JITENDRA VIRJI THAKKAR, MUMBAI V. ACIT, CENTRAL CIRCLE-1, THANE

ITA 1945/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6844 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: V C SHAH
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH , JM & SHRI M.BALAGANESH, AM ITA NO S . 1945/MUM/2018 & 1946 /MUM/201 8 ( ASSESSMENT YEAR : 2011 - 12 & 2012 - 13 ) SHRI JITENDRA VIRJI THAKKAR 402, VIHANG VIHAR APT NEAR GAUTA M PARK PANCHPAKHADI THANE 0W) - 400 602 VS. ACIT, CENTRAL CIRCLE - 1 ROOM NO.10, A WING 6 TH FLOOR, ASHAR IT PARK ROAD NO.16 - Z, WAGLE INDUSTRIAL ESTATE, THANE(W) 400 604 PAN/GIR NO. AARPT1761C (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI V.C. SHAH RE VENUE BY SHRI RAJEEV GUBGOTRA DATE OF HEARING 18 / 07 /2019 DATE OF PRONOUNCEMENT 26 / 07 /2019 / O R D E R PER M. BALAGANESH (A.M) : ITA NO.194 5 /MUM/2018 (A.Y.2011 - 12) TH IS APPEA L IN ITA NO. 1945/MUM/2018 FOR A.Y. 2011 - 12 ARISE S OUT O F THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 11, PUNE IN APPEAL NO. PN/CIT(A) - 11/ACIT CEN CIR - 1/THN/799/2014 - 15 DATED 31/01/2018 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE I.T ACT IN THE SUM OF RS . 92,700/ - ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 2 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C ) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF BROKER FOR FOOD GRAINS AND ALSO ENGAGED IN CONSTRUCTION ACTIVITIES. THERE WAS A SEARCH ACTION CARRIED OUT IN THE PREMISES OF THE ASSESSEE ON 22.2.2012. PURSUANT TO THE SEARCH, THE ASSESSEE AND HIS FAMILY MEMBERS DECLARE D RS 1.11 CRORES AS ADDITIONAL INCOME VIDE LETTER DATED 16.5.2012 ADDRESSED TO THE ADDITIONAL DIRECTOR OF INCOME TAX (INV.) THANE. OUT OF THE SAID DECLARATION, RS 3 LAKHS WAS OFFERED IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE ASSE SSEE IN RESPONSE TO NOTICE U/S 153A OF THE ACT FILED HIS RETURN OF INCOME ON 12.3.2014 DECLARING TOTAL INCOME OF RS 11,01,903/ - WHICH WAS INCLUSIVE OF ADDITIONAL INCOME OF RS 3,00,000/ - DECLARED DURING THE COURSE OF SEARCH. THE ASSESSEE HONOURED THE DEC LARATION MADE U/S 132(4) OF THE ACT DURING THE COURSE OF SEARCH AND PAID THE TAXES DUE THEREON. THE LD AO IN THE QUANTUM ASSESSMENT ORDER IN PARA 4 SPECIFICALLY RECORDED THE FACT THAT THE ASSESSEE HAD DECLARED AN ADDITIONAL AMOUNT OF RS 3,00,000/ - WHICH IS REFLECTED IN THE RETURN OF INCOME. IN RESPECT OF THIS SUM OF RS 3,00,000/ - WHICH WAS OFFERED AS ADDITIONAL INCOME BY THE ASSESSEE PURSUANT TO THE SEARCH, THE LD AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT BY ISSUING NOTICE U/S 274 OF T HE ACT ON 21.03.2014 WHEREIN HE DID NOT STRUCK OFF THE RELEVANT PORTION BY MENTIONING THE SPECIFIC CHARGE OF OFFENCE COMMITTED BY THE ASSESSEE I.E WHETHER THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOM E. THE LD AO FINALLY LEVIED PENALTY U/S 271(1)(C ) OF THE ACT FOR THE ASST YEAR 2011 - 12 IN THE SUM OF RS 92,700/ - FOR THE ADDITIONAL INCOME MADE PURSUANT TO THE SEARCH ACTION IN THE SUM ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 3 OF RS 3,00,000/ - . THE LEVY OF PENALTY WAS CONFIRMED BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT PURSUANT TO THE SEARCH ACTION, THE ASSESSEE AND HIS FAMILY MEMBERS HAD GIVEN DECLARATION U/S 132(4) OF THE ACT DURING SEARCH OFFERING TOTA L SUM OF RS 1.11 CRORES AS ADDITIONAL INCOME. IT IS NOT IN DISPUTE THAT OUT OF THE SAID SUM OF RS 1.11 CRORES, A SUM OF RS 3 LAKHS PERTAINS TO THE ASSESSEE FOR THE ASST YEAR 2011 - 12. IT IS NOT IN DISPUTE THAT THE SAID SUM OF RS 3 LAKHS WAS DULY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND TAXES DUE THEREON WERE PAID. THERE WAS NO ADDITION MADE IN THE SUM OF RS 3 LAKHS BY THE LD AO IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT. WE FIND THAT THE LD A R BEFORE US HAD RAISED A PRELIMINARY OBJECTION THAT THE PENALTY NOTICE U/S 274 READ WITH SECTION 271(1)(C ) OF THE ACT ITSELF IS DEFECTIVE FOR NON - STRIKING OFF THE RELEVANT PORTION THEREON. WE FIND FROM THE PERUSAL OF THE SAID PENALTY NOTICE ENCLOSED IN PAGE 10 OF THE PAPER BOOK THAT THE LD AO HAD NOT STRUCK OFF THE RELEVANT PORTION AND HAD NOT SPECIFICALLY MENTIONED THE CHARGE OF OFFENCE COMMITTED BY THE ASSESSEE I.E WHETHER THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THIS ISSUE IS ALREADY DECIDED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RADHAKRISHNA ROADWAYS PVT LTD VS ACIT IN ITA NO. 3728/MUM/2017 DATED 14.3.2019 WHEREIN IT WAS HELD AS UNDER: - WE HAVE HEARD THE RIVAL SUBMISS IONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE VARIOUS DECISION CITED BY THE LEARNED AR. THE UNDISPUTED FACTS ARE THAT THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT INITIATED THE PENALTY U/S 271(1)(C ) OF THE ACT WITHOUT MENTION IN G WHETHER THE SAME RELATES TO CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME. SIMILARLY, WHEN THE NOTICE U/S 271(1) (C) WAS ISSUED ON 28.03.2013 THE SAME WAS ISSUED IN MECHANICAL ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 4 MANNER WITHOUT STRIKING OFF IR RELEVANT LIMB AND THEREFORE THERE WAS NO APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. EVEN IN THE ORDER IMPOSING PENALTY, THE ASSESSING OFFICER MENTIONED BOTH LIMBS. IN OUR VIEW IT IS MANDATORY ON THE PART OF THE ASSESSING OFFICER TO SPECIFIC ALLY STATE THE PARTICULAR CHARGE ON WHICH PENALTY IS PROPOSED TO BE LEVIED AND NON - STRIKING OFF OF THE IRRELEVANT LIMB WILL GO TO THE ROOT OF JURISDICTION OF THE ASSESSING OFFICER TO PASS PENALTY ORDER. IN THE CASE OF MANJUNATH COTTON & GINNING FACTORY (S UPRA) AND M/S SSAS EMERALD MEADOWS, ITA NO. 38 OF 2015 DATED 23.11.2015 , IT HAS BEEN HELD THAT NO PENALTY CAN BE IMPOS E D WHERE ONE OF THE TWO LIMBS I.E CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ON WHICH PENALTY WAS PROP OSED TO BE IMPOSED IS NOT MENTIONED. IN THE CASE OF M/S SSAS EMERALD MEADOWS (SUPRA) SLP FILED IN HONBLE SUPREME COURT BY THE DEPARTMENT HAS ALSO BEEN DISMISSED. IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA) HONBLE BOMBAY HIGH COURT HAS HELD THAT PENA LTY TO BE IMPOSED ON THE GROUND / LIMB ON WHICH PENALTY HAS BEEN INITIATED. THUS, IN VIEW OF THE RATIO LAID DOWN BY VARIOUS COURTS AND JUDICIAL FORUMS, WE ARE OF THE VIEW THAT PENALTY ORDER IS BAD IN LAW. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DE LETE THE PENALTY. 4.1. WE FIND THAT THE HONBLE TELANGANA & ANDHRA PRADESH HIGH COURT IN PCIT VS SMT BAISETTY REVATHI REPORTED IN 398 ITR 88 ALSO HELD THAT WHEN PENALTY PROCEEDINGS ARE SOUGHT TO BE INITIATED BY THE REVENUE U/S 271(1)(C ) OF THE ACT, THE SPECIFIC GROUND WHICH FORMS THE FOUNDATION, THEREFORE, HAS TO BE SPELT OUT IN CLEAR TERMS. OTHERWISE, AN ASSESSEE WOULD NOT HAVE PROPER OPPORTUNITY TO PUT FORTH HIS DEFENSE . WHEN THE PROCEEDINGS ARE PENAL IN NATURE, RESULTING IN IMPOSITION OF PENALTY RA NGING FROM 100% TO 300% OF THE TAX LIABILITY, THE CHARGE MUST BE UNEQUIVOCAL AND UNAMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF, THE REVENUE MUST SPECIFY AS TO WHICH ONE OF THE T WO IS SOUGHT TO BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTERJECTING ONE OR BETWEEN THE TWO. 4.2. RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS, WE DIRECT THE LD AO TO DELETE THE PENALTY LEVIED U/S 271(1)(C ) OF THE AC T IN THE SUM OF ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 5 RS 92,700/ - FOR THE ASST YEAR 2011 - 12. IN VIEW OF THIS DECISION, THE OTHER ARGUMENTS ADVANCED BY THE COUNSELS FOR BOTH THE SIDES NEED NOT BE LOOKED INTO. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASST YEAR 2011 - 12 ARE ALLOWE D. ITA NO.1946/MUM/2018 (A.Y.2012 - 13) 5. NOW LET US TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO. 1946/MUM/2018 FOR A.Y. 2012 - 13 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 11, PUNE IN APPEAL NO. PN/CIT(A) - 11/ACIT CEN CIR - 1/T HN/801/2014 - 15 DATED 26/12/2017 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF IMPOSITION OF PENALTY U/S. 271AAA OF THE I.T. ACT IN THE SUM OF RS 4,80,000/ - . 6. THE BRIEF FACTS OF THIS ISSUE ARE THAT THERE WAS A SEARCH ACTION CARRIED OUT IN THE PREMISES OF TH E ASSESSEE ON 22.2.2012. PURSUANT TO THE SEARCH, THE ASSESSEE AND HIS FAMILY MEMBERS DECLARED RS 1.11 CRORES AS ADDITIONAL INCOME VIDE LETTER DATED 16.5.2012 ADDRESSED TO THE ADDITIONAL DIRECTOR OF INCOME TAX (INV.) THANE. OUT OF THE SAID DECLARATION, RS 48 LAKHS WAS OFFERED IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE IN RESPONSE TO NOTICE U/S 153A OF THE ACT FILED HIS RETURN OF INCOME ON 12.3.2014 DECLARING TOTAL INCOME OF RS 56,97,815/ - WHICH WAS INCLUSIVE OF ADDITIONAL INCOME OF RS 48,00,000/ - DECLARED DURING TH E COURSE OF SEARCH. THE ASSESS EE HONOURED THE DECLARATION MADE U/S 132(4) OF THE ACT DURING THE COURSE OF SEARCH AND PAID THE TAXES DUE THEREON. THE LD AO OBSERVED THAT THE ASSESSEE IN THE INSTANT CASE HAD: A ) MADE A DECLARATION U/S 132(4) OF THE ACT AT THE TIME OF SEARCH MAKING DISCLOSURE OF ADDITIONAL INCOME OF RS 48 LAKHS FOR THE ASST YEAR 2012 - 13. ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 6 B) PAID THE TAXES DUE THEREON WITH INTEREST 6.1. HE OBSERVED THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED BY THE ASSESSEE. HENCE THE CUMULATIVE CONDITIONS PRESCRIBED U/S 271AAA(2) OF THE ACT DOES NOT GET FULFILLED. ACCORDINGLY, THE LD AO LEVIED PENALTY U/S 271AAA OF THE ACT FOR THE ASST YEAR 2012 - 13 IN THE SU M OF RS 4,80,000/ - WORKED OUT AT 10% OF UNDISCLOSED INCOME OF RS 48 LAKHS. THIS PENALTY WAS CONFIRMED BY THE LD CITA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT PURSUANT TO THE SE ARCH ACTION, THE ASSESSEE AND HIS FAMILY MEMBERS HAD GIVEN DECLARATION U/S 132(4) OF THE ACT DURING SEARCH OFFERING TOTAL SUM OF RS 1.11 CRORES AS ADDITIONAL INCOME. IT IS NOT IN DISPUTE THAT OUT OF THE SAID SUM OF RS 1.11 CRORES, A SUM OF RS 48 LAKHS PER TAINS TO THE ASSESSEE FOR THE ASST YEAR 2012 - 13. IT IS NOT IN DISPUTE THAT THE SAID SUM OF RS 48 LAKHS WAS DULY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT AND TAXES DUE THEREON WERE PAID. THERE WAS N O ADDITION MADE IN THE SUM OF RS 48 LAKHS BY THE LD AO IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT. WE FIND THAT THE ONLY GRIEVANCE OF THE REVENUE SEEMS TO BE THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE MANNER OF DERIVING THE UNDISCLOSED INCOME AT THE TIM E OF SEARCH OR AT THE TIME OF QUANTUM ASSESSMENT PROCEEDINGS OR PENALTY PROCEEDINGS U/S 271AAA OF THE ACT. WE FIND THAT THE ASSESSEE BEFORE THE LD CITA VIDE LETTER DATED 13.12.2017 HAD SUBSTANTIATED THE MANNER OF DERIVING THE UNDISCLOSED INCOME BY STATING THAT THE SAME WAS DERIVED OUT OF UNACCOUNTED CASH RECEIPTS FROM BROKERAGE AND BUILDER BUSINESS. THERE IS NO DISPUTE WITH REGARD TO THE FACT OF ASSESSEE CARRYING ON THE BUSINESS OF BROKER AND BUILDER. IT IS NOT THE CASE OF THE REVENUE THAT THE SAID ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 7 UNDIS CLOSED INCOME OF RS 48 LAKHS WAS DERIVED FROM ANY OTHER SOURCE OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE ONLY SOURCE OF INCOME FOR THE ASSESSEE COULD BE ONLY FROM HIS BUSINESS WHICH ASSESSEE HAD ALSO STATED BEFORE THE LD CITA. HENCE THE MANNER OF DERI VING THE UNDISCLOSED INCOME STOOD SUBSTANTIATED. WE HAVE ALSO GONE THROUGH THE STATEMENT RECORDED ON OATH FROM THE ASSESSEE AT THE TIME OF SEARCH ON 22.2.2012 WHEREIN WE FIND THAT NO QUESTIONS WERE POSED TO THE ASSESSEE ASKING HIM TO SUBSTANTIATE THE MANN ER OF DERIVING THE UNDISCLOSED INCOME OFFERED BY HIM. HENCE THE ASSESSEE CANNOT BE FAULTED WITH IN THIS REGARD BY REFUSING THE IMMUNITY PROVIDED TO HIM IN THE STATUTE. THE ASSESSEE COULD BE EXPECTED TO ANSWER THE QUESTIONS THAT WERE PUT TO HIM AT THE TI ME OF SEARCH BY THE SEARCH PARTY. THE ASSESSEE CANNOT BE EXPECTED TO KNOW THE INTRICACIES OF THE INCOME TAX LAWS. WE FIND THAT THE ASSESSEE VIDE LETTER DATED 16.5.2012 HAD MADE A DUE DISCLOSURE U/S 132(4) OF THE ACT BEFORE THE ADDITIONAL DIRECTOR OF INCOM E TAX (INV.) THANE AND HAD DULY ADHERED TO THE SAID DECLARATION BY OFFERING THE SAME IN THE RETURN OF INCOME AND BY PAYING DUE TAXES THEREON WITH APPLICABLE INTEREST. WE FIND THAT THE LD CITA HAD WRONGLY RELIED ON THE REPLY TO QUESTION NO.7 GIVEN BY THE AS SESSEE AT THE TIME OF RECORDING STATEMENT ON 22.2.2012. WE FIND THAT IN THE SAID QUESTION, THE ASSESSEE WAS ONLY ASKED TO EXPLAIN THE SOURCE OF PROPERTIES OWNED BY HIM. WE FIND THAT EVEN IN THE POST SEARCH PROCEEDINGS OR IN THE COURSE OF ASSESSMENT PROCE EDINGS OR PENALTY PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE MANNER OF DERIVING THE UNDISCLOSED INCOME OF RS 48 LAKHS. WE FIND THAT THE LD AR RIGHTLY PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS EMIRATES TECHNOLOGIES PVT LTD REPORTED IN 399 ITR 189 (DEL) WHEREIN IT WAS HELD THAT IN ABSENCE OF QUERY ABOUT THE MANNER IN WHICH UNDISCLOSED INCOME WAS DERIVED AND ABOUT ITS SUBSTANTIATION, THE LD AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 271AAA OF THE ACT ESP ECIALLY ITA NO. 194 5 & 1946 /MUM/2018 SHRI JITENDRA VIRJI THAKKAR 8 WHEN THE OTHER TWO CONDITIONS FOR CLAIMING IMMUNITY UNDER SUB - SECTION (2) OF SECTION 271AAA VIZ OFFERING THE UNDISCLOSED INCOME IN THE RETURN AND PAYING TAXES THEREON HAD BEEN FULFILLED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE INCLINED TO HO LD THAT THE ASSESSEE IS ENTITLED FOR IMMUNITY PROVIDED U/S 271AAA(2) OF THE ACT AND ACCORDINGLY DIRECT THE LD AO TO DELETE THE PENALTY LEVIED IN THE SUM OF RS 4,80,000/ - . 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRO NOUNCED IN THE OPEN COURT ON THIS 26 / 07 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 26 / 07 / 2019 KARUNA , SR.PS COPY OF THE O RDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//