The DCIT, Circle-10, Ahmedabad V. Shri Karsanbhai Khodidas Patel, Ahmedabad

ITA 4115/AHD/2008

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0235 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-01-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 24-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: S N SOPARKAR
• Section: 271(1)(c)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD. BEFORE: HON'BLE SHRI T.K. SHARMA, JUDICIA L MEMBER, AND HON'BLE SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 4115/AHD/2008 ASSESSMENT YEAR : 2002-2003 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10, AHMEDABAD VERSUS KARSANBHAI KHODIDAS PATEL, HUF AHMEDABAD PAN: AAAHP 7025 Q (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI RAJEEV AGARWAL, CIT FOR THE RESPONDENT : S/SHRI S.N. SOPARKAR AND HI MANSHU SHAH ORDER PER T K SHARMA, JUDICIAL MEMBER :- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 05.11.2008 OF LD. COMMISSIONER OF INCOM E TAX(APPEALS)-XVI, AHMEDABAD CANCELLING THE PENALTY OF RS.80,57,113/- FOR THE ASSESSMENT YEAR 2002- 03. 2. BRIEFLY STATED THE FACTS ARE THAT FOR THE ASSESS MENT YEAR UNDER APPEAL, THE A.O. LEVIED THE PENALTY OF RS.80,57,113/- UNDER SECTION 271(1)(C) IN RESPECT OF FOLLOWING TWO ADDITIONS :- (I) RS.2,11,535/- ON ACCOUNT OF ACCRUED INTEREST; (II) RS.2,61,18,902/- ON ACCOUNT OF SHORT-TERM CA PITAL GAIN. ON APPEAL, IN THE IMPUGNED ORDER DATED 05.11.2008 T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE PENALTY AMOUNTING TO RS.80,57,113/- LEVIED UNDER SECTION 271(1)(C) FOR THE DETAILED REASONS GIVEN IN PARA 6-8, WHICH READS AS UNDER :- 6. THUS IN SHORT THE APPELLANT HAS RELIED UPON THE JUDGMENT OF ITAT IN THE CASE OF KISAN DISCRETIONARY FAMILY TRUS T VS.- ACIT, CIR.-10, AHMEDABAD IN ITA NO. 1850/AHD/2007 FOR A.Y . 2003-04. ON THE IDENTICAL FACTS AND CIRCUMSTANCES OF THE CAS E THE ITAT HAS HELD THAT SINCE THE APPELLANT WAS FOLLOWING CASH SY STEM OF ACCOUNTING, THE INTEREST INCOME ON THE DEEP DISCOUN T BONDS/ OFCPNS IS TO BE TAXED IN THE YEAR OF RECEIPT AND NO T ON ACCRUAL BASIS. ACCORDING TO THE APPELLANT SINCE IN SIMILAR CASE QUANTUM ADDITION HAS BEEN DELETED BY THE ITAT, THREE IS NO SCOPE FOR LEVYING PENALTY U/S. 271(1)(C). THE BASIS OF LEVY O F PENALTY IS THE YEAR OF TAXABILITY OF THE INCOME FROM DEEP DISCOUNT BONDS. THE 2 ITA NO.4115/AHD/2008 VIEW OF THE ASSESSING OFFICER IS THAT THE INTEREST INCOME HAS TO BE ASSESSED ON YEAR TO YEAR BASIS WHERE THE VIEW OF TH E APPELLANT IS THAT IT SHOULD BET AXED IN THE YEAR OF RECEIPT AS T HE APPELLANT IS FOLLOWING CASH SYSTEM OF ACCOUNTING. THE APPELLANT HAS DISCLOSED ALL THE FACTS OF THE INCOME GENERATING FROM THE BON DS AND FILED THE RELATED DETAILS BEFORE ASSESSING OFFICER. THUS, THE RE ARE DIFFERENT VIEWS REGARDING THE YEAR OF TAXABILITY OF THE INTER EST INCOME. IN OTHER WORDS, THE SHORT QUESTION IS WHETHER PENALTY U/S. 271(1)(C) CAN BE LEVIED IN SUCH CASE WHERE THE ISSUE OF ADDIT ION ITSELF IS DEBATABLE. AFTER CONSIDERING THE JUDGMENT OF THE HO N'BLE ITAT IN THE CASE OF KISAN DISCRETIONARY FAMILY TRUST, ITA N O. 1850/AHD./2007 AND THE ORDERS PASSED BY C.I.T.(A)-X I ON IDENTICAL ISSUES IN THE CASE OF OTHER FOLLOWING MEMBERS OF TH E GROUP NAMELY :- (1) SHRI DHIREN K. PATEL APPEAL NO. C.I.T.(A).XI/125/ 07-08 DT.11-01-2008, (2) SHRI RAKESH K PATEL APPEAL NO. C.I.T.(A).XI/126/07 -08 DT.11-01-2008, (3) SHRI KARSANBHAI K PATEL- APPEAL NO. C.I.T.(A).XI/12 9/07- 08 DT.11-01-2008. I AM IN AGREEMENT WITH THE APPELLANT THAT ON DEBATA BLE ISSUES PENALTY U/S. 271(1)(C) CANNOT BE LEVIED. 7. SINCE IN PRINCIPLE, I HAVE HELD THAT ON DEBATABL E ISSUES PENALTY U/S. 271(1)(C) CANNOT BE LEVIED, IT IS IMMATERIAL W HETHER THE CORRECT MINIMUM PENALTY LEVIABLE WAS RS.80,14,274/- AS PLEA DED BY THE APPELLANT IN GROUND NO. 2 OR RS.80,57,113/- AS LEVI ED BY THE ASSESSING OFFICER. 8. ACCORDINGLY PENALTY OF RS.80,57,113/- LEVIED BY THE A.O. IS CANCELLED. APPEAL OF THE APPELLANT IS ALLOWED. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE OUTSET, SHRI S.N. SOPARKAR APPEARED FOR T HE ASSESSEE AND CONTENDED THAT THE ASSESSEE PRODUCED A COPY OF DECISION DATED 09.1 0.2009 OF ITAT, A BENCH, AHMEDABAD IN ITA NO. 1042/AHD/2006 IN THE CASE OF K ARSANBHAI KHODIDAS PATEL, HUF IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. IT WAS SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE THAT BOTH THE ADDITIONS , FOR WHICH PENALTY UNDER SECTION 271(1)(C) IS LEVIED, ARE DELETED BY THE ITAT DATED 09.10.2009 IN ITA NO. 1042/AHD/2006 IN ASSESSEES OWN CASE. THEREFORE, TH E VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLING THE PENALTY BE UPHELD. 3 ITA NO.4115/AHD/2008 4. ON THE OTHER HAND, SHRI RAJEEV AGARWAL, CIT, APP EARING FOR THE REVENUE COULD NOT CONTROVERT THE AFORESAID SUBMISSION OF TH E LD. COUNSEL OF THE ASSESSEE. 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW AS WELL AS THE DECISION OF ITAT, A BENCH, AHMEDABAD IN ASSESSEE S OWN CASE IN ITA NO. 1042/AHD/2006 FOR THE ASSESSMENT YEAR 2002-03. ADMI TTEDLY, IN THIS CASE THE TRIBUNAL HAS CANCELLED BOTH THE ADDITIONS. ON THE B ASIS OF WHICH A.O. LEVIED THE PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS.80, 57,113/-. THESE TWO ADDITIONS ARE AS UNDER :- (I) THE ADDITION OF RS.2,11,535/- ON ACCOUNT OF ACC RUAL INTEREST AND, (II) THE ADDITION OF RS.2,61,18,902/- ON ACCOUNT OF SHORT- TERM CAPITAL GAIN. 6. IT IS WELL SETTLED LAW THAT WHERE THE ADDITIONS MADE IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT IS LEVIE D, ARE DELETED, THERE REMAINS NO BASIS AT ALL FOR LEVYING PENALTY UNDER SECTION 271( 1)(C) FOR CONCEALMENT AND, THEREFORE, IN SUCH A CASE, NO PENALTY CAN SURVIVE AND PENALTY IS LIABLE TO BE CANCELLED. TO SUM UP, PENALTY CANNOT STAND IF THE ADDITION ON THE BASIS O F WHICH PENALTY IS LEVIED UNDER SECTION 271(1)(C) IS DELETED. 7. IN VIEW OF THIS, VIEW TAKEN BY THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) CANCELLING THE PENALTY OF RS.80,57,113 /- LEVIED UNDER SECTION 271(1)(C) IS UPHELD. 8. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMIS SED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 13 TH JANUARY, 2010. SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 13/01/2010 COPY OF THE ORDER IS FORWARDED TO: 4 ITA NO.4115/AHD/2008 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, // TRUE COPY // ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD. LAHA/SR. P.S.