Vijay Kumar Surana, V. ACIT,

ITA 812/BANG/2013

• Counselvise Citation: 81221114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SREEHARI
• Assessee Lawyers: ROHIT GOUTAMCHAND
• Keywords: Revised return
• Section: 80C; 133A; 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.812/BANG/2013 ASSESSMENT YEAR : 2007-08 VIJAY KUMAR SURANA, PROP. M/S. VIJAY GEMS, NO.112, NEELA COMPLEX, 3 RD FLOOR, NAGARATHPET, BANGALORE 560 002. PAN: AAQPV 5813L VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ROHIT GOUTAMCHAND, C.A. RESPONDENT BY : SHRI P.K. SREEHARI, ADDL. CIT(DR) DATE OF HEARING : 23.09.2014 DATE OF PRONOUNCEMENT : 30.09.2014 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 27.3.2013 OF THE CIT(APPEALS), LTU, BANGALORE RELATING TO ASSESS MENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(APPEALS) CONFIRMING THE ORDER OF THE ASSESSING OFFICER IMPOSING ITA NO. 812/BANG/2013 PAGE 2 OF 8 PENALTY U/S. 271(1)(C) OF THE ACT. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE AS FOLLOWS. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS IN THE BU SINESS OF TRADING IN DIAMOND AND DIAMOND STUDDED WITH PLATINUM IN GOLD J EWELLERY IN THE NAME OF M/S. VIJAY GEMS. FOR THE A.Y. 2007-08, THE ASSE SSEE FILED A RETURN OF INCOME ON 31.10.07 DECLARING TOTAL INCOME OF RS.45, 71,564. THE ASSESSEE USED TO IMPORT LOOSE DIAMONDS FROM M/S. EURO STAR D IAMOND TRADERS, BELGIUM [EURO STAR FOR SHORT] FROM AS EARLY AS 2005. ON 18.5.2006, GOODS SENT BY EURO STAR WERE DETAINED BY THE CUSTOM S DEPARTMENT (DRI) ON THE GROUND THAT SUCH GOODS WERE UNDERVALUED. TH E LOOSE DIAMONDS WERE SENT BY EURO STAR FOR THEIR INDIAN RELATIVES T HROUGH VIJAY GEMS, WHO ACTED AS A COMMISSION AGENT FOR PERSONS IN INDIA. THE CUSTOMS AUTHORITIES DEMANDED AN EXTRA CUSTOMS DUTY OF RS.13,43,659.60 O N ACCOUNT OF UNDER- VALUATION. THE ASSESSEE, WITH A VIEW TO CLEAR THE LOOSE DIAMOND STONES, AGREED TO PAY THE AFORESAID EXTRA CUSTOMS DUTY DEMA NDED BY THE CUSTOMS AUTHORITIES. THERE IS NO DISPUTE THAT THE AMOUNT A CTUALLY PAID BY THE ASSESSEE TO EURO STAR WAS THE VALUE AS DECLARED BY THE ASSESSEE AND NOT THE VALUE AS ESTIMATED BY THE CUSTOMS DEPARTMENT. THEREFORE, AS FAR AS THE VALUE OF LOOSE DIAMONDS IMPORTED WAS CONCERNED, IT IS THE SAME VALUE AS HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE ONLY DIFFERENCE THAT WOULD ARISE CONSEQUENT TO THE DISPUTE RAISED BY THE CUSTOMS DEPARTMENT WOULD BE ADDITIONAL CUSTOMS DUTY OF RS.13,43,659.60 PAID BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT THE ASSESSEE INCLUDED THI S CUSTOMS DUTY PAID AS ITA NO. 812/BANG/2013 PAGE 3 OF 8 COST OF LOOSE DIAMONDS IN ITS BOOKS OF ACCOUNT AND THE VALUATION OF STOCK HAS BEEN DONE BY THE ASSESSEE AFTER INCORPORATING T HE AFORESAID CUSTOMS DUTY IN ITS BOOKS. THE ORIGINAL RETURN OF INCOME F ILED BY THE ASSESSEE WAS ON THE BASIS OF THE VALUATION OF STOCK DONE BY THE ASSESSEE INCLUDING THE CUSTOMS DUTY PAID. 4. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED ON 06.12.2007IN THE BUSINESS PREMISES OF THE ASSESSEE, BASED ON THE INF ORMATION RECEIVED FROM CUSTOMS DEPARTMENT (DRI) ABOUT THE UNDER-VALUA TION OF IMPORTED LOOSE DIAMOND STONES BY THE ASSESSEE. IT IS THE PL EA OF THE ASSESSEE THAT ON 07.12.2007 IT WAS PLANNING TO OPEN A NEW OFFICE- CUM-STORE AT ANANDA RAO CIRCLE, BANGALORE AND AT THIS CRUCIAL JUNCTURE, SURVEY OPERATIONS TOOK PLACE. THE ASSESSEE IN THAT SURVEY OPERATION AGREE D TO OFFER AN ADDITIONAL INCOME OF RS.10,25,000. IT IS TO BE CLARIFIED HER E THAT THERE WAS NO BASIS FOR DECLARATION OF ADDITIONAL INCOME BY THE ASSESSE E. IT IS THE PLEA OF THE ASSESSEE THAT THIS ADDITIONAL INCOME HAD TO BE OFFE RED TO CLOSE THE SURVEY OPERATIONS, SO THAT THE OPENING OF THE NEW STORE SC HEDULED ON 07.12.2007 COULD TAKE PLACE WITHOUT ANY DIFFICULTY. IT IS ALS O NOT IN DISPUTE THAT THE ASSESSEE HAD OFFERED ADDITIONAL INCOME OF RS.60 LAK HS IN THE A.Y. 2006-07 IN THE COURSE OF THE VERY SAME SURVEY AND PAID TAXE S ON THAT FOR THAT YEAR. IN THAT YEAR, NO PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE. ITA NO. 812/BANG/2013 PAGE 4 OF 8 5. IN THIS BACKGROUND, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 31.3.2008 DECLARING A TOTAL INCOME OF RS.55,96,564 AS PER THE FOLLOWING DETAILS:- INCOME FROM BUSINESS (RS.) NET PROFIT AS PER P & L ACCOUNT 4798913 LESS: EXPO WORLD EXPENSES-CHENNAI U/S. 40(A) OF LAST YEAR 395728 LESS: THE OTHER SIDE U/S 40(A) OF LAST YEAR 75000 4328185 ADD: INCOME DECLARED U/S. 133A 1025000 ADD: PROFESSIONAL FEES U/S. 40(A) 84270 ADD: PROFIT FROM INDO STAR 252859 ADD: DONATION 10000 5700314 LESS: DEDUCTION U/S 80C LIC RS.110310 100000 LESS: DEDUCTION U/S 80G (7500*50%) 3750 TOTAL TAXABLE INCOME 5596565 6. THE AO COMPLETED THE ASSESSMENT AT A FIGURE OF R S.56,46,511 BY DISALLOWING VEHICLE EXPENSES ON THE ROUND OF PERSON AL USER TO THE EXTENT OF RS.49,947. 7. THE AO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME IN AS MUCH AS THE ADDITIONAL INCOME OF RS .10,25,000 WHICH WAS OFFERED AS ADDITIONAL INCOME HAD NOT BEEN DECLARED IN THE ORIGINAL RETURN OF INCOME. THE ASSESSEE POINTED OUT THE VARIOUS CIRCU MSTANCES UNDER WHICH ADDITIONAL INCOME WAS OFFERED TO TAX AND FURTHER PL EADED THAT THERE WAS NO BASIS FOR SURRENDER OF ADDITIONAL INCOME AT THE TIM E OF SURVEY AND THEREFORE ITA NO. 812/BANG/2013 PAGE 5 OF 8 THE ASSESSEE COULD NOT BE VISITED WITH IMPOSITION O F PENALTY. THE AO, HOWEVER, HELD THAT REVISED RETURN WAS NOT FILED VOL UNTARILY AND THEREFORE PENALTY FOR CONCEALMENT AND FURNISHING OF INACCURAT E PARTICULARS OF INCOME HAD TO BE IMPOSED. ACCORDINGLY, MINIMUM PENALTY WA S IMPOSED ON THE ASSESSEE. 8. ON APPEAL BY THE ASSESSEE, THE LD. CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER GIVING RISE TO PRESE NT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR ASSESSEE, WHO REITERATED THE VARIOUS CIRCUMSTANCES REFERRED TO IN THE EARLIER PART OF THIS ORDER. HE SUBMITTED THAT SURRENDER OF ADDITIONAL I NCOME BY THE ASSESSEE AT THE TIME OF SURVEY WAS NOT BASED ON ANY INCRIMINATI NG MATERIAL FOUND AT THAT TIME AND THAT SUCH A SURRENDER WAS MADE ONLY B ECAUSE OF CIRCUMSTANCES AS NARRATED ABOVE. THE LD. COUNSEL D REW OUR ATTENTION TO SHOW CAUSE NOTICE ISSUED 274 OF THE ACT, IN WHICH T HE AO HAS NOT SPECIFIED AS TO WHETHER PENALTY IS BEING INITIATED FOR FURNIS HING INACCURATE PARTICULARS OR FOR CONCEALMENT OF PARTICULARS OF INCOME. OUR A TTENTION WAS DRAWN TO THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY (2013) 35 TAXMA NN.COM 250 (KAR) , WHEREIN IT WAS HELD THAT A SHOW CAUSE NOTICE BEFO RE IMPOSING PENALTY WHICH DOES NOT SPECIFY THE GROUND ON WHICH PENALTY IS BEING INITIATED, THEN THE ENTIRE PROCEEDINGS HAVE TO BE H ELD AS ILLEGAL AND ITA NO. 812/BANG/2013 PAGE 6 OF 8 QUASHED. FURTHER RELIANCE WAS ALSO PLACED ON THE D ECISION OF THE ITAT, BANGALORE BENCH IN THE CASE OF MUNINAGA REDDY V. ACIT (2013) 37 TAXMANN.COM 440 (BANGALORE-TRIB.) WHEREIN THE JUDGMENT OF HONBLE SUPREME COURT IN DHARMENDRA TEXTILES PROCESSORS, 295 ITR 244 (SC) WAS EXPLAINED IN THE LIGHT OF JUDGMENT OF THE HON BLE DELHI HIGH COURT IN CIT V. SAS PHARMACEUTICALS, 335 ITR 259 (DEL) . IT WAS HELD BY THE TRIBUNAL THAT IMPOSITION OF PENALTY IS NOT AUTO MATIC AND THIS IS NOT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPRA) . 10. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEA LS) AND THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (SUPRA) AND MAK DATA SYSTEMS 358 ITR 593 (SC). ACCORDING TO HIM, ADMISSION BY THE ASSESSEE IN TH E SURVEY PROCEEDINGS WAS ENOUGH TO IMPOSE PENALTY. 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. COPY OF THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF TH E ACT WAS SHOWN TO US AT THE TIME OF HEARING WHICH WAS DIRECTED TO BE FIL ED BEFORE US. PERUSAL OF THE SAME SHOWS THAT THE AO HAS NOT SPELT OUT AS TO WHETHER PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING INAC CURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF PARTICULARS OF INCOME. SUCH INITIATION OF PENALTY PROCEEDING HAS BEEN HELD TO BE ILLEGAL BY T HE HONBLE HIGH COURT OF ITA NO. 812/BANG/2013 PAGE 7 OF 8 KARNATAKA IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) . IN THE LIGHT OF THE AFORESAID DECISION OF THE JU RISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE ORDER IMPOSING P ENALTY HAS TO BE CANCELLED. 12. EVEN ON MERITS, WE FIND THAT THE ENTIRE BASIS O F SURVEY OPERATIONS CARRIED OUT BY THE REVENUE WAS INFORMATION OBTAINED BY THE REVENUE AUTHORITIES FROM DRI IN CONNECTION WITH IMPORT OF L OOSE DIAMOND STONES BY THE ASSESSEE. THE ASSESSEE HAS ALREADY RECORDED IN HIS BOOKS OF ACCOUNT THE VALUE OF ADDITIONAL CUSTOMS DUTY PAID. THEREFOR E, AS FAR AS UNDER- VALUATION OF LOOSE DIAMONDS IS CONCERNED, FACTS ARE ALREADY FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, EVEN WHEN THE OR IGINAL RETURN WAS FILED BY THE ASSESSEE. THEREFORE, NO ADVERSE INFERENCE C AN BE DRAWN ON THIS ASPECT. IN THE LIGHT OF THE FACTUAL POSITION, WE F IND THAT THERE IS NO BASIS WHATSOEVER FOR DECLARATION OF ADDITIONAL INCOME AT THE TIME OF SURVEY AND THE CIRCUMSTANCES UNDER WHICH ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE HAS BEEN SATISFACTORILY EXPLAINED. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THIS IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. IN OUR VIEW, THE EXPLANATIO N OFFERED BY THE ASSESSEE IS ACCEPTABLE AND NO PENALTY CAN BE IMPOSED. WE AR E OF THE VIEW THAT IMPOSITION OF PENALTY IS NOT AUTOMATIC, AS CONTENDE D BY THE LD. DR. FOR THE REASONS GIVEN ABOVE, WE CANCEL THE ORDER IMPOSING P ENALTY AND ALLOW THE APPEAL. ITA NO. 812/BANG/2013 PAGE 8 OF 8 13. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 30 TH SEPTEMBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.