DCIT, New Delhi V. M/s Air Commodore K.A. Mathana, New Delhi

ITA 4626/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7306 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHALINI VERMA
• Assessee Lawyers: K A MATANE
• Keywords: Bonafide belief; Retrospective amendment; Tax effect; Revised return
• Section: 154

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4626 /DEL/ 2013 (ASSESSMENT YEAR: 2007 - 08 ) DCIT CIRCLE - 42(1), NEW DELHI VS. AIR COMMODORE K.A. MATHANA C/O BEE KAY ASSOCIATES , SANGAM COMPLEX, SUBROTO PARK NEW DELHI PAN: AAEPM8211H (APPELLANT) (RESPONDENT) APPELLANT BY : SHALINI VERMA, DR RESPONDENT BY : SH. K.A. MATANE, CA O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), XXX, NEW DELHI DATED 30.05.2013 RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 . 2. THE SOLE GROUND OF APPEAL IS THE DELETION OF THE PENALTY OF RS. 2, 5 5,280/ - U/S. 271(1)(C). 3 . BRIEFLY STATED THE FACT IS THAT THE ASSESSEE IS A SERVING COMMISSIONED OFFICER OF THE RANK OF AIR COMMODORE IN THE INDIAN AIR FORCE AND HAS BEEN FILING HIS ITR REGULARLY. THE ITR OF ASSESSEE FOR ASSESSMENT YEAR 07 - 08 WAS SELECTED FOR SCRUTINY AND NOTICE TO THIS EFFECT WAS ISSUED BY THE CONCERNED AO . DURING THE SCRUTINY ASSESSMENT , THE ASSESSEE HAD SUBMITTED BEFORE THE AO, THE RELEVANT INFORMATION AND DOCUMENTS EXCEPT DOCUMENT S IN RESPECT OF SALE PROCEED S OF ANCESTRAL JEWELLERY . THE AO MADE THE FOLLOWING ADDITION: - A) INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES RS.93610/ - B) UNEXPLAINED INCOME (SALE PROCEEDS FOR ANCESTRAL JEWELLERY) RS.575250/ - 4 . THE ASSESSEE THEREAFTER PAID THE TAXES AS CO MPUTED AND DEMANDED BY THE AO. 5 . THEREAFTER, THE AO INITIATED THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE AND VIDE ORDER DATED 28.06.2010 DID NOT ACCEPT T HE EXPLANATION OF THE ASSESSEE AND IMPOSED PENALTY AND HELD AS UNDER: - 9. THE BANK ACCOUNT SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAD UNEXPLAINED CASH DEPOSITS. THE ASSESSEE HAD SATED THAT THESE DEPOSITS HAVE BEEN MADE FROM MONEY RECEIVED THROUGH SALE OF JEWELLERY IN PIECE MEAL FASHION. THE ASSESS EE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS EXPLANATION. THE ASSESSEES ARGUMENT THAT HE DOES NOT HAVE PROOFS OF SALE OF JEWELLERY AS HE DID NOT ANTICIPATE ANY NEED TO KEEP THOSE PROOFS, IS NOT TENABLE. THIS AMOUNTS TO CONCEALMENT OF INCOME AS PER EXPLANATION 1 OF SECTION 271(1)(C), AND THEREFORE ATTRACTS PENALTY UNDER SECTION 271(1)(C). PAGE NO. 2 10. THE ASSESSEE HAS NOT DECLARED THE INTEREST INCOME OF RS. 93610/ - IN HIS INCOME TAX RETURN. THE ASSESSEE HAD AMPLE OPPORTUNITY TO FILED A REVISED RETURN AND DECLARE THIS INCOME. BUT HE FAILED TO DO SO. AS PER PROVISION OF SECTION 271(1)(C) AS REINFORCED BY RECENT JUDGMENT OF HONBLE SUPREME COURT, IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. VS. CIT, THIS AMOUNTS TO CONCEALMENT OF INCOME. THEREFORE, IT ATTRACTS PENALTY UNDER SECTION 271(1)(C). 11. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, A PENALTY OF RS.255280/ - IS HEREBY IMPOSED U/S 271(1)(C) FOR THE ASSESSMENT YEAR 2007 - 08, WHICH IS EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED. 6. AGG RIEVED BY THE PENALTY IMPOSED ON HIM THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A), THE REVENUE IS BEFORE US. 7 . THE LD DR, SMT. SHALINI VERMA, VEHEMENTLY ASSAILED T HE ORDER OF THE LD CIT(A) AND CONTENDED THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS DID NOT REVEAL THE UNEXPLAINED CASH DEPOSIT. AND THAT THE ASSESSEES EXPLANATION THAT THE SAID CASH DEPOSIT WAS RECEIVED THROUGH SALE OF ANCESTRAL JEWELLERY COULD N OT BE PROVED BY THE ASSESSEE. AND THE ASSESSEE FAILED TO DECLARE THE INTEREST INCOME TO THE TUNE OF RS.93,610/ - IN HIS RETURN OF INCOME. THEREFORE THE AO HAS RIGHTLY IMPOSED PENALTY AS ENVISAGED BY THE ACT AND THE LD CIT(A) ERRED IN DELETING THE SAME. IT W A S ALSO POINTED OUT BY THE LD DR THAT THERE WERE MISTAKES IN THE ORDER OF THE LD CIT(A) WHICH WAS APPARENT ON THE FACE OF RECORD AND THE LD CIT(A) REFUSED TO MAKE NECESSARY CORRECTION U/S 154 OF THE ACT. THEREFORE THE LD DR PRAYED THAT THE ORDER OF THE LD CIT(A) MAY BE REVERSED AND THE ORDER OF THE AO BE RESTORED. 8 . ON THE OTHER HAND, THE ASSESSEE IN PERSON , CONTENDED THAT THERE WAS NO DELIBERATE CONCEALMENT OF INCOME IN RESPECT OF ADDITION MADE IN RESPECT OF ACCRUAL OF INTEREST IN THE BANK ACCOUNT OF THE ASSESSEE . IT WAS EXPLAINED BY HIM THAT AT THE TIME OF FILING ITR , ASSESSEE WAS HAVING ACCOUNT WITH ICICI BANK WITH SEEP - IN/SWEEP - OUT OPTION AND WAS NOT AWARE OF THE INTEREST INCOME ACCUMULATED ON MULTIPLE FDR GENERATED AND REDEE MED SUO - MOTU BY THE BANKER. NOTWITHSTANDING THIS , ACCORDING TO THE ASSESSEE , THE BANKER HAD NOT ISSUED ANY SUCH STATEMENT INCLUDING FORM NO. 16A . THE AIR COMMODORE STATED THAT HE HAD NOT RECEIVED ANY SUCH DOCUMENTS MAY BE DUE TO FREQUENT POSTING IN THE AIR FORCE AND DUE TO THAT , THE ADDRESS OF THE ASSESSEE KEPT ON CHANGING . DURING THE COURSE OF PROCEEDING, WHEN ASSESSEE HAD BEEN ASKED FOR STATEMENT OF S W EEP - IN/ SWEEP - OUT ACCOUNT, THEN ONLY HE CAME TO KNOW ABOUT THE INTEREST INCOME AS WELL AS TDS DEDUCTED THEREON. HOWEVER DURING THE COURSE OF SCRUTINY PROCEEDING, HE OBTAINED THE FORM 16 AND DULY OFFERED THE SAME BEFORE THE AO FOR ADDITION OF INTEREST INCOME. THEREFORE THE AIR COMMODORE ASSERTED THAT HE , HIMSELF, AT THE VERY FIRST INSTANCE ITSELF HAD AGREED TO ADD BACK THE INTEREST AS WELL AS TDS IN HIS ITR WHEN HE HAD THE OPPORTUNITY OF FIRSTHAND KNOWLEDGE ABOUT IT. THEREFORE , HE NEITHER CONCEALED ANY FACTS AT ANY STAGE NOR TRIED TO HIDE THE INCOME DELIBERATELY. PAGE NO. 3 9 . IN RESPECT OF PROCEEDS OF ANCESTRAL JEWELL ERY, THE ASSESSEE URGED THAT FOR PURCHASING OF AIR FORCE NAVAL FLATS ( AFNHB FLATS) , HE NEEDED TO RAISE MONEY AND IN ORDER TO MEET THIS URGENT NECESSITY THE ANCESTRAL JEWELLERY RECEIVED BY HIM AFTER THE DEMISE OF HIS PARENTS WERE SOLD IN PIECE MEAL TO VARIOUS JEWELERS IN RURAL AREA IN HIS NATIVE PLACE IN SOUTH INDIA AND NOT REALIZED THE REQ UIREMENT OF ANY RECEIPT THEREOF BECAUSE THIS SELLING HAPPENED AT HIS VILLAGE, WHEN HE GOT LEAVE FOR FEW DAYS FROM AIR FORCE , SO DUE TO THE PAUCITY OF TIME HURRIEDLY HE HAD SOLD THE JEWELLERY AND DID NOT KEEP THE RECEIPTS OF THE SAME IN SAFE CUSTODY. THE AO HOWEVER INSISTED ON SALE RECEIPTS AND ULTIMATELY ADDED THE SAME TO HIS INCOME , TREATING IT AS UNEXPLAINED INCOME AND DEMAND OF RS.3,09,62 9/ - WAS RAISED . WHEN THE ASSESSEE POINTED OUT INCORRECT CALCULATION IN THE SAID DEMAND , THE SAME WAS RECTIFIED BY THE AO BY REDUCING DEMAND TO RS.2 , 99 , 410/ - . ACCORDING TO THE AIR COMMODORE HE DEPOSITED THE REQUISITE TAX OF RS.2 , 99 , 410/ - (INCLUSIVE OF INTEREST) MAKING WITHDRAWAL FROM HIS HARD EARNED SAVING IN PF AND IN FACT HAD TO BORROW LOAN FROM FRIENDS AND RELATIVES TO COUGH UP THE TAX . FURTHER IT WAS SUBMITTED THAT D URING THE COURSE OF PROCEEDINGS BEFORE THE AO, THE ASSESSEE EXTENDED HIS FULL CO - OPERATION AND SUBMITTED ALL THE RELEVANT DOCUMENTS AS AND WHEN ASKED BY THE AO WITHOUT ANY HESITATION AND EXPLAINED THE ABOVE - SAID FACTUAL POSITION. THUS HE REITERATED THAT HE IS AN HONEST TAX PAYER AND STATED THAT HE FILE S HIS ITR REGULARLY. ACCORDING TO THE ASSESSEE, THE SUBSTANTIAL TAX WAS LEVIED ON HIS EXEMPTED INCOME JUST FOR NOT PRODUCING THE RECEIPTS AND SINCE HE HAD DEPOSITED THE TAX , FURTHER LEVYING PENALTY U/S 271 WILL NOT ONLY CAUSE FINANCIAL HARDSHIP BUT ALSO CA USE MENTAL STRESS FOR DEFEN C E PERSONNEL. 10. WE HAVE HEARD BOTH THE PARTIE S. THE ASSESSEE IS A HIGHLY DECORATED SERVING FIGHTER PILOT OF THE RANK OF AIR - COMMODORE, WHO BE CAUSE OF THE EXIGENCIES IN SERVICE OF DEFENCE HAD TO FREQUENTLY CHANGE HIS ADDRESS BECAUSE OF POSITING IN INDIA AND ABROAD. DUE TO THE SAID FREQUENT TRANSFER WHILE PACKING ETC OFFICERS TEND TO MISS DOCUMENTS WHILE SHIFTING TO NEW PLACE OF POSTING . THOUGH THE ASSESSEE EXPLAINED THE CIRCUMSTANCES WHICH LED TO SALE OF ANCESTRAL JEWELLERY IN HIS NATIVE VILLAGE, AND THE PURPOSE OF RAISING THE AMOUNT WAS EXPLAINED BY HIM , I.E. FOR PURCHASING A HOUSE AT BANGALORE IN AIR FORCE - NAV AL SOCIETY , HOWEVER THE AO SIMPLY DID NOT ACCEPT HIS EXPLANATION AND ADDED THE SALE RECEIPT OF ANCESTRAL JEWELLERY AS UNEXPLAINED INCOME. WE FIND THAT THE AIR COMMODORE HAS REMITTED THE TAX ALONG WITH INTEREST. AS NOTED EARLIER THE ASSESSEE BEING A FIGHTER PILOT HAD TO MOVE ON SHORT NOTIC E TO FAR FLUNG AREAS THROUGHOUT THE LENGTH AND BREADTH OF THE COUNTRY AND ALSO HAD SERVED ABROAD ON NATION S DUTY IN VERY SENSITIVE APPOINTMENTS AND BECAUSE OF HIS DEVOTION TO DUTY HAS BEEN PROMOTED AND IS NOW HOLDING THE HIGH RANK OF AIR COMMODORE. AS NOT ED EARLIER, DUE TO THE FREQUENT POSITING ON SHORT NOTICES SOMETIMES CERTAIN DOCUMENTS AND ARTICLES TEND TO BE LOST IN TRANSIT. THE EXPLANATION OF THE ASSESSEE THAT FOR PURCHASING OF A FLAT IN THE AIR FORCE NAV A L FLAT AT BANGALORE, HE SOLD THE ANCESTRAL JEW ELLEY IN HIS NATIVE VILLAGE CANNOT BE DISBELIEVED THOUGH HE COULD NOT PRODUCE THE RECEIPTS . THE ASSESSEE WAS ON A BONAFIDE BELIEF THAT THE INCOME PAGE NO. 4 GENERATED FROM SALE OF ANCESTRAL JEWELLERY IS EXEMPT FROM TAX AND THAT WA S THE PRECISE REASON HE DEPOSITED TH E SAME IN THE JOINT ACCOUNT OF HIMSELF AND HIS BROTHER. ABSENCE OF RECEIPT OF SALE OF ANCESTRAL JEWELLERY ALONE CANNOT AMOUNT TO IMPOSITION OF PENALTY UNDER SECTION 271(C) OF THE ACT . AND CONSIDERING THE ASSESSEES STATU S , THE BONAFIDE OF THE EXPLANATION GIVEN BY HIM AND THE PROXIMITY OF THE SAID DEPOSIT WITH THE PURCHASE OF FLATS IN AIR FORCE - NAVAL FLAT AT BANGALORE CANNOT BE IGNORED DURING THE PENALTY PROCEEDINGS AND THE SAID EXPLANATION HAVE NOT BEEN FOUND TO BE FALSE BY THE AO. THEREFORE PENALTY WAS RI GHTLY DELETED ON THIS ACCOUNT BY THE LD CIT(A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE. LIKEWISE THE ASSESSEE HAS EXPLAINED ABOUT THE AUTOMATIC INTEREST GETTING ADDED BECAUSE OF CERTAIN SCHEME OF THE BANK, ON TO THE INCOME OF THE ASSESSEE WHICH HE WAS NOT AWARE OF TILL THE TIME THE REQUI SI TE DOCUMENTS WERE SOUGHT FOR BY THE AO FROM THE BANK . THIS EXPLANATION OF THE ASSESSEE CANNOT ALSO BE DISBELIEVED TAKING INTO CONSIDERATION THE STATUS , FREQUENT POSTING, CHANGE OF ADDRESS AND THE SERVICE RENDERED BY TH E ASSESSEE TO THE NATION AS A FIGHTER PILOT . IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THIS CASE DOES NOT WARRANT PENALTY AND THE LD CIT(A) HAD RIGHTLY DELETED THE SAME. 11 . ANOTHER ASPECT WHICH HAS NOT BEEN CONTROVERTED BEFORE US, BUT HAS BEEN OBSERVED BY US IS THAT THE PENALTY LEVIED BY THE AO IS FOR A SUM OF RS.2,5 5,280/ - . AS PER THE CBDT INSTRUCTION NO.3/2011( F . NO.279/MISC142/200 - ITJ) DATED 0 9.02.2011. THE MONETARY LIMIT F OR FILING APPEAL BY THE REVENUE HAS BEEN PRESCRIBED. THE MONETARY LIMIT PRESCRIBED BEFORE ITAT I S RS. 3 LAKHS AND IT IS CLARIFIED IN THE SAID INSTRUCTION THAT THE SAME APPLIES IN RESPECT TO P ENALTY APPEAL ALSO AS IN CASE OF PENALTY ORDER, THE TAX EFFECT WI LL MEAN QUANTUM OF PENALTY WHICH IS ORDERED TO BE DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST IN THIS CASE THE PENALTY ORDERED TO BE DELETED BY THE LD CIT(A) IS FOR A SUM OF RS.2, 5 5,280/ - WHICH IS LESS THAN THE MONETARY LIMIT PRESCRIBED BY TH E SAID INSTRUCTION, WE TAKE NOTICE THAT SECTION 268A HAS BEEN INSERTED BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 01/04/99. THE PROVISIONS CONTAINED IN SECTION 268A READ AS UNDER: 268A. (1) THE BOARD MAY, FROM TIME TO TIME, ISSUE ORDERS, IN STRUCTIONS OR DIRECTIONS TO OTHER INCOME - TAX AUTHORITIES, FIXING SUCH MONETARY LIMITS AS IT MAY DEEM FIT, FOR THE PURPOSE OF REGULATING FILING OF APPEAL OR APPLICATION FOR REFERENCE BY ANY INCOME - TAX AUTHORITY UNDER THE PROVISIONS OF THIS CHAPTER. (2) WHERE, IN PURSUANCE OF THE ORDERS, INSTRUCTIONS OR DIRECTIONS ISSUED UNDER SUB - SECTION (1), AN INCOME - TAX AUTHORITY HAS NOT FILED ANY APPEAL OR APPLICATION FOR REFERENCE ON ANY ISSUE IN THE CASE OF AN ASSESSEE FOR ANY ASSESSMENT YEAR, IT SHALL NOT PRE CLUDE SUCH AUTHORITY FROM FILING AN APPEAL OR APPLICATION FOR REFERENCE ON THE SAME ISSUE IN THE CASE OF (A) THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR; OR (B) ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR. (3) NOTWITHSTANDING THA T NO APPEAL OR APPLICATION FOR REFERENCE HAS BEEN FILED BY AN INCOME - TAX AUTHORITY PURSUANT TO THE ORDERS OR INSTRUCTIONS OR DIRECTIONS ISSUED UNDER PAGE NO. 5 SUB - SECTION (1), IT SHALL NOT BE LAWFUL FOR AN ASSESSEE, BEING A PARTY IN ANY APPEAL OR REFERENCE, TO CONTE ND THAT THE INCOME - TAX AUTHORITY HAS ACQUIESCED IN THE DECISION ON THE DISPUTED ISSUE BY NOT FILING AN APPEAL OR APPLICATION FOR REFERENCE IN ANY CASE. ( 4) THE APPELLATE TRIBUNAL OR COURT, HEARING SUCH APPEAL OR REFERENCE, SHALL HAVE REGARD TO THE ORDERS, INSTRUCTIONS OR DIRECTIONS ISSUED UNDER SUB - SECTION (1) AND THE CIRCUMSTANCES UNDER WHICH SUCH APPEAL OR APPLICATION FOR REFERENCE WAS FILED OR NOT FI LED IN RESPECT OF ANY CASE. (5) EVERY ORDER, INSTRUCTION OR DIRECTION WHICH HAS BEEN ISSUED BY THE BOAR D FIXING MONETARY LIMITS FOR FILING AN APPEAL OR APPLICATION FOR REFERENCE SHALL BE DEEMED TO HAVE BEEN ISSUED UNDER SUB - SECTION (1) AND THE PROVISIONS OF SUB - SECTIONS (2), (3) AND (4) SHALL APPLY ACCORDINGLY.] 12 . IT IS NOT IN DISPUTE THAT THE BOARDS INSTRUCTION OR DIRECTIONS ISSUED TO THE OTHER INCOME - TAX AUTHORITIES ARE BINDING ON THOSE AUTHORITIES, THEREFORE, THE D EPARTMENT OUGHT NOT TO HAVE FILED THE APPEAL IN VIEW OF THE ABOVE MENTIONED SECTION 268A SINCE THE TAX EFFECT IN THE INSTANT CASE IS LESS THAN THE AMOUNT PRESCRIBED FOR NOT FILING THE APPEAL. 13 . IT IS NOTICED THAT THE CBDT HAS ISSUED INSTRUCTION NO.3 OF 2011 DATED 09.02.2011, BY WHICH THE CBDT HAS RE VISED THE MONETARY LIMIT TO RS. 3,00,000/ - FOR FILING THE APPEAL BEFORE THE TRIBUNAL WHIC H APPLIES TO PENALTY APPEAL ALSO. 14 . KEEPING IN VIEW THE CBDT INSTRUCTION NO.3 OF 2011 DATED 09.02.2011 AND ALSO THE PROVISIONS OF SECTION 268A OF INCOME TAX ACT, 1961, WE ARE OF THE VIEW THAT THE REVENUE SHOULD NOT HAVE FILED THE INSTANT APPEAL BEFORE THE TRIBUNAL. 15 . IN VIEW OF THE ABOVE, BOTH ON MERITS AND ON THE GROUND THAT THE REVENUE SHOULD NOT HAVE PREFERRED AN APPEAL IN THE INSTANT CASE AS PER THE INSTRUCTION OF CBDT , WE DISMISS THE APPEAL FILED BY THE REVENUE ON THIS BASIS AS WELL AS ON MERITS. 16 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 2 6 . 09 .2014. - S D / - - S D / - ( S. V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 6 / 09 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI