Appeal Details
Counselvise Citation
[2012] 124 COUNSELVISE.COM (IT) 7700 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
23-03-2012
Appeal Filed By
Assessee
Bench Allotted
C
Next Hearing Date
14-03-2012
Assessment Year
misc
Appeal Filed On
06-06-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.(SS) A. NO. 19/MDS/2011 (BLOCK ASSESSMENT PERIOD : 1996-97 TO 2000-01) M/S R.S. WINDTECH ENGINEERS PVT. LTD., 8/126-E3, MAIN ROAD, ARALVOIMOZHI, NAGERCOIL 629 301. PAN : AAACR7743Q (APPELLANT) V. THE COMMISSIONER OF INCOME TAX (APPEALS)-II, MADURAI. (RESPONDENT) APPELLANT BY : SHRI N. DEVANATHAN RESPONDENT BY : SHRI E.S. NAGENDR A PRASAD, CIT-DR DATE OF HEARING : 14.03.2012 DATE OF PRONOUNCEMENT : 23.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, IT IS AGGRI EVED ON THE LEVY OF PENALTY UNDER SECTION 158 BFA(2) OF INCOME-TAX A CT, 1961 (IN SHORT 'THE ACT'). I.T.(SS) A. NO. 19/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A DOMESTI C COMPANY ENGAGED IN ERECTION AND MAINTENANCE OF WINDMILLS, W AS SUBJECTED TO SEARCH UNDER SECTION 132 OF THE ACT, PURSUANT TO WH ICH A BLOCK ASSESSMENT WAS COMPLETED ON THE ASSESSEE FOR A BLOC K PERIOD 1.4.95 TO 10.8.2000 ASSESSING TOTAL UNDISCLOSED INCOME ` 13,94,313/-. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) AND LA TER BEFORE THIS TRIBUNAL. THE CASE WAS REMITTED BACK TO THE A.O. B Y THIS TRIBUNAL AND THE A.O. IN THE FRESH ASSESSMENT ORDER PASSED O N 31.12.2008 ASSESSED THE UNDISCLOSED INCOME AT ` 5,42,000/-. PENALTY PROCEEDINGS WERE THEREAFTER INITIATED SINCE ASSESSE E IN ITS RETURN OF INCOME FILED FOR THE BLOCK PERIOD, HAD RETURNED NIL INCOME. ASSESSING OFFICER NOTED THAT TWO BILLS RAISED BY TH E ASSESSEE ON M/S NEPC LTD. FOUND AT THE TIME OF SEARCH, ONE FOR ` 1,85,000/- ON 1.9.1998 AND THE OTHER FOR ` 2,45,000/- ON 2.4.1998, WERE NOT ACCOUNTED BY THE ASSESSEE IN ITS SALES REGISTER. A SSESSING OFFICER VERIFIED THE ACCOUNT COPIES OF M/S NEPC LTD. AND FO UND THAT M/S NEPC LTD. HAD ALSO OMITTED TO RECORD SUCH BILLS IN ITS BOOKS OF ACCOUNTS. THE TOTAL AMOUNT OF THE TWO BILLS COMING TO ` 4,34,000/- WAS ADDED AS UNDISCLOSED INCOME. ASSESSEES APPEAL ON THIS ISSUE DID NOT MEET WITH ANY SUCCESS EITHER BEFORE CIT(APP EALS) OR BEFORE THIS TRIBUNAL. THEREAFTER, PENALTY PROCEEDINGS WER E INTIATED AND THE I.T.(SS) A. NO. 19/MDS/11 3 ASSESSEE WAS ISSUED SHOW CAUSE NOTICE WHY PENALTY U NDER SECTION 158BFA(2) SHOULD NOT BE LEVIED ON IT. REPLY OF THE ASSESSEE WAS THAT IT HAD AGREED TO THE ADDITION WITH THE IDEA OF SETT LING THE DISPUTE WITH THE DEPARTMENT AMICABLY AND IT WAS ONLY A HUMAN ERR OR THAT TWO BILLS WERE NOT POSTED TO THE SALES REGISTER. AS PER THE ASSESSEE, THE DIRECTORS WERE NOT AWARE OF THIS MISTAKE AND IT OUG HT NOT HAVE BEEN CONSIDERED AS A REASON FOR PENALTY UNDER SECTION 15 8 BFA(2) OF THE ACT. HOWEVER, THE A.O. DID NOT ACCEPT THESE SUBMI SSIONS. ACCORDING TO HIM, ASSESSEE HAD SUFFICIENT OPPORTUNI TY FOR VERIFYING ITS BOOKS AND FILING ITS RETURN FOR THE BLOCK PERIOD, B UT, HAD OMITTED TO DO SO. AS PER THE A.O., OMISSION TO RECORD THE SALES CAME TO LIGHT ONLY ON SEARCH AND SUBSEQUENT TO THE SEARCH, ASSESSEE CO ULD NOT OFFER ANY ACCEPTABLE EXPLANATION FOR THE OMISSION AND THE RE WAS A CLEAR ATTEMPT TO EVADE TAX. HE, THEREFORE, HELD THAT IT WAS A CASE FIT FOR LEVYING PENALTY UNDER SUB-SECTION (2) OF SECTION 15 8BFA OF THE ACT AND LEVIED PENALTY OF ` 3,25,200/- AT THE MINIMUM LEVEL PRESCRIBED. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE ASSESSMENT ITSELF WAS BARRED BY TIME. ACCORDING TO THE ASSESSEE, THOUGH THIS GROUND WAS TAKEN BY IT BEFORE LD. CIT(APPEALS) IN QUANTUM APPEAL, LD. CIT(APPEALS) HAD DISMISSED S UCH GROUND AS I.T.(SS) A. NO. 19/MDS/11 4 NOT PURSUED. ASSESSEE IN THE SECOND APPEAL FILED B EFORE THIS TRIBUNAL, HAD NOT PRESSED THE ISSUE OF LEGALITY OF ASSESSMENT. FURTHER, SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) WAS THAT THERE WAS NO ACCRUAL OF INCOME SINCE BILLS IN ORIGINAL WERE FOUND AT THE TIME OF SEARCH AND THOUGH IT WAS FOLLOWING M ERCANTILE SYSTEM, IT WAS NOT BOUND TO SHOW INCOME UNLESS THE BILLS WERE ISSUED TO THE PARTIES. AS PER THE ASSESSEE, THE INVOICES WERE L ATER CANCELLED BY IT. HOWEVER, LD. CIT(APPEALS) WAS NOT IMPRESSED. ACCOR DING TO HIM, ASSESSEE COULD NOT FURNISH ANY SATISFACTORY DOCUMEN TARY EXPLANATION SUBSTANTIATING ITS PLEA THAT THE BILLS THAT WERE RA ISED WERE LATER ON CANCELLED. LD. CIT(APPEALS) ALSO NOTED THAT THE TR IBUNAL HAD CONFIRMED THE ADDITIONS IN QUANTUM ASSESSMENT. HE, THEREFORE, REFUSED TO INTERFERE IN THE ORDER OF A.O. LEVYING T HE PENALTY. 4. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF AUTHORITIES BELOW, SUBMITTED THAT THE GROUND INVOLV ING VALIDITY OF ASSESSMENT, WHICH WAS A PURE QUESTION OF LAW, WHICH NEEDED NO INVESTIGATION, COULD BE CONSIDERED EVEN IN AN APPEA L AGAINST PENALTY. ACCORDING TO HIM, THE SEARCH WAS CONDUCTED ON 10.8. 2000 AND THEREFORE, UNDER SECTION 158BE OF THE ACT, THE LAST DATE FOR PASSING THE BLOCK ASSESSMENT ORDER WAS 31.8.2002. ACCORDIN G TO HIM, THE I.T.(SS) A. NO. 19/MDS/11 5 BLOCK ASSESSMENT ORDER PASSED ON 30.9.2002 WAS BEYO ND TIME LIMIT. LEARNED A.R. STRONGLY CONTENDED THAT THERE COULD NO T BE ANY PENALTY PROCEEDINGS WHEN ASSESSMENT ITSELF WAS BARRED BY TI ME AND VOID. FURTHER, ACCORDING TO HIM, THE TWO BILLS PERTAINING TO M/S NEPC LTD., WHICH WERE CONSIDERED AS NOT ACCOUNTED, WERE NEVER ISSUED TO THE SAID M/S NEPC LTD. THE ORIGINAL BILLS FOUND AT THE TIME OF SEARCH WERE STILL IN THE CUSTODY OF DEPARTMENT. THEREFORE , ASSESSEE COULD NOT BE EXPECTED TO ACCOUNT THE BILLS WHICH WERE NOT ISSUED. THERE WAS NO LEGAL LIABILITY ON THE PART OF M/S NEPC LTD. AND THERE WAS NO ACCRUAL OF ANY INCOME TO THE ASSESSEE. FURTHER, IT WAS ARGUED THAT THE OMISSION TO RECORD THE INCOME DID NOT LEAD TO F ILING OF ANY INACCURATE PARTICULARS OF INCOME. 5. PER CONTRA, LEARNED D.R. SUBMITTED THAT THE ASSE SSMENT, AS PER THE CIT(APPEALS)S ORDER, WAS COMPLETED ON 30.8.200 0 AT 7 P.M. RELYING ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF BHARAT RICE MILLS V. CIT (278 ITR 599) AND THAT MADHYA PRA DESH HIGH COURT IN THE CASE OF S.S. RATANCHAND BHOLANATH V. CIT (21 0 ITR 682), LEARNED D.R. STRONGLY SUBMITTED THAT THE QUESTION O F VALIDITY OF ASSESSMENT COULD NOT BE CONSIDERED IN A PENALTY PRO CEEDINGS. RELYING ON PARA 9 OF THE THE DECISION OF THIS TRIBU NAL IN ASSESSEES I.T.(SS) A. NO. 19/MDS/11 6 QUANTUM APPEAL IN I.T.(SS) A. NO. 114/MDS/04 DATED 20.7.2007, LEARNED D.R. SUBMITTED THAT ADDITION WAS CONFIRMED SINCE BILLS WERE INDEED RAISED BY THE ASSESSEE BUT NOT ACCOUNTED IN THE BOOKS. AS PER THE LEARNED D.R., ASSESSEE HAD AN OPPORTUNITY T O CLEAR THESE DEFECTS AND FILE A CORRECT RETURN FOR ITS BLOCK PER IOD WHICH IT DID NOT AVAIL OF BUT HAD ELECTED, ON THE OTHER HAND, TO FIL E A NIL RETURN. ASSESSEE HAD FILED THE NIL RETURN OF INCOME EVEN WH EN IT WAS AWARE THAT BILLS RAISED ON M/S NEPC LTD. TOTALLING TO ` 3,34,000/- WERE NOT ACCOUNTED. THEREFORE, AS PER LEARNED D.R., ASSESSE E DESERVED NO SYMPATHY FROM THIS TRIBUNAL AND LEVY OF PENALTY HAD TO BE CONFIRMED. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FROM PARA 5.4 OF THE ORDER OF LD. CIT(A PPEALS) THAT THE SEARCH WAS CONCLUDED ON 30.8.2000 AT 7 P.M. IT HAS ALSO BEEN MENTIONED BY THE LD. CIT(APPEALS) THAT THIS FACT HA S BEEN NOTED IN A LETTER DATED 27.2.2011 OF ASSESSING OFFICER. ALONG WITH THIS LETTER, ASSESSING OFFICER HAD ALSO ENCLOSED A COPY OF PANCH NAMA AND IT WAS BASED ON SUCH PANCHNAMA, LD. CIT(A) CAME TO A CONCL USION THAT THE SEARCH WAS CONCLUDED ON 30.8.2000. WHEN THE SEARCH WAS CONCLUDED ON 30.8.2000, THE TIME LIMIT PRESCRIBED U NDER SECTION 158BE FOR PASSING AN ORDER UNDER SECTION 158BC EXPI RED ON I.T.(SS) A. NO. 19/MDS/11 7 31.8.2002. CLAUSE (B) OF SUB-SECTION (1) OF SECTIO N 158BC PRESCRIBES TWO YEARS FROM THE END OF THE MONTH IN WHICH LAST O F THE AUTHORIZATION FOR SEARCH WAS EXECUTED, FOR PASSING AN ORDER UNDER SECTION 158BC OF THE ACT. IT IS NOT DISPUTED THAT THE ORIGINAL A SSESSMENT ORDER WAS PASSED BY THE A.O. ON 30.9.2002 AND THIS FACTUM IS ALSO CLEARLY MENTIONED NOT ONLY IN THE ORDER OF PENALTY PASSED B Y THE ASSESSING OFFICER, BUT ALSO IN THE ORDER OF LD. CIT(APPEALS). SO, CLEARLY THE BLOCK ASSESSMENT ORDER WAS PASSED AFTER THE STATUTORY TIM E LIMIT. NO DOUBT, THIS ISSUE THOUGH RAISED BY THE ASSESSEE BEF ORE CIT(APPEALS) IN ITS QUANTUM APPEAL WAS NOT PURSUED BY IT VIGOROU SLY NOR FURTHER TAKEN IN ITS APPEAL BEFORE THIS TRIBUNAL. BUT, NEV ERTHELESS, THE FACTS WOULD CLEARLY SHOW THAT THE ASSESSMENT ORDER WAS PA SSED BEYOND TIME. ARGUMENT OF THE LEARNED D.R. IS THAT WHEN TH E VALIDITY OF ASSESSMENT WAS NOT CHALLENGED IN THE QUANTUM APPEAL , THEN IT COULD NOT BE HELD AS VOID IN A COLLATERAL PROCEEDING LIKE A PENALTY PROCEEDING AND THIS IS SUPPORTED BY THE DECISION IN THE CASE OF S.S. RATANCHAND BHOLANATH (SUPRA) OF MADHYA PRADESH HIGH COURT. BUT, IN OUR OPINION, WHAT IS TO BE DECIDED IS WHETHER PE NALTY PROCEEDINGS CAN BE QUESTIONED WHEN THE VALIDITY OF ORDER OF ASS ESSMENT ITSELF WAS QUESTIONABLE. WE ARE NOT DECIDING WHETHER THE ASSE SSMENT WAS NOT VALID. HERE, WITHOUT DOUBT, ASSESSEE HAD QUESTIONE D THE VALIDITY OF I.T.(SS) A. NO. 19/MDS/11 8 ASSESSMENT BEFORE LD. CIT(APPEALS) BUT HAD NOT PURS UED IT VIGOROUSLY EITHER BEFORE CIT(APPEALS) OR LATER BEFORE THIS TRI BUNAL. DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF DHIRAJ SURI V. ADDL . CIT (98 ITD 187) HAD HELD THAT IF THE BLOCK ASSESSMENT ITSELF WAS WI THOUT JURISDICTION, THERE WAS NO QUESTION OF LEVY OF PENALTY UNDER SECT ION 158BFA(2) OF THE ACT. THERE, THE ISSUE WAS WHETHER THE AUTHORIZ ATION ISSUED UNDER SECTION 132 WAS VALID. IT WAS HELD BY THE TRIBUNAL THAT WHEN THE AUTHORIZATION FOR SEARCH ITSELF WAS NOT VALID, THER E COULD BE NO QUESTION OF LEVY OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT, THE BLOCK ASSESSMENT ITSELF BEING BASED ON SUCH AN AUTH ORIZATION. AGAIN, IN THE CASE OF ACIT V. SMT. SURINDER KAUR (18 DTR 3 8) DECIDED BY LUCKNOW BENCH OF THIS TRIBUNAL, IT HAS BEEN HELD TH AT FOR LEVY OF PENALTY, THERE SHOULD BE A LEGALLY VALID ASSESSMENT ORDER. IT WAS ALSO HELD THAT EVEN THOUGH SUCH ASSESSMENT WAS NOT CHALL ENGED AND WAS ACCEPTED BY THE ASSESSEE, IT COULD NOT BE A GROUND TO HOLD THAT IT WAS A VALID PLATFORM FOR LEVY OF PENALTY. THEREFORE, W E ARE OF THE OPINION THAT THOUGH THE ASSESSMENT HAS NOT BEEN HELD AS VOI D BEING TIME BARRED, THE ASSESSEE CAN RAISE THIS ISSUE OF VALIDI TY OF THE ASSESSMENT AS A DEFENCE IN A PROCEEDING FOR LEVY OF PENALTY. I.T.(SS) A. NO. 19/MDS/11 9 7. INSOFAR AS MERITS OF THE CASE IS CONCERNED, WITH OUT DOUBT, TWO INVOICES OF M/S NEPC LTD., WERE FOUND AT THE TIME O F SEARCH. WHAT IS SPECIFICALLY NOTED BY US IS THAT THESE WERE ORIGINA L BILLS RAISED ON M/S NEPC LTD. IT IS CLEARLY NOTED BY THE A.O. IN THE P ENALTY ORDER THAT SUCH BILLS WERE NOT ACCOUNTED BY M/S NEPC LTD. AS W ELL. ADMITTEDLY, THE ORIGINAL BILLS WERE STILL WITH DEPARTMENT. SO, THE BILLS WERE NEVER ISSUED BY THE ASSESSEE TO THE SAID M/S NEPC LTD. AN D THE LATTER HAD NEVER ACCOUNTED SUCH BILLS. WHEN THE ASSESSEE HAD NEVER RAISED THE INVOICES BUT HAD KEPT IT TO ITSELF, WE CANNOT SAY T HAT ANY LEGAL LIABILITY COULD BE FASTENED ON M/S NEPC LTD. FOR PAYING SUCH BILLS. WHEN M/S NEPC LTD. ITSELF WAS NEVER AWARE ABOUT THE BILLS RA ISED BY THE ASSESSEE ON IT, THERE WAS NO LEGAL LIABILITY ON ITS PART TO PAY SUCH BILLS. UNLESS AND UNTIL THE BILLS WERE RAISED, M/S NEPC LT D. COULD NOT BE HELD LIABLE FOR PAYMENT OF THE SUMS MENTIONED THERE IN. ASSESSEE HAD NO RIGHT OF RECOVERY OF THE SAID SUM FROM M/S N EPC LTD. AS HELD BY HONBLE APEX COURT IN THE CASE OF E.D. SASSOON & COMPANY LTD. V. CIT (26 ITR 27) FOR AN AMOUNT TO BE RECOGNIZED A S INCOME, THERE SHOULD BE A RIGHT TO RECEIVE SUCH INCOME, WHATEVER MIGHT BE THE METHOD OF ACCOUNTING FOLLOWED. HERE, WITHOUT THE I NVOICES HAVING NEVER REACHED M/S NEPC LTD., WE CANNOT SAY THAT ASS ESSEE HAD ANY RIGHT TO RECEIVE THE SUMS. ASSESSEE MIGHT HAVE ACC EPTED IT AS I.T.(SS) A. NO. 19/MDS/11 10 INCOME TO BUY PEACE WITH THE DEPARTMENT. IN OUR OP INION, THIS BY ITSELF CANNOT BE A REASON TO FASTEN THE ASSESSEE WI TH PENALTY UNDER SECTION 158BFA(2) OF THE ACT. SUB-SECTION (2) OF S ECTION 158 IS NOT A MANDATORY ONE, WHEREBY A PENALTY HAS TO BE LEVIED I N EVERY CASE. IT HAS BEEN HELD BY VARIOUS COURTS THAT A DISCRETION I S VESTED WITH THE A.O. TO LEVY OR NOT TO LEVY SUCH PENALTY. IN OUR O PINION, THIS WAS A FIT CASE WHERE SUCH DISCRETION OUGHT HAVE BEEN EXERCISE D IN FAVOUR OF ASSESSEE. THE LEVY OF PENALTY WAS NOT WARRANTED. SUCH LEVY IS CANCELLED. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 23 RD MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 23 RD MARCH, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II, MADURAI (4) CIT-II, MADURAI (5) D.R. (6) GUARD FILE
