ITO 20(1)4, MUMBAI V. INDUS ELECTRONICS, MUMBAI

ITA 548/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI
• Assessee Lawyers: R K BOTHRA
• Keywords: Reasonable cause
• Section: 143(3); 133A; 148; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , . , ! BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 THE ITO 20(1)-4, ROOM NO.608, 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012 ' ' ' ' / VS. M/S.INDUS ELECTRONICS, B-53, INDUS HOUSE, NEW LINK ROAD, ANDHERI(W), MUMBAI - 53 $ ./ % ./ PAN/GIR NO. : AACFI 0670E ( $& / APPELLANT ) .. ( '($& / RESPONDENT ) $& ) / APPELLANT BY: SHRI ASHOK SURI '($& * ) / RESPONDENT BY : SHRI R.K.BOTHRA ' * +, / DATE OF HEARING : 09/04/2014 -.# * +, / DATE OF PRONOUNCEMENT : 09/04/2014 / / O R D E R PER I.P.BANSAL,J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-31, MUMBAI DATED 9/11/2012 FOR ASSESSMENT YEAR 2005- 06. GROUNDS OF APPEAL READ AS UNDER: I.THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LAW AND IN THE CIRCUMSTANCES OF THE CASE IN DIRECTING THE AO TO DELETE THE PENALTY LEVI ED U/S.271(1)(C) OF THE I.T.ACT, 1961. II. THE CIT(A) HAS ERRED ON FACTS AND IN LAW AND IN CIRCUMSTANCES OF THE CASE IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FIL ED THE RETURN OF INCOME VOLUNTARILY AND NOT OFFERED THE RENTAL INCOME FOR TAXATION. THE SAME WAS DONE ONLY AFTER NOTICE U/S 148 OF THE I T ACT III. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN L AW AND IN THE CIRCUMSTANCE OF THE CASE IN LAYING EMPHASIS ON THE FACT THAT TAX ON THE RENT WAS DEDUCTED AND PAID; WITHOUT APPRECIATING THAT THE TAX WAS DEDUCTED BY T HE DEDUCTOR AND NOT THE ASSESSEE. ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 2 IV. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W AND IN THE CIRCUMSTANCES OF THE CASE IN NOT CONSIDERING THE FACT THAT THE ASSES SEES ACT OF DECLARING RENTAL INCOME CAME ONLY AFTER DETECTION BY THE DEPARTMENT AND NOT VOLUNTARILY V. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(AP PEALS) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED VI. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR TO SUBMIT ADDITIONAL NEW GROUND WHICH MAY BE NECESSARY 2. THE IMPUGNED ASSESSMENT IN RESPECT OF WHICH PRE SENT PENALTY ORDER HAS BEEN PASSED IS AN ORDER DATED 22/12/2009 PASSED UND ER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT). THE ASS ESSEE DID NOT FILE RETURN OF INCOME BEFORE THE PERIOD SPECIFIED IN SUB-SECTION (1) OF SECTION 153 OF THE ACT AND UNTIL THE EXPIRY OF THE SAID PERIOD NO NOTICE W AS ISSUED TO THE ASSESSEE UNDER CLAUSE (I) OF SUB-SECTION (1) OF SECTION 142 OR SECTION 148. SUBSEQUENTLY, A SURVEY UNDER SECTION 133A WAS CONDUCTED IN THE CASE OF M/S. INDUS TECHNO PVT. LTD., FROM WHERE IT CAME TO THE NOTICE OF THE DEPAR TMENT THAT THE SAID CONCERN HAS MADE PAYMENT OF RS.18.50 LACS TO THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF RENT AND PARTNER OF ASS ESSEE FIRM ALSO CONFIRMED THAT THE SAID RENT WAS RECEIVED BY THE FIRM. SINCE NO R ETURN WAS FILED BY THE ASSESSEE SHOWING THE SAID INCOME A NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE ON 20/3/2009. IN RESPONSE TO THE SAID NOTICE THE R ETURN WAS FILED BY THE ASSESSEE ON 24/6/2009 DECLARING TOTAL INCOME AT RS. 12,95,000/- AFTER CLAIMING DEDUCTION FROM THE RENT RECEIVED OF RS.18.50 LACS. IN THE ASSESSMENT ORDER IT HAS ALSO BEEN RECORDED THAT PENALTY PROCEEDINGS UNDER S ECTION 271(1)(C) OF THE ACT WILL BE INITIATED SEPARATELY. IN PURSUANCE OF T HE SAID ASSESSMENT ORDER IMPUGNED PENALTY ORDER DATED 24/6/2010 IS PASSED V IDE WHICH CONCEALMENT PENALTY OF RS.4,73,872/- WAS LEVIED WHICH IS AN AM OUNT EQUAL TO THE TAX SOUGHT TO BE EVADED. IN RESPONSE TO SHOW CAUSE NOTICE ISS UED UNDER SECTION 274 R.W.S. 271(1)(C) DATED 22/12/2009 THE ASSESSEE DID NOT AT TEND AND DID NOT FILE WRITTEN SUBMISSION. ANOTHER NOTICE WAS ISSUED ON 3/6/20 10 AND THE REPLY OF THE ASSESSEE WAS AS UNDER: ACCORDING TO US OUR CLIENT NEITHER CONCEALED AN IN COME NOR FURNISHED ANY INACCURATE PARTICULARS. AS A MATTER OF FACT HERE I S NO VARIATION BETWEEN THE RETURNED INCOME AND ASSESSED INCOME. THEREFORE, YO U ARE REQUESTED TO DROP THE PENALTY PROCEEDINGS. ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 3 THE AFOREMENTIONED REPLY OF THE ASSESSEE WAS TURNED DOWN BY THE AO ON THE GROUND THAT IF SURVEY WAS NOT CONDUCTED IN THE CAS E OF M/S. INDUS TECHNO PVT. PVT. LTD., THE FACT THAT EVASION OF TAX ON ACCOUNT OF RENT INCOME WOULD NOT HAVE CAME TO THE LIGHT. THE DISCLOSURE OF THE INCOME BY THE ASSESSEE IN THE RETURN FURNISHED IN RESPONSE TO NOTICE UNDER SECTION 148 DOES NOT DISCHARGE THE LIABILITY FOR LEVY OF PENALTY FOR CONCEALING PARTIC ULARS OF INCOME. THE ASSESSEE DID NOT PREFER ANY APPEAL BEFORE LD. CIT(A) ON THE ADDI TION MADE BY THE AO AND THUS, ASSESSEE HAS COMMITTED DEFAULT UNDER SECTION 271 (1)(C) OF THE ACT. IT IS IN THIS MANNER THE CONCEALMENT PENALTY WAS LEVIED. 2.1 THE LEVY OF CONCEALMENT PENALTY WAS AGITATED IN THE APPEAL FILED BEFORE LD. CIT(A), WHICH APPEAL IS DECIDED BY IMPUGNED ORDER D ATED 9/11/2012, VIDE WHICH THE PENALTY HAS BEEN DELETED. BEFORE LD. CIT(A) IT WAS PLEADED THAT THERE WERE TWO DIFFERENT OPINIONS FROM TWO DIFFERENT CONSULTAN TS THAT THE RENTAL INCOME RECEIVED FROM M/S.INDUS TECHNO PVT. LTD. SHOULD BE TREATED AS INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES AND DUE TO THAT THAT THERE WAS A DELAY IN FILING THE RETURN. MEANWHILE, SURVEY ACT ION WAS CONDUCTED AND ASSESSEE FILED ITS RETURN OF INCOME IN RESPONSE TO NOTICE IS SUED UNDER SECTION 148 OF THE ACT DECLARING RENTAL INCOME AS INCOME FOR THE YEAR UNDER CONSIDERATION AND ASSESSMENT HAS BEEN COMPLETED BY ACCEPTING THE RET URNED INCOME. IT WAS PLEADED THAT FIRST CONDITION FOR INVOKING PENAL P ROVISIONS IS THAT AO SHOULD RECORD HIS SATISFACTION WHILE PASSING THE PENALTY O RDER AND AO HAVING FAILED TO DO SO WAS WRONG IN LEVYING THE PENALTY. IT WAS FU RTHER SUBMITTED THAT AS NO RETURN WAS FILED BEFORE ISSUE OF NOTICE UNDER SECT ION 148 OF THE ACT, THE QUESTION OF CONCEALMENT DOES NOT ARISE BECAUSE CONCEALMENT OF INCOME TAKES PLACE, WHEN RETURN IS FILED WITHOUT DISCLOSING THE PARTICULARS OF INCOME. THE ASSESSEE RELIED UPON VARIOUS JUDICIAL DECISIONS TO PLEAD THAT PENAL TY IS NOT ATTRACTED IN THE CASE OF ASSESSEE AND THE SAME WAS REQUESTED TO BE DELETE D. 2.2 CONSIDERING THE AFOREMENTIONED SUBMISSIONS LD. CIT(A) OBSERVED THAT A CRITICAL ASPECT TO BE NOTED IN THE CASE IS THAT REN TAL INCOME OF RS.18.50 LACS IS OSTENSIBLY SAID TO HAVE BEEN CONCEALED WHICH WAS SU BJECT TO DEDUCTION OF TAX AT SOURCE AND THE REQUIRED TDS RETURN HAS ALSO BEEN FI LED. THE TAX SO DEDUCTED WAS ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 4 PAD AS EARLY AS ON 2/4/2005. THE SURVEY BY THE DE PARTMENT TAKE PLACE ONLY ON 9/10/2007. SINGULAR FACT THAT TDS WAS DEPOSITED LONG BEFORE THE SURVEY WILL COMPEL ONE TO SEE THE WHOLE ISSUE IN A DIFFERENT L IGHT. IF THE ASSESSEE HAD INDEED INDENT TO HIDE THE SAID INCOME, THE DEDUCTION OF TA X AND THE FILING OF THE CONCERNED RETURN WOULD CERTAINLY NOT HAVE BEEN DO NE. IN VIEW OF CHRONOLOGY OF THE EVENTS, PENALTY COULD NOT BE SUSTAINED. IT IS IN THIS MANNER LD. CIT(A) HAS DELETED THE PENALTY. THE DEPARTMENT IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. AFTER NARRATING THE FACTS LD. DR DREW OUR ATTENT ION TOWARDS THE PROVISIONS OF EXPLANATION-3 TO SECTION 271(1)(C) WHICH DESCRI BES A CAUSE OF DEEMED CONCEALMENT WHERE A PERSON FAILS WITHOUT REASONABLE CAUSE TO FURNISH HIS RETURN OF INCOME WITHIN THE PERIOD SPECIFIED IN SUB-SECTIO N (1) OF SECTION 153 OF THE ACT, WHICH HE IS REQUIRED TO FURNISH UNDER SECTION 139 IN RESPECT OF ANY ASSESSMENT YEAR, COMMENCING ON OR AFTER FIRST DAY OF APRIL 198 9 AND UNTIL THE EXPIRY OF PERIOD SPECIFIED IN SUB-SECTION (1) OF SECTION 153, NO NO TICE HAS BEEN ISSUED TO HIM UNDER CLAUSE (I) OF SUB-SECTION(1) OF SECTION 142 O R SECTION 148 AND THE AO IS SATISFIED THAT IN RESPECT OF SUCH ASSESSMENT YEAR SUCH PERSON HAS TAXABLE INCOME THEN FOR THE PURPOSE OF CLAUSE (C) OF SECTIO N 271(1)(C) THE SAID PERSON SHALL BE DEEMED TO HAVE CONCEALED THE PARTICULARS O F HIS INCOME IN RESPECT OF SUCH ASSESSMENT YEAR, NOTWITHSTANDING THAT SUCH PER SON FURNISH A RETURN OF INCOME AT ANY TIME AFTER EXPIRY OF THE PERIOD A FORESAID IN PURSUANCE OF NOTICE UNDER SECTION 148. REFERRING TO AFOREMENTIONED PRO VISIONS OF EXPLANATION 3 TO SECTION 271(1)(C) IT WAS SUBMITTED BY LD. DR THAT T HE CASE OF THE ASSESSEE CLEARLY FALLS WITHIN THE AMBIT OF EXPLANATION-3 TO SECTIO N 271(1)(C) AND THUS, IT CAN BE FOUND THAT ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME. HE, THEREFORE, PLEADED THAT AO WAS RIGHT IN LEVYING THE PENALTY AN D LD. CIT(A) HAS WRONGLY DELETED THE PENALTY WITHOUT CONSIDERING THE APPROP RIATE PROVISIONS OF LAW. HE SUBMITTED THAT ACCORDING TO EXPLANATION FURNISHED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE FOR LEVY OF PENALTY IT HAS BEEN CONTENDED THAT ASSESSEE NEITHER CONCEALED THE INCOME NOR FURNISHED ANY INA CCURATE PARTICULARS SINCE THERE WAS NO VARIATION BETWEEN THE RETURNED AND ASS ESSED INCOME. LD. DR PLEADED THAT SUCH EXPLANATION SUBMITTED BY THE ASS ESSEE IS NOT ACCEPTABLE IN ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 5 VIEW OF EXPRESSED PROVISIONS OF EXPLANATION-3 TO SE CTION 271(1)(C) OF THE ACT. THEREFORE, LD. DR PLEADED THAT PENALTY HAS WRONGLY BEEN DELETED BY LD. CIT(A). HOWEVER, LD. DR FAIRLY POINTED OUT THAT FOR THE PU RPOSE OF COMPUTING AMOUNT OF TAX SOUGHT TO BE EVADED EXPLANATION-4 WILL COME IN TO PLAY AND VIDE CLAUSE (B) TO EXPLANATION-4 IN A CASE WHERE EXPLANATION-3 APPLIES , THE AMOUNT OF TAX SOUGHT TO BE EVADED MEANS THAT THE TAX ON THE TOTAL INCOME A SSESSED AS REDUCED BY THE AMOUNT OF ADVANCE TAX, TDS, TAX COLLECTED AT SOURCE AND SELF ASSESSMENT PAID BEFORE THE ISSUE OF NOTICE UNDER SECTION 148. THER EFORE, LD. DR PLEADED THAT TO THE EXTENT TDS IS PAID BY THE ASSESSEE, THE TAX SOU GHT TO BE EVADED COMPUTED BY THE AO IN THE PENALTY PROCEEDINGS SHOULD BE REDUCED AND ACCORDINGLY, PENALTY MAY BE REDUCED. IT IS IN THIS MANNER LD. DR COMPLE TED HIS ARGUMENTS. 4. ON THE OTHER HAND, RELYING UPON THE ORDER PASSE D BY LD. CIT(A) IT WAS SUBMITTED BY LD. AR THAT THERE WAS NO DIFFERENCE BE TWEEN RETURNED INCOME AND THE ASSESSED INCOME. THUS, THERE BEING NO CONCEALM ENT, LD. CIT(A) WAS RIGHT IN DELETING THE PENALTY. HE FURTHER SUBMITTED THAT TD S ON THE INCOME WAS PAID MUCH BEFORE DATE OF SURVEY AND DUE DATE OF FILING T HE RETURN. THUS, THERE WAS NO INTENTION OF THE ASSESSEE TO HIDE THE INCOME. HE F URTHER SUBMITTED THAT RELIANCE ON THE PROVISION OF EXPLANATION-3 TO SECTION 271(1) (C) CANNOT BE PLACED AS AO DID NOT INVOKE EXPLANATION -3. THUS, IT WAS PLEADED BY LD. AR THAT LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY AND HIS ORDER SHOULD BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. NO DOUBT THAT ACCORDING TO THE FACTS O F THE CASE THE CASE OF THE ASSESSEE WILL SQUARELY FALL WITHIN THE AMBIT OF E XPLANATION-3 TO SECTION 271(1)(C) OF THE ACT. THE PAYMENT OF TDS BEFORE THE DATE O F SURVEY OR DUE DATE OF FILING THE RETURN CANNOT COME TO THE RESCUE OF THE ASSESSE E TO SAY THAT THE ASSESSEE IS NOT LIABLE FOR CONCEALMENT PENALTY EVEN IF THE PR OVISIONS OF EXPLANATION-3 TO SECTION 271(1)(C) ARE CONSIDERED. HERE, THE QUEST ION WILL ARISE THAT WHETHER OR NOT THE LEVY OF PENALTY IN THE PRESENT CASE IS JUST IFIED AS AO DID NOT SPECIFICALLY INVOKE THE PROVISIONS OF EXPLANATION-3 TO SECTION 271(1)(C) OF THE ACT. IT IS ALL THE MATTER WHICH WILL REQUIRE ARGUMENTS AT LENGTH AN D ADJUDICATION THERE OF AS THIS ISSUE HAS ALSO NOT BEEN ADDRESSED BY BOTH THE PARTIES BEFORE. THOUGH IT ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 6 WAS THE CASE OF LD. DR THAT THERE WAS NO OBLIGATION ON THE PART OF AO TO SPECIFICALLY DESCRIBE THE APPLICATION OF EXPLANATIO N-3 TO SECTION 271(1)(C)OF THE ACT BUT IMPLIEDLY THE SAME HAS BEEN APPLIED AND THAT A PPLICATION IS IN ACCORDANCE WITH CERTAIN SET OF JUDICIAL PRINCIPLES. HOWEVER, AS MENTIONED EARLIER NO SUPPORTING DECISIONS WERE CITED BY EITHER SIDE. LO OKING INTO PECULIAR FACTS OF THE CASE AND THE DECISION RENDERED BY LD. CIT(A) WHICH IS IN TOTAL CONTRADICTION OF AVAILABLE PROVISIONS OF LAW, WE CONSIDER IT JUST AN D PROPER TO RESTORE THE ISSUE REGARDING LEVY OR OTHERWISE OF THE CONCEALMENT PENA LTY ON EXISTING FACTS TO THE FILE OF LD. CIT(A) WITH A DIRECTION TO RE-ADJUDICATE THE SAME AS PER PROVISIONS OF LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE REVENUE IS TREATED AS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 09/04/2014 . / * -.# 0 1'2 09/04/2014 . * 3 SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; 1' DATED 09/04/2014 / / / / * ** * '+4 '+4 '+4 '+4 54#+ 54#+ 54#+ 54#+ / COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 473 '+' , , / DR, ITAT, MUMBAI 6. 38 9 / GUARD FILE. /' /' /' /' / BY ORDER, (4+ '+ //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . .VM , SR. PS ./ I.T.A. NO.548/MUM/2013 ( ' ' ' ' # # # # / ASSESSMENT YEAR : 2005-06 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 09/04/2014 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 09/04/2014 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER