SHASHIKANT CHIMANLAL BHAGAT, MUMBAI V. ITO 18(2)(2), MUMBAI

ITA 7210/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8158 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2006-2007
• Appeal Filed On: 07-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 7210 / MUM/ 20 1 6 ( / ASSESSMENT YEAR: 200 6 - 07 ) SHRI SHASHIKANT CHIMANLAL BHAGAT M/S. SURATWALA NAGINDAS & CO., 12/13, PIR BAGADI DARGAH, TRUST CHAWL, DR. DSILVA ROAD, DADAR (W), MUMBAI - 400028. / VS. ITO 18(2)(2) MUMBAI ./ ./ PAN/GIR NO. : AAAPB 9713 D ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 24 . 12 .201 8 / DATE OF PRONOUNCEMENT : 27. 12 .2018 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 15 .0 9 .201 6 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 33 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2006 - 07 IN WHICH THE PEN ALTY LEVIED BY THE AO HAS BEEN ORDERED TO BE CONFIRMED . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LD. AO HAS ERRED IN LEVYING PENALTY OF RS.6,24,515/ - WITHOUT APPRECIATING THE FACTS OF THE CASE IN THE RIGHT PERSPECTIVE. ASSESSEE BY : SHRI SNEHAL SHAH REVENUE BY: SHRI MANOJ KUMAR SINGH ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 2 2. THE GROUND OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 3. THE APPELLANT RESERVE THE RIGHT TO AMEND, ALTER OR ADD TO THE GROUND OF APPEAL. 4. THE APPELLANT THEREFORE PRAYS THAT THE PENAL ACTION SO INITIATED BE DELETED. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE FILED HIS RETUR N OF INCOME FOR THE A.Y. 2006 - 07 ON 31 .03.20 06 DECLARING TOTAL INCOME TO THE TUNE OF RS.36,630 / - . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE INFORMATION REVEALS THAT AN AMOUNT OF OF RS.12,45,000/ - WAS DEPOSITED WITH THE BANK AC COUNT OF THE ASSESSEE LIES AT SHAMRAO VITTHAL CO - OP. BANK, BANDRA. SIMILARLY, IT SHOWED THE INVESTMENT OF RS.40,25,000/ - IN A PROPERTY. THE NOTICE WAS GIVEN TO THE ASSESSEE AND ASSESSEE FILED THE REPLY THAT THE SAID AMOUNT WAS NOT BELONGING TO HIM BEING TH E ACCOUNT WAS JOINTLY HELD BY HIM WITH HIS WIFE SMT. TARULATA BHAGAT AND HIS SON NILESH BHAGAT. THEREAFTER, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY MAKING ADDITION OF RS.12,45,000/ - U/S 68 OF THE ACT. THE ASSESSEE FILED AN APPEAL BEFORE THE C IT(A) WHO SOUGHT THE REMAND REPORT BEFORE THE AO AND THE AO IN HIS REMAND REPORT DATED 22.06.2009 RECOMMENDED THE ASSESSMENT OF THE ASSESSEE ON PROTECTIVE BASIS. THEREAFTER, THE CIT(A) BY RELYING UPON THE REMAND REPORT OF THE AO CONFIRMED THE ADDITION OF A N AMOUNT OF RS.12,45,000/ - U/S 68 OF THE ACT AND RS.7,80,000/ - U/S 69 OF THE ACT. THEREAFTER, THE PENALTY PROCEEDING WAS INITIATED AND THE AO LEVIED THE PENALTY IN SUM OF RS.6,25,515/ - . THE ASSESSEE FILED AN APPEAL BEFORE ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 3 THE CIT(A) WHO CONFIRM ED THE PENAL TY ORDER , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE PETITION HAS BEEN FILED 23 DAYS DELAY ED AND THE ASSESSEE TOOK THE PLEA TH AT HE WAS SUFFER ING FROM FEVER, THEREFORE, UNABLE THE CONTACT TO HIS CA. THE ASSESSEE FILED THE AFFIDAVIT IN SUPPORT OF HIS CLAIM . THE DELAY IS NOT SO LONG . WE ARE OF THE VIEW THAT THE MATTER OF CONTROVERSY IS REQUIRED TO BE ADJUDICATED ON MERITS. T HEREF OR E, IN THE INTEREST OF JUSTICE, W E CONDONE D THE DELAY. AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED ON PROTECTIVE BASIS, THEREFORE, NO PENALTY IS LEVIABLE IN VIEW OF THE LAW SETTLED IN CIT VS. SUPER STEEL (SALES ) (1989) 178 ITR 451, SHEELA, NEW DELHI VS. ITO (ITA. NO.4003/DEL/2016) DATED 20.12.2016, ABHAY KUMAR VS. ACIT (1999) 237 ITR 98 (CAL). HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE REVENUE HAS REFUTED THE SAID CONT ENTION. ON APPRAISAL OF THE FINDING BY THE CIT(A) IN HIS ORDER DATED 25.03.2011 , WE NOTICED THAT THE CIT(A) HAS SUSTAINED THE ADDITION ON PROTECTIVE BASIS WHICH WAS BASED UPON THE REMAND REPORT CALLED BY CIT(A) DATED 22.06.2009. THERE IS NOTHING ON RECORD IN CONNECTION WITH THE ASSESSMENT OF NILESH BHAGAT AND RASHMIBEN MODY . N OW THE QUESTION IS THIS WHETHER THE ASSESSMENT ON PROTECTIVE BASIS LEADS TO LEVY THE PENALTY OR NOT. IN THIS REGARD, THE HONBLE ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 4 CALCUTTA HIGH COURT IN THE CASE OF CIT VS. SUPER STEEL (SALES) (1989) 178 ITR 451 HAS HELD THAT : - THERE CAN BE A PROTECTIVE ASSESSMENT BUT THERE CANNOT BE ANY PROTECTIVE PENALTY. BEFORE ANY PENALTY CAN BE LEVIED, THE INCOME HAS TO BE ASSESSED AS CONCEALED INCOME IN THE ASSESSMENT OF AN ASSESSEE. THEREAFTER, IN PENALTY PROCEEDINGS, THE COMPETENT AUTHORITY HAS TO PROBE INTO AND DECIDE WHETHER THERE HAS BEEN ANY CONCEALMENT OF INCOME. BUT WHERE THERE IS A DISPUTE AS TO WHETHER SUCH INCOME ALLEGEDLY CONCEALED WOULD BE ASSESSED IN THE HANDS OF X OR Y, UNLESS THE D ETERMINATION IS MADE BY THE INCOME TAX OFFICER, NO CHARGE OF CONCEALMENT CAN BE MADE AGAINST THE PERSON IN WHOSE HANDS THE INCOME IS ADDED ON PROTECTIVE BASIS. HE IS LIABLE ONLY IF IT IS HIS INCOME WHICH HAS BEEN CONCEALED. IN OTHER WORDS, ONLY A PERSON UP ON WHOM A SUBSTANTIVE ASSESSMENT IS MADE WOULD BE LIABLE FOR PENALTY PROVIDED THE CONDITIONS PRECEDENT FOR IMPOSITION OF THE PENALTY ARE SATISFIED . THE ID. COUNSEL FOR THE ASSESSEE FURTHER RELIED ON A DECISION OF THE CALCUTTA BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. MISS VASUDHA BAJORIA 40 ITD 414 WHERE IT WAS HELD THAT PENALTIES COULD NOT BE SUSTAINED BECAUSE THE ASSESSMENT HAD BEEN MADE ON A PROTECTIVE BASIS. LOOKING FROM ANOTHER ANGLE ALSO THE PENALTIES CANNOT SURVIVE, FOR THE REASON THAT THE ITO MAD E THE ASSESSMENT ON THE ASSESSEE ON A PROTECTIVE BASIS THOUGH THE RETURN WAS FILED BY HER THROUGH HER GUARDIAN CLAIMING DECLARED INCOME TO BE HER INCOME. THE FINDING GIVEN BY THE ITO IN THAT PROTECTIVE ASSESSMENT IS THAT THE INCOME AND INVESTMENT MADE IS R IOT THE INCOME OR INVESTMENT BY OR OF THE ASSESSEE BUT THAT OF HER FATHER AND THE ITO HAS SPECIFICALLY MENTIONED THAT THE SAME WILL BE ASSESSED IN THE HANDS OF THE FATHER ONLY. LEVY OF PENALTY ON SUCH PROTECTIVE ASSESSMENT IS NOT SUSTAINABLE AT ALL BECAUSE IT TANTAMOUNT PROTECTIVE PENALTIES. ADMITTEDLY THERE IS NO OR WARRANT OF LEVY OF ANY PROTECTIVE _PENALTIES _UNDER THE PROVISIONS OF THE INCOME - TAX ACT, 1961. IT HAS FIRST TO BE ESTABLISHED CONCLUSIVELY WHETHER THE INCOME DECLARED IS OF THE ASSESSEE OR OF HER FATHER. UNTIL THIS EXERCISE IS DONE NO PENALTIES CAN BE LEVIED ON THE PRESENT ASSESSEE ON WHOM PROTECTIVE ASSESSMENT HAS BEEN MADE. NO EVIDENCE IS LAID BEFORE US BY THE REVENUE WHETHER THE INCOME AND THE INVESTMENT ADDED PROTECTIVELY IN THE ASSESSMENT OF THE ASSESSEE HAS BEEN CONSIDERED IN THE INDIVIDUAL ASSESSMENT OF HER FATHER AND FINAL RESULT OR DECISION IN THE CASE OF ASSESSEE FATHER. THE MATTER, THEREFORE, IS STILL ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 5 HANGING AND UNDECIDED. WE ARE, THEREFORE, OF THE OPINION THAT NO PENALTIES CAN BE L EVIED ON THE ASSESSEE ON PROTECTIVE ASSESSMENT. I N THE CASE OF SHEELA, NEW DELHI VS. ITO (ITA. NO.4003/DEL/2016) , IT HAS BEEN HELD THAT : - I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES. I FIND THAT IT IS WELL SETTLED LAW THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ANATHARAM VEERASINGHAIAH & CO. VS. CIT 123 ITR 457. I AGREE WITH THE CONTENTION OF THE ASSESSEE'S COUNSEL THAT MERELY BECAUSE AN ADDITION HAS NOT BEEN CONTESTED, IT CANNOT BE PRESUMED THAT THE ADDITION REPRESENTS CONCEALED INCOME AND PLACED THE RELIANCE OF THE DECISION OF THE HON'BLE SUPREME COURT OF I NDIA IN THE CASE OF SIR SHADILAL SUGAR & GENERAL MILLS LTD. REPORTED AT 168 ITR 705 THAT FROM THE ASSESSEE AGREEING TO ADDITIONS TO HIS INCOME, IT DOES NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED INCOME. I FURTHER FIND THAT ADDITION IN THIS CASE WAS MADE ON PROTECTED ASSESSMENT/ADDITION ON ESTIMATED BASIS WHICH IS AGAINST THE LAW LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF M/S BAHILAL MANILAL PATEL VS. CIT (2015) 232 TAXMANN . 483 (2014). I FURTHER FIND THAT SECTION 271(1)(C) POSTULATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOM E. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE THE ASSESSEE'S CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS SO AS TO WARRANT LEVY OF PENALTY. 7.1 IN THIS REGARD, I FIND THAT HON'BLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIV IL APPEAL NO. 2463 OF 2010 IS SQUARELY APPLICABLE IN THE PRESENT CASE OF THE ASSESSEE WHEREIN IT WAS HELD AS UNDER: - 'A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER S. ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 6 271(1)(C) . IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY AO FOR ANY REASON, THE ASSESSEE WILL INVI TE PENALTY UNDER S. 271 (1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE.' 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENTS, I FIND THAT THE LEVY OF PENALTY IN THIS CASE IS NOT JUSTIFIED. ACCORDINGLY, I QUASH THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE LEVY OF PENALTY IN DISPUTE. IN THE CASE OF ABHAY KUMAR VS. ACIT (1999) 237 ITR 98 (CAL) , IT HAS BEEN HELD THAT : - IT WAS SUBMITT ED BEFORE THE CIT(A) THAT FIRSTLY, THE ASSESSMENT ON THE ASSESSEE WAS A PROTECTIVE ASSESSMENT AND ALTHOUGH THE PROTECTIVE ASSESSMENT IS PERMISSIBLE IN LAW, NO PENALTY IS LEVIABLE AS PROTECTIVE MEASURE. ALL THE ABOVE MENTIONED LAW SPEAKS THAT THE NO PENALT Y IS LEVIABLE IF THE ASSESSMENT HAS BEEN COMPLETED ON PROTECTIVE BASIS. THE FACTUAL POSITION IS NOT DISPUTE IN THIS CASE WHEREIN THE CIT(A) SUSTAINED THE ADDITION ON PROTECTIVE BASIS UPON THE RECOMMEND ATION OF THE AO IN HIS REMAND REPORT DATED 22.06.2009. ACCORDINGLY, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS WRONG AGAINST LAW AND FACTS, THEREFORE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND DELETE THE PENALTY . ITA. NO.7210 /M/201 6 A.Y. 20 06 - 07 7 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED T O BE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 27. 12 . 201 8 SD/ - SD/ - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 27. 12 . 201 8 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI