RASHID D LAKDAWALA, MUMBAI V. ITO 20(2)(4), MUMBAI

ITA 5757/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1772 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Opportunity of being heard; Peak credit
• Section: 143(3); 142(1); 10; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 5757 /MUM/201 4 ( / ASSESSMENT YEAR S : 200 9 - 10 ) RA SHID D LAKDAWALA, C/O CITIZEN TIMBER MARG, SATELLITE 2, OPP GARDEN GATE, FILM CITY ROAD, GOREGAON EAST, MUMBAI -- 400063 / VS. INCOME TAX OFFICER 20(2)(4), ROOM NO.409, 4 TH FLOOR, PIRAMAL CHAMBERS, JIJIBHOY LANE, LALBAUG, PAREL, MUMBAI - 400012 ./ PAN : AABPL6186F / ASSESSEE BY NONE / REVENUE BY SHRI B S BIST / DATE OF HEARING : 2 4 .10. 2016 / DATE OF PRONOUNCEMENT : .1 1 . 2016 / O R D E R PER RAJESH KUMAR , A M T HIS IS AN APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 4.7.2015 PASSED BY THE LD.CIT(A) - 31 , MUMBAI SUSTAINING THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSES SMENT YEAR 2008 - 09. 2. DESPITE SERVICE OF NOTICE THROUGH RPAD NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE APPOINTED DATE OF HEARING , WE, THEREFORE, PROCEED TO DECIDE THE APPEAL EX - PARTE ON MERIT AFTER HEARING THE LD. DR . 2 ITA NO. 5757 /M/2014 3. THE ISSUE RAISED BY THE AS SESSEE IN THE GROUNDS OF APPEAL NO.1 AND 2 IS AGAINST THE CONFIRMATION OF PENALTY AS IMPOSED BY THE AO U/S 271(1)(C) OF THE ACT OF RS.1,64,512/ - . 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 9.9.2009 DECLARING A TOTAL INC OME OF RS.6,50,491 / - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY, STATUTORY NOTICES U/S 143(2) AND 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. THE AO FRAMED THE ASSESSMENT U/S 143(3) VIDE ORDER DATED 26.12.2011 BY ASSESSING THE TOTAL INCOME AT RS.12,22,850/ - BY MAKING ADDITION OF RS.4,84,000/ - ON ACCOUNT OF PEAK CREDIT AND RS.88,360/ - DISCREPANCIES IN CLAIMING VARIOUS EXPENSES. THE AO INITIATED PENALTY PROCEEDINGS, U/S 271(1) ON THE ASSESSEE FOR FURNISHING INACCURATE PARTICU LARS OF INCOME LEADING TO CONCEALMENT OF INCOME ON THE ADDITION OF RS.48,400/ - ONLY . DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS ACCOUNT WITH HDFC BANK WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT WHICH HAS FAILED TO MENTIONED CAS H IN HAND IS SHOWING CREDIT BALANCES AT MANY INSTANCES. ACCORDINGLY MADE ADDITION OF RS.4,84,000/ - ON ACCOUNT OF PEAK OF SUCH CREDIT BALANCES AND LEVIED PENALTY OF RS.1,64,512/ - FOR CONCEALING THE INCOME AND ALSO FURNISHING IN ACCURATE PARTICULARS OF I NCOME. THE MATTER CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHO DISMISSED THE APPEAL OF THE ASSESSEE AFTER CONSIDERING THE SUBMISSIONS WHICH ARE INCORPORATED AT PAGE 4 OF THE APPELLATE ORDER AND RELYING ON THE VARIOUS DECISIONS SUCH AS HONBLE DELHI HIGH 3 ITA NO. 5757 /M/2014 COURT IN THE CASE OF ZOOM COMMUNICATIONS P LTD 327 ITR 510 (DEL), BHAIRAV LAL VERMA V/S UNION OF INDIA (230 ITR 855), N D SHROFF (SMALLER HUF) V/S JCIT (82 TTJ (MUM) 626, AND CIT V/S MAK DATA (358 ITR 593) THE OBSERVATIONS AND FINDING AS UNDER: 5.2 AS IS EVIDENT FROM THE AFORESAID CLAUSE (C) OF S. 271(1) OF THE AC T, THE WORDS USED I N THE STATUTE ARE 'HAS CONCEALED THE PARTICULARS OF HIS INCOM E OR FURNISHED 'INACCURATE PARTICULARS OF SUCH INCOME'. ACCORDING TO LAW LE XICON, THE WORD 'CONCEAL' MEAN S TO 'HIDE OR KEEP SECRET.' THE WORD 'CONCE AL IS DERIVED FROM THE LATIN ROOT 'CONCELARE' WHICH IMPLIES TO HIDE OR WIT HDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THU S, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME - TAX AUTHORITIES. IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFINED AS 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO ERRONEOUS; AS AN INACCURAT E STATEMENT, COPY OR TRANSCRIPT.' THE WORDS 'PARTICULARS OF INCOME' REFER TO THE FACTS THAT LEAD TO THE CORRECT COMPUT ATION OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. IN OTHER WORDS, ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS INCOME OR MATER THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THE ASSESSEE WILL BE LIABLE TO PENALTY UNDER S. 271(1)(C) OF THE ACT. BOT H THE CONCEALMENT OF FACTS OR THE FURNISHING OF INACCURATE PARTICULARS, LEAD T O THE SAME END RES ULT I.E WITHHOLDING A CERTAIN PORTION OF THE INCOME FROM RETURNED INCOME. THUS, ON A PERUSAL OF THE SECTION IT IS APPARENT THAT THE PENAL PROVISION WILL OPERATE WHEN THERE IS A FAILURE TO DISCLOSE FULLY OR TRULY ALL THE PARTICULARS. IN ESSENCE, WHEN ANY FACT MATERIAL TO THE DETERMINATION OF AN ITEM AS INCOME OR MATERIAL TO THE CORRECT COMPUTATION IS NOT FILED OR THAT WHICH IS FILED IS NOT ACCURATE, THEN THE ASSESSEE WOULD BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 5.3 IN THE DECISION REND ERED BY THE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS REPORTED AT 306 ITR 277, THE APEX COURT CLARIFIED THAT MENSREA WAS NOT REQUIRED TO BE PROVED FOR LEVY OF PENALTY BUT ALSO HELD THAT LEVY OF PENALTY IS NOT AUTOMATIC IF HE ASSESSEE CAN FURNISH A BONAFIDE EXPLANATION. 5.4 IN THE CASE OF CIT V/S VS ZOOM COMMUNICATION PVT LTD IT HAS BEEN HELD AS UNDER : 4 ITA NO. 5757 /M/2014 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSESSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE LIABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONAFIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE BASIS OF SELF ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTED FOR SCRUTINY, THEY CAN GET AWAY M ERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE BY THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, ACTUATED BY A MALAFIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP FOR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 5.5 IN THE DECISION RENDERED IN THE CASE OF BHAIRAV LAL VERMA V/S UOI REPORTED AT 230 ITR 855, THE HONBLE ALLAHABAD HIGH COURT WHILE INTERPRETING THE WORK VOLUNTARILY GIVEN IN SECTION 273(A) OF THE ACT, HELD AS UNDER : THE POSITION THUS SETTLED IS THAT THE WORD 'VOLUNTARILY' IN SECTION 273A OF THE ACT MEANS OUT OF FREE WILL WITHOUT ANY COMPULSION. DISCLOSURE OF CONCEALED INCOME AFTER THE DEPARTMENT HAS SEIZED THE INCRIMINATING MATERIAL WITH REGARD TO THE INCOME SO DISCLOSED, CANNOT BE VOLUNTARY DISCLOSURE, BECAUSE IT WAS MADE UNDER THE CONSTR AINT OF EXPOSURE TO ADVERSE ACTION BY THE DEPARTMENT 5.6 IT IS AN ACCEPTED PRINCIPLE THAT A TAX PAYER IS DUTY BOUND TO DECLARE THE TRUE AND CORRECT PARTICULARS OF INCOME WHILE FILING THE RETURN OF INCOME. IN THE DECISION RENDERED IN THE CASE OF N D SHROF F (SMALLER HUF) V/S JCIT REPORED AT 82 TTJ (MUM) 626, THE HONBLE TRIBUNAL OBSERVED AS UNDER : 5 ITA NO. 5757 /M/2014 'WHEN AN ASSESSEE FURNISHES HIS RETURN, HE IS REQUIRED T O FURNISH PARTICULARS AND ACCOUNTS ON WHICH INCOME RETURNED HAS BEEN ARRIVED AT. THESE MAY BE THE PART ICULARS AS PER HIS BOOKS OF ACCOUNTS IF HE HAS SO MAINTAINED OR ANY OTHER BASIS UPON WHICH HE HAS ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN SUCH BOOKS OF ACCOUNT OR OTHERWISE WHICH RESULTED IN KEEPING OF OR HIDING A PORTION OF HIS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF HIS INCOME. IT MAY BE STATED THAT THE PENALTY PROVISIONS WOULD OPERATE WHEN THERE IS A FAILURE OF DUTY ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY PART ICULARS OF INCOME. THE DUTY IS ENJOINED UPON THE ASSESSEE TO MAKE A CORRECT AND COMPLETE DISCLOSURE OF HIS INCOME IF THE DISCLOSURE MADE OF THE PARTICULARS OF INCOME IS INCORRECT, HE COMMITS BREACH OF THE DUTY AND IS LIABLE TO PENAL CONSEQUENCES CONTEMPLATED UNDER SECTION 271(1)( C ) (III) 5.7 IN THE DECISION RENDERED IN THE CASE OF CIT V/S MAK DATA REPORTED AT 3 58 ITR 593, THE HON'BLE APEX COURT HELD AS UNDER: ' ... IT CANNOT BE DENIED THAT THE NATURE AND SOURCE OF THE AMOUNT SURRENDERED ARE FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF THE ASSESSEE. THE REVENUE IS ENTITLED TO KNOW THE SAME AND IF THE NATURE AND SOURCE OF THE AMOUNT ARE NOT EXPLAINED, IT IS ENTITLED TO DRAW THE INFERENCE THAT THE AMOUNT REPRESENTS THE ASSESSEE'S TAXABLE INCOME. THOUGH THIS PRINCIPLE WAS O RIGINALLY CONFINED TO THE ASSESSMENT PROCEEDINGS , THE EXPLANATION HAS EXTENDED IT TO PENALTY PROCEEDINGS ALSO, PRESUMABLY ON THE ASSUMPTION THAT THE FURNISHING OF AN EX PLANA TION REGARDING THE NATURE AND SOURCE WOULD HAVE COMPROMISED THE ASSESSEE'S POSITION . IT IS THE ASSESSEE WHO HAS RECEIVED THE MONIES AND IS IN THE KNOWLEDGE OF ALL THE FACTS RELEVANT AND MATERIAL IN RELATION TO THE RECEIPT. THEREFORE, IT SHOULD BE IN A POSITION TO OFFER AN EXPLANATION AND DISCLOSE THE MATERIAL FACTS REGARDING THE SAME. TH E ABSENCE OF ANY EXPLANATION IS STATUTORILY CONSIDERED AS AMOUNTING TO CONCEALMENT OF INCOME. IN THE ABSENCE OF ANY EXPLANATION REGARDING THE RECEIPT OF THE MONEY, WHICH IS IN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE, AN ADVERSE INFERENCE IS SOUGHT TO BE D RAWN AGAINST THE ASSESSEE UNDER THE FIRST PART OF CLAUSE (A) OF THE SAID EXPLANATION.' 5.8 IN THE PRESENT CASE, PENALTY HAS BEEN LEVIED ON THE ADDITION MADE ON ACCOUNT UNEXPLAINED CASH DEPOSITS IN THE BANK ACCOUNT MAINTAINED BY THE APPELLANT WITH HDFC B ANK LTD, PEAK OF WHICH WORKED OUT TO RS.4,84,000/ - THE BANK ACCOUNT WAS NOT DISCLOSED IN THE RETURN FILED BY THE APPELLAN T. WHEN CONFRONTED DURING ASSESSMENT PROCEEDINGS, THE 6 ITA NO. 5757 /M/2014 APPELLANT SIMP LY SURRENDERED THE SAID INCOME, OFFERING NO EXPLANATION FOR THE SAM E. THUS ON THE FACTS OF THE CASE, THE APPELLANT HAVING BEEN UNABLE TO SUBSTANTIATE TH AT THE CASH DEPOSITS OF RS.4,84,OOO/ - WERE FROM ACCOUNTED AND GENUINE SOURCE S CANNOT BE SAID TO HAVE FURNISHED A BONAFIDE EXPLANATION FOR THE ANOMA LY DETECTED BY THE AO OR TO HAVE S ATISFACTORILY DISCHARGED THE ONUS CAST UP ON HIM. IN VIEW OF THESE FACTS, I FIND THE LEVY OF PENALTY OF RS. 1, 64,512/ - TO BE IN ORDER AND THE SAME IS UPHELD. ACCORDINGLY, THE GROUND RAISED BY THE APPELLANT IS DISMISSED. 5. WE HAVE HEARD THE LD D R AND PERUSED THE RELEVANT MATERIALS ON RECORDS INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND FROM THE ASSESSMENT ORDER THAT THE PENALTY WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHEREAS THE PENALTY WAS IMPOSED WHILE FRAMING THE ORD ER U/S 271(1) (C) OF THE ACT ON CONCEALMENT OF INCOME AND ALSO FOR FURNISHING INACCURATE PARTICULARS OF INCOME. SO NOW THE ISSUE IS WHETHER THE AO CAN INITIATE PENALTY ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND LEVY ON BOTH CHARGES OF CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDING TO US THERE MUST BE A PRECISE CHARGE AND IMPOSITION OF PENALTY MUST BE ON THAT FOOTING ONLY. IN OUR VIEW , BEFORE LEVYING PENALTY ON THE ASSESSE E , THE AO MUST APPRISE THE ASSESSEE OF THE PRECISE CHARGE LEVE L LED AGAINST HIM. HE MUST BE TOLD VIVIDLY WHETHER HE IS GUILTY OF CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. SECTION 271(1)(C) R.W.S. 274 PROVIDES FOR A REASONABLE OPPORTUNITY TO BE GIV EN TO THE ASSESSEE SO THAT HE CAN AVAIL THE OPPORTUNITY TO DEFEND HIMSELF. WHERE THE PENALTY PROCEEDINGS ARE INITIATED ON A PARTICULAR FOOTING OR CHARGE OF C ONCEALMENT OF INCOME BUT FINAL CONCLUSION OF 7 ITA NO. 5757 /M/2014 LEVY OF PENALTY IS BASED UPON SOME DIFFERENT FOOTIN G ALTOGETHER OF CONCEALMENT OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME, IN THAT CASE IT CAN NOT BE PRESUMED THAT THE ASSESSEE HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE ORDER IMPOSING PENALTY IS PASSED. IN SUCH CAS E THE IMPOSITION IS NOT JUSTIFIED. ACCORDINGLY WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. THE APPEAL OF THE ASSESSEE IS ALLOWED. 6 . IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 . 1 1 .2016 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 29 . 1 1 . 2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT (A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI