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2016 DIGILAW 1463 (GUJ)

Vinay Kumar Yadav v. Income Tax Officer

2016-07-25

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. By way of these appeals under section 260A of the Income-tax Act, 1961, the appellant-assessee has challenged the order of the Income-tax Appellate Tribunal whereby the Tribunal has dismissed the appeal preferred by the assessee by upholding the order of the Commissioner of Income-tax (Appeals) which confirmed the penalty order imposed by the Assessing Officer. 2. While admitting the appeals, this court has framed the following substantial questions of law: "(A) In view of the fact that the alleged amount of concealment/furnishing inaccurate statement as ultimately found by the Tribunal was not the same as was assessed by the Assessing officer and the CIT (Appeals), whether the Tribunal below committed substantial error of law in bringing the case within the purview of section 271(1)(c) of the Act when the finding as regards the alleged concealment/furnishing inaccurate statement was not concurrent? (B) In view of the fact that initially there was dispute as regards the liability of concealment/furnishing inaccurate statement as to whether it should be imposed upon the partner or upon the firm, whether the Tribunal below committed substantial error of law in affirming the order of penalty in the absence of any clear-cut finding of concealment/furnishing inaccurate statement at the instance of partners by the Assessing Officer at the time of initiation of proceedings under section 271(1)(c) of the Act?" 3. Learned counsel for the assessee Mr. Shah has pointed out that in all these tax appeals the issue is relating to imposition of penalty in the case of individual assessee for the relevant assessment years. Therefore, two issues are raised in these tax appeals as framed above. He has contended that the Assessing Officer in his penalty order did not clearly state the charge for levy of penalty under section 271(1)(c) of the Act. He has further contended that the Assessing Officer has made additions on estimate basis which is not a ground for initiation of penalty proceedings under section 271(1)(c) of the Act when there is no particular charge for levy of penalty made by the Assessing Officer in the assessment order. He has further contended that the Assessing Officer has made additions on estimate basis which is not a ground for initiation of penalty proceedings under section 271(1)(c) of the Act when there is no particular charge for levy of penalty made by the Assessing Officer in the assessment order. He has relied on the decision of this court in the case of Commissioner of Income-tax, Gujarat-III v. Vinaychand Harilal reported in (1979) 120 ITR 752 (Gujarat) particularly at page No. 5 where this court has observed as under: "It was, therefore, by the deeming provision under s. 69A that the ITO and, thereafter, in appeal, the AAC could assess the amount of Rs. 60,000/- as the income of the assessee for the financial year in question. But that does not discharge the onus on the revenue in proving in the penalty proceedings that the amount of Rs. 60,000/- represented income of the assessee for the particular financial year. There is a distinction between wealth belonging to an assessee and his income in the course of a particular year. If by virtue of unexplained wealth under s. 69A in the absence of a satisfactory explanation a deeming provision is attracted and the amount of the wealth is deemed to be income of the assessee for that particular year, it cannot be said that, for the purpose of penalty proceedings, the department has been able to establish that the amount of Rs. 60,000/- in the instant case was the income (as distinguished from wealth) of the assessee. In view of the decisions of the Supreme Court in Anwar Ali's case (1970) 76 ITR 696 and in Khoday Eswarsa's case (1972) 83 ITR 369 , it is obvious that in penalty proceedings, the department must establish that the receipt of the amount in dispute constituted income of the assessee." 3.1 He has further relied on the decision of this court in the case of Vijay Proteins Ltd. v. Commissioner of Income-tax in Income Tax Reference No. 139 of 1996 with Tax Appeal No. 243 of 2002 delivered on 9.12.2014, particularly, paragraph Nos. 18 and 18.1 to contended that no penalty proceedings can be initiated against the assessee as there is no concealment or furnishing inaccurate particulars of income. Relying on the decision of the Apex Court, this court in paragraph Nos. 18 and 18.1 has observed as under: "18. 18 and 18.1 to contended that no penalty proceedings can be initiated against the assessee as there is no concealment or furnishing inaccurate particulars of income. Relying on the decision of the Apex Court, this court in paragraph Nos. 18 and 18.1 has observed as under: "18. Insofar as T.A. No. 243/2002 is concerned, the question of law raised therein is already concluded by a decision of this Court rendered in T.A. No. 461/2000 & allied matters, as stated herein above. Paras 6 & 6.1 of the said decision are relevant for our purpose, which read thus:- "6. Heard both the parties and gone through the material available on record. In the instant case, we are of the opinion that assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. Therefore, the issues raised in appeals No. 461 to 464 of 2000 are required to be answered in the affirmative and against the assessee. 6.1 So far as the issue involved in appeals No. 833 to 836 of 2005 is concerned, in view of the decisions cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly imposed under Section 271(1)(c) of the Act. In the case of Krishi Tyre Retreading and Rubber Industries (supra), it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. We therefore answer the issue involved in appeals No. 833 to 836 of 2005 in the negative and in favour of the assessee." 18.1 At this juncture, it would be relevant to refer to a decision of the Apex Court in the case of Asst. We therefore answer the issue involved in appeals No. 833 to 836 of 2005 in the negative and in favour of the assessee." 18.1 At this juncture, it would be relevant to refer to a decision of the Apex Court in the case of Asst. Commissioner of Income-tax v. Gebilal Kanhaialal, HUF, [2012] 348 ITR 561 (SC) wherein, it has been held that the only condition which was required to be fulfilled for getting the immunity, after the search proceedings got over, was that the assessee had to pay the tax together with interest in respect of such undisclosed income up to the date of payment. Clause (2) did not prescribe the time limit within which the assessee should pay tax on income disclosed in the statement u/s. 132(4) and thus, the assessee was entitled to immunity under clause (2) of Explanation 5 to section 271(1)(c)." 3.2 He has also relied on another decision of this court in the case of National Textiles v. Commissioner of Income-tax reported in (2001) 249 ITR 125 (Gujarat) where this court has held as under: "Held that, in the instant case, the cash credits were not satisfactorily explained by evidence and documents. The parties who had advanced the alleged temporary loans were neither disclosed nor were there any supporting documents on record. The accountant, who had arranged the loans was not produced and it was stated that he had left the service as relations with him were strained. In this state of accounts and evidence in quantum proceedings, the Department was justified in treating the cash credits as income of the assessee, but merely on that basis by recourse to Explanation 1, penalty under section 271(1) (c) could not have been imposed without the Department making any other effort to come to the conclusion that the cash credits could in no circumstances have been amounts received as temporary loans from various parties. Admittedly, the assessee in the quantum proceedings failed to produce the accountant but the Department also in penalty proceedings made no effort to summon him. Therefore, it was a case where there was no circumstance to lead to a reasonable and positive inference that the explanation that cash credits were arranged as temporary loans was false. The facts and circumstances were equally consistent with the hypothesis that they could have been sundry loans in small amounts obtained from different parties. Therefore, it was a case where there was no circumstance to lead to a reasonable and positive inference that the explanation that cash credits were arranged as temporary loans was false. The facts and circumstances were equally consistent with the hypothesis that they could have been sundry loans in small amounts obtained from different parties. Therefore, the imposition of penalty was not justified." 3.3 Relying on the aforesaid decisions, the learned counsel for the assessee has contended that the addition based on estimate which was confirmed by the authorities below was not certain for imposition, the penalty under section 271(1)(c) of the Act will not follow as a matter of course. Regarding income from truck, the learned counsel for the assessee has contended that since there is no material on record, the Assessing Officer made additions of Rs. 4000/- and Rs. 28,000/- which were confirmed by the authorities below. He has further contended that in Tax Appeal Nos. 1894 of 2010, 1895 of 2010, 1896 of 2010 and 1899 of 2010, the assessment made by the Assessing Officer for the relevant years was on protective basis and in view of the decision of this court in the case of Bhailal Manilal Patel v. Commissioner of Income-tax reported in (2014) 49 taxmann.com 539 (Gujarat) where this court relying on the decision of this court in CIT v. Bankim J. Shah I.T. Reference No. 117 of 1979 held that if the assessment is made on protective basis, no penalty proceedings under section 271(1)(c) can be initiated, it is submitted that no penalty can be imposed. 3.4 So far as short term capital gain from transfer of truck under section 45(3) of the I.T. Act to firm is concerned, the learned counsel for the assessee has taken us through the order of the Assessing Officer and contended that the addition is not proper and therefore, the same is required to be deleted. As regards purchase of truck, the addition made by the Assessing Officer is upheld by the CIT(A) and the Tribunal. Therefore, the same may not be upheld. 3.5 As regards investment in truck under section 69 of the Act, the learned counsel for the assessee has contended that the addition may not be upheld and penalty may not follow as a matter of course. He has relied on the decision of this court in the case of New Sorathia Engineering Co. 3.5 As regards investment in truck under section 69 of the Act, the learned counsel for the assessee has contended that the addition may not be upheld and penalty may not follow as a matter of course. He has relied on the decision of this court in the case of New Sorathia Engineering Co. v. Commissioner of Income-tax reported in (2006) 282 ITR 642 (Guj.) where it has been held that penalty order and the order of the Commissioner (Appeals) showed that no clear cut finding had been reached. The Tribunal had failed to appreciate this legal issue. The ratio in CIT v. Manu Engineering Works (1980) 122 ITR 306 (Guj.) was applicable and the order of penalty could not be upheld by the Tribunal. The order was invalid. He submitted that the respective paragraph of each appeal for imposition of penalty is as under: Tax Appeal No. 1893 of 2010: "Para 5. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income/furnished inaccurate particulars of income, to the extent of Rs. 2,41,500/-. Tax Appeal No. 1894 of 2010 "Para 10. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income inasmuch as furnished inaccurate particulars of income, to the extent of Rs. 3,50,000/-. Tax Appeal No. 1895 of 2010: "Para 7. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income inasmuch as furnished inaccurate particulars of income, to the extent of Rs. 4,43,600/-. Tax Appeal No. 1896 of 2010: "Para 7 Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income/furnished inaccurate particulars of income, to the extent of Rs. 4,00,500/- Tax Appeal No. 1897 of 2010: "Para 5. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income/furnished inaccurate particulars of income, to the extent of Rs. 3,00,000/- Tax Appeal No. 1898 of 2010: "Para 7. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income/furnished inaccurate particulars of income, to the extent of Rs. 2,90,500/- Tax Appeal No. 1899 of 2010: "Para 5. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. Having regard to the above facts and circumstances of the case, I am of the considered view that this is a fit case for levying penalty under section 271(1)(c) of the I.T. Act as the assessee has concealed the particulars of income for which penalty is leviable under section 271(1)(c) read with explanation of the Act. It is also held that the assessee has concealed income/furnished inaccurate particulars of income, to the extent of Rs. 2,60,000/-. 3.6 The learned counsel for the assessee has therefore contended that in view of the decision of this court New Sorathia Engineering Co. v. Commissioner of Income-tax (supra), the penalty order is required to be set aside. 4. Learned counsel for the revenue Mr. Parikh has taken us to the order of the Assessing Officer and contended that since the assessee has not challenged the original order and accepted the same, the assessee cannot raise the same in penalty proceedings under section 271(1)(c) of the Act. He has contended that in view of the concurrent findings of the authorities below, no interference is called for with the order imposing penalty. 5. We have heard learned counsel for the parties. So far as investment in truck is concerned, in view of the decision of this court in the case of Commissioner of Income-tax v. Vinaychand Harilal (supra) and other decisions, we are of the opinion that the both Commissioner (Appeals) and the Tribunal are not clear about the same and therefore penalty ought not to have been imposed. Therefore, the issue is answered in favour of the assessee and against the revenue. Since the assessee has shown income and addition is justified, the income which has been assessed for penalty of Rs. 4000/- in Tax Appeal No. 1893 of 2010 and Rs. 28,000/- in Tax Appeal No. 1898 of 2010 is upheld. Regarding protective assessment, in view of the decision of this court in the case of Bhailal Manilal Patel v. Commissioner of Income-tax (supra), penalty ought not to have been imposed. This issue is answered in favour of the assessee and against the revenue. However, so far as income of Rs. 4000/- and Rs. 28,000/- is concerned, the same was not shown and therefore, penalty is imposed. 6. So far as question No. 1 is concerned, we are of the opinion that penalty ought not have been imposed. This issue is answered in favour of the assessee and against the revenue. However, so far as income of Rs. 4000/- and Rs. 28,000/- is concerned, the same was not shown and therefore, penalty is imposed. 6. So far as question No. 1 is concerned, we are of the opinion that penalty ought not have been imposed. We, therefore, answer issue No. 1 in favour of the assessee and against the revenue. So far as question No. 2 is concerned, in view of concurrent findings of both Commissioner (Appeals) and the Tribunal, that income was not shown and therefore penalty is imposed is proper. Question No. 2 is answered accordingly in favour of the Department and against the assessee. The appeals stand disposed of accordingly.