Usman Faheed Fayaz, CHENNAI V. ACIT, CHENNAI

ITA 1087/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7989 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR
• Keywords: Rejection of books of accounts; Business income; Depreciation; Loose papers; Corroborative evidences
• Section: 143(3)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1087/MDS/2013 / ASSESSMENT YEAR :200 7 - 08 SHRI USMAN FAHEED FAYAZ, NO. 71, 1 ST AVENUE, I CROSS STREET, VETTUVANKENI, ECR ROAD, CHENNAI 600 041. [PAN: A A I P U9054G ] VS. THE ASSISTANT COMMISSIONER OF IN COME TAX , COMPANY CIRCLE I ( 3 ) , CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. BASKAR , ADVOCATE / RESPONDENT BY : SHRI A. V. SREEKANTH , J CIT / DATE OF H EARING : 0 6 . 0 1 .201 6 / DATE OF P RONOUNCEMENT : 17 . 0 2 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IX , CHENNAI , DATED 21 . 02. 20 13 RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF PENALTY LEVI ED UNDER SECTION 271(1)(C) OF THE ACT. I.T.A. NO . 1087 /M/ 13 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DIRECTOR OF M/S. CLEMENT VENTURES PVT. LTD. ENGAGED IN THE BUSINESS PROVIDING CONSULTANCY. THE ASSESSEE FILED HIS INCOME DECLARING TOTAL INCOME OF .41,21,450/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND SUBSEQUENTLY SELECTED FOR SCRUTINY. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT ON 11.12.2009 DETERMINING THE INCO ME AT .94,80,777/ - . DURING THE SCRUTINY, THE ASSESSING OFFICER HAS FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER VARIOUS HEADS VIZ., SALARY AND WAGES, ADMINISTRATIVE EXPENSES, TRAVELLING AND CONVEYANCE, STAFF WELFARE, MISCELLANEOUS EXPENSES, ET C. ARE NOT SUPPORTED BY ANY PROPER EVIDENCES AND ESTIMATED 20% OF SUCH EXPENDITURE AS ALLOWABLE EXPENDITURE. THE ASSESSING OFFICER ALSO MADE DISALLOWANCE OF DEPRECIATION @ 20% AS ATTRIBUTABLE TO PERSONAL USE OF CAR AND INTEREST ON CAR LOAN. THEREBY, THE AS SESSING OFFICER MADE A TOTAL DISALLOWANCE OF .52,73,764/ - . SINCE THE ASSESSEE HAS NOT PRODUCED ANY PROPER EVIDENCE IN SUPPORT OF THE EXPENDITURE CLAIMED BY HIM, THE ASSESSING OFFICER HAS OPINED THAT THE ASSESSEE HAS CONCEALED THE TAXABLE INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. ACCORDI NGLY, THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY OF .16,00,000/ - UNDER SECTION 271(1)(C) OF THE ACT. I.T.A. NO . 1087 /M/ 13 3 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRME D THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE NEITHER CONCEALED HIS INCOME NOR FURNISHED INACCURATE PARTICU LARS OF INCOME WARRANTING LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND BY RELYING ON THE DECISION IN THE CASE OF CIT V. DURR INDIA PVT. LTD. [2014] 97 DTR (MAD) 160 AND IN THE CASE OF CIT V. AJAIB SINGH & CO. 253 ITR 630 (P&H), PLEADED THAT THE P ENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT MAY BE DELETED. 5. PER CONTRA, BY SUPPORTING THE ORDERS OF AUTHORITIES BELOW, THE LD. DR BY RELYING ON THE DECISION IN THE CASE OF ACIT V. HARVEY HEAR T HOSPITALS LTD. [2013] 32 TAXMANN.COM 348 (CHENNAI) A ND SANGHVI SWISS REFILLS (P.) LTD. V. ACIT [2012] 28 TAXMANN.COM 208 (BOM.), PRAYED THAT THE ORDERS OF AUTHORITIES SHOULD BE CONFIRMED. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AS SESSEE, BEING DIRECTOR OF M/S. CLEMENT VENTURES PVT. LTD., STATED TO HAVE BEEN RECEIVED CONSULTANCY CHARGES OF .94,39,777/ - . AGAINST THE ABOVE RECEIPTS, THE ASSESSEE CLAIMED I.T.A. NO . 1087 /M/ 13 4 EXPENDITURE UNDER VARIOUS HEADS TO THE TUNE OF .65,92,205/ - . HOWEVER, THE ASSESS EE HAS NOT PRODUCED ANY EVIDENCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE, THE ASSESSING OFFICER, BY ALLOWING 20% OF THE SAID EXPENDITURE, DISALLOWED 80% OF THE EXPENDITURE WHICH COMES TO .52,73,764/ - . THE ASSESSING OFFICER ALSO DISALLOWE D DEPRECIATION @ 20% AS ATTRIBUTABLE TO PERSONAL USE OF CAR AND INTEREST ON CAR LOAN AND THEREBY THE ASSESSING OFFICER ENHANCED THE ASSESSED INCOME TO .94,80,777/ - . AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE HAS NOT PREFERRED ANY AP PEAL BEFORE THE APPELLATE AUTHORITY. SINCE THE ASSESSEE FAILED TO FURNISH THE SUPPORTING EVIDENCE FOR THE EXPENDITURE STATED TO HAVE BEEN INCURRED AND CLAIMED IN THE RETURN, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE, BY FURNISHING INACCURA TE PARTICULARS, SUPPRESSED THE TAXABLE INCOME AND THEREFORE, INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. AGAINST THE NOTICE DATED 11.12.2009 UNDER SECTION 274(1) OF THE ACT, THE ASSESSEE HAS SUBMITTED THAT HE HAS NOT CONCEALED ANY DET AILS AND DISALLOWANCE OF EXPENDITURE WAS MADE OUT OF THE DETAILS AVAILABLE IN THE RETURN OF INCOME FILED BY HIM. THEREFORE, HE HAS SUBMITTED THAT IMPOSITION OF PENALTY IS NOT WARRANTED AND PRAYED THAT PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE AND THUS, LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH WAS CONFIRMED BY THE LD. CIT(A) DURING APPELLATE PROCEEDINGS. I.T.A. NO . 1087 /M/ 13 5 7. T HE ADDITION MADE IN THE AS SESSMENT WOULD NOT AUTOMATICALLY ENTITLE THE R EVENUE TO IMPOSE PENALTY IN VIEW OF THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF MADHUSUDHANAN K.P. VS . CIT(2001) 251 ITR 99 (SC). THE LAW SAYS THAT ASSESSMENTS AND PENALTY PROCEEDINGS ARE DI FFERENT AND THAT PENALTY DOES NOT BECOME EXIGIBLE, MERELY BECAUSE THE ADDITION HAD BECOME FINAL , IS WELL SETTLED AS PER THE JUDGEMENT IN THE CASE OF CIT VS. MATA PRASAD (2005) 278 ITR 354 (ALL.). 8. MERE CLAIMING DEDUCTION PER SE WOULD NOT INVITE PENALTY IN VIEW OF THE LEGAL PREPOSITION LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS (P) LTD. [2010] 322 ITR 158. WITHOUT INCURRING ANY EXPENDITURE, NO BUSINESS INCOME WOULD HAVE EARNED BY THE ASSESSEE AND IN VIEW OF THIS T HE ASSESSING OFFICER HAS NOT OUT - RIGHTLY REJECTED THE BOOKS OF ACCOUNTS, BUT, ALLOWED 20% OF EXPENDITURE CLAIMED BY THE ASSESSEE. 9. OTHER THAN PARTICULARS FURNISHED BY THE ASSESSEE IN THE RETURN OF INCOME, THE REVENUE DOES NOT HAVE ANY OTHER MATERIAL TO SUBSTANTIATE THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS. IT IS ESTABLISHED LAW THAT NOT ALL ADDITIONS WOULD JUSTIFY PENALTY AS A MATTER OF COURSE. BUT ADDITION IS THE BASIS FOR PENALTY. MERE ADMISSION DOES NOT JUSTIFY PENALTY EVEN IN THE LIGHT OF THE EXPLANATION TO SEC TION 271(1)(C) OF THE ACT IN VIEW OF THE JUDGEMENT IN THE CASE OF CIT VS. SARAN KHANDSARI SUGAR WORKS (2000) 246 ITR 216 (ALL.). I.T.A. NO . 1087 /M/ 13 6 IN THE INSTANT CASE, THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER IS PURELY BASED ON THE ASSESSMENT M ADE UNDER SECTION 143(3) OF THE ACT. 10. THE RELIANCE PLACED BY THE DEPARTMENT IN THE CASE OF ACIT V. HARVEY HEART HOSPITALS LTD. (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE BECAUSE IN THAT CASE, NO BUSINESS WAS CARRIED OUT BY THE ASSESS EE DURING THE RELEVANT ASSESSMENT YEAR BUT DEDUCTION ON ACCOUNT OF EXPENDITURE WAS CLAIMED AND IN THE ABSENCE OF ANY EVIDENCE TO SUPPORT ITS CLAIM OF INCURRING EXPENDITURE, IMPOSITION OF PENALTY WAS JUSTIFIED. IN THE INSTANT CASE, INCURRING EXPENDITURES DU RING THE COURSE OF BUSINESS BY THE ASSESSEE WAS NOT REJECTED BY THE ASSESSING OFFICER, BUT THE ASSESSEE COULD NOT FILE ANY VALID EVIDENCE FOR CLAIMING THE EXPENDITURE BEFORE THE ASSESSING OFFICER AND THEREFORE BY DISALLOWING 80% OF THE CLAIM, THE ASSESSING OFFICER HAS ALLOWED 20% OF EXPENDITURE ATTRIBUTABLE TO EARN THE BUSINESS INCOME. 11. FURTHER, THE CASE LAW RELIED ON BY THE LD. DR IN THE CASE OF SANGH V I SWISS REFILLS (P) LTD. (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE, BECAUSE IN THA T CASE, THERE WAS SEARCH OPERATION AND DURING THE COURSE OF SEARCH, SEVERAL INCRIMINATING DOCUMENTS, LOOSE PAPERS, ETC. WERE SEIZED. TO BUY PEACE, THE ASSESSEE OFFERED .25 LAKHS AS ADDITIONAL INCOME. MOREOVER, THE ASSESSEE HAS FILED INACCURATE PARTICULARS WITH REGARD TO THE AMOUNT OF RS.10.81 LAKHS PAID BY THE ASSESSEE TO ITS SISTER CONCERN M/S. PRIMCO PRIVATE LIMITED AS SERVICE CHARGES (REIMBURSEMENT OF SALARY AND I.T.A. NO . 1087 /M/ 13 7 WAGES), INTER ALIA, ON VERIFICATION OF INCOME TAX RECORDS REVEAL THAT M/S. PRIMCO PRIVATE LI MITED HAS FILED A NIL INCOME. AGAINST THE PARTICULARS FILED BY THE ASSESSEE, WHICH, WAS CLEARLY PROVED BY THE DEPARTMENT AS FALSE, PENALTY WAS EXIGIBLE AND THE HON BLE HIGH COURT CONFIRMED THE IMPOSITION OF PENALTY. IN THE INSTANT CASE, THE ASSESSEE COUL D NOT FILE CONCRETE EVIDENCE FOR HIS CLAIM OF EXPENDITURE, BUT IT WAS NOT RULED OUT THAT THERE WAS NO EXPENDITURE WOULD HAVE BEEN INCURRED BY THE ASSESSEE DURING THE COURSE OF H IS BUSINESS, AND THEREFORE, THE ASSESSING OFFICER ALLOWED 20% OF EXPENDITURE CL AIMED BY THE ASSESSEE. 12. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND DECISIONS RELIED ON, WE ARE OF THE OPINION THAT LEVY OF PENALTY IS NOT WARRANTED IN THE PRESENT CASE AND ACCORDINGLY, WE DELETE THE PENALTY LEVIED BY THE ASSESSING O FFICER. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 1 3 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 17 TH FEBRUARY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL RE DDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 17 . 0 2 .201 6 VM/ - I.T.A. NO . 1087 /M/ 13 8 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.