The DCIT, Central Circle-1(2), Ahmedabad V. Shri Ketan R. Patel, Ahmedabad

ITSSA 74/AHD/2016

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 2853 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 16-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S CHAUDHARY
• Assessee Lawyers: G C PIPARA
• Keywords: Business income; Search and seizure; Transactions in derivatives
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI S.S. GODARA, JM & SHRI MANISH BORAD, AM. ITA NO. 74/AHD/2016 ASST. YEAR: 2009-10 D.C.I.T CENTRAL CIRCLE 1(2), AHMEDABAD VS. SHRI KETAN R. PATEL, 66, TIRTHNAGAR SOCIETY, PART-I, B/H SUN & STEP CLUB, BHYANGDEV, AHMEDABAD. APPELLANT RESPONDENT PAN ABRPP7959F APPELLANT BY SHRI P.S. CHAUDHARY, SR.DR RESPONDENT BY SHRI G.C. PIPARA, AR DATE OF HEARING: 16 /01/2017 DATE OF PRONOUNCEMENT: 19/01/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF REVENUE FOR ASST. YEAR 2009-10 IS D IRECTED AGAINST THE ORDER OF LD. CIT(A), AHMEDABAD, DATED 0 7/10/2015 VIDE APPEAL NO.CIT(A)-11/440/CC-1(2)/2014-15 ARISING OU T OF ORDER U/S 271(1) (C) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 26/09/2014 BY DCIT, CENTRAL CIRCLE-1(2), AHMEDABAD. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE :- ITA NO. 74/AHD/2016 ASST. YEAR 2009-10 2 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN DELETING THE PE NALTY U/S.271(L)(C) OF RS.13,94,666/- WITHOUT APPRECIATING THE FACTS OF TH E CASE & RELEVANT PROVISIONS.' 2. THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD GIVEN OPPORTUNITY TO DISCLOSE HIS INCOME FULLY BY I SSUANCE OF NOTICE U/S.L53A OF THE ACT WHICH THE ASSESSEE HAD FAILED TO DO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A INDIVIDUAL. HE FILED RETURN OF INCOME ON 27/10/2009 DECLARING TOTAL INCOME OF RS.7,03,100/-. SEARCH U/S.132 OF THE INCO ME TAX ACT, 1961WAS CONDUCTED IN THE CASE OF MARUTI-SAVVY GROUP ON 27/04/2011. M/S.ELEGANCE SKYZ PVT. LTD. GROUP WAS O NE OF THE SUB- GROUPS COVERED UNDER THE SEARCH AND SEIZURE OPERATI ONS. THIS SUB- GROUP IS INVOLVED IN CONSTRUCTION BUSINESS. ASSESSE E IS ONE OF THE DIRECTOR, OF THE COMPANY. ASSESSMENT ORDER U/S. 1 43(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 WAS FRAMED ON 28/03/20 14 AFTER ASSESSING INCOME OF RS.47,71,138/- AND MAKING VAR IOUS ADDITIONS TOTALING OF RS.46,88,039/-. PENALTY PROCEEDINGS U/ S/ 271(1)(C) OF THE ACT INITIATED. IMPOSED PENALTY OF RS.13,94,666/- ON THE CONCEALED INCOME OF RS.40,68,038/- 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND SUCCEEDED IN FULL AND PENALTY U/S 271(1)(C) WAS DE LETED. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. ITA NO. 74/AHD/2016 ASST. YEAR 2009-10 3 5. THE LD. DR VEHEMENTLY ARGUE SUPPORTING THE ORDER OF AO. ON THE OTHER HAND LD. AR REFERRED TO THE SUBMISSION MA DE BEFORE THE LD.CIT(A) AND THE ORDER OF LD. CIT(A) APPEAL DELETI NG THE IMPUGNED PENALTY BY RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASES OF PRICE WATERHOUSE COOPERS (P.) LTD., 348 ITR 306 (SC), RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) AND SREE K RISHNA ELECTRICALS, 2009 23 VST. 249(SC) 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORDS PLACED BEFORE US AND GONE THROUGH THE J UDGMENTS RELIED ON BY BOTH THE AUTHORITIES. SOLITARY GRIEVANCE THRO UGH THIS APPEAL OF REVENUE IS AGAINST THE ACTION LD. CIT(A) DELETING IMPUGNED PENALTY OF RS.13,94,666/- IMPOSED U/S 371(C) OF THE ACT. WE HA VE OBSERVED THAT ASSESSMENT U/S 143(3) R.W.S. 153A OF THE ACT WAS CO MPLETED AFTER MAKING ADDITION OF RS.40,68,039 UNDER VARIOUS HEADS BUT THE COMMON THING IN ALL THESE ADDITIONS WAS THAT THEY H AD THEIR SOURCE IN THEIR REGULAR BOOKS OF ACCOUNTS BUT DUE TO INADVERT ANCE OF THE ACCOUNTANT AND CERTAIN ACCOUNTS NOT RECONCILED THER EFORE ADDITION WERE MADE WHICH INTERALIA INCLUDED ADDITION ON ACCO UNT OF NOTIONAL RENT ON THE PROPERTIES OWNED BY THE ASSESSEE. 7. WE FURTHER OBSERVE THAT LD.CIT(A) HAS DELETED IM PUGNED PENALTY OF RS,13,94,666/- BY OBSERVING AS UNDER. THE APPELLANT IN HIS SUBMISSION MENTIONED THAT THE PENALTY WAS LEVIED WITHOUT PROPER APPRECIATION AND CONSIDERATION OF TH E FACTS OF THE CASE. THE AO DID NOT BRING ON RECORD ANY EVIDENCE TO ESTABLISH T HAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME. HE ONLY RELIED UP ON THE CONTENTS OF THE ITA NO. 74/AHD/2016 ASST. YEAR 2009-10 4 ASSESSMENT ORDER. THE ADDITIONS AND DISALLOWANCES O N WHICH PENALTY LEVIED WERE MADE ON ACCOUNT OF GENUINE, BONAFIDE AND INADVERTEN T ERRORS ON PART OF THE ACCOUNTANT OF THE APPELLANT, THEREFORE, THE ASSESSE E AGREED FOR THE ADDITIONS EXCEPT ADDITION OF RENT FROM HOUSE PROPERTY. THE DECISIONS RELIED BY THE APPELLANT WERE ALSO PER USED. HE EMPHASIZED ON THE DECISION IN THE CASE PRICE WATERHOUSE COOPER S (P) LTD. 348 ITR 306 SC AND ALSO RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 SC. THEREFORE, IT IS NECESSARY TO BRIEFLY DISCUSS THE FACTS OF THESE DEC ISIONS. IN THE CASE OF PRICE WATERHOUSE COOPERS (P) LTD. THE ISSUE WAS RELATED T O ADDITION OF PROVISION OF GRATUITY AS PER REMARK IN THE TAX AUDIT REPORT, HOW EVER, IN THE COMPUTATION OF INCOME THE SAID AMOUNT WAS NOT ADDED. THE AO LEVIED PENALTY ON THIS ADDITION. THE HON'BLE COURT HELD THAT THE TAX AUDIT REPORT SU GGESTED THAT THERE WAS NO QUESTION OF THE ASSESSEE CONCEALING ITS INCOME. THE COURT FURTHER HELD THAT IN THAT CASE THE MISTAKE COULD HAPPEN THROUGH A BONAFIDE AN D INADVERTENT ERROR. THIS CAN BE DESCRIBED AS HUMAN ERROR AS WE ARE ALL PRONE TO MAKE SUCH ERRORS. CALIBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT B E DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT DOES NOT ME AN THAT THE ASSESSEE WAS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTE MPTING TO CONCEAL ITS INCOME. THEREFORE, IN THE PECULIAR FACTS OF THE CASE THE AS SESSEE COMMITTED INADVERTENT AND BONAFIDE ERROR AND HAD NOT INTENDED TO OR ATTEM PTED TO EITHER CONCEAL INCOME OR FURNISH INACCURATE PARTICULARS. IN THE CASE OF RELIANCE PETRO PRODUCT PVT. LTD., TH E ISSUE WAS RELATED TO CLAIM OF EXPENDITURE OF INTEREST IN RESPECT OF LOAN INCURRED FOR PURCHASING OF SHARES BY WAY OF ITS BUSINESS POLICY. THE AO DISALL OWED THE CLAIM AND LEVIED PENALTY ON ACCOUNT OF CONCEALMENT OF INCOME. THE CO URT HAS HELD THAT THE ASSESSEE HAD FURNISHED ALL THE DETAILS OF ITS EXPEN DITURE AS WELL AS INCOME IN THE RETURN- OF INCOME WHICH ARE NOT FOUND INACCURATE, N OR COULD BE VIEWED AS THE CONCEALMENT OF THE INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM OR NOT. THEREFORE, MERELY THE ASSESSEE HAD CL AIMED THE EXPENDITURE, WHICH WAS NOT ACCEPTABLE TO THE REVENUE, THAT MAY ITSELF WOULD NOT ATTRACT PENALTY (PARA 10 OF THE DECISION). IN THE CASE OF SREE KRISHANA ELECTRICALS, (2009) 23 VST. 249 (SC) THE ISSUE PERTAINED TO THE PENALTY PROCEEDINGS IN TAMIL NADU GENERAL SALES TAX ACT, THE COURT FOUND IN THAT CASE THAT THERE WAS NO DOUB T THAT THE AUTHORITIES HAD FOUND THAT THERE WERE SOME INCORRECT STATEMENTS MAD E IN THE RETURN. HOWEVER, THE SAID TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. THEREFORE, THE COURT SET ASIDE THE PENALTY. THE HON'BLE COURT ALSO REFERRED THIS CASE IN THE DECISION OF RELIANCE PETRO PRODUCTS PVT. LTD. (SUPR A). ITA NO. 74/AHD/2016 ASST. YEAR 2009-10 5 THE FACTS OF THE CASE AND SUBMISSION OF THE APPELLA NT HAVE BEEN GONE THROUGH. IT WAS NOT IN DISPUTE THAT THE APPELLANT A CCEPTED THE ADDITIONS MADE BY THE AO ON THE BASIS OF THE FACTS EXCEPT THE ADDITIO N MADE ON ACCOUNT OF NOTIONAL RENT INCOME FROM HOUSE PROPERTY. THE AO GAVE CATEGO RICAL FINDINGS IN THE ASSESSMENT ORDER IN PARA 3 OF PAGE 2 THAT THE INCOM E FROM SALE OF PROPERTY WAS SHOWN IN THE PROFIT & LOSS ACCOUNT, SIMILARLY, IT W AS ALSO MENTIONED IN PARA 4 OF PAGE 2 OF THE ORDER THAT ALL THE 3 BALANCE SHEETS I .E. THE ASSESSEE'S INDIVIDUAL BALANCE SHEET, BALANCE SHEET OF HIS PROPRIETARY CON CERN AND THE CONSOLIDATED BALANCE SHEET. THESE DOCUMENTS WERE AVAILABLE ON RE CORD WHICH WERE FURNISHED WITH RETURN OF INCOME. REGARDING ADDITION OF RS.19, 24,204/-, THE AO MENTIONED THAT IN THE PERSONAL PROFIT & LOSS A/C. THE ORANGE COMMODITY TRANSACTION WAS REFLECTED. THUS, THIS TRANSACTION WAS NOT REFLECTIN G IN THE PROFIT & LOSS A/C. OF HIS PROPRIETARY CONCERN. DESPITE THAT INCOME FROM THIS TRANSACTION WAS TAKEN AS BUSINESS INCOME AND CLAIMED BUSINESS LOSS AGAINST T HE SAME IN THE COMPUTATION OF INCOME. THESE FACTS ESTABLISHED THAT THE TRANSACTIO NS WHICH RESULTED INTO ADDITION AND PARTICULARS THEREOF WERE AVAILABLE IN THE PROFI T & LOSS A/C AND BALANCE SHEETS WHICH WERE FILED WITH RETURN OF INCOME. THUS , THERE WAS NO DOUBT THAT THE PARTICULARS OF THESE TRANSACTIONS WERE AVAILABLE ON THE RECORD OF THE AO FROM WHERE HE COULD DETERMINE THE CORRECT INCOME AS PER PROVISIONS OF THE ACT. WHEN THESE FACTS WERE BROUGHT TO THE KNOWLEDGE OF THE AS SESSEE, HE ACCEPTED THE MISTAKES WITH AN EXPLANATION THAT THE MISTAKES WERE BONAFIDE, GENUINE AND INADVERTENT. THEREFORE, AFTER HAVING REGARD TO THE RATIO LAID DOWN IN THE JUDGMENTS IN THE CASES OF PRICE WATERHOUSE COOPERS (P) LTD. (SUPRA), RELIANCE PETRO PRODUCT PVT. LTD. (SUPRA) AND SREE KRISHANA E LECTRICALS (SUPRA), IN MY CONSIDERED OPINION THE ASSESSEE DID NOT CONCEAL THE PARTICULARS OF INCOME. ACCORDINGLY, THE PENALTY LEVIED BY THE AO IS DELETE D. 8. FROM GOING THROUGH THE DISCUSSION MADE BY LD. CI T (A) IN HIS ORDER AND ALSO OBSERVING FACTS OF THE CASE IN THE L IGHT OF JUDGMENTS OF HONBLE APEX COURT IN CASES PRICE WATERHOUSE COOP ERS (P) LTD. (SUPRA), RELIANCE PETRO PRODUCT PVT. LTD. (SUPRA) A ND SREE KRISHANA ELECTRICALS (SUPRA). WE FIND THAT NEXUS OF IMPUGNED ADDITIONS MADE BY LD. AO WHILE FRAMING THE ASSESSMENT, WERE VERY MUCH AVAILABLE IN THE PROFIT AND LOSS ACCOUNTS AND BALANCE SHEET F ILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME. AS SUCH A SSESSEE COMMITTED MISTAKE WHICH WERE BONAFIDE GENUINE AND INADVERTENT ITA NO. 74/AHD/2016 ASST. YEAR 2009-10 6 BUT CERTAINLY THERE WAS NO CASE OF FURNISHING INAC CURATE PARTICULAR OR CONCEALMENT OF PARTICULAR OF INCOME. 9. WE ARE THEREFORE OF THE VIEW THAT IN THE GIVEN F ACTS AND CIRCUMSTANCE, ASSESSEE SHOULD NOT HAVE BEEN VISIT ED BY PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT AT RS.13,94,6 10/- WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CI T(A) . WE UPHOLD THE SAME. 10. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 JANUARY, 2017 SD/- SD /- (S.S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER TRUE COPY DATED 19/01/2017 MANISH/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD