Shri Kamalkumar Soni, Sendhwa V. The Assistant Commissioner of Income Tax, Khandwa

ITA 390/IND/2010

• Counselvise Citation: 39022714 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Search and seizure; Onus to prove

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS. 416, 417, 418, 419, 420 & 421/IND/2010 A.YS. 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, & 2005-06 SHRI MOTILAL SONI SENDHWA PAN AKQPS 0071 B :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT ITA NOS. 402 TO 408/IND/2010 A.YS.2000-01, 2001,02, 2002-03, 2003-04, 2004-05, 2 005- 06, 2006-07 SHRI KISHORECHAND SONI SENDHWA PAN AKQPS 0069R :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT 2 ITA NOS. 409 TO 415/IND/2010 A.YS. 2000-01, 2001,02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 SHRI RAJESH KUMAR SONI SENDHWA PAN AOSPS 5555A :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT ITA NOS. 384 TO 390/IND/2010 A.YS.2000-01, 2001,02, 2002-03, 2003-04, 2004-05, 2 005- 06, 2006-07 SHRI KAMAL KUMAR SONI SENDHWA PAN AKQPS 0070 A :: APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX KHANDWA :: RESPONDENT APPELLANTS BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI KESHAV SAXENA DATE OF HEARING 07 .0 8 .2012 DATE OF PRONOUNCEMENT 31 .0 8 .2012 3 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS BUNCH OF TWENTY-SEVEN APPEALS BY DIFFERENCE ASSESSEES OF THE SAME GROUP ARISES OUT OF DIFFERENT O RDERS OF THE LEARNED CIT(A) FOR THE ASSESSMENT YEARS MENTIONED ABOVE. SINCE IN ALL THESE APPEALS, THE ISSUE RELATING T O PENALTY LEVIED U/S 271(1)(C) OF THE ACT IS INVOLVED, THESE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. 2. DURING HEARING, WE HAVE HEARD SHRI S.S. DESHPANDE ALONG WITH SHRI R.P. MANDOVRA, LEARNED COUNSEL FOR THE ASSESSEE, AND SHRI KESHAV SAXENA, LEARNED CIT DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE LEARNED CIT(A) INITIATED PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT ON THE GROUND THAT THE LEARNED AO FAILED TO I NITIATE PENALTY PROCEEDINGS FOR WHICH OUR ATTENTION WAS INVITE D TO PARA 6 OF THE APPELLATE ORDER. IT WAS ALSO PLEADED THAT AS 4 PER THE LEARNED CIT(A) THE ASSESSEE FURNISHED INACCU RATE PARTICULARS OF INCOME LEADING TO CONCEALMENT OF INCOME. ASSERTION WAS MADE BY THE LEARNED COUNSEL THAT WHATEVER DETAILS WERE AVAILABLE, THE SAME WERE SUBMITTED BEFORE T HE AO AND DURING SEARCH PROCEEDINGS NOTHING WAS FOUND REGARDING DAY TO DAY HOUSEHOLD EXPENSES INCURRED BY THE ASSESSEE SUGGESTING THAT THE ASSESSEES MADE PAYMENT OVE R AND ABOVE THE WITHDRAWALS FOR HOUSEHOLD EXPENSES. A PLEA WAS ALSO RAISED THAT THE WITHDRAWALS MADE BY THE WIVES O F THE RESPECTIVE ASSESSEES WERE NOT CONSIDERED AND THE RE WAS INCOME FROM AGRICULTURAL PRODUCE AND MILK. IT WAS ALSO CONTENDED THAT DURING SEARCH AND SEIZURE OPERATION, NOTHING ADVERSE WITH REGARD TO HOUSEHOLD EXPENSES/AGRICULTURAL EXPENSES WAS FOUND AND THE ALLEGE D UNDISCLOSED INCOME WAS DULY RETURNED AND ASSESSED. TH E LEARNED COUNSEL ALSO RELIED UPON CERTAIN JUDICIAL PRONOUNCEMENTS WHICH WILL BE DEALT WITH WHILE 5 ADJUDICATING THE ISSUE. THE LEARNED COUNSEL EMPHATICAL LY CONTENDED THAT NO PENALTY IS IMPOSABLE ON ESTIMATION O F LOW HOUSEHOLD/AGRICULTURAL EXPENSES. 3. ON THE OTHER HAND, THE LEARNED CIT DR, SHRI KESHAV SAXENA, DEFENDED THE IMPOSITION OF PENALTY BUT DID NO T CONTROVERT THE ASSERTION MADE BY THE LEARNED COUNSEL F OR THE ASSESSEE THAT THERE IS ESTIMATION OF LOW HOUSEHOLD EXPENSES/AGRICULTURAL EXPENSES. HOWEVER, MR. SAXENA CONTENDED THAT THE LEARNED CIT(A) IS WITHIN HIS JURIS DICTION TO INITIATE PENALTY PROCEEDINGS AS THERE WAS FURNISHING OF INACCURATE PARTICULARS OF INCOME LEADING TO CONCEALMENT O F INCOME. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE LEARNED AO MADE ADDITIONS ON ACCOUNT OF ALLEGED UNEXPLAINED INCOME TOWARDS LOW HOUSEHOLD WITHDRAWALS/AGRICULTURAL EXPENSES. HOWEVER, THE LEARNE D 6 AO DID NOT INITIATE PENALTY PROCEEDINGS FOR FURNISHIN G INACCURATE PARTICULARS OF INCOME RESULTING INTO CONCEALM ENT OF INCOME. HOWEVER, THE LEARNED CIT(A) INITIATED PEN ALTY PROCEEDINGS U/S 271(1)(C) DURING FIRST APPELLATE PROC EEDINGS ON THE PLEA THAT SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WHICH LEADS TO CONCEALMENT OF INCOME, THEREFORE, PENALTY U/S 271(1)( C) IS LEVIABLE. THE ASSESSEE HAS CHALLENGED SUCH INITIATION B Y THE LEARNED CIT(A). IN VIEW OF THESE FACTS, WE ARE SU PPOSED TO ANALYSE THE LANGUAGE USED IN SECTION 271(1)(C) OF TH E ACT. AS PER SUB-SECTION (1) OF SECTION 271 OF THE ACT I F THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR T HE COMMISSIONER, IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, HE MAY DIRECT THAT SUCH PE RSON SHALL PAY BY WAY OF PENALTY...... 7 4.1 SO FAR AS THE CONTENTION OF THE ASSESSEE THAT THE LEARNED CIT(A) IS NOT EMPOWERED TO LEVY PENALTY ESPEC IALLY WHEN THE AO HAS NOT LEVIED THE SAME, IS CONCERNED, WE ARE SATISFIED THAT THE LEARNED CIT(A) IS DULY EMPOWERED BY THE ACT ITSELF TO INITIATE/LEVY SUCH PENALTY, THEREFORE, WE ARE NOT IN AGREEMENT WITH THIS PROPOSITION OF THE ASSESSEE. 4.2 NOW THE QUESTION ARISES AS TO WHETHER PENALTY IS LEVIABLE ON ESTIMATED/AD-HOC LOW HOUSEHOLD EXPENSES/ AGRICULTURAL EXPENSES. WE ARE OF THE VIEW THAT ESTIMATI ON GENERALLY DEPENDS UPON SO MANY FACTORS AND SUBJECTIVE PERCEPTION. SO FAR AS INCURRING OF EXPENSES ON ACCOUN T OF LOW HOUSEHOLD WITHDRAWALS/AGRICULTURAL EXPENSES IS CONCERNED, IT DEPENDS UPON SO MANY FACTORS LIKE PLACE OF LIVING OF THE ASSESSEE (VILLAGE OR CITY), NATURE OF WO RK OF THE ASSESSEE, FAMILY COMPOSITION, EDUCATIONAL EXPENSES, COMPOSITION OF THE FAMILY, EDUCATIONAL QUALIFICATION OF THE FAMILY MEMBERS, FINANCIAL AND SOCIAL STATUS OF THE FAMILY , 8 ETC. SO FAR AS AGRICULTURAL EXPENSES ARE CONCERNED, IT ALSO DEPENDS ON MANY FACTORS LIKE NATURE OF LAND, AVAILABILIT Y OF MEANS OF IRRIGATION, RAIN FALL, LAND HOLDING, WHETHER TH E AGRICULTURAL OPERATION IS DONE THROUGH LABOUR OR BY FAMI LY MEMBERS, LOCATION OF LAND, AVAILABILITY OF MARKET, FINAN CIAL STATUS OF THE FAMILY, ETC. AS SENDHWA, WHERE THE ASSESS EE IS RESIDING, IS A SMALL TOWN, THEREFORE, THE COST OF LIVING MAY BE LESSER IN COMPARISON TO BIGGER CITIES AND AT THE SAM E TIME, SINCE THE ASSESSEE ALSO IS AN AGRICULTURIST, THER EFORE, SOME OF THE ITEMS LIKE WHEAT, PULSES, VEGETABLES, MI LK, FRUITS MAY BE AVAILABLE EASILY FROM THEIR OWN LANDS FOR DAY TO DAY CONSUMPTION AND SEEDS, ETC., THEREFORE, LESSE R HOUSEHOLD WITHDRAWALS MAY BE ENOUGH. HOWEVER, AS MENTIONED EARLIER, SUCH WITHDRAWALS ALSO DEPEND UPON S O MANY FACTORS, THEREFORE, NO CLEAR CUT FORMULA CAN BE ADDUCED. SIMILAR IS THE SITUATION FOR AGRICULTURAL EXPE NSES. 9 4.3 IT IS NOT THE CASE OF THE REVENUE THAT THERE WAS NO WITHDRAWAL FOR HOUSEHOLD EXPENSES OR NO EXPENSES WER E INCURRED FOR AGRICULTURAL OPERATIONS. EVEN OTHERWISE, AS MENTIONED EARLIER, THE ESTIMATION IS ALWAYS A SUBJECTIV E APPROACH AND DEPENDS UPON SO MANY FACTORS, THEREFORE, ESTIMATION OF ANY SPECIFIC PERCENTAGE FOR SUCH WITHDR AWALS OR AGRICULTURAL EXPENSES ALWAYS CAN NEVER BE ACCURATE. EVEN OTHERWISE, THERE ARE SO MANY FACTORS FOR SUCH EXPENSES AS THE FRUGAL NATURE OF THE INDIVIDUAL. AS MENTIONED EARLIER, ONE PRESUMPTION IS OOZING OUT THAT EVEN THE LEARNED AO WAS SATISFIED, THEREFORE, HE DID NOT IN ITIATE PENALTY PROCEEDINGS BECAUSE HE MADE ADDITIONS TO THE RETURNED INCOME BY ESTIMATING HOUSEHOLD/AGRICULTURAL EXPENSES BUT DID NOT MAKE ANY ADDITION FOR ALLEGED UNEXPLAINED INCOME AS IS EVIDENT FROM RESPECTIVE ASSESSMENT ORDERS THEMSELVES. 10 4.4 THE DECISION FROM HONBLE PUNJAB & HARYANA HIG H COURT IN HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85/1 256 TAXMAN 252 CLEARLY STATES THAT PENALTY CANNOT BE LEVIED WHEN INCOME HAS BEEN ESTIMATED. THE HONBLE APEX COU RT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. L TD.; 322 ITR 158 HELD THAT MERE MAKING A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FUR NISHING OF INACCURATE PARTICULARS REGARDING INCOME OF THE ASSESSEES. IT WAS FURTHER HELD THAT DISALLOWANCE OF EXPENSES WILL NOT PER SE AMOUNT TO FURNISHING OF INAC CURATE PARTICULARS OF INCOME, THEREFORE, THAT BY ITSELF WOULD NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. THE HONBLE MADRAS HIGH COURT IN CIT VS. K.R. CHINNI KRISHNA CHET TY; 246 ITR 121 HELD THAT DEFINITE FINDING ABOUT CONCEALM ENT IS NECESSARY FOR IMPOSING PENALTY U/S 271(1)(C). EVEN OTHERWISE, DISCRETION IS VESTED WITH THE REVENUE AUT HORITIES FOR LEVYING PENALTY AS THE WORD MAY HAS BEEN USED AND 11 NOT SHALL IN THE SECTION ITSELF AND SUCH POWER HAS T O BE EXERCISED JUDICIOUSLY AND NOT ARBITRARILY. DURING SEAR CH PROCEEDINGS, NOTHING WAS FOUND FROM THE PREMISES OF THESE ASSESSEES REGARDING DAY TO DAY HOUSEHOLD EXPENSES INCURRED BY THESE ASSESSEES SUGGESTING THAT THESE ASSESSEES MADE ANY PAYMENTS OVER AND ABOVE THE WITHDRAWALS MADE FOR SUCH HOUSEHOLD EXPENSES. RATHER THE LEARNED FIRST APPELLATE AUTHORITY HIMSELF HAS SUGGE STED THAT THESE ASSESSEES DID NOT GIVE ANY BROAD ESTIMATE OF SUCH EXPENSES. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF JUMABAI PREMCHAND (HUF) VS. CIT; 243 ITR 812, WHEREIN THERE WAS A FINDING IN THE ASSESSMENT ORDER T HAT HOUSEHOLD EXPENSES OF THE ASSESSEE WERE VERY LOW DUR ING THE RELEVANT ASSESSMENT YEARS, HELD THAT LOW HOUSEHOLD WITHDRAWALS IS NOT CONCLUSIVE FOR IMPOSING PENALTY U/ S 271(1)(C) OF THE ACT. WHILE COMING TO THIS CONCLUS ION, THE 12 HONBLE HIGH COURT CONSIDERED FOLLOWING JUDICIAL PRONOUNCEMENTS :- (A) CIT VS. ANWAR ALI (1970) 76 ITR 696 (SC) (B) CIT VS. NAVNITLAL POCHALAL (1995) 213 ITR 69 (G UJ) (C) CIT VS. VINAYCHAND HARILAL (1979) 120 ITR 752 ( GUJ) (D) MEHTA PARIKH & CO. VS. CIT (1956) 30 ITR 181( SC) (E) VIDYA SAGAR OSWAL VS. CIT (1977) 108 ITR 861 (P &H) 4.5 THERE ARE SO MANY DECISIONS ON PENALTY LIKE UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS; (2008) 16 6 TAXMAN 65(SC) WHICH SAYS THAT PENALTY U/S 271(1)(C) IS A CIVIL LIABILITY, K.C. BUILDERS VS. ACIT (2004) 265 ITR 562 (SC) WHEREIN IT WAS HELD THAT MERE OMISSION FROM RETU RN OF AN ITEM OF RECEIPT NEITHER AMOUNTS TO CONCEALMENT NOR DELIBERATE FURNISHING OF INACCURATE PARTICULARS. IN THE CASE OF T. ASHOK PAI; 292 ITR 11 (SC), THE HONBLE APEX COURT CONCLUDED THAT CONCEALMENT REFERS TO A DELIBERATE ACT ON THE PART OF THE ASSESSEES AND IF THE EXPLANATION GIVEN B Y THE ASSESSEE WITH REGARD TO MISTAKE COMMITTED BY HIM I S 13 FOUND TO BE BONAFIDE THEN NO PENALTY IS IMPOSABLE. IN THE CASE OF DILIP & SHROFF VS. JCIT (2007) 291 ITR 519 ( SC) THE HONBLE COURT HELD THAT PRIMARY BURDEN OF PROOF IS ON THE REVENUE. HOWEVER, IN A LATER DECISION, THE FULL BENC H OF HONBLE DELHI HIGH COURT IN CIT V RAMPUR ENGG. CO.L TD., (2009) 309 ITR 143 CONCLUDED THAT POWER TO IMPOSE PENALTY U/S 271(1)(C) DEPENDS UPON SATISFACTION OF THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS AND IT CANNOT BE EXERCISED IF HE IS NOT SATISFIED AND HAS NOT RECORDED HIS SATISFACTION ABOUT EXISTENCE OF CONDITIONS SPECIFIED IN CLAUSES (A)(B) AND (C) OF SUB-SECTION (1) OF SECTION 2 71 BEFORE PROCEEDINGS ARE CONCLUDED. IN THESE APPEALS, NO SUCH SATISFACTION WAS RECORDED BY THE LEARNED AO. HOWEVER, THE SAME WAS INITIATED BY THE LEARNED CIT(A), THEREFORE, T HE FULL BENCH DECISION FROM HONBLE DELHI HIGH COURT FORTIF IES THE CASE OF THE ASSESSEE BUT UNDISPUTEDLY THE LEARNED CIT (A) IS 14 ALSO HAVING CO-TERMINUS POWER AS THAT OF THE ASSESSING OFFICER. 4.6 IT IS WORTH MENTIONING HERE THAT EVEN THE TRIBU NAL IN QUANTUM APPEALS OF THE PRESENT ASSESSEES HAS AGAIN ESTIMATED THE WITHDRAWAL/EXPENSES BY SUBSTANTIALLY REDUCING THE SAME MEANING THEREBY AGAIN AN ESTIMATION WHICH IS BASED ON SUBJECTIVE APPROACH, THEREFORE, NO PENALTY IS LEVIABLE. THE HONBLE APEX COURT IN THE C ASE OF ANVAR ALI; 76 ITR 696 HELD THAT FINDINGS IN ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE, THOUGH GOOD EVIDENCE BUT BEFORE PENALTY IS IMPOSED, THE ENTIRETY OF CIRCUMSTAN CES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISP UTED AMOUNT REPRESENTED INCOME AND THE ASSESSEES HAVE CONSCIOUSLY CONCEALED SUCH INCOME OR DELIBERATELY FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 5. WITH RESPECT TO THE AGRICULTURAL INCOME, THE AO HAS NOT DENIED THE NATURE OF SUCH INCOME WHICH IS EXEMPT FROM 15 TAX. HOWEVER, HE HAS NOT ACCEPTED THE QUANTUM OF EXPENDITURE INCURRED FOR EARNING THE AGRICULTURAL INCO ME. BY ESTIMATING THE AGRICULTURAL EXPENDITURE AT A HIGHER AMOUNT, THE AO HAS TREATED THE EXCESS OF EXPENDITURE AS INCOME FROM OTHER SOURCES. AS PER OUR CONSIDERED V IEW, WHEN THE NATURE OF AGRICULTURAL INCOME ITSELF IS NOT QUESTIONED, EVEN DEDUCTION IN AGRICULTURAL EXPENDITURE WILL FINALLY REDUCE THE NET INCOME OFFERED BY THE ASSESSE E UNDER THE HEAD AGRICULTURE MEANING THEREBY THE EXEMPTED INCO ME WILL BE REDUCED AND THERE WILL BE NO EFFECT ON THE O THER SOURCE OF INCOME AS ALLEGED BY THE AO. ACCORDINGLY, LEVYING PENALTY WITH REFERENCE TO TRADING THE NET AGRICULTURAL INCOME AT LOWER AMOUNT IS NOT GOING TO AFFECT THE TAXAB ILITY OF AGRICULTURAL INCOME INSOFAR AS THE SAME IS EXEMPT FRO M TAXATION. 6. SO FAR AS THE CASES RELIED UPON BY THE LEARNED CIT( A) IN THE IMPUGNED ORDERS ARE CONCERNED, WE FIND THAT THESE 16 DECISIONS WERE ARRIVED AT ON THE FACTS OF THOSE CASES WHEREAS THE FACTS OF THE PRESENT APPEALS ARE DISTINGUISHABLE. THE DECISION IN THE CASE OF PRADEEP KUMAR KHANDELWAL (ITA NO. 284/IND/2008) ORDER DATED 22.2.201 0 AND KAMAL KUMAR LATH (ITA NO. 709/IND/2007) ORDER DATED 19.11.2009, CITED BY THE LEARNED CIT(A) PERTAINS TO CONFIRMATION OF HOUSEHOLD WITHDRAWALS AND THE EXPENSES INCURRED IN THE MARRIAGE WHEREAS THE ISSUE BEFORE US PERTAINS TO LEVY OF PENALTY ON ESTIMATED HOUSEHOLD WITHDRAWALS/AGRICULTURAL EXPENSES, THEREFORE, MAY NOT HELP THE REVENUE. IDENTICAL IS THE SITUATION IN THE CASE O F SHYAM SUNDER AGRAWAL. THERE IS NO WHISPER IN THE PENALTY OR DER PASSED BY CIT(A) U/S 271(1)(C) TO THE EFFECT THAT THE RE IS ANY CONCEALMENT OF INCOME WITH REFERENCE TO NETTING OF I NTEREST INCOME. PENALTY HAS BEEN LEVIED WITH REFERENCE TO TH E LOW HOUSEHOLD WITHDRAWAL AND ESTIMATED ADDITION ON 17 AGRICULTURAL EXPENSES. IN VIEW OF THESE FACTS, THE PE NALTY SO LEVIED IS DIRECTED TO BE DELETED. FINALLY, ALL THESE APPEALS ARE ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 ST AUG., 2012. SD SD (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED -31 ST AUG, 2012 COPY TO : APPELLANTS/RESPONDENTS/CIT/CIT(A)/CIT DR/ GUARD FILE DN/-892130