Shri Ajay Dubey, Pune V. Dy. CIT Cir. 7, Pune, Pune

ITA 614/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3254 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Keywords: Bonafide belief; Revised return; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER I.T.A. NO. 614/PN/2009: A.Y. 2006-07 SHRI AJAY DUBEY E-12 VARSHA PARK, BANER ROAD, PUNE-411 045 PAN ADAPD 1076 G APPELLANT VS. DY. CIT CIR. 7, PUNE RESPONDENT APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI ABHAY DAMLE ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17-2-2009 OF CIT(A) FOR A.Y. 2006-07. T HE ONLY DISPUTE IS REGARDING PENALTY U/S 271(1)(C) OF THE A CT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE, IN THE RELEVANT YEAR, HAD DECLARED TOTAL INCOME OF RS. 53,88,600/-. AT THE TIME OF ASSESSMENT PROCEED INGS, THE A.O NOTED THAT THE ASSESSEE HAD MADE INVESTMENTS IN NHB, NABARD AND SIDBI BONDS TOTALING TO RS. 186.00 LAKHS FROM WHICH NO INTEREST INCOME HAD BEEN SHOWN. ON BEING A SKED TO EXPLAIN, THE ASSESSEE FILED REVISED RETURN ON 3-3-2 008 PAGE 2 OF 6 ITA NO. 614/PN/2009 SHRI AJAY DUBEY A.Y. 2006-07 DECLARING INTEREST INCOME OF RS. 8,06,532/-. THE A .O INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). IN RESPONSE TO SHOW CAUSE NOTICE, ASSESSEE EXPLAINED THAT THE INTEREST INCOME HAD NOT BEEN DECLARED AS THE ASSESSEE WANTED TO SHOW THE IN COME ON THE BASIS OF CASH METHOD WHICH WAS PERMISSIBLE UNDE R SECTION 145(1) OF THE ACT. HOWEVER, THE SAME WAS D ISCLOSED TO BUY PEACE OF MIND. IT WAS ALSO SUBMITTED THAT T HE ENTIRE INCOME HAD BEEN ASSESSED IN THE ASSESSMENT AND THER EFORE, THERE WAS NO CASE FOR CONCEALMENT. THE A.O HOWEVER , DID NOT ACCEPT THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD REVISED RETURN ONLY AFTER BEI NG POINTED OUT. IT WAS ALSO OBSERVED THAT THE PLEA OF THE ASS ESSEE THAT HE WANTED TO FOLLOW CASH METHOD WAS DEVOID OF ANY M ERIT AS THE ASSESSEE HIMSELF REVISED RETURN SHOWING THE SAI D INCOME. THE A.O ACCORDINGLY LEVIED PENALTY U/S 271(1)(C) AM OUNTING TO RS.5,42,958/- AT THE RATE OF 200% OF TAX SOUGHT TO BE EVADED. 3. THE ASSESSEE DISPUTED THE DECISION OF THE A.O AN D REITERATED THE SUBMISSIONS MADE EARLIER THAT NON-DI SCLOSURE OF INTEREST INCOME WAS BECAUSE THE ASSESSEE WANTED TO FOLLOW CASH METHOD IN RESPECT OF INCOME FROM OTHER SOURCES AND THAT THE ASSESSEE REVISED RETURN TO BUY PEACE O F MIND. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NOT CONCEA LED ANY PAGE 3 OF 6 ITA NO. 614/PN/2009 SHRI AJAY DUBEY A.Y. 2006-07 INCOME. IT WAS A BONAFIDE OMISSION WHICH WAS COVER ED BY EXPLANATION 1 TO SECTION 271(1)(C) AND NO PENALTY S HOULD BE LEVIED IN SUCH CASES. THE CIT (A) HOWEVER, DID NOT ACCEPT THE CONTENTION RAISED. IT WAS OBSERVED BY HIM THAT THE REVISED RETURN WAS FILED ONLY AFTER BEING POINTED O UT AND SINCE THE ASSESSEE HIMSELF HAD REVISED THE RETURN, THE PLEA THAT THE ASSESSEE WANTED TO FOLLOW CASH METHOD WAS NOT ACCEPTABLE. THE CIT(A) ACCORDINGLY UPHELD THE PENA LTY LEVIED BY A.O, AGGRIEVED BY WHICH, THE ASSESSEE IS IN APPE AL BEFORE THE TRIBUNAL. 4. BEFORE US, THE LEARNED AR SUBMITTED THAT THE ASS ESSEE HAD MADE INVESTMENTS IN BONDS UNDER CUMULATIVE SCHE ME AND ENTIRE INTEREST INCOME WAS RECEIVABLE ONLY AT THE E ND OF THE TERM. THERE WAS NO INTEREST INCOME RECEIVABLE FRO M YEAR TO YEAR. THE ASSESSEE BEING A SALARIED PERSON, WAS UN DER BONAFIDE BELIEF THAT THE INTEREST INCOME WILL HAVE TO BE SHOWN IN THE YEAR OF MATURITY. THE ASSESSEE, IMMED IATELY REVISED RETURN WHEN IT WAS POINTED OUT BY THE A.O. THIS WAS ONLY A BONAFIDE OMISSION AND THEREFORE, NO PENAL AC TION SHOULD BE TAKEN. THE LEARNED DR ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AND AR GUED THAT THE ASSESSEE HAD REVISED THE RETURN ONLY AFTER BEIN G POINTED PAGE 4 OF 6 ITA NO. 614/PN/2009 SHRI AJAY DUBEY A.Y. 2006-07 OUT TO HIM. HE ALSO PLACED RELIANCE ON THE JUDGMEN T OF HONBLE SUPREME COURT IN THE CASE OF G.C. AGARWAL V S. CIT (186 ITR 571) AND THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. AJAY DAL MILL (263 ITR 66). 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING LE VY OF PENALTY IN RELATION TO THE INTEREST INCOME ON BOUND S NOT DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. THERE IS NO DISPUTE THAT THE BONDS WERE UNDER CUMULATIVE OPT ION AND THE INTEREST WAS RECEIVABLE ONLY AT THE END OF THE TERM AND NOT FROM YEAR TO YEAR. THE CASE OF THE ASSESSEE IS THAT HE WAS UNDER THE BONAFIDE BELIEF THAT THE INTEREST INC OME HAD TO BE DECLARED ONLY WHEN IT BECAME RECEIVABLE. THE CA SE OF THE REVENUE IS THAT THE CLAIM OF THE ASSESSEE IS NOT BO NAFIDE AND HE HAD REVISED RETURN ONLY AFTER BEING POINTED OUT AND THEREFORE, PENALTY HAD TO BE LEVIED. IN OUR VIEW W HETHER THE PENALTY U/S 271(1)(C) IS TO BE LEVIED OR NOT WILL D EPEND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. THOUGH H ONBLE SUPREME COURT RECENTLY IN THE CASE OF UNION OF INDI A AND OTHERS VS. DHARMENDRA TEXTILES PROCESSORS AND OTHER S (306 ITR 27) HAVE HELD THAT PENALTY U/S 271(1)(C) IS ONL Y A CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT REQUIRED T O BE PROVED PAGE 5 OF 6 ITA NO. 614/PN/2009 SHRI AJAY DUBEY A.Y. 2006-07 BY THE REVENUE, HOWEVER, EACH AND EVERY ADDITION MA DE IN THE ASSESSMENT CANNOT AUTOMATICALLY LEAD TO CONCEAL MENT PENALTY. A CASE OF PENALTY HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C) AS PER WHICH IN CASE, IN RELATION TO ANY ADDITION, THE ASSESSEE OFFERS AN EXPLANATION WHICH IS FOUND TO BE BONAFIDE AND ALL N ECESSARY DETAILS HAVE BEEN GIVEN, NO PENALTY COULD BE IMPOSE D. ON THE FACTS OF THE PRESENT CASE, WE ARE SATISFIED THAT TH IS WAS ONLY A BONAFIDE OMISSION. IT IS CLEAR THAT THE INTEREST WAS NOT RECEIVABLE FROM YEAR TO YEAR AND WAS RECEIVABLE ONL Y AT THE END OF MATURITY PERIOD. THEREFORE, IN SUCH A SITUA TION, IT IS POSSIBLE TO FORM A BELIEF THAT INCOME HAD TO BE DEC LARED ONLY WHEN IT BECAME RECEIVABLE. THE ASSESSEE HAD REVISED RETURN IMMEDIATELY ON BEING POINTED OUT THOUGH HE COULD ST ILL TAKEN THE PLEA THAT THE SAME HAD TO BE ASSESSED ONLY IN T HE YEAR IN WHICH INTEREST WAS RECEIVABLE. WE THEREFORE, HOLD THAT IT WAS A CASE OF BONAFIDE OMISSION AND LEVY OF PENALTY WOU LD NOT BE JUSTIFIED. THE LEARNED DR HAS PLACED RELIANCE ON TH E JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF G.C. AGARWA L (SUPRA) AND ON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF AJAY DAL MILL (SUPRA) WHICH RELATE TO THE P ERIOD PRIOR TO AMENDMENT TO SECTION 271(1)(C) FROM 1-4-1976 AND THEREFORE, THE SAME COULD NOT BE APPLIED TO THE CAS E OF THE PAGE 6 OF 6 ITA NO. 614/PN/2009 SHRI AJAY DUBEY A.Y. 2006-07 ASSESSEE TO WHICH THE AMENDED PROVISIONS ARE APPLIC ABLE. AS DISCUSSED EARLIER THE CASE OF THE ASSESSEE HAS T O BE DEALT WITH AS PER AMENDED PROVISIONS OF EXPLANATION 1 EFF ECTIVE FROM 1-4-1976. IN TERMS OF THIS PROVISION, IN OUR OPINION, PENALTY IS NOT LEVIABLE. WE THEREFORE, SET ASIDE T HE ORDER OF THE CIT(A) AND DELETE THE PENALTY IMPOSED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN ON THE 15 TH DAY OF OCTOBER 2010. SD/- SD/- ( I.C. SUDHIR) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER PUNE DATED THE 15 TH OCTOBER 2010 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)- III PUNE 4. THE CIT- IV PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE