KAILASH KUMAR MANWANI, Jaipur V. DDIT, (INTERNATIONAL TAXATION), Jaipur

ITA 449/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4954 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 29-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DR DHK
• Keywords: Bonafide belief; Revised return; Bonafide mistake; Ignorance of law

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 449/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 SHRI KAILASH KUMAR MANWANI PLOT NO. 756, ASHOK CHOWK ADARSH NAGAR, JAIPUR CUKE VS. THE DDIT(INTERNATIONAL TAXATION ) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ANHPM 8079 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI P.C. PARWAL , CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA, ADDL CIT-. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/10/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/10/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-42, NEW DELHI DATED 21-03-2016 FOR THE ASSES SMENT YEAR 2011-12 RAISING THEREIN FOLLOWING GROUND:- THE LD. CIT(A) HAS ERRED ON FACT AND IN LAW IN CONFIRMING THE LEVY OF PENALTY OF RS. 6,70,933/- U/ S 271(1)( C) OF THE I.T. ACT, 1961 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A NON-RESIDENT RESIDING AT DUBAI. HE FILED HIS RETURN OF INCOME ON 28.02.2012 DECLARING ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 2 GROSS TOTAL INCOME OF RS.66,000/- I.E. RS.56,000/- DECLARED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND RS.10,000/ - DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES. AFTER CLAIMING DE DUCTION UNDER CHAPTER VIA, TOTAL INCOME WAS DECLARED AT RS. NIL. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO VIDE SHOW CAUSE NOTI CE DATED 16.07.2013 REQUIRED THE ASSESSEE TO FURNISH CERTAIN INFORMATIO N/DETAILS MENTIONED THEREIN. ACCORDINGLY, THE ASSESSEE APPOINTED A CHAR TERED ACCOUNTANT TO REPRESENT HIS CASE. THE LD AR WHEN EXAMINED THE RET URN AND THE PAPERS SUBMITTED BY THE ASSESSEE NOTED THAT ASSESSEE HAS N OT DECLARED STCG ON SHARES AND SECURITIES AND INTEREST ON FDR AND ALSO NOT CLAIMED TAX DEDUCTED AT SOURCE ON SUCH INCOME. THEREFORE, THE L D. AR OF THE ASSESSEE VIDE LETTER DATED 16.09.2013 FURNISHED THE COPY OF THE ORIGINAL RETURN FILED AS ALSO THE REVISED COMPUTATION OF TOTAL INCO ME. IN THE REVISED COMPUTATION, ASSESSEE COMPUTED THE TOTAL INCOME AT RS.41,15,200/- WHICH INCLUDED INCOME OF RS.29,16,841/- AS STCG AND INCOM E OF RS.12,33,548/- AS INTEREST ON FDR AND ALSO CLAIMED CREDIT OF TDS OF RS.11,15,136/- (RS.7,33,959 + RS.3,81,177) ON THESE INCOMES RESULTING INTO A REFUND OF RS.4,44,570/-. THE AO COMPLETED TH E ASSESSMENT AT TOTAL INCOME OF RS.41,16,390/- BUT ALLOWED CREDIT OF TDS OF RS.7,33,959/- AS ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 3 AGAINST TDS CLAIMED AT RS.11,15,136/-. AFTER COMPLE TION OF THE ASSESSMENT, NO DEMAND IS RAISED ON THE ASSESSEE. 2.2 IN PENALTY PROCEEDINGS, ASSESSEE EXPLAINED THAT HE FILED THE REVISED COMPUTATION OF TOTAL INCOME SUO-MOTO WITHOUT ANY QU ERY RAISED BY THE AO. HE NEITHER INCLUDED THE INCOME FROM STCG AND FD R INTEREST IN THE ORIGINAL RETURN NOR CLAIMED THE CREDIT OF TDS. AFTE R INCLUSION OF SUCH INCOME AND CLAIMING CREDIT OF TDS, REFUND IS DUE TO THE ASSESSEE WHICH SHOWS THAT HE HAS A BONAFIDE BELIEF THAT INCOME ON WHICH TAX HAS BEEN DEDUCTED AT SOURCE IS NOT REQUIRED TO BE INCLUDED I N THE TOTAL INCOME. VARIOUS CASES WERE RELIED ON AS REPRODUCED AT PAGE 2-3 OF THE PENALTY ORDER. THE AO, HOWEVER, RELYING ON THE DECISION OF DHARMENDRA TEXTILE PROCESSORS AND OTHERS 306 ITR 277 (SC) HELD THAT AO IS NOT REQUIRED TO PROVE THE PRESENCE OF MEANS REA, ASSESSEE HAS MALAF IDE INTENTION TO HIDE TRUE PARTICULARS OF HIS INCOME, HAD THE CASE NOT CO ME UNDER THE SCRUTINY, THIS INCOME WOULD NOT HAVE BEEN DISCLOSED BY THE AS SESSEE AND THE ASSESSEE HAS ALSO NOT AVAILED FILING REVISED RETURN UNDER SECTION 139(5). HE, THEREFORE, IMPOSED THE PENALTY OF RS. 6,70,933/ - U/S 271(1)(C) OF THE I.T. ACT, 1961. 2.3 IN FIRST APPEAL, THE LD. CIT(A) OBSERVED THAT I F THE ASSESSEE'S CLAIM THAT TDS OF RS.3,81,777/- IS DEDUCTED ON FDR INTERE ST IS CORRECT THEN THE ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 4 CORRESPONDING INTEREST INCOME OUGHT TO BE HIGHER TH AN RS.12,33,548/- AS TDS ON INTEREST INCOME IS DEDUCTED AT 10%. IN THE R EVISED COMPUTATION, ASSESSEE CLAIM TDS OF RS.11,15,136/- WHEREAS IN FOR M 26AS, TDS CREDIT IS OF RS.7,33,959/- ONLY IN RESPECT OF TAX DEDUCTE D BY ABU DHABI COMMERCIAL BANK LTD. . THE PLEA THAT ASSESSEE IS NO T AWARE OF LAW IS NOT SATISFACTORY AS IGNORANCE OF LAW IS NO EXCUSE. ASSE SSEE WAS FILING RETURN FROM LAST SEVERAL YEARS AND THEREFORE IT CANNOT BE STATED THAT HE WAS NOT CONVERSANT WITH THE TAX LAWS. SINCE THE ASSESSEE HA S NOT DISCLOSED TAXABLE STCG AND INTEREST ON FDR, THE LD. CIT(A) UPHELD TH E ACTION OF THE AO IN LEVYING THE PENALTY U/S. 271(1)( C) OF THE ACT.. 2.4 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF PENALTY OF RS. 6,70,933/- U/S 271(1)( C ) OF THE ACT CONFIRMED BY THE LD. CIT(A). TO THIS EFFECT, THE LD. AR OF TH E ASSESSEE FILED THE WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER:- 1. THE UNDISPUTED FACT ON RECORD IS THAT THE ASSE SSEE IN THE ORIGINAL RETURN NEITHER CONSIDERED THE INCOME FROM CAPITAL GAIN AND INTEREST ON FDR NOT CLAIMED THE CREDIT OF TAX D EDUCTED AT SOURCE BY THE PAYER OF SUCH INCOME. ONCE THE INCOME AS ALSO THE TDS IS CONSIDERED, A SUM OF RS.4,44,570/- BECOMES R EFUNDABLE TO THE ASSESSEE. THE AO, HOWEVER, ALLOWED CREDIT OF TDS ON CAPITAL INCOME OF RS.7,33,959/- BUT HAS NOT ALLOWED CREDIT OF TDS OF RS.3,81,177/- ON THE FDR INTEREST. EVEN AFTE R ALLOWING CREDIT OF TDS OF RS.7,33,959/-, NO TAX REMAINED PAY ABLE ON THE INCOME COMPUTED BY HIM. THESE FACTS WITHOUT ANY DOU BT SHOW THAT ASSESSEE HAS NO INTENTION TO CONCEAL ANY INCOM E OR FURNISH ANY INACCURATE PARTICULARS OF INCOME. THEREFORE, ON CE THERE IS NO ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 5 EVASION OF TAX, NO PENALTY OUGHT TO HAVE BEEN LEVIE D BY THE LOWER AUTHORITIES. 2. THE LD. CIT(A) HAS OBSERVED THAT NEITHER THE INT EREST ON FDR NOR TDS THEREON IS REFLECTED IN FORM 26AS AND T HAT IF THE TDS OF RS.3,81,777/- ON FDR INTEREST IS ACCEPTED TO BE CORRECT, THEN INTEREST INCOME WOULD BE MUCH HIGHER THAN RS.1 2,33,548/- CONSIDERING THAT THE RATE OF TDS ON INTEREST IS 10% . IN OBSERVING SO, HE IGNORED THAT ASSESSEE IS A NON-RESIDENT AND THEREFORE TAX HAS BEEN DEDUCTED AT SOURCE ON INTEREST INCOME @30. 9%. THEREFORE, THE INTEREST INCOME IS RIGHTLY DECLARED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME AT RS.12,33,548/ - ON WHICH TAX DEDUCTIBLE @30.9% WOULD WORK OUT TO RS.3,81,777 /-. IN FACT, THE TDS OF RS.3,81,777/- IS REFLECTED IN SEPARATE F ORM NO. 26AS HAVING PAN ADAPM3790N WHEREAS TDS OF RS.7,33,959/- IS REFLECTED IN ANOTHER FORM NO. 26AS HAVING PAN ANHPM8079M. THE ISSUE AS TO TWO PAN NUMBERS WAS EXPLAINED TO THE AO VIDE LETTER FILED ON 06.09.2013 WHERE THE REASONS LEADING TO ISSUE OF TWO PAN NUMBERS AND THE ASSESSEES REQUEST TO CANCEL PAN NO. ADAPM3790N VIDE LETTER DT . 18.06.2007 WAS NARRATED AND SUPPORTED BY THE AFFIDA VIT. COPY OF THIS LETTER AND THE AFFIDAVIT SUBMITTED. 3. THE AO FOR LEVYING THE PENALTY HAS REFERRED TO T HE DECISION OF HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXT ILE PROCESSORS AND OTHERS 306 ITR 277. THIS DECISION ON LY SAYS THAT AO IS NOT REQUIRED TO PROVE THE PRESENCE OF MENS RE A. THE ASSESSEES CASE IS NOT ON MENS REA BUT A CASE OF A BONAFIDE EXPLANATION AS TO WHY BOTH THE INCOME AND THE TDS W AS NOT DISCLOSED/CLAIMED IN THE ORIGINAL RETURN AND SUCH N ON-INCLUSION HAS NOT RESULTED INTO ANY LOSS OF TAX TO THE DEPART MENT. THE CASE OF THE ASSESSEE IS A SHEER BONAFIDE MISTAKE DUE TO IGNORANCE OF LAW AND THEREFORE IN SUCH A SITUATION, NO PENALTY I S LEVIABLE. 4. RELIANCE IN THIS CONNECTION IS PLACED IN THE CAS E OF PRICE WATERHOUSE COOPERS (P.) LTD. VS. CIT (2012) 348 ITR 306 (SC ) WHERE IT WAS HELD THAT WHERE THE ASSESSEE FIRM FILE D ITS RETURN OF INCOME ALONG WITH TAX AUDIT REPORT IN WHICH IT WAS INDICATED THAT PROVISION TOWARDS PAYMENT OF GRATUITY WAS NOT ALLOW ABLE BUT THE ASSESSEE FAILED TO ADD PROVISION FOR GRATUITY TO IT S TOTAL INCOME, IT ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 6 IS A CASE OF BONA FIDE AND INADVERTENT ERROR. THE S AME CAN ONLY BE DESCRIBED AS A HUMAN ERROR WHICH WE ALL ARE PRON E TO MAKE. THE ASSESSEE COULD NOT BE HELD GUILTY OF EITHER FUR NISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. THEREFORE, IMPOSITION OF PENALTY WAS UNJUSTIFIED. F URTHER THE SUPREME COURT IN CASE OF MOTILAL PADAMPAT SUGAR MIL LS CO. LTD. VS. STATE OF UTTAR PRADESH & ORS. 118 ITR 0326 HELD THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. IT IS OFTEN SAID THAT EVERYONE IS PRESUMED TO KNOW THE LAW, BUT THAT IS NOT A CORRECT STATEMENT : THERE IS NO SUCH MAXIM KNOWN TO THE LAW. OVER A HUNDRED AND THIRTY YEARS AGO, MAULA, J. POIN TED OUT IN MARTINDALE VS. FALKNER (1846) 2 CB 706 : 'THERE IS NO PRESUMPTION IN THIS COUNTRY THAT EVERY PERSON KNOWS THE LAW : IT WOULD BE CONTRARY TO COMMON SENSE AND REASON IF IT WERE SO. 'SCRUTTON, L.J. ALSO ONCE SAID: 'IT IS IMPOSSIBLE T O KNOW ALL THE STATUTORY LAW, AND NOT VERY POSSIBLE TO KNOW ALL TH E COMMON LAW. 'BUT IT WAS LORD ATKIN WHO, AS IN SO MANY OTHE R SPHERES, PUT THE POINT IN ITS PROPER CONTEXT WHEN HE SAID IN EVANS VS. BARTLAM (1937) AC 473 :'....... THE FACT IS THAT TH ERE IS NOT AND NEVER HAS BEEN A PRESUMPTION THAT EVERY ONE KNOWS T HE LAW. AGAIN THE T&AP HIGH COURT IN CASE OF CIT VS. CHENNU PATI TYRE AND RUBBER PRODUCTS 90 CCH 0181 HAS HELD THAT THE PRINCIPLE THAT RUNS CUTTING ACROSS ANY SYSTEMS OF L AW IS THAT BEFORE PERSON IS VISITED WITH PUNISHMENT OR PENALTY , THE WRONGFUL ACT ON HIS PART MUST BE ESTABLISHED. IF NO T A DELIBERATE INTENTION, AT LEAST, INTENTION, AS SUCH, MUST BE PR OVED TO BE EXISTING. THE INTENTION OF THIS NATURE MAY NOT BE E QUATED TO THE CONCEPT OF MENS REA. AT THE SAME TIME, THE MINIMUM CONTRAST WITH AN INSTANCE OF MERE OMISSION, OR FAILURE MUST BE MADE. OTHERWISE, EVERY INADVERTENT OMISSION, OR A BONA FI DE UNDERSTANDING OF A PARTICULAR PROVISION, WHICH IS N OT ACCEPTED BY THE INCOME TAX OFFICER MAY EXPOSE THE ASSESSEE T O PENALTY. IF THAT TIME IS PURSUED, ACT MAY TURN OUT TO BE THE ONE OF THE COLLECTION OF PENALTIES THAN THE INCOME TAX. THE CO NCEALMENT CAN OCCUR, ONLY WHEN THE PERSON IS IN FULL KNOWLEDGE OF THE STATE OF AFFAIRS AND EVEN WHILE BEING UNDER OBLIGATION TO MA KE IT KNOWN TO OTHERS, AND IN PARTICULAR THE AUTHORITIES UNDER THE ACT FAILS OR REFUSES TO DO SO. IT IS THEN, AND ONLY THEN, THAT H E CAN BE SAID TO HAVE CONCEALED AND ONCE THE FACTUM OF CONCEALMENT I S PROVED, HIS ATTEMPT TO VOLUNTARILY DISCLOSE IT DOES NOT SAV E HIM. ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 7 THEREFORE, WHERE THERE WAS NO INTENTION ON PART OF ASSESSEE TO CONCEAL INCOME AND THE ASSESSEE HAD AGREED TO OFFER SUNDRY CREDITS WHICH WERE CARRIED FORWARD FROM PREVIOUS YE AR AS INCOME AS A MEASURE OF PURCHASING PEACE, IMPOSITION OF PENALTY U/S 271(1)(C) WAS UNJUSTIFIED. 2.5 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW . 2.6 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE WAS NRI AND TAX W AS DEDUCTED AT SOURCE ON THE INTEREST OF FDR AND ALSO ON THE SHORT TERM CAPITAL GAIN. THE AO HIMSELF HAD ADMITTED THAT THE ASSESSEE HIMSELF S UBMITTED THE REVISED COMPUTATION OF TOTAL INCOME FOR THE YEAR UNDER CONS IDERATION AFTER CONSIDERING THE SHORT TERM CAPITAL GAIN AND ALSO TH E INTEREST INCOME. IT IS ALSO NOTICED THAT THE TDS WAS DEDUCTED ON BOTH THES E INCOME. THE TDS WAS SUFFICIENT TO MEET THE TAX PAYABLE ON THESE TWO INCOMES. THERE WAS NO TAX PAYABLE BY THE ASSESSEE ON THE REVISED COMPU TATION OF INCOME. THUS FACTUAL ASPECT OF THE CASE SHOWS THAT THERE WA S NO MALAFIDE INTENTION ON THE PART OF THE ASSESSEE FOR NOT SHOWING INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM INTEREST ON THE FDR IN THE RETURN OF INCOME. HAD THE INCOMES MADE PART OF THE RETURNED INCOME TH EN ALSO NO TAX WAS PAYABLE AS TDS WAS SUFFICIENT TO MEET SUCH TAX LIAB ILITY. REFUND OF TDS WAS ALSO NOT CLAIMED BY THE ASSESSEE. THE AO HIMSEL F HAD MENTIONED IN HIS ORDER THAT THE ASSESSEE HIMSELF SUBMITTED THE R EVISED COMPUTATION OF ITA NO. 449/JP/2016 SHRI KAILASH KUMAR MANWANI VS. DDIT (INTERNATIONAL TAXATION) . 8 INCOME FOR THE YEAR UNDER CONSIDERATION WHERE NO TA X WAS PAYABLE. IN VIEW OF THE ABOVE DELIBERATION, FACTS AND CIRCUMSTA NCES OF THE CASE AND ALSO THE CASE LAWS CITED BY THE ASSESSEE IN THIS WR ITTEN SUBMISSION, I DIRECT TO DELETE THE LEVY OF PENALTY OF RS. 6,70,933/- CON FIRMED BY THE LD. CIT(A) U/S 271(1)(C) OF THE ACT. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/10/ 2016 SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 /10/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KAILASH KUMAR MANWANI, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DDIT(INTERNATIONAL TAXATION.), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 449/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR