MEETA H GANDHI, MUMBAI V. ITO 26 (2)(2), MUMBAI

ITA 4292/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9342 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 20-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAJIT NAIR
• Keywords: Gift; Income from undisclosed sources; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 250; 274; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 4292/MUM/2019 ( ASSESSMENT YEARS: 2004-05 ) MEETA H GANDHI KALPATARU RESIDENCY, FLAT NO. 82, KAMANI MARG SION (E), MUMBAI - 400076 / VS. ITO 26(2)(2) BKC BANDRA, MUMBAI ./ ./ PAN/GIR NO. : ACRPG0806D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI SAJIT NAIR, SR. DR / DATE OF HEARING 20/01/2021 !'# / DATE OF PRONOUNCEMENT 28/01/2021 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(A)-38, MUMBAI PASSED U/S 271(1)(C ) AND 250 OF THE ACT. THE ASSESSEE HAS RAISED THE FOLLOWING THE GROUNDS OF APPEAL: 1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN SUSTAINING THE PENA LTY OF ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 2 - RS. 49000/- LEVIED BY THE AO WITHOUT CONSIDERING TH E FACTS ON RECORD. 2. THE IMPUGNED PENALTY IS SUSTAINED ON THE BASIS OF PERVERSE FINDING. 3. THE APPELLANT PRAYS YOUR HONORS TO CRAVE LEAVE TO ADD, AMEND, ALTER, DELETE, MODIFY AND OR CHANGE ANY OF THE GROUNDS OF APPEAL, WHICH ARE INDEPENDENT, AND WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE ES ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 04.12.2006 DETERMINING TOTAL INCOME OF RS. 4,09,750/- AS AGAINST RETURNED INCOME OF RS.1,59,752/-.SUBSEQUENTLY, THE ASSESSEE HAS PREFERRED AN APPEAL WITH THE FIRST APPELLATE AUTHOR ITY AND THE CIT(A) HAS CONFIRMED THE ADDITION AS THE ASSESSEE COULD NOT ABLE TO ESTABLISH THE IDENTITY O F DONOR. FURTHER, THE ASSESSEE HAS FILED AN APPEAL WI TH THE HONBLE ITAT, WHEREAS, THE HONBLE TRIBUNAL H AS DIRECTED THE A.O TO EXAMINE THE DONOR AND DECIDE TH E MATTER AFRESH. SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED U/S 143(3)R.W.S.254 OF THE ACT ON 29.12.2011 ASSESSING THE TOTAL INCOME OF RS. 4,09,752/- INCLUDING THE GIFT OF RS. 2,50,000/- TRE ATED AS INCOME FROM UNDISCLOSED SOURCES. THE A.O. HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 3 - AND ISSUED NOTICE. THE ASSESSEE HAS FILED THE EXPLANATIONS ON 15.09.2015 MENTIONING THAT THE ASSESSEE HAS DISCLOSED FULL AND CORRECT PARTICULARS OF INCOME AND THE DONORS GIFT WAS GENUINE SUPPORTED WITH CONFIRMATIONS, BUT THE A.O HAS TREATED THE GIF T UNDER INCOME FROM OTHER SOURCES.SINCE THE SUBMISSIONS OF THE ASSESSEE ARE NOT SATISFACTORY, T HE A.O. HAS APPLIED THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT AND LEVIED MINIMUM PENALTY OF RS. 49,000/- . AGGRIEVED BY THE PENALTY ORDER OF THE A.O, THE ASSESSEE HAS PREFERRED AN APPEAL WITH THE CIT(A) AN D THE CIT(A) HAS CONFIRMED THE PENALTY ORDER. AGGRIE VED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE HONBLE TRIBUNAL. 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE AND HEARD THE SUBMISSIONS OF THE LD.DR AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE A.O. IN THE ASSESSMENT PROCEEDINGS HAS MAD E ADDITION OF GIFT RECEIVED FROM THE DONOR UNDER INCO ME FROM OTHER SOURCES. WE FIND THAT THE ASSESSEE IS IN THE SECOND ROUND OF LITIGATION, BEFORE THE LD.CIT(A ) AND HAS FILED EXPLANATIONS IN THE PENALTY APPEAL TH AT THE DONOR HAD PERSONALLY ATTENDED THE INCOME TAX ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 4 - OFFICE BUT STATEMENT COULD NOT BE RECORDED DUE TO NON AVAILABILITY OF THE OFFICER AND AGAIN COULD NOT REA PPEAR DUE TO ILL HEALTH. BUT THE ASSESSEE HAS SUBMITTED T HE INCOME TAX RETURN OF THE DONOR, BANK STATEMENT FINANCIAL STATEMENTS, AND AFFIDAVIT. THE A.O. HAS DISBELIEVED THE FACTS AND MADE ADDITION AND ALSO LEVIED THE PENALTY. WE FIND THE PENALTY IS NOT A GATEWAY FOR EVERY ADDITION MADE IN THE ASSESSMENT ORDER.WE RELY ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 AND THE PRINCIPLES AS UNDER: IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY , KARNATAKA HIGH COURT HAS LAID DOWN THE FOLLOWING PRINCIPLES FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 :- (A) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(L)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTH ORITY OR REVISIONAL AUTHORITY. ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 5 - (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT L EAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUT E CONCEALMENT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CO NTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PE NALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT I S ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOS ING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PR OCEEDINGS, IN ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 6 - APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS INSOFAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCOR RECT PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LE VIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE P ENALTY PROCEEDINGS. 4. WE CONSIDERING THE RATIO OF THE JUDICIAL DECISIO N, THE FACTS OF THE CASE, AND EXPLANATIONS OF THE ASSE SSEE ARE OF THE OPINION THAT THE PENALTY IS NOT SUSTAINA BLE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A ) ITA NO . 4292/MUM/2019 MEETA H. GANDHI, MUMBAI - 7 - AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENA LTY AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.2021 SD/- SD/- (RAJESH KUMAR) (PAVA N KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 28/01/2021 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI