Sri.Natesh Subramanya Jayaram , Madikeri V. Income Tax Officer Ward-1, Madikeri

ITA 592/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2816 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 02-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAN
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 592 / BANG/201 8 ASSESSMENT YEAR : 2 0 11 - 12 SHRI NATESH SUBRAMANYA JAYARAM, PWD CONTRACTOR, DOOR NO. X/172, M-D BLOCK, SOMWARPET, KODAGU DISTRICT. PAN: AFEPJ2909J VS. THE INCOME TAX OFFICER, WARD 1, MADIKERI. APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAN, CA RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL. CIT (DR) DATE OF HEARING : 28 .0 2 .2019 DATE OF PRONOUNCEMENT : 28 .0 2 .2019 O R D E R PER SHRI LALIET KUMAR, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A), MYSORE DATED 28.02.2017 FOR AS SESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IS PREJUDICIAL TO THE INTERESTS OF THE AP PELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. THAT THE NOTICE ISSUED U/S 274 OF THE ACT IS BAD IN LAW. 3. THAT THE NOTICE ISSUED U/S 274 OF THE ACT DOES N OT SATISFY THE REQUIREMENTS OF SECTION 274, AS NOTICE IS VAGUE AND NO DETAILS REGARDING CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME WERE FURNISHED IN THE NOTICE. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN ITA NO.592/BANG/2018 PAGE 2 OF 5 LAW AND ON FACTS IN UPHOLDING THE PENALTY U/S 271(1 )(C) OF THE ACT EVEN THOUGH THE APPELLANT HAD OFFERED A BONAFIDE EXPLANA TION. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) OUGHT TO HAVE CONSIDERED THE JUDGMENT OF THE HON'BLE TRIBUNA L IN THE QUANTUM APPEAL WHERE THE HON'BLE TRIBUNAL HAS HELD ONLY THE GROSS PROFITS ON THE OMITTED RECEIPTS HAVE TO BE TREATED AS INCOME. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY EVEN THO UGH THE ADDITION MADE BY THE HON'BLE TRIBUNAL IS PURELY ON AN ESTIMA TE BASIS AND PENALTY CANNOT BE LEVIED ON SUCH ADDITION. EACH OF THE ABOVE GROUND IS WITHOUT PREJUDICE TO ON E ANOTHER AND THE APPELLANT CRAVES THE LEAVE OF THE HON'BLE INCOME TA X APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR MODIFY OTHERWISE ANY OF THE GROUND EITHER BEFORE THE HEARING OR AT THE TIME OF HEARING THIS APPEAL. 3. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUN D WHICH IS AS UNDER. 1. THAT THE NOTICE ISSUED U/S 274 OF THE ACT DOES N OT SATISFY THE REQUIREMENTS OF SECTION 274, AS NOTICE IS VAGUE AND NO DETAILS REGARDING CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME WERE FURNISHED IN THE NOTICE. 4. THE LD. AR OF ASSESSEE SUBMITTED A COPY OF NOTIC E ISSUED BY AO U/S. 274 R.W.S. 271 OF IT ACT, 1961 ON 07.03.2014. HE SUBMI TTED THAT THIS NOTICE COPY IS ALTHOUGH CERTIFIED TRUE COPY BY THE AO BUT SINCE THE SAME IS NOT CLEARLY LEGIBLE, THE ASSESSEE IS SUBMITTING TYPED VERSION O F THIS NOTICE WHICH IS CERTIFIED TO BE TRUE COPY BY LD. AR OF ASSESSEE. H E POINTED OUT THAT AS PER THIS NOTICE ISSUED BY THE AO, THE AO IS STATING THA T THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME AND FOR THIS VAGUE ALLEGATION, THE AO IS ASK ING THE ASSESSEE TO SHOW CAUSE WHY PENALTY U/S. 271 SHOULD NOT BE IMPOSED ON THE ASSESSEE. HE PLACED RELIANCE ON THE JUDGEMENT OF HON'BLE KARNATA KA HIGH COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 AND SUBMITTED THAT IN VIEW OF THIS VAGUE ALLEGATION OF THE AO IN THE NOTICE ISSUED BY AO U/S. 274, PENALTY CANNOT BE IMPOSED ON THE ASSESSEE. HE ALSO SUBMITTED THAT IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL HAS HELD THAT AS AGAINST ADDITION MADE BY THE AO TO THE TOTAL AMO UNT OF RS. 45,33,494/-, ITA NO.592/BANG/2018 PAGE 3 OF 5 ADDITION IS JUSTIFIED ONLY TO THE EXTENT OF GP @ 15 %. HE SUBMITTED THAT FOR SUCH ESTIMATED ADDITION, PENALTY IS NOT JUSTIFIED. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON TRIBUNAL ORDER RE NDERED IN THE CASE OF VIJAYKUMAR MAVJIBHAI DODIYA VS. ITO IN ITA NO. 187/ RJT/2017 DATED 04.12.2017. HE SUBMITTED A COPY OF THIS TRIBUNAL O RDER. HE DRAWN OUR ATTENTION TO PARA 8 OF THIS TRIBUNAL ORDER AND POIN TED OUT THAT IN THAT CASE ALSO, THE TRIBUNAL IN QUANTUM PROCEEDINGS CONFIRMED THE ADDITION TO THE EXTENT OF 10%. UNDER THESE FACTS, THE TRIBUNAL CAN CELLED THE PENALTY. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE O RDERS OF AUTHORITIES BELOW. HE ALSO PLACED RELIANCE ON A JUDGMENT OF HON'BLE KA RNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. SRI DURGA ENTERPRIS ES AS REPORTED IN [2014] 44 TAXMANN.COM 442 (KARNATAKA) AND SUBMITTED THAT A NY MISTAKE IN THE NOTICE IS TAKEN CARE OF BY SECTION 292B OF IT ACT. AT THIS JUNCTURE, THE BENCH POINTED OUT TO THE LD. DR OF REVENUE THAT IN THAT C ASE, THE ISSUE INVOLVED WAS REGARDING REOPENING U/S. 148 AND NOT PENALTY U/S. 2 71 (1)(C) OF IT ACT. BUT IN REPLY, LD. DR OF REVENUE COULD NOT POINT OUT AS TO HOW THIS JUDGEMENT IS APPLICABLE IN THE PRESENT CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. BEFOR E DECIDING THE ISSUE ON TECHNICAL ASPECT REGARDING DEFECT IN THE NOTICE ISS UED BY THE AO U/S. 274, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE ON MERIT FIRST BECAUSE IF THE PENALTY IS NOT SUSTAINABLE ON MERIT THEN THE TE CHNICAL ASPECT WILL BE OF ACADEMIC INTEREST ONLY. AS PER THE TRIBUNAL ORDER IN QUANTUM PROCEEDINGS AVAILABLE ON PAGES 23 TO 27 OF PAPER BOOK, WE FIND THAT THE TRIBUNAL HAS HELD IN QUANTUM PROCEEDINGS THAT THE ADDITION MADE BY THE AO AND CONFIRMED BY CIT (A) FOR THE WHOLE AMOUNT OF RS. 45 ,33,494/- CANNOT BE SUSTAINED AND ONLY REASONABLE AMOUNT CAN BE CONSIDE RED AS A PROFIT FOR THE PURPOSE OF MAKING ADDITION AND THE TRIBUNAL DIRECTE D TO ADOPT 15% AS GP RATE AND CONFIRMED THE ADDITION TO THAT EXTENT. HE NCE IT IS SEEN THAT THE ADDITION CONFIRMED BY THE TRIBUNAL IN QUANTUM PROCE EDINGS IS ONLY ON ESTIMATION BASIS. THIS IS BY NOW A SETTLED POSITIO N OF LAW THAT ON THE BASIS OF ESTIMATED ADDITION, PENALTY IS NOT JUSTIFIED. THE TRIBUNAL ORDER RENDERED IN THE CASE OF VIJAYKUMAR MAVJIBHAI DODIYA VS. ITO (SU PRA) ON WHICH RELIANCE ITA NO.592/BANG/2018 PAGE 4 OF 5 HAS BEEN PLACED BY LD. AR OF ASSESSEE IS ALSO SUPPO RTING THIS VIEW. FOR READY REFERENCE, WE REPRODUCE PARA 8 OF THIS TRIBUN AL ORDER. 8. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE FA CTS OF THE ASSESSEE'S CASE. ASSESSEE IS A SMALL TRADER ENGAGED IN MANUFA CTURING AND TRADING OF MECHANICAL IRON SCALE. HE FILED RETURN O F INCOME DECLARING TOTAL INCOME AT RS.1,47,690/-. THIS WAS ASSESSED AT RS.27,40,320/- AFTER TAKING INTO ACCOUNT A DEPOSIT OF RS.25,79,207 /- FOUND IN THE BANK STATEMENT. CHALLENGE TO THE ADDITION ON WHICH PENAL TY WAS IMPOSED TRAVELLED UP TO THE TRIBUNAL, AND THE TRIBUNAL CONS IDERING FACTS OF THE CASE, MADE ADDITION ON THE BASIS OF ESTIMATED NET P ROFIT AT THE RATE OF 10% OF DEPOSIT RECEIPTS. BEFORE THE AO, IN THE PENA LTY PROCEEDINGS ASSESSEE EXPLAINED THAT THE ABOVE DEPOSIT DID NOT B ELONG TO THE ASSESSEE, BUT BELONGED TO THE HUF, AND SINCE HUF DI D NOT HAVE ASSESSABLE INCOME AND NOT REQUIRED TO MAINTAIN BOOK S OF ACCOUNTS, THE SAME WAS NOT REFLECTED IN THE RETURN. THOUGH THE EX PLANATION OF THE ASSESSEE MAY NOT BE CONVINCING, IT WOULD NOT LEAD T O THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THERE MUST B E A POSITIVE AND COGENT ACT OF CONCEALMENT ON THE PART OF THE ASSESS EE, WHICH IS MISSING IN THIS CASE. THE PROVISIONS OF SECTION 271 (1)(C) ARE NOT ATTRACTED IN CASES WHERE INCOME OF THE ASSESSEE IS ASSESSED ON AN ESTIMATE BASIS AND ADDITION IS MADE ON THAT BASIS. EVEN IF THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION, BUT HI S EXPLANATION IS NOT LACKING BONA FIDE, AND, THEREFORE, WE ARE OF THE VI EW THAT IT IS NOT A FIT WHERE VIGOUR OF PROVISIONS OF SECTION 271(1) IS ATT RACTED. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE AND CANCEL THE IMPUGNED PENALTY. 6. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER AND I N VIEW OF THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE PENALTY IN THE PRESE NT CASE IS NOT JUSTIFIED AND HENCE, WE DELETE THE SAME. IN VIEW OF THIS DEC ISION, WE DO NOT DECIDE THE TECHNICAL ASPECT REGARDING THE DEFECT IN NOTICE ISSUED BY AO U/S. 274. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE ME NTIONED ON THE CAPTION PAGE. SD/- SD/- (ARUN KUMAR GARODIA) (LALIET KU MAR) ACCOUNTANT MEMBER JUDICI AL MEMBER BANGALORE, DATED, THE 28 TH FEBRUARY, 2019. /MS/ ITA NO.592/BANG/2018 PAGE 5 OF 5 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.