Ashwin Vaghasia, Surat V. Income Tax Officer, Ward -3(1)(1), Surat

ITA 374/SRT/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8813 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 19-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUPAMA SINGLA
• Keywords: Unexplained investment; Business income; Salary income; Maximum Marginal Rate; Bonafide mistake
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ITA NO.374/SRT/2017 ( [ [ / ASSESSMENT YEAR: (2006-07) (VIRTUAL COURT HEARING) ASHWIN VAGHASIA 35, SAHYOG CHAMBERS MINI BAZAR, SARDAR CHOWK, VARACHHA ROAD, SURAT - 395006 V S. THE INCOME TAX OFFICER, WARD-3(1)(1), SURAT. ./ ./ PAN/GIR NO.: ABMPV2520M (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI MEHUL SHAH, C.A. RESPONDENT BY : MRS. ANUPAMA SINGLA SR.DR / DATE OF HEARING : 13/07/2021 /DATE OF PRONOUNCEMENT : 30/07/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINING TO A.Y.2006-07 IS DIRECTED AGAINST THE ORDER PASSED BY THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-3, SURAT, [LD.CIT(A)] IN APPEAL NO.CAS-3/TRFD/V/270/2014-15 DATED 25.10.2017, WHICH IN TURN ARISES OUT OF A PENALTY ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 19.03.2014. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN LEVYING PENALTY OF RS.4,07,023/- UNDER SECTION 271(1) (C ) OF THE INCOME TAX ACT, 1961. 3.BRIEF FACTS AS DISCERNIBLE FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT ASSESSEE IS AN INDIVIDUAL BEFORE US AND HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 01.02.2007, DECLARING TOTAL INCOME OF RS. 4,97,432/- WHICH INTER PAGE | 2 ITA NO.374/SRT/2017 FOR A.Y. 2006- 07 ASHWIN VAGHASIA ALIA INCLUDING AGRICULTURE INCOME OF RS. 3,03,950/-. THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT WAS FRAMED ON 29.12.2008, DETERMINING TOTAL INCOME AT RS. 12,69,700/-. DURING THE COURSE OF ASSESSMENT PROCEEDING, ON VERIFICATION OF THE RETURN OF INCOME, IT WAS NOTED BY ASSESSING OFFICER THAT IN THE RETURN OF INCOME ASSESSEE HAS ANNEXED THE CAPITAL ACCOUNT FOR THE ASSESSMENT YEAR 2005-06. ACCORDINGLY, THE ASSESSEE WAS REQUESTED TO FURNISH THE COPY OF CAPITAL ACCOUNT, BALANCE-SHEET ETC. FOR THE ASSESSMENT YEAR 2006-07, UNDER CONSIDERATION. THE SAME WAS FURNISHED BY THE ASSESSEE, BEFORE THE ASSESSING OFFICER, VIDE HIS LETTER DATED 14.11.2008. ON EXAMINATION THE SAME WITH THE CAPITAL ACCOUNT FOR THE FINANCIAL YEAR RELEVANT TO A.Y. 2005-06, IT WAS NOTICED BY THE ASSESSING OFFICER THAT CLOSING BALANCE FOR THE ASSESSMENT YEAR 2005-06, WAS RS. 21,17,617/- WHEREAS CAPITAL ACCOUNT FURNISHED FOR ASSESSMENT YEAR 2006-07 HAD SHOWN OPENING CAPITAL AT RS. 25,85,939/-. THEREFORE, ASSESSING OFFICER NOTED THE DIFFERENCE TO THE TUNE OF RS. 4,68,322/- ( RS. 25,85,939- RS. 21,17,617). THIS DIFFERENCE WAS BROUGHT TO THE NOTICE OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED HIS REPLY BEFORE ASSESSING OFFICER. 4. ON VERIFICATION OF THE REPLY OF THE ASSESSEE, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT ASSESSEE HAS GIVEN INCORRECT AND FALSE INFORMATION, AS SUCH THE ACTION OF THE ASSESSEE IS NOTHING BUT A FEIGNED STORY TO MANEUVER THE REVENUE BY FURNISHING ILLOGICAL AND INCORRECT INFORMATION AND THEREFORE SUCH DIFFERENCE OF OPENING CAPITAL OF RS. 4,68,322/- ( RS. 25,85,939- RS. 21,17,617) WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1) (C ) OF THE ACT ON ACCOUNT OF FURNISHING THE INACCURATE PARTICULARS OF INCOME. 5. DURING THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT SUBMITTED ANY PROPER EXPLANATION. THE ASSESSING OFFICER ALSO NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAS NOT SUBMITTED ANY WRITTEN SUBMISSION, WITH RESPECT TO ADDITION OF RS.4,68,322/-,(RS. 25,85,939- RS. 21,17,617) BEING DIFFERENCE IN OPENING CAPITAL. THEREFORE, ASSESSING OFFICER WAS PAGE | 3 ITA NO.374/SRT/2017 FOR A.Y. 2006- 07 ASHWIN VAGHASIA OF THE VIEW THAT ASSESSEE HAS NOT DISCHARGED HIS ONUS AND THEREFORE HE IMPOSED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT, TO THE TUNE OF RS.4,07,023/-. 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO HAS CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. 7. SHRI MEHUL SHAH, LEARNED COUNSEL FOR THE ASSESSEE, RELIED ON THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) DURING THE APPELLATE PROCEEDINGS. 8. ON THE OTHER HAND, LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA, THEREFORE THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. THE CONTENTION OF LD COUNSEL IS THAT DIFFERENCE IN OPENING BALANCE OF CAPITAL ACCOUNT IS ADDED BY THE ASSESSING OFFICER, BECAUSE OF AGRICULTURAL INCOME OF ASSESSMENT YEAR 2005-06, WHICH WAS NOT TAKEN INTO CAPITAL ACCOUNT. THAT IS, DIFFERENCE IN OPENING BALANCE OF CAPITAL ACCOUNT HAS ARISEN MAINLY ON THE REASON THAT AGRICULTURAL INCOME OF ASSESSMENT YEAR 2005- 06, BY MISTAKE, WAS NOT TAKEN INTO CAPITAL ACCOUNT, BY THE ASSESSEE, WHICH IS AN UNINTENTIONAL MISTAKE. WE NOTE THAT DIFFERENCE IN CLOSING CAPITAL OF RS. 4,68,322/-, PERTAINING TO FINANCIAL YEAR 2004-05 OF RS. 21,17,617/- AND OPENING CAPITAL OF FINANCIAL YEAR 2005-06 OF 25,85,939/-, IS ON ACCOUNT OF THE REASON THAT WHILE FINALISING THE CAPITAL ACCOUNT OF EARLIER YEAR, THE ASSESSEE FORGOT TO INCORPORATE THE EARLIER YEAR'S NET AGRICULTURE INCOME OF RS. 4,68,322/- IN THE CAPITAL ACCOUNT DUE TO INADVERTENT MISTAKE FOR THE REASON THAT THE SAID INCOME WAS NOT LIABLE TO TAX UNDER THE ACT. PAGE | 4 ITA NO.374/SRT/2017 FOR A.Y. 2006- 07 ASHWIN VAGHASIA ACCORDINGLY, THE ASSESSEE HAD FILED HIS CAPITAL ACCOUNT WITH THE RETURN OF INCOME WITHOUT INCORPORATING AGRICULTURAL INCOME. HOWEVER, THE SAID MISTAKE CAME TO HIS NOTICE LATER ON AND ACCORDINGLY, THE SAME WAS RECTIFIED IN THE BOOKS AND ACCORDINGLY THE RECTIFIED CLOSING BALANCE OF CAPITAL ACCOUNT WAS CARRIED FORWARD AS OPENING BALANCE IN THE CURRENT YEAR AT RS. 25,85,939/-. IT IS FURTHER SUBMITTED BY LD COUNSEL THAT SINCE THE AGRICULTURE INCOME WAS NOT LIABLE TO TAX, THE ASSESSEE DID NOT FILE A REVISED STATEMENT OF ACCOUNTS OF EARLIER YEAR. 10. WE NOTE THAT ASSESSEE IS AN INDIVIDUAL AND DERIVING INCOME FROM SALARY, HOUSE PROPERTY AND OTHER SOURCES AND HENCE AS PER INCOME TAX ACT, 1961, ASSESSEE IS NOT LIABLE TO MAINTAIN ANY BOOKS OF ACCOUNTS UNDER SECTION 44AA OF THE ACT. THUS, THE BOOKS OF ACCOUNTS ARE ONLY VOLUNTARILY MAINTAINED BY THE ASSESSEE AND THE ASSESSEE DOES NOT HAVE ANY BUSINESS INCOME. APART FROM SALARY, THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS AGRICULTURE INCOME. FURTHER ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE DIFFERENCE IN CAPITAL ACCOUNT REPRESENTS ANY UNACCOUNTED INVESTMENT OR ANY UNACCOUNTED TAXABLE INCOME. FURTHER, THIS IS NOT THE CASE WHERE ASSESSEE HAS CONCEALED ANY PARTICULARS OF INCOME BECAUSE THE CAPITAL ACCOUNT FROM THE BOOKS OF ACCOUNTS MAINTAINED VOLUNTARILY WAS FURNISHED TO THE ASSESSING OFFICER, THOUGH THE ASSESSEE WAS NOT LIABLE TO MAINTAIN ANY BOOKS OF ACCOUNTS UNDER INCOME TAX ACT, 1961. FURTHER THE DIFFERENCE IS ALSO EXPLAINED TO THE ASSESSING OFFICER WHICH IS A BONAFIDE EXPLANATION BY THE ASSESSEE. JUST BECAUSE ASSESSEE HAS COMMITTED AN INADVERTENT AND BONA FIDE ERROR, DOES NOT MEAN THAT PENALTY SHOULD BE IMPOSED ON HIM. 11. WE MUST HASTEN TO ADD HERE THAT IN ASSESSEE`S CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, MAKING UNINTENDED MISTAKE IN THE CAPITAL ACCOUNT DOES NOT MEAN THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. WE ARE VERY MUCH CONSCIOUS OF HON'BLE APEX COURTS LANDMARK DECISION IN CASE OF PRICE PAGE | 5 ITA NO.374/SRT/2017 FOR A.Y. 2006- 07 ASHWIN VAGHASIA WATERHOUSE COOPERS PVT LTD. [(348 ITR 306)(SC)], WHEREIN IT WAS HELD THAT 'IMPOSITION OF PENALTY 'WOULD BE UNWARRANTED IN A CASE WHERE THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS'. 12. CONSIDERING THE PECULIAR FACTS OF THE ASSESSEE`S CASE, AS NARRATED ABOVE, THE IMPOSITION OF PENALTY ON THE ASSESSEE IS NOT JUSTIFIED. THE ASSESSEE HAD COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. THEREFORE, WE ARE OF THE VIEW THAT IN THE ASSESSEES CASE THE IMPOSITION OF PENALTY IS NOT JUSTIFIED AND THEREFORE, WE DELETE THE PENALTY OF RS. RS.4,07,023/-. 12. BEFORE PARTING, WE WOULD LIKE TO CLARIFY THE MISTAKE COMMITTED BY THE ASSESSING OFFICER WHILE IMPOSING PENALTY UNDER SECTION 271(1) (C ) OF THE ACT. THE ASSESSING OFFICER HAS ERRED IN CALCULATING PENALTY OF RS. 4,07,023/- ON THE TOTAL ADDITION OF RS. 4,68,322/-. EVEN, IF MAXIMUM MARGINAL RATE IS CONSIDERED, THE PENALTY SHALL BE RS.1,12,053/-. THE LD COUNSEL SUBMITS BEFORE US THAT COMPUTATION OF PENALTY MADE BY THE AO AT RS.4,07,023/- IS NOT CORRECT AND HE HAS SUBMITTED BEFORE US COMPUTATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS PLACED AT PAPER BOOK PAGE NO.14 AND THE SAME IS REPRODUCED BELOW: COMPUTATION OF PENALTY LEVIABLE U/S 271(1)(C) TAXABLE INCOME AS PER ASSESSMENT ORDER 9,65,754 ADD : AGRICULTURAL INCOME AS PER ASSESSMENT ORDER 3,03,950 ASSESSED INCOME 12,69,700 TAX ON ASSESSED INCOME AS PER ANNEXURE A 2,64,920 LESS : TAX ON RETURNED INCOME AS PER PENALTY ORDER 1,52,867 TAX SOUGHT TO BE EVADED AS PER SECTION 271(1)(C) 1,12,053 PAGE | 6 ITA NO.374/SRT/2017 FOR A.Y. 2006- 07 ASHWIN VAGHASIA 13. THE JUDICIAL PROPRIETY AND FAIRNESS DEMANDS THAT ASSESSEE`S FACTS SHOULD BE CONSIDERED IN RIGHT PERSPECTIVE. THEREFORE, WE NOTE THAT INSTEAD OF PENALTY AMOUNT TO THE TUNE OF RS.4,07,023/- THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD BE RS.1,12,053/-. SINCE, WE HAVE DELETED THE ENTIRE PENALTY IMPOSED BY THE ASSESSING OFFICER, THEREFORE, THE ERROR SO COMMITTED BY THE ASSESSING OFFICER IN COMPUTING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT DOES NOT HAVE ANY IMPACT ON OUR INSTANT ADJUDICATION. THIS IS ONLY A PASSING REFERENCE, JUST TO HIGHLIGHT THE MISTAKE COMMITTED BY THE ASSESSING OFFICER. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED ON 30/07/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 30/07/2021 / SKS COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT