Hamdaan Exports, New Delhi V. DCIT, New Delhi

ITA 1094/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2759 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: D P SACHDEVA
• Keywords: Income from undisclosed sources; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 1094/DEL/2012 ASSESSMENT YEAR: 2005-06 M/S HAMDAAN EXPORTS, VS. DCIT, CC-5, C/O SH. ANDLEEB SEHGAL, NEW DELHI C-28, SUJAN SINGH PARK, NEW DELHI - 110 003 (PAN: AAFAH4100L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.P. SACHDEVA, CA REVENUE BY : SHRI T. VASANTHAN, SR. DR DATE OF HEARING ON : 03/12/2015 ORDER PRONOUNCED ON : 04/1/201 6 ORDER PER H.S. SIDHU, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 03.12.2011 PASSED BY THE LD. CIT(A), NEW DELHI RELA TING TO ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE PETITIONER FIRMS CASE, THE LEARNED CIT(A) IS WRONG IN UPHOLD ING THE PENALTY OF RS. 9,18,665/- IMPOSED UNDER SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961 BY THE LD. AO. 2. THAT THE ORDER PASSED UNDER SECTION 250 OF THE I NCOME TAX ACT, 1961 IS BAD IN LAW. ITA NO. 1094/DEL/2012 (AY 2005-06) 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSMENT WAS COMPLETED U/S. 148/143(3) OF THE INCOME TAX ACT, 1961 ON 28.1 2.2007 AT A TOTAL INCOME OF RS. 25,10,530/- AGAINST THE NIL INCOME RE TURNED BY THE ASSESSEE. AO MADE THE ADDITION OF RS. 15,72,500/- ON ACCOUNT OF UNEXPLAINED RECEIPT SHOWN AS COMMISSION AND RS. 93, 58,028/- AS DIFFERENCE IN EXCHANGE. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE HAS FAILED TO JUSTIFY THE NATURE OF DUTIES PERFORMED TO EARN ITS COMMISSION AND THE DIFFERENCE OF EXCHANGE RELATING TO EARLIER YEARS AS THE ASSESSEE HAS NOT WORKED DURING THE YEA R. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TAX ACT WA S ACCORDINGLY INITIATED ON THE SATISFACTION OF THE AO FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. THE AO SENT A SHOW CAUSE N OTICE, WHICH WAS NOT REPLIED BY THE AO. THUS THE AO LEVIED A PEN ALTY OF RS. 9,18,665/- U/S. 271(1)(C) OF THE I.T. ACT, 1961 VID E ORDER 27.6.2008. 3. AGAINST THE ABOVE PENALTY ORDER DATED 27.6.2008 PASSED BY THE ASSESSING OFFICER, ASSESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 30.12.2011 DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGAINST THE ABOVE ORDER OF THE LD. CIT(A) DATED 30.12.2011, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE HAS STATED THAT N O SATISFACTION FOR CONCEALMENT IS RECORDED FOR ADDITION OF RS.9,38,028 /- FOR FOREIGN EXCHANGE DIFFERENCE IN THE ASSESSMENT ORDER. HE FUR THER STATED THAT IN ANY CASE WHERE THE AO FINDS ANY AMOUNT AS CONCEALM ENT OF INCOME IT ALWAYS INCREASES OR REDUCES THE TOTAL INCOME TO THA T EXTENT AS DECLARED BY THE ASSESSEE. HOWEVER, IN THIS CASE BOTH THE AM OUNTS CONSIDERED AS CONCEALED INCOME WHICH HAVE BEEN INCLUDED BY US IN OUR TOTAL INCOME, AS SUCH, THESE CANNOT BE LEGALLY TREATED AS CONCEALED INCOME. HE FURTHER STATED THAT MERELY THE CHANGE IN THE HEA D OF INCOME ALSO CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME. THER EFORE, THE ITA NO. 1094/DEL/2012 (AY 2005-06) 3 AMOUNT OF RS. 9,38,028/- DOES NOT ATTRACT ANY PENAL TY. IN SUPPORT OF HIS CONTENTION, HE FILED A PAPER BOOK HAVING PAGES 1 TO 29 CONTAINING THE WRITTEN SUBMISSIONS; COPY OF LETTER DATED 6.1.2 010 TO THE CIT(A); BALANCE SHEET AS AON 31.3.2005 AND TRADING AND PROF IT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2005 OF HAMDAAN EXP ORTS ALONGWITH SCHEDULE A OF FIXED ASSETS AS ON 31.3.2005; COPY OF AFFIDAVIT OF SH. KARANJIT SINGH, MANAGING DIRECTOR, KOYELA INTERNATI ONAL (P) LTD. FILED IN DELHI HIGH COURT; COPY OF ACITS LETTER DATED 26 .5.2008 ALONGWITH PHOTOCOPY OF ENVELOPE; COPY OF LETTER DATED 17.6.20 08 ADDRESSED TO ACIT, CC-5, NEW DELHI AND REPLY BY ACIT; COPY OF LE TTER DATED 27.6.2008 ADDRESSED TO ACIT, CC-5, NEW DELHI; COPY OF ACITS LETTER DATED 20.6.2008 UNDER SECTION 148/143(3) MADE BY TH E HONBLE DELHI C BENCH IN ITA NO. 3564/DEL/2011 FOR THE ASSESSME NT YEAR 2005-06 AND COPY OF THE ORDER DATED 22.7.2013 OF HONBLE DE LHI HIGH COURT IN ITA NO. 527/2012 FOR THE ASSESSMENT YEAR 2005-06. 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND REQUESTED THAT THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. IN SUPPORT OF HIS CONTENTION, HE R ELIED UPON THE JUDGMENT DATED 29.7.2013 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HCIL KALINDEE ARRSSPL WHEREIN THE DELETI ON OF PENALTY BY TRIBUNAL WAS TREATED TO BE UNJUSTIFIED AND THE APPE AL OF THE REVENUE WAS ALLOWED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS, ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW, THE PAPER BOOK FILED BY THE ASSESSEE. WE FIND THAT DURING THE PENALTY PROCE EDINGS, THE AO HELD AS UNDER:- DESPITE OF GIVING REPEATED OPPORTUNITY, THE ASSESS EE HAS NO EXPLANATION TO OFFER AS CLAIMED BY THE ASSESSEE HAS NEVER DISCLOSED HIS CHANGE OF ADDRESS. IN VIEW OF THESE FACTS, I HOLD THAT THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS ITA NO. 1094/DEL/2012 (AY 2005-06) 4 OF HIS INCOME TO THE EXTENT OF RS. 25,10,530/- WIT HIN THE MEANING OF EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE ACT. PENALTY IMPOSABLE U/S. 271(1)(C) IS CALCULATED AS B ELOW:- AMOUNT OF INCOME SOUGHT TO BE EVADED : RS. 2510530/ - TAX SOUGHT TO THE EVADED : RS. 918665/- MINIMUM PENALTY @100% : RS. 918665/- MAXIMUM PENALTY 2 300% : RS. 2755995/- ACCORDINGLY, I IMPOSE A PENALTY OF RS. 988665/- WH ICH IS EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED BY TH E ASSESSEE. THE PENALTY ORDER U/S. 271(1)(C) IS PASSE D AFTER THE PRIOR APPROVAL OF THE ADDL. CIT, R-3, NEW DELH I VIDE LETTER NO. 195 DATED 27.6.2008. 7.1 WE FURTHER FIND THAT LD. CIT(A) HAS HELD THAT EVEN IF THERE IS AN INCOME DECLARED WHICH HAS THE EFFECT OF REDUCING LO SS OR CONVERTING LOSS INTO INCOME IS LIABLE TO PENALTY IF INACCURATE PART ICULARS ARE FURNISHED WITH RESPECT TO THAT INCOME. SINCE THE ASSESSEE DI D NOT GIVE TRUE PARTICULARS HENCE LIABLE FOR PENALTY. 7.2 WE FIND FORCE IN THE SUBMISSIONS OF THE ASSESS EES COUNSEL THAT ASSESSEE HAS SUBMITTED THE EVIDENCE IN RESPECT OF C OMMISSION OF RS. 15,72,500/- RECEIVED FROM KOYELA INTERNATIONAL PRIVATE LTD., NEW DELHI FOR ASSISTANCE OF PURCHASE/SALE OF IRON ORE H AVING BEEN FURNISHED TO THE AO, THE TREATMENT OF THE AFORESAID COMMISSION OF RS. 15,72,500 AS UNDISCLOSED INCOME ON THE ALLEGED GRO UNDS THAT IN THE PREVIOUS YEAR NO ACTIVITY HAS BEEN CARRIED OUT AND NO TDS HAS BEEN DEDUCTED. MOREOVER, NON DEDUCTION OF TAX BY THE DED UCTOR ON ANY INCOME CANNOT BE CONSIDERED THAT INCOME IS UNDISCLO SED INCOME OF THE RECIPIENT. CERTIFICATE DATED 5.12.2007 FROM KOYELA INTERNATIONAL (P) ITA NO. 1094/DEL/2012 (AY 2005-06) 5 LTD. WAS FILED MENTIONING ITS PAN AAACK8190N. WE N OTE THAT THE ON 16.08.2012 THE ASSESSEE FILED AN APPEAL BEFORE THE HON'BLE DELHI HIGH COURT, AGAINST ITAT'S ORDER DATED 20.01.2012 IN ITA 3546/DE1/2011. A COPY OF AFFIDAVIT OF SHRI KARANJIT SINGH, MANAGIN G DIRECTOR OF KOYELA INTERNATIONAL (P) LTD., CONFIRMING THE PAYMENT OF C OMMISSION OF RS.15,72,000, SERVICES RENDERED BY THEM AND THE CON TENTS OF CERTIFICATE DATED 5.12.2007. IT PROVES THAT THE EXP LANATION GIVEN BY THE ASSEESSEE WAS BONAFIED AND THEY DID BUSINESS DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-06. 7.2.1 IN SO FAR AS THE INCOME OF RS.9,38,028 FROM D IFFERENCE IN EXCHANGE IS CONCERNED, IT WAS NOTED THAT IT HAS BE EN CORRECTLY SHOWN AS INCOME FOR THE ASSESSMENT YEAR 2005-2006 AS THE DIFFERENCE IN EXCHANGE IS ADJUSTED IN THE BOOKS OF ACCOUNT AND TH E ACCOUNTS ARE AUDITED FOR EACH YEAR. THEREFORE IT ALSO CANNOT BE A CAUSE FOR IMPOSITION OF ANY PENALTY. 7.2.2 MOREOVER, AS THE ASSESSING OFFICER CONSIDERED THIS INCOME AS PERTAINING TO EARLIER YEAR HE SHOULD NOT HAVE ASSES SED IT IN THIS YEAR AS ACCORDING TO HIM IT DOES NOT PERTAIN TO THIS YEAR. 7.2.3 FROM THE ABVOE, THE ASSESSEE FIRM HAS PROVE D THE SOURCES OF INCOME, THEREFORE THE PROVISIONS OF EXPLANATION 1 ( B) TO SECTION 271 (1)(C) OF THE INCOME-TAX ACT, 1961 REPRODUCED HEREU NDER DO NOT APPLY TO ITS CASE:- 'EXPLANATION 1(B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH E XPLANATION IS BONAFIDE AND THAT ALL THE FACTS RELATING TO THE SAM E AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM'. 7.2.4 WE FURTHER NOTE THAT IN THIS CASE NO SATISFA CTION FOR CONCEALMENT WAS RECORDED FOR ADDITION OF RS.9,38,028 FOR FOREIG N EXCHANGE DIFFERENCE IN THE ASSESSMENT ORDER. IN ANY CASE WHE RE THE ASSESSING ITA NO. 1094/DEL/2012 (AY 2005-06) 6 OFFICER FINDS ANY AMOUNT AS CONCEALMENT OF INCOME I T ALWAYS INCREASES OR REDUCES THE TOTAL INCOME TO THAT EXTENT AS DECLA RED BY THE ASSESSEE. IN THIS CASE BOTH THE AMOUNTS CONSIDERED AS CONCEAL ED INCOME HAVE BEEN INCLUDED BY THEM IN THIER TOTAL INCOME, AS SUC H, THESE CANNOT BE LEGALLY TREATED AS CONCEALED INCOME. ONLY THE HEADS OF INCOME HAVE BEEN CHANGED. IT IS A SETTLED LAW THAT MERELY THE C HANGE IN THE HEAD OF INCOME ALSO CANNOT BE CONSIDERED AS CONCEALMENT OF INCOME. THEREFORE, THE AMOUNT OF RS.9,38,028 DOESN'T ATTRAC T ANY PENALTY. MERELY BY CHANGING THE HEAD OF INCOME OF RS.15,72,5 00 SHOWN AS COMMISSION BUT ASSESSED AS INCOME FROM UNDISCLOSED SOURCES CANNOT BE CONSIDERED AS CONCEALED INCOME. THIS VIEW IS SU PPORTED BY THE VARIOUS JUDGMENTS OF THE HON'BLE SUPREME COURT, DEL HI HIGH COURT AND INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH IN T HE CASES OF : I) COMMISSIONER OF INCOME TAX DELHI-XV VS. AURIC INVES TMENTS & SECURITIES LTD. (2009) 310 ITR 121 (DELHI) II) KC BUILDERS VS. ACIT (2004) 265 ITR 562 ( SC) II) COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODU CTS PVT. LTD. (2010) 322 ITR 158 (SC) 7.2.5 WE ARE OF THE CONSDIERED VIEW THAT THE CASE LAW RELIED UPON BY THE LD. DR BEFORE US, AS AFORESAID IS DISTINGUISHE D FROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 7.3 WE FURTHER NOTE THE AO OBSERVED THAT ASSESSEE F URNISHED INACCURATE PARTICULARS OF ITS INCOME AND IS LIABLE FOR PENALTY U/S 271(1)(C), WHICH DID NOT ESTABLISH FROM THE ABOVE F ACTS AND CIRCUMSTANCSE THAT HOW THE ASSESSEE HAS FURNISHED I NACCURATE PARTICULARS OF ITS INCOME. SECTION 271(1)(C) POSTUL ATES IMPOSITION OF ITA NO. 1094/DEL/2012 (AY 2005-06) 7 PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AN D CONCEALMENT OF INCOME. IN THIS REGARD, WE DRAW OUR SUPPORT FROM T HE DECISION OF THE HON'BLE CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2 010) 322 ITR-158 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS HELD TH AT 'WHERE THERE IS NO FINDINGS THAT ANY DETAILS SUPPLIED BY THE ASSESS EE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE ISNO QUESTION OF INVITING THE PENALTY U/SEC. 271(1)(C) OF THE ACT. A MERE MAK ING A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT OF FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING A IN ACCURATE PARTICULARS OF INCOME. AS THE ASSESSEE HAS FURNISHED ALL THE DE TAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCURATE NOR COU LD BE VIEWED AS THE CONCEALMENT OF INCOME ON ITS PART. IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT. MERELY, BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WA S NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINI ON, ATTRACT THE PENALTY U/SEC. 271(1)(C). IF WE ACCEPT THE CONTENTION OF TH E REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY U/SEC. 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLAT URE'. 7.4 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HA S NOT FURNISHED ITA NO. 1094/DEL/2012 (AY 2005-06) 8 INACCURATE PARTICULARS OF INCOME AND THERE ARE NO F INDINGS OF THE ASSESSING OFFICER AND THE CIT (APPEALS) THAT THE DE TAILS FURNISHED BY THE ASSESSEE IN HIS RETURN ARE FOUND TO BE INACCURA TE OR ERRONEOUS OR FALSE. UNDER THESE CIRCUMSTANCES, IN OUR VIEW THE P ENALTY IN DISPUTE IS TOTALLY UNWARRANTED AND DESERVE TO BE DELETED. ACC ORDINGLY, WE DELETE THE PENALTY OF RS. 9,18,665/- MADE U/S. 271(1)(C) O F THE I.T. ACT AND CANCEL THE ORDERS OF THE AUTHORITIES BELOW ON THE I SSUE IN DISPUTE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 04/1/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES