SIDDHI HOME MAKERS, NAVI MUMBAI V. ITO CEN THANE, THANE

ITA 4168/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1087 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Search and seizure
• Section: 143(3); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.4168/MUM/2013 (AY. 2008-09) SIDDHI HOME MAKERS, B-304, SHIV CHAMBERS, PLOT NO.21, SECTOR -11, CBD BELAPUR, NAVI MUMBAI 400 614 PAN: ABFFS8504H ...... APPELLANT VS. THE ITO, CENTRAL , ASHAR IT PARK, 6 TH FLOOR, BWING, ROOM NO.22, ROAD NO.16Z, WAGLE INDUSTRIAL ESTATE, THANE .... RESPON DENT APPELLANT BY : SHRI SUBODH RATNA PARKHI RESPONDENT BY : DR.A.K.NAYAK DATE OF HEARING : 27/03/2017 DATE OF PRONOUNCEMENT : 28/04/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2008-09 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-1, MUMBAI DATED 31/01/2013, WHICH IN TURN, ARISES OUT OF AN ORDE R PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 29/06/2011. 2 ITA NO.4168/MUM/2013 (AY. 2008-09) 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO THE ACTION OF THE CIT(A) IN SUSTAINING PENALTY OF R S.69,95,271/- IMPOSED BY THE ASSESSING OFFICER UNDER SECTION UNDER SECTION 2 71(1)(C) OF THE ACT. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOP ER AND CIVIL CONSTRUCTION. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF TH E ACT WAS CARRIED OUT AT VARIOUS PREMISES OF SIDDHI GROUP OF CASES, TO WHICH THE ASSESSEE ALSO BELONGS, ON 19/02/2009. DURING THE COURSE OF SEARC H AND SURVEY ACTION UNDER SECTION 133A OF THE ACT CARRIED OUT SIMULTA NEOUSLY AT DIFFERENT PREMISES BELONGING TO THE GROUP, VARIOUS INCRIMINAT ING DOCUMENTS AND RECORDS WERE FOUND AND SEIZED. IN THE ASSESSMENT F INALIZED CONSEQUENT TO THE SEARCH UNDER SECTION 143(3) R.W.S. 153A OF TH E ACT ON 30/12/2010 FOR THE ASSESSMENT YEAR 2008-09, THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT OF UNACCOUNTED RECEIPTS, WHICH WAS BASED ON THE INCRIMINATING DOCUMENTS FOUND AND SEIZED DURING COURSE OF SEARCH. NOTABLY, THE INCRIMINATING DOCUMENTS AND MATERIAL FOUND DURING T HE SEARCH HAD REVEALED THAT THE ASSESSEE WAS RECEIVING INCOMES OUTSIDE T HE BOOKS OF ACCOUNT. NOTABLY, IN THE COURSE OF ITS BUSINESS ACTIVITY, AS SESSEE HAD CONSTRUCTED A BUILDING AT NAVI MUMBAI BY THE NAME ELLORA CONSIS TING OF VARIOUS FLATS AND SHOPS. THE ASSESSING OFFICER, BASED ON THE MATERIA L FOUND AND SEIZED DURING THE COURSE OF SEARCH, NAMELY, DIARIES, INFERRED THA T ASSESSEE WAS RECEIVING ON-MONEY IN CASH ON SALE OF UNITS IN ELLORA, WHI CH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. PERTINENTLY, THE FACTUM OF THE RECEIPT OF UNACCOUNTED CONSIDERATION IN CASH WAS ALSO ADMITTED BY THE ASSESSEE AND IT SUO-MOTU DECLARED ADDITIONAL INCOME ON THIS COUNT . IN THE RETURN FILED IN 3 ITA NO.4168/MUM/2013 (AY. 2008-09) RESPONSE TO THE NOTICE UNDER SECTION 153A OF THE AC T ASSESSEE DECLARED A TOTAL INCOME OF RS.2,55,12,620/-, WHICH INTER-ALIA, INCLUDED ADDITIONAL INCOME OFFERED OF RS.1,20,00,000/-, WHEREAS IN THE RETURN OF INCOME ORIGINALLY FILED UNDER SECTION 139(1) OF THE ACT ON 02/09/2008, T HE TOTAL INCOME WAS RETURNED AT RS.1,13,93,844/-. THE ASSESSING OFFICE R FINALIZED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A OF THE ACT ON 30/1 2/2010 ASSESSING THE TOTAL INCOME AT RS.3,05,87,120/-, THEREBY MAKING AN ADDIT ION RS.50,74,500/- TO THE INCOME RETURNED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. THE VARIATION IN THE RETURNED INCOME WAS ALSO ON ACCOUN T OF DETERMINING THE AMOUNT UNACCOUNTED CASH RECEIPTS IN RESPECT OF THE UNITS SOLD IN THE BUILDING ELLORA. SUBSEQUENTLY, VIDE ORDER DATED 29/06/201 1 PASSED UNDER SECTION UNDER SECTION 271(1)(C) OF THE ACT THE ASSESSING OF FICER HELD THE ASSESSEE GUILTY OF CONCEALMENT OF INCOME AND PENALTY EQUIVAL ENT TO 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS.2,05,74,500 /- HAS BEEN LEVIED, WHICH CAME TO RS.69,93,271/-. THE ASSESSING OFFICE R ALSO OBSERVED THAT THE CASE OF THE ASSESSEE FOR LEVY OF PENALTY WAS ALSO COVERED BY EXPLANATION-5A TO SECTION 271(1)(C) OF THE ACT. THE SAID LEVY O F PENALTY HAS SINCE BEEN AFFIRMED BY THE CIT(A) AND ACCORDINGLY ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS RAISED VARIOUS SUBMISSIONS IN LAW AND ON FACTS ASSAILING THE IMPOS ITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HOWEVER, FIRST AND F OREMOST PLEA RAISED BY THE ASSESSEE IS FOUNDED ON THE ARGUMENT THAT THE ASSES SING OFFICER WAS UNSURE ABOUT THE NATURE OF DEFAULT COMMITTED BY THE ASSESS EE. IN THIS CONTEXT, HE HAS REFERRED TO THE TWO NOTICES ISSUED UNDER SECTIO N 274 OF THE ACT ON 30/12/2010; ONE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT AND SECOND 4 ITA NO.4168/MUM/2013 (AY. 2008-09) UNDER SECTION 274 OF THE ACT R.W.S. 271AAA OF THE A CT. FURTHERMORE, IT IS SOUGHT TO BE POINTED OUT THAT EVEN IN THE NOTICE IS SUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT IN THE STANDARD PROFORM A, THE IRRELEVANT PORTION IN THE NOTICE HAS NOT BEEN STRUCK-OFF AND, THEREFORE, THE NOTICE DOES NOT SPECIFY THE EXACT GROUND ON WHICH PENALTY IS TO BE CHARGED I.E. WHETHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. IN THIS CONTEXT, RELIANCE HAS BEEN PLACED ON THE JU DGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHRI SAMSON PERI NCHERY, ITA NOS.1154,953,1097 AND 1226 OF 2014 ORDER DATED 5 TH JANUARY, 2017 AND ALSO THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN T HE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY,359 ITR 565 (KA R) TO CONTEND SUCH A NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT IS INVALID. SO FAR AS THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271AAA O F THE ACT IS CONCERNED, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE INSTANT ASSESSMENT YEAR SECTION 271AA OF THE ACT IS INAPPLI CABLE SINCE THE DATE OF SEARCH IS 19/02/2009. 5. ON THE AFORESAID PRELIMINARY ASPECT, THE LD. DEP ARTMENTAL REPRESENTATIVE POINTED OUT THAT IN THE PRESENT CA SE THE ASSESSING OFFICER INITIATED PENALTY FOR CONCEALMENT OF THE PARTICULA RS OF INCOME IN TERMS OF SECTION 271(1)(C) OF THE ACT, AND HE HAS REFERRE D TO THE OBSERVATIONS OF THE ASSESSING OFFICER IN PARA-9 OF THE ASSESSMENT ORDER IN THIS REGARD. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT THE FA CTS IN THE INSTANT CASE STAND ON A DIFFERENT FOOTING THAN THE FACTS BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA ). THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT IN THE INSTANT CAS E, THE NON-STRIKING OFF OF 5 ITA NO.4168/MUM/2013 (AY. 2008-09) ONE OF THE LIMBS MEANS THAT PENALTY HAS BEEN IMPOS ED ON BOTH THE LIMBS; AND; IT IS NOT A CASE WHERE THE PENALTY IS INITIAT ED ON ONE LIMB I.E. FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHILE I T HAS BEEN IMPOSED ON THE OTHER LIMB I.E. FOR CONCEALMENT OF INCOME. THE LD. DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT IN THE CASE BEFORE THE HON'BLE HIGH COURT THE POSITION WAS DIFFERENT, INASMUCH AS, THE PENA LTY WAS IMPOSED ON ONE LIMB WHILE IT WAS INITIATED FOR THE OTHER LIMB. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS WITH REGARD TO THE PRELIMINARY PLEA OF THE ASSESSEE IN TERMS OF WHICH THE VALIDITY OF THE PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF TH E ACT HAS BEEN SOUGHT TO BE CHALLENGED. THE SUM-AND-SUBSTANCE OF THE POINT RAISED BY THE ASSESSEE IS THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER UND ER SECTION 274 R.W.S. 271(1)(C) OF THE ACT DATED 30/12/2010 DOES NOT REFL ECT AN APPROPRIATE APPLICATION OF MIND, INASMUCH AS, THE NOTICE HAS BE EN ISSUED IN A STANDARD PROFORMA WHERE THE IRRELEVANT PORTION HAS NOT BEEN STRUCK OFF. AT THE TIME OF HEARING, LD. REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE AC T DATED 30/12/2010 IN THIS REGARD. FACTUALLY SPEAKING, IT IS CLEARLY EMERGING THAT THE NOTICE HAS BEEN ISSUED IN A STANDARD PROFORMA AND THE IRRELEVA NT LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN STRUCK OFF. NOTABLY, THE PENALTY PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE ATTRACTED WHERE THE ASSESS EE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF SUCH INCOME. IT IS ALSO A WELL ACCEPTED PROPOSITION THAT THE AFORESAI D TWO LIMBS OF SECTION 271(1)(C) OF THE ACT CARRY DIFFERENT MEANINGS. THE REFORE, IT WAS IMPERATIVE FOR THE ASSESSING OFFICER TO STRIKE- OFF THE IRRELE VANT LIMB SO AS TO MAKE THE 6 ITA NO.4168/MUM/2013 (AY. 2008-09) ASSESSEE AWARE AS TO WHAT IS THE CHARGE MADE AGAIN ST HIM SO THAT HE CAN RESPOND ACCORDINGLY. THE HON'BLE KARNATAKA HIGH C OURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) OBSERVE D THAT THE LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB UNDER WHIC H IT IS BEING LEVIED. AS PER HON'BLE HIGH COURT, WHERE THE ASSESSING OFFICER P ROPOSED TO INVOKE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. THE HON'BLE HIGH COURT HELD THAT THE STANDARD PRO FORMA OF NOTICE UNDER SECTION 274 OF THE ACT WITHOUT STRIKING OF THE IRRE LEVANT CLAUSES WOULD LEAD TO AN INFERENCE OF NON-APPLICATION OF MIND BY THE ASSE SSING OFFICER. THE HONBLE SUPREME COURT IN THE CASE OF DILIP N. SHROF F VS. JCIT, 291 ITR 519(SC) HAS ALSO NOTICED THAT WHERE THE ASSESSING OFFICER I SSUES NOTICE UNDER SECTION 274 OF THE ACT IN THE STANDARD PROFORMA AND THE INA PPROPRIATE WORDS ARE NOT DELETED, THE SAME WOULD POSTULATE THAT THE ASSESSIN G OFFICER WAS NOT SURE AS TO WHETHER HE WAS TO PROCEED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCUR ATE PARTICULARS OF INCOME. ACCORDING TO THE HONBLE SUPREME COURT, IN SUCH A S ITUATION, LEVY OF PENALTY SUFFERS FROM NON-APPLICATION OF MIND. IN THE BACKG ROUND OF THE AFORESAID LEGAL POSITION AND, HAVING REGARD TO THE MANNER IN WHICH THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT DATED 30/12/2010 WITHOUT STRIKING OFF THE IRRELEVANT WORD S, THE PENALTY PROCEEDINGS SHOW A NON-APPLICATION OF MIND BY THE A SSESSING OFFICER AND IS, THUS, UNSUSTAINABLE. WE HOLD SO. 7. BEFORE PROCEEDING FURTHER, WE MAY ALSO REFER TO ANOTHER FEATURE OF THE PRESENT CASE, WHICH ALSO DEMONSTRATES THE NON-APPLI CATION OF MIND BY THE ASSESSING OFFICER. AS POINTED OUT BY THE LD. REPRE SENTATIVE FOR THE ASSESSEE, 7 ITA NO.4168/MUM/2013 (AY. 2008-09) IN THE PRESENT CASE, ON 30/12/2010 ASSESSING OFFICE R ISSUED TWO NOTICES NAMELY, ONE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT; AND, SECOND UNDER SECTION 274 R.W.S 271AAA OF THE ACT. SECTION 271AA A OF THE ACT IS A SPECIFIC PROVISION DEALING WITH LEVY OF PENALTY IN CASES WHE RE SEARCH UNDER SECTION 132 OF THE ACT HAS BEEN INITIATED AFTER A SPECIFIED DATE. ONE OF THE QUALIFYING CONDITIONS OF SECTION 271AAA OF THE ACT IS THAT IT APPLIES TO SPECIFIED PREVIOUS YEAR, WHICH HAS BEEN DEFINED IN CLAUSE (B) OF THE EXPLANATION BELOW SUB-SECTION(4) OF SECTION 271AAA OF THE ACT. HAVING REGARD TO THE DEFINITION OF SPECIFIED PREVIOUS YEAR CONTAINED I N SECTION 271AAA OF THE ACT, AND THE DATE OF SEARCH BEING 19/02/2009, THE INSTAN T ASSESSMENT YEAR OF 2008-09 DOES NOT FALL FOR CONSIDERATION UNDER SECTI ON 271AAA OF THE ACT. THUS, THE ACTION OF THE ASSESSING OFFICER IN ISSUIN G NOTICE UNDER SECTION 274 R.W.S. 271AAA OF THE ACT IS ERRONEOUS IN LAW. IN A NY CASE, WHAT WE ARE TRYING TO EMPHASIZE IS THAT AT THE TIME OF INITIATION OF PENALTY, THE ASSESSING OFFICER WAS QUITE UNSURE AS TO WHICH OF THE TWO SECTIONS NA MELY, SECTION 271(1)(C) OF THE ACT OR SECTION 271AAA OF THE ACT WAS HE INTENDI NG TO PROCEED. SUCH AN APPROACH IS ALSO REFLECTIVE OF NON APPLICATION OF M IND BY THE ASSESSING OFFICER, AND, THEREFORE, FOLLOWING THE PARITY OF RE ASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE DILIP N. SHROFF ( SUPRA), HON'BLE BOMBAY HIGH COURT IN THE CASE SHRI SAMSON PERINCHERY (S UPRA) AS WELL AS THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COT TON & GINNING FACTORY (SUPRA), THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT DATED 30/12/2010 IS UNTENABLE AND CONSEQUENTLY, THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECT ION 271(1)(C) OF THE ACT OF THE ACT IS HEREBY DIRECTED TO BE DELETED. 8 ITA NO.4168/MUM/2013 (AY. 2008-09) 8. SINCE ASSESSEE HAS SUCCEEDED ON THE AFORESAID PR ELIMINARY GROUND, THE OTHER PLEAS RAISED BY THE ASSESSEE WITH REGARD TO T HE MERITS OF ALLOWABILITY OF PENALTY, ETC. ARE NOT BEING DEALT WITH, AS THE SAME HAVE BEEN RENDERED ACADEMIC. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 28/04 /2017 SD/- SD/- (AMARJIT SINGH ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 28/04/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI