VINOD FARIA, MUMBAI V. DCIT CEN CIR 4(4) CEN RG 4,

ITA 7667/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1253 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAMATHA MULLAMUDI
• Keywords: Unexplained cash credit; Business income; Initiation of penalty proceedings

Judgement Text

ITA NO. 7667/MUM/2016 ASSESSMENT YEAR : 20 1 0 - 11 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH, MUMBAI [ CORAM : PRAMOD KUMAR ( VICE PRESIDENT ) AND MADHUMITA ROY ( JUDICIAL MEMBER )] ITA NO . 7667 / MUM / 2016 ASSESSMENT YEAR : 2010 - 11 VINOD FARIA ..................... APPELLANT FLAT NO . 3 , 3 RD FLOOR, FAIRY MANOR 13, GUNBOW STREET, FORT, MUMBAI 400 001 [ PAN : AAAPF1045J ] VS DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 4 ( 4 ) , MUMBAI ....................... RESPONDENT APPEARANCES BY HIRAL SEJPAL FOR THE RESPONDENT SAMATHA MULLAMUDI FOR THE APPELLANT DATE OF CONCLUDING THE HEARING : : JANUARY 09, 2020 DATE OF PRONOUNCEMENT : MAY 27, 2020 ORDER PER PRAMOD KUMAR, VP : 1. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 2 ND SEPTEMBER 2016, PASSED BY THE LEARNED CIT ( A ) CONFIRMING THE PENALTY UNDER SECTION 271 ( 1 )( C ) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010 - 11 . 2. GRIEVANCE OF THE ASSESSEE APPELLANT, IN SUBSTANCE, IS THAT THE LEARNED CIT ( A ) ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271 ( 1 )( C ) IN RESPECT OF UNEXPLAINED CASH CREDIT TO THE EXTENT OF RS . 3,41,000 . 3. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPASS OF MATERIAL FACTS . THE ASSESSEE BEFORE US IS AN INDIVIDUAL AND IS ENGAGED IN BUSINESS AS PROPRIETOR OF MAYUR PLY - N - VEERS AND MAHAVIR ALUMINIUM . AS THE ASSESSEE DID NOT ALLEGEDLY COOPERATE IN THE SCRUTINY ASSESSMENT ITA NO. 7667/MUM/2016 ASSESSMENT YEAR : 20 1 0 - 11 PAGE 2 OF 5 PROCEEDINGS, HIS INCOME FROM BUSINESS WAS ASSESSED, ON THE BASIS OF ESTIMATION BY THE ASSESSING OFFICER, AT RS 1,00,00,000 . THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS, INTER ALIA, UNDER SECTION 271 ( 1 )( C ). HOWEVER, WHEN MATTER WAS CARRIED IN APPEAL BEFORE THE CIT ( A ) , LEARNED CIT ( A ) WA S OF THE VIEW THAT IT WILL BE FAIR AND REASONABLE TO RESTRICT THE ESTIMATION OF BUSINESS INCOME AT RS 8,00,000 AND THAT THUS THE APPELLANT GETS A RELIEF OF RS 92,00,000 . HE DID NOT LEAVE IT THAT . HE EXAMINED THE POSITION WITH RESPECT TO THE LOANS SHOWN BY THE ASSESSEE AND OBSERVED THAT HE HAS NO HESITATION IN HOLDING THE LOANS OF RS 1,50,000 FROM FORAM J GALA AND RS 1,91,000 FROM VINIT G GALA AS UNEXPLAINED , AND ACCORDINGLY, THE INCOME OF THE APPELLANT IS DIRECTED TO BE ENHANCED BY AN AMOUNT OF RS 3, 41,000 [ RS 1,50,000 + RS 1,91,000 ]. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271 ( 1 )( C ) IN RESPECT OF THESE QUANTUM ADDITIONS OF RS 8,00,000 AND RS 3,41,000 . WHILE THE PENALTY IN RESPECT OF ADDITION OF RS 8,00,000 WAS DELETED BY THE CIT ( A ) , SO FAR AS THE PENALTY IN RESPECT OF ADDITION OF RS 3,41,000 IS CONCERNED, LEARNED CIT ( A ) CONFIRMED THE SAME . THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US . 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . 5. IN RESPONSE TO A SPECIFIC QUESTION FROM THE BENCH, LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT SHOW US ANY SPECIFIC INITIATION OF PENALTY PROCEEDINGS BY THE CIT ( A ). IT IS ONLY ELEMENTARY THAT UNLESS THE PENALTY PROCEEDINGS ARE SPECIFICALLY INITIATED IN RESPECT OF AN ADDITION, THE PENALTY CANNOT BE IMPOSED . AS NO SUCH ADDITION WAS MADE BY THE ASSESSING OFFICER, THERE COULD NOT HAVE ANY OCCASION TO INITIATE THE PEN ALTY IN RESPECT OF THIS ADDITION OF RS 3,41,000 . THE ADDITION WAS MADE BY THE CIT ( A ) , WHO HAS HIMSELF TERMED IT AS ENHANCEMENT , AND THERE WAS NO SPECIFIC INITIATION OF PENALTY BY THE CIT ( A ). IN THE ABSENCE OF SPECIFIC SATISFACTION RECORDED BY THE CIT ( A ) THAT THE PENALTY IS REQUIRED TO BE INITIATED IN RESPECT OF THE RELATED ADDITION OF RS 3,41,000, IN OUR CONSIDERED VIEW, THE IMPUGNED PENALTY IS DEVOID OF A LEGALLY SUSTAINABLE FOUNDATION . WE, THEREFORE, DEEM IT FIT AND PROPER TO DELETE THE IMPUGNED PENALTY . THE ASSESSEE GETS THE RELIEF ACCORDINGLY . 6. THE ASSESSEE THUS SUCCEEDS IN HIS APPEAL . 7. HOWEVER, BEFORE WE PART WITH THE MATTER, WE MUST DEAL WITH ONE PROCEDURAL ISSUE AS WELL . WHILE HEARING OF THESE APPEALS WAS CONCLUDED ON 7TH JANUARY 2020, THIS ORDER THEREON IS BEING PRONOUNCED TODAY ON TH DAY OF MAY, 2020, MUCH AFTER THE EXPIRY OF 90 DAYS FROM THE DATE OF CONCLUSION OF HEARING . WE ARE ALSO ALIVE TO THE FACT THAT RULE 34 ( 5 ) OF THE INCOME TAX APPELLATE TRIBUNAL RULES 1963, WHICH DEALS WITH PRONOUNCEMENT OF ORDERS, PROVIDES AS FOLLOWS : ITA NO. 7667/MUM/2016 ASSESSMENT YEAR : 20 1 0 - 11 PAGE 3 OF 5 (5) THE PRONOUNCEMENT MAY BE IN ANY OF THE FOLLOWING MANNERS : (A) THE BENCH MAY PRONOUNCE THE ORDER IMMEDIATELY UPON THE CONCLUSION OF THE HEARING . (B) IN CASE WHERE THE ORDER IS NOT PRONOUNCED IMMEDIATELY ON THE CONCLUSION OF THE HEARING, THE BENCH SHALL GIVE A DATE FOR PRONOUNCEMENT . (C) IN A CASE WHERE NO DATE OF PRONOUNCEMENT IS GIVEN BY THE BENCH, EVERY ENDEAVOUR SHALL BE MADE BY THE BENCH TO PRONOUNCE THE ORDER WITHIN 60 DAYS FROM THE DATE ON WHICH THE HEARING OF THE CASE WAS CONCLUDED BUT, WHERE IT IS NOT PRACTICABLE SO TO DO ON THE GROUND OF EXCEPTIONAL AND EXTRAORDINARY CIRCUMSTANCES OF THE CASE, THE BENCH SHALL FIX A FUTURE DAY FOR PRONOUNCEMENT OF THE ORDER, AND SUCH DATE SHALL NOT ORDINARILY ( EMPHASIS SUPPLIED BY US NOW ) BE A DAY BEYOND A FURTHER PERIOD OF 30 DAYS AND DUE NOTICE OF THE DAY SO FIXED SHALL BE GIVEN ON THE NOTICE BOARD . 8. QUITE CLEARLY, ORDINARILY THE ORDER ON AN APPEAL SHOULD BE PRONOUNCED BY THE BENCH WITHIN NO MORE THAN 90 DAYS FROM THE DATE OF CONCLUDING THE HEARING . IT IS, HOWEVER, IMPORTANT TO NOTE THAT THE EXPRESSION ORDINARILY HAS BEEN USED IN THE SAID RULE ITSELF . THIS RULE WAS INSERTED AS A RESULT OF DIRECTIONS OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIVSAGAR VEG RESTAURANT VS ACIT [( 2009 ) 317 ITR 433 ( BOM )] WHEREIN THEIR LORDSHIPS HAD, INTER ALIA, DIRECTED THAT WE, THEREFORE, DIRECT THE PRESIDENT OF THE APPELLATE TRIBUNAL TO FRAME AND LAY DOWN THE GUIDELINES IN THE SIMILAR LINES AS ARE LAID DOWN BY THE APEX COURT IN THE CASE OF ANIL RAI ( SUPRA ) AND TO ISSUE APPROPRIATE ADMINISTRATIVE DIRECTIONS TO ALL THE BENCHES OF THE TRIBUNAL IN THAT BEHALF . WE HOPE AND TRUST THAT SUITABLE GUIDELINES SHALL BE FRAMED AND ISSUED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL WIT HIN SHORTEST REASONABLE TIME AND FOLLOWED STRICTLY BY ALL THE BENCHES OF THE TRIBUNAL . IN THE MEANWHILE ( EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW ) , ALL THE REVISIONAL AND APPELLATE AUTHORITIES UNDER THE INCOME - TAX ACT ARE DIRECTED TO DECIDE MATTERS HEARD BY THEM WITHIN A PERIOD OF THREE MONTHS FROM THE DATE CASE IS CLOSED FOR JUDGMENT . IN THE RULED SO FRAMED, AS A RESULT OF THESE DIRECTIONS, THE EXPRESSION ORDINARILY HAS BEEN INSERTED IN THE REQUIREMENT TO PRONOUNCE THE ORDER WITHIN A PERIOD OF 90 DAYS . THE QUESTION THEN ARISES WHETHER THE PASSING OF THIS ORDER, BEYOND NINETY DAYS, WAS NECESSITATED BY ANY EXTRAORDINARY CIRCUMSTANCES . 9. LET US IN THIS LIGHT REVERT TO THE PREVAILING SITUATION IN THE COUNTRY . ON 24TH MARCH, 2020, HON BLE PRIME MINIS TER OF INDIA TOOK THE BOLD STEP OF IMPOSING A NATIONWIDE LOCKDOWN, FOR 21 DAYS, TO PREVENT THE SPREAD OF COVID 19 EPIDEMIC, AND THIS LOCKDOWN WAS EXTENDED FROM TIME TO TIME . AS A MATTER OF FACT, EVEN BEFORE THIS FORMAL NATIONWIDE LOCKDOWN, THE FUNCTIONING OF THE INCOME TAX APPELLATE TRIBUNAL AT MUMBAI WAS SEVERELY RESTRICTED ON ACCOUNT OF ITA NO. 7667/MUM/2016 ASSESSMENT YEAR : 20 1 0 - 11 PAGE 4 OF 5 LOCKDOWN BY THE MAHARASHTRA GOVERNMENT, AND ON ACCOUNT OF STRICT ENFORCEMENT OF HEALTH ADVISORIES WITH A VIEW OF CHECKING SPREAD OF COVID 19 . THE EPIDEMIC SITUATION IN MUMBAI BEING GRAVE, THERE WAS NOT MUCH OF A RELAXATION IN SUBSEQUENT LOCKDOWNS ALSO . IN ANY CASE, THERE WAS UNPRECEDENTED DISRUPTION OF JUDICIAL WOK ALL OVER THE COUNTRY . AS A MATTER OF FACT, IT HAS BEEN SUCH AN UNPRECEDENTED SITUATIO N, CAUSING DISRUPTION IN THE FUNCTIONING OF JUDICIAL MACHINERY, THAT HON BLE SUPREME COURT OF INDIA, IN AN UNPRECEDENTED ORDER IN THE HISTORY OF INDIA AND VIDE ORDER DATED 6 . 5 . 2020 READ WITH ORDER DATED 23 . 3 . 2020, EXTENDED THE LIMITATION TO EXCLUDE NOT ONL Y THIS LOCKDOWN PERIOD BUT ALSO A FEW MORE DAYS PRIOR TO, AND AFTER, THE LOCKDOWN BY OBSERVING THAT IN CASE THE LIMITATION HAS EXPIRED AFTER 15 . 03 . 2020 THEN THE PERIOD FROM 15 . 03 . 2020 TILL THE DATE ON WHICH THE LOCKDOWN IS LIFTED IN THE JURISDICTIONAL AREA WHERE THE DISPUTE LIES OR WHERE THE CAUSE OF ACTION ARISES SHALL BE EXTENDED FOR A PERIOD OF 15 DAYS AFTER THE LIFTING OF LOCKDOWN . HON BLE BOMBAY HIGH COURT, IN AN ORDER DATED 15TH APRIL 2020, HAS, BESIDES EXTENDING THE VALIDITY OF ALL INTERIM ORDER S, HAS ALSO OBSERVED THAT, IT IS ALSO CLARIFIED THAT WHILE CALCULATING TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCOR DINGLY , AND ALSO OBSERVED THAT ARRANGEMENT CONTINUED BY AN ORDER DATED 26TH MARCH 2020 TILL 30TH APRIL 2020 SHALL CONTINUE FURTHER TILL 15TH JUNE 2020 . IT HAS BEEN AN UNPRECEDENTED SITUATION NOT ONLY IN INDIA BUT ALL OVER THE WORLD . GOVERNMENT OF INDIA HAS, VIDE NOTIFICATION DATED 19 TH FEBRUARY 2020, TAKEN THE STAND THAT, THE CORONAVIRUS SHOULD BE CONSIDERED A CASE OF NATURAL CALAMITY AND FMC ( I . E . FORCE MAJEURE CLAUSE ) MAYBE INVOKED, WHEREVER CONSIDERED APPROPRIATE, FOLLOWING THE DUE PROCEDURE . THE T ERM FORCE MAJEURE HAS BEEN DEFINED IN BLACK S LAW DICTIONARY, AS AN EVENT OR EFFECT THAT CAN BE NEITHER ANTICIPATED NOR CONTROLLED WHEN SUCH IS THE POSITION, AND IT IS OFFICIALLY SO NOTIFIED BY THE GOVERNMENT OF INDIA AND THE COVID - 19 EPIDEMIC HAS BEEN NOTIFIED AS A DISASTER UNDER THE NATIONAL DISASTER MANAGEMENT ACT, 2005, AND ALSO IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE PERIOD DURING WHICH LOCKDOWN WAS IN FORCE CAN BE ANYTHING BUT AN ORDINARY PERIOD . 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING PRONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENTIRE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING AT LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE . WE MUST FACTOR GROUND REALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER . LAW IS NOT BROODING OMNIPOTENCE IN THE SKY . IT IS A PRAGMATIC TOOL OF THE SOCIAL ORDER . THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED . THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY IN CONSONANCE WITH THE LETTER AND SPIRIT OF RULE 34 ( 5 ) BUT IS ALSO A PRAGMATIC APPROACH AT A TIME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPRECEDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM . UNDOUBTEDLY, IN THE CASE OF OTTERS CLUB VS DIT [( 2017 ) 392 ITR 244 ( BOM )] , HON BLE BOMBAY HIGH COU RT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HON BLE ITA NO. 7667/MUM/2016 ASSESSMENT YEAR : 20 1 0 - 11 PAGE 5 OF 5 BOMBAY HIGH COURT ITSELF HAS, VIDE JUDGMENT DATED 15 TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY . THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HON BLE JURISDICTIONA L HIGH COURT AND HON BLE SUPREME COURT ALSO INDICATE THAT THIS PERIOD OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE . IN OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINARILY , IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING WHICH LOCKOUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIMITS SET OUT IN RULE 34 ( 5 ) OF THE APPELLATE TRIBUNAL RULES, 1963 . VIEWED THUS, THE EXCEPTION, TO 90 - DAY TIME - LIMIT FOR PRONOU NCEMENT OF ORDERS, INHERENT IN RULE 34 ( 5 )( C ) , WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE . OF COURSE, THERE IS NO, AND THERE CANNOT BE ANY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BECAUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCLUDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, IN OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE . 11. IN THE RESULT, THE APPEAL IS ALLOWED, IN THE TERMS INDICATED ABOVE . ORDER PRONOUNCED UNDER RULE 34 ( 4 ) OF THE INCOME TAX ( APPELLATE TRIBUNAL ) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD . SD / XX SD / XX MADHUMITA ROY PRAMOD KUMAR ( JUDICIAL MEMBER ) MUMBAI, DATED THE 27 TH DAY OF MAY, 2020 ( VICE PRESIDENT ) COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI