Sureshbhai Makanshi Gadesha, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 203/RJT/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6617 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY , MEMBER ITA NO S . 203 & 204 / RJT /201 3 : ASS T. YEAR S : 2004 - 05 & 2005 - 06 SURESHBHAI MAKANSHI GADESHA C/O. D.R. ADHIA, OM SHRI PADMALAYA , BESIDE TRIKAMRAIJI HAWELI, OPP. HOTEL IMPERIAL PALACE, 16, JAGNATH PLOT, DR. YAGNIK ROAD, RAJKOT (APPELLANT) PAN : AGHPG5642F VS ITO, WARD - 5(2), RAJKOT (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY : SMT. USHA SHROTE, DR DATE OF HEARING : 2 3 /0 3 /201 7 DATE OF PRONOUNCEMENT : 24 /0 3 /201 7 O R D E R PER K. NAR A SIMHA CHARY, MEMBER, JM : THE ABOVE APPEALS ARE FILED BY THE ASSESSEE CHALLENGING THE CONFIRMATION OF PENALTY BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - IV, RAJKOT (FOR SHORT HEREINAFTER REFERRED TO AS LD. CIT(A) ) DATED 28.2.2013 IN APPEAL NOS.CIT(A) - IV/0249/10 - 11 & CIT(A) - IV/0251/10 - 11 FOR ASSESSMENT YEAR 2004 - 05 & 2005 - 06 RESPECTIVELY. 2 SURESHBHAI MAKANSHI GADESHA ITA NOS. 203 & 204/RJT/2013 2. SINCE THE I SSUE INVOLVED IN BOTH THE APPEALS IS ONE AND THE SAME, TH ESE TWO APPEALS ARE DISPOSED OF BY THIS COMMON ORDER WITH REFERENCE TO THE FACTS RELATING TO ASSESSMENT YEAR 2004 - 05. 3 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM M/S. GANESH SOAP & CHEMICAL INDUSTRIES, VERAVAL, RAJKOT AND DURING THE ASSESSMENT YEAR IN THE COURSE OF ASSESSMENT PROCEEDINGS U/S 144 OF THE INCOME TAX ACT, 1961 (FOR SHOR T HEREINAFTER REFERRED TO AS THE ACT ), THE ASSESSING OFFICER FOUND THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME, AS SUCH INITIATED PENALTY PROCEEDINGS FOR SUCH CHARGE U/S 271(1)(C) OF THE ACT. AFTER ISSUING NOTICE AND HEARING THE ASS ESSEE, THE ASSESSING OFFICER FOUND THAT THE EXPLANATION OF ASSESSEE WAS NOT ACCEPTABLE, AS SUCH, BY WAY OF ORDER DATED 29.6.2010 HE RECORDED HIS SATISFACTION THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND HAS CONCEALED THE PARTICU LARS OF HIS INCOME AND, THEREFORE, PROCEEDED TO LEVY THE PENALTY OF RS.49,000/ - . ASSESSEE S APPEAL BEFORE THE LD. CIT(A) ENDED UP IN DISMISSAL CONFIRMING THE SAME. 4. AGGRIEVED BY THE IMPUGNED ORDER, ASSESSEE IS BEFORE US IN THIS APPEAL STATING THAT TH E PENALTY SUFFERS FROM INHERENT CONTRADICTION INASMUCH AS FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE WAS THE BASE FOR INITIATION OF PENALTY PROCEEDINGS. ULTIMATELY, THE ASSESSING OFFICER PASSED AN ORDER IMPOSING PENALTY FOR BOTH FURNIS HING OF INACCURATE PARTICULARS OF INCOME AND ALSO CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE, WHICH IS BAD IN LAW. FOR THIS PROPOSITION, RELIANCE HAS BEEN PLACED ON THE FOLLOWING DECISIONS : - 3 SURESHBHAI MAKANSHI GADESHA ITA NOS. 203 & 204/RJT/2013 I) ORDER OF ITAT, RAJKOT E - BENCH IN THE CASE OF SHRI PARASKUMAR V. KATARIA, ITA NO. 542/RJT/2012 DATED 20.2.2017; II) ORDER OF ITAT, KOLKATA BENCH IN THE CASE OF SUVAPRASANNA BHATACHARYA, ITA NO. 1303/KOL/2010 DATED 6.11.2015; III) MANJUNATHA COTTON & GINNING FACTORY, [2013] 359 ITR 565 (KAR.) IV) NEW SORATHIA ENGG. CO VS CIT, [2006] 282 ITR 642 (GUJ) V) CIT VS RAJAN & CO., [2007] 291 ITR 340 (DEL.) VI) CIT VS VIRGO MARKETING (P) LTD., [2008] 171 TAXMAN 156 (DELHI) VII) MS. MADHUSHREE GUPTA VS UNION OF INDIA, [2009] 183 TAXMAN 100 (DELHI) VIII) CIT VS M WP LTD., [2014] 264 CTR 502 (KAR) IX) CIT VS JYOTI LTD., [2013] 34 TAXMANN.COM 65 (GUJARAT) 5. PER CONTRA , IT IS THE ARGUMENT OF THE LD. DR THAT IN PARA 2 OF THE PENALTY ORDER AS WELL AS IN PARA 5 THEREOF, IT IS CLEARLY STATED THAT THE PENALTY IS PROPOSED ONLY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, AS SUCH, MERELY BECAUSE AT A LATER STAGE THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND ALSO CONCEALED THE PARTICULARS OF HIS INCOME IT HAS NO CONSEQUENCE AT ALL, AS SUCH PRAYED TO UPHOLD THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE CAREFULLY PERUSED THE MATERIAL PAPERS ON RECORD IN THE LIGHT OF THE STATEMENTS MADE ON BEHALF OF THE ASSESSEE INCLUDING THE JUDGMENT RELIED UPON BY HIM IN THE CASE OF CIT VS MANJUNATHA COTTON & 4 SURESHBHAI MAKANSHI GADESHA ITA NOS. 203 & 204/RJT/2013 GINNING FACTORY, 359 ITR 565 (KAR) (SUPRA) . VIDE PARAGRAPH 60, THE HON BLE KARNATAKA HIGH COURT HAS HELD AS FOLLOWS : - 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FU RNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF T HE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPO RTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIM E OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUST ICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IM POSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DI SCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. THIS WAS FOLLOWED BY THE HON BLE KARNATAKA HIGH COURT IN THE DECISION IN THE CASE OF CIT VS M/S. MAGANUR BUILDERS IN IT A NO. 616/2015 DATED 28.7.2016 . THE HON BLE JURISDICTIONAL HIGH COURT CONSIDERED THIS ISSUE IN THE CASE OF JYOTI LTD. (SUPRA), WHITEFORD INDIA LTD. (SUPRA) (?) , NEW SORATHIA ENGG. CO. (SUPRA) AND MANU ENGINEERING WORKS (SUPRA) (?) . FINDING OF THE ASSESSING OFFICER AS EXTRACTED IN PARA 6 OF JYOTI LTD. (SUPRA) IS SIMILAR TO THE ORDER IN THIS CASE, AND IT IS AS FOLLOWS : - 5 SURESHBHAI MAKANSHI GADESHA ITA NOS. 203 & 204/RJT/2013 IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS OF I NCOME. I, THEREFORE, CONSIDER IT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) . 7. ON A CAREFUL READING OF THE DECISIONS RELIED UPON BY THE ASSESSEE, IT IS, THEREFORE, CLEAR THAT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE AS SESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY OF EITHER ONE OR OTHER CANNOT BE SUSTAINED IN LAW. IN THIS CASE ALSO THE ASSESSMENT ORDER READS THAT PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREAS THE PEN ALTY ORDER SHOWS THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDING TO THE BINDING PRECEDENTS REFERRED TO ABOVE, SUCH A COURSE IS BAD IN LAW AND CANNOT BE SUSTAINED. WE, THEREFORE, PROCEED TO QUASH THE PENALTY PROCEEDINGS AS THEY CANNOT BE SUSTAINED UNDER LAW. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 T H MARCH, 2017. SD/ - SD/ - ( S.V. MEHROTRA ) ACCOUNTANT MEMBER ( K. NARASIMHA CHARY ) JUDICIAL MEMBER RAJKOT , DATE : 2 4 T H MARCH , 201 7 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, RAJKOT 6) GUARD FILE BY ORDER D Y./ASSTT. REGISTRAR I.T.A.T, RAJKOT