M/s. Phaltan Hotels (Hotel Minar), Satara V. Income-tax Officer,

ITA 319/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7184 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Assessee Lawyers: DR PRAYAG JHA
• Keywords: Principle of natural justice
• Section: 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO , AM AND SHRI VIKAS AWASTHY, JM . / I TA NO S . 319 & 320 /PUN/20 16 /ASSESSMENT YEAR : 2008 - 09 M/S. PHALTAN HOTELS (HOTEL MINAR), SHINGNAPUR ROAD, KOLKI, PHALTAN, TAL. PHALTAN, DIST - SATARA, PIN - 415 523 PAN : AADFP4341C ....... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD - 3, SATARA. / RESPONDENT / RESPONDENT A SSESSEE BY : DR. PRAYAG JHA REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 22.11.2017 / DATE OF PRONOUNCEMENT : 24 .11.2017 / ORDER PER VIKAS AWASTHY, JM THESE TWO APPEALS ARE FILED BY THE ASSESSEE. ITA NO. 319/PUN/2016 IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, PUNE DATED 30.11.2015 FOR THE ASSESSMENT YEAR 2008 - 09 CONFIRMING LEVY OF PENALTY U/S.221(1) R.W.S 140A(3) OF THE INCOME T AX ACT, 1961 ( HE REINAFTER REFERRED TO AS THE ACT). 2 ITA NO S .319 & 320/PUN/2016 A.Y.2008 - 09 IN ITA NO. 320/PUN/2016, THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, PUNE DATED 30.11.2015 FOR THE ASSESSMENT YEAR 2008 - 09 CONFIRM ING LEVY OF PENALTY U/S. 271(1) (C) OF THE ACT. 2. DR. PRAYAG JHA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF FOUR PARTNERS AND WAS ENGAGED IN THE BUSINESS OF RUNNING HOTEL UNDER THE NAME AND STYLE OF M/S. PHALTAN HOTELS ( HOTEL MINAR). THE ASSESSEE SOLD THE BUSINESS ALONG WITH ASSETS AS GOING CONCERN IN JULY, 2007. ADMITTEDLY, THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL WITHIN THE DUE DATE AS SPECIFIED U/S. 139 OF THE ACT. THE ASSESSEE FILED RETURN OF INCOME ON 13. 12.2011 DECLARING TOTAL INCOME OF RS.21,74,500/ - IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. IN RETURN OF INCOME, THE RESPONSE TO NOTICE U/S. 148 OF THE ACT. IN RETURN OF INCOME, THE ASSESSEE DISCLOSED CAPITAL GAIN OF RS.23,25,874/ - ARISING FROM SALE OF HOTEL BUS INESS. THE INCOME FROM LONG TERM CAPITAL GAIN DISCLOSED BY ASSESSEE WAS ACCEPTED BY ASSESSING OFFICER WITH MINOR ADDITIONS OF RS.54,935/ - U/S. 40(A)(IA) AND RS.10,000/ - AD - HOC DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF SELF MADE VOUCHERS. PENALTY PROCEEDINGS U/S. 271(1)(C) WERE INITIATED FOR CONCEALMENT OF INCOME A ND FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSING OFFICER VIDE ORDER DATED 13.06.2012 LEVIED PENALTY OF RS.9,45,073/ - U/S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER LEVIED PENALTY EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVADED. HOWEVER, WHILE COMPUTING TAX LIABILITY, THE ASSESSING OFFICER INCLUDED INTEREST ON ALLEGED CONCEALED INCOME. THE LD. AR POINTED THAT IF AT ALL PENALTY IS TO BE LEVIED U/S. 271(1) ( C) OF THE ACT , IT HAS TO BE ON TAX COMPONENT AND NOT ON INTEREST PART. 3 ITA NO S .319 & 320/PUN/2016 A.Y.2008 - 09 3. THE LD. AR FUR THER SUBMITTED THAT THE ASSESSING OFFICER ALSO INI TIATED PENALTY PROCEEDINGS U/S. 221(1) R.W.S.140A(3) OF THE ACT SEPARATELY. WHILE COMPUTING PENALTY UNDER SAID S ECTION, THE ASSESSING OFFICER A GAIN C OMMITTED THE ERROR IN COMPUTING PENALTY BY TAKING TAX INCLUSIVE OF INTEREST. THE LD. AR SUBMITTED THAT TAX HAS BEEN DEFINED U/S. 2(43) OF THE ACT. AS PER DEFINITION OF TAX; I NTEREST DOES NOT FORM PART OF TAX . 3.1 THE LD. AR FURTHER SUBMITTED THAT BOTH THE IMPUGNED ORDERS HAVE BEEN PASSED EX - PARTE. THE LD. AR CONTENDED THAT SINCE THE ASSESSEE HAD SOLD ITS HOTEL BUSINESS IN 2007, THE ASSESSEE DID NOT RECEIVE NOTICE OF APPEAL FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE NOTICE OF THE APPEAL WAS SENT TO THE ADDRESS WHEREI N NOW ASSESSEE CEASES TO HAVE INTEREST IN HOTEL BUSINESS. THE LD. AR PRAYED FOR REMITTING THE FILE HAVE INTEREST IN HOTEL BUSINESS. THE LD. AR PRAYED FOR REMITTING THE FILE BACK TO ASSESSING OFFICER. 4. ON THE OTHER HAND, DR. VIVEK AGGARWAL REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISSIONER OF INCOME T AX (APPEALS). THE LD. DR SUBMITTED THAT TAX INCLUDES ELEMENT ON INTEREST AS WELL. THE LD. DR FURTHER SUBMITTED THAT A PERUSAL OF IMPUGNED ORDER WOULD SHOW THAT NOTICE ISSUED BY COMMISSIONER OF INCOME T AX (APPEALS), WAS DULY SERVED ON THE ASSESSEE. THE ASSESSEE DELI BERATELY CHOOSES NOT TO APPEAR BEFORE COMMISSIONER OF INCOME TAX (APPEALS) AND PURSUE THE APPEALS. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. A PERUSAL OF 4 ITA NO S .319 & 320/PUN/2016 A.Y.2008 - 09 ORD ER LEVYING PENALTY U/S. 271(1) (C) DATED 13.06.2012 AND ORDER LEVYING PENALTY U/S. 221 (1) R.W.S. 140A(3) OF THE ACT OF EVEN DATE REVEAL THAT PENALTY HAS BEEN LEVIED ON TAX INCLUDING INTEREST COMPONENT. A BARE PERUSAL OF THE DEFINITION TAX AS DEFINED U/S. 2(43) OF THE ACT SHOWS THAT TAX DOES NOT INCLUDE INTEREST. TAX AND INTEREST ARE TWO DIFFERENT COMPONENTS OF LIABILITIES ON THE ASSESSEE UNDER INCOME TAX ACT. OUR THIS VIEW IS FORTIFIED BY THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ORYX FINANCIAL INVESTMENT P. LTD. REPORTED AS 395 ITR 745. THE HON'BLE HIGH COURT OBSERVED THAT ON READING OF PROVISIONS OF SECTION 221 WITH THE DEFINITION OF TAX U/S.2(43), THE IRRESISTIBLE CONCLUSION THAT CAN BE DRAWN IS THAT PHRASEOLOGY TAX I N ARREAR AS ENVISAGED U/S. 221 OF THE ACT WOULD NOT TAKE WITHIN ITS REALM THE INTEREST COMPONENT. SIMILAR VIEW HAS BEEN TAKEN BY AHMEDABAD BENCH OF TRIBUNAL IN THE CASE OF ASHABEN JAYANTI BHAI VS. ITO REPORTED AS 39 TAXMAN. 230 ( AHMEDABAD) ( MAG). AS 39 TAXMAN. 230 ( AHMEDABAD) ( MAG). 6. THE PENALTY U/S. 271 (1) (C) IS LEVIED ON THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE CHARGING OF INTEREST IS CONSEQUENTIAL TO ADDITIONS/DISALLOWANCES MADE DURI NG ASSESSMENT. THE PENALTY IS IMPOSED ON THE AMOUNT OF TAX LEV I ED ON INCOME WHICH WAS EITHER CONCEALED OR SUPPRESSED BY VIRTUE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE INTEREST CHARGED UNDER THE PROVISIONS OF ACT DOES NOT CONSTITUTE PART OF TAX ON INCOME SOUGHT TO BE EVADED BY THE ASSESSEE BY REASON OF CONCEALMENT OR FURNISHING INACCURA TE PARTICULARS OF INCOME. 5 ITA NO S .319 & 320/PUN/2016 A.Y.2008 - 09 7 . THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISIONS REFERRED ABOVE, THE ASSESSING OFFICER HAS ERRED IN COMPUTING PENALTY U/S. 271(1) (C) , AS WELL AS U/S. 221 (1) R.W.S. 140(3) OF THE ACT ON INTEREST ELEMENT . IN VIEW OF O UR ABOVE FINDINGS, WE DEEM IT APPROPRIATE TO REMIT BOTH THE APPEALS BACK TO THE FILE OF ASSESSING OFF ICER FOR RE - COMPUTING PENALTY, IN ACCORDANCE WITH LAW. 8. THE LD. AR HAS NOT MADE ANY SUBMISSIONS CHALLENGING THE LEVY OF PENALTY ON MERITS EXCEPT THAT THE ORDER OF FIRST APPELLATE AUTHORITY IS EX - PARTE ORDER WHICH IS AGAINST THE PRINCIPLE S OF NATURAL JUSTICE. WE DO NOT FIND MUCH MERIT IN THIS SUBMISSION. AS PER ASSESSEES OWN CONTENTION S , HOTEL BUSINESS WAS SOLD IN 2007. THE ASSESSEE FILED APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS) IN JULY, 2012. A PERUSAL OF FORM - 35 FILED BEFORE FIRST APPELLATE AUTHORITY REVEALS THAT ASSESSEE HAS GIVEN ADDRESS OF HIS HOTEL BUSINESS FOR COMMUNICATION OF NOTICE . THE ADDRESS OF HIS HOTEL BUSINESS FOR COMMUNICATION OF NOTICE . THE COMMISSIONER OF INCOME TAX (APPEALS) WAS BOUND T O ISSUE NOTICE TO THE ASSESSEE ON THE ADDRESS AS GIVEN IN FORM NO. 35. THE COMMISSIONER OF INCOME TAX (APPEALS) CATEGORICALLY RECORDED THAT NOTICES ISSUED TO ASSESSEE ARE DULY SERVED UPON THE ASSESSEE. AFTER FILING APPEAL I N JULY, 2012, IT WAS INCUMBENT UP ON THE ASSESSEE TO KEEP TRACK RECORD OF HIS APPEAL AND TO BE VIGILANT OF HIS INTEREST WHIC H WAS SUB - JUDICE. W E ARE OF CONSIDERED VIEW THAT ASSESSEE WAS NEGLIGENT IN NOT PURSUING HIS APPEAL AS WELL AS FURNISHING OF INFORMATION BEFORE THE COMMISSIONER OF INC OME TAX (APPEALS). THEREFORE, THE SECOND PRAYER OF THE ASSESSEE IS REJECTED. 9. THE ASSESSING OFFICER BE FORE RE - COMPUTING TAX LIABILITY FOR THE PURPOSE OF PENALTY SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE 6 ITA NO S .319 & 320/PUN/2016 A.Y.2008 - 09 ASSESSEE , IN ACCORDANCE WITH LAW. THUS, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN AFORESAID TERMS. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRO NOUNCED ON FRIDAY , THE 24 TH DAY OF NOVEMBER , 201 7 . SD / - SD/ - ( . / D. KARUNAKARA RAO ) ( /VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 24 TH NOVEMBER , 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS) - 2, PUNE. 4. THE CIT - 2, PUNE. 5 . , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE .