Akash Enterprises, Samrala V. ACIT, Khanna

ITA 705/CHANDI/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8941 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 12-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Difference of opinion; Agreed addition; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.704/CHD/2015 (ASSESSMENT YEAR : 2007-08) & ITA NO.705/CHD/2015 (ASSESSMENT YEAR : 2008-09) AKASH ENTERPRISES, VS. THE A.C.I.T, DHILLON COMPLEX, CIRCLE KHANNA, CHANDIGARH ROAD, KHANNA. SAMRALA. PAN: AAMFA7188F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 08.08.2016 DATE OF PRONOUNCEMENT : 21.11.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE CONSOLIDATED ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA DATED 10.6.2015 FO R ASSESSMENT YEARS 2007-08 AND 2008-09.,CONFIRMING TH E LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT ,1961. 2. AT THE OUTSET IT MAY BE STATED THAT BOTH THE ABOVE CASES WERE FIXED FOR HEARING ON 05.01.2016 WH EN NONE APPEARED ON BEHALF OF THE ASSESSEE, NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. THE APPEALS 2 WERE, THEREFORE, DISMISSED VIDE ORDER DATED 05.01.2 016. THEREAFTER, THE ASSESSEE MOVED A MISCELLANEOUS APPLICATION, IN PURSUANCE TO WHICH BOTH THE APPEALS WERE RECALLED VIDE ORDER DATED 29.4.2016 AND FIXED FOR H EARING BEFORE US. 3. THE ISSUE INVOLVED IN BOTH THE APPEALS IS IDENTICAL AND ARE THEREFORE BEING DEALT WITH BY A C OMMON ORDER. FOR THE SAKE OF CONVENIENCE THE FACTS IN TH E CASE OF APPEAL FILED IN ITA. NO. 704/CHD/2015, PERTAINING T O A.Y 2007-08, ARE BEING DEALT WITH HEREWITH AND THE SAME SHALL APPLY MUTATIS MUTANDIS TO OTHER APPEAL OF THE ASSES SEE IN ITA NO.705/CHD/2015 ALSO. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT FOR T HE IMPUGNED YEAR, RETURN DECLARING TOTAL INCOME OF RS.53,55,480/- WAS FILED BY THE ASSESSEE. THE ASSE SSEE IS A WINE CONTRACTOR AND HAD OPENED 122 LIQUOR VENDS O UT OF WHICH ONLY 41 AHATAS HAD BEEN MAINTAINED ON WHICH AHATA INCOME OF RS.23,96,647/- HAD BEEN CREDITED TO THE TRADING ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTED THAT THE AHATA I NCOME HAD BEEN SHOWN ON ESTIMATE BASIS. THE ASSESSING OF FICER FURTHER NOTED THAT THE CASH MEMOS HAD NOT BEEN ISSU ED BY THE SALESMAN OF THE AHATAS. ON BEING ASKED TO EXPL AIN THESE DISCREPANCIES, THE ASSESSEE OFFERED AN ADDITI ON OF RS.3 LACS ON ACCOUNT OF AHATA INCOME. FURTHER, THE ASSESSING OFFICER EXAMINED BOOKS OF ACCOUNT ALONGWI TH ORIGINAL VOUCHERS AND NOTED THAT SOME VOUCHERS WERE NOT PROPERLY PREPARED. WHEN CONFRONTED WITH THE SAME, THE 3 ASSESSEE VOLUNTARILY OFFERED AN ADDITION OF RS.1 LA C OUT OF MISCELLANEOUS EXPENSES AND RS.50,000/- OUT OF GENER AL EXPENSES, BEING UNVOUCHED AND UNVERIFIABLE EXPENSES INCURRED IN CASH. ACCORDINGLY, AN ADDITION OF RS.3 LACS ON ACCOUNT OF AHATA INCOME AND RS.1,50,000/- ON ACCOUN T OF EXPENSES DISALLOWED WAS MADE TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WERE ALSO INITIATED. DURING THE COURSE OF PENALTY PROCEEDING S, THE ASSESSEE SUBMITTED THAT THE ADDITIONS WERE MADE ON AGREED BASIS AND, THEREFORE, NO PENALTY WAS LEVIABL E ON THE SAME. THE ASSESSING OFFICER REJECTED THE ASSES SEES CONTENTION AND REFERRING TO EXPLANATION-1 TO SECTIO N 271(1)(C) OF THE ACT, AS ALSO, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF K.P.MADHUSUDAN VS. CIT (2001) 251 ITR 99 (SC) AND THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MANGARA M (2005) 276 ITR 362 (P&H), HELD THAT THE ASSESSEE HA D DELIBERATELY FURNISHED INACCURATE PARTICULARS OF IN COME AND TRIED TO EVADE TAXES. THE ASSESSING OFFICER HE LD THAT HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY, THE AS SESSEE WOULD HAVE EVADED TAXES OF RS.4,50,000/- ACCORDING LY, THE ASSESSING OFFICER HELD THE ASSESSEE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND ACCORDINGLY, IMPOSED PENALTY OF RS.1,51,470/- @ 100% OF TAX SOUG HT TO BE EVADED. 4 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT (APPEALS) WHO UPHELD THE PENALTY LEVIED BY STAT ING THAT IT WAS AN ADMITTED FACT THAT THE INCOME SHOWN BY THE ASSESSEE IN HIS RETURN WAS NOT CORRECT AND THE ADD ITIONAL INCOME OFFERED WAS NOT VOLUNTARY BUT BASED ON SPECI FIC FINDINGS OF THE ASSESSING OFFICER. THE LD. CIT (AP PEALS) HELD THAT EVIDENTLY THE ASSESSEE HAD TRIED TO UNDER STATE HIS TAXABLE INCOME TO AVOID PAYMENT OF TAXES. FURT HER THE LD. CIT (APPEALS) HELD THAT NO JUSTIFICATION OR EXP LANATION WAS ALSO OFFERED BY THE ASSESSEE AND, THEREFORE, EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT WAS ATTRACTED. THEREAFTER RELYING ON A NUMBER OF CASE LAWS, THE LD. CIT (APPEALS) HELD THAT IT WAS A FIT CASE F OR LEVY OF PENALTY AND UPHELD THE ORDER OF THE AO. 6. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US. DURING THE COURSE OF HEA RING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE MADE MU LTI PRONGED ARGUMENTS AGAINST THE LEVY OF PENALTY. THE LD. COUNSEL FOR THE ASSESSEE PLEADED THAT THE ADDITIONS MADE IN THE CASE OF THE ASSESSEE WERE AGREED ADDITIONS SUBJECT TO NO PENALTY WHEN NO ADVERSE INTERFERENCE HAD BEEN DRAWN BY THE DEPARTMENT. NO SPECIFIC DEFECT HAD BE EN POINTED OUT BY THE DEPARTMENT IN ANY VOUCHERS OR AN Y BILL, THAT THE BOOKS OF ACCOUNT WERE PROPERLY AUDIT ED AND ALL EXPENSES WERE DULY VOUCHED AND THE ASSESSEE HIM SELF HAD OFFERED THE AMOUNT DURING THE COURSE OF ASSE SSMENT 5 PROCEEDINGS TO AVOID ANY LITIGATION AND TO BUY PEAC E OF MIND. THE LD. COUNSEL FOR THE ASSESSEE PLEADED THA T IN SUCH CIRCUMSTANCES NO PENALTY WAS LEVIABLE. RELIAN CE WAS PLACED ON A NUMBER OF CASE LAWS IN THIS REGARD : A) CIT VS. AGRAWAL ROUND ROLLING MILLS LTD. (88 CCH 03 6 ) (SC) B) CIT VS. SURESH CHANDRA MITTAL (251 ITR 9 )(SC) C) CIT VS. SUBASH KUMAR JAIN (335 ITR 364) (P&HH C) D) CIT VS RAJNISH NATH AGGARWAL (219 CTR 590) (P & H H C) E) CIT VS RAJIV GARG & ORS (313 ITR 256 (P& H HC) F) HERANBA INDUSTRIES LTD. VS DOT IN ITA NO. 2292/MUM/2013 VIDE ORDER DATED 08 7. THE SECOND LINE OF ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE DISALLOWANCE OF EXPEN DITURE AND ESTIMATION OF INCOME WAS PURELY ADHOC MADE ON ACCOUNT OF DOUBTS AND SUSPICION WITHOUT PINPOINTING ANY DEFECT AND, THEREFORE, THERE WAS NO QUESTION OF INV ITING ANY PENALTY UNDER SECTION 271(1)(C) OF THE ACT. RE LIANCE WAS PLACED ON A NUMBER OF CASE LAWS IN THIS REGARD ALSO. THEREAFTER LD. COUNSEL FOR THE ASSESSEE PLEADED TH AT THE ADDITIONS MADE IN QUANTUM PROCEEDINGS DO NOT AUTOMATICALLY LEAD TO THE LEVY OF PENALTY. THE LD. COUNSEL FOR THE ASSESSEE ALSO DISTINGUISHED EACH AND EVERY CASE LAW RELIED UPON BY THE LD. CIT (APPEALS) WHILE UPHO LDING THE LEVY OF PENALTY. 8. THE LD. D.R., ON THE OTHER HAND, RELIED UPON TH E ORDER OF THE LD. CIT (APPEALS). 6 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO DOCUMEN TS PLACED BEFORE US. 10. THE UNDISPUTED FACTS OF THE PRESENT CASE, WE FIND,ARE THAT THE ASSESSEE IS A WINE CONTRACTOR AND THE IMPUGNED YEAR IS THE FIRST YEAR OF WORKING OF THE A SSESSEE FIRM. ADMITTEDLY, THE ASSESSEE HAD SHOWN AHATA INC OME ON ESTIMATE BASIS AND NO CASH MEMOS WERE ISSUED BY THE SALESMEN OF AHATAS RUN BY THE ASSESSEE. WHEN CONFR ONTED WITH THE SAME, THE ASSESSEE HAD VOLUNTARILY SURREND ERED RS.3 LACS ON ACCOUNT OF AHATA INCOME. SIMILARLY, T HE ASSESSING OFFICER FOUND SOME VOUCHERS NOT PROPERLY PREPARED AND WHEN THE ASSESSEE WAS CONFRONTED WITH THE SAME, HE SURRENDERED RS.1 LAC OUT OF MISCELLANEOUS EXPENSES AND RS.50,000/- OUT OF GENERAL EXPENSES. IT IS ON THESE ADDITIONS MADE, THAT THE PENALTY UNDER SEC TION 271(1)(C) OF THE ACT HAS BEEN LEVIED. 11. WHAT EMERGES FROM THE ABOVE IS THAT THE PENALT Y HAS BEEN LEVIED FOR CONCEALING AHATA INCOME TO THE EXTENT OF RS.3 LACS AND WRONGLY CLAIMING EXPENSES ON ACCOU NT OF GENERAL AND MISCELLANEOUS EXPENSES AMOUNTING IN ALL RS.50,000/-. BE THAT AS IT MAY, WE FIND THAT THERE IS NO ADVERSE FINDING EITHER IN THE ASSESSMENT ORDER OR T HE PENALTY ORDER RELATING TO AFORESAID TWO ISSUES EXCE PT FOR THE ADMITTANCE BY THE ASSESSEE THAT HE HAS RETURNED HIS 7 AHATA INCOME ON ESTIMATE BASIS SINCE THE SALESMEN H AD NOT ISSUED CASH VOUCHERS PROPERLY, AS ALSO THE SURR ENDER ON ACCOUNT OF THE SAME WHICH WE FIND, WAS ACCEPTED AS SUCH BY THE ASSESSING OFFICER. THERE IS NO FINDING EITHER IN THE ASSESSMENT ORDER OR THE PENALTY ORDER THAT T HE ESTIMATION OF INCOME BY THE ASSESSEE WAS ON THE LOW ER SIDE TO THE EXTENT OF RS.3 LACS WHICH RESULTED IN CONCEALMENT OF INCOME TO THIS EXTENT. THERE IS NO IOTA OF EVIDENCE ON RECORD TO SHOW THAT THE INCOME RETURNED BY THE ASSESSEE WAS ON THE LOWER SIDE. THE ADDITION A LSO WAS MADE ON ADHOC BASIS WITHOUT ANY SHRED OF EVIDENCE I N SUPPORT OF CONCEALMENT OF INCOME TO THAT EXTENT. C LEARLY, THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF TH E ASSESSEE WITHOUT MAKING ANY FURTHER INVESTIGATION E ITHER WITH REGARD TO THE INCOME ESTIMATED OR THE INCOME SURRENDERED. SIMILAR IS THE CIRCUMSTANCE IN THE CA SE OF ADDITION MADE ON ACCOUNT OF EXPENSES DISALLOWED AMOUNTING TO RS.1,50,000/-. NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE VOUCHERS OF THE ASSESSEE EXCEPT FOR A GENERAL OBSERVATION AND AS IN THE CASE OF AHATA IN COME, THE SURRENDER MADE BY THE ASSESSEE HAS BEEN ACCEPTE D WITHOUT MAKING ANY EFFORT TO DETERMINE WHETHER THE SAME REFLECTED THE CONCEALED INCOME OF THE ASSESSEE OR N OT. CLEARLY THERE IS NO SPECIFIC FINDING OF CONCEALMENT OF INCOME IN THE PRESENT CASE. FOR LEVYING PENALTY UN DER SECTION 271(1)(C) OF THE ACT, THERE HAS TO BE A POS ITIVE ACT OF CONCEALMENT AND THE ONUS TO PROVE THE SAME IS ON THE DEPARTMENT. ORDER IMPOSING PENALTY BEING QUASI CRI MINAL 8 IN NATURE, BURDEN LIES ON THE DEPARTMENT TO ESTABLI SH THAT ASSESSEE CONCEALED HIS INCOME. THE HONBLE PUNJAB A ND HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH V S CIT (2002) 258 ITR 85 HAS WHILE LAYING DOWN THE ABOVE PROPOSITION HELD IN ITS ORDER AS FOLLOWS: IN ORDER TO ATTRACT CLAUSE (C) OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASS ESSEE OF THE PARTICULARS OF HIS INCOME OR IF HE FURNISHES IN ACCURATE PARTICULARS OF SUCH INCOME. WHAT IS TO BE SEEN IS WH ETHER THE ASSESSEE IN THE PRESENT CASE HAD CONCEALED HIS INCOM E AS HELD BY THE ASSESSING OFFICER AND THE TRIBUNAL. HE HAD NOT MAINTAINED ANY ACCOUNTS AND HE FILED HIS RETURN OF I NCOME ON ESTIMATE BASIS. THE ASSESSING OFFICER DID NOT AGREE W ITH THE ESTIMATE OF THE ASSESSEE AND BROUGHT HIS INCOME TO T AX BY INCREASING IT TO RS. 2,07,500. THIS, TOO, WAS ON ESTIMATE B ASIS. THE TRIBUNAL AGREED THAT THE INCOME OF THE ASSESSEE HAD TO BE ASSESSED ON AN ESTIMATE OF THE TURNOVER BUT WAS OF T HE VIEW THAT THE ESTIMATE AS MADE BY THE ASSESSING OFFICER W AS HIGHLY EXCESSIVE AND IT FIXED THE TOTAL INCOME OF TH E ASSESSEE AT RS. 1,50,000 FOR THE YEAR UNDER APPEAL. IT IS, THUS, CLEA R THAT THERE WAS A DIFFERENCE OF OPINION AS REGARDS T HE ESTIMATE OF THE INCOME OF THE ASSESSEE. SINCE THE ASSESSING O FFICER AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSIN G THE INCOME OF THE ASSESSEE, IT CANNOT BE SAID THAT THE AS SESSEE HAD 'CONCEALED THE PARTICULARS OF HIS INCOME' SO AS TO ATTRACT CLAUSE (C) OF SECTION 271(1) OF THE ACT. THERE IS NOT EVEN AN IOTA OF EVIDENCE ON THE RECORD TO SHOW THAT THE INC OME OF THE ASSESSEE DURING THE YEAR UNDER APPEAL WAS MORE THAN THE INCOME RETURNED BY HIM. ADDITIONS IN HIS INCOME WERE M ADE, AS ALREADY OBSERVED, ON ESTIMATE BASIS AND THAT BY ITS ELF DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. THERE HAS TO BE A POSITIV E ACT OF CONCEALMENT ON HIS PART AND THE ONUS TO PROVE THIS IS ON THE DEPARTMENT. 9 12. MOREOVER THE ADDITIONS MADE ARE PURELY ADHOC AND MERE ESTIMATIONS ONLY WHICH DO NOT TANTAMOUNT T O CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RELIANCE PLAC ED BY LD. COUNSEL FOR THE ASSESSEE ON THE DECISIONS OF TH E PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS IQBAL SINGH & CO.(2009)180 TAXMANN 355 AND CIT VS MODI INDUSTRIAL CORPORATION (2010) 34 DTR 158,IN THIS RE GARD, WE FIND, IS APT. 13. FURTHER THE CASE LAWS RELIED UPON BY THE LD. CIT(A) WHILE UPHOLDING THE LEVY OF PENALTY ARE MAIN LY RELATED TO THE ATTRACTION OF THE EXPLANATION TO SEC TION 271(1)(C), WHICH WE FIND IS NOT APPLICABLE IN THE P RESENT CASE, SINCE THERE IS NO FINDING OF CONCEALMENT OF I NCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN T HE FIRST PLACE FOR WHICH THE ASSESSEE WAS REQUIRED TO GIVE A NY EXPLANATION. THE ASSESSEE HAD ON THE FIRST OCCASIO N ADMITTED THAT IT HAD ESTIMATED THE INCOME OF ITS AH ATAS, EVEN BEFORE THE AO COULD DISCOVER ANYTHING ADVERSE TO THIS EFFECT, WHICH IN ANY CASE ,WE FIND HE DID NOT, EVEN AFTER AFORESAID ADMITTANCE BY THE ASSESSEE AND SURRENDER OF INCOME ON THIS ACCOUNT OR FOR THAT MATTER ON ACCOUN T OF EXPENSES. FOR THIS REASON ALSO THE RELIANCE PLACED BY THE CIT ON THE DECISION OF THE APEX COURT IN MAK DATA P VT. LTD. VS CIT AND THE DECISION OF THE PUNJAB AND HAR YANA 10 HIGH COURT IN THE CASE OF PREMPAL GANDHI VS CIT 33 5 ITR 23 DOES NOT APPLY IN THE ASSESSEES CASE. 14. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DELETE THE PENALTY LEVIED . 15. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21ST NOVEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH