M/S. DIPIKADEVI TODI, THANE v. THE ITO WD 1(3),

ITA 189/MUM/2008 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 18919914 RSA 2008
Assessee PAN AHWPK8377P
Bench Mumbai
Appeal Number ITA 189/MUM/2008
Duration Of Justice 3 year(s) 6 month(s) 21 day(s)
Appellant M/S. DIPIKADEVI TODI, THANE
Respondent THE ITO WD 1(3),
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 29-07-2011
Date Of Final Hearing 06-07-2011
Next Hearing Date 06-07-2011
Assessment Year 2004-2005
Appeal Filed On 08-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SMT. ASHA VIJAYRAGHAVAN JUDICIAL MEMBER ITA NO. 189/MUM./2008 (ASSESSMENT YEAR : 2004-05 ) DATE OF HEARING 6.7.2011 SMT. DIPIKADEVI TODI A-13 FLAT NO.401 FLOWER VALLEY KHOPAT THANE (WEST) PAN AHWPK8377P .. APPELLANT V/S INCOME TAX OFFICER WARD-1(3) THANE .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : MR. PARTHASARATHI NAIK O R D E R PER J. SUDHAKAR REDDY A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 13 TH NOVEMBER 2007 PASSED BY THE COMMISSIONER (APPEALS)-II THANE FOR ASSESSMENT YEAR 2004-05 A GAINST CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOM E TAX ACT 1961 (FOR SHORT THE ACT ). 2. WE HAVE HEARD THE LEARNED COUNSEL MR. VIJAY MEHTA APPEARING ON BEHALF OF THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE MR. PARTHASARATHI NAIK APPEARING ON BEHALF OF THE REVE NUE. SMT. DIPIKADEVI TODI ITA NO.189/M./2008 2 3. THE ASSESSEE FILED AN ADDITIONAL GROUND OF APPEAL W HICH READS AS FOLLOWS. HE PRAYED THAT THIS BEING A LEGAL GROUND THE SAME MAY BE ADMITTED. THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING TH AT THE QUANTUM ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTIO N 68 WAS ILLEGAL AND BAD IN LAW AND HENCE NO PENALTY COULD BE VALIDL Y IMPOSED. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT SINCE THE APPELLANT HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT ADDITION CANNOT BE MADE UNDER SECTION 68 OF THE ACT. 4. BEFORE US LEARNED COUNSEL SUBMITS THAT THE ADDITIO N IN QUESTION WAS MADE UNDER SECTION 68 OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE HER CLAIM THAT SHE HAS RECEIVE D GIFTS. HE SUBMITS THAT THE ASSESSEE IS AN INDIVIDUAL AND IT IS CLEAR FROM THE ASSESSMENT ORDER AND THE RETURN OF INCOME FILED THAT THE ASSESSEE HAD SH ARE INCOME FROM PARTNERSHIP FIRM ONLY. HE SUBMITS THAT THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THIS FACT IS EVIDENT FROM PERU SAL OF THE ASSESSMENT ORDER AS WELL AS THE RETURN OF INCOME COMPUTATION OF INCOME AND OTHER DOCUMENTS. 5. LEARNED COUNSEL SUBMITS THAT IT IS WELL SETTLED THA T THE ASSESSEE CAN CHALLENGE THE ADDITION ITSELF IN THE PENALTY PROCEE DINGS. HE ARGUED THAT THE ADDITION MADE UNDER SECTION 68 IS BAD-IN-LAW AS THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND IN THE ABSENCE OF MAINTAINING BOOKS OF ACCOUNT SUCH AN ADDITION CANNOT BE MADE. FOR THIS PROPOSITION HE RELIED ON THE FOLLOWING CASE LAWS:- CIT V/S BHAICHAND H. GANDHI (1983) 144 ITR 67 (BOM .); AND MADHU RAITANI V/S ACIT (2011) 45 SOT 231 (BOM.). 6. LEARNED COUNSEL RELIED ON THE DECISION OF MUMBAI E BENCH OF THIS TRIBUNAL IN MR. SURESH B. DEDHIA V/S DCIT ITSSA NO .16/MUM./2009 ORDER DATED 3 RD DECEMBER 2010 FOR THE PROPOSITION THAT THE ADDITI ON GROUND OF SMT. DIPIKADEVI TODI ITA NO.189/M./2008 3 APPEAL BEING LEGAL GROUND SHOULD BE ADMITTED AND AL SO FOR THE PROPOSITION THAT THE VALIDITY OF THE ASSESSMENT CAN BE CHALLENG ED IN PENALTY PROCEEDINGS. 7. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND OPPOSED THE ADMISSION OF ADDITION GROUND. HE SUBMITS THAT THE A SSESSEE HAS FILED A BALANCE SHEET AND IN THOSE CIRCUMSTANCES AN ADDITI ON CAN BE MADE UNDER SECTION 68 OF THE ACT. ON FACTS HE SUBMITS THAT TH E ASSESSEE HAS INTRODUCED BOGUS GIFTS AND HAD CONCEALED HER INCOME WARRANTING LEVY OF PENALTY. HE RELIED ON THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE COMMISSIONER (APPEALS). 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE HOLD AS FOLLOWS:- ON THE FIRST ISSUE OF ADMISSION OF ADDITIONAL GROUN D OF APPEAL WE HOLD THAT THE GROUND RAISED IS A LEGAL GROUND AND WE HAV E TO ADMIT THE SAME. WE DRAW STRENGTH FROM THE FOLLOWING CASE LAWS:- THE MUMBAI BENCH OF THE TRIBUNAL IN MR. SURESH B. D EDHIA (SUPRA) HELD AS FOLLOWS:- 9. THE DELHI C-BENCH OF THE TRIBUNAL IN THE CASE O F TIDEWATER MARINE INTERNATIONAL INC. VS. DCIT (SUPRA) HAD CONSIDERED THE ISSUE AT PARA 9 WHEREIN IT IS STATED AS FOLLOWS:- THE BASIC QUESTION ARISES FOR CONSIDERATION WHETHE R THE ASSESSEE HAVING FAILED TO RAISE THE QUESTION OF VAL IDITY OF ASSESSMENT EITHER BEFORE THE ASSESSING OFFICER IN T HE ASSESSMENT PROCEEDINGS OR IN THE QUANTUM APPEAL AND HAVING NEITHER RAISED THIS ISSUE BEFORE THE ASSESSI NG OFFICER IN THE PENALTY PROCEEDINGS OR IN THE APPELL ATE PROCEEDINGS AGAINST THE PENALTY ORDER COULD RAISE T HE QUESTION OF VALIDITY OF ASSESSMENT ORDER BEFORE THE TRIBUNAL AT THIS STAGE. AFTER CONSIDERING THE JUDICIAL PRECEDENT ON THE ISS UE AT PARA 14 THE TRIBUNAL HELD AS FOLLOWS: SMT. DIPIKADEVI TODI ITA NO.189/M./2008 4 IN VIEW OF THE ABOVE LEGAL POSITION WE ARE OF THE VIEW THAT IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE THE QUESTION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST THE LEVY OF PENALTY. SINCE THE QUESTION OF VALIDITY OF ASSESSME NT MADE IN THE MATTER IS RAISED WHICH IS A PURE QUEST ION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FA CTS AS THE SAME ARE ON RECORD WE ADMIT THE ADDITIONAL GRO UND RAISED BY THE ASSESSEE FOR DECISION. FURTHER AT PARA 16 OF THE ORDER IT IS HELD AS FOLLO WS: 16. IN THE CASE OF P.V. DOSHI (SUPRA) THEIR LORDS HIPS OF THE HONBLE GUJARAT HIGH COURT HAVE HELD THAT THE CONDITIONS PR ECEDENT FOR INITIATING THE REASSESSMENT PROCEEDINGS UNDER SECTI ON 147 READ WITH SECTION 148 ARE MANDATORY. THERE COULD NEVER BE A W AIVER OF A MANDATORY PROVISION FOR THE SIMPLE REASON THAT IN S UCH CASES JURISDICTION COULD NOT BE CONFERRED ON THE AUTHORIT Y BY MERE CONSENT BUT ONLY ON CONDITIONS PRECEDENT FOR THE EXERCISE O F JURISDICTION BEING FULFILLED. IF JURISDICTION CANNOT BE CONFERRED BY C ONSENT THERE WOULD BE NO QUESTION OF WAIVER ACQUIESCENCE OR ESTOPPEL OR THE BAR OF RES JUDICATA BEING ATTRACTED BECAUSE THE ORDER IN SUCH CASES WOULD LACK INHERENT JURISDICTION AND WOULD BE A VOID ORDER OR A NULLITY. IF AN ORIGINAL ORDER IS WITHOUT JURISDICTION IT WOULD BE A NULLITY CONFIRMED IN FURTHER APPEALS. THE APPELLATE ORDER OF THE TRIBUNA L THEREON WOULD ALSO BE A NULLITY AND THE TRIBUNAL CANNOT CONFER ANY JUR ISDICTION ON THE INCOME-TAX OFFICER BY MAKING A REMAND ORDER. (EMPHA SIS OURS). THUS RESPECTFULLY FOLLOWING THE SAME WE ADMIT THIS ADDI TIONAL GROUND. NOW WE TAKE UP THE ISSUE WHETHER THE ASSESSEE COUL D CHALLENGE THE VALIDITY OF AN ASSESSMENT IN PENALTY PROCEEDINGS. 19. WE NOW CONSIDER THE DECISION OF THE DELHI-A BE NCH OF THE TRIBUNAL IN THE CASE OF DHIRAJ SURI VS. ADDL. CIT 9 8 ITD 97. IN THIS CASE IT IS HELD AS FOLLOWS: THE ASSESSEE HAD CANVASSED THE VALIDITY OF THE BLO CK ASSESSMENT BOTH IN THE APPEAL AGAINST THE BLOCK ASSESSMENT AND IN THE APPEAL BEFORE THE COMMISSIONE R (APPEALS) AGAINST THE LEVY OF PENALTY. THE COMMISSI ONER (APPEALS) HAD ACTUALLY REJECTED THE PLEA FOLLOWING HIS ORDER IN THE APPEAL AGAINST THE BLOCK ASSESSMENT W HICH IMPLIED THAT THE ASSESSEE HAD TAKEN THE PLEA EVEN I N THE APPEAL AGAINST THE BLOCK ASSESSMENT. THUS THE POIN T HAD ALREADY BEEN TAKEN BEFORE THE INCOME-TAX AUTHORITIE S AND THERE WAS NO ELEMENT SURPRISE OF. IN FACT EVEN WIT HOUT THE HELP OF THE ADDITIONAL GROUND THE ASSESSEE COUL D HAVE CANVASSED THE VALIDITY OF THE BLOCK ASSESSMENT WITH IN THE SMT. DIPIKADEVI TODI ITA NO.189/M./2008 5 SCOPE OF THE FIRST AND THIRD GROUNDS OF THE ORIGINA L GROUNDS OF APPEAL. FURTHER THE ADDITIONAL GROUND D ID NOT INVOLVE AN INVESTIGATION INTO THE FACTS. THE PANCHA NAMA AND THE SEARCH WARRANT WERE A MATTER OF RECORD. THAT APART THIS WENT TO THE VERY ROOT OF THE MATTE R. THE QUESTION OF JURISDICTION IS OF VITAL IMPORTANCE AND IT WOULD BE OPEN TO THE ASSESSEE TO RAISE THE QUESTION OF VALIDITY OF ASSESSMENT ON ACCOUNT OF LACK OF JURISDICTION AT ANY TIME AND AT ANY STAGE OF THE PR OCEEDINGS. IN VIEW OF THE IMPORTANCE OF THE QUESTION OF VALIDITY OF THE A SSESSMENT AND SINCE THE MATTER INVOLVED A PURE LEGAL QUESTION NOT INVOL VING ANY INVESTIGATION INTO FACTS THE ADDITIONAL GROUND WAS TO BE ADMITTED. THE INITIAL WARRANT AND THE PANCHANAMA WERE IN THE NAME OF THE ASSESSEES HUSBAND AND NOT IN THE NAME OF THE ASSESSEE. THE SA ME WAS THE CASE RELATING TO THE SEARCH OF THE LOCKER. THUS THERE W AS NO SEARCH WARRANT IN THE NAME OF THE ASSESSEE. SECTION 158BB(1) SAYS THAT WHERE A SEARCH INITIATED UNDER SECTION 132 OR BOOKS OF ACCO UNT ETC. ARE REQUISITIONED UNDER SECTION 132A IN THE CASE OF AN Y PERSON THEN THE UNDISCLOSED INCOME OF THAT PERSON SHALL BE ASSESSED IN ACCORDANCE WITH CHAPTER XIV-B. A SEARCH IS A PRE-REQISITE FOR THE INITIATION OF BLOCK ASSESSMENT PROCEEDINGS. A SEARCH UNDER SECTION 132 IS PERSON SPECIFIC AND NOT PREMISES SPECIFIC. IT FOLLOWS THAT IF THE N AME OF THE ASSESSEE AGAINST WHOM THE BLOCK ASSESSMENT HAS BEEN MADE DO ES NOT FIGURE IN THE WARRANT OF AUTHORIZATION ISSUED UNDER SECTION 1 32 THE BLOCK ASSESSMENT WOULD BE UNAUTHORIZED AND VOID AB INITIO . IF IT IS THE CORRECT LEGAL POSITION IT WOULD FOLLOW THAT THE AD DITIONAL GROUND IS WELL- FOUNDED. IF THE BLOCK ASSESSMENT ITSELF WAS WITHOUT JURISDICTION THEN THERE WAS NO QUESTION OF LEVY OF ANY PENALTY UNDER SECTION 158BFA(2). IT THEREFORE APPEARED TO BE A CORRECT POSITION TH AT THE BLOCK ASSESSMENT IN THE INSTANT CASE WAS VOID AB INITIO SINCE THERE WAS NO WARRANT OF AUTHORIZATION UNDER SECTION 132 IN THE N AME OF THE ASSESSEE. THEREFORE THE PENALTY LEVIED COULD NOT B E SUSTAINED. (EMPHASIS OURS) SIMILARLY THE DELHI C-BENCH OF THE TRIBUNAL IN THE CASE OF TIDEWATER MARINE INTERNATIONAL INC. 96 ITD 406 HELD AS FOLLOWS: IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE THE QUE STION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST THE LE VY OF PENALTY. SINCE THE QUESTION OF VALIDITY OF ASSESSME NT MADE IN THE MATTER WAS RAISED WHICH WAS A PURE QUESTION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FACTS AS THE SAME WERE ON RECORD THE ADDITIONA L GROUND RAISED BY THE ASSESSEE WAS ADMITTED FOR DECI SION. SECTION 149(3) PROVIDES THAT NO NOTICE UNDER SECTIO N 148 SHALL BE SERVED ON A PERSON TREATING AS AGENT OF A NON- RESIDENT UNDER SECTION 163 AFTER EXPIRY OF THE PERI OD OF TWO YEARS FROM THE END OF THE RELEVANT ASSESSMENT Y EAR. IN THE INSTANT CASE NOTICE UNDER SECTION 148 WAS I SSUED ON 13-2-2001 I.E. BEYOND THE PERIOD OF TWO YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR IN THE NAME OF T TREATING IT AS AGENT OF NON-RESIDENT ASSESSEE. THUS IT WOULD APPEAR THAT A VALID AND PROPER NOTICE UNDER S ECTION 148 WAS NOT ISSUED AND SERVED ON THE ASSESSEE WHIC H IS SMT. DIPIKADEVI TODI ITA NO.189/M./2008 6 A CONDITION PRECEDENT FOR ASSUMPTION OF VALID JURIS DICTION FOR INITIATING PROCEEDINGS UNDER SECTION 147. IN TH E INSTANT CASE SINCE INITIATION OF THE REASSESSMENT PROCEEDINGS WERE VITIATED AS THE NOTICE UNDER SECTI ON 148 HAD BEEN ISSUED BEYOND THE STATUTORY PERIOD PRESCRI BED UNDER SECTION 149(3) CONSEQUENTLY ASSESSMENT MADE ON THE BASIS OF SUCH NOTICE WOULD BE NULL AND VOID. SI NCE IN THE INSTANT CASE THE VERY BASIS OF IMPOSITION OF P ENALTY CEASED TO EXIST BY VIRTUE OF VOID ASSESSMENT ORDER THE PENALTY IMPOSED UNDER SECTION 271(1)(C) WAS LIABLE TO BE CANCELLED. IN THE RESULT THE APPEALS OF THE ASSESSES WERE TO BE ALLOWED. RESPECTFULLY FOLLOWING THE AFORESAID FINDINGS OF TH E TRIBUNAL WE HOLD THAT THE VALIDITY OF THE ADDITION ITSELF CAN BE CHA LLENGED IN THE PENALTY PROCEEDINGS. IN THE CASE IN HAND THE UNDISPUTED FACT IS THAT TH E ONLY INCOME DERIVED BY THE ASSESSEE IS SHARE INCOME FROM A PART NERSHIP FIRM. THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT DR AFTING OF STATEMENT OF AFFAIRS DOES NOT COME TO PROVE THAT THE ASSESSEE MA INTAINS BOOKS OF ACCOUNT. THE ASSESSING OFFICER NOWHERE IN THE ASSESSMENT OR DER STATES THAT THE ASSESSEE WAS MAINTAINING ANY BOOKS OF ACCOUNT. UNDE R THESE CIRCUMSTANCES THE CLAIM OF THE ASSESSEE IS THAT THE ADDITION HAS BEEN MADE UNDER SECTION 68 WHEN THE ADMITTED FACT IS THAT THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT. THE HON'BLE JURISDICTIONAL HIGH COURT IN BHAICHAND H. GANDHI (SUPRA) HELD AS FOLLOWS:- WHEN MONEYS ARE DEPOSITED IN A BANK THE RELATIONSHI P THAT IS CONSTITUTED BETWEEN THE BANKER AND THE CUSTOMER IS ONE OF DEBTOR AND CREDITOR AND NOT OF TRUSTEE AND BENEFICIARY. THE PA SS BOOK SUPPLIED BY THE BANK TO ITS CONSTITUENT IS ONLY A COPY OF THE C ONSTITUENTS ACCOUNT IN THE BOOKS MAINTAINED BY THE BANK. IT IS NOT AS I F THE PASS BOOK IS MAINTAINED BY THE BANK AS THE AGENT OF THE CONSTITU ENT NOR CAN IT BE SAID THAT THE PASS BOOK IS MAINTAINED BY THE BANK U NDER THE INSTRUCTIONS OF THE CONSTITUENT. HENCE THE PASS BO OK SUPPLIED BY THE BANK TO THE ASSESSEE CANNOT BE REGARDED AS THE BOOK OF THE ASSESSEE SMT. DIPIKADEVI TODI ITA NO.189/M./2008 7 THAT IS A BOOK MAINTAINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. THEREFORE A CASH CREDIT FOR THE PREVIOUS YEAR SHOW N IN THE ASSESSEES BANK PASS BOOK BUT NOT SHOWN IN THE CASH BOOK MAINT AINED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. THEREFORE A CA SH CREDIT FOR THE PREVIOUS YEAR SHOWN IN THE ASSESSEES BANK PASS BOO K BUT NOT SHOWN IN THE CASH BOOK MAINTAINED BY THE ASSESSEE FOR THA T YEAR DOES NOT FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT AND AS SUCH THE SUM SO CREDITED IS NOT CHARGEABLE TO TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. RESPECTFULLY FOLLOWING THE AFORESAID BINDING JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT WE HAVE TO NECESSARILY H OLD THAT THE ADDITION MADE UNDER SECTION 68 IS BAD-IN-LAW. ON THE FACE OF SUC H A FINDING THE PENALTY LEVIED IN OUR OPINION CANNOT BE SUSTAINED. CONSEQ UENTLY WE DELETE THE PENALTY IMPOSED UNDER SECTION 271(1)(C) BY THE ASSE SSING OFFICER AND AS CONFIRMED BY THE COMMISSIONER (APPEALS) IN THE IMPU GNED ORDER AND ALLOW THE GROUND RAISED BY THE ASSESSEE. 9. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011 SD/- ASHA VIJAYRAGHAVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR K BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI