Gangadhar Vitthal Badhe, Pune V. Deputy Commissioner of Income-tax,

ITA 522/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6928 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-12-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Keywords: Presumptive income; Search and seizure; Opportunity of being heard; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO S . 517 TO 522 /P U N/20 1 6 / ASSESSMENT YEAR S : 20 0 5 - 0 6 TO 2010 - 11 MR. GANGADHAR VITTHAL BADHE, B - 903, KUMARPURAM, MUKUND NAGAR, PUNE 411037 . / APPELLANT PAN: AHNPB2399F VS. THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI KISHOR PHADKE / RESPONDENT BY : S HRI VIVEK AGGARWAL / DATE OF HEARING : 14 . 12 .2017 / DATE OF PRONOUNCEMENT: 20 . 1 2 .2017 / ORDER PER SUSHMA CHOWLA, JM: THIS BUNCH OF SIX APPEAL S FILED BY THE ASSESSEE ARE AGAINST CONSOLIDATED ORDER OF CIT(A) - 13 , PUNE , DATED 31.12.2015 RELATING TO ASSESSMENT YEAR S 200 5 - 0 6 TO 2010 - 11 AGAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . TH IS BUNCH OF APPEALS RELATING TO THE SAME ASSESSEE ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE 2 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO. 517 /PUN/2016 , RELATING TO ASSESSMENT YEAR 2005 - 06 TO ADJUDICATE THE ISSUES. 3. THE ASSESSEE IN ITA NO. 517 /PUN/201 6 , RELATING TO ASSESSMENT YEAR 200 5 - 0 6 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) - 13, PUNE ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY U/S 271( 1 )(C) OF THE ITA, 1961 LEVIED BY DCIT, CENTRAL CIRCLE 2(1), PUNE AMOUNTING TO RS.3 , 15 , 000/ - . THE LEARNED IT - AUTHORITIES OUGHT TO HAVE APPRECIATED THAT CONCEALMENT PENALTY OUGHT NOT TO BE LEVIED / SUSTAINED WHEN RETURNS ARE FILED UNDER PRESUMPTIVE TAXATION U/S 44AE OF INCOME TAX ACT , 1961. 2. THE LEARNED CIT(A) - 13, PUNE ERRED IN LAW AND ON FACTS IN SUSTAINING THE PENALTY U/S 271( 1 )(C) OF THE ITA , 1961 WITHOUT REFERRING TO EXPLANATION - 5 OF SECTION 271( 1 )(C). LEARNED I - T AUTHORITIES OUGHT TO HAVE APPRECIATED THAT IN CASE OF A SEARCH U/S 132, ISSUE OF CONCEALMENT PENALTY OUGHT TO BE DECIDED EITHER UNDER EXPLANATION - 5 OF SECTION 271( 1 )(C) OR SECTION 271AAA OF THE ITA 1961. 3. LEARNED CIT(A) - 13, PUNE FURTHER ERRED IN LAW AND ON FACTS IN NOT PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND ERRED IN DECIDING THE MATTER ON THE BASIS OF WRITTEN SUBMISSION FILED. CONSIDERING THE TRIVIAL MATTER OF CONCEALMENT PENALTY , THE LEARNED CIT(A) - 2 OUGHT TO HAVE GRANTED AN OPPORTUNITY OF PERSONAL HEARING & SUBMISSIONS THER ETO. 4. THE LEARNED CIT(A) - 13 , PUNE ERRED IN LAW AND ON FACTS IN SUSTAINING PENALTY OF RS.3,15 , 000 LEVIED BY THE LEARNED AO WITHOUT APPRECIATING THAT, THERE WAS NO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH WHICH CAN LEAD TO POSSIBILITY OF UNDISCLOSED INCOME. 4. BRIEFLY, IN THE FACTS OF THE CASE, SEARCH AND SEIZURE OPERATION S WERE CARRIED OUT AT THE RESIDENT IAL PREMISES OF THE ASSESSEE ON 12.10.2010. THE ASSESSEE WAS ASSOCIATED WITH RATHI AND DUGAD GROUP OF CASES. THE ASSESSEE DERIVED ITS INCOME FROM TRANSPORT BUSINESS AND TRADING IN BRICKS. THE ASSESSEE IN ADDITION HAD DECLARED ADDITIONAL INCOME OF RS.10,50,000/ - ON ACCOUNT OF UNACCOUNTED CASH INCOME UTILIZED FOR CASH EXPENSES. THE ASSESSEE HAD DECLARED THE SAID ADDITIONAL INCOME FO R TAXATION IN ITS RETURN OF INCOME. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAVING ADDITIONAL INCOME DETECTED AT THE TIME OF SEARCH, 3 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE WHICH WAS NOT SHOWN IN HIS ORIGINAL RETURN OF INCOME AND IF SEARCH HAD NOT TAKEN PLACE THEN THE ADDITIONAL INCOME MIGHT HAVE ESCAPED FROM TAXATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CASE OF THE ASSESSEE CLEARLY COMES UNDER THE AMBIT OF EXPLANATION - 5 TO SECTION 271(1)(C) OF THE ACT. HENCE, PEN AL TY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WERE INITIATED SEPARATELY. THE ASSESSING OFFICER DIRECTED FOR ISSUE OF NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT. THE ASSESSING OFFICER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT HELD THAT THE PROVISIONS OF EXP LANATION - 5A TO SECTION 271(1)(C) OF THE ACT WERE SQUARELY APPLICABLE. VIDE PARA 4 OF THE PENALTY ORDER, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAVING ACCEPTED UNDISCLOSED INCOME OF RS.10.50 LAKHS DURING SEARCH AND THEREAFTER BEING OFFERED AS UNDISCL OSED INCOME IN RETURN OF INCOME, SQUARELY COMES UNDER THE AMBIT OF SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER HELD IT TO BE A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT AND LEVIED PENALTY OF RS.3,15,000/ - . 5. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ORDER OF ASSESSING OFFICER AND CONSIDERED IT TO BE A CASE FOR LEVY OF PENALTY UNDER CLAUSE ( C ) OF EXPLANATION - 1 TO SECTION 271(1)(C) OF THE ACT. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD OFFERED UNDISCLOSED INCOME IN THE STATEMENT RECORDED U/S. 132(4) OF THE ACT WHICH WAS DISCLOSED IN THE RETURN OF INCOME FILED FOR EACH OF THE YEAR. THE UNDISCLOSED INCOME OFFERED IN ASSESSMENT YEAR 2005 - 06 WAS RS.10,50,000/ - AND IN TOTAL IN ASSESSMENT YEARS 2005 - 06 TO 2011 - 12 WAS RS. 33,55,120/ - . HE FURTHER POINTED 4 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE OUT THAT IN OTHER YEARS I.E. OTHER THAN ASSESSMENT YEARS 2005 - 06, 2 009 - 10 AND 2010 - 11 ADDITIONAL INCOME WAS ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF APPLICATION OF FUNDS I.E. TOTA L OF RS.21,44,880/ - . HE FAIRLY ADMITTED THAT NO SET OFF OF THE SOURCE AND THE APPLICATION HAD BEEN ASKED AND THE ASSESSEE HAD PAID TAXES ON THE ADDITIONAL INCOME IN THE RESPECTIVE YEARS. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON THE PRELIMINARY ISSUE THAT THOUGH THE ASSESSING OFFICER HAD MADE REFERENCE TO EXPLANATION 5A OF SECTIO N 271(1)(C) OF THE ACT , BUT BOTH AT THE TIME OF RECORDING OF SATISFACTION AND AT THE TIME OF LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT , HAS FAILED TO INVOKE THE APPROPRIATE LIMB OF THE SAID SECTION. HE POINTED OUT THAT IN THE ABSENCE OF ASSESSING OFFICER HAVING SHOW CAUSE D THE ASSESSEE AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS NOT FULFILLED, THE PENALTY ORDER PASSED IN THE CASE IS BOTH INV ALID AND BAD IN LAW. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KANHAIYALAL D. JAIN VS. ASST. COMMISSIONER OF INCOME TAX IN ITA NOS. 1201 TO 1205/PN/2014 FOR ASSESSMENT YEARS 2003 - 04 TO 2007 - 07, ORDER DATED 30.11.2016. 8. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER S OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT BUNCH OF APPEALS RELATES TO LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THE JURISDICTIONAL ISSUE WHICH HAS BEEN RAISED IN THE PRESENT APPEAL S IS AGAINST NON - RECORDI NG OF SATISFACTION BY THE ASSESSING OFFICER WHILE INITIATING THE PENALTY PROCEEDINGS AND EVEN WHILE PASSING THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. THE CASE OF THE ASSESSEE BEFORE US IS THAT THE ASSESSING OFFICER HAS FAILED TO COME TO THE CON CLUSION AS TO WHICH LIMB OF SECTION 271(1)(C) 5 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE OF THE ACT HAS NOT BEEN FULFILLED BY THE ASSESSEE AND IN THE ABSENCE OF SAME , NO PENALTY FOR CONCEALMENT C OULD BE LEVIED UPON THE ASSESSEE. 10. PENALTY FOR CONCEALMENT U/S. 271(1)(C) OF THE ACT IS LEVIABLE IN THE CASE WHERE THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS INCUMBENT UPON THE ASSESSING OFFICER TO COME A FINDING AS TO WHICH LIMB OF THE SAID SECTION HAS NOT BEEN FULFILLED BY THE ASSESSEE AND RECORD SATISFACTION IN THIS REGARD AND SHOW CAUSE THE ASSESSEE ACCORDINGLY. IN CASE OF NON - RECORDING OF SATISFACTION OF NON - FULFILLMENT OF WHICH OF THE LIMB OF SECTION 271(1)(C) OF THE ACT AND ISSUING SHO W CAUSE NOTICE TO THE ASSESSEE IN THIS REGARD , THEN THE INITIATION OF PENALTY PROCEEDINGS IS BOTH INV ALID AND BAD IN LAW. FURTHER, THE ASSESSING OFFICER HAVING NOT COME TO A CONCLUSION WHILE PASSING THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT , AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN FULFILLED , THEN THE PENALTY ORDER SO PASSED IS BAD IN LAW. SUCH IS THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 WITH OTHER INCOME TAX APPEALS NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, JUDGMENT DATED 05.01.2017 , WHEREIN IT WAS HELD THAT WHERE INITIATION OF PENALTY IS ON ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 11. THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KANHAIYALAL D. JAIN VS. ASST. COMMISSIONER OF INCOME TAX (SUPRA) HAS ALSO HELD AS UNDER : 26. WHERE CONCEALMENT OF INCOME AND FURNISHING OF I NACCURATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATIONS, THEN AS PER PROVISIONS OF THE ACT, THE SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER BEFORE INITIATING PENALTY PROCEEDINGS AS TO UNDER WHICH LIMB THE CASE OF ASSESSEE FALLS. IN THE PRESENT SET OF FACTS, THE SATISFACTION AS RECORDED BY THE ASSESSING OFFICER WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF DOES NOT ESTABLISH THE CASE OF REVENUE AGAINST THE ASSESSEE THAT IT IS LIABLE FOR LEVY OF PENALTY FOR CONCEALMENT UNDER WHICH LIMB 6 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT BY THE ASSESSING OFFICER ALSO DOES NOT SHOW CAUSE THE ASSESSEE AS TO MAKE HIM AWARE OF EXACT CHARGE LEVIED AGAINST HIM. IN THE ABSENCE OF SAME, IT CAUSES PREJUDICE TO THE RIGHT OF REASONABLE OPPORTUNITY TO BE ALLOWED TO THE ASSESSEE BEFORE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, PENALTY NOTICE ISSUED IN THE PRESENT CASE SUFFERS FROM INFIRMITIES I.E. LACK OF SATISFACTION AND LACK OF NOTICE BEING ISSUED IN MAKING THE ASSESSEE AWARE OF EXACT CHARGE AGAINST HIM, HENCE THE SAME IS QUASHED. THE PENALTY PROCEEDINGS COMPLETED PURSUANT TO SUCH NOTICE ARE VITIATED AND THE SAME ARE HELD TO BE INVALID. 12. NO W, COMING TO THE FACTS OF PRESENT APPEAL BEFORE US . T H E ASSESSING OFFICER IN THE ASSESSMENT ORDER THOUGH MENTIONS THE INITIATION OF PENALTY PROCEEDINGS IN VIEW OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT , BUT IN THE ORDER LEVYING PENALTY HAS REPRODUCED THE PROVISIONS OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. THE SAID EXPLANATION 5A PROVIDES THE CONDITIONS UNDER WHICH THE SAME CAN BE INVOKED AND PROVIDES NOTWITHSTANDING THAT SUCH INCOME IS DECLARE D BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF SEARCH, HE SHALL, FOR THE PURPOSE OF IMPOSITION OF A PENALTY UNDER CLAUSE ( C ) OF SUCH SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEAL ED THE PARTICULARS OF HIS INCOME OR FURNISHED INA CCURATE PARTICULARS OF SUCH INCOME . IN OTHER WORDS WHILE SHOW CAUSING THE ASSESSEE , THE ASSESSING OFFICER HAS TO COME TO A FINDING AS TO WHETHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE REQUIREMENT OF THE ACT IS TO SHOW CAUSE AS TO WHICH LIMB OF THE SAID SECTION HAS NOT BEEN FULFILLED BY THE ASSESSEE. IN THE ABSENCE OF SAME , THE INITIATION OF PENALTY PROCEEDINGS ITSELF CANNOT STAND. ACCORDINGLY, WE HOLD SO. FURTHER, THE ASSESSING OFFICER WHILE LEVYIN G THE PENALTY U/S. 271(1)(C) OF THE ACT HAS ALSO FAILED TO COME TO A FINDING AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN FULFILLED ; IN THE ABSENCE OF WHICH ALSO THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER CANNOT STAND. ACCORDINGLY, WE HOLD SO. THE ASSESSING OFFICER IS THUS , DIRECTED TO DELETE PENA LTY LEVIED U/S. 7 ITA NO S . 517 TO 522 /PUN/20 16 GANGADHAR V. BADHE 271(1)(C) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 13. THE FACTS AND ISSUES IN ITA NO S . 518 /PUN/2016 TO 522/PUN/2016 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO. 517 /PUN/2016 AND OUR DECISION IN ITA NO. 517 /PUN/2016 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.518/PUN/2016 TO 522/PUN/2016 . 1 4 . IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF DECEM BER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 20 TH DECEM BER , 201 7 . R R K K / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 13 , PUNE ; 4. THE PR. C IT (CENTRAL), PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER // TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE