Kotarki Construction Pvt Ltd , Bidar V. Joint COmmissioner of Income Tax Gulbarga Range , Gulbarga

ITA 3395/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7466 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-08-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ELA MURUGU G JT C IT BENGALURU
• Keywords: Unexplained investment; Depreciation; Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c); 43B; 143(3); 40(a)(ia); 80IA; 274; 27; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER IT A NO . 3395/BANG/2018 ASSESSMENT YEAR : 2010 - 11 KOTARKI CONSTRUCTION PVT. LTD., # 131/1, VENKATADRI KOTARKI BUILDING, GANDHI GUNJ, CHIDRI ROAD, BIDAR 585 401. P AN: AACCK 6097J VS. THE JOINT COMMISSIONER OF INCOME TAX, GULBARGA RANGE, GULBARGA. APPELLANT RESPONDENT APPELLANT BY : SHRI RAVI SHANKAR, ADVO CATE RESPO NDENT BY : SHRI ELA MURUGU G. , JT. C IT(DR)(ITAT ), BENGALURU. DATE OF HEARING : 31.08.2021 DATE OF PRONOUNCEMENT : 31 . 0 8 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS), GULBARGA DATED 30.10.2018 FOR THE ASS ESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. THE ORDER PASSED BY THE LEARNED ASSESSING OFFIC ER, UNDER SECTION 271(1)(C) OF THE ACT, IS OPPOSED TO LAW, WE IGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO THE PENALT Y OF RS. 5,03,278/- LEVIED BY THE LEARNED ASSESSING OFFICER UNDER ITA NO. 3395/BANG/2018 PAGE 2 OF 7 SECTION 271(1)(C) OF THE ACT ON THE FACTS AND CIRCU MSTANCES OF CASE. 3. THE NOTICE ISSUED UNDER SECTION 271(1)(C) OF THE ACT, IS BAD IN LAW, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE AO HAS NOT ASSUMED PROPER JURISDICTION, AS THE MANDATORY CONDI TIONS FOR INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN COMPLIED WITH UNDER THE FACTS AND CIRCUMST ANCES OF THE CASE. 5. THE CIT(A) FAILED TO APPRECIATE THAT THE AO HAS NOT RECORDED SATISFACTION IN THE ORDER OF ASSESSMENT, EITHER FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONSEQUENTLY THE ORDER PASSED IS BAD IN LAW, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE ORDER PASSED BY THE CIT(A) CONFIRMING THE PE NALTY ON THE LIMB OF FURNISHING INACCURATE PARTICULARS OF IN COME IS NOT THE LIMB OF PENALTY LEVIED BY THE ASSESSING OFFICER AND CONSEQUENTLY THE ORDER IS BAD IN LAW ON THE FACTS A ND CIRCUMSTANCES OF THE CASE. 7. WITHOUT PREJUDICE, THE ORDER PASSED BY THE CIT(A ) IS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE IN R ESPECT OF CONFIRMING THE PENALTY ON THE LIMB WHICH WAS NOT EV EN INVOKED IN THE PENALTY ORDER OF THE AO AND CONSEQUE NTLY THE ORDER IS REQUIRED TO BE QUASHED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT PEN AL STATUTES HAVE TO CONSTRUED STRICTLY ON THE FACTS AND CIRCUMS TANCES OF THE CASE. 9. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ISSUE OF PENALTY NOTICES UNDER SECTION 274 OF THE ACT, PERMI T THE AO TO ASSUME JURISDICTION OVER THE APPELLANT AND WAS N OT A MERE FORMALITY, TO BE DIVESTED WITH, NOR WAS A CURABLE D EFECT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 3395/BANG/2018 PAGE 3 OF 7 10. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE ADDITIONS MADE IN THE ORDER OF ASSESSMENT ORDER WERE DUE TO R EASONS BEYOND THE CONTROL OF THE APPELLANT AND SINCE NO AP PEAL WAS PREFERRED AGAINST THE SAME, PENALTY OUGHT NOT TO HA VE BEEN LEVIED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEV IED IS HIGHLY EXCESSIVE AND LIABLE TO REDUCED SUBSTANTIALLY. 12. THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIB UNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL OF TH E ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME O F HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APP EAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE AND EQUITY. 2. THE ASSESSEE IN THE RETURN OF INCOME HAS DECLA RED THE NET TAXABLE INCOME OF RS. 37,35,140/-. THE ASSESSEE ADMITTED GR OSS TOTAL INCOME OF RS. 1,59,68,410/-. AFTER CLAIMING DEDUCTION U/S 80I A OF THE IT ACT AMOUNTING TO RS. 12233272/- THE ASSESSEE ARRIVED AT NET TAXABLE INCOME OF RS.3735140/-. THE CASE WAS TAKEN UP FOR SCRUTINY AN D THE SCRUTINY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT ON 28.03.2013 DETERMINING THE NET TAXABLE INCOME OF RS.8274150/ - AFTER ALLOWING THE DEDUCTION U/S 80IA OF THE I.T. ACT. THE DETAILS OF ADDITIONS MADE WERE AS UNDER:- SL NO. NATURE OF ADDITION RS. 1 VARIATION IN CONTRACT RECEIPTS 15,91,922/ - 2 UNDISCLOSED CONTRACT RECEIPTS 87,744/ - 3 UNDISCLOSED INTEREST RECEIPTS 38,20,262/ - 4 UNEXPLAINED INVESTMENT IN PURCHASES VEHICLE AND FURNITURE 1,68,540/ - 5 VARIATION IN SUNDRY CREDITORS 16,94,901/ - 6 DISALLOWANCE OF EXCESS DEDUCTIONS CLAIMED UNDER THE HEAD DEPARTMENTAL DEDUCTION U/S 43B 54,06,759/ - ITA NO. 3395/BANG/2018 PAGE 4 OF 7 7 DISALLOWANCE OF DEDUCTION CLAIMED UNDER THE HEAD CBF 2,71,454/ - 8 DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION 37,487/ - 9 DISALLOWANCE OF DEPRECIATION CLAIMED IN RESPECT OF GUEST HOUSE 2,19,231/ - 10 DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE IT ACT IN RESPECT OF LAB TESTING CHARGES 6,50,565/ - TOTAL DISALLOWANCES 1,05,08,865/ DEDUCTION ADMISSIBLE U/S 80IA OF THE IT ACT 189203 125/ - 3. ACCORDINGLY, THE AO LEVIED PENALTY OF RS.5,03,27 9 OBSERVING THAT THE ASSESSEE HAD CONCEALED INCOME BY PROVIDING INACCURA TE PARTICULARS. ON APPEAL, THE CIT(APPEALS) CONFIRMED THE LEVY OF PENA LTY OBSERVING THAT THE ASSESSEE DELIBERATELY FURNISHED INACCURATE PARTICUL ARS WITH AN INTENTION TO EVADE TAX. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. AT THE OUTSET, THE LD. AR ARGUED THAT THE AO IN THE PENALTY NOTICE ISSUED U/S. 274 DATED 28.3.2013 MENTIONED AS FOLLOW S:- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 5. THE AO INITIATED PENALTY PROCEEDINGS FOR LEVY O F PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HE HO WEVER LEVIED PENALTY FOR CONCEALING THE PARTICULARS OF INCOME WHICH WAS CONF IRMED BY THE CIT(APPEALS) ON THE REASON OF FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDING TO THE LD. AR, THERE IS VARIATION IN INI TIATING THE PROCEEDINGS AND LEVYING PENALTY BY THE AO AND CONFIRMED THE LEVY OF PENALTY BY THE CIT(APPEALS). HENCE THE PENALTY HAS TO BE DELETED ON THIS REASON. HE RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT IN MOHD. FARHAN ITA NO. 3395/BANG/2018 PAGE 5 OF 7 A. SHAIKH V. DCIT, 125 TAXMANN.COM 253 (BOMBAY) WHE REIN IT WAS HELD AS FOLLOWS:- IN ASSESSMENT PROCEEDINGS, REVENUE FORMS AN OPINIO N, PRIMA FACIE OR OTHERWISE, TO LAUNCH PENALTY PROCEEDINGS AGAINS T THE ASSESSEE. BUT THAT TRANSLATES INTO ACTION ONLY THRO UGH THE STATUTORY NOTICE UNDER SECTION 271(1)( C ), READ WITH SECTION 274 . TRUE, THE ASSESSMENT PROCEEDINGS FORM THE BASIS FOR THE PENAL TY PROCEEDINGS, BUT THEY ARE NOT COMPOSITE PROCEEDINGS TO DRAW STRENGTH FROM EACH OTHER. NOR CAN EACH CURE THE OTH ER'S DEFECT. A PENALTY PROCEEDING IS A COROLLARY; NEVERTHELESS, IT MUST STAND ON ITS OWN. THESE PROCEEDINGS CULMINATE UNDER A DIFFER ENT STATUTORY SCHEME THAT REMAINS DISTINCT FROM THE ASSESSMENT PR OCEEDINGS. THEREFORE, THE ASSESSEE MUST BE INFORMED OF THE GRO UNDS OF THE PENALTY PROCEEDINGS ONLY THROUGH STATUTORY NOTICE. AN OMNIBUS NOTICE SUFFERS FROM THE VICE OF VAGUENESS. 6. THE LD. AR ALSO RELIED ON THE JUDGMENT OF THE B OMBAY HIGH COURT IN CIT V. SAMSON PERINCHERY, 88 TAXMANN.COM 413 (BOMBA Y) WHEREIN IT WAS HELD AS FOLLOWS:- CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)( C ) CARRY DIFFERENT MEANINGS/ CONNOTATIONS AND, THEREFORE, THE SATISFACTION OF TH E ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)( C ) FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOSED FOR THE OT HER. THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANN OT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. THEREFO RE, WHERE THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UND ER SECTION 271(1)( C ) FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THE ORDER IMPOSING PENALTY FOR CONCEALMENT OF INCOME WA S NOT VALID. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF CIT(APPEALS). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SECTION 271(1)(C) OF THE ACT HAS TWO LIMBS FOR LEVY OF PENALTY; ITA NO. 3395/BANG/2018 PAGE 6 OF 7 (I) CONCEALMENT OF PARTICULARS OF INCOME; AND (II) FURNISHING INACCURATE PARTICULARS OF INCOME. BEING SO, IT IS INCUMBE NT UPON THE AO TO STATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. ONE LIMB OUT OF THE TWO MUST BE MENTIONED BY THE TAXING AUTHORITY IN THE NOTICE FOR LEVYING SUCH PENALTY. IF BOTH LIMBS HAVE BEEN MENTIONED IN THE NOTICE OR ONE IRRELEVANT LIMB IS NOT STRUCK OFF BY THE AUTHORITY, THEN IT IS INVALID ISS UE OF NOTICE, THEREBY LEVY OF PENALTY U/S. 271(1)(C) IS NOT VALID. 9. IN THE PRESENT CASE WHILE ISSUING NOTICE U/S. 27 4 ON 28.3.2013 THE AO OBSERVED AS UNDER:- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 10. HOWEVER, HE LEVIED PENALTY VIDE HIS ORDER DATED 23.9.2013 FOR CONCEALMENT OF INCOME FOR WHICH THERE WAS NO MENTIO N IN THE NOTICE U/S. 274 OF THE ACT. ON THE OTHER HAND, THE CIT(APPEALS ) CONFIRMED THE LEVY OF PENALTY BY OBSERVING THAT THE ASSESSEE HAS DELIBERA TELY FURNISHED INACCURATE PARTICULARS OF INCOME WITH AN INTENTION TO EVADE TAX AND CONSEQUENTLY THE LEVY OF PENALTY IS JUSTIFIED. AS HELD BY THE BOMBAY HIGH COURT IN CIT V. SAMSON PERINCHERY (SUPRA) , THE ORDER OF IMPOSITION OF PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. THEREFORE, WHERE THE A O INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME, THE ORDER IMPOSING PENALTY FOR CONCEALMENT OF INCOME WAS NOT VALID. IN THE PRESENT CASE, THE PENALTY WAS INIT IATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, HOWEVER PENALTY I S LEVIED BY THE AO FOR CONCEALMENT OF INCOME. FURTHER, THE CIT(APPEALS) C ONFIRMED THE PENALTY ON THE REASON OF FURNISHING INACCURATE PARTICULARS OF INCOME. BEING SO, THERE IS A DEFECT IN ISSUE OF NOTICE AND LEVY OF PE NALTY BY THE AO AND ITA NO. 3395/BANG/2018 PAGE 7 OF 7 CONFIRMATION OF PENALTY BY THE CIT(APPEALS), WHICH INVALIDATES THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. ACCORDINGLY, WE QUASH THE PENALTY ORDER ON THIS GROUND IN THIS CASE. 11. SINCE WE HAVE ALLOWED THE LEGAL GROUND OF THE A SSESSEE, WE REFRAIN FROM GOING INTO OTHER GROUNDS OF APPEAL RAISED BY T HE ASSESSEE. 12. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF AUGUST, 2021. SD/- SD/- ( N V VASUDEV AN ) ( CHANDRA POOJARI ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST AUGUST, 2021. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.