ACIT, Kota V. HARBANS LAL SETHI, Kota

ITA 454/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2202 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P MEENA
• Keywords: Rejection of books of accounts; Depreciation; Initiation of penalty proceedings

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA -@ ITA. NO. 454/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2007-08 ASSTT. COMMISSIONER OF INCOME- TAX, CIRCLE-1, KOTA CUKE VS. SHRI HARBANS LAL SETHI, 97, DUSHERA SCHEME, KOTA LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AJYPS6625G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI P. P. MEENA (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADV.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/01/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 18/01/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), KOTA DATED 27.03.2017 FOR ASSESSMENT YEAR 2007-08 WHEREIN THE REVENUE HAS CHALLENGED THE ACTION OF THE LD CIT(A) IN DELETING THE PENALTY AMOUNTING TO RS. 26,95,277/-. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE HAS REPORTED GROSS RECEIPT OF RS. 41,14,68,583/- AND N.P RATE OF 9.73% (SUBJECT TO INTEREST AND DEPRECIATION) IN HIS RETURN OF INCOME. THE AO REJECTED THE BOOKS OF ACCOUNTS INVOKING PROVISIONS OF SECTION 145(3) ITA NO. 454/JP/2017 ACIT, KOTA VS. SHRI HARBANS LAL SETHI, KOTA 2 AND ENHANCED THE N.P RATE TO 10.36% (SUBJECT TO INTEREST AND DEPRECIATIONS). THUS, THE AO MADE AN ADDITION OF RS. 25,95,796/- TO THE DECLARED INCOME OF THE ASSESSEE. HOWEVER, NO SATISFACTION WAS RECORDED IN RESPECT OF LEVY OF PENALTY DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO PENALTY PROCEEDINGS WERE SEPARATELY INITIATED BY ISSUANCE OF NOTICE U/S 274 OF THE ACT. 3. IN THE FIRST APPEAL, THE LD. CIT(A) UPHELD THE APPLICATION OF SECTION 145(3) OF THE ACT AND ALSO ISSUED A SHOW CAUSE PROPOSING ENHANCEMENT OF INCOME. AFTER CONSIDERING THE ASSESSEES SUBMISSION, THE LD. CIT(A) ENHANCED OF INCOME BY MAKING AN ADDITION OF RS. 54,11,562/- WHICH RESULTED INTO TOTAL ADDITION OF RS. 80,07,358/- (INCLUDING THE ADDITION MADE BY THE AO) AND IN TERMS OF N.P RATE, IT COMES TO 11.68% (SUBJECT TO INTEREST AND DEPRECIATION). SEPARATELY, THE LD. CIT(A) HAS STATED IN HIS ORDER THAT ASSESSEE HAS CONCEALED ITS INCOME BY A FURTHER SUM OF RS. 54,11,562/. ISSUE NOTICE U/S 271(1)(C) OF THE ACT. 4. ON APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A), THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 30.05.2017 IN ITA NO. 496/JP/2013 HAS DELETED THE ENHANCEMENT SO MADE BY THE LD. CIT(A). HOWEVER, IT HAS UPHELD THE APPLICATION OF PROVISIONS OF SECTION 145(3) AND FOUND THAT THOUGH THE GROSS PROFIT SHOWN BY THE ASSESSEE WAS BETTER THAN AVERAGE OF 5 YEARS, THE ADDITION MADE BY THE AO WAS SUSTAINED TO THE EXTENT OF RS. 3,00,000/- TO PLUG THE LEAKAGE OF REVENUE AS AGAINST THE ORIGINAL ADDITION OF RS. 25,95,796/- MADE BY THE AO. ITA NO. 454/JP/2017 ACIT, KOTA VS. SHRI HARBANS LAL SETHI, KOTA 3 5. IN THE IMPUGNED PENALTY ORDER DATED 24.03.2015 PASSED BY THE AO AND NOT BY THE LD CIT(A), APPARENTLY BEFORE THE RECEIPT OF THE ORDER PASSED BY THE COORDINATE BENCH ON 30.05.2017, THE AO OBSERVED THAT THE LD. CIT(A) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS AND AN ADDITION OF RS. 80,07,358/- HAS BEEN MADE INCLUDING THE ENHANCEMENT OF INCOME BY RS. 54,11,562/-. IT WAS ALSO STATED BY THE AO THAT IN THE SAID ORDER, THE LD. CIT(A) ALSO DIRECTED THE AO TO ISSUE NOTICE U/S 271 (1)(C) OF THE ACT. THE AO OBSERVED THAT IT IS CLEARLY ESTABLISHED THAT THE ASSESSEE IS GUILTY OF CONCEALING THE PARTICULARS OF INCOME TO THE EXTENT OF RS. 80,07,358/- AND PENALTY WAS ACCORDINGLY LEVIED U/S 271(1)(C) @ 100% OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO RS. 26,95,277/-. 6. ON APPEAL BY THE ASSESSEE AGAINST SUCH LEVY OF PENALTY, THE LD. CIT(A) REFERRED TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY 35 TAXMANN.COM 250 (KARNATAKA) WHERE IT WAS HELD THAT THE IMPOSITION OF PENALTY MAY BE DONE AT THE STAGE OF ASSESSMENT OR AT THE STAGE OF APPEAL. AT THE STAGE OF ASSESSMENT, THE ASSESSING OFFICER HAS TO ISSUE A NOTICE TO THE ASSESSEE AND THE IMPOSITION OF PENALTY HAS ALSO TO BE DONE BY THE ASSESSING OFFICER. IN THE CASE OF INITIATION OF PENALTY PROCEEDINGS DURING THE COURSE OF APPEAL, THE AUTHORITY WHO HAS TO BE SATISFIED IS THE AUTHORITY IN WHOSE PROCEEDINGS THE ISSUE IS EXAMINED AND NOT ANY OTHER AUTHORITY. IF THE LD. CIT(A) IN THE COURSE OF APPEAL PROCEEDINGS IS SATISFIED, THEN IT IS THE COMMISSIONER (APPEALS) WHO HAS TO INITIATE THE PENALTY PROCEEDINGS AND ALSO COMPLETE THE SAME BY LEVYING THE PENALTY. HE CANNOT PERMIT THE ASSESSING AUTHORITY TO LEVY PENALTY. THE LD CIT(A) ALSO REFERRED TO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE ITA NO. 454/JP/2017 ACIT, KOTA VS. SHRI HARBANS LAL SETHI, KOTA 4 OF CIT VS. KRISHI TYRE RETREADING & RUBBER INDUSTRIES 44 TAXMANN.COM 9 WHERE IT WAS HELD THAT WHERE THE ADDITIONS HAVE BEEN SUSTAINED PURELY ON ESTIMATE BASIS AND NO POSITIVE FINDING OR FACTS HAD BEEN PROVED SO AS TO MAKE SUCH ADDITION, NO PENALTY WAS LEVIABLE. TAKING THE ABOVE LEGAL AUTHORITIES INTO CONSIDERATION, THE LD. CIT(A) DELETED THE PENALTY AND HIS FINDINGS ARE REPRODUCED AS BELOW: IN VIEW OF THE ABOVE FACTS AND LEGAL PRECEDENTS AVAILABLE IN THIS REGARD, I AM OF THE OPINION THAT THE PENALTY HAS BEEN WRONGLY IMPOSED IN THIS CASE INVOKING THE PROVISIONS OF SECTION 271(1)(C) BY THE A.O WHEN IT SHOULD HAVE BEEN IMPOSED BY THE CIT(A) IN REFERENCE TO THE FINDINGS ON ENHANCEMENT GIVEN BY HIM IN THE COURSE OF THE QUANTUM APPELLATE PROCEEDINGS. THE PENALTY OF RS. 26,95,277/- ON THE ADDITIONAL INCOME OF RS. 80,07,358/- IS ACCORDINGLY DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 7. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE PENALTY ORDER WAS PASSED WITHOUT TAKING INTO CONSIDERATION THE ORDER OF THE CO-ORDINATE BENCH IN THE QUANTUM PROCEEDINGS WHEREIN THE ADDITIONS SO MADE BY THE AO AND THE LD. CIT(A) HAVE BEEN SUBSTANTIALLY REDUCED TO RS. 3,00,000/- ONLY. IT WAS FURTHER SUBMITTED THAT THE PENALTY IMPOSED BY THE AO WAS COMPLETELY WITHOUT JURISDICTION AND SAME HAS RIGHTLY BEEN QUASHED BY THE LD. CIT(A) AND IN SUPPORT, THE LD AR RELIED UPON THE DECISION OF THE HONBLE KARANATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA). ON MERITS, IT WAS FURTHER SUBMITTED THAT THE ADDITIONS SO SUSTAINED IN THE QUANTUM PROCEEDINGS WAS MERELY ON ESTIMATION BASIS AND ON SUCH ESTIMATION, THERE CANNOT BE A QUESTION ITA NO. 454/JP/2017 ACIT, KOTA VS. SHRI HARBANS LAL SETHI, KOTA 5 OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AND RELIANCE WAS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF KRISHI TYRE RETREADING & RUBBER INDUSTRIES (SUPRA). 8. ON THE OTHER HAND, LD. D/R SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, NO PENALTY PROCEEDINGS HAVE BEEN INITIATED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. DURING THE APPELLATE PROCEEDINGS, THE LD CIT(A) HAS ENHANCED THE INCOME OF THE ASSESSEE AND SATISFACTION HAS BEEN RECORDED TO INITIATE THE PENALTY PROCEEDINGS IN RELATION TO SUCH ENHANCEMENT OF INCOME BY ISSUANCE OF NOTICE U/S 274 OF THE ACT. THE COORDINATE BENCH IN THE QUANTUM PROCEEDINGS, AS WE HAVE NOTED ABOVE, HAS SINCE DELETED THE ENHANCEMENT OF INCOME SO MADE BY THE LD CIT(A). WHERE THE VERY BASIS OF LEVY OF PENALTY HAS BEEN DELETED, THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. IN THE RESULT, THE GROUND TAKEN BY THE REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/01/2018. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 454/JP/2017 ACIT, KOTA VS. SHRI HARBANS LAL SETHI, KOTA 6 TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18/01/2018. * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, KOTA 2. IZR;FKHZ@ THE RESPONDENT- SHRI HARBANS LAL SETHI, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 454/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR