Shri Jagdishchandra Natverlal Gandhi, Surat V. The Income tax Officer, Ward-6(2), Surat

ITA 2610/AHD/2007

• Counselvise Citation: 261020514 RSA 2007
• Duration Of Justice: 4 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 12-06-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWANI
• Assessee Lawyers: S N DIVETIA
• Keywords: Opportunity of being heard; Revised return
• Section: 133A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2610/AHD/2007 A. Y.: 2002-03 JAGDISHCHANDRA NATVERLAL GANDHI, C/O. NATVERLAL MAGANLAL GANDHI, BARANPURI BHAGAL, SURAT VS INCOME TAX OFFICER, WARD 6 (2), AAYAKAR BHAVAN, MAJURA GATE, SURAT PA NO. ABRPG 0962 F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. DIVETIA, AR RESPONDENT BY SHRI VINOD TANWANI, DR DATE OF HEARING: 23-08-2011 DATE OF PRONOUNCEMENT: 25-08-2011 O R D E R PER BHAVNESH SAINI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE CIT(A)-IV, SURAT DATE D 10-10-2006 FOR ASSESSMENT YEAR 2002-03, CHALLENGING THE LEVY OF PE NALTY U/S 271 (1) ( C ) OF THE IT ACT. 2. THIS APPEAL WAS EARLIER DISMISSED IN DEFAULT BY ORDER DATED 10-08-2007. SAME ORDER WAS RECALLED BY ALLOWING THE MISC. APPLICATION OF THE ASSESSEE. THE APPEAL WAS ACCORDI NGLY RE-FIXED FOR HEARING ON MERIT. 3. THE FACTS OF THE CASE ARE THAT ON VERIFICATION O F PURCHASES MADE BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE H AD SHOWN ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 2 PURCHASES OF RS.4,32,844/- FROM M/S. SHREE MAHALAXM I SYNTHETICS BUT THE SELLER HAD SHOWN SALES OF RS.3,82,782/- ONL Y. THUS, THERE WAS A DIFFERENCE OF RS.50,062/- IN THE BOOKS OF ACCOUNT S OF THE PARTY. WHEN REQUIRED TO EXPLAIN, THE ASSESSEE STATED THAT A PURCHASE BILL OF RS.50,062/- WAS EXCESSIVELY ACCOUNTED IN THIS CASE AND THE EXCESS PURCHASES SHOWN MAY BE ADDED BACK TO THE INCOME. TH E AO INITIATED PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE IT ACT O N THIS ACCOUNT. DURING THE PENALTY PROCEEDINGS THE ASSESSEE DID NOT FURNISH ANY REPLY AND THEREFORE, THE AO HOLDING THAT THE ASSESS EE HAD FURNISHED INACCURATE PARTICULARS OF INCOME, IMPOSED PENALTY O F RS.10,211/- BEING 100% OF THE TAX SOUGHT TO BE EVADED. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT WHEN DISCREPANCY WAS P OINTED OUT BY THE AO, IT WAS SUBMITTED THAT DUE TO BONA FIDE MIST AKE BY THE DATA ENTRY OPERATOR, A PURCHASE BILL WAS OVER STATED BY THE SAID AMOUNT AND IMMEDIATELY OFFERED THE SAME FOR TAXATION. SINC E THE OFFER WAS MADE DURING THE COURSE OF ASSESSMENT, NO PENALTY U/ S 271 (1) (C) OF THE IT ACT SHOULD BE IMPOSED. 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE CONFIRMED THE PENALTY AND DISMISSED THE AP PEAL OF THE ASSESSEE. HIS FINDINGS ARE REPRODUCED AS UNDER: AFTER GOING THROUGH THE RECORDS AND THE SUBMISSIONS OF THE APPELLANT, I FIND THAT THE OFFER FOR ADDITION WAS MADE ONLY AFTER DISCREPANCY WAS NOTED BY THE AO AND THEREFORE, IT TENTAMOUNT TO FURNISHING O F INACCURATE PARTICULARS OF INCOME. THEREFORE, THE EXPLANATION 1 TO SEC. 271 (1) (C) IS CLEARLY ATTRAC TED IN THIS CASE AND PENALTY HAS BEEN RIGHTLY IMPOSED FOR FURNI SHING ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 3 OF INACCURATE PARTICULARS OF INCOME. THE SAME IS, THEREFORE, CONFIRMED. IN THE RESULT, THE APPEAL IS DISMISSED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE H AS SUBMITTED THAT IT WAS A BONA FIDE MISTAKE BY THE DATA ENTRY O PERATOR AND PURCHASE BILLS WERE OVERSTATED. THEREFORE, NO PENAL TY IS LEVIABLE IN THIS CASE. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO VERIFIE D THE PURCHASE TRANSACTION AND ISSUED NOTICE U/S 133(6) OF THE IT ACT AND ON VERIFICATION IT WAS FOUND THAT THE ASSESSEE HAS SHO WN PURCHASES OF RS.4,32,844/- FROM M/S. SHREE MAHALAXMI SYNTHETICS BUT THE SAID PARTY HAS SHOWN SALES OF RS.3,82,782/- ONLY. THE AO ISSUED SPECIFIC SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN THE DI SCREPANCY AND THE SAID DISCREPANCY WAS NOT SATISFACTORILY EXPLAIN ED BY THE ASSESSEE, THEREFORE, IT WAS NOT A BONA FIDE MISTAKE AND THE ASSESSEE HAS NOT VOLUNTARILY SURRENDERED THE EXCESSIVE AMOUN T. THE ASSESSEE MADE SURRENDER ONLY AFTER THE ASSESSEE WAS CORNERED BY THE AO AT THE ASSESSMENT STAGE TO EXPLAIN THE CORRECT FACTS. THE LEARNED DR SUBMITTED THAT EVEN AT THE PENALTY STAGE THE ASSESS EE DID NOT FILE ANY REPLY DESPITE GIVING OPPORTUNITY OF BEING HEARD. SI NCE THE ASSESSEE DID NOT TURN UP AND NO EXPLANATION WAS FILED, THERE FORE, PENALTY WAS CORRECTLY LEVIED IN THE MATTER. THE LEARNED DR, THE REFORE, SUBMITTED THAT EXPLANATION (1) TO SECTION 271 (1) (C) OF THE IT ACT IS CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE. ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 4 6.0. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A) IN CONFIRMING THE PENALTY. EXPLANATION (1) TO SECTION 271 (1) (C) OF THE IT ACT READS AS UNDER: EXPLANATION 1.WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSO N UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFIC ER OR THE [***] [COMMISSIONER (APPEALS)] [OR THE COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE I S NOT ABLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS REL ATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. 6.1 THE HONBLE M. P. HIGH COURT IN THE CASE OF VIM AL GINNING AND PRESSING FACTORY VS CIT 279 ITR 100 HELD AS UNDER: WHEN NO EXPLANATION OFFERED WHEN PENALTY PROCEEDINGS WERE INITIATED, IMPOSITION OF PENALTY U /S 271 (1) ( C ) IS VALID. 6.2 THE HONBLE M. P. HIGH COURT IN THE CASE OF RUKMINI BAI 276 ITR 650 HELD AS UNDER: ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 5 HELD, REJECTING THE APPLICATION, THAT THE ASSESSEE DID NOT FILE ANY EXPLANATION WHEN THE PENALTY PROCEEDINGS WERE INITIATED. THE EXPLANATION COULD BE THE SAME AS THAT GIVEN BEFORE THE ASSESSIN G OFFICER AND IF THAT HAD BEEN SO, IT WOULD HAVE HAD TO BE LOOKED INTO IN THE PENALTY PROCEEDINGS, BUT WHEN NO EXPLANATION WAS FILED, IT COULD NOT BE TAKEN INT O CONSIDERATION. THE ASSESSEE COULD NOT CONTEND FOR THE FIRST TIME BEFORE THE COURT THAT INTERFERENCE W AS WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CAS E. CALLING FOR THE STATEMENT OF CASE WAS NOT WARRANTED IN THIS CASE BECAUSE THE TRIBUNAL HAD RIGHTLY RECORDED THAT THE IMPOSITION OF PENALTY UNDER SECTION 271(1) (C) IN THE CASE WAS JUST AND PROPER. 6.3 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS HARPARSHAD AND COMPANY LTD. 328 ITR 53 HELD AS UNDER: HELD, THAT THE REASONS GIVEN BY THE TRIBUNAL FOR QUASHING THE PENALTY PROCEEDINGS WERE IRRELEVANT, N OT GERMANE TO THE ISSUE AND THE TRIBUNAL HAD LOST SIGH T OF ASPECTS WHICH HAD BEEN CONCLUSIVELY ESTABLISHED IN THE QUANTUM PROCEEDINGS. THE TRIBUNAL HAD FAILED TO TAKE NOTE OF THE FACT THAT PART OF THE CLAIM AS COMMISSION WAS ALLOWED TO THE ASSESSEE NOT BECAUSE R HAD RENDERED ANY SERVICES BUT BECAUSE J HAD RENDERED SERVICES FOR WHICH IT WAS PAID 1 PER CENT OF THE COMMISSION BY R OUT OF THE 3 PER CENT RECEIVED BY HER. AS FAR AS COMMISSION TO R WAS CONCERNED, IT WAS ACCEPTED BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS THAT SHE DID NOT RENDER ANY SERVICES AT ALL. THE ASSESSEE HAD FAILED TO OFFER A NY EXPLANATION IN RESPECT OF THE ADDITION OF RS.1,83,0 78 AND IT COULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, BY VIRTUE OF THIS EXPLANATION. THE TRIBUNAL WAS NOT JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE INCOME-TAX OFFICER UNDER SECTION 271 (1) (C) OF THE ACT. ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 6 THE FINDINGS GIVEN IN ASSESSMENT PROCEEDINGS ARE RELEVANT AND HAVE PROBATIVE VALUE. WHERE THE ASSESSEE PRODUCES NO FRESH EVIDENCE OR PRESENTS ANY ADDITIONAL OR FRESH CIRCUMSTANCES IN PENALTY PROCEEDINGS, HE WOULD BE DEEMED TO HAVE FAILED TO DISCHARGE THE ONUS PLACED ON HIM AND THE LEVY OF PENALTY COULD BE JUSTIFIED. EVEN IF THERE IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, BUT ON THE BA SIS THEREOF THE CLAIM WHICH IS MADE IS EX FACIE BOGUS, IT MAY STILL ATTRACT PENALTY PROVISION. THE EXPLANATION APPENDED TO SECTION 271 (1) (C) OF THE ACT ENTIRELY INDICATE THE ELEMENT OF STR ICT LIABILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GI VING INACCURATE PARTICULARS WHILE FILING RETURN. THE OBJ ECT BEHIND ENACTMENT OF SECTION 271 (1) (C) READ WITH T HE EXPLANATIONS INDICATE THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE . THE PENALTY UNDER THAT PROVISION IS A CIVIL LIABILI TY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MA TER OF PROSECUTION UNDER SECTION 276C OF THE ACT. 6.4 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF J YOTI LAXMAN KONKAR VS CIT, 292 ITR 163 HELD AS UNDER: THE ASSESSEE HAD FILED A RETURN FOR THE ASSESSMENT YEAR 1999-2000 DECLARING AN INCOME OF RS.7,40,510. NOT SATISFIED THEREWITH, THE ASSESSING OFFICER CARRIED OUT A SURVEY UNDER SECTION 133A OF THE INCOME-TAX ACT, 1961, AND DURING THE SURVEY FOUND THAT THERE WAS A DISCREPANCY IN STOCK TO THE TUNE O F RS.18,28,706 WHICH WAS BROUGHT TO THE NOTICE OF THE ASSESSEE, AND THE ASSESSEE FILED A REVISED RETURN DISCLOSING ADDITIONAL INCOME OF RS.18,28,706. THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271 ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 7 (1) (C) AND THIS WAS UPHELD BY THE TRIBUNAL. ON APP EAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT THE QUESTION WHETHER THERE IS CONCEALMENT OF INCOME OR NOT HAS T O BE DECIDED WITH REFERENCE TO THE FACTS OF A GIVEN C ASE AND THE FACT FINDING AUTHORITIES UNDER THE ACT HAVI NG COME TO THE CONCLUSION THAT IN THE FACTS OF THE CAS E, THE ASSESSEE HAD CONCEALED THE INCOME INITIALLY WIT H A VIEW TO AVOID THE PAYMENT OF TAX, THE IMPOSITION OF PENALTY WAS VALID. 6.5 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF L PM PRECISION ENGG. CO. LTD. VS DCIT(ASSESSMENT), 330 ITR 93 HELD AS UNDER: HELD, THAT IT WAS ONLY AFTER THE STATEMENT OF THE CHAIRMAN AND MANAGING DIRECTOR WAS RECORDED BY THE DEPUTY DIRECTOR OF INCOME-TAX (INVESTIGATION), MUMBAI, THAT THE FIRST DISCLOSURE DATED OCTOBER 20, 1988, RS.54,71,463 WAS MADE ACCOMPANIED BY ANOTHER DISCLOSURE OF RS.54 LAKHS IN A ROUND FIGURE BEING DIVIDED INTO THREE SEGMENTS OF RS.18 LAKHS EACH FOR ASSESSMENT YEARS 1986-87, 1987-88 AND 1988-89. THE REVISED RETURN DECLARING A SUM OF RS.78,56,613 CAME ABOUT AS A CONSEQUENCE OF FOLLOW- UP PROCEEDINGS UNDERTAKEN BY THE DEPUTY DIRECTOR OF INCOME-TAX IN RELATION TO THE OTHER THREE SUPPLIERS , VIZ., SC, NB AND NPST. THEREFORE, THE ASSESSEE COUL D NOT BE STATED TO HAVE VOLUNTARILY COME FORWARD TO DISCLOSE INCOME WHICH HAD UNINTENTIONALLY BEEN OMITTED FROM THE ORIGINAL RETURN OF INCOME. THE IMPOSITION OF PENALTY WAS VALID. 6.6 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAKESH SURI, 331 ITR 458 HELD AS UNDER: HELD, ALLOWING THE APPEAL, THAT THE ASSESSEE HAD CONCEALED THE MATERIAL FACTS AND GIVEN INCORRECT ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 8 STATEMENT OF FACTS IN THE APPLICATION AND ALSO NOT PROVIDED INFORMATION REQUIRED BY THE ASSESSING OFFICER, AFTER RECEIPT OF NOTICE. ACCORDINGLY THE A CTION OF THE ASSESSEE WAS NEITHER BONA FIDE NOR VOLUNTARY . THE MANNER IN WHICH THE ASSESSEE HAD TRIED TO PROLONG THE CASE BEFORE THE ASSESSING OFFICER BY NO T PROVIDING INFORMATION IMMEDIATELY AND BY NARRATING INCORRECT FACTS IN THE LETTER DATED DECEMBER 6, 200 6 SHOWED THAT THE ASSESSEE HAD CONCEALED THE INCOME AND DISCLOSURE WAS NOT VOLUNTARY BUT UNDER COMPULSION BEING CORNERED BY THE ASSESSING OFFICER. PENALTY HAD TO BE IMPOSED. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F EXPLANATION (1) TO SECTION 271 (1) (C) OF THE IT ACT AND THE ABOVE DECISIONS, I AM OF THE VIEW THAT EXPLANATION (1) TO SECTION 271 (1) (C ) OF THE IT ACT IS CLEARLY ATTRACTED IN THE CASE OF THE ASSESSEE. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS CALLED FOR THE INF ORMATION TO VERIFY GENUINENESS OF THE PURCHASES AND ON THE BASIS OF TH E REPLY FURNISHED BY M/S. SHREE MAHALAXMI SYNTHETICS IT WAS FOUND THA T THE ASSESSEE HAS SHOWN EXCESSIVE PURCHASES IN THE BOOKS OF ACCOU NTS. EXPLANATION OF THE ASSESSEE WAS CALLED FOR BY GIVIN G SHOW CAUSE NOTICE. THE ASSESSEE INSTEAD OF EXPLAINING THE DISC REPANCY IN THE PURCHASES HAS ADMITTED EXCESS PURCHASES AND AGREED TO THE ADDITION. THEREFORE, IN THE CASE OF THE ASSESSEE, T HE ASSESSEE AGREED FOR ADDITION ONLY WHEN THE ASSESSEE WAS CORN ERED BY THE AO AT THE ASSESSMENT STAGE. IF THE AO WOULD NOT HAVE CALLED FOR INFORMATION FROM THE CONCERN PARTY AND WOULD NOT HA VE GIVEN SHOW CAUSE NOTICE TO THE ASSESSEE, THE ASSESSEE WOULD NO T HAVE DISCLOSED THE ABOVE CONCEALED INCOME ON ACCOUNT OF EXCESSIVE PURCHASES. EVEN AT THE PENALTY STAGE, THE ASSESSEE FAILED TO O FFER ANY ITA NO. 2610/AHD/2007 SHRI JAGDISHCHANDRA NATVERLAL GANDHI VS ITO, W- 6 ( 2), SURAT 9 EXPLANATION AND ALSO FAILED TO PROVE THAT ITS EXPLA NATION REGARDING WRONG ENTRY MADE BY THE DATA ENTRY OPERATOR WAS BON A FIDE. IN THE ABSENCE OF ANY EXPLANATION FROM THE SIDE OF THE ASS ESSEE, THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT EXPLAN ATION (1) TO SECTION 271 (1) ( C ) OF THE IT ACT IS CLEARLY ATTRACTED AG AINST THE ASSESSEE. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF T HE ABOVE DECISIONS, I AM OF THE VIEW THAT PENALTY WAS RIGHTLY CONFIRMED B Y THE LEARNED CIT(A). THERE IS NO MERIT IN THE APPEAL OF THE ASSE SSEE. SAME IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A)- CONCERNED 5. THE DR, ITAT, CONCERNED 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD