SHAILESH JAYENDRA BHADALIA, MUMBAI V. ITO 33(3)(4), MUMBAI

ITA 7274/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6104 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 19-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Keywords: Unexplained cash credit
• Section: 271(1)(c); 143(3); 250; 201; 274; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI PAWAN SINGH (JM) & SHRI S RIFAUR RAHMAN (A.M.) ITA NO. 7274/MUM/2018(ASSESSMENT YEAR: 2014-15) SHAILESH JAYENDRA BHADALIA C-1204, HULAS BASTI TOWER MAHAVIR NAGAR, DAHANUKARWADI, KANDIVALI (W), MUMBAI-400 067 PAN : AAEPB3316Q VS ITO-33(3)(4), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI KUMAR KALE- ADVOCATE RESPONDENT BY SHRI V VINODKUMAR, SR DR DATE OF HEARING 21-01-2020 DATE OF PRONOUNCEMENT 07-02-2020 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF CIT(A)-45, MUMBAI DATED 21-08-2018 FOR THE ASSESSMENT YEAR 201 4-15, WHICH IN TURN, ARISES OUT OF THE PENALTY ORDER LEVYING PENAL TY UNDER SECTION(U/S) 271(1)(C) OF THE I.T. ACT, 1961. THE FOLLOWING GRO UNDS HAVE BEEN RAISED BY THE ASSESSEE:- BEING AGGRIEVED BY THE ORDER DATED 10.09.2018 PASS ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-45, MUMBAI [L D. CIT(A)'] U/S 250 OF THE INCOME-TAX ACT, 1961 ('ACT'), YOUR APPELLANT PR EFERS THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH I S WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: 1. LEVY OF PENALTY U/S. 271(1)(C): RS.6.62.230/- A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE SHOW CAUSE NOTIC E U/S. 274 R. W. S. 271(L)(C) OF THE ACT DATED 30.12.2016 ISSUED BY THE LD. AO WAS BAD I N LAW, HAVING BEEN ISSUED WITHOUT SPECIFYING THE PRECISE CHARGE FOR IMPOSITIO N OF PENALTY. 2 ITA 7274/MUM/2018 B. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE PENALTY ORDER IS BAD IN LAW INASMUCH AS THE PENALTY WAS IMPOSED BY THE LD. AO FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME, WHEREAS THE CHARGE MADE OUT AGAINST THE APP ELLANT IN THE RELEVANT ASSESSMENT ORDER WAS FOR FURNISHING INACCURATE PART ICULARS OF INCOME AND CONCEALMENT OF INCOME. C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND ALSO IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY, WIT HOUT APPRECIATING THAT THE APPELLANT HAD OFFERED SATISFACTORY EXPLANATION WHIC H WAS SUBSTANTIATED BY THE DOCUMENTARY EVIDENCE PLACED ON RECORD, AND THAT THE REFORE, THERE WAS NO BASIS FOR IMPOSITION OF THE PENALTY UNDER SECTION 271(L)(C) O F THE ACT. YOUR APPELLANT, THEREFORE, PRAYS THAT THE LD. AO'S ORDER IMPOSING THE PENALTY OF RS.6,62,230/- U/S. 271(L)(C) OF THE ACT BE QUASH ED AND THE PENALTY BE CANCELLED. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT FOR AY 2013-14 WAS COMPLETED ON 30-12-2016 U/S 143(3) OF THE I.T. ACT, 1961. THE AO WHILE PASSING THE ASSESSMENT ORDER TREATED THE LONG TERM CAPITAL GAIN AS UNEXPLAINED CASH CREDIT UNDER SECTION (U/S) 68 AND INITIATED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CON CEALMENT OF INCOME. THE AO, VIDE ORDER DATED 27-02-2017 LEVIED PENALTY @100% OF TAX SOUGHT TO BE EVADED ON THE ADDITION U/S 68. THE AO WORKED OUT PENALTY OF RS.6,62,230/-. ON APPEAL BEFORE CIT(A), THE PENALTY WAS CONFIRMED. THUS, FURTHER AGGRIEVED, THE ASSESSEE H AS FILED PRESENT APPEAL BEFORE US. 3. AT THE OUTSET OF HEARING, THE LD.AR OF THE ASSESSEE SUBMITS THAT SIMILAR PENALTY WAS LEVIED BY AO IN CASE OF ASSESSEES AND WAS CONFIRMED BY LD. CIT(A) VIDE ORDER DATED 21-08-2017, I.E. ON THE SAME DAY, 3 ITA 7274/MUM/2018 HOWEVER, ON FURTHER APPEAL, THE TRIBUNAL DELETED TH E PENALTY IN ITA NO.7273/MUM/2018 DATED 20-02-2018. THE LD.AR FURTH ER SUBMITS THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO INI TIATED PENALTY FOR CONCEALMENT OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HOWEVER, WHILE LEVYING THE PENALTY, THE AO DISCUSSED ALL INGREDIENTS OF EXPLANATION 1 TO SECTION 271(1)(C) O F THE ACT, WHICH RELATES TO CONCEALMENT THE INCOME. HOWEVER, WHILE L EVYING THE PENALTY, THE AO LEVIED THE PENALTY FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. THE LD.AR OF THE ASSESSEE SUBMITS THAT THE AO LEVIED PENALTY WITHOUT APPLICATION OF MIND. THERE WAS NEI THER ANY CONCEALMENT OF INCOME NOR ASSESSEE FURNISHED INACCU RATE PARTICULARS OF INCOME. ADMITTEDLY, THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE QUANTUM ASSESSMENT THAT DOES NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. THE PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT. MERE DISALLOWANCE OF CLAIM IN THE ASSESSMENT ORDER WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. 4. THE LD.AR FURTHER SUBMITS THAT WHILE ISSUING SHOW C AUSE NOTICE U/S 274, THE AO HAS NOT STRUCK DOWN THE INAPPROPRIATE P ORTION OF THE SHOW CAUSE NOTICE. THUS, THE ASSESSEE WAS NOT GIVEN OPP ORTUNITY TO DEFEND THE CHARGE. IN SUPPORT OF HIS SUBMISSION, THE LD.A R OF THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS:- 4 ITA 7274/MUM/2018 DCIT VS NEPA LTD (2015 58 TAXMANN.COM 137 (INDORE-T RIB) CIT VS UPENDRA V MITHANI I.T.A (L) NO.1860 OF 2009 ORDER DATED 5 TH AUGUST, 2009 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPO RTED THE ORDERS OF LOWER AUTHORITIES. THE LD. DR FURTHER SUBMITS THAT ASSESSEE FILED INACCURATE PARTICULARS OF INCOME BY CLAIMING BOGUS ACCOMMODATION ENTRY. THE ADDITION MADE IN ASSESSMENT WAS NOT CHA LLENGED BY ASSESSEE. THE ASSESSEE WAS FULLY AWARE THAT EVEN O N FILING APPEAL BEFORE HIGHER FORUMS, HE WAS NOT ENTITLED FOR ANY R ELIEF; THEREFORE, NO APPEAL WAS FILED BY THE ASSESSEE. SO FAR AS NON ST RIKING OFF OF INAPPROPRIATE PORTION IN THE SHOW CAUSE NOTICE U/S 274 R.W.S. 271(1)(C), THE LD. DR SUBMITS THAT IT IS MERELY A CLERICAL MIS TAKE WHICH HAS BEEN DULY CONSIDERED AND EXPLAINED BY LD.CIT(A) IN THE I MPUGNED ORDER. THE LD. DR SUBMITS THAT ASSESSEE IS NOT ENTITLED FO R ANY RELIEF. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE CASE LAW AS HAVE BEEN RELIED ON BEFORE US. DURING T HE ASSESSMENT THE ASSESSING OFFICER TREATED THE LONG TERM CAPITAL GAI N (LTCG) AND BOGUS MADE ADDITION UNDER SECTION 68 AS UNEXPLAINED CASH CREDIT. THE AO ALSO MADE ADDITION OF RS. 77,183/- ON ACCOUNT OF COMMISS ION FOR CONVERTING THE UNACCOUNTED MONEY IN LTCG. NO FURTHER APPEAL W AS FILED BY THE ASSESSEE. THE ASSESSING OFFICER SERVED NOTICE UNDE R SECTION 271(1)(C) RWS 5 ITA 7274/MUM/2018 274 DATED 301.12.2016. THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THE CLAIM OF LTCG WAS GENUINE; THE ASSESSEE FURNISHED A LL THE DOCUMENTARY EVIDENCES TO PROVE ITS CLAIM. THE ASSESSEE FULLY CO -OPERATED IN THE ASSESSMENT AND PAID DUE TAX. IT WAS ALSO CONTENDED THAT MERE ADDITIONS WERE MADE IN THE ASSESSMENT WOULD NOT BY ITSELF BE TERMED AS FURNISHING INACCURATE PARTICULARS IN ABSENCE OF MEANS REA. TH E ASSESSEE VOLUNTRLY OFFERED LTCG ON SALE OF SHARE TO BUY PEACE. THE REP LY OF ASSESSEE WAS NOT ACCEPTED THE THE ASSESSING OFFICER. THE ASSESSI NG OFFICER LEVIED PENALTY @100% OF TAX SOUGHT TO BE EVADED. THE ASSES SING OFFICER LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULAR OF INC OME. THE ACTION OF ASSESSING OFFICER WAS AFFIRMED BY LD CIT(A). 7. THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, IS READ AS UNDER : '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CO NCEALMENT OF INCOME, ETC. (1) IF THE AO OR THE CIT(A) OR THE PRINCIPAL CIT OR CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT A NY PERSON (A)------ (B)------ ( C ) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME, (D)------- HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, (I) --- (II) --- 6 ITA 7274/MUM/2018 ( III ) IN THE CASES REFERRED TO IN CL. (C) OR CL. (D), I N ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFITS OR THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS. ** ** ** EXPLANATION 1 . WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE C OMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT(A) OR THE PRINCIPAL CIT OR CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CL. (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED.' 8. A CARE FULL PERUSAL OF THE AFORESAID PROVISION MAKE S IT CLEAR THAT IF THE AO IN THE COURSE OF ANY PROCEEDINGS IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME, THEN HE MAY LEVY THE PENALTY ON THE ASSESSE E. TWO DIFFERENT CHARGES I.E., THE CONCEALMENT OF PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME IS PRESCRIBED UNDE R THE PROVISIONS OF SECTION 271(1)(C). IN OUR VIEW THE PENALTY CAN BE I MPOSED FOR A SPECIFIC CHARGE AND NOT EVASIVE OBSERVATION WHILE PASSING TH E ASSESSMENT ORDER. FURTHER, FURNISHING OF INACCURATE PARTICULARS MEANS WHEN THE ASSESSEE HAS NOT DISCLOSED THE PARTICULARS CORRECTLY OR THE PART ICULARS DISCLOSED BY THE ASSESSEE ARE INCORRECT. ON THE OTHER HAND CONCEALME NT OF PARTICULARS OF 7 ITA 7274/MUM/2018 INCOME MEANS WHEN THE ASSESSEE HAS CONCEALED THE IN COME AND HAS NOT SHOWN THE INCOME IN ITS RETURN OR IN ITS BOOKS OF A CCOUNT. FURTHER, EXPLANATION 1 IS A DEEMING PROVISION AND IT IS APPL ICABLE ONLY WHEN AN AMOUNT IS ADDED OR DISALLOWED IN COMPUTATION OF TOT AL INCOME WHICH IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. EXPLANATION 1 IS NOT APPLICABLE IN THIS CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 9. WE NOTED THAT THE AO HAS INITIATED PENALTY PROCEEDI NGS UNDER BOTH THE LIMBS OF SECTION 271(1)(C) WITHOUT SPECIFYING , IF THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. THE PENALTY UL TIMATELY WAS LEVIED ON THE ASSESSEE FOR CONCEALING THE INCOME BY OBSERVI NG THAT THE CASE OF THE ASSESSEE IS COVERED BY THE EXPLANATION 1 TO SECTIO N 271(1)(C). HOWEVER, THE LD CIT(A) WHILE AFFIRMING THE ACTION OF ASSESSI NG OFFICER TOOK THE VIEW THAT THE ASSESSEE FURNISHED INACCURATE PARTICU LARS OF INCOME. 10. WE ARE OF THE VIEW THAT IN THE CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME, THE ONUS IS ON THE REVENUE TO, PROVE THAT T HE ASSESSEE HAD FURNISHED THE INACCURATE PARTICULARS, WHILE IN THE CASE OF CONCEALMENT OF PARTICULARS OF INCOME, WHERE THE EXPLANATION . 1 IS APPLICABLE; THE ONUS IS ON THE ASSESSEE TO PROVE THAT HE HAS NOT CONCEALED THE PARTICULARS OF INCOME. IT IS APPARENT FROM THE EXPLANATION-1, THI S EXPLANATION CLEARLY STATES WHERE IN RESPECT OF ANY FACTS MATERIAL TO TH E COMPUTATION OF TOTAL INCOME OF ANY PERSON SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS 8 ITA 7274/MUM/2018 EXPLANATION WHICH IS FOUND BY THE AO TO BE FALSE OR SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE OR FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DI SCLOSED BY HIM. 11. WE NOTED THAT THE AO, FAILED TO DISCHARGE HIS ONUS AS HE WAS NOT SURE AT THE INITIATION OF PENALTY UNDER SECTION 271(1)(C) F OR WHICH SPECIFIC CHARGE OF PENALTY HAS BEEN INITIATED BY THE AO. EVEN WHILE LEVYING THE PENALTY ALSO, THE AO SIMPLY RELIED ON THE EXPLANATION 1TO S . 271(1)(C), THOUGH HE LEVIED THE PENALTY FOR INACCURATE PARTICULARS OF IN COME . THEREFORE, IN OUR OPINION, THE BASIS OF LEVY OF PENALTY ITSELF IS NOT CORRECT. 12. WE HAVE FURTHER NOTED THAT SIMILAR PENALTY WAS LEVI ED IN CASE OF ASSESSEES WIFE ( SMT. DIVYA SHAILESH BHADALIYA). A ND ON APPEAL BEFORE LD CIT(A) THE PENALTY WAS AFFIRMED VIDE NO. CIT(A) -45/ITO- 33)(1)(4)/ITA-13/2017-18 DATED 21.08.2018. HOWEVER, ON FURTHER APPEAL BEFORE TRIBUNAL THE PENALTY WAS DELETED VIDE IT NO. 7273/MUM/2018 DATED 20.02.2019. THE PENALTY WAS DELETED BY COORDI NATE BENCH BY TAKING VIEW THAT THE PENALTY ORDER WAS NOT PASSED AFTER DU E APPLICATION OF MIND. 13. WE HAVE FURTHER NOTED THAT INDORE BENCH OF TRIBUNAL IN DCIT VS NEPA LTD (SUPRA) ALSO TOOK THE VIEW THAT WHERE ASSESSING OFFICER LEVIED PENALTY ON ASSESSEE FOR FURNISHING INACCURATE PARTI CULARS OF INCOME BY INVOKING EXPLANATION 1 TO SECTION 271(1)(C), SAME C OULD NOT BE SUSTAINED AS EXPLANATION 1 IS APPLICABLE IN RESPECT OF PARTIC ULARS WHICH HAVE BEEN 9 ITA 7274/MUM/2018 CONCEALED AND NOT FOR FURNISHING INACCURATE PARTICU LARS OF INCOME. IN VIEW OF THE AFORESAID DISCUSSION, IN OUR OPINION THE ASS ESSING OFFICER FAILED TO DISCHARGE HIS ONUS BEING NOT SURE AT THE INITIATI ON OF PENALTY UNDER SECTION 271(1)(C) FOR WHICH SPECIFIC CHARGE OF PENA LTY HAS BEEN INITIATED BY THE AO. EVEN WHILE LEVYING THE PENALTY ALSO, THE ASSESSING OFFICER SIMPLY RELIED ON THE EXPLANATION TO SECTION 271(1)( C) EVEN THOUGH HE LEVIED THE PENALTY FOR FURNISHING THE INACCURATE PA RTICULARS OF INCOME. THIS IS APPARENT FROM THE PROVISIONS OF S. 271(1)(C ) THAT EXPLANATION-1 OF SECTION 271(1)(C) IS NOT APPLICABLE IN CASE INACCUR ATE PARTICULARS ARE FURNISHED. THEREFORE, IN OUR OPINION, THE BASIS OF LEVY OF PENALTY ITSELF IS NOT CORRECT. THUS, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 07-02-2020. SD/- SD/- (S.RIFAUR RAHMAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 7 TH FEBRUARY, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI