Income Tax Appellate Tribunal - Delhi
M/S. Rama Krishna Jewellers (India), ... vs Ito, New Delhi on 22 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER
AND
SMT. BEENA A. PILLAI, JUDICIAL MEMBER
ITA Nos.5669, 5670 & 5671/Del/2015
A. Ys. : 2004-05, 2003-04 & 2006-07
Rama Krishna Jewellers (India), ITO, Ward- 32(3),
C/o. M/s. RRA TAXINDIA, New Delhi.
D-28, South Extension, Part- I, Vs.
New Delhi.
PAN : AAEFR1351H
(Appellant) (Respondent)
Assessee by : Shri Somit Aggarwal, Adv.
Shri Deepash Garg, Adv.
Department by : Shri S.R. Senapati, Sr.DR
Date of hearing : 21-02-2018
Date of pronouncement : 22-03-2018
ORDER
PER R. K. PANDA, AM :
The above three appeals filed by the assessee are directed against the separate orders of the CIT(A)- 18, New Delhi relating to assessment years 2004-05, 2003-04 & 2006-07 respectively confirming the penalty levied by the Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961, the details of which are as under :-
(a) A.Y. 2003-04 - Rs.1,12,087/-
(b) A.Y. 2004-05 - Rs.38,386/-
(c) A.Y. 2006-07 - Rs.42,667/-
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ITA Nos.5669 to 5671/Del/2015
2. First we take up ITA No.5670/Del/2015 for assessment year 2003-04 as the lead case. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of jewelers. A search and seizure operation u/s 132 was carried out on 20.01.2006. The assessee, in response to notice u/s 153A, submitted that the original return filed on 28.11.2003 declaring income of Rs.68,258/- may be treated as return in response to notice u/s 153A of the I.T. Act, 1961. The Assessing Officer completed the assessment u/s 153A determining the total income at Rs.25,82,321/- wherein he made the following additions :-
(a) Donation 6600
(b) Disallowance of partner's remuneration 72000
(c) Unexplained addition in partner's capital 700000
(d) Unconfirmed loan creditors 1000000
(e) Difference in the balance of Sundry Creditors 105000
(f) Unverified making charges 339957
(g) Disallowance u/s 40A(3) 254189
(h) Disallowance of car expenses 36317
3. In appeal, ld. CIT(A) deleted the addition on account of (i) Unverified making charges - Rs.3,39,957/-, (ii) Unconfirmed loan creditors - Rs.10,00,000/- and (iii) Unexplained addition in partner's capital Rs.5,00,000/-. On further appeal by the assessee, the Tribunal restored the issue of partner's remuneration to the file of the Assessing Officer for fresh adjudication.
4. Similarly, for assessment year 2004-05, the assessee in response to notice u/s 153A submitted that the original return filed on 01.11.2004 declaring total income at Rs.1,79,879/- may be treated as return in response to notice u/s 153A 3 ITA Nos.5669 to 5671/Del/2015 of the I.T. Act. The Assessing Officer completed the assessment on a total income of Rs.15,32,173/- by making addition on account of (i) Donation - Rs.8,000/-, (ii) Disallowance of partner's remuneration - Rs.1,20,000/-, (iii) Unconfirmed loan creditors - Rs.2,62,292/-, (iv) Unverified making charges - Rs.3,78,440/-, (v) Unaccounted sales - Rs.5,26,446/-, (vi) Disallowance u/s 40A(3) - Rs.15,280/-, (vii) Motorcar expenses - Rs.32,695/- and (viii) Telephone expenses - Rs.9141/-.
5. In appeal, the ld. CIT(A) sustained the addition on account of (i) Partner's remuneration - Rs.1,20,000/-, (ii) Disallowance of motorcar expenses - Rs.32,695/- and (iii) Telephone expenses - Rs.9141/-. Similarly, out of disallowance of unconfirmed loan creditors at Rs.2,62,292/-, the ld. CIT(A) restricted the same to Rs1,07,200/-.
6. On further, appeal by the assessee, the Tribunal restored the issue of Partner's remuneration to the file of the Assessing Officer for fresh adjudication.
7. For assessment year 2006-07, the assessee filed the return of income on 31.10.2006 declaring total income of Rs.22,615,330/- and the Assessing Officer completed the assessment on a total income of Rs.2,73,53,136/- by making following additions/disallowances :-
(i) Donation Rs.23100
(ii) Partner's remuneration Rs.240000
(iii) Interest paid Rs.245027
(iv) Unverified making charges Rs.578918
(v) Disallowance u/s 40A(3) Rs.161809
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ITA Nos.5669 to 5671/Del/2015
(vi) Disallowance u/s 40(a)(ia) Rs.71470
(vii) Advertisement expenses Rs.49074
(viii) Exhibition expenses Rs.134458
8. In appeal, the ld. CIT(A) sustained the addition on account of (i) Partner's remuneration - Rs.2,40,000/-, (ii) Disallowance u/s 40A(3) - Rs.1,61,809/- and
(iii) Disallowance of advertisement expenses at Rs.49,074/-. The disallowance u/s 68 of the I.T. Act, unverified making charges and disallowance of exhibition expenses were partly allowed.
9. On further appeal by the assessee, the Tribunal restored the issue of remuneration to the partners to the file of the Assessing Officer for fresh adjudication.
10. The Assessing Officer in the mean time initiated penalty proceedings u/s 271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee and observing that the assessee has furnished inaccurate particulars of income, he levied penalty of Rs.1,20,087/- for assessment year 2003-04, Rs.38,386/- for assessment year 2004-05 and Rs.42,667/- for assessment year 2006-07 respectively u/s 271(1)(c) of the I.T. Act, 1961.
11. In appeal, the ld. CIT(A) confirmed the action of the Assessing Officer in levying penalty u/s 271(1)(c) of the I.T. Act.
12. Aggrieved with such order of the ld. CIT(A), the assessee is not in appeal before the Tribunal challenging the levy of penalty by the Assessing Officer and sustained by the ld. CIT(A) for all the three years.
5
ITA Nos.5669 to 5671/Del/2015
13. Ld. counsel for the assessee at the outset submitted that the Assessing Officer has not struck off the inappropriate words in the notice issued for initiation of penalty. Therefore, in view of the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory reported in 359 ITR 656 where it has been held that where the inappropriate words in the notice issued for levy of penalty are not struck off and the notice does not specify as to whether the assessee has concealed its particulars of income or furnished inaccurate particulars of income, penalty u/s 271(1)(c) is liable to be deleted, no penalty in the instant case is leviable. He submitted that the SLP filed by the Revenue was dismissed by the Hon'ble Supreme Court vide C.C. No.11485/2016 order dated 05.08.2016. 13.1 In another alternate argument ld. counsel for the assessee submitted that so far as the assessment years 2003-04 and 2004-05 are concerned, the assessments have been completed u/s 153A of the I.T. Act and no incriminating material was found during the course of search on account these two years and the assessment has been completed by making various additions on the basis of the profit and loss account already filed. He submitted that entire assessment order becomes null and void in view of the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawala reported in 388 ITR 573 and in the case of Meeta Gutgutia reported in 397 ITR 416 in absence of any incriminating material found during the course of search. He submitted that merely because 6 ITA Nos.5669 to 5671/Del/2015 the assessee has not challenged the validity of such assessment proceedings in quantum proceedings, same cannot preclude the assessee from making new plea before the Tribunal in penalty proceedings.
14. So far as merit of the case is concerned for all the three years, he submitted that various additions as made for assessment year 2003-04 is concerned, some of the sum has been partly deleted by the ld. CIT(A). Major addition on which penalty has been levied is on account of addition on account of partner's capital and difference in the balance of sundry creditors. He submitted that any addition to partner's capital account should have been added in the hands of the partners and not in the hands of the firm. So far as difference in the balance of sundry creditors is concerned, the same is on account of non- reconciliation and, therefore, no penalty should have been levied. Similarly, the case for assessment year 2004-05 wherein the penalty has been levied on account of unconfirmed loan creditor, he submitted that the Assessing Officer himself has partly allowed the creditors.
15. So far as assessment year 2006-07 is concerned, he submitted that the penalty is basically levied on account of addition u/s 68 and interest thereon. He submitted that most of the amounts are brought forward amounts and TDS has been deducted from such interest. Therefore, it is not a fit case for levy of penalty. Relying on various decisions including the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. reported in 322 7 ITA Nos.5669 to 5671/Del/2015 ITR 158, he submitted that mere making of a claim which is not sustainable in law by itself does not amount to furnishing inaccurate particulars of income and, therefore, penalty is not leviable. He accordingly submitted that the penalty levied by the Assessing Officer and sustained by the ld. CIT(A) should be deleted.
16. Ld. DR on the other hand heavily relied on the order of the ld. CIT(A). He submitted that the Assessing Officer has rightly levied penalty u/s 271(1)(c) of the I.T. Act for furnishing of inaccurate particulars of income which has been rightly sustained by the ld. CIT(A). Therefore, grounds raised by the assessee should be dismissed.
17. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessments for all the three years in the impugned appeals have been completed u/s 153A of the I.T. Act. No incriminating material whatsoever was found during the course of search for assessment years 2003-04 and 2004-05. Therefore, even though the assessee has not challenged such validity of the assessments in the past in quantum proceedings however, the assessee can always make a new plea during the penalty proceedings. The Courts are categorically holding that no addition can be made in case of orders passed u/s 153A in absence of any incriminating material found during the 8 ITA Nos.5669 to 5671/Del/2015 course of search. The Hon'ble Delhi High Court in the case of Kabul Chawala (supra) and various other decisions has held so.
18. Further, a perusal of the notice issued u/s 274 r.w.s. 271 for all the three years which have been obtained by the assessee through RTI shows that the inappropriate words in the three notices have not been struck off. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) has held that where the inappropriate words in the notice issued for levy of penalty are not struck off and the notice does not specify as to whether the assessee has concealed its particulars or furnished inaccurate particulars of income, penalty u/s 271(1)(c) is liable to be deleted. We find the SLP filed by the Revenue was dismissed by the Hon'ble Supreme Court vide C.C. No.11485/2016 order dated 05.08.2016. Since in the instant case also, the Assessing Officer has not struck off the inappropriate words and the notice does not specify as to whether the penalty is levied for furnishing inaccurate particulars of income or for concealing particulars of income, therefore, in view of the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra), the penalty levied by the Assessing Officer and sustained by the ld. CIT(A) is liable to be deleted for all the three years.
19. Even on merits also, the major amount on which the penalty has been levied is on account of reconciliation of sundry creditors balance and 9 ITA Nos.5669 to 5671/Del/2015 introduction of capital by partners and/or unsecured loan etc. which have been sustained partly. In our opinion, in the present appeals penalty is also not leviable in the light of the ratio laid down by the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) wherein it has been held that a mere making of claim which is not sustainable in law by itself does not amount to furnishing of inaccurate particulars of income and, therefore, penalty u/s 271(1)(c) cannot be levied. In view of the above discussion, we are of the considered opinion that it is not a fit case for levy of penalty u/s 271(1)(c) for the above three years. We, therefore, set-aside the order of the ld. CIT(A) and direct the Assessing Officer to cancel the penalty so levied.
20. In the result, all the three appeals filed by the assessee are allowed.
Order pronounced in the open Court on this 22nd March, 2018.
Sd/- Sd/-
(BEENA A. PILLAI) (R. K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 22-03-2018.
Sujeet
Copy of order to: -
1) The Appellant
2) The Respondent
3) The CIT
4) The CIT(A)
5) The DR, I.T.A.T., New Delhi
By Order
//True Copy//
Assistant Registrar
ITAT, New Delhi