Shri Jayantibhai T.Hirpara, Surat V. Shri Dy.CIT.,Cent.Circle-2, Surat

ITA 2469/AHD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9816 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-09-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 21-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Income from undisclosed sources; Search and seizure
• Section: 271(1)(c); 27

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M SHRI JAYANTIBHAI T. HIRPARA,1- 2, SARITA VIHAR SOCIETY, OPP. RENUKA BHAVAN, PUNA BOMBAY MARKET ROAD, SURAT. VS. DY CIT, CIR-2, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE (WRITTEN SUBMISSION) RESPONDENT BY:- SHRI K. M. MAHESH, SR.D.R. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 20/07/2009 WHEREIN HE HAS CONFIRMED TH E LEVY OF PENALTY OF RS.25,000/- U/S 271A OF THE ACT ON THE GROUND THAT ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT. 2. THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZ URE WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 7.3.2006 DURING THE COU RSE OF WHICH ASSESSEE DECLARED UNACCOUNTED INCOME OF RS.1,00,00,000/-. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF SEARCH IT WAS NOTICED BY THE AO THAT ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. THE AO ACCORDINGLY ISSUED SHOW CAUSE NOTICE UNDER S ECTION 271A, IN RESPONSE TO WHICH IT WAS EXPLAINED THAT PROVISIONS OF SECTION 271A ARE ITA NO.2469/AHD/2009 ASST. YEAR :2006-07 ITA NO.2469/AHD/2009 ASST. YEAR 2006-07 2 NOT APPLICABLE WITH REFERENCE TO DETERMINATION OF I NCOME UNDER CHAPTER XIVB. THE AO CONSIDERED THIS REPLY AS ABSURD AND LE VIED THE PENALTY OF RS.25,000/-. 3. BEFORE LD. CIT(A) IT WAS EXPLAINED THAT THE ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBU NAL IN THE CASE OF CHADHA SUDHIR KUMAR VS. ITO (1996) 56 ITD (DEL) 470 AND THEREFORE, PENALTY IN A CASE COVERED UNDER CHAPTER XIVB OF THE ACT WOULD NOT BE LEVIABLE. THE LD. CIT(A) ALSO DID NOT AGREE AND CON FIRMED THE LEVY OF PENALTY BY HOLDING THAT ASSESSEE WAS REQUIRED TO MA INTAIN THE BOOKS OF ACCOUNT FOR THE BUSINESS CARRIED OUT IN THE PREVIOU S YEAR. 4. NONE APPEARED BEFORE US ON BEHALF OF THE ASSESSE E. HOWEVER, WRITTEN SUBMISSIONS WERE SUBMITTED WHEREIN THE SAME ARGUMENTS WERE RAISED AS WERE TAKEN UP BEFORE THE LD. CIT(A). 5. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDE RS OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. SO FAR AS THE FACTS IN THE PRESENT CASE ARE CONCERNED, THERE IS NO DISPUTE. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT DURING THE COURSE OF WHICH ASSESSEE DECLARED UNDISCLOSED INCOME OF RS .1 CRORES AS THERE WAS NO MAINTENANCE OF BOOKS RELEVANT TO THE BUSINES S FOR WHICH DISCLOSURE WAS MADE. THE RELIANCE OF THE ASSESSEE O N THE DECISION OF THE TRIBUNAL IN CHADHA SUDHIR KUMAR VS. ITO (SUPRA) IS NOT QUITE ON THE POINT. IN THAT CASE INCOME WAS RETURNED AND ASSESSE D ON ESTIMATED PROFIT RATE BASIS. THE AO HAD LEVIED PENALTY UNDER SECTION 271B FOR FAILURE TO GET THE BOOKS OF ACCOUNT AUDITED. THE TRIBUNAL HELD THAT WHERE PROFITS ARE ESTIMATED THEN THE QUESTION OF MAINTAINING THE BOOK S OF ACCOUNT DOES NOT ITA NO.2469/AHD/2009 ASST. YEAR 2006-07 3 ARISE AND, THEREFORE, PENALTY UNDER SECTION 271B CO ULD NOT BE LEVIED. THE ASSESSEE HAS SOUGHT TO DRAW SIMILARITY WITH THE ABO VE CASE. THE REASONING GIVEN IN THE ABOVE JUDGMENT CAN BE PARTLY APPLIED H ERE. THE PENALTY UNDER SECTION 271A IS LEVIED FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT. THE RELEVANT PROVISIONS OF SECTION ARE AS UNDER :- [FAILURE TO KEEP, MAINTAIN OR RETAIN BOOKS OF ACCOU NT, DOCUMENTS, ETC. 271A- WITHOUT PREJUDICE TO THE PROVISIONS OF SECTIO N 271, IF ANY PERSON FAILS TO KEEP AND MAINTAIN ANY SUCH BOOKS OF ACCOUN T AND OTHER DOCUMENTS AS REQUIRED BY SECTION 44AA OR THE RULES MADE THEREUNDER, IN RESPECT OF ANY PREVIOUS YEAR OR TO RETAIN SUCH BOOK S OF ACCOUNT AND OTHER DOCUMENTS FOR THE PERIOD SPECIFIED IN THE SAID RULE S, THE (ASSESSING) OFFICER OR THE COMMISSIONER (APPEALS) MAY DIRECT TH AT SUCH PERSON SHALL PAY, BY WAY OF PENALTY (A SUM OF TWENTY FIVE THOUSA ND RUPEES)] THE EXPLANATION OF THE ASSESSEE FOR NOT MAINTAINING THE BOOKS OF ACCOUNT IS THAT HE IS ASSESSED UNDER CHAPTER XIVB AND THE C ASE OF THE ASSESSEE CAN BE BROUGHT UNDER CHAPTER XIVB ONLY IN RESPECT O F THAT PART OF INCOME WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT. IT C AN BE A CASE WHERE ENTIRE INCOME IS NOT RECORDED IN THE BOOKS OF ACCOU NT AND, THEREFORE, ENTIRE INCOME SO DISCOVERED DURING THE COURSE OF SE ARCH MAY HAVE TO BE ASSESSED AS UNDISCLOSED INCOME UNDER CHAPTER XIVB. WHEN THE LAW REQUIRES TO MAKE ASSESSMENT OF THAT PART OF INCOME WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT TO BE ASSESSED UNDER CHAPTE R XIVB THEN NON- MAINTENANCE OF BOOKS OF ACCOUNT IS ACCEPTED AS A LO GICAL INFERENCE. THUS LAW PRESUPPOSES NON-EXISTENCE OF BOOKS OF ACCOUNT F OR CONFERRING JURISDICTION TO THE AO TO ASSESS SUCH PART OF INCOM E UNDER SECTION 158BC OR SECTION 158BD. NON-MAINTENANCE OF BOOKS OF ACCOU NT DOES NOT BECOME A VIOLATION OF A MANDATE GIVEN BY THE LAW FO R WHICH PENALTY COULD BE INVITED UNDER SECTION 271A BUT IT IS A CON DITION PRECEDENT FOR INVOKING JURISDICTION FOR ASSESSING A PART OR WHOLE OF INCOME UNDER CHAPTER XIVB. IT IS TO BE NOTED THAT THE TAX RATE I N RESPECT OF INCOME ITA NO.2469/AHD/2009 ASST. YEAR 2006-07 4 ASSESSED UNDER CHAPTER XIVB IS 60% WHEREAS INCOME C OMPUTED ON THE BASIS OF ENTRIES MADE IN THE REGULAR BOOKS OF ACCOU NT OR IN RESPECT OF DECLARED INCOME IS WHAT IS PRESCRIBED UNDER THE RES PECTIVE FINANCE ACT. THUS A PENALTY IS INBUILT IN HIGHER RATE OF TAX IMP OSED ON CONCEALED INCOME OR INCOME WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT OR WHERE BOOKS OF ACCOUNT ARE NOT MAINTAINED. NO FURTHER PEN ALTY EITHER UNDER SECTION 271(1)(C) OR FOR THAT EVEN UNDER SECTION 27 1A CAN BE LEVIED IN RESPECT OF THE INCOME ASSESSED UNDER CHAPTER XIVB. THE PROVISIONS OF SECTION 271A COULD HAVE BEEN INVOKED IF NO SEARCH A ND SEIZURE WOULD HAVE BEEN CARRIED OUT AND IN THE NORMAL COURSE OF A SSESSMENT PROCEEDINGS OR OTHERWISE AO FINDS THAT ASSESSEE HAS NOT MAINTAI NED BOOKS OF ACCOUNT. BUT WHERE SEARCH AND SEIZURE OPERATIONS ARE CARRIED OUT THE JURISDICTION OF THE AO TO ASSESSEE INCOME NOT RECORDED IN THE REGUL AR BOOKS OF ACCOUNT WOULD FALL UNDER CHAPTER XIVB AND NOT OTHERWISE. EV EN SECTION 158BA EXCLUDES OPERATION OF ANY OTHER PROVISIONS OF THE A CT IN RESPECT OF WHERE SEARCH AND SEIZURE OPERATIONS ARE CARRIED OUT. THE INCOME OF THE ASSESSEE WOULD BE ASSESSED IN SUCH CASES IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIVB ONLY. THEREFORE, WHERE PROVISIONS OF C HAPTER XIVB ARE INVOKED, OTHER PROVISIONS OF THE ACT ARE EXCLUDED. THIS WOULD ALSO EXCLUDE PENALTY UNDER SECTION 271A IN THE SAME WAY AS IT EXCLUDES PROVISIONS RELATING TO PENALTY UNDER SECTION 271(1) (C). SINCE AS PER PENALTY ORDER AO HAS BASED THE LEVY OF PENALTY U/S 271A IN RESPECT OF INCOME DISCLOSED UNDER CHAPTER XIVB AND NOT IN RESP ECT OF INCOME ASSESSED UNDER NORMAL PROVISIONS OF THE ACT, SUCH LEVY OF PENALTY U/S 271A CANNOT BE UPHELD. 7. EVEN OTHERWISE THE EXPLANATION GIVEN BY THE ASSE SSEE THAT HIS INCOME IS DISCLOSED UNDER CHAPTER XIVB AND, THEREFO RE, IS NOT LIABLE TO PENALTY UNDER SECTION 271A IS REASONABLE AND ACCORD ING TO LAW. ITA NO.2469/AHD/2009 ASST. YEAR 2006-07 5 THEREFORE, PENALTY IS ALSO NOT LEVIABLE FROM THAT C OUNT. ACCORDINGLY THE LEVY OF PENALTY IS CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 24/9/10. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 24/9/10. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 16 /9/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 21/9/2010 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..