Raka Bal, V. DCIT, Central Circle-I,

ITSSA 422/DEL/2003

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8809 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 1 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 08-10-2010
• Assessment Year: misc
• Appeal Filed On: 12-09-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: V K GARG
• Keywords: Unexplained expenditure; Depreciation; Bonafide belief; Block assessment; Unabsorbed depreciation
• Section: 132; 154

Judgement Text

IT(SS)A NO. 422/DEL/2003 BP : 1.4.88 TO 13.11.98 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.(SS)A. NO. 422/DEL/2003 BLOCK PERIOD : 1.4.88 TO 13.11.98 RAKA BAL, 3338, SECTOR-D, POCKET-III, VASANT KUNJ, NEW DELHI (PAN/GIR: 11-R/CC-1) VS. DCIT , CENTRAL CIRCLE (1), NEW DELHI (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : SH. V.K. GARG, ADV. DEPARTMENT BY : SH. N.K. CHAND, SR. D.R. ORDER PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 8.7.20 03 PERTAINING TO BLOCK PERIOD 1.4.88 TO 13.11.98. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN SUSTAINI NG A PENALTY OF ` 1,11,683/- U/S 158BFA(2) OF THE IT ACT. 2.1 IN THIS CASE IN ASSESSMENT PROCEEDINGS ADDITI ONS WERE MADE ON TWO COUNTS; A SUM OF ` 55885/- WAS ADDED FOR HOUSEH OLD EXPENSES AND A SUM OF ` 68206/- WAS MADE FOR DISALLOWANCE OF DED UCTION UNDER CHAPTER VIA. ASSESSEE HAS FILED A RECTIFICATION A PPLICATION U/S 154 HOLDING THAT A SUM OF 55885/- FOR HOUSEHOLD EXPENSES WAS NOT TO BE ADDED. IT(SS)A NO. 422/DEL/2003 BP : 1.4.88 TO 13.11.98 2 2.2 LD. COMMISSIONER OF INCOME TAX (APPEALS) DISMISS ED THAT APPEAL. THE MATTER TRAVELLED TO THE ITAT IN IT(SS)A NO. 162/ DEL/2002 AND VIDE ORDER DATED 9.12.2005, THE TRIBUNAL ACCEPTED THE AS SESSEES SUBMISSIONS AND DIRECTED THAT THE MISTAKE WAS APPARE NT FROM RECORD AND, THEREFORE, THE LOWER AUTHORITIES WERE DIRECTED TO RECTIFY THE MISTAKE PERTAINING TO UNEXPLAINED EXPENDITURE AS CLA IMED BY THE ASSESSEE. 2.3 ON THE ISSUE DISALLOWANCE ON ACCOUNT DENIAL OF DEDUCTION UNDER CHAPTER VI-A THE ASSESSEE HAS NOT APPEALED AGAINST. THE ASSESSING OFFICER HAS LEVIED THE PENALTY ON THE DIFFERENCE B ETWEEN THE UNDISCLOSED INCOME ASSESSED AND TOTAL DISCLOSED IN COME AMOUNTING TO ` 124092/- AND ON THAT AMOUNT TAX @ 60% WAS LEVIED AND PENALTY @ 150% WAS IMPOSED AMOUNTING TO ` 111683/-. 2.4 UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE PENALTY. 2.5 AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 2.6 WE FIND THAT AS EVIDENT FROM THE ABOVE, THE UND ISCLOSED INCOME AMOUNTING TO ` 124092/-, COMPRISED OF ` 55885/- RELA TING TO HOUSEHOLD EXPENSES WHICH THE TRIBUNAL HAD DIRECTED FOR RECTIFICATION AS PER THE AFORESAID ORDER AND ADDITION OF ` 68206/- WAS ON ACCOUNT OF DENIAL OF CHAPTER VIA DEDUCTION UNDER THE BLOCK AS SESSMENT BY THE ASSESSING OFFICER. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE STATED THAT THIS IS A DEBATABLE ISSUE AND MOREOVER HE REFE RRED TO CIRCULAR NO. 8 DATED 27.8.2002 ISSUED BY THE CBDT, WHEREIN IT HA S BEEN MENTIONED THAT FINANCE ACT, 2002 HAS CARRIED OUT THE AMENDMENT S TO CLARIFY THAT THE AGGREGATE TOTAL INCOME IS TO BE COMPUTED IN ACCO RDANCE WITH THE IT(SS)A NO. 422/DEL/2003 BP : 1.4.88 TO 13.11.98 3 PROVISIONS OF THE ACT INCLUDING THE PROVISIONS OF C HAPTER VI-A, AND THAT FOR THE PURPOSE OF COMPUTING DEDUCTIONS UNDER CHAPT ER VIA, EFFECT SHALL BE GIVEN TO SET OFF OF BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION. THESE AMENDMENTS TAKE EFFECT RETROSPE CTIVELY FROM 1 ST DAY OF JULY, 1995 AND ACCORDINGLY APPLY TO BLOCK AS SESSMENTS IN CASES OF SEARCH UNDER SECTION 132 OR REQUISITION UNDER SE CTION 132A MADE ON OR AFTER 1 ST DAY OF JULY, 1995. THEREFORE, IT WAS MENTIONED T HAT THE PROVISION WILL APPLY TO BLOCK ASSESSMENT IN CASE OF SEARCH TAKEN UNDER SECTION 132 MADE ON OR AFTER 1.7.95. IN THE PRESENT CASE, BEFORE US THE SEARCH CONDUCTE D ON 14.10.2008 AND THE AFORESAID CBDT CIRCULAR IS SQUAR ELY APPLICABLE. JUST BECAUSE THE ASSESSEE HAS NOT APPEALED AGAINST THE S AME ASSESSEE WILL NOT BE LIABLE FOR LEVY OF PENALTY U/S 158BFA, WHEN T HE ADDITION ITSELF IS NOT JUSTIFIABLE. SECTION 158 BFA(2) PROVIDES THA T:- THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DI RECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHA LL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NO T EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC. 2.7 WE FIND THAT OUT OF THE TOTAL UNDISCLOSED INCOME OF ` 124092/-, ` 55885/- FOR HOUSEHOLD EXPENSES WAS DIRECTED BY TH E TRIBUNAL TO BE RECTIFIED AS IT WAS AN APPARENT MISTAKE AND AS DISCU SSED ABOVE BY US THE ADDITION OF ` 68206/- PERTAIN TO DISALLOWANCE O F DEDUCTION CLAIMED UNDER CHAPTER VI-A WHICH CANNOT BE MADE, AS PER THE CBDT CIRCULAR CITED ABOVE. IT IS A SETTLED LAW THAT CBDT CIRCUL ARS ARE BINDING UPON IT(SS)A NO. 422/DEL/2003 BP : 1.4.88 TO 13.11.98 4 THE ASSESSING AUTHORITIES AND HENCE, IN OUR CONSID ERED OPINION, THERE IS NO CASE OF LEVY OF PENALTY HERE. 2.8 IN THIS REGARD WE PLACE RELIANCE FROM THE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE P ARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FA ILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED I N REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 2.9 WE WOULD ALSO LIKE TO REFER TO THE HONBLE AP EX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2 010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE C ONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDE R TEXTILE CASE IT(SS)A NO. 422/DEL/2003 BP : 1.4.88 TO 13.11.98 5 WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WA S HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE AO FOR ANY REASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LE GISLATURE. 3. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENTS, WE DELETE THE PENALTY OF ` 1,11,683/-. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/10/2010. SD/- SD/- [A.D. JAIN] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 13/10/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES