Anju Arora, Uttrakhand V. ITO, Uttrakhand

ITA 4813/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3727 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-06-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 21-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C AGGARWAL
• Keywords: Bonafide belief
• Section: 271(1)(c); 148

Judgement Text

ITA NO. 4813/DEL/2009 A.Y. 2002-03 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 4813/DEL/2009 A.Y. : 2002-03 MRS. ANJU ARORA, VS. ITO, KASHIPUR, W/O SHRI SURENDERA ARORA, DISTT. U.S. NAGAR KASHIPUR, DISTT. U.S. NAGAR, UTTARAKHAND - 244713 (PAN: AFMPA5934J) [APPELLANT] (RESPONDENT) ASSESSEE BY : SH. S.C. AGGARWAL, CA DEPARTMENT BY : SH. J.P. CHANDRIKAR, SR. DR PER SHAMIM YAHYA: AM THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 10.9.200 9 PERTAINING TO ASSESSMENT YEAR 2002-03. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS. 50,0 00/- IMPOSED U/S 271(1)(C) OF THE IT ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, W HILE JOINING THE FIRM M/S. SHIVAM FINCAP, KASHIPUR IN ASSESSMENT YEAR 2002-03 , INTRODUCED CAPITAL OF RS. 2,00,000/-, WHICH REMAINED UNEXPLAINED BEFORE THE A SSESSING OFFICER MAKING THE ASSESSMENT OF THE FIRM. THEREFORE, THE ASSESSING O FFICER, MAKING THE ASSESSMENT ITA NO. 4813/DEL/2009 A.Y. 2002-03 2 OF THE FIRM M/S. SHIVAM FINCAP, KAHIPUR, PASSED ON THE INFORMATION TO THIS OFFICE, AND, THEREFORE, NOTICE U/S 148 OF THE INCOME TAX A CT, 1961 WAS ISSUED TO THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE THE ASSESSI NG OFFICER THAT THE ORIGINAL RETURN FILED BY HERE MAY BE TREATED RETURN IN RESP ONSE TO NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. 3.1 WHILE JOINING THE AFORESAID FIRM M/S. SHIVAM FIN CAP, KASHIPUR IN ASSESSMENT YEAR 2002-03, THE ASSESSEE INTRODUCED RS . 2,00,000/- IN THREE INSTALMENTS AS UNDER:- I) RS. 50,000/- CASH 1.4.2001 II) RS. 1,00,000/- CASH 1.8.2001 III) RS. 50,000/- CASH 5.10.2001 THE ASSESSEE WAS REQUIRED TO EXPLAIN THE NATURE AND SOURCE OF THE ABOVE INVESTMENTS. IT WAS SUBMITTED BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER THAT THE INVESTMENT WAS MADE OUT OF HER INCOME FROM CLOT H BUSINESS WHICH WAS RUNNING FOR THE LAST THREE YEARS AND PAST SAVINGS. THE ASSESSEE WAS REQUIRED BY THE ASSESSING OFFICER TO FURNISH COPY OF BANK ACCOU NT THROUGH WHICH THE ABOVE INVESTMENT WAS MADE. IT WAS SUBMITTED BY THE ASSES SEE THAT HSE DID NOT MAINTAIN ANY BANK ACCOUNT. 3.2 THE ASSESSING OFFICER WAS NOT SATISFIED WITH T HE ASSESSEES EXPLANATION AND HE ALLOWED DEDUCTION OF RS. 30,000/- FOR HOUSE HOL D EXPENSES AND BALANCE OF RS. 1,70,000/- WAS TREATED AS UNEXPLAINED AND ADDE D TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS ON THE SAME WERE INI TIATED. IN THE PENALTY PROCEEDINGS THE ASSESSEE SUBMITTED AS UNDER:- ITA NO. 4813/DEL/2009 A.Y. 2002-03 3 I) THE ASSESSEE HAS AN OPENING BALANCE OF CAPITAL O F RS. 2,31,800/- AS ON 31.3.2001, REPRESENTING STOCK OF CLOTH OF RS. 1,70,000/- AND CASH IN HAND OF RS. 61,800/-. TH E CAPITAL HAS COME OUT OF THE ACCUMULATION OF WEALTH FROM SEVERAL PREVIOUS YEARS. THIS FACT IS ITSELF VERIFIABLE FROM THE INC OME TAX RECORD. II) THE ASSESSING OFFICER ADMITTED THAT SALES OF C LOTH OF RS. 5,82,800/- AS AGAINST RS. 5,72,800/- AS SHOWN BY T HE ASSESSEE AND MADE AN ADDITION OF RS. 10,000/- ON ACCOUNT OF UNDERSTATEMENT OF SALES. CONSIDERING THE OPENING CASH IN HAND OF RS. 61,800/-, SALES OF RS. 5,82,800/- DURIN G THE YEAR AND DISPOSAL OF OPENING STOCK OF RS. 1,30,000/- AND THE PROFITS OF RS. 64,800/- THE POSSIBILITY OF INVESTMENT OF RS . 2,00,000/- CANNOT BE RULED OUT. 3.3 THE ASSESSING OFFICER DID NOT ACCEPT THESE CON TENTIONS. HE HELD THAT WHEN THE ASSESSEE WAS ENGAGED IN COACHING JOB AND N OT CLOTH BUSINESS DURING ASSESSMENT YEAR PRIOR TO A.Y. 2002-03 THERE IS NO Q UESTION OF ANY STOCKS, BEING AVAILABLE WITH THE ASSESSEE. HE LEVIED PENALTY OF RS. 50,000/- ON THE DISALLOWANCE OF RS. 1,70,000/-. 4. UPON ASSESSES APPEAL, THE LD. COMMISSIONER OF IN COME TAX (APPEALS) CONFIRMED THE ASSESSING OFFICER S ACTION. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED BEFORE US THE ASSESSMENT ORDER OF A.Y. 2001-02 IN THE ITA NO. 4813/DEL/2009 A.Y. 2002-03 4 CASE OF THE ASSESSEE. IN THE SAID ASSESSMENT ORDE R THE ASSESSING OFFICER HAS CLEARLY BROUGHT ON RECORD THAT THAT ASSESSEE DERIV ED INCOME FROM TUITION AND RETAIL SALES OF CLOTH BUSINESS. HE REFERRED TO T HE VISIT OF THE INSPECTOR OF INCOME TAX MENTIONED IN THE ASSESSMENT ORDER, WHEREIN IT W AS REPORTED THAT ASSESSEE HAS A SMALL SHOP IN A STREET NIWAS NAGAR, KASHIPUR AND STOCK WAS FOUND OF RS. 50,000/-. HE FURTHER MADE THE ASSESSMENT AS UN DER:- THE INCOME FROM RETAIL SALE OF CLOTH BUSINESS APPE ARS TO BE TOO LOW. THIS ISSUE DISCUSSED WITH THE ASSESSEE. AFTER DISCUSSI ON, ASSESSEE AGREED FOR ADDITION OF RS. 25000/- ON ACCOUNT OF RETAILS SALE OF CLOTH BUSINESS INSTEAD OF RS. 10000/- TO RS. 12000/-. SUBJECT TO THE ABOVE DISCUSSION TOTAL INCOME OF THE ASSESSEE COMPUTED AS UNDER:- NET INCOME DECLARED AS PER RETURN OF INCOME. RS. 52400/- ADD : UNDISCLOSED INCOME ON ACCOUNT OF RETAIL SALE RS. 25000/- OF CLOTH BUSINESS ON AGREED BASIS DISCUSSED AS ABO VE. TOTAL= RS. 77400/- 6.1 REFERRING THE ABOVE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT IT WAS TOTALLY WRONG TO HOLD THAT ASSESSEE WAS NOT ENGAGED INTO CLOTH BUSINESS AND DID NOT HAVE ANY STOCK. HE FURTHER SUBMITTED THAT ASSE SSEE HAD AN OPENING BALANCE IN THE CAPITAL ACCOUNT OF RS. 231800/- WHICH WAS RE PRESENTED BY STOCK OF CLOTH OF RS. 1,70,000/- AND CASH IN HAND WAS RS. 61800/-. THIS CAPITAL HAS COME OUT OF ACCUMULATION OF WEALTH OF SEVERAL PREVIOUS YEARS. IT WAS FURTHER SUBMITTED THAT ASSESSEES CASE DID NOT INVITE RIGORS OF PENALTY U/ S 271(1)(C). HE ARGUED THAT FINDING OF ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIV E. 6.2 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 4813/DEL/2009 A.Y. 2002-03 5 7. WE HAVE CAREFULLY CONSIDERED THE ISSUE. ADDITI ON IN THIS CASE WAS MADE FOR INVESTMENTS OF RS. 2 LACS BY THE ASSESSEE IN THE CO NCERNED ASSESSMENT YEAR AS CAPITAL IN THE FIRM M/S SHIVAM FINCAP, KASHIPUR. ASSESSEE HAD SUBMITTED THAT INVESTMENT WAS MADE OUT OF ITS ACCUMULATION OF CAPI TAL OF THE PAST YEARS. ASSESSEE WAS SUBMITTING RETURNS IN ASSESSMENT YEA RS AND IN THE RETURN PERTAINING TO IMMEDIATELY PRECEDING ASSESSMENT YEAR S, ASSESSING OFFICER HAS HIMSELF ADDED THE UNDISCLOSED INCOME IN THE CLOTH B USINESS OF THE ASSESSEE. AS REFERRED BY ASSESSING OFFICER, THE INSPECTOR OF INC OME TAX VISITED THE ASSESSEE AND ASSESSEE HAS BEEN FOUND TO BE OWNING SHOP WHERE THE STOCK WAS ALSO FOUND. 7.1 IN THIS BACKGROUND, WE FIND THAT ASSESSING OFFI CER IS NOT CORRECT IN OBSERVING THAT ASSESSEE HAS NOT BEEN DOING ANY CLOT H BUSINESS, BUT HAS DERIVED INCOME FROM TUITION COACHING ONLY. MOREOVER, AGA INST A CLAIM OF CAPITAL INTRODUCTION OF RS. 2 LACS, ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 1,70,000/- BY ALLOWING RS. 30,000/- FOR HOUSEHOLD E XPENSES. WE ARE UNABLE TO FIND WHAT WAS THE RATIONALE OF ALLOWANCE OF RS. 30, 000/- AS HOUSEHOLD EXPENSES AGAINST THE CLAIM OF RS. 2 LACS FOR CAPITAL INTRODU CTION. HENCE IT IS CLEAR THAT IN THE PENALTY PROCEEDINGS ASSESSING OFFICER HAS FAIL ED TO APPRECIATE THE FACTS PROPERLY. HENCE IN OUR CONSIDERED OPINION, RIG ORS OF PROVISIONS OF SECTION 271(1)(C) ARE NOT ATTRACTED IN THE PRESENT CASE. WE FIND THAT SECTION 271(1(C) OF THE ACT POSTULATES IMPOSITION OF PENALTY FOR FURNIS HING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THE PRESENT CASE, TH E ASSESSEE CANNOT BE HELD TO BE GUILTY OF FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THE LEVY O F PENALTY OF RS. 50,000/- IN THIS CASE IS LIABLE TO BE DELETED. ITA NO. 4813/DEL/2009 A.Y. 2002-03 6 8. IN THIS REGARD, WE REFER TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN H ELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE M EANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUS E WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WAS ONLY THAT PART IN DILI P SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PE NALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTEN TION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENAL TY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 9. IN THIS REGARD WE ALSO PLACE RELIANCE FROM THE A PEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF THEIR LOR DSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGA TION IS THE RESULT OF A QUASI- CRIMINAL PROCEEDINGS, AND PENALTY WILL NOT ORDINARI LY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDIC IALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENA LTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT, OR WHERE ITA NO. 4813/DEL/2009 A.Y. 2002-03 7 THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OF FENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 10. UNDER THE CIRCUMSTANCES, FOLLOWING THE ABOVE PR ECEDENTS, WE HOLD THAT ASSESSEES CLAIM WAS NOT EX-FACIE BOGUS AND HENCE P ENALTY IMPOSED U/S 271(1)(C) IS NOT ATTRACTED MERELY BECAUSE THE REVENUE HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE. ACCORDINGLY, WE DELETE THE LEVY OF PENALT Y. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/06/2010. SD/- SD/- [I.P. BANSAL] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 18/06/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES