Sri. Najeeb C, Cochin V. The ITO, Cochin

ITA 238/COCH/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3882 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 18-08-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Search and seizure; Document seized; Assessment record; Block assessment; Documents seized
• Section: 142(1); 144; 139

Judgement Text

ITA NO.238/COCH/2015 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.238/COCH/2015 ( #$ % /ASSESSMENT YEAR : 2002-03) SHRI C. NAJEEB, PROPRIETOR, M/S. NAJEEB ASSOCIATES, 4 TH FLOOR, CHICAGO PLAZA, RAJAJI ROAD, COCHIN-682 035 VS THE INCOME TAX OFFICER, WARD-2(3), KOCHI. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . ' ./PAN NO. AAOPN 2180L &' * + /ASSESSEE BY SHRI T.M. SREEDHARAN, SR. ADV. ( ) &' * + /REVENUE BY SHRI A. DHANARAJ, SR. DR . -. * /0 / DATE OF HEARING 18/08/2016 1 % * /0 /DATE OF PRONOUNCEMENT 26/09/2016 2 2 2 2 /ORDER PER B.P. JAIN, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF THE LD. CIT(A)-II, KOCHI DATED 30/06/2014 CONFIRMING THE PE NALTY LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2 002-03. ITA NO.238/COCH/2015 2 2. AT THE OUTSET, THERE IS A DELAY OF 190 DAYS I N FILING THE APPEAL. THE ASSESSEE HAS FILED CONDONATION PETITION ALONGWITH AN AFFIDAV IT STATING THE REASONS FOR THE DELAY IN FILING THE APPEAL. 3. THE LD. DR OPPOSED THE CONDONATION PETITION. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. ON PERUSAL OF THE AFFIDAVIT, WE FIND THERE IS SUFFICIE NT CAUSE FOR DELAY IN FILING THIS APPEAL AND HENCE, WE CONDONE THE DELAY AND PROCEED TO DISPOSE OF THE APPEAL ON MERITS. 5. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPE ALS)-II, KOCHI IN I.T.A. NO.9/R-II/E/CIT(A)-II/08-09 DATED 30/06/2014 CONFIR MING THE LEVY OF PENALTY U/S. 272(1)(C) FOR 2002-03 IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) WENT WRONG IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.10,31,586/-. 3. THE CIT(A) SHOULD HAVE FOUND THAT AS FAR AS THE ASSESSMENT FOR THE 2002-03 WAS CONCERNED, PART OF THE ASSESSMENT WAS COVERED B Y SEARCH PERIOD FOR THE SEARCH CONDUCTED ON 20/09/2001 AND THE BLOCK AS SESSMENT WAS COMPLETED WITH RESPECT TO THE INCOME UPTO THE DATE OF SEARCH. 4. PENALTY PROCEEDINGS INITIATED U/S. 158BFA(2) O F THE INCOME TAX ACT WAS SET ASIDE BY THE HONBLE ITAT COCHIN BENCH. WHAT I S NOW CONSIDERED FOR LEVY OF PENALTY IS THE ASSESSMENT FOR THE BROKEN PERIOD FROM 21/09/2001 TO 31/03/2002 WHICH WAS MADE ON ESTIMATE BASIS AND NOT WITH REFERENCE TO ANY SEIZED DOCUMENTS. ITA NO.238/COCH/2015 3 5. A PERUSAL OF THE ASSESSMENT RECORDS SHOW THAT TH E INCOME WAS DETERMINED ON ESTIMATE BASIS WHICH HAS BEEN MODIFIED MORE THAN ONCE. 6. IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSMENT MADE ON ESTIMATE BASIS CANNOT PROVIDE BASIS FOR PENALTY PROCEEDINGS U/S. 2 71(1)(C). 7. AT ANY RATE, THE CIT(A) SHOULD HAVE FOLLOWED THE ORDER OF THE APPELLATE TRIBUNAL IN THE APPEAL AGAINST THE ORDER U/S. 158BF A(2) IN AS MUCH AS THE INGREDIENTS FOR LEVY OF PENALTY U/S. 271(1)(C) AND 158BFA(2) ARE THE SAME. 8. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SU BMITTED THAT THE QUANTUM OF PENALTY LEVIED EQUAL TO 3 TIMES OF THE TAX, IS HIGH LY EXCESSIVE AND ARBITRARY. IN ANY EVENT THE PENALTY CALLS FOR REDUCTION. 9. WITHOUT PREJUDICE, IT IS ALSO SUBMITTED THAT THE PROCEEDINGS FOR LEVY OF PENALTY ARE BARRED BY LIMITATION. 10. THE APPELLANT HUMBLY PRAYS THAT THE GROUNDS OF APPEAL BEFORE THE CIT(A), MAY KINDLY BE CONSIDERED AS PART OF THESE GROUNDS. FOR THESE AND OTHER REASONS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE HONBLE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH MAY KINDLY BE PLEASED TO SET ASIDE THE ORDER OF THE FIRST APPELLATE AUTHORITY, CANCEL THE PENALTY, ALLOW THE APPEAL AND RENDER JUSTICE. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN ARCHITECT AND THE PROPRIETOR OF M/S. NAJEEB ASSOCIATES. THE ASSESSEE IS ALSO ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AS A CONTRACTOR AND IS ALSO A BUILDER. THE ASSESSEE DID NOT FILE THE RETURN OF INCOME AS REQUIRED U/S. 139(1) OF THE ACT. NOTICES U/S. 142(1) OF THE ACT WERE ISSUED ON TWO OCCASIONS, VIZ . 27.12.2002 CALLING FOR THE RETURN OF INCOME AND ON 02/12/2004 CALLING FOR THE RETURN OF INCOME, BOOKS OF ACCOUNT AND OTHER DETAILS. THE ASSESSEE DID NOT RE SPOND TO BOTH THE NOTICES. THEREFORE, A NOTICE UNDER THE PROVISO TO SUB-SEC. ( 1) OF SEC. 144 OF THE INCOME TAX ACT, 1961 INFORMING THE ASSESSEE THAT THE ASSES SMENT WAS PROPOSED TO BE ITA NO.238/COCH/2015 4 COMPLETED EX PARTE U/S. 144 ESTIMATING THE TOTAL IN COME AT RS.19,50,000/- AND ACCORDINGLY, NOTICE WAS ISSUED ON 12/01/2005 FOR H EARING ON 24/01/2005. THE ASSESSING OFFICER IN HIS ORDER DATED 31/03/2008 BY WHICH PENALTY U/S. 271(1)(C) WAS IMPOSED, FURTHER NOTICED THAT THE ASSESSEE WHI LE APPEARING IN CONNECTING WITH SOME OTHER MATTER ON 25/01/2005, INFORMED THAT HE HAD NOT RECEIVED THE ABOVE NOTICE FOR APPEARANCE ON 24/01/2005. THEREFO RE, THE CASE WAS RE- POSTED FOR HEARING ON 14/02/2005 AS REQUESTED. BUT THE ASSESSEE DID NOT RESPOND. HOWEVER, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS.2,58,500/- ON 15/02/2005. THE SUBSEQU ENT NOTICES WERE NOT RESPONDED BY THE ASSESSEE AND FINALLY, THE ASSESSME NT CAME TO BE COMPLETED U/S. 144 ON 03/03/2005, SINCE THE ASSESSEE HAD FAIL ED TO COMPLY WITH THE PROVISIONS OF SEC. 139, 142(1) & 143(2), BY FIXING THE TOTAL INCOME AT RS.16,38,000/- 7. PROCEEDINGS FOR LEVY OF PENALTY U/S. 271(1)(C) WAS INITIATED SEPARATELY BY ISSUE OF NOTICE U/S. 274 R.W.S. 271(1)(C) DATED 03/ 03/2005. THE ORDER IMPOSING PENALTY GOES TO SHOW THAT THERE WAS NO RESPONSE TO THE SAID SHOW CAUSE NOTICE BY THE ASSESSEE, EITHER ON THE APPOINTED DAY OR THE REAFTER. PENALTY PROCEEDINGS WERE POSTED ON SUBSEQUENT OCCASIONS, BU T THERE WAS NO PROPER COMPLIANCE TO ANY OF THESE NOTICES. ACCORDINGLY, T HE ASSESSING OFFICER FINALIZED THE PENALTY PROCEEDINGS BY ORDER DATED 31/03/2008 W ITH THE FOLLOWING OBSERVATIONS:- ITA NO.238/COCH/2015 5 AS HAS ;ABUNDANTLY CLEAR AND ESTABLISHED, THE ASSE SSEE HAS NOT CO-OPERATED WITH THE DEPARTMENT IN COMPLETION OF THE ASSESSMENT PROCEEDINGS ALSO. IN THE CIRCUMSTANCES, I HOLD THAT THE MENS-REA HAS BEE N PROVED AND THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME BY NOT FILING THE RETURN OF INCOME U/S. 139 AND EVEN IN SPITE OF THE NOTICE U/S . 142(1). I AM SATISFIED THAT THIS IS A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)( C) AS THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME. THE ASSESSEE IS LIABLE FOR MAXIMUM LIABILITY LEVIABLE U/S. 271(1)(C), WHICH WORKS OUT TO RS.10,31,586/-. ACCORDINGLY, A PENALTY OF RS.10,31,586/- WAS LEVIED AFTER OBTAINING THE STATUTORY APPROVAL FROM THE HIGHER AUTHORITY. 8. THE ASSESSEE FILED APPEAL AGAINST THE ABOVE ORD ER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER VIDE A DETAILED ORDER DATED 30/06/2014. THE LD. CIT(A) IN PARAGRAPH 4.3 OF THE ORDER HAS REFERRED TO THE QUANTUM OF INCOME CONCEALED AS ADOPTED BY THE ASSESSING OFFICER AT RS. 12,10,400/- AND THE FINAL INCOME THA T HAS BEEN DETERMINED AS A RESULT OF SUBSEQUENT APPELLATE PROCEEDINGS IN THE Q UANTUM APPEAL. THE LD. CIT(A) ACCORDINGLY DIRECTED THE ASSESSING OFFICER T O WORK OUT PENALTY U/S. 271(1)(C) BASED ON THE FINAL INCOME FOR THE YEAR AS DETERMINED IN THE QUANTUM ASSESSMENT PROCEEDINGS AND IMPOSED PENALTY AT THREE TIMES OF THE TAX SOUGHT TO BE EVADED. 9. AGGRIEVED BY THE ABOVE APPELLATE ORDER, THE A SSESSEE HAS FILED THIS SECOND APPEAL. IN THE MEMORANDUM OF APPEAL VIDE GROUND NO . 4, THE ASSESSEE HAS ITA NO.238/COCH/2015 6 REFERRED TO THE PENALTY PROCEEDINGS INITIATED U/S. 153BFA(2) OF THE INCOME TAX ACT, WITH RESPECT TO THE BLOCK ASSESSMENT THAT FOLL OWED PURSUANT TO A SEARCH AND SEIZURE OPERATION CONDUCTED ON 20/09/2001. IN THE COURSE OF THE HEARING OF THE APPEAL, THE LD. SENIOR COUNSEL APPEARING FOR TH E ASSESSEE POINTED OUT THAT FOR THE ASSESSMENT YEAR 2002-03, THE PREVIOUS YEAR COMMENCES FROM 01/04/2001 AND EXTENDS TO 31/03/2002. THE SEARCH WAS CARRIED OUT ON 20/09/2001. THEREFORE, THE INCOME OF THE ASSESSEE UPTO 20/09/20 01 RELATING TO THE ASSESSMENT YEAR 2002-03 HAS ALREADY BEEN INCLUDED I N THE BLOCK ASSESSMENT. PURSUANT TO THE BLOCK ASSESSMENT ORDER U/S. 153BC R ELATABLE TO THE ASSESSMENT YEAR 2002-03, INCOME UPTO 20/09/2001 HAD ALREADY BE EN ASSESSED IN THE BLOCK ASSESSMENT ORDER. THE CONSEQUENTIAL PENALTY PROCEE DINGS INITIATED U/S. 158BFA(2) OF THE ACT WAS SET ASIDE BY THE ITAT, COC HIN BENCH, AFTER HAVING FOUND THAT THE INCOME WAS DETERMINED ON ESTIMATE BA SIS WITH REFERENCE TO THE VARIOUS DOCUMENTS FOUND AT THE TIME OF SEARCH. IT WAS PLEADED THAT THE SAME FACTS AND FINDINGS ARE RELEVANT FOR THE PERIOD FROM 21/09/2001 TO 31/03/2002, I.E., THE REMAINING PART OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03. THE LD. SENIOR COUNSEL FURTHER PLEADED THAT IN ANY EVENT, THE PENALTY LEVIED EQUAL TO THREE TIMES OF THE TAX, IS HIGHLY EXCESSIV E AND UNREASONABLE AND ACCORDINGLY PRAYED FOR A REDUCTION. THE ABOVE SUBM ISSION WAS MADE WITHOUT PREJUDICE TO THE CASE PLEADED FOR TOTAL CANCELLATIO N OF PENALTY. ITA NO.238/COCH/2015 7 10. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE FACTS OF THE CASE. WE ARE NOT INCLINED TO ACCEPT THE CASE PLEADED BEFO RE US IN VIEW OF THE FINDINGS IN THE ORDER LEVYING PENALTY, WHICH WE HAV E QUOTED ABOVE AND THE FACTS AND FINDINGS ON RECORD CONFIRMING THE PENALTY BY THE LD. CIT(A). ADMITTEDLY, THE ASSESSEE HAS ACTED IN TOTAL DISREGA RD OF THE STATUTORY OBLIGATIONS AND HAS NOT CO-OPERATED IN THE ASSESSMENT PROCEEDIN GS AND HAS DRIVEN THE ASSESSING OFFICER FOR MAKING THE ASSESSMENT U/S. 14 4 OF THE ACT. THE ASSESSEE HAD ALSO COURTED THE PENALTY U/S. 271B AS WELL AS T HE PENALTY U/S. 271(1)(E) WHICH WERE ALSO APPEALED AGAINST BEFORE THE LD. CIT (A) WHO CONFIRMED THE SAME. THUS THERE IS CLEAR AND CATEGORICAL FINDING BY BOTH THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) THAT THE ASSESSEE ACTED I N TOTAL DISREGARD OF THE STATUTORY OBLIGATIONS AND WAS CALLOUS IN HIS APPROA CH TO THE STATUTORY NOTICES ISSUED AND THERE WAS FAILURE TO COMPLY WITH SUCH NO TICES. IN THE CIRCUMSTANCES AND FACTS OF THE CASE, WE ARE NOT INCLINED TO INTER FERE WITH THE ORDERS OF BOTH THE ASSESSING OFFICER AS WELL AS OF THE LD. CIT(A) AND ACCORDINGLY, WE UPHOLD THE SAME AS CORRECT AND IN ACCORDANCE WITH LAW. THUS A LL THE GROUNDS OF THE ASSESSEE ARE DISMISSED. IT IS ORDERED ACCORDINGLY. ITA NO.238/COCH/2015 8 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 238/COCH/2015 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 26 -09-2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 3 /DATED: 26 TH SEPTEMBER, 2016 GJ/ 2 * (/4 54%/ /COPY TO: 1. &' /SHRI C. NAJEEB, PROPRIETOR, M/S. NAJEEB ASSOCIATES , 4 TH FLOOR, CHICAGO PLAZA, RAJAJI ROAD, COCHIN-682 035. 2. () &' /THE INCOME TAX OFFICER, WARD-2(3), KOCHI. 3. -6 / ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI , 4. -6 / /THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. 478 (/ , /THE DR/ITAT, COCHIN BENCH. 6. 8: ;. /GUARD FILE. 2- /BY ORDER < /ASSISTANT REGISTRAR . . =0 . > . =0 ., /I.T.A.T., COCHIN