Sh. Archit Aggarwal, New Delhi V. DCIT, New Delhi

ITA 4441/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5758 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K TIWARI
• Assessee Lawyers: S L DEEPAK
• Keywords: Principle of natural justice; Bonafide belief; Ignorance of law
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE S H. R. K. PANDA , ACCOUNTANT MEMBER AND M S. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 4441/ DEL/201 5 ASSESSMENT YEAR: 2010 - 11 ARCHIT AGGARWAL 21/17, EAST PUNJABI, BAGH NEW DELHI 110026 PAN NO. AHNPA3720B VS DCIT CIRCLE 26 (1) ROOM NO. 192 C. R. BUILDING, I. P. ESTATE NEW DELHI 110002 (APPELLANT) (RESPONDENT) APPELLANT BY SH. S. L. DEEPAK, CA RESPONDENT BY SH. K. TIWARI, SR. DR DATE OF HEARING: 20 /0 6 /2018 DATE OF PRONOUNCEMENT: 28 / 0 6 /2018 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07.07.2014 OF THE CIT (A) - XIX, NEW DELHI RELATING TO A. Y. 2010 - 11. 2. LEVY OF PENALTY OF RS.6,99,608/ - B Y TH E ASSESSING OFFICER U/S. 271 ( 1)(C) OF THE IT ACT W HICH HAS BEEN CONFIRMED BY THE CIT (A) IS THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL. ITA NO. 4441 /DE L/20 1 6 2 3. FACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND FIELD HI S RETURN OF INCOME ON 31.07.2010 DECLAR ING TOTAL INCOME OF RS.9,32,510/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THERE ARE CASH DEPOSITS IN ICICI BANK, PUNJABI BAGH, NEW DELHI MAINTAINED BY THE ASSESSEE. ON BEING QUEST IONED BY THE ASSESSING OFFICER TO FURNISH THE SOURCE OF CASH DEPOSITS THE ASSESSEE FILED A LETTER DATED 22.02.2013 STATING THAT THE CASH DEPOSITS PERTAIN TO SALE/ PURCHASE OF AGRICULTURAL PRODUCE. HE FILED SOME BILLS OF SALES AND PURCHASE. THE ASSESSING O FFICER SEN T LETTER S TO THE SELLER OF AGRICULTURE PRODUCE NAMELY M/S. PRADEEP FRUITS AND MUSHROOMS, ASHOK VEGETABLES AND MUSHROOMS, ABDUL RAUF AND NAND KISHOR CALLING FOR THEIR DETAILS OF TRANSACTIONS WITH THE ASSESSEE. SINCE NO RESPONSE WAS RECEIVED THE AS SESSING OFFICER ASKED THE ASSESSEE TO SUBMIT THE REASONS AND WHY THE PEAK CASH CREDIT OF RS.22,64,105/ - BE NOT ADDED TO THE INCOME. THE ASSESSEE IN RESPONSE TO THE SAME SUBMITTED AS UNDER : - THE ABOVE THE DESCRIPTION OF TRADING IN AGRICULTURE PRODUCE BY THE ASSESSEE IS CORRECT. WE HAVE SUBMITTED THE INVOICES BOTH FOR THE PURCHASE AND SALE. GIVEN TIME WE ARE ALSO AGREEABLE TO PRODUCE THE PERSONS CONCERNED. HOWEVER, GIVEN THE TIME CONSTRA I NT WE ARE AGREEABLE TO THE ADDITION OF RS.22,64,105/ - SUBJECT TO NON LEVY OF PENALTY AND / OR PROSECUTION. WE ARE AGREEABEL ONLY TO BUY PEACE OF MIND 4. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.22,64,105/ - . THE ASSESSING OFFICER THEREAFTER INITIATED PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE IT ACT, 19 61. REJEC T ING THE EXPLANATION GIVEN BY THE ASSESSEE AND OBSERVING THAT ASSESSEE FAILED TO GIVE ANY SATISFACTORY ANSWER TO PROVE THE GENUINENESS AND ALLOWABILITY OF ITS CLAIM MADE IN GOOD FAITH WITH DUE DILIGENCE , T HE ASSESSING OFFICER LEVIED PENALTY OF RS. 6,99,608/ - BEING 100% OF TAX SOUGHT TO BE EVADED. ITA NO. 4441 /DE L/20 1 6 3 5. BEFORE CIT (A) IT WAS SUBMITTED THAT THE ASSESSEE WAS UNDER THE IMPRESSION THAT INCOME FROM TRADING OF AGRICULTURE PRODUCE IS EXEMPT FROM TAX BEING AGRICULTURE INCOME AND HENCE DID NOT SHOW SUCH INCO ME IN THE RETURN OF INCOME FILED. IT WAS ARGUED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FULLY COOPERATED WITH THE ASSESSING OFFICER AND AGREED TO SURRENDER OF RS.22,64,105/ - AS HIS INCOME. IT WAS SUBMITTED THAT THE SURRENDER OF INCOME WAS COND ITIONAL ON THE FACT THAT NO PENALTY AND OR PROSECUTION SHALL BE LEVIED ON THE ASSESSEE. 6. HOWEVER, THE LD. CIT (A) W AS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND CONFIRMED THE PENALTY SO LEVIED. WHILE DOING SO HE OBSERVED THAT ONLY AF TER THE ASSESSING OFFICER NOTICED THE CASH DEPOSITS IN THE BANK ACCOUNT AND ASKED THE ASSESSEE TO EXPLAIN THEIR SOURCE THAT THE ASSESSEE FOUND HIMSELF UNABLE TO SUBSTANTIATE THE TRANSACTIONS CLAIMED AND EXPLAIN THE SOURCE OF CASH DEPOSITS. HE OBSERVED THAT THE ASSESSEE WAS ALSO UNABLE TO EXPLAIN WHY INCOME FROM THE TRANSACTIONS CLAIMED WAS NOT SHOWN IN HIS RETURN. THE ASSESSEE ONLY MADE A VIRTUE OF A NECESSITY BY ADMITT ING THAT RELEVANT AMOUNT REPRESENTED HIS OWN UNDISCLOSED INCOME. ACCORDING TO THE LD. C IT (A) THIS IS CLEARLY NOT A CASE OF VOLUNTARY OR SUO - MOTO DECLARATION OF INCOME. SINCE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT A BONAFIDE ONE AND THERE WAS NO FULL DIS CLOSURE OF FACTS, THEREFORE, THE PROVISIONS OF E XPLAN A TION 1 TO SECTION 271 (1 ) (C ) OF THE IT ACT ARE APPLICABLE BECAUSE THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND ALSO FAILED TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DIS CLOSED BY HIM. RELYING ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF MAK DATA PVT. LTD. VS. CIT REPORTED 35 8 ITR 593 AND THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS PVT. LTD. REP ORTED 327 ITR 510 HE SUSTAINED THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271 (1) ( C ) OF THE IT ACT, 1961. ITA NO. 4441 /DE L/20 1 6 4 7. AGGRIEVED WITH SUCH ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE STRONGL Y CHALLENGED THE ORDER OF THE CIT (A) IN SUSTAINING THE PENALTY LEVIED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN SUSTAINING THE SAME DESPITE THE FACT THAT THE ADDITION PERTAINS TO AMOUNT SURRENDER ED BY THE ASSESSEE WI TH THE CONDITION T HAT NO PENALTY SHOULD BE LEVIED. FURTHER THE ASSESSING OFFICER IN THE INSTANT CASE HAS NOT RECORDED PROPER SATISFACTION BEFORE LEVYING PENALTY U/S. 271 (1) (C ) OF THE IT ACT, 1961. THEREFORE, THE LD. CIT (A) SHOULD NOT HAVE CONFIRM ED TH E PENALTY SO LEVIED. HE SUBMITTED THAT IGNORANCE OF LAW IS AN EXCUSE. SINCE THE ASSESSEE IN THE INSTANT CASE WAS UNDER THE BONAFIDE BELIEF THAT INCOME FROM TRADING IN FRUITS IS AGRICULTURE INCOME AND THEREFORE EXEMPT FROM TAX , HE HAD NOT DISCLOSED THE SA ME IN THE RETURN OF INCOME. REFERRING TO THE DECISION BY HON BLE MADRAS HIGH COURT IN CASE CIT VS. M/S. GEM GRANITES ( KARNATAKA ) VIDE ITA NO.504/09 ORDER DATED 12.11.2013 , HE SUBMITTED THAT THE HON BLE HIGH COURT AFTER CONSIDERING THE DECISION OF HON BLE S UPREME COURT IN THE CASE OF MAK DATA PVT. LTD ( SUPRA) HAD HELD THAT WHEN THE ASSESSEE DISCHARGES THE ONUS CAST ON IT BY GIVING COGENT AND RELIABLE EXPLANATION THEN THE ONUS SHIFTS TO THE DEPARTMENT TO PROVE THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME. HE SUBMITTED THAT IN THE INSTANT CASE THE ASSESSEE HAS GIVEN AN EXPLANATION WHICH HAS NOT BEEN PROVE D TO BE FALSE OR UNTRUE. 9. REFERRING TO THE ORDER OF THE ASSESSING OFFICER HE SUBMITTED THAT THE A SSESS EE HA D SOUGHT TIME FROM THE ASSESSING OFFICER TO PRODUCE THE PERSONS CONCERN ED . HOWEVER, THE ASSESSING OFFICER HAD NOT GIVEN ANY SUCH TIME TO THE ASSESSEE . T HEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LEVY OF PENALTY U/S 27 1 (1) (C ) I S NOT JUSTIFIED. ITA NO. 4441 /DE L/20 1 6 5 10. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A) . R ELYING ON VARIOUS DECISIONS , H E SUBMITTED THAT WHEN THE ASSESSEE FAIL ED TO SUBSTANTIATE WITH COGENT EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER REGARDI NG THE BONAFIDNESS OF ITS TR ADING ACTIVITY IN AGRICULTURE PRODUCE, THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE PENALTY LEVIED BY THE ASSESSING OFFICER. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CI TED BEFORE US BY BOTH THE SIDES. WE FIND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE ADDITION OF RS.22,64,105/ - BEING CASH DEPOSITS MADE BY THE ASSES SEE IN THE BANK ACCOUNT MAINTAINED WITH ICICI BANK, PUNJABI BAGH, NEW DELHI ON THE GROUND THAT ASSESSEE COULD NOT SUBSTANTIATE THE SOURCE OF THE SAME AND AGREED TO THE ADDITION OF THE SAME. FURTHER THE VARIOUS PARTIES TO WHOM LETTERS WERE SENT DID NOT RES POND. WE FIND THE ASSESSING OFFICER LEVIED PENALTY U/S. 271 (1) ( C ) OF THE IT ACT, 1961 ON THE GROUND THAT ADDITION W AS AGREED ONLY AFTER THE SAME WAS DETECTED BY THE DEPARTMENT A ND WAS NOT AN ACT OF FREE V OLITION ON THE PART OF THE ASSESSEE. W E FIND THE LD. CIT (A) CONFIRM ED THE PENALTY ON THE GROUND THAT THE PROVISIONS OF E XPLANATION 1 TO SECTION 271 (1 ) ( C) OF THE IT ACT, 1961 ARE APPLICABLE S INCE THE ASSESSEE IN THE INSTANT CASE HAS OFFERED AN EXPLANATION WHICH HE WAS NOT ABLE TO SUBSTANTIATE AND HA S FAIL ED TO PROVE SUCH EXPLANATION A S BONAFIDE. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD ASKED FOR SOME TIME TO PRODUCE THE PERSONS FROM WHOM HE HAD PURCHASED THE AGRICULTURE PRODUCE AND THE BILLS PRODUCED WERE NOT PRO VED TO BE FALSE OR UNTRUE. IT IS ALSO HIS ARGUMENT THAT THE AMOUNT WAS SURRENDERED TO B UY PEACE OF MIND WITH CONDITION THAT NO PENALTY SHALL BE LEVIED/ OR INITIATED AND THEREFORE PENALTY SHOULD NOT HAVE BEEN LEVIED. ITA NO. 4441 /DE L/20 1 6 6 12. WE FIND SOME FORCE IN THE ABOVE A RGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAD PRODUCED CERTAIN BILLS/ VOUCHERS REGARDING PURCHASE OF THE FRUITS. TH E S E BILLS / VOUCHERS WERE NOT PROVED TO BE FALSE OR UNTRUE. IT IS ALSO AN ADMITTED FACT THAT T HE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD STATED BEFORE THE ASSESSING OFFICER THAT GIVEN TIME ASSESSEE I S AGREEABLE TO PRODUCE T HE PERSON S CONCERN ED . HOWEVER, IT IS SEE N FROM THE ASSESSMENT ORDER THAT NO SUCH TIME W AS GIVEN BY THE ASSES SING OFFICER TO THE ASSESSEE DESPITE THE SAME BEING ASKED FOR . THERE WAS NO URGENCY ON THE PART OF THE ASSESSING OFFICER TO PASS THE ORDER ON 08.03.2013 WHEN THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 06.03.2013 HAD REQUESTED THE ASSESSING OFFICER TO GIVE S OME TIME TO PRODUCE THE CONCERN ED PERSONS. WE THEREFORE, FIND BONAFIDE NESS IN THE STATEMENT MADE BY THE ASSESSEE . F URTHER THE ASSESSING OFFICER HAS NOT FOLLOWED THE PRINCIPLE OF NATURAL JUSTICE. 13. WE FIND T HE HON BLE MADRAS HIGH COURT IN THE CASE OF M/ S. GEM GRANITES ( KARTANAKA ) (SUPRA) AFTER CONSIDERING VARIOUS DECISIONS INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS, M/S. DHARMENDRA TEXTILE PROCESSORS AND ORS. AND MAK DATA PVT. LT D. (SUPRA) HAS HELD AS UNDER : - IN A RECENT DECISION OF THE HON'BLE SUPREME COURT IN CIVIL APPEAL NO.9772 OF 2013, DATED 30.10.2013 (MAK DATA P. LTD., VS. COMMISSIONER OF INCOME TAX - II), THE HON'BLE SUPREME COURT WHILE CONSIDERING THE EXPLANATION TO SECT ION 271(1), HELD THAT THE QUESTION WOULD BE WHETHER THE ASSESSEE HAD OFFERED AN EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME AND THE EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, W HEN A DIFFERENCE IS NOTICED BY THE ASSESSING OFFICER BETWEEN THE REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ITA NO. 4441 /DE L/20 1 6 7 ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE AND WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY THE ASSESSEE, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THEIR INCOME AND NOT OTHERWISE. FACTUALLY, WE FIND THAT THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED BY GIVING A COGENT AND RELIABLE EXPLANATION. THEREFO RE, IF THE DEPARTMENT DID NOT AGREE WITH THE EXPLANATION, THEN THE ONUS WAS ON THE DEPARTMENT TO PROVE THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, SUCH ONUS WHICH SHIFTED ON THE DEPARTMENT HAS NOT BEEN DISCHARGED. IN THE CIRCUMSTANCES, WE DO NOT FIND THAT THERE IS ANY GROUND FOR THIS COURT TO SUBSTITUTE OUR INTERFERE WITH THE FINDING OF THE TRIBUNAL ON THE ASPECT OF THE BONAFIDES OF THE CONDUCT OF THE ASSESSEE. 12. IN THE CIRCUM STANCES, FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT, WE UPHOLD THE ORDER OF THE TRIBUNAL AND THE TAX CASE APPEAL STANDS DISMISSED. NO COSTS. 14. SINCE THE BILLS AND VOUCHERS PRODUCED IN THE INSTANT CASE ARE NOT PROVED TO BE FALSE OR UNTRUE, AND THE ASSESSEE WAS AGREEABLE TO PRODUCE THE PARTIES CONCERNED BEFORE THE ASSESSING OFFICER BUT AT THE SAME TIME AGREED FOR THE ADDITION, THEREFORE, FOLLOWING THE ABOVE DECISION CITED (SUPRA) AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271 (1) (C ) OF THE I. T. ACT, 1961. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDIN GLY ALLOWED. ITA NO. 4441 /DE L/20 1 6 8 1 5 . IN THE RESULT , THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28. 0 6 .2018. SD/ - SD/ - ( SUCHITRA KAMBLE ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE: - 28 .0 6 .2018 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 4441 /DE L/20 1 6 9 DATE OF DICTATIO N 26.06.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.06.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 27.06.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 27.06.2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 28.06.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 28.06.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 9 .06.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 9 .06.2018 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER