Rashid K. Nurani, Ahmedabad V. ITO, Ward-6(1)(5), Ahmedabad

ITA 758/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6567 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-02-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K SADHWANI
• Section: 271(1)(c); 44AD; 143(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT ./ ITA.NO.758/AHD/2018 / ASSTT. YEAR: 2014-15 RASHID K. NURANI 36,N3 SHIV SHAKTI ESTATE OPP: KASHIRAM TEXTILE MILL NAROL, AHMEDABAD 382 405 VS ITO, WARD-6(1)(5) AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI S.K. SADHWANI, AR REVENUE BY : SHRI DILIP KUMAR, SR.DR / DATE OF HEARING : 05/02/2020 / DATE OF PRONOUNCEMENT: 07/02/2020 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-6, VADODARA DATED 19.2.2018 PASSED FOR TH E ASSTT.YEAR 2014-15. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING PENALTY OF RS.1,34,987/- WHICH WAS IMPOS ED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ELECTRONICALLY ON 8.11.2014 DECLARING TOTAL INCOME AT RS.3,78,875/-. A NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 29.9.2015 WHICH WAS DULY SERVED UPON THE ASSESSEE. AFTER THE SERVICE O F NOTICE UNDER SECTION 143(2), THE ASSESSEE HAS FILED A REVISED STATEMENT OF INCOME DISCLOSING ADDITIONAL INCOME AND PAID TAXES THEREON. THIS COM PUTATION READS AS UNDER: ITA NO.758 /AHD/2018 2 PARTICULAR AMT(IN RS) AMT(IN RS) INCOME AS PER RETURN OF INCOME 3,78,875/- ADD:PROFITS/GAINS FROM BUSINESS U/S 44AD 6,42,981/- SAVING BANK & F.D. INTEREST INCOME 15,638/- DIVIDEND INCOME 4,819/- INTEREST INCOME OF MINOR 20,637/- 6,84,075/- INCOME OFFERED & ASSESSED 10,62,950/- 4. THE LD.AO INITIATED PENALTY PROCEEDINGS FOR VISI TING THE ASSESSEE WITH REGARD TO THE ADDITIONAL DISCLOSURE OF INCOME AMOUN TING TO RS.6,84,075/-. AFTER HEARING THE ASSESSEE, THE LD.AO HAS IMPOSED P ENALTY OF RS.1,34,075/-. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO TH E ASSESSEE. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH TH E RECORD. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS D IRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAKE NO TE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN 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 T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, ITA NO.758 /AHD/2018 3 (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE 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 EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS ITA NO.758 /AHD/2018 4 RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 7. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE FA CTS OF THE PRESENT CASE. THE CASE OF THE ASSESSEE IS THAT NOTICE UNDER SECTI ON 143(2) WAS REQUIRED TO BE GIVEN TO AN ASSESSEE BY THE AO FOR SCRUTINIZING ITS RETURN. THIS IS AN OPPORTUNITY TO AN ASSESSEE TO SUBMIT WHAT THE ASSES SEE WANTS TO SUBMIT IN SUPPORT OF THE RETURN HE HAS SUBMITTED. ON RECEIPT OF SUCH NOTICE, THE ASSESSEE REALISED THE MISTAKE THAT HIS TAX CONSULTANT HAS NO T INCLUDED THE INCOME WITH RESPECT TWO BANK ACCOUNTS. IN OTHER WORDS, THE ASS ESSEE WAS IN THE RETAIL BUSINESS OF CHEMICALS. THE SALE PROCEEDS WERE BEIN G DEPOSITED IN DIFFERENT BANKS. THE ASSESSEE HAS SUBMITTED DETAILS OF THESE BANK ACCOUNTS TO THE TAX CONSULTANTS, AND ITS INCOME WAS TO BE COMPUTED UNDE R SECTION 44AD. ITA NO.758 /AHD/2018 5 SOMEHOW THE DETAILS FROM TWO BANKS ACCOUNTS WERE NO T CONSIDERED BY THE TAX CONSULTANT WHILE FILING RETURN. THEREFORE, THE MOM ENT IT CAME TO KNOW TO THE NOTICE OF THE ASSESSEE, HE IMMEDIATELY FILED A REVI SED STATEMENT AND PAID TAXES. HE DID NOT DISPUTE INCLUSION OF THE INCOME EMBEDDED IN THOSE ACCOUNTS. SIMILARLY, HE HAS INCLUDED CERTAIN MINOR INCOME IN SHAPE OF DIVIDEND INCOME OF RS.4,819/- AND INTEREST INCOME. NO DOUBT ASSESSEE SHOULD HAVE BEEN MORE VIGILANT WHILE FILING RETURN, BUT HI S CONDUCT IS TO BE SEEN FROM THE ANGLE THAT HE WAS RUNNING A PROPRIETARY CONCERN AND HE HAS GIVEN ALL THE DETAILS TO HIS TAX CONSULTANT. UNDER SOME HUMAN ER ROR, THE PROCEEDS FROM RETAIL SALE OF CHEMICALS DEPOSITED IN TWO ACCOUNTS REMAINED TO BE ACCOUNTED FOR THE PURPOSE OF COMPUTATION OF TURNOVER FOR ESTI MATING PROFIT UNDER SECTION 44AD. TO MY MIND, IT IS A FIT CASE WHERE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD VS. STATE OF ORISSA, 83 ITR 026 IS APPLICABLE ON THE GIVE FACTS. OMISSION AT THE END OF THE ASSESSEE WAS NEITHER DELIBERATE NOR CONTUMACIOUS IN CONSCIOUS DISREGARD TO HIS OBLIGATION. THE ASSESSEE HAS IMMEDIATELY FILED A REVISED STATEMENT AND PAID TAXES. HE DID NOT LINGER ON THE DISPUTE WITH THE DEPARTMENT, AND HENC E A BONA FIDE MISTAKE. THEREFORE, I ALLOW THIS APPEAL, AND DELETE PENALTY IMPOSED UPON THE ASSESSEE. 8. IN THE RESULTS, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 7 TH FEBRUARY, 2020 AT AHMEDABAD. SD/- (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED 07/02/2020