The Deputy Commissioner of Income Tax, Central Circle, Panaji., Panaji V. Shri Bhalchandra Bakhale, Margao

ITA 340/PAN/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7516 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 19-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVENDRA GUPTA LD
• Keywords: Search and seizure; Revised return
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI SINGLE MEMBER CASE BEFORE SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 340 /PAN/2016 (ASST. YEAR : 201 0 1 1 ) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PUNDALIK N I WAS, RUA - DE - OUREM, PANAJI V. SHRI BHALCHANDRA BAKHALE C/F - 1 & 3, J.B. APARTMENTS, NEAR PANDAVA CHURCH, A Q UEM ALTO, MARGAO, GOA. PAN NO. ADSPB 8075 H (APPELLANT) (RESPONDENT) ITA NO. 341 /PAN/2016 (ASST. YEAR: 2010 11) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PUNDALIK NIWAS, RUA - DE - OUREM, PANAJI V. SMT MEDHA BAKHALE C/F - 1 & 3, J.B. APARTMENTS, NEAR PANDAVA CHURCH, AQUEM ALTO, MARGAO , GOA. PAN NO. AGTPB 6046 L (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : SHRI SHIVENDRA GUPTA LD. DR DATE OF HEARING : 14/03/ 2017 DATE OF PRONOUNCEMENT : 1 4 /0 3 /2017 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER 1 . THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE ORDERS OF THE LEARNED CIT (A) PANAJI, IN APPEAL NO. ITA.NO.375/CIT( A) VI/BNG/2013 - 14 & ITA.NO. 79 /CIT( A) 2 / PNJ /201 4 - 1 5, ITA.NO.379/CIT( A) VI/BNG/2013 - 14 & ITA.NO.80/CIT( A) 2/PNJ/2014 - 15 AND ITA.NO.386/CIT(A) VI/BNG/2013 - 14 & ITA.NO.81/CIT(A) ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 2 2/PNJ/2014 - 15 .DATED 30.09.2016 AND APPEAL NO. ITA.NO.377/CIT(A) VI/BNG/2013 - 14 & ITA.NO.82/CIT( A) 2/PNJ/2014 - 15, ITA.NO.384/CIT(A) VI/BNG/2013 - 14 & ITA.NO.83/CI T( A) 2/PNJ/2014 - 15 AND ITA.NO.385/CIT(A) VI/BNG/2013 - 14 & ITA.NO.84/CIT(A) 2/PNJ/2014 - 15 . DATED 30.09.2016 FOR THE ASSESSMENT YEAR 2010 11 AGAINST CANCELLATION OF PENALTY LEVIED UNDER SECTION 271(1)(C) IN THE CASE OF SHRI BHALCHANDRA BAK HALE AND SM T MEDHA BAKHALE. 2 . SHRI SHIVENDRA GUPTA LEARNED DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF THE DEPARTMENT AND NONE REPRESENTED ON BEHALF OF THE ASSESSEE. 3 . IT WAS SUBMITTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THERE WAS A SEA RCH ON THE ASSESSEE ON 12.10.2010. CONSEQUENT TO THE SEARCH , NOTICE UNDER SECTION 15 3 C HA D BEEN ISSUED AND ASSESS MENT HAS BEEN COMPLETED UNDER SECTION 153(A) AND READ WITH 143(3) ON 29.11.2012. IN THE COURSE OF ASSESSMENT CERTAIN ADDITIONS HAD BEEN MADE. IT WAS A SUBMISSION THAT AS A CONSEQUEN CE OF THE ADDITIONS, PENALTY PROCEEDINGS HA D BEEN INITIATED UNDER SECTION 274 READ WITH 271 AND PENALTY HA D BEEN LEVIED UNDER SECTION 271 (1) ( C ) V IDE ORDER DATED 15.05.2013. IT WAS FURTHER SUBMISSION THAT THE PENALTY LEVIED UNDER SECTION 271(1)( C ) WAS CHALLENGED BY THE ASSESSEE IN APPEAL BEFORE THE CIT(A) WHO HAD CANCELLED THE PENALTY BY FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY REPORTED IN 3 59 ITR 565 . IT WAS A SUBMISSION THAT IN T H E ASSESSMENT ORDER THE ASSESSING OFFICER HAS SPECIFICAL L Y MENTIONED THAT THE PENALTY PROCEEDINGS HAS BEEN INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS A SUBMISSION THAT THE ORDERS OF THE LE ARNED CIT(A) IS LIABLE TO BE REVERSED. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO FILED A WRITTEN SUBMISSION WHICH IS EXTRACTED HEREIN BELOW: - ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 3 1. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN M/S TRIMURTI GROUP OF CASES ON 12.10.2010, DURING WHICH THE RESIDENCE OF THE ASSESSEE SHRI. BHALCHANDRA S. BHAKHALE, PARTNER/ DIRECTOR WAS ALSO COVERED. 2. FOR THE A.Y. 2010 - 11 THE ASSESSEE HAD NOT FILED RETURN OF INCOME WITHIN THE TIME LIMIT U/S 139(1). THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE FIRST TIME ON 11.08.2011 IN RESPONSE TO NOTICE U/S 153C DECLARING A TOTAL INCOME OF RS. 32,98,432/ - . THE ASSESSMENT WAS COMPLETED ON 29.11.2012 U/S 143(3) R.W.S. 153A AT RS. 41,17,908/ - BY MAKING AN ADDITION OF RS. 8,19,476/ - TOWARDS INTEREST ON CAPITAL OF M/S T RIMURTI MINING SERVICES. 3. PENALTY U/S 271( 1 )(C ) WAS INITIATED AND PENALTY U/S 271( 1 )(C ) OF RS. 11,73,553/ - WAS LEVIED ON 15.05.2013. 4. THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A), PANAJI. THE CIT(A) DELETED THE PENALTY WITH A FINDING THAT THE AO HAS NOT RECORDED HIS SATISFACTION IN THE ASSESSMENT ORDER AS REGARDS WHETHER THE DEFAULT COMMITTED BY THE APPELLANT IS WITH REFERENCE TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. FURTHER, THE CIT(A) RELIED ON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY 35 TAXMAN 250. 6. THE ORDER OF THE CIT(A) IS NOT ACCEPTABLE AS IT IS CONTRARY TO THE FACTS AND LAW. 7. THE FINDINGS OF THE CIT(A) THAT AO HAS NOT RECORDED THE REASON FOR INITIATING THE PENALTY IS FACTUALLY IN CORRECT. A) AS REGARDS THE INCOME FROM M/S TRIMURTI EXPORTS THE AO AT PAGE 3 PARA 1 OF THE ASSESSMENT ORDER HAS RECORDED 'SINCE THE ASSESSEE HAS OF FERED THIS UNDISCLOSED INCOME CONSEQUENT TO SEARCH PROCEEDINGS, PENALTY PROCEEDINGS U/S 271(L)(C ) INITIATED SEPARATELY.' B) AS REGARDS THE ADDITION OF RS. 8,19,476/ - BEING INTEREST ON CAPITAL FROM M/S TRIMURTI MINING SERVICES THE ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 4 AO AT PAGE 3 PARA2 OF THE ASSESSMENT ORDER HAS RECORDED 'PENALTY PROCEEDING U/S 271(L)(C ) INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF INCOME'. THUS THE FINDINGS OF THE CIT(A) THAT THE AO HAS NOT RECORDED THE REASON IS FACTUALLY INCORRECT. 8. FURTHER, THE LD. CIT(A) FAILED TO APPRECIATE THE PROVISIONS OF SEC.271(L)(C ) R.W.EXPLN. 5A ' WHERE, IN THE COURSE OF A SEARCH INITIATED U/S 132 ON OR AFTER FIRST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER - (II) ANY INCO ME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENTS...................... FOR ANY PREVIOUS YEAR, WHICH ENDED BEFORE THE DATE OF SEARCH AND, - (B) THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOSITION OF PENALTY UNDER CLAUSE (C) OF SUB SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 9. I N THE INSTANT CASE, ALL THE ABOVE CONDITIONS AS STIPULATED HAVE BEEN SATISFIED FOR LEVY OF PENALTY, THERE WAS A SEARCH IN THE CASE OF THE ASSESSEE ON 12.10.2010. THE ASSESSEE HAD TAXABLE INCOME FROM THE GROUP CONCERNS AS WAS NOTICED DURING THE COURSE OF SEARCH. THE PREVIOUS YEAR HAD ENDED. ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 5 THE DUE DATE OF FILING RETURN HAD EXPIRED ON 31.10.2010. HENCE THE INCOME ADMITTED IN THE RETURN OF INCOME FILED SUBSEQUENT TO SEARCH WOULD AUTOMATICALLY ATTRACT PENALTY U/S 271(L)(C)R.W.EXPLN 5A. FURTHER, THE HON'BLE SUPREME COURT IN THE CASE OF KP MADHUSUDHANAM VS. CIT 251 ITR 99 HAS HELD THAT ' NO, EXPRE SS INVOCATION OF THE EXPLANATION TO S.271 IN THE NOTICE UNDER S. 271 IS, IN OUR VIEW, NECESSARY BEFORE THE PROVISIONS OF EXPLANATION THEREIN ARE APPLIED.' FURTHER, THE HON'BLE COURT HAS ALSO DISTINGUISHED ITS OWN JUDGMENT IN THE CASE OF SIR SHADILALSUGAR & GENERAL MILLS LTD., VS. CIT 168 ITR 705. THUS THE FINDINGS OF THE LD. CIT(A) ARE CONTRARY TO FACTS AND LAW. 10. AS REGARDS THE FINDINGS OF THE CIT(A) WITH RESPECT TO NON STRIKING OF INAPPLICABLE PORTION IN THE NOTICE U/S 274 AND ALSO HIS RELIANCE ON TH E FINDINGS OF THE HON'BLE BOMBAY HIGH COU RT IN 216 ITR 660(PARA 3.1 PAGE 5 OF CIT(A) ORDER)' MERE MISTAKE IN LANGUAGE USED WHILE INITIATING OR LEVYING PENALTY OR MERE NON STRIKING OFF OF INACCURATE PORTION CANNOT BY ITSELF INVALIDATE NOTICE U/S 274 BUT VAGUENESS AND AMBIGUITY IN NOTICE CAN PREJUDICE RIGHT OF REASONABLE OPPORTUNITY T O ASSESSEE SINCE HE WAS UNAWARE OF EXACT CHARGES HE HAD TO FACE.'THE ABOVE FINDINGS OF THE HON'BLE BOMBAY HIGH COURT HAS BEEN DISTINGUISHED BY THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF GANGADHARBERA VS. ACIT IN 267 ITR 422 WHEREIN IT WAS HELD THAT MER E NON STRIKING OF ONE PORTION OF THE NOTICE IS A WAIVABLE OBJECTION. IF BY THE TENOR AND TEXT OF THE NOTICE MAKES THE MIND OF THE NOTICE CLEAR WHAT IS TO BE DONE, THAN SPECIFIC MENTIONING OF CL. (II) IS A MERE TECHNICAL FORMALITY. FURTHER, SUCH A MISTAKE G ETS IMMUNITY U/S 292B. 11. FURTHER, THE FINDINGS AND RELIANCE BY THE CIT(A) IS MISCONSTRUED AS PROCEEDINGS OF PENALTY OR NOT MERELY FINALIZED BY ISSUANCE OF NOTICE U/S 274 BUT IT IS SUBSEQUENTLY ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 6 FOLLOWED BY A SHOW CAUSE AND THE ASSESSEE IS CLEARLY INFORMED OF THE CONCEALED INCOME/INACCURATE PARTICULARS AND IS GIVEN AN OPPORTUNITY TO EXPLAIN BEFORE THE PENALTY PROCEEDINGS ARE FINALIZED. 12. AS REGARDS THE RELIANCE OF CIT(A) ON THE JUDGEMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF MISS. MADHUSHREE GUPTA BRITISH AIRWAYS PLC VS. UNION OF INDIA 317 ITR 107, ' THAT THERE HAS TO BE A PRIMA FACIE SATISFACTION OF THE AO WHILE INITIATING THE PENALTY PROCEEDINGS...........' AS THE AO HAS RECORDED THE SATISFACTION FOR INITIATION AS DISCUSSED IN THE PRECEDING PARAS THE FINDINGS OF THE CIT(A) ARE CONTRARY TO FACTS. 13. .AS REGARDS RELIANCE OF THE CIT (A) ON THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 35 TAXMAN 250. IT MAYBE APPRECIATED THAT THE GROUP OF CASES DECIDE BY THE HON'BLE HIGH COURT THE FACTS WERE DIFFERENT, THE ISSUE WAS RELATING TO ADMISSION DURING THE COURSE OF SURVEY AND SUBSEQUENT ADMISSION DURING THE REVISED RETURNS FILED. FURTHER EXPLANATION 1 TO SECTION 271 WAS DISCUSSED AND CONS IDERED. IN THE INSTANT CASE, THERE IS A SE A RCH IN THE ASSESSEE'S CASE, THE ASSESSE E HAS FAILED TO ADMIT/DECLARE INCOME RECEIVED BY HIM - INTEREST ON CAPITAL FROM THE FIRMS & REMUNERATION RECEIVED AS PARTNER OF THE FIRM. FURTHER HE WOULD B E HIT BY EXPLANATI ON 5A OF THE SECTION 271. 14. THUS IT IS PRAYED BEFORE THE HON'BLE ITAT TO KINDLY DISTINGUISH THE CASE AND UPHOLD THE PENALTY LEVIED AND REVERSE THE FINDINGS OF THE FIRST APPELLATE AUTHORITY. 4 . I HAVE CONSIDERED THE SUBMISSIONS. ADMITTEDLY AFTER PERUSAL OF THE ASSESSMENT ORDER AT PAGE 3 PARA 2 SHOWS THAT THE ASSESSING OFFICER HAS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IN RESPECT OF ADDITION OF . 8,19,476/ - MENTIONED THAT PENALTY PROCEE DINGS UNDER SECTION 271(1)(C) INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS OF IN COME. HOWEVER ON PERUSAL , THE PENALTY WAS UNDER SECTION 271(1)(C) IN PAGE 2 , 4 TH PARAGRAPH SHOWS THAT HE HAS TURNED HIS STAND AND HE SAYS THE ASSESSEE HAS DE LIBERATELY CONCEALED THE INCOME WHICH ATT R ACTS THE ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 7 LEVY OF PENALTY OF 271(1)(C) . AS THE ASSESSING OFFICER HAS DRAWN TWO DIFFERENT LIMBS OF THE PENALTY PROCEEDINGS , SHOW CAUSE NOTICE UNDER SECTION 274 AND 271 DATED 29.11.2012, AS ALS O THE REMINDER DATED 03.05.2013 WAS PERUSED. IN NEITHER THE SHOW CAUSE NOR THE REM IN DER DOES HE MENTION AS TO WHETHER THE PENALTY IS BEING LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THIS BEING SO THE FINDING OF THE LEARNED CIT (A) IN PARA 3.6 OF HIS ORDER AT PAGE 8 WHEREIN HE HAS RECORDED THAT EVEN THE NOTICE UNDER SECTION 274 ISSUED TO THE APPELLANT IS ISSUE D IN THE STANDARD PROFO RMA WITH OU T ST R IKING OF THE INAPPLICABLE PORTIONS AND THEREFORE , IT IS NOT KNOWN AS TO WHICH LIMB OF SECTION 271 (1) (C) PENALTY IS LEVIED BY THE ASSESSING OFFICER STANDS SUBSTANTIALLY PROVED. THIS BEING SO I AM OF THE VIEW THAT LEARNED CIT (A) HAS RIGHTLY FOLLOWED THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY REPORTED IN 359 ITR 565 REFERRED (SUPRA) WHEREIN PARA 15 TO 17 IT HAS BEEN CATEGORICALLY HELD THA T IN THE ABSENCE OF SPECIFIC ME NTIONING THE SPECIFIC LIMB FOR WHICH THE PENALTY IS BEING LEVIED THE PENALTY A S LEVIED IS LIABLE TO BE CANCELLED. 5 . HERE IT WOULD H E LD TO BE WORTHWHILE TO MENTION THAT THE VIEW EXPRESSED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY HAS BEEN UPH E LD BY THE HONBLE SUPREME COURT BY REJECTION OF THE SLP IN THE CASE OF CIT V SSAS EME RALD MEADOWS WHEREIN ORDER DATED 05 TH AUGUST, 2016, WHEREIN IT HAS BEEN HELD OMISSION BY THE ASSESSING OFFICER TO EXPLICITLY SP ECIFY IN THE PENALTY NOTICE AS TO WHETHER PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABILITY FOR CANCELLATION . IN THE SAID DECISION OF THE HONBLE SUP R EME COURT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY IS ALSO REFERRED TO. ITA.NO.340 & 341/PAN/2016 SHRI BHALCHANDRA BAKHALE AND SMT MEDHA BAKHALE 8 6 . IN THE CIRCUMSTANCES AS REVENUE HAS NOT BEEN ABLE TO POINT OUT ANY SPECIFIC ERROR IN THE FINDINGS OF THE LEARNED CIT (A) THE ORDER OF THE LEARNED CIT(A) IS STANDS CONFIRMED. 7 . I N THE RESULT THE APPEALS FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 1 4 TH DAY OF MARCH , 2017 AT GOA. S D / - (GEORGE MATHAN) JUDICIAL MEMBER DATED : 1 4 TH MARCH , 2017. VSSGB / - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A), 5 . THE D.R. 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI