Sh. Ajeet Singh, New Delhi V. DCIT, New Delhi

ITA 361/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6821 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: RAKESH JAIN
• Keywords: Revised return; Ignorance of law
• Section: 143(3); 142(1)

Judgement Text

1 ITA NO. 361/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-361/DEL/2014 (ASSESS MENT YEAR 2008-09) AJEET SINGH PROP. BOUTIQUE GLOBAL B-33, PUMPOSH ENCLAVE NEW DELHI AAZPS4257J (APPELLANT) VS DCIT CIRCLE-22(1) NEW DELHI (RESPONDENT) APPELLANT BY SH. RAKESH JAIN, ADV RESPONDENT BY SH. S. K. JAIN, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 28/10/2013 PASSED BY CIT(A)-XXIII, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. BECAUSE THE ACTION IS UNDER CHALLENGE ON FACTS AND LAW FOR THE LEVY OF THE PENALTY AMOUNTING TO RS.6,07,320/-W HICH IS UNSUSTAINABLE ON THE TRUE AND CORRECT INTERPRETATIO N OF THE FACTS, DOCUMENTS, EVIDENCES, PLEADINGS, PROVISION O F ACT AND THE VARIOUS PROPOSITIONS OF LAW. 2. BECAUSE THE ACTION IS UNDER CHALLENGE ON FACTS A ND LAW SINCE THE AFFIDAVITS FILED BY THE ASSESSEE AND ACCO UNTANT DATE OF HEARING 09.08.2016 DATE OF PRONOUNCEMENT 20.10.2016 2 ITA NO. 361/DEL/2014 OF THE ASSESSEE HAVE NOT BEEN CONSIDERED IN ITS TRU E SENSE & SPIRITS. 3. THE ASSESSEE IS AN INDIVIDUAL AND ENAGED IN THE BUSINESS OF MANUFACTURING OF EXPORTS AND READYMADE GARMENTS UND ER THE NAME AND STYLE OF BOUTIQUE GLOBAL AS PROPRIETORSHIP FIRM , WHICH HAS BEEN ESTABLISHED ON 30.06.2010. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE ASSESSING OFFIC ER THAT THE ASSESSEE HAS NOT DECLARED CAPITAL GAIN ARISES ON 12 .07.2007 ON THE SALE OF SHARES OF M/S. BOUTIQUE INTERNATIONAL PVT. LTD. AND M/S. BOUTIQUE CLOTHING PVT. LTD. IN THE TUNE OF 21,35,40 0/- AND RS. 18,75,000/- RESPECTIVELY. NOTICE U/S. 142(1) OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 15.04.2010, THEREIN VIDE ATTACHE D DETAILED QUESTIONNAIRE HAS ASKED TO FURNISH COMPUTATION OF L ONG TERM/SHORT TERM CAPITAL GAIN/ LOSS WITH EVIDENCES OF INVESTMEN T / SALE ETC. THE ASSESSEE FILED REPLY ON 06.12.2010. THE ASSESSEE S UBMITTED THAT AFTER THE SEPARATION FROM THE PARTNERSHIP BUSINESS W.E.F. 30.06.2007 DATE COMING WITHIN THE IMPUGNED ASSESSMENT YEAR ENDING ON 31.3.2008, THE INDIVIDUAL COMMENCED ITS O PERATION ON AND AFTER 30.06.2007 ONWARDS AS SUBMITTED DURING TH E CASE PROCEEDING DT. 02/11/2010. THE ASSESSEE FILED ITS F IRST RETURN OF INCOME IN THE INDIVIDUAL CAPACITY ON DT. 16.09.2008 IN ACCORDANCE WITH THE AUDITED FINANCIAL STATEMENTS DT. 02.09.200 8 AT AN AMOUNT OF RS.1,31,64,170/- WHEREBY THE BOOKS OF ACCOUNT AN D SUPPORTING VOUCHERS WITH NECESSARY DETAILS HAVE BEEN MAINTAINE D AND ASSESSEE IS FOLLOWING 'MERCANTILE SYSTEM OF ACCOUNTING. THE SAID DETAILS IN ACCORDANCE WITH NOTICE DATED 15/04/2010 WERE SUBMIT TED ON 3 ITA NO. 361/DEL/2014 06.05.2010. THE ASSESSMENT WAS COMPLETED ON 30/12/2 010 AND THE PENALTY ORDER WAS PASSED THEREAFTER. 4. AGGRIEVED BY THE PENALTY ORDER THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. STATING THEREIN THAT THE A.O HAS MENTIONED IN THE P ENALTY ORDER U/S 271(1)(C) THAT THE APPELLANT WAS ISSUED A QUESTIONN AIRE ALONG WITH NOTICE U/S 142(1) OF THE ACT ON 15/4/2010 WHEREIN H E WAS ASKED TO FURNISH THE COMPUTATION OF LONG TERM/SHORT TERM CAP ITAL GAIN/LOSS WITH EVIDENCE OF INVESTMENT OF SALE ETC. 7. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS ALREA DY PAID ALMOST 45 LACKS AS HIS TAX AND THERE IS AN AFFIDAVI T FROM THE ASSESSEE AS WELL AS FROM HIS ACCOUNT AND THAT. DUE TO INADVERTENT CIRCUMSTANCES AND THERE WAS A RESHUFFLING IN THE PA RTNERSHIP FIRM THE SAID SHORT TERM CAPITAL GAIN WAS NOT INCLUDED I N THE INCOME BUT WHEN THE MISTAKE WAS FOUND OUT BY THE ASSESSEE AFTE R SEEING THE QUESTION IN LAW IMMEDIATELY THE ASSESSEE DISCLOSED THE SAME WITH THE LETTER DATED 6/12/2010 OF WHICH THE ASSESSING O FFICER HAS ALSO TAKEN COGNIZANCE WHILE FINALIZING THE PENALTY. THE LD. AR SUBMITTED THAT BEFORE THE INITIATION OF ANY SPECIFIC QUERY BA SED QUESTIONNAIRE AND OR ORDER SHEET ENTRY, THE ASSESSEE VOLUNTARILY REALIZED THE MISTAKE ON DT. 06.12.2010 WHEREBY THE AMOUNT FOR THE CAPITAL GAIN WAS BEING REQUISITIONED AS A QUESTION NO.VII, IX OF QUESTIONNAIRE ISSUED ALONG WITH NOTICE U/S 142(1) DATED 15.04.201 0 WAS NOT CASE SPECIFIC, BUT A 'GENERAL QUESTIONNAIRE . THIS IS THE SOLITARY QUESTIONNAIRE ISSUED BEFORE VOLUNTARILY REVISING TH E RETURN OF 4 ITA NO. 361/DEL/2014 INCOME BY ASSESSE ON DT. 06.12.2010 . WHILE PREPARING THE INDIVIDUAL STATEMENT OF AFFAIRS AS ON 31.3.2008 IT WAS FOUND THAT THE ASSESSEE HAS RECEIVED RS.21,35,400/- ON 12.7.20 07 FROM BOUTIQUE INTERNATIONAL PVT. LTD. AND RS.18,75,000/- ON 12.7.2007 FROM BOUTIQUE CLOTHING PVT. LTD, WHICH WERE RECEIVE D FROM SALE OF SHARES OF ABOVE SAID COMPANIES. THE CAPITAL GAIN ON SALE OF ABOVE MENTIONED SHARES HAD NOT BEEN SHOWN DUE TO INADVERT ENT MISTAKE NEVERTHELESS AMOUNTS ALREADY ACCOUNTED, RECODED ,DI SCLOSED & DECLARED IN THE BANK ACCOUNT NO.10003717 AND ATTRIB UTABLE TO THE UNINTENTIONAL AND INADVERTENT MISTAKE OF COUNSEL. H ENCE OMITTED THE FACTS THEREOF AND THE ASSESSEE TOO SIGNED THE R ETURN LIKEWISE WHICH CAME TO THE NOTICE WHILE THERE WAS THE COMMEN CEMENT OF THE PROCEEDINGS (GENERAL ENQUIRY {SUPRA}) AND REAPPRAIS AL & RE- EXAMINATION OF THE COMPLETE RECORDS UNDERTAKEN INDI VIDUALLY AT THE HANDS OF THE ASSEESSEE BEFORE HAVING RECEIVED ANY N OTICE/ORDER SHEET ENTRY ON SAID CAPITAL GAIN. ADDITIONALLY THE REASON FOR DECLARATION THROUGH THE 'REVISED RETURN OF INCOME' FOR THE CAPITAL GAIN IS DUE TO TWO REASONS 1) THERE WAS PARTITION I N BUSINESS OF ASSESSEE WITH HIS PARTNERS AND THE ASSESSEE STARTED A NEW PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF BOU TIQUE GLOBAL FROM 30.06.2007. DUE TO PARTITION, RECORDS RELATING TO COMPANIES WERE WITH THE ASSESSEE'S PARTNER AND THE SAME WERE NOT ASSESSABLE TO THE ACCOUNTANT AT THE TIME OF FILING OF RETURN { AFFIDAVIT OF ASSESSE AS WELL AS ACCOUNTANT OF THE ASSESSEE } 2) ASSESSEE WAS NOT REQUIRED TO SUBMIT ANY PERSONAL STATEMENT OF AFFAIRS AS ON 3 1.03.2007 AND 31.03.2008 AS THE RETURN FOR THE AY 2007-08 WAS SUB MITTED IN 5 ITA NO. 361/DEL/2014 FORM NO.ITR-3. WHILE DURING THE AY 2008-09 ASSESSEE FILED INCOME TAX RETURN IN FORM NO.ITR-4. AS PER NEW INCOME TAX RETURN RULES, ASSESSEE IS NOT REQUIRED TO FILE PERSONAL STATEMENT OF AFFAIRS ALONG WITH INCOME TAX RETURN. HOWEVER WHILE PREPARING PER SONAL BALANCE SHEET FOR SCRUTINY PROCEEDINGS, THE ASSESSEE FOUND THAT THE ABOVE SAID CAPITAL GAIN ON SHARES WAS PENDING DISCLOSURE 'WITHOUT ANY INTENTION TO CONCEAL' THE INCOME AS THE ASSESSEE HA S ALREADY FILED RETURN SHOWING INCOME OF RS.1,32,24,171/- AND 'PAID TAX AMOUNTING TO RS.45,69,390/-. RETURN ACKNOWLEDGEMENT , COMPUTATION OF INCOME AUDIT REPORT U/S 44AB AND AUD ITED BALANCE SHEET AS ON 31/3/2008. THE LD. AR FURTHER S UBMITTED THAT THE ASSESSEE HAD GIVEN ALL PARTICULARS OF HIS INCOM E AND HAD DISCLOSED ALL FACTS TO THE AO DURING THE ASSESSMEN T PROCEEDINGS. IT IS NOT THE CASE SET UP BY THE AO THAT IN REPLY TO A QUERY FROM ASSESSEE AND/OR SOME NEW MATERIAL WERE DISCOVERED O R SOME INFORMATION WHICH WAS NOT FURNISHED BY THE ASSESSEE . IN SUCH CIRCUMSTANCES, THE HUMBLE PRAYER IS TO VACATE THE L EVY OF PENALTY U/S 271(L)(C). RELIANCE IS BEING PLACED UPON CIT VS . SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC) WHEREIN IT IS HELD THAT THOUGH THE ASSESSEE SURRENDERED ADDITIONAL INCOME BY WAY O F REVISED RETURNS AFTER PERSISTENT QUERIES BY AO ONCE THE REV ISED RETURNS HAVE BEEN REGULARIZED BY REVENUE THE EXPLANATION OF THE ASSESSEE THAT HE HAS DECLARED ADDITIONAL INCOME TO BUY PEACE AND TO COME OUT OF VEXED LITIGATION COULD BE TREATED AS BONA FIDE AND PENALTY UNDER SECTION 271(1)(C) WAS NOT LEVIABLE. THE UNINTENTION AL AND INADVERTENT MISTAKE FOR THE TRANSACTIONS HAVING GON E TO OMIT THE 6 ITA NO. 361/DEL/2014 SIGHT OF THE ACCOUNTANT TOO IS EVIDENT FROM RECORDS RESULTING THE SAME WAS MADE TO PAY THE DEMANDS OF TAX DUE ON DT. 03.12.2010 WITH HDFC BANK, BSR CODE 0510308 SI. NO.50211 BEING A MATERIAL ON RECORD AND WITH GREATEST RESPECT BEING PRAYED TH AT THE LEVY BE VACATED UNDER THE AFORESAID FACTS &CIRCUMSTANCES OF THE CASE AS EXPLAINED. SINCE, THE SAID WAS AVAILABLE WITH THE A SSESSING OFFICER AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) ON DT 30.12.2010 AT AN AMOUNT OF RS.1,50,52,122 NOTWITHST ANDING THE BONAFIDE AND UNINTENTIONAL AND INADVERTENT MISTAKE THE ORDER DT. 30.12.2010 WAS NOT CONTESTED IN APPELLATE PROCEEDIN GS AND IT CANNOT BE CONSTRUED AS THE CONFESSION CALLING FOR A MECHANICAL LEVY ON THE TRUE AND CORRECT INTERPRETATION AND APPRECIA TION OF SEC. 271(L)(C) EXPLANATION 5(2). THE FINANCIAL STATEMENT S HAVING BEEN EXTRACTED FROM THE 'MATERIAL PARTICULARS' AND 'MATE RIAL ON RECORD' BY THE PROFESSIONAL AND THERE BEING APPRECIATION AND E XAMINATION OF THE SAME BY THE AO ONCE HAVING RECORDED A FINDING O F FACT (30.12.2010) QUA THE CALLING OF THE REPLIES, HAVING BEEN SUBMITTED THEM REGULARLY, ALONG WITH THE PRODUCTION OF BOOKS OF ACCOUNTS AND THE SUPPORTING MATERIAL WOULD GO TO SUFFICIENTLY SH OW THE INTENTION BEING FOR MAKING THE COMPLETE DETAILS AVAILABILITY TO THE AO SINCE IN THE TOTALITY THERE ARE MERELY NON BUSINESS USAGE DI SALLOWANCES FOR EXPENSES AND BY ANY STRETCH OF IMAGINATION ON THE P RIMA FACIE EXAMINATION OF THE TOTALITY OF THE CASE IT IS EVIDE NT THAT ALL EFFORT HAS BEEN TOWARDS THE CORRECT COMPILATION, PREPARATION, FILING AND PRESENTING OF THE CASE AND RENDERING ALL ASSISTANCE IN THE INTEREST OF FAIR PROCEEDINGS MORE SO THE PLEADING IS NOT FOCUSE D TOWARDS THE 7 ITA NO. 361/DEL/2014 IGNORANCE OF LAW RATHER THE STRESS IS ON THE COMPIL ATION OF THE RECORDS AS THE PARTIAL RECORDS WERE RECEIVED FROM O THER PARTNER AND THE ACCOUNTANT PREPARING THE RETURN WHOSE AFFIDAVIT REALIZING THE UNINTENTIONAL AND INADVERTENT MISTAKE IS APPENDED. 8. THE LD. DR RELIED ON THE ORDER OF THE CIT(A) AND THE PENALTY ORDER. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE MATERIALS AVAILABLE ON RECORD. AFTER GOING THROUGH THE RECORD IT CAN BE SEEN THAT THE ASSESSEE HAS FILED RETURN OF INCOME FOR AL MOST RS.1,31,64,117/-AND FOR WHICH ALMOST 45,69,387/- TA X WAS PAID. IF THE ASSESSEE WANTED TO CONCEAL THE INCOME OR FILED INACCURATE PARTICULARS THEN HE WOULD HAVE NOT FILED LETTER DAT ED 6/12/2010 BEFORE THE ASSESSING OFFICER AND IMMEDIATELY PAID T HE AMOUNT TAXABLE ON THE INCOME WHICH INADVERTENTLY NOT PLACE BEFORE THE AUTHORITIES AT THE RELEVANT TIME. THIS WAS MENTION ED IN THE AFFIDAVIT PRODUCED BEFORE THE CIT(A). AS PER THE HON'BLE SUPR EME COURT IN CASE OF CIT VS. SURESH CHANDRA MITTAL (2001) 251 IT R 9 (SC) WHEREIN IT IS HELD THAT THOUGH THE ASSESSEE SURREND ERED ADDITIONAL INCOME BY WAY OF REVISED RETURNS AFTER PERSISTENT Q UERIES BY AO ONCE THE REVISED RETURNS HAVE BEEN REGULARIZED BY R EVENUE THE EXPLANATION OF THE ASSESSEE THAT HE HAS DECLARED AD DITIONAL INCOME TO BUY PEACE AND TO COME OUT OF VEXED LITIGATION CO ULD BE TREATED AS BONA FIDE AND PENALTY UNDER SECTION 271(1)(C) WAS N OT LEVIABLE. THUS, THE ACT OF THE ASSESSEE CANNOT BE TERMED AS I NACCURATE FURNISHING OF INCOME OR CONCEALMENT OF INCOME. THE REFORE, THE 8 ITA NO. 361/DEL/2014 CIT(A) AS WELL AS THE ASSESSING OFFICER SHOULD HAV E TAKEN THIS ASPECT INTO CONSIDERATION. THIS WAS TOTALLY IGNORE D BY BOTH THE AUTHORITIES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. THE ORDER IS PRONOUNCED IN THE OPEN COURT 20TH OF OCTOBER, 2016. SD/- SD/- (G. D. AGRAWAL) (SUCH ITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER DATED: 20/10/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 09.08.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 10.08.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 0 .10.2016 PS/PS 9 ITA NO. 361/DEL/2014 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 0 .10.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.