Deputy Commissioner of Income-tax, V. INC Developers Pvt. Ltd., Mumbai

ITA 2247/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7296 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Revised return
• Section: 143(3); 148; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.2246 & 2247/PUN/2014 / ASSESSMENT YEARS : 2010-11 & 2011-12 DCIT, CIRCLE-11, PUNE . /APPELLANT VS. INC DEVELOPERS PVT. LTD., B/601, VINTAGE PEARL, 29 TH ROAD, BANDRA (WEST), MUMBAI 400 050 PAN : AABCI9252J . / RESPONDENT / APPELLANT BY : SHRI ACHAL SHARMA, ADDL.CIT / RESPONDENT BY : SHRI NIKHIL PATHAK / DATE OF HEARING : 16.10.2017 / DATE OF PRONOUNCEMENT: 25.10.2017 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 2 APPEALS UNDER CONSIDERATION FILED BY TH E REVENUE AGAINST THE COMMON ORDER OF CIT(A) CENTRAL, PUNE DATED 29- 09-2014 FOR THE A.YRS. 2010-11 & 2011-12. 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER : 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO THE L AW & TO THE FACTS & CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD .CIT(A) GROSSLY ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) OF THE AC T, BY NOT TAKING INTO CONSIDERATION THE RATIO OF HONBLE APEX COURT IN TH E CASE OF MAK DATA PVT. LTD. VS. CIT-II. SIMILAR GROUNDS HAVE BEEN RAISED BY THE REVENUE FOR A.Y. 2011-12 TOO. ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 2 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSES SEE IS A DOMESTIC COMPANY AND A MEMBER OF AMAR BUILDERS GROUP. ASSESSEE IS E NGAGED IN CONSTRUCTION BUSINESS AND WAS COVERED UNDER SURVEY U/S.133A OF T HE I.T. ACT. ASSESSEE FILED THE ORIGINAL RETURN OF INCOME ON 24-09-2010 D ECLARING TOTAL INCOME OF RS.13,05,573/-. ASSESSEE DISCLOSED ADDITIONAL INCO ME OF RS.3 CRORES ON ACCOUNT OF UNACCOUNTED RECEIPTS FROM THE FLAT OWNERS. ALTH OUGH, THE ASSESSEE PAID THE TAXES ON THE SAID ADDITIONAL INCOME OF RS.3 CRORES, RELEVANT RETURN OF INCOME- REVISED WAS FILED ONLY ON 16-10-2012 BELATEDLY DISC LOSING TOTAL INCOME OF RS.3,13,05,573/- AS AGAINST THE ORIGINAL RETURN OF INCOME OF RS.13,05,573/-. REGULARISING THE SAID REVISED RETURN OF INCOME U/S. 148 OF THE ACT, AO ASSESSED THE TOTAL INCOME OF THE ASSESSEE U/S.148 OF THE ACT AT RS.3,13,05,573/-. THUS, THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WITHOUT SPECIFYING ANY ONE OF THE TWO LIMBS OF CLAUSE (C) OF SECTION 2 71(1)(C) OF THE ACT. EVENTUALLY, THE AO LEVIED PENALTY OF RS.1,01,97,000 /- FOR A.Y. 2010-11 FOR CONCEALMENT OF INCOME OF FURNISHING OF INACCURATE P ARTICULARS OF INCOME. RELEVANT EXTRACTS FROM THE AO AND PENALTY ORDER ARE GIVEN IN PARA 10 OF THIS ORDER AT OVERLEAF. SAME IS THE CASE FOR A.Y. 2011-12 TOO WHERE THE AS SESSEE DISCLOSED ADDITIONAL INCOME OF RS.50 LAKHS IN THE REVISED RET URN OF INCOME AS AGAINST THE ORIGINAL RETURN OF INCOME OF RS.91,78,000/-. EVENT UALLY, AO LEVIED THE PENALTY OF RS.16,60,875/- U/S.271(1)(C) OF THE ACT. 4. HOWEVER, CIT(A), VIDE COMMON ORDER DATED 29-09-2 014, DELETED THE PENALTIES LEVIED BY THE AO FOR BOTH THE A.YRS. 201 0-11 AND 2011-2 RELYING ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN CIT VS. NARASIMHA PRASAD REPORTED IN 250 ITR 852 (KAR.) AND THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA RE PORTED IN 1970 AIR 253. THE CONTENTS OF PARA 6.3 OF THE ORDER OF CIT(A) ARE REL EVANT. IN THESE CASES, THE ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 3 PENALTY WAS DELETED ON THE FACTUAL MATRIX AS IN THE CASE OF THE PRESENT ASSESSEE, I.E. IN RESPONSE TO NOTICE U/S.148 OF THE ACT, ASSESSEE FILED THE REVISED RETURN OF INCOME OFFERING THE ADDITIONAL IN COME, WHICH IS HIGHER THAN THE RETURN OF INCOME FILED U/S.139(1) OF THE ACT. 5. AGGRIEVED WITH THE SAID ORDER OF CIT(A), I.E. TH E DELETION OF PENALTY IN BOTH ASSESSMENT YEARS, THE REVENUE IS IN APPEALS B EFORE US FOR BOTH THE ASSESSMENT YEARS 2010-11 AND 2011-12. 6. LD. DR FOR THE REVENUE ARGUED THAT THE ORDER OF THE CIT(A) IS REQUIRED TO BE REVERSED AND RELIED HEAVILY ON THE DISCUSSION GIVEN BY THE AO IN THE PENALTY AS WELL AS ASSESSMENT ORDERS. 7. PER CONTRA, LD. AR FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AND SUBMITTED THAT THEY RELATE TO LEVY OF PENALTY U /S.271(1)(C) OF THE ACT FOR A.YRS. 2010-11 AND 2011-12 AND SUBMITTED THAT THE C IT(A) GRANTED FULL RELIEF DELETING THE PENALTY LEVIED BY THE AO FOR BOTH THE YEARS. FURTHER, MENTIONING THAT, THESE ARE THE CASES OF AMBIGUITY IN THE MIN D OF AO WHILE INITIATING & LEVYING THE PENALTY, LD. AR BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER AND MENTIONED THAT THE PENALTY WAS LEVIED ON THE AO AS PER THE DISCUSSION GIVEN IN PARA 3 OF THE AOS ORDER. REFERRING TO THE SAID PA RA, LD. AR SUBMITTED THAT THE SAID REASONING FALLS SHORT OF THE LEGAL REQUIREMENT OF THE SATISFACTION OF THE AO FOR INITIATING THE PENALTY. THEREFORE, AO CANNOT B E HELD COMPLYING WITH THE REQUIREMENT OF LAW. FURTHER, REFERRING TO THE PENA LTY ORDER MADE U/S.271(1)(C) OF THE ACT, LD. AR DREW OUR ATTENTION TO PARA NO.10 AND SUBMITTED THAT THE AO SUFFERS FROM AMBIGUITY IN HIS MIND SINCE HE DID NOT TICK ANY OF THE LIMBS OF CLAUSE (C) OF SECTION 271(1) OF THE ACT. 8. FURTHER, THE LD. AR FOR THE ASSESSEE RELIED ON T HE FOLLOWING JUDGMENTS FOR THE PROPOSITION THAT PENALTY IS NOT SUSTAINABLE WHEN THERE IS NO CLEAR SATISFACTION RECORDED BY THE AO AT THE TIME OF INIT IATION OF PENALTY PROCEEDINGS : ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 4 1. HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PE RINCHERY JUDGMENT DATED 05-01-2017. 2. HONBLE KARNATAKA HIGH COURT JUDGMENT IN THE CAS E OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (359 ITR 565) 9. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS O F THE REVENUE AUTHORITIES. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LD. AR FOR THE ASSESSEE. AFTER GOING THROUGH THE ASSESSME NT ORDER AND THE PENALTY ORDERS, WE FIND IT RELEVANT TO EXTRACT PARA NO.3 OF THE ASSESSMENT ORDER AND PARA 10 OF THE PENALTY ORDER AND THE SAME READ AS U NDER : 03. . . . . . . . . . . . . . . . . . . . . . SINCE THE RETURN INCOME INCLUDED UNDISCLOSED INCOME OF RS.300 LACS, HENCE ASSESSEE IS LIABLE FOR PENAL PRO CEEDINGS U/S.274 R.W.S. 271(1)(C). ACCORDINGLY PENAL PROCEEDINGS IS BEING INITIATED. FROM THE ABOVE, IT IS EVIDENT THAT IT IS THE CASE O F NOT MENTIONING ANY OF THE LIMBS SPECIFIED IN CLAUSE (C) OF THE SAID SECTI ON 271(1) OF THE ACT. 10. FURTHER, THE PARA 10 OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER : 10. IN VIEW OF ABOVE DISCUSSION, THE UNDERSIGNED I S OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS CONCEALED THE INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME AMOUNTING TO RS.3 CRORES AND IS LIABLE FOR PENALTY U/S.271(1)(C) OF THE ACT, 1961. . . . . . . FROM THE ABOVE, IT IS A CASE OF REFERRING TO BOTH T HE LIMBS OF THE SAID CLAUSE (C) OF THE SAID SECTION. AO DID NOT APPLY H IS MIND TO ONE OF THE APPLICABLE LIMBS OF CLAUSE (C) OF THE SAID SECTION. 11. FROM THE ABOVE EXTRACTS, IT IS EVIDENT THAT TH E AO HAS NOT BOTHERED TO SPECIFY THE LIMB OR STUCK OFF AN INAPPROPRIATE LIMB OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IT SHOWS THAT THE AO HAS NOT APPLIED HIS MIND TO THE FACT FOR WHICH REASON OF THE DEFAULT, THE PENALTY NOTICE S WERE ISSUED. WE FIND THE PENALTY ORDER OF THE AO FALLS SHORT OF LEGAL REQUIR EMENT ON THE ISSUE UNDER DISCUSSION. INITIATION OF PENALTY PROCEEDINGS IN T HIS CASE DONE IN A GENERAL ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 5 SENSE AND THE LEVY OF PENALTY IS DONE FOR BOTH THE LIMBS AND SUCH ORDERS ARE BAD IN LAW. THIS VIEW GETS STRENGTH BY THE JUDGMEN T OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERIN CHERY DATED 05-01-2017 AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COUR T IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565. THE ISSUE NEEDS TO BE DECIDED IN BOTH APPEALS IN FAVOUR OF THE ASSESSEE. 12. WE FURTHER FIND THAT CIT(A) VIDE THE DISCUSSION GIVEN IN PARA 6.3 OF HIS ORDER HAS RIGHTLY RELIED ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. NARASIMHA PRASAD REPORTED IN 250 IT R 852 (KAR.). CIT(A) AFTER CONSIDERING THE FACTS OF THE PRESENT CASE HAS RIGHT LY HELD THAT THE AO HAS NOT EXERCISED HIS DISCRETION HIS DECISION JUDICIALLY AN D EVENTUALLY DELETED THE PENALTY LEVIED BY THE AO. FURTHER, NO ADVERSE JUDICIAL PRO NOUNCEMENTS HAVE BEEN FILED BEFORE US WHICH WOULD WARRANT US TAKING A DIFFERENT VIEW AND IN FAVOUR OF THE REVENUE. 13. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE PROCEED TO EXTRACT PARA NO.6.3 OF THE CIT(A) AND THE SAME READS AS UNDER : 6.3 I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACT S BEFORE ME AND TO THE ARGUMENTS AND CONTENTIONS PUT FORWARD ON BEHALF OF THE APPELLANT. IT IS NO DOUBT TRUE THAT THE REVISED RETURN DECLARING THE AD DITIONAL INCOME OF RS.3 CRORES WAS DECLARED BY THE APPELLANT ONLY AFTER THE SURVEY ACTION. HOWEVER, I FIND SOME MITIGATING CIRCUMSTANCES IN THIS CASE. I T IS NOTEWORTHY THAT EVEN AFTER FILING THE ORIGINAL RETURN THE APPELLANT CONT INUED TO MAKE TAX PAYMENTS ON THE DECLARED INCOME. IT IS NOT CLEAR FROM THE AOS ORDER THAT ANY ACTION WAS TAKEN BY THE DEPARTMENT IN THE INTERIM PERIOD BETWE EN THE FILING OF THE ORIGINAL RETURN AND THE FILING OF THE REVISED RETURN WHICH F ORCED THE APPELLANT TO DECLARE THE ADDITIONAL INCOME OF RS.3 CRORE IN HIS REVISED INCOME. ON THE CONTRARY, IT IS CLEAR FROM THE AOS ORDER THAT NOTICE UNDER SECTION 148 WAS ISSUED BY HER ONLY TO REGULARIZE THE REVISED RETURN FILED BY THE APPEL LANT AND THEREFORE, THE ISSUE OF THE SAID NOTICE BY THE AO COULD NOT HAVE BEEN THE R EASON WHICH PROMPTED THE APPELLANT TO FILE THE SAID REVISED RETURN AND DECLA RE ADDITIONAL INCOME. THE HON. KARNATAKA HIGH COURT, IN CIT V. NARASIMHA PRAS AD [2001] 250 ITR 852 (KAR.) WHEREIN AFTER A SURVEY THE APPELLANT HAD FIL ED REVISED RETURN DECLARING A MUCH HIGHER INCOME THAN DECLARED IN THE ORIGINAL RE TURN, UPHELD THE ORDER OF THE ITAT THAT THERE WAS NO CONCEALMENT OF INCOME. IT IS ALSO NOT IN DOUBT THAT THE ASSESSMENT WAS ULTIMATELY COMPLETED AT THE INCO ME DECLARED BY THE APPELLANT IN THE REVISED RETURN. THE APPELLANT HAS ALSO ARGUED THAT ACTION UNDER SECTION 271(1)(C) WAS NOT VALIDLY INITIATED I N HIS CASE SINCE THE SAME WAS INITIATED IN THE COURSE OF 143(3) PROCEEDINGS WHERE AS ASSESSMENT PROCEEDINGS IN HIS CASE SHOULD HAVE ACTUALLY BEEN CONCLUDED UND ER SECTION 153C & NOT ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 6 UNDER SECTION 143(3) R.W.S. 147 IN VIEW OF THE NON- OBSTINATE CLAUSE IN S.153C. HOWEVER, I DO NOT WISH TO GO INTO THIS LEGAL ISSUE AS THE APPELLANT HAS ALREADY ACCEPTED THE ASSESSMENT ORDER AND IS NOT IN APPEAL AGAINST IT. THE HON. SUPREME COURT IN HINDUSTAN STEEL LTD. V. STATE OF O RISSA HELD THAT PENALTY WILL NOT BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO . WHETHER PENALTY SHOULD BE IMPOSED IS A MATTER OF DISCRETION OF THE AUTHORI TY TO BE EXERCISED JUDICIALLY AND AFTER CONSIDERATION OF ALL RELEVANT CIRCUMSTANC ES. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT SU FFICIENT REASONS EXISTED FOR THE LD. AO TO EXERCISE HER JUDICIAL DISCRETION FAVO URABLY IN THE APPELLANTS CASE AND NOT LEVY THE IMPUGNED PENALTY. HAVING CONSIDER ED ALL THE FACTS BEFORE ME IN THE PRESENT CASE, THEREFORE, I HEREBY DELETE THE PENALTY LEVIED BY THE AO. TO THAT EXTENT THESE GROUNDS OF APPEAL MAY BE TREATED AS ALLOWED. 14. WE ALSO CONSIDERED OUR DECISION IN THE CASE OF SHRI AMAR MANJREKAR VS. DCIT - ITA NO.324/PUN/2015 DATED 30-08-2017, RELIED UPON BY THE LD. AR AND FIND THE CONTENTS OF PARA NOS.7 AND 8 OF THE SAID O RDER OF THE TRIBUNAL ARE REQUIRED TO BE EXTRACTED AS UNDER : 7. WE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE/A DDITIONAL GROUND AND PERUSED THE ASSESSMENT ORDER/PENALTY ORDER AND THE TWO NOTICES ISSUED U/S.274 AND FIND THE FOLLOWING OPERATIONAL LINES ARE FOUND WORTH TO BE EXTRACTED IN THIS ORDER : (1) EXTRACT FROM THE ASSESSMENT ORDER (PARA NO.5) : 5. . . . . . . . . . . . HENCE, PROVISIONS OF EXPL ANATION-5A OF SEC.271(1) ARE CLEARLY APPLICABLE IN THIS CASE AND ASSESSEE HA S CONCEALED INCOME AS PER THE PROVISIONS. (2) EXTRACT FROM THE PENALTY ORDER (PARA NO.5) : 5. IN VIEW OF ABOVE DISCUSSION, THE UNDERSIGNED I S OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS CONCEALED THE INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND IS LIABLE FOR PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961 . . . . . . . . . . (3) EXTRACT FROM NOTICE U/S.274 R.W.S. 271(1)(C) OF THE ACT DT.19-03-2013 : WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE A.Y. 2009-10, IT APPEARS TO ME THAT YOU : HAVE CONCEALED THE PARTICULARS OF YOUR INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. . . . (4) EXTRACT FROM NOTICE U/S.274 R.W.S. 271(1)(C) OF THE ACT DT.23-08-2013 : WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FO R THE A.YRS. 2009- 10 TO 2011-12, IT APPEARS TO ME THAT YOU HAVE CONCE ALED THE PARTICULARS OF YOUR INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. . . . 8. FROM THE ABOVE 4 EXTRACTS, THE AO IS FOUND TO HA VE USED OR AT ONE PLACE, AND AT OTHER PLACE AND CONCEALED THE PARTICULARS OF YOUR INCOME AT ONE PLACE AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AT OTHER PLACE ETC., NOWHERE, THE CORRECT LIMB OF CLAUSE (C) TO SECTION ITA NOS.2246 & 2247/PUN/2014 INC DEVELOPERS PVT. LTD., 7 271(1) OF THE ACT IS CLEARLY REFERRED TO. IN VIEW OF THE DOCUMENTS (ASSESSMENT ORDER/PENALTY ORDER/NOTICES U/S.274) CITED ABOVE, I N OUR CONSIDERED VIEW, WITHOUT GOING INTO THE MERITS OF THE PENALTY AS WEL L AS THE NATURE OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RETURN OF INC OME FILES U/S.153A OF THE ACT. THE AMBIGUITY IN THE MIND OF THE AO IS OBVIOU S AT THE TIME OF INITIATION AS WELL AS LEVY OF PENALTY PROCEEDINGS. ACCORDINGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. THEREFORE, OTHER GROUN DS ON MERITS ARE DISMISSED AS ACADEMIC. FROM THE ABOVE, IT IS EVIDENT THAT USAGE OF EXPRESS IONS LIKE OR AND AND CONFIRM THE AMBIGUITY IN THE MIND OF AO. W ITH SUCH EXPRESSIONS THE PENALTY IS NOT SUSTAINABLE. 15. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE PENALTY LEVIED BY THE AO FOR BOTH THE ASSESSMENT YEARS. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE FOR A.YRS. 2010-11 AND 2011-12 ARE DISMISSED. 16. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF OCTOBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 25 TH OCTOBER, 2017. / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) CENTRAL, PUNE CIT CENTRAL, PUNE , , A BENCH PUNE; / GUARD FILE.