AJESH AGARWAL, Jaipur V. ITO, Jaipur

ITA 412/JPR/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9683 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITHVIRAJ MEENA CIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Principle of natural justice; Earning of tax free income; Question of law; Initiation of penalty proceedings; Wrong claim
• Section: 143(3); 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 412/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. SHRI AJESH AGARWAL, PROP. M/S SHREE NARAYAN GEMS, KHANDAKA BHAWAN, BORDI KA RASTA, JAIPUR. CUKE VS. THE ITO, WARD - 1(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABJPA7832C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI PRITHVI RAJ MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.03.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23 /03/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS)- I, JAIPUR DATED 02.02.2015 PERTAINING TO ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT IT HAS BEEN HELD THAT THE ASSESEE IS NOT ENTITLED FOR EXEMPTION U/S 10(37) OF THE ACT WITH RESPECT TO CERTAIN KHASRAS AND ACCORDINGLY ON PROPORTIONATE BA SIS EXEMPTION TO THE EXTENT OF RS. 73,38,805/- HAS BEEN DISALLOWED AS IN GREDIENT OF CLAUSE (C) ARE FULFILLED AND SATISFIED SO AS TO JUSTIFY IMPOSITION OF PENALTY. THE SAID FINDING IS ILLEGAL AND UNJUSTIFIED. 2. THAT THE LD.CIT(A) HAS ERRED IN HOLDING THAT MERE D ISCLOSURE OF EXEMPT INCOME IN SCHEDULE E-1 TO ROI WILL NOT PROVE THE BO NAFIDELY OF THE FULL DISCLOSURE. THE SAID FINDING IS ILLEGAL AND UNJUST IFIED. 3. THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE A SSESSEE HAS MADE FALSE CLAIM OF EXEMPTION AND IN VIEW OF THESE FACTS AND C IRCUMSTANCES PENALTY UNDER SECTION 271(1)(C) HAS RIGHTLY BEEN LEVIED AND CONFIRMING THE LEVY OF PENALTY OF RS. 16,43,892/- IMPOSED UNDER THE PROVIS IONS OF SECTION 271(1)(C) OF THE IT ACT. THE ACTION OF THE CIT (A) IN CONFIR MING THE LEVY OF PENALTY IS ILLEGAL AND UNJUSTIFIED. 2 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. VIDE APPLICATION DATED NIL RECEIVED IN THE REGISTRY ON 1/8/2016 UNDER RULE 11 OF INCOME TAX APPELLATE TRIBUNALS RULE, 1960. THE AS SESSEE HAS FILED AN ADDITIONAL GROUND THAT READ AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) WHICH IS ILLEG AL, UNLAWFUL AND UNJUSTIFIED. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) O F THE INCOME TA ACT, 1961( HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30 TH DEC. 2011. WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER DECLINING THE CLAIM OF EXEMPTION IN RESPECT OF SALE OF AGRICULTURE LAND AN D COMPUTED CAPITAL GAIN WHILE FRAMING THE ASSESSMENT THE ASSESSING OFFICER INITIA TED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR CONCEALMENT AND SUBMITTING INACCURATE PARTICULARS OF INCOME. SUBSEQUENTLY, THE ASSESSING OFFICER IMPOSE D THE PENALTY OF SUM OF RS. 24,65,838/-. AGGRIEVED BY THIS, THE ASSESSEE PREFE RRED AN APPEAL BEFORE LD. CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS DISMISSED THE APPEAL. 4. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH IS TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. 4.1 ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENT ATIVES OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDERS OF THE AUTHORI TIES BELOW. 4.2 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORIT IES BELOW. ONE OF THE GROUND IS THAT THE INITIATION OF THE PEN ALTY IS NOT AS PER THE PROVISION OF LAW. IT IS CONTENDED THAT WHILE ISSUING THE NOTICE FOR INITIATING PENALTY PROCEEDING 3 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE WHETHER THE NOTICE WAS FOR CONCEALMENT OF INCOME OR FURNISHING THE INACCURATE PARTICULARS OF INCOME. HE DREW OUR ATTENTION TO PAPER BOOK PAGE NO. 3 TO DEMONSTRA TE THAT THE NOTICE IS ISSUED ON PRE-TYPED PERFORMA. HE SUBMITTED IN THIS REGARD TH E RELIANCE IS PLACED ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 358 ITR 565 (KARN) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER :- IN THE LIGHT OF THE WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILIT Y. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING P ENALTY FOR BREACH OF CIVIL OBLIGATION OR LIABILITIES. (C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1 )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR THE APPELLATE AUTHORITY OR THE REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) AND 1(B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF DEEMING PROVISION (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SE CTION 271(1)(C) IS A SINE QUA NON FOR THE ASSESSING OFFICER TO INITIATE THE P ROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SUB-SECTION(1B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO B E ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AND THE COMMISS IONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) THE IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IS THE ASSESSEE HAS NOT CHALLENGED THE ORDER O F ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE P ENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE A SSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUD ED BY THE AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIA BILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND A OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 4 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANAT ION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT T HE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE P ASSED (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND AL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION 1(B) TO SE CTION 271 O THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HA NOT ISUD ANY DIRECTION TO IMITATE PENALTY PROCEEDINGS, IN AP PEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PR OCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE AS SESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS O F INCOME. (Q) SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONE D IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFF ENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO TH E ASSESSEE. (S) TAKING UP O PENALTY PROCEEDINGS ON ONE LIMB AN FIND ING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EM ANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SE PARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCORREC T PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDI NGS. IT IS OPEN TO THE ASSESEE TO CONTEST THE SAID PROCEEDINGS ON THE MERI TS. HOWEEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSU ANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS IN VALID IN THE PENALTY PROCEEDINGS. IN THE PRESENT CASE ALSO THE NOTICE HAS BEEN ISSUE IN THE PRE-TYPED PERFORMA THERE IS NO SPECIFIC CHARGE. THEREFORE IN OUR CONSIDERED VI EW, NOTICE ISSUED U/S 271(1)(C) OF THE ACT IS NOT AS PER THE LAW LAID DOWN BY THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA (SUPRA). ANOTHER GROUND IS THAT THE ASSESEE HAD DISCLOSED ALL MATERIAL BEFORE THE AUTHORITIES BELOW. MERELY THAT THE CLAIM OF THE ASSESSEE FOR ENTITLEMENT EXEMPTION U/S 10(37) OF THE ACT WAS REJ ECTED BY THE ASSESSING OFFICER 5 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. WOULD NOT BE THE BASIS FOR INITIATION OF PROCEEDING S. IN THIS RESPECT THE RELIANCE HAS BEEN PLACED BY THE LD. COUNSEL FOR THE ASSESSEE THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF M/S RELIANCEPATRO PVT . LTD. VS. CIT 322 ITR 158 (SC) HAS HELD AS UNDER: IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURR ED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFO RE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CON CLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING T HAT THEY ARE INCORRECT, IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FO RMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXP ENDITURE MAY BE FALSELY) OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES A TTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNI SHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS T HE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEP T ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EX PENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECT ION 271(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY RE ASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLE ARLY, NOT THE INTENDMENT OF THE LEGISLATURE. FURTHER HE IS SUBMITTED THAT IN THE QUANTUM PROCEED INGS APPEAL HAS BEEN ADMITTED BY THE HONBLE JURISDICTIONAL HIGH COURT IN INCOME TAX APPEAL NO. 221/2016. THEREFORE THE ISSUE OF ENTITLEMENT FOR EXEMPTION U/ S 10(37) OF THE ACT IS DEBATABLE. WE FIND FORCE INTO THE CONTENTION OF THE LD. COUNSE L FOR THE ASSESSEE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS PLACED ALL MATERIAL B EFORE THE ASSESSING OFFICER MERELY THAT THE CLAIM OF THE ASSESEE WAS NOT FOUND ACCEPTA BLE BY THE ASSESSING OFFICER ON THE BASIS THAT AS REQUIRED BY LAW THE LAND IN QUEST ION WAS NOT AN AGRICULTURAL LAND. 6 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. 4.3 IT IS THE CASE OF THE ASSESSEE, THE ASSESSEE MA DE ON CLAIM OF THE AGRICULTURAL LAND. HOWEVER, THE SAME WAS NOT ACCEPTED BY THE AS SESSING OFFICER, IT IS CONTENTED BY THE LD. COUNSEL THAT THE ASSESSING OFFICER DID N OT CONSIDERED THE RELEVANT KHASARA GIRDAVARI THEREFORE ON WRONG APPRECIATION OF FACTS IN QUANTUM PROCEEDINGS ADDITIONS CAME TO BE CONFIRMED. IT IS ALSO SUBMITTED THAT TH E QUESTION OF LAW HAS BEEN ADMITTED BY THE JURISDICTIONAL HIGH COURT IN THE CA SE OF THE ASSESSEE IN DB INCOME TAX APPEAL 221/2016 UNDER THESE FACTS IT IS PRAYED BY THE ASSESSEE THAT THE PENALTY HAS IMPOSED IS NOT JUSTIFIED IT IS ALSO STATED THAT PENALTY PROCEEDINGS AND QUANTUM PROCEEDINGS ARE TWO DIFFERENT AND DISTINCT PROCEEDI NGS. 4.4 AS WE OBSERVED IN THE PRECEDING PARAGRAPH THAT THE INITIATION OF PROCEEDINGS BY ISSUING A DEFECTIVE NOTICE IS CONTRARY TO THE VI EW OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF MANJUNATHA (SUPRA) , THE IMPOSITION OF PENALTY WAS NOT JUSTIFIED ON MERIT AS WELL AS WE ARE OF THE CON SIDERED VIEW THAT THE JUDGMENT OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF R ELIANCE PATROPRODUCT (SUPRA) IS APPLICABLE ON THE FACTS OF THE PRESENT CASE THEREFO RE RESPECTIVELY FOLLOWINGS THE SAME, THE PENALTY IS DELETED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 412/JP/2015 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23RD DA Y OF MARCH 2017. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 23 /03/2017. POOJA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 7 ITA NO. 412/JP/2015 SHRI AJESH AGARWAL. 1. THE APPELLANT- SHRI AJESH AGARWAL, JAIPUR. 2. THE RESPONDENT- THE ITO WARD-1(2),JAIPUR. 3. THE CIT, 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 412/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR