The ACIT, Circle-1, Bharuch V. M/s. Master Silk Mills Pvt.Ltd., Bhavnagar

ITA 1009/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8974 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-02-2010
• Assessment Year: 1993-1994
• Appeal Filed On: 08-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: N O N E
• Keywords: Bonafide belief
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NOS. 1008 & 1009/AHD./2007 ASSESSMENT YEARS : 1992-1993 & 1993-1994 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- M/ S. MASTER SILK MILLS PVT. LTD., CIRCLE-1, BHAVNAGAR BHAVNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.C. PANDIT, SR. D.R. RESPONDENT BY : N O N E O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THESE TWO APPEALS FILED BY THE REVENUE ARE AGAINST THE ORDER DATED 27.12.2006 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIX, AH MEDABAD CANCELLING THE PENALTY OF RS.13,73,010/- AND RS.17,48,490/- LEVIED BY THE A.O . UNDER SECTION 271(1)(C) FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY. 2. BRIEFLY STATED THE FACTS ARE THAT IN THE ASSESSM ENT YEAR 1992-93, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING LOSS OF RS.22,86,356/-. THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3). IN THE ASSESSMENT ORDER, THE A.O. DISALLOWE D INTEREST PAID AND HELD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME TO THE EXTENT O F RS.23,87,830/-. ON IDENTICAL BASIS, IN THE ASSESSMENT YEAR 1993-94 THE A.O. DISALLOWED THE INT EREST PAYMENT OF RS.20,38,759/- AND TOOK THE VIEW THAT THE ASSESSEE HAS CONCEALED THE PARTIC ULARS OF INCOME TO THE EXTENT OF RS.20,38,759/-. SUBSEQUENTLY, THE A.O. LEVIED THE PENALTY OF RS.13, 73,010/- FOR THE ASSESSMENT YEAR 1992-93 AND RS.17,48,490/- FOR THE ASSESSMENT YEAR 1993-94. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) FOR THE ASSESSMENT YEAR 1992-93 THE ASSESSEE MADE ITS SIMILAR SUBMISSI ONS AS WERE MADE IN THE ASSESSMENT YEAR 1993-94. AFTER CONSIDERING THE SUBMISSIONS, THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE PENALTIES FOR THE DETAILED REASONS G IVEN IN PARAS 5 TO 7, WHICH ARE AS UNDER :- 2 ITA NOS. 1008-1009/AHD/ 2007 5. THE CONTENTION OF THE APPELLANT HAS BEEN CAREFU LLY CONSIDERED. I HAVE GONE THROUGH THE PENALTY ORDER AS WELL AS THE ASSESSMENT ORDER. IT IS A FACT THAT THE APPELLANT FAILED TO GIVE EXPLANATION IN RESPONSE TO NOTICES ISSUED U/S. 271(1)(C) OF THE INCOME TAX ACT. BUT AL L THE PARTICULARS OF INCOME ARE STATED TO HAVE BEEN MADE AVAILABLE IN TH E RETURN OF INCOME FILED BY THE APPELLANT. ACCORDING TO THE ASSESSING OFFICE R, THE APPELLANT HAS CLAIMED FALSE DEDUCTION BY MAKING CLAIM OF INTEREST EXPENSES OF RS.15,60,662/-. HOWEVER, THE ASSESSING OFFICER HAS NOT MADE ANY DISCUSSION OR GIVEN A SINGLE EXAMPLE WHERE THE APPE LLANT HAS GIVEN FALSE FACTS OR TRIED TO CONCEAL ANY FACTS EITHER IN FILIN G THE RETURN OR DURING THE ASSESSMENT PROCEEDINGS OR DURING THE PENALTY PROCEE DINGS. THE ASSESSING OFFICER HAS MERELY COME TO THE CONCLUSION FOR FURNI SHING INACCURATE PARTICULARS OF INCOME ON THE BASIS OF DISALLOWANCE OF INTEREST MADE IN ASSESSMENT YEARS 1994-95 AND 1995-96 WHICH WAS CONF IRMED BY THE ITAT AND THE APPELLANT IS NOT IN APPEAL BEFORE HON'BLE G UJARAT HIGH COURT AGAINST THE ORDER OF ITAT. THUS, THIS ISSUE IS DEBA TABLE AND HAS NOT COME TO ITS FINALIZATION. HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CIT VS.- ANWARALI [76 ITR 696 (SC)] THAT IT CANNOT BE SAID THAT THE FINDING GIVEN IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR CO MPUTING THE TAX IS CONCLUSIVE. HOWEVER, IT IS GOOD EVIDENCE. BEFORE PE NALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTED INCOME AND THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED PARTICULARS OF INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. 6. IN THE PRESENT CASE, THE ISSUE INVOLVED IS DEBAT ABLE AND PENDING BEFORE HON'BLE GUJARAT HIGH COURT. THUS, IT HAS NOT ARRIVED TO ITS CONCLUSION. 7. IN THE CASE OF CIT VS.- AJAIB SING & CO. 253 IT R 630, HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT MERELY B ECAUSE CERTAIN EXPENSES CLAIMED BY THE ASSESSEE ARE DISALLOWED BY AN AUTHORITY, IT CANNOT MEAN THAT PARTICULARS FURNISHED BY THE ASSESSEE ARE WRONG. DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULARS OF ITS INCOME. CONCEALMENT INVOLVES PEN AL ACTION. IT HAS TO BE PROVED AS A CONSCIOUS ACT. IT IS TRUE THAT DIRECT E VIDENCE MAY NOT BE AVAILABLE IN EVERY CASE. YET, IT MUST BE PROVED AS A NECESSARY COROLLARY TO FORM THE FACTS AND CIRCUMSTANCES ESTABLISHED. IN T HE PRESENT CASE, THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE APPE LLANT HAS DELIBERATELY FILED INACCURATE PARTICULARS OF ITS INCOME. CONSIDE RING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN LEVYING PENALTY FOR FURNISHING INA CCURATE PARTICULARS OF INCOME FOR DISALLOWANCE OF INTEREST EXPENSES. THERE FORE, THE PENALTY LEVIED BY THE ASSESSING OFFICER IS HEREBY DELETED. 3 ITA NOS. 1008-1009/AHD/ 2007 4. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS), THE REVENUE IS IN APPEALS BEFORE US. 5. AT THE TIME OF HEARING, SHRI M.C. PANDIT, SR. D. R. APPEARED ON BEHALF OF REVENUE. ON THE OTHER HAND, NEITHER ANYBODY APPEARED ON BEHALF OF T HE ASSESSEE NOR AN APPLICATION FOR ADJOURNMENT RECEIVED. WE, THEREFORE, PROCEED TO DEC IDE BOTH THESE APPEALS ON THE BASIS OF THE SUBMISSIONS MADE BY THE LD. D.R. AND THE MATERIAL A VAILABLE ON RECORD. 6. THE LD. D.R. RELYING ON THE REASONING GIVEN BY T HE A.O. CONTENDED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME BY CLAIMING INT EREST IN BOTH THE ASSESSMENT YEARS. THE INTEREST IS DISALLOWED BY THE A.O. IN THE ASSESSMEN T YEARS 1994-95 AND 1995-96 ALSO, ON IDENTICAL FACTS, INTEREST WAS DISALLOWED, THE SAID DISALLOWAN CE IS CONFIRMED BY THE HON'BLE ITAT AND THE ASSESSEE WAS IN APPEAL BEFORE THE HON'BLE GUJARAT H IGH COURT. THE INTEREST EXPENSES IS NOT ALLOWABLE, BUT THE ASSESSEE CLAIMED THE SAME, THERE FORE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS WELL SETTLED LAW THAT FINDING GIVEN IN THE ASSESSMENT PROCEEDINGS FOR DETERMINING OR COMPUTING THE TAX IS NOT CONCLUSIVE. NO DOUBT, IT I S GOOD EVIDENCE BUT BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONA BLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTED INCOME AND THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF INCOME OR HAS DELIBERATELY FURNISHED INACCURATE PAR TICULARS OF INCOME. FOR BOTH THE ASSESSMENT YEARS, IN THE ORIGINAL ASSESSMENT ORDERS, INTEREST EXPENDITURE WAS ALLOWED. FOR BOTH THE ASSESSMENT YEARS, THE A.O. MERELY CAME TO THE CONCL USION FOR FURNISHING INACCURATE PARTICULARS OF INCOME ON THE BASIS OF DISALLOWANCE OF INTEREST MAD E IN THE ASSESSMENT YEARS 1994-95 AND 1995- 96. THE HON'BLE PUNJAB & HARIYANA HIGH COURT IN THE CASE OF CIT VS.- AJAIB SING & CO. [253 ITR 630] HAS HELD AS UNDER :- MERELY BECAUSE CERTAIN EXPENSES CLAIMED BY THE ASS ESSEE ARE DISALLOWED BY AN AUTHORITY, IT CANNOT MEAN THAT PARTICULARS FU RNISHED BY THE ASSESSEE ARE WRONG. DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULARS OF ITS INCOME. CONCEALMENT INVOLVES PENAL ACTION. IT HAS TO BE PROVED AS A CON SCIOUS ACT. IT IS TRUE THAT 4 ITA NOS. 1008-1009/AHD/ 2007 DIRECT EVIDENCE MAY NOT BE AVAILABLE IN EVERY CASE. YET, IT MUST BE PROVED AS A NECESSARY COROLLARY TO FORM THE FACTS AND CIRC UMSTANCES ESTABLISHED. 8. CONSIDERING OVERALL ALL THE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE AT THE TIME OF FILING THE RETURN OF INCOME WAS OF THE BONAFIDE BELIEF THA T INTEREST EXPENDITURE IS AN ALLOWABLE EXPENDITURE UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961. THIS EXPLANATION SUBMITTED BY THE ASSESSEE, IN OUR OPINION, PROVES THAT THE ASSES SEE HAS DISCHARGED HIS ONUS AND HAS REBUTTED THE PRESUMPTIONS AVAILABLE TO REVENUE UNDER EXPLANATION 1 TO SECTION 271(1)(C). THIS EXPLANATION OF THE ASSESSEE CANNOT BE REGARDED TO BE FALSE EXPLANA TION UNTIL AND UNLESS REVENUE PROVES THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. THE CON FIRMATION OF DISALLOWANCE BY THE TRIBUNAL DOES NOT MEAN CONCEALMENT OF INCOME OR FURNISHING I NACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE INCOME TAX ACT. FOR BOTH THE ASSESSMENT YEARS, THE ASSESSEE WAS OF THE BONAFIDE BELIEF THAT IT IS ENTITLED TO D EDUCTION OF INTEREST UNDER SECTION 36(1)(III) OF TH E ACT. THESE BEING THE FACTS, IN OUR OPINION, IT IS N OT A FIT CASE FOR LEVYING THE PENALTY UNDER SECTION 271(1)(C) FOR BOTH THE ASSESSMENT YEARS. WE, THEREF ORE, INCLINED TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN CANCELLING T HE PENALTY LEVIED BY THE A.O. FOR BOTH THE ASSESSMENT YEARS UNDER SECTION 271(1)(C) OF THE INC OME TAX ACT, 1961. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 12.02.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12/ 02 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.