No AI summary yet for this case.
Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI P.K. BANSAL & SHRI AMARJIT SINGH
PER AMARJIT SINGH, J.M.
The assessee has filed the present appeals against the impugned order dated 22nd July 2016, passed by the learned Commissioner
(Appeals)–3, Nagpur, for the assessment year 2007–08 and 2008–09
respectively, confirming penalty of ` 30,74,550 for the assessment
year 2007–08 and ` 35,14,875 for the assessment year 2008–09,
imposed by the Assessing Officer under section 271(1)(c) of the
Income Tax Act, 1961 (for short "the Act").
Since both these appeals pertain to the same assessee involving
common issues arising out of identical set of facts and circumstances,
therefore, as a matter of convenience, these appeals were heard
together and are being disposed off by way of this consolidated order.
However, in order to understand the implication, it would be necessary
to take note of the facts of one appeal. We are, accordingly, narrating
the facts, as they appear in the appeal in ITA no. 495/Nag./2016, for
assessment year 2007–08.
Brief facts of the case are that the assessee filed return of income under section 139 of the Act on 1st November 2007, declaring
total income to the tune of ` 15,44,910, for the assessment year
2007–08. A search and seizure action under section 132(1) was
3 Abhijit Construction Co.
conducted on 14th October 2011, by the Investigation Wing in the
Abhijit Group of cases. The assessee being one of the members of this
group was also covered under section 132(1) of the Act by virtue of
authorization. Subsequent to the action under section 132(1) of the Act, statutory notices under section 153A(1)(a) was issued on 11th
December 2012, which was served upon the assessee. Contesting the
action of the Assessing Officer, the assessee filed return of income dated 3rd May 2013, under section 153A of the Act declaring total
income of ` 2,05,44,910, including disclosure of ` 1,90,00,000
admitted during the search. The assessee had also filed original return of income on 1st November 2007 under section 139(1) declaring total
income of ` 15,44,910. The Assessing Officer concluded the
assessment under section 143(3) r/w section 153A of the Act on 31st
December 2013, assessing income at ` 2,05,83,440. The Assessing
Officer also initiated penalty proceedings under section 271(1)(c) of
the Act imposing penalty of ` 30,74,550, observing as under:–
“The assessee group has paid huge amount of money over and above the amount recorded in the books of account for purchase of land for construction of residential as well as commercial units. During the course of search operation, documents showing the evidence with regards to the payment of 'on money' on purchase of land has been found and seized from the residence of Shri Abhijit Majumdar at Plot No. 20, High Court Society, SBI Road, Govind Nagar, Khamla, Nagpur and inventorised at item no. 1 of Annexure - "B". The page nos. 30 and 31 of item 1 of Annexure "B” seized is a receipt issued by Shri O.G. Bajaj of Devison Estates Pvt. Ltd. In these seized documents, payments are recorded mentioning the dates as well as amounts. The two parties have also authenticated
4 Abhijit Construction Co.
by putting their signatures on these documents. It is also mentioned in the documents that the payments are made through cheques and cash. "Ch" is mentioned for cheque payment and "C" is mentioned for cash payments. The total of payments made is 388.25 between 06.09.2006 to 29.09.2009. Out of this total payment of 388.25, payments to the tune of 188.25 is recorded against "C" which means cash payments and to the tune of 200 is recorded against aCh" which means cheque payments. These pages are crucial as it contains the entries about the payment of considerable cash to 'OGB/DE Pvt Ltd" by Abhijit Construction Company. The notings in these pages are very clear as it states that the cash is received from Abhijit Construction Co. for sale of Plot no. 2, Khasra No. 81/1 of mouza Somalwada, Nagpur. The pages also contain the signatures of Shri Abhijit Majumdar and the recipient. The scanned copies of these two pages are placed in the following pages.” (seized document has been scanned by the A.O. on page–3 and 4 of the penalty order).”
Being aggrieved by the aforesaid order imposing penalty, the
assessee carried the matter before the learned CIT(A), who confirmed
the penalty imposed by the Assessing Officer. Being aggrieved the
assessee is in further appeal before us.
The learned Counsel for assessee, at the very outset, submitted
before us that the show cause notices issued are vague and are bad in
law and, consequently, the penalty levied thereupon is unjustified. He
submitted that the present issue in dispute is covered in favour of
assessee by following decisions:–
i) ITA No.1154 of 2014 in the case of Shri Samson Perinchery vide order dated 05.01.2017.
ii) ITAT order in ITA No.4168/Mum/2013 in the case of Siddhi Home Makers vide order dated 28.04.2017.
5 Abhijit Construction Co.
The learned Counsel submitted that the penalty under section
271(1)(c) has been levied in respect to additional income declared in
the return of income filed under section 153A of the Act. He further
submitted that the income declared in the return filed under section
153A of the Act has been accepted. The assessee is engaged in the
business of real estate and purchase of land by assesse is in respect to
stock in trade. On money payment on purchase of land is primarily in
respect to item of revenue expenditure allowable at the hands of
assesse. No real income accrued at the hands of assesse and no
increase in capital of assesse. Merely because assesse agree to pay tax
in respect to such sums same cannot be visited with penalty under
section 271 (1)(c). The additional Income has been assessed merely
because such sums have been offered for taxation in the return filed
under section 153A. Seized documents are no conclusive evidence for
imposing penalty at the hands of assessee. Seized documents were
not verified with third parties to bring any corroborative evidence on
record. No income is assessable in respect to same in the absence of
any independent verification of same. Income returned under section
153A of IT Act 1961 has been regularized by assessment framed u/s
143(3) r/w section 153A of the Act. Assessee agreed to pay tax to buy
peace and avoid litigation. Assessee has not claimed that entry in
document represents its income. Explanation 5A is not applicable in
the case of assessee hence, the assessee cannot be visited with
6 Abhijit Construction Co.
penalty under section 271(1)(c) of the Act. Penalty exigible only in
respect to addition which has been made to the income returned under
section 153A of the Act 1961. In view of above, no penalty ought to
have been levied under section 271(1)(c) of the Act. The learned
Counsel for assessee further submitted that the amendment to
Explanation 5A of section 271(1)(c) of the Act received the ascent of the President on 13th August 2009. Pre-amended provision of
Explanation 5A applies to the case where assessee has not filed any
return of income for respective assessment years under section 139(1)
of the Act. He submitted that the levy of penalty under section
271(1)(c) is not mandatory. Considering the facts and
circumstances in the case of assessee, no penalty under section
271(1)(c) ought to have been levied. In support of the contentions,
the learned Counsel for assessee relied upon the decision of the
Hon’ble Supreme Court in Hindustan Steel Ltd. v/s State of Orissa, 82
ITR 26 (SC). The learned Counsel submitted that the assessee has
filed return of Income under section 139(1) of Act for the assessment years 2007–08 and 2008–09 on 1st November 2007 and 30th
November 2008 respectively. The original return of income filed before 13th August 2009 i.e., prior to amended Explanation 5A. Amended to
Explanation 5A is not applicable in the case of assesse. In support of
this contention, the learned Counsel relied upon the decision of the
Hon’ble Supreme Court in CIT v/s Onkar Saran & Sons, 194 ITR 001
7 Abhijit Construction Co.
(SC) and the decision of the Hon’ble Jurisdictional High Court in CIT
V/s Samson perinchery (2017) 392 ITR 4 (Bom.).
Learned Departmental Representative on the other hand relied
on the order of the authorities below for both the years under
consideration.
Having heard the rival contentions and on perusal of the material
available on record, we find that in assessee’s case, the income
offered by the assessee in the return of income and the income which
was assessed in the assessment completed under section 153A is
same. We also noticed that the assessee is engaged in the activity of
real estate and income offered in the return is in relation to
expenditure which is allowable as business expenditure in the hands of
assessee. The income offered to tax has been regularized in the
assessment framed under section 153A r/w section 143(3) of the Tax
Act. It is also seen that in assessee’s case, notice issued for imposition
of penalty under section 271(1)(c) of the Act is in cyclostyle proforma
notice where no specific charge to show as to whether the penalty is
exigible for concealment of income or furnishing inaccurate particulars
of income is to be levied at the hands of assessee. The aforesaid legal
issue has been considered by the Co–ordinate Bench of the Tribunal,
Mumbai, rendered in the case of Siddhi Home Makers, vide order
8 Abhijit Construction Co.
dated 28th April 2017, in ITA no. 4168/Mum./2013, wherein the
Tribunal held as under:–
“We have carefully considered the rival submissions with regard to the preliminary plea of the assessee in terms of which the validity of the proceedings initiated under section 271(1)(c) of the Act has been sought to be challenged. The sum-and-substance of the point raised by the assessee is that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act dated 30/12/2010 does not reflect an appropriate application of mind, inasmuch as, the notice has been issued in a standard proforma where the irrelevant portion has not been struck off. At the time of hearing, Ld. Representative for the assessee has referred to the notice issued under section 274 r.w.s. 271(1)(c) of the Act dated 30/12/2010 in this regard. Factually speaking, it is clearly emerging that the notice has been issued in a standard proforma and the irrelevant limb of section 271(1)(c) of the Act has not been struck off. Notably, the penalty provisions of section 271(1)(c) of the Act are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon’ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon’ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the
9 Abhijit Construction Co.
Act dated 30/12/2010 without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable. We hold so.”
The ratio laid down by the Co–ordinate Bench of the Tribunal cited
supra squarely applies to facts in assessee’s case and respectfully following
the same, we hold that the penalty levied under section 271(1)(c) by the
Assessing Officer and confirmed by the learned Commissioner (Appeals) is
not sustainable on the aforesaid legal ground also. We also find that the
Hon’ble Jurisdictional High Court in Shri Samsung Perinchery, 392 ITR 4
(Bom.) has taken a similar view and the ratio laid down therein fully support
the submission of assessee. The ratio laid down by Hon’ble Jurisdictional
High Court applies with full force to the facts in assessee’s case and
considering the same, penalty imposed is not sustainable in the eyes of law.
Considering the totality of facts and circumstances in case of assessee we are
of considered opinion that the penalty levied is unjustified and is directed to be
cancelled. The grounds of appeal are allowed.
In the result, assessee’s appeal for the assessment year 2007–08
is allowed.
ITA no.496/Nag./2016 – A.Y. 2008–09
After hearing both the parties, we find that the sole issue for our
adjudication in this appeal relates to imposition of penalty by the
Assessing Officer under section 271(1)(c) of ` 35,14,875. Since the
10 Abhijit Construction Co.
assessee being same and the facts and circumstances of the present
case is similar to the issue decided in assessee’s own case for
assessment year 2007–08 cited supra, except variation in figures,
therefore, following our decision given in Para–7 and 8 above, we set
aside the impugned order passed by the learned Commissioner
(Appeals) and cancel the penalty under section 271(1)(c) for the year
under consideration also. The grounds raised by the assessee are
allowed.
In the result, assessee’s appeal for assessment year 2007–08
and 2008–09 are allowed.
Order pronounced in the open Court on 28.06.2017
Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER
NAGPUR, DATED: 28.06.2017
Copy of the order forwarded to:
(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt. Registrar) ITAT, Nagpur