SHRI ARVIND KHANDELWAL, ALWAR V. INCOME TAX OFFICER, ALWAR

ITA 892/JPR/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6271 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 29-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Initiation of penalty proceedings; Wrong claim
• Section: 271(1)(c); 133A; 201; 139(1); 132; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 892/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. SHRI ARVIND KHANDELWAL PROP. M/S. KRISHNA FASHION, TILAK MARKET, ALWAR. CUKE VS. THE INCOME TAX OFFICER, WARD 2(1), ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ASJPK 2758 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13.09.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 11/10/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 17.10.2017 OF LD. CIT (APPEALS), ALWAR ARISING FROM THE PENALTY O RDER PASSED UNDER SECTION 271(1)(C) OF THE IT ACT FOR THE ASSESSMENT YEAR 201 1-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER DATED 19.08.2016 PASSED BY THE LEARNED ASSESS ING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ON THE BASIS OF NOTICE ISSUED ON 07.02.2014 WITHOUT STRIKI NG OFF THE IRRELEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CO NCEALED PARTICULARS OF SUCH INCOME IS BAD IN LAW. 2. THAT THE ORDER PASSED BY THE LEARNED CIT (A) U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 IS VOID AB-INITIO DESERVES TO BE QUASHED. 2 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT (A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 1,73,443 /- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 4. THAT THE ORDER PASSED BY THE LEARNED ASSESSING O FFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 IS VOID AB-IN ITIO DESERVES TO BE QUASHED AS NO SATISFACTION WAS RECORDED WITH REFERENCE TO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. 5. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING IN SAREES. THERE WAS A SURVEY UNDER SECTION 133A ON 28 .01.2011 WHEREIN THE ASSESSEE DECLARED AN ADDITIONAL INCOME OF RS. 5,59,827/-. TH E ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 139(1) ON 30 TH SEPTEMBER, 2011 DECLARING TOTAL INCOME AT RS. 9,53,880/- INCLUDING THE INCOME DECLARED DURING THE SURVEY PROCEEDINGS. THE AO WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ) ON 07.02.2014 MADE THREE ADDITIONS AS UNDER :- 1. TOTAL INCOME AS DECLARED BY THE ASSESSEE RS. 9,53,880/ - ADD: A) ADDITION ON ACCOUNT OF UNDISCLOSED INCOME ON UNRECORDED CASH SALES. RS.1,56,036/ - B) ADDITION ON ACCOUNT OF BOGUS EXPENDITURE (SALARY) RS. 24,000/ - C) DISALLOWANCE OUT OF VARIOUS EXPENSES . RS. 33,847/ - RS. 2,13,883/ - TOTAL INCOME : ROUNDED OFF RS.11,67,763/ - RS.11,67,760/- THUS THE AO HAS COMPUTED THE TOTAL INCOME AT RS. 11 ,67,760/- AFTER MAKING THE ADDITION ON ACCOUNT OF TRADING ADDITION, DISALLOWAN CE OF EXPENDITURE ETC. SUBSEQUENTLY, THE AO INITIATED THE PROCEEDINGS UNDE R SECTION 271(1)(C) BY ISSUING 3 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. SHOW CAUSE NOTICES DATED 07.02.2014 AND 24.05.2016. THE AO LEVIED THE PENALTY UNDER SECTION 271(1)(C) VIDE ORDER DATED 19.08.2016 OF RS. 1,73,443/- AGAINST THE INCOME OF RS. 7,45,263/- WHICH INCLUDES THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME OF RS. 5,59,827/-. THE ASSESSEE C HALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. BEFORE THE TRIBUNAL, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT ONCE THE ASSESSEE HAS DECLARED THE INCOME OF RS. 5,59,827/- IN THE RETURN OF INCOME UNDER SECTION 139(1), THE SAME CANNOT BE CONSIDERED AS CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. THUS THE AO HAS ERRED IN IMPOSING THE PENALTY UNDER SECTION 271(1)(C) IN RES PECT OF THE SAID INCOME. HE HAS FURTHER CONTENDED THAT AS REGARDS THE ADDITION OF R S. 1,55,036/-, THE SAME WAS MADE BY THE AO AFTER REJECTION OF BOOKS OF ACCOUNT AND APPLYING THE GP RATE AT 2% AS AGAINST THE GP RATE DECLARED BY THE ASSESSEE AT 1.92%. THEREFORE, THE ADDITION BASED ON THE ESTIMATION OF INCOME IS NOT SUSTAINABL E IN LAW AS IT IS NOT FALLING IN THE CATEGORY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME. THE LD. A/R HAS THEN CONTEN DED THAT THE EXPENDITURE ON ACCOUNT OF SALARY AS WELL AS MISCELLANEOUS EXPENDIT URE WAS ALSO ON ADHOC BASIS AS INITIALLY THE AO MADE A DISALLOWANCE OF RS. 24,000/ - WHICH WAS RESTRICTED BY THE LD. CIT (APPEALS) TO RS. 4,000/- AND SIMILARLY THE VARI OUS EXPENDITURES WHICH WERE DISALLOWED BY THE AO TO THE TUNE OF RS. 33,847/- WA S RESTRICTED BY THE LD. CIT (APPEALS) TO RS. 6,400/-. THEREFORE, SUCH DISALLOW ANCE ON ADHOC BASIS WOULD NOT ATTRACT THE PENALTY PROVISION OF SECTION 271(1)(C). THUS THE LD. A/R HAS PLEADED THAT THE PENALTY LEVIED BY THE AO AND SUSTAINED BY THE L D. CIT (A) MAY BE DELETED. 4 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T BUT FOR THE SURVEY CONDUCTED BY THE DEPARTMENT, THE ASSESSEE WOULD NOT HAVE DISCLOSED THE UNDISCLOSED INCOME OF RS. 5,59,827/-. THEREFORE, TH E INCOME DISCLOSED BY THE ASSESSEE AND OFFERED TO TAX IN THE RETURN OF INCOME FALLS IN THE CATEGORY OF UNDISCLOSED INCOME. THE LD. D/R HAS FURTHER CONTEN DED THAT APART FROM THE UNDISCLOSED INCOME, THE ASSESSEE HAS ALSO CONCEALED THE SALES AND IT WAS FOUND THAT THERE WAS UNRECORDED SALES OF MORE THAN RS. 51 LACS WHICH HAS LEAD TO REJECTION OF BOOKS OF ACCOUNT. THE AO THEN ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING GP AT 2% ON THE ENTIRE SALES WHICH INCLUDES RECORDED A ND UNRECORDED BOTH SALES. THUS IT IS A CLEAR CASE OF CONCEALMENT OF PARTICULARS OF INCOME WHEN THE ASSESSEE HAS NOT RECORDED THE SALES IN THE BOOKS OF ACCOUNT. AS REG ARDS THE DISALLOWANCE OF SALARY EXPENDITURE, THE LD. D/R HAS SUBMITTED THAT THE AO DETECTED THE BOGUS CLAIM OF SALARY AND CONSEQUENTLY THE ADDITION OF RS. 4,000/- WAS SUSTAINED BY THE LD. CIT (A) BASED ON THE STATEMENT OF THE EMPLOYEE OF THE ASSES SEE WHO HAS ADMITTED THAT HE WAS RECEIVING RS. 10,000/- PER MONTH AS AGAINST THE CLAIM OF RS. 12,000/- PER MONTH. THUS IT IS A CLEAR CASE OF INFLATION OF EXPE NDITURE BY THE ASSESSEE. SIMILARLY, THE ASSESSEE HAS FAILED TO SUPPORT HIS CLAIM OF MIS CELLANEOUS EXPENDITURE WHICH WAS CONSEQUENTLY DISALLOWED BY THE AO AND SUSTAINED BY THE LD. CIT (A) TO THE EXTENT OF RS. 6,400/-. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS CONSIDERED THE VARIOUS ADDITION S/UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY. THE DETAILS OF ADDITIO NS MADE BY THE AO AND RESTRICTED BY THE LD. CIT (A) IN QUANTUM APPEAL ARE GIVEN AT P AGE 2 OF THE PENALTY ORDER AS UNDER :- 5 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. S.NO. HEAD OF ADDITION AS PER ASSTT. ORDER AFTER APPEAL EFFECT 1. UNDISCLOSED INCOME (559827+155036) 155036 155036 2. BOGUS EXPENDITURE 24000 4000 3. VARIOUS EXPENDITURES 33847 6400 TOTAL : 213883 165436 APART FROM THE ADDITION OF RS. 1,65,436/- SUSTAINED BY THE LD. CIT (A), THE AO HAS ALSO CONSIDERED THE SURRENDER MADE BY THE ASSESSEE OF RS. 5,59,827/- AND CONSEQUENTLY THE PENALTY WAS LEVIED IN RESPECT OF A SUM OF RS. 7,14,863/-. IT IS UNDISPUTED FACT THAT THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SECTION 139(1) OF THE IT ACT AND DECLARED TOTAL INCOME AT RS. 9,53,88 0/- WHICH INCLUDES AN INCOME OF RS. 5,59,827/- WHICH WAS SURRENDERED DURING THE COU RSE OF SURVEY PROCEEDINGS CONDUCTED ON 28.01.2011. EVEN IF THE ASSESSEE HAS SURRENDERED THE SAID INCOME OF RS. 5,59,827/- IN THE COURSE OF SURVEY PROCEEDINGS, HOWEVER, ONCE THE SAID INCOME WAS DECLARED IN THE RETURN OF INCOME UNDER SECTION 139(1), THEN THE SAME CANNOT BE DEEMED AS FURNISHING OF INACCURATE PARTICULARS OF I NCOME OR CONCEALMENT OF PARTICULARS OF INCOME AS PER THE PROVISIONS OF SECT ION 271(1)(C) OF THE IT ACT. IT IS NOT A CASE OF SEARCH CARRIED OUT UNDER SECTION 132 OF THE IT ACT AND THEREBY THE EXPLANATIONS 5 OR 5A OF SECTION 271(1)(C) WOULD BE APPLICABLE TO DEEM SUCH INCOME DECLARED IN THE RETURN OF INCOME FILED AFTER SEARCH WILL FALL IN THE CATEGORY OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. THEREFORE, IN THE ABS ENCE OF ANY SUCH DEEMING PROVISION UNDER SECTION 271(1)(C), ONCE THE ASSESSE E HAS DECLARED THE INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) THEN TH E SAME CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALMENT OF PARTICULARS OF 6 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. INCOME. AS PER THE PROVISIONS OF SECTION 271(1)(C) , ONLY WHEN AN AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE AS A RESULT THEREOF SHALL FOR THE PURPOSE OF CLAUSE (C) OF SECTION 271(1) BE DEEMED TO REPRESENT INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. SINCE THE EXPLANATION 5 OR 5A OF SECTIO N 271(1)(C) CANNOT BE PRESSED INTO SERVICE IN THIS CASE, THEREFORE, ANY SURRENDER MADE BY THE ASSESSEE IN THE SURVEY PROCEEDINGS PRIOR TO FILING OF THE RETURN OF INCOME UNDER SECTION 139(1) WOULD NOT LEAD TO THE CONCLUSION THAT DISCLOSURE OF THE SAID INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) REPRESENTS THE INCOME IN RESPE CT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED OR PARTICULARS HAVE BEEN CONCEALED. HENCE THE PENALTY LEVIED BY THE AO IN RESPECT OF THE SAID AMO UNT OF RS. 5,59,827/- DECLARED IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) IS NOT SUSTAINABLE IN LAW AND THE SAME IS DELETED. 6. AS REGARDS THE ADDITION OF RS. 1,55,036/- / RS. 1,56,036/- (AS ONE MENTIONED IN THE PENALTY ORDER AND ANOTHER MENTIONED IN THE A SSESSMENT ORDER RESPECTIVELY), IT IS PERTINENT TO NOTE THAT THE AO HAS REJECTED THE B OOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) AND THEREAFTER ESTIMAT ED THE INCOME OF THE ASSESSEE BY APPLYING GP RATE AT 2% AS AGAINST 1.92%. THUS TO T HE EXTENT OF SALES DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND IN THE RET URN OF INCOME FILED UNDER SECTION 139(1), ANY TRADING ADDITION MADE AFTER REJECTION O F BOOKS OF ACCOUNT BY ESTIMATING THE INCOME WOULD NOT ATTRACT THE PENALTY UNDER SECT ION 271(1)(C) AND PARTICULARLY IN THE CASE OF THE ASSESSEE WHEN THE INCOME DECLARED B Y THE ASSESSEE REPRESENTS GP RATE AT 1.92% AND THE AO HAS ESTIMATED THE INCOME B Y APPLYING GP AT 2%. THEREFORE, TO THE EXTENT OF THE ADDITION BY APPLYIN G GP AT 2% ON THE DECLARED SALES, 7 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. SAME WILL NOT BE REGARDED AS FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME TO ATTRACT THE PENAL PROVISION UNDER SECTION 271(1)(C). ACCORDINGLY, THE PENALTY TO THE EXTENT OF THE TRADING ADDITION MADE IN RESPECT OF THE DECLARED SALES IS DELETED. 7. AS REGARDS THE ADDITION MADE BY THE AO IN RESPEC T OF UNACCOUNTED SALES BY APPLYING GP AT 2%, SINCE IT IS THE CASE OF UNDISCLO SED SALES BY THE ASSESSEE AND, THEREFORE, THE ADDITION ON THE SAID AMOUNT WILL FAL L IN THE CATEGORY OF CONCEALMENT OF PARTICULARS OF INCOME AND CONSEQUENTLY THE PENALTY LEVIED UNDER SECTION 271(1)(C) IN RESPECT OF THE ADDITION IS SUSTAINED. THE AO IS DI RECTED TO RE-COMPUTE THE PENALTY IN RESPECT OF THE ADDITION ON ACCOUNT OF UNACCOUNTED S ALES. 8. AS REGARDS THE SALARY EXPENDITURE WHICH WAS ORIG INALLY DISALLOWED BY THE AO OF RS. 24,000/- BUT THE LD. CIT (A) HAS RESTRICTED THE SAME TO RS. 4,000/-, THIS IS ONLY A CASE OF NON-ACCEPTANCE OF THE CLAIM OF THE ASSESS EE WHEREAS IT IS NOT A BOGUS CLAIM OF SALARY EXPENDITURE. THE ASSESSEE HAS CLAI MED THE SALARY @ RS. 12,000/- PER MONTH WHEREAS THE LD. CIT (A) IN QUANTUM APPEAL HAS ALLOWED THE SALARY @ RS. 10,000/- PER MONTH. THEREFORE, IN SUCH A SITUATION WHEN THE CLAIM AND PARTICULARS WERE ALREADY DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME, THEN DISALLOWANCE OF PART OF THE CLAIM WOULD NOT ATTRACT THE PENALTY PRO VISION UNDER SECTION 271(1)(C). SIMILARLY, THE MISCELLANEOUS EXPENDITURES WERE DISA LLOWED ON ESTIMATED BASIS OF RS. 6,400/- AS PER THE ORDER OF THE LD. CIT (A) IN QUAN TUM PROCEEDINGS, THEREFORE, THE DISALLOWANCE SUSTAINED ON ESTIMATION BASIS WOULD NO T AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME. ACCORDINGLY, THE PENALTY LEVIED UNDER SECTION 271(1 )(C) IN RESPECT OF THE DISALLOWANCE OF SALARY AND MISCELLANEOUS EXPENDITUR E IS DELETED. 8 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR. 9. THE ASSESSEE HAS ALSO RAISED A LEGAL GROUND REGA RDING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) FOR WANT OF SPECIFYING THE LIMB AND DEFAULT OF THE ASSESSEE WHETHER IT IS FOR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME. TH OUGH THE LD. A/R AS WELL AS THE LD. D/R HAS SERIOUSLY CONTESTED THIS ISSUE, HOWEVER , IN VIEW OF THE FINDING ON THE MERITS OF THE APPEAL, I DO NOT PROPOSE TO TAKE UP T HIS ISSUE FOR ADJUDICATION. HENCE THE SAME IS DISMISSED BEING INFRUCTUOUS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 11/10/201 9. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 11/10/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI ARVIND KHANDELWAL, ALWAR. 2. THE RESPONDENT THE ITO WARD 2(1), ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 892/JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 9 ITA NO. 892/JP/2017 SHRI ARVIND KHANDELWAL, ALWAR.