Shri Maheshbhai Shantibhai Patel (HUF), Ahmedabad V. The Income Tax Officer, Ward-3(3)(4), Ahmedabad

ITA 253/AHD/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9701 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH PATHAK
• Keywords: Initiation of penalty proceedings
• Section: 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO.253/AHD/2017 ( / ASSESSMENT YEAR : 2007-08) MAHESHBHAI SHANTIBHAI PATEL (HUF) B-202, MARUTI TOWER NR.SHIVRANJANI CROSS ROAD SATELLITE, AHMEDABAD380 015 / VS. THE ITO WARD-3(3)(4) AHMEDABAD ./ ./ PAN/GIR NO. : AAFHP 6862 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS.URVASHI SHODHAN, AR / RESPONDENT BY : SHRI OMPRAKASH PATHAK, SR.DR / DATE OF HEARING 12/09/2018 / DATE OF PRONOUNCEMENT 18/09/2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)3, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- 3/WD/3(3)(4)/118/15-16 DATED 06.12.2016 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961(HERE- IN-AFTER REFERRED TO AS 'THE ACT') DATED 09.03.2015 RELEVANT TO ASSESSMENT YEAR (AYS) 2007-08. ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 2 - 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LD.CIT(A) ERRED IN LAW IN CONFIRMING ORDER OF AO FRAMING ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT IN ABSENCE OF ESCAPEMENT OF INCOME DURING THE YEAR UNDER CONSIDERATION. LD.CIT(A) OUGHT TO HAVE QUASHED THE ORDER BEING ILLEGAL, UNLAWFUL AND THEREFORE VOID AB INITIO. IT BE SO HELD NOW. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT AO GRANTED ADEQUATE OPPORTUNITY TO THE APPELLANT DISCUSSING GROUNDS FOR REJECTION OF THE CLAIM IN THE ORDER. LD. CIT(A) FAILED TO APPRECIATE THAT FAILURE TO ISSUE SHOW CAUSE NOTICE AS REGARDS THE CLAIMS MADE IN THE RETURN OF INCOME BEFORE ANY MODIFICATION BY AO VITIATES THE ASSESSMENT PROCEEDINGS. 3. LD.CIT(A) ERRED IN LAW AND ON FACTS CONFIRMING ADDITION MADE BY AO OF RS.7,50,000/- SHARE OF PROFIT FROM UNDISCLOSED PROFITS OF PARTNERSHIP FIRM. LD.CIT(A) OUGHT TO HAVE HELD THAT ONCE LAND BECAME PROPERTY OF THE FIRM FROM THE DATE OF PARTNERS CONTRIBUTION THEN PARTNER IS NOT LIABLE TO TAX ON SHARE OF PROFIT FROM ANY INCOME SUBSEQUENTLY EARNED BY THE FIRM. 4. LD.CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ABOVE ADDITION OF UNACCOUNTED PROFIT IN THE HANDS OF THE APPELLANT IGNORING THE FACT THAT THE SAID PROFIT WAS ALREADY OFFERED BY THE FIRM BEFORE SETTLEMENT COMMISSION. 5. LEVY OF INTEREST U/S.234A, 234B, 234C & 234D OF THE ACT IS UNJUSTIFIED. 6. INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IS UNJUSTIFIED. ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 3 - 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT ADVANCED ANY ARGUMENT ON THE GROUND OF RE-OPENING OF ASSESSMENT U/S.147 OF THE ACT. THEREFORE, WE REJECT THE SAME AS NOT PRESSED. 4. THE NEXT ISSUE RAISED BY ASSESSEE IS THAT LD.CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER (AO) FOR RS.7,50,000/- IN THE HANDS OF THE PARTNER OF THE FIRM. 5. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS HUF AND DERIVED ITS INCOME AS SHARE OF PROFIT FROM THE FIRM AND INCOME FROM OTHER SOURCES. THERE WAS A SEARCH U/S 132 OF THE ACT CARRIED OUT IN THE CASE OF SAVVY GROUP DATED 27.04.2011 AND ON SUBSEQUENT DATES. IN CONSEQUENCE TO THE SEARCH, A SURVEY OPERATION WAS ALSO CONDUCTED AT THE PREMISES OF THE ASSESSEE. AS A RESULT OF SEARCH AND SURVEY PROCEEDINGS, A STATEMENT OF SHRI MAHESH SHANTILAL PATEL WAS RECORDED U/S 131 OF THE ACT. IN THE STATEMENT IT WAS ADMITTED BY SHRI MAHESH SHANTILAL PATEL THAT A SUM OF RS.69 LAKHS WAS RECEIVED FROM THE FIRM BY THE PARTNERS WHICH WAS NOT DISCLOSED IN THE INCOME-TAX RETURN. THIS UNDISCLOSED INCOME WAS PERTAINING TO THE ASSESSMENT YEARS 2007-08 & 2008-09. THE ALLOCATION OF SUCH UNDISCLOSED INCOME HAS BEEN TABULATED BY THE AO ON PAGE NO.4- 5 OF HIS ORDER. THE AO ACCORDINGLY WORKED OUT THE SHARE OF THE ASSESSEE IN SUCH UNDISCLOSED INCOME FOR RS.7,50,000/- WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 4 - 6. AGGRIEVED BY THE ASSESSEE PREFERRED IN APPEAL TO THE LD. CIT(A) WHO CONFIRMED THE ORDER OF THE AO. 7. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US. 8. THE LD.AR AT THE OUTSET SUBMITTED THAT A SIMILAR KIND OF ADDITION WAS MADE BY THE AO IN THE ASSESSMENT YEAR 2008-09 IN THE HANDS OF THE ASSESSEE AMOUNTING TO RS.9.75 LAKHS WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD.CIT(A). HOWEVER, ON FURTHER APPEAL TO THE HONBLE ITAT, THE MATTER WAS REMANDED BACK TO THE FILE OF CIT(A) FOR FRESH ADJUDICATION. THE LD.AR IN SUPPORT OF HIS CLAIM, FILED A COPY OF THE ORDER OF THE HONBLE ITAT IN THE OWN CASE OF ASSESSEE BEARING ITA NO.3447/AHD/2016 FOR AY 2008-09 & ORS. WHICH IS PLACED ON RECORD. ACCORDINGLY, THE LD.AR PRAYED TO THE BENCH TO RESTORE THE ISSUE TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION. 9. ON THE OTHER HAND, THE LD.AR RAISED NO OBJECTION IF THE MATTER IS REFERRED BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE NOTE THAT THE ITAT IN THE IDENTICAL ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 5 - FACTS AND CIRCUMSTANCES IN THE OWN CASE OF THE ASSESSEE HAS REMANDED BACK THE MATTER TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 14. WE HAVE CAREFULLY CONSIDERED RIVALS SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW2. THE TAXABILITY OF UNDISCLOSED INCOME DETECTED IN THE COURSE OF SEARCH IN THE CASE OF PARTNERSHIP FIRM WHERE THE ASSESSEE IS A PARTNER IS IN QUESTION. WE SHALL FIRST TAKE A LOOK INTO THE SECOND PROPOSITION RAISED ON BEHALF OF THE ASSESSEE. ON BEHALF OF THE ASSESSEE, IT IS SOUGHT TO BE CONTENDED THAT THE ALLEGED UNDISCLOSED INCOME HAS ALREADY BEEN INCLUDED IN THE TAXABLE INCOME OF THE PARTNERSHIP FIRM IN THE COURSE OF SETTLEMENT PROCEEDINGS AND THUS THE SAME INCOME CANNOT BE TAXED AGAIN IN HANDS OF THE PARTNERS. WE FIND OURSELVES IN COMPLETE AGREEMENT, IN PRINCIPLE, WITH THE SAID PROPOSITION RAISED ON BEHALF OF THE ASSESSEE-PARTNER THAT THE UNDISCLOSED INCOME ONCE ALREADY CONSIDERED FOR TAXATION IN THE HANDS OF THE PARTNERSHIP FIRM CANNOT BE TAXED ONCE AGAIN IN THE HANDS OF THE PARTNER. HOWEVER, IN THE SAME VEIN, WE FIND THAT QUESTION AS TO WHETHER THE UNDISCLOSED INCOME IN CONTROVERSY, FORMS PART OF THE ADDITIONAL INCOME DECLARED BEFORE THE SETTLEMENT COMMISSION OR NOT, IS ESSENTIALLY A QUESTION OF FACT. THIS ASPECT HAS NOT BEEN RAISED BEFORE THE LOWER AUTHORITIES, AND THUS REMAINED UNANSWERED. HENCE, AS A MEASURE OF FAIR-PLAY, THE ISSUE REQUIRES TO BE REMANDED BACK AND RESTORED TO THE FILE OF CIT(A) TO RE-APPRECIATE THE LIMITED ASPECT AS TO WHETHER INCOME IN DISPUTE HAS ALREADY BEEN INCLUDED IN THE ADDITIONAL INCOME OFFERED BY THE PARTNERSHIP FIRM BEFORE THE SETTLEMENT COMMISSION, DIRECTLY OR INDIRECTLY. THEREFORE, WE CONSIDER IT EXPEDIENT TO SET ASIDE THE ISSUE TO THE FILE OF THE CIT(A) FOR EXAMINATION OF THIS LIMITED ASPECT OF ASSESSMENT OF UNDISCLOSED INCOME IN THE HANDS OF THE PARTNERSHIP FIRM. NEEDLESS TO SAY, THE ASSESSEE CANNOT BE TAXED ON THE UNDISCLOSED WHERE THE UNDISCLOSED INCOME IS ALREADY FOUND TO BE TAXED IN THE HANDS OF THE PARTNERSHIP FIRM. ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 6 - 15. WE SHALL NOW ADVERT TO THE FIRST PROPOSITION RAISED ON BEHALF OF THE ASSESSEE THAT THE INCOME CAN BE TAXED ONLY IN THE HANDS OF THE PARTNERSHIP FIRM. IT IS TRUE THAT INCOME IS REQUIRED TO BE TAXED IN THE HANDS OF RIGHT PERSON ONLY. HOWEVER, WE ALSO BEAR IN MIND THAT THE PARTNERSHIP FIRM IS ONLY A CREATURE OF AGREEMENT AND PARTNERS ARE INTRINSICALLY CONNECTED CONTRACTUALLY UNDER THE PARTNERSHIP ACT. PARTNERS (ASSESSEE HEREIN) HOLD MUTUAL AGENCY ON BEHALF OF THE FIRM AND ARE LIABLE AND RESPONSIBLE FOR THE ACTS OF THE ASSESSEE-FIRM. A FIRM IS MERELY A COMPENDIOUS EXPRESSION FOR ITS PARTNERS. THIS APART, THE UNDISCLOSED INCOME OF THE PARTNERSHIP FIRM ULTIMATELY GOES TO THE PARTNERS BY WAY OF SHARE OF THEIR UNDISCLOSED INCOME. THEREFORE, A STRICT ADHERENCE OF TAXABILITY THAT TOO OF AN UNDISCLOSED INCOME IN THE HANDS OF THE PARTNERSHIP FIRM AS INSISTED UPON, WOULD NOT, IN OUR VIEW, CHANGE THE GROUND REALITY. BESIDES, THE INCLUSION OF UNDISCLOSED INCOME IN THE HANDS OF PARTNERSHIP FIRM IN EXERCISE OF POWERS VESTED UNDER ERSTWHILE PROVISIONS 153(3) IS ALSO PLAUSIBLE. HOWEVER, SINCE THE MATTER HAS ALREADY BEEN SET ASIDE AND REMANDED TO THE FILE OF THE CIT(A), WE DO NOT CONSIDER IT NECESSARY TO DELINEATE INTO THIS ASPECT OF REVENUE NEUTRAL EXERCISE ANY FURTHER. 16. IN VIEW OF THE AFORESAID DISCUSSION, THE ISSUE IS SET ASIDE AND REMANDED BACK TO THE FILE OF THE CIT(A) FOR ADJUDICATION OF THE ISSUE AFRESH IN TERMS OF DIRECTIONS NOTED ABOVE IN ACCORDANCE WITH LAW. 11. RESPECTFULLY FOLLOWING THE SAME, WE ARE INCLINED TO REMAND THIS MATTER TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE PROVISIONS OF LAW. HENCE, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.253/AHD/2017 MAHESHBHAI SHANTIBHAI PATEL (HUF) VS. ITO ASST.YEAR 2007-08 - 7 - THIS ORDER PRONOUNCED IN OPEN COURT ON 18/09/2018 SD/- SD/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 18/09/2018 T.C. NAIR SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-3, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD