Sri P A Usman , Sullia V. The Income Tax Officer Ward-1 , Puttur

ITA 888/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8909 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 25-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: PRATIBHA
• Keywords: Business income; Bonafide belief; Retrospective amendment; Question of law; Reasonable cause; TDS; Set aside
• Section: 271(1)(c); 273B; 143(3); 143(1); 250; 274; 27; 15

Judgement Text

ITA NO S . 888 & 889 (B)/201 9 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : C , BANGALORE BEFORE SHRI A.K.GARODIA , ACCOUNTANT MEMBER AND S HRI P AVAN K UMAR GADALE , JUDICAL MEMBER ITA NO S . 888 & 889 (BANG)/201 9 (ASSESSMENT YEAR S : 20 1 4 - 15 ) S HRI P.A.USMAN, D NO.2 - 106 - 2, CHENNAVARA HOUSE, PERUVAJE POST, BELLARE, SULLIA - 574 212 PAN NO. A APPU4406R APPELLANT VS THE INCOME TAX OFFICER, WARD - 1, PUTTUR RESPONDENT APPELLANT BY : SMT. PRATIBHA, ADVOCATE REVENUE BY : SMT. R.PREMI, JCIT DATE OF HEARING : 11 - 0 9 -- 2019 DATE OF PRONOUNCEMENT : 20 - 09 - 2019 O R D E R PER SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST DIFFERENT ORDER S OF THE LD.CIT(A), M ANGAL URU DATED 15 .0 2 .201 9 PASSED U/S 271(1 )(C) AND 271B OF THE IT ACT , AND 250 OF THE IT ACT, 1961 FOR THE ASSESSMENT YEAR S 20 14 - 15 . SINCE THE APPEALS PERTAIN TO SAME ITA NO S . 888 & 889 (B)/201 9 2 ASSESSEE FOR THE SAKE OF CONVENIENCE THEY WERE CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY A COMMON CONSOLIDATED ORDER. 2. FIRST WE SHALL TAKE UP APPEAL IN ITA NO.888 / B/2019 , WHERE THE A S SESSEE HAS CHALLENGED THE LEVY OF PENALTY U/S 271B OF THE ACT. THE BRIEF FACTS OF THE C ASE ARE THAT THE ASSESSEE IS A C IVIL C ONTRACTOR AND FILED THE RETURN OF INCOME ON 18 - 06 - 2015 DISCLOSING TOTAL INCO M E OF RS. 4,86, 930/ - . SUBSEQUENTLY, THE R ETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT AND WAS SELECTED FOR LIMITED SCRUTINY UNDER CASS AND NOTICE U/S143( 2 ) AND 142 (1) OF THE IT ACT WERE ISSUED. IN COMPLIANCE THE L D. AR OF THE ASSESSEE APPEARED AND FILED THE DETAILS AS CALLED FOR . T HE AO ON VERIFICATION OF DETAILS FOUND THAT THERE IS MISMATCH OF CONTRACT RECEIPTS DISCLOSED BY THE ASSESSEE AND REQUIRED D ETAILS OF CONTRACT RECEIPTS, BANK ACCOUNTS , STATEMENTS, BOOKS OF ACCOUNTS. WHEREAS T HE ASSESSEE HAS GROSS RECEIPTS BELOW T AX A UDIT LIMIT FOR COMPULSORY AUDIT U/S 44AB O F THE IT ACT AND DISCLOSED RATE INCOME AT 5.26% OF CONTRACT RECEIPTS. SINCE THE DETAILS WERE NOT SUPPORTED IN RESPECT OF CLAIMS AND NO DOCUMENTARY EVIDENCE W AS FILED IN SUPPORT OF EXPENSES THE BUSINESS INCOME IS ESTIMATED BY THE AO AT 9% OF THE GROSS RECEIPTS AND INCOME FROM UNACCOUNTED ITA NO S . 888 & 889 (B)/201 9 3 RECEIPTS AND FINALLY A SSESSED TOTAL INCOME AT RS.11, 17,930/ - AND PASSED THE ORDER U/S 143(3) DATED 13 - 12 - 2016. SUBSEQUENTLY, THE AO INITIATED PENALTY PROCEEDINGS U/S 27 1 B OF THE IT ACT , FOR FAILU R E TO GET THE B OOKS OF ACCOUNTS AUDITED . THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE A S THE GROSS RECEIPTS WERE MORE THAN THE PRESCRIBED LIMITS U/S 44AB OF THE IT ACT AND THE ASSESSEE FAILED TO GET THE B OOKS OF ACCOUNTS AND FURNISH THE AUDIT R EPORT WITHIN THE TIME LIMIT U/ S139(1)OF THE IT ACT. THE AO FOUND THAT THE TOTAL GROSS RECEIPTS FOR THE FY: 2013 - 14 HAVE BEEN DISCLOS E D AT RS.80,56,300/ - AND THE ASSESSEE HAS OPTED TO OFFER THE INCOME AT 5.26% MUCH BELOW THE PRESUMPTI VE @ 8% OF GROSS RECEIPTS UNDER PROVISIONS OF SECTION 44A D OF THE ACT. FURTHER, I N THE ASSESSMENT PROCEEDINGS, THE A O FOUND THAT THE ASSES S EE HAS NOT ACCOUNTED THE CREDITS IN THE B ANK ACCOUNT VIJAYA BANK AND THEREFORE, THE AO AFTER CONSIDERING THE CREDITS OF THE BANK ACCOUNT WORKED OUT TH E GROSS RECEIPTS TO RS. 1,16,80,868/ - . IN THE PENALTY PROCEEDINGS, THE ASSESSEE HAS NOT FILED THE EXPLANATION S AND REASONABLE CAUSE FOR D EFAULT IN NOT GETTING THE B OOKS OF ACCOUNTS AUDITED. FINALLY, AO BASED ON MATERIAL ITA NO S . 888 & 889 (B)/201 9 4 AVAI LABLE ON RECORD LEVIED PENALTY OF RS.58,404/ - AND PASSED ORDER U/S 271B ON 29 - 01 - 2017. 3. AGGRIEVED BY THE ORDER, ASSESSEE HAS FILED AN APPEAL BEFORE THE LD. CIT(A) , WHERE AS THE L D. CIT(A) IN THE APPELLATE PROCEEDINGS CO NSIDERING THE GROUNDS OF APPEAL AND SUBMISSIONS FILED BY THE ASSE S SEE OBSERVED THAT THE ASSESSEE COULD NOT EXPLAIN THE REASONABLE CAUSE FOR FAILURE TO GET THE BOOKS OF ACCOUNTS AUDIT ED AND OBTAIN A UDITED REPORT UNDER THE PROVISIONS OF SECTION 44AB OF THE IT ACT AND CONFIRMED THE PENALT Y LEVIE D U/S 271B OF THE IT ACT, AND DISMISSED ASSESSEES APPEAL. AGGRI E VED BY THE ORD E R, THE ASSES S EE FILED AN APPEAL BEFORE THE TRIBUNAL. 4 . THE LD. AR ARGUED THAT THE L D. CIT( A) HAS ERRED IN CONFIRMING THE PENALTY WITHOUT CONSIDERING THE SUBMISSIONS AND T HE EXPLANATIONS FILED IN THE COURSE OF APPELLATE PROCEEDINGS. THE LD. AR FURTHER SUBMITTED THAT TURNOVER HAS EXCEEDED THE LIMITS DUE TO ADDITION BY THE AO. THE TURNOVER OF THE ASSES S EE FOR THE FY: 2013 - 14 WAS RS.80,56,300/ - WHICH DOES NOT EXCEED THE LIMIT PRESCRIBED FOR MANDATORY A UDIT U/S 44AB OF THE IT ACT AN D FURNISHING OF A UDIT REPORT. THE L D. AR CONTENTION THAT THE TURNOVER EXCEEDED THE LIMIT OF ITA NO S . 888 & 889 (B)/201 9 5 RS.1.00 CRORE PRESCRIBED U/S 44AB OF THE IT ACT, AFTER CONSIDERING THE AO ADDITION OF RS.36,24,568/ - TOWARDS THE TURNOVER WHICH AGGREGATED TO RS.1,16,80,868/ - AND SUBSEQUENTLY, THE AO ESTIMATED THE INCOME . THE L D. AR SUBMITTED THE ARGUMENTS AND FILED PAP E R B OOK S DISCLOSING THE WRITTEN SUBMISSIONS . R ETURN OF INCOME ALONG WITH FINANCIAL STATEMENTS AND JUDICIAL DECISIONS AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, L D. DR RELIED ON THE ORDERS OF THE LD. CIT(A). 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE CRUX OF THE DISPUTED ISSUE IS IN RES PECT OF LEVY OF PENALTY U/S 271 B OF THE ACT, WH ER E DUE TO ADDITION THE TURNOVER OF THE ASSESEE HAS INCREASED THE PRESCRIBED LIMIT OF RS.1.00 CRORE APPLICABLE FOR THE ASSESSMENT YEAR 2014 - 15 WHERE THE AO HAS ESTIMATED INCOME @9% ON RS.1,16,80,868/ - . THE L D. AR SUBMITTED THAT THE ASSESSEE HAS DISCLOSED THE TURNOVER OF CONTRACT RECEIPTS AND FILED THE RETURN OF INCOME ON 18 - 06 - 2015 AND REFERRED PAPER BOOK P AGE - 5 WHEREIN IN THE INCOME AND EXPENDITURE ACCOUNT , THE CONTRACT RECE I PTS ARE DISCLOSED AT RS.80,56,300/ - WHICH IS NOT DI S PUTED BY THE REVENUE. WE FOUND THAT THE ASSESSEE HAS D ISCLOSED THE TURNOVER AS ITA NO S . 888 & 889 (B)/201 9 6 PER THE B OOKS OF ACCOUNTS AND FILED THE RETURN OF INCOME , BUT THE FACT REMAINS THAT AT THE TIME OF FILING OF THE R ETURN OF INCOME, THE TURNOVER OF THE ASSESSEE WAS BELO W THE LIMIT PRESCRIBED U/S 271B OF THE IT ACT, 1961. HENCE, T HE ASSESSEE WAS UNDER THE BONAFIDE BELIEF THAT THE BO OKS OF ACCOUNTS NEED NOT BE AUDITED AND FILE D THE R ETURN OF INCOME . WE FIND THE EXPLANATIONS OF THE L D. AR ARE REALISTIC AND DULY SUPPORTED WITH THE FINANCIAL STATEMENTS WHICH CANNOT BE OVER LOOKED. FURTHER, THE ASSESSEE IS R EGULAR IN FILING THE R ETURN OF INCOME AND HAS BEEN PAYING THE TAXES. THE R EASONABLE CAUSE EXPLAINED BY THE ASSESSEE U/S 273B OF THE IT ACT, TH AT THE ASSESSEE HAS MAINTAINED B OOKS OF ACCOUNTS AND BASED ON B OOKS OF ACCOUNTS , INCOME AND EXPENDITURE HAS BEEN PREPARED AND FILED THE RETURN OF INCOM E. IN THE A SSESSMENT PROCEEDINGS, THE AO FOUND THE CREDITS IN OTHER BA NK ACCOUNTS WHICH WERE NOT DISCLOSED AND THE ASSESSEE HAS ACCEPTED THE AD DITION . WE ARE OF THE SUBSTANTIVE OPINION, THAT THE ASSESSEE HAS A R EASONABLE CAUSE AND THE ACTION OF THE ASS E S S EE IS NOT WANTON . CONSIDERING THE FACTS, CIRCUMSTANCES AND THE LEGAL PROVISIONS THAT THE PENALTY PROVISIONS ARE NOT AUTOMATIC AND THE AO HAS TO WEIGH THE CIRCUMS TANCES FURTHER O N THE TURNOVER AND ITA NO S . 888 & 889 (B)/201 9 7 DEMONSTRATED WITH FINANCIAL STATEMENTS. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 6 . NOW WE SHALL TAKE UP APPEAL IN ITA NO.889 / B / 2019 , WHERE THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY U/S 271(1)( C ) OF THE ACT AND VALIDITY O F THE NOTICE. THE AO SUBSEQUENT TO PASSING THE ASSESSMENT OR D ER DATED 13 - 12 - 2016 ISSUED SHOW C A USE NOTICE FOR LEVYING PENALTY U/S 271 (1) ( C ) OF THE ACT . T HE AO CONSIDERING THE MATERIAL ON RECORD AND FINDINGS IN THE ASSESSMENT ORD ER FOUND THAT IN S PITE OF PROVI D ING OPPORTUNITY, THE ASSE S SEE HAS NOT FILED THE EXPLANATIONS AND HENCE RELIED ON INFORMATION AVAILABLE ON RECORD AND LEVIED PENALTY U/S 271(1)( C ) OF THE ACT , R S.1,43,000/ - VIDE ORDER DATED 29 - 05 - 2017. 7 . AGGRIEVED BY THE AOS ORDER, THE ASSESSEE HAS FILED APPEAL BEFORE THE CIT(A) , WHEREAS THE LD.CIT(A) HAS C ON F IRMED THE P E NALTY AND DISMISS E D ASSESSEE S APPEAL. AGGRIEVED BY THE CIT(A)S ORDER , THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO S . 888 & 889 (B)/201 9 8 8 . AT THE TIME OF H EARING , THE L D.AR SUBMITTED THAT THE AO WHILE INITIATING PENALTY HAS NOT CONSIDERED THE R EASONS FOR LEVYING PENALTY I.E FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AND FILED COPY OF NOTICE U/S 274 AND SEC. 271(1)(C) OF THE IT ACT, DATED 13 - 12 - 2016 AND SU PPORTED THE ARGUMENTS WITH JUDICIAL DECISIONS AND PRAYED FOR CANCELLATION OF P E NALTY. CONTRA, L D.DR SUPPORTED THE ORDERS OF LD.CIT(A). 9 . WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE LOWER AUTHORITIES. THE ONLY PRIMA FACIE ISSUE BEING THE ASSESSING OFFICER HAS PASSED THE ORDER U/S 271(1)(C) OF THE ACT LEVYING PENALTY AND ASSESSEE HAS CHALLENGED THE ISSUE OF NOTICE U/S 274 OF THE ACT. WE FOUND, THE HONBLE APEX COURT DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN ITA NO.380 OF 2015 DATED 23/11/2015 IN THE CASE OF CIT VS. M/S.SSAS EMERALD MEADOWS WHERE AN IDENTICAL ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE. WE CONSIDER IT PROPER TO REFER TO THE OPERATIVE PART OF THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S. SSAS EMERALD MEADOWS (SUPRA) WHICH IS AS UNDER: ITA NO S . 888 & 889 (B)/201 9 9 2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWIN G SUBSTANTIAL QUESTIONS OF LAW: (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLA TION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SECTION 27.41 13) WITH RETROSPECTIVE EFFECT AND BRA VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATI SFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAINST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSING OFFICER HAS SPECIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOMETAX - VS - MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 . 4 IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED. ITA NO S . 888 & 889 (B)/201 9 10 1 0 . WE ARE OF THE OPINION THAT PENALTY PROVISIONS U/S 271(1)(C) OF THE ACT ARE ATTRACTED WHERE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL ACCEPTED PROPOSITION THAT THE AFORESAID TWO LIMBS OF SECTI ON 271(1)(C) OF THE ACT CARRY DIFFERENT MEANING. THEREFORE, IT WAS IMPERATIVE FOR THE AO TO STRIKE OFF IRRELEVANT LIMB SO AS TO MAKE THE ASSESSEE AWARE AS TO WHAT IS THE CHARGE MADE AGAINST HIM AND SO THAT HE CAN RESPOND ACCORDINGLY. FURTHER, THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. MANJUNATHA COTTON GINNING FACTORY (2013) 359 ITR 565 OBSERVED THAT THE LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB UNDER WHICH IT IS BEING LEVIED. AS PER THE HONBLE HIGH COURT, WHERE THE AO PROPOSES TO I NVOKE THE FIRST LIMB BEING THE CONCEALMENT THEN, NOTICE HAS TO BE APPROPRIATELY MARKED. FURTHER, THE HONBLE HIGH COURT HAS HELD THAT THE STANDARD PROFORMA OF NOTICE U/S 274 OF THE ACT, WITHOUT STRIKING OF THE RELEVANT CLAUSES WOULD LEAD TO INFERENCE OF N ON - APPLICATION OF MIND BY THE AO. IN THE PRESENT CASE, THE AO IS NOT SURE WHETHER HE WAS TO PROCEED ON THE BASIS THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME ITA NO S . 888 & 889 (B)/201 9 11 OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT ALSO OBSE RVED THAT IN SUCH A SITUATION, THE LEVY OF PENALTY SUFFERS FROM NON - APPLICATION OF MIND. 1 1 . WE, CONSIDERING THE LEGAL POSITION AND THE ACTION OF THE AO IN PASSING THE PENALTY ORDER U/S 271(1)(C) SHOWS THAT THERE IS NON - APPLICATION OF MIND THEREBY THE PE NALTY ORDER IS NOT SUSTAINABLE AND RESPECTFULLY FOLLOW THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF M/S.SSAS EMERALD MEADOWS (SUPRA) AND HONBLE HIGH COURT MANJUNATHA COTTON GINNING FACTORY (SUPRA), AND WE SET ASIDE THE ORDER OF THE CIT(A) AND CANCEL THE ORDER OF THE AO DATED 29 - 05 - 2017 LEVYING PENALTY U/S 271(1)(C) OF THE ACT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE . 1 2 . IN T H E RESULT, THE ASSESSEE APPEAL IN ITA NO.888(B)/2019 AND ITA NO.889/B?2019 ARE ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 20 - 09 - 2019 SD/ - S D / - ( A.K.GARODIA ) (PAVAN KUMAR GADALE ) S ACCOUNTANT MEMBE R JUDICIAL MEMBER DATED: *AM ITA NO S . 888 & 889 (B)/201 9 12 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR