M/s. B.M. Chapalkar & Sons, Nashik V. Assistant Commissioner of Income-tax,

ITA 448/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9459 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-12-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Section: 143(3); 133A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.448/PUN/2016 / ASSESSMENT YEAR : 2009-10 M/S. B.M. CHAPALKAR & SONS, 26, DEHBANOO COMPLEX, NASHIK PUNE ROAD, NASHIK ROAD, NASHIK 422101. PAN : AADFB5084C. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE. REVENUE BY : SHRI MUKESH JHA. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A)-1, NASHIK DT. 14.01.2016 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF GOVERNMENT CONTRACTS AND CIVIL CONSTRUCTION. A SURVEY AC TION U/S 133A OF THE ACT WAS CARRIED OUT ON 06.08.2009 AT THE BU SINESS PREMISES OF THE ASSESSEE AT NASHIK. DURING THE COURSE OF SURVEY / DATE OF HEARING : 13.12.2017 / DATE OF PRONOUNCEMENT: 12.01.2018 2 ACTION, ONE OF THE PARTNERS OF THE FIRM SANDEEP SHANKAR C HAPALKAR HAD VOLUNTARILY DISCLOSED ADDITIONAL INCOME OF RS.30,00,000/- ON ACCOUNT OF DISCREPANCIES FOUND IN BILLS AND PAYMENTS MADE T O SUB- CONTRACTORS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF IN COME FOR A.Y. 2009-10 ON 24.09.2009 DECLARING TOTAL INCOME OF RS.1,70,20,730 /-. THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY AND ASS ESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.30.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.3,18,35,938/-, BY INTER-ALIA MAK ING ADDITIONS OF INCOME OF RS.1,48,15,208/-. ON THE AFORESAID ADDIT IONS MADE, AO VIDE ORDER DT.20.02.2014 LEVIED PENALTY OF RS.4,78,50 0/- U/S 271(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER OF AO, AS SESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.14.0 1.2016 (IN APPEAL NO.NSK/CIT(A)-1/876/2013-14) APART FROM DISMISSING THE APPEAL OF THE ASSESSEE, ENHANCED THE PENALTY BY RS.44,5 0,000/-. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. L EA RN E D AS SE SSIN G OFFI CE R IS NOT JUSTIFI E D I N L E V Y IN G TH E P E N A LT Y FOR TH E ADDITION OF RS. 1 4 , 50,000 A ND TH E CIT ( A) IS NOT J USTIF I E D IN E NH A NCING TH E PEN A LT Y ON T H E A LL E G E D NON G E NUIN E P AY M E NT TO SUBCONTRA C TORS WH E N TH E A DDITION IS B A S E D ON E ST I M A T E . P E N A L T Y IS NOT L E V I AB L E WH E N TH E A DDITION IS E S T IM A T E D . TH E P E N A L T Y M AY P L EA S E B E CA N CE LL E D . 2. ON TH E FACTS A ND IN TH E CIRC U MSTAN CE S OF T H E C A SE A ND IN L A W THE L EA RN E D ASS E S S IN G OFFI CE R IS NOT JUSTIF IE D I N L E VYIN G TH E P E N A LT Y FOR TH E ADD I TION OF RS. 1 4,50,000 A ND TH E CIT ( A) IS NOT JUS TI FI E D IN EN H A N C IN G TH E PENAL TY ON TH E A LL E G E D NON GE NUIN E P A YM E NT T O SUB C ONTR AC TORS A T RS.44,50 , 000 WH E N T H E R E IS D I FF E RENCE OF O P IN I ON AS TO G E NUIN E N E SS OR OTH E RWISE OF T H E EX PENDITURE. THE PENALT Y MA Y P L E A S E B E CAN CE LL E D . 3. ON TH E F A CTS AND IN THE C IRCUMST A N C E S O F TH E CA S E A ND I N L AW TH E L EA RN E D ASS E SSIN G OFF I CE R IS NOT J U STIFI E D IN L E VYIN G TH E P E N A LT Y FOR TH E ADDITION OF RS.14, 5 0,000 A ND TH E C I T ( A) IS NOT JUSTIFI E D IN E NH A N C ING TH E P E N A LT Y ON TH E A LL EGE D NON G E NU I N E P AY M E NT T O SUB CO NTR ACT OR S OF RS. 44,50,000 WH E N TH E ADDIT I ON W A S M A D E O N TH E B A SIS OF DIAR Y OWN E D AND R E COV E R E D FROM T HI RD P A RTY AND IN W H I C H NO ENTRY W A S IN TH E HAND WRITING OF A N Y OF T H E PARTN E R . TH E PENA L TY MAY P L EASE B E CANC E LLED. 3 4. ON TH E F A CTS AND IN TH E CI R C UMST A NC E S OF TH E CA S E A ND IN LAW TH E L EA RN E D CIT (A) IS NOT JUST I FI E D IN C ONFIRMIN G TH E P E N A L T Y ON TH E A DDITION OF RS.14 , 50,000 A ND FURTH E R E NHAN C IN G TH E S A M E ON T H E B A SIS O F A LL EGE D NON-G E NUIN E EX P E NDITURE WHEN THE R E IS NO ADDIT I ON OF RS.14,50 , 000 OR RS.44,50 , 000 . TH E PENA L T Y MAY P L EAS E BE CANCEL L E D. 5. ON TH E F A CTS AND IN THE CIRCU M S T AN CE S O F TH E CA S E A ND IN L AW TH E CIT (A) IS NOT JUSTIFI E D IN R E TAIN I NG TWO P E N A L T Y ORD E RS FOR TH E S AME Y EA R . TH E ORD E R OF CIT M AY PL E AS E B E CANC E LL E D . 3. BEFORE US, LD.A.R. SUBMITTED THAT ALL THE GROUNDS BEING INT ER- CONNECTED AND ARE WITH RESPECT TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 4. BEFORE US, LD.A.R. SUBMITTED THAT ASSESSEE IS A PARTNERS HIP FIRM ENGAGED IN THE BUSINESS OF GOVERNMENT CONTRACTS AND CIV IL CONSTRUCTION. HE SUBMITTED THAT WHILE FRAMING THE ASSESS MENT U/S 143(3) OF THE ACT, AO HAD MADE ADDITIONS ON ACCOUNT OF SEC.36(1)(VA) OF THE ACT AT RS.37,637/-, ON ACCOUNT OF INFLATION OF EXPEN DITURE UNDER THE GUISE OF SUB-CONTRACT AT RS.1,03,27,571/- AND RS.44,50,000/- ON ACCOUNT OF THE EXPENDITURE DEBITED UND ER THE GUISE OF PAYMENTS TO SUB-CONTRACTORS AND THEREAFTER DE TERMINED THE TOTAL INCOME AT RS.3,18,35,940/-, AS AGAINST THE INCOME OF RS.1,70,20,730/- OFFERED BY THE ASSESSEE. HE SUBMITTED THA T ON THE ADDITIONS MADE, AO VIDE ORDER DATED 20.02.2014 LEVIED PENALT Y OF RS.4,78,500/- U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCO ME AND FURNISHING INACCURATE PARTICULARS OF INCOME. HE SUBMITTED TH AT WHILE PASSING THE ASSESSMENT ORDER, AO HAS NOT RECORDED ANY SATISFACTION FOR LEVY OF PENALTY. HE THEREFORE RELYING ON THE DECISION O F HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCH ERY (ITA NO.1154 OF 2014 ORDER DT.05.01.2017), SUBMITTED THAT WHEN P ASSING ASSESSMENT ORDER NO SATISFACTION FOR LEVY OF PENALTY WAS R ECORDED BUT IN THE PENALTY ORDER, PENALTY WAS LEVIED FOR FURNISHING OF INA CCURATE 4 PARTICULARS OF INCOME AND CONCEALMENT OF INCOME, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO ASSESSEE AND IN THE ABS ENCE OF RECORDING OF SATISFACTION, PENALTY U/S 271(1)(C) CANNOT BE LE VIED. HE THEREFORE SUBMITTED THAT PENALTY LEVIED BY AO BE DELETED. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE PRESENT CASE, PEN ALTY HAS BEEN LEVIED BY AO AT RS.4,78,500/- ON THE ADDITION OF RS.14,50,00 0/-. LD.CIT(A) DURING THE APPELLATE PROCEEDINGS FOR LEVY OF PENALT Y U/S 271(1)(C) OF THE ACT NOTED THAT ASSESSEE HAD INFLATED EXPEN DITURE ON ACCOUNT OF PAYMENT TO THE SUB-CONTRACTORS TO THE EXT ENT OF RS.44,50,000/- AND THEREFORE ASSESSEE HAD FURNISHED INACCU RATE PARTICULARS TO THE TUNE OF RS.44,50,000/- AND IN SUCH A SIT UATION, THE AO SHOULD HAVE LEVIED PENALTY OF RS.44,50,000/-. LD.CIT(A) T HEREFORE APART FROM UPHOLDING THE ACTION OF AO FOR LEVY OF PENALTY O N ADDITION OF RS.14,50,000/-, DIRECTED THE AO TO COMPUTE PENALTY ON T HE TOTAL INCOME OF RS.44,50,000/-. THE PERUSAL OF ASSESSMENT ORD ER PASSED U/S 143(3) OF THE ACT REVEALS THAT AO HAD THOUGH STATED THAT PENALTY PROCEEDINGS ARE INITIATED SEPARATELY BUT NO SATISFACTION WAS RECORDED. THEREAFTER IN THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT, AO HELD THAT ASSESSEE HAD CONCEALED PARTICULARS OF INCOME B Y FURNISHING INACCURATE PARTICULARS OF INCOME U/S 271(1)(C) OF THE ACT. IT IS A SETTLED LAW THAT WHILE LEVYING PENALTY FOR CONCEALMENT, THE AO HAS TO RECORD SATISFACTION AND THEREAFTER COME TO A FINDING IN RES PECT OF ONE OF THE LIMBS, WHICH IS SPECIFIED UNDER SECTION 271(1)(C) OF THE A CT. THE 5 FIRST STEP IS TO RECORD SATISFACTION WHILE COMPLETING THE ASS ESSMENT AS TO WHETHER THE ASSESSEE HAD CONCEALED ITS INCOME OR FU RNISHED INACCURATE PARTICULARS OF INCOME. THEREAFTER, NOTICE U/S 2 74 READ WITH SECTION 271(1)(C) OF THE ACT IS TO BE ISSUED TO THE ASS ESSEE. THE ASSESSING OFFICER THEREAFTER HAS TO LEVY PENALTY UNDER SECTION 271(1 )(C) OF THE ACT FOR NON-SATISFACTION OF EITHER OF THE LIMBS. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HAS TO COME TO A FIN DING AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNIS HED INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN ITA NO.1154 OF 2014 WITH OTHER ITA NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, VIDE J UDGMENT DATED 05.01.2017 HELD THAT WHERE INITIATION OF PENALTY IS ON E LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE ABSENCE O F PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 6. IN THE PRESENT CASE, AS NOTED HEREINABOVE, IT IS SEEN THAT THE AO HAS NOT RECORDED ANY SATISFACTION AND FURTHER LEVIED PEN ALTY ON BOTH THE LIMBS I.E., FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. CONSIDERING THE AFORESAID FACTS IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF SAMSON PERINCHERY (SUPRA), WE ARE OF THE VIEW THAT IN THE PRESENT CASE THE BASIC CONDITION FOR LEVY OF PENALTY HAS NOT BEEN FULFILLED A ND THAT THE PENALTY ORDER SUFFERS FROM NON-EXERCISING OF JURISDICTIO N POWER OF AO AND THEREFORE PENALTY ORDER CANNOT BE UPHELD. SINCE WE HAVE DELETED THE PENALTY ON THE PRELIMINARY ISSUE, THE QUANTUM OF ENHANCEMENT OF PENALTY AS DIRECTED BY LD.CIT(A) ALSO DOES NOT ARISE. 6 WE ACCORDINGLY SET ASIDE THE PENALTY ORDER PASSED BY A O. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 12 TH DAY OF JANUARY, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH JANUARY, 2018. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-1, NASHIK. PR.CIT-1, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.