M/s. Rama Krishna Jewellers (India), New Delhi V. ITO, New Delhi

ITA 5669/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2781 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 07-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Keywords: Search and seizure
• Section: 40A(3); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NOS.5669, 5670 & 5671/DEL/2015 A. YS. : 2004-05, 2003-04 & 2006-07 RAMA KRISHNA JEWELLERS (INDIA), C/O. M/S. RRA TAXINDIA, D-28, SOUTH EXTENSION, PART- I, NEW DELHI. VS. ITO, WARD- 32(3), NEW DELHI. PAN : AAEFR1351H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SOMIT AGGARWAL, ADV. SHRI DEEPASH GARG, ADV. DEPARTMENT BY : SHRI S.R. SENAPATI, SR.DR DATE OF HEARING : 21-02-2018 DATE OF PRONOUNCEMENT : 22-03-2018 O R D E R PER R. K. PANDA, AM : THE ABOVE THREE APPEALS FILED BY THE ASSESSEE ARE D IRECTED AGAINST THE SEPARATE ORDERS OF THE CIT(A)- 18, NEW DELHI RELATI NG TO ASSESSMENT YEARS 2004-05, 2003-04 & 2006-07 RESPECTIVELY CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE I.T. ACT, 19 61, THE DETAILS OF WHICH ARE AS UNDER :- (A) A.Y. 2003-04 - RS.1,12,087/- (B) A.Y. 2004-05 - RS.38,386/- (C) A.Y. 2006-07 - RS.42,667/- 2 ITA NOS.5669 TO 5671/DEL/2015 2. FIRST WE TAKE UP ITA NO.5670/DEL/2015 FOR ASSESS MENT YEAR 2003-04 AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE TH AT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF JEWELERS. A SEARCH AND SEIZURE OPERATION U/S 132 WAS CARRIED OUT ON 20.01.2006. THE ASSESSEE, I N RESPONSE TO NOTICE U/S 153A, SUBMITTED THAT THE ORIGINAL RETURN FILED ON 2 8.11.2003 DECLARING INCOME OF RS.68,258/- MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 153A OF THE I.T. ACT, 1961. THE ASSESSING OFFICER COMPLETED THE ASS ESSMENT U/S 153A DETERMINING THE TOTAL INCOME AT RS.25,82,321/- WHER EIN HE MADE THE FOLLOWING ADDITIONS :- (A) DONATION 6600 (B) DISALLOWANCE OF PARTNERS REMUNERATION 72000 (C) UNEXPLAINED ADDITION IN PARTNERS CAPITAL 70000 0 (D) UNCONFIRMED LOAN CREDITORS 1000000 (E) DIFFERENCE IN THE BALANCE OF SUNDRY CREDITORS 105000 (F) UNVERIFIED MAKING CHARGES 339957 (G) DISALLOWANCE U/S 40A(3) 254189 (H) DISALLOWANCE OF CAR EXPENSES 36317 3. IN APPEAL, LD. CIT(A) DELETED THE ADDITION ON AC COUNT OF (I) UNVERIFIED MAKING CHARGES RS.3,39,957/-, (II) UNCONFIRMED LO AN CREDITORS RS.10,00,000/- AND (III) UNEXPLAINED ADDITION IN PA RTNERS CAPITAL RS.5,00,000/-. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL RES TORED THE ISSUE OF PARTNERS REMUNERATION TO THE FILE OF THE ASSESSING OFFICER F OR FRESH ADJUDICATION. 4. SIMILARLY, FOR ASSESSMENT YEAR 2004-05, THE ASSE SSEE IN RESPONSE TO NOTICE U/S 153A SUBMITTED THAT THE ORIGINAL RETURN FILED O N 01.11.2004 DECLARING TOTAL INCOME AT RS.1,79,879/- MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 153A 3 ITA NOS.5669 TO 5671/DEL/2015 OF THE I.T. ACT. THE ASSESSING OFFICER COMPLETED T HE ASSESSMENT ON A TOTAL INCOME OF RS.15,32,173/- BY MAKING ADDITION ON ACCO UNT OF (I) DONATION RS.8,000/-, (II) DISALLOWANCE OF PARTNERS REMUNERA TION RS.1,20,000/-, (III) UNCONFIRMED LOAN CREDITORS RS.2,62,292/-, (IV) UN VERIFIED MAKING CHARGES RS.3,78,440/-, (V) UNACCOUNTED SALES RS.5,26,446/ -, (VI) DISALLOWANCE U/S 40A(3) RS.15,280/-, (VII) MOTORCAR EXPENSES RS. 32,695/- AND (VIII) TELEPHONE EXPENSES RS.9141/-. 5. IN APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITION ON ACCOUNT OF (I) PARTNERS REMUNERATION RS.1,20,000/-, (II) DISALLOWANCE OF MOTORCAR EXPENSES RS.32,695/- AND (III) TELEPHONE EXPENSES RS.9141/ -. SIMILARLY, OUT OF DISALLOWANCE OF UNCONFIRMED LOAN CREDITORS AT RS.2, 62,292/-, THE LD. CIT(A) RESTRICTED THE SAME TO RS1,07,200/-. 6. ON FURTHER, APPEAL BY THE ASSESSEE, THE TRIBUNAL RESTORED THE ISSUE OF PARTNERS REMUNERATION TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7. FOR ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL INCOME OF RS.22,615,330/ - AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.2, 73,53,136/- BY MAKING FOLLOWING ADDITIONS/DISALLOWANCES :- (I) DONATION RS.23100 (II) PARTNERS REMUNERATION RS.240000 (III) INTEREST PAID RS.245027 (IV) UNVERIFIED MAKING CHARGES RS.578918 (V) DISALLOWANCE U/S 40A(3) RS.161809 4 ITA NOS.5669 TO 5671/DEL/2015 (VI) DISALLOWANCE U/S 40(A)(IA) RS.71470 (VII) ADVERTISEMENT EXPENSES RS.49074 (VIII) EXHIBITION EXPENSES RS.134458 8. IN APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITION ON ACCOUNT OF (I) PARTNERS REMUNERATION RS.2,40,000/-, (II) DISALLOWANCE U/S 40A(3) RS.1,61,809/- AND (III) DISALLOWANCE OF ADVERTISEMENT EXPENSES AT RS. 49,074/-. THE DISALLOWANCE U/S 68 OF THE I.T. ACT, UNVERIFIED MAKING CHARGES A ND DISALLOWANCE OF EXHIBITION EXPENSES WERE PARTLY ALLOWED. 9. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL RESTORED THE ISSUE OF REMUNERATION TO THE PARTNERS TO THE FILE OF THE ASS ESSING OFFICER FOR FRESH ADJUDICATION. 10. THE ASSESSING OFFICER IN THE MEAN TIME INITIATE D PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT. REJECTING THE VARIOUS E XPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF INCOME, HE LEVIED PENALTY OF RS.1,20,087/- FOR ASSE SSMENT YEAR 2003-04, RS.38,386/- FOR ASSESSMENT YEAR 2004-05 AND RS.42,6 67/- FOR ASSESSMENT YEAR 2006-07 RESPECTIVELY U/S 271(1)(C) OF THE I.T. ACT, 1961. 11. IN APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY U/S 271(1)(C) OF THE I.T. ACT. 12. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS NOT IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE LEVY OF PENALTY BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) FOR ALL THE THREE YEARS . 5 ITA NOS.5669 TO 5671/DEL/2015 13. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT THE ASSESSING OFFICER HAS NOT STRUCK OFF THE INAPPROPRIATE WORDS IN THE NOTICE ISSUED FOR INITIATION OF PENALTY. THEREFORE, IN VIEW OF THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNA THA COTTON AND GINNING FACTORY REPORTED IN 359 ITR 656 WHERE IT HAS BEEN H ELD THAT WHERE THE INAPPROPRIATE WORDS IN THE NOTICE ISSUED FOR LEVY O F PENALTY ARE NOT STRUCK OFF AND THE NOTICE DOES NOT SPECIFY AS TO WHETHER THE A SSESSEE HAS CONCEALED ITS PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME, PENALTY U/S 271(1)(C) IS LIABLE TO BE DELETED, NO PENALTY IN TH E INSTANT CASE IS LEVIABLE. HE SUBMITTED THAT THE SLP FILED BY THE REVENUE WAS DIS MISSED BY THE HONBLE SUPREME COURT VIDE C.C. NO.11485/2016 ORDER DATED 0 5.08.2016. 13.1 IN ANOTHER ALTERNATE ARGUMENT LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SO FAR AS THE ASSESSMENT YEARS 2003-04 AND 2004-05 ARE CONCERNED, THE ASSESSMENTS HAVE BEEN COMPLETED U/S 153A OF THE I.T . ACT AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH ON A CCOUNT THESE TWO YEARS AND THE ASSESSMENT HAS BEEN COMPLETED BY MAKING VARIOUS ADDITIONS ON THE BASIS OF THE PROFIT AND LOSS ACCOUNT ALREADY FILED. HE SUBM ITTED THAT ENTIRE ASSESSMENT ORDER BECOMES NULL AND VOID IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWALA REPORTED IN 388 ITR 573 AND IN THE CASE OF MEETA GUTGUTIA REPORTED IN 397 ITR 416 IN A BSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. HE SUB MITTED THAT MERELY BECAUSE 6 ITA NOS.5669 TO 5671/DEL/2015 THE ASSESSEE HAS NOT CHALLENGED THE VALIDITY OF SUC H ASSESSMENT PROCEEDINGS IN QUANTUM PROCEEDINGS, SAME CANNOT PRECLUDE THE ASSES SEE FROM MAKING NEW PLEA BEFORE THE TRIBUNAL IN PENALTY PROCEEDINGS. 14. SO FAR AS MERIT OF THE CASE IS CONCERNED FOR AL L THE THREE YEARS, HE SUBMITTED THAT VARIOUS ADDITIONS AS MADE FOR ASSESS MENT YEAR 2003-04 IS CONCERNED, SOME OF THE SUM HAS BEEN PARTLY DELETED BY THE LD. CIT(A). MAJOR ADDITION ON WHICH PENALTY HAS BEEN LEVIED IS ON ACC OUNT OF ADDITION ON ACCOUNT OF PARTNERS CAPITAL AND DIFFERENCE IN THE BALANCE OF SUNDRY CREDITORS. HE SUBMITTED THAT ANY ADDITION TO PARTNERS CAPITAL AC COUNT SHOULD HAVE BEEN ADDED IN THE HANDS OF THE PARTNERS AND NOT IN THE HANDS O F THE FIRM. SO FAR AS DIFFERENCE IN THE BALANCE OF SUNDRY CREDITORS IS CONCERNED, TH E SAME IS ON ACCOUNT OF NON- RECONCILIATION AND, THEREFORE, NO PENALTY SHOULD HA VE BEEN LEVIED. SIMILARLY, THE CASE FOR ASSESSMENT YEAR 2004-05 WHEREIN THE PENALT Y HAS BEEN LEVIED ON ACCOUNT OF UNCONFIRMED LOAN CREDITOR, HE SUBMITTED THAT THE ASSESSING OFFICER HIMSELF HAS PARTLY ALLOWED THE CREDITORS. 15. SO FAR AS ASSESSMENT YEAR 2006-07 IS CONCERNED, HE SUBMITTED THAT THE PENALTY IS BASICALLY LEVIED ON ACCOUNT OF ADDITION U/S 68 AND INTEREST THEREON. HE SUBMITTED THAT MOST OF THE AMOUNTS ARE BROUGHT F ORWARD AMOUNTS AND TDS HAS BEEN DEDUCTED FROM SUCH INTEREST. THEREFORE, I T IS NOT A FIT CASE FOR LEVY OF PENALTY. RELYING ON VARIOUS DECISIONS INCLUDING TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 7 ITA NOS.5669 TO 5671/DEL/2015 ITR 158, HE SUBMITTED THAT MERE MAKING OF A CLAIM W HICH IS NOT SUSTAINABLE IN LAW BY ITSELF DOES NOT AMOUNT TO FURNISHING INACCUR ATE PARTICULARS OF INCOME AND, THEREFORE, PENALTY IS NOT LEVIABLE. HE ACCORDINGLY SUBMITTED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY TH E LD. CIT(A) SHOULD BE DELETED. 16. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY LEVIED PENALTY U/S 271(1)(C) OF THE I.T. ACT FOR FURNISHING OF INACCURATE PARTIC ULARS OF INCOME WHICH HAS BEEN RIGHTLY SUSTAINED BY THE LD. CIT(A). THEREFORE, GR OUNDS RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 17. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSMENTS FOR ALL THE THR EE YEARS IN THE IMPUGNED APPEALS HAVE BEEN COMPLETED U/S 153A OF THE I.T. AC T. NO INCRIMINATING MATERIAL WHATSOEVER WAS FOUND DURING THE COURSE OF SEARCH FOR ASSESSMENT YEARS 2003-04 AND 2004-05. THEREFORE, EVEN THOUGH THE AS SESSEE HAS NOT CHALLENGED SUCH VALIDITY OF THE ASSESSMENTS IN THE PAST IN QUA NTUM PROCEEDINGS HOWEVER, THE ASSESSEE CAN ALWAYS MAKE A NEW PLEA DURING THE PENALTY PROCEEDINGS. THE COURTS ARE CATEGORICALLY HOLDING THAT NO ADDITION C AN BE MADE IN CASE OF ORDERS PASSED U/S 153A IN ABSENCE OF ANY INCRIMINATING MAT ERIAL FOUND DURING THE 8 ITA NOS.5669 TO 5671/DEL/2015 COURSE OF SEARCH. THE HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWALA (SUPRA) AND VARIOUS OTHER DECISIONS HAS HELD SO. 18. FURTHER, A PERUSAL OF THE NOTICE ISSUED U/S 274 R.W.S. 271 FOR ALL THE THREE YEARS WHICH HAVE BEEN OBTAINED BY THE ASSESSEE THRO UGH RTI SHOWS THAT THE INAPPROPRIATE WORDS IN THE THREE NOTICES HAVE NOT B EEN STRUCK OFF. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTT ON AND GINNING FACTORY (SUPRA) HAS HELD THAT WHERE THE INAPPROPRIATE WORDS IN THE NOTICE ISSUED FOR LEVY OF PENALTY ARE NOT STRUCK OFF AND THE NOTICE DOES N OT SPECIFY AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS PARTICULARS OR FURNISHED INACCURATE PARTICULARS OF INCOME, PENALTY U/S 271(1)(C) IS LIABLE TO BE DELET ED. WE FIND THE SLP FILED BY THE REVENUE WAS DISMISSED BY THE HONBLE SUPREME CO URT VIDE C.C. NO.11485/2016 ORDER DATED 05.08.2016. SINCE IN THE INSTANT CASE ALSO, THE ASSESSING OFFICER HAS NOT STRUCK OFF THE INAPPROPRI ATE WORDS AND THE NOTICE DOES NOT SPECIFY AS TO WHETHER THE PENALTY IS LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALING PARTICULARS OF INCOME, THEREFORE, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA), THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) I S LIABLE TO BE DELETED FOR ALL THE THREE YEARS. 19. EVEN ON MERITS ALSO, THE MAJOR AMOUNT ON WHICH THE PENALTY HAS BEEN LEVIED IS ON ACCOUNT OF RECONCILIATION OF SUNDRY CR EDITORS BALANCE AND 9 ITA NOS.5669 TO 5671/DEL/2015 INTRODUCTION OF CAPITAL BY PARTNERS AND/OR UNSECURE D LOAN ETC. WHICH HAVE BEEN SUSTAINED PARTLY. IN OUR OPINION, IN THE PRESENT A PPEALS PENALTY IS ALSO NOT LEVIABLE IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WH EREIN IT HAS BEEN HELD THAT A MERE MAKING OF CLAIM WHICH IS NOT SUSTAINABLE IN LA W BY ITSELF DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME A ND, THEREFORE, PENALTY U/S 271(1)(C) CANNOT BE LEVIED. IN VIEW OF THE ABOVE D ISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LE VY OF PENALTY U/S 271(1)(C) FOR THE ABOVE THREE YEARS. WE, THEREFORE, SET-ASIDE TH E ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY SO LEVIED. 20. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND MARCH, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22-03-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI