Devidas Ramchandra Kulkarni, Nashik V. Additional Commissioner of Income-tax,

ITA 444/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1518 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 13-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bonafide belief; Initiation of penalty proceedings; Competent authority
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 4 44 /PN/201 5 / ASSESSMENT YEAR : 20 09 - 1 0 SHRI DEVIDAS RAMCHANDRA KULKARNI, 1, DATTARAJ KRUPA ROW HOUSES, HIRAY NAGAR, NASHIK PUNE ROAD, NASHIK 422011 . / APPELLANT PAN: ABRPK1189N VS. THE JT. COMMISSIONER OF IN COME TAX, RANGE 1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI M.K. KULKARNI / APPELLANT BY : SHRI M.K. KULKARNI / RESPONDENT BY : SHRI SUHAS KULKARNI, JCIT / DATE OF HEARING : 27 .0 7 . 201 6 / DATE OF PRONOUNCEMENT: 29 . 0 7 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I, NASHIK , DATED 0 3 . 0 2 .20 1 5 RELATING TO ASSESSMENT YEAR 20 09 - 1 0 AGAINST LEVY OF PENALTY UNDER SECTION 271D OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL ORDER PASSED BY THE LD. CIT(A) - NASHIK CONFIRMING THE LEVY OF PENALTY LEVIED BY JT. CIT, RANGE 1, NASHIK UNDER S.271 - D OF THE ACT OF RS.4,18,000/ - WITHOUT PROPERLY APPRECIATING THE PROVISIONS OF S.273 - B OF THE ACT IS CONTRARY TO THE PROVISIONS OF LAW. IT BE SET ASIDE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W THE LOWER AUTHORITIES FAILED TO APPRECIATE THE LEGAL POSITION EMANATING FROM THE LOAN ETC. FROM WIFE WHO IS CONSIDERED TO BE HALF - BODY OF THE HUSBAND AND THEREFORE NOT A LOAN/DEPOSIT FROM ANY THIRD PARTY. THE TRANSACTION IS NOT COVERED BY S.269SS OF THE ACT AND THEREFORE NO PENALTY WAS LEVIABLE FOR VIOLATION OF S.269SS OF THE ACT U/S 271 - D. THE PENALTY LEVIED AND SUSTAINED BE QUASHED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A)S DECISION IN CONFIRMING THE LEVY OF PEN ALTY UNDER S.271 - D FOR VIOLATION OF THE PROVISIONS OF S.269SS IS CONTRARY TO BE WEIGHT OF EVIDENCE SUBMITTED BEFORE AUTHORITIES AND IN VIEW OF THIS THE ORDER CONFIRMING THE LEVY OF PENALTY U/S 271 - D IS PERVERSE AND NOT SUSTAINABLE IN LAW. IT BE QUASHED. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271D OF THE ACT AT RS.4,18,000/ - . THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. BRIEFLY, IN THE FACT S OF THE CASE, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 6,77,220/ - . THE ASSESSEE WAS ENGAGED IN THE CONSTRUCTION ACTIVITY AND THE ASSESSING OFFICER PASSED ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT DATED 28.12.2011 AF TER MAKING AN ADDITION OF RS.50,000/ - AT TAXABLE INCOME OF RS. 7,27,215/ - . THE COPY OF THE ASSESSMENT ORDER IS PLACED ON RECORD. THEREAFTER, THE ASSESSING OFFICER MADE A REFERENCE UNDER SECTION 272A(3)(C) OF THE ACT FOR INITIATING PENALTY PROCEEDINGS UNDE R SECTION 271D OF THE ACT VIDE LETTER DATED 03.05.2012. THE ASSESSING OFFICER STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT THE ASSESSEE HAD ACCEPTED LOAN / DEPOSIT IN CASH FROM HIS WIFE SMT. C.D. KULKARNI OF RS.4,18,000/ - . SI NCE THERE WAS RECEIPT OF CASH LOAN, WHICH WAS IN VIOLATION ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 3 OF PROVISIONS OF SECTION 269SS OF THE ACT, THE JCIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY PENALTY UNDER SECTION 271D OF THE ACT SHOULD NOT BE LEVIED. THE CASE OF THE ASSESSEE BEFORE T HE JCIT WAS THAT HE WAS A BUILDER, DEVELOPER AND WAS THE PROPRIETOR OF HIS BUSINESS. HE FURTHER POINTED OUT THAT HIS WIFE WAS A CIVIL ENGINEER AND SHE IS USED TO DO THE JOB OF DRAFTING AND GETTING THE PLANS APPROVED FROM THE NASHIK MUNICIPAL CORPORATION. IN THIS REGARD, HE POINTED OUT THAT THERE WAS RUNNING ACCOUNT WITH HIS WIFE AND WHEREIN, THERE WERE CASH TRANSACTIONS WHICH WERE MORE THAN RS.20,000/ - . HIS CLAIM BEFORE THE JCIT THAT THERE WAS GENUINETY OF THE TRANSACTIONS AND FURTHER, HE HAD A BONAFIDE BELIEF THAT THE FAMILY TRANSACTIONS WERE NOT COVERED UNDER SECTION 269SS OF THE ACT. THE AMOUNT WAS STATED TO HAVE BEEN UTILIZED FOR ADVANCEMENT OF HIS BUSINESS AND REQUEST WAS MADE TO DROP THE PENALTY PROCEEDINGS INITIATED UNDER SECTION 271D OF THE ACT. THE JCIT OBSERVED THAT THE ASSESSEE HAD FAILED TO PROVE THE BUSINESS EXIGENCY FORCING HIM TO ACCEPT THE AMOUNT IN CASH AND FURTHER THE SAID TRANSACTIONS WERE CONDUCTED AGAINST SOME BUSINESS URGENCY ALSO AND THERE WAS NO MAJOR SHORTAGE WAS PROVED BY THE AS SESSEE. CONSEQUENTLY , THE JCIT HELD THE ASSESSEE TO HAVE VIOLATED THE PROVISIONS OF SECTION 269SS OF THE ACT AND LEVIED PENALTY OF RS.4,18,000/ - UNDER SECTION 271D OF THE ACT. 5. THE CIT(A) HAS UPHELD THE ORDER OF ASSESSING OFFICER IN THE ABSENCE OF AS SESSEE HAVING ESTABLISHED WHETHER THERE WAS ANY EMERGENCY TO ACCEPT SUCH CASH LOANS. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 4 7. THE FIRST PLANK OF ARGUMENTS OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT THE AMOUNT WAS RECEIVED FROM HIS WIFE, WHO WAS ALSO ENGAGED IN ALLIED LINE OF CONSTRUCTION AND THE AMOUNT WAS ADVANCED BY HER OUT OF HER BUSINESS FUNDS. THE ASSESSEE HAD REQUISITIONED THE SAID FUNDS FOR CARRYING ON OF HIS BUSINESS AND BECAUSE OF RELA TIONSHIP BETWEEN THE HUSBAND AND WIFE, THERE WAS NO MERIT IN HOLDING THAT THERE WAS VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT. THE SECOND PLANK OF ARGUMENTS RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE INITIATION OF PENALTY PROCEEDINGS AFTER COMPLETION OF ASSESSMENT PROCEEDINGS, BY THE JCIT W AS INCORRECT. HE REFE R RED TO THE CBDT CIRCULAR NO.9/DV OF 2016, DATED 26.04.2016, WHEREIN IT HAS BEEN OBSERVED THAT INITIATION OF PENALTY PROCEEDINGS SHOULD BE DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. THE CIRCULAR CLEARLY PROVIDES THAT WHERE THE ASSESSING OFFICER WAS BELOW THE RANK OF JCIT, THEN HE WAS ADVISED TO MAKE A REFERENCE TO RANGE HEAD REGARDING VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT AND 269T OF THE A CT, IN THE COURSE OF ASSESSMENT PROCEEDINGS OR ANY OTHER PROCEEDINGS UNDER THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. ON PERUSAL OF RECORD AND AFTER HEAR ING BOTH THE LEARNED AUTHORIZED REP RESENTATIVES, THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE ASSESSING OFFICER, WARD 1(3), NASHIK HAD COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT V IDE ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 5 ORDER DATED 28.12.2011. THE PERUSAL OF ASSESSMENT ORDER DOES NOT REFLECT ANY OBSERVATIONS ABOUT THE RECEIPT OF ANY CASH LOAN BY THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER, NASHIK HAD MADE A REFERENCE UNDER SECTION 272A(3)(C) OF THE ACT TO THE JC IT, RANGE - 1, NASHIK FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT ON THE PREMISE THAT DURING THE YEAR, THE ASSESSEE HAD ACCEPTED THE LOAN / DEPOSIT IN CASH FROM HIS WIFE SMT. C.D. KULKARNI OF RS.4,18,000/ - . THE PERUSAL OF ORDER PASSED U NDER SECTION 271D OF THE ACT REFLECTS THAT THE ASSESSING OFFICER, WARD 1(3), NASHIK HAD STATED THAT THE SAID INFORMATION CAME TO HIS KNOWLEDGE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 - 10. SINCE THE ASSESSEE HAD ACCEPTED THE SAI D LOAN IN CASH, PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271D OF THE ACT BY ISSUE OF NOTICE DATED 07.05.2012 BY THE JCIT. THE ASSESSEE HAS RAISED TWO ISSUES IN THE PRESENT APPEAL. THE FIRST ISSUE RAISED IS AGAINST THE JURISDICTION OF JCIT TO PASS THE SAID ORDER LEVYING PENALTY UNDER SECTION 271D OF THE ACT. THE CASE OF THE ASSESSEE IS THAT WHERE THE ASSESSMENT PROCEEDINGS WERE COMPLETED ON 28.12.2011 AND THEREAFTER, PENALTY PROCEEDINGS WERE INITIATED ON A REFERENCE MADE BY THE ASSESSING OFFICER V IDE LETTER DATED 03.05.2012, WHICH WAS AFTER COMPLETION OF ASSESSMENT PROCEEDINGS, THE POWER EXERCISED BY THE JCIT, RANGE - 1, NASHIK WAS NOT CORRECT. IN THIS REGARD, RELIANCE WAS PLACED ON CIRCULAR ISSUED BY THE CBDT (SUPRA). THE LEARNED DEPARTMENTAL REPR ESENTATIVE FOR THE REVENUE OBJECTED TO THE SAID RELIANCE OF ASSESSEE ON THE PREMISE THAT THE SAID CIRCULAR ISSUED BY CBDT WAS DATED 26.04.2016 AND WAS NOT AVAILABLE AT THE RELEVANT TIME. 10. UNDER THE PROVISIONS OF SECTION 272A(3)(C) OF THE ACT, IT IS P ROVIDED THAT ANY PENALTY IMPOSABLE UNDER SUB - SECTION (1) OR (2) OF THE SAID SECTION SHALL BE ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 6 IMPOSED BY THE JOINT DIRECTOR OR JOINT COMMISSIONER IN RESPECT OF CASES OTHER THAN THE CASES COVERED IN CLAUSES (A) & (B) OF SUB - SECTION (3). THE ISSUE WHICH ARIS ES BEFORE THE TRIBUNAL IS THAT WHERE THE ASSESSMENTS HAVE BEEN COMPLETED BY A PERSON OTHER THAN JOINT COMMISSIONER, THEN AT WHAT JUNCTURE, THE ASSESSING OFFICER MAKING A REFERENCE TO THE JCIT, FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271D OF THE AC T SHOULD SEN D THE INTIMATION IN THIS REGARD. THE INFORMATION THAT THE ASSESSEE HAD ACCEPTED THE CASH LOAN FROM HIS WIFE HAD ADMITTEDLY COME TO THE KNOWLEDGE OF ASSESSING OFFICER, WARD 1(3), NASHIK DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF, WHICH IS CLEARLY MENTIONED IN THE ORDER PASSED UNDER SECTION 271D OF THE ACT. ONCE SUCH INFORMATION HA D COME TO HIS KNOWLEDGE, THEN IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO HAVE FORWARDED THE SAID INFORMATION TO THE JCIT I.E. RANGE HEAD BEFORE COMPLETION OF ASSESSMENT, SINCE AFTER THE COMPLETION OF ANY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER BECOMES NON GRATA TO SAID PROCEEDINGS. THIS POSITION AND STATUS OF THE ASSESSING OFFICER TO MAKE A REFERENCE TO THE JCIT FOR INITIATING PROCEEDINGS UNDER SECTIO N 271D OF THE ACT HAS FURTHER BEEN EXPLAINED BY THE AFORESAID CIRCULAR OF CBDT. THOUGH THE SAID CIRCULAR HAS BEEN PASSED ON 26.04.2016 BUT IT EXPLAINS LAW WHICH IS TO BE APPLIED. AS PER THE SAID CIRCULAR, IT IS INCUMBENT UPON THE ASSESSING OFFICER OTHER THAN THE JCIT TO MAKE A REFERENCE TO THE JCIT WITH REGARD TO VIOLATION OF PROVISIONS OF SECTION 269SS AND 269T OF THE ACT BEFORE CLOSE OF ASSESSMENT PROCEEDINGS. IT IS VERY CLEARLY PROVIDED SO IN THE SAID CIRCULAR. IT HAS ALSO BEEN CONSIDERED BY THE CBDT THAT THE STATUTORY PROVISIONS CLEARLY STATE THAT THE COMPETENT AUTHORITY TO LEVY PENALTY IS THE JOINT COMMISSIONER, THEREFORE, ONLY THE JOINT COMMISSIONER CAN INITIATE PROCEEDINGS TO LEVY PENALTY AND SUCH INITIATION OF PENALTY PROCEEDINGS COULD NOT BE DON E BY THE ASSESSING OFFICER. ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 7 THE CBDT HAS FURTHER ACKNOWLEDGED THAT STATEMENT IN THE ASSESSMENT ORDER THAT THE PROCEEDINGS UNDER SECTION 271D AND 271E OF THE ACT ARE INITIATED IS CONSEQUENTIAL SINCE THE INITIATION IS BY AN AUTHORITY WHO IS INCOMPETENT. TH E PROCEEDINGS IN THIS REGARD CAN BE INITIATED ONLY BY ISSUANCE OF NOTICE BY THE JCIT AND THE SAME HAS TO BE INITIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS OR ANY OTHER PROCEEDINGS UNDER THE ACT. IN THE ABOVE SAID CIRCUMSTANCES, PENALTY ORDER PASSED IN THE PRESENT CASE BY WAY OF REFERENCE MADE BY THE ASSESSING OFFICER TO JCIT VIDE LETTER DATED 03.05.2012 IS BEYOND LIMITS PRESCRIBED, WHERE THE ASSESSMENT ORDER WAS COMPLETED ON 28.12.2011 . H ENCE ON THIS COUNT, PENALTY ORDER MERITS TO BE DISMISSED AND THE SAME IS SO DISMISSED. 11. NOW, COMING TO THE MERITS OF LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. THE ASSESSEE WAS RUNNING BUSINESS OF CONTRACTOR AND HIS WIFE WAS A CIVIL ENGINEER AND WAS ALSO CARRYING ON HER ACTIVITIES. DURING THE COURSE OF PRESENT ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD ACCEPTED RS.4,18,000/ - IN CASH FROM HIS WIFE. THE WIFE OF ASSESSEE WAS ALSO ATTACHED TO CONSTRUCTION BUSINESS OF THE BUILDINGS AS CIVIL ENGINEER. THE ASSESSEE CLAIMS THAT WHERE HE HAD RECEIVED THE AFORESAID CASH AMOUNT IN CASH FROM HIS WIFE, THEN NO ADVERSE INTERFERENCE IS CALLED FOR. THERE IS MERIT IN THE CLAIM OF ASSESSEE AS THE INTENTION OF INTRODUCING THE PRESENT SECTION 269SS OF THE ACT WAS TO PREVENT THE ADJUSTMENT OF ENTRIES BY WAY OF CASH LOANS. HOWEVER, THE ASSESSEE HAS RECEIVED THE SAID CASH FROM HIS WIFE AND IN SUCH CIRCUMSTANCES, THERE IS NO MERIT IN HOLDING THE ASSESSEE TO HAVE DEFAULTED AND BEING LIABLE FOR LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. ON THIS COUNT ALSO, WE DIRECT THE ASSESSING O FFICER TO DELETE PENALTY LEVIED UNDER SECTION 271D OF THE ACT AT ITA NO. 444 /PN/20 1 5 SHRI DEVIDAS RAMCHANDRA KULKARNI 8 RS.4,18,000/ - . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 1 2 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 29 TH DAY OF JULY , 201 6 . SD/ - SD/ - ( R.K. PANDA ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 29 TH JULY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPEL LANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , NASHIK ; 3. ( ) 4. / THE CIT - 1, NASHIK ; 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE