Income Tax Appellate Tribunal - Pune
Shankar Ramchandra Earthmovers Pvt. ... vs Assistant Commissioner Of ... on 17 March, 2017
आयकर अपील
य अ धकरण "बी" यायपीठ पण
ु े म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" 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. 341/PUN/2015
#नधा&रण वष& / Assessment Year : 2010-11
Shankar Ramchandra Earthmovers Pvt. Ltd.
Om Laxmi Niwas,
80/85, Prabhat Road,
Earndwane,
Pune-411 004.
PAN : AACCS3382E
.......अपीलाथ / Appellant
बनाम / V/s.
Assistant Commissioner of Income Tax
Circle-10,
Pune.
......
यथ / Respondent
Assessee by : Shri S.N Doshi
Revenue by : Shri H.B. Ninawe
सन
ु वाई क तार ख / Date of Hearing : 15.03.2017
घोषणा क तार ख / Date of Pronouncement : 17.03.2017
आदे श / ORDER
PER VIKAS AWASTHY, JM
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-4, Pune dated 19.01.2015 for the assessment year 2010-11 confirming the levy of penalty u/s 271(1)
(c) of the Income Tax Act, 1961 ( hereinafter referred to as ' the Act'). 2 ITA No. 341/PUN/2015
Assessment year 2010-11
2. The facts of the case as emanating from the records are : The assessee filed its return of income for the assessment year 2010-11 on 10.09.2010 declaring income of Rs.1,57,81,910/-. During course of scrutiny assessment proceeding, the Assessing Officer made additions on account of ;
1) Cash payment to bogus sub-contractors Rs.20,73,852/-;
2) Cash payment to sub-contractors Rs.11,67,125/-;
3) Additional income declared during survey Rs.50,00,000/-; and
4) Disallowance of Mess expenses Rs. 7,00,000/-
The assessee agitated addition before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) confirmed the additions. Thereafter, the Assessing Officer vide order dated 27.09.2013 levied penalty of Rs. 25,46,470/- u/s 271 (1) ( c) of the Act on account of cash payments made to bogus sub- contractors/contractors and additional income declared during survey.
3. Aggrieved by the order levying penalty u/s 271 (1) (c) of the Act, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the contention of the assessee and upheld the levy of penalty. Now, the assessee is in second appeal before the Tribunal assailing findings of the Commissioner of Income Tax (Appeals) in confirming levy of penalty u/s 271 (1) (c) of the Act. The assessee has impugned the levy of penalty on merits. The assessee has filed additional grounds of appeal assailing the levy of penalty on technical ground i.e the Assessing Officer has not recorded clear satisfaction with respect to the charge as 3 ITA No. 341/PUN/2015 Assessment year 2010-11 to whether the assessee/appellant has concealed the particulars of income or furnished inaccurate particulars of income.
4. Shri S.N Doshi appearing on behalf of the assessee submitted that the order levying penalty is bad in law. The Assessing Officer while recording satisfaction for initiating penalty proceeding, has observed that penalty proceedings u/s 271 (1) (c ) of the Act are initiated for furnishing inaccurate particulars of income, whereas while issuing notice u/s 274 r.w.s 271(1) (c ) of the Act, the Assessing Officer has failed to clearly specify the charge for levying penalty i.e whether the penalty is being levied for concealing particulars of income or furnishing inaccurate particulars of income. The irrelevant parts of the proforma notice have not been struck off by the Assessing Officer. The ld. AR further pointed that in penalty order dated 27.09.2013, initially the Assessing Officer observed that penalty u/s 271 (1) (c) of the Act is initiated for furnishing inaccurate particulars of income and while concluding order, the Assessing Officer observed that the assessee has furnished inaccurate particulars of income amounting to Rs. 82,40,977/- and has thereby concealed the said income. Furnishing of inaccurate particulars of income and concealment of income are two different offences. The Assessing Officer is himself not clear as to whether penalty is levied for furnishing of inaccurate particulars of income or concealment of income. The ld. AR further submitted that non striking of irrelevant parts of notice issued u/s 274 r.w.s 271 (1)( c) of the Act makes notice vague and invalid. In support of his submission ld. AR placed reliance on the following decisions: 4 ITA No. 341/PUN/2015
Assessment year 2010-11
1) The Commissioner of Income Tax-11 V/s. Shri Samson Perinchery, decided by Hon'ble Bombay High Court in ITA No.1154 of 2014 on
05.01.2017;
2) Kanhaiyalal D. Jain V/s. The Assistant Commissioner of Income Tax decided by Pune Bench of the Tribunal in ITA Nos. 1201 to 1205/PN/2014, for Assessment years 2003-04 to 2007-08 on 30.11.2016;
3) Nandkishor Tulsidas Katore V/s. The Assistant Commissioner of Income Tax decided by Pune Bench of the Tribunal in ITA Nos. 2174 to 2180/PN/2014 for the assessment years 2002-03 to 2008-09, on 14.12.2016.
4.1 Ld. AR submitted that even on merits, the assessee has got a strong case. The penalty has been levied in respect of addition made on account of cash payments made to alleged bogus sub-contractors and additional income declared during survey. The ld. AR submitted that the details of payment made to the sub-contractors in cheque and cash are given at page No. 2 of the paper book. The list of sub-contractors along with their address, PAN numbers, payments made and TDS deducted on such payments have been given at page No. 3 to 6 of the paper book. The payments have been disallowed on the ground that genuineness of the sub-contractors could not be verified. Although, the addition made during assessment proceedings, have been confirmed by the Commissioner of Income Tax (Appeals) and the assessee has accepted the same but that would not mean that every addition made during assessment would be subject to penalty. The Assessing Officer while making addition has erred in observing that assessee has failed to produce PAN numbers of 33 sub-contractors. The list at page No. 3 to 6 of the paper book would show that the assessee has given details of sub-contractors including PAN numbers in majority of cases. The disallowance of Rs. 20,73,852/- has been made merely on the ground 5 ITA No. 341/PUN/2015 Assessment year 2010-11 that confirmation letter have not been received from the sub contractors.
4.2 In respect of disallowance of Rs. 11,67,125/-, the ld. AR submitted that the Assessing Officer has made addition for the reason that payments made to the sub contractors have not been verified. The payments were made to sub contractors who regularly worked for the assessee. The ledger extract of the sub- contractors would show that the payments have been made to them in the normal course of business. The sub contractors have raised bills and payments have been made to them by cheque and in some of the cases, payments were made in cash after deducting tax at source. Despite accepting cheque payments as genuine, the Assessing Officer has disallowed cheque payment of Rs.4,06,807/-. The assessee has accepted addition and has paid tax thereon.
The ld. AR further submitted that merely because payments have been made in cash that per se would not mean that payments made are not genuine. Cash payment exceeding Rs. 20,000/- could be disallowed u/s 40(A) (3) of the Act. However, no penalty could be levied on such disallowance. The ld. AR in support of his submissions placed reliance on the decision of Hon'ble Supreme Court of India in the case of CIT v/s. Reliance Petro Products (P) Ltd. reported in 322 ITR 158. 4.3 In respect of penalty on addition of Rs. 50 Lakhs declared as additional income during survey, the ld A.R submitted that in statement recorded at the time of survey, the assessee offered Rs.50,00,000/-as additional income on ad-hoc basis to cover all possible errors etc. The declaration of additional amount has not been 6 ITA No. 341/PUN/2015 Assessment year 2010-11 made on account of seizure of any incriminating material during survey. Some loose papers were seized during survey, however, they do not directly relate to any income. The assessee offered additional income of Rs. 50 Lakhs basically to buy peace of mind. The ld. AR contended that any addition made on ad-hoc basis does not attract penalty. In support of his submission, ld. AR placed reliance on the decision of Hon'ble Bombay High Court in the case of Commissioner of Income Tax V/s. Bhimji Bhanjee & Co reported in 146 ITR 145 and the decision of Hon'ble Punjab & Haryana High Court, in the case of Harigopal Singh V/s. Commissioner of Income Tax reported in 258 ITR
85. The ld. AR furnished copies of several other decisions to buttresses his submissions.
5. On the other hand, Shri H.B Ninawe representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in confirming levy of penalty. The ld. DR submitted that a perusal of assessment order would show that the Assessing Officer while recording satisfaction has clearly mentioned that penalty proceedings are initiating for furnishing inaccurate particulars of income. Even while levying penalty, the Assessing Officer in penalty orders dated 27.09.2013 has made categoric observation that penalty has been levied for furnishing inaccurate particulars of income and thereby resulting in concealing of income. The ld. DR further submitted that observations of the Assessing Officer while recording satisfaction and while levying penalty are consistent. The penalty has been levied u/s 271 (1) (c) of the Act for furnishing inaccurate particulars of income.
7ITA No. 341/PUN/2015
Assessment year 2010-11 5.1 The ld. DR submitted that on merits, the assessee has not been able to show that the additions made during assessment proceedings warrant no levy of penalty. The addition made during scrutiny assessment proceeding were confirmed by the Commissioner of Income Tax (Appeals). The cash payments made by the assessee to sub- contractors were found to be bogus. Several bogus sub-contractors were introduced merely to suppress income. The assessee could not prove genuineness of the payments made to the sub contractors. 5.2 As regards additional income declared during the course of survey, the ld. DR submitted that loose papers were found and seized during survey action. Seized papers clearly indicate that assessee has suppressed income. The assessee would not have declared additional income, had there been no survey action. The additional income was unearthed only during survey.
6. We have heard the submissions made by representatives of rival sides and have perused the orders of the authorities below. We have also considered documents and decisions on which ld. AR of the assessee has placed reliance in support of his submissions. Penalty proceedings have been initiated against assessee in respect of cash payments made to sub-contractors and additional income declared by the assessee during course of survey action. It is an undisputed fact that the assessee has accepted addition made during assessment proceedings and has paid tax thereon.
7. The assessee has furnished the list of sub contractors to whom payments have been made. A perusal of the list show that assessee has 8 ITA No. 341/PUN/2015 Assessment year 2010-11 given addresses, PAN numbers, details of amount paid and TDS deducted on the said payments. In case of some of the sub-contractors, PAN details are missing. The Assessing Officer has disbelieved the payments made to those sub contractors, for whom, the assessee has failed to provide PAN details. Out of total payment of Rs. 74,522,272/- to sub contractors, the Assessing Officer has added back payments of Rs. 32,40,977/-. The disallowed payment constitutes merely 4.5 % of the total payments made. The Assessing Officer has accepted rest of the payments. The payments have been disallowed as the assessee could not furnish confirmation letters from sub-contractors to whom payments were made in cash. We find merit in the submissions of ld. AR that in respect of cash payments made in excess of Rs. 20,000/-, disallowance can be made u/s 40 A (3) of the Act. However, no penalty u/s 271(1) (c) of the Act is attracted.
8. With regard to levy of penalty on additional income of Rs.50,00,000/- disclosed during survey action is concerned , the assessee has admitted the said ad-hoc amount to buy peace of mind. It is a well settled law that any addition made during assessment proceedings on ad-hoc basis does not attract penalty.
9. Thus, in view of our above findings, we hold that levy of penalty u/s 271 (1) (c) of the Act is unjustified.
10. The ld. AR has pointed that while recording satisfaction and while passing order levying penalty, the findings of Assessing Officer are inconsistent with respect to the charge for levy of penalty. Even notice issued u/s 274 r.w.s 271 (1) (c) of the Act is vague as irrelevant 9 ITA No. 341/PUN/2015 Assessment year 2010-11 parts of the proforma notice have not been struck off by the Assessing Officer.
11. The Hon'ble Bombay High Court in a recent decision rendered in the case of Commissioner of Income tax V/s. Shri Samson Perinchery (supra) has reiterated the law laid down by the Hon'ble Apex Court in the case of Ashok Pai V/s. CIT reported in 292 ITR 11 and has also relied on the decision rendered in the case of CIT V/s. Manjunath Cotton & Ginning Factory, 359 ITR 565. The Hon'ble Jurisdictional High Court held :
"6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai V/s. CIT 292 ITR 11 [ relied upon in Manjunath Cotton & Ginning Factory( supra)- wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271 (1) (c ) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under section 271 (1) (c ) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/ notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
7. Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton & Ginning Factory ( supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton & Ginning Factory ( supra)."
12. The Hon'ble Karnataka High Court in the case of CIT V/s. Manjunath Cotton & Ginning Factory (supra) has held that when Assessing Officer proposes to invoke first limb being concealment then notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind. Notice u/s 274 r.w.s 271 (1) (c) of the Act 10 ITA No. 341/PUN/2015 Assessment year 2010-11 specifically state to the ground mentioned in section 271 (1) (c) of the Act i.e whether it is for concealment of income or furnishing of inaccurate particulars of income. Sending printed form where all grounds are mentioned for levying penalty u/s 271 (1) (c) of the Act would not satisfy the requirement of law.
13. In the present case, the Assessing Officer while recording satisfaction for initiating proceedings u/s 271 (1) (c) of the Act has observed that penalty is being initiated for furnishing inaccurate particulars of income and while levying penalty, the Assessing Officer has observed that the assessee has furnished inaccurate particulars of income and has thereby concealed the income. Even while issuing notice u/s 274 r.w.s 271 (1) (c) of the Act, the assessee has not struck off irrelevant clause/limb of the notice. The specific change for levy of penalty is not decipherable from the notice. We are of considered view that incoherent observations made by the Assessing Officer while recording satisfaction and at the time of levy of penalty, coupled with defective notice would vitiate penalty proceedings. Thus, in view of our findings and the judgments cited above, we hold that the penalty proceedings are bad in law.
14. In the result, the impugned order is set aside and appeal of the assessee is allowed.
Order pronounced on Friday, the 17th day of March, 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
पुणे / Pune; !दनांक / Dated : 17th March, 2017.
11
ITA No. 341/PUN/2015
Assessment year 2010-11
SB
आदे श क) *#त,ल!प अ-े!षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT (Appeals)-4, Pune.
4. The Pr. CCIT, Pune.
5. %वभागीय त न(ध, आयकर अपील य अ(धकरण, "बी" ब,च, पण ु े / DR, ITAT, "B" Bench, Pune.
6. गाड/ फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, çðèðÚð¨î Ñðü¸ðó¨îðÜ /Assistant Registrar आयकर अपील य अ(धकरण, पुणे / ITAT, Pune 12 ITA No. 341/PUN/2015 Assessment year 2010-11