SARBARI N. BASAK, NAVI MUMBAI V. ITO WD 22(3)-1, NAVI MUMBAI

ITA 104/MUM/2010

• Counselvise Citation: 10419914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 06-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SANGATE
• Assessee Lawyers: RAVI MULCHANDANI
• Section: 133(6)

Judgement Text

1 ITA NO.104/MUM/2010 (ASST YEAR 2002-03) 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BEFORE SHRI RAJENDRA SINGH, AM & SHRI VIJAY PAL RAO , JM ITA NO. 104 /MUM/2010 ITA NO. 104 /MUM/2010 ITA NO. 104 /MUM/2010 ITA NO. 104 /MUM/2010 (ASST YEAR 2002-03) SARBARI N BASAK UNIT NO.3 PLOT NO.229 SECTOR NO.28 VASHI, NAVI MUMBAI 703 VS THE INCOME TAX O FFICER WARD 22(30(1), NAVI MUMBAI 703 PAN NO. AWQPB5375P ASSESSEE BY SHRI RAVI MULCHANDANI REVENUE BY SHRI D SANGATE DR ORDER ORDER ORDER ORDER PER VIJAY PAL RAO: PER VIJAY PAL RAO: PER VIJAY PAL RAO: PER VIJAY PAL RAO: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDE R DATED 23.9.2009 OF THE CIT(A)-33, MUMBAI ARISING FROM THE ORDER PASSED U/ S 271(1)(C ) OF THE I T ACT FOR THE ASSESSMENT YEAR 2002-03. 2 THE ONLY GROUND TAKEN BY THE ASSESSEE READS AS UNDE R: THE LD CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY OF RS. 71,615/- U/S 271(1 )( C) OF TH E I T ACT, 1961 FOR THE ALLEGED FURNISHING OF INACCURATE PARTICULARS OF INC OME OF RS. 2,30,000/- WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAS FURNIS HED ALL THE PARTICULARS IN RESPECT OF SAID AMOUNT OF RS. 2,30,000 /- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AND THAT THERE ARE NO INCONSIST ENCIES IN THE PARTICULARS GIVEN BY THE APPELLANT AND THAT SAID ADDITIO N HAS BEEN MADE BY THE LD ASSESSING OFFICER BY NOT ACCEPTING THE EXPLANA TION OF THE APPELLANT. 3 WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFIC ER MADE ADDITION/DISALLOWANCE ON ACCOUNT OF (I) DIFFERENCE IN CANDIDATE FEES RECEIVED AND THE AMOUNT REFUNDED TO THE CANDIDATE BY THE ASSESSEE OF RS. 60,000/- ; (II) ON ACCOUNT OF DISALLOWANCE OF CANDIDATE FEES REFUNDED BY THE ASS ESSEE BY ACCOUNT PAYEE CHEQUE TO ONE OF THE CANDIDATES NAMELY SHRI MAHESHSIN GH KARKI, WHICH WAS 2 ITA NO.104/MUM/2010 (ASST YEAR 2002-03) 2 RECEIVED BY THE SAID CANDIDATE IN JUNE 2002 OF RS. 1, 70,000/-. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY U/S 2 71(1)( C) OF RS. 71,615/- VIDE ORDER DATED 15.3.2007. ON APPEAL, THE CIT(A) CONFIRM ED THE PENALTY LEVIED BY THE AO VIDE IMPUGNED ORDER. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTED TH AT AS REGARDS THE DISCREPANCY ON ACCOUNT OF ADDITION OF RS. 60,000/- IS CONCERNED, THE ASSESSING OFFICER RECORDED THE STATEMENT OF ONE OF THE CANDIDATES, WHO HAS STATED THAT HE HAS PAID RS. 60,000/- IN CASH. THEREFORE, THE ADDITI ON IS BASED ON THE STATEMENT OF THIRD PARTY WITHOUT ANY EVIDENCE OR MATERIAL IN SUPPORT O F THE SAID ALLEGED PAYMENT IN CASH. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS SHOWN ALL THE PAYMENTS RECEIVED IN CHEQUE AND NO PAYMENT HAS BE EN RECEIVED IN CASH; THEREFORE, THE STATEMENT RECORDED BY THE ASSESSING OFFIC ER CANNOT BE USED AGAINST THE ASSESSEE IN THE ABSENCE OF CORROBORATIVE EVIDENCE WHEN NO DISCREPANCY WAS FOUND IN THE ACCOUNT OF THE ASSESSEE WITH RESPECT TO THE F EES RECEIVED. 5 AS REGARDS THE REFUND OF RS. 1,70,000/- IS CONCER NED, THE LD AR OF THE ASSESSEE HAS POINTED OUT THAT ON REFUND MADE BY THE AS SESSEE BY ACCOUNT PAYEE CHEQUE ISSUED ON 31.3.2002; THOUGH THE CANDIDATE HAS R ECEIVED THE PAYMENT BY CHEQUE IN THE NEXT FINANCIAL YEAR AND IT WAS EN-CASHE D ACCORDINGLY. HOWEVER, SINCE THE ASSESSEE IS FOLLOWING CASH METHOD OF ACCOUN TING AND ONCE THE CHEQUE WAS ISSUED, THE ASSESSEE HAS SHOWN IN THE BOOKS OF ACCOUN T AND CLAIMED AS DEDUCTION ON ACCOUNT OF REFUND. THERE IS NO DISPUTE REGARDING TH E REFUND OF RS. 1,70,000/- . THE ADDITION MADE BY THE ASSESSING OFFICER IS ONLY ON THE GROUND THAT THE CHEQUE WAS RECEIVED BY THE CANDIDATE AND WAS EN-CASHED IN TH E NEXT FINANCIAL YEAR AND THE SAME CANNOT BE ALLOWED IN THE YEAR UNDER CONSIDERA TION. HE RELIED ON THE 3 ITA NO.104/MUM/2010 (ASST YEAR 2002-03) 3 DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF REPORTED IN 25 ITR 529 (SC) AND SUBMITTED THAT EVEN IN THE CASH SYSTEM OF ACCOUNTIN G, THE PAYMENT IS DEEMED TO BE MADE ON THE DATE WHEN THE CHEQUE IS ISSUED, WHICH WAS NOT SUBSEQUENTLY DIS- HONOURED OR RETURNED. 5.1 ON THE OTHER HAND, THE LD DR, WHILE SUPPORTING THE O RDERS OF THE AUTHORITIES BELOW SUBMITTED THAT THE APPEAL FILED BY THE ASSESSEE AG AINST THE ADDITION IN QUANTUM HAS ALREADY BEEN DISMISSED BY THE TRIBUNAL; TH EREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER HAS ATTAINED THE FINALITY; HE , THUS SUBMITTED THAT ONCE THE ADDITION HAS BECOME FINAL, LEVY OF PENALTY IS JUSTIFIE D. 5.2 IN THE REJOINDER, THE LD AR OF THE ASSESSEE SUBMIT TED THAT THE APPEAL OF THE ASSESSEE HAS BEEN DISMISSED FOR NON-PROSECUTION AND NOT ON MERITS. THEREFORE, THE SAME CANNOT BE TAKEN AGAINST THE ASSESSEE AS FAR AS THE LEVY OF PENALTY IS CONCERNED. 6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY B OTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. AS FAR AS THE REFUND OF FEES OF RS. 1,70,000/- IS CONCERNED, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS REFUNDED THE SAID FEES VIDE ACCOUNT PAYEE CHEQUE ON 31.3.2002; THOUGH THE SA ME WAS RECEIVED BY THE CANDIDATE IN THE MONTH OF JUNE 2002 AND ACCORDINGLY E N-CASHED. THE ASSESSEE HAS CLAIMED THE DEDUCTION OF REFUND OF FEES ON THE BASIS OF THE CHEQUE ISSUED. EVEN IF IT IS PRESUMED THAT THE SAID DEDUCTION IS NOT ALLOWABLE AS THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNT, IT CANNOT SAID THAT IT AMOU NTS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. THE CLAIM OF THE ASSESSEE HAS NOT BEEN FOUND MALAFIDE OR ABSOLUTELY WRONG OR FALSE. THE CLAIM OF THE ASSESSEE IS BONAFIDE AS BASED ON THE CHEQUE ISSUED BY THE ASSESSEE FOR REFUND , WHICH WAS SUBSEQUENTLY EN- 4 ITA NO.104/MUM/2010 (ASST YEAR 2002-03) 4 CASHED IN THE NEXT FINANCIAL YEAR. THEREFORE, MERELY BECAUSE THE CLAIM OF THE ASSESSEE FOR REFUND OF FEE, WAS DISALLOWED BY THE A SSESSING OFFICER BECAUSE THE CHQEUE WAS EN-CASHED IN THE NEXT FINANCIAL YEAR DO NO T IPSO FACTO LEAD TO LEVY OF PENALTY U/S 271 (1 )( C) OF THE ACT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE RELIANCE PETROPRODUCTS LTD REPORTED IN 222 ITR 1 58 (SC). THEREFORE, PENALTY IS NOT JUSTIFIED AGAINST THE DISALLOWANCE OF REFUND OF RS . 1,70,000/- 6 AS REGARDS THE ADDITION OF RS. 60,000/- MADE ON THE BASIS OF STATEMENT RECORDED BY THE ASSESSING OFFICER AFTER SUMMONING THE CANDIDATE U/S 133(6) OF THE ACT.; IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT SINCE TH E ASSESSMENT WAS GETTING TIME BARRED, THE ASSESSING OFFICER DID NOT GIVE AN OPP ORTUNITY FOR CROSS EXAMINING OR REBUTTING THE STATEMENT RECORDED BY THE ASSESSING OFFI CER IN THE ABSENCE OF THE ASSESSEE. THEREFORE, THE ADDITION, THOUGH HAS ATTAINED ITS FINALITY BECAUSE OF THE APPEAL FILED BY THE ASSESSEE HAS BEEN DISMISSED BY TH E TRIBUNAL FOR NON PROSECUTION; HOWEVER, THE STATEMENT OF THE THIRD PARTY CAN NOT BE USED AGAINST THE ASSESSEE WITHOUT GIVING A PROPER OPPORTUNITY FOR CROSS EXAMINING TO THE ASSESSEE. THE PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THEREFORE, IN OUR OPINION THE PENALTY IS NOT SUSTAINABLE AGAINST THE ADDITION, WHICH WAS MADE BY USING THE STATEMENT OF THE TH IRD PARTY AGAINST THE ASSESSEE WITHOUT GIVING PROPER OPPORTUNITY FOR CROSS EX AMINATION. HENCE, THE PENALTY LEVIED U/S 271(1) ( C) IS NOT JUSTIFIED AND LIABLE TO BE CANCELLED. ACCORDINGLY, WE CANCEL THE PENALTY LEVIED BY THE AO AND CONFIRMED B Y THE CIT(A). 5 ITA NO.104/MUM/2010 (ASST YEAR 2002-03) 5 7 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THE 27 TH , DAY OF APRIL 2011. SD/ SD/- ( ( ( ( RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH ) )) ) ACCOUNTANT MEMBER ( ( ( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:27 TH , APRIL 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI