N Subramaniam, Rayagada V. ACIT, Berhampur

ITA 297/CTK/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7836 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 28-06-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 30-04-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: J M PATTNAIK
• Keywords: Unexplained investment

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 297/CTK/2012 (ASSESSMENT YEAR 2000 - 01) N.SUBRAMANIAM, S/O. N.VENKAT RAO, AT:RMCS ROAD, GANDHI NAGAR, RAYAGADA PAN: ACDPN 04 26 E VERSUS ASST.COMMISSIONER OF INCOME - TAX, BERHAMPUR CIRCLE, BERHAMPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI J.M.PATTNAIK, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR DATE OF HEARING : 28.06.2012 DATE OF PRONOUNCEMENT : 29.06.2012 ORDER SHRI K.K.GUPTA, AM : THIS APPEAL IS ON THE SOLITARY ISSUE LEVYING PENALTY U/S.271(1)(C) OF THE I.T.ACT,1961. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD AND AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AS PART OF HIS ARGUMENT ARE TH AT THE ASSESSEE IS ONE OF THE DIRECTOR OF M/S. SHREE JAGANNATH COTTON GINNIG AND PRESSING PVT. LTD. AT RAYAGADA SUBMITTED HIS RETURN IN THE STATUS OF INDIVIDUAL BY DISCLOSING AGRICULTURAL INCOME AT 2,40,000 & REMUNERATION RECEIVED FROM M/S. SHREE JAGANTH COTTON GINNIG AND PRESSING PVT. LTD. AS DIRECTOR AT 28,000. THE ASSESSING OFFICER IN THE ASSESSMENT MADE U/S. 143 (3)/147 OF THE I.T. ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION BY RAISING A DE MAND AT 15,55,000 BASING ON TWO GROUNDS AS FOLLOWS: - ( A ) THAT, THE ADDITION OF 14,50,000 AS UNEXPLAINED INVESTMENT AS A DIRECTOR WITH M/S. SHREE JAGANNATH COTTON GINNIG AND PROCESSING PVT. LTD. AT RAYAGADA. ( B ) THAT, THE ADDITION OF 1,05,000 AGAINST AT 2,40,0 00 AS SHOWN AGRICULTURAL INCOME WITH A VIEW OF SAID AGRICULTURAL LAND DISCLOSED BY THE ASSESSEE WHERE THE SURPLUS FROM AGRICULTURAL INCOME AT 2,40,000 IS NOT ASSESSABLE BASING ON A PURELY GUESS ASSESSMENT. ITA NO.297/CTK/2012 2 AGAINST SUCH ORDER OF ASSESSMENT THE ASSESSEE PRE FERRED APPEAL BEFORE THE CIT(A) AND THE LEARNED CIT(A) DELETED THE ADDITION OF 1,05,000 OUT OF THE 14,50,000 THEREBY SUSTAINED THE ADDITION OF 13,45,000 . AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE TRIBUNAL AND VIDE ORDER DT.28.9.2007 IN ITA NO.3 52/CTK/2006 THE TRIBUNAL HAS DELETED THE RS, 10,12,268, THEREBY SUSTAINING THE ADDITION OF 4,37,732. WHILE SO, THE TRIBUNAL HELD A VIEW THAT THE ADDITIONS ARE MADE ONLY ON ESTIMATION. 3. THE ASSESSING OFFICER STARTED PENALTY PROCEEDINGS U/S.271(1)(C) AND LEVIED PENALTY OF 1,16,000 UNDER THAT SECTION, WHICH IN APPEAL HAS BEEN CONFIRMED BY THE LEARNED CIT(A) AND HENCE, THE ASSESSEE IS IN THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALTY CANNOT IMPOSED A S THE ADDITION MADE WHICH IS SUSTAINED BY THE ITAT AT 4,37,432 WHICH IS ONLY ON ESTIMATION. HE ALSO POINTED OUT THAT WHILE COMPUTING THE TAX ON ESTIMATED TOTAL INCOME IN VIEW OF THE ORDER OF THE LD. ITAT AT 4,37,732.00 HAS DETERMINED THE TAX PAYABLE AT 1,02,540.00 WHEREAS IN THE PENALTY ORDER, THE SAID ASSESSING OFFICER HAS TAKEN IT AS 1,16,000.00, THEREBY THE ASSESSING OFFICER IS IN CONFUSION WHILE IMPOSING PENALTY, WHICH OUGHT TO BE SET ASIDE. HE FURTHER CONTENDED THAT THE IMPOSITION OF PENALTY IS ILL EGAL AS THERE IS NO CONCEALMENT OF INCOME AS ALLEGED BY THE AUTHORITIES BELOW AS THE ASSESSEE HAS SUBSTANTIATED HIS BONAFIDENESS BY DISCLOSING 23.00 LAKHS AS HIS SHARE APPLICATION MONEY WITH M/S. SHREE JAGANNATH COTTON GINNING & PROCESSING PVT. LTD., RAYA GA DA BEFORE THE REGISTRAR OF COMPANIES, ORISSA AS WELL AS IN THE RETURN OF THE SAID COMPANY, WHICH HAS ONCE AGAIN CONFIRMED BY THE LD. I.T.A.T. IN I.T.A. NO.353/CTK/2006, ORDER DTD. 17.07.2007, THEREBY THE BONAFIDENESS OF THE ASSESSEE HAS BEEN PROVED BEYON D ANY DOUBT. HE ARGUED THAT IN ORDER TO ATTRACT PENALTY TWO BASIC CONDITIONS SHOULD BE SATISFIED; VIZ. ITA NO.297/CTK/2012 3 (I) THE ASSESSEE HAS TO SUBSTANTIATE ITS EXPLANATION; AND (II) PROVE ITS BONAFIDENESS. IN CASE ANY OF THE TWO CONDITIONS IS NOT FULFILLED, NO PENALTY U/S .271(1)(C) IS IMPOSABLE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT I T IS AN UNDISPUTED FACT AS PER RECORD AND INVESTIGATION REPORT OF THE INCOME TAX INSPECTOR THAT THE ASSESSEE WAS ENGAGED IN AGRICULTURAL ACTIVITIES AND CULTIVATION OF TOBACCO AND COTTON ON HIS ACTUALLY OWNED AND LEASED AGRICULTURAL LAND HAVING A VALID LICENCE FOR CULTIVATION OF TOBACCO, THEREBY THE GENUINENESS OF SOURCE IS VERY MUCH THERE. HENCE, THE ORDER OF PENALTY SHOULD BE QUASHED OWING TO NON - APPLICATION OF MIND. AS THE STATE MENT OF TOTAL INCOME FOR AGRICULTURAL INCOME DISCLOSED BY THE APPELLANT ON ESTIMATE BASIS AND THE ASSESSING OFFICER HAS DISALLOWED CERTAIN AMOUNT OF AGRICULTURAL INCOME ON ESTIMATE BASIS, I.E. 8,50,000 FOR PRECEDING EIGHT YEARS INCLUDING CURRENT YEAR WHIC H HAS AGAIN FORTIFIED BY THE ORDER OF CIT (A) WHILE PARTLY ALLOWING THE APPEAL STATING THEREIN THE SAID INCOME IS ALSO ON ESTIMATE BASIS BY ALLOWING FURTHER 1,05,000 AND SIMILARLY, THE I.T.A.T. HAS SUSTAINED THE ADDITION OF 4,37,732 BASING ON THE ESTIMAT ION OF THE ASSESSING OFFICER WHILE PASSING THE ORDER OF ASSESSMENT ON ESTIMATE BASIS. AS RETURNED INCOME AND ASSESSED INCOME BOTH BEING ON ESTIMATE BASIS, PENALTY U/S.271(1)(C) IS NOT ATTRACTED. FURTHER, HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT RECO RDED HIS SATISFACTION AS REQUIRED UNDER THE I.T.ACT TO THE EFFECT THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF, LEVY OF PENALTY IS NOT SUSTAINABLE AS THE ASSESSING OFFICER HAS NOWHERE STATED THAT THE PARTICULARS FURNIS HED BY THE ASSESSEE WERE WRONG OR FALSE OR UNEARTHED ANY MATERIAL FACTS OR PARTICULARS FACTS WHICH THE ASSESSEE DID NOT DISCLOSE. IN THE INSTANT CASE OF THE ASSESSEE, THE ASSESSMENT ORDER IS COMPLETELY SILENT REGARDING ANY SATISFACTION OF THE ASSESSING OF FICER FOR INITIATION OF PENAL PROCEEDING. HENCE, THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AD ITA NO.297/CTK/2012 4 CONFIRMED BY THE LEARNED CIT(A) SHOULD BE QUASHED. HE FURTHER SUBMITTED THAT AS THE PENALTY PROCEEDING IS A QUASI - CRIMINAL IN NATURE, THE BURDEN OF PROVIN G CONCEALMENT LIES ON THE DEPARTMENT. IN THE PRESENT CASE, THE DEPARTMENT HAS FAILED TO UNEARTH ANY CONCEALMENT OF INCOME, BUT HARPING ON THE DISCLOSED SOURCE OF INCOME OF 23.00 LAKHS AS THE SHARE APPLICATION MONEY DISCLOSED BEFORE THE REGISTRAR OF COMPAN IES AS PER THE BALANCE SHEET, THEREBY LEVY OF PENALTY IS COMPLETELY NON - EST. TREATING SHARE APPLICATION MONEY AS CONCEALED INCOME IN THE HAND OF THE DIRECTOR IS COMPLETELY ILLEGAL AS THE SAME HAS DISCLOSED IN THE HAND OF THE COMPANY ON ITS INCOME TAX RETUR N. A S THE ADMITTED AND UNDISPUTED SOURCE OF INCOME IS COMPLETELY FROM AGRICULTURE AS EXEMPTED FROM INCOME TAX AND NO OTHER SOURCE OF INCOME OTHER THAN AGRICULTURE NOT UNEARTHED BY THE DEPARTMENT, THEREBY THE LEVY OF PENALTY IS COMPLETELY NON - APPLICATION OF MIND AND AS SUCH, T HE SAME IS LIABLE TO BE CANCELLED. 5 . THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) INSOFAR AS THE LEARNED CIT(A) HAS RELIED ON THE DECISIONS IN THE CASE OF CHANDRAKANTA (MP) 205 ITR 607, LAXMI INDUSTRIES (ALL) 146 ITR 492, KRISHNA SWAMY & SONS (MAD) 299 ITR 157 AND CHANDRAVILAS HOTEL (GUJ) 291 ITR 202. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. HAVIN G HEARD THE RIVAL PARTIES, WE FIND THAT THE QUANTUM ADDITION HAS BEEN SETTLED BY THE TRIBUNAL AND THE RESIDUAL AMOUNT WHICH WAS PETITIONED BEFORE THE TRIBUNAL BY WAY OF MISC. APPLICATION WHICH FATE IS UNKNOWN WAS ONLY A MATTER OF ABUNDANT PRECAUTION SUBMIT TED BY THE ASSESSEE INSOFAR AS THE RESIDUAL BALANCE OF ESTIMATION FROM INVESTMENT OF THE TOTAL SHARE CAPITAL WHICH SOURCE HAS BEEN DEALT WITH BY THE TRIBUNAL STANDS CONFIRMED BY THE TRIBUNAL AT 4,37,732. THIS CLEARLY INDICATES THAT THE ITA NO.297/CTK/2012 5 ESTIMATION CANNOT BE LOST SIGHT OF ON THE SPECIFIC FINDING OF THE TRIBUNAL THAT THE ESTIMATION WAS AT 3 STAGES , FIRST AT THE ST AGE OF LAND HOLDING, SECOND AT THE ST AGE OF EXPENDITURE INCURRED FOR CULTIVATION AND AT THIRD STAGE I.E., YIELD. ALL THESE FACTS WERE CONSIDERED FOR THE PURPOSE OF DETERMINING THE AMOUNT AVAILABLE TO MAK E INVESTMENT OF 23 LAKHS IN THE SHARE CAPITAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED A PAPER BOOK CONTENDING VARIOUS DOCUMENTS SUCH AS THE TRUE COPY OF THE LAND PARTICULARS, COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2000 - 0 1 MADE U/S.143(3)/147,COPY OF APP ELLATE ORDER DT.30.10.2006 , ORDER OF THE ITAT DT.17.7.2006 IN ITA NO.352/CTK/2006, COPY OF ORDER DT.28.09.2007 PASSED BY THE ITAT IN MISC.APPLN.NO.19/CTK/2007, ASSESSMENT ORDER AND ITAT ORDER FOR THE 2000 - 01 IN CASE OF M/S.SHRE JAGANNATH COTTON GINNING & PRESSING, WHICH HAVE BEEN PERUSED. THE LEARNED DR EMPHASIZED THAT PENALTY WAS ON THE ASSESSEE HAVING FURNISHED INACCURATE PARTICULARS OR PURPORTEDLY CONCEALMENT OF INCOME THEREFORE LOSES SIGHT THE MOMENT TRIBUNAL HAS CONSIDERED ALL THESE FACTS AND WERE CO NSIDERED ENOUGH TO HOLD THAT AFTER 23 LAKHS THE AMOUNT THAT COULD BE ADDED ON THE BASIS OF P & L ACCOUNT FROM AGRICULTURAL ACTIVITIES CARRIED CAN LEAD TO INCOME BEING AGRICULTURAL INCOME AND NOT FROM AGRICULTURAL PROCESS AT 4,37,732. AGRICULTURAL INCOME IS NOT TAXABLE. THE ASSESSEE HAS NOT CONCEALED INCOME WHICH IS EXEMPT. ESTIMATION CANNOT RESULT IN LEVY OF PENALTY STRAIGHT WAY IN A MECHANICAL MANNER. THE CASE LAWS RELIED UPON BY THE LEARNED CIT(A) ARE COVERED BY EXPLANATION - I TO SECTION 271(1)(C) WHICH LEANS IN FAVOUR OF THE ASSESSEE. THE ASSESSEE HAD NEITHER CONCEALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS. IT WAS A DENIAL OF THE ASSESSING AUTHORITIES WHICH WAS ADJUDICATED UPON BY THE TRIBUNAL, WHICH THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED AS MENTIONED ABOVE. IN THE LIGHT OF THE SAME, WE HAVE NO HESITATION TO CANCEL THE PENALTY LEVIED U/S. ITA NO.297/CTK/2012 6 271(1)(C) ON THE PART ESTIMATION SUSTAINED BY THE TRIBUNAL. IN VIEW OF THE IMPUGNED PENALTY OF 1,16,000 LEVIED BY THE ASSESSING OFFICER U/S.27 1(1)(C) AND SUSTAINED BY THE LEARNED CIT(A), IS CANCELLED. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 29.06.2012 H.K.PADHEE, SENIOR PRIV ATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: N.SUBRAMANIAM, S/O. N.VENKAT RAO, AT:RMCS ROAD, GANDHI NAGAR, RAYAGADA 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, BERHAMPUR CIRCLE, BERHAMPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY. APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 28.06,2012 .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29.06.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING ME MBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 29.06.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..