Harshit Indravadan Talati, Ahmedabad V. The Income Tax Officer, Ward -5(1), Baroda

ITA 713/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9768 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-08-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 26-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: M M PATEL
• Keywords: Gift; Business expenditure; Income from undisclosed sources; Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.713/AHD/2008 ASSESSMENT YEAR:2002-03 DATE OF HEARING:19.8.10 DRAFTED:20.8.10 HARSHIT INDRAVADAN TALATI, C/O MUKESH M PATEL & CO. 304, VITHALBHAI BHAVANA, NR. S.P.COLONY, RLY. CROSSING, AHMEDABAD-13 PAN NO.ABIPT6038Q V/S . INCOME TAX OFFICER, WARD-5(1), BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.M. PATEL, AR RESPONDENT BY:- SHRI R.K. DHANESTA, DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-V, BARODA IN APPEAL NO. CAB/(A )-V/325/02-03 DATED 31-12- 2007. THE PENALTY UNDER DISPUTE WAS LEVIED BY ITO, WARD-5(1), BARODA U/S271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDER DATED 20-02-2007 FOR ASSESSMENT YEAR 2002-03. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FAC TS IN CONFIRMING THE PENALTY OF RS.4,00,000 LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE I.T. ACT. THAT THE LEARNED CIT(A) FURTHER ERRED IN HOLDING TH AT THE APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND THAT THE EXPLANATION OF THE APPELLANT WAS FOUND TO BE FALSE. 3. AT THE OUTSET, IT IS NOTICED THAT THE PENALTY U/ S.271(1) OF THE ACT WAS LEVIED ON THE FOLLOWING THREE ITEMS:- A. ENHANCED FROM RS.80,728/- BY RS.28,722/- 1,09, 500 ITA NO.713/AHD/2008 A.Y 200 2-03 HARSHIT I TALATI BARODA V. ITO WD-5(1), BARODA PAG E 2 TO RS.1,09,500/- B. PAYMENT MADE TO SHRI DHARMESH SHAH 1,50,000 C. PAYMENT MADE TO SMT. HEENA PATEL 5,00,000 TOTAL RS. 7,59,500 NOW, WE WILL DEAL WITH ISSUE OF PENALTY, ISSUE-WISE ABOVE:- 4. FIRST POINT ON WHICH PENALTY LEVIED AND CONFIRME D IS AS REGARDS TO ADDITION MADE U/S.40A(3) OF THE ACT BY THE ASSESSING OFFICER AMOUNTING TO RS.80,720/-, WHICH WAS SUBSEQUENTLY ENHANCED BY CIT(A) AT RS.1,09,520/ -. THE ASSESSEE IS ENGAGED IN PURCHASE AND SALE OF LAND. ACCORDING TO THE AO THE LAND HAS BEEN HELD AS STOCK-IN- TRADE AND THEREFORE THE PAYMENT MADE TO THE LAND OW NERS ARE BUSINESS EXPENSES. ACCORDING TO ASSESSING OFFICER, THE ENTIRE PAYMENT WAS MADE BY BEARER CHEQUES AND ALL THE PAYMENTS WERE MADE TO SINGLE PERSON SHR I BAROT, WHO HAD COUNTERSIGNED ON THE BACK OF THE BEARER CHEQUES AT THE TIME OF EN CASHMENT. ACCORDINGLY, HE MADE DISALLOWANCE U/S.40A(3) OF THE ACT @ 20% OF THE PAY MENT. THE ASSESSEES CLAIM BEFORE THE LOWER AUTHORITIES WAS THAT THE ASSESSEE IS NOT CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF LAND AND THEREFORE THE PROVISI ON OF SECTION 40(3) CANNOT BE INVOKED IN HIS CASE. THE AO CONSIDERED THE TRANSACT ION OF SALE OF PLOT OF LAND BY THE ASSESSEE AS ADVENTURE IN THE NATURE OF TRADE JUST B ECAUSE THE FIRM IN WHICH THE ASSESSEE IS PARTNER, IS CARRY ON SIMILAR NATURE OF BUSINESS AND THE TWO FIRMS ARE NAMELY, M/S.SRINATH ASSOCIATES AND M/S. MINAL ENTER PRISES. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), AGAINST QUANTUM ADD ITION AND HE ENHANCED THE ADDITION AT RS.1,09,500/- AS AGAINST ACTUAL ADDITIO N MADE AT RS.80,728/-. THE TRIBUNAL DELETED THE ENHANCED AMOUNT AND RESTRICTED THE DISALLOWANCE U/S.40A(3) OF THE ACT AT RS.80,728/- AS THE CIT(A) HAS NOT AFFORD ED ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE MAKING ENHANCEMENT. THIS ADD ITION CONFIRMED BY TRIBUNAL HAS BEEN ACCEPTED BY ASSESSEE AND NO FURTHER APPEAL HAS BEEN PREFERRED BEFORE HONBEL JURISDICTIONAL HIGH COURT. THE AO LEVIED TH E PENALTY ON THE ENHANCE ADDITION AMOUNTING TO RS.1,09,500/-. AGGRIEVED, ASSESSEE PRE FERRED APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS R ECORDED BY TRIBUNAL IN QUANTUM APPEAL IN ITA NO.107/AHD/2006 DATED 10-07-2009 FOR ASSESSMENT YEAR 2002-03 THAT THE ASSESSING OFFICER HAS CONSIDERED THE TRANSACTIO N OF SALE OF PLOT OF LAND AS ITA NO.713/AHD/2008 A.Y 200 2-03 HARSHIT I TALATI BARODA V. ITO WD-5(1), BARODA PAG E 3 ADVENTURE IN THE NATURE OF TRADE JUST BECAUSE THE F IRM IN WHICH THE ASSESSEE IS A PARTNER IS ALSO CARRY ON THE SIMILAR NATURE OF BUSI NESS, IT IS NOT CONCLUSIVELY PROVED THAT PARTICULAR TRANSACTION OF SALE OF PLOT IS ADVE NTURE IN NATURE OF TRADE OR NOT. BEFORE US LD. COUNSEL FOR THE ASSESSEE, SHRI M.M.PATEL MAD E SUBMISSIONS THAT THE SALE DEED IS REGISTERED WITH THE GOVERNMENT AUTHORITIES AND ASSESSEE EARNED SHORT-TERM CAPITAL GAINS TAXABLE U/S.45 OF THE ACT AND ASSESSE E IN INDIVIDUAL CAPACITY HAS MADE THIS INVESTMENT IN PLOT AND ACTUALLY HE IS NOT CARR Y ON BUSINESS OF PURCHASE AND SALE OF LAND. ACCORDINGLY, HE ARGUED THAT THE PROVISION S OF SECTION 40A(3) OF THE ACT CANNOT BE INVOKED IN HIS CASE. WE FIND THAT THE AO EVEN IN HIS PENALTY ORDER COULD NOT POINT OUT ANYTHING WHICH PROVES THAT THE ASSESS EE HAS CONCEALED THE PARTICULARS OF INCOME OR HE HAS FURNISHED INACCURATE PARTICULAR S OF INCOME. THE ASSESSEE HAS FILED ALL THE DETAILS OF TRANSACTION ENTERED WITH T HE BUYERS OF THE LAND ALONG WITH RETURN OF INCOME, I.E. COPY OF AGREEMENT, DETAILS OF PAYME NTS AND ALSO DISCLOSED SHORT-TERM CAPITAL GAINS ON THESE TRANSACTIONS. FROM THE FACTS AND CIRCUMSTANCES, IT IS CLEAR THAT THIS IS NOT A CASE OF FURNISHING OF INACCURATE PART ICULARS OF INCOME AS HELD BY DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 174 (SC), WHEREIN THE HONBLE APEX COURT HA S HELD :- WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A M ATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY, THE WORD INACCURATE HAS BEEN DEFINED AS: NOT ACCURATE, NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ERRONEOUS AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTI CULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCUR ATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABL E IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. 6. AFTER HEARING BOTH THE SIDES, WE FIND IN VIEW OF THE ABOVE GIVEN FACTS THAT THIS ISSUE ARE COVERED BY THE DECISION OF HONBLE APEX C OURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE DELETE THE LEVY OF PENALTY BY ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). ITA NO.713/AHD/2008 A.Y 200 2-03 HARSHIT I TALATI BARODA V. ITO WD-5(1), BARODA PAG E 4 7. THE NEXT POINT ON WHICH PENALTY CONFIRMED IS AS REGARDS TO ADDITION MADE ON ACCOUNT OF PAYMENT TO SHRI DHARMESH S SHAH OF RS.1 .50 LAKH AND RS.5 LAKH TO SMT. HEENA PATEL . 8. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE REFER RED TO QUANTUM ORDER OF TRIBUNAL IN ITA NO.107/AHD/2006 (SUPRA), WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER VIDE PARA-9 :- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, SHRI M.M.P ATEL, LEARNED AR OF THE ASSESSEE INVITED OUR ATTENTION TO A LETTER DATED 27 -11-2004 ADDRESSED TO THE ASSESSING OFFICER RELEVANT PORTION OF WHICH READS A S UNDER:- AS YOUR GOODSELVES INTEND TO REJECT THE CLAIM FOR PAYMENT MADE TO SHRI DHARMESH SHAH RS.1,50000/- AND HINA PATEL RS.50000/ - WE REQUEST YOU TO LET US HAVE THE COPIES OF STATEMENT RECORDED OR STATEMENT MADE BY THEM FOR DENYING THAT PAYMENT RECEIVED BY THEM, AS THE ASSESSEE INTENDS TO CROSS EXAMINE BOTH OF THEM BY HIS ADVOCA TE. WE THEREFORE, REQUEST YOU TO FURNISH THE STATEMENTS REQUESTED FOR . COST OF STATEMENTS SHALL BE PAID AS MAYBE ASKED FOR. WE ALSO REQUEST Y OUR GOODSELVES TO FIX THE DATE FOR CROSS EXAMINING BOTH SHRI DHARMESH SHAH AND HINA PATEL UNDER INTIMATION TO THE ASSESSEE. SHRI M.M PATEL, LEARNED AR OF THE ASSESSEE SUBMITTE D THAT THE ASSESSING OFFICER HAS NOT AFFORDED ANY OPPORTUNITY TO CROSS E XAMINE DHARMESH SHAH AND SMT. HEENA PATEL. IT SEEMS THAT THE ASSESSING O FFICER HAS MADE THE DISALLOWANCE RELYING ON THE STATEMENT OF THESE TWO PERSONS WHICH WERE RECORDED BY THE ASSESSING OFFICER AT THE BACK OF TH E ASSESSEE. IN OUR VIEW, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DENYING THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE SHRI DHARMESH S SHAH AND SMT. HEENA PATEL. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) ON T HIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AFTER AFFORDING AN OPPORTUNITY TO CROSS EXAM INE BOTH THE PERSONS BY THE ASSESSEE OR THROUGH HIS AUTHORIZED REPRESENTATIVE. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL IS ALLOWED. AS THE TRIBUNAL HAS SET ASIDE THE ADDITION TO THE F ILE OF ASSESSING OFFICER FOR REFRAMING THE ASSESSMENT, THE PENALTY LEVIED BY THE AO AND CONFIRMED BY CIT(A) CANNOT SURVIVE. ACCORDINGLY, WE DELETE THE PENALTY BUT ASSESSING OFFICER, IN CASE DURING THE COURSE OF RE-FRAMING OF ASSESSMENT, FIND S THAT THIS IS A CASE OF CONCEALMENT, THEN HE IS FREE TO RE-INITIATE THE PEN ALTY U/S.271(1)(C) OF THE ACT. 9. THE NEXT POINT REGARDING LEVY OF PENALTY IS ON A DDITION OF GIFT AMOUNTING TO RS.5,06,126/-. THE LD. COUNSEL FOR ASSESSEE AT THE OUTSET STATED THAT THE TRIBUNAL ITA NO.713/AHD/2008 A.Y 200 2-03 HARSHIT I TALATI BARODA V. ITO WD-5(1), BARODA PAG E 5 HAS DELETED THE ADDITION IN ITA NO.107/AHD/2006 (SUPRA),WHEREIN PARA-14 AS UNDER:- 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION IN MAKING THE IMPUGNED ADDITION. I T IS SEEN THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE H AS RECEIVED GIFTS FROM FRIENDS AND RELATIVES AMOUNTING TO RS.5,06,126/-. T HE ASSESSING OFFICER PRESUMED THAT THESE GIFTS WERE PURCHASED BY THE ASS ESSEE FROM HIS UNACCOUNTED INCOME. IN FACT, THERE IS NO MATERIAL O N RECORD TO SUBSTANTIATE THAT THE GIFTS WERE PURCHASED BY THE ASSESSEE. IN T HE INSTANT CASE, THE DONORS CONFIRMED THE GIFTS HAVING BEEN MADE BY THEM. THE G IFTS WERE RECEIVED THROUGH CHEQUES, WHICH WERE REALIZED THROUGH BANKIN G CHANNEL. ON THE CONTRARY, THESE HAS PROVED THAT THE DONORS ARE GENU INE AND THEY ARE CAPABLE OF MAKING THE GIFTS. WE DO NOT FIND ANY MATERIAL TO CONTROVERT THE ABOVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . IN OUR CONSIDERED VIEW, THE PRIMARY ONUS WHICH RESTED WITH THE ASSESSEE HAS BEEN DISCHARGED AND, THEREFORE, THERE WAS NO JUSTIFICATION IN MAKING THE ADDITION. ACCORDINGLY, WE DO NOT FIND ANY JUSTIFICATION IN MAKING THE ADDITION A ND THE SAME IS HEREBY DELETED. SINCE QUANTUM ADDITION IN APPEAL HAS BEEN DELETED B Y THE TRIBUNAL, THE PENALTY IS CONSEQUENTIALLY DELETED. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AS INDI CATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 17/09/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 17/09/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-V, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD