Income Tax Appellate Tribunal - Ahmedabad
Shri Vikram P. Mahurkar,, Ahmedabad vs The Acit, Circle-2(2),, Baroda on 28 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH
(BEFORE SHRI P. K. KEDIA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA.Nos: 3195, 3197, 3199, 3201 & 3202/AHD/2014
(Assessment Years: 2004-05 to 2007-08 & 2009-10)
Shri Vikram P. Mahurkar, V/S Asst. Comm. of Income
1, Sajni Apartments, Dalal Tax, Circle -2(2), Baroda
Road, Golwad Fatehgunj,
Baroda-390002
(Appellant) (Respondent)
PAN: ACHPM3681J
Appellant by : Shri Anil R. Shah & Kinjal Shah, A.R.
Respondent by : Shri Mudit Nagpal, Sr. D.R.
(आदे श)/ORDER
Date of hearing : 13 -06-2018
Date of Pronouncement : 28 -06-2018
PER MAHAVIR PRASAD, J.M.
1. These five appeals have been filed by the appellant against the order of the ld. CIT(A) for confirming of penalty u/s. 271(1)(c) of the Act. These are five appeals have been common grounds of appeal and only amount and 2 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors. . A.Ys. 2004-05 to 2007-08 & 2009-10 assessment years are different. Therefore for the sake of convenience, we would like to dispose of all five appeals by way of common order and following grounds have been taken by the appellant:
1 .The CIT(A) has erred both in Law and in fact in confirming levy of Penalty u/s. n 27I(1)( c) of Rs.3 7,22,490/- on addition of Deemed Dividend u/s.2(22)(e) character of which was debatable and having two opinions.
It is submitted that the since your Appellant has not "Concealed any Income" or "Furnished Inaccurate particulars of such Income" on facts of the case and provisions of Law and for non acceptance of Explanation Penalty is not levyable.
2. CIT (A) has also erred in confirming Penalty u/s. 271(1)( c) Notice issued which was vague, unclear and capable of two views as to whether Penalty proceedings were initiated and Penalty levied were "For concealing Income" or "For furnishing inaccurate particulars of such Income" in view of binding judgment of Hon. Gujarat High Court in the case of New Sarathiya Engg. Company vs CIT 282 ITR page 642 Penalty is void abinitio
2. Apart from the above said ground, appellant also filed following additional grounds of appeal:
2. (a) Your Appellant submits that in view of recent Circular of Central Board of Direct Taxes bearing F.No.279/Misc./140/2015/ITJ and Circular No.19/2017) dated 12th June, 2017 the amount added as Dividend of Rs. 47,50,727/- as a result of is Peck Credit of debits and credits of running account operated during course of Business with Checkmate Services Pvt. Ltd.
is not Dividend u/s. 2(22)(e).
(b) Your Appellant further submits that the addition of Rs. 47,50,727/-requires to be deleted particularly keeping in mind the binding judgment of Hon. Gujarat High Court in the case of CIT vs. Schutz Dishman Bio Tech Pr. Ltd. Tax Appeal No.958/959 of 2015 dated 21/12/15.
3. The Assessee has taken additional ground. We do not find any substance in the plea of the assessee for admission of additional grounds. The additional 3 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors. . A.Ys. 2004-05 to 2007-08 & 2009-10 grounds raised to raise a plea that the transactions were commercial in nature and this trade advances requires factual examinations in the absence of relevant facts in this regard and in the absence of reasonable cause for belated plea on the factual aspects, we decline to entertain the same.
4. Briefly stated the facts of the case are in this case, a survey action U/S.133A of the Act was carried out on 06.10.2012. During the course of survey, assessee has disclosed deemed dividend of Rs.5,36,578/- in A.Y. 2004-05 from Institute of Fire & Disaster Management services, which is a proprietary concern of the assessee during the period relevant to A.Y. 2004-05. Since the assessee failed to offer tax of above deemed dividend in his original return of income filed u/s. 139(1) on 01.112004, thereafter, case was reopened and the assessment was completed u/s. 143(3) r.w.s.147 of the Act on 29.12.2011 determining total income at Rs.42,59,058/-. Subsequently, order u/s. 263 of the Income-tax Act 1961 C.I.T-I, Baroda which is reproduced as under:
"The record of the assessment proceedings in the case of the assessee for the A.Y.2004-05 leading to passing order u/s. 143(3) on 29.12.2011 was called for an examined. It was found that the order passed by the Assessing Officer was erroneous in so far as it was prejudicial to the interest of the revenue. A notice of hearing under section 263(1) was accordingly issued on 24.02.2012. The assessee filed his -written submission on 13.02.2013.
The point raised in the notice was regarding non-addition of income towards deemed dividend from MJs Checkmate Detective Agency ofRs.42,14,149/- which was discovered during the course of survey and admitted by the assessee.
In this case, assessee filed his return of income for the A. Y. 2004-05 on 01.11.2004 declaring income at Rs.23,76,210/- . Assessment u/s. 143(3) was finalized on 29.12.2006 determining income of Rs.37,22,490/-. Subsequently, survey was conducted in the case ofM/s Checkmate services P.Ltd. Group, Baroda by the Director of Income-tax(Inv.), Baroda on 4 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors. . A.Ys. 2004-05 to 2007-08 & 2009-10 06.01.2010 and during the course of survey the undisclosed income on account of deemed dividend of'Rs. 5,35,5681- from M/s Institute of Fire Management and Rs.42,14,149/- from M/s Checkmate Detective Agency was found and admitted by the assessee. In' view of the survey and disclosure, the case was re-opened which completed on 29.12.201. In the revised return filed, though additional income of Rs.5,35,568/- was shown, the income of Rs.42,14,149/-towards deemed dividend from M/s Checkmate detective Agency was not shown by the assessee in his return of income in response to the notice u/s. 148. The Assessing Officer also failed to consider the same in the reopened assessment, though the case was re-opened for this very purpose. The assessee, in his submission dated 13.02.2013 in response to the notice u/s. 263(1) of the Act, has admitted that by mistake he had not shown the income towards deemed dividend of Rs.42,14,149/- from M/s Checkmate Detective Agency in his return of income filed in response to notice u/s. 148 of the Act, though he had already paid tax thereon.
The submission of the assessee has been examined. It is_ undisputed that deemed dividend of Rs.42,14,149/- was not declared in the return filed in response to notice u/s. 147. The assessee contention that this was an inadvertent mistake because tax on this was paid was not found to be correct. This can be ascertained from the following:
- The original return was filed showing an income of Rs.23,76,210/- and claiming refund of Rs. 19,38,418/- on account of IDS ofRs.26,93,967/-. The return of income was processed u/s. 143(1) on 31.03.2005 and refund of Rs.18,15,470/- (including interest u/s.244A of Rs.1,02,762/-) was issued to the assessee.
- The revised return was filed on 28.12.2011 showing income of Rs.29,12,774/- and TDS claim of Rs.26,93,967/- and claiming further refund of Rs.48,615/-. Thus, it can be seen that no additional tax was paid in response to notice u/s. 147. On the contrary, further refund was claimed on the TDS originally claimed.
The Assessing Officer is accordingly directed to enhance the income by an amount of Rs. 42,14,149/-. The assessee had concealed income ofRs.5,35,568/- in the original return andRs.42,14,149/- in both original and return u/s.147, penalty u/s.271(l)(c )is also initiated on these amounts ".5 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors.
. A.Ys. 2004-05 to 2007-08 & 2009-10 As the assessee has concealed the particulars of income, penalty proceedings u/s.271(l)(c) were initiated on the above issue in the order u/s.263 of the I T Act passed by the C.I.T-I, Baroda on 12.03.2013. Thereafter, due to change in incumbency, a fresh notice u/s. 271(l)(c) dated 26.07.2013 was issued and duly served upon assessee on the same day. Further, a show-cause notice u/s. 271(1)(C) dated 04.09.2013 was again issued and duly served upon the assessee on 05.09.2013 requiring the assessee to show-cause as to why penalty should not be imposed. The date for compliance with the show-cause notice dated 04.09.2013 was fixed on 12.09.2013. However, neither the assessee furnished any valid explanation nor sought for any adjournment. It is therefore clear that the assessee has nothing to say on this issue which tantamount to acceptance of the default and made him liable to penalty u/s.271(l)(c) of the IT.
Act, 1961.
5. Under the above circumstances, it is reasonably concluded that the assessee could not substantiate his case or furnish any satisfactory explanation. The assessee failed to bring any appreciable material on record to rebut the charge of concealment of his income. In this case, deemed dividend of Rs.5,35,568 & Rs. 42,14,149/- was detected by the Department during the course of survey and the assessee himself admitted the said amount. However, this amount was not shown in the original return filed by the assessee on 01.11.2004. Thus there was a concealment of income totaling to Rs.47,49,717/-. Therefore, I am satisfied that the assessee has concealed the income to the tune of Rs.47,49,717/- ((Rs.5,35,568 + 42,14,149) and hence this is a fit case for levy of penalty u/s.271(l)(c).
The working of penalty u/s. 271(l)(c) of the IT Act is as under: -
(a) Amount of income on which tax is sought to be 47,49,717 6 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors. . A.Ys. 2004-05 to 2007-08 & 2009-10 evaded, as discussed above (Rs.5,35,568 + 42,14,149) (b) Amount of tax sought to be evaded ) 15,67,407 (c) Minimum Penalty leviable u/s. 271(l)(c) @ 100% thereof 15,67,407 (d) Maximum Penalty leviable u/s. 271(l)(c) @ 300% thereof 47,02,221
A minimum penalty of Rs.15,67,407/- (Rupees Fifteen lakh Sixty Seven Thousand Four hundred seven only) is hereby levied
6. Against the said order, assessee preferred first statutory appeal before the ld. CIT(A) but without any success.
7. We have gone through the relevant record and in the impugned order. In this case, appellant during survey proceedings declared deemed dividend of Rs. 5,36,578/- from the Institute of Fire & Disaster Management Services and prior to that appellant filed his original return u/s. 139(1). Thereafter, case was reopened and assessment u/s. 143(3)r.w.s. 147 of the Act on 29.12.2011 determining total income at Rs.42,59,058/- and subsequently, order u/s. 263 of the Income-tax was passed by the ld. CIT(A).
8. In this case, deemed dividend of Rs. 5,35,568/- and Rs. 42,14,149/- was detected by the Department during the course of survey and the same was admitted by the appellant.
9. However in challenge to penalty proceedings made u/s. 271(1)(c) in IT(SS)A No. 17/Ahd/2014 & ITA No.45/Ahd/2014 order dated 05.04.2017 in similar situation, the issue of imposition of penalty was held to favour of Assessee.
7 ITA Nos. 3195, 3197, 3199/Ahd/2014 & Ors.. A.Ys. 2004-05 to 2007-08 & 2009-10
3. The simple question that arises for consideration is whether penalty can be imposed by invoking section 271(1)(c) of the Act on loans and advances as taken by the assessee and regarded as deemed income by virtue of s.2(22)(e) of the Act.
4. Section 2(22)(e) of the Act creates legal fiction whereby loans/advances received by an assessee are deemed as taxable income in the hands of the recipient assessee in certain circumstances as specified therein. In view of section 2(22)(e) of the Act, loans/advances amount under consideration artificially partake the character of dividend and brought to tax as deemed dividend. Needless to say, the aforesaid provision of section 2(22)(e) has brought a deeming and unnatural concept of treating the returnable loans/advances as taxable income in the hands of borrower in departure with the operation of the normal provisions. Admittedly, the relevant facts concerning the issue were available to the AO. Thus, there is no concealment of any 'particulars' of any fact per se. The Assessee has simultaneously claimed that the aforesaid advances have been received the course of ordinary business and owing to ongoing business transactions and thus not susceptible to provisions of section 2(22)(e) of the Act. Thus, while the provisions of s.2(22)(e) have been applied, the issue is not entirely free of any debate. As noted, section 2(22)(e) of the Act is only deeming provision of law and is not a substantive provision. Thus, in the absence of any perceptible malafides, we find no infirmity in the order of the CIT(A) deleting the penalty imposed by the AO. Thus, we do not see any merits in the appeals of the Revenue.
10. Since in similar circumstances ITAT deleted penalty, therefore, relying upon the aforesaid judgment, we delete the penalty in all five appeals and allow the appeal of the appellant.
Order pronounced in Open Court on 28 - 06- 2018
Sd/- Sd/-
(P.K. KEDIA) (MAHAVIR PRASAD)
ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER
Ahmedabad: Dated 28 /06/2018
Rajesh