The ITO, Ward-14(2), Ahmedabad V. Shri Damjibhai Jivabhai Hadial, Ahmedabad

ITA 797/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0175 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-08-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 03-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: PF JAIN
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM ITA NO.797/AHD/2008 (ASSESSMENT YEAR:-1997-98) INCOME-TAX OFFICER, WARD- 14(2),6 TH FLOOR, NATURE VIEW BUILDING,NEAR HK HOUSE, ASHRAM ROAD, AHMEDABAD V/S SHRI DAMJIBHAI JIVABHAI HADIAL, A/32, SUBHLAXMI FLATS, VASTRAPUR, AHMEDABAD [PAN: AAEPH 7551 H] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K M MAHESH, DR ASSESSEE BY:- SHRI P F JAIN, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER DATED 20-12-2007 OF THE LD. CIT(APPEALS)-XXI, AHMEDABAD, CANCELLING A PENALTY OF RS.2,58,966/-LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961[HEREINAFTER R EFERRED TO AS THE ACT] 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE ASSESSEE, A CANE INSTRUCTOR IN THE RAJESH MEHTA TECHNICAL SCHOO L FOR THE BLIND, DID NOT FILE HIS RETURN FOR THE YEAR UNDER CONSIDER ATION. SUBSEQUENTLY, ON THE BASIS OF AN AFFIDAVIT FILED BY THE ASSESSEE IN A CITY CIVIL COURT, AHMEDABAD, AVERRING THAT HE HAD LENT AN AMOUNT OF RS.5,61,000/- IN CASH ON VARIOUS DATES TO SHRI SHAI LESH K. THAKER, ASSESSMENT WAS REOPENED U/S 147 OF THE ACT WITH TH E SERVICE OF A NOTICE U/S. 148 OF THE ACT ON 25-3-2004. THE ASSE SSEE DID NOT FILE ANY RETURN IN RESPONSE TO THIS NOTICE ALSO. SUBSE QUENTLY, ASSESSMENT WAS COMPLETED ON 31-01-2005 U/S. 143(3) R.W.S. 147 OF THE ACT, DETERMINING INCOME OF RS.7,54,920/-. INTE R ALIA, AN AMOUNT OF RS.7,21,000/- WAS ADDED DUE TO UNEXPLAINED INVES TMENT. SIMULTANEOUSLY, PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT WERE ALSO INITIATED, THE ASSESSEE HAVING FAILED TO EXPLA IN THE SOURCES OF INVESTMENT. SUBSEQUENTLY, INCOME WAS REVISED TO R S.7,14,920/- IN ITA NO.797/AHD/2008 2 AN ORDER DATED 6-9-2006 U/S. 154 OF THE ACT ,ALLOW ING DEDUCTION U/S. 80U OF THE ACT. ON APPEAL, THE LD. CIT(A) VIDE HIS ORDER DATED 1.2.2006 UPHELD THE ADDITIONS MADE BY THE AO. ON RE CEIPT OF ORDER OF THE LD. CIT(A), IN RESPONSE TO A SHOWCAUSE NOTI CE DATED 22-6- 2006, THE ASSESSEE IN HIS WRITTEN SUBMISSIONS DATE D 24-07-2006 REQUESTED TO KEEP THE PENALTY PROCEEDINGS IN ABEYAN CE TILL THE DISPOSAL OF THEIR APPEAL BEFORE THE TRIBUNAL. HOWEV ER, THE AO DID NOT ACCEPT THESE SUBMISSIONS OF THE ASSESSEE AND I MPOSED A PENALTY OF RS. 2,58,966/- @ 100% OF THE TAX SOUGHT TO BE EVADED DUE TO CONCEALMENT OF PARTICULARS OF INCOME OF RS.7 ,21,000/- . 3. ON APPEAL, THE LD. CIT(A) WHILE RELYING UPON DEC ISION IN NATIONAL TEXTILES V/S. CIT 249 ITR 125(GUJ.) CANCELLED THE P ENALTY. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID ORDER OF THE LD. CIT(A).AT THE OUTSET, BOTH THE PAR TIES AGREED THAT THE ITAT HAVING SET ASIDE THE ASSESSMENT TO THE FIL E OF THE AO, PENALTY DOES NOT SURVIVE AT THIS STAGE. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RELEVANT ORDERS OF THE ITAT IN QUANTUM APPEAL. WE FIND THAT THE ITAT IN THEIR ORDER DATED 21-5-2010 IN QUANTUM APPEAL IN THE ASS ESSEES OWN CASE IN ITA NO.929/AHD/2006 CONCLUDED AS UNDER: 3. ON HEARING BOTH THE SIDES, WE CAN COMMENT THAT THIS ISSUE OF FURNISHING OF REASONS FOR ISSUANCE OF NOTI CE U/S. 148 OF THE I.T. ACT, 1961 NOW STOOD SETTLED BY THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (INDIA ) LTD. VS. ITO & OTHERS REPORTED AS (2003) 259 ITR 19 (SC), WH EREIN OBSERVATION WAS MADE AS FOLLOWS:- 'WE SEE NO JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER UNDER CHALLENGE. HOWEVER, WE CLARIFY THAT WHEN A NO TICE UNDER SECTION 148 OF THE INCOME-TAX ACT IS ISSUED, THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE A RETURN AND IF HE SO DESIRES, TO SEEK REASONS FOR ISSUING N OTICES. THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS W ITHIN ITA NO.797/AHD/2008 3 A REASONABLE TIME. ON RECEIPT OF REASONS, THE NOTIC EE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE A ND THE ASSESSING OFFICER IS BOUND TO DISPOSE OF THE SAME B Y PASSING A SPEAKING ORDER. IN THE INSTANT CASE, AS T HE REASONS HAVE BEEN DISCLOSED IN THESE PROCEEDINGS, T HE ASSESSING OFFICER HAS TO DISPOSE OF THE OBJECTIONS, IF FILED, BY PASSING A SPEAKING ORDER, BEFORE PROCEEDI NG WITH THE ASSESSMENT IN RESPECT OF THE ABOVESAID FIV E ASSESSMENT YEARS. ' 4. IN ORDER TO RESOLVE THIS OBJECTION WHICH IS IMPO RTANT TO DETERMINE THE INVOCATION OF JURISDICTION, WE DEEM I T PROPER FIRST TO SETTLE THE SAME AND FOR THAT PURPOSE WE HEREBY R ESTORE THIS FUNDAMENTAL DISPUTE BACK TO THE STAGE OF THE ASSESS ING OFFICER TO BE RESOLVED IN THE LIGHT OF THE DIRECTIONS AND O BSERVATIONS OF THE HON'BLE SUPREME COURT. ONCE WE ARE RESTORING TH IS GROUND BACK TO THE STAGE OF THE ASSESSING OFFICER FOR DE N OVO ADJUDICATION, THEREFORE, REST OF THE GROUND PERTAIN ING TO THE QUANTUM ADDITION FOR THE TIME BEING HAVE BECOME OTI OSE RATHER INDOLENT, THEREFORE ONLY TO BE DECIDED ONCE THIS P RELIMINARY AS ALSO FUNDAMENTAL OBJECTION GETS RESOLVED. WITH THE RESULT, THE RELEVANT GROUND MAY BE TREATED .AS ALLOWED ONLY FOR STATISTICAL PURPOSES. 5.1 HONBLE SUPREME COURT IN THE CASE OF K. C.BUILDERS VS. ACIT,265 ITR 562(SC) HELD THAT ORDINARILY, PENALTY CANNOT STAND IF THE ASSESSMENT ITSELF IS SET ASIDE. WHERE AN ORDER OF ASSESSMENT OR REASSESSMENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE, HAS ITSELF BEEN FINALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHERWISE, THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CANCELLED. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. R.DALMIA,(1992)107 TAXATION 107, HELD THAT NO PENAL TY SURVIVES AFTER DELETION OF ADDITIONS, FORMING THE BASIS FOR THE LEVY OF PENALT Y. SIMILAR VIEW WAS TAKEN IN ADDL. COMMISSIONER OF INCOME-TAX V. BADRI KASHI PRA SAD (1993] 200 ITR 206 (ALL) AND PRABHAT OIL TRADERS V. INCOME-TAX OFFICER (NO. 3) (1996) 218 ITR (A.T.) 39 (ITAT, AHMEDABAD),CITY DRY FISH COMPANY V. COMMISSI ONER OF INCOME-TAX (1999) 238 ITR 63 (A.P.) , CIT VS. MOHD. BUX SOKAT ALI (2004) 265 ITR 326 (RAJ)AND ACIT VS. VIP INDUSTRIES (2009) 122 TTJ 289 (MUM). 5.2 SINCE THE VERY BASIS UPON WHICH THE PENALTY HAS BEEN IMPOSED DOES NOT EXIST IN VIEW OF AFORESAID ORDER DATED 21-05-2010 OF THE ITAT IN QUANTUM APPEAL IN ITA NO.949/AHD/2006 , WE ARE OF THE OPIN ION THAT PENALTY LEVIED ITA NO.797/AHD/2008 4 IN RELATION TO THE ADDITIONS UPHELD BY THE LD. CIT (A) DOES NOT SURVIVE AND THE IMPUGNED ORDER IS , THEREFORE, SET ASIDE. HOWEVER, THE AO IS FREE TO INITIATE THE PENALTY PROCEEDINGS IN ACCORDANCE WITH LAW WHILE CO MPLETING THE ASSESSMENT IN PURSUANCE TO THE AFORESAID DIRECTIONS OF THE ITAT I N QUANTUM APPEAL. WITH THESE OBSERVATIONS, GROUND NO.1 IN THE APPEAL IS DISPOS ED OF. 6. GROUND NO.2 ,BEING MERE PRAYER, DOES NOT RE QUIRE ANY SEPARATE ADJUDICATION AND IS, THEREFORE, DISMISSED. 7. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 17 -8 -2010 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 17 -08-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI DAMJIBHAI JIVABHAI HADIAL, A/32, SUBHLAXMI FLATS, VASTRAPUR, AHMEDABAD 2. ITO, WARD-14((2), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XXI, AHMEDABAD 5. DR, BENCH-C, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD