Shri S.Sathyanarayanan, CHENNAI V. ACIT, CHENNAI

ITA 2300/CHNY/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9285 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 26-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 24-12-2012
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Unexplained cash credit; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' ! # . $% , & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 2300/MDS/2012 / ASSESSMENT YEAR : 2005-06 SHRI S. SATHYANARAYANAN, OLD NO.19, NEW NO.45, DR. GIRIAPPA ROAD, T.NAGAR, CHENNAI 600 017. PAN ABCPS0844B APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I(5), CHENNAI 600 034. RESPONDENT) / APPELLANT BY : SHRI A.S.SRIRAMAN, ADVOCATE / RESPONDENT BY : SHRI A.B.KOLI, JCIT ! / DATE OF HEARING : 26.05.2016 '# ! / DATE OF PRONOUNCEMENT: 03.06.2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 29 .10.2012 FOR THE ASSESSMENT YEAR 2005-06. - - ITA 2300/12 2 2. ORIGINALLY, THE ISSUE IN THIS APPEAL IS WITH REG ARD TO LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT IN RESPECT OF DEEMED DIVIDEND. THE ASSESSEE CAME IN APPEAL BEFORE THE T RIBUNAL IN ITA NO.2300/MDS/2012, WHICH WAS DISPOSED OFF BY THE TRIBUNAL ALONG WITH OTHER APPEALS DATED 18.3.2013 BY HOLDING AS FOLLOWS: 13. WE HAVE CONSIDERED THE FAIR SUBMISSIONS ADVANCED BY BOTH PARTIES AND GONE THROUGH ALL CASE FILES. IN THESE CASES AS WELL, SINCE THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION IN PENALTY PROCEEDINGS, WE RELY IN THE CASE LAW OF CIT V. MAK DATA LTD. (SUPRA ) AND CONFIRM THE ORDERS UNDER CHALLENGE PASSED BY TH E CIT(A). AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFOR E THE HIGH COURT OF MADRAS AND THE JURISDICTIONAL HIGH COURT V IDE ITS ORDER DATED 12.11.2014 IN TC(APPEAL) NO.614 OF 2013 REMIT TED THE ISSUE TO THE FILE OF THE TRIBUNAL WITH THE FOLLOWIN G OBSERVATION : 6. WE FIND MUCH FORCE IN THE CONTENTION OF THE LEA RNED COUNSEL FOR THE APPELLANT, AS THE PROCEEDINGS OF TH E COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUNAL ONLY STATE THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT CORRECT, MEANING THEREBY THAT BOTH THE AUTHORITIES WENT INTO THE MERITS OF THE EXPLANA TION OFFERED BY THE ASSESSEE ON PENALTY AND NOT ON THE ISSUE WHETHER THE ORIGINAL AUTHORITY HAD RESERVED H IS RIGHT TO PROCEED UNDER SECTION 271(1)(C) OF THE ACT RELATING TO THE DEEMED DIVIDEND. SINCE THERE IS NO CONSIDERATION BY THE TRIBUNAL ON THE GROUND RAISED BY THE ASSESSEE AS ABOVE, WE ARE INCLINED TO REMAND TH E MATTER TO THE TRIBUNAL TO CONSIDER THE SCOPE OF THE SECOND PENALTY ORDER NOW UNDER CHALLENGE IN THE LIG HT - - ITA 2300/12 3 OF THE EARLIER ORDER DATED 30.6.2008. THE TAX CASE APPEAL STANDS ALLOWED BY WAY OF REMAND. CONSEQUENTLY, M.P.NO.1 OF 2013 IS CLOSED. NO COSTS. HENCE, THIS APPEAL ONCE AGAIN CAME BEFORE US FOR CONSIDERATION. 3. THE LD. AR SUBMITTED THAT THE ASSESSMENT FOR THE ABOVE ASSESSMENT YEAR WAS FRAMED BY THE ASSESSING OFFICER ON 31.12.2007 U/S.153C/153A R/W SEC.143(3) OF THE ACT IN THE DETERMINATION OF TAXABLE TOTAL INCOME AT ` 1,71,92,686/-. A SEARCH WAS CONDUCTED IN THE RESIDENTIAL AND BUSINES S PREMISES OF THE ASSESSEES FATHER, MR. K. SUNDARAJ ON 21.9.2 005 AND CONSEQUENTLY THE PROCEEDINGS IN THE HANDS OF THE AS SESSEE WAS INITIATED ON THE ISSUANCE OF A NOTICE U/S.153C OF T HE ACT DATED 28.8.2006. IN RESPONSE TO THE SAME NOTICE, THE ASS ESSEE FILED HIS RETURN OF INCOME ADMITTING A TAXABLE TOTAL INCO ME AT ` 1,47,08,820/-. IN THE ASSESSMENT FRAMED BY THE ASS ESSING OFFICER, THE ASSESSEE HAD MADE AN ATTEMPT TO RECONC ILE THE VARIOUS BANK DEPOSITS BY PREPARING A CASH FLOW STAT EMENT, WHICH CASH FLOW STATEMENT WAS PART OF THE PROCEEDINGS INI TIATED AND COMPLETED BY HIM AND CONSIDERING THE EXPLANATION OF FERED, THE ASSESSING OFFICER MADE AN ADDITION OF ` 14,90,000/- U/S.69 OF THE - - ITA 2300/12 4 ACT WHILE FRAMING THE ASSESSMENT ORDER DATED 31.12. 2007. 3.1 THE LD. AR, FURTHER SUBMITTED THAT THE ASSESSIN G OFFICER MADE ADDITIONS/DISALLOWANCES WITH REGARD TO DEEMED DIVIDEND AGGREGATING TO ` 1,50,000/- AND TREATED THE CLAIM OF AGRICULTURAL INCOME OF ` 6,48,950/- AS INCOME UNDER THE HEAD OTHER SOURCES AND ` 14,90,000/- U/S.68 AS UNEXPLAINED CREDIT. PENALTY PROCEEDINGS WERE INITIATED U/S.271(1)(C) OF THE ACT AND THE PENALTY WAS LEVIED VIDE ORDER DATED 30.6.2008, WHER E THE ASSESSING OFFICER CHOOSE TO LEVY PENALTY U/S.271(1) (C) OF THE ACT FOR THE ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED IN VESTMENT, SINCE THE ASSESSEE HAS NOT CHALLENGED THE ADDITION BY WAY OF AN APPEAL. THE LD. AR SUBMITTED THAT THE ASSESSING O FFICER CHOOSE NOT TO LEVY PENALTY WITH REGARD TO THE ADDITION MAD E ON ACCOUNT OF DEEMED DIVIDEND IN THE FIRST PENALTY ORDER UNDER CONSIDERATION NOR THE AO HAD RESERVED HIS RIGHT TO LEVY PENALTY A T A LATER POINT IN TIME AND RESERVED THE RIGHT TO LEVY PENALTY ONLY IN RESPECT OF AGRICULTURAL INCOME, IN WHICH CASE, LEVY OF PENALTY KEPT IN ABEYANCE. THE SAID ADDITION OF DEEMED DIVIDEND WAS ACCEPTED BY THE ASSESSEE BY WAY OF NON- FILING OF APPEAL AGA INST THE SAID ISSUE. - - ITA 2300/12 5 3.2 ACCORDING TO THE LD. AR, AFTER THE CIT(APPEALS) HAD DISMISSED THE APPEAL OF THE ASSESSEE WITH REGARD TO THE ADDITION OF AGRICULTURAL INCOME VIDE HIS ORDER DATED 14.11.2 008, THE ASSESSING OFFICER THEN PROCEEDED TO LEVY PENALTY VI DE SECOND ORDER DATED 30.3.2010, SINCE THE ADDITION OF AGRICU LTURAL INCOME WAS CONFIRMED BY THE FIRST APPELLATE AUTHORITY AND IN THAT ORDER THE AO HAD RESERVED THE RIGHT TO LEVY PENALTY WITH REGARD TO THE SAID ISSUE, I.E. AGRICULTURAL INCOME. WHILE DOING SO, THE ASSESSING OFFICER ALSO NOT LEVIED PENALTY WITH REGA RD TO THE ADDITION OF DEEMED DIVIDEND FOR WHICH ADDITION. TH US, THE AO HAD NOT LEVIED PENALTY IN THE FIRST ROUND OF PROCEE DINGS NOR RESERVED THE RIGHT TO DO SO. FURTHER, THE ASSESSEE HAD NOT TAKEN UP THE SAID ISSUE IN APPEAL, THE ASSESSEE PLEADS TH AT THE ACTION OF THE AO IN LEVYING PENALTY FOR THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND AGGREGATING TO ` 1,50,000/- IS NOT TENABLE IN LAW AND THE SAME IS TIME BARRED IN TERMS OF THE LIM ITATION PRESCRIBED UNDER THE ACT. THE LD. AR SUBMITTED TH AT THE AO IN THE SECOND PENALTY ORDER DATED 30.3.2010 OBSERVED T HAT HE HAD RESERVED THE RIGHT WITH REGARD TO THE ISSUE OF DEEM ED DIVIDEND WHICH FACT IS NOT BORNE OUT OF RECORD AS PER THE PE NALTY ORDER - - ITA 2300/12 6 DATED 30.6.2008, THEREBY LEADING TO PERVERSITY OF F ACTS. FURTHER, IN THE SECOND PENALTY ORDER DATED 30.3.2010, THE AO HIMSELF POINTED OUT THAT THE RIGHT TO LEVY PENALTY WAS RESE RVED ONLY WITH REGARD TO THE ISSUE OF AGRICULTURAL INCOME. ACCORD INGLY, HE PRAYED THAT THE HIGH COURT REMITTED BACK TO THE FIL E OF THE ITAT TO EXAMINE THE SAID ISSUE AND PENALTY IMPOSED IN TERMS OF SEC.271(1)(C) OF THE ACT MAY BE DELETED. 4. ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE PENALTY IS RIGHTLY LEVIED U/S.271(1)(C) OF THE ACT IN RESPE CT DEEMED DIVIDEND. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. ADMITTEDLY, IN FIRST PENALTY ORDER PASS ED BY THE AO ON 30.6.2008, THE ASSESSING OFFICER CONSIDERED UNEXPLA INED INVESTMENT OF ` 14,90,000/- IN BANKS, AS UNDISCLOSED INCOME TO LEVY PENALTY U/S.271(1)(C) OF THE ACT AND LEVIED PE NALTY AT ` 5,13,785/-. FURTHER, WITH REGARD TO AGRICULTURAL I NCOME, HE OBSERVED AS FOLLOWS : IN COURSE OF ASSESSMENT IT WAS FOUND THAT RUPEES 6,48,950/- WAS SHOWN AS AGRICULTURAL INCOME. THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM BY PRODUC ING THE DOCUMENTS. HENCE THE SAME WAS TREATED AS UNDISCLOSED INCOME AND PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. HOWEV ER, - - ITA 2300/12 7 THE ISSUE HAS NOT YET ATTAINED FINALITY AS AN APPEA L HAS BEEN FILED BY THE ASSESSEE. IN VIEW OF THE FACT TH AT APPEAL HAS BEEN FILED PENALTY PROCEEDINGS ON THE AGRICULTURAL INCOME ARE KEPT IN ABEYANCE TILL DISPO SAL OF APPEAL. FURTHER, THERE IS NO WHISPER REGARDING THE LEVY OF PENALTY IN RESPECT OF DEEMED DIVIDEND OF ` 1,50,000/- IN THE FIRST PENALTY ORDER. THE ASSESSEE WAS IN APPEAL BEFORE THE APPEL LATE AUTHORITY ONLY ON THE ISSUE RELATING TO AGRICULTURA L INCOME, WHICH IS EVIDENT FROM THE ORDER DATED 14.11.2008, WHICH R EADS AS FOLLOWS: 5. THE COMMON GROUNDS OF APPEAL IS THE TREATMENT O F AGRICULTURAL INCOME RETURNED BY THE APPELLANT AS IN COME FROM UNDISCLOSED SOURCES FOR A.YS. 2001-02 TO 2006- 07. THUS, THE ISSUE RELATING TO DEEMED DIVIDEND IS NOT AT ALL SUBJECT MATTER OF APPEAL BEFORE THE CIT(APPEALS) AND ALSO T HERE IS NO WHISPER IN THE PENALTY ORDER DATED 30.6.2008, KEEPI NG THE ISSUE OF PENALTY IN ABEYANCE. THE AO HAS NOT MENTIONED A NYTHING RELATING TO LEVY OF PENALTY ON THE INCOME IN RESPEC T OF DEEMED DIVIDEND. BEING SO, THE ASSESSING OFFICER CANNOT T AKE UP THE ISSUE RELATING TO LEVY OF PENALTY ON DEEMED DIVIDEN D INCOME AND THE PENALTY ORDER DATED 30.3.2010 IS BAD IN LAW. I N THIS CASE, THE ISSUE IN DISPUTE IS NOT SUBJECT MATTER OF APPEAL EI THER BEFORE THE - - ITA 2300/12 8 CIT(APPEALS) OR BEFORE THE TRIBUNAL. THE ASSESSING OFFICER HAS NOT RESERVED THE RIGHT TO IMPOSE PENALTY BY KEEPING THE PENALTY IN ABEYANCE ON DEEMED DIVIDEND INCOME IN FIRST PENA LTY ORDER DATED 30.6.2008. AS PER SEC.275(1)(C) OF THE ACT, THE PENALTY ORDER IS BARRED BY LIMITATION. ACCORDINGLY, WE ARE INCLINED TO DELETE THE PENALTY IN RESPECT OF DEEMED DIVIDEND IN COME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.2300/MDS/2012 IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 3 RD OF JUNE, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 3 RD JUNE, 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.