Shri Mukesh R. Varma, Ahmedabad V. The Income Tax Officer, Ward-10(3), Ahmedabad

ITSSA 394/AHD/2013

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2492 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Loose papers
• Section: 143(3); 153A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER IT(SS)A NO. 394/AHD/2013 / ASSESSMENT YEAR: 2006-07 MUKESH R. VARMA, SATYAGRAH CHHAVNI, 314-C, LANE-16, SECTOR-2, SATELLITE ROAD, AHMEDABAD 380015 PAN : AASPV 4338 G VS. INCOME TAX OFFICER, WARD 10(3), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE(S) BY : SHRI P.M. MEHTA WITH SHRI G.M. THAKOR, ARS REVENUE BY : SHRI MUDIT NAGPAL, SR DR / DATE OF HEARING : 25/10/2016 / DATE OF PRONOUNCEMENT: 27/10/2016 / O R D E R PER N.K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, AHMEDABAD DATED 29.08.2013 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AT RS.3,21,521/-. 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASS ESSMENT ORDER DATED 31.12.2008 MADE U/S 153A R.W.S. 143(3) OF THE ACT. 4. DURING THE COURSE OF SEARCH OPERATIONS AT THE PR EMISES OF THE ASSESSEE, INTER ALIA , LOOSE PAPERS MARKED AS PAGE NOS. 121 & 133 OF ANN EXURE A 1/2 WERE FOUND AND SEIZED. THE ASSESSING OFFICER WAS O F THE OPINION THAT IN THESE LOOSE PAPERS, THE ASSESSEE HAS CHARGED AMOUNT MORE THAN WHAT IT HAS IT(SS)A NO. 394/AHD/2013 MUKESH R. VARMA VS. ITO AY 2006-07 2 SHOWN IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE WAS CO NFRONTED ABOUT THIS AND WAS ASKED TO SUBMIT THE EXPLANATION. THE REPLY OF THE ASSESSEE READS AS UNDER:- WITH REFERENCE TO THE LOOSE PAPER NO.121 AND 133 O F ANNEXURE A1/2 FOUND & SEIZED AND IN CONTINUATION OF EARLIER SUBMISSION, THE ASSESSEE SUBMITS THAT MR. DHARMENDRA TRIVEDI, PANKAJBA N CHUDASMA & ARUN N. PRAJAPATI HAD BECOME MEMBERS OF AVANI HILLS PRIOR TO 1.4.2000. T HE SAME IS BEING DEVELOPED ON LAND BELONGING TO JAI MATADI COOPERATI VE HOUSING SOCIETY LTD. THE COPY OF ALLOTMENT LETTER EVIDENCING THE ALLOTME NT OF FLATS IS ALREADY SUBMITTED TO YOUR GOODSELVES. THE SAID NOTINGS CON TAIN THE ADDITIONAL AMOUNT DEMANDED AGAINST SALE OF FLAT MADE FROM MR.D HARMENDRA TRIVEDI, PANKAJBA B. CHUDASMA AND ARUN PRAJAPATI THAT WAS BE ING CHARGED FROM NEW MEMBERS IN 2005, WHICH WAS ULTIMATELY REJECTED BY THEM. ACCORDINGLY, THE SAID TRANSACTION PERTAINS PRIOR TO 1.4.2000 AND PERTAIN TO THE RESPECTIVE MEMBER AND JAI MATADI COOPERATIVE HOUSING SOCIETY L TD, WHICH NEVER GOT MATERIALIZED. HOWEVER, IN ORDER TO AVOID LITIGATION AND TO BUY PE ACE THE ASSESSEE IS READY TO OFFER A SUM OF RS.972900/- IN ASSESSMENT YEAR 2006- 07 (RS.225000 + RS.292600+RS.455300) SUBJECT TO THE CONDITION THAT NO PENALTY SHALL BE IMPOSED ON THE SAID SUM. 5. THE ABOVE SUBMISSIONS OF THE ASSESSEE DID NOT FI ND ANY FAVOUR WITH THE ASSESSING OFFICER WHO MADE THE ADDITION OF RS.9 ,72,900/- AND SIMULTANEOUSLY INITIATED PENALTY PROCEEDINGS. 6. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSING OFFICER ASKED THE ASSESSEE TO SHOW-CAUSE WHY PENALTY SHOULD NOT B E LEVIED U/S 271(1)(C) OF THE ACT REGARDING CASH RECEIPT OF RS.9,72,900/- . THE ASSESSEE FILED A DETAILED REPLY WHICH WAS NOT ACCEPTED BY THE ASSESS ING OFFICER. HEAVILY DRAWING SUPPORT FROM EXPLANATION 1 APPENDED TO SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER WAS CONVINCED THAT THE A SSESSEE HAS COMMITTED THE DEFAULT WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND IT IS A FIT CASE FOR LEVY OF PENALTY. THE ASSESSING OFFICER CO NCLUDED THE PROCEEDINGS BY LEVYING PENALTY OF RS.3,21,521/-. IT(SS)A NO. 394/AHD/2013 MUKESH R. VARMA VS. ITO AY 2006-07 3 7. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BU T WITHOUT ANY SUCCESS. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHE MENTLY STATED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER AND CONFIRM ED BY THE CIT(A) NOWHERE MENTIONS WHETHER THE PENALTY HAS BEEN LEVIE D FOR CONCEALMENT OF INCOME OR FOR FILING OF INACCURATE PARTICULARS OF I NCOME. IT IS THE SAY OF THE COUNSEL THAT IF THE CHARGE IS NOT SPECIFIC, THE LEV Y OF PENALTY WOULD BE UNLAWFUL. PER CONTRA, THE DR STRONGLY SUPPORTED TH E ORDERS OF THE REVENUE AUTHORITIES. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE HAD OF FERED RS.9,72,900/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE CONDITION THAT NO PENALTY SHOULD BE LEVIED. 10. BE THAT AS IT MAY, A PERUSAL OF THE ORDERS OF T HE AUTHORITIES BELOW SHOWS THAT NOWHERE THE LOWER AUTHORITIES HAVE MENTI ONED THE CHARGE, SPECIFICALLY WHETHER THE PENALTY IS LEVIED FOR CONC EALMENT OF INCOME OR FOR FILING OF INACCURATE PARTICULARS OF INCOME. 11. THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARA T IN THE CASE OF NEW SORATHIA ENGINEERING CO., VS. CIT, REPORTED IN [200 6] 282 ITR 642 (GUJ.) HAS OBSERVED AS UNDER:- IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STAT E WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCO ME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BE EN FURNISHED BY THE ASSESSEE. WHERE THE TRIBUNAL FAILS TO TAKE INTO CONSIDERATION AND DEAL WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT IT WOULD CONSTITUT E AN ERROR IN LAW WHICH GOES TO THE VERY BASIS OF THE CONTROVERSY INVOLVED. IT(SS)A NO. 394/AHD/2013 MUKESH R. VARMA VS. ITO AY 2006-07 4 AN ADDITION OF RS. 61,000 WAS MADE TO THE INCOME OF THE ASSESSEE IN THE ASSESSMENT YEAR 1981-82. PENALTY WAS IMPOSED. THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER (APPEALS) WHO UPHELD THE PENALTY. BY OBSERVING '... THEREFORE, RS. 61,000 CLEARLY IS INCOME WHICH IS CONCEALED OR IN WHICH INACCURATE PARTICULARS OF INCOME HAVE B EEN FURNISHED.' THE ASSES-SEE, THEREFORE, FILED SECOND APPEAL BEFORE TH E TRIBUNAL BUT DID NOT SUCCEED. ONE OF THE CONTENTIONS RAISED BEFORE THE T RIBUNAL WAS BASED ON A DECISION OF THE COURT IN THE CASE OF CIT V. MANU EN GINEERING WORKS [1980] 122 ITR 306 (GUJ). IT WAS SUBMITTED ON BEHALF OF TH E ASSESSEE THAT THE PENALTY COULD NOT BE SUSTAINED IN THE ABSENCE OF A CLEAR-CUT FINDING BY THE ASSESSING OFFICER. THE TRIBUNAL DID NOT DEAL WITH T HE CONTENTION AND UPHELD THE ORDER OF PENALTY. ON A REFERENCE: HELD, THAT THE PENALTY ORDER AND THE ORDER OF THE C OMMISSIONER (APPEALS) SHOWED THAT NO CLEAR-CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HAD FAILED TO APPRECIATE THIS LEGAL ISSUE. THE RATIO IN CIT V. MA NU ENGINEERING WORKS [1980] 122 ITR 306 (GUJ) WAS APPLICABLE AND THE ORD ER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 12. A SIMILAR VIEW WAS ALSO TAKEN BY THE HONBLE JU RISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. MANU ENGINE ERING WORKS, REPORTED IN [1980] 122 ITR 306 (GUJ.). THE RELEVANT PORTION OF THE ORDER READS AS UNDER:- THE LANGUAGE OF AND/OR MAY BE PROPER IN ISSUING A NOTICE FOR A PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI CRIMINAL CASE BUT IT IS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FIN DING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHE R ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY HI M. IF NO SUCH CLEAR-CUT FINDING IS REACHED BY THE IAC, PENALTY CANNOT BE LE VIED. IN THE ASSESSMENT FOR THE YEAR 1970-71 MADE ON THE ASSESSEE-FIRM AN ADDITION OF RS.21,691 WAS MADE BY THE ITO ON THE GROUND THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE WAS NOT ACCEPTABLE BECAUS E OF CERTAIN DEFECTS IN THE ACCOUNTS. AS A RESULT OF THE ADDITION THE DIFFERENC E BETWEEN THE ASSESSED AND RETURNED INCOMES EXCEEDED TWENTY PER CENT, AND PENA LTY PROCEEDINGS WERE INITIATED AND THE MATTER REFERRED TO THE IAC. AGAIN ST THE ORDER OF ASSESSMENT AN APPEAL WAS PREFERRED. BEFORE THE APPEAL CAME UP FOR HEARING THE ASSESSEE DISCOVERED THAT THE ACCOUNTANT HAD DEBITED THE OPEN ING STOCK VALUE AMOUNTING TO RS. 25,770 TO THE P & L ALE TWICE AND THEREBY THERE WAS AN UNDERSTATEMENT OF THE PROFITS. THIS AMOUNT OF RS. 2 5,770 WAS SURRENDERED BEFORE THE AAC FOR PURPOSES OF TAXATION. THIS FACT WAS DISCLOSED TO THE IAC. IT(SS)A NO. 394/AHD/2013 MUKESH R. VARMA VS. ITO AY 2006-07 5 BUT HE LEVIED PENALTY HOLDING: 'I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' ON APPEAL, THE TRIBUNA L CAME TO THE CONCLUSION THAT THE IAC HAD NO JURISDICTION TO LEVY PENALTY IN VIEW OF THE FACT THAT DURING THE PENDENCY OF THE PENALTY PROCEEDINGS S. 2 74 HAD BEEN AMENDED. ON A REFERENCE : HELD, THAT THE JURISDICTION OF THE IAC UNDER THE UN AMENDED S. 274 CONTINUED AND HE COULD DISPOSE OF THE PENALTY PROCEEDINGS. BU T THOUGH THE AAC DID NOT RECOMMEND LEVYING OF ANY PENALTY IN VIEW OF THE CHA NGE IN THE WHOLE BASIS OF ASSESSMENT, THE IAC TREATED THE NON-DISCLOSURE OF T HE DOUBLE DEBITING OF RS.25,770 IN THE P & L A/C FOR THE ASSESSMENT YEAR AS CONCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS. THE IA C HAD NO JURISDICTION TO PASS THE ORDER LEVYING THE PENALTY ON THAT BASIS. 13. FACTS OF THE CASE IN HAND ARE IDENTICAL TO THE FACTS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA); THEREFOR E, RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE HIGH COURT, WE SET ASID E THE FINDINGS OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE PENALTY OF RS.3,21,521/-. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 27 TH OCTOBER, 2016 AT AHMEDABAD. SD/- SD/- (MAHAVIR PRASAD) JUDICIAL MEMBER (N.K. BILLAIYA) ACCOUNTANT MEMBER AHMEDABAD; DATED 27/10/2016 BIJU T., PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! # / CONCERNED CIT 4. # ( ) / THE CIT(A) - XI, AHMEDABAD 5. & ! , ! , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) # $, / ITAT, AHMEDABAD