Sh. Rajinder Singh, Bhawanigarh V. ACIT, Sangrur

ITA 796/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8409 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business expenditure; Opportunity of being heard; Onus to prove; Documents seized
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 796/CHD/2014 ASSESSMENT YEAR: 2007-08 SHRI RAJINDER SINGH, VS THE ACIT, PROP. SARPANCH PROPERTIES, CIRCLE, V. SANGEHARI, SANGRUR. P.O. BHAWANIGARH. PAN: BGEPS6883E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 16.02.2016 DATE OF PRONOUNCEMENT : 08.03.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) PATIALA DATED 25.06.2 014 FOR ASSESSMENT YEAR 2007-08 CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT. 2. BRIEFLY THE FACTS OF THE CASE AS NOTED IN THE PENALTY ORDER ARE THAT THE ASSESSEE IS INDIVIDUAL A ND FILED RETURN OF INCOME OF RS. 39,28,400/- ON 31.10. 2007. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX AC T AND INCOME WAS ASSESSED AT RS.80,17,360/- + RS. 6 L ACS 2 AS AGRICULTURAL INCOME. THE DETAIL OF THE SAME IS AS UNDER : S.NO. NATURE OF ADDITION AMOUNT 1. ON ACCOUNT OF RENT PAID RS. 96,000/- 2. ON ACCOUNT OF COMMISSION RS.18,50,100/- 3. ON ACCOUNT OF SALARY PAID TO RS.3,73,500/- VARIOUS PERSONS 4. ON ACCOUNT OF UNVOUCHED RS.17,69,360/- EXPENSES 5. AGRICULTURE INCOME RS. 6,00,000/- 3. THERE WAS A SEARCH ON THE BUSINESS PREMISES AND RESIDENTIAL PREMISES OF SHRI S.P. GOYAL ON 27.09.20 07. SHRI S.P. GOYAL WAS A COMMISSION AGENT OF M/S SIPRA ESTATES LTD., NEW DELHI FOR LAND DEALINGS IN AND AR OUND ZIRAKPUR. ON THE BASIS OF DOCUMENTS SEIZED FROM THE BUSINESS AND RESIDENTIAL PREMISES OF SHRI S.P. GOYA L, STATEMENT OF ASSESSEE SHRI RAJIDNER SINGH WAS RECOR DED IN WHICH HE HAS ADMITTED TO HAVE RECEIVED COMMISSION O F ABOUT 2 CRORES FROM M/S SIPRA ESTATE LTD. AND IN ASSESSMENT YEAR UNDER APPEAL, AMOUNT WAS QUANTIFIED TO RS. 1,12,24,000/-. THE ASSESSEE FILED RETURN OF IN COME DECLARING INCOME OF RS. 45,28,400/- AFTER CLAIMING EXPENSES OF RS. 72,95,600/- UNDER THE VARIOUS HEADS FROM THE TOTAL COMMISSION OF RS. 1,12,24,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SEEN THAT ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. THE ASSESSEE HAS FILED CASH-FLOW STATEMENT GIVING DETAI LS OF ALLEGED CASH OF RS. 79,70,188/- AVAILABLE WITH THE 3 ASSESSEE TO MEET BUSINESS EXPENSES. THE ASSESSING OFFICER DISCUSSED THE SOURCE OF THE FUNDS WITH THE ASSESSEE UNDER VARIOUS HEADS AND HELD THAT ASSESSEE WAS HAVING AVAILABILITY OF THE FUNDS TO LIMITED EXTENT AND THE EXPENSES BEYOND THE AVAILABILITY OF THE FUNDS COULD NOT BE ALLOWED. THE ASSESSING OFFICER DISCUSSED VARIOUS ADDITIONS ON ACCOUNT OF DISALLOWANCE OF EXPENSES AS NOTED ABOVE AND MADE THE ADDITIONS AS REFERRED TO ABOVE. THE PENALTY PROCEEDINGS WERE ALSO INITIATED SEPARATELY. 3(I) IN THE MEANTIME, LD. CIT(APPEALS) DECIDED THE APPEAL FILED BY THE ASSESSEE ON QUANTUM VIDE ORDER DATED 09.06.2010 AND DIRECTED TO CALCULATE NET PROFIT OF THE ASSESSEE BY APPLYING PROFIT RATE OF 55% ON THE TOTA L COMMISSION RECEIPTS. ORDER OF THE LD. CIT(APPEALS) IS REPRODUCED IN THE PENALTY ORDER AND ACCORDING TO TH E FINDINGS OF THE LD. CIT(APPEALS), THE RESULTANT NET ADDITION WAS WORKED OUT TO RS. 22,44,800/-. THE ASSESSING O FFICER AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE A CT ON ADDITION SO MAINTAINED BY LD. CIT(APPEALS) IN A SUM OF RS. 22,44,800/-. THE PENALTY ORDER WAS CHALLENGED BEFO RE LD. CIT(APPEALS) AND VARIOUS SUBMISSIONS HAVE BEEN MADE . HOWEVER, THE LD. CIT(APPEALS) DID NOT ACCEPT CONTEN TION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESS EE BECAUSE THE ASSESSEE FAILED TO PRODUCE NECESSARY EVIDENCES IN SUPPORT OF THE CLAIM AND APPEAL OF THE ASSESSEE WAS DISMISSED. 4 4. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. IT IS ADMITTED FACT THAT THE REVENUE PREFERRED APPEAL BEF ORE ITAT CHANDIGARH BENCH AGAINST THE ORDER OF THE LD. CIT(APPEALS) DATED 09.06.2010 ON QUANTUM IN ITA 1060/2010 AND THE TRIBUNAL VIDE ORDER DATED 10.05.2 012 REVERSED THE ORDER OF THE LD. CIT(APPEALS) AND REST ORED THE ORDER OF THE ASSESSING OFFICER. THE FINDINGS OF TH E TRIBUNAL IN PARAS 8 TO 14 ARE REPRODUCED AS UNDER : 8. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIO NS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE UNDISPUTED FACTS IN THIS CASE ARE, THAT THE ASSESSE E FAILED TO MAINTAIN BOOKS OF ACCOUNT OR ANY RECORD TO SUPPO RT HIS CLAIM OF EXPENSES. SIMILARLY, NO VOUCHER, WHAT -SO- EVER HAS BEEN MAINTAINED BY THE ASSESSEE, TO SUPPOR T HIS CLAIM OF EXPENDITURE. THE ASSESSEE IS MERELY MAKING BARE ASSERTIONS THAT SINCE THE INCOME HAS BEEN DECLARED, THERE MUST HAVE BEEN SOME EXPENSES. IT IS ALSO UNDISPUTE D FACT THAT THE RECEIPT OF THE SO-CALLED COMMISSION OF RS.1,12,24,000/-, HAS BEEN CREDITED ON 31.3.2007 I. E. THE LAST DATE OF THE FINANCIAL YEAR. THE ASSESSEE MERE LY RELIED UPON FUND-FLOW STATEMENT, DEMONSTRATING AVAILABILITY OF FUNDS, TO INCUR SUCH EXPENDITURE. HOWEVER, THERE HAS BEEN NOT EVEN A SINGLE ENTRY DUR ING THE PREVIOUS YEAR, UNDER REFERENCE IN THE BANK ACCO UNT OF THE ASSESSEE, DEMONSTRATING AVAILABILITY OF FUNDS, FOR THE PURPOSE OF INCURRING EXPENDITURE, AS CLAIMED BY THE ASSESSEE. THE FUND-FLOW STATEMENT IS NOTHING BUT, AN ARTIFICIAL AVAILABILITY OF FUNDS, CREATED BY THE AS SESSEE, WITHOUT ANY CORROBORATIVE EVIDENCE, TO SUPPORT THE SAME. THE AO HAS BEEN VERY FAIR, LIBERAL IN CONCEDING EXPENSES, MERELY ON THE BASIS OF ASSERTION, MADE BY THE ASSESSEE. NEEDLESS TO SAY THAT AO ISSUED FIRST NOTI CE U/S 143(2) OF THE ACT, ON 21.07.2008 AND PASSED THE 5 ASSESSMENT ORDER ON 28.12.2009. THE AO HAS AFFORDE D PROPER AND REASONABLE OPPORTUNITY TO THE ASSESSEE. HOWEVER, THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE , TO SUPPORT HIS CLAIM OF IMPUGNED EXPENSES, EXCEPT FILI NG SELF-SERVING AND UN-CORROBORATIVE EVIDENCE, IN THE FORM OF FUND-FLOW STATEMENT. 9. IN THE PRESENT CASE, THE ASSESSEE HAS MADE A CLA IM OF THE IMPUGNED EXPENSES, THEREFORE, THE ONUS LIES ON THE ASSESSEE TO SUPPORT HIS CLAIM, BY WAY OF COGENT AND CORROBORATIVE EVIDENCE. THIS LEGAL PROPOSITION IS SUPPORTIVE OF STATUTORY PROPOSITION, AS CONTEMPLATE D U/S 143(3)(II) OF THE ACT, WHICH IS REPRODUCED HEREUNDE R: 143(3)(II) ON THE DAY SPECIFIED IN THE NOTICE, (II) ISSUED UNDER CLAUSE (II) OF SUB-SECTION (2), O R AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY RE QUIRE ON SPECIFIED POINTS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESSING OFFICER SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSES SEE, AND DETERMINE THE SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO H IM ON THE BASIS OF SUCH ASSESSMENT 10. HAVING REGARD TO THE CLEAR PROVISIONS OF SECTIO N 143(3)(II) OF THE ACT, IT IS INCUMBENT UPON THE ASS ESSEE TO SUPPORT HIS RETURN OF INCOME, BY WAY OF ADDUCING EVIDENCE, WHEREAS THE AO IS COMPETENT TO MAKE ADDITIONS, ON THE BASIS OF RELEVANT MATERI AL IN HIS POSSESSION. THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MAL V CIT (1988) 172 ITR 250, HIGHLIGHTED TH E FACT THAT THE PRINCIPLE OF EVIDENCE LAW ARE NOT TO BE IGNORED BY THE AUTHORITIES, BUT AT THE SAME TIME, H UMAN PROBABILITY HAS TO BE THE GUIDING PRINCIPLE, SINCE THE AO IS NOT FETTERED, BY TECHNICAL RULES OF EVIDENCE, AS HE LD BY THE HON'BLE SUPREME COURT IN THE CASE OF DHAKESHWARI CO TTON MILLS V CIT (1954) 26ITR 775. THE HON'BLE SUPREME COURT, IN THE CASE OF CHUHAR MAL V CIT (SUPRA) HELD THAT 6 WHAT WAS MEANT BY SAYING THAT EVIDENCE ACT DID NOT APPLY TO THE PROCEEDINGS UNDER INCOME-TAX ACT,1961, WAS T HAT THE RIGORS OF RULES OF EVIDENCE, CONTAINED IN THE E VIDENCE ACT WAS NOT APPLICABLE; BUT THAT DID NOT MEAN THAT WHEN THE TAXING AUTHORITIES WERE DESIROUS OF INVOKING TH E PRINCIPLES OF EVIDENCE ACT, IN PROCEEDINGS BEFORE T HEM, THEY WERE PREVENTED FROM DOING SO. IT WAS FURTHER HELD BY THE HON'BLE APEX COURT THAT ALL THAT SECTION 110 OF THE EVIDENCE ACT, 1872 DID, WAS TO EMBODY A SALUTARY PR INCIPLE OF COMMON LAW, JURISPRUDENCE VIZ, WHERE A PERSON WA S FOUND IN POSSESSING OF ANYTHING, THE ONUS OF PROVIN G THAT HE WAS NOT ITS OWNER, WAS ON THAT PERSON. THUS, THIS PRINCIPLE COULD BE ATTRACTED TO A SET OF CIRCUMSTAN CES THAT SATISFIES ITS CONDITIONS AND WAS APPLICABLE TO TAXI NG PROCEEDINGS. 11. IN VIEW OF THE LEGAL AND FACTUAL DISCUSSION, THE BURDEN OF PROOF SQUARELY LIES ON THE ASSESSEE AND THE ASS ESSEE HAS FAILED TO FILE ANY EVIDENCE TO DISCHARGE, EVEN THE INITIAL ONUS, CAST ON HIM. 12. THE HON'BLE SUPREME COURT, IN A NUMBER OF DECISIONS HAS HELD THAT THE REVENUE CANNOT MAKE ADD ITIONS, PURELY ON SURMISES, GUESS-WORK OR CONJECTURES. THE REVERSE OF THE OBSERVATION OF THE HON'BLE SUPREME COURT IS EQUALLY TRUE IN CASE OF AN ASSESSEE, THAT NO CLAIM OF EXPEN SES CAN BE ALLOWED, MERELY ON THE BASIS OF SURMISES, GUESS-WOR K AND CONJECTURES, IN THE ABSENCE OF CORROBORATIVE AND CO GENT EVIDENCE. 13. IN VIEW OF THE FACT-SITUATION OF THE PRESENT CASE, THE FINDINGS OF THE CIT(A) ARE PURELY BASED ON SURMISES AND CONJECTURES AND HENCE, THE SAME ARE REVERSED AND CONSEQUENTLY, THE FINDINGS OF THE AO ARE RESTORED. 14. IN THE RESULT, APPEAL OF THE REVENUE IS ALLO WED. 7 5. IN VIEW OF THE ABOVE, IT WAS CLEAR THAT THE ADDI TIONS ORIGINALLY MADE BY THE ASSESSING OFFICER WERE RESTO RED ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENSES WHICH W AS MORE THAN THE AMOUNT COMPUTED BY THE LD. CIT(APPEAL S) BY APPLYING THE NP RATE OF 55%. THE LD. DR WAS, THERE FORE, DIRECTED TO FILE REPLY FROM THE ASSESSING OFFICER I F THE DEPARTMENT HAD TAKEN ANY ACTION IN THIS REGARD AFTE R PASSING OF THE ORDER BY THE TRIBUNAL DATED 10.05.20 12. THE LD. DR FILED LETTER OF THE ACIT, CIRCLE SANGRU R DATED 26.08.2015 INTIMATING THAT NO PENALTY ORDER ENHANCI NG THE AMOUNT OF PENALTY HAVE BEEN PASSED BY THE ASSESSING OFFICER AFTER PASSING THE ORDER BY THE TRIBUNAL. I N VIEW OF THESE FACTS AND CIRCUMSTANCES AND PARTICULARLY IN V IEW OF THE ORDER PASSED BY THE TRIBUNAL RESTORING THE ORDE R OF THE ASSESSING OFFICER, WE ARE OF THE VIEW THAT WHOLE COMPLEXION OF THE PENALTY MATTER HAS CHANGED BECAUS E OF THE SUBSEQUENT EVENT I.E. THE ORDER PASSED BY THE TRIBUNAL. THE ASSESSING OFFICER CONSIDERED THE PEN ALTY MATTER ON THE BASIS OF PART ADDITION SUSTAINED BY LD. CIT(APPEALS) BY APPLYING PROFIT RATE OF 55%, HOWEVE R, ASSESSING OFFICER MADE SPECIFIC ADDITIONS ON ACCOUN T OF DISALLOWANCE OF VARIOUS EXPENSES BY GIVING SPECIFIC FINDINGS OF FACT AGAINST THE ASSESSEE. THEREFORE, IN OUR VIEW THE PENALTY MATTER SHALL HAVE TO BE RE-CONSIDE RED IN THE LIGHT OF FINDINGS OF ASSESSING OFFICER GIVEN IN THE ASSESSMENT ORDER BECAUSE THE ORDER OF THE ASSESSING OFFICER HAVE BEEN RESTORED BY THE TRIBUNAL AND AS S UCH, THE PENALTY MATTER NEED NOT TO BE DECIDED ON THE BA SIS OF 8 FINDINGS GIVEN BY THE LD. CIT(APPEALS) COMPUTING TH E INCOME OF THE ASSESSEE BY APPLYING PROFIT RATE OF 5 5%. 6. WE MAY ALSO NOTE HERE THAT SINCE THE FINDING OF FACT RECORDED BY THE ASSESSING OFFICER HAVE NOT BEEN CONSIDERED IN THE PENALTY MATTER, THEREFORE, THE MA TTER WOULD ALSO REQUIRE RE-CONSIDERATION BECAUSE THE ADD ITIONS WOULD BE HIGHER NOW ON PASSING THE FINAL ORDER PASS ED BY THE ASSESSING OFFICER. THEREFORE, WE ARE NOT COMME NTING UPON THE ADDITIONS ON MERIT AT THIS STAGE ON THE PE NALTY MATTER BECAUSE IN OUR VIEW, MATTER REQUIRES RE- CONSIDERATION AT THE LEVEL OF THE ASSESSING OFFICER . THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT ASSESS ING OFFICER IN THE PENALTY NOTICE HAS NOT SPECIFICALLY STATED WHETHER PENALTY IS TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OR FURNISHING INACCURATE PARTICULARS OF INCOME AND RELIED UPON ORDER OF ITAT BANGALORE BENCH IN TH E CASE OF H. LAXMI NARAIN VS ITO 41 ITR (TRIB) 465. HOWEV ER, SUCH SUBMISSIONS COULD BE CONSIDERED BY THE ASSESSI NG OFFICER IN THE FRESH PENALTY PROCEEDINGS. CONSIDER ING TOTALITY OF THE FACTS AND CIRCUMSTANCES, IN THE LIG HT OF ORDER OF THE TRIBUNAL IN THE CASE OF SAME ASSESSEE DATED 10.05.2012 WHEREBY THE QUANTUM ADDITION MADE BY ASSESSING OFFICER HAVE BEEN RESTORED, WE ARE OF THE VIEW THE MATTER REQUIRES RE-CONSIDERATION OF PENALTY MAT TER AT THE LEVEL OF THE ASSESSING OFFICER. WE, ACCORDINGL Y, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND RESTORE T HE PENALTY MATTER TO THE FILE OF ASSESSING OFFICER WIT H 9 DIRECTION TO RE-DECIDE THE PENALTY MATTER UNDER SEC TION 271(1)(C) OF THE ACT IN ACCORDANCE WITH LAW IN THE LIGHT OF FINDING OF FACT GIVEN BY THE TRIBUNAL IN THE CASE O F SAME ASSESSEE VIDE ORDER DATED 10.05.2012. THE ASSESSIN G OFFICER SHALL GIVE REASONABLE SUFFICIENT OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS AT LI BERTY TO RAISE ALL CONTENTIONS BEFORE LD. CIT(APPEALS) WHICH HAVE BEEN RAISED BEFORE US IN THE PRESENT PROCEEDINGS. 7. IN THIS VIEW OF THE MATTER, THE APPEAL OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNES H SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 8 TH MARCH, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD