Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DIVISION BENCHES ‘A’, CHANDIGARH
Before: MS. DIVA SINGH & Dr. B.R.R.KUMAR
PER BENCH
By these 5 appeals filed by the assessee pertaining to 2005-06 to 2009-10 assessment year, the correctness of the consolidated order dated 28.02.2018 of CIT(A)-3 Gurgaon is assailed on various grounds. It was a common stand of the parties before the Bench that the issues raised in ITA 357 to 361/CHD/ 2018 are identical. Accordingly, the parties were in agreement that the arguments advanced in ITA 357/CHD/2018 would remain the same in the remaining appeals also. For ready reference, the grounds from the aforesaid appeal are reproduced hereunder : 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] upholding the levy of penalty under section 271(1)(c) of the Act is bad, both in the eyes of law as well as on facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming penalty on the addition of Rs. 4,74,174/- sustained by Hon'ble ITAT. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty of Rs. 1,51,994/- on an amount of Rs. 4,74,174/- being amount invested in residential house during the year considering the same as undisclosed income of the assessee. 4. On the facts and circumstances of the case, the penalty proceedings initiated by the learned AO is bad both in the eye of law and on facts in the absence of any specific satisfaction/ notice on the issue of concealment of income or furnishing of inaccurate particulars of income.
ITA 357 to 361/CHD/2018 A.Y. 2005-06 to 2009-10 Page 2 of 6
On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty and rejecting the contention of the assessee that on an addition made on the basis of estimation no penalty under section 271(1)(c) can be levied. 6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in levying the penalty on the addition made by the AO by mere estimation on the basis of valuation report. 7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty despite the fact that there being no incriminating material found during the search, the addition itself is not tenable in proceedings under section 153A of the Act, as such no penalty is leviable. 8. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming penalty under section 271(1)(c) despite the fact that there is neither concealment nor furnishing of inaccurate particulars. 9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming penalty and rejecting the contention of the assessee that the penalty proceedings are independent proceedings, as such merely on the basis of disallowances and additions made by the AO, penalty cannot be levied. 10. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts and in law in confirming the penalty u/s 271(1)(c) of the Act without giving any finding as to the merits of the case on concealment and furnishing of inaccurate particulars of income.” 2. The relevant facts of the case are that search and seizure operation was carried out in the case of the assessee on 24/07/2009. In the course of the assessment proceedings on account of the construction carried out by the assessee in the respective years in House No. 346, Sector 9, Chandigarh certain additions were made by the assessing officer. The additions were partly sustained in appeal by the CIT(A). On further appeal before the ITAT, the additions estimated by the AO and the CIT(A) to an extent were restricted to the additions proposed by the DVO in his valuation report. In the penalty proceedings, penalty u/s 271(1)(c) of the Act has been levied and sustained by the AO and the CIT-A respectively taking note of the additions made in the assessment proceedings and the additions sustained in appeal. The position in the remaining years remains the same
Aggrieved by these orders the assessee is in appeal before the ITAT.
Inviting attention to the impugned order, it was submitted by the Ld. AR relying upon the synopsis filed that the CIT-A has confirmed the penalty orders on the ground that addition has been sustained by the ITAT. Referring to the chart extracted in the impugned order our attention was invited to the following facts :
ITA 357 to 361/CHD/2018 A.Y. 2005-06 to 2009-10 Page 3 of 6
A.Y. Addition on which Penalty Penalty upheld by CIT (A) 2005-06 4,47,174 1,51,994 2006-07 5,91,290 2,00,979 2007-08 8,04,371 2,73,406 2008-09 18,67,465 6,34,751 Total 37,10,300 12,61,130
4.1. Referring to the facts it was the submission of the Ld. AR that the assessee in the respective years claimed that the construction had been made with the investment of Rs. 2,23,92,375/- in the following manner :
Rs.47,80,000/- • A.Y. 2005-06 • A.Y. 2006-07 Rs. 63,20,500/- • A.Y. 2007-08 Rs. 60,32, 750/- • A.Y. 2008-09 Rs. 49,43,450/- • A.Y. 2009-10 Rs. 3,15,675/- Total Rs. 2,23,92,375/-
4.2 The assessing officer did not accept the explanation of the assessee and made a reference to the DVO (District Valuation Officer) for estimating the cost of construction. The DVO vide report dated 01/12/2011 determined the cost of construction at Rs. 2,41,42,070/-. It was his submission that in the addition vis-a-vis assessee's claim and as per the DVO’s Report, there was a difference of only 7.81% as the resultant addition would have been made, that too by way of estimate only of Rs. 17,49,625/-. Referring to the record, it was his submission that the assessing officer travelling beyond the report of the DVO himself estimated the cost of construction at Rs. 20 crore odd. The CIT-A restricted the addition to Rs. 6 crore odd and the ITAT taking into consideration the DVO’s report which again was based on estimates more or less restricted the addition to the additions again on estimate basis to the estimate of the DVO. In the said background it was his submission that penalty cannot be levied on the basis of additions made on an estimate basis. Reliance was placed upon Sangrur Vanaspati mills Ltd. [2008] 171 taxman320 (Punjab & Haryana)/[2008] 303 ITR 53 (Punjab & Haryana) ; CIT v. Aero traders (p.) Ltd. [2010] 322 ITR 31 6 (Delhi); Harigopal Singh vs. CIT[2002] 125taxman242 (Punjab & Haryana)/[2002] 258 ITR 85 (Punjab & Haryana); CIT v. Dhillon Rice Mills [2003]127taxman529 (Punjab & Haryana)/[2002] 256 ITR 447 (Punjab & Haryana); Ajay Gupta v. DCIT
ITA 357 to 361/CHD/2018 A.Y. 2005-06 to 2009-10 Page 4 of 6
[2017] 81 taxmann.com 462 (Delhi - trib.)/[2016] 50 ITR(t) 179 (Delhi-Tribunal.); CIT v. Devandas Perumal & co. [1983] 140 ITR 943 (Bombay)/[1982]28CTR 211 (Bombay); ACIT v. E. Bhoopathy [1978] 113 ITR 188; ACIT v. Horilal Kunj Behari Lal [1977] 106 ITR 720 (Allahabad); CIT v. Madhab ram bora [1977] 110 ITR 532 (Gauhati); Rajeev Agarwal, v. ACIT 2012 (9) TMI 442-ITAT, Agra ITA no. 187/Agra/2011. It was also his submission that it is well settled that penalty under section 271(1)(c) cannot be imposed on the basis of the DVO’s report because the said Report at best is only an opinion on estimate of investment. In support of the said proposition; CIT v. Prakash Industries Ltd. [ITA No. 6230/Del/2013 dated 19.02.2016]; DCIT v. Ghodawat Enterprises Pvt. Ltd. [ITA no. 1613/Bang/2014 dated 03.06.2016] were heavily relied upon. It was also his submission that penalty u/s 271(1)(c) cannot be imposed in respect of differences in estimation of cost. For the said proposition, reliance was placed upon CIT v. K.R.Chinni Krishna Chetty (2000) 246 ITR 121 and DCIT v. JMD Advisors (2009) 310 ITR 280. Reliance was also placed upon Honest Group of Hotels (P) Ltd. Vs CIT 2000 (11) TMI 1016-High Court of J&K (2002) and CIT V Smt. Vimal Chawla Charitable Trust 2010 (5) TMI 192 for the proposition that where the difference on estimate is less than 10% no addition is called for. 4.3. It was also his submission that in the facts of the present case the cumulative addition was less than 10% and the individual additions in the respective years as noticed from the chart itself would show that they are much below the judicial standard of acceptable estimates set out. 4.4 Further inviting attention to paper book pages 73; 194; 244 and 295, it was his submission that at the time of initiation of penalty the assessing officer has been careless and lax in not mentioning the specific charge which he seeks to invoke. Referring to the specific provision, it was submitted that the said provision has two limbs and the AO has failed to point out for which limb of the provision, the penalty was being invoked. Accordingly, relying on CIT Vs Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and CIT Vs SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (S.C/[2016] 242 taxman 180 (S.C) it was his submission the penalty order even
ITA 357 to 361/CHD/2018 A.Y. 2005-06 to 2009-10 Page 5 of 6
otherwise cannot survive. Reliance was also placed upon CIT v Reliance Petroproducts P.Ltd. 322 ITR 158; and CIT V M/s L & T Finance Ltd. [ITA No. 1358, 1359 and 1363 of 2015] dated 04.06.2018 for the proposition that merely making a claim which is not sustainable in law will not by itself amount to furnishing of inaccurate particulars of income. 5. The ld. Sr.DR relies upon the orders of the authorities below. 6. We have heard the rival submissions and perused the material on record. Admittedly in the facts of the present case, the additions made by the AO were largely deleted by the CIT(A). Admittedly, in the facts of the present case, the assessee's claim of investment in the specific property in the years under consideration was sought to be upset by the Department relying upon the DVO’s report sought by the AO. It is a matter of fact that the DVO’s report was largely in alignment with the cost of investment claimed by the assessee. It is a matter of fact that in the quantum proceedings before the ITAT, the additions sustained by the CIT(A) on the basis of estimate relying upon the DVO’s report and the list of inventory prepared by the search team has largely been deleted. In the said background, the claim of the assessee that in terms of the judicial precedent available, penalty u/s 271(1)(c) of the Act is not attracted as the additions ultimately have been sustained on the basis of estimates is well supported. It has also been claimed by the assessee that the variation between the additions sustained and the cost of investment relied upon by the assessee individually and cumulatively is well below 10%. Admittedly there is a judicial precedent available which mandates that in such circumstances, penalty u/s 271(1)(c) of the Act is not attracted. It is also a fact on record which stands undisputed when Paper Book pages 73, 194, 244 and 294 are seen that the AO in the facts of the present case has not identified the specific charge which he seeks to invoke. The prayer for quashing the penalty order is supported by the decision of the Hon'ble Karnataka High Court in the case of CIT Vs Manjunath Cotton & Ginning Factory and decision of the Apex Court in the case of CIT Vs SSA’s Emerald Meadows and catena of decisions of the ITAT relying up these decisions. Apart from that, as we note the taxpayer has also relied upon the decision of the Apex Court in the case of CIT
ITA 357 to 361/CHD/2018 A.Y. 2005-06 to 2009-10 Page 6 of 6
Vs Reliance Petroproducts Pvt. Ltd. for the argument that merely because a claim made has not been sustained in law, that itself does not amount to furnishing of inaccurate particulars of income. On a consideration of the aforesaid propositions of law, considering the peculiar facts and circumstances of the present case, we find that penalty imposed by the AO and sustained by the CIT(A) on facts cannot survive, not only on the grounds that the specific charge of Section 271(1)(c) of the Act has not been spelt out by the AO but even otherwise, the additions all along have been made on the basis of estimates and ultimately what has been sustained is also based on the estimates of the DVO. It is well settled that assessment proceedings and penalty proceedings are separate and distinct. Merely because the additions had been sustained in the quantum proceedings is not a good enough reason to sustain the penalty. The facts, submissions and the position of law in the penalty proceedings have to be specifically addressed qua the requirements of the specific provision. No doubt the report of the DVO is an estimate of an expert, but the fact that it is an estimate, cannot be disputed. Accordingly, considering the judicial precedents cited on facts as they stand, we are of the view that penalty u/s 271(1)(c) of the Act in the respective years was not maintainable. On account of the detailed reasons set out hereinabove, we hold that the penalty imposed deserves to be quashed. The said finding would apply equally to the remaining years also as facts, circumstances and position of law thereon remains the same. 7. In the result, the appeals of the assessee are allowed. Order pronounced in the Open Court on 07.08.2018.
Sd/- Sd/-
(Dr.B.R.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ‘Poonam’ Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR Asstt. Registrar ITAT,Chandigarh.