THE TAX SOUGHT TO BE EVADED. 4.1. SIMILARLY, FOR THE AY 2004-05, 25% OF AGRICULT URAL INCOME OF RS.4,66,600/- (RS. 1,16,650/-) CLAIMED IN THE RETURN WAS HELD AS NON-AGRICULTURAL INCOME AND THE 3 PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED IN RESP ECT OF THE SAID AMOUNT OF RS. 1,16,650/-. THE PENALTY WORKED OUT TO RS. 36,745/- . 5. THE PENALTY ORDERS ARE CHALLENGED BEFORE THE CIT (A). DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) CONFIRMED THE PENALTY LEVIED U /S 271(1)(C) OF THE ACT FOR BOTH THE ASSESSMENT YEARS IE 2003-04 AND 2004-05. CIT ( A) IS OF THE OPINION THAT THE EXEMPT AGRICULTURAL INCOME CLAIMED IN THE RETURNS I S ON HIGHER SIDE CONSIDERING THE LOW AGRICULTURE HOLDING OF THE ASSESSEE. HE HELD TH AT THE ASSESSEE FAILED TO PROVE THAT HE HAS NO MENS REA TO EVADE THE TAX. 6. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A), THE ASSESSEE FILED THE INSTANT APPEALS BEFORE US. DURING THE PROCEEDINGS BEFORE US , SHRI D.V. LAKHANI, LD COUNSEL FOR THE ASSESSEE ARGUED STATING THAT THE LAND IS LO CATED AT BAGWADA IN VALSAD DISTRICT OF GUJARAT AND IT IS A VERY FERTILE LAND. ASSESSEE HAS GROWN FRUITS IN THE SAID AGRICULTURAL LAND AND VALUE OF THE SAID FRUITS IS VERY HIGH WHEN SOLD IN THE OPEN MARKET. HE ALSO MENTIONED THAT THE EXERCISE OF VER IFICATION WAS UNDERTAKEN BY THE AO INVOKING THE PROVISIONS OF SECTION 133(6) OF THE ACT AND PARTIES HAVE CONFIRMED THE PURCHASING OF THE AGRICULTURAL PRODUCE. IN THIS REGARD, LD COUNSEL BROUGHT OUR ATTENTION TO PAGE 15 TO 23 OF THE PAPER BOOK, WHERE MR. PREMJI HIRJIBHAI NAYAKA CONFIRMED THE PAYMENT OF THE MONEY TO THE ASSESSEE IN THE CAPACITY OF FRUIT CONTRACTOR. FURTHER, LD COUNSEL MENTIONED THAT ASSE SSEE HAS FURNISHED THE EVIDENCES TO THE TUNE OF NEARLY 80% OF THE RECEIPTS; THEREFORE, THE CLAIM MADE BY THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY THE REVEN UE IN FULL. FURTHER, RELYING ON THE ORDER OF THE TRIBUNAL ON MERITS, LD COUNSEL MEN TIONED THAT IT IS MERELY A CASE OF ESTIMATIONS WHILE THE AO HAS ALLOWED THE CLAIM TO THE TUNE OF 50%, THE TRIBUNAL AGAIN ON THE BASIS OF THE ESTIMATIONS ALLOWED THE A GRICULTURAL INCOME @ 25% OF THE ORIGINAL CLAIM MADE IN THE RETURN IN BOTH THE ASSES SMENT YEARS. ALL THESE PERCENTAGES ADOPTED BY THE AUTHORITIES SUFFER FROM LACK OF SOUND AND SUSTAINABLE BASE AND THEY ARE MERELY AUTHORITY CENTRIC AND NO E VIDENCE WHAT SO EVER EXISTS TO SUPPORT THE ESTIMATIONS. FURTHER, LD COUNSEL MENTIO NED THAT PENALTY PROCEEDINGS ARE SEPARATE AND DISTINGUISHABLE FROM THAT OF THE APPEA L ON MERITS. HE RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF COMMISSIONER OF INCOME- 4 TAX VS AERO TRADERS P. LTD. (DEL) 322 ITR 316 FOR THE PROPOSITION THAT PENALTY CANNOT BE ATTRACTED TO THE ADDITIONS MADE ON ESTIMA TION BASIS. HE WAS ALSO MENTIONED THAT THERE IS NO INCRIMINATING EVIDENCES AGAINST THE ASSESSEE TO DEMONSTRATE THAT ASSESSEE INITIALLY INFLATED THE AG RICULTURAL INCOME CLAIMED. HE ALSO BROUGHT OUR ATTENTION TO THE FACT THAT THERE IS NO DISPUTE ABOUT THE AGRICULTURAL HOLDING. 7. ON THE OTHER HAND, LD DR MENTIONED THAT IT IS NO T MERELY A CASE OF ESTIMATION AND ASSESSEE HAS INTENTION TO CLAIM THE HIGHER AGRI CULTURAL INCOME WITH AN ULTERIOR MOTIVE. HE ALSO MENTIONED THAT PENALTY CAN BE LEVIE D IN CASES OF ESTIMATIONS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE U S IN RESPECT OF BOTH THE APPEALS, WHERE THE ISSUES ARE COMMON. FROM THE DISCLOSURE P OINT OF VIEW, IT IS NOTICED THAT THE DISALLOWANCE IS MADE BY THE AO OUT OF THE CLAIM S OF AGRICULTURAL INCOME MADE IN THE RETURNS. WHILE THE AO ON ESTIMATION BASIS HELD THAT THE SAID CLAIM IS INFLATED ONE AND RESTRICTED THE ALLOWANCE OF NON-EXEMPT INCOME T O THE EXTENT OF 50% OF THE CLAIM, THE TRIBUNAL FURTHER RESTRICTED TAXABLE INCO ME TO ONLY 25% OF THE CLAIM. AS THERE IS NO INCRIMINATING MATERIAL IN POSSESSION OF THE AO TO DEMONSTRATE THAT THE ASSESSEE HAS INTENTION OF INFLATING THE EXEMPT AGRICULTURAL INCOME. IT IS ALSO A FACT THAT IN BOTH THE APPEALS 25% OF THE CLAIM IS C OMMONLY TAKEN AS NON-AGRICULTURAL INCOME, WHICH SUGGEST THE AD-HOCISM IN QUANTIFYING THE INFLATION IN THE CLAIMS OF AGRICULTURAL INCOME AND CONSEQUENT EFFECTS ON THE I MPUGNED PENALTY IN BOTH THE AYS. CONSIDERING THE FACT THAT THE ASSESSEE UNDISPU TEDLY POSSESS AGRICULTURAL HOLDING OF AROUND 4 ACRES, WHICH IS LOCATED AT AN ARABLE AN D FERTILE LANDS AND THE ASSESSEE HAS DIRECT EVIDENCE TO SUPPORT THE MARKETING OF THE AGRICULTURAL PRODUCE TO THE THIRD PARTY, AND ALSO CONSIDERING THE FACT THAT THE THERE IS NO DIRECT INCRIMINATING MATERIAL AGAINST THE ASSESSEE FOR DEMONSTRATING THE INTENTIO N OF MAKING INFLATED CLAIM OF AGRICULTURAL INCOME IN THE RETURN, WE ARE OF THE OP INION, THE ALLEGATION OF CONCEALMENT IS UNJUSTIFIED. IN OUR OPINION, AO/CIT( A)/ ITAT HAVE ONLY QUANTIFIED THE ALLEGED INFLATION PREDOMINANTLY BASED ON THE PRINCI PLE OF ADHOCISM, WHICH MAY BE SUSTAINABLE IN QUANTUM APPEAL AND CERTAINLY NOT IN MATTERS OF PENALTY PROCEEDINGS. 5 THEREFORE, ESSENTIALLY CONSIDERING THE DISCLOSURE I N THE RETURNS OF INCOME AND ALSO THE ABSENCE OF ANY DIRECT INCRIMINATING EVIDENCE AG AINST THE ASSESSEE, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE OF PENALTY U/S 271(1(C) OF THE ACT IN BOTH THE ASSESSMENT YEARS. ACCORDINGLY, GROUNDS RAISED BY T HE ASSESSEE IN BOTH THE APPEALS ARE ALLOWED . 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSE SSEE ARE ALLOWED . 3 /4 5 63/ - ( 7 / - 8/ 9 ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. . '2 - 01 % :'4 15.5.2013 - ; SD/- SD/- (D. MANMOHAN) (D. KARUNAKARA RAO) /VICE PRESIDENT % &'( / ACCOUNTANT MEMBER MUMBAI; :' 15.5.2013. . 5 . & ./ OKK , SR. PS '2 - +5/<= >=1/ /COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. = @; +5/5 , , / DR, ITAT, MUMBAI 6. ;!6 A / GUARD FILE. &,=/ +5/ //TRUE COPY// '2 & '2 & '2 & '2 & / BY ORDER, / & & & & 8 8 8 8 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI