ITAT- JAIPUR

GRASS FIELD FARMS & RESORTS P. LTD. VS DCIT ITA No. 415/JP/2015, DATED: 06.06.2016

Summarised Judgement (Scroll for Complete Judgment)

Introduction:

This is an appeal filed by the revenue against the order dated 11/02/2015 of the learned C.I.T.(A)-I Jaipur, for A.Y. 2007-08. The effective grounds of appeal are as under:-

"Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in deleting the penalty U/s 271(1)(c) amounting to Rs. 1,54,07,020/-".

Facts of the Case:

The revenue's appeal is against deleting the penalty imposed U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) at Rs. 1,54,07,020/- and determination the limitation from the date of order of ld CIT(A). The assessee filed return at Rs. 5,11,69,560/- on 31/12/2009 as against Rs. 14,73,790/- shown in the return of income filed of 31/10/2007. The case was scrutinized U/s 143(3) of the Act on 30/09/2009 by the Assessing Officer.

The assessment was made at Rs. 5,11,69,560/- in which the addition on account of investment in purchase of agricultural land U/s 69B of the Act was made at Rs. 4,96,75,774/- Penalty U/s 271(1)(c) was initiated for furnishing of wrong particulars and concealment of income vide order dated 30/12/2009 by the ld Assessing Officer. The assessee challenged the order of the Assessing Officer before the ld CIT(A), who vide order dated 08/2/2011 had deleted the addition made by the Assessing Officer at Rs. 39,23,278/- U/s 69B of the Act.

Judgement:

The penalty proceedings initiated in original assessment has been dropped by the ld Assessing Officer vide D&CR No. 87/135 dated 27/3/2012. When there is no addition made in set aside proceedings, no penalty can be imposed on Rs. 4,57,72,496/-.

In set aside assessment order, the ld Assessing Officer has not specified at the time of initiation of penalty proceedings whether penalty is initiated for the inaccurate particulars of income or concealment of income. The case laws   relied by the ld AR i.e. CIT Vs Manjunatha Cotton & Ginning Factory & Ors. (supra) is squarely applicable. The Coordinate Bench also considered this issue in detail in the case of Radha Mohan Maheshwari Vs. DCIT (supra) on the facts and circumstances of case. Accordingly, we uphold the order of the ld CIT(A).

In the result, the revenue's appeal is dismissed. Order pronounced in the open court on 06/06/2016.

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Complete Judgement

GRASS FIELD FARMS & RESORTS P. LTD. VS DCIT ITA No. 415/JP/2015, DATED: 06.06.2016

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM

ITA No. 415/JP/2015

Assessment Year: 2007-08.

        Deputy Commissioner of Income Tax,

      Circle – 2, Jaipur

VS.

M/s Grass Field Farms &

Resorts P Ltd.,

K-107, Club Lane,

Janpath,

Shyam Nagar, Jaipur.

Appellant

Respondent

Assessee by: Shri P.C. Parwal (C.A.)

Date of Hearing	10/05/2016
Date of Pronouncement	06/06/2016

                                                            

ORDER

This is an appeal filed by the revenue against the order dated 11/02/2015 of the learned C.I.T.(A)-I Jaipur, for A.Y. 2007-08. The effective grounds of appeal are as under:-

"(1) Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in deleting the penalty U/s 271(1)(c) amounting to Rs. 1,54,07,020/-.

(2) Whether on the facts and in the circumstances of the case and in law the ld CIT(A) has erred in determining the limitation from the date of order of CIT(A) when the entire assessment order was subsequently set aside by Hon'ble ITAT."

2. The revenue's appeal is against deleting the penalty imposed U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) at Rs. 1,54,07,020/- and determination the limitation from the date of order of ld CIT(A). The assessee filed return at Rs. 5,11,69,560/- on 31/12/2009 as against Rs. 14,73,790/- shown in the return of income filed of 31/10/2007. The case was scrutinized U/s 143(3) of the Act on 30/09/2009 by the Assessing Officer. The assessment was made at Rs. 5,11,69,560/- in which the addition on account of investment in purchase of agricultural land U/s 69B of the Act was made at Rs. 4,96,75,774/- Penalty U/s 271(1)(c) was initiated for furnishing of wrong particulars and concealment of income vide order dated 30/12/2009 by the ld Assessing Officer. The assessee challenged the order of the Assessing Officer before the ld CIT(A), who vide order dated 08/2/2011 had deleted the addition made by the Assessing Officer at Rs. 39,23,278/- U/s 69B of the Act. Remaining addition was not challenged by the assessee before the ld CIT (A). The revenue in appeal before the Hon'ble ITAT against the CIT (A) order dated 08/2/2011.

The Hon'ble ITAT vide order dated 14/12/2011 in ITA No. 406/JP/2011 A.Y. 2007-08 has set aside this issue to the Assessing Officer. Thereafter, the ld Assessing Officer completed the set aside proceeding vide order dated 18/3/2013 wherein he had not made any addition separately but accepted the original assessed income and issued notice U/s 274 read with Section 271(1)(c) of the Act without mentioning the penalty proceeding is either for concealment of income or furnishing inaccurate particulars of income. The ld Assessing Officer had satisfied with the explanation made by the assessee before him and no addition of Rs. 39,23,278/- was made in set aside proceedings.

2.1 Before imposing the penalty, the ld Assessing Officer gave reasonable opportunity of being heard. The ld Assessing Officer observed that the assessee company has a project of developing farm houses scheme at NH-8, near village Mahela, district- Jaipur. Survey U/s 133A of the Act was carried out at business premises of the assessee company on 26/2/2008 to 28/02/2008. During the course of survey operation, incriminating documents were found and impounded U/s 133A of the Act. As a result of survey, undisclosed investment in purchase of agricultural land and other discrepancies were detected and noticed, which was  admitted by the Director of the company. It is found on the basis of incriminating document that registry of the agricultural land was lesser amount but actually amount paid by the assessee much more. Therefore, assessment for A.Y. 2006-07 was made at Rs. 5,57,72,496/- and addition on account of undisclosed investment U/s 69B of the Act were made. The assessee also availed reasonable opportunity given by the ld Assessing Officer vide letter dated 16/9/2013, which has been reproduced by the Assessing Officer at page 2 to 5 of the assessment order. After considering the assessee's reply, the ld Assessing Officer held that paper marked as Annexure- A/1 and A/2 were found and impounded from the site office of the assessee, which were confronted with Shri Ram Kisore Jat, main person of the assessee and with the directors of the assessee company also and the additional income was surrendered by the Director, hence it did not make any difference that papers were not found at the registered office or administrative office of the assessee company but found at the site office. The argument taken by the assessee that no specific penalty U/s 271(1)(c) has been initiated in set aside proceeding was not found convincing to the Assessing Officer as the Hon'ble ITAT has set aside specifically mentioned the assessment order is set aside, which means the entire order U/s 143(3) of the Assessing Officer had been set aside to assess the income of the assessee afresh, as such the assessment as well as the consequent penalty proceeding had no existence until the set aside assessment was completed and income was determined accordingly. Therefore, the ld Assessing Officer had dropped the penalty proceedings for a while on 27/3/2012. This was done within the prescribed time limit as per provisions of Income Tax Act, 1961. Thereafter the set aside assessment had been completed vide order dated 18/3/2013 determining the income of the assessee at Rs. 4,72,86,290/- wherein addition of Rs. 4,57,72,496/- was made U/s 69B of the Act and penalty proceedings U/s 271(1)(c) of the act were initiated and notice in this regard was issued alongwith assessment order dated 18/3/2013. Thus, there is no merit in the assessee's submissions at instant penalty proceeding is bad in law. Further he did not find any merit in the submission that the income had been assessed at the figure offered for taxation by the assessee because as was the matter of fact the assessee had filed its return of income declaring income of Rs. 14,73,790/- on 31/10/2007 and it was the survey operation conducted by the department at the business premises of the assessee on 26/2/2008 to 28/2/2008 wherein the undisclosed investment amounting to Rs. 4,57,72,496/- was detected, which was admitted by the director of the assessee company. With regards to no specific penalty has been initiated by the Assessing Officer, he held that as per Section 271(1)(b) inserted by the Finance Act, 2008 with retrospective effect from 01/4/1989 direction contained in the assessment order is deemed as satisfaction for initiation of the penalty proceedings and in the case of the assessee through the notice issued U/s 274 read with Section 271(1)(c) alongwith the assessment order. The assessee has apprised that you had concealed the particulars of income or furnished inaccurate particulars of income.

In this case, the assessment was completed on 31/12/2009 initiating the penalty which was decided by the ld CIT(A) on 08/2/2011 and by the Hon'ble ITAT on 14/10/2011 thus, period of deciding the penalty was up to 31/4/2012. It is to be mentioned that the penalty was dropped by the Assessing Officer on 27/3/2012 (D&CR No. 87/135) i.e. well within the time. The penalty proceedings were dropped by the Assessing Officer because of the fact that the Hon'ble ITAT vide their order dated 14/10/2011 in ITA No. 406/JP/2011 had set aside the assessment as had been concluded by the Hon'ble ITAT at paragraph 8 of the order i.e. the assessment order is set aside. The penalty proceedings initiated alongwith set aside assessment are altogether different from the earlier. The assessee's argument was also not found convincing that the assessee has disclosed the income during the assessment proceedings at Rs. 4,57,72,496/- and this surrender was made to avoid the litigation and  was continued to buy peace of mind and avoid penalty and prosecution. This argument was not found convincing to the Assessing Officer and held that if the assessee disclosed on account of investment will automatically would be reduced at the time of sale of the project and adjusted against the cost of the land purchased. As per Explation-1 of Section 271(1)(c), the assessee had clearly concealed the particulars of income or furnished inaccurate particulars of income, the assessee failed to offer an explanation and has not substantiated that explanation filed by the assessee is bonafide. He further relied on the decision of Hon'ble Supreme Court in the case of Dharmendra Textile Processors & ors (2008) 306 ITR 277 (SC) wherein it has been held that penalty proceedings are no longer quasi criminal proceedings and, hence, the presence of mensrea is not required to be established. Therefore, he imposed penalty U/s 271(1)(c) of the Act on concealed income at Rs. 1,54,07,020/-, which is 100% of tax sought to be evaded on income.

3. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had deleted the penalty by observing that the assessee filed revised computation disclosing additional income of Rs. 4,57,72,496/- during the assessment proceedings. The ld Assessing Officer completed assessment on 30/12/2009 U/s 143(3) making addition of Rs. 4,96,95,774/-, which includes the addition of Rs. 39,23,273/- U/s 69B of the Act also. The ld CIT(A) vide order dated 08/2/2011 in ITA No. 834/2009-10 deleted the addition of Rs. 39,23,273/-. The department preferred appeal before the Hon'ble ITAT, the Hon'ble ITAT had set aside this issue to the Assessing Officer. The ld Assessing Officer after ITAT order, had dropped the penalty proceedings vide D&CR No. 87/135 dated 27/03/2012. The ld Assessing Officer finalized the set aside proceeding of assessment on 18/3/2013 and accepted the assessee's contention and no addition was made of Rs. 39,23,278/-. While passing the set aside order, the ld Assessing Officer had also initiated the penalty proceedings U/s 271(1)(c) of the Act. The moot question of limitation date was decided by the ld CIT(A) after considering Section 275 of the Act. The ld CIT(A) in first round had decided the appeal on 08/2/2011, therefore, as per CIT(A) it has to be decided on or before 31/3/2012. However, the ld Assessing Officer has passed order U/s 271(1)(c) on 27/09/2013. It is also a fact that the Assessing Officer had initially dropped the penalty proceedings. Further the addition of Rs. 4,57,72,496/- was not a subject matter in the set aside assessment order and therefore, period of limitation cannot be accounted from the date of set aside assessment order.

Various  cases relied by the assessee also supported its contention. Thereafter, it has been held as under:-

Thus, as per section 275(1 )(a) proviso, in order to be within limitation, a penalty order needs must be passed, in the facts of the present case, within one year from the end of the financial year in which the order of the Commissioner(A) is received by the Chief Commissioner or Commissioner, whichever is later. Thus, as per the proviso to section 275 (1)(a) of the Act, the penalty order ought to have been passed on or before 31.3.2012, i.e., within one year from the end of financial year in which the Id. CIT(A)'s order was received back by the Department. The penalty order, however, got to be passed only on 27/9/2013. That being so, the contention of the assessee is correct. The penalty order is clearly barred by limitation provided by the proviso to section 275(1)(a) of the Act. In view of the above, the penalty order is hit by the proviso to section 275(1 )(a) of the Act. Going by the para-meters laid down therein in the said section, the penalty order is clearly beyond the limitation provided therein. Accordingly, the penalty order is cancelled, being barred by limitation, as above. Since the penalty order stands cancelled as barred by limitation, nothing else survives. As such, the original grounds raised by the assessee, on merits, are not required to be gone into and I am not doing so. In the result, the appeal is allowed."

4. Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the Assessing Officer. At the outset, the ld AR of the assessee has reiterated the facts mentioned in the penalty order before the ld CIT(A). In set aside proceedings, the ld Assessing Officer accepted the income offered by the assessee as such at Rs. 4,57,72,496/- by filing the revised computation and also added by the Assessing Officer in the original assessment proceedings remained to the income originally returned by the assessee. In set aside assessment proceedings, the ld Assessing Officer had not specified the addition for which notice U/s 271(1)(c) of the Act was issued nor it was specified whether it is for concealment of income or for furnishing of inaccurate particulars of income. In notice issued on 18/3/2013, the ld Assessing Officer had also not specified the initiation of penalty whether it is for concealed the particulars of income or furnished inaccurate particulars of such income. The order challenged the legality of penalty proceedings initiated in the assessment order passed U/s 143(3)/set aside even then the ld Assessing Officer imposed the penalty on Rs. 4,57,72,496/- on assessed income. The ld CIT(A) has allowed the appeal in favour of the assessee by considering Section 275(1) and held that penalty is barred by limitation. Therefore, it was argued that penalty proceedings initiated in assessment order U/s 143(3)/set aside dated 18/3/2013 is bad in law as the ld Assessing Officer had dropped the penalty proceedings after set aside the order by the Hon'ble ITAT, this is because, in the order, no addition is made. The only addition which was made while framing the original assessment was considered as such, whereas there is no reason to consider the original addition of Rs. 4,57,72,496/- in set aside assessment as this addition was neither challenged by the assessee nor set aside by the Hon'ble ITAT. The amount only, in addition to this amount of Rs. 39,23,278/- was challenged by the assessee and same was set aside by the Hon'ble ITAT, which has been accepted by the Assessing Officer and no addition in set aside proceeding has been made by him. Therefore, penalty proceedings initiated at the time of set aside assessment is illegal and bad in law. The Hon'ble ITAT has set aside the order vide order dated 14/10/2011. As per Section 275(1)(a), the penalty order is to be passed on or before 31/3/2012. The assessee only requested to keep the penalty proceeding pending only addition set aside by the Hon'ble ITAT for Rs. 39,23,278/- and ld Assessing Officer was free to impose the penalty on remaining addition if intent to do so on remaining assessed income, which has not been challenged by the assessee. The ld Assessing Officer considering this reply, had dropped the penalty proceedings, thus the levy of penalty with reference to amount of Rs. 4,57,72,496/- imposed by the Assessing Officer on 27/9/2013 is barred by limitation. It is settled law that once the assessment of a particular item of income is final, the ld Assessing Officer has to impose penalty qua that item within the limitation which respect to the order which confers such finality. Law is not averse to passing multiple penalty orders for same assessment year, for which he relied on the following case laws:-

(i) UP State Bridge Corporation Ltd. Vs DCIT 17 DTR 297 (Luck-B Bench).

(ii) Pramod Kumawat in ITSSA No. 178/JP/2005 dated 22/2/2008.

(iii) CIT Vs Moradabad General Art Metal Mills 282 ITR 510 (All).

Even set aside assessment order dated 18/3/2013, the ld Assessing Officer simply issued notice U/s 274 read with Section 271(1)(c) of the Act. Thus, it is not stated as to whether the proceedings are initiated for concealment of income or for furnishing of inaccurate particulars of income without specifying any charge and initiation of penalty proceedings is vague, no penalty can be levied. He relied on the decision in the case of CIT Vs Manjunatha Cotton & Ginning Factory & Ors. 359 ITR 565 (Kar.) wherein notice U/s 274 of the Act should specially stayed the grounds mentioned in Section 271(1)(c) i.e. whether it is for concealment of income or for furnishing inaccurate particulars of income, sending printed form where all the grounds mentioned in Section 271 or mentioned would not specified requirement of law. The assessee should know the ground which he has to meet specifically, otherwise principles of natural justice is offended, on the basis of such proceedings, no penalty could be imposed to the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. He further relied on the following case laws:-

(i) CIT Vs Manu Engineering Works 122 ITR 306 (Guj)(HC)

(ii) CIT Vs Virgo Marketing Pvt. Ltd. 171 Taxman 156 (Del)(HC).

(iii) Radha Mohan Maheshwari Vs. DCIT order dated 18/3/2016 in ITA No. 773/JP/2013.

Therefore, he prayed to dismiss the revenue's appeal.

5. We have heard the rival contentions of both the parties and perused the material available on the record. The assessee originally filed return on 31/10/2007 at Rs. 14,73,790/-. A survey U/s 133A was conducted on 26/2/2008 to 28/2/2008. During the course of survey proceedings, the assessee admitted additional income for the year under consideration at Rs. 4,57,72,496/- on account of undisclosed expenditure/investment towards purchase of land. However, the addition was made by the Assessing Officer at Rs. 4,96,95,774/-. The another addition of Rs. 39,23,278/- was made by the Assessing Officer, which has been deleted by the ld CIT(A) vide order dated 08/2/2011. The same was challenged before the ITAT, the ITAT had set aside the proceeding to the Assessing Officer. Thereafter, the ld Assessing Officer has not made any addition in the set aside assessment order. The ld Assessing Officer imposed penalty on additional income disclosed by the assessee at Rs. 4,57,72,496/-, which has not been challenged before the ld CIT(A). Therefore, after the original assessment, this quantum was final. As per Section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31/3/2012 i.e. within one year from the end of the financial year in which the ld CIT(A)'s order was received by the department. However, penalty order passed on 27/09/2013 by the ld Assessing Officer, therefore, penalty order passed is barred by limitation.

5.1 We further find that the penalty proceedings initiated in original assessment has been dropped by the ld Assessing Officer vide D&CR No. 87/135 dated 27/3/2012. When there is no addition made in set aside proceedings, no penalty can be imposed on Rs. 4,57,72,496/-. In set aside assessment order, the ld Assessing Officer has not specified at the time of initiation of penalty proceedings whether penalty is initiated for the inaccurate particulars of income or concealment of income. The case laws relied by the ld AR i.e. CIT Vs Manjunatha Cotton & Ginning Factory & Ors. (supra) is squarely applicable. The Coordinate Bench also considered this issue in detail in the case of Radha Mohan Maheshwari Vs. DCIT (supra) on the facts and circumstances of case. Accordingly, we uphold the order of the ld CIT(A).

6. In the result, the revenue's appeal is dismissed. Order pronounced in the open court on 06/06/2016.