Rajaram Jaisingh Kate, Pune V. Assistant Commissioner of Income-tax,

ITA 263/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7641 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 22-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.263/PUN/2016 / ASSESSMENT YEAR : 2011-12 RAJARAM JAISINGH KATE, S/O. JAISINGH KATE, KATE MALA, NEAR SWARAJ GARDEN, PUNE 411 027 PAN : ATHPK3146P . /APPELLANT VS. ACIT, WARD-4(6), PUNE . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 25.04.2018 / DATE OF PRONOUNCEMENT:25.04.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF C IT(A)-3, PUNE, DATED 21-12-2015 FOR THE ASSESSMENT YEAR 2011-12. 2. ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENAL TY ON THE AMOUNT OF RS.50 LACS DEPOSITED BY THE APPELLANT IN HIS BANK A /CS. WITHOUT APPRECIATING & CONSIDERING THE PRACTICAL INABILITY OF THE APPELLANT WHICH WAS BEYOND HIS CONTROL. 2. THE LD.CIT(A) HAS ERRED BY NOT CONSIDERING THE F ACT THAT, NOTHING WAS UNEARTHED BY THE ASSESSING OFFICER BUT THE AMOU NT OF RS.50 LACS WAS OFFERED AS INCOME BY THE APPELLANT SUO MOTO AND BEFORE THE ASSESSING OFFICER COULD FIND OUT, THE APPELLANT PAI D ALL TAXES & INTEREST. 3. THE LD.CIT(A) HAVE ERRED IN HOLDING THE GROUND OF LEVYING PENALTY BEING FURNISHING OF INACCURATE PARTICULARS OF INCOM E TO BE CONSIDERED WITH REFERENCE TO THE ORIGINAL RETURN OF INCOME AS ANY E NTRIES FOUND HAD 2 VARIANCE WITH THE ORIGINAL RETURN THEN IT CAN BE H ELD THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OF THE GROUNDS OF THE APPEAL ON BEFORE THE APPEAL. 3. ASSESSEE ALSO RAISED THE ADDITIONAL GROUNDS WHICH ARE LEGAL IN NATURE AND THE SAME ARE EXTRACTED HERE AS UNDER : 1. THE APPELLANT SUBMITS THAT THE PENALTY ORDER PAS SED U/S.271(1)(C) BE DECLARED NULL AND VOID SINCE THERE IS NO PROPER SATISFACTION RECORDED BY THE AO IN THE ASSESSMENT ORDER. 2. THE APPELLANT FURTHER SUBMITS THAT THE NOTICE IS SUED U/S.274 R.W.S. 271(1)(C) IS ALSO BAD IN LAW AND ACCORDINGLY, THE P ENALTY LEVIED MAY KINDLY BE DELETED. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL. ASSESSEE FILED THE RETURN OF INCOME ON 26-03-20 13 DECLARING TOTAL INCOME OF RS.62,250/-. DURING THE SCRUTINY ASSESSMENT , AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION ASSESS EE SOLD AGRICULTURAL LAND ADMEASURING 80R AT S.NO.24, PIMPLE SAUDAGAR WHICH WAS CO-OWNED BY HIM ALONG WITH HIS FAMILY MEMBERS FOR A S UM OF RS.3 CRORE. ASSESSEE ALSO HAS INCOME FROM OTHER SOURCES. A SSESSEE WAS ASKED TO FURNISH THE COMPLETE DETAILS VIZ, EXTRACT OF BANK ACCOUNTS, SOURCE OF CASH DEPOSITS ETC. OF THE SAID LAND TRANSACTION. IN RESPONSE, ASSESSEE SUBMITTED THAT DETAILS AND STATED THAT HE IS O NE OF THE CO- OWNER OF THE PROPERTY SOLD BY HIM AND HE RECEIVED RS.1.40 CRORE AS HIS SHARE OF CONSIDERATION. ASSESSEE CLAIMED DEDUCTION OF RS.1.1 0 CRORES U/S.54B(1) OF THE ACT ON ACCOUNT OF INVESTMENT IN AGRICULTUR AL LAND. IN SUPPORT, ASSESSEE ALSO FURNISHED COPY OF SALE DEED. AT T HE END OF THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, AO DETERMINE D THE ASSESSED INCOME AT RS.1,56,34,710 MAKING COUPLE OF ADDITIONS , I.E. ON ACCOUNT OF INCOME FROM LONG TERM CAPITAL GAINS AT RS.1,05,72 ,458/- AND INCOME FROM OTHER SOURCES AT RS.50,00,000/-. PENALTY PROC EEDINGS ALSO 3 INITIATED FOR CONCEALMENT/FURNISHING INACCURATE PARTICULARS O F INCOME AND A PENALTY OF RS.35,91,782/- HAS BEEN LEVIED ON THE ASSESSEE. 5. IN THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED ELABORATE SUBMISSIONS VIDE LETTERS DATED 19-11-2015 & 04-12-2015 AND RELIED ON VARIOUS DECISIONS. THE SAID SUBMISSIONS OF THE ASSESSEE AR E INCORPORATED IN PARA NO.3.1 OF THE ORDER OF CIT(A). IN THE ABSENCE OF PRODUCING ANY EVIDENCE REGARDING THE DEPOSIT OF RS.50,00,00 0/- THE CIT(A) UPHELD THE ACTION OF THE AO. HOWEVER, WITH REGARD T O INCOME FROM LONG TERM CAPITAL GAINS, THE CIT(A) AFTER GOING THROUGH THE SALE AGREEMENT AND THE DETAILS OF PAYMENTS THROUGH CHEQUES DIRECTED THE AO TO DELETE THE ADDITION MADE BY THE AO ON THIS ISSUE. CONTENTS OF PARA NO.3.3 (PAGES 20 AND 21) ARE RELEVANT. THERE IS NO APPEAL BY THE REVENUE ON THE DELETION OF AD DITION BY THE CIT(A) ON ACCOUNT OF INCOME FROM LONG TERM CAPITAL GAINS. 6. AGGRIEVED WITH THE ORDER OF CIT(A) CONFIRMING THE PENALTY ON THE ADDITION OF RS.50 LAKHS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. BEFORE US, AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE REFERRING TO THE ADDITIONAL GROUNDS, SUBMITTED THAT THERE IS AMBIGUITY IN THE MIND O F AO IN RECORDING THE SATISFACTION WHILE INITIATING AND LEVYING T HE PENALTY. REFERRING TO PARA NO.7 OF THE ASSESSMENT ORDER, HE MENTIO NED THAT THE AO INITIATED THE PENALTY PROCEEDINGS STATING THAT PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT/FURNISHING INACCURATE PA RTICULARS OF INCOME. FURTHER, REFERRING TO THE PARA NO.9 OF THE PENALTY ORDER, DATED 19-09- 2014, LD. COUNSEL SUBMITTED THAT PENALTY IS LEVIED STATIN G THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND THEREBY CONCEALED THE INCOME. HE RELIED ON VARIOUS DECISIONS OF PUNE BENCH OF THE TRIBUNAL DELIVERED IN THE CONTEXT OF RECORDING OF SATISFA CTION BY THE 4 AO WHILE INITIATING AND LEVYING THE PENALTY ORDERS U/S.271(1)(C ) OF THE ACT AND PRAYED FOR QUASHING THE PENALTY ORDER. 8. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMITTED TH AT THE AO IS JUSTIFIED IN LEVYING THE PENALTY IN THE ASSESSMENT YEAR U NDER CONSIDERATION. THEREFORE, LD. DR PRAYED FOR CONFIRMING THE ORDER OF THE AO. 9. WE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUNDS AND PERUSED THE O RDERS OF THE REVENUE ON THE ISSUE OF INITIATION AND LEVY OF PENALTY U/S.27 1(1)(C) OF THE I.T. ACT, 1961. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE ON THE ISSUE RELATING TO REC ORDING OF SATISFACTION BY THE AO AND THE DECISIONS RELIED UPON BY HIM . ON GOING THROUGH THE ORDERS OF THE REVENUE ON THIS PENALTY ISSUE , WE FIND IT IS A CLEAR CASE THAT THE AO INITIATED THE PENALTY PROCEEDINGS FOR THE OFFENCE STATING THAT PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT/FURNISHING INACCURATE PARTICULARS OF IN COME. AND LEVIED THE SAME STATING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND THEREBY CONCEALED THE INCOME . THEREFORE, IT IS A CASE WHERE THE AO DID NOT HAVE CLARITY OF THOUGHT AND AO SUFFERED FROM AMBIGUITY IN HIS MIND WITH REGARD TO THE AP PLICABLE LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT TO THE FACTS O F THE CASE. THEREFORE, WE FIND THE PENALTY ORDER OF THE AO FALLS SHORT O F LEGAL REQUIREMENT ON THE ISSUE OF RECORDING OF SATISFACTION. THIS VIEW WAS ALREADY TAKEN BY THE PUNE BENCH IN A SERIES OF CASES. T HE MANNER OF INITIATING AND LEVYING OF PENALTY WITHOUT MAKING REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) IS UNSUSTAINED. AO IS UNDER OBLIGATION TO SP ECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THEREFORE, THE PENALTY LEVIED BY THE AO IS UNSUS TAINABLE ON 5 TECHNICAL GROUNDS. THIS VIEW OF OURS GET STRENGTH BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERINCHERY AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) . 10. FURTHER, WE FIND, IN A RECENT CASE, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SACHIN MANOHAR DESHMUKH VS. ACIT ITA NO.3767/MUM/2016, DATED 23-03-2018 HAS DEALT WITH AN IDE NTICAL ISSUE AND QUASHED THE PENALTY ORDER OF THE AO. THE OP ERATIONAL PARA NO.12 OF THE ORDER OF THE TRIBUNAL IS EXTRACTED HERE AS UNDER : 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO T HE ISSUE BEFORE US, AND AFTER DELIBERATING ON THE FACTS ARE OF THE CONS IDERED VIEW THAT NOW WHEN THE A.O AFTER RECORDING HIS SATISFACTION HAD I NITIATED THE PENALTY PROCEEDINGS IN THE BODY OF THE ASSESSMENT ORDER FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME, THEREFORE, P UTTING THE ASSESSEE TO NOTICE AND CALLING UPON HIM TO EXPLAIN AS TO WHY PE NALTY MAY NOT BE IMPOSED ON HIM UNDER SEC. 271(1)(C) FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, FOL LOWED BY IMPOSING OF PENALTY UNDER SEC. 271(1)(C) IN HIS HANDS FOR FURN ISHING OF INACCURATE PARTICULARS OF INCOME , CAN IN NO WAY BE CONSTRUED AS HAVING FAIRLY PUT THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAU LTS FOR WHICH PENALTY WAS SOUGHT TO BE IMPOSED IN HIS HANDS. WE ARE OF TH E CONSIDERED VIEW THAT A FAILURE ON THE PART OF THE A.O TO CLEARLY PU T THE ASSESSEE TO NOTICE AS REGARDS THE DEFAULT/DEFAULTS FOR WHICH PENALTY U NDER SEC. 271(1)(C) IS SOUGHT TO BE TO BE IMPOSED ON HIM, HAS TO BE VISITE D WITH AND ACCORDED THE SAME TREATMENT AS IN A CASE WHERE THE A.O HAD F AILED TO STRIKE OFF THE IRRELEVANT DEFAULT IN THE SHOW CAUSE NOTICE, BECAUSE, IN BOTH THE SITUATIONS THE ASSESSEE IS NOT INFORMED AND RATHER IS LEFT GUESSING OF THE DEFAULT/DEFAULTS FOR WHICH HE IS BEING PROCEEDED AG AINST FOR. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF A STRONG CONVICTION THAT AS THE A.O HAD CLEARLY FAILED TO DISCHARGE HIS STAT UTORY OBLIGATION OF FAIRLY PUTTING THE ASSESSEE TO NOTICE AS REGARDS THE DEFAU LT/DEFAULTS FOR WHICH HE WAS BEING PROCEEDED AGAINST, THEREFORE, ARE OF T HE CONSIDERED VIEW THAT THE PENALTY UNDER SEC. 271(1)(C) OF RS.12,14,1 40/- IMPOSED BY THE A.O IN CLEAR VIOLATION OF THE MANDATE OF SEC. 274(1 ) OF THE ACT, CANNOT BE SUSTAINED. WE THUS NOT ABLE TO PERSUADE OURSELVES T O SUBSCRIBE TO THE IMPOSITION OF PENALTY BY THE A.O, THEREFORE, SET AS IDE THE ORDER OF THE CIT(A) WHO HAD UPHELD THE SAME. THE PENALTY OF RS.1 2,14,140/-IMPOSED BY THE A.O UNDER SEC.271(1)(C) IS QUASHED IN TERMS OF OUR AFORESAID OBSERVATIONS. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE OPINION THAT THE AO IS NOT JUSTIFIED IN LEVYING THE PENALTY. THUS, WE HOLD THAT T HE PENALTY ORDER DATED 19-09-2014 PASSED BY THE AO IS UNSUSTAINABLE IN LAW. 6 11. SINCE WE ALLOW THE ADDITIONAL GROUNDS IN FAVOUR OF THE ASSESSEE, THE ADJUDICATION OF ORIGINAL GROUNDS RAISED BY THE ASSESS EE ON MERITS BECOME AN ACADEMIC EXERCISE. THEREFORE, THE ORIGINAL GROU NDS RAISED BY THE ASSESSEE ARE DISMISSED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF APRIL, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 25 TH APRIL, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-3, PUNE 4. CIT-3, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.