Shri Akhilesh Kumar Gupta , Bhopal V. Income Tax Officer 1 (2), Bhopal

ITA 496/Ind/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7482 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C SELVAMANI
• Assessee Lawyers: S S SOLANKI
• Keywords: Principle of natural justice
• Section: 271(1)(c); 143(3); 133A

Judgement Text

AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.496/IND/2017 ASSESSMENT YEARS 2007-08 REVENUE BY SHRI K.C. SELVAMANI , SR.DR ASSESSEE BY SHRI S.S. SOLANKI, CA DATE OF HEARI NG 07.01.2019 DATE OF PRONOUNCEMENT 10 .01.2019 O R D E R PER MANISH BORAD. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANC E OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2007-08 AND IS DIRE CTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- I (IN SHORT LD.CIT(A)], BHOPAL DATED 30.05.2017 WHICH IS ARI SING OUT OF THE ORDER U/S 271(1)(C) OF THE INCOME TAX ACT 1961(IN S HORT THE ACT) DATED 19.05.2014 FRAMED BY ITO-1(2), BHOPAL. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL; S HRI AKHILESH KUMAR GUPTA, PLOT NO.162, SHOP G, ASHIRVAD COMPLEX, ZONE-!, M.P. NAGAR, BHOPAL ITO - 1 (2) , BHOPAL (APPELLANT) (RESPONDENT ) PAN NO. A ENPG0415N AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 2 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN CONFIRMING LEVY OF PENALTY OF RS.5,00,000/- U/S 271 (1)(C) OF THE ACT. 2. THAT THE ORDER OF PENALTY PASSED BY THE A.O AND SUSTAINED BY CIT(A) IS BAD IN LAW AND OUGHT TO BE SET ASIDE. ADDITIONAL GROUNDS OF APPEAL 3. THAT THE LEARNED AO ERRED IN ISSUANCE OF NOTICE US/ 271(1)(C) WITHOUT THERE BEING ANY SATISFACTION OF THE AO AS TO ON WHI CH LIMB PENALTY PROCEEDINGS ARE INITIATED. BLANKET PENALTY PROCEED INGS SO INITIATED BEING ILLEGAL AND WRONG, THE PENALTY REQUIRE TO BE CANCEL LED. 4. THAT THE LEARNED AO ERRED IN IMPOSING PENALTY OF RS.5,00,000/- BY INVOKING BOTH THE LIMBS OF THE PENALTY I.E. (I) FUR NISHING OF INACCURATE PARTICULARS AND (II) CONCEALMENT OF PARTICULARS OF HIS INCOME. THE PENALTY SO IMPOSED BY INVOKING BOTH THE LIMBS IS ILLEGAL AN D WRONG. THE PENALTY ORDER SO PASSED BEING ILLEGAL AND WRONG, THE SAME R EQUIRE TO BE ANNULLED. 5. THAT THE LEARNED AO ERRED IN PASSING PENALTY ORD ER U/S 271(1)(C) BY SOLELY RELYING ON THE ORDER U/S 143(3). THAT PENAL TY BEING A SEPARATE PROCEEDINGS AND ITS NOT THAT ON EVERY ADDITION CONF IRMED PENALTY WILL BE IMPOSED. THE ORDER OF AO SO PASSED AND CONFIRMED L EARNED ) IS ILLEGAL AND WRONG, THE SAME REQUIRE TO BE DELETED. 3. THE SOLE ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF LEVY OF PENALTY OF RS.5,00,000/- U/S 271(1)(C) O F THE ACT. AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 3 4. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F WHOLESALE AND RETAIL TRADING OF PLYWOOD, DOOR SHUTTERS, CEILING T ILES AND SOFT BOARD ETC. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007- 08 DECLARING INCOME OF RS.5,27,681/- FILED ON 31.10.2018. A SURV EY U/S 133A OF THE ACT HAD TAKEN PLACE AT THE BUSINESS PREMISES OF M/S. ARADHANA DISTRIBUTORS WHERE SHRI AKHILESH KUMAR GUPTA WAS T HE PROPRIETOR ON 13.9.2006 AND 14.09.2006. DURING THE COURSE OF SURVEY EXCESS STOCK OF PLYWOOD WORTH RS.15,15,430/- AND EXCESS CA SH OF RS.3,97,483/- WAS FOUND AND THE APPELLANT SURRENDER ED THE SAME AND ADVANCE TAXES OF RS.5,95,000/- WERE ALSO PAID B Y THE APPELLANT. AS THE ASSESSEE RETRACTED AND DID NOT ACCEPTED HIS DECLARATION, THE CASE TAKEN FOR SCRUTINY AND NOTICE U/S 143(2) WAS I SSUED ON 11.09.2008. THE INCOME OF RS.24,78,068/- ASSESSED U /S 143(3) ADDING EXCESS STOCK AT RS.15,15,430/- RENT AT RS.1, 25,632/-, STOCK DIFFERENCE AT RS.2,99,325 AND EXPENSES AT RS.10,000 /-. PENALTY U/S 271(1)(C) OF THE ACT OF RS.5,00,000/- WAS LEVIE D FOR FURNISHING INACCURATE PARTICULARS/CONCEALED PARTICULARS OF INC OME. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AGAINST THE PENALTY LEVIED U/S 271(1)(C) AT RS.5,00,000/- BUT COULD NOT SUCCEED. AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 4 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.AO IN ORDER U/S 143(3) DATED 31.12.09 INITIATED THE PENAL TY PROCEEDINGS BY HOLDING AS UNDER :_ (I) 'PENALTY PROCEEDINGS U/S 271 (I )( C) INITIATED SEPARATELY. I AM SATISFIED FOR ISSUING PENALTY NOTICE U/S 271(1)( C) OF THE INCOME TAX ACT, 1961'. (II) IN THE PENALTY NOTICE ATTACHED WITH THE ORDER THE FOLLOWING WAS MENTIONED:- 'IN CONNECTION WITH THE PENALTY PRO CEEDINGS U/S 271(I)(C) FOR THE ASSESSMENT YEARS 2007-08 YOU ARE REQUESTED TO ATTEND MY OFFICE ON OR BEFORE 21.01.20 10 AT 11:OOAM TO SHOW CAUSE WHY PENALTY SHOULD NOT BE IMP OSED'. 6. HE SUBMITTED THAT IT IS A SETTLED LAW THAT BLANK ET PENALTY PROCEEDINGS SO INITIATED ARE BAD IN LAW AND THE NOT ICE SO ISSUED REQUIRE TO QUASHED. THE AO WHILE PASSING THE ORDER U/S 271(I)(C) ALSO IMPOSED PENALTY BY HOLDING AS UNDER:- 'IN THESE CIRCUMSTANCES, I AM SATISFIED THAT THE AS SESSEE HAS FURNISHED INACCURATE PARTICULARS/CONCEALED PARTICUL ARS OF HIS INCOME AMOUNTING TO RS.14,54,260/- AND IS LIABLE FO R PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT,1961'. 7. HE FURTHER SUBMITTED THAT EVEN AT THE TIME OF IM POSITION OF AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 5 PENALTY, THE AO WAS NOT SURE AS TO ON WHICH LIMB PE NALTY IS TO BE IMPOSED. ON THIS COUNT ONLY THE PENALTY ORDER IS LI ABLE TO BE QUASHED. ON MERITS ALSO, NO PENALTY U/S 271 (1)( C) IS LEVIABLE AS THE ASSESSEE HAS EXPLAINED FACTS OF THE CASE WITH D OCUMENTARY EVIDENCE. FURTHER THE ADDITION HAS BEEN MADE BY EST IMATING G.P AND WORKING OUT STOCK AT A GIVEN DATE ASSUMING THAT G.P% REMAINS SAME THROUGHOUT THE YEAR. THE PENALTY SO LEVIED ON ESTIMATED ADDITION IS ILLEGAL AND WRONG. MERELY BECAUSE THE A O IS NOT SATISFIED ABOUT THE EXPLANATION, NO PENALTY IS LEVIABLE. FOR THIS PROPOSITION RELIANCE IS PLACED ON FOLLOWING DECISIONS:- (I) CIT VS. RELIANCE PETROPRODUCTS P. LTD. 322 ITR 0158(SC) (II) T. ASHOK PAI VS. CIT 292 ITR 0011 (SC) (III) BHAGIRATH PRASAD BILGAIYA VS. CIT 139 ITR 090 2 (MP) (IV) CIT VS. S.M. CONSTRUCTION (ITA NO.412/2013)(MU MBAI HC) (V) CIT VS. GEM GRANITES 86 CCH 0160(CHENNAI HC) (VI) CIT VS. AGRAWAL ROUND ROLLING MILLS LTD. 88 CC H 0036(SC) (VII)CIT VS. MANJUNATH COTTON & GINNING FACTORY 83 CCH 0282 (KARNATAKA HC) (VIII) NATIONAL THERMAL POWER CO. LTD V/S CIT (1999 ) 157 CTR 0249. (IX) PRINCIPAL COMMISSIONER OF INCOME TAX V/S KULWA NT SINGH AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 6 BHATIA ITA NO.9 TO 14 OF 2018 (M.P. HIGH COURT) (X) PRINCIPAL COMMISSIONER OF INCOME TAX V/S SMT. B AISETTY REVATHI ITA NO.684 OF 2016 HIGH COURT OF JUDICATURE AT HYDERABAD. (XI) CIT V/S SHRI SAMSON PERINCHERY ITA NO.1154 OF 2014 HIGH COURT OF JUDICATURE AT BOMBAY. (XII) CIT V/S M/S. SSAS EMERALD MEADOWS ITA NO.380 OF 2015 HIGH COURT OF KARNATAKA. (XIII) M/S. ABR AUTO PVT. LTD V/S ACIT CIRCLE 1(1), ITAT DELHI BENCH ITA NO.6236/DEL/2015 (XIV) DCIT-1(2)(2) V/S M/S. PENNZOIL QUAKER STATE I NDIA LTD. ITAT MUMBAI BENCH ITA NO.7386/MUM/2014 (XV) M/S. ORBIT ENTERPRISES V/S ITO 15(2)(2) ITAT M UMBAI BENCH ITA NO.1596 & 1597/MUM/2014 (XVI) S. CHANDRASEKHAR VS. ACIT ITA NO.386/2016 HIG H COURT OF KARNATAKA. 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED AND SUPPORTED THE ORDERS OF LOWER AUTHORITIE S. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH VARIOUS JUDGMENTS AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 7 REFERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSE SSEE. APART FROM CHALLENGING THE MERITS OF THE CASE RELATING TO PENA LTY LEVIED U/S 271(1)(C) OF THE ACT AT RS.5,00,000/-, LD. COUNSEL FOR THE ASSESSEE HAS ALSO RAISED ADDITIONAL LEGAL GROUND CHALLENGING THE LEGALITY OF THE PENALTY PROCEEDINGS INITIATED BY ISSUANCE OF NO TICE U/S 274 R.W.S. 271(1)(C) OF THE ACT AND SUBMITTED THAT AT T HE TIME OF ISSUANCE OF NOTICE LD. A.O HAS NOT MENTIONED AS TO FOR WHICH LIMB I.E. FOR CONCEALMENT OF PARTICULARS OF INCOME OR FO R FURNISHING INACCURATE PARTICULARS OF INCOME, PENALTY PROCEEDIN G HAVE BEEN INITIATED. 10. IN VIEW OF THE JUDGMENT OF HON'BLE APEX COURT I N THE CASE OF NATIONAL THERMAL POWER CO. LTD ( SUPRA ) , WE HAVE ADMITTED THIS LEGAL GROUND FOR ADJUDICATION AND ARE PROCEEDING TO DEAL WITH THE SAME. 11. IT IS AN ESTABLISHED POSITION OF LAW THAT THE L D.A.O AT THE TIME OF ISSUING NOTICE U/S 274 R.W.S. 271(1)(C) OF THE A CT HAS TO GIVE POSITIVE AND CLEAR CUT FINDING IN THE BODY OF THE S HOW CAUSE NOTICE ITSELF REFLECTING THE CHARGES AGAINST THE ASSESSEE AS TO WHETHER PENALTY PROCEEDING ARE INITIATED FOR CONCEALMENT OF PARTICULARS OF AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 8 INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TO EXAMINE THIS FACT WE WILL FIRST GO THROUGH THE PENA LTY SHOW CAUSE NOTICE WHICH HAS BEEN REPRODUCED BELOW; OFFICE OF THE INCOME TAX O:FFICER -1(2) AAYAKAR BHAWAN, HOSHANGABAD ROAD, BHOPAL BHOPAL DATED 16.12.2013 PAN AENPG0415N D.NO.1072 PENALTY NOTICE U/S 271 (1)(C)OF INCOME TAX ACT, 196 1 TO SHRI AKHILESH KUMAR GUPTA PROP. M/S ARADHANA DISTRIBUTERS, PLOT NO. 162 SHOP NO. G, ASHIRWAD COMPLEX, ZONE-I, M.P. NAGAR, BHOPAL SIR / MADAM, SUB:- PENALTY PROCEEDING U/S.. 271( 1 ) ( C) .. OF THE INCOME TAX ACT 1961 FOR THE AY 2007-08 IN CONNECTION WITH THE PENALTY PROCEEDINGS U/S. 271 (1) (C) FOR THE ASSESSMENT YEAR(S) 2007-08 YOU ARE REQUESTED TO ATT END MY OFFICE ON OR BEFORE 03.01.2014AT 11 :00 AM TO SHOW CAUSE WHY PENALTY SH OULD NOT BE IMPOSED. HOWEVER, IF YOU DO NOT WISH TO BE HEARD IN PERSON I N THIS REGARD, YOU MAY SUBMIT YOUR WRITTEN SUBMISSIONS SO AS TO REACH ME B Y THE ABOVE DATE WHICH WILL BE CONSIDERED BEFORE DISPOSAL OF THE MATTER. SD/- (BINAY KUMAR RAI) INCOME TAX OFFICER -1 (2), BHOPAL AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 9 12. FROM GOING THROUGH THE ABOVE PENALTY NOTICE DAT ED 16.12.1013 WE FIND THAT THERE NO WHISPER ABOUT THE SPECIFIC CHARGE LEVELED AGAINST THE ASSESSEE AND NOTICE SEEMS TO BE ISSUED ON A SET FORMAT AND THE SAME EVIDENTLY LACKS TO MENTION THE SPECIFIC CHARGE TO BE LEVELED AGAINST THE ASSESSEE FOR INITIATING T HE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 13. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE J URISDICTIONAL HIGH COURT IN THE CASE OF SHRI KULWANT SINGH BHATIA (SUPRA) WHEREIN THE HON'BLE COURT DISCUSSED THE JUDGMENT O F HON'BLE HIGH COURT IN THE CASE OF CIT V/S MANJUNATHA COTTON GINN ING FACTORY (SUPRA) AND CIT V/S SSAS EMERALAD MEADOWS (SUPRA) HELD THAT ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LD. COUNS EL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT THE GR OUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SPECIFY THE REQUIREMENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LD . TRIBUNAL HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDER OF PENALTY ENFORCED BY THE AUTHORITY. 14. SIMILARLY IN THE CASE OF CIT V/S MANJUNATHA GIN NING FACTORY, HON'BLE HIGH COURT OF KARNATAKA HELD THAT THE NOTICE ISSUED U/S AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 10 274 R.W.S. 271(1)(C) OF THE ACT SHOULD SPECIFICALLY MENTION THE GROUND IN SECTION 271(1)(C) WHETHER CONCEALMENT OF INCOME OR FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL GROUND OF SECTION 271(1)(C ) WOULD NOT MENTIONED TH E SPECIFIC REQUIREMENT OF LAW. ASSESSEE SHOULD KNOW THE GROUND S ON WHICH HE HAS CHARGED SPECIFIC OTHERWISE OPPORTUNITIES OF NAT URAL JUSTICE DENIED. ON THE BASIS OF SUCH PROCEEDINGS NO PENALT Y COULD BE IMPOSED TO THE ASSESSEE. TAKING UP THE PENALTY PRO CEEDINGS ON ONE LIMB AND FINDING THE ASSESSSEE IN ANOTHER LIMB IS B AD IN LAW. 15. EXAMINING THE FACTS IN THE LIGHT OF THE ABOVE R EFERRED JUDGMENTS WE FIND THAT IN THE BODY OF THE NOTICE IS SUED U/S 274 R.W.S. 271(1)(C) OF THE ACT THE LD.A.O FAILED TO M ENTION THE LIMBS FOR WHICH PENALTY PROCEEDINGS HAVE BEEN INITIATED. IT IS THE NEGLIGENCE OF THE LD. A.O IN NOT MAKING PROPER SPECIFIC CHARGE IN THE NOTICE U/S 274 ABOUT THE ADDITION FOR WHICH PENALTY PROCEE DINGS HAVE BEEN INITIATED. LD. A.O SHOULD BE CLEAR AS TO WHET HER THE ALLEGED ADDITION GOES UNDER THE LIMB OF CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF IN COME. MERELY ISSUING NOTICE IN GENERAL PROFORMA WILL NEGATE THE VERY PURPOSE OF AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 11 NATURAL JUSTICE AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF DILIP N SHRAF 161 TAXMANN 218 THAT THE QUASI- CRI MINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPL Y WITH THE PRINCIPLES OF NATURAL JUSTICE. 16. WE THEREFORE RESPECTFULLY FOLLOWING ABOVE REFER RED JUDGMENTS AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E ARE OF THE CONSIDERED VIEW THAT THE ALLEGED NOTICE ISSUED U/S 271(1)(C) OF THE ACT DATED 19.5.2014 IS INVALID, UNTENABLE AND SUFFE RS FROM THE INFIRMITY OF NON APPLICATION OF MIND BY THE ASSESSI NG OFFICER. WE ACCORDINGLY DIRECT TO DELETE THE PENALTY OF RS.5,00 ,000/- IMPOSED U/S 271(1)(C) ON THIS GROUND ITSELF. WE ACCORDINGL Y ALLOW THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THE LEG ALITY OF THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT. 17. SINCE THE PENALTY U/S 271(1)(C) OF THE ACT HAS ALREADY BEEN DELETED BY US ALLOWING THE LEGAL GROUND DISCUSSED A BOVE, OTHER ARGUMENTS OF THE ASSESSEE DEALING WITH THE MERITS O F THE LEVY OF PENALTY ARE NOT BEEN DEALT WITH, AS THE SAME ARE AC ADEMIC IN NATURE AND THEREFORE REMAINING GROUNDS ARE RENDERED INFRUC TUOUS. AKHILESH KUMAR GUPTA ITA NO.496/IND/2017 12 18. IN THE RESULT APPEAL OF THE ASSESSEE PERTAINING TO ASSESSMENT YEARS 2007-08 CHALLENGING THE PENALTY OF RS.5,00,00 0/- LEVIED U/S 271(1)(C) OF THE ACT IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10.01.20 19. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 10 JANUARY, 2019 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE