M/S ABHIJIT CONSTRUCTION CO.,NAGPUR vs. A,C.I.T CENT CIR. 1(4), NAGPUR

662_ t IN THEINCQMEJAXAPPELLATE TRIBUNAL NAGPUR BENCH NAGPUR BEFORE SHRI EK_BANSAL_VICE PRESIQENI AND SHBI AMARJII SINGKJUDICIAL Member ITAnQ 495[Nag/2016 (Assessment Year 200z-Q2) Abhijit Construction Co_ Jayanti Mansion-IIT Manish Nagar Nagpur 400 001 PAN AAFFA2373M Appellant v/s Asstt; Commissioner of Income Tax Central Circle-1(4) Civil Lines, Nagpur 440 001 Respondent [Ano496/Nag2016 (Assessment Year_ ; 2008-09) M1 Abhijit Construction Co. Jayanti Mansion-III Manish Nagar Nagpur 400 001 PAN AAFFA2373M Appellant vs Asstt. Commissioner of Income Tax Central Circle-1(4) Civil Lines, Nagpur 440 001 Respondent Assessee by Revenue by Shri K.P. Dewani Shri A.R, Ninawe Date of Hearing 22.06.2017 Date of Order 28.06.2017 661 2 Abhijit Construction Co. QRDE R PER AMARJIT SINGHLM 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 ad 2008-09 respectively, confirming penalty of 7 30,74,550 for the assessment year 2007-08 and { 35,14,875 far the assessnent year 2008-09, imposed by the Assessing Officer under section 27i(1)(c) of the Fome Tax Act; 1961 (for short "the Act"). Since both these appeals pertain to the same assessee involving comman issues arising out of identical set of facts and circumstances, therefore, a5 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 , 3 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 7 15,44,910, for the assessment year 2007-08_ 4 search and seizure action under section 132(1) was 662 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 ta 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 1534 of the Act declaring total income of { 2,05,44,910, including disclosure of 7 1,90,00,000 admitted during the search_ APPEdL The assessee had also filed original return : income On 1st November 2007 under section 139(1) declaring total 4 come 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 ad above the amount recorded in the books Of account for purchase of land for construction of residential 35 weli 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 ad seized from the residence of Shri Abhijit Majumdar at Plot No, 20, High Court Society , SBJ Road, Govind Nagar, Khamla, Nagpur and inventorised at item no- 1 "8"_ of Annexure The page nos. 30 and 31 of item 1 of Annexure "8" seized is 3 receipt issued by Shri O.G. Bajaj of Devison Estates Pvt Ltd. In these seized documents, payments are recorded menticnng 02 dates as well as amounts. The two parti=s hrc Abhijit Construction Co, by putting their signatures On these documents: It i5 also mentioned in thg documents that the payments are made through cheques ad cash. "Ch is mentioned for cheque payment ad "C" is mentioned for cash payments: The total of payments made is 388.25 between 06.09.2006 ta 29.09.2009. Out of this total payment of 388.25, pavments to the tune of 188.25 is recorded against C" which means cash payments and to the tune of 2OO is recorded against #Ch- which means cheque payments. These are crucial a5 it contains the entries about the Payseenagef considerable cash to 'OGBIDE Pvt Lta" by Abhijit Construction Company. The notings in these pages are very clear a5 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 a/s0_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. 5_ 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: - 1) ITA No.1154 %f 2O14 in the case of Shri Samson Perinchery vide order dated 05.01.2017. "i) ITAT order in ITA No.4168/Mum/2013 in the case of Siddhi Home Makers vide order dated 28.04.2017 663 G6h 5 Abhijit Construction Co. 6 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 1534 of the Act has been accepted. The assessee is engaged in the business of real estate and purchase of Iand 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 increzse In capital of assesse, Merely because assesse agree to pay tax respect to such sums same cannot be visited with penalty under ection 271 (1)(c): The additional Income has been assessed merely because such sums have been offered for taxation in the return filed under section 1534. 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 14303) r/w section 1534 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 Omi 665" 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 1534 of the Act 1961, In view of above, na 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 ReLLATE under section 1(1)(c) is not mandatory. Considering the facts and 4 cumstances 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 Kindustan 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 15t November 2007 and 30th November 2008 respectively. The original return of income filed before 13th August 2009 i.e-, prior to amended Explanation SA Amended to Explanation SA 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 001 666 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,) 1, Learned Departmental Representative on the other hand relied on the order of the authorities below For both the years under consideration. 7 Having heard the rival contentions ad on perusal of the material available on record; we find that in assessee'5 case, the income offered by the assessee in the return of income and the income which was assessed in the assessment completed under section 1534 is same_ We aiso noticed that the assessee Is engaged in the activity of al estate and income offered in the return is in relation to penditure which is allowable as business expenditure in the hands of m assessee_ The income pffered to tax has been regularized in the assessment framed under section 1534 r/w section 143(3) of the Tax Act: It is alsa 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 Horne Makers; vide order 661 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 Qf the point raised by the assessee is that the notice issued by the Assessing Officer under section 274 KW,S 271(1)(c) of the Act dated 30/12/2010 does not reflect an appropriate application of mind; inasmuch a5, the notice has been issued in & 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 rW,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 8 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 50 as to make the assessee aware a5 to what is the charge made against him 5o that he can respond accordingly, The Hon'ble Karnataka High Court in the case of Manjunatha Cotton 8 Ginning Factory (supra) observed that the Jevy 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 nptice under section 274 0f 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 M, Shroff Vs. JCI , 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 35 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 9 situation; levy Of penalty suffers Trom 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,5. 271(1)(c) of the 668 9 Abhijit Construction Co Act dated 30/12/2010 without striking Off the irrelevant words, the penalty proceedings show 2 non-application pf mind by the Assessing Officer and Is, thus, unsustainable, We hold s0. 8 The ratio laid down by the Co-ordinate Bench of the Tribunal cited supra squarely applles to facts in assessee's case and respectfully following the same, we hold that the penalty levied under section 271(T)(c) by the Assessing Officer and confirmed by the learned Commissioner (Appeals) is not sustainable on the aforesaid legal ground also. We also lind that the Honble Jurisdictional High Court in Shri Samsung Perinchery, 392 ITR 4 'Bam ) has taken a simiiar view and the ratio Iald down thereln fully support 8 submission of assessee The ratio laid down by Hon'ble Jurisdictional High Court applies with full force to the facts in assesseets 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. 9 In the result, assessee's appeal for the assessment year 2007-08 is allowed ITAno.496/NagL2016 5 A.Y 2008-09 10_ 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 669 Abhijit Construction Co; assessee being same and the facts and circurstances of the present case is similar to the issue decided fn 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_ 11. In the result, assessee'5 appeal for assessment year 2007-08 2008-09 are allowed, Order pronounced in the open Court on 28,06.2017 - Sdj - P.K BANSAL VICE PRESIDENT AMARJIT SINGH JUdICIAL MEMBER NAGPUR; DATED: 28.06.2017 Copk pLthe_order forwarded to; Lrj The 4ssessee; (2) The Revenue; (3) The CIT(A); (4} The CIT , Nagpur City concerned; {5) The DR, ITAT, Nagpur; Lor Guard file. True CpPY By Ord Pradeep J, Chowahury Sr. Private Secretery (Dyuaistt WAlTAF' Nag 17 ~WNA. O2n