SHRI SAURABH KALANI, Indore V. THE DCIT 1(1), Indore

ITA 420/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6003 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV JAIN
• Assessee Lawyers: AVINASH GOUR S
• Keywords: Difference of opinion
• Section: 143(3); 142(1); 153A; 14A; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SHRI SAURABH KALANI, 11,TUKOGANJ MAIN ROAD, INDORE. .. ./ PAN: AADPK3439N VS. DY. CIT, 1(1), INDORE. / APPELLANT / RESPONDENT SHRI MANISH KALANI, 11, TUKOGANJ MAIN ROAD, INDORE. .. ./ PAN: ACBPK8196N VS. DY. CIT, 1(1), INDORE. / APPELLANT / RESPONDENT / APPELLANTS BY SHRI MANJEET SACHDEVA AND SHRI AVINASH GOUR, ADVOCATES / RESPONDENT BY SHRI RAJEEV JAIN, SR. DR .. . / I.T.A. NO. 420/IND/2015 / ASSESSMENT YEAR: 2009-10 .. ./ I.T.A. NO. 421/IND/2015 / ASSESSMENT YEAR: 2009-10 I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 2 OF 13 DATE OF HEARING 02.01.2017 # DATE OF PRONOUNCEMENT 13.01.2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THESE APPEALS ARE FILED BY THE DIFFERENT ASSESSEES OF KALANI GROUP ARE DIRECTED AGAINST THE SEPARATE ORDE RS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE [HER EINAFTER REFERRED TO AS THE CIT(A)] DATED 15.01.2015 AND 21. 01.2015 RESPECTIVELY AND PERTAIN TO ASSESSMENT YEAR 2009-10 , 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL : - I.T.A.NO. 420/IND/2015: (SHRI SAURABH KALANI): 1. THAT THE LD. CIT(A) ERRED IN LEVYING THE PENALTY OF RS. 2,834/- U/S 271AAA OF THE INCOME-TAX ACT, 1961, DURING THE APPEAL PROCEEDINGS ON THE ADDITION MADE U/S 14A OF THE INCOME-TAX ACT, 1961. DURING THE ASSESSMENT PROCEEDINGS. 2. THAT THE LD. CIT(A) ERRED IN LEVYING THE PENALTY WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSEE AND AS SUCH PENALTY LEVIED IS AGAINST THE NATURAL L AW OF JUSTICE. 3. THAT THE LD. CIT(A) LEVIED THE PENALTY SUO MOTU AND WITHOUT APPRECIATING THAT NO PENALTY PROCEEDINGS I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 3 OF 13 WERE INITIATED BY THE LD. AO ON THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS. 4. THAT THE ADDITION WAS MADE DURING THE ASSESSMENT PROCEEDINGS DUE TO DIFFERENCE OF OPINION ON DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT AND AS SUCH DOES NOT ATTRACT PENALTY WHICH THE LD. CIT(A) FAILED TO APPRECIATE. I.T.A.NO. 421/IND/2015: (SHRI MANISH KALANI): 1. THAT THE LD. CIT(A) ERRED IN LEVYING THE PENALTY OF RS. 16,548/- U/S 271AAA OF THE INCOME-TAX ACT, 1961, DURING THE APPEAL PROCEEDINGS ON THE ADDITION MADE U/S 14A OF THE INCOME-TAX ACT, 1961. DURING THE ASSESSMENT PROCEEDINGS. 2.THAT THE LD. CIT(A) ERRED IN LEVYING THE PENALTY WITHOUT PROVIDING ANY OPPORTUNITY TO THE ASSESSEE AND AS SU CH PENALTY LEVIED IS AGAINST THE NATURAL LAW OF JUSTIC E. 3.THAT THE LD. CIT(A) LEVIED THE PENALTY SUO MOTU A ND WITHOUT APPRECIATING THAT NO PENALTY PROCEEDINGS WE RE INITIATED BY THE LD. AO ON THE ADDITION MADE DURIN G THE ASSESSMENT PROCEEDINGS. 4.THAT THE ADDITION WAS MADE DURING THE ASSESSMENT PROCEEDINGS DUE TO DIFFERENCE OF OPINION ON DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT AND AS SUCH DOES NOT ATTRACT PENALTY WHICH THE LD. CIT(A) FAILED TO APPRECIATE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT SHRI SAURABH KALANI IS AN INDIVIDUAL FILED THE RETURN OF INCOME ON I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 4 OF 13 06.12.2010 IN RESPONSE TO PROCEEDINGS INITIATED UND ER SECTION 153A OF THE INCOME TAX ACT VIDE NOTICE UNDER SECTIO N 153A DATED 22.10.2010 DECLARING TOTAL INCOME AT RS.56,11 ,170/-. THE SEARCH PROCEEDINGS UNDER SECTION 132 OF THE INC OME TAX ACT WERE CARRIED AT THE ASSESSEES PREMISES ON 16.04 .2009 AND ACCORDINGLY PROCEEDINGS UNDER SECTION 153A OF THE I NCOME TAX ACT WERE INITIATED. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) AND 142(1) OF THE INCOME TAX ACT WERE ISSUED. THE ASSESSEE FURNISHED T HE REQUIRED INFORMATION FROM TIME TO TIME AND THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT AT THE TOTAL INCOME OF RS.56,39,515/- AFTER MAKING THE DISALLOWANCE/ADDITION TO THE RETURNED INCOME. THE PE NALTY PROCEEDINGS UNDER SECTION 271AAA OF THE INCOME TAX ACT WERE INITIATED ON THE AMOUNT OF RS.50,00,000/- SURRENDER ED DURING THE COURSE OF SEARCH PROCEEDINGS BY THE ASSESSEE. T HE ASSESSING OFFICER PASSED PENALTY ORDER LEVYING PEN ALTY OF RS.5,00,000/- UNDER SECTION 271AAA OF THE INCOME TA X ACT ON I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 5 OF 13 THE AMOUNT OF RS.50,00,000/- SURRENDERED DURING THE COURSE OF SEARCH. 4. THAT AGGRIEVED BY THE PENALTY ORDER ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TA X (APPEAL)-I, INDORE. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, INDORE DURING THE APPEAL PROCEEDINGS A CCEPTED THE SUBMISSION GIVEN BY THE ASSESSEE AND DELETED PENALT Y LEVIED OF RS.5,00,000/- UNDER SECTION 271AAA OF THE INCOME TA X ACT BY THE ASSESSING OFFICER BUT ERRED IN LEVYING PENALTY OF RS.2834/- UNDER SECTION 271AAA OF THE INCOME TAX ACT ON DISAL LOWANCE MADE OF RS.28345/- UNDER SECTION 14A OF INCOME TAX ACT. 6. SIMILARLY, IN THE CASE OF SHRI MANISH KALANI, WHO IS ALSO AN INDIVIDUAL AND FILED THE RETURN OF INCOME O N 06.12.2010 IN RESPONSE TO PROCEEDINGS INITIATED UND ER SECTION 153A OF THE INCOME TAX ACT VIDE NOTICE UNDER SECTIO N 153A DATED 22.10.2010 DECLARING TOTAL INCOME AT RS.1,20, 69,610/-. THE SEARCH PROCEEDINGS UNDER SECTION 132 OF THE INC OME TAX ACT WERE CARRIED AT THE ASSESSEES PREMISES ON 16.04 .2009 AND I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 6 OF 13 ACCORDINGLY PROCEEDINGS UNDER SECTION 153A OF THE I NCOME TAX ACT WERE INITIATED. THE CASE OF THE ASSESSEE WAS SE LECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) AND 142(1) OF THE INCOME TAX ACT WERE ISSUED. THE ASSESSEE FURNISHED T HE REQUIRED INFORMATION FROM TIME TO TIME AND THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) R.W.S. 153A OF THE INCOME TAX ACT AT THE TOTAL INCOME OF RS.1,22,35,098/- AFT ER MAKING FOLLOWING DISALLOWANCE/ADDITION. THE PENALTY PROCEEDI NGS UNDER SECTION 271AAA OF THE INCOME TAX ACT WERE INIT IATED ON THE AMOUNT OF RS.75,00,000/- SURRENDERED DURING THE COURSE OF SEARCH PROCEEDINGS BY THE ASSESSEE. THE AO PASSE D PENALTY ORDER LEVYING PENALTY OF RS.7,50,000/- UNDER SECTI ON 271AAA OF THE INCOME TAX ACT ON THE AMOUNT OF RS.75,00,000 /- SURRENDERED DURING THE COURSE OF SEARCH. 7. AGGRIEVED BY THE PENALTY ORDERS, ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) -I, INDORE. 8. THE LD. CIT(A)-I, INDORE DURING THE APPEAL PROCEEDI NGS ACCEPTED THE SUBMISSION GIVEN BY THE ASSESSEE AND D ELETED PENALTY LEVIED OF RS.7,50,000/- UNDER SECTION 271AA A OF THE I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 7 OF 13 INCOME TAX ACT BY THE ASSESSING OFFICER, BUT ERRED IN LEVYING PENALTY OF RS.16,548/- UNDER SECTION 271AAA OF THE INCOME TAX ACT ON DISALLOWANCE MADE OF RS.1,65,488/- UNDER SECTION 14A OF INCOME TAX ACT. 9. BOTH THE ASSESSEE ARE IN APPEALS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALTY PROCEEDINGS U/S 271AAA OF THE ACT WERE INIT IATED ON THE AMOUNT OF RS. 50 LAKHS AND RS. 75 LAKHS SURREND ERED DURING THE COURSE OF SEARCH PROCEEDINGS BY THE ASSE SSEES ON WHICH PENALTY OF RS. 5 LAKHS AND RS. 7.50 LAKHS WAS L EVIED. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS DELETED THE PENALTY LEVIED OF RS. 5 LAKHS AND RS. 7 .50 LAKHS U/S 271AAA OF THE ACT, BUT ERRED IN LEVYING THE PEN ALTY OF RS. 2834/- AND RS. 16,548/- U/S 271AAA OF THE ACT ON TH E DISALLOWANCES OF RS. 28,345/- AND RS. 1,65,488/- MAD E U/S 14A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE CO NTENDED THAT THE PROVISIONS OF SECTION 251(1) OF THE ACT TA LKS OF THE POWERS OF CIT(A) TO VARY THE QUANTUM OF PENALTY LEV IED WHICH I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 8 OF 13 HAS ALREADY BEEN LEVIED. THEREFORE, THE LD. CIT(A) HAS NO POWER TO INITIATE AND IMPOSE THE PENALTY U/S 271(1)(C), WH ERE THE AO DID NOT INITIATE OR DID NOT LEVY ANY PENALTY FOR CO NCEALMENT OF INCOME, EVEN THE POWERS OF THE CIT(A) ARE CO-TERMIN US WITH THE POWERS OF THE AO, BUT HE HAS NO POWER TO LEVY PENAL TY. AS SUCH PENALTY LEVIED ON THE DISALLOWANCE U/S 14A BY T HE LD. CIT(A) IS UNLAWFUL AND NEEDS TO BE DELETED. THE LD. COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE IN SUPPORT OF HIS PROPOSITION IN THE CASE OF AJIT RAMCHANDRA JADHAV V S. ASSTT. COMMISSIONER OF INCOME TAX, I.T.A.NO. 2104/PN/2013, WHEREIN THE CIT(A) IMPOSED THE PENALTY ON ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME IN PURSUANCE OF CERTAIN ACTION ON WHICH THE AO HAS NOT LEVIED THE PE NALTY, WAS DELETED BY THE TRIBUNAL. WITHOUT PREJUDICE TO ABOVE , THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT CAS E LAW RELIED BY THE LD. CIT(A) ARE NOT APPLICABLE BECAUS E IT IS FOR SURRENDER AND NOT FOR DISALLOWANCE U/S 14A. FURTHER, THE LD. CIT(A) LEVIED THE PENALTY SUO MOTU AND WITHOUT APPRE CIATING THAT NO PENALTY PROCEEDINGS WILL BE INITIATED ON THE I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 9 OF 13 DISALLOWANCE U/S 14A OF THE INCOME-TAX ACT, 1961. TH E LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE GENUINE EXPENSES INCUR RED FOR THE BUSINESS PURPOSE AND THERE WAS NO CONTRARY OBSER VATION BY THE AO. LASTLY DISALLOWANCES MADE U/S 14A OF THE ACT ARE ON ACCOUNT OF LEGAL PROVISION ON WHICH FACTS AND FI GURES WERE CORRECTLY DISCLOSED IN THE RETURNS OF INCOME. THERE FORE, THIS DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICU LARS OF INCOME. FURTHER, THE AO HIMSELF HAS NOT INITIATED P ENALTY ON THE DISALLOWANCE U/S 14A OF THE ACT NOR LEVIED ANY P ENALTY ON THIS ACCOUNT. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF ACIT, CIRCLE 36(1) VS. GLOBAL ASSOCIATES, I.T.A.NO. 4819/DEL/201 2 DATED 28 TH JUNE, 2013, WHEREIN PENALTY LEVIED ON ACCOUNT OF DISALLOWANCE U/S 40(A)(IA) AND U/S 14A WAS DELETED BY FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LIMITED, 32 2 ITR 158 (S.C.) AND PRICE WATER COOPERS PRIVATE LIMITED VS. CIT, 348 ITR 306 ( S.C.). THE LD. COUNSEL FOR THE ASSESSEE F URTHER CITED I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 10 OF 13 DECISION OF TRIBUNAL IN THE CASE OF ACIT, CIRCLE 30 1 VS. MANISH JAIN, I.T.A.NO. 5999/DEL/12 DATED 14.6.2013, WHEREIN PENALTY LEVIED U/S 271(1)(C) ON ACCOUNT OF DISALLOWANCE MADE U/S 14A READ WITH RULE 8D WAS DELETED. ACCORDINGLY, THE LD. C OUNSEL FOR THE ASSESSEE ARGUED THAT THE DISALLOWANCES U/S 1 4A IS MERE TECHNICAL AND LEGAL AND NO PENALTY IS LEVIABLE IN BOTH THE ASSESSMENT YEARS ON ACCOUNT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA ). 11. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 12. WE HAVE CONSIDERED THE FACTS, RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) ON ACCOUNT OF INCOME OF RS. 11 LAKHS DISCLOSED IN THE RETURNS OF INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. THE RETU RNS OF INCOME ARE SO FILED WERE AS SUCH ACCEPTED EXCEPT BY MAKING DISALLOWANCE U/S 14A OF THE ACT. HOWEVER, THE AO LE VIED THE PENALTY ON THE AMOUNT DISCLOSED DURING THE COURSE O F SEARCH, WHICH WAS CAME TO BE DELETED BY THE LD. CIT(A). HOWEV ER, I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 11 OF 13 DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HA S DELETED THE PENALTY IN BOTH THE ASSESSMENT YEARS ON ACCOUNT OF SURRENDERED INCOME, BUT THE LD. CIT(A) HAS LEVIED A PENALTY ON ACCOUNT OF DISALLOWANCES U/S 14A OF THE ACT. WE FIND THAT THE DISALLOWANCES U/S 14A HAVE BEEN MADE ON THE BASIS OF FACTS DISCLOSED IN THE RETURNS OF INCOME AND THE SAME ARE BEING LEGAL IN NATURE NOR ON WHICH THE AO HAS INITIATED TH E PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED THE PENALTY ON SUCH DISALLOWANCES. THEREFORE, WE ARE OF THE CONSIDER ED OPINION THAT DISALLOWANCES ARE MADE ON ACCOUNT OF LE GAL PROVISION AS ENUMERATED IN RULE 8D READ WITH SECTIO N 14A OF THE ACT, WHICH HAS BEEN MADE ON THE FACTS DISCLOSED IN THE RETURNS OF INCOME. THEREFORE, THE PENALTY U/S 271AA A OF THE ACT IN BOTH THE ASSESSMENT YEARS ARE NOT SUSTAINABL E ON SUCH LEGAL DISALLOWANCES IN THE LIGHT OF DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S P.LIMITED, (2010) 322 ITR 158 ( S.C.), WHEREIN IT WAS HELD THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURNS OF INCOME ARE FOUND TO BE INCORRECT OR ERRONEOUS OR I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 12 OF 13 FALSE, THERE IS NO QUESTION OF INVITING PENALTY U/S 271AAA OF THE ACT. A MERE MAKING OF A CLAIM WHICH IS NOT SUSTA INABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCUR ATE PARTICULARS REGARDING INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. THIS VIEW IS ALSO SUPPORTED BY THE DEC ISION OF HON'BLE SUPREME COURT IN THE CASE OF PRICE WATER CO OPER PRIVATE LIMITED VS. CIT, 348 ITR 306 ( S.C.). THERE FORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS OFFERED AN EXPLANA TION, WHICH IS FOUND TO BE BONA FIDE AND SUBSTANTIATED BY THE F ACTS RELATING TO THE SAME AS DISCLOSED IN THE RETURNS OF INCOME. THEREFORE, THE PENALTY LEVIED BY THE CIT(A) IN BOTH THE ASSESS MENT YEARS UNDER APPEAL ON ACCOUNT OF DISALLOWANCES OF EXPENSES U/S 14A READ WITH RULE 8D IS NOT SUSTAINABLE IN LAW. THIS VI EW IS ALSO SUPPORTED BY THE DECISION IN THE CASE OF ACIT, CIR CLE 36(1) VS. GLOBAL ASSOCIATES (I.T.A.NO. 4819/DEL/2012 DATED 28 .06.2013 (TRIB-DELHI) AND ACIT, CIRCLE 30(1) VS. MANISH JAIN ( I.T.A.NO. 5999/DEL/2012 DATED 14.06.2013 (TRIB-DEL). HENCE, THE PENALTY LEVIED BY THE CIT(A) IS CANCELLED. ACCORDI NGLY, GROUND I.T.A.NOS. 420 & 421/IND/2015 SHRI SAURABH KALANI AND SHRI MANISH KALANI A.Y.20 -09-10 PAGE 13 OF 13 NOS. 1 TO 5 FOR BOTH THE ASSESSMENT YEARS ARE ALLOW ED. HENCE, THE SAME ARE CANCELLED. 13. IN THE RESULT, THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS ARE ALLOWED. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALL OWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 13 TH JANUARY. 2017. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 13 TH JANUARY, 2017. CPU*