Late Dr.K.C.G.Verghese,Represented by Shri Anand Jacob Varghese, CHENNAI V. ACIT, CHENNAI

ITSSA 16/CHNY/2011

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2205 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2016
• Assessment Year: misc
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR SHRI M M
• Keywords: Cost of acquisition; Reasonable cause; Block assessment
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.(SS) A. NO. 16/MDS/2011 BLOCK ASSESSMENT PERIOD : 01.04.1989 TO 31.03.199 9 & 01.04.1999 TO 20.08.1999 LATE DR. K.C.G. VERGHESE, REPRESENTED BY SHRI ANAND JACOB VERGHESE, NO.11, 4 TH MAIN ROAD, NEHRU NAGAR, ADYAR, CHENNAI - 600 020. PAN : AADPV 2845 B V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III(2), CHENNAI - 600 034. ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE +,)* - . / RESPONDENT BY : SHRI M. MURUGABOOPATHY, ADDL. CIT / - 0% / DATE OF HEARING : 15.06.2016 1'2 - 0% / DATE OF PRONOUNCEMENT : 01.07.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) II, CHEN NAI, DATED 17.01.2011 CONFIRMING THE PENALTY LEVIED BY THE ASS ESSING OFFICER 2 I.T.(SS) A. NO.16/MDS/11 UNDER SECTION 158BFA(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSING OFFICER LEVIED PENALTY UNDER SEC TION 158BFA(2) OF THE ACT CONSEQUENT TO COMPLETION OF BLOCK ASSESS MENT UNDER SECTION 158BC OF THE ACT. THE LD.COUNSEL FURTHER S UBMITTED THAT THE ASSESSEE HAS DISCLOSED A SUM OF ` 53,06,762/- WHICH WAS TREATED AS UNDISCLOSED INCOME IN THE BLOCK PERIOD. HOWEVER, THE ASSESSING OFFICER DETERMINED THE INCOME DURING THE BLOCK PERIOD AT ` 1,23,01,214/-. THE ASSESSEE FILED APPEAL BEFORE TH E CIT(APPEALS) AND THE CIT(APPEALS) FOUND THAT THE ADDITION MADE B Y THE ASSESSING OFFICER TO THE EXTENT OF ` 34,30,000/- WAS NOT JUSTIFIED. ACCORDINGLY, THE CIT(APPEALS) DELETED THE ADDITION TO THE EXTENT OF ` 34,30,000/-. THE ASSESSEE FILED FURTHER APPEAL BEF ORE THIS TRIBUNAL. DURING THE PENDENCY OF THE APPEAL, THE A SSESSEE SHRI K.C.G. VERGHESE EXPIRED. THE LEGAL HEIRS OF SHRI K .C.G. VERGHESE WITHDREW THE APPEAL PENDING BEFORE THIS TRIBUNAL. AFTER WITHDRAWAL OF APPEAL AGAINST THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSING OFFICER INITIATED PENALTY PR OCEEDING UNDER SECTION 158BFA(2) OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE 3 I.T.(SS) A. NO.16/MDS/11 PENALTY LEVIED BY THE ASSESSING OFFICER IS IN RESPE CT OF THE CONDUCT OF THE DECEASED ASSESSEE, THEREFORE, AFTER THE EXPI RY OF THE ASSESSEE NO PENALTY CAN BE LEVIED AGAINST THE LEGAL HEIRS. 3. THE LD.COUNSEL FURTHER SUBMITTED THAT IN RESPECT OF INVESTMENT MADE BY THE ASSESSEE IN LAND AT KARAPAKK AM, THE SAME WAS DISCLOSED TO THE EXTENT OF ` 18,41,238/-. HOWEVER, THE ACTUAL AMOUNT FOUND TO BE INVESTED BY THE ASSESSEE WAS ` 71,48,000/-. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE HAS DISC LOSED THE INVESTMENT IN THE LANDED PROPERTY IN THE VDI SCHEME , 1997 TO THE EXTENT OF ` 18,41,238/-. THEREFORE, ACCORDING TO THE LD. COUNS EL, THE INVESTMENT IN THE LAND WAS WITHIN THE KNOWLEDGE OF REVENUE AUTHORITIES. MERELY BECAUSE THERE WAS A DIFFERENCE WHICH WAS FOUND SUBSEQUENTLY IN THE INVESTMENT MADE IN THE LA ND THAT CANNOT BE A REASON TO LEVY PENALTY. ACCORDING TO THE LD. COUNSEL, AFTER THE DEATH OF THE ASSESSEE SHRI K.C.G. VERGHESE, THE LEG AL REPRESENTATIVE COULD NOT TRACE OUT ANY PAPERS WITH REGARD TO INVESTMENT MADE IN THE LANDED PROPERTY. THEREFORE, HE COULD NOT EXPLAIN BEFORE THE ASSESSING OFFICER WHY SUCH DIFFE RENCE HAS COME. THE HANDICAP FACED BY THE ASSESSEE, BEING THE LEGAL REPRESENTATIVE OF THE DECEASED, CANNOT BE TAKEN ADVANTAGE BY THE R EVENUE FOR 4 I.T.(SS) A. NO.16/MDS/11 LEVYING PENALTY. ACCORDING TO THE LD. COUNSEL, LEV Y OF PENALTY IS A DISCRETION OF ASSESSING OFFICER IN THE FACTS OF EAC H AND EVERY CASE. THE POWER TO LEVY PENALTY IS ONE THING AND EXERCISI NG OF THAT POWER IS ENTIRELY ANOTHER ASPECT. THEREFORE, MERELY BECA USE THERE WAS DIFFERENCE IN RESPECT OF THE INVESTMENT MADE IN THE LANDED PROPERTY IN THE AMOUNT DISCLOSED IN THE VDI SCHEME AND ACTUA L INVESTMENT, AND THE PERSON WHO ACTUALLY INVESTED IS NO MORE, AC CORDING TO THE LD. COUNSEL, LEVY OF PENALTY UNDER SECTION 158BFA(2 ) OF THE ACT IS NOT JUSTIFIED. ACCORDING TO THE LD. COUNSEL, THERE IS REASONABLE CAUSE ON THE PART OF THE LEGAL REPRESENTATIVE FOR N OT PRODUCING RELEVANT DETAILS WITH REGARD TO INVESTMENT, THEREFO RE, THE PENALTY LEVIED BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT(APPEALS) IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI M. MURUGABOOPATHY, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE INV ESTMENT IN THE LANDED PROPERTY AT KARAPAKKAM WAS MADE BY THE DECEA SED ASSESSEE TO THE EXTENT OF ` 71,48,000/-. HOWEVER, WHAT WAS DISCLOSED IN THE VDI SCHEME IS ONLY ` 18,41,238/-. THEREFORE, THE DIFFERENCE OF ` 53,06,762/- NEEDS TO BE EXPLAINED BY THE ASSESSEE. ACCORDING TO THE LD. D.R., THE PENALTY IS LEVIED ON LY ON THE ASSESSEE 5 I.T.(SS) A. NO.16/MDS/11 FOR NOT FURNISHING THE PARTICULAR DETAILS AND NOT O N THE LEGAL REPRESENTATIVE. THE PENALTY IS TO BE RECOVERED ONL Y FROM THE ASSETS OF THE DECEASED ASSESSEE. IN ORDER TO COMPLY WITH THE PROCEDURAL ASPECT, THE LEGAL REPRESENTATIVE WAS GIVEN AN OPPOR TUNITY AS PROVIDED IN SECTION 159 OF THE ACT. THEREFORE, THE DEATH OF THE ASSESSEE, NAMELY , SHRI K.C.G. VERGHESE CANNOT BE A REASON FOR NOT LEVYING PENALTY. 4. SHRI M. MURUGABOOPATHY, THE LD. D.R. FURTHER SUB MITTED THAT THERE WAS A DIFFERENCE BETWEEN THE ASSESSED INCOME AND THE INCOME RETURNED BY THE ASSESSEE. THEREFORE, IT IS FOR THE ASSESSEE TO EXPLAIN WHY SUCH A DIFFERENCE HAS COME. IN THE ABSENCE OF ANY PROPER EXPLANATION ON THE PART OF THE ASSESSEE, NAM ELY, THE LEGAL REPRESENTATIVE, THE CIT(APPEALS) HAS RIGHTLY CONFIR MED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, DURING THE PENDENCY OF THE APPEAL BEFORE THIS TRIBU NAL AGAINST THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE SHRI K.C.G. VERGHESE EXPIRED. THEREFORE, THE LEGAL REPR ESENTATIVE WITHDREW THE APPEAL FOR THE REASON BEST KNOWN TO TH EM. ADMITTEDLY, 6 I.T.(SS) A. NO.16/MDS/11 AFTER WITHDRAWAL OF THE APPEAL BY THE LEGAL REPRESE NTATIVE, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDING UNDE R SECTION 158BFA(2) OF THE ACT. THE QUESTION ARISES FOR CONS IDERATION IS WHETHER THERE WAS ANY CONCEALMENT OF INCOME BY THE ASSESSEE, NAMELY, SHRI K.C.G. VERGHESE? WE HAVE CAREFULLY GO NE THROUGH THE PROVISIONS OF SECTION 158BFA(2) OF THE ACT. W HEN THERE WAS DIFFERENCE BETWEEN ASSESSED INCOME AND INCOME DECLA RED BY THE ASSESSEE IN THE BLOCK PERIOD, THE ASSESSING OFFICER WAS EMPOWERED TO LEVY PENALTY ON THAT PORTION OF UNDISCLOSED INCO ME DETERMINED, WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INC OME SHOWN IN THE RETURN. IN THE CASE BEFORE US, THE ASSESSEE EX PIRED DURING THE PENDENCY OF QUANTUM APPEAL BEFORE THIS TRIBUNAL AND THE LEGAL REPRESENTATIVE WITHDREW THE APPEAL. NOW THE LEGAL REPRESENTATIVE OF THE DECEASED ASSESSEE CLAIMS BEFORE THIS TRIBUNAL T HAT THEY COULD NOT TRACE OUT ANY PAPERS AND THEY ARE NOT ABLE TO E XPLAIN WHY THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER EXCEEDED THE UNDISCLOSED INCOME DISCLOSED BY THE ASSESSEE IN THE RETURN. THE FACT REMAINS THAT THE DECEASED ASSESSEE HAS DIS CLOSED THE COST OF ACQUISITION OF LAND IN THE VDI SCHEME TO TH E EXTENT OF ` 18,41,238/-. THE SEIZED MATERIAL, WHICH WAS IDENTI FIED DURING THE COURSE OF SEARCH OPERATION, DISCLOSED THE INVESTMEN T TO THE EXTENT 7 I.T.(SS) A. NO.16/MDS/11 OF ` 71,48,000/-. THEREFORE, THE INVESTMENT MADE BY THE DECEASED ASSESSEE IS VERY MUCH AVAILABLE BEFORE THE ASSESSIN G AUTHORITY EVEN BEFORE THE DATE OF SEARCH. THEREFORE, THE DEC EASED ASSESSEE MAY BE IN A BETTER POSITION TO EXPLAIN WHY ` 18,41,238/- WAS DISCLOSED IN THE VDI SCHEME, 1997, WHEN THE ACTUAL INVESTMENT WAS IDENTIFIED AT ` 71,48,000/-. 6. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LEGAL REPRESENTATIVE OF THE DECEASED ASSESSEE IS HANDICAP PED BECAUSE THEY COULD NOT TRACE OUT ANY PAPERS AFTER THE EXPIR Y OF THE ASSESSEE. THIS IMPEDIMENT FACED BY THE LEGAL REPRESENTATIVE C ANNOT BE TAKEN ADVANTAGE BY THE REVENUE AUTHORITIES. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE POWER TO LEVY PENALTY U NDER SECTION 158BFA(2) OF THE ACT IS ONE THING AND EXERCISING OF THAT POWER IS ENTIRELY DIFFERENT. THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE POWER TO LEVY PENALTY HAS TO BE EXERCISED JUDICIOUS LY. THEREFORE, MERE WITHDRAWAL OF THE APPEAL PENDING BEFORE THIS T RIBUNAL BY LEGAL REPRESENTATIVE CANNOT BE PRESUMED THAT THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME. THIS TRIBUNAL FINDS THAT PUNJAB & HARYANA HIGH COURT IN CIT V. TIKKA RAM THROUGH L/H SMT. MUNNI DEVI (2008) 8 DTR 174, 8 I.T.(SS) A. NO.16/MDS/11 A COPY OF WHICH IS FILED BY THE ASSESSEE, FOUND THA T SINCE THE LEGAL REPRESENTATIVE WAS IGNORANT OF THE SOURCE OF IMPUGN ED INVESTMENT AND WAS NOT IN A POSITION TO EXPLAIN THE SAME, THEY ACCEPTED THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 148 OF THE ACT. THEREFORE, THE DISCLOSURE MADE BY THE LEGAL REPRESE NTATIVE IS A BONAFIDE AND VOLUNTARY. HENCE, THE PENALTY CANNOT BE LEVIED AT ALL. THIS PRINCIPLE WAS LAID DOWN BY PUNJAB & HARYANA HI GH COURT IN A PROCEEDING FOR LEVYING PENALTY UNDER SECTION 271(1) (C) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME PRINCIPLE IS EQUALLY APPLICABLE IN RESPECT OF PENALTY LEVIED UND ER SECTION 158BFA(2) OF THE ACT. THEREFORE, MERELY BECAUSE TH E LEGAL REPRESENTATIVE WITHDREW THE APPEAL PENDING BEFORE T HIS TRIBUNAL AFTER THE EXPIRY OF THE ASSESSEE SHRI K.C.G. VERGHE SE AND THE LEGAL REPRESENTATIVE IS NOT IN A POSITION TO EXPLAIN THE SOURCE OF INVESTMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THAT CANNOT BE A REASON FOR LEVYING PENALTY UNDER SECTIO N 158BFA(2) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE PENALTY LEVIED UNDER SECTION 158BFA(2) OF THE ACT I S DELETED. 9 I.T.(SS) A. NO.16/MDS/11 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 1 ST JULY, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 1 ST JULY, 2016. KRI. - +056 7620 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-II, CHENNAI-34 4. / 80 /CIT, CENTRAL-III, CHENNAI 5. 69 +0 /DR 6. :; < /GF.