Appeal Details
Counselvise Citation
[2011] 124 COUNSELVISE.COM (IT) 7885 (ITAT-INDORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
30-12-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
misc
Appeal Filed On
21-07-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M. PAN NO. : ANDPK6408Q I.T.(SS)A.NO. 82/IND/2010 BLOCK PERIOD 1.4.1990 TO 10.10.2000 SMT. KRISHNA KHANUJA, ACIT, L/R OF LATE SHRI SARDARSINGH RAJPUT, VS 3(1), BHOPAL. 84, SUBHASH NAGAR, KHANDWA APPELLANT RESPONDENT APPELLANT BY : SHRI AJAY TULSIYAN, C. A. AND SHRI MANISH VAIDYA, CA RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR DATE OF HEARING : 02.11.2011 DATE OF PRONOUNCEMENT : 30.12.2011 O R D E R -: 2: - 2 PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, BHOPAL, DATED 29.03.2010. 2. FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 158BFA(2) OF RS. 2,02,76,185/-. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW THE PENALTY LEVIED IS ILLEGAL, WRONG AND UNCALLED FOR AND THE SAME REQUIRES TO BE DELETED. 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING PENALTY LEVIED BY THE ASSESSING OFFICER OVERLOOKING THE SUBMISSIONS MADE BY THE APPELLANT. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE VERY BASIS OF LEVY OF PENALTY IS ILLEGAL, WRONG AND BAD IN LAW. 3. FACTS IN BRIEF ARE THAT THERE WAS SEARCH OPERATION AT ASSESSEES PREMISES AFTER HIS DEATH. T HE ASSESSEE WAS MURDERED ON 1 ST OCTOBER, 2000, AT GANJ BASODA, DISTRICT VIDISHA, M.P. THE ASSESSEE WAS -: 3: - 3 ENGAGED IN THE BUSINESS OF MONEYLENDING, RENTAL INCOME ETC. WHEN THE ASSESSEE WAS MURDERED, THE POLICE AUTHORITIES ALONGWITH THE RELATIVES OF THE DECEASED TOOK ALL THE CASH, GOLD, PAWNED JEWELLERY, SILVER UTENSILS ETC. TO STATE BANK OF INDORE AND DEPOSITED IN THE SAFE DEPOSIT WALT. WHEN THE DEPARTMENT CAME TO KNOW OF THE MURDER AFTER TEN DAYS, THEY CONDUCTED A SEARCH OPERATION AT STATE BAN K OF INDORE AND SEIZED ALL THE VALUABLES. SINCE THE ASSESSEE LATE SHRI SARDAR SINGH RAJPUT WAS HAVING N O CHILDREN, CERTAIN RELATIVES CLAIMED THEM AS LEGAL H EIR ON THE BASIS OF THEIR RELATIONSHIP WITH HIM. ACCORDINGLY, ASSESSMENTS WERE FRAMED ON THE LEGAL HEIR OF THE DECEASED. THE DEPARTMENT ISSUED NOTICE U/S 158BC TO THE ASSESSEE THROUGH HIS LEGAL REPRESENTATIVE ON 18.1.2002, TO FILE RETURN IN FORM NO.2-B AND THE RETURN WAS FILED DECLARING TOTAL -: 4: - 4 UNDISCLOSED INCOME AT RS. 1.84 CRORES. ENTIRE CASH, JEWELLERY, AS PER THE VALUATION REPORT, INDIA VIKAS PATRA WERE DECLARED AS UNDISCLOSED INCOME. ASSESSMENT WAS FRAMED U/S 158BC READ WITH SECTION 144 ON TOTAL UNDISCLOSED INCOME OF RS. 4.76 CRORES. HOWEVER, IN THE QUANTUM ORDER PASSED U/S 158BC, THERE WAS NO MENTION OF ANY INITIATION OF PENALTY U/S 158BFA. TH E LD. CIT(A) GAVE RELIEF OF RS. 1.69 CRORES LEAVING UNDISCLOSED INCOME AT RS. 3.07 CRORES IN FURTHER APPEAL, THE I.T.A.T. GAVE RELIEF OF RS. 20.68 LAKHS LEAVING UNDISCLOSED INCOME AT RS. 2.87 CRORES. AN APPEAL WAS FILED AGAINST THE ORDER OF THE TRIBUNAL BEFORE HON'BLE COURT, WHICH IS STILL PENDING. AFTER GIVING APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL, PENALTY PROCEEDINGS U/S 158BFA WERE INITIATED BY THE ACIT VIDE SHOW CAUSE NOTICE DATED 14.8.2008. PENALTY ORDER WAS PASSED ON 27.8.2008. BY THE IMPUGNED -: 5: - 5 ORDER, THE LD. CIT(A) UPHELD THE PENALTY, AGAINST W HICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. CONTENTION OF THE LD. AUTHORIZED REPRESENTATIVE WAS THAT PENALTY ORDER PASSED BY THE ACIT WAS BAD I N LAW IN SO FAR AS BLOCK ASSESSMENT ORDER DID NOT CONTAIN ANY REFERENCE FOR INITIATION OF PENALTY PROCEEDINGS U/S 158BFA(2). IT WAS ALSO PLEADED THAT BEFORE PASSING THE PENALTY ORDER, THE ACIT HAS NOT OBTAINED THE PERMISSION FROM ADDITIONAL CIT/CIT IN S O FAR AS PENALTY SO IMPOSED WAS EXCEEDING RS. 20,000/ -. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS ALREADY DECLARED INCOME AT RS. 1.84 CRORES IN FORM 2-B AS UNDISCLOSED INCOME. THE ASSESSMENT WAS COMPLETED ON TOTAL UNDISCLOSED INCOME OF RS. 4.76 CRORES. AFT ER CONSIDERING THE RELIEF GIVEN BY THE LD.CIT(A) AND TRIBUNAL, PENALTY IF AT ALL LEVIABLE SHOULD HAVE BEN E LEVIED ONLY ON RS. 1,11,20,958/-, WHICH IS THE -: 6: - 6 DIFFERENCE OF THE RETURN UNDISCLOSED INCOME AND THE INCOME FINALLY DETERMINED BY THE I.T.A.T. 5. IT WAS ALSO ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT ALL THE SEIZED ASSETS ARE ALRE ADY ADJUSTED AGAINST THE TAX AND INTEREST BURDEN, THEREFORE, PENALTY SHOULD NOT BE LEVIED ON THE LEGAL REPRESENTATIVE, WHO COULD NOT EXPLAIN THE THINGS, WHICH WAS NOT IN HIS KNOWLEDGE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. AS PER PROVISIONS OF SECTION 158BFA(3)(B) IF THE AMOUNT OF PENALTY LEVIED IS IN EXCESS OF RS. 20,000/ -, THE ASSESSING OFFICER IS REQUIRED TO TAKE PRIOR PERMISSION OF THE JT. COMMISSIONER OR JT. DIRECTOR FOR LEVYING THE PENALTY. IN THE INSTANT CASE, WE FOUND T HAT PENALTY ORDER U/S 158BFA(2) WAS PASSED ON 27.8.2008 CALCULATION SHEET OF DEMAND WAS ALSO DATED 27.8.2008 , -: 7: - 7 EVEN THE DEMAND NOTICE ON THE BASIS OF THE ENTRIES ARE MADE IN D & CR IS ALSO DATED 27.8.2008. HOWEVER, TH E APPROVAL FOR LEVY OF PENALTY U/S 158BFA(2) WAS APPLI ED ON 29.8.2008 AND THE SAME WAS ALSO GIVEN ON 29.8.2008. THUS, PASSING OF PENALTY ORDER WITHOUT TAKING PROPER APPROVAL IS CLEAR CONTRAVENTION OF PROVISIONS OF SECTION 158BFA(3)(B). SUCH PRIOR APPROVAL CANNOT BE SAID TO BE ONLY PROCEDURAL BUT IT IS MANDATORY BEFORE PASSING THE PENALTY ORDER, WHERE T HE PENALTY IS IN EXCESS OF RS. 20,000/-. 7. EVEN IN RESPECT OF MERIT OF THE PENALTY SO IMPOSED, AS PER OUR CONSIDERED VIEW, NO PENALTY SHOULD BE IMPOSED WITH RESPECT TO THE INCOME RETURNED BY THE ASSESSEE IN THE BLOCK RETURN, ONLY I N RESPECT OF FINAL INCOME DETERMINED AFTER GIVING APP EAL EFFECT, THE IN EXCESS OF THE RETURNED INCOME THE PEN ALTY SHOULD HAVE BEEN IMPOSED. THIS LEGAL PROPOSITION HA S -: 8: - 8 ALSO BEEN WELL ACCEPTED BY THE LD. CIT(A) IN HIS ORD ER AGAINST PENALTY APPEAL PREFERRED BY THE ASSESSEE WH ERE IN THE LAST PARA OF THE ORDER ON PAGE 4, LD. CIT(A) HAS REFERRED TO THE SECOND PROVISO AND STATED THAT T HE DEFAULT COMMITTED BY THE APPELLANT IS COVERED BY SECOND PROVISO TO SECTION 158BFA(2) WHERE IN PENALT Y LEVIABLE ON THE PORTION OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER WHICH IS IN EXC ESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN WHICH IS IN THE INSTANT CASE IS RS. 2,88,83,457/- ON WHICH PENALTY HAS BEEN LEVIED BY T HE ASSESSING OFFICER. 8. FOR THE DEFAULT COMMITTED BY THE ASSESSING OFFICER AS ENVISAGED U/S 158BFA(3)(B) SINCE THE ASSESSING OFFICER HAS VIOLATED THE INTENT AND PURPOS E OF THE INCOME TAX, THERE IS NO SHELTER U/S 292B. -: 9: - 9 9. IN THE INSTANT CASE, NO PENALTY PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN ALL HIS WISDOM DID NOT FIND IT FIT TO EVEN INITIATE THE PENALTY AND HENCE DID NOT INITIAT E THE PENALTY PROCEEDINGS. SECTION 158BFA(2) STARTS WITH ASSESSING OFFICER IN THE COURSE OF ANY PROCEEDINGS , MAY DIRECT THAT THE PERSON SHALL PAY BY WAY OF PENALTY. THE WORD MAY IS VERY IMPORTANT AS IT CARRIES ITSELF THE SATISFACTION OF THE ASSESSING OFF ICER, UNLESS AND UNTIL THERE IS SATISFACTION ON THE PART O F THE ASSESSING OFFICER THAT IT IS A FIT CASE OF INITIATIO N OF PENALTY, HE WILL NOT DO SO. I.T.A.T. INDORE BENCH IN THE CASE OF MAHENDRA GUPTA I.T(SS).A.NO. 67/IND/2009 ORDER DATED 15 TH MARCH, 2010, HAS OBSERVED UNDER :- THE USE OF THE WORD MAY IN SECTION 158BFA(2) CLEARLY SHOWS THAT THE ASSESSING OFFICER IS VESTED WITH THE DISCRETION WHILE -: 10: - 10 LEVYING PENALTY. THE ASSESSEE HAS DEMONSTRATED HIS INNOCENCE, THEREFORE, THERE IS AN INBUILT MECHANISM IN SECTION 158BFA TO THE EFFECT THAT PENALTY MAY NOT BE LEVIED IF THE FACTS AND CIRCUMSTANCES OF THE CASE JUSTIFY THE BONA FIDES OF THE ASSESSEE, CONSEQUENTLY, LEVY OF PENALTY U/S 158BFA IS NOT AUTOMATIC. THE LD. ASSESSING OFFICER MUST CONSIDER THE CIRCUMSTANCES OF THE CASE AND THEN SUPPOSED TO EXERCISE THE DISCRETION IN JUDICIOUS MANNER. OUR VIEW FINDS SUPPORT FROM THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SMT. PRAMILA PRATAP SHAH, (2006) 100 ITR 160 (MUM) WHEREIN VARIOUS OTHER JUDICIAL PRONOUNCEMENTS HAVE ALREADY BEEN CONSIDERED BY THE BENCH. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENA LTY -: 11: - 11 U/S 158BFA(2) OF THE ACT, CONSEQUENTLY, THE IMPUGNED PENALTY IS DELETED, THEREFORE, THIS APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE INSTANT CASE, WE ALSO FOUND THAT AGAINST THE QUANTUM ADDITION RETAINED BY THE TRIBUNAL, HON'BLE HIGH COURT HAS ACCEPTED SUBSTANTIAL QUESTION OF LAW. I.T.A.T. INDORE BENCH IN THE CASE OF SMT. KUSUM OSWAL IN I.T(SS).A.NO.101/IND/2009 VIDE ORDER DATED 20 TH APRIL, 2011, HAVE HELD AS UNDER :- HON'BLE COORDINATE BENCH OF AHMEDABAD IN THE CASE OF RUPAM MERCANTILE, 91 ITD 1273, HELD THAT WHERE A PLEA OR CLAIM WHICH IS HELD BY THE HIGH COURT COULD HAVE GIVEN RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE SO A S TO ATTRACT LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME -TAX ACT, 1961. IN THE INSTANT CASE BEFORE US, PENALTY W AS LEVIED BY THE ASSESSING OFFICER U/S 158BFA(2) WITH REGARD TO THE GOLD ORNAMENTS ADDED BY THE ASSESSING -: 12: - 12 OFFICER IN HER INCOME. PENALTY U/S 158BFA(2) IS IN THE NATURE OF PENALTY WHICH IS ALSO LEVIABLE U/S 271(1) (C) OF THE ACT. MEANING THEREBY BOTH THE SECTIONS ARE P ARI MATERIA AND IMPOSE PENALTY FOR CONCEALMENT OF INCOME. HOWEVER, WHERE THE ADDITION SO MADE IS DEBATABLE, AS PER OUR CONSIDERED VIEW, NO PENALTY SHOULD BE LEVIED WITH RESPECT TO SUCH ADDITION. RECENTLY, I.T.A.T., MUMBAI BENCH IN THE CASE OF NAYAN BUILDERS & DEVELOPERS PRIVATE LIMITED VS. ITO , HELD THAT WHEN THE HON'BLE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT ADDITION IS CERTAINLY DEBATABLE AND UNDER SUCH CIRCUMSTANCES, PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE ACT. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW LEADS CREDENCE TO THE BONA FIDES OF THE ASSESSEE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF LOWER AUTHORITIES FOR LEVYING THE PENALTY. ACCORDINGLY, WE REVERSE THE ORDER OF LOWER AUTHORIT IES AND ALLOW THE APPEAL IN FAVOUR OF THE ASSESSEE. -: 13: - 13 11. KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE SEARCH WAS CONDUCTED AFTER DEATH OF THE ASSESSEE, WHEREIN ALL THE ASSETS FOUND AT DECEASEDS PREMISES WERE SURRENDERED AS UNDISCLOSED INCOME, FURTHER ADDITIONS WERE MADE ON THE PLEA THAT LEGAL HEIR COULD NOT EXPLAIN THE DOCUMENTS ETC., WHICH WERE ONLY IN THE KNOWLEDGE OF DECEASED PERSON. AS PER OUR CONSIDERED VIEW, NO PENALTY SHOULD BE IMPOSED FOR SUCH ADDITIONS. DECISIONS OF COORDINATE BENCH AS DISCUSSED ABOVE AL SO SUPPORTS THE CASE OF ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH DECEMBER, 2011. CPU* 2.30
