Nandgopal Nanak Krishnani, Pune V. Deputy Commissioner of Income-tax,

ITA 414/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9174 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Bogus purchase; Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Revised return
• Section: 153A; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO S. 413 & 414 /P U N/201 5 / ASSESSMENT YEAR S : 20 08 - 09 & 2009 - 10 SHRI NANDGOPAL NANAK KRISHNANI, (PROP. N.N.K. CONSTRUCTION), OFFICE NO. 106, PARMAR TRADE CENTRE, SADHUWASWANI CHOWK, CAMP, PUNE 411001 PAN : AJHPK5906D ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1), PUNE / RESPONDENT ASSESSEE BY : S HRI KISHORE PHADKE REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 1 3 - 07 - 2017 / DATE OF PRONOUNCEMENT : 26 - 0 7 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH ESE TWO APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 12, PUNE DATED 20 - 02 - 2015 , COMMON FOR BOTH THE ASSESSMENT 2 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 YEARS CONFIRMING LEVY OF PENALTY U/S. 271(1)(C) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE ASSESSEE HAS FILED ADDITIONAL GROUND OF APPEAL CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT. SINC E, BOTH THE APPEALS ARE EMANATING FROM SAME SET OF FACTS AND THE GROUNDS RAISED BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS ARE IDENTICAL, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DECIDED BY THIS COMMON ORDER. 3. FOR THE SAKE OF BRE VITY AND CONVENIENCE WE ARE EXTRACTING THE FACTS FROM THE APPEAL OF ASSESSEE IN ITA NO. 413/PUN/2015 FOR ASSESSMENT YEAR 2008 - 09. A SEARCH ACTION WAS CARRIED OUT IN THE CASE OF SHRADDHA GROUP ON 08 - 09 - 2010. CONSEQUENT TO SEARCH ACTION IN THE CASE OF SHRA DDHA GROUP, SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE CASES OF N.N.K. CONSTRUCTIONS, UNIGLORY INFRAPROJECTS PVT. LTD., DEVGIRI ENGINEERING AND SOPAN D. PATIL ON 17 - 09 - 2010. THE ASSESSEE IS A PROPRIETOR OF N.N.K. CONSTRUCTIONS. IN RESPONSE TO TH E NOTICE DATED 11 - 08 - 2011 ISSUED U/S. 153A OF THE ACT , THE ASSESSEE FILED RETURN OF INCOME ON 24 - 02 - 2012 DISCLOSING TOTAL INCOME OF RS.86,10,230/ - . THEREAFTER, THE ASSESSEE FILED REVISED RETURN OF INCOME ON 10 - 12 - 2012 DECLARING TOTAL INCOME OF RS.1,74,39, 010/ - . THE ADDITIONAL INCOME OF RS.88,28,780/ - WAS MAINLY ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSING OFFICER ACCEPTED THE RETURN OF INCOME FILED BY THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) R.W. EXPLANATION 5A OF THE ACT. FIRST NOT ICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 25 - 03 - 2013. THE SECOND NOTICE U/S. 274 R.W.S. 271(1)(C) FOR ASSESSMENT YEARS 2008 - 09 TO 2011 - 12 3 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 WAS ISSUED TO THE ASSESSEE ON 23 - 08 - 2013. THE PENALTY OF RS.30,00,903/ - WAS LEVIED U/S. 271(1)(C) VIDE ORDER DATED 27 - 09 - 2013. 4. SIMILARLY, IN THE ASSESSMENT YEAR 2009 - 10 , PENALTY U/S. 271(1)(C) R.W. EXPLANATION 5A WAS INITIATED AT THE TIME OF PASSING OF THE ASSESSMENT ORDER DATED 25 - 03 - 2013. NOTICE U/S. 274 R.W.S. 271(1)(C) FOR ASSESSMEN T YEAR 2009 - 10 WAS ISSUED TO THE ASSESSEE ON 25 - 03 - 2013. THE ASSESSING OFFICER VIDE ORDER DATED 27 - 09 - 2013 LEVIED PENALTY OF RS.13,28,849/ - U/S. 271(1)(C) OF THE ACT. 5. AGAINST THE LEVY OF PENALTY IN THE IMPUGNED ASSESSMENT YEARS THE ASSESSEE FILED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER REJECTED THE CONTENTIONS OF ASSESSEE AND CONFIRMED THE LEVY OF PENALTY IN BOTH THE ASSESSMENT YEARS. NOW, THE ASSESSEE IS IN SECOND APPE AL BEFORE US ASSAILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) FOR ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. THE ASSESSEE HAS ASSAILED THE LEVY OF PENALTY ON MERITS. THE ASSESSEE HAS ALSO FILED AD DITIONAL GROUNDS OF APPEAL CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT. 6. SHRI KISHORE PHADKE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS HAS NOT SPECIFI ED THE LIMB OR THE CHARGE UNDER WHICH PENALTY IS TO BE LEVIED. THEREAFTER, IN THE NOTICE DAT E D 25 - 03 - 2013 ISSUED U/S. 274 R.W.S. 271(1)(C) THE ASSESSING OFFICER HAS MENTIONED BOTH THE LIMBS I.E. CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULA RS OF INCOME. IN THE SECOND 4 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 NOTICE DATED 23 - 08 - 2013 AGAIN BOTH THE LIMBS OF SECTION 271(1)(C) HAVE BEEN MENTIONED FOR LEVY OF PENALTY. HOWEVER, WHILE PASSING ORDER LEVYING PENALTY IN BOTH THE ASSESSMENT YEARS , THE ASSESSING OFFICER HAS MENTIONED THAT THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THUS, IT IS EVIDENT FROM THE RECORD S THAT THE ASSESSING OFFICER WAS NOT CLEAR IN HIS MIND AS TO WHETHER THE PENALTY IS TO BE LEVIED FOR CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME OR BOTH. THERE WAS AMBIGUITY IN THE MIND OF ASSESSING OFFICER AT ALL THE THREE STAGES I.E. (I) AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS, (II) AT THE TIME OF ISSUANCE OF NOTICE , AND (III) AT THE TIME OF LEVY OF PENALTY. THE LD. AR SUBMITTED THAT UNDER SUCH CIRCUMSTANCES THE PENALTY PROCEEDINGS ARE LIABLE TO BE SET ASIDE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED AS 359 ITR 565 AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SAMSON PERINCHERY REPORTED AS 392 ITR 4. 7. ON THE OTHER HAND SHRI MUKESH JHA REPRES ENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ACTION OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY. THE LD. DR SUBMITTED THAT THERE IS NO AMBIGUITY IN THE MIND OF ASSESSING OFFICER AT THE TIME OF INITIATION OF PENALTY PROCEEDIN GS AND AT THE TIME OF ISSUING NOTICE. THE PENALTY PROCEEDINGS WERE INITIATED U/S. 271(1)(C) R.W. EXPLANATION 5A FOR CONCEALMENT OF INCOME RESULTING FROM FURNISHING OF INACCURATE PARTICULARS OF INCOME. NOTICE U/S. 274 R.W.S. 271(1)(C) WAS ACCORDINGLY, ISS UED INCLUDING BOTH THE CHARGES AS SPECIFIED U/S. 271(1)(C) OF THE ACT. IT IS A 5 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 CASE WHERE THERE IS OVERLAPPING OF THE CHARGES. FURNISHING OF INACCURATE PARTICULARS OF INCOME HAS RESULTED IN CONCEALMENT OF INCOME BY THE ASSESSEE IN THE PRESENT CASE. 8 . W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL CHALLENGING VALIDITY OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT . THE LD. AR OF THE ASSESSEE HAS CONFINED HIS SUBMISSIONS TO THE ADDITIONAL GROUND RAISED ONLY. 9. A PERUSAL OF THE ASSESSMENT ORDER DATED 25 - 03 - 2013 FOR ASSESSMENT YEAR 2008 - 09 SHOW THAT WHILE RECORDING SATISFACTION THE ASSESSING OFFICER HAS NOT SPECIFIE D THE CHARGE UNDER WHICH PENALTY HAS TO BE LEVIED. THE RELEVANT EXTRACT OF THE SATISFACTION RECORDED BY THE ASSESSING OFFICER AT THE TIME OF PASSING OF THE ASSESSMENT ORDER READS AS UNDER : 6. . IN VIEW OF THE ABOVE, THIS IS FIT CASE FOR INITIATING P ENAL PROCEEDINGS. FOR THIS PURPOSE PROVISIONS CONTAINED IN EXPLANATION - 5A OF SEC. 271[1][C] ARE SQUARELY APPLICABLE. HENCE, PENAL PROCEEDINGS U/S. 274 R.W.S. 271[1][C] IS INITIATED SEPARATELY. 10. THEREAFTER, WHILE ISSUING NOTICE U/S. 274 R.W.S. 271 (1)(C) OF THE ACT THE ASSESSING OFFICER RECORDED : WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE A.Y. 2008 - 09 TO 2011 - 12, IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR INCOME AND FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 11. WHILE PASSING ORDER DATED 27 - 09 - 2013 LEVYING PENALTY U/S. 271(1)(C) , THE ASSESSING OFFICER CONCLUDED AS UNDER : 6 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 THIS CLEARLY SHOWS THAT THERE WAS A CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME IN THE C ASE OF THE ASSESSEE. LEAVING THIS APART AS THE SEARCH HAS BEEN INITIATED IN THE CASE OF THE ASSESSEE AFTER 01/06/2007 THE PROVISION OF EXPLANATION 5A TO SEC. 271(1)(C) ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THEREAFTER ON FACTS THERE IS A DEE MED CONCEALMENT ALSO. 12. A CONJOINT PERUSAL OF THE SATISFACTION, NOTICE AND PENALTY ORDER SHOWS THAT THERE WAS VAGUENESS IN THE MIND OF ASSESSING OFFICER AT ALL THE THREE STAGES I.E. (I) INITIATION OF PENALTY, (II) ISSUANCE OF NOTICE FOR PENALTY AND (III) LEVY OF PENALTY. AT THE TIME OF RECORDING SATISFACTION THE ASSESSING OFFICER HAS FAILED TO MENTION CHARGE FOR LEVY OF PENALTY. IN THE NOTICE, THE ASSESSING OFFICER HAS USED CONJUNCTION AND TO GIVE AN IMPRESSION THAT THERE IS OVERLAPPING OF THE CH ARGES I.E. CONCEALMENT AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. FINALLY, AT THE TIME OF LEVY OF PENALTY THE ASSESSING OFFICER HAS USED CONJUNCTION OR . T HE ASSESSING OFFICER WAS NOT COHERENT IN HIS OPINION WHILE RECORDING SATISFACTION AND IN THE SUBSEQUENT STAGE OF LEVYING PENALTY. 13. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS HELD : 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED 7 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 ONLY TO THO SE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSE D ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCE EDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASI S OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATER IALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 14. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SAMSON PERINCHERY (SUPRA) HAS APPROVED THE PRINCIPLE LAID DOWN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) . 15. THUS, IN VIEW OF THE FAC TS OF THE CASE AND THE DECISIONS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY LEVIED U/S. 271(1)(C) IN ASSESSMENT YEAR 2008 - 09 IS LIABLE TO BE DELETED AND THE APPEAL OF ASSESSEE IS ALLOWED . 16. AS HAS BEEN POINTED EARLIER THAT THE FACTS IN ASSESSMENT YEAR 2009 - 10 ARE IDENTICAL . THE MANNER IN WHICH THE SATISFACTION HAS BEEN RECORDED IN ASSESSMENT YEAR 2009 - 10 , THE CONTENTS OF NOTICE ISSUED AND THE FINAL 8 ITA NO S. 413 & 414/PUN/2015, A.YS. 2008 - 09 & 2009 - 10 PENALTY ORDER HAS BEEN PASSED IN IDENTICAL MANNER , THE FINDINGS GIVEN BY US IN T HE APPEAL OF THE ASSESSEE IN ITA NO. 413/PUN/2015 WOULD MUTATIS MUTANDIS APPLY IN ASSESSMENT YEAR 2009 - 10 AS WELL. 17. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 26 TH DAY OF JULY, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 26 TH JULY, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 12, PUNE 4. / THE CIT (CENTRAL), PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE