PRAMOD N. PRAJAPATI,SURAT vs. THE INCOME TAX OFFICER, WARD-1, VAPI, VAPI

Assessee represented by Shri Ashutosh P Nanavaty, AR Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 19/12/2022 Date of pronouncement 20/12/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the different assessees are directed against the separate orders of learned Commissioner of Income Tax (Appeals)-3, Surat (in short, the ld. CIT(A) Valsad both dated 03/10/2022 for the Assessment year (AY) 1998-1999. In both these appeals, the assessee(s) have raised certain common grounds of appeal

, facts in both these years are almost similar, therefore, both these appeals were clubbed, heard & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal being is treated as a “lead case”. In this appeal, the assessee has raised following grounds of appeal: “1. Ld. CIT(A) Valsad has erred in law and in facts in rejecting application for rectification of mistake apparent on record u/s 154 of the I.T. Act, 1961 in respect of appellate order dated 28/07/2022 passed u/s 250 of the I.T. Act 1961 in respect of penalty order u/s 271(1)(c) of the I.T. Act, 1961 for A.Y. 1998-1999.

2. Ld. CIT(A) has erred in facts and in law in treating finding in assessment proceedings as sole basis of penalty without anything more as held in Jain Bros. Vs Union of India 77 ITR 107 (SC).

3. Ld. CIT(A) has erred in facts and in law in levying penalty without recording finding of concealment as held in CIT Vs. Anwar Ali 76 ITR 690 (SC), CIT vs/ Khoday Eswarsa 83 ITR 369 (SC) and Ananthraman Veerasinghaiah & Cop. Vs CIT 123 ITR 457 (SC).

4. Ld. CIT(A) has failed to appreciate that cash of Rs. 5,00,000/- is assessed as income of A.Y. 1998-1999 though said income was disclosed in V.D.I.S. 1997 being cash of A.Y. 1991-1992 to 1997-1998 and is therefore assessable as income of respective Assessment year and not as income of A.Y. 1998-1999 as held in CIT Vs British Paints 188 ITR 44 (SC) which lays down principle that each previous year is distinct unit of time for the purpose of assessment and the profit made or the liabilities or losses incurred before or after the relevant previous year are immaterial in assessing profit of that year.

5. Ld. CIT(A) has failed to appreciate that penalty proceedings are not continuation of assessment proceedings as held in Jain Bros. Vs/ Union of India 77 ITR 107 (SC) and therefore dispute as to year of assessment cannot be subjected to penalty as held in CIT Vs Manilal Tarachand 254 ITR 630 (Guj.).

6. Ld. CIT(A) has failed to appreciate in facts and in law that estimate of business income shall not be liable to penalty as held in Dilip M Shroff Vs JCIT 2007 291 ITR 519 (SC) and CIT Vs Mussadilal Rambharose 165 ITR 14 (SC) and there is complete absence of gross r wilful omission to disclose material facts as held in CIT Vs Subhash Trading Co. 221 ITR 110 (Guj). & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr.

7. Ld. CIT(A) has failed to appreciate that assessee has disclosed full and true disclosure of all materials and has not recorded any finding contrary to such full and true disclosure of facts hence in terms of explanation 1 to Sec. 271(1)(c) of the I.T Act 1961 and as held in Sir Shadilal Sugar & General Mills Ltd. Vs CIT 1987 168 ITR 705 SC ad again approved in CIT Vs Suresh Chandra Mittal 251 ITR 9 (SC) as also followed in CIT Vs Valmikbhai H Patel 2006, 280 ITR 487 (Guj).

8. Ld. CIT(A) Valsad has failed to appreciate in facts and in law that investment in flat of Rs. 2,10,000/- has been taxed in A.Y. 1996-97 and such income is taxed second time and it is significant appreciate that such investment is also subject to penalty; copy of assessment order and penalty order for A.Y. 1996-1997 is enclosed herewith and it discloses manner of payment of consideration out of savings bank account No. 850 of Gujarat Industrial Co. Op Bank Ltd. which is verifiable and such facts and available in assessment order of A.Y. 1996- 1997 hence such income cannot be basis for penalty again for A.Y. 1998-1999.

9. Ld. CIT(A) Valsad has failed to consider circular No. 68 [F. No. 245/17/71-A&PAC] dated 17/11/1971 of CBDT that rendering of judgment by Supreme Court is interpretation of law therefore subsequent judgment on the issue of law can be given effect by rectification of mistake as apparent on record as also held by Gujarat High Court in CIT Vs Subodhchandra S. Patel (2004) 138 Taxman 185 (Guj) that even judgments of Supreme Court and Jurisdictional High Court shall constitute mistake apparent on record on issues decided by such courts.”

2. Brief facts of the case are that the assessment in case of assessee was completed under Section 144 of the Income Tax Act, 1961 (in short, the Act) on 25/01/2001. During the assessment the assessing officer noted that the assessee filed declaration under Voluntary Disclosure of Income Scheme, 1997 (VDIS-97) on 31.012.1997. as per the scheme of VDIS- 97, the assessee was required to deposit within the stipulated time. The assessee failed to deposit such required tax, thus, the discloser under VDIS-97 was treated as invalid. The assessing officer issued numerous notice on the assesse as recorded in para-2 the assessment order. The 3 & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. assessee failed to respond such notices and to file required details. The assessing officer completed assessment under section 144 of the Act. The Assessing Officer in assessment order made addition of Rs. 5.00 lacs on account of unexplained money earned as undisclosed income, addition of Rs. 1.25 lacs earned from M/s Pramod Kumar and investment in immovable property of Rs. 2.10 lacs thereby made a total addition of Rs. 8,35,860/-. The Assessing Officer levied penalty under Section 271(1)(c) of the Act of Rs. 2,25,500/- vide order dated 31/07/2001. The Assessing Officer levied penalty @ 100% of tax sought to be evaded.

3. Aggrieved by the order of penalty, the assesse filed appeal before the ld. CIT(A). The appeal of assessee was dismissed by the ld. CIT(A) vide order dated 30/10/2002. Thus, the order of penalty under Section 271(1)(c) was confirmed. The ld. CIT(A) while upholding the order of Assessing Officer held that various notices were issued to the assessee but the assessee has not made any compliance. The ld. CIT(A) on the basis of statement of fact available on record, adjudicated the said appeal. The ld. CIT(A) while adjudicating the appeal recorded that the assessee was engaged in sale and purchase of cloths in the name of M/s Pramodkumar Nagindas & Co. The assessee has shown business income from his proprietory concerned for A.Y. 1996-97. Thereafter no return of income was filed. Detail of business activity and source of income was called from assessee. The assessee failed to furnish such details. The & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. Assessing Officer estimated the income of assessee at Rs. 1.25 lacs on the basis of income determined in A.Y. 1996-97. The Assessing Officer also found that the assessee purchased a flat bearing No. B-1, Panchvati Apartment, Tokarkhada, Silvassa in joint name with his mother Smt. Parvatiben Nagindas Prajapati. Source of acquisition of said flat was called for but no explanation or source of investment was furnished. The Assessing Officer made addition of Rs. 2.10 lacs in the name of assessee. The assessee made a declaration under Section 65 of Finance Act, 1997 under Voluntary Disclosure of Income Scheme, 1997 (in short, VDIS) on 31/12/1997. In the declaration, the assessee declared various property acquired during the previous year. The assessee was required to pay tax within stipulated time but he failed to pay tax so determined, therefore, the declaration under VDIS was treated as not valid. The assessee disclosed Rs. 5.00 lacs under VDIS for A.Y. 1991-92 to 1997-98. This fact came to the knowledge of the department only on 13/12/1997 on making VDIS, therefore, the addition of Rs. 5.00 lacs for A.Y. 1998-99 was also added. As no further appeal in the quantum assessment was filed, therefore, addition in the quantum attained finality. On such addition, the Assessing Officer levied penalty @ 100% of tax sought to be evaded. The ld. CIT(A) while confirming the penalty, recorded all these facts that no return of income was filed by assessee for the year under consideration nor any due tax on VDIS was filed. The Assessing Officer made addition & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. and initiated penalty for concealment of income. The assessee was given opportunity but he failed to avail opportunity and no explanation was furnished by assessee, thus, the Assessing Officer levied penalty for concealment of income. The ld. CIT(A) confirmed the penalty in the order dated 03/10/2002. No further appeal before the Tribunal was filed by the assessee.

4. The assessee filed application under Section 154 dated 20/07/2018 before the ld. CIT(A) for seeking rectification in the order dated 03/10/2002. The ld. CIT(A) dismissed the application of assessee vide order dated 01/08/2018. The ld. CIT(A) while dismissing the application under Section 154 held that the decision of his predecessor is based on merit. He has no power to review the order except for any mistake apparent from the record. There is no mistake apparent from the record. In absence of any mistake apparent, the application of assessee was rejected. The ld. CIT(A) also rejected the prayer of restoration of appeal. Further aggrieved, the assessee has filed the present appeal before this Tribunal.

5. During the hearing of appeal on 22/07/2022, it was noted that the assessee has neither filed assessment order nor order of penalty nor copy of application under Section 154 of the Act filed before the ld. CIT(A) for rectification, which was filed after 16 years of passing the order dated 3.10.2002. On repeated persuasion and direction of the bench, the & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. assessee obtained copy of assessment order dated 25/01/2001, penalty order dated 31/07/2001. All such orders/documents were necessary for adjudication of the present appeal. Only after filing such orders/documents, the present appeal was taken for final hearing.

6. We have heard the submissions of both the parties at lenth. The ld. AR of the assessee submits that the ld. CIT(A) dismissed the appeal against the penalty order vide order dated 03/10/2002. The assessee was a very poor person and not having sufficient means to pursue the proceedings before the ld. CIT(A). No further appeal was filed before Tribunal against dismissal of such order. The assessee filed application under Section 154 before ld CIT(A) for seeking recall as well as restoration of appeal for adjudication on merit. The application of assessee under Section 154 was dismissed vide order dated 01/08/2018. The ld. CIT(A) dismissed the application in a non-speaking order. The ld. CIT(A) passed the order without giving opportunity of hearing to the assessee. The ld. AR submits that the order dated 01/08/20188 as well as 03/10/2002 is liable to be recalled and the assessee may be given opportunity to contest the appeal on merit.

7. On the other hand, the ld. Sr. DR for the revenue submits that there is no mistake apparent in the order dated 03/10/2002. The Assessing Officer passed the assessment order on 25/01/2001. The ld CIT(A) dismissed the appeal of the assessee on 03.12.2022. before deciding the & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. appeal, the assessee was given numerous opportunity. The assessee failed to avail such opportunity. The ld CIT(A) has no option except to decide the appeal on the basis of material available on record. The assessee neither made any compliance of various notices of the Assessing Officer nor filed any document. The assessee filed declaration under VDIS of 1997. No tax was paid by the assessee under such declaration, therefore, the declaration filed by the assessee was treated as invalid. No return of income was filed by assesse, the Assessing Officer completed the assessment under Section 144 and made addition of unexplained income disclosed in VDIS of Rs. 5.00 lacs, business income for his proprietary concern of Rs. 1.25 lacs and addition of investment in flat of Rs. 2.10 lacs. No further appeal in quantum assessment was filed by assessee. The Assessing Officer levied penalty under Section 271(1)(c) for concealment of particulars of income by levying penalty @ 100% of tax sought to be evaded vide order dated 31/07/2001.

8. The ld SR DR for the revenue further submits that the Assessing Officer levied penalty of Rs. 2.25 lacs being 100% of tax sought to be evaded. Against the penalty, the assessee filed appeal before the ld. CIT(A). The assessee failed to appear before the ld. CIT(A) as recorded in para 7 of his order. The ld. CIT(A) after considering the statement of fact and the material gathered by the Assessing Officer, confirmed the penalty. The assessee not taken any further action for filing appeal before the & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. Tribunal. After 16 years, when the prosecution of assessee was started, the assessee filed application under Section 154. The assessee failed to show any mistake apparent in the order dated 03/10/2002, even otherwise, the application under Section 154 was hopelessly time barred. The time limit for filing application under Section 154 is only 4 years, however, the assessee has filed said application after 16 years. The application under Section 154 was neither maintainable on fact nor on law or the order dated 03/10/2002 was not liable to be recalled. To support his submission, the ld. Sr. DR for the revenue has relied upon the decision of Hon’ble Supreme Court in the case of N.R. Portfolio Pvt. Ltd. (2019) 108 taxmann.com 266 (SC).

9. In the rejoinder submission, the ld. AR of the assessee submits that in his application under Section 154, the assessee was not seeking review of the order rather for making prayer for recalling of order as the assessee was not given fair and reasonable opportunity before passing the order dated 03/10/2002. On our specific query, the ld. AR submits that no appeal in quantum assessment was filed. The ld. AR for the assessee explained that the assessee was not having sufficient means to bear the cost of litigation and appeal fees.

10. We have considered the considered the submissions of both the parties and have gone through the various documents filed on record by the ld. AR of the assessee. The ld AR for the assessee also filed copy of & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr. assessment order for A.Y. 1996-97 and penalty order for A.Y. 1996-97. Though, such order was neither referred nor relied while making his submission. We also find that the ld. AR has placed on record certain case laws, however, no such case laws was referred or relied during the submission.

11. We find that the assessment for A.Y. 1998-99 was completed under Section 144 of the Act on 25/01/2001. The Assessing Officer made three additions, first addition relates to unexplained money earned and disclosed in VDIS-97 of Rs. 5.00 lacs, second addition of business income from proprietary concerned of Rs. 1.25 lacs and third addition of investment in immovable property of Rs. 2.10 lacs. Admittedly, no further appeal is filed by assessee in quantum assessment. The Assessing officer levied penalty under Section 271(1)(c) of the Act for concealment of particulars of income and 100%. Aggrieved by the order of penalty, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), no submission was filed except filing statement of facts. The ld. CIT(A) after considering the statement of fact and referring the contents of assessment order, which we have recorded above and are not repeated here for the sake of brevity. The ld. CIT(A) after his considering the material on record, upheld the penalty on all three additions vide order dated 03/10/2002. No further appeal was filed by assessee against such dismissal of appeal before Tribunal.

ITA No. 621 & 622/Srt/2018 Pramod N Prajapati Vs PCIT & 1 Anr.

No. 1 to 9 (which are otherwise argumentative in nature and contains reference of various case laws) are dismissed.

14. In the result, this appeal of assessee is dismissed.

15. Now we take appeal in ITA No. 622/Srt/2018 for the A.Y. 1998-99 wherein the assessee has raised similar grounds of appeal as raised in appeal in A.Y. 1998-1999, except variation of amount of penaly. Considering the fact that we have dismissed the appeal of assessee in ITA No. 621/Srt/2018 for A.Y. 1998-1999, therefore, considering the principle of consistency, the appeal of ITA No. 622/Srt/2018 for the A.Y. 1998-99 is also dismissed with similar findings.

16. In the result, both these appeals of assessees are dismissed. Order pronounced in the open court on 20th December, 2022.