The ACIT, Valsad Circle,, Valsad v. M/s. Shree Rang Printing Mills, Valsad

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL VP AND BHAVNESH SAINI JM) ITA NO.3719/AHD/2007 A. Y.: 2003-04 THE A. C. I. T. VALSAD CIRCLE SURYAPRAKASH CHAMBERS DHARAMPUR ROAD VALSAD VS M/S. SHREE RANG PRINTING MILLS 3 RD FLOOR SILVER COIN OPP. AVA BAI HIGH SCHOOL VALSAD PA NO. AAWFS 6800J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI U. B. MISHRA DR RESPONDENT BY SHRI K. N. BHAT AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II AHMEDAB AD DATED 9 TH JULY 2007 FOR ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING PENALTY LEVIED U/S 271 (1) ( C) OF THE I. T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW LD. CIT(A) ERRED IN PROVIDING IMMUNITY AS PROV IDED BY PARA.2 TO EXPLANATION 5 OF SECTION 271(1) (C). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW. LD. COMMISSIONER OF INCOME TAX (APPEALS) SHOUL D HAVE UPHELD THE ORDER OF THE ACIT VALSAD. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. ITA NO.3719/AHD/2007 SHREE RANG PRINTING MILLS LTD. 2 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO S TATED THAT THE RETURN OF INCOME WAS FILED ON 05-08-2004 FOR TOTAL INCOME OF RS.39 54 212/- AS LONG TERM CAPITAL GAIN. THE RETURN WAS FILED IN RES PONSE TO NOTICE U/S 153C OF THE IT ACT. THE ASSESSMENT WAS MADE U/S 153 A READ WITH SECTION 143(3) OF THE IT ACT ON 28-02-2006 AT THE S AME INCOME. IT IS FURTHER OBSERVED THAT THE PREMISES OF M/S. PARAMOUN T CONSTRUCTION WERE SEARCHED AND AS PER THE PANCHNAMA DATED 18-06-2003 LOOSE PAPER FILE ANNEXURE BS-1 PAGE 41 REFLECTED DETAILS OF SALE O F LAND AT SURVEY NO.244 PARDI VALSAD. THIS LAND BELONGED TO THE A SSESSEE FIRM AND WAS SOLD AT RS.48 71 000/-. THE PARTNER OF THE FIRM SHR I HIMATLAL B. SHAH IN THE COURSE OF SEARCH ADMITTED THAT THIS CONSIDERATI ON WAS NOT SHOWN IN THE REGULAR BOOKS AND WAS UNACCOUNTED INCOME OF THE FIRM. HENCE THE PROCEEDINGS U/S 153C OF THE IT ACT WERE INITIATED IN RESPONSE TO WHICH RETURN WAS FILED ON 05-08-2004 FOR TOTAL INCOME OF RS.39 54 212/-. THIS LAND WAS IDLE LAND SINCE 1984 AND THE SAME WAS DISP OSED OFF BY WAY OF POWER OF ATTORNEY IN FAVOUR OF VIJAY VASHI FOR RS.4 8 71 000/-. IT IS STATED THAT IN VIEW OF THE ABOVE THE PENALTY PROCEEDINGS WERE INITIATED AS PER EXPLANATION 5 TO SECTION 271 (1) ( C ) OF THE INCOM E-TAX ACT. IT IS STATED BY THE AO THAT IN RESPONSE TO NOTICE DATED 01-08-2006 NO REPLY WAS RECEIVED AND HENCE HE HAS FINALIZED THE PENALTY PRO CEEDINGS LEVYING PENALTY OF RS.10 22 910/- ON THE GROUND THAT THE AS SESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 3. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT ALONG WITH THE ASSESSMENT ORDER DATED 28-02-2006 NOTICE U/S 2 71 (1) ( C ) OF THE IT ACT WAS RECEIVED AND IT WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 30-03-2006. THE SAID REPLY HAS BEEN IGNORED BY THE AO. IT WAS SUBMITTED THAT WHEN THE SEARCH WAS CARRIED OUT ON 18-06-2003 THE RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04 WAS NOT DUE AND IT WAS DUE ON 31-07-2003. THE ASSESSEE FIRM HAD NO ACTIVITY AND T HE LAND WHICH WAS PURCHASED IN 1978 WAS REFLECTED IN THE REGULAR BOOK S OF ACCOUNTS ITA NO.3719/AHD/2007 SHREE RANG PRINTING MILLS LTD. 3 MAINTAINED AT THE RELEVANT TIME. THE ASSESSEE FIRM WAS NOT HAVING ANY BUSINESS ACTIVITY AND HENCE REGULAR BOOKS OF ACCOUN TS WERE NOT MAINTAINED THEREAFTER. IN THE COURSE OF SEARCH THE PARTNER OF THE ASSESSEE FIRM HAD GIVEN COMPLETE DETAILS AND MADE DISCLOSURE OF INCOME. ACCORDINGLY THE INCOME WAS DISCLOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE U/S 153C OF THE IT ACT. HENC E THERE WAS NO QUESTION OF LEVY OF PENALTY. DURING THE APPELLATE P ROCEEDING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS THE AO H AS REFERRED TO EXPLANATION 5 TO SECTION 271(1) ( C ) OF THE IT ACT THE ASSESSEE HAVING DISCLOSED THE INCOME IN THE COURSE OF SEARCH THE R ETURN NOT BEING DUE FOR THE YEAR AT THAT TIME AND IN THE RETURN OF INCOME T HE DISCLOSED INCOME WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. EVEN OTH ERWISE THE ASSESSEE IS ENTITLED TO IMMUNITY AS PER THE SAID EX PLANATION TO SECTION 271(1) ( C ) OF THE IT ACT. IT WAS ALSO SUBMITTED T HAT THERE WAS NO CONCEALMENT AND AS SUCH PENALTY LEVIED DESERVED TO BE DELETED. 4. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE CANCELLED THE PENALTY. HIS FINDINGS ARE REPRODUCED AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE A. O. AND THE ABOVE SUBMISSIONS. THE A. O. HAS RELIED ON EXPLANAT ION 5 TO SECTION 271 (1) ( C ) WHILE LEVYING PENALTY. I FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE CONDITIONS FOR IMMUNI TY FROM PENALTY VIZ. THE APPELLANT ACCEPTED THE UNDISCLOSED INCOME SPECIFIED IN MANNER IN WHICH SUCH INCOME HAS BEEN E ARNED OFFERED SUCH INCOMES IN THE RETURN FILED AFTER SEAR CH AND PAID TAXES. THE APPELLANT IS THUS ENTITLED TO GET BENEFI T OF THE SAID PROVISIONS. THIS IS SUPPORTED BY THE RATIO LAID DOW N BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. D.V. CHANDRU 266 ITR 175 WHERE THE HONBLE MADRAS HIGH COURT (SUPRA) HELD THAT IMMUNITY UNDER EXPLANATION 5 (2) TO S. 271 (1) ( C ) OF THE I. T. ACT IS AVAILABLE AND PENALTY WAS LIABLE TO BE DELETED EVEN FOR ALL THE EARLIER YEARS. I ACCORDING LY HOLD THAT THE APPELLANT IS ENTITLED TO THE BENEFIT OF THE PRO VISIONS OF EXPLANATION 5(2) TO SECTION 271 (1) ( C ) OF THE I. T. ACT FOR A. Y. 2003-04 AND NO PENALTY CAN BE IMPOSABLE. ITA NO.3719/AHD/2007 SHREE RANG PRINTING MILLS LTD. 4 EVEN OTHERWISE I AM INCLINED TO AGREE WITH THE SUB MISSIONS AND ARGUMENTS MADE ON BEHALF OF THE APPELLANT THAT INCOME WAS DISCLOSED IN THE RETURN OF INCOME. IN VIEW OF S PECIFIC PROVISION OF SECTION 153A OF I. T. ACT THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153A OF THE I. T. ACT AN D IT IS TO BE CONSIDERED AS RETURN FILED U/S. 139 OF THE I. T. AC T. THE AO HAS MADE ASSESSMENT ON THE SAID RETURN THEREFORE THIS RETURN IS TO BE CONSIDERED FOR THE PURPOSE OF PENALTY U/S. 271(1 ) ( C ) OF THE I. T. ACT AND PENALTY IS TO BE LEVIED ON THE INCOME ASSESSED OVER AND ABOVE THE INCOME RETURNED U/S. 153A OF THE I.T. ACT IF ANY. EVEN THE AMENDMENT MADE IN THE FINANCE ACT WHICH INTRODUCED A NEW SECTION BEING S. 271AAA IS PROPOS ED WHEREIN A PENALTY IS PROPOSED TO BE LEVIABLE IN THE SEARCH CASES W. E. F. 01/06/2007. THE INTRODUCTION OF SUCH PROVISIONS ITSELF SHOWS THAT NO PENALTY U/S. 271 (1 ) ( C ) OF THE I. T. ACT IS IMPOSABLE ON THE INCOME RETURNED U/S. 153A OF THE I. T. ACT PRIOR TO SUCH AMENDMENT. IN VIEW OF THE ABOVE DISCUSSION I HOLD THAT PENAL TY U/S. 271 (1) ( C ) OF THE I. T. ACT CANNOT BE LEVIED ON THE INCOMES SHOWN IN THE RETURN FILED U/S. 153A OF THE I. T. ACT. THE REFORE THE A. O. WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S. 27 1 (1) ( C ) OF THE I. T. ACT. ASSESSMENTS ARE MADE ON THE INCOME R ETURNED U.S 153A OF THE I. T. ACT. ACCORDINGLY THE PENALTY LEVIED IS DELETED. 3. IN THE RESULT THE APPEAL IS ALLOWED . 5. THE LEARNED DR RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSE E REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE AO IN THE PENALTY OR DER NOTED THAT THE SEIZED PAPER WAS FOUND IN SEARCH IN THE CASE OF M/S. PARAM OUNT CONSTRUCTION WHICH WAS INVENTORIZED AND SEIZED VIDE PANCHNAMA DA TED 18-06-2003. IT CAME TO THE NOTICE OF THE AO THAT THE SAME RELATES TO DETAILS OF SALE OF LAND WHICH BELONGING TO THE ASSESSEE. THE AO ALSO N OTED THAT THE LAND MENTIONED WAS LYING IDLE SINCE 1984 AND THE ASSESSE E SUSPENDED ITS ITA NO.3719/AHD/2007 SHREE RANG PRINTING MILLS LTD. 5 ACTIVITY IN 1984. THE PROPERTY WAS SOLD THROUGH POW ER OF ATTORNEY FOR THE CONSIDERATION MENTIONED ABOVE. THE ASSESSEE DUE TO THE ABOVE REASON DID NOT MAINTAIN ANY BOOKS OF ACCOUNT. IN THE COURS E OF SEARCH THE PARTNER OF THE ASSESSEE FIRM HAD GIVEN COMPLETE DET AILS AND MADE DISCLOSURE OF THIS INCOME. THE INCOME WAS ALSO DISC LOSED IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 153C OF THE IT ACT. SECTION 153C (1) PROVIDES FOR ASSESSMENT OF INCOME OF ANY OTHER PERSON AFTER SATISFYING THE CONDITION OF THIS PROVISION AND IT IS PROVIDED THAT THE AO SHALL PROCEED AGAINST EACH OF SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR RE-ASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF T HE IT ACT. THE SECOND PROVISO TO SECTION 153A (1) OF THE IT ACT PROVIDES PROVIDED FURTHER THAT ASSESSMENT OR RE-ASSESSMENT IF ANY RELATING TO AN Y ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YE ARS REFERRED TO IN THIS SUB SECTION PENDING ON THE DATE OF INITIATI ON OF SEARCH U/S 132 OR MAKING OF REQUISITION U/S 132A AS THE CASE MAY BE SHALL ABATE. THE COMBINED READING OF THE ABOVE PROVISIONS THUS WOULD SHOW THAT WHEN INCOME OF SUCH OTHER PERSON IS TO BE COMP UTED TREATING IT TO BE UNDISCLOSED INCOME IF ANY ASSESSMENT OR RE-ASSE SSMENT WAS PENDING ON THE DATE OF INITIATION OF THE SEARCH OR REQUISIT ION SHALL ABATE. THE INCOME IS THUS TO BE COMPUTED IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 153A READ WITH SECTION 153C OF THE IT ACT. THE ASSESSEE IN THIS CASE EXPLAINED THAT DURING THE COURSE OF SEARCH PA RTNER OF THE ASSESSEE FIRM HAD GIVEN COMPLETE DETAILS AND MADE DISCLOSURE OF THE INCOME UNDER THE HEAD INCOME FROM LONG TERM CAPITAL GAIN. THE IN COME IS DECLARED IN THE RETURN FILED U/S 153C OF THE IT ACT AND IS ALSO ACCEPTED BY THE AO IN THE ASSESSMENT SO FRAMED. THE PROVISIONS OF SECTION 271 (1) ( C ) EXPLANATION 5 (2) OF THE IT ACT THUS WOULD APPLY IN THIS CASE BECAUSE ONE OF THE PARTNERS OF THE ASSESSEE MADE A STATEMENT DU RING THE COURSE OF SEARCH THAT INCOME ON ACCOUNT OF CAPITAL GAIN HAS N OT BEEN DISCLOSED AND IT IS NOW DISCLOSED AS PER THE STATEMENT AND TAXES HAVE BEEN PAID ITA NO.3719/AHD/2007 SHREE RANG PRINTING MILLS LTD. 6 ACCORDINGLY. THE HONBLE MADRAS HIGH COURT IN THE C ASE OF CIT VS S. D. V. CHANDRU 266 ITR 175 CONSIDERING THE ISSUE HELD T HAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT PENALTY WAS NOT LEVIABLE. THE OPERATIVE PORTION OF THE ORDER IS REPRODUCED AS UNDER: THERE WAS A SEARCH IN THE PREMISES OF THE ASSESSEE ON FEBRUARY 13 1990. A STATEMENT OF THE ASSESSEE WAS RECORDED UNDER SECTION 132(4) OF THE ACT AT THE T IME OF SEARCH. THEREAFTER THE ASSESSEE FILED HIS RETURNS FOR THE EARLIER YEARS AND ADMITTED A LARGER INCOME AND ALSO PAID THE TAX TOGETHER WITH INTEREST. THE ASSESSING OFFICER LEVIED PENALTY. THE TRIBUNAL CANCELED THE PENALTY. ON A REFERENCE: HELD THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PENALTY WAS NOT LEVIABLE. 7. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LEARNED CIT(A) CANCELING THE PENALTY. WE CON FIRM HIS FINDINGS AND DISMISS THE APPEAL OF THE REVENUE. 8. AS A RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON 07-05-2010 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 07- 05-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD