Dr.Esmail Sait, Calicut V. The ITO, Calicut

ITA 494/COCH/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3656 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-08-2018
• Assessment Year: 2002-2003
• Appeal Filed On: 22-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: P V VIJAYAN ITP
• Keywords: Income from undisclosed sources; Opportunity of being heard; Reasonable cause
• Section: 133A; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM I .T . A. NO. 494 / COCH/ 20 16 ASSESSMENT YEAR : 2002 - 03 DR. E SMAIL SAIT, 5/1333, RARICHAN ROAD, EAST NADAKKAVU, CALICUT. [PAN:AABPE 8698R] VS. THE INCOME TAX OFFICER, WARD - 3(1), KOZHIKODE. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) A SSESSEE BY SHRI P.V. VIJAYAN, ITP REVENUE BY SMT. A.S. BINDHU, DR D ATE OF HEARING 13/08/2018 DATE OF PRONOUNCEMENT 14 / 0 8 /2018 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), KOZHIKODE, DATED 23/08/2016 AND PERTAINS TO THE ASSESSMENT YEAR 2002-03. 2. THE ASSESSEE HAS RAISED THE GROUND WITH REGARD TO SUSTENANCE OF PENALTY LEVIED U/S. 271(1)(C) OF THE I.T. ACT AT RS.2,25,877/-. 3. THE FACTS OF THE CASE ARE THAT DURING THE PREVIOUS YEAR, THE ASSESSEE WAS WORKING AS PRINCIPAL OF HOMEO MEDICAL COLLEGE, KOZHIKODE. HE WAS ALSO DOING I.T.A. NO.494/C/2016 2 PRIVATE PRACTICE AT HIS HOME. FOR THE AY 2002-03, THE ASSESSEE FILED HIS RETURN OF INCOME ON 09/04/2003 DECLARING A TOTAL INCOME OF RS.4,55,710/- INCLUDING AN ESTIMATED INCOME OF RS.3,00,000/- FROM PRIVATE PRACTICE. A SURVEY U/S. 133A OF THE I.T., ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 19/03/2003. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE WAS GETTING HUGE INCOME FROM PRIVATE PRACTICE IN THE INCOME TAX RETURNS FILED. ON THE BASIS OF THE CASH FLOW STATEMENT, THE AO MADE AN ADDITION OF RS.11,25,161/- DETERMINING THE TOTAL INCOME AT RS.15,80,870/-. THE ASSESSEE WENT IN APPEAL AND THE CIT(A) VIDE HIS ORDER DATED 25/06/2004 REDUCED THE ADDITION TO RS.7,30,161/-. THEREAFTER, THE AO PASSED THE ORDER OF PENALTY U/S. 271(1)(C), LEVYING A PENALTY OF RS.2,25,877/- WHICH IS THE MINIMUM AMOUNT LEVIABLE IN THIS CASE. 4. ON APPEAL, THE CIT(A) CONFIRMED THE LEVY OF PENALTY BY OBSERVING THAT THE ASSESSEE, BEING A PRACTICING MEDICAL PROFESSIONAL WAS BOUND TO MAINTAIN BOOKS OF ACCOUNT AS PER THE PROVISIONS OF SECTION 44AA. THE CIT(A) HAS REPRODUCED A PART OF THE STATEMENT GIVEN BY THE ASSESSEE DURING THE SURVEY U/S. 133A ON 19/03/2008 WHICH SHOWED THAT HE HAD RECEIVED RS.25,300/- BY 9 PM ON 19/03/2003 FROM 70 PATIENTS AND 15 PATIENTS WERE WAITING FOR CONSULTATION AT THAT TIME. FROM THIS, THE CIT(A) FOUND THAT THE TOTAL CONSULTATION AMOUNT WOULD HAVE BEEN MORE THAN RS.30,000/- ON THE DAY OF SURVEY AND IF THIS AMOUNT IS TAKEN AS HIS AVERAGE COLLECTION FOR A DAY, THE APPROXIMATE AMOUNT OF COLLECTION OF 300 DAYS IN A YEAR WOULD HAVE BEEN RS.90,00,000/- (300 X 30,000). ACCORDING TO THE CIT(A), EVEN IF HALF OF THE ABOVE AMOUNT IS CONSIDERED AS HIS I.T.A. NO.494/C/2016 3 AVERAGE COLLECTION, THE GROSS COLLECTION WOULD HAVE BEEN RS.45,00,000/-, WHICH REQUIRES THE ASSESSEE TO MAINTAIN BOOKS OF ACCOUNT U/S. 44AA AND ALSO TO GET IT AUDITED U/S. 44AB OF THE ACT. THE CIT(A) NOTICED THAT THE ASSESSEE WAS DOING PRACTICE IN THE SAME PLACE FOR ABOUT 25 YEARS AND THEREFORE, THERE CANNOT BE MUCH DIFFERENCE IN INCOME FROM THE PRIVATE PRACTICE IN THE EARLIER YEARS. 4.1. THE CIT(A) FURTHER NOTICED THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME FOR THE AY 2002-03 IN TIME BUT ONLY FILED IT ON 09/04/2003, I.E., AFTER THE DATE OF SURVEY OFFERING JUST AN INCOME OF RS.3 LAKHS FROM PRIVATE PRACTICE. ACCORDING TO THE CIT(A), THE AO MADE THE ADDITION ON THE BASIS OF THE CASH FLOW STATEMENT AND THE CIT(A) WHILE PASSING APPELLATE ORDER ON THE ASSESSMENT ORDER HAD GIVEN SUBSTANTIAL REDUCTIONS IN A CASE WHERE THE ASSESSEE HAD SUBSTANTIAL UNACCOUNTED INCOME FROM PRIVATE PRACTICE AND THE ACTUAL INCOME WOULD HAVE BEEN MUCH MORE THAN THE ASSESSED INCOME, HAD THE ASSESSEE MAINTAINED THE BOOKS OF ACCOUNT. 4.2 IN VIEW OF THE ABOVE, THE CIT(A) WAS OF THE OPINION THAT THE ASSESSEE, BEING A GOVERNMENT MEDICAL OFFICER, WAS HAVING SCANT REGARD FOR THE INCOME TAX LAW. THE CIT(A) WAS OF THE OPINION THAT THE AO HAD IMPOSED ONLY A MINIMUM PENALTY WHICH IS 100% OF THE TAX SOUGHT TO BE EVADED. THEREFORE, THE CIT(A) DID NOT SEE ANY REASON TO DELETE OR REDUCE THE QUANTUM OF PENALTY AND IT IS A FIT CASE FOR IMPOSITION OF PENALTY. HENCE, HE CONFIRMED THE PENALTY IMPOSED BY THE AO. I.T.A. NO.494/C/2016 4 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, THE LD. AR RAISED ADDITIONAL GROUND STATING THAT THE ORDER PASSED BY THE AO FOR LEVYING PENALTY U/S. 271(1)(C) OF THE ACT WAS BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED, I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. AR DREW OUR ATTENTION TO THE COPY OF THE NOTICE ISSUED U/S. 274 R.W.S. 271 OF THE ACT DATED 22/01/2004 WHEREIN THE AO HAD NOT SPECIFIED WHETHER HE HAS LEVIED PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDING TO THE LD. AR, IT IS THE REQUIREMENT OF SECTION 274 TO SPECIFY FOR WHAT LAPSE THE AO IS LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. FOR THIS PROPOSITION, THE LD. AR RELIED ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF THE CIT & ORS. VS. MANJUNATHA COTTON AND GINNING FACTORY & ORS. (2013) (359 ITR 565). THE LD. AR ALSO RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT & ANR. VS. M/S. SSAS EMERALD MEADOWS IN CC NO.11485/2016 DATED 05/08/2016 AND THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF M/S. ABR AUTO PVT. LTD. VS. ACIT IN ITA NO. 6236/DEL/2015 DATED 04/12/2017. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. I.T.A. NO.494/C/2016 5 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE HAVE CAREFULLY GONE THROUGH THE NOTICE ISSUED U/S. 274 R.W.S. 271 OF THE ACT. FOR CLARITY, WE REPRODUCE THE NOTICE HEREINBELOW: NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 DATED 22/01/2004 TO DR. ESMAIL SAIT, 5/1333, RARICHAN ROAD, EAST NADAKKAVU CALICUT WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2002-03 IT APPEARS TO ME THAT YOU:- *HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WHICH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDER SECTION 22(1)/22(2)/34 OF THE INDIAN INCOME-TAX ACT, 1922 OR WERE REQUIRED TO FURNISH UNDER SECTION 139 (1) OR BY A NOTICE GIVEN UNDER SECTION 139(2)/148 OF THE INCOME-TAX ACT, 1961. NO____________________DATED______________ OR HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE TIME ALLOWED AND THE MANNER REQUIRED BY THE SAID SECTION 139(1) OR BY SUCH NOTICE. *HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WITH A NOTICE UNDER SECTION 22(4)/23(2) OF THE INDIAN INCOME-TAX ACT, 1922 OR UNDER SECTION 142(1)/143(2) OF THE INCOME-TAX ACT, 1961. NO.______________________DATED_________________ *HAVE CONCEALED THE PARTICULARS OF INCOME OR __________FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUEST TO APPEAR BEFORE ME, AT 10 AM ON 27.2.2004 AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY ON YOU AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME-TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF I.T.A. NO.494/C/2016 6 THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUTHORISED REPRE- SENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271. (SD/-) INCOME TAX OFFICER 7.1 AS SEEN FROM THE ABOVE NOTICE ISSUED U/S. 274 OF THE ACT, THE AO HAS NOT STRUCK OUT THE IRRELEVANT PORTION OF THE NOTICE. IN OTHER WORDS, HE HAS NOT SPECIFIED WHETHER HE IS LEVYING PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. AS HELD BY THE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. VS. M/S. SSAS EMERALD MEADOWS (2015) (11) TMI 1620 THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S. 274 R.W.S 271(1)(C) IS TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED, I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THIS VIEW WAS CONFIRMED BY THE SUPREME COURT IN THE SAME CASE, I.E., CIT & ANR. VS. M/S. SSAS EMERALD MEADOWS REPORTED IN (2016) (8) TMI 1145. 7.2 IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO HOLD THAT THE PENALTY PROCEEDINGS INITIATED BY THE AO IS AB INITIO AND ALLOW THE APPEAL OF THE ASSESSEE. SINCE WE HAVE QUASHED THE PENALTY PROCEEDINGS ITSELF, WE REFRAIN FROM ADJUDICATING THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE. I.T.A. NO.494/C/2016 7 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH AUGUST, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 14 TH AUGUST, 2018 GJ COPY TO: 1. DR. ESMAIL SAIT, 5/1333, RARICHAN ROAD, EAST NADAKKAVU, CALICUT. 2. THE INCOME TAX OFFICER, WARD-3(1), KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKODE. 4. THE PR. COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN