Sri Sunil Kumar Jain, Visakhapatnam V. The ITO, Ward-5(2), Visakhapatnam, Visakhapatnam

ITA 4/VIZ/2012

• Counselvise Citation: 425314 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Keywords: Reopening of assessment; Unexplained investment; Business income; Revised return
• Section: 143(3); 133A; 148

Judgement Text

ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 4 /VIZAG/ 2012 ASSESSMENT YEAR : 2006-07 SRI SUNIL KUMAR JAIN VISAKHAPATNAM VS. ITO WARD-5(2) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAXPK 9921H ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SMT. KOMALI KRISHNA, ADDL. CIT DATE OF HEARING : 04.03.2014 DATE OF PRONOUNCEMENT : 07.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 31.10.2011 OF THE CIT(A), VISAKHAPATNAM UPHOLDING T HE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT FOR THE ASSESSME NT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THE MEMORANDUM OF APPEAL. IN ADDITION TO THE MAIN GROUNDS AS AFORESAI D, THE ASSESSEE ON 28.2.2014 HAS FILED A PETITION SEEKING ADMISSION OF THE FOLLOWING ADDITIONAL GROUND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHETHER THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON THE BASI S OF AN INVALID ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE A CT IS ALSO INVALID AND LIABLE TO BE CANCELLED? 3. SINCE THE ADDITIONAL GROUND RAISED IS PURELY ON A LEGAL ISSUE AND CAN BE DECIDED ON THE BASIS OF FACTS AND MATERIALS AVAILABLE ON RECORD, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF NATIONAL ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP 2 THERMAL POWER CORPORATION VS. CIT 229 ITR 383, WE A DMIT THE ADDITIONAL GROUND FOR ADJUDICATION. 4. BRIEFLY, THE FACTS ARE THE ASSESSEE AN INDIVIDUA L IS CARRYING ON BUSINESS IN JEWELLERY THROUGH A PROPRIETORY CONCERN ED STYLED AS MAHAVEER JEWELLERY HOUSE. A SURVEY U/S 133A OF THE INCOME- TAX ACT WAS CONDUCTED IN ASSESSEES BUSINESS PREMISES ON 24.3.2 006. THE ASSESSEE FILED HIS ORIGINAL RETURN OF INCOME FOR THE IMPUGNE D ASSESSMENT YEAR ON 31.10.2006 DECLARING GROSS TOTAL INCOME OF RS.3,97, 122.75PS. INCLUDING BUSINESS INCOME OF RS.3,96,811.86PS. IN COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT DURIN G THE SURVEY OPERATION, THE STOCK AVAILABLE WITH THE ASSESSEE WAS PHYSICALL Y VERIFIED AND INVENTORISED. IT WAS NOTICED THAT THE ASSESSEE HAS NOT REGULARLY MAINTAINED STOCK REGISTER AND THE STOCK REGISTER MA INTAINED WAS ALSO NOT UPDATED. THEREFORE, THE SURVEY TEAM ARRIVED AT THE STOCK POSITION AS PER BOOKS AFTER TAKING INTO ACCOUNT THE OPENING STOCK B ALANCE AS ADJUSTED AGAINST SALES AND GROSS PROFIT FOUND THE STOCK AVAI LABLE AS UNDER: GOLD - 34,838.035 GMS. SILVER - 1,62,699.176 GMS. 5. FROM THE AFORESAID PHYSICAL INVENTORY OF THE STO CK FOUND AT THE TIME OF SURVEY, THE FOLLOWING DISCREPANCIES WERE FO UND: DESCRIPTION STOCK AS PER PHYSICAL INVENTORY TAKEN (GMS) STOCK AS PER BOOKS AS WORKED OUT (GMS) EXCESS STOCK FOUND (GMS) GOLD 36,051 34,838.035 1,213 SILVER 1,81,958 1,62,699.176 19,259 6. THE VALUE OF THE EXCESS STOCK WAS ARRIVED AT RS. 11,98,635/- BY ADOPTING THE PREVAILING RATES OF GOLD AT RS.750/- P ER GM. AND SILVER @ 15/- PER GM. AS NOTED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER, IN COURSE OF SURVEY, THE ASSESSEE ALSO ADMITTED THE EXCESS STOCK FOUND AS REPRESENTING HIS UNEXPLAINED INVESTMENT. THE ASSES SING OFFICER HOWEVER NOTED THAT THE ASSESSEE HAS NOT ADMITTED THE ADDITI ONAL INCOME OF ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP 3 RS.11,98,635/- WHICH WAS DISCLOSED AT THE TIME OF S URVEY IN THE RETURN FILED FOR THE IMPUGNED ASSESSMENT YEAR. ON THAT BA SIS, HE REOPENED AN ASSESSMENT U/S 147 OF THE ACT BY ISSUING A NOTICE U /S 148 OF THE ACT ON 5.12.2008. IN PURSUANCE TO THE SAID NOTICE, THE ASS ESSEE FILED A REVISED RETURN ON 22.12.2008 DECLARING ADDITIONAL INCOME OF RS.11,98,635/- AND ALSO PAID TAX OF RS.82,420/- ON THE AFORESAID ADDIT IONAL INCOME. THE ASSESSING OFFICER ACCEPTED THE INCOME FROM BUSINESS DECLARED BY THE ASSESSEE IN THE REVISED RETURN IN ADDITION TO WHAT IS DISCLOSED IN THE ORIGINAL RETURN TOTAL AMOUNTING TO RS.15,95,446.86P S. HOWEVER, THE ASSESSING OFFICER MADE SOME OTHER DISALLOWANCES AS A RESULT TO WHICH TOTAL INCOME WAS DETERMINED AT RS.17,97,090/-. THE ASSES SEE ACCEPTED THE ASSESSMENT ORDER PASSED BY NOT APPEALING AGAINST TH E ADDITIONS MADE BY THE ASSESSING OFFICER. PURSUANT TO THE ASSESSMENT COMPLETED U/S 143(3) R.W.S. 147 OF THE ACT, THE ASSESSING OFFICER INITIA TED PROCEEDING U/S 271(1)(C) OF THE ACT FOR IMPOSITION OF PENALTY BY I SSUING A SHOW CAUSE NOTICE TO THE ASSESSEE. THE ASSESSEE SUBMITTED ITS EXPLANATION EXPLAINING THEREIN THAT SINCE AT THE TIME OF FILING OF RETURN OF INCOME, THE DIFFERENCE WAS NOT RECONCILED, RETURN WAS FILED SEEKING REFUND OF ADVANCE TAX PAID ON THE STOCK DIFFERENCE. IT WAS SUBMITTED THAT THOUGH THE REFUND WAS GRANTED BUT THE ASSESSEE HAS NOT ENCASHED THE REFUN D VOUCHER. IT WAS SUBMITTED THAT AS THE ASSESSMENT WAS GETTING BARRED BY TIME THE ASSESSEE CONSENTED TO CONSIDER THE STOCK DIFFERENCE AS UNEXPLAINED WITHOUT CONSIDERING THAT ANY INCOME WAS CONCEALED B Y HIM AND ALSO REQUESTED THAT THE SAID AMOUNT NOT BE CONSIDERED AS CONCEALED INCOME. IT WAS SUBMITTED THAT IN COMPLIANCE TO NOTICES ISSUE D U/S 148 OF THE ACT, THE ASSESSEE FILED THE REVISED RETURN ADMITTING THE ADDITIONAL INCOME OF RS.11,98,631/- TOWARDS STOCK DIFFERENCE. IT WAS THE REFORE CONTENDED THAT SINCE THE ASSESSEE HAS COOPERATED WITH THE DEPARTME NT AND HAS AGREED FOR CONSIDERING THE STOCK DIFFERENCE AS INCOME ONLY BECAUSE THE DIFFERENCE COULD NOT BE RECONCILED, PENALTY SHOULD NOT BE IMPO SED. THE ASSESSING OFFICER HOWEVER WAS NOT SATISFIED WITH THE EXPLANAT ION SUBMITTED BY THE ASSESSEE. RELYING ON THE DECISION OF THE HONBLE S UPREME COURT IN CASE ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP 4 OF UNION OF INDIA VS. DHARMENDRA TEXTILE 306 ITR 27 7, THE ASSESSING OFFICER PROCEEDED TO IMPOSE A PENALTY OF RS.3,85,00 0/- U/S 271(1)(C) OF THE ACT VIDE ORDER DATED 30.6.2009. 7. BEING AGGRIEVED OF THE ORDER PASSED IMPOSING PEN ALTY, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE C IT(A) ALSO SUSTAINED THE IMPOSITION OF PENALTY. 8. THE LD. A.R. ARGUING ON THE LEGAL ISSUE OF VALID ITY OF THE ORDER IMPOSING PENALTY U/S 271(1)(C) OF THE ACT WHEN THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT IS ITSELF I NVALID SUBMITTED THAT IN ASSESSEES CASE THE ASSESSEE HAD FILED ORIGINAL RET URN ON 31.10.2006. THE ASSESSING OFFICER ON 17.7.2007 HAD ISSUED A NOTICE UNDER SECTION 143(2) OF THE ACT FOR ASSESSMENT TO BE MADE U/S 143(3) OF THE ACT. HOWEVER, DURING THE PENDENCY OF THE ASSESSMENT PROCEEDING IN ITIATED IN PURSUANCE TO NOTICE U/S 143(2) OF THE ACT, THE ASSESSING OFFI CER ON 5.12.2008 ISSUED A NOTICE U/S 148 AND ULTIMATELY PROCEEDED TO COMPLE TE THE ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 31.12 .2008. IT WAS CONTENDED BY THE LD. A.R. THAT A PROCEEDING U/S 147 OF THE ACT DURING THE PENDENCY OF THE ASSESSMENT PROCEEDING U/S 143(3) IS WITHOUT JURISDICTION AND INVALID IN LAW. THEREFORE, PENALTY U/S 271(1)( C) OF THE ACT CANNOT BE IMPOSED IN PURSUANCE TO THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT, WHICH ITSELF IS INVALID. IT WAS SU BMITTED BY THE LD. A.R. THAT THE FACT THAT THE ASSESSEE HAD NOT CHALLENGED THE VALIDITY OF THE ASSESSMENT ORDER BY FILING AN APPEAL WOULD NOT BE A GROUND TO SUSTAIN THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AS T HE ASSESSEE IN COURSE OF THE PENALTY PROCEEDING ALSO CAN CHALLENGE THE VALID ITY OF THE ASSESSMENT. IN SUPPORT OF SUCH CONTENTION, THE LD. A.R. RELIED U PON A DECISION OF THE ITAT LUCKNOW BENCH IN CASE OF ACIT VS. SMT. SURINDE R KAUR 120 TTJ 618. 9. THE LD. D.R. RELIED ON THE ORDER OF THE CIT(A) A ND ASSESSING OFFICER. ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP 5 10. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. 11. BEFORE DECIDING THE ISSUE, IT IS NECESSARY TO B EAR IN MIND THE FOLLOWING DATES AND EVENTS WHICH ARE VERY MUCH CRUC IAL FOR DECIDING THE ISSUE AT HAND. 31.10.2006 - ORIGINAL RETURN FILED BY THE ASSESSEE . 17.07.2007 - ASSESSING OFFICER ISSUES NOTICE U/S 1 43(2) OF THE ACT. 05.12.2008 - NOTICE U/S 148 ISSUED BY THE ASSESSI NG OFFICER. 22.12.2008 - REVISED RETURN OF INCOME FILED IN PURS UANCE OF NOTICE ISSUED U/S 148 OF THE ACT. 12. FROM THE AFORESAID DATES AND EVENTS IT IS VERY MUCH CLEAR THAT THOUGH THE ASSESSING OFFICER INITIATED REGULAR ASSE SSMENT PROCEEDING IN PURSUANCE TO NOTICE DATED 17.7.2007 U/S 143(2) OF T HE ACT BUT BEFORE COMPLETING THE ASSESSMENT U/S 143(3), THE ASSESSING OFFICER HAS ISSUED 147 BY ISSUING A NOTICE U/S 148 OF THE ACT ON 5.12. 2008. IN OUR VIEW, THE REOPENING OF ASSESSMENT U/S 147 OF THE ACT DURING T HE PENDENCY OF THE REGULAR ASSESSMENT PROCEEDINGS IS NOT PERMISSIBLE I N LAW, HENCE, THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF TH E ACT IS INVALID. THEREFORE, THE PENALTY PROCEEDING INITIATED IN PURS UANCE TO SUCH INVALID ASSESSMENT IS ALSO UNSUSTAINABLE, NOTWITHSTANDING T HE FACT THAT THE ASSESSEE HAS NOT CHALLENGED THE ASSESSMENT ORDER PA SSED U/S 143(3) R.W.S. 147 OF THE ACT IN APPEAL. THE VALIDITY OF A N ASSESSMENT ORDER CAN ALSO BE RAISED BY THE ASSESSEE IN A PENALTY PROCEED ING. THE ITAT LUCKNOW BENCH IN CASE OF ACIT VS. SMT. SURINDER KAU R (SUPRA) HAS HELD THAT FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT THERE SHOULD BE A LEGALLY VALID ASSESSMENT ORDER. IT IS IMMATERIAL WH ETHER THE ASSESSEE HAS NOT CHALLENGED SUCH ASSESSMENT ORDER AND HAS ACCEPT ED IT. BUT THAT CANNOT BE A GROUND TO HOLD THAT IT IS A VALID PLATF ORM FOR LEVY OF PENALTY. THE RATIO LAID DOWN BY THE ITAT LUCKNOW BENCH, AS A BOVE, SQUARELY APPLIES TO THE FACTS OF THE CASE AT HAND. THEREFOR E, FOLLOWING THE SAME, ITA NO.4/VIZAG/2012 SUNIL KUMAR JAIN, VSKP 6 WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENAL TY IMPOSED U/S 271(1)(C) OF THE ACT. 13. AS WE HAVE DELETED THE PENALTY ON THE LEGAL ISS UE, THERE IS NO NEED TO ADJUDICATE THE GROUNDS RAISED ON MERITS, WHICH I N ANY CASE HAS BECOME ACADEMIC. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 7 TH MARCH, 2014 COPY TO 1 SUNIL KUMAR JAIN, PROP: MAHAVEER JEWELLERY HOUSE, D.NO.1-148, MAIN ROAD, GAJUWAKA, VISAKHAPATNAM 2 ITO WARD-5(2), VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM