Rama Kapur, New Delhi V. ACIT, New Delhi

ITA 6484/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3635 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHANDER DUBEY
• Assessee Lawyers: B K ANAND
• Keywords: Invalid notice; Additional evidence; Question of law; Reasonable cause; Onus to prove; Revised return; Ignorance of law
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER I.T.A .NO. 6484/DEL/2013 ASSESSMENT YEAR-2006-07 RAMA KAPUR, 5, SOUTHERN AVENUE, NEW DELHI-110065 (PAN:AARPK8685N) (APPELLANT) VS ACIT, CIRCLE 22(1), NEW DELHI. (RESPONDENT) APPELLANT BY SHRI B.K. ANAND, CA RESPONDENT BY SHRI UMESH CHANDER DUBEY, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT (A)-XVIII, NEW DELHI AND PERTAINS TO ASSESS MENT YEAR 2006- 07. THE APPEAL CHALLENGES THE CONFIRMATION OF PENA LTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT) A MOUNTING TO RS. 7,82,787/-. DATE OF HEARING 5.1.2017 DATE OF PRONOUNCEMENT 5.4.2017 I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 2 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT IN T HIS CASE WAS COMPLETED AT AN INCOME OF RS.37,98,058/- AS AGAINST THE RETURNED INCOME OF RS. 11,54,492/-. SUBSEQUENTLY, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED AND IT WAS NOTE D BY THE ASSESSING OFFICER THAT ASSESSEE HAD FAILED TO DISCLOSE THE SH ORT TERM CAPITAL GAIN OF RS.23,25,566/- AND WHEN CONFRONTED BY THE A SSESSING OFFICER WITH THE SAME, THE ASSESSEE HAD OFFERED THE SAME FOR TAXATION. THE ASSESSING OFFICER FURTHER OBSERVED TH AT THE ASSESSEE DID NOT FILE ANY REVISED RETURN, NOR WAS THE OFFER FOR TAXATION VOLUNTARY. THE ASSESSEE HAD CONTENDED BEFORE THE AS SESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS THAT SHE W AS A SENIOR CITIZEN AND THAT SHE HAD MEAGRE INCOME FROM INVESTM ENT TILL ASSESSMENT YEAR 2005-06. HER HUSBAND HAD PASSED AW AY ON 31.12.04 WHEREUPON HIS ESTATE HAD DEVOLVED UPON HER AND THEIR TWO MARRIED DAUGHTERS WERE BOTH LIVING OUTSIDE INDI A. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT DURING HIS LIFE TIME, HER LATE HUSBAND WAS NORMALLY ATTENDING TO HER FINANCIA L AND TAX MATTERS AND AFTER THE DEATH OF HER HUSBAND, THE EST ATE HAVING DEVOLVED UPON HER, THE MONEY WAS INVESTED IN MUTUAL FUNDS ON THE ADVICE OF THE PERSON WHO WAS ASSISTING HER HUSBAND DURING HIS LIFE I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 3 TIME. IT WAS FURTHER SUBMITTED THAT SOON THEREAFTE R, SHE DECIDED TO GO OUT OF INDIA AND STAY WITH HER DAUGHTERS AND THE MONEY INVESTED IN THE MUTUAL FUNDS GAVE RISE TO SHORT TERM CAPITAL GAINS BUT NOT BEING FULLY CONVERSANT EITHER WITH THE NATURE OF TR ANSACTIONS OR THE IMPACT OF TAXATION IN TERMS OF SHORT TERM CAPITAL G AINS, THERE WAS A FAILURE ON HER PART TO OFFER THIS INCOME FOR TAX IN THE RETURN. IT WAS CONTENDED BEFORE THE ASSESSING OFFICER THAT NON-INC LUSION OF THE SHORT TERM CAPITAL GAIN WAS A GENUINE MISTAKE ON TH E PART OF THE ASSESSEE RATHER THAN INTENT TO CONCEAL THE PARTICUL ARS OF INCOME. HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSE ES CONTENTIONS AND HELD THE ASSESSEE IN DEFAULT FOR FURNISHING INA CCURATE PARTICULARS OF INCOME AND IMPOSED A PENALTY OF RS. 7,82,787/- WHICH WAS LATER CONFIRMED BY THE LD. CIT(A). NOW, THE ASSESSEE IS IN APPEAL BEFORE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEAL) ERRED IN CONFIRMING THE PENALT Y ORDER IN RESPECT OF PENALTY OF RS.7,82,787 LEVIED O N THE ASSESSEE U/S 271 (1)(C) OF THE ACT. 2. (I) THAT THE LEARNED CIT (APPEAL) ERRED IN NOT H OLDING THAT THE PENALTY NOTICE DT. 17.02.2008 ISSUED BY TH E AO WAS PRIMA-FACIE AN INVALID NOTICE AS A DID NOT BEAR THE OFFICE SEAL OF THE OFFICER NOR DID IT CONVEY THE DE FAULT FOR I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 4 WHICH PENALTY PROCEEDINGS HAD BEEN INITIATED AND THEREFORE COULD NOT RESULT INTO A VALID PENALTY ORD ER. 2. (II) THAT THE LEARNED CIT (APPEAL) ERRED IN NOT HOLDING THAT THE ISSUE AND SERVICE OF A VALID NOTICE U/S 27 4 OF THE ACT BEING A SUBSTANTIVE QUESTION OF LAW COULD B E URGED BY THE ASSESSEE AT ANY STAGE OF PROCEEDINGS A ND FURTHER ERRED IN NOT DISPOSING OFF ON MERIT THE OBJ ECTIONS RAISED BY THE ASSESSEE, BECAUSE NO SUBSEQUENT NOTIC E COULD VALIDATE AN INHERENTLY INVALID NOTICE. 3. THAT THE LEARNED CIT (APPEAL) ERRED IN NOT HOLD ING THAT A MERE FAILURE ON PART OF THE ASSESSEE TO SUBSTANTIATE HER BONA-FIDE STATEMENT NARRATING ALL THE FACTS RELATING TO THE MISTAKE IN REPORTING OF THE M UTUAL FUND TRANSACTIONS AT THE TIME OF ORIGINAL RETURN WO ULD NOT BE ENOUGH TO WARRANT PENALTY AS THERE WAS NOTHING T O SHOW THAT HER BONA-FIDE STATEMENT WAS NOT A CORRECT ONE. 4. THAT THE ORDER OF THE LEARNED AUTHORITIES BELOW BEING CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE APPEAL BE ALLOWED. 3. LD. AUTHORISED REPRESENTATIVE REITERATED THE FAC TS OF THE CASE AND SUBMITTED THAT THERE WAS A GENUINE MISTAKE ON T HE PART OF THE ASSESSEE AS SHE WAS NOT WELL-VERSED WITH THE FINANC IAL AFFAIRS AND THIS AMOUNTED TO A REASONABLE CAUSE AND AS SUCH, TH E PENALTY WAS NOT IMPOSABLE. LD. AUTHORISED REPRESENTATIVE ALSO FILED WRITTEN SUBMISSIONS ON BEHALF OF THE ASSESSEE WHICH ARE REP RODUCED AS UNDER:- MY HUSBAND, SHRI R.C. KAPUR DIED ON 31.12.2004. TI LL HIS DEATH I FUNCTIONED AS A HOUSEWIFE AND ALL TAX MATTE RS AND I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 5 OTHER AFFAIRS WERE LOOKED AFTER BY HIM. AFTER HIS D EATH I HAD NO CLOSE RELATIVES TO HELP AND I WENT TO CANADA TO STAY WITH MY TWO MARRIED DAUGHTERS. MY INCOME TAX RETURNS WER E FILED BY MR. B.K. ANAND, CHARTERED ACCOUNTANT. I OPERATED A SAVINGS ACCOUNT AND ALSO, HAD GIVEN MONEY TO THE ST ANDARD CHARTERED BANK FOR INVESTMENT IN MUTUAL FUNDS. THOU GH, BANK STATEMENTS HAD BEEN RECEIVED NO STATEMENT OF PURCHASE AND SALE OF MUTUAL FUNDS HAD BEEN SENT BY STANDARD CHARTERED BANK TO ME. AT THE TIME OF FILIN G RETURNS WHATEVER PAPERS I HAD I SHARED WITH MR. ANAND AND H E PREPARED AND FILED MY RETURN. SINCE THE STATEMENT O F MUTUAL FUND TRANSACTIONS HAD NOT BEEN SENT BY STANDARD CHA RTERED BANK THE INFORMATION CONTAINED THEREIN COULD NOT BE INCLUDED IN MY RETURN. DURING ASSESSMENT PROCEEDINGS I WAS A SKED TO OBTAIN THIS STATEMENT FROM THE BANK AND, THEREAFTER , I AGREED TO THE INCLUSION OF CAPITAL GAINS INCOME IN MY RETU RN. I PAID TAX AS DEMANDED THEREAFTER. A HEAVY PENALTY WAS ALS O IMPOSED. I NEVER COMMITTED ANY ACT OF CONCEALMENT W ILFULLY AND THE OMISSION WAS DUE TO MY IGNORANCE AND LACK O F EXPERIENCE. I REQUEST THAT I MAY BE FORGIVEN BECAUS E THE OMISSION OF NOT INCLUDING CAPITAL GAINS IN MY RETUR N WAS NOT DELIBERATE BUT DUE TO LACK OF EXPERIENCE. 3.1. LD. AUTHORISED REPRESENTATIVE PRAYED THAT THE PENALTY IMPOSED BE KINDLY DELETED. 4. IN RESPONSE, THE LD. DR SUBMITTED THAT THE ASSES SEE HAD ADMITTED HER MISTAKE ONLY AFTER BEING CONFRONTED BY THE ASSESSING OFFICER AND THE PLEA OF THE ASSESSEE WAS JUST A LAM E EXCUSE WHICH DOES NOT HOLD GOOD IN THE EYES OF THE LAW. LD. DR ALSO SUBMITTED THAT IGNORANCE OF LAW WAS NO EXCUSE AND THE ASSESSE E COULD NOT TAKE SHELTER BEHIND SUCH AN EXCUSE. LD. DR FURTHER SUBMITTED THAT I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 6 THE ASSESSEE HAD FURNISHED AN EXPLANATION WHOSE BON A FIDE COULD NOT BE ESTABLISHED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEES CLAIM IS NOT SUPPORTED BY ANY MATERIAL ON RECORD AN D IS JUST A BALD ARGUMENT. LD. DR PRAYED THAT THE PENALTY BE CONFIR MED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT, IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA 83 ITR 26, HAD LAID D OWN THE POSITION OF LAW BY HOLDING THAT THE ASSESSING OFFICER IS NOT BO UND TO LEVY PENALTY AUTOMATICALLY SIMPLY BECAUSE THE QUANTUM AD DITION HAS BEEN SUSTAINED. ALSO IN CASE OF CIT V. KHODAY ESWAR A (83 ITR 369) (SC), INCIDENTALLY REPORTED IN SAME ITR VOLUME, IT IS HELD THAT PENALTY CANNOT BE LEVIED SOLELY ON BASIS OF REASONS GIVEN IN ORIGINAL ORDER OF ASSESSMENT. THE HONBLE SUPREME COURT HAS REITERATED THE LAW IN CASE OF DILIP N. SHROFF V. JT. CIT [2007 ] 291 ITR 519 BY HOLDING IN PARA 62 THAT FINDING IN ASSESSMENT PROCE EDINGS CANNOT AUTOMATICALLY BE ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. THE STATUTE REQUIRES A SATISFACTION ON THE PART OF THE ASSESSING OFFICER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 7 CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTIC ULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. WHILE CONSIDERING WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN THE ASSESSING OFFICER SHOULD NOT BEGIN WITH THE PRESUMP TION THAT HE IS GUILTY. SINCE THE BURDEN OF PROOF IN PENALTY PROCEE DINGS VARIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN TH E ASSESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CAN NOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE A SSESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALT Y PROCEEDINGS. IN THE PENALTY PROCEEDINGS THE AUTHORITIES MUST CON SIDER THE MATTER AFRESH AS THE QUESTION HAS TO BE CONSIDERED FROM A DIFFERENT ANGLE. IT IS IMPORTANT TO KEEP IN MIND THE FUNDAMENTAL LEG AL PROPOSITION THAT ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE. ASS ESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D DISTINCT. FINDINGS IN ASSESSMENT PROCEEDINGS DONT OPERATE AS RES JUDICATA IN PENALTY PROCEEDINGS. FOR THIS PROPOSITION RELIANCE IS PLACED ON THE DECISION IN CIT VS. DHARAMCHAND L. SHAH (1993) 204 ITR 462 (BOM). IN VIJAY POWER GENERATORS LTD VS. ITO (2008) 6 DTR 64 (DEL) IT WAS HELD THAT IT IS WELL SETTLED THAT THOUGH THEY CONSTITUTE GOO D EVIDENCE DO NOT CONSTITUTE CONCLUSIVE EVIDENCE IN P ENALTY I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 8 PROCEEDINGS. DURING PENALTY PROCEEDINGS, THERE HAS TO BE REAPPRAISAL OF THE VERY SAME MATERIAL ON THE BASIS OF WHICH THE ADDITION WAS MADE AND IF FURTHER MATERIAL IS ADDUCE D BY THE ASSESSEE IN THE COURSE OF THE PENALTY PROCEEDINGS, IT IS ALL THE MORE NECESSARY THAT SUCH FURTHER MATERIAL SHOULD ALSO BE EXAMINED IN AN ATTEMPT TO ASCERTAIN WHETHER THE ASSESSEE CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS. THUS, UNDER PENAL TY PROCEEDINGS ASSESSEE CAN DISCHARGE HIS BURDEN BY RELYING ON THE SAME MATERIAL ON THE BASIS OF WHICH ASSESSMENT IS MADE BY CONTEND ING THAT ALL NECESSARY DISCLOSURES WERE MADE AND THAT ON THE BAS IS OF MATERIAL DISCLOSED THERE CANNOT BE A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. FURTHE R IF THERE IS ANY MATERIAL OR ADDITIONAL EVIDENCE WHICH WAS NOT PRODU CED DURING ASSESSMENT PROCEEDINGS SAME CAN BE PRODUCED IN PENA LTY PROCEEDINGS AS BOTH ASSESSMENT AND PENALTY PROCEEDI NGS ARE DISTINCT AND SEPARATE. IN CIT VS. M/S SIDHARTHA ENT ERPRISES (2009) 184 TAXMAN 460 (P & H)(HC) IT WAS HELD THAT THE JUD GMENT IN DHARMENDRA TEXTILE CANNOT BE READ AS LAYING DOWN TH AT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PE NALTY MUST FOLLOW. EVEN SO, THE CONCEPT OF PENALTY HAS NOT UND ERGONE CHANGE I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 9 BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT. 5.1 REVERTING TO THE FACTS OF THE PRESENT CASE, THE PEN ALTY ORDER IS WOEFULLY SILENT ON THE ISSUE AS TO HOW THIS SATISFA CTION OF CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS WA S ARRIVED AT. THE LD. CIT (A) HAS ALSO NOT EXAMINED THE ISSUE IN DETAIL BUT HAS SIMPLY CONFIRMED THE PENALTY BY RELYING ON THE FIND INGS OF THE AO. WE ARE OF THE CONSIDERED OPINION THAT THIS KIND OF FINDING MIGHT BE VERY RELEVANT IN QUANTUM PROCEEDINGS BUT WILL NOT S UFFICE IN PENALTY PROCEEDINGS. IT IS UNDISPUTED THAT THE ASSESSEE IS AN OLD LADY W HO WAS RECENTLY WIDOWED AND IT WAS FOR THE VERY FIRST TIME THAT SHE WAS FILING HER RETURN OF INCOME WITHOUT BEING ASSISTED BY HER HUSBAND. IT IS EQUALLY UNDISPUTED THAT IT WAS NOT MANDATORY FOR HER TO MAINTAIN REGULAR BOOKS OF ACCOUNTS. IT IS EQUALLY UNDISPUTED THAT THE ASSESSEE HAD ACCEPTED THE MISTAKE AND HAD PROVI DED AN EXPLANATION WHICH APPEARS PLAUSIBLE BUT THE AO HAS NOT RECORDED A FINDING THAT THE EXPLANATION FURNISHED BY THE ASSES SEE WAS A FALSE EXPLANATION. THUS, THE EXPLANATION OF THE ASSESSEE , UNDER THE CIRCUMSTANCES, CANNOT BE SAID TO BE NOT BONA FIDE. IT IS OUR CONSIDERED OPINION THAT, IN THE GIVEN CIRCUMSTANCES , A MERE I.T.A. NO.6484/DEL/2013 ASSESSMENT YEAR 2006-07 10 OMISSION IN OFFERING THE CAPITAL GAINS TO TAX WOULD NOT IPSO FACTO REFLECT CONCEALMENT OF INCOME OR FURNISHING OF INAC CURATE PARTICULARS OF INCOME IN TERMS OF SECTION 271(1)(C) OF THE ACT. CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, IN O UR VIEW THE IMPUGNED OMISSION WAS A MISTAKE AND DOES NOT INVITE THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. WE SE T ASIDE THE ORDER OF THE LD. CIT (A) AND DIRECT THE AO TO DELETE THE ENT IRE PENALTY. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2017. SD/- SD/- (N. K. SAINI) (SUDHANSHU SRIVA STAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5TH APRIL 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSTT. REGISTRAR ITAT NEW DELHI