A.Kalimuthu, CHENNAI V. ACIT, Coimbatore

ITA 306/CHNY/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7692 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SRINIVASAN
• Assessee Lawyers: S SRIDHAR
• Section: 69; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NOS. 305 & 306/MDS/2014 / ASSESSMENT YEARS : 2006-07 & 2007-08 SHRI A. KALIMUTHU, C/O. SHRI S. SRIDHAR, ADVOCATE, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI 600 020. PAN: AKJPK4620P V. THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II, COIMBATORE ( ! /APPELLANT) ( '# ! /RESPONDENT) ! $ /APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE '# ! $ /RESPONDENT BY : SHRI A. SRINIVASAN, JCIT $ /DATE OF HEARING : 19.01.2017 $ /DATE OF PRONOUNCEMENT : 28.02.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAIN ST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- II, COIMBATORE DATED 27.07.2012 AND PERTAINS TO THE ASSESSMENT YEA RS 2006-07 & 2007-08 CONFIRMING THE PENALTIES LEVIED BY THE ASSE SSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 I.T.A. NO. 305 & 306/MDS/2014 2. THERE WAS A DELAY OF 504 DAYS IN FILING THESE AP PEALS BY THE ASSESSEE. THE ASSESSEE HAS FILED A PETITION FOR CO NDONATION OF DELAY. WE HAVE HEARD THE LD. COUNSEL FOR THE ASSES SEE AND THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THERE WA S SUFFICIENT CAUSE FOR NOT FILING THE APPEAL BEFORE THE STIPULAT ED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. LET US TAKE ITA NO.305/MDS/2014 FOR CONSIDERATIO N. SHRI S. SRIDHAR, THE LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE UNDER SECTION 132 OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE. THE LD. CO UNSEL FURTHER SUBMITTED THAT THE ASSESSEE STUDIED ONLY UP TO ELEM ENTARY SCHOOL LEVEL AND HE HAS NO KNOWLEDGE OF THE INCOME TAX ACT . DURING THE COURSE OF SEARCH OPERATION, THE ASSESSEE HAS ACCEPT ED ALL THE PROPOSALS OF THE DEPARTMENT AND PAID THE TAXES ALSO . THEREFORE LEVY OF PENALTY OF RS.85,000/- IS NOT JUSTIFIED. R EFERRING TO THE ORDER OF THE ASSESSMENT, THE LD. COUNSEL SUBMITTED THAT T HE ASSESSEE BORROWED UNSECURED LOANS OF RS.2 LAKHS FROM HIS FRI ENDS AND RELATIVES. THIS WAS DISCLOSED BEFORE THE REVENUE A UTHORITIES. MERELY BECAUSE THE ASSESSEE COULD NOT SUBSTANTIATE THE SOURCE, 3 I.T.A. NO. 305 & 306/MDS/2014 THAT CANNOT BE A REASON FOR LEVY OF PENALTY. SIMIL ARLY, DUE TO NEGLIGENCE OF THE ACCOUNTANT, THE ASSESSEE HAS OFFE RED ADDITIONAL INCOME OF RS.66,540/-. THE ASSESSEE HAS FURNISHED ALL THE DETAILS BEFORE THE REVENUE AUTHORITIES. THEREFORE EXPLANAT ION 5A TO THE SECTION 271(1)(C) OF THE ACT IS NOT APPLICABLE. 4. ON THE CONTRARY, SHRI A. SRINIVASAN, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CLAIM OF THE ASSE SSEE THAT HE WAS ILLITERATE AND NOT AWARE OF THE PROVISIONS OF T HE INCOME TAX ACT CANNOT BE AN EXCUSE FOR NOT DISCLOSING THE INCOME E ARNED BY THE ASSESSEE. IN THE CASE BEFORE US, ACCORDING TO THE L D. D.R., THE ASSESSING OFFICER MADE AN ADDITION OF RS.2 LAKHS TO WARDS UNSECURED LOANS. THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE LOAN. THE ASSESSING OFFICER HIMSELF WAS FAI R ENOUGH IN NOT LEVYING PENALTY TO THE EXTENT OF RS.91,352/- UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE THE CIT (APPEALS) HAS RIGHTL Y CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER TO THE EXTE NT OF RS.85,000/-. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER LEVIED PENALTY OF RS.85,000/- FOR ADDITION OF RS.2, 66,540/-. THE 4 I.T.A. NO. 305 & 306/MDS/2014 ASSESSEE CLAIMED THAT HE BORROWED RS.2 LAKHS FROM H IS FRIENDS AND RELATIVES. THIS FACT WAS DISCLOSED TO THE REVENUE. THE ASSESSEE OFFERED ADDITIONAL INCOME OF RS.66,540/-. THE ADD ITION MADE BY THE ASSESSING OFFICER IS NOT ON THE BASIS OF ANY MATERI AL FOUND DURING THE COURSE OF SEARCH OPERATION. THE ADDITION WAS ON THE BASIS OF THE ADMISSION MADE BY THE ASSESSEE. EVEN THOUGH, C ERTAIN MATERIAL WAS FOUND DURING THE SEARCH OPERATION, NO PENALTY WAS LEVIED IN RESPECT OF THOSE ITEMS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT INVOKING EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE ASSESS EE CLAIMED BEFORE THE ASSESSING OFFICER THAT HE BORROWED A SUM OF RS. 2 LAKHS FROM FRIENDS AND RELATIVES. THE MERE CLAIM CANNOT BE A REASON FOR LEVY OF PENALTY. IT IS FOR THE ASSESSING OFFICER TO EXA MINE FURTHER AND FIND OUT THAT THE CLAIM MADE BY THE ASSESSEE IS FALSE ON E. IN THIS CASE, NO SUCH EXAMINATION WAS MADE. MERELY BECAUSE THE A SSESSEE COULD NOT PROVE THE GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS, THAT CANNOT BE A REASON FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE A SSESSING OFFICER HAS TO FIND OUT WHETHER THE ASSESSEE HAS CONCEALED ANY PART OF HIS INCOME OR FURNISHED ANY INACCURATE PARTICULARS. I N THE ABSENCE OF ANY SUCH EXAMINATION, THIS TRIBUNAL IS OF THE CONSI DERATE OPINION 5 I.T.A. NO. 305 & 306/MDS/2014 THAT THERE CANNOT BE ANY PENALTY UNDER SECTION 271( 1)(C) OF THE ACT. MOREOVER, THE ADDITIONAL INCOME OFFERED BY THE ASSE SSEE TO THE EXTENT OF RS.66,540/- WAS DUE TO THE NEGLIGENCE OF THE ACCOUNTANT. THIS FACT WAS NOT FOUND TO BE FALSE. BY TAKING IN TO CONSIDERATION OF THE TOTALITY OF THE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LEVY OF PENALTY OF RS.85,000/- IS NOT JUSTIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING OFFICER IS DELETED. 6. NOW COMING TO ITA NO.306/MDS/2014, THE ASSESSING OFFICER LEVIED PENALTY OF RS.3,55,132/-. 7. SHRI S. SRIDHAR, THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF R S.11,80,224/- DURING THE COURSE OF SEARCH OPERATION. THE PURCHAS E OF RS.50,000/- WAS ALSO OMITTED BY THE ACCOUNTANT IN THE BOOKS OF ACCOUNT. MERE ADDITION IN THE ABSENCE OF ANY SEARCH MATERIAL, ACC ORDING TO THE LD. COUNSEL CANNOT BE A REASON FOR LEVY OF PENALTY. TH E ASSESSEE HAS PAID THE TAXES. THEREFORE LEVYING PENALTY UNDER SE CTION 271(1)(C) OF THE ACT IS NOT JUSTIFIED. 6 I.T.A. NO. 305 & 306/MDS/2014 8. ON THE CONTRARY, SHRI A. SRINIVASAN, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS PURCHASED A VACANT LAND FOR RS.50, 000/- ON 15.11.2006. THIS PURCHASE WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE AGREED THAT THE COST OF VACA NT LAND WAS RS.50,000/- WHICH WAS NOT ACCOUNTED. THEREFORE, AN ADDITION OF RS.50,000/- WAS MADE UNDER SECTION 69 OF THE ACT. THE LD. D.R., FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO OFFERE D RS.11,30,224/- AS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATI ON. IN THE ABSENCE OF ANY EXPLANATION FOR EARNING THIS RS.11,3 0,224/-, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CONCE ALED THE INCOME. THEREFORE, THE PENALTY LEVIED BY THE ASSES SING OFFICER WAS RIGHTLY CONFIRMED BY THE CIT (APPEALS). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE OFFERED AN ADDITIONAL INCOME OF RS.11,30,224/- AND THE COST OF PURCHASE OF VACANT LAND RS.50,000/- WAS NOT ACCOUNT ED IN THE BOOKS OF ACCOUNT WHICH WAS ALSO TAKEN AS INCOME OF THE ASSESSEE. THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE ON 12.02.2008 AND THE ADDITION MADE BY THE ASSESSING OFFICER WAS NOT IN RELATION 7 I.T.A. NO. 305 & 306/MDS/2014 TO ANY MATERIAL FOUND DURING THE COURSE OF SEARCH O PERATION. THE ADDITION WAS MADE ON THE BASIS OF THE ADMISSION MAD E BY THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THERE IS NO MATERIAL TO ESTABLISH THAT THE ASSESSEE HAS CONCEAL ED ANY PART OF THE INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF SUCH INCOME. UNLESS AND UNTIL IT IS BROUGHT ON RECORD THAT THE A SSESSEE HAS FURNISHED ANY INACCURATE PARTICULARS OR CONCEALED A NY PART OF HIS INCOME, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT J USTIFIED. IT IS A WELL SETTLED PRINCIPLES OF LAW THAT ASSESSMENT PROCEEDIN G IS DIFFERENT AND DISTINGUISHED FROM PENALTY PROCEEDING. THE ASSESSI NG OFFICER IS EXPECTED TO RE-APPRECIATE THE MATERIAL AVAILABLE ON RECORD WHILE CONSIDERING THE LEVY OF PENALTY. MERELY BECAUSE TH ERE WAS AN ADDITION IN THE ASSESSMENT PROCEEDING THAT WILL NOT BE A REASON FOR LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN OTHER WORDS, ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSES SMENT PROCEEDING WILL NOT AUTOMATICALLY RESULT IN LEVY PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE CASE BEFORE US, THE R EVENUE COULD NOT ESTABLISH THAT THE ASSESSEE HAS CONCEALED ANY PART OF HIS INCOME OR FURNISHED ANY INACCURATE PARTICULARS. MOREOVER INV OKING EXPLANATION 5A OF SECTION 271(1)(C) OF THE ACT IN T HE FACTS AND 8 I.T.A. NO. 305 & 306/MDS/2014 CIRCUMSTANCES OF THIS CASE IS NOT JUSTIFIED. CONSI DERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT LEVY OF PENALTY UNDER SECTION 271(1)(C ) OF THE ACT TO THE EXTENT OF RS.3,55,132/- IS NOT CALLED FOR. ACCORDI NGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE PENALTY LEVIED BY THE ASSESSING OFFICER IS DELETED. 10. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED ON 28 TH FEBRUARY, 2017 AT CHENNAI. SD/- SD/- ( . ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GAN ESAN) / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 28 TH FEBRUARY, 2017. JR. $ ' % & % /COPY TO: 1. ! /APPELLANT 2. '# ! /RESPONDENT 3. '() ( )/CIT(A)-II, COIMBATORE 4. '() /CIT, 5. ' % /DR 6. *+ /GF.