Income Tax Appellate Tribunal - Pune
Rohini Ranjeet Mulay, Aurangabad vs Dcit, Central Circle,, Aurangabad on 30 January, 2017
आयकर अपील
य अ धकरण "ए" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
ी आर. के. पांडा, लेखा सद य, एवं ी "वकास अव थी, या$यक सद य के सम% ।
BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA No. 288/PUN/2013
$नधा'रण वष' / Assessment Year : 2002-03
Rohini Ranjeet Mulay,
Sahyadri, Rachnakar Colony,
Station Road, Aurangabad-431005
PAN : AJZPM4518M
.......अपीलाथ / Appellant
बनाम/Vs.
Deputy Commissioner of Income Tax,
Central Circle, Aurangabad
......
यथ / Respondent
आयकर अपील सं. / ITA No. 289/PUN/2013
$नधा'रण वष' / Assessment Year : 2006-07
Padmakar Haribhau Mulay,
Sahyadri, Rachnakar Colony,
Station Road, Aurangabad-431005
PAN : AEIPM3632E
.......अपीलाथ / Appellant
बनाम/Vs.
Deputy Commissioner of Income Tax,
Central Circle, Aurangabad
......
यथ / Respondent
आयकर अपील सं. / ITA No. 290/PUN/2013
$नधा'रण वष' / Assessment Year : 2003-04
Snehal Sameer Mulay,
2nd Floor, Tapadiya Terraces,
Adalat Road, Aurangabad-431001
PAN : AJZPM4516F
.......अपीलाथ / Appellant
बनाम/Vs.
Deputy Commissioner of Income Tax,
Central Circle, Aurangabad
......
यथ / Respondent
2
ITA Nos. 288, 289 & 290/PUN/2013
Assessee by : Shri Sunil Ganoo
Revenue by : Shri Anil Chaware
सन
ु वाई क तार ख / Date of Hearing : 27-12-2016
घोषणा क तार ख / Date of Pronouncement : 30-01-2017
आदे श / ORDER
PER VIKAS AWASTHY, JM :
These three appeals by the different assessees are taken up together for hearing as the issues raised in the appeals are arising from same set of facts. In ITA No. 288/PUN/2013, the assessee has assailed the order of Commissioner of Income Tax (Appeals), Aurangabad dated 03-12-2012 for the assessment year 2002-03 confirming the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). In ITA No. 289/PUN/2013, the assessee has impugned the order of Commissioner of Income Tax (Appeals), Aurangabad dated 03-12-2012 for the assessment year 2006-07 confirming the levy of penalty u/s. 271(1)(c) of the Act and in ITA No. 290/PUN/2013, the assessee has assailed the order of Commissioner of Income Tax (Appeals), Aurangabad dated 03-12-2012 for the assessment year 2003-04 confirming the levy of penalty u/s. 271(1)(c) of the Act.
2. The brief facts of the case as emanating from records are: A search and seizure action u/s. 132 of the Act was carried out on Mulay Group on 10-10-2007. All the three assessees are part of Mulay Group. Notice u/s. 153A was issued to the assessees. In response to the said notice, the assessees filed their respective return of income for the impugned assessment years. During the course of assessment, certain additions/disallowances were made by the Assessing Officer in the 3 ITA Nos. 288, 289 & 290/PUN/2013 income returned by the assessees. The assessees accepted the additions and did not file any appeal. Thereafter, penalty proceedings u/s. 271(1)(c) were initiated and penalties were levied in the case of respective assessees as under :
ITA No. Name of Assessee Assessment Penalty levied year 288/PUN/2013 Rohini Ranjeet Mulay 2002-03 `1,13,220/- 289/PUN/2013 Padmakar Haribhau 2006-07 `3,47,606/-
Mulay 290/PUN/2013 Snehal Sameer Mulay 2003-04 `5,73,090/-
Aggrieved by the order levying penalty, the assessees filed appeals before the Commissioner of Income Tax (Appeals) in their respective cases. The Commissioner of Income Tax (Appeals) in the case of Rohini Ranjeet Mulay and Snehal Sameer Mulay upheld the levy of penalty in toto. In the case of Padmakar Haribhau Mulay, the Commissioner of Income Tax (Appeals) granted part relief to the assessee by restricting the levy of penalty on addition of `4,30,830/-.
The Assessing Officer had levied penalty on addition of `12,64,840/-.
Now, the assessees are in second appeal before the Tribunal assailing the order of Commissioner of Income Tax (Appeals) confirming the levy of penalty.
3. Shri Sunil Ganoo appearing on behalf of the assessees submitted that the assessees are having agricultural land and are deriving agricultural income there from. The assessees have not filed return of income u/s. 139 of the Act in the assessment years under appeal. After search and seizure action on Mulay Group on 10-10-2007, notice u/s. 153A was issued to the assessees. In pursuance to the said notice, the assessees filed their respective return of income. Assessments were framed u/s. 143(3) r.w.s. 153A of the Act. The 4 ITA Nos. 288, 289 & 290/PUN/2013 additions made during the assessment proceedings were accepted by the assessee and no appeals were filed against the additions. Thereafter, the Assessing Officer initiated penalty proceedings u/s. 271(1)(c) in the case of all the assessees. The ld. AR pointed that a perusal of assessment order shows that satisfaction for levy of penalty was recorded u/s. 271(1)(c) r.w. Explanation 1. However, at the time of levy of penalty, the Assessing Officer invoked the provisions of Explanation 5A. When the matter travelled to the First Appellate Authority, the Commissioner of Income Tax (Appeals) held that penalty levied as per Explanation 5A to section 271(1)(c) is not justified. The Commissioner of Income Tax (Appeals) levied the penalty by invoking the provisions of Explanation 3 to section 271(1)(c) of the Act. The ld. AR submitted that the provisions of Explanation 3 to section 271(1)(c) are not applicable in the case of assessees. Provisions of Explanation 3 applies where the return of income is filed u/s. 142 and/or u/s. 148 of the Act. In the present case, the assessees have filed return of income in response to notice issued u/s. 153A. The ld. AR further submitted that in the present set of appeals no penalty is leviable as no incriminating material was seized during the course of search. Where during search action no incriminating document is found and seized no addition can be made. In support of his submissions the ld. AR placed reliance on the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Continental Warehousing Corporation reported as 374 ITR 645.
3.1 The ld. AR submitted that the assessee in ITA No. 288/PN/2013 has primarily derived agricultural receipts from M/s. Ajeet Seeds Ltd. The Tribunal in the case of Ajeet Seeds Ltd. has deleted the addition u/s. 40A(2)(b) of the Act. The Department filed appeal against the 5 ITA Nos. 288, 289 & 290/PUN/2013 order of Tribunal before the Hon'ble High Court but the issue of disallowance u/s. 40A(2) was not raised by the Department in appeal before the Hon'ble High Court. The ld. AR placed on record the copy of the order of Tribunal in the case of ACIT Vs. Ajeet Seeds Ltd. in ITA Nos. 109 to 115/PN/2012 for the assessment years 2002-03 to 2008- 09 decided on 22-03-2013 and the copy of order of Hon'ble Bombay High Court, Aurangabad Bench in the case of the Commissioner of Income Tax Vs. Ajeet Seeds Ltd. in Income Tax Appeal Nos. 20 to 26 of 2014 decided on 18-06-2015.
4. Au Contraire Shri Anil Chaware representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in confirming the levy of penalty. The ld. DR further placed reliance on the decision rendered in the case of Income Tax Officer Vs. Smt. Gurinder Kaur reported as 102 ITD 189 (ITAT-Del.).
5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. It is an undisputed fact that the assessees have not filed their return of income u/s. 139 of the Act. A search action u/s. 132 of the Act was carried out on Mulay Group on 10-10-2007. The assessees being member of Mulay Group were served with the notice u/s. 153A of the Act on 21-05-2008. The assessees filed their respective return of income for the assessment years under appeal in pursuance to the notice issued u/s. 153A of the Act on 20-06-2008.
ITA No. 288/PUN/2013
6. A perusal of the assessment order in the case of assessee in ITA No. 288/PN/2013 shows that certain additions were made in the 6 ITA Nos. 288, 289 & 290/PUN/2013 income retuned by the assessee. The Assessing Officer while recording satisfaction for levy of penalty u/s. 271(1)(c) r.w. Explanation 1 has not specified whether penalty proceedings are initiated for concealment of income or furnishing of inaccurate particulars of income. Thereafter, while passing penalty order on 13-05-2010 the penalty was levied u/s. 271(1)(c) r.w. Explanation 5A. During the First Appellate proceedings, the Commissioner of Income Tax (Appeals) observed that the provisions of Explanation 5A are not attracted as no incriminating material was found during search action. However, the Commissioner of Income Tax (Appeals) confirmed the levy of penalty by invoking Explanation 3 to section 271(1)(c) of the Act.
7. Before proceedings further it would be relevant to refer to the provisions of Explanation 3. The same are reproduced here-in-under :
"Explanation 3.--Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish under section 139 in respect of any assessment year commencing on or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148."
A bare perusal of Explanation 3 shows that the same is applicable where the assessee has taxable income but has not filed return of income without reasonable cause within the time prescribed u/s. 153(1) and until the expiry of period u/s. 153(1) no notice u/s. 142(1) or 148 of the Act has been issued. The assessee shall be held to 7 ITA Nos. 288, 289 & 290/PUN/2013 have concealed the income and penalty is leviable on him accordingly, if he is later found to have taxable income in that year. This provision is applicable even if such person furnishes return of income at any time after the expiry of period specified u/s. 153(1) in pursuance of notice u/s. 148 of the Act. Explanation 3 to section 271(1)(c) is attracted if all the conditions laid down therein are satisfied. Thus, each condition has to be established for the purpose of invoking Explanation 3.
8. In the present case, as has been pointed earlier, the assessee has not filed return of income u/s. 139 of the Act within the time specified u/s. 153(1) of the Act. The assessee has filed return of income in pursuance to notice issued u/s. 153A of the Act. In our considered opinion Explanation 3 is not attracted in the facts and circumstances of instant case. After search, the assessment and subsequent proceedings are carried out under special provisions of the Act. The Legislature in its wisdom has specifically mentioned about issuance of notices u/s. 142(1) or u/s. 148 in Explanation 3. There is no reference to notice u/s. 153A of the Act. Where return of income is filed in pursuance to search action, provisions of Explanation 5 or 5A as the case may be are attracted, provided other conditions set out in the said explanations are fulfilled. Explanation 3 is attracted only where the assessment is made under regular provisions and not in case of search. Thus, we are of the considered view that the Commissioner of Income Tax (Appeals) has erred in invoking the provisions of Explanation 3 for confirming penalty u/s. 271(1)(c) of the Act in the present case. Therefore, no case for levy of penalty u/s. 271(1)(c) r.w. Explanation 3 is made out against the assessee. The Department is not in appeal against the order of Commissioner of Income Tax (Appeals). Hence, in 8 ITA Nos. 288, 289 & 290/PUN/2013 the peculiar facts and circumstances of the case, the impugned order is set aside and the appeal of the assessee is allowed. ITA No. 289/PUN/2013
9. A perusal of assessment order dated 31-12-2009 passed u/s. 143(3) r.w.s. 153A of the Act in ITA No. 289/PUN/2013 for assessment year 2006-07 shows that while recording satisfaction for initiating penalty u/s. 271(1)(c) r.w. Explanation 1 specific charge i.e. whether the penalty proceedings are initiated for concealment of income or furnishing of inaccurate particulars of income has not been mentioned by the Assessing Officer. While passing order u/s. 271(1)(c) levying penalty, the Assessing Officer invoked the provisions of Explanation 5A. A perusal of the order levying penalty reveal that the Assessing Officer was not clear whether the penalty u/s. 271(1)(c) is to be levied for furnishing of inaccurate particulars of income or concealment of income. The Assessing Officer while levying penalty u/s. 271(1)(c) has observed that the assessee has rendered himself as assessee in default within the meaning of section 271(1)(c) of the Act by not filing the return of income in time and furnishing of inaccurate of particulars of income/concealing the particulars of income. Thus, the Assessing Officer has levied penalty u/s. 271(1)(c) for not only the charges mentioned under the said section but for delay in filing of return of income as well. Penalty u/s. 271(1)(c) is levied where the Assessing Officer in the course of assessment proceedings is satisfied that the assessee has concealed the particulars of income or has furnished inaccurate particulars of income. Penalty u/s. 271(1)(c) is not attracted for delay in filing of the appeal.
In first appeal, the Commissioner of Income Tax (Appeals) has confirmed the levy of penalty u/s. 271(1)(c) without invoking provisions 9 ITA Nos. 288, 289 & 290/PUN/2013 of Explanation 5A. We find that the reasons recorded for initiating penalty proceedings, order levying penalty u/s. 271(1)(c) and the order of Appellate Authority are incoherent in so far as charge for levy of penalty and the provisions under which penalty is to be levied. The proceedings u/s. 271(1)(c) are penal in nature. Therefore, the provisions under the said section have to be construed strictly. One of the essential condition for levy of penalty is that the satisfaction recorded by the Assessing Officer for initiating penalty proceedings u/s. 271(1)(c) and the order levying penalty u/s. 271(1)(c) should be congruent in so far as the charge for levy of penalty is concerned. In the present case, we observe that there is discord between the recording of satisfaction for initiating penalty proceedings u/s. 271(1)(c), order levying penalty u/s. 271(1)(c) and the findings of first Appellate Authority confirming penalty. Under such circumstances we are of the considered view that the penalty levied is not sustainable. Hence, the impugned order is set aside and the appeal of the assessee is allowed.
ITA No. 290/PUN/2013
10. A perusal of the assessment order dated 22-12-2009 passed u/s. 143(3) r.w.s. 153A of the Act in ITA No. 290/PUN/2013 for assessment year 2003-04 shows that the Assessing Officer has accepted the return of income filed by the assessee in response to notice u/s. 153A without any addition. The Assessing Officer initiated penalty proceedings u/s. 271(1)(c) for concealment of income. However, while levying penalty u/s. 271(1)(c) vide order dated 13-05-2010 the Assessing Officer invoked Explanation 5A. In first appeal, the Commissioner of Income Tax (Appeals) observed that since, no incriminating material was found during the course of search, Explanation 5A is not attracted. However, 10 ITA Nos. 288, 289 & 290/PUN/2013 the Commissioner of Income Tax (Appeals) invoked Explanation 3 for confirming the levy of penalty. For the detailed reasons given while deciding the appeal of the assessee in ITA No. 288/PUN/2013, the provisions of Explanation 3 are not attracted where the return of income has been filed in response to notice issued u/s. 153A of the Act. The findings given by us in paragraphs 7 and 8 above would mutatis mutandis apply in the appeal of the present assessee as well. Accordingly, the impugned order is set aside and the appeal of the assessee is allowed.
11. In the result, all the three appeals by the assessees are allowed.
Order pronounced on Monday, the 30th day of January, 2017.
Sd/- Sd/-
(आर. के. पांडा / R.K. Panda) (!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER $या%यक सद"य / JUDICIAL MEMBER
पण
ु े / Pune; &दनांक / Dated : 30th January, 2017
RK
आदे श क+ ,$त.ल"प अ/े"षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. आयकर आयु'त (अपील) / The CIT(A), Aurangabad
4. आयकर आयु'त / The CIT, Central, Nagpur
5. !वभागीय %त%न,ध, आयकर अपील य अ,धकरण, "ए" ब0च, पुणे / DR, ITAT, "A" Bench, Pune.
6. गाड2 फ़ाइल / Guard File.
//स या!पत %त // True Copy// आदे शानस ु ार / BY ORDER, %नजी स,चव / Private Secretary, आयकर अपील य अ,धकरण, पुणे / ITAT, Pune