Ishwar Chand Prop., Muzaffarnagar V. ITO, Shamli

ITA 5192/DEL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2761 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 06-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASUDEVAN
• Assessee Lawyers: PREM PRAKASH; ASHISH AGARWAL
• Section: 40A(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 NEW DELHI) BEFORE SHRI I.C. SUDHIR: HONBLE JUDICIAL MEMBER ITA NO. 5192/DEL/2015 ASSESSMENT YEAR: 2009-10 ISHWAR CHAND, PROP. VS. ITO, C/O. PREM PRAKASH, ADV. WARD-2, 183/2, NORTH CIVIL LINES, SHAMLI. MUZAFFARNAGAR. (PAN: ADRPC5383J) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI PREM PRA KASH & SH. ASHISH AGARWAL, ADV. DEPARTMENT BY: SHRI T. VASUDEVA N, SR. DR DATE OF HEARING : 06.10.2015 DATE OF PRONOUNCEMENT: 04:01.2016 ORDER THE ASSESSEE HAS QUESTIONED VALIDITY OF LEVY OF PE NALTY AT RS.1,54,800 UNDER SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961 SU STAINED BY THE LEARNED CIT(APPEALS). 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE PENALTY IN QUESTION HAS BEEN LEVIED ON THE A DDITIONS OF RS.66,152 ON ACCOUNT OF SHORTAGE OF STOCK, RS.38,000 UNDER SE C. 40A(3) OF THE ACT, RS.3,46,821 ON ACCOUNT OF SUPPRESSED PURCHASES AND RS.2,13,975 ON ACCOUNT 2 OF GOODS RETURN, REBATE, DISCOUNT AND CUSTOMERS SCH EME. THE ASSESSING OFFICER LEVIED PENALTY OF RS.1,54,800 UNDER SEC. 27 1(1)(C) OF THE ACT ON THE BASIS THAT THE ASSESSEE COULD NOT EXPLAIN THE ABOVE ADDITIONS MADE ON DIFFERENT ACCOUNTS AND AGREED UPON THE SAID ADDITIO NS SINCE HE WAS HAVING NO EXPLANATION. THE PENALTY WAS QUESTIONED BEFORE THE LEARNED CIT(APPEALS) ALSO ON THE BASIS THAT THE ADDITIONS WERE AGREED UP ON WITH THIS ASSURANCE THAT NO PENALTY WILL BE LEVIED. IT WAS CONTENDED THAT TH E ADDITIONS HAVE BEEN MADE ON ESTIMATE BASIS HENCE PENALTY IS NOT LEVIABL E. THE ASSESSEE, HOWEVER, COULD NOT SUCCEED BEFORE THE LEARNED CIT(APPEALS). 4. IN SUPPORT OF THE GROUNDS, THE LEARNED AR SUBMIT TED THAT SHOW-CAUSE NOTICE FOR LEVY OF PENALTY WAS ISSUED ON TWO BASIS. FIRSTLY, FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND SECONDLY FOR C ONCEALMENT OF INCOME, WHILE THE PENALTY HAS BEEN LEVIED FOR INACCURATE PA RTICULARS OF INCOME. THE PENALTY IS THUS NOT MAINTAINABLE. IN THIS REGARD, H E PLACED RELIANCE ON THE DECISION OF JODHPUR BENCH OF THE TRIBUNAL IN THE CA SE OF KANSARA BEARINGS LTD. VS. ACIT (2013) 153 TTJ (JODHPUR) (UO) 13 AN D THE DECISION OF INDORE BENCH OF THE ITAT IN THE CASE OF DCIT VS. NE PA LTD. (2014) 112 DTR 0212 (IND). THE LEARNED AR SUBMITTED FURTHER TH AT TWO AVOID LITIGATION AND TO PURCHASE PEACE OF MIND, THE ASSESSEE HAD AGR EED UPON THE ADDITIONS 3 WITH THIS CONDITION THAT NO PENALTY WILL BE LEVIED. SINCE THE ASSESSEE HAD VOLUNTARILY AGREED FOR THE ADDITIONS, THERE WAS NO QUESTION OF LEVY OF PENALTY. HE SUBMITTED FURTHER THAT PENALTY CANNOT B E LEVIED ON ESTIMATED INCOME. 5. THE LEARNED SENIOR DR ON THE OTHER HAND PLACED R ELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW WITH THE SUBMISSION THAT ASSESSEE HAD AGREED UPON THE ADDITIONS SINCE HE WAS CORNERED BY THE ASS ESSING OFFICER AND HE WAS HAVING NO EXPLANATION ON THE PROPOSED ADDITIONS /DISALLOWANCES. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAD VOLUNTARILY SU RRENDERED THE INCOME BY WAY OF ACCEPTING THE ADDITIONS. 6. HAVING GONE THROUGH THE ABOVE CITED DECISIONS, I FIND THAT IN THE CASE OF KANSARA BEARINGS LTD. VS. ACIT (SUPRA), IT HAS B EEN HELD THAT THE ASSESSING OFFICER HAS TO CLEARLY SHOW-CAUSE THE ASS ESSEE AS TO WHICH OF THE TWO DEFAULTS OR BOTH THE DEFAULTS ( I.E. CONCEALMEN T OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ) OF BOTH THE DEFAULTS HAVE BEEN COMMITTED BY THE ASSESSEE. IT HAS BEEN HELD TH AT PENALTY CAN BE IMPOSED ONLY THE ASSESSEE IS CLEARLY PUT TO NOTICE FOR SPECIFIC DEFAULT AND ITS EXPLANATION IS NOT FOUND SATISFACTORY. IN THE PRESE NT CASE, NO SUCH SPECIFIC 4 NOTICE HAS BEEN ISSUED IN THE SHOW-CAUSE NOTICE DAT ED 23.12.2011, THE ASSESSING OFFICER HAS CALLED THE ASSESSEE TO SHOW-C AUSE ON THE ALLEGATION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME AND FURNISH INACCURATE PARTICULARS OF SUCH INCOME. A COPY OF TH IS NOTICE HAS BEEN MADE AVAILABLE AT PAGE NO. 77 OF THE PAPER BOOK. IT IS T HUS CLEAR THAT WHILE ISSUING SHOW-CAUSE NOTICE, THE ASSESSING OFFICER WAS NOT CL EAR BEYOND DOUBT AS TO WHICH DEFAULT OUT OF THE TWO REQUIRED DEFAULTS THE ASSESSEE HAS COMMITTED. IN OTHER WORDS, AS HELD IN THE DECISION IN THE CASE OF KANSARA BEARINGS LTD. VS. ACIT (SUPRA), PENALTY CAN BE IMPOSED ONLY WHEN THE ASSESSEE IS CLEARLY PUT TO NOTICE FOR THE SPECIFIC DEFAULT AND ITS EXPLANAT ION IS NOT FOUND SATISFACTORY. IN ABSENCE OF SUCH COMPLIANCE IN THE PRESENT CASE W HEN THE SHOW-CAUSE NOTICE AS DISCUSSED ABOVE HAS NOT BEEN ISSUED ON SP ECIFIC DEFAULT, THE ASSESSEE CANNOT BE SUBJECTED TO PENAL ACTION. BEING PENAL IN NATURE, THE PROVISIONS UNDER SEC. 271(1)(C) OF THE ACT CAN BE I NVOKED ONLY WHEN THE ASSESSING OFFICER IS CLEAR IN HIS APPROACH BEYOND D OUBT THAT AN SPECIFIC DEFAULT HAS BEEN COMMITTED BY THE ASSESSEE AND THER EAFTER EXPLANATION ON THE SAID SPECIFIC DEFAULT IS CALLED BY WAY OF ISSUING S HOW-CAUSE NOTICE TO THE ASSESSEE AND IF THE ASSESSING OFFICER IS NOT SATISF IED WITH THE CAUSE SHOWN BY THE ASSESSEE THEN ONLY PENALTY CAN BE LEVIED. I THU S, RESPECTFULLY FOLLOWING THE ABOVE DISCUSSED DECISION OF JODHPUR BENCH OF TH E ITAT, HOLD THAT THE 5 ASSESSING OFFICER WAS NOT JUSTIFIED IN THE PRESENT CASE TO LEVY PENALTY IN QUESTION. THE SAME IS THUS DIRECTED TO BE DELETED. THE GROUND IS ACCORDINGLY ALLOWED. 7. IN RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.01.2016 SD/- ( I.C. SUD HIR ) JUDICIAL MEMBER DATED: 04/01/2016 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 04.01.2016 DRAFT PLACED BEFORE AUTHOR DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 04.01.2016 KEPT FOR PRONOUNCEMENT ON 04.01.2016 FILE SENT TO THE BENCH CLERK 04.01.20 16 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.