Smt. Anasuya B Kerudi, Bagalkot V. Assistant Commissioner Of Income Tax, Circle- 1, Vijayapur

ITA 2296/BANG/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4531 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-01-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 01-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Set aside; Capital Gains
• Section: 271(1)(c); 143(3); 274; 153; 153C; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2296/BANG/2019 ASSESSMENT YEAR : 2011-12 SMT. ANASUYA B KERUDI, NEAR LIONS SCHOOL, EXTENSION AREA, WARD NO.10, BAGAALKOT-587 101. PAN AFWPK 0255 Q VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, VIJAYAPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI S.V RAVISHANKAR, ADVOCATE RESPONDENT BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 28-01-2021 DATE OF PRONOUNCEMENT : 10 -02-2021 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: PRESENT PENALTY APPEAL HAS BEEN FILED BY ASSESSE E AGAINST ORDER DATED 28/08/2019 PASSED BY THE LD.CIT(A)-BELGAUM FO R ASSESSMENT YEAR 2011-12 ON FOLLOWING GROUNDS OF APP EAL. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX [APPEALS] PASSED UNDER SECTION 251(1) OF THE ACT IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES HERSELF LIABLE TO A PENALTY OF RS. 38,69,110/- UNDER SECTION 271(1)(C) ON THE FACTS AND CIRCUMSTAN CES OF THE CASE. PAGE 2 OF 9 ITA NO.2296/BANG/2019 3. THE NOTICE ISSUED UNDER SECTION 271(1)(C) OF THE ACT IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE IMPUGNED ORDER OF PENALTY PASSED UNDER SECTI ON 271(1)(C) OF THE INCOME-TAX ACT, 1961 IS WITHOUT ASSUMPTION OF PROPE R JURISDICTION, AS THE NOTICE FOR INITIATING PENALTY WAS ERRONEOUS AND CON SEQUENTLY ALL ACTIONS PURSUANT TO A DEFECTIVE NOTICE WAS BAD IN LAW, ON T HE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE NOTICE ISSUED U/S 271(1)(C) OF THE ACT, WAS UNDER THE LIMB OF 'FAILIN G TO COMPLYING WITH NOTICES ISSUED' AND CONSEQUENTLY THE ORDER PASSED U /S 271(1)(C) OF THE ACT, IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES O F THE CASE. 6. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION IN THE ORDER OF ASSESSMEN T EITHER FOR FAILING TO COMPLY WITH NOTICES AND CONSEQUENTLY THE NOTICE ISS UED U/S 274 OF THE ACT, IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES O F THE CASE. 7. THE IMPUGNED ORDER OF PENALTY PASSED UNDER SECTI ON 271 [1] [C] OF THE INCOME-TAX ACT, 1961 IS WITHOUT ASSUMPTION OF PROPE R JURISDICTION AS NO NOTICE U/S 271FLXC) OF THE ACT, FOR INITIATING PENA LTY, I.E. FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE ORDER OF PENALTY FOR CONCEALMENT IS REQUIRED TO BE SET ASIDE AS NO NOTICE HAS BEEN ISSUED, IN SO FAR AS THE LIMBS OF C ONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, AL ONG WITH THE ORDER OF ASSESSMENT AND THUS THE AO HAS NOT ASSUMED JURISDIC TION TO LEVY PENALTY ON THE LIMB OF CONCEALMENT, ON THE FACTS AND CIRCUM STANCES OF THE CASE. 9. WITHOUT PREJUDICE, THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE APPELLANT HAS NEITHER CONCEALED ANY INCOME NOR FURN ISHED INACCURATE PARTICULARS OF INCOME TO WARRANT LEVY OF PENALTY AN D THEREFORE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT REQUIRES TO BE CAN CELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED TH AT, THE PENALTY WAS NOT AUTOMATIC AND THAT THERE WAS A DISCRETION NOT T O LEVY PENALTY AND THE ASSESSING OFFICER OUGHT TO HAVE EXERCISED THE DISCR ETION AND THE PENALTY PROCEEDINGS ARE NOT TO BE RESORTED TO AS A MATTER O F PROCEDURE, ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 11. THE LEARNED CIT(A) OUGHT TO HAVE NOTICED THAT, THE ASSESSING OFFICER HAS FURTHER FAILED TO APPRECIATE THE FACT THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT TO THAT OF THE ASSESSMENT PROCEEDINGS U NDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. WITHOUT PREJUDICE, THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT WHEN THE RETURNED INCOME IS ACCEPTED AND THE AO WITHOUT MAKING ANY ADDITIONS, CONSEQUENTLY LEVY OF PENALTY U/S 271(1)( C) OF THE ACT, IS BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEV IED IS HIGHLY EXCESSIVE AND LIABLE TO REDUCED SUBSTANTIALLY. PAGE 3 OF 9 ITA NO.2296/BANG/2019 14. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBST ITUTE AND DELETE ANY OR ALL OF THE GROUNDS OF APPEAL URGED ABOVE. 15. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DUR ING THE HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL BE ALLOW ED IN THE INTEREST OF EQUITY AND JUSTICE. BRIEF FACTS OF THE CASE ARE AS UNDER: 2. THE ASSESSEE IS A DOCTOR AND ALSO PARTNER IN THE FIRM M/S KERUDI HOSPITAL AND RESEARCH CENTRE, BAGALKOT. SHE FILED HER RETURN OF INCOME FOR YEAR UNDER CONSIDERATION ON 30 /10/2011 DECLARING INCOME OF RS.85,41,850/-. A SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN CASE OF M/S KERUDI HOSP ITAL AND RESEARCH CENTRE ON 21/11/2012. DURING THE SEARCH AT RESIDENCE OF ASSESSEE, DOCUMENTS PERTAINING TO SALE OF PROPER TY AT BAGALKOT, WERE FOUND AND SEIZED. THE LD.AO NOTED THAT THE ASS ESSEE DECLARED RS.50 LACS, BEING 50% OF RS.1 CRORE AS HER SHARE OF SALE CONSIDERATION IN THE CAPITAL GAINS COMPUTATION. THE LD.AO NOTED THAT, IN THE AGREEMENT TO SELL SEIZED DURING SEARCH , REVEALED THE TRUE VALUE OF SALE CONSIDERATION TO BE RS.3.5 CRORE . 3. WHEN CONFRONTED WITH THE INCRIMINATING DOCUMENT, THE ASSESSEE AND HER HUSBAND ADMITTED IN STATEMENT UNDE R SECTION 132 (4) THAT, THE ACTUAL SALE CONSIDERATION RECEIVE D WAS RS.3.5 CRORE AND IT WAS AGREED THAT, SHE AND HER HUSBAND W OULD PAY TAX ON THE DIFFERENCE IN SHORT TERM CAPITAL GAINS OF RS .2.5 CRORE. CONSEQUENTLY, IN THE RETURN FILED UNDER SECTION 153 C AFTER THE SEARCH, ASSESSEE DECLARED CAPITAL GAIN BY SHOWING T HE SALE CONSIDERATION AS RS.1.75 CRORE BEING 50% OF HER SHA RE IN THE TRUE SALE CONSIDERATION. THE LD.AO HELD THAT ASSESSEE CO NCEALED PAGE 4 OF 9 ITA NO.2296/BANG/2019 INCOME THAT IS SALE CONSIDERATION RECEIVED BY HER ON THE SALE OF LAND IN THE ORIGINAL RETURN FILED. 4. THE LD.AO ALSO NOTED THAT THE ASSESSEE DECLARED INTEREST ON SAVING BANK ACCOUNT AMOUNTING TO RS.21,396/- WHICH WAS AGAIN NOT DECLARED IN THE ORIGINAL RETURN UNDER SECTION 1 39 (1) OF THE ACT. THE LD.AO WHILE PASSING ORDER U/S 153C R.W.SEC . 143(3) OF THE ACT HELD THAT, ASSESSEE CONCEALED INCOME BEING INTEREST EARNED AS UNEXPLAINED INDIRECT INCOMES. 5. CONSEQUENTLY, THE LD.AO ISSUED NOTICE UNDER SECT ION 274 OF THE ACT INITIATING PENALTY PROCEEDINGS READ WITH S ECTION 271(1)(C ) OF THE ACT. THE ASSESSEE WAS CALLED UPON TO FILE SU BMISSIONS IN RESPECT OF THE PENALTY NOTICE ISSUED. REPRESENTATIV E OF THE ASSESSEE VIDE SUBMISSIONS DATED 03/07/2015 AND 17/0 7/2015 FILED EXPLANATIONS SUBMITTING THAT THE ASSESSEES C ASE CANNOT BE BROUGHT WITHIN THE AMBIT OF CONCEALMENT OF INCOME A S THE LD.AO HAS NOT BROUGHT OUT THE SAME IN THE ASSESSMENT ORDE R. AND THAT THE LD.AO HAS INITIATED PENALTY MECHANICALLY AND TH ERE HAS BEEN NON APPLICATION OF MIND. 6. THE LD.AO HOWEVER WHILE PASSING THE PENALTY ORDE R LEVIED PENALTY AT RS.38,69,110/- BEING 100% OF TAX SOUGHT TO BE EVADED BY HOLDING THAT ASSESSEE FURNISHED INACCURATE PART ICULARS OF THE SALE CONSIDERATION AND HAS CONCEALED THE PARTICULAR S OF INTEREST INCOME AND HAS NOT OFFERED ANY COGENT AND RELIABLE EXPLANATION. 7. AGGRIEVED BY THE PENALTY LEVIED, ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A), WHO UPHELD OBSERVATIONS OF THE LD.AO BY HOLDING AS UNDER: PAGE 5 OF 9 ITA NO.2296/BANG/2019 11.5 FROM THE FACTS NARRATED ABOVE AND AFTER CAREF UL ANALYSIS I FEEL THAT, THE AO CONSIDERED ALL THE SUBMISSIONS MADE BY THE A SSESSEE DURING THE PENALTY PROCEEDINGS. THE ASSESSEE HAS FILED ADDITIO NAL INCOME IN THE RETURN OF INCOME FILED AGAINST NOTICE U/S 153C AND PAID TAXES ONLY AFTER THE SEARCH OPERATION U/S 132. THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ASSESSMENT ORDER. IN THE ASSESSMENT U/S 153C, THE AG HAD CLEARLY GIVEN A FINDING OF CONCEALMENT OF INCOME FO R INITIATING PENALTY PROCEEDINGS. THE AR APPEARED BEFORE THE AG DURING T HE PENALTY PROCEEDINGS AND NEVER RAISED THE ISSUE OF VALIDITY OF NOTICE. THE, PENALTY LEVIED U/S 271(1)(C) IS BASED ON PROPER SATISFACTIO N OF AG IN THE ASSESSMENT ORDER AND AFTER DUE CONSIDERATION OF SUB MISSIONS MADE BY THE AR. HENCE, I FEEL THAT THE PENALTY LEVIED BY AG IS PROPERLY INITIATED AND LEVIED. HENCE, THE PENALTY ORDER U/S 271(1)(C) PASSED BY THE AG IS IN ACCORDANCE WITH LAW. THEREFORE, I DO NOT FIND ANY R EASON TO INTERFERE WITH THE ORDER OF THE AO. 8. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) ASSESSEE IS IN APPEAL BEFORE US NOW. 9. AT THE OUTSET, THE LD.AR SUBMITTED THAT, NO ADDI TION IS MADE BY LD.AO ON THE INCOME OFFERED OR DECLARED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED UNDER SEC TION 153C OF THE ACT. IT WAS SUBMITTED THAT, THE ENTIRE INCOME O FFERED BY ASSESSEE HAVE BEEN ACCEPTED AND THE ADDITION PERTAI NS TO CERTAIN AGRICULTURAL INCOME WHICH IS AGAIN NOT BASED ON ANY SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH BELONGIN G TO THE ASSESSEE. THE LD.AR SUBMITTED THAT IMPOSITION OF PE NALTY IS NOT AUTOMATIC, EVEN IF, ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT. IN THE PRESENT FACTS OF THE CASE, THE L D.AR SUBMITTED THAT, ASSESSEE PAID INTEREST ON THE INCOME DECLARE D BY ASSESSEE IN THE RETURN FILED IN RESPONSE TO NOTICE ISSUED UN DER SECTION 153C OF THE ACT. IT IS ALSO SUBMITTED BY THE LD.AR THAT THE ASSESSEE IS ENTITLED TO IMMUNITY AS PER EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT, AS THE INCOME ADMITTED DURING THE SEARCH PAGE 6 OF 9 ITA NO.2296/BANG/2019 OPERATION WAS OFFERED BY ASSESSEE AND HAS ALSO PAID TAX AND INTEREST THEREON. 10. ON THE CONTRARY THE LD.SR.DR SUBMITTED THAT, HA D THE SEARCH NOT TO TAKEN PLACE, ASSESSEE WOULD NOT HAVE DISCLOSED THE CONSIDERATION ACTUALLY RECEIVED BY HER. IT HAS BEEN SUBMITTED THAT, THE ASSESSEE DID NOT HAVE ANY INTENTION TO DE CLARE THE TRUE INCOME, AND THEREFORE PENALTY PROCEEDINGS FOR CONCE ALMENT INITIATED BY THE LD.AO DESERVES TO BE UPHELD. 11. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SI DES IN LIGHT OF RECORDS PLACED BEFORE US. 12. ADMITTEDLY, THE ASSESSEE OFFERED ADDITIONAL IN COME DURING THE SEARCH AND HAS PAID TAXES ON THE SAME. IT IS A LSO NOTED THAT NO ADDITION HAS BEEN MADE BY THE LD.AO ON SUCH INCO ME OFFERED BY ASSESSEE AND HAS BEEN ACCEPTED BY THE REVENUE. W E NOTE THAT, WHILE PASSING THE ASSESSMENT ORDER THE LD.AO RECORD ED SATISFACTION IN RESPECT OF CONCEALMENT TOWARDS THE ADDITIONAL INCOME OFFERED BY ASSESSEE BASED ON THE SEIZED MATE RIAL. THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT IS FOR B OTH THE LIMBS BEING FILING OF INACCURATE PARTICULARS OF INCOME AS WELL AS CONCEALMENT. ON A CAREFUL PERUSAL OF THE PENALTY OR DER PASSED BY THE LD.AO, IT IS CLEAR THAT ALL THROUGHOUT THE SUBM ISSIONS MADE BY ASSESSEE WAS IN RESPECT OF CONCEALMENT OF INCOME REGARDING THE ADDITIONAL SALE CONSIDERATION OF LAND, THE LD.A O LEVIES PENALTY FOR FURNISHING INACCURATE PARTICULARS OF SALE CONSI DERATION OF THE LAND. THIS IN OUR OPINION IS A CLEAR NONAPPLICATION OF MIND BY THE LD.AO. PAGE 7 OF 9 ITA NO.2296/BANG/2019 13. LAW THE LD.AR HAS PLACED RELIANCE ON THE DECISI ON OF HONBLE SUPREME COURT IN CASE OF DCIT VS RAJKUMAR GULAB BADGUJAR REPORTED IN (2019) 111 TAXMANN.COM 257 . HONBLE SUPREME COURT UPHELD THE OBSERVATIONS OF HONBLE BOMBAY HIGH COURT, REPORTED IN (2019) 111 TAXMANN.COM 256, THAT WHERE NO ADDITION TO THE INCOME DECLARED BY THE SEARCHED PER SON IN THE RETURN FILED PURSUANT TO SEARCH IS MADE IT IS NOT O PEN TO THE REVENUE TO LEVY PENALTY BY VIRTUE OF EXPLANATION 5 TO SECTION 271 . HONBLE BOMBAY HIGH COURT ALSO HELD THAT, EXPLANATION 5A TO SECTION 271 WOULD APPLY ONLY IN CASE OF THE SEARCHED PERSON. 14. ON PERUSAL OF THE DECISION BY HONBLE BOMBAY HIGH COURT (SUPRA) WE NOTE THAT PENALTY WAS INITIATED BY THE LD.AO TH EREIN IN ASSESSMENT ORDER PASSED PURSUANT TO NOTICE UNDER SE CTION 153C OF THE ACT, WHEREIN ASSESSEE THEREIN DECLARED ADDIT IONAL INCOME IN THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SE CTION 153C OF THE ACT. WE NOTE THAT FACTS IN THE CASE BEFORE HONBLE BOMBAY HIGH COURT (SUPRA) ARE SIMILAR TO THE FACTS BEFORE US. 15. THEREFORE RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT (SUPRA), WHICH HAS BEEN SUBSEQUENTLY UPHELD BY HONBLE SUPREME COURT (SUPRA) , WE ARE OF THE OPINION THAT NO PENALTY COULD BE LEVIED ON AN INCOME WHICH HAS BEEN OFFERED TO TAX IN THE RETURNS FILED IN RESPONSE TO NOTICE UNDER SECTION 153C OF THE ACT AND THAT NO ADDITION HAS BE EN MADE BY THE LD.AO IN RESPECT OF THE SAME. 16. WE ALSO NOTE THAT THE ONLY ADDITION THAT HAS BE EN MADE BY THE LD.AO IS IN RESPECT OF AGRICULTURAL INCOME DISA LLOWED PAGE 8 OF 9 ITA NO.2296/BANG/2019 AMOUNTING TO RS.2,71,625/- AGAINST WHICH THE PENALT Y PROCEEDINGS HAS NOT BEEN INITIATED. BASED ON THE AB OVE FACTS AND DISCUSSIONS, WE ARE OF THE OPINION THAT THE PENALTY LEVIED BY THE LD.AO DESERVES TO BE DELETED. ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 10 TH FEBRUARY, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 9 OF 9 ITA NO.2296/BANG/2019 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -2-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -2-2021 JM/AM 4. DRAFT DISCUSSEDAPPROVED BY SECOND MEMBER. -2-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -2-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -2-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -2-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -2-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS