M/s.Raicon Engineers, Bangalore V. Income-Tax Officer, Bangalore

ITA 316/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5523 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 271(1)(c); 40A(3); 143(3); 133A; 40(a)(ia); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NO S.316 & 317/BANG/2017 ASSESSMENT YEAR : 2008 - 09 M/S. RAICON ENGINEERS, NO.11, CASCADING MEADOWS, T C PALYA MAIN ROAD, K R PURAM, BENGALURU 560 036. PAN: AAFFR 9137A VS. THE INCOME TAX OFFICER, WARD 8(1), BANGALORE. APPELLANT RESPONDENT APP ELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : DR.P.V. PRADEEP KUMAR, ADDL.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 04 .0 6 .2019 DATE OF PRONOUNCEMENT : 04 . 0 6 .201 9 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT ITA 317/BANG/2017 THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(APPEALS)-4, BANGALORE DATED 31.08.2016. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THERE WAS A SURVEY U/S. 133A OF THE INCOME-TAX ACT, 1961 [THE ACT] IN THE CASE OF ASSESSEE ON 26.02.2009. THE DUE DATE FOR FILING RETURN OF INCOME FOR AY 2008-09 WAS 31.10.2008. ON THE DATE OF SURVEY, ITA NOS.316& 317/BANG/2017 PAGE 2 OF 7 THE ASSESSEE HAD NOT FILED RETURN OF INCOME FOR AY 2008-09. IN THE COURSE OF SURVEY IT WAS NOTICED BY THE OFFICER CONDUCTING THE SURVEY THAT ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON EXPENDITURE TO TH E TUNE OF RS.30,09,087 ON WHICH TAX WAS DEDUCTIBLE AS PER THE PROVISIONS O F CHAPTER XVIIB OF THE ACT. IT WAS ALSO NOTICED AT THE TIME OF SURVEY THA T THERE WERE EXPENDITURE TO THE TUNE OF RS.28,94,491 WHICH WERE INCURRED IN CAS H ABOVE THE LIMITS SPECIFIED U/S. 40A(3) OF THE ACT AND WAS THEREFORE LIABLE TO BE DISALLOWED (NOT ALLOWABLE AS DEDUCTIBLE EXPENDITURE IN COMPUTI NG INCOME FROM BUSINESS). 3. SINCE THE ASSESSEE HAD NOT FILED RETURN OF INCOM E FOR AY 2008-09, A NOTICE U/S. 148 DATED 27.02.2009 WAS ISSUED BY THE AO. IN RESPONSE TO THE SAME, ASSESSEE FILED RETURN OF INCOME ON 21.12.2009 DECLARING INCOME OF RS.89,80,010. IN THE SAID RETURN OF INCOME, THE AS SESSEE HAD DISALLOWED AND ADDED TO THE TOTAL INCOME A SUM OF RS.30,09,087 WHICH WAS EXPENDITURE DISALLOWABLE U/S. 40(A)(IA) AND A SUM O F RS.28,97,491 WHICH WAS DISALLOWABLE U/S. 40A(3) OF THE ACT. THE RETUR N FILED BY THE ASSESSEE WAS ACCEPTED BY THE AO AND AN ORDER OF ASSESSMENT W AS PASSED ON 29.12.2009. IN THE ORDER OF ASSESSMENT, THE AO INI TIATED PENALTY PROCEEDINGS U/S. 271(1)(C) FOR FURNISHING INACCURAT E PARTICULARS. IT IS TO BE MENTIONED HERE THAT RETURN OF INCOME WAS ACCEPTED B Y THE AO, NO ADDITIONS WERE MADE AND THEREFORE INITIATION OF PEN ALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME APPEARS TO BE NOT IN ORDER. 4. AGAINST THE AFORESAID ASSESSMENT ORDER, THE ASSE SSEE FILED APPEAL BEFORE THE CIT(APPEALS) AND THERE WAS A DELAY OF 72 5 DAYS IN FILING THE APPEAL BEFORE THE CIT(A). WHEN THE RETURNED INCOME IS ACCEPTED, THE NEED FOR FILING AN APPEAL BEFORE CIT(A) IS NOT DISCERNIB LE FROM THE GROUNDS OF APPEAL FILED BY ASSESSEE BEFORE CIT(A). THE CIT(A) REFUSED TO CONDONE ITA NOS.316& 317/BANG/2017 PAGE 3 OF 7 THE DELAY IN FILING THE APPEAL BEFORE HIM AND DISMI SSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE AFORESAID ORDER OF CIT(APPEALS) , THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING OF APPEAL, THE LD. COUNSEL FOR THE ASSESSEE FILED A LETTER DATED 0 3.06.2019 WITHDRAWING THE APPEAL OF ASSESSEE. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED AS WITHDRAWN. ITA 316/BANG/2017 6. WE HAVE ALREADY SEEN THAT IN THE ASSESSMENT CONC LUDED FOR AY 2008-09 AND THE ORDER DATED 29.12.2009 PASSED U/S. 143(3) R.W.S. 147 OF THE ACT THAT THE AO ACCEPTED THE INCOME RETURNED BY THE ASSESSEE, BUT NEVERTHELESS INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESP ECT OF DISALLOWANCE OF EXPENSES U/S. 40(A)(IA) AND 40A(3) OF THE ACT. THE AO ISSUED A SHOW CAUSE NOTICE U/S. 274 OF THE ACT FOR IMPOSING PENAL TY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. IT IS THE CASE OF THE REVENU E THAT BUT FOR THE SURVEY U/S. 133A OF THE ACT, THE ASSESSEE WOULD NOT HAVE D ISALLOWED EXPENDITURE ON WHICH TDS WAS NOT DEDUCTED IN VIEW OF THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT AND EXPENSES INCURRED IN CASH IN VIOLATION OF SECTION 40A(3) OF THE ACT. THE PLEA OF THE ASSESSEE WAS TH AT WHEN THE ASSESSEE HAS DECLARED IN THE RETURN OF INCOME THE TOTAL INCO ME AFTER MAKING DISALLOWANCE U/S. 40(A)(IA) AND 40A(3) OF THE ACT A ND WHEN SUCH RETURN OF INCOME IS ACCEPTED BY THE AO, THERE WAS NO CASE FOR IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT, AS THERE WAS NEITHER CON CEALMENT OF PARTICULARS NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE REVENUE AUTHORITIES (AO & CIT(A)) DID NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSEE AND HELD THAT THE ASSESSEE CONCEALED AND FURNISHED PARTICULA RS OF INCOME AND ITA NOS.316& 317/BANG/2017 PAGE 4 OF 7 IMPOSED PENALTY U/S. 271(1)(C). AGGRIEVED BY THE ACTION OF CIT(A) IN CONFIRMING THE ORDER OF THE AO IMPOSING PENALTY, TH E ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE FILED BEFORE US SHOW CAUSE NOTICE ISSUED U/S. 274 BEFORE IMPOSING PENALTY U/S. 271(1) (C) OF THE ACT. HE POINTED OUT THAT IN THE AFORESAID SHOW CAUSE NOTICE , THE AO HAS NOT STRUCK OFF THE IRRELEVANT PORTION VIZ., AS TO WHETHER THE PENALTY IS BEING PROPOSED FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE RELIED ON THE DECISION OF THE ITAT BANG ALORE BENCH IN THE CASE OF ARUN KUMAR V. ACIT IN ITA NO.117/BANG/2016, ORDER D ATED 16.12.2016 WHEREIN THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) WHEREIN IT WAS HELD THAT WHEN SHOW CAUSE NOTICE IM POSING PENALTY DOES NOT SPECIFICALLY STATE THAT THE GROUND ON WHICH PENALTY IS SOUGHT TO BE LEVIED VIZ., AS TO WHETHER IT IS FOR F URNISHING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, THE ORDER IMPOSING PENALTY IS LIABLE TO BE HELD AS INVALID. THE LD. C OUNSEL FOR THE ASSESSEE ALSO BROUGHT TO OUR NOTICE THE DECISION OF ITAT BANGALOR E BENCH IN THE CASE OF VASAVI SHELTERS IN ITA NOS.499 & 500/BANG/2012 DATE D 22.2.2013 WHEREIN THE TRIBUNAL ON IDENTICAL FACTS SUCH AS THE CASE OF ASSESSEE IN THE PRESENT APPEAL HELD THAT THERE SHOULD BE NO IMPOSITION OF P ENALTY WHEN THE INCOME DECLARED IN THE RETURN OF INCOME IS ACCEPTED AS SUC H BY THE AO. THE FOLLOWING RELEVANT OBSERVATIONS ARE BROUGHT TO OUR NOTICE :- 13. THERE CAN BE NO CONCEALMENT OR NON-DISCLOSURE , AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE IT R ETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX AND THEREFORE NO PENALTY UNDER S. 271(1)(C) COULD BE LEVIED. THE WOR DS 'IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT' IN SEC. 271 (1)( C) OF THE ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT(A ). WHEN A SURVEY ITA NOS.316& 317/BANG/2017 PAGE 5 OF 7 IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATI SFACTION OF AO OR THE CIT(A) OR THE CIT DOES NOT ARISE. ONE ITA NOS.4 99 & 500/BANG/2011 HAS TO KEEP IN MIND THAT IT IS THE AO WHO INITIATES PENALTY PROCEEDINGS AND DIRECTS THE PAYMENT OF PENA LTY. HE CANNOT RECORD ANY SATISFACTION DURING THE COURSE OF SURVEY . DECISION TO INITIATE PENALTY PROCEEDINGS IS TAKEN WHILE MAKING ASSESSMENT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION 'IN THE CO URSE OF ANY PROCEEDINGS UNDER THIS ACT' CANNOT HAVE THE REFEREN CE TO SURVEY PROCEEDINGS. IT NECESSARILY FOLLOWS THAT CONCEALMEN T OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF IN COME BY THE ASSESSEE HAS TO BE IN THE IT RETURN FILED BY IT. TH E ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTH ING WOULD DEPEND UPON THE IT RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLANATIONS 4 AS WELL AS 5 AND 5A OF S. 271 . OBVIOUSLY, NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASS ESSEE WAS EXPOSED DURING SURVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENAL TY ONLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SEC. 271(1 )(C) HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE I S ACTUALLY A CONCEALMENT OR NON-DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONCEALMENT OR NON- DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN T HE IT RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 8. THE LD. DR RELIED ON THE ORDER OF CIT(APPEALS). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ARE OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES, IMPOSITION OF PE NALTY CANNOT BE JUSTIFIED. FIRSTLY, THE DISALLOWANCES U/S.40(A)(IA) AND SEC.40 A(3) OF THE ACT ARE STATUTORY DISALLOWANCES AND THERE IS NO DISPUTE ABO UT THE GENUINENESS OF THESE EXPENSES OR THAT THEY WERE UNRELATED TO THE B USINESS OF THE ASSESSEE. ON SUCH STATUTORY DISALLOWANCES, THERE C ANNOT BE IMPOSITION OF PENALTY, ESPECIALLY WHEN THE ASSESSEE HAD NOT MADE CLAIM FOR DEDUCTION OF THESE EXPENSES IN A RETURN OF INCOME FILED. ITA NOS.316& 317/BANG/2017 PAGE 6 OF 7 10. SECONDLY, THERE CANNOT BE ANY PENALTY ON INCOME WHICH IS DECLARED IN A RETURN OF INCOME, ON THE FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE. PENALTY U/S.271(1)(C) OF THE ACT IS IMPOSED FOR 'CO NCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE ITA NOS.499 & 500/B ANG/2011 PARTICULARS OF INCOME'. WHEN AN INCOME WHICH IS ULTIMATELY BROU GHT TO TAX IS DECLARED IN A RETURN OF INCOME, THERE CAN BE NO QUESTION OF TREATING THE ASSESSEE AS HAVING 'CONCEALED PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME'. THE STARTING POINT OF DETERMINING CONCE ALMENT FOR IMPOSING PENALTY IS THE RETURN OF INCOME. IF THE RETURN OF I NCOME DECLARES INCOME WHICH IS ULTIMATELY BROUGHT TO TAX THERE CAN BE NO COMPLAINT BY THE REVENUE THAT THE ASSESSEE IS GUILTY OF 'CONCEALING PARTICUL ARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE DECISION OF THE TRIBUNAL IN THE CASE OF VASAVI SHELTERS (SUPRA) SUPPORTS THE PLEA OF ASSESSEE IN THIS REGARD. 11. APART FROM THE ABOVE, WE ALSO FIND THAT THE SHO W CAUSE NOTICE (AT PAGES 31 & 32 OF PB) ISSUED BY THE AO BEFORE IMPOSI NG PENALTY DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE FOR WHICH T HE PENALTY IS SOUGHT TO BE IMPOSED VIZ., AS TO WHETHER IT IS FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN TH E CIRCUMSTANCES, THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WILL APPLY AND IMPOSITION OF PENALTY HAS TO BE HELD TO BE NOT SUSTAINABLE IN VIEW OF THE AFORES AID DECISION. WE THEREFORE HOLD THAT PENALTY IMPOSED U/S. 271(1)(C) OF THE ACT IS NOT SUSTAINABLE AND THE SAME IS DIRECTED TO BE CANCELLE D. ITA NOS.316& 317/BANG/2017 PAGE 7 OF 7 12. IN THE RESULT, ITA NO.316/BANG/2017 IS ALLOWED, WHILE ITA NO.317/BANG/2017 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JUNE, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 4 TH JUNE, 2019. / D ESAI S MURTHY / COPY TO: 1. A P P ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.