M/s Punjab Wool Traders, Ludhiana V. DCIT, CC-1, Ludhiana

ITA 33/CHANDI/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5677 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 09-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Set aside
• Section: 274; 132

Judgement Text

! , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 33/CHD/2019 / ASSESSMENT YEAR : 2014-15 M/S PUNJAB WOOL TRADERS, # 6515/14, JASSIAN ROAD, LUDHIANA VS. ! THE DCIT, CENTRAL CIRCLE,-1, LUDHIANA ' # ./ PAN NO: AANFP9513G '$/ APPELLANT &' '$ / RESPONDENT ()*+ /ASSESSEE BY : SH. SANJAY SOOD, CA *+ / REVENUE BY : SH. RITESH PARMAR, SR. DR , -*) .# /DATE OF HEARING : 24.09.2019 /0 *) .# / DATE OF PRONOUNCEMENT : 30. 09. 2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 12.11.2018 OF THE COMMISSIONER OF INC OME TAX (APPEALS ) JALANDHAR [HEREINAFTER REFERRED TO AS CIT(A)] AGITA TING THE LEVY OF PENALTY U/S 271AA(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. AT THE OUTSET, BOTH THE LD. REPRESENTATIVES OF B OTH THE PARTIES HAVE SUBMITTED THAT THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT APPEAL BE IDENTICAL TO THAT OF THE CASE OF M/S GENEX INDUSTR IES LTD, LUDHIANA VS ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 2 DCIT, ITA NOS 27 & 28/CHD/2019 & ORS. DECIDED VIDE COMMON ORDER DATED 31.7.2019 OF THE TRIBUNAL, WHEREBY, THE MATT ER HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTI ON TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVEN THE ASSESS EE A REASONABLE OPPORTUNITY OF BEING HERD. THE RELEVANT PART OF TH E ORDER OF THE TRIBUNAL IN THE CASE OF M/S GENERX INDUSTRIES LTD VS DCIT (SUPRA) IS REPRODUCED AS UNDER:- 2. IN THE RESPECTIVE APPEALS, THE ASSESSEES ARE CHALLENGING NEAR IDENTICAL ORDERS OF THE CIT(A)-2 JALANDHAR WHEREIN BY AN ORDER PASSED U/S 154, THE E ARLIER ORDER PASSED BY THE CIT(A) WAS RECTIFIED. THE SAID MISTAKE IN EACH OF THESE APPEALS WAS POINTED OUT BY THE AO AND RECORDING THIS FACT IN PARA 2 OF THE ORDER O N AN IDENTICAL REASONING ON FACTS FOR THE REASONS SET OU T IN PARA 4 TO 4.9, THE CIT(A) HAS HELD THAT PENALTY @ 3 0% AS LEVIED BY THE AO INVOKING CLAUSE (C) OF SECTION 271 AAB(1) IS UPHELD. 3. ACCORDINGLY, IN THE SAID BACKGROUND, THE GROUNDS RAISED IN ITA 27/CHD/2019 ARE REPRODUCED HEREUNDER FOR READY REFERENCE: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO (ACIT CENTRAL CIRCLE -1 LUDHIANA) AN D COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LEVYI NG PENALTY U/S 271 AAB(1 )(C) OF THE INCOME TAX ACT OF RS 1,95,00, 000 /- WITHOUT APPRECIATING THE FACT THE ESTIMATED LUMP SUM CONDIT IONAL SURRENDER OF RS. 6,50,00,000/- WAS MADE SUBJECT TO NO PENAL A CTION AND PROSECUTION. (AS EVIDENT FROM SURRENDER LETTER ENCL OSED) 2. THE FINDING OF THE LD. ASSESSING OFFICER IS BASED U PON MERE CONJECTURES AND SURMISES AND IS FACTUALLY WRONG AND LEGALLY INVALID. HENCE, THE ENTIRE PENALTY DESERVES TO BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY GROUND(S) OF APPEAL BEFORE IT IS FINALLY HEARD FOR DISPOSAL. ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 3 4. THE LD. AR WHILE REFERRING TO THE IMPUGNED ORDER SUBMITTED THAT THE ABOVE INCOME OFFERED BY THE ASSE SSEE BY WAY OF SURRENDER WAS IN ORDER TO BUY PEACE AND O N THE CONDITION THAT NO PENALTY WOULD BE VISITED UPON THE ASSESSEE. ACCORDINGLY, PENALTY ORDER IMPOSING THE PENALTY AND THE IMPUGNED ORDER CONFIRMING THE PENAL TY IMPOSED WAS ASSAILED AS IT WAS CONTRARY TO THE COND ITIONS OF THE SURRENDER. 5. THE LD. CIT-DR ON THE OTHER HAND, RELYING UPON T HE IMPUGNED ORDER SUBMITTED THAT THE ASSESSEE HAS ADMI TTEDLY OFFERED THE ADDITIONAL INCOME OF RS. 6.50 CRORES ON ACCOUNT OF VARIOUS DISCREPANCIES NOTICED AT THE TIM E OF THE SEARCH AND THESE CONSTITUTE UNDISCLOSED INCOME. REFERRING TO PARA 4.4 OF THE IMPUGNED ORDER, IT WAS SUBMITTED THAT THE SURRENDER WAS ON ACCOUNT OF BUSI NESS TRANSACTIONS ETC. NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT. INVITING ATTENTION TO PARA 4.5 OF THE ORDE R, IT WAS SUBMITTED THAT THE CIT(A) HAS RECORDED THAT, THE APPELLANT HAS FURTHER STATED THAT THIS ADDITIONAL I NCOME WAS OFFERED ON THE GROUNDS THAT NO PENALTY WOULD BE IMPOSED. THE REPLY OF THE ASSESSEE WAS CONSIDERED B UT NOT FOUND TENABLE BY THE AO. AS PER THE AO, THE ASSESSE E HAS ONLY STALED THAT SURRENDERED INCOME WAS OFFERED BUT IT WAS NOT DECLARED IN THE RETURN OF INCOME BY THE DUE DAT E AND HAS NOT SUBSTANTIATED THE MANNER AND MODE OF EARNIN G THE INCOME NEITHER DURING SEARCH NOR IN THE COURSE OF P ENALTY PROCEEDINGS. ACCORDINGLY, IT WAS ARGUED THAT ON TH E BASIS OF THESE FACTS, THE AO CONCLUDED THAT THE PEN ALTY U/S 271AAB OF THE INCOME TAX ACT. 1961 IS APPLICABLE IN THIS CASE ON THE UNDISCLOSED INCOME OF RS. 6.50 CRORE. I N VIEW THEREOF, THE AO LEVIED THE MINIMUM PENALTY OF RS. 1,95,00,000/- CALCULATED @ 30% OF THE UNDISCLOSED I NCOME OF RS. 6.50 CRORE. 5.1. RELYING UPON PARA 4.9 OF THE ORDER IT WAS SUBM ITTED THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION A S TO HOW THE ISSUE WAS NOT COVERED IN CLAUSE (A) OR (B) OF SECTION 271AAB OF THE ACT. IT WAS HIS SUBMISSION TH AT THE STATUTE MANDATES THAT LEVY OF PENALTY IS MANDATORY IF ANY OF THE CIRCUMSTANCES AS SET OUT IN CLAUSES (A), (B) OR (C) ARE TRIGGERED. IN THE FACTS OF THE PRESENT CASE, I T WAS SUBMITTED THAT THE REVENUE IS OF THE VIEW THAT ON F ACTS, CIRCUMSTANCES AS SET OUT IN CLAUSE (C) OF SUB-SECTI ON (1) OF ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 4 SECTION 271AAB OF THE ACT ARE ATTRACTED. CONSEQUEN TLY PENALTY @ 30% HAS BEEN IMPOSED. THE REQUIREMENT OF THE STATUTE IT WAS SUBMITTED, IS THAT IN TERMS OF SECTI ON 274 OF THE ACT BEFORE THE PASSING OF THE ORDER, THE ASSESS EE IS TO BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD WHIC H HAS BEEN GRANTED. 6. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS BEEN ARGUING THAT THE SURRENDER WAS CONDITIONAL, CONSEQU ENTLY NO PENALTY WAS ATTRACTED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE R ECORD IT IS EVIDENT THAT IN THE FACTS OF THE PRESENT CASE IT IS EVIDENT THAT THE ASSESSEE HAS BEEN HEARD, HOWEVER, THE ASSESSEE, IT IS SEEN HAS MISTAKENLY RELIED UPON THE STATEMENTS ALLEGEDLY GIVEN AT THE TIME OF SURRENDER THAT THE SURRENDER IS MADE ON THE UNDERSTANDING THAT NO PENALTY WOULD BE VISITED UPON HIM ON ACCOUNT OF THE SURRENDER MADE. IT GOES WITHOUT SAYING THAT NO SUC H DISCRETION OR POWERS HAVE BEEN VESTED UPON THE TAX AUTHORITIES BY THE INCOME TAX ACT. ANY SUCH BELIEF ENTERTAINED BY THE ASSESSEE HAS NO LEGAL SANCTION. ACCORDINGLY, IT IS SEEN THAT SUCH EXPLANATION OFFER ED AT THE APPELLATE STAGE AND RE-ITERATED BEFORE US HAS T O BE DISCARDED. THE FACT WHICH EMANATES IS THAT ADMITTE DLY AN EFFECTIVE OPPORTUNITY OF BEING HEARD HAS NOT BEEN EXERCISED BY THE ASSESSEE ON ACCOUNT OF THE MIS- CONCEPTIONS ENTERTAINED AND MISTAKEN BELIEF. SECTI ON 271AAB OF THE ACT IN SUB-SECTION (1) OF THE SAME UNAMBIGUOUSLY LAYS DOWN THAT, WHERE SEARCH HAS BEE N INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM PENALTY AT THE RATE OF 10%, 20% OR 30% ON THE UNDISCLOSED INCOME IN C ASE THE CIRCUMSTANCES AS SET OUT IN CLAUSES (A) (B) AND (C) OF SUB-SECTION (1) OF SECTION 271AAB ARE APPLICABLE. 7.1 WHAT WOULD CONSTITUTE UNDISCLOSED INCOME HAS BEEN DEFINED IN THE EXPLANATION TO SECTION 271AAB A S UNDER : EXPLANATION.- FOR THE PURPOSES OF THIS SECTION- (A) SPECIFIED DATE X X X (B) SPECIFIED PREVIOUS YEAR X X (C) UNDISCLOSED INCOME MEANS- ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 5 (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLIONS, JE WELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNTS , OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS- (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SE ARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL C HIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEA RCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHIC H IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD TH E SEARCH NOT BEEN CONDUCTED.] 7.2 ON A PERUSAL OF THE ABOVE, IT IS EVIDENT THAT T HE SECTION IS SELF-CONTAINED WHEN THESE ARE CONSIDERED ALONGWI TH THE STATUTORY MANDATE AS SET OUT IN CLAUSES (A); (B) AN D (C) OF SUB- SECTION (1) OF SECTION 271AAB THERE CAN BE NO DOUBT THAT THERE IS NO DISCRETION WITH THE AO AS THE PARAMETERS BY W HICH THE AO OR THE TAX AUTHORITIES ARE BOUND IN REGARD TO THE R ATE OF PENALTY AND THE CIRCUMSTANCES ON THE BASIS OF WHICH THE PEN AL PROVISION CAN BE SAID TO BE ATTRACTED IS SELF EXPLA NATORY. THE STATUTE FURTHER IN TERMS OF SUB-SECTION (4) OF SECT ION 271AAB MANDATES THAT SO FAR AS MAY BE PROVISIONS OF SECTIO N 274 AND 275 SHALL APPLY. IN THE FACTS OF THE PRESENT CASE, THE STATUTORY MANDATE OF SUB-SECTION (1) OF SECTION 274 IS TRIGGE RED. THE REQUIREMENT SET OUT THEREIN IS THAT NO ORDER IMPOSI NG PENALTY UNDER THIS CHAPTER SHALL BE MADE UNLESS THE ASSESSE E HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. IN THE FACTS OF THE PRESENT CASE, NO DOUBT THE ASSESSEE HAS BEEN HEARD BUT THERE CAN ALSO BE NO TWO OPINION S ON THE FACT THAT THE ASSESSEE INSTEAD OF ARGUING ON PERMIS SIBLE FACTS HAS MISTAKENLY RELIED UPON HIS SURRENDER LETTER BEL IEVING THAT THE TAX AUTHORITIES WERE ALSO BOUND BY THE UNILATER AL TERMS OF THE SURRENDER MADE I.E. THAT ON ACCOUNT OF THE SURR ENDER BEING MADE ALLEGEDLY VOLUNTARILY ON THE CONDITION THAT NO PENAL CONSEQUENCES WOULD BE VISITED UPON THE ASSESSEE, TH E SURRENDER HAVING BEEN MADE CONSEQUENTLY BOUND THE TAX AUTHORI TIES ALSO TO HONOUR THE UNILATERAL BELIEF. AS NOTED, THIS BE LIEF HAS NO ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 6 LEGAL SANCTION AND HAS TO BE DISCARDED. HOWEVER, T HE FACT REMAINS THAT THE OPPORTUNITY SO PROVIDED HAS BEEN M ISUTILIZED BY THE ASSESSEE BY MAKING IRRELEVANT ARGUMENTS. AC CORDINGLY, IN ALL FAIRNESS, IT CANNOT BE SAID THAT AN EFFECTIV E AND REASONABLE OPPORTUNITY OF BEING HEARD HAS NOT BEEN AVAILED OF BY THE ASSESSEE. 8. ACCORDINGLY, IN VIEW OF THE FACTS AS SET OUT HER EINABOVE, WE SET ASIDE THE IMPUGNED ORDERS. THE PARTIES WERE , ACCORDINGLY, REQUIRED TO ADDRESS AS TO WHICH AUTHOR ITY THE REMAND BE MADE AS NECESSARILY THE STATEMENT RECORDE D AT THE TIME OF THE SEARCH AND THE DOCUMENTS CONFRONTED AND ANY OTHER RELEVANT FACT WOULD BE REQUIRED TO BE ADDRESSED WHI CH LED TO THE SURRENDER BEING MADE SO AS TO ADDRESS UNDISCLO SED INCOME. THE LD.-DRS MADE A REQUEST THAT THE MATTE R MAY BE REMANDED TO THE AO AS HE SHALL BE IN A BETTER POSIT ION TO CONFRONT THE MATERIAL TO THE ASSESSEE. THE LD. AR A GREED THAT HE SHALL ADDRESS HIS ARGUMENTS WITHIN THE PARAMETERS O F THE POWERS VESTED WITH THE TAX AUTHORITIES. ACCORDINGL Y, THE IMPUGNED ORDER IS SET ASIDE BACK TO THE FILE OF THE AO WITH THE DIRECTION TO PASS A SPEAKING ORDER IN ACCORDANCE WI TH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEI NG HEARD. THE ASSESSEE IN ITS OWN INTERESTS IS ADVISED TO PAR TICIPATE FULLY AND FAIRLY IN THE PROCEEDINGS BEFORE THE TAX AUTHOR ITIES. IT IS MADE CLEAR THAT IN THE EVENTUALITY OF ABUSE OF THE TRUST REPOSED THE AO WOULD BE AT LIBERTY TO PASS AN ORDER ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. SAID ORDER WAS PRONOU NCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 9. IN THE RESULT, ITA 27/CHD/2019 IS ALLOWED FOR ST ATISTICAL PURPOSES. 3. SINCE THE FACTS AND ISSUE INVOLVED ARE IDENTICAL AND, HENCE, AS PER THE REQUEST OF BOTH THE LD. REPRESENTATIVES OF THE PARTIES, THE MATTER IN THESE APPEALS IS RESTORED TO THE FILE OF THE ASSESS ING OFFICER ACCORDINGLY FOR DECISION AFRESH IN THE LIGHT OF THE DIRECTION G IVEN IN THE CASE OF M/S GENEX INDUSTRIES LTD, LUDHIANA VS DCIT (SUPRA). ITA NO. 33-CHD-2019- M/S PUNJAB WOOL TRADERS, LUDHIANA 7 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09.2019. SD/- SD- ( . . / N.K. SAINI) ( ! ' / SANJAY GARG) #$% / VICE PRESIDENT &' / JUDICIAL MEMBER DATED : 30.09.2019 .. 2*&)3454) / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. &' '$ / THE RESPONDENT 3. , 6) / CIT 4. , 6) ( )/ THE CIT(A) 5. 47 &)8 , . 8 , 9:;< / DR, ITAT, CHANDIGARH 6. ;= - / GUARD FILE 2 , / BY ORDER, > / ASSISTANT REGISTRAR