CIT, HISAR V. M/S PARKASH INDUSTRIES LTD.

ITA/512/2009

AI Insights

The case involves an appeal by the revenue against the decision of the Income Tax Appellate Tribunal, which had canceled a penalty imposed on M/s Parkash Industries Limited for alleged discrepancies in income reporting related to transactions with a non-existent entity, M/s Sahib Engineering Works. The revenue challenged the Tribunal's decision, arguing that the transactions were not genuine. However, the Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the transactions and the source of the funds. The High Court, after reviewing the Tribunal's decision and the evidence presented, upheld the Tribunal's findings and dismissed the appeal.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 737994 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 28-10-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SANJEEV KAUSHIK
• Keywords: Bogus Firm; Depreciation allowance; Lease Rent; Penalty cancellation; Unaccounted money
• Section: 271(1)(c); 260A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.512 of 2009(O&M) Date of decision: 28.10.2009 CIT, Hisar -----Appellant Vs. M/s Parkash Industries Limited Bijwasan, New Delhi. ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE GURDEV SINGH Present:- Mr. Sanjeev Kaushik, Standing Counsel for the appellant-revenue. Adarsh Kumar Goel,J. 1. This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, ‘the Act’) against order dated 4.2.2009 passed by Income Tax Appellate Tribunal, Delhi Bench “F”,New Delhi in ITA No.2993/Del/2008, for the assessment year 1993-94, proposing to raise following substantial questions of law:- “Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in canceling the penalty of Rs.76,97,423/- levied under section 271(1) ITA No.512 of 2009 (O&M) (c) of the Income Tax Act, 1961 in respect of addition of Rs.1,48,74,249/- representing peak amount of credit shown as receipts from one M/s Sahib Engineering Works which is a non-existent entity particularly when the Revenue is in appeal to the Hon’ble High Court against the deletion of addition of Rs.1,48,74,249/- on quantum? 2. During the assessment, the Assessing Officer referred to the material found during search that the assessee received amount of Rs.3.5 crores from the bank account of M/s Sahib Engineering Works, Faridabad. It was observed that the said firm was a bogus firm and claim of the assessee that the amount was received towards consideration for sale of material, was not accepted. Inference was drawn that the assessee siphoned off its unaccounted money by making M/s Sahib Engineering Works a conduit pipe through which unaccounted money travelled and reached back to the assessee. Thus, addition was made to the declared income. Further additions were made by holding that lease rent shown to have been paid by the assessee had not been infact paid and claim for 2 ITA No.512 of 2009 (O&M) depreciation could not be allowed as machinery was not in possession of the assessee during physical verification. The CIT(A) upheld the addition in respect of receipts shown to have been made from M/s Sahib Engineering works but deleted the addition towards lease rent and depreciation allowance, taking into account additional evidence led by the assessee. 3. On further appeal, the Tribunal upheld the plea of the assessee in respect of amount received from M/s Sahib Engineering works but dismissed the appeal of the revenue in respect of deletions in respect of lease, rent and depreciation allowance. 4. We have heard learned counsel for the appellant. 5. Learned counsel for the revenue submits that finding of the Tribunal that transaction for sale, for which amount is alleged to have been received from M/s Sahib Engineering Works, was genuine is perverse. 6. This contention cannot be accepted. The Tribunal has recorded reasons taking into account, inter- alia, following circumstances:- “A. The assessee sold steel to M/s Sahib Engineering Works. 3 ITA No.512 of 2009 (O&M) B. M/s Sahib Engineering Works have sold the Steel rolling mills rolls to M/s Kotak,SRF and Times. C. M/s Kotak, SRF and Times, leased these rolls t the assessee. D. Neither the transaction of sale of rolls by M/s Sahib Engineering Works to M/s Kotak, SRF and Times is in dispute nor lease by M/s Kotak, SRF and Times to assessee is in dispute or doubt. On the contrary, the lease rent payments by the assessee is held allowable. E. Later on Kotak, SRF and Times took legal steps for recovery of lease rentals, which were settled. This also proves the genuineness of transaction of lease of rolls by Kotak, SRF and Times to the assessee which as per the lease deed were brought by lessons from M/s Sahib Engineering Works. F. Money which came to the account of assessee is from account of M/s Sahib Engineering Works and money which came into the account of M/s Sahib Engineering Works came from accounts of M/s Kotak, 4 ITA No.512 of 2009 (O&M) SRF and Times. Thus the assessee has not only proved source of its credit but also proved source of source with corroborating overwhelming evidence.” 6. The above reasons cannot be held to be non existent. The matter is in the realm of appreciation of evidence. Even if it is held that two views are possible, inference drawn by the Tribunal, being final fact finding authority, cannot be held to be perverse. 7. As regards deletion by the CIT(A) after referring to additional evidence led before it, the Tribunal has examined the matter and recorded that a remand report was duly sought and thus no prejudice was caused by considering the additional evidence. There is no doubt that additional evidence has to be allowed only for the specific reason, there cannot be rigid yardstick for sufficiency or otherwise of the reason in a given case. Admittedly, the revenue did not raise this objection before the Tribunal. Explanation given is that the fact that reasons had not been recorded came to light only on inspection of record. This cannot be held to be a handicap with the revenue as the 5 ITA No.512 of 2009 (O&M) record could have been inspected even earlier when the appeal was filed before the Tribunal. 8. No substantial question of law arises. 9. The appeal is dismissed. (Adarsh Kumar Goel) Judge October 28, 2009 (Gurdev Singh) ‘gs’ Judge 6 "