SUBHASH BENIWAL, Jaipur V. ITO, Jaipur

ITA 614/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9684 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRITHVIRAJ MEENA CIT DHK
• Assessee Lawyers: N S VYAS
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 14A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 614/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. SHRI SUBHASH BENIWAL, C-41, RAGHU MARG, HANUMAN NAGAR, KHATIPURA, JAIPUR CUKE VS. THE INCOME TAX OFFICER WARD 3(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACGPB4847A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI N. S. VYAS (C.A) JKTLO DH VKSJ LS@ REVENUE BY : SHRI PRITHVI RAJ MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 2.03.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23 /03/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE O RDER OF LD. COMMISSIONER OF INCOME TAX (A)-I, JAIPUR, DATED 22/7/2014 PERTAININ G TO THE ASSESSMENT YEAR 2008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT THE AUTHORITIES BELOW ERRED IN CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE IT ACT, 1961 AMOUNTING TO RS. 10,17,007/- BY THE ITO, WARD 3(1), JAIPUR. 2. THAT THE PENALTY SO CONFIRMED IS BAD IN LAW AS WELL AS ON FACTS. 3. THAT THE PETITIONER CRAVES TO ADD, ALTER OR AMEND A LL OR ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 2 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). TH E ASSESSING OFFICER MADE ADDITION OF RS. 43,90,008/- ON ACCOUNT OF LONG TERM CAPITAL GAIN AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. SUBSEQUENTL Y, THE ASSESSING OFFICER LEVIED A PENALTY ON THIS ADDITION OF RS. 10,17,007/- BY OR DER DATED 22/3/2013. IT IS ALSO NOTEWORTHY THAT IN QUANTUM THE ADDITION CAME TO BE SUSTAINED AT THE LEVEL OF HONBLE HIGH COURT. THE ASSESEE AGGRIEVED BY THE P ENALTY ORDER PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING TH E SUBMISSIONS DISMISSED THE APPEAL. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEF ORE THIS TRIBUNAL. 3. THE LD. COUNSEL REITERATED THE SUBMISSION AS MAD E IN THE WRITTEN BRIEF. IT IS SUBMITTED THAT INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS ILLEGAL AS THE ASSESSING OFFICER IN THE ASSESSMENT ORDER INITIATED THE PENAL TY WITHOUT SPECIFYING THE CHARGE. THE LD. COUNSEL PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA CO TTON AND GINNING FACTORY 358 ITR 565 (KARN), AND ALSO SUBMITTED THAT THERE IS NE ITHER CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS AS THE ASSESSEE HAS PLACE D ALL MATERIAL BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS SOUGHT CLARIFIC ATION ON THE MATERIAL SO PLACED BEFORE THE ASSESSING OFFICER AND HE RE-COMPUTED THE GAIN ON THE BASIS THAT THAT THE ASSESSEE ENTERED INTO THE TRANSACTION WITH M/S CITY STAR HOSPITALITY PVT. LTD. OF PURCHASING THE SHARES AT THE PREMIUM OF RS. 90/- PE R SHARES. HOWEVER, THE SAME SHARES WERE SOLD WITHIN A SHORT SPAN OF TIME TO CLA IM SHORT TERM CAPITAL LOSS. HE 3 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. SUBMITTED THAT IT IS AN ALLEGATION OF ASSESSING OFF ICER THAT THIS TRANSACTION WAS EFFECTED TO TAKE BENEFIT OF SET OFF AGAINST THE LON G TERM CAPITAL GAIN OF RS. 43,00,008/-. HE SUBMITTED THAT, THAT THE PENALTY PR OCEEDINGS AND QUANTUM PROCEEDINGS ARE TWO DIFFERENT AND DISTINCT PROCEEDI NGS. HE SUBMITTED MERELY BECAUSE THE EXPLANATION FOUND TO BE NOT ACCEPTABLE WOULD NOT BE A BASIS FOR INITIATING THE PENALTY. HE PLACED RELIANCE ON THE J UDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PATROPRODUCT PVT.LTD. 322 ITR 158 (SC). 3.1. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATI VES OPPOSED THE SUBMISSIONS. 3.2. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAD PLACED ALL MATERIALS BEFORE THE ASSESSING OFFICER. THEREFORE, IT CANNOT BE INFERRED THAT THE ASSESSEE CONCEALED THE FACTUM OF THE TRANSACTION FROM THE ASSESSING OFFICER. THE AS SESSEE CLAIMED SHORT-TERM CAPITAL LOSS ON SALE OF SHARES. THIS TRANSACTION WAS DULY REFLECTED BY THE ASSESSEE. THE REVENUES CONTENTION IS THAT THIS TRANSACTION IS CO LORABLE DEVICE TO AVOID LIABILITY OF CAPITAL GAIN TAX ON ACCOUNT OF SALE OF LONG-TERM C APITAL ASSET. WE FIND THAT THE ASSESSING OFFICER WHILE INITIATING THE PROCEEDINGS IN THE ASSESSMENT ORDER DATED 20/12/2010/- HAS SATED AS UNDER :- PENALTY PROCEEDINGS U/S 271(1)(C) RWS 274 HAS BEEN INITIATED SEPARATELY FOR CONCEALMENT OF INCOME/FURNISHINGS OF INACCURATE PAR TICULARS OF INCOME. FROM THE ABOVE, IT IS EVIDENT THAT INITIATION OF PR OCEEDING IS NOT SPECIFIC WHILE IMPOSING PENALTY IN THE PENALTY ORDER DATED 22/3/20 13. THE ASSESSING OFFICER, IN PARA 7 STATED AS UNDER:- 4 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. IN VIEW OF AFORESAID DISCUSSION, IT IS CLEARLY EST ABLISHED AND SATISFIED THAT THE ASSESSEE HAS CONCEALED/FURNISHED INACCURATE PARTICU LARS OF INCOME TO THE EXTENT OF RS. 45,00,000/- AND HE IS LIABLE FOR PENA LTY U/ 271(1)(C) OF THE ACT, 1961. FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSING OFF ICER HAS NOT MADE ANY SPECIFIC CHARGE. WE THEREFORE, FIND MERIT INTO THE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE. THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 358 ITR 565 (KARN) WHEREIN THE HONBLE HIGH COURT HAS HELD AS U NDER :- IN THE LIGHT OF THE WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILIT Y. (B) MENS REA ISNOT AN ESSENTIAL ELEMENT FOR IMPOSING PE NALTY FOR BREACH OF CIVIL OBLIGATION OR LIABILITIES. (C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1 )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR THE APPELLATE AUTHORITY OR THE REVISIONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) AND 1(B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF DEEMING PROVISION (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SE CTION 271(1)(C) IS A SINE QUA NON FOR THE ASSESSING OFFICER TO INITIATE THE P ROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SUB-SECTION(1B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO B E ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) AND THE COMMISS IONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) THE IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN I THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE P ENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE A SSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUD ED BY THE AUTHORITIES IT 5 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIA BILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND A OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANAT ION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT T HE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE P ASSED (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND AL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION 1(B) TO SE CTION 271 O THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HA NOT ISUD ANY DIRECTION TO IMITATE PENALTY PROCEEDINGS, IN AP PEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PR OCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE AS SESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS O F INCOME. (Q) SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONE D IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFF ENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO TH E ASSESSEE. (S) TAKING UP O PENALTY PROCEEDINGS ON ONE LIMB AN FIND ING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EM ANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SE PARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS CONCEALMENT OF INCOME AND FURNISHING OF INCORREC T PARTICULARS WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDI NGS. IT IS OPEN TO THE ASSESEE TO CONTEST THE SAID PROCEEDINGS ON THE MERE ITS. HOWEEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSU ANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS IN VALID IN THE PENALTY PROCEEDINGS. 3.3. IT IS ALSO UNDISPUTED THAT THE ASSESSEE HAD DI SCLOSED ALL THE MATERIALS BEFORE THE AUTHORITIES BELOW AND THE LAW IS WELL SETTLED T HAT PENALTY PROCEEDINGS AND QUANTUM PROCEEDINGS ARE TWO DIFFERENT AND DISTINCT PROCEEDINGS. THE CLAIM OF THE ASSESSEE WAS REITERATED ON THE GROUND THAT IN QUANT UM THE ASSESSEE HAS CLAIMED 6 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. SHORT-TERM CAPITAL LOSS ON ACCOUNT OF SALE OF SHARE S. THE TRANSACTION WAS DOUBTED, BEING NOT GENUINE BY THE ASSESSING OFFICER. THE HO NBLE SUPREME COURT IN THE CASE OF M/S RELIANCE PATROPRODUCTS PVT. LTD.(SUPRA) HAS HELD AS UNDER:- IT WAS TRIED TO BE SUGGESTED THAT SECTION 14A OF T HE ACT SPECIFICALLY EXCLUDED THE DEDUCTIONS IN RESPECT OF THE EXPENDITURE INCURR ED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT WAS FURTHER POINTED OUT THAT THE DIVIDENDS FROM THE SHARES DID NOT FORM THE PART OF THE TOTAL INCOME. IT WAS, THEREFO RE, REITERATED BEFORE US THAT THE ASSESSING OFFICER HAD CORRECTLY REACHED THE CON CLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING T HAT THEY ARE INCORRECT, IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FO RMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II) AN ITEM OF EXP ENDITURE MAY BE FALSELY) OR IN AN EXAGGERATED AMOUNT) CLAIMED, AND BOTH TYPES A TTEMPT TO REDUCE THE TAXABLE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PARTICULARS OF ONES INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNI SHED ALL THE DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS T HE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEP T ITS CLAIM IN THE RETURN OR NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EX PENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER SECT ION 271(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RET URN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY RE ASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLE ARLY, NOT THE INTENDMENT OF THE LEGISLATURE. IN THE PRESENT CASE ALSO, THE ASSESSEES CLAIM WAS REJECTED ON THE GROUND THAT TRANSACTION WAS NOT GENUINE. IN THE LIGHT TO THE A BOVE JUDGMENT WE ARE OF THE CONSIDERED VIEW THAT THE INITIATION OF PENALTY IS N OT AS PER LAW. THEREFORE, IT CANNOT BE SUSTAINED. ACCORDINGLY WE HEREBY DIRECT THE ASSE SSING OFFICER TO DELETE THE PENALTY. 7 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 /3/2017 SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 23 /03/2017. POOJA/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI SUBHASH BENIWAL,JAIPUR. 2. THE RESPONDENT- THE INCOME TAX OFFICER WARD 3(1) , JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 614/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 614/JP/2014 SHRI SUBHASH BENIWAL.