SMT. PADMA KALANI, Indore V. THE DCIT 1(1), Indore

ITA 422/IND/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6004 (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: 2006-2007
• 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); 153A; 14A; 27; 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 SMT. PADMA KALANI, 11, TUKOGANJ MAIN ROAD, INDORE. .. ./ PAN: AFXPK1177L VS. DCIT, 1(1), INDORE. / APPELLANT / RESPONDENT / APPELLANT BY SHRI MANJEET SACHDEVA AND SHRI AVINASH GOUR, ADVOCATES / RESPONDENT BY SHRI RAJEEV JAIN, SR. DR DATE OF HEARING 02.01.2017 DATE OF PRONOUNCEMENT 13.01.2017 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE [HEREINAFTER .. . / I.T.A. NO. 422/IND/2015 %' ' / A.YS.: 2006-07 I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 2 OF 13 REFERRED TO AS THE CIT(A)] DATED 21.01.2015, FOR IM POSITION OF PENALTY AMOUNTING TO RS. 67,480/- AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE LD. CIT(A) ERRED IN LEVYING THE PENALTY OF RS. 67,480/- U/S 271(1)(C) 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 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. 5. THAT THE PENALTY LEVIED IS UNLAWFUL AND NOT BASED O N THE FACTS OF THE CASE. I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 3 OF 13 3. BRIEFLY STATED THE FACTS AS CULLED OUT FROM THE LOWE R AUTHORITIES ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND BELONGS TO KALANI GROUP. A SEARCH ACTION U/S 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE ASSE SSEE ON 16.04.2009. ACCORDINGLY, THE PROCEEDINGS U/S 153A W ERE INITIATED BY ISSUE OF NOTICE U/S 153A DATED 22.10.2 010, IN RESPONSE TO WHICH RETURN OF INCOME WAS FILED ON 06.1 2.2010 DECLARING TOTAL INCOME AT RS. 3,87,839/- FOR THE AS SESSMENT YEAR 2006-07, WHICH WAS ASSESSED U/S 143(3) READ WITH SECTION 153A ON 27.12.2011 BY DETERMINING TOTAL INC OME AT RS. 11,020/- FOR THE ASSESSMENT YEAR 2006-07 BY MAK ING DISALLOWANCES AT RS. 3,98,857/- U/S 14A OF THE ACT F OR THE ASSESSMENT YEAR 2006-07. PENALTY PROCEEDINGS U/S 27 1(1)(C) OF THE ACT WERE ALSO INITIATED VIDE NOTICES U/S 274 RE AD WITH SECTION 271(1)(C) DATED 27.12.2011. IT WAS EXPLAINE D BY THE ASSESSEE THAT THE ASSESSEE HAS DECLARED AN AMOUNT O F RS. 5,20,000/- FOR ASSESSMENT YEAR 2006-07 AS ADMITTED DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT AND THE SAME HAS BEEN DISCLOSED IN THE RETURNS OF INCOME FILED U/S 1 53A OF THE I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 4 OF 13 ACT. HOWEVER, THE ASSESSEE HAS NOT CONSIDERED THIS INCOME IN HER RETURN OF INCOME FILED U/S 139(1) ON 24.07.2006 . ACCORDINGLY, THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE. THE AO WAS OF THE VIEW THAT AS PER EXPLANATION (5A) T O SECTION 271(1)(C) OF THE ACT, THE ASSESSEE SHALL BE DEEMED TO BE CONCEALED INCOME WHERE DUE DATE FOR FILING OF THE RE TURN IS EXPIRED U/S 139(1), BUT THE SAME IS INCLUDED IN THE RETURN FILED AFTER SEARCH U/S 139(4) OF THE INCOME-TAX ACT, 1961 . ACCORDINGLY, THE AO INVOKED THE PROVISIONS OF EXPLA NATION (5A) TO SECTION 271(1)(C) OF THE ACT AND LEVIED A MINIMU M PENALTY OF RS. 1,60,000/- FOR ASSESSMENT YEAR 2006-07 AS AGAIN ST THE MINIMUM PENALTY WORKED OUT AT RS. 67,480/- U/S 271(1 )(C) OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE LD. CIT(A). 5. BEFORE HIM, THE SAME ARGUMENTS WERE ADVANCED BY THE ASSESSEE, WHICH ARE REPRODUCED BY THE LD. CIT(A) IN HIS APPELLATE ORDER. THE LD. CIT(A) NOTED THAT THERE IS NO DISPUTE ON THE FACTS THAT AFTER SEARCH, THE ASSESSEE ADMITT ED CERTAIN I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 5 OF 13 UN-ACCOUNTED INCOME, WHICH WAS DULY INCORPORATED IN T HE RETURNS FILED U/S 153A AND TAX AND INTEREST PAID ON IT. THE AO HAS RAISED A TECHNICAL POINT THAT DISCLOSURE OF INC OME MADE IN THE STATEMENT U/S 132(4) OF THE INCOME-TAX ACT, 196 1, WAS A COMBINED DISCLOSURE OF ENTIRE GROUP AGAINST WHICH LE TTER OF NAME-WISE BIFURCATION WAS SUBMITTED. THIS WAS DONE BY THE ASSESSEE IN CONSONANCE WITH THE STATEMENT RECORDED D URING SEARCH U/S 132(4) OF THE ACT, WHERE IN REPLY TO QUES TION REPRODUCED IN THE ASSESSMENT ORDER, THE MAIN PERSON OF THE GROUP STATED THAT HE DISCLOSING RS. 30 CRORES ON BE HALF OF INDIVIDUAL OF KALANI FAMILY AND THEIR COMPANY TO CO VER UNDISCLOSED INCOME, RECEIPTS AND VALUABLE ARTICLES FOUND AND SEIZED. THEREFORE, SUBSEQUENT BIFURCATION OF SUCH DISCLOSURE IN THE NAMES OF VARIOUS INDIVIDUALS AND COMPANIES WA S AN EXTENSION OF SUCH STATEMENT ONLY. THE STATEMENT ALS O GIVE BASIS OF DISCLOSURE WHICH WAS UNDISCLOSED INCOME REC EIPTS. THE AO ACCEPTED THAT DISCLOSED AS SUCH WITHOUT ANY O BJECTION AND EVEN BASIS OF EARNING SUCH INCOME WAS ALSO NOT D ISPUTED BY THE AO. IN FACT, THE AO HAS HIMSELF WRITTEN IN AS SESSMENT I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 6 OF 13 ORDER THAT INCOME RETURNED IN THE RETURN FILED U/S 153A WAS AS SUCH ACCEPTED AND NO FURTHER ADDITION WAS MADE. THEREFORE, THE LD. CIT(A) HELD THAT NO PENALTY CAN BE LEVIED ON THE AMOUNT DISCLOSED BY THE ASSESSEE AT RS. 5,20,00 0/- AND DULY REFLECTED THE SAME IN THE RETURN. HOWEVER, TH ERE IS AN ADDITION OF RS. 3,98,857/- U/S 14A OF THE INCOME-TA X ACT, 1961. FOR MAKING VARIOUS INVESTMENT OUT OF BORROWED FUND AND SINCE THIS ADDITION IS NOT CHALLENGED IN APPEAL THAT ITSELF IS A PROOF OF CONCEALMENT OF SUCH INCOME AS HELD IN TH E CASE OF CHIRAG METAL ROLLING MILLS PRIVATE LIMITED, 305 ITR 29 (MP). SUCH AMOUNT WAS NOT DISCLOSED DURING SEARCH BUT WAS DETECTED BY THE AO DURING ASSESSMENT. THEREFORE, SU CH DISALLOWANCES HAD TWIN ELEMENTS THERE WAS A CLEAR C ASE OF DIVERSION OF BORROWED FUNDS IN VARIOUS STATEMENT AND ON SUCH DIVERSION DISALLOWANCE OF INTEREST EXPENSES U/S 14A OF THE ACT WAS NOT MADE SUO MOTU BY THE ASSESSEE. ACCORDING TO THE CIT(A), THERE WAS A CLEAR CASE OF CONCEALMENT OF SU CH INCOME AND NON LEVY OF PENALTY OF SUCH AMOUNT WAS A MISTAKE APPARENT FROM RECORD, WHICH IS BEING RECTIFIED HERE BY THE I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 7 OF 13 UNDERSIGNED BY USING CO-TERMINUS POWERS OF CIT(A), AS A RESULT PENALTY OF RS. 67,480/- IS LEVIED ON THE ADD ITION OF RS. 3,98,857/-. 6. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE IN ITIATED ON THE AMOUNT OF RS. 5,20,000/- SURRENDERED DURING THE COURSE OF SEARCH PROCEEDINGS BY THE ASSESSEE ON WHICH PENAL TY OF RS. 1,60,000/- WAS LEVIED. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS DELETED THE PENALTY LEVIED OF RS .1,60,000/- U/S 271(1)(C) OF THE ACT, BUT ERRED IN LEVYING THE PENALTY OF RS. 67,480/- U/S 271(1)(C) OF THE ACT ON THE DISALLOWAN CE OF RS. 3,98,857/- MADE U/S 14A OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE PROVISIONS OF SECTION 2 51(1) OF THE ACT TALKS OF THE POWERS OF CIT(A) TO VARY THE QUANT UM OF PENALTY LEVIED WHICH HAS ALREADY BEEN LEVIED. THEREF ORE, THE LD. CIT(A) HAS NO POWER TO INITIATE AND IMPOSE THE PENAL TY U/S 271(1)(C), WHERE THE AO DID NOT INITIATE OR DID NOT LEVY ANY I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 8 OF 13 PENALTY FOR CONCEALMENT OF INCOME, EVEN THE POWERS O F THE CIT(A) ARE CO-TERMINUS WITH THE POWERS OF THE AO, BU T HE HAS NO POWER TO LEVY PENALTY. AS SUCH PENALTY LEVIED ON THE DISALLOWANCE U/S 14A BY THE LD. CIT(A) IS UNLAWFUL A ND NEEDS TO BE DELETED. THE LD. COUNSEL FOR THE ASSESSEE ALS O PLACED RELIANCE IN SUPPORT OF HIS PROPOSITION IN THE CASE OF AJIT RAMCHANDRA JADHAV VS. ASSTT. COMMISSIONER OF INCOME TAX, I.T.A.NO. 2104/PN/2013, WHEREIN THE CIT(A) IMPOSED T HE PENALTY ON ADDITIONAL INCOME OFFERED BY THE ASSESSE E IN THE RETURN OF INCOME IN PURSUANCE OF CERTAIN ACTION ON WHICH THE AO HAS NOT LEVIED THE PENALTY, WAS DELETED BY THE TR IBUNAL. WITHOUT PREJUDICE TO ABOVE, THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT CASE LAW RELIED BY THE LD. CI T(A) ARE NOT APPLICABLE BECAUSE IT IS FOR SURRENDER AND NOT FOR DISALLOWANCE U/S 14A. FURTHER, THE LD. CIT(A) LEVIED THE PENALTY SUO MOTU AND WITHOUT APPRECIATING THAT NO PENALTY PROCEEDINGS WILL BE INITIATED ON THE DISALLOWANCE U/S 14A OF THE INCOME- TAX ACT, 1961. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBM ITTED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE GENUINE E XPENSES I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 9 OF 13 INCURRED FOR THE BUSINESS PURPOSE AND THERE WAS NO C ONTRARY OBSERVATION BY THE AO. LASTLY DISALLOWANCE MADE U/S 14A OF THE ACT IS ON ACCOUNT OF LEGAL PROVISION ON WHICH FA CTS AND FIGURES WERE CORRECTLY DISCLOSED IN THE RETURN OF I NCOME. THEREFORE, THIS DOES NOT AMOUNT TO FURNISHING OF IN ACCURATE PARTICULARS OF INCOME. FURTHER, THE AO HIMSELF HAS NOT INITIATED PENALTY ON THE DISALLOWANCE U/S 14A OF THE ACT NOR LEVIED ANY PENALTY ON THIS ACCOUNT. IN SUPPORT OF H IS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF ACIT, CIRCLE 36(1) VS. GLOB AL ASSOCIATES, I.T.A.NO. 4819/DEL/2012 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 THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LIMITED, 322 ITR 158 (S.C.) AND PRICE WATER COOPERS PRIVATE LIMITED VS. CIT, 348 ITR 306 ( S.C.). THE L D. COUNSEL FOR THE ASSESSEE FURTHER CITED DECISION OF TRIBUNAL IN THE CASE OF ACIT, CIRCLE 30(1) VS. MANISH JAIN, I.T.A.NO. 59 99/DEL/12 DATED 14.6.2013, WHEREIN PENALTY LEVIED U/S 271(1)(C ) ON I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 10 OF 13 ACCOUNT OF DISALLOWANCE MADE U/S 14A READ WITH RULE 8 D WAS DELETED. ACCORDINGLY, THE LD. COUNSEL FOR THE ASSES SEE ARGUED THAT THE DISALLOWANCES U/S 14A IS MERE TECHNICAL AN D LEGAL AND NO PENALTY IS LEVIABLE IN BOTH THE ASSESSMENT Y EARS ON ACCOUNT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA). 8. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 9. 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. 5,20,000/- DISCLOSED IN THE RETURNS O F INCOME FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. TH E RETURNS 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, DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HA S DELETED THE PENALTY FOR THE ASSESSMENT YEAR UNDER APPEAL ON ACC OUNT OF I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 11 OF 13 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 RETURN OF INCOME. THEREFORE, THE PENALTY U/S 271(1) (C) OF THE ACT FOR THE ASSESSMENT YEAR UNDER APPEAL IS NOT SUS TAINABLE ON SUCH LEGAL DISALLOWANCES IN THE LIGHT OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P.LIMITED, (2010) 322 ITR 158 ( S.C.), WHEREIN IT WAS HELD THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURNS OF INCOME ARE FOUND TO BE I NCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTION OF INVITIN G PENALTY U/S 271(1)(C) OF THE ACT. A MERE MAKING OF A CLAIM WHIC H IS NOT I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 12 OF 13 SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FU RNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE ASSE SSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PR ICE WATER COOPER PRIVATE LIMITED VS. CIT, 348 ITR 306 ( S.C.) . THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS OFFERED AN EXPLANATION, WHICH IS FOUND TO BE BONA FIDE AND SUBS TANTIATED BY THE FACTS RELATING TO THE SAME AS DISCLOSED IN T HE RETURNS OF INCOME. THEREFORE, THE PENALTY LEVIED BY THE CIT(A) FOR THE ASSESSMENT YEAR UNDER APPEAL ON ACCOUNT OF DISALLOWA NCES OF EXPENSES U/S 14A READ WITH RULE 8D IS NOT SUSTAINABL E IN LAW. THIS VIEW IS ALSO SUPPORTED BY THE DECISION IN THE CASE OF ACIT, CIRCLE 36(1) VS. GLOBAL ASSOCIATES (I.T.A.NO. 4819/DEL/2012 DATED 28.06.2013 (TRIB-DELHI) AND ACI T, CIRCLE 30(1) VS. MANISH JAIN ( I.T.A.NO. 5999/DEL/2 012 DATED 14.06.2013 (TRIB-DEL). HENCE, THE PENALTY LEVIED B Y THE CIT(A) IS CANCELLED. ACCORDINGLY, GROUND NOS. 1 TO 5 FOR B OTH THE ASSESSMENT YEARS ARE ALLOWED. I.T.A.NOS. 422/IND/2015 A.Y.2006-07 SMT.PADMA KALANI, INDORE. PAGE 13 OF 13 10. IN THE RESULT, THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL ARE A LLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 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*