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Income Tax Appellate Tribunal - Mumbai

Velji Dharmshi Vavia, Navi Mumbai vs Acit Cc 1, Mumbai on 28 July, 2017

                IN THE INCOME TAX APPELLATE TRIBUNAL,
                        MUMBAI BENCH"F", MUMBAI

              BEFORE D.T. GARASIA, JUDICIAL MEMBER AND
              SHRI G. MANJUNATHA, ACCOUNTANT MEMBER

                           ITA Nos.5711 & 5713/M/2013
                       Assessment Years: 2005-06 & 2007-08

        Shri Velji Dharmshi Vavia,           ACIT, Central Circle-1,
        B-200, Arenja Corner,                Room No.29, B-Wing,
                                         Vs. th
        Plot No.71, Sector-17, Vashi,        6 Floor, Ashar I.T. Park,
        Navi Mumbai-400 703                  Wagle Estate,
        PAN: ABSPV 8228Q                     Thane - 400 604
              (Appellant)                       (Respondent)

      Present for:
      Assessee by                 : Shri Hari S. Raheja, A.R.
      Revenue by                  : Ms. Pooja Swaroop, D.R.

      Date of Hearing             : 15.06.2017
      Date of Pronouncement       : 28.07.2017

                                    ORDER

Per D.T. GARASIA, Judicial Member:

The above titled appeals have been preferred by the assessee against the common order dated 08.07.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2005-06 & 2007-08.

2. The short facts of the case are that the assessee has filed the return of income under section 139 of the Act on 31.12.2005 declaring income of Rs.96,815/-. Search and seizure action under section 132 of the Act was conducted in Patel group of cases on 17.01.2008 in which assessee's residential premises was also covered. Consequent to the assignment of case to ACIT, Central Circle-1, notice under section 153A was issued to the assessee and the assessee filed the return of income on 31.03.2009 admitting the total income of Rs.6,02,465/- and agricultural income of Rs.1,81,250/-.

Shri Velji Dharmshi Vavia Assessment under section 143 read with section 53 of the Act was completed on 30.12.09. The penalty proceedings were initiated on account of cash payment of Rs.4 lakhs incurred in previous year relevant to A.Y. 2005-06 on account of purchase of land. The show cause notice was given. In reply to show cause notice, the assessee submitted that assessee has declared the income under section 132(4) of the Act during the course of search and the same is admitted in the return filed in response to notice under section 153A. Another ground is that once the search is conducted in a case the pending assessment gets abated and the return filed earlier under section 139 becomes non-est. After considering the reply of the assessee, the Assessing Officer (hereinafter referred to as the AO) has levied the penalty of Rs.1,22,403/- under section 271(1)(c) of the Act.

3. Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has dismissed the appeal.

4. The Ld. A.R. has taken the preliminary objection that the notice under section 274 read with section 271(1)(c) should specify whether the penalty is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. In the instant case, the Ld. A.R. has drawn our attention to the assessment order and submitted that in assessment order the only word written penalty is initiated while in the penalty order the AO has not stated whether the penalty is imposed for concealment of the income or for furnishing of inaccurate particulars of income. The Ld. A.R. submitted that the issue in controversy is covered by the decision of Hon'ble Jurisdictional Bombay High Court and various decisions of the Tribunal. Secondly, the Ld. A.R. submitted that in this case the assessee has admitted that the income was assessed in the assessment proceeding under section 132 itself and as per declaration made before investigation authority, assessee has filed the return and paid the taxes which were accepted by the AO without further addition. Since the assessee 3 ITA Nos.5711 & 5713/M/2013 Shri Velji Dharmshi Vavia has filed the return in order to settle the matter, there cannot be any penalty. Further, it was contended that the provisions of Explanation 5A under section 271(1)(c) cannot be invoked as assessee's search was conducted much before amended provision was approved by President on 13.08.09. Therefore, the decision of co-ordinate bench of the Tribunal in the case of Ashish Kumar Agarwal in ITA Nos.16 to 20/Hyd/2015 dated 14.10.2015 is applicable in this case. The Ld. A.R. further submitted that since the said proceedings have been conducted before Explanation 5A has come into effect, the provisions of Explanation 5A are not applicable on the date of filing of the original returns.

5. The Ld. D.R. has relied upon the order of Ld. CIT(A).

6. The Ld. A.R. has further relied upon the following decisions:

1. CIT vs. SSA'S Emerald Meadows (2016) 73 taxmann.com 248 (SC)

2. Anil Kumar Surekha & Nisha Anil Surekha vs. ACIT in ITA Nos.3861 to 3864/M/2015 & ITA Nos.3856 to 3860/M/2015 decided on 06.04.2017

3. Hon'ble Bombay High Court decision in the case of CIT vs. Samson Perinchery in ITA No.1154, 953, 1097 & 1226 of 2014

4. Shri Krishnakanth Agarwal vs. DCIT in ITA Nos.976 to 978/Hyd/2015 & ITA Nos.979 to 982/Hyd/2015 decided on 23.09.2016

5. Dilip Kedia vs. ACIT - (2013) 40 taxmann.com 102 (Hyderabad - Trib.)

6. ACIT vs. Ashok Raj Nath (2013) 33 taxmann.com 588 (Delhi

- Trib.)

7. We have heard the rival contentions and perused relevant material on record. So far as the applicability of Explanation 5A is concerned, we fully agree with the contentions of the Ld. DR that the language of Explanation 5A makes it amply clear that whenever additional income is declared in a return of income filed after the date of search, the assessee is deemed to have concealed the particulars of his income or furnishing of inaccurate particulars within the 4 ITA Nos.5711 & 5713/M/2013 Shri Velji Dharmshi Vavia meaning of Section 271(1)(c). The cited judgment of Hon'ble Delhi High Court was rendered in the context of Explanation 5 and hence, the same do not apply to the case of the assessee. However, we have also noted that the penalty has been initiated on one limb but finally imposed for another limb. Further, the show-cause notice u/s 274 read with section 271(1)(c) issued to the assessee did not specify the limb for which the penalty proceedings were being initiated against the assessee which took away a valuable right of the assessee and therefore, vitiates the penalty proceedings. Our view stands fortified by the above-cited judgment of Apex Court where the decision of Hon'ble Karnataka High Court has been confirmed, which in turn, relied upon the judgment of same court in CIT Vs Manjunatha Cotton & Ginning Factory [359 ITR 565].

Respectfully following the settled judicial discipline / precedent, we hold the penalty proceedings to be bad in law and therefore, quash the same. Accordingly, the appeal of the assessee is allowed.

8. The common grounds taken by the assessee in this appeal are already adjudicated in ITA No.5711/M/2013 for A.Y. 2005-06 as above. Hence, applying the same ratio followed in ITA No.5711/M/2013 for A.Y. 2005-06, we decide this appeal also in favour of the assessee.

9. In the result, both the appeals of the assessee are allowed.

Order pronounced in the open court on 28.07.2017.

         Sd/-                                                Sd/-
   (G. Manjunatha)                                     (D.T. Garasia)
ACCOUNTANT MEMBER                                  JUDICIAL MEMBER

Mumbai, Dated: 28.07.2017.
* Kishore, Sr. P.S.
                                             5                ITA Nos.5711 & 5713/M/2013
                                                                Shri Velji Dharmshi Vavia

Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT (A) Concerned, Mumbai
        The DR Concerned Bench
//True Copy//                           [




                                                By Order



                              Dy/Asstt. Registrar, ITAT, Mumbai.