Sh. Radhey Shyam, Delhi V. ITO, New Delhi

ITA 5268/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3764 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Onus to prove
• Section: 145; 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5268/DEL /2015 ASSESSMENT YEAR: 2009-10 SHRI RADHEY SHYAM, 17/93, THAN SINGH NAGAR, DELHI-110005 VS INCOME TAX OFFICER, CIRCLE 38(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S. SINGHVI, CA RESPONDENT BY: SHRI ATIQ AHMAD, SR. DR DATE OF HEARING : 12.09.2017 DATE OF PRONOUNCEMENT: 31.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 20, NEW DELHI WHEREIN VIDE ORDER DATED 26/05/2015, THE LD. CIT (APPEALS) HAS CONFIRMED THE IMPOSITION OF PENALTY A MOUNTING TO RS. 4,21,040/- IMPOSED UNDER SECTION 271(1)(C) OF T HE INCOME TAX ACT, 1961 FOR ASSESSMENT YEAR 2009 10. ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 2 2. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME WAS FILED DECLARING INCOME AT RS. 33,08,421/- AND SUBSEQUENTL Y THE ASSESSMENT UNDER SECTION 143 (3) READ WITH SECTION 144 OF THE INCOME TAX ACT, 1961 WAS COMPLETED AFTER MAKING AN ADDITION OF RS. 12,38,711/- AFTER INVOKING PROVISIONS OF SECTIO N 145 (3) OF THE INCOME TAX ACT, 1961 AND APPLYING A NET PROFIT RATE OF 5% ON THE GROSS TURNOVER. THE AO ALSO MADE A DISALLOWANCE OF RS. 41,000/- OUT OF DONATIONS WHICH WERE CLAIMED AS EXPENSES. SU BSEQUENTLY, PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 27 1 (1) (C) OF THE INCOME TAX ACT, 1961 ON THE ADDITION MADE ON ACCOUN T OF NET PROFIT RATE AND A PENALTY OF RS. 4,21,040/- WAS IMP OSED, WHICH, ON APPEAL, WAS CONFIRMED BY THE LD. FIRST APPELLATE AUTHORITY. NOW THE ASSESSEE IS BEFORE THE ITAT AND HAS CHALLEN GED THE CONFIRMATION OF THE PENALTY BY RAISING THE FOLLOWIN G GROUNDS OF APPEAL 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS (APPEALS) HAS GROSSLY ERRED BOTH IN LAW AND ON FACT S IN SUSTAINING IMPOSITION OF PENALTY UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT AMOUNTING TO RS. 4, 21,040/-. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THE FACT THAT, THERE WAS N EITHER FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME NOR COULD IT BE VALIDLY HELD THAT THERE WAS ANY CONCEALMENT O F INCOME ON THE FACTS OF THE CASE, NEITHER THERE WAS ANY SPE CIFIC SATISFACTION/FINDING BY LEARNED ASSESSING OFFICER R EGARDING ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 3 FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME AND AS SUCH, THE PENALTY SO LEVIED IS UNSUST AINABLE IN LAW AND IS LIABLE TO BE DELETED AS SUCH. 2.1 THAT FURTHER THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) HAS IGNORED THE BASIC FACT THAT PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT PROCEEDING S, THUS, RELIANCE PLACED BY LEARNED ASSESSING OFFICER SOLELY ON THE ORDER OF ASSESSMENT IS WHOLLY MISCONCEIVED AND MISPLACED IN LAW AND AS SUCH, THE PENALTY ORDER IS LIABLE TO BE QUASHED AS SUCH. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED IN LAW AND ON FACTS IN OVERLOOKING THE BA SIC FACT THAT PENALTY WAS IMPOSED BY THE LEARNED ASSESSING O FFICER ON THE ADDITION MADE, IN THE ORDER OF ASSESSMENT ON ACCOUNT OF LOW NET PROFIT (5% INSTEAD OF 3.65% DECLARED BY ASSESSEE) AND THAT TOO, AFTER REJECTING THE BOOKS OF ACCOUNTS , WHICH ADDITION WAS MERELY A DEEMED ADDITION AND AS SUCH, THE PENALTY SO SUSTAINED IS HIGHLY UNJUST, AS NO PENALT Y SHOULD BE LEVIED ON THE BASIS OF DEEMED ADDITION. 3.1 THAT THE LEARNED CIT(A) HAS ALSO ERRED IN PROC EEDING TO UPHOLD THE LEVY OF PENALTY ON WHOLLY IRRELEVANT, EX TRANEOUS AND IMMATERIAL CONSIDERATIONS AND AS SUCH, PENALTY SUSTAINED IS NOT IN ACCORDANCE WITH LAW. 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ADDITION ON WHICH THE PENALTY WAS IMPOSED WAS ESTIM ATED AFTER APPLYING THE NET PROFIT RATE AND THAT IT WAS A SETT LED LAW THAT PENALTY ON AD HOC DISALLOWANCE OR ADDITION MADE ON ESTIMATE BASIS WAS NOT ATTRACTED. THE LD. AUTHORISED REPRESE NTATIVE PLACED RELIANCE ON A PLETHORA OF CASE LAWS IN SUPPO RT OF HIS CONTENTION AND PRAYED THAT THE PENALTY LEVIED BE DE LETED. ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 4 4. THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE, ON T HE OTHER HAND, VEHEMENTLY ARGUED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AS THERE WERE INHERENT DEFEC TS IN THE SAME AND, THEREFORE, THE AO HAD NO OPTION BUT TO APPLY T HE NET PROFIT RATE SO AS TO DETERMINE THE CORRECT INCOME OF THE A SSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE WAS UNABLE TO PROVIDE V ARIOUS DETAILS RELATED WITH THE DETERMINATION OF INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND, THEREFORE, THE PENALTY WAS CORRECTLY IMPOSED. IT WAS SUBMITTED THAT THE PENALTY IMPOSED SHOULD BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT, IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA 83 ITR 26, HAD LAID DOWN THE POSITION OF LAW BY HOLDING THAT THE ASSESSING O FFICER IS NOT BOUND TO LEVY PENALTY AUTOMATICALLY SIMPLY BECAUSE THE QUANTUM ADDITION HAS BEEN SUSTAINED. ALSO IN CASE OF CIT V. KHODAY ESWARA (83 ITR 369) (SC), INCIDENTALLY REPORTED IN SAME ITR VOLUME, IT IS HELD THAT PENALTY CANNOT BE LEVIED SO LELY ON BASIS OF REASONS GIVEN IN ORIGINAL ORDER OF ASSESSMENT. THE HONBLE SUPREME COURT HAS RECENTLY REITERATED THE LAW IN CA SE OF DILIP N. ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 5 SHROFF V. JT. CIT [2007] 291 ITR 519 BY HOLDING IN PARA 62 THAT FINDING IN ASSESSMENT PROCEEDINGS CANNOT AUTOMATICA LLY BE ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. 5 .1 THE STATUTE REQUIRES A SATISFACTION ON THE PART OF THE ASSESSIN G OFFICER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT THERE IS PRIMARY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTICULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. WHILE CONSIDER ING WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN THE ASSESSING OFFICER SHOULD NOT BEGIN WITH THE PRESUMPTION THAT HE IS GUILTY. SINCE THE BURDEN OF PROOF IN PENALTY PROCEEDINGS VA RIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN THE ASS ESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CAN NOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE A SSESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALT Y PROCEEDINGS. IN THE PENALTY PROCEEDINGS THE AUTHORI TIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO B E CONSIDERED FROM A DIFFERENT ANGLE. IT IS IMPORTANT TO KEEP IN MIND THE FUNDAMENTAL LEGAL PROPOSITION THAT ASSESSMENT PROCE EDINGS ARE NOT CONCLUSIVE. ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 6 ARE SEPARATE AND DISTINCT. FINDINGS IN THE ASSESSME NT PROCEEDINGS DO NOT OPERATE AS RES JUDICAT A IN PENALTY PROCEEDINGS AND IT WAS SO HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DHARAMCHAND L. SHAH REPORTED IN 204 ITR 462 (BOM). FURTHER, IN VIJAY POWER GENERATORS LTD VS. ITO REPO RTED IN DTR 64 (DEL) IT WAS HELD THAT IT IS WELL SETTLED THAT THOUGH THEY CONSTITUTE GOOD EVIDENCE, THEY DO NOT CONSTITUTE CO NCLUSIVE EVIDENCE IN PENALTY PROCEEDINGS. THUS, IT IS WELL SETTLED THAT DURING PENALTY PROCEEDINGS, THERE HAS TO BE REAPPRA ISAL OF THE VERY SAME MATERIAL ON THE BASIS OF WHICH THE ADDITI ON WAS MADE AND IF FURTHER MATERIAL IS ADDUCED BY THE ASSESSEE IN THE COURSE OF THE PENALTY PROCEEDINGS, IT IS ALL THE MORE NECE SSARY THAT SUCH FURTHER MATERIAL SHOULD ALSO BE EXAMINED IN AN ATTE MPT TO ASCERTAIN WHETHER THE ASSESSEE CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS. THUS, UNDER PENAL TY PROCEEDINGS ASSESSEE CAN DISCHARGE HIS BURDEN BY RE LYING ON THE SAME MATERIAL ON THE BASIS OF WHICH ASSESSMENT IS M ADE BY CONTENDING THAT ALL NECESSARY DISCLOSURES WERE MADE AND THAT ON THE BASIS OF MATERIAL DISCLOSED THERE CANNOT BE A C ASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. FURTHER, IF THERE IS ANY MATERIAL OR ADDITI ONAL EVIDENCE ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 7 WHICH WAS NOT PRODUCED DURING ASSESSMENT PROCEEDING S, THE SAME CAN BE PRODUCED IN PENALTY PROCEEDINGS AS BOTH ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE. 5.2 IN CIT VS. M/S SIDHARTHA ENTERPRISES REPORTED I N 184 TAXMAN 460 (P & H), THE HONBLE PUNJAB & HARYANA HI GH COURT HELD THAT THE JUDGMENT IN DHARMENDRA TEXTILE CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. EVEN SO, THE CONCE PT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDG MENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT. 5.3 AT THIS JUNCTURE IT MAY BE ALSO WORTHWHILE TO REFER TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P.) LTD . REPORTED IN 322 ITR 158 WHEREIN THE HONBLE APEX COURT, WHILE INTERPRETING THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT, HELD THAT A GLANCE AT THE SAID PROVISION WOULD SUGGEST THAT IN ORDER TO BE CO VERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN THE FACTS OF ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 8 THAT CASE, THE COURT FOUND THAT IT WAS NOT A CASE O F CONCEALMENT OF THE PARTICULARS OF THE INCOME, NOR WAS IT THE CA SE OF THE REVENUE EITHER. HOWEVER, THE COUNSEL FOR THE REVENU E SUGGESTED THAT BY MAKING AN INCORRECT CLAIM FOR THE EXPENDITU RE ON INTEREST, THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS O F INCOME. THE HONBLE APEX COURT OBSERVED THAT IT HAD TO ONLY SEE AS TO WHETHER IN THAT CASE, AS A MATTER OF FACT, THE ASSESSEE HAD GIVEN INACCURATE PARTICULARS. THE HONBLE APEX COUR T NOTED THAT AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTIC ULAR' IS A DETAIL OR DETAILS (IN THE PLURAL SENSE); THE DETAIL S OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD ' PARTICULAR' USED IN SECTION 271(1)( C ) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. THE HONBLE APEX COURT F URTHER OBSERVED THAT IN WEBSTER'S DICTIONARY , THE WORD 'INACCURATE' HAS BEEN DEFINED AS: 'NOT ACCURATE, NOT EXACT OR CORREC T; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, CO PY OR TRANSCRIPT.' THE HONBLE SUPREME COURT OBSERVED THA T BY READING THE WORDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNC TION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TR UTH OR ERRONEOUS. THE HONBLE SUPREME COURT FURTHER NOTED THAT IT WAS ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 9 AN ADMITTED POSITION THAT NO INFORMATION GIVEN IN T HE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUAL LY INCORRECT AND, ACCORDINGLY, HELD THAT, PRIMA FACIE , THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS . THE HONBLE APEX COURT ALSO REJECTED THE CONTENTION RAISED BY T HE COUNSEL FOR THE REVENUE THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INAC CURATE PARTICULARS OF SUCH INCOME'. THE HONBLE APEX COURT HELD THAT IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. IT WAS THE HONBLE APEX COURTS OBSERVATIO N THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM I N LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS AND THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)(C ) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THE HONBLE APEX COU RT FURTHER OBSERVED THAT THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ON LY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF H IS INCOME. 5.4 REVERTING TO THE FACTS OF THE PRESENT CASE, TH E ASSESSING OFFICER, IN THE PENALTY ORDER, HAS OBSERVED THAT TH E ASSESSEEE HAD ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 10 CONCEALED THE INCOME AND HAS FURNISHED INACCURATE P ARTICULARS. HOWEVER, THE PENALTY ORDER IS WOEFULLY SILENT ON TH E ISSUE AS TO HOW THIS SATISFACTION OF CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS WAS ARRIVED AT. THE PENALTY WAS IMPOSED ON THE QUANTUM ADDITION WHICH WAS ESTIMATED BY APPLYING TH E NET PROFIT RATE OF 5% AS AGAINST THE NET PROFIT RATE OF 3.65% DECLARED BY THE ASSESSEE. THUS, THE ADDITION WAS, AT BEST, AN ESTIM ATE OF THE PROFIT BY THE AO WHICH THE ASSESSEE WOULD HAVE EARN ED. THEREFORE, THE QUANTIFICATION OF THE ALLEGED CONCEALMENT/INACCURATE PARTICULARS IS ONLY AN ESTIM ATE AND IT IS SETTLED LAW THAT PENALTY IS NOT ATTRACTED ON ESTIMA TED ADDITIONS. 5.5 THE HON'BLE DELHI HIGH COURT IN CIT VS. AERO TRADER S PVT. LTD., REPORTED IN 322 ITR 316 (DEL), HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE IMPOSED WHEN INCOME IS DETERMINED ON ESTIMATE BASIS. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH V S. CIT REPORTED IN 258 ITR 85 (P&H) AND THE HON'BLE GUJARA T HIGH COURT IN THE CASE OF CIT VS. SUBHASH TRADING COMPANY REPO RTED IN 221 ITR 110 (GUJ). IN VIEW OF THE FOREGOING PRECEDENTS INCLUDING THE ONE FROM THE HON'BLE JURISDICTIONAL HIGH COURT, IT IS APPARENT THAT WHEN THE BEDROCK OF INSTANT PENALTY IS THE EST IMATE OF NET ITA NO. 5268/DEL/2015 ASSESSMENT YEAR 2009-10 11 PROFIT, THE SAME CANNOT BE SUSTAINED. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE A O TO DELETE THE PENALTY. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 31ST OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR