SURESH GANDHI, MUMBAI V. DCCC 36, MUMBAI

ITA 3581/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3730 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NITESH JOSHI VIPUL MODY
• Keywords: Salary income; Difference of opinion

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/3581/MUM/2014, /ASSESSMENT YEARS: 2008-09 SURESH GANDHI 51,NARIMAN BHAVAN, NARIMAN POINT MUMBAI-400 021. PAN:AACPG 9382 P VS. DCCC-36 ROOM NO.11, AAYAKAR BHAVAN, MK ROAD,CHURCHGATE, MUMBAI-20. ( /APPELLANT ) ( / RESPONDENT) ./ITA/4682/MUM/2014, /ASSESSMENT YEARS: 2008-09 DCCC-36 MUMBAI-20. VS. SURESH GANDHI MUMBAI-400 021. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI SANJEEV KASHYAP -DR ASSESSEE BY: S/SHRI NITESH JOSHI, VIPUL MODY / DATE OF HEARING: 25.07.2016 / DATE OF PRONOUNCEMENT: 03.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER, DATED 28/03/2014, OF THE CIT (A)-41,MUMBAI THE ASSESSEE AND THE ASSESSING OFFICER(AO)HAVE FILED CROSS APPEA LS FOR THE YEAR UNDER CONSI - DERATION.THE EFFECTIVE GROUND OF APPEAL, RAISED BY THE AO AND THE ASSESSEE IS ABOUT DELETING/UPHOLDING THE PENALTY LEVIED U/S. 271(1)(C ) OF THE ACT. BRIEF FACTS: 2. ASSESSEE,AN INDIVIDUAL,DERIVING INCOME FROM SALARY, CAPITAL GAINS AND OTHER SOURCES,FILED HIS RETURN OF INCOME ON 31/07/2008,DE CLARING TOTAL INCOME AT RS. 12.96 LAKHS.THE AO COMPLETED THE ASSESSMENT, U/S.14 3(3)OF THE ACT,ON 03/12/ 2010,DETERMINING THE INCOME OF THE ASSESSEE AT RS. 84.20 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT FDR MATUR ITY PROCEEDS/NAKUL 3581&4682/M/14-SURESHGANDHI 2 BAFAN,AMOUNTING RS.1,78,33,969/-WAS ADDED TO CAPIT AL ACCOUNT, THAT THE FDR WAS NOT APPEARING IN THE BALANCE SHEET OF THE LAST YEAR I.E. AS ON 31/03/2007. HE DIRECTED THE ASSESSEE TO FILE EXPLANATION IN THAT R EGARD.THE ASSESSEE,VIDE HIS LETTER DATED 30/11/2010/STATED THAT THE CREDITED AMOUNT RE PRESENTED THE MATURITY PROCEEDS OF KOTAK LIFE INSURANCE POLICY TAKEN BY HIM. HE DIR ECTED THE ASSESSEE TO FIND FULL DETAILS ABOUT THE SAID POLICY.AFTER CONSIDERING A S UBMISSIONS OF THE ASSESSEE,THE AO HELD THAT THE POLICY WAS SUBSCRIBED ON 20/09/200 4,THAT ITS MATURITY PERIOD WAS 10 YEARS, THAT THE ASSESSEE SURRENDERED IT AFTER PA YING THREE INSTALMENTS,THAT THE INVESTMENT WAS JUST LIKE FIXED DEPOSIT, THAT THE AS SESSEE HAD ADMITTED A TYPOGRAPHICAL ERROR IN THAT REGARD. REFERRING TO TH E PROVISIONS OF THE SECTION 10(10 D) OF THE ACT,HE HELD THAT THE SECTION DID NOT ALLO W EXEMPTION ON SUM RECEIVED ON PRE-MATURE TERMINATION AND WITHDRAWAL, THAT THE INC OME ON FROM SAID POLICY WAS TO BE ADDED TO THE INCOME OF THE ASSESSEE.AFTER CONSID ERING THE AMOUNT RECEIVED ON MATURITY OF THE POLICY AND THE INVESTMENT MADE BY T HE ASSESSEE,HE HELD THAT RS.58,33,996/-WAS THE INCOME OF THE ASSESSEE FOR TH E YEAR UNDER CONSIDERATION. HE ALSO INITIATED PENALTY PROCEEDINGS AS PER THE PROVI SIONS OF SECTION 271(1)(C)OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF THE IN COME. 2.A. HE FURTHER NOTICED THAT THE ASSESSEE HAD TWO PROPER TIES NAMELY FLATS AT MANJU APARTMENT AND AT GUIDE,THAT HE HAD TREATED THE FLAT AT MANJU APARTMENT AS SELF OCCUPIED PROPERTY,THAT FLAT AT GUIDE, PURCHASED ON 09/11/2005, WAS NOT OFFERED FOR 3581&4682/M/14-SURESHGANDHI 3 TAXATION.ACCORDINGLY,HE DETERMINED THE ANNUAL LETTI NG VALUE AT THE RATE OF 85% OF THE INVESTMENT OF RS.1,87,89,058/-WHICH WORKED OUT TO RS.11.17 LAKHS AFTER ALLOWING DEDUCTION U/S. 24 (A) OF THE ACT. FOR FURN ISHING INACCURATE PARTICULARS OF INCOME,PENALTY PROCEEDINGS WERE INITIATED ON THAT A CCOUNT ALSO. IN THE APPELLATE PROCEEDINGS, BEFORE THE FIRST APPE LLATE AUTHORITY (FAA), BOTH THE ADDITIONS MADE BY THE AO WERE CONFIRMED. 3. IN REPLY TO THE PENALTY NOTICE, ISSUED BY THE AO, T HE ASSESSEE STATED THAT HE HAD FILED AN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ORDER OF THE FAA, THAT HE HAD NOT CONCEALED ANY PARTICULARS OF INCOME OR HAD NOT FURNISHED ANY INACCURATE PARTICULARS, THAT ADDITION MADE BY THE AO COULD NOT BE CONSTRUED AS FURNISHING OF INACCURATE PARTICULARS,THAT MERE ADDITION OF A SUM AS INCOME DURING THE ASSESSMENT PROCEEDINGS SHOULD NOT RESULT IN AUTOMATIC LEVY OF PENALTY.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE AO HELD THAT THE BAL ANCE SHEET OF THE ASSESSEE INITIALLY HAD SHOWN THE CREDIT OF RS.1.78CRORES IN THE CAPITAL ACCOUNT,THAT THE NARRATION OF THIS CREDIT ENTRY WAS GIVEN AS FDR MAT URITY, THAT WHEN DETAILS WERE CALLED FOR THE ASSESSEE SUBMITTED THAT IT WAS RECEI PT OF LIFE INSURANCE POLICY AND NOT FDR RECEIPT, THAT THE AMOUNT RECEIVED ON PREMAT URE TERMINATION OF INSURANCE POLICY WAS NOT EXEMPT U/S.10 OF THE ACT, THAT EVEN AFTER KNOWING THE PROVISIONS THE ASSESSEE HAD NOT OFFERED THE RECEIPT AS INCOME. INV OKING THE PROVISIONS OF SECTION 3581&4682/M/14-SURESHGANDHI 4 271(1)(C),FOR CONCEALING THE PARTICULARS OF INCOME, THE AO LEVIED A PENALTY OF RS. 23.62 LAKHS,VIDE HIS ORDER DATED 22/03/ 2013. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA AND MADE ELABORATE SUBMISSIONS AND RELIED UPON SEVERAL CASES.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE PENALTY ORDER,THE FAA HELD THAT MENS REA WAS NO LONGER AN ESSENTIAL INGREDIENT FOR LEVY OF PENALTY U/S. 271 (1)(C),THAT THE OBJECTIVE BEHIND THE SECTION WAS TO PROVIDE REMEDY FOR LOSS OF REVENUE AND THAT SUCH A PENALTY WAS A SIMILAR ABILI TY THAT THE EVIDENCES GATHERED AT THE STAGE OF ASSESSMENT PROCEEDINGS WAS PRIMA FACIE MATERIAL IN PENALTY PROCEEDINGS, THAT IF THE ASSESSEE WOULD NOT PRODUCE ANY EVIDENCE TO DISPROVE THE FACTS GATHERED DURING THE ASSESSMENT PROCEEDINGS TH E AO WOULD BE JUSTIFIED IN LIVING PENALTY U/S. 271(1)(C).REFERRING TO THE EXPL ANATION 1 TO THE SECTION HE HELD THAT INITIAL OWNERS WAS ON THE ASSESSEE TO PROVE TH AT HIS CASE DID NOT FALL WITHIN THE PREVIEW OF EXPLANATION.WITH REGARD TO THE ADDITION OF RS.58.50 LAKHS, HE HELD THAT EXPLANATION1(A) TO SECTION 271(1)(C)WAS NOT APPLICA BLE,THAT THE ASSESSEE HAD OFFERED AN EXPLANATION IN THAT REGARD,THAT THE EXPL ANATION ON ACCOUNT OF SURRENDER VALUE OF LIFE INSURANCE POLICY WAS NOT FOUND TO BE FALSE, THAT THERE WAS AN INADVERTENT TYPOGRAPHICAL ERROR IN THE CAPITAL ACCO UNT ENCLOSED WITH THE RETURN OF INCOME,THAT DURING THE ASSESSMENT PROCEEDINGS THE A SSESSEE HAD FURNISHED SUPPORTING DOCUMENTARY EVIDENCES AND PROVED THAT TH E SUM RECEIVED REPRESENTED 3581&4682/M/14-SURESHGANDHI 5 SURRENDER VALUE OF LIFE INSURANCE POLICY,THAT THE A SSESSEE HAD OFFERED A PLAUSIBLE EXPLANATION WITH REGARD TO PREMATURE TERMINATION OF KOTAK LIFE INSURANCE POLICY,THAT IT WAS NOT THE CASE OF THE AO THAT EXCL USION FURNISHED BY THE ASSESSEE WAS NOT BONA FIDE,THAT IT WAS ONLY THAT THE ASSESSE E HAD MADE A CLAIM FOR EXEMPTION OF THE AFORESAID AMOUNT U/S.10(10D) OF TH E ACT THAT WAS NOT ACCEPTED BY THE AO OWING TO DIFFERENCE OF OPINION ARISING FROM DIFFERENT LEGAL INTERPRETATION OF THE SAID EXEMPTION PROVISION.REFERRING TO THE CASE OF RELIANCE PETROPRODUCTS (P) LTD.(322ITR158) OF THE HONBLE SUPREME COURT, HE HE LD THAT AO WAS NOT JUSTIFIED IN LIVING PENALTY IN RESPECT OF THE ADDITION OF RS. 58.50 LAKHS. 4.1. WITH REGARD TO NON-DISCLOSURE OF ANNUAL VALUE OF FL AT AT THE GUIDE, AMOUNTING TO RS.11.17 LAKHS,THE FAA HELD THAT NO ORAL OR WRIT TEN SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN THE COURSE OF APPELLATE P ROCEEDINGS, THAT THE ASSESSEE OWNED TWO PROPERTIES, THAT HE IS ENTITLED TO EXERCI SE THE OPTION TO SPECIFY THE HOUSE PROPERTY WHICH WAS TO BE TREATED AS SELF OCCUPIED P ROPERTY U/S. 23(4)(A) OF THE ACT,THAT THE ASSESSEE HAD TO OFFER TO TAX THE ANNUA L VALUE OF THE OTHER FLAT AS SAME WAS LET OUT, THAT THE ASSESSEE COULD NOT TREAT BOTH THE FLATS AS SELF OCCUPIED IN CONTRAVENTION OF THE PROVISIONS OF THE ACT, THAT NO FAULT COULD BE FOUND WITH THE ACTION OF THE AO IN BRINGING TO TAX THE ANNUAL VALU E OF ONE OF THE FLATS AT RS. 11.17 LAKHS AND ALSO LEVYING PENALTY U/S. 271(1)(C) ON AC COUNT OF NON-DISCLOSURE OF THE SAID INCOME FROM HOUSE PROPERTY IN THE RETURN OF IN COME FOR THE YEAR UNDER 3581&4682/M/14-SURESHGANDHI 6 CONSIDERATION,THAT THE ASSESSEE HAD FAILED TO PROVE THAT HIS FAILURE TO OFFER THE SAID ANNUAL VALUE TO TAX UNDER THE HEAD INCOME FROM HOUS E PROPERTY IN THE RETURN OF INCOME WAS BONA FIDE. 5. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA WITH REGARD TO PENAL TY LEVIED FOR NON-DISCLOSURE OF HOUSE PROPERTY INCOME.WITH REGARD TO SURRENDER OF L IFE INSURANCE POLICY, HE RELIED UPON THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE(AR) STATED THAT THE T RIBUNAL HAD DECIDED THE QUANTUM APPEALS,FILED BY THE ASSESSEE AND THE AO.S FOR THE ASSESSMENT YEARS 2007- 08 AND 2008-09 (ITA.S.2915& 6523/MUM/2011-AY.2007-0 8 AND ITA/ 5743/ MUM/2011 AY.2008 09, DATED 22/05/ 2015).WE FIND THAT WHILE DECIDING THE APPEAL, FILED BY THE AO, FOR THE AY.2007-08(ITA/652 3/MUM/2011),THE TRIBUNAL HAD HELD THAT IT WAS NOT A FIT CASE FOR LEVY OF PEN ALTY, THAT IT WAS A DEBATABLE ISSUE. RESPECTFULLY, FOLLOWING THE SAID ORDER OF THE TRIBU NAL, THE REVERSE THE ORDER OF THE FAA AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. WE FURTHER FIND THAT THE TRIBUNAL HAD, WHILE ADJUDI CATING THE APPEAL FILED BY THE ASSESSEE FOR THE AY.2008 09 (SUPRA) DEALT WITH TH E ISSUE OF ADDITION OF RS. 58.50 LAKHS, THAT IT HAD ALLOWED THE QUANTUM APPEAL FILED BY THE ASSESSEE WITH REGARD TO SURRENDER OF LIFE INSURANCE POLICY. AS THE ADDITION CONFIRMED BY THE FAA HAS BEEN 3581&4682/M/14-SURESHGANDHI 7 DELETED BY THE TRIBUNAL, SO, IN OUR OPINION PENALTY WOULD NOT SURVIVE. IN THE APPELLATE PROCEEDINGS, THE FAA HAS DELETED THE PENA LTY.CONFIRMING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A O. AS A RESULT,APPEAL FILED BY THE ASSESSEE IS ALLOWED AND APPEAL OF THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE O PEN COURT ON 3 RD AUGUST, 2016. 3 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03 .08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.