Chhaganlal Kanabhai Makwana, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-3(3), RAJKOT-GUJARAT

ITA 29/RJT/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9058 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 02-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: DR ADHIA
• Keywords: Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings
• Section: 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA LOZJH EGKOHJ IZLKN] U;KF;D LNL; ,OA VEJTHR FLAG] YS [KK LNL; DS LE{KA VEJTHR FLAG] YS[KK LNL; DS LE{KA VEJTHR FLAG] YS[KK LNL; DS LE{KA VEJTHR FLAG] YS[KK LNL; DS LE{KA (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ) ./ I.T.A. NO.29/RJT/2017 ( / ASSESSMENT YEAR : 2011-12 ) SHRI CHHAGANLAL KABABHAI MAKWANA, KHODIYAR KRUPA, BAJRANGWADI-II JAMNAGAR ROAD, RAJKOT-360006 / VS. THE ITO WARD-3(3), RAJKOT. ./ ./ PAN/GIR NO. : AFHPM 0408 A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI D.R. ADHIA, A.R. / RESPONDENT BY : MS USHA N. SHROTE, SR. D.R. / DATE OF HEARING 03/04/2017 !'# / DATE OF PRONOUNCEMENT 24/05/2017 $% / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, RAJKOT, DATED 28/12/2016 FOR THE ASSESSMENT YEAR (AY) 2011-12 FOR IMPOSING P ENALTY. 2. ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPE AL: THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN CO NFIRMING PENALTY U/S. 271(1)(C) OF RS.10,110/-. THE PENALTY NEEDS DELETION. ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 2 - 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- DURING THE COURSE OF SCRUTINY OF ASSESSMENT PROCEE DING FOR A.Y. 2011-12, THE ASSESSEE WAS ASKED TO FURNISH THE DETA ILS OF ALL THE BANK ACCOUNTS AND COPIES OF BANK STATEMENTS. THE ASSESSE E REPORTED THAT HE HAS TWO SAVING BANK ACCOUNTS. ONE (A/C NO.300994805 12) WITH STATE BANK OF INDIA, JAWAHAR ROAD BRANCH, RAJKOT AND ANOT HER (A/C. NO. 013003100005771) WITH RAJKOT NAGRIK SAHAKARI BANK L TD., JUNCTION PLOT BRANCH, RAJKOT. ON VERIFICATION OF BANK STATEM ENTS, IT WAS NOTICED THAT ASSESSEE HAD SOME CASH DEPOSITS IN THE ABOVE M ENTIONED ACCOUNTS. THE ASSESSEE HAS BEEN ASKED TO EXPLAIN THE SOURCE O F CASH DEPOSIT IN THESE ACCOUNTS VIDE SHOW CAUSE NOTICE DATED 24/10/2013 AN D 05/12/2013. THE ASSESSEE, IN HIS REPLY DATED 27/12/2013, HAS EXPLAI NED PART OF THE CASH DEPOSITS, WHICH WAS ACCEPTED. HOWEVER, THE ASSESSEE FAILED TO OFFER ANY SATISFACTORY EXPLANATION ABOUT THE SOURCE OF TOTAL CASH DEPOSITS OF RS.69,000/- IN STATE BANK OF INDIA AND RS.25,000/- IN RAJKOT NAGARIK SAHAKARI BANK LTD. RESPECTIVELY. IN ABSENCE OF ANY SATISFACTORY EXPLANATION AND DOCUMENTARY EVIDENCES, TOTAL CASH D EPOSIT IN BOTH OF THE ACCOUNTS, AMOUNTING TO RS.94,000/- WAS TREATED AS U NEXPLAINED CASH CREDIT AND THE SAME WAS ADDED TO THE TOTAL INCOME O F THE ASSESSEE U/S. 68 OF THE IT ACT, 1961 ALONG WITH BANK INTEREST, NOT O FFERED TO TAX, AMOUNTING TO RS. 4,138/- RECEIVED FROM STATE BANK O F INDIA. VIDE ASSESSMENT ORDER 31/12/2013. ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 3 - 4. ASSESSEE HAS NOT PREFERRED APPEAL BEFORE THE CIT (A) AGAINST THE ABOVE ADDITION. NOTICE WAS GIVEN BY THE AUTHORITY T O OFFER ANY SATISFACTORY EXPLANATION BUT ASSESSEE HAS FAILED TO EXPLAIN ABOUT CASH DEPOSIT AND BANK INTEREST INCOME, IN RESPONSE TO SH OW CAUSE NOTICES DATED 28/05/2014 DURING THE TIME OF PENALTY PROCEED INGS, AMOUNT OF RS.98,138/- WAS DEEMED TO REPRESENT THE INCOME, IN RESPECT OF WHICH THE PARTICULARS HAD BEEN CONCEALED. THE AO CONCEALED TH AT THE ASSESSEE HAS NOT EXPLAINED THE ADDITIONS AT THIS STAGE AND HAS T HUS FAILED TO OFFER ANY EXPLANATION; THEREFORE, CLAUSE (A) OF EXPLANATION O F THE SECTION 271(1) WAS CLEARLY ATTRACTED. 5. IN VIEW OF THE REASON MENTIONED ABOVE AND IN ASS ESSMENT ORDER, THE LEARNED AO HAS LEVIED OF PENALTY OF RS.30,327/- UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME. 6. AGAINST THE SAID ORDER ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) WHO HAD DISMISSED THE APPEAL OF THE ASSESSEE . 7. NOW ASSESSEES APPEAL HAS COME BEFORE US. DURING THE COURSE OF APPELLATE PROCEEDINGS THE LEARNED COUNSEL SUBMITTED PAPER BOOK AND CONTENDED THAT THE NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT DATED 31/12/2013 IS INVALID AS THE NOTICE DOES NOT SPECIF Y AS TO WHETHER IT IS ISSUED FOR CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE HAS ALSO PLACED RELIANCE UPON THE FOLLOWING JUDICIAL PRONOUNCEMENT: ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 4 - 4. AS REGARDS LEGAL ISSUE OF THE CASE AT THE OUTSET IT MAY HUMBLY BE SUBMITTED THAT THE MATTER IS FULLY COVERED ON LEGAL ISSUE BY THE ORDERS OF FOLLOWING : 1. HON. ITAT, RAJKOT E-BENCH - ITA NO. 738/RJT/214 DAT ED 24-4-2017 IN THE CASE OF SHREE KHODAL STEEL LTD (THE HON. BENCH HEADED BY MOST HON. SHRI MAHAVIR PRASAD JM SIR). 2. HON. ITAT, RAJKOT E-BENCH - ITA NO. 542/RJT/2012 DA TED 20-2-2017 IN THE CASE OF SHRI PARASKUMAR V. KATARIYA. 3. HON. ITAT, KOLKATA - ITA NO. 1303/KOL./2010 DATED 6 -11-2015 IN THE CASE OF SUVAPRASANNA BHATACHARYA. 4. HON. IT AT, RAJKOT - ITA NO. 203 & 204/RJT/2013 DAT ED 24-3-2017 IN THE CASE OF SURESHBHAI MAKANSI GADESHA. 5. HON. ITAT, RAJKOT - ITA NO. 368/RJT/2015 DATED 24-3 -2017 IN THE CASE OF HARIDAS DHONDIRAM KATKAR 6. HON. KARNATAKA HIGH COURT - 359 ITR 565 (KARN.) IN THE CASE OF MANJUNATH COTTON & GINNING FACTORY (COPY ENCLOSED). 7. DECISION OF THE HON. GUJARAT HIGH COURT & DELHI HIG H COURT MENTIONED AT PARA 12, 13 & 14 OF THIS WRITTEN SUBMI SSIONS. 8. ON THE OTHER HAND LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A). WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE MATERIAL ON RECORD. WE HAVE PERUSED THE ABOVE REFERRED NOTICE D ATED 31/02/2013 AND NOTICED RELEVANT CLAUSE APPEARING AS UNDER: HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME WE OBSERVED THAT THE NOTICE DOES NOT SPECIFY WHETHE R IT IS ISSUED FOR CONCEALING THE PARTICULARS OF INCOME OR FURNISH ING INACCURATE ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 5 - PARTICULARS OF SUCH INCOME. WE HAVE FURTHER NOTICED THAT THE CO-ORDINATE BENCH OF THE ITAT HAS DECIDED THE IDENTICAL ISSUE I N THE CASE OF SHREE KHODSAL STEEL LTD. VS. ACIT, RAJKOT VIDE ITA NO.738 /RJT/2014 BY OBSERVING AS UNDER: 10.1 FROM THE PERUSAL OF THE ABOVE FINDINGS IT IS CRYSTAL CLEAR THAT PENALTY PROCEEDINGS WERE INITIATED ON EITHER OF THE TWO REASONS WHEREAS PENALTY ORDER SHOWS THAT ASSESSEE WAS GUILTY FOR BO TH THE REASONS I.E CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. WE FURTHER OBSERVE THAT SIMI LAR ISSUES DEALING WITH THE LEGALITY OF NOTICE U/S.274 W R.W.S 271(1)( C) OF THE ACT HAVE BEEN ADJUDICATED BY THE CO-ORDINATE BENCH IN THE CASE OF SURESHBHAI MAKANSHI GADESHA V/S. ITO (SUPRA) DECIDING THE ISSU E IN FAVOUR OF ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE KARNA TAKA HIGH COURT- 359 ITR 565 (KARN.) IN THE CASE OF CIT V/S MANJUNAT H COTTON & GINNING FACTORY WHICH HAS BEEN FURTHER UPHELD BY HO NBLE APEX COURT. FINDINGS OF THE TRIBUNAL READ AS UNDER: 5. WE HAVE CAREFULLY PERUSED THE MATERIAL PAPERS ON RECORD IN THE LIGHT OF THE STATEMENTS MADE ON BEHALF OF TH E ASSESSEE INCLUDING THE JUDGMENT RELIED UPON BY HIM IN THE CA SE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (K AR). VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COURT HAS HELD AS FOLLOWS :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC TS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER 4 ITA NO. 41/RJT/2015 SHRI K.C . VARGHESE CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QU A NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDI NGS ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 6 - SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SA ID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. A FTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPO SED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER . IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINC IPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ON CE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALT Y SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. THIS WAS FOLLOWED BY THE HONBLE KARNATAKA HIGH COU RT IN THE DECISION IN THE CASE OF CIT VS M/S. MAGANUR BUILDER S IN ITA NO. 616/2015 DATED 28.7.2016. THE HONBLE JURISDICTIONA L HIGH COURT CONSIDERED THIS ISSUE IN THE CASE OF JYOTI LT D. (SUPRA), WHITEFORD INDIA LTD. (SUPRA), NEW SORATHIAENGG. CO. (SUPRA) AND MANU ENGINEERING WORKS (SUPRA). FINDING OF THE ASSESSING OFFICER AS EXTRACTED IN PARA 6 OF JYOTI LTD. (SUPRA ) IS SIMILAR TO THE ORDER IN THIS CASE, AND IT IS AS FOLLOWS :- IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE A SSESSEE CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS O F INCOME. I, THEREFORE, CONSIDER IT A FIT CASE FOR LE VY OF PENALTY UNDER SECTION 271(1)(C). ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 7 - 6. ON A CAREFUL READING OF THE DECISIONS RELIED UPO N BY THE ASSESSEE, IT IS, THEREFORE, CLEAR THAT DRAWING UP P ENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY OF EITHER ONE OR OTHER CANNOT BE SUSTAINED IN LAW. IN THIS CASE ALSO THE A SSESSMENT ORDER READS THAT PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREA S THE PENALTY ORDER SHOWS THAT THE ASSESSEE WAS GUILTY OF CONCEAL MENT OF PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICU LARS OF INCOME. ACCORDING TO THE BINDING PRECEDENTS REFERRE D TO ABOVE, SUCH A COURSE IS BAD IN LAW AND CANNOT BE SUSTAINED . WE, THEREFORE, PROCEED TO QUASH THE PENALTY PROCEEDINGS AS THEY CANNOT BE SUSTAINED UNDER LAW. 10.2 SIMILARLY IN ANOTHER DECISION OF CO-ORDINATE B ENCH IN THE CASE OF SHRI PARAS KUMAR V KATARIA VS. ITO, WARD-1(3), RAJK OT, IT WAS OBSERVED AS FOLLOWS: 16. WE HAVE CAREFULLY CONSIDERED RIVAL SUBMISSION S. AT THE OUTSET, WE TAKE NOTE OF THE LEGAL ARGUMENTS RAISED ON BEHALF OF THE ASSESSEE THAT APPROPRIATE CHARGE HAS NOT BEEN S PECIFIED IN THE SHOW-CAUSE NOTICE ISSUED TO THE ASSESSEE. A PER USAL OF NOTICE ISSUED UNDER S.274 READ WITH S. 271(1)(C) SHOWS THA T THE RELEVANT PART OF THE NOTICE HAS NOT BEEN STRUCK OFF. THUS, I T CAN BE INFERRED THAT THERE IS LACK OF APPLICATION OF MIND BY THE AO . THE VAGUENESS AND AMBIGUITY IS CLAIMED TO HAVE PREVENTE D THE ASSESSEE OF REASONABLE OPPORTUNITY TO DEFEND ITS CA SE. THUS, DEFINITE PREJUDICE HAS CAUSED TO THE ASSESSEE. IT I S THE REQUISITE OF LAW THAT THE NOTICE TO THE ASSESSEE SHOULD BE SPECI FIC. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT THAT THE SO- CALLED AMBIGUOUS NOTICE HAS NOT IMPAIRED OR PREJUDICED THE RIGHT OF THE ASSESSEE TO REASONABLE OPPORTUNITY OF BEING HEARD. IT THEREFORE MUST FOLIOW THAT THE NOTICES ISSUED PROPOSING PENAL TY WERE ILLUSORY AND THE ASSESSEE WAS INCAPACITATED TO DEFE ND ITS CASE. THE DECISIONS QUOTED ON BEHALF OF THE ASSESSEE IN T HE CASE OF SAMSON PERINCHERY (BOMBAY) & MANJUNATHA COTTON (KARNATAKA) [SUPRA] ARE APPLICABLE TO THE FACTS OF THE CASE. THE PENALTY NOTICES, THUS, ISSUED ARE RENDERED INVALID AND CANNOT BE SUSTAINED. ITA NO.29/RJT/2 017 SHRI CHHAGANLAL KABABHAI MAKWANA VS. ITO ASST.YEAR 2011-12 - 8 - 9. RESPECTFULLY, FOLLOWING THE JUDGMENT OF KARNATAK A HIGH COURT AS CONFIRMED BY HONBLE APEX COURT AND THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE CONSIDERED THAT THE NOTIC E ISSUED U/S. 274 R.W.S 271(1)(C) OF THE ACT WAS ILLEGAL AND BAD IN LAW AS IT HAD NOT SPECIFIED THE CHARGES ON WHICH THE PENALTY WAS LEVIED I.E. FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME, THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/05/2017 SD/- SD/- VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG &' $ ( $ ) ()* $ ) ( AMARJIT SINGH ) ( MAHAVIR PR ASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 24/05/2017 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. , -. / / CONCERNED CIT 4. / () / THE CIT(A)-II, RAJKOT. 5. 012 **-. , -.# , '&$,$ / DR, ITAT, AHMEDABAD 6. 245 6 / GUARD FILE. / BY ORDER, / !'# ( DY./ASSTT.REGISTRAR) #$ %, / ITAT, AHMEDABAD TRUE COPY