M/s. Kolte Patil Developers Ltd, Pune V. Deputy Commissioner of Income-tax,

ITA 2579/PUN/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1441 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-04-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHAI
• Keywords: Bogus purchase; Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 153A; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . / ITA NO.2579/PUN/2016 / ASSESSMENT YEAR : 2007-08 M/S. KOLTE PATIL DEVELOPERS LTD., 2 ND FLOOR, CITY POINT, DHOLE PATIL ROAD, PUNE - 411001. PAN : AAACK7310G . /APPELLANT VS. DCIT, CENTRAL CIRCLE-1(1), PUNE. . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI SANJEEV GHAI / DATE OF HEARING : 10.04.2019 / DATE OF PRONOUNCEMENT: 14.05.2019 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-11, PUNE DATED 03.08.2016 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE PENALTY ORDER PASSED WAS NOT BARRED BY LIMITATION AND WAS VALID IN LAW WITHOUT APPRECIATING THAT THE PENALTY ORDER PASSED BY THE LEARNED A.O. DATED 28.09.2015 WAS BARRED BY LIMITATION AND ACCORDINGLY, THE SAME SHOULD BE HELD AS NULL AND VOID. 2] THE PENALTY ORDER PASSED U/S 271(1)(C) BE DECLARED NULL AND VOID SINCE IT IS PASSED WITHOUT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF RS.1,85,28,842/- ON ACCOUNT OF THE ADDITION OF BOGUS PURCHASES. 3.1] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD INFLATED ITS PURCHASES AND THEREBY REDUCED ITS INCOME AND ACCORDINGLY, THE LEVY OF PENALTY WAS JUSTIFIED IN LAW. 3.2] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SIMPLY BECAUSE THE ADDITION WAS MADE DID NOT INDICATE THAT THE ASSESSEE HAD MADE NON GENUINE PURCHASES AND THEREFORE, THERE WAS NO QUESTION OF LEVY OF PENALTY IN RESPECT OF THE SAID ADDITION. ITA NO.2579/PUN/2016 2 3.3] THE LEARNED CIT(A) FURTHER ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD PROVED THAT IT HAD UTILISED THE MATERIAL AND THEREFORE, THERE WAS NO QUESTION OF MAKING ANY ADDITION AND THE LEVY OF PENALTY WAS NOT JUSTIFIED AT ALL. 3.4] THE ASSESSEE SUBMITS THAT SIMPLY BECAUSE ITS CLAIM HAS BEEN REJECTED WITHOUT PROVING IT TO BE FALSE DOES NOT WARRANT ANY LEVY OF PENALTY AND ACCORDINGLY, THE PENALTY LEVIED MAY KINDLY BE DELETED. 4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDITIONAL GROUND OF APPEAL :- 1] THE ASSESSEE SUBMITS THAT NO PROPER SATISFACTION HAS BEEN RECORDED BY THE LEARNED A.O. IN THE ASST. ORDER AND THEREFORE, THE LEVY OF PENALTY U/S 271(1)(C) IS INVALID IN LAW. 4. BRIEFLY STATED THE RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS A COMPANY OF KOLTE PATIL GROUP AND IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF REAL ESTATE, PURCHASE AND SALE OF LAND ETC. A SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCTED ON THE M/S. KOLTE PATIL DEVELOPERS LTD. GROUP ON 22.08.2008 AND A NOTICE U/S 153A OF THE ACT WAS ISSUED AND DULY SERVED ON THE ASSESSEE. IN RESPONSE TO THE SAME, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.71,78,88,401/-. AT THE END OF THE ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT, THE ASSESSING OFFICER FOUND THAT THE CERTAIN EXPENSES DEBITED IN FORM OF STEEL PURCHASE AND TRANSPORT CHARGES PAID TO M/S NEW ARCH TRANSPORT TO THE TUNE OF RS.7,75,34,092/- WERE ABSOLUTELY BOGUS PURCHASES AND ADDED THE SAID AMOUNT TO THE TOTAL TAXABLE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. FURTHER, THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDING STATING THAT .. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I-T ACT WERE INITIATED (PARA 4.14 OF THE ASSESSMENT ORDER). ITA NO.2579/PUN/2016 3 5. IN THE PENALTY ORDER, THE ASSESSING OFFICER CLEARLY STATED THAT THE LEVY OF PENALTY FOR THE DEFAULT OF FURNISHING INACCURATE PARTICULARS OF ITS INCOME (PARA 3.0 OF THE PENALTY ORDER). 6. THE CIT(A), RELYING ON THE VARIOUS JUDGEMENTS OF THE HIGH COURT AS WELL AS THE DECISIONS OF THE TRIBUNAL, CONFIRMED THE PENALTY AS LEVIED BY THE ASSESSING OFFICER. THE CONTENTS OF PARA 6 ONWARDS OF THE APPELLATE ORDER ARE RELEVANT IN THIS REGARD. 7. AGGRIEVED WITH THE SAID DECISION OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ABOVE EXTRACTED GROUNDS/ADDITIONAL GROUND. 8. ACCORDING TO THE LD. AR, THE ORDER OF THE CIT(A) SHALL HAVE TO BE SET- ASIDE ON THE LEGAL ISSUE. HIGHLIGHTING THE LEGAL REQUIREMENT OF MAKING A SPECIFIC REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELYING ON VARIOUS BINDING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565, LD. COUNSEL DEMONSTRATED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW AND THE SAME IS WRONGLY UPHELD BY THE CIT(A). 9. ON THE OTHER HAND, LD. DR FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS IS A CASE WHERE THE ITA NO.2579/PUN/2016 4 ASSESSING OFFICER FAILED TO RECORD PROPER SATISFACTION WHILE INITIATING AND LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT. IN THIS REGARD, WE PURSED THE ORDERS OF THE REVENUE AUTHORITIES. ON PERUSAL OF PARA 4.14 OF THE ASSESSMENT ORDER, WE FIND THE FOLLOWING IS THE REASONS FOR INITIATION OF PENALTY PROCEEDINGS :- 4.14 . . THEREFORE, THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I-T ACT WERE INITIATED. 11. FURTHER, WE ALSO PERUSED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER ON 28.09.2015. ON PERUSAL OF PARA 3.0 OF THE PENALTY ORDER, WE FIND THE FOLLOWING IS THE REASONS FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT :- 3.0 . FURNISHED INACCURATE PARTICULARS OF ITS INCOME 12. THE ABOVE EXTRACTS REVEAL THAT THE ASSESSING OFFICER SUFFERS FROM AMBIGUITY IN HIS MIND WHILE RECORDING THE SATISFACTION AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 13. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE LEGAL REQUIREMENT OF MAKING A CLEAR CUT REFERENCE TO THE APPLICABLE LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT, IS NOT MET BY THE ASSESSING OFFICER WHILE INITIATING AND LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT. THUS, THE SATISFACTION OF THE ASSESSING OFFICER SUFFERS FROM AMBIGUITY IN HIS MIND. 14. THEREFORE, CONSIDERING THE ABOVE REFERRED BINDING JUDGMENTS, WE ARE OF THE VIEW THAT SUCH PENALTY IS UNSUSTAINABLE IN LAW LEGALLY. IT IS A SETTLED LEGAL PROPOSITION THAT THE ASSESSING OFFICER IS UNDER OBLIGATION TO SPECIFY THE APPROPRIATE LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AT THE TIME OF ITA NO.2579/PUN/2016 5 INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. IN VIEW OF THE ABOVE DELIBERATION ON THIS ISSUE, WITHOUT GOING INTO THE MERITS OF THE CASE, WE SET- ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE PENALTY IMPOSED BY HIM. ACCORDINGLY, THE GROUNDS/ADDITIONAL GROUND RAISED BY THE ASSESSEE ARE ALLOWED ON LEGAL ISSUE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF MAY, 2019. SD/- SD/- SSSSD- SD/- (SUSHMA CHOWLA) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 14 TH MAY, 2019. SUJEET / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-11, PUNE; 4. THE DGIT (INV.), PUNE; 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE