ROBERT MCLEAN CONSULTANTS PVT. LTD., MUMBAI V. ACIT-CC-1(2), MUMBAI

ITA 5009/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4258 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKTAR ANSARI
• Keywords: Initiation of penalty proceedings; Fair market value; Corroborative evidences; Set aside
• Section: 271(1)(c); 143(3); 142(1); 250; 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 5009 & 2010/MUM/2018 ( ASSESSMENT YEARS: 2009-10 & 2010-11 ) ROBERT MCLEAN CONSULTANTS PVT LTD., 9, ROWDON STREET, UDAYANCHAL BLDG, FLAT NO. 20, 5 TH FLOOR , KOLKATA - 700017 / VS. ACIT CC 1(2) 9 TH FLOOR, PRATISTHA BHAVAN, NEW MARINE LINES, MUMBAI. ./ ./ PAN/GIR NO. : AABCR5764N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI AKTAR ANSARI, SR. DR / DATE OF HEARING 14/09/2020 !'# / DATE OF PRONOUNCEMENT 21/09/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A)-47, MUMBAI, PASSED U/S 271(1)(C) AND 250 OF THE ACT. SINCE BOTH THE APPEALS HAVE COMMON AND IDENTICAL ISSUE, HENCE THEY ARE CLUBBED AND HEARD AND ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 2 - CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVENIENCE,WE SHALL TAKE UP THE ITA NO. 5009/MUM/2018 FOR THE A.Y 2009-10.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING LEVY OF PENA LTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 11,124/-. 2.THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ORDE R LEAVING PENALTY U/S 271(1)(C) IS WITHOUT JURISDICTION AND B AD IN LAW. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE APP ELLANT COMPANY WAS PREVENTED BY A REASONABLE AND SUFFICIEN T CAUSE FROM SUBMISSION OR FURNISHING OF SUPPORTING EVIDENCE BEFORE ASSESSMENT AND APPELLANT PROCEEDING S WITH RESPECT TO QUANTUM APPEALS. 4. THE APPELLANT COMPANY PRAYS THAT A. PENALTY LE VIED U/S 271(1)(C) MAY BE DELETED. B. ORDER ON APPEAL MAY BE SET ASIDE. C. RECOVERY DEMAND IN DISPUTE MAY BE SET ASIDE. D. PERSONNEL HEARING MAY BE GRANTED. E. ANY OTHER RELIEF YOUR HOURS DEEM FIT. 5. APPELLANT COMPANY CRAVES LEAVES TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF INVESTMENT ACTIVITIES AND FILED THE RETURN OF INCOME ON 19.01.2011 WITH RS NIL INCOME. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) AND 142(1) OF THE ACT ALONG WITH QUESTIONER WERE ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 3 - ISSUED. IN COMPLIANCE, THE LDAR OF THE ASSESSEE APPEARED AND SUBMITTED THE DETAILS. 3. THE A.O FIND THAT THE ASSESSEE HAS FILED INCOMPL ETE INFORMATION AND BOOKS OF ACCOUNTS ARE NOT PRODUCED. FURTHER THE ASSESSEE HAS NOT FILED THE CONFIRMATIO NS TO ESTABLISH THE LOAN TRANSACTIONS AND THEREFORE T HE A.O MADE ADDITION OF RS. 16,391/-.THE A.O FOUND THA T THE ASSESSEE WAS DISCLOSING THE RENTAL INCOME OF RS.36,000/-FROM A PORTION OF PROPERTY AT 28-B, CAMA C STREET, KOLKATA FROM EARLIER YEARS BUT IN THE PRESE NT FINANCIAL YEAR NO INCOME WAS DISCLOSED. THE ASSESSE E HAS FILED THE EXPLANATIONS THAT NO RENTAL INCOME IS RECEIVED FROM A.Y 2008-09 DUE TO VACANCY OF PREMISE S. THE A.O IS OF THE OPINION, THAT THE ASSESSEE HAS NO T PROVIDED ANY EVIDENCE OR DOCUMENT TO ESTABLISH VACANCY OF THE PROPERTY THEREFORE ESTIMATED THE REN TAL INCOME FROM HOUSE PROPERTY OF RS.36,000/-AND ASSESSED THE TOTAL INCOME OF RS. 52,391/-AND PASSED ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 14.11.2011. SUBSEQUENTLY, THE A.O INITIATED PENALT Y PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE LD. AR FI LED A LETTER STATING THAT THE ASSESSEE HAS CHALLENGED T HE QUANTUM ADDITIONS OF THE ASSESSMENT U/S 143(3) OF ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 4 - THE ACT AND PRAYED FOR THE ABEYANCE OF LEVY OF PENA LTY TILL DISPOSAL OF APPEAL. WHEREAS THE CIT(A) VIDE OR DER DATED 12.12.2013 HAS PARTLY ALLOWED THE APPEAL OF T HE ASSESSEE. SUBSEQUENTLY THE A.O ISSUED SHOWCASE NOTICE DATED 12.02.2015 FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE HAS FILED SUBMISSIONS ON 25.02.2015 EXPLAINING THAT THE ADDITION OF RS. 36,000/-AS RENTAL INCOME IS NOT JUSTIFIED AS THE PROPERTY REMAINED VACANT FROM EARLIER YEARS AND RENTAL INCOME IS NOT RECEIVED,BUT , THE A.O IS OF THE OPINION THAT THE ASSESSEE HAS FAI LED TO FILE THE PARTICULARS AND CONCEALED THE INCOME, H ENCE LEVIED PENALTY OF RS. 11,124/- AND PASSED THE ORDE R U/S 271(1)(C) OF THE ACT DATED 24.03.2015. AGGRIEVED WITH THE PENALTY ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A).THE LD. CIT(A) CONSIDERED THE GROUNDS OF APPEAL AND SUBMISSIONS OF THE ASSESSEE AND HAS CONFIRMED THE PENALTY AND DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE CIT(A)ORDER THE ASSESSEE HAS FILED AN APPEAL WITH T HE TRIBUNAL. ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 5 - 4. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR WAS ADJOURNMENT PETITION FILED. WE HEARD THE SUBMISSIONS OF LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. PRIMA-FACIE, THE PE NALTY IS LEVIED FOR NON OFFERING OF RENTAL INCOME OF RS. 36,000/- IN THE SAID FINANCIAL YEAR. WE ARE ON PER USAL OF THE ASSESSMENT ORDER FIND THAT THE ASSESSEE HAS SUBMITTED DETAILS OF RENTAL INCOME OF EARLIER YEAR S AND ALSO EXPLAINED THAT FROM THE A.Y 2008-09, THE PROPERTY REMAINED VACANT AND NO RENTAL INCOME HAS BEEN RECEIVED. BUT THE REVENUE HAS APPLIED THE FAIR MARKET VALUE AND HAS MADE AN ADDITION OF RS. 36,000/. WE FIND THAT ANY ADDITION IN THE ASSESSMEN T ORDER CANNOT BE A GATE WAY FOR AUTOMATIC LEVY OF PENALTY. THE LD. CIT(A) HAS PASSED A VERY ELABORATE ORDER OVERLOOKING THE FACTS THAT THE ASSESSEE HAS NOT RECEIVED THE RENTAL INCOME AS PER SUBMISSIONS MADE IN THE COURSE OF ASSESSMENT AND PENALTY PROCEEDINGS . WE ARE OF THE VIEW THAT THE PENALTY CANNOT BE AUTOMATIC AND SUPPORT OUR OPINION RELYING ON THE DECISION OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY, [2013] 359 ITR 0565 (KAR) AND THE PRINCIPL ES AS UNDER:- ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 6 - IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY , KARNATAKA HIGH COURT HAS LAID DOWN THE FOLLOWING PRINCIPLES FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 :- (A) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(L)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTH ORITY OR REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT L EAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUT E CONCEALMENT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CO NTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PE NALTY, UNLESS IT ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 7 - IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT I S ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOS ING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOT AL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PR OCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 8 - (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS INSOFAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCOR RECT PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LE VIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE A SSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE P ENALTY PROCEEDINGS. 5.FURTHER,THE PENALTY LEVIED BY THE A.O FOR CONCEALMENT OF INCOME IS BEYOND THE POSSIBILITY OF THE ASSESSEE TO OBTAIN THE CONFIRMATION AS THE TENANT HAS ALREADY LEFT THE PREMISES IN THE A.Y 2008-09 WHICH WAS SUBMITTED IN THE PENALTY PROCEEDINGS. THE A. O CANNOT ASK THE ASSESSEE TO DO A IMPOSSIBLE TASK CONSIDERING THE FACTS AND CIRCUMSTANCES. WE RELAY ON THE DECISION OF HONBLE SUPREME COURT DECISION IN T HE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD 322 ITR 158 (SC) AND FOLLOW THE JUDICIAL PRECEDENTS AND WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O TO DELETE PENALTY AND ALLOW THE GROUNDS OF APPEAL OF T HE ASSESSEE. ITA NO. 5010/MUM/2018, A.Y 2010-11. ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 9 - 7. THE A.O HAS PASSED THE ASSESSMENT ORDER UNDER 143(3) OF THE ACT ON 24-12-2012 WITH THE ADDITION O F RS. 1,46,084/- BEING EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT AS THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM WITH EVIDENCES AND RS. 36,000/-BEING RENT AL INCOME AS THE ASSESSEE HAS FAILED TO OBTAIN AND SUBSTANTIATE THAT THE RENTAL PREMISES IS VACATED. SUBSEQUENTLY,THE A.O HAS INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND ISSUED SHOWCASE NOTICE. THE ASSESSEE HAS FILED THE EXPLANATIONS ON 25.02.2015 ON DISALLOWANCE OF EXPENDITURE,MENTIONING THAT THE ASSESSEE HAS INCURRED THE MINIMUM EXPENDITURE TO RUN THE BUSINESS ENTERPRISES AND DUE TO TEMPORARY LULL IN T HE BUSINESS THERE ARE NO DIRECTORS AND STAFF AVAILABLE IN THE REGISTERED OFFICE. FURTHER THE ADDITION OF RS. 36,000/- IS NOT JUSTIFIABLE AS THE PROPERTY REMAI NED VACANT FROM EARLIER YEARS AND RENTAL INCOME IS NOT RECEIVED. THE A.O OBSERVED THAT THE EXPLANATIONS AR E NOT SATISFACTORY AND LEVIED A PENALTY OF RS. 56,264 /- U/S 271(1)(C) OF THE ACT AND PASSED ORDER ON 27.02.2015. AGGRIEVED BY THE ORDER THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). WHEREAS THE CIT(A) ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 10 - HAS OVER LOOKED VARIOUS FACTS AND HAS CONFIRMED TH E PENALTY AND DISMISSED THE APPEAL. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE HAS FILED AN APPEA L WITH THE TRIBUNAL. 8. NONE APPEARED OF BEHALF OF THE ASSESSEE. WE HE ARD THE SUBMISSIONS OF THE LD. DR AND PERUSED THE MATERIAL ON RECORD. PRIMA-FACIE, THE SOLE CRUX OF THE ISSUE IS WITH REGARD TO LEVY OF PENALTY BY THE A.O ON TWO POINTS BEING NONE SUBMISSION OF EVIDENCES FOR CLAIM OF EXPENDITURE AND NONE RECEIPT OF RENTAL INCOME. THE ASSESSEE HAS EXPLAINED THAT DUE TO NON AVAILABILITY OF STAFF AND LULL IN BUSINESS OPERATIO NS AND THE JUDICIAL PROCEEDINGS AT MUMBAI, THE DIRECTORS A ND STAFF ARE NOT AVAILABLE AT REGISTERED OFFICE. BUT T HE ASSESSEE HAS INCURRED THE EXPENDITURE WHICH CANNOT BE DOUBTED AND THE ASSESSEE HAS FILED THE EXPLANATIONS IN THE PENALTY PROCEEDINGS. SIMILARLY IN RESPECT OF RENTAL INCOME, THE ASSESSEE HAS MENTIONE D THAT THE PROPERTY WAS VACATED FROM THE EARLIER YEAR S AND NO RENTAL INCOME HAS BEEN RECEIVED. IN SPITE OF SUBMITTING THE EXPLANATIONS PENALTY WAS LEVIED. ON THE ASPECTS OF LEVY OF PENALTY WHICH IS CHALLENGE O N THE SIMILAR ISSUES,WE HAVE DEALT IN THE ABOVE ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 11 - PARAGRAPH IN ASSESSEES OWN CASE FOR THE A.Y 2009-1 0. THE FACTS AND CIRCUMSTANCES ARE IDENTICAL. HENCE TH E DECISION RENDERED WOULD APPLY MUTATIS MUTANDIS FOR THIS CASE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE PENALTY AND ALLOW THE GROUNDS OF APPEAL THE ASSESS EE. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.09.2020 SD/- SD/- ( SHAMIM YAHYA ) ( PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 21/09/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. &'( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. ITA NO . 5009 & 5010MUM/2018 ROBERT MCLEAN CONSULTANTS PVT LTD., MUMBAI. - 12 - / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI