Dalichand H. Oswal (Jain), Jalgaon V. Income-tax Officer,

ITA 498/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5351 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2018
• Assessment Year: 2002-2003
• Appeal Filed On: 20-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Salary income; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , ' BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . .. . / ITA NO.498/PUN/2015 $ $ / ASSESSMENT YEAR : 2002-03 SHRI DALICHAND H. OSWAL (JAIN), PLOT NO.3, GAURI SHANKAR, TELEPHONE NAGAR, JALGAON 425 002 PAN : AAAPO4133C ....... / APPELLANT / V/S. ITO, WARD-1(1), JALGAON / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 19.06.2018 / DATE OF PRONOUNCEMENT : 18.07.2018 / ORDER PER D. KARUNAKARA RAO, AM: THIS IS THE APPEAL FILED BY ASSESSEE AGAINST THE ORDER O F CIT(A)-2, NASHIK, DATED 03-02-2015 FOR THE A.Y. 2002-03. 2. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED HERE AS UNDER : THE GROUNDS OF APPEAL STATED BELOW ARE WITHOUT PRE JUDICE TO EACH OTHER. 1. THE LEARNED CIT (A) ERRED IN CONFIRMING LEVY OF PENALTY OF RS. 66,100 U/S. 271(1) (C) OF THE ACT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE PENALTY SO LEVIED BY THE AO AND CONFIRMED BY THE LEARNED CIT (A) BE CANC ELLED. 2. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT SU SPICION HOWSOEVER GRAVE COULD NOT TAKE THE PLACE OF PROOF AND CONSEQU ENTLY NO PENALTY IN THE ABSENCE OF ANY COGENT MATERIAL/EVIDENCE RE; CONCEAL MENT OF INCOME, COULD BE JUSTIFIED. 3. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH AT PENALTY PROCEEDINGS ARE INDEPENDENT OF ASSESSMENT PROCEEDIN GS AND AS SUCH MERE ADDITION IN THE ASSESSMENT (WHICH IS ALSO UNDER DIS PUTE IN APPEAL PENDING 2 ITA NO.498/PUN/2015 SHRI DALICHAND H. OSWAL (JAIN) BEFORE THE HON'BLE ITAT PUNE) COULD NOT JUSTIFY THE LEVY OF PENALTY U/S. 271 (1 ) (C). 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TH E CHARGE CONTEMPLATED BY SEC. 271(1)(C) MUST BE SPECIFIC AND IN THE ABSENCE THEREOF ORDER PASSED BY THE AO IMPOSING PENALTY BEING BAD I N LAW COULD NOT BE UPHELD. 5. THE LEARNED CIT (A)'S ORDER CONFIRMING LEVY OF P ENALTY WITHOUT DISPOSING OF EACH OF THE GROUNDS RAISED IS NOT IN A CCORDANCE WITH LAW AND AS SUCH CANNOT BE UPHELD. 6. THE LEARNED CIT (A) HAS ERRONEOUSLY CONCLUDED TH AT THE APPELLANT HAD ADVANCED MONEY TO CHHORIYAS IN THE PAST AND EAR NED INTEREST THEREON WHEN ADMITTEDLY THERE WAS NO MATERIAL ON RECORD TO SUPPORT SUCH AN INFERENCE, AND CONSEQUENTLY FURTHER ERRED IN LEVYIN G PENALTY OF RS. 66,100 U/S. 271 (1) (C). 7. GENERAL : 7.1 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANYONE OR MORE OF THE GROUNDS OF APPEALS AS MAY BE REQUIRED I N THE NATURE AND CIRCUMSTANCES OF THE CASE. 7.2 THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHE R EVIDENCE TO SUBSTANTIATE HIS CASE AS THE OCCASION MAY DEMAND. 3. BRIEFLY STATED RELEVANT FACTS INCLUDE THAT THE ASSESSEE IS AN INDIVIDUAL. ASSESSEE IS EMPLOYED WITH LAXMI IRRIGATION SYSTE M PVT. LTD. AND NEW JAIN WAREHOUSING CORPORATION, JALGAON. ASSESSEE DE RIVES INCOME FROM SALARY AND AGRICULTURAL INCOME. ASSESSEE FILED THE RETURN OF INCOME ON 26-07-2022 DECLARING TOTAL INCOME OF RS.2,04,131/ - AND AGRICULTURAL INCOME OF RS.7,500/-. THERE WAS SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT AT THE RESIDENTIAL PREMISES OF TH E CHHORIYA GROUP OF JALGAON ON 22-08-2008. CERTAIN INCRIMINATING DOCU MENTS WERE SEIZED FROM THE RESIDENTIAL-CUM-FACTORY PREMISES OF SHRI KA NHAIYALAL D. CHHORIYA. ON PERUSAL OF THE SEIZED DOCUMENT AS PER ANN EXURE-B ITEM NO.1 TO 40 WHICH ARE ROUGH CASH BOOKS OF CHHORIYA GROU P, IT WAS NOTICED THAT THE ASSESSEE GAVE ADVANCES TO THE TUNE OF RS.9 LAKHS TO CHHORIYA GROUP OF JALGAON DURING THE PERIOD 01-04-2001 T O 31-03-2002. THE SAID ADVANCES WERE NOT REFLECTED IN THE BALANCE SHE ET. IN THE 3 ITA NO.498/PUN/2015 SHRI DALICHAND H. OSWAL (JAIN) ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE, THE AO PRO CEEDED TO MAKE ADDITION OF RS.9 LAKHS AS UNEXPLAINED ADVANCES. AO ALSO ADD ED THE INTEREST EARNED ON SUCH ADVANCES AMOUNTING TO RS.1,86,00 0/- TO THE TOTAL INCOME OF THE ASSESSEE. EVENTUALLY, THE AO DETERMIN ED THE INCOME OF THE ASSESSEE AT RS.12,90,131/- AS AGAINST THE INCOME OF RS.2,04,131/ - RETURNED BY THE ASSESSEE. 4. IN THE FIRST APPELLATE PROCEEDINGS, REGARDING THE ADDIT ION OF RS.9 LAKHS MADE BY THE AO ON ACCOUNT OF UNEXPLAINED ADVANCES , THE CIT(A) GAVE RELIEF TO THE ASSESSEE STATING THAT THE AMOUNT IN Q UESTION BELONGED TO A.Y. 2001-02 AND THEREFORE, THE SAID AMOUNT SHOULD HAV E BEEN ADDED IN THE YEAR IN WHICH IT WAS INTRODUCED. REGARDING THE AD DITION OF RS.1,86,000/- MADE BY THE AO ON ACCOUNT OF INTEREST, THE CIT(A) NOTED THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS.2,16,000/- (R S.18,000/- PER MONTHS X 12 MONTHS) AND THEREFORE, THE SAID AMOUNT REPR ESENTS UNACCOUNTED INCOME. THUS, THE CIT(A) RESTRICTED THE ADDITIO N TO RS.2,16,000/-. EVENTUALLY, THE AO AFTER GIVING EFFECT TO THE ORDER OF CIT(A) LEVIED PENALTY OF RS.66,096/-. THE DETAILS ARE GIVEN BELOW : TAX ON ASSESSED INCOME INCLUDING CONCEALED INCOME RS.4,20,131 RS.1,02,040/- LESS : TAX ON INCOME EXCLUDING CONCEALED INCOME (ASSESSED INCOME CONCEALED INCOME) (I.E. RS.4,20,131 RS.2,16,000 = RS.2,04,131/- R S.35,944/- ------------------- TAX SOUGHT TO BE EVADED RS.66,096/- ------------------- THE CIT(A) AFTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE DATED 19-01-2015 CONFIRMED THE PENALTY LEVIED BY THE AO. 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE IS IN A PPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 4 ITA NO.498/PUN/2015 SHRI DALICHAND H. OSWAL (JAIN) 6. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE REFERRING TO GROUND NO.4 (LEGAL IN NATURE) SUBMITTED THAT THIS IS A CAS E WHERE THE AO FAILED TO RECORD VALID SATISFACTION IN THE ASSESSMENT ORDER DURING WHICH THE PENALTY PROCEEDINGS WERE INITIATED. HIGHLIGHTING THE LEGA L REQUIREMENT OF MAKING A SPECIFIC REFERENCE TO THE SPECIFIC LI MB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELYING ON VARIOUS BIND ING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN T HE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 LD. COUNSEL DEMONSTRATED THAT THE PENALTY LEVIED BY THE AO IS UNSUS TAINABLE IN LAW. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE ASSESS MENT ORDER AS WELL AS THE PENALTY ORDER HIGHLIGHTING THE ABOVE LEGAL DEFICIENCIES. 7. PER CONTRA, LD. DR FOR THE REVENUE RELIED ON THE ORDE RS OF AO/CIT(A). 8. WE HEARD BOTH THE PARTIES ON THIS SPECIFIC LEGAL ISSUE, I.E. RECORDING OF PROPER SATISFACTION BY THE AO. WE PERUSED THE ORDER OF THE AO AND FIND THE SATISFACTION RECORDED BY THE AO FOR INITIATING THE P ENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THER EFORE, THE SAME IS REPRODUCED AS UNDER : 9. . . . . . . . . . . . . . PENALTY PROCEEDINGS U/S.271(1)(C) ARE SEPARATELY INITIATED FOR BOTH THE ABOVE ADDITIONS. 8.1 WE ALSO PERUSED THE PENALTY ORDER DATED 28-03-2013 AND FIND THE SATISFACTION RECORDED BY THE AO FOR LEVYING THE PENALTY U/ S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THE SAID SATISFACTION READS AS UN DER : 5 ITA NO.498/PUN/2015 SHRI DALICHAND H. OSWAL (JAIN) 6. UNDER THE SET OF CIRCUMSTANCES OF FACTS OF THE CASE, I HAVE BEEN LEFT WITH NO OPTION BUT TO LEVY PENALTY IN RESPECT OF AD DITION MADE OF RS.26,50,000/- AS UNEXPLAINED CASH CREDITS U/S.68 O F THE ACT. THUS, I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS O F HIS INCOME AND CONCEALED THE PARTICULARS OF INCOME. THUS, THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I .T. ACT, 1961. THEREFORE, ASSESSEE IS LIABLE FOR LEVY OF PENALTY U/S.271(1)(C ) OF THE ACT, 1961 FOR FURNISHING OF INACCURATE PARTICULARS OF HIS INCOME. I, THEREFORE, LEVY A MINIMUM PENALTY OF RS.66,096/-, I.E. 100% OF TAX SO UGHT TO BE EVADED AS AGAINST MAXIMUM PENALTY LEVIABLE AT RS.1,98,288/-, I.E. 300% OF THE TAX SOUGHT TO BE EVADED. FROM THE ABOVE, IT IS EVIDENT THAT AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT, AO DID NOT SPECIFY ANY LIM B OF CLAUSE (C) OF SECTION 271(1) OF THE ACT. THIS MANNER OF RECORDING OF SA TISFACTION SUGGESTS THE EXISTENCE OF AMBIGUITY WITH REFERENCE TO APP LICABILITY OF SPECIFIC LIMB. THERE IS NO HARMONY BETWEEN THE INITIATION OF P ENALTY PROCEEDINGS AND AT THE TIME OF LEVYING THE PENALTY. THERE FORE, WE ARE OF THE OPINION THAT CONSIDERING THE ABOVE REFERRED BINDING JU DGMENTS SUCH PENALTY ORDER IS UNSUSTAINABLE IN LAW LEGALLY. AO IS UNDER O BLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. IN VIEW OF THE ABOVE DELIBERATION ON THIS IS SUE, WE ARE OF THE OPINION THAT THE PENALTY ORDER IS LIABLE TO BE QUASHED ON THIS LEGAL ISSUE. THUS, THE ORDER OF CIT(A) IS SET-ASIDE AND DIRECT THE AO TO DELETE THE PENALTY. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 18 TH DAY OF JULY, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER / PUNE; / DATED : 18 TH JULY, 2018. SATISH 6 ITA NO.498/PUN/2015 SHRI DALICHAND H. OSWAL (JAIN) ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-2, NASHIK 4. THE PR. CIT-2, NASHIK , , # , / DR, ITAT, B BENCH, PUNE. 6. & / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.