V.G.VASANTHAMANI,COIMBATORE vs. ACIT, COIMBATORE

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

Facts apropos are that one Shri. V.P. Venugopal who was 2. doing a real estate business was subjected to a survey u/s.133 of the Income Tax Act, 1961 (in short ‘’the Act’’) on 06.01.2011. It seems during the course of search various documents regarding transactions in immovable property in the name of Shri. V.P. Venugopal as well as his wife Smt. Vasanthamani were found. Accordingly, notices u/s. 148 of the Act were issued to both Shri. V.P. Venugopal and Smt.

Vasanthamani for the impugned assessment years. During the course of assessment proceedings, it seems Shri. V.P. Venugopal expired and was later represented by his legal heir Smt. V.G. Vasanthamani.

Assessees ld. Authorised Representative filed bank statements, profit and loss account and other details for each of the impugned assessment years. Ld. Assessing Officer thereafter completed assessment for the impugned assessment years, for both the assessees, by making addition for Sundry Creditors shown in the accounts. As per ld. Assessing Officer no evidence was produced by to 555/Mds/2017 :- 3 -: the assessees in support of the amount shown as Sundry Creditors.

The additions made for the impugned assessment years were as under’;- V.G. Vasanthamani.

Assessment year Amount added 2007-08 3,05,809 2008-09 2,55,002 2009-10 9,17,744 2010-11 33,12,554 2011-12 38,52,491 Late V.P. Venugopal represented by legal heir Smt. V.G. Vasanthamani.

Assessment year Amount added 2007-08 1,92,822 2008-09 2,46,458 2009-10 5,10,720 2010-11 4,49,880 2011-12 9,51,210

Thereafter proceedings, were initiated for levy of penalty 3. u/s. 271 (1) ( c) of the Act by issuing notices u/s. 274 r.w.s 271 of the Act. Reply of Smt. V.G. Vasanthamani was that her husband late V.P.

Venugopal was doing real estate business and she was not aware of his business transactions. According to her, he was unwell for three years suffering from hepatitis C, and had finally passed away on 04.06.2013. According to her, there was no intention to conceal any income or to furnish any inaccurate particulars. However, ld. to 555/Mds/2017 :- 4 -:

Assessing Officer was not impressed by the above arguments.

According to him, late V.P. Venugopal and Smt. V.G. Vasanthamani were reaping huge profits in real estate business and there were on- money transactions which were never recorded in the books.

Further, according to him, assessee had failed to provide evidence for Sundry Creditors. He held that assessee had furnished inaccurate particulars of income, for the balances shown as ‘’Sundry Creditors’’ for impugned assessment years. Penalty was levied at the minimum level of 100% of tax sought to be evaded.

Vasanthamani before the ld.CIT(A) was that she was not involved in the business which was being done by her late husband. According to her, ld. Assessing Officer had failed to give a correct finding as to who had carried on the business. However, ld. Commissioner of Income Tax (Appeals) was not impressed by the arguments.

According to him, assessees chose to work out a profit and declare their income, only when notices were issued u/s. 148 of the Act. Ld. Commissioner of Income Tax (Appeals) held that but for the survey, assessees would not have filed returns at all. He confirmed the orders levying penalty. to 555/Mds/2017 :- 5 -:

Vasanthamani was never found to be incorrect. The addition as per the ld. Authorised Representative was only for Sundry Creditors which arose during the ordinary course of business. Assessees failure to prove the Sundry Creditors, would not as per ld. Authorised Representative mean that the claim itself was wrong. In any case, according to him, notices issued to him u/s. 271 (1) (c) r.w.s. 274 of the Act were vague and did not spell out the fault of the assessee.

According to him, by virtue of judgment of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565 a vague notice will invalidate the penal proceedings.

Per contra, ld. Departmental Representative strongly 6.

supporting the orders of the lower authorities submitted that Co- ordinate Bench in the case of Shri. Ramadurai Ravichandran vs. ACIT (in dated 03.05.2017) had held that penalty orders could not be invalidated for a defect in notice issued u/s. to 555/Mds/2017 :- 6 -:

274 r.w.s 271 of the Act. Further, according to him, there was clear failure on the part of the assessee’s to return their income truly and correctly. As per ld. Departmental Representative , the penalty was rightly levied on the assessees.

It may be true that assessee was not be able to prove Sundry Creditors by producing confirmations. However, once it is accepted that Sundry Creditors arose on account of trading transactions of the assessee, we cannot say that there was concealment of any particulars done by the assessee. There is no finding by the lower authorities that Sundry Creditors shown by the assessees were nonexistent. Lower authorities had disbelieved the Sundry Creditors only for a reason that assessee was unable to produce evidence in to 555/Mds/2017 :- 7 -: support. That apart, notices issued by the ld. Assessing Officer initiating the penal proceedings read as under:-

‘’Whereas in the course of proceedings before me for the Assessment Year 2011-12, it appears to me that you:-

* have without reasonable cause failed to furnish me Return of Income which you were required to furnish by a notice given under Section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under Section 139(1) or by a notice given under Section 139(2)/148 of the Income Tax Act, 1961, No. dated or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said Section 139(1) or by such notice.

* have without reasonable cause failed to comply with a notice under Section 22(4)/23(2) of the Indian Income Tax Act, 1922 or under Section 142(1)/143(2) of the Income Tax Act, 1961. have concealed the particulars of your Income or furnished inaccurate particulars of such income.

You are hereby requested to appear before me at 11.00 am on 08.04.2014 and show cause why an order imposing a penalty on you should not be made under Section 271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised Representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271’’.

It does not specifically state what was the reason why ld. Assessing Officer initiated the penalty u/s. 271 (1) ( c) of the Act. Hon’ble to 555/Mds/2017 :- 8 -:

Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) has held that a vague notice will invalidate penalty proceedings. No doubt the Co-ordinate Bench in the case of Shri. Ramadurai Ravichandran (supra) had held that failure to strike off the columns from the printed notice would not perse invalidate the notice. However, in the said case, penalty was imposed both for furnishing inaccurate particulars as well as concealment of income. There is no such conclusion drawn by the ld. Assessing Officer in the impugned orders before us. As a result, we have no hesitation to delete the penalty levied on the assessees for the impugned assessment years.

In the result, the appeals of the assessees stand allowed. 8. Order pronounced on Wednesday, the 20th day of September, 2017, at Chennai.