K.Ramakrishnan (HUF), CHENNAI V. DCIT, CHENNAI

ITSSA 7/CHNY/2011

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8272 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T(SS).A. NO.7(MDS)/2011 BLOCK PERIOD: A.Y.1992-93 TO 2001-02 & A.Y.2002-03( PART) SHRI K.RAMAKRISHNAN(HUF), DEPUTY COMMISSIONER OF FLAT NO.F-5, 25, KANDASAMY VS. INCOME-T AX, ST., PALLIPATTU, CHENNAI-600 113. CENTRA L CIRCLE I(1), PAN AAFHK0446R. CHENNA I. (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI T.BANUSEKAR RESPONDENT BY: DR. I .VIJAYAKUMAR O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME- TAX(APPEALS)-I AT CHENNAI DATED 31-12-2010 AND ARIS ES OUT OF THE IT(SS)A NO.7(MDS)/2011 2 ORDER OF THE ASSESSING OFFICER IMPOSING A PENALTY O F ` 2,34,653/- PASSED UNDER SECTION 158BFA(2) OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IS A HINDU UNDIVIDED FAMILY. A SE ARCH AND SEIZURE ACTION UNDER SECTION 132 WAS CARRIED OUT IN THE CASE OF THE ASSESSEE. THE SEIZED MATERIALS MADE OUT A CASE OF UNDISCLOSED INCOME. IN VIEW OF THAT THE ASSESSING OFFICER INIT IATED PROCEEDINGS UNDER SECTION 158BD. THE ASSESSEE FURNISHED A RETU RN IN RESPONSE TO 158BD NOTICE, DECLARING NIL UNDISCLOSED INCOME. THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT TREATI NG THE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED I NCOME. THE CAPITAL GAINS BEING ASSESSED IN A BLOCK ASSESSMENT, TAX WAS LEVIED AT 60%. IT IS IN VIEW OF THE ABOVE THAT THE PENALTY H AS BEEN LEVIED IN THE PRESENT CASE. 3. BUT THE FACTS OF THE CASE ARE NOT COMPLETE AS S TATED ABOVE. IMMEDIATELY AFTER THE SEARCH ACTION, THE AS SESSEE HAD FILED A VOLUNTARY RETURN OFFERING THE CAPITAL GAINS FOR TAX ATION. THE ASSESSEE COMPUTED THE TAX LIABILITY AT 20%, WHICH IS NORMALL Y APPLICABLE TO LONG TERM CAPITAL GAINS. THE RETURN FILED BY THE ASSESS EE WAS ANYHOW BELATED. THE ASSESSING OFFICER DID NOT TAKE INTO C OGNIZANCE THE BELATED RETURN AND COMPLETED THE ASSESSMENT ACCORDI NGLY. THE IT(SS)A NO.7(MDS)/2011 3 ASSESSEE DISCLOSED NIL UNDISCLOSED INCOME IN THE BE LATED RETURN FILED BY IT ON THE GROUND THAT THE CAPITAL GAINS HAVE ALR EADY BEEN OFFERED FOR TAXATION IN THE VOLUNTARY RETURN FILED IMMEDIAT ELY AFTER THE SEARCH. THEREFORE IT IS THE CASE OF THE ASSESSEE THAT THERE IS NO CASE OF NON DISCLOSURE OF UNDISCLOSED INCOME IN THE BLOCK RETUR N FILED BY THE ASSESSEE. 4. WE CONSIDERED THE MATTER. THIS IS A UNIQUE CAS E. TECHNICALLY SPEAKING, THE RETURN FILED BY THE ASSES SEE IMMEDIATELY AFTER THE SEARCH OPERATION IS NOT VALID IN THE EYES OF LAW. THE SAID BELATED RETURN IS NON EST. THEREFORE THE NIL RETUR N FILED BY THE ASSESSEE COULD NOT HAVE BEEN ACCEPTED BY THE ASSESS ING AUTHORITY FOR THE PURPOSE OF BLOCK ASSESSMENT. THE BLOCK ASS ESSMENT SHOULD HAVE BEEN COMPLETED BY TAKING INTO CONSIDERATION TH E CAPITAL GAINS AND RIGHTLY CHARGING TAX AT 60%. THE TAX PAID BY T HE ASSESSEE AT 20% ALONGWITH ITS RETURN COULD NOT HAVE BEEN ACCEPT ED. ALL THESE FACTORS ARE VERY RELEVANT FOR COMPLETING THE QUANTU M ASSESSMENT AND DEMANDING THE TAX AT 60% FROM THE ASSESSEE. 5. BUT THE ABOVE FACTORS ARE NOT SUFFICIENT TO IMP OSE PENALTY UNDER SECTION 158BFA. THE REASON THAT THE ASSESSEE HAS NOT FURNISHED ANY UNDISCLOSED INCOME IN THE BLOCK RETUR N FILED BY IT IN IT(SS)A NO.7(MDS)/2011 4 PURSUANCE OF NOTICE UNDER SECTION 158BD IS NOT A GR IEVOUS MISTAKE WHEN THE EARLIER BELATED RETURN FILED BY THE ASSESS EE AND AVAILABLE IN THE FILES OF THE ASSESSING AUTHORITY IS ALSO LOOKED INTO. THE FACT THAT THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME THR OUGH ITS BLOCK RETURN IS A LEGAL ERROR BUT NOT A GROUND TO IMPOSE PENALTY. THE BLOCK ASSESSMENT ITSELF HAS BEEN COMPLETED BY THE ASSESSI NG OFFICER BY ADOPTING THE AMOUNT OF CAPITAL GAINS OFFERED BY THE ASSESSEE IN ITS BELATED RETURN FILED IMMEDIATELY AFTER THE SEARCH O PERATION. THEREFORE, EVEN THOUGH LEGALLY AND TECHNICALLY NOT VALID, THE ASSESSEE HAS ALREADY RETURNED THE CAPITAL GAINS LIABLE FOR T AXATION IN ITS HANDS. IF THAT AMOUNT OF CAPITAL GAINS IS IMPREGNATED IN T HE BLOCK RETURN FILED BY THE ASSESSEE, THE EQUATION BECOMES COMPLETE. TH E ONLY CORRECTION WAS CALCULATING TAX AT 60% INSTEAD OF 20 %. 6. IF THE ASSESSEE HAD NOT FURNISHED ITS BELATED R ETURN IMMEDIATELY AFTER THE SEARCH, THE ASSESSEE WOULD HA VE DEFINITELY OFFERED THE CAPITAL GAINS FOR TAXATION IN ITS BLOCK RETURN. IF THAT AMOUNT IS OFFERED THROUGH THE BLOCK RETURN THERE WOULD BE NO CASE OF ACTION TO IMPOSE PENALTY. THEREFORE IT IS TO BE SEEN THAT TH E ONLY MISTAKE COMMITTED BY THE ASSESSEE IS THAT IT ACTED LITTLE O VER-SMART AND OVER- IT(SS)A NO.7(MDS)/2011 5 CAUTIOUS, EVEN THOUGH THE ENDEAVOR OF THE ASSESSEE WAS NOT PRODUCTIVE. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE D O NOT FIND THE LEVY OF PENALTY JUSTIFIED. IT IS DELETED. 8. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 7 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 7 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.