M/s Genex Industries Ltd., Ludhiana V. DCIT, CC-I, Ludhiana

ITA 27/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6704 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 09-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside
• Section: 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH !, ' # , $ % & ' ( , )* # BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NOS. 27 & 28/CHD/2019 / A.Y.: 2013-14 & 2014-15 M/S GENEX INDUSTRIES LTD., 228-G, INDUSTRIAL AREA-A, CHEEMA CHOWK, LUDHIANA. VS THE DCIT, CENTRAL CIRCLE-1, LUDHIANA. ./ PAN /TAN NO: AAACB6770H / APPELLANT / RESPONDENT ./ ITA NO. 29/CHD/2019 / A.Y.: 2014-15 M/S G URDEV WOOL & FIBRES, # 6515/13-A, JASSIAN ROAD, LUDHIANA. VS THE DCIT, CENTRAL CIRCLE-1, LUDHIANA. ./ PAN /TAN NO: AALFG2972Q / APPELLANT / RESPONDENT ./ ITA NO. 30/CHD/2019 / A.Y.: 2013-14 SHRI KAILASH AGGARWAL, # 3301/2, GURDEV NAGAR, LUDHIANA. VS THE DCIT, CENTRAL CIRCLE-1, LUDHIANA. ./ PAN /TAN NO: AENPA4308J / APPELLANT / RESPONDENT ! / ASSESSEE BY : SHRI SANJAY SOOD, CA ' ! / REVENUE BY : SHRI CHARANJIT SINGH, CIT-DR SHRI ANKUR ALYA, SR.DR # $ %/ DATE OF HEARING : 24.07.2019 &'() %/ D ATE OF PRONOUNCEMENT : 31.07.2019 ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 2 OF 9 )-/ ORDER PER BENCH THESE FOUR APPEALS OF DIFFERENT ASSESSEES PERTAINI NG TO 2013-14 AND 2014-15 ASSESSMENT YEARS ARE BEING DECI DED BY A COMMON ORDER IN VIEW OF THE FACTS THAT THE ISSUES ARISING IN THE PRESENT APPEALS ARE IDENTICAL WHEREIN IT WAS A COMMON STAND OF THE PARTIES THAT THE ARGUMENTS ADVANCED IN ITA 27/CHD/2019 WOULD COVER IDENTICAL ISSUES IN EACH OF THE APPEALS. 2. IN THE RESPECTIVE APPEALS, THE ASSESSEES ARE CHA LLENGING NEAR IDENTICAL ORDERS OF THE CIT(A)-2 JALANDHAR WHE REIN BY AN ORDER PASSED U/S 154, THE EARLIER ORDER PASSED B Y THE CIT(A) WAS RECTIFIED. THE SAID MISTAKE IN EACH OF THESE APPEALS WAS POINTED OUT BY THE AO AND RECORDING THI S FACT IN PARA 2 OF THE ORDER ON AN IDENTICAL REASONING ON FA CTS FOR THE REASONS SET OUT IN PARA 4 TO 4.9, THE CIT(A) HAS HE LD THAT PENALTY @ 30% AS LEVIED BY THE AO INVOKING CLAUSE ( C) OF SECTION 271AAB(1) IS UPHELD. 3. ACCORDINGLY, IN THE SAID BACKGROUND, THE GROUNDS RAISED IN ITA 27/CHD/2019 ARE REPRODUCED HEREUNDER FOR REA DY REFERENCE: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO (ACIT CENTRAL CIRCLE -1 LUDHIANA) AND CO MMISSIONER OF INCOME TAX (APPEALS) ERRED IN LEVYING PENALTY U/S 271 AAB( 1 )(C) OF THE INCOME TAX ACT OF RS 1,95,00,000 /- WITHOUT APPRECIATING THE FACT THE ESTIMATED LUMP SUM ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 3 OF 9 CONDITIONAL SURRENDER OF RS. 6,50,00,000/- WAS MADE SUBJECT TO NO PENAL ACTION AND PROSECUTION. (AS EVIDENT FROM SURRENDER LETTER ENCLOSED) 2. THE FINDING OF THE LD. ASSESSING OFFICER IS BASED U PON MERE CONJECTURES AND SURMISES AND IS FACTUALLY WRONG AND LEGALLY INVALID . HENCE, THE ENTIRE PENALTY DESERVES TO BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY GROUND(S) OF APPEAL BEFORE IT IS FINALLY HEARD FOR DISPOSAL. 4. THE LD. AR WHILE REFERRING TO THE IMPUGNED ORDER SUBMITTED THAT THE ABOVE INCOME OFFERED BY THE ASSE SSEE BY WAY OF SURRENDER WAS IN ORDER TO BUY PEACE AND ON T HE CONDITION THAT NO PENALTY WOULD BE VISITED UPON THE ASSESSEE. ACCORDINGLY, PENALTY ORDER IMPOSING THE PENALTY AND THE IMPUGNED ORDER CONFIRMING THE PENALTY IMPOS ED WAS ASSAILED AS IT WAS CONTRARY TO THE CONDITIONS OF TH E SURRENDER. 5. THE LD. CIT-DR ON THE OTHER HAND, RELYING UPON T HE IMPUGNED ORDER SUBMITTED THAT THE ASSESSEE HAS ADMI TTEDLY OFFERED THE ADDITIONAL INCOME OF RS. 6.50 CRORES ON ACCOUNT OF VARIOUS DISCREPANCIES NOTICED AT THE TIME OF THE SEARCH AND THESE CONSTITUTE UNDISCLOSED INCOME. REFERRI NG TO PARA 4.4 OF THE IMPUGNED ORDER, IT WAS SUBMITTED THAT TH E SURRENDER WAS ON ACCOUNT OF BUSINESS TRANSACTIONS E TC. NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. INVITING ATTENTION TO PARA 4.5 OF THE ORDER, IT WAS SUBMITTED THAT THE CIT(A) HAS RECORDED THAT, THE APPELLANT HAS FURTHER STATED THAT THIS ADDITIONAL INCOME WAS OFFERED ON THE GROUNDS THAT N O PENALTY ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 4 OF 9 WOULD BE IMPOSED. THE REPLY OF THE ASSESSEE WAS CON SIDERED BUT NOT FOUND TENABLE BY THE AO. AS PER THE AO, THE ASSESSEE HAS ONLY STALED THAT SURRENDERED INCOME WAS OFFERED BUT IT WAS NOT DECLARED IN THE RETURN OF INCOME BY THE DUE DATE AND HAS NOT SUBSTANTIATED THE MANNER AND MODE OF EARNIN G THE INCOME NEITHER DURING SEARCH NOR IN THE COURSE OF P ENALTY PROCEEDINGS. ACCORDINGLY, IT WAS ARGUED THAT ON THE BASIS OF THESE FACTS, THE AO CONCLUDED THAT THE PENALTY U/S 271AAB OF THE INCOME TAX ACT. 1961 IS APPLICABLE IN THIS C ASE ON THE UNDISCLOSED INCOME OF RS. 6.50 CRORE. IN VIEW THERE OF, THE AO LEVIED THE MINIMUM PENALTY OF RS. 1,95,00,000/- CAL CULATED @ 30% OF THE UNDISCLOSED INCOME OF RS. 6.50 CRORE . 5.1. RELYING UPON PARA 4.9 OF THE ORDER IT WAS SUBM ITTED THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION AS TO HOW THE ISSUE WAS NOT COVERED IN CLAUSE (A) OR (B) OF SECTI ON 271AAB OF THE ACT. IT WAS HIS SUBMISSION THAT THE STATUTE MANDATES THAT LEVY OF PENALTY IS MANDATORY IF ANY OF THE CIR CUMSTANCES AS SET OUT IN CLAUSES (A), (B) OR (C) ARE TRIGGERED . IN THE FACTS OF THE PRESENT CASE, IT WAS SUBMITTED THAT THE REVE NUE IS OF THE VIEW THAT ON FACTS, CIRCUMSTANCES AS SET OUT IN CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271AAB OF THE ACT ARE ATTRACTED. CONSEQUENTLY PENALTY @ 30% HAS BEEN IMPOSED. THE REQUIREMENT OF THE STATUTE IT WAS SUBMITTED, IS THA T IN TERMS OF SECTION 274 OF THE ACT BEFORE THE PASSING OF THE ORDER, THE ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 5 OF 9 ASSESSEE IS TO BE GIVEN REASONABLE OPPORTUNITY OF B EING HEARD WHICH HAS BEEN GRANTED. 6. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS BEEN ARGUING THAT THE SURRENDER WAS CONDITIONAL, CONSEQU ENTLY NO PENALTY WAS ATTRACTED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE R ECORD IT IS EVIDENT THAT IN THE FACTS OF THE PRESENT CASE IT IS EVIDENT THAT THE ASSESSEE HAS BEEN HEARD, HOWEVER, THE ASSESSEE, IT IS SEEN HAS MISTAKENLY RELIED UPON THE STATEMENTS ALLE GEDLY GIVEN AT THE TIME OF SURRENDER THAT THE SURRENDER I S MADE ON THE UNDERSTANDING THAT NO PENALTY WOULD BE VISITED UPON HIM ON ACCOUNT OF THE SURRENDER MADE. IT GOES WITHOUT SAYING THAT NO SUCH DISCRETION OR POWERS HAVE BEEN VESTED UPON THE TAX AUTHORITIES BY THE INCOME TAX ACT. ANY SUCH BE LIEF ENTERTAINED BY THE ASSESSEE HAS NO LEGAL SANCTION. ACCORDINGLY, IT IS SEEN THAT SUCH EXPLANATION OFFER ED AT THE APPELLATE STAGE AND RE-ITERATED BEFORE US HAS TO BE DISCARDED. THE FACT WHICH EMANATES IS THAT ADMITTE DLY AN EFFECTIVE OPPORTUNITY OF BEING HEARD HAS NOT BEEN E XERCISED BY THE ASSESSEE ON ACCOUNT OF THE MIS-CONCEPTIONS ENTERTAINED AND MISTAKEN BELIEF. SECTION 271AAB OF THE ACT IN SUB-SECTION (1) OF THE SAME UNAMBIGUOUSLY LAYS D OWN THAT, WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 O N ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 6 OF 9 OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM PENALTY AT THE RATE OF 10%, 20% OR 30% ON THE UNDISCLOSED INCOME IN CASE THE CIRCUMSTANCES AS SET OUT IN CLAUSES (A ) (B) AND (C) OF SUB-SECTION (1) OF SECTION 271AAB AR E APPLICABLE. 7.1 WHAT WOULD CONSTITUTE UNDISCLOSED INCOME HAS BEEN DEFINED IN THE EXPLANATION TO SECTION 271AAB AS UND ER : EXPLANATION.- FOR THE PURPOSES OF THIS SECTION- (A) SPECIFIED DATE X X X (B) SPECIFIED PREVIOUS YEAR X X (C) UNDISCLOSED INCOME MEANS- (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLIONS, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNTS , OR OTHER DOCUM ENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS- (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SE ARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL C HIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIO NER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN T HE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.] 7.2 ON A PERUSAL OF THE ABOVE, IT IS EVIDENT THAT T HE SECTION IS SELF-CONTAINED WHEN THESE ARE CONSIDERED ALONGWITH THE STATUTORY MANDATE AS SET OUT IN CLAUSES (A); (B) AND (C) OF S UB-SECTION (1) OF SECTION 271AAB THERE CAN BE NO DOUBT THAT THERE IS NO DISCRETION WITH THE AO AS THE PARAMETERS BY WHICH THE AO OR TH E TAX ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 7 OF 9 AUTHORITIES ARE BOUND IN REGARD TO THE RATE OF PENA LTY AND THE CIRCUMSTANCES ON THE BASIS OF WHICH THE PENAL PROVI SION CAN BE SAID TO BE ATTRACTED IS SELF EXPLANATORY. THE STAT UTE FURTHER IN TERMS OF SUB-SECTION (4) OF SECTION 271AAB MANDATES THAT SO FAR AS MAY BE PROVISIONS OF SECTION 274 AND 275 SHALL A PPLY. IN THE FACTS OF THE PRESENT CASE, THE STATUTORY MANDATE OF SUB-SECTION (1) OF SECTION 274 IS TRIGGERED. THE REQUIREMENT SE T OUT THEREIN IS THAT NO ORDER IMPOSING PENALTY UNDER THIS CHAPTER S HALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVE N A REASONABLE OPPORTUNITY OF BEING HEARD . IN THE FACTS OF THE PRESENT CASE, NO DOUBT THE ASSESSEE HAS BEEN HEARD BUT THER E CAN ALSO BE NO TWO OPINIONS ON THE FACT THAT THE ASSESSEE INSTE AD OF ARGUING ON PERMISSIBLE FACTS HAS MISTAKENLY RELIED UPON HIS SURRENDER LETTER BELIEVING THAT THE TAX AUTHORITIES WERE ALSO BOUND BY THE UNILATERAL TERMS OF THE SURRENDER MADE I.E. THAT ON ACCOUNT OF THE SURRENDER BEING MADE ALLEGEDLY VOLUNTARILY ON THE C ONDITION THAT NO PENAL CONSEQUENCES WOULD BE VISITED UPON THE ASS ESSEE, THE SURRENDER HAVING BEEN MADE CONSEQUENTLY BOUND THE T AX AUTHORITIES ALSO TO HONOUR THE UNILATERAL BELIEF. AS NOTED, THIS BELIEF HAS NO LEGAL SANCTION AND HAS TO BE DISCARDE D. HOWEVER, THE FACT REMAINS THAT THE OPPORTUNITY SO PROVIDED H AS BEEN MISUTILIZED BY THE ASSESSEE BY MAKING IRRELEVANT AR GUMENTS. ACCORDINGLY, IN ALL FAIRNESS, IT CANNOT BE SAID THA T AN EFFECTIVE ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 8 OF 9 AND REASONABLE OPPORTUNITY OF BEING HEARD HAS NOT B EEN AVAILED OF BY THE ASSESSEE. 8. ACCORDINGLY, IN VIEW OF THE FACTS AS SET OUT HER EINABOVE, WE SET ASIDE THE IMPUGNED ORDERS. THE PARTIES WERE, A CCORDINGLY, REQUIRED TO ADDRESS AS TO WHICH AUTHORITY THE REMAN D BE MADE AS NECESSARILY THE STATEMENT RECORDED AT THE TIME OF T HE SEARCH AND THE DOCUMENTS CONFRONTED AND ANY OTHER RELEVANT FAC T WOULD BE REQUIRED TO BE ADDRESSED WHICH LED TO THE SURRENDER BEING MADE SO AS TO ADDRESS UNDISCLOSED INCOME. THE LD.-DRS MADE A REQUEST THAT THE MATTER MAY BE REMANDED TO THE AO A S HE SHALL BE IN A BETTER POSITION TO CONFRONT THE MATERIAL TO THE ASSESSEE. THE LD. AR AGREED THAT HE SHALL ADDRESS HIS ARGUMEN TS WITHIN THE PARAMETERS OF THE POWERS VESTED WITH THE TAX AUTHOR ITIES. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE BACK T O THE FILE OF THE AO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPP ORTUNITY OF BEING HEARD. THE ASSESSEE IN ITS OWN INTERESTS IS A DVISED TO PARTICIPATE FULLY AND FAIRLY IN THE PROCEEDINGS BEF ORE THE TAX AUTHORITIES. IT IS MADE CLEAR THAT IN THE EVENTUAL ITY OF ABUSE OF THE TRUST REPOSED THE AO WOULD BE AT LIBERTY TO PAS S AN ORDER ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 9. IN THE RESULT, ITA 27/CHD/2019 IS ALLOWED FOR ST ATISTICAL PURPOSES. ITA NOS. 27 TO 30/CHD/2019 A.Y. 2013-14 & 2014-15 PAGE 9 OF 9 10. SINCE IN ITA 28 TO 30/CHD/2019, NO SEPARATE ARG UMENTS WERE ADVANCED BY THE PARTIES AS THE FACTS, CIRCUMST ANCES REMAINED IDENTICAL, ACCORDINGLY, IN VIEW OF IDENTIC AL REASONS WITH IDENTICAL DIRECTIONS, THE ORDERS ARE REMANDED BACK. THE ASSESSEES ARE ADVISED TO PARTICIPATE FAIRLY AND NOT ABUSE THE TRUST REPOSED AS IN SUCH AN EVENTUALITY, THE ASSESS ING OFFICER IS AT LIBERTY TO PASS AN ORDER ON THE BASIS OF THE MAT ERIAL AVAILABLE ON RECORD. SAID ORDER WAS PRONOUNCED IN THE OPEN CO URT AT THE TIME OF HEARING ITSELF. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY,2019. SD/- SD/- ( $ % & ' ( ) ( ! ) (ANNAPURNA GUPTA) (DIVA SINGH) )* #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER