MAHENDRA G GANDHI, MUMBAI V. ITO 21(1)(3), MUMBAI

ITA 7642/MUM/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0291 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Business income
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) MAHENDRA G. GANDHI, 1,YESHWANT BHUVAN, RAM MANDIR RD., VILE PARLE EAST, MUMBAI 400057 PAN: AABPG8818M ...... APPELLANT VS. THE ITO 21(1)(3), MUMBAI 400051. .... RESPONDENT APPELLANT BY : SHRI MAYUR KISNADWALA RESPONDENT BY : SHRI SUMAN KUMAR DATE OF HEARING : 23/11/2017 DATE OF PRONOUNCEMENT : 16/ 02 /2018 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTA INING TO ASSESSMENT YEAR 2009-10 IS DIRECTED AGAINST THE ORDER PA SSED BY CIT(A)-32, MUMBAI DATED 23/10/2013, WHICH IN TURN ARISES OUT OF AN O RDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/05/2012. 2. IN THIS APPEAL ASSESSEE HAS CHALLENGED THE PENAL TY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT AMOUNTING TO RS.2,15,0 64/-. 2 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT ASSESSE E IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 D ECLARING A TOTAL INCOME OF RS.1,62,430/-. THE INCOME SO DECLARED COMPRISED OF BUSINESS INCOME ON ACCOUNT OF RETAIL TRADE OF RS.2,17,537/- COMPUTED O N PRESUMPTIVE BASIS IN TERMS OF SECTION 44AF OF THE ACT; AND, INTEREST INC OME UNDER THE HEAD OTHER SOURCES OF RS.18,750/, THEREBY SHOWING GROSS TOTAL INCOME OF RS.7,89,176/- AFTER REDUCING THE DEDUCTION UNDER CHAPTER VIA OF RS.73,856/-, NET INCOME OF RS.1,62,430/- WAS DECLARED. THE ASSESSMENT HAS BEE N FINALIZED AT RS.7,15,320/-, WHICH INTER-ALIA, CONTAINS THE BUSI NESS INCOME AT RS.2,17,537/- AS RETURNED; SHORT TERM CAPITAL GAIN OF RS.6,96,00 0/-, WHICH WAS HITHERTO NOT DECLARED IN THE RETURN OF INCOME ; RS.25,639/- AS I NTEREST INCOME UNDER OTHER SOURCES, WHICH INCLUDED RS.6,889/-, WHICH WAS HITHE RTO NOT DECLARED IN THE RETURN OF INCOME; A CLAIM OF INTEREST EXPENDITURE T OWARDS HOUSING LOAN UNDER THE HEAD INCOME FROM HOUSE PROPERTY OF RS.1,50,0 00/-, WHICH WAS HITHERTO NOT CLAIMED IN THE RETURN OF INCOME AND AFTER ALLOW ING DEDUCTION UNDER CHAPTER VIA AS CLAIMED, THE TAXABLE INCOME WAS ARRI VED AT RS.7,15,320/-. SUBSEQUENTLY VIDE AN ORDER DATED 30/05/2012, THE AS SESSING OFFICER HELD THE ASSESSEE GUILTY OF CONCEALING PARTICULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT, QUA THE NON-DECLARING OF SHORT TERM CAPITA L GAIN OF RS.6,96,000/- IN THE RETURN OF INCOME. ACCORDINGLY, HE HAS LEVIED A PENA LTY EQUIVALENT TO 100% OF THE TAX SOUGHT TO BE EVADED ON SUCH INCOME, WHICH C AME TO RS.2,15,064/-. THIS LEVY HAS ALSO BEEN AFFIRMED BY THE CIT(A), WHI CH IS PRESENTLY IN DISPUTE BEFORE THE TRIBUNAL. 4. BEFORE US, THE FIRST PLEA OF THE ASSESSEE WAS TH AT THE NON-DECLARATION OF SUCH INCOME IN THE RETURN OF INCOME WAS AN INADVERT ENT MISTAKE, WHICH WAS 3 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) SUO-MOTU BROUGHT OUT BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS, AND IN THIS CONTEXT THE LD.REPRESENTAT IVE FOR THE ASSESSEE REFERRED TO A COMMUNICATION DATED 15/07/2011 ADDRES SED TO THE ASSESSING OFFICER, COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK AT PAGES 18-19. IT IS POINTED OUT THAT INITIALLY A NOTICE UNDER SECTION 1 42(1) OF THE ACT DATED 27/6/2011 WAS ISSUED CALLING FOR VARIOUS DETAILS, W HICH IS ALSO PLACED IN THE PAPER BOOK AT PAGES 6-8. THE LD. REPRESENTATIVE FO R THE ASSESSEE POINTED OUT THAT THIS MISTAKE WAS DUE TO NON-CONSIDERATION OF E NTRIES APPEARING IN THE SAVING BANK ACCOUNT, WHICH WAS AN INADVERTENT MISTA KE. THE LD.REPRESENTATIVE FOR THE ASSESSEE HAS ALSO POINTED OUT THAT SO FAR AS THE ASSESSING OFFICER IS CONCERNED, HE SHOW CAUSED THE ASSESSEE ON THE ASPECT OF SALE OF PROPERTY ONLY ON 20/10/2011 AFTER WHICH AS SESSEE HAD CLARIFIED THE POSITION BEFORE THE ASSESSING OFFICER. IT WAS, THE REFORE, CONTENDED THAT IT WAS A CASE, WHERE THE MISTAKE WAS NOTED BY THE ASSESSEE HIMSELF, WHICH WAS RECTIFIED AND DOES NOT CALL FOR A PENALTY HAVING R EGARD TO THE FOLLOWING JUDGMENTS:- (1) CIT VS. BENNETT COLEMAN & CO.LTD. (2013) 33 TA XMANN.COM 227(BOM) (2) CIT VS. SOMANY EVERGREE KNITS LTD. (2013) 35 T AXMANN.COM 529(BOM) (3) GOPALRAJ T. KAPOOR VS. ITO,ITA NO.6076/MUM/201 3 DATED 05/01/2016 (4) CIT VS.SOCIETEX (2012) 24 TAXMANN.COM 309 (DEL) (5) CIT VS. SIDHARTHA (2009) 184 TAXMAN 460(P&H) 5. ON THIS ASPECT, THE LD. DEPARTMENTAL REPRESENTAT IVE POINTED OUT THAT THE ASSESSING OFFICER HAD SHOW CAUSED THE ASSESSEE ON 20/10/2011 BASED ON AIR INFORMATION, THAT ASSESSEE HAD SOLD A PROPERT Y FOR RS.55.00 LACS ON 4 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) 03/10/2008, WHICH WAS NOT DECLARED IN THE RETURN OF INCOME AND HENCE, IT WAS NOT A CASE WHERE THE DISCLOSURE WAS VOLUNTARILY MAD E BY THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE JUDGME NT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SAMSON MARITIME L TD. VS. CIT, IN INCOME TAX APPEAL NO.1718 OF 2014 DATED 9 TH MARCH, 2017 TO CONTEND THAT SUCH A DISCLOSURE WOULD ATTRACT PENALTY UNDER SECTION 271( 1)(C) OF THE ACT, SINCE IT WAS DETECTED BY THE ASSESSING OFFICER. 6. ON THIS ASPECT, WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE EARLIER PART OF THIS ORDER WE HAVE BRIEFLY TOUC HED UPON THE MANNER IN WHICH THE ASSESSEE HAD FILED HIS COMPUTATION OF INC OME ALONG WITH THE RETURN OF INCOME AND THE ASSESSMENT THEREAFTER COMPLETED B Y THE ASSESSING OFFICER. NO DOUBT IN THE RETURN OF INCOME ASSESSEE HAD NOT D ECLARED ANY SHORT TERM CAPITAL GAIN, WHICH WAS ASSESSED BY THE ASSESSING O FFICER AT RS.6,96,000/-, AND THIS HAS FORMED THE BASIS SUBSEQUENTLY FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT . THE QUESTION TO BE EXAMINED IS AS TO WHETHER THE DISCLOSURE BY THE ASSESSEE VIDE HIS LETTER DATED 1 5/07/2011 IS MADE VOLUNTARILY OR IS AFTER DETECTION BY THE ASSESSING OFFICER. IN CASE, IF IT IS FOUND THAT THE DISCLOSURE WAS VOLUNTARY, PRIOR TO DETECTION BY THE REVENUE, A FURTHER QUESTION WILL ARISE AS TO WHETHER SUCH A DISCLOSURE IS BONAF IDE SO AS TO MITIGATE THE RIGORS OF SECTION 271(1)(C) OF THE ACT. FOR THE SAID PURPOSE, WE HAVE PERUSED THE COPY OF NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 142(1) OF THE ACT DATED 27/06/2011 ALONG WITH ITS ANNEXURE AND FI ND THAT IT IS A VERY GENERALIZED QUESTIONNAIRE NOT TOUCHING UPON ANY TR ANSACTION RELATING TO SALE OF PROPERTY, WHEREAS IN ITS COMMUNICATION DATED 15/ 07/2011 ASSESSEE ASSERTED THAT AFTER GOING THROUGH THE RECORDS IT WA S FOUND THAT CERTAIN TRANSACTIONS REFLECTED IN THE PERSONAL SAVING BAN K ACCOUNT REMAINED TO BE 5 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) DECLARED IN THE RETURN OF INCOME. WITH THE ABOVE P REFACE, THE ASSESSEE MADE THREE CLAIMS, FIRSTLY, HE CLAIMED DEDUCTION FOR INT EREST PAID ON HOUSING LOAN OF RS.1,74,032/-( LIMITED TO RS.1,50,000/-); SECONDLY INTEREST EARNED IN SAVING BANK ACCOUNT, WHICH WAS NOT DECLARED IN THE RETURN; AND THIRDLY, ASSESSEE EXPLAINED THAT HE HAD SOLD THE PROPERTY FOR A CONSI DERATION OF RS.55.00 LACS IN OCTOBER, 2008, WHICH WAS PURCHASED FOR A SUM OF SUM OF RS.42.00 LACS ON 4 TH OCT. 2007. ON THE BASIS OF THE SAID COMMUNICATION, IT IS SOUGHT TO BE CANVASSED THAT THE DISCLOSURE OF THE SALE OF PROPERTY IS PRIO R TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER IN THIS REGARD, WH ICH IS DATED 20/10/2011, COPY OF WHICH IS PLACED AT PAGE 20 OF THE PAPER BOO K. IN THIS NOTICE, THE ASSESSING OFFICER DREW THE ATTENTION OF THE ASSESSE E TO AN AIR INFORMATION RECEIVED REGARDING PURCHASE OF PROPERTY ON 04/10/ 2007 AND SALE OF PROPERTY FOR RS.55.00 LACS ON 03/10/2008. NO DOUBT, ASSESSE E HAS DISCLOSED SALE OF PROPERTY, WHICH WAS HITHERTO NOT DECLARED IN THE RE TURN OF INCOME, ONLY AFTER THE NOTICE WAS ISSUED UNDER SECTION 142(1) OF THE ACT DATED 27/06/2011, BUT TO SAY THAT THE DISCLOSURE WAS ONLY AFTER THE DETE CTION BY THE ASSESSING OFFICER IS FACTUALLY DOUBTFUL. WE SAY SO BECAUSE IN THE AN NEXURE TO THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT DATED 27/06/2011, T HERE IS NO MENTION OF ANY AIR INFORMATION WITH REGARD TO SALE OF PROPERTY. FURTHER, IN OUR VIEW, IT CANNOT BE THE CASE OF THE REVENUE THAT THE SAID OMISSION/M ISTAKE ON THE PART OF THE ASSESSEE IS NON-BONAFIDE SO AS TO ATTRACT PENALTY U NDER SECTION 271(1)(C) OF THE ACT. WE SAY SO FOR THE REASON THAT WHILE IN THE CO MMUNICATION DATED 15/11/2011, WHICH WE HAVE NOTED ABOVE, ASSESSEE BRO UGHT OUT THREE POINTS, WHICH WERE HITHERTO NOT REFLECTED IN THE RETURN OF INCOME. THE OTHER TWO POINTS NAMELY CLAIM FOR DEDUCTION ON ACCOUNT OF INT EREST PAID ON HOUSING LOAN AND INTEREST EARNED ON THE SAVING BANK ACCOUNT WERE ACCEPTED BY THE 6 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) ASSESSING OFFICER IN THE ASSESSMENT AND ON SUCH POI NTS NO PENALTY PROCEEDINGS HAVE BEEN INITIATED UNDER SECTION 271(1)(C) OF THE ACT. PERTINENTLY, THESE POINTS WERE ALSO PART OF THE TRANSACTIONS IN THE SAVING BANK ACCOUNT, THE VERY SAME ACCOUNT WHEREIN THE TRANSACTION OF SALE OF PR OPERTY ALSO HAS BEEN REFLECTED. THUS, IF ON TWO POINTS, THE NON-REPORT ING/OMISSION/MISTAKE IS ACCEPTED AS BONAFIDE AND NOT EXIGIBLE FOR PENALTY, THEN UNDER SIMILAR CIRCUMSTANCES THE OTHER POINT EMERGING FROM THE SAM E BANK ACCOUNT CANNOT BE SAID TO INVITE PENALTY UNDER SECTION 271(1)(C ) OF THE ACT. IN THIS CONTEXT, WE FIND THAT THE RELIANCE PLACED BY THE ASSESSEE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF BENNETT COLEMAN & CO.LTD. (SUPRA) IS APT AS THE OMISSION TO DECLARE THE SHORT TERM CAPITAL GAIN IS ONLY AN INADVERTENT MISTAKE AND NOT WITH A VIEW TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID PAYMENT OF TAX. 6.1 IN SO FAR AS RELIANCE PLACED BY THE LD. DEPARTM ENTAL REPRESENTATIVE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF SAMSON MARITIME LTD.(SUPRA) IS CONCERNED, THE SAME IN OUR VIEW, DOE S NOT HELP THE CASE OF THE REVENUE IN THE PRESENT CASE ON ACCOUNT OF DISTINCTI ON IN FACTS. IN THE CASE BEFORE THE HONBLE HIGH COURT, THE PENALTY RELATED TO THE WRONG DEBIT OF LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS TO DET ERMINE NON-TONNAGE INCOME. THE ASSESSEE HAD CLAIMED THAT IT WAS A MIS TAKE SINCE THE SAID LOSS RELATED TO THE TONNAGE INCOME WHICH WAS OTHERWISE T AXED ON CONCESSIONAL BASIS UNDER CHAPTER XIIG OF THE ACT. THIS PLEA WAS NOT ACCEPTED BY THE INCOME- TAX AUTHORITIES AND ONE OF THE POINT CANVASSED BY T HE ASSESSEE WAS THAT THE MISTAKE WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BY THE ASSESSEE SUO-MOTU. THE AFORESAID ASSERTION OF THE ASSESSEE WAS NEGATED BY THE INCOME-TAX AUTHORITIES, WHICH WAS THEREAFTER UPHELD BY THE HON'BLE HIGH 7 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) COURT. IN THIS CONTEXT, IT WAS NOTICED THAT IN THE NOTICE ISSUED BY THE ASSESSING OFFICER INITIALLY, THE ANNEXURE THEREOF SOUGHT DETA ILS OF THE EXPENDITURES DEBITED TO THE P&L ACCOUNT ALONGWITH FOREIGN EXCHA NGE DETAILS. ONCE THE DETAIL OF EXPENDITURE IS CALLED FOR, THEN THE SUBS EQUENT STAND OF THE ASSESSEE OF BRINING THE MISTAKE TO THE NOTICE OF THE ASSESSI NG OFFICER WAS NOT HELD TO BE A VOLUNTARY DISCLOSURE. THE HON'BLE HIGH COURT N OTED THAT THE ASSESSMENT ORDER ITSELF RECORDED THE FACT THAT VERIFICATION BY THE ASSESSING OFFICER LED TO THE FINDING THAT ASSESSEE HAD WRONGLY DEBITED TH E FOREIGN EXCHANGE LOSS TO ARRIVE AT NON-TONNAGE INCOME. THUS, OF THE FACT-SI TUATION NOTED BY THE HON'BLE HIGH COURT IN THE CASE OF SAMSON MARITIME LTD.(SUPR A) IS QUITE DIFFERENT. IN THE PRESENT CASE, WE HAVE ALREADY NOTED EARLIER THAT TH E NOTICE ISSUED INITIALLY UNDER SECTION 142(1) OF THE ACT DOES NOT CONTAIN AN Y SPECIFIC QUERY AND THAT THE SHOW CAUSE BASED THE AIR INFORMATION OF SALE O F PROPERTY WAS ISSUED MUCH AFTER THE REPLY OF THE ASSESSEE ON 15/07/2011. THEREFORE, IN OUR VIEW, THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COU RT IN THE CASE OF SAMSON MARITIME LTD.(SUPRA) IS NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. IN VIEW OF THE AFORESAID DISCUSSION, WE THEREFORE, DEEM IT FIT TO DELETE THE PENALTY IMPOSED THE ASSESSING OFFICER OF RS.2,15,064/- UND ER SECTION 271(1)(C) OF THE ACT . 7. BEFORE PARTING, WE MAY NOTICE THAT THE ASSESSEE HAS RAISED A PLEA REGARDING INVALIDITY OF THE PENALTY IMPOSED ON THE GROUND THAT THE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1) OF THE ACT DATED 29/11/2011 IS AMBIGUOUS. THE SAID PLEA IS RENDERED ACADEMIC SINC E THE ASSESSEE HAS SUCCEEDED IN THE EARLIER PARAS AND, THEREFORE, THE SAID PLEA HAS NOT BEEN ADJUDICATED. 8 ITA NO. 7642/MUM/2013 (ASSESSMENT YEAR 2009-10) 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 16/02/2018. SD/- SD/- (RAVISH SOOD) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 16/02/2018 VM , SR. PS 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