ACIT, Bangalore V. Shri Hajee Abdul Sattar Sait, Bangalore

ITA 684/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2059 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 06-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: PRASAD
• Keywords: Business income; Salary income; Bonafide belief; Initiation of penalty proceedings; Speculation loss
• Section: 271(1)(c); 143(3)

Judgement Text

PAGE 1 OF 5 ITA NO.684/BANG/09 1 IN THE INCOME TAX APPELLATE TRIBUNA L, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.684/BANG/2009 (ASSESSMENT YEAR 2004-05) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-8(1), BANGALORE. - APPELLANT VS SHRI HAJEE ABDUL SATTAR SAIT, # 84/85, INFANTRY ROAD, BANGALORE-1. - RESPONDENT APPELLANT BY : SMT. V S SREELEKHA RESPONDENT BY : SHRI PRASAD ORD ER PER GEORGE GEORGE K : THIS APPEAL, FILED BY THE REVENUE, IS DIRECTED AG AINST THE ORDER OF LEARNED CIT(A)-VI, BANGALORE DATED 15T H APRIL, 2009. THE ORDER OF THE CIT(A) EMANATES FROM THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME TAX LEVYING PENALTY U/S 271(1) (C) OF THE ACT. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL IS WHET HER THE CIT(A) IS JUSTIFIED IN DELETING THE PENALTY LEVIED U /S 271(1)(C) AMOUNTING TO RS.5,16,000/-. PAGE 2 OF 5 ITA NO.684/BANG/09 2 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. FOR THE YEAR UND ER APPEAL, NAMELY 2004-05, THE ASSESSEE FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.18,44,800/-. THE SCRUTIN Y ASSESSMENT WAS COMPLETED FIXING A TOTAL INCOME OF RS.35,64,673 /-. THE VARIATION FROM THE RETURNED INCOME AND THE ASSESSED INCOME WAS ON ACCOUNT OF THE FOLLOWING ADDITIONS/DISALLOWANCES:- (A) THE FIRST ITEM OF DIFFERENCE WAS ON ACCOUNT THAT THE ASSESSEE RECEIVED HONORARIUM FROM KSTDC AS HE WAS ITS APPOINTED HON. CHAIRMAN. THE ASSESSING OFFICER AFTER DEDUCTING AN AMOUNT OF RS.1,17,794/- OUT OF THE GROSS RECEIPT OF RS.2,57,794/- AND TAXED RS.1,40,000/- AS INCOME FROM SALARY. (B) SECONDLY, THE AO SEGREGATED PART OF BUSINESS INCOME DECLARED AS NON SPECULATIVE BUSINESS INCOME AND DENIED THE SET OFF OF CARRIED FORWARD SPECULATION LOSS AMOUNTING TO RS.14,04,872/-. (C) THIRDLY, THE AO TREATED 50% OF THE RENT RECEIVED FROM SAFINA HOTELS PVT. LTD. FOR HOME OFFICE AS PERQUISITE AMOUNTING TO RS.1,75,000/-. IN THE ASSESSMENT COMPLETED, THE OFFICER HAD INITIA TED PENALTY PROCEEDINGS WITH RESPECT TO THE ADDITIONS IN ITEM N O. (A) MENTIONED ABOVE. THE OFFICER CALLED FOR THE ASSESSEE'S OBJEC TIONS WITH REFERENCE TO INITIATION OF PENALTY AND THE ASSESSEE FILED HIS OBJECTIONS WITH REFERENCE TO THE ADDITION OF RS.1,4 0,000/- (INCOME FROM SALARY). PENALTY U/S 271(1)(C) WAS IMPOSED VIDE ORDER DATED 29.3.2007 AMOUNTING TO RS.5,16,000/-. THE PENALTY I MPOSED WAS ON PAGE 3 OF 5 ITA NO.684/BANG/09 3 THE BASIS OF THE ABOVE THREE ADDITIONS MADE IN THE ASSESSMENT ORDER. 4. ON APPEAL BEFORE THE CIT(A), THE LEARNED AR SUBMITTED THAT THE PENALTY PROCEEDINGS WERE INITIATE D FOR CONCEALMENT OF RS.1,40,000/- ONLY. HOWEVER, PENALTY WAS IMPOSED, BASED ON THE DIFFERENCE BETWEEN THE ASSESSED INCOME AND THE RETURNED INCOME. IT WAS FURTHER SUBMITTED THAT NON -DISCLOSURE WAS NOT MALAFIDE AND PENALTY MAY BE DELETED SINCE THE WOR D USED IN SECTION 271(1)(C) OF THE ACT IS 'MAY' AND NOT 'SHALL '. WITH REFERENCE TO THE ADDITION OF RS.1,40,000/-, IT WAS CONTENDED BY THE ASSESSEE THAT HE WAS UNDER THE BONAFIDE BELIEF THAT HONORARIUM RECEIVED FROM KSTDC WAS NOT A PART OF TAXABLE INCOM E AND IT WAS THE AMOUNT RECEIVED FOR REIMBURSEMENT OF EXPENSES. IT WAS SUBMITTED THAT THE ASSESSEE IS 71 YEARS OLD MAN AND IS FRAIL AND HAS INDIFFERENT HEALTH. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE PENALTY AMOUNTED TO RS.5,16,000/-. 5. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. THE LEARNED DR RELIED ON THE ORDER IMPOSING PENALTY U/S 271(1)(C) AND ALSO THE GROUNDS RAISED IN THIS APPEAL. 6. ON THE OTHER HAND, THE LEARNED AR REITERATED HI S SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE ALSO RELIED ON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ADDITIONAL CIT V MOHAMMED AND SONS 154 ITR 220 AND ALSO THE PAGE 4 OF 5 ITA NO.684/BANG/09 4 DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V S L KHUNNAH 180 ITR 340 AND CONTENDED THAT PENALTY I S NOT LEVIABLE ON THE FACTS OF THIS CASE. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. WE FIND THAT THE ASSESSING OFF ICER, WHILE PASSING ORDER U/S 143(3), SPECIFICALLY INITIATED PE NALTY IN RESPECT OF ADDITION OF RS.1,40,000/- (HONORARIUM RECEIVED FROM KSTDC). THE OFFICER, WHO LEVIED THE PENALTY, EXPANDED THE LEVY OF PENALTY ON ALL THE ADDITIONS WITHOUT TAKING COGNIZANCE OF THE FACT THAT THE OFFICER WHO PASSED THE ASSESSMENT ORDER HAS SPECIFI CALLY INITIATED PENALTY ONLY ON A SUM OF RS.1,40,000/-. IN OTHER WO RDS, THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS, WHICH IS A JURISDICTIONAL FACT, IS ABS ENT IN RESPECT OF ADDITIONS MADE IN ASSESSMENT ORDER OTHER THAN THE A DDITION OF RS.1,40,000/-. THEREFORE, WE ARE OF THE FIRM VIEW THAT LEVY OF PENALTY SHOULD BE LIMITED TO THE CONCEALMENT OF INCO ME OF RS.1,40,000/- AND NOT WITH REFERENCE TO OTHER ADDIT IONS MADE IN THE ASSESSMENT FOR WHICH THERE HAS BEEN NO INITIATI ON OF PENALTY AT THE TIME OF COMPLETION OF ASSESSMENT U/S 143(3) OF THE ACT. NOW ON FACTS, LET US EXAMINE WHETHER PENALTY COULD BE IM POSABLE ON THE ADDITION OF RS.1,40,000/-. EVEN AS PER THE EXPLANA TION (1) TO SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER IS REQUIRED TO ARRIVE AT A FINDING THAT EXPLANATION OFFERED BY AN A SSESSEE, IN THE EVENT, HE OFFERS ONE WAS FALSE. HE MUST BE FOUND T O HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY BONAFIDE BU T ALL THE FACTS PAGE 5 OF 5 ITA NO.684/BANG/09 5 RELATING TO THE SAME AND MATERIAL TO THE INCOME WER E NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BONAFIDE, IT SHOULD BE FOUND AS OF FACT THAT HE HAS NOT DISCLOSE D ALL THE FACTS, WHICH ARE MATERIAL TO THE COMPUTATION OF INCOME. W E ARE OF THE VIEW THAT EXPLANATION FURNISHED BY THE ASSESSEE WITH REFERENCE TO THE ADDITION OF RS.1,40,000/- IS REASONABLE AND SHO WS HIS BONAFIDE AND PENALTY IS NOT IMPOSABLE ON FACTS OF THIS PARTIC ULAR CASE. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND DOES NOT REQ UIRE ANY INTERFERENCE. 8. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON 18TH DECEMBER, 200 9. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED : 18/12/2009 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. MSP/17/12/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.