Pawan Kumar Malhotra, Prop., Faridabad V. ITO, Faridabad

ITA 1116/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7679 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 16-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL SENIOR
• Assessee Lawyers: K C SINGHAL
• Keywords: Opportunity of being heard
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH F FF F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 1116/DEL/2012 1116/DEL/2012 1116/DEL/2012 1116/DEL/2012 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, PROP. M/S NEUMANN PROP. M/S NEUMANN PROP. M/S NEUMANN PROP. M/S NEUMANN ENGIN ENGIN ENGIN ENGINEERING WORKS, EERING WORKS, EERING WORKS, EERING WORKS, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, FARIDABAD (HARYANA). FARIDABAD (HARYANA). FARIDABAD (HARYANA). FARIDABAD (HARYANA). PAN : ABOPM2836N. PAN : ABOPM2836N. PAN : ABOPM2836N. PAN : ABOPM2836N. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -1(5), 1(5), 1(5), 1(5), FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C. SINGHAL, ADVOCATE. RESPONDENT BY : SHRI AMRIT LAL, SENIOR DR. ITA N ITA N ITA N ITA N O OO O .4065/DEL/2009 .4065/DEL/2009 .4065/DEL/2009 .4065/DEL/2009 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2007 2007 2007 2007 - -- - 08 0808 08 SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, PROP. M/S NEU MANN PROP. M/S NEU MANN PROP. M/S NEU MANN PROP. M/S NEU MANN ENGINEERING WORKS, ENGINEERING WORKS, ENGINEERING WORKS, ENGINEERING WORKS, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, 16/4, MATHURA ROAD, FARIDABAD (HARYANA). FARIDABAD (HARYANA). FARIDABAD (HARYANA). FARIDABAD (HARYANA). PAN : ABOPM2836N. PAN : ABOPM2836N. PAN : ABOPM2836N. PAN : ABOPM2836N. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -1(5), 1(5), 1(5), 1(5), FARIDABAD. FARIDABAD. FARIDABAD. FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA AND SHRI SOMIL AGRAWAL, ADVOCATES. RESPONDENT BY : MRS. NANDITA KANCHAN, CIT - DR. DATE OF HEARING : 16.05.2016 16.05.2016 16.05.2016 16.05.2016 DATE OF PRONOUNCEMENT : 19.05.2016 19.05.2016 19.05.2016 19.05.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - ITA-1116/DEL/2012 & 4065/DEL/2009 2 ITA NO.1116/ ITA NO.1116/ ITA NO.1116/ ITA NO.1116/DEL/2012 : DEL/2012 : DEL/2012 : DEL/2012 :- -- - THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A), FARIDA BAD DATED 1 ST DECEMBER, 2011. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW , THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE IMPUGNED ADDITION OF RS.5,71,59,665/- U/S 41(1) OF IT ACT 1961 IN AS MUCH AS THERE WAS NO MATERIAL ON RECORD TO PROVE THAT THERE WAS CESSATION OF LIABILITY. HE WAS NOT LEGALLY JUSTIFIED IN PRESUMING THAT CONDITIONAL SURRENDER IMPLIEDLY AMOUNTED TO CESSATION OF LIABILITY. 2. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE IMPUGNED ADDITION OF RS.5,71,59,665/- IS NOT LEGALLY JUSTIFIED UNDER ANY OTHER SECTION. 3. THAT IMPUGNED ADDITION COULD NOT BE LEGALLY JUSTI FIED BY THE CIT(A) MERELY ON THE BASIS OF CONDITIONAL SURRE NDER SINCE THERE IS NO ESTOPPEL AGAINST LAW. 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) WAS NOT JUSTIFIED IN REJECTING THE APPLICA TION OF THE APPELLANT UNDER RULE 46A OF IT RULES 1962. 5. THAT CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE LEVY OF INTEREST U/S 234B. 6. THE APPELLANT CRAVES TO ADD, OR AMEND THE GROUNDS OF APPEAL, IF REQUIRED AND NECESSARY. IT IS THEREFORE PRAYED THAT THE IMPUGNED ADDITION SU STAINED BY THE CIT(A) BE DELETED OR SUCH OTHER SUITABLE RELIE F BE ALLOWED WHICH THE HONBLE BENCH MAY DEEM FIT. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES IN COME FROM THE BUSINESS OF MANUFACTURING OF SHEET METAL COMPONENTS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED THE TOTA L INCOME OF ITA-1116/DEL/2012 & 4065/DEL/2009 3 `4,76,763/-. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE WAS ASKED TO PRODUCE CONFIRMATIONS OF CREDITORS, THE DETAILS OF WHICH ARE GIVEN IN PARAGRAPH 4 OF THE ASSESSMENT ORD ER, WHICH READ AS UNDER:- 4. DURING THE COURSE OF ASSESSMENT PROCEEDING THE A SSESSEE WAS ASKED TO PRODUCE THE CONFIRMATION OF FOLLOWING CRED ITORS : S.NO. NAME OF CREDITORS CREDIT BALANCE AS ON 31.03.2007 1. NIDHI ENTERPRISES 14120359.31 2. ANKIT INDUS TRIAL CORP. 3543984.95 3. AYUSHI STEELS CO.PVT.LTD. 11232284.98 4. BHAGWATI TRADING CO. 10916484.98 5. S.B. INDL.CORP. 17346552.00 TOTAL 57159665.46 4. THE ASSESSEE, INSTEAD OF FURNISHING THE CONFIRMATION, HAS STATED THAT HE IS NOT IN A POSITION TO CONFIRM THESE CREDITOR S AND, THEREFORE, HE OFFERED TO SURRENDER THESE CREDITS AMOUNTING TO `5,71, 59,665/- AS HIS INCOME SUBJECT TO NO PENAL ACTION. THE ASSESSING OFFICE R COMPLETED THE ASSESSMENT BY MAKING THE ADDITION OF `5,71,59,665/- . THOUGH IN THE ASSESSMENT ORDER HE INITIATED THE PENALTY PROCEEDI NGS, BUT, THE SAME WERE DROPPED VIDE ORDER DATED 24 TH MARCH, 2009. THE ASSESSEE ALSO ACCEPTED THE ASSESSMENT ORDER AND DID NOT FILE ANY APPEAL. HOWEVER, THE CIT INITIATED PROCEEDINGS U/S 263 VIDE SH OW CAUSE NOTICE DATED 31 ST AUGUST, 2009. THEREAFTER, THE ASSESSEE FILED THE APPEA L BEFORE THE CIT(A) AGAINST THE ASSESSMENT ORDER DATED 12 TH MARCH, 2009 WITH THE APPLICATION FOR CONDONATION OF DELAY. THE CIT, VIDE ORDER DATED 9 TH SEPTEMBER, 2009, SET ASIDE THE PENALTY ORDER DATED 2 4 TH MARCH, 2009 BY WHICH THE ASSESSING OFFICER HAS DROPPED T HE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT. ITA-1116/DEL/2012 & 4065/DEL/2009 4 5. LEARNED CIT(A) CONDONED THE DELAY AND ADMITTED T HE APPEAL. HOWEVER, ON MERITS, HE SUSTAINED THE ADDITION U/S 41(1) HOLDING THAT THE OUTSTANDING LIABILITIES CEASED TO EXIST. HE HELD TH AT AS SOON AS INQUIRIES WERE INITIATED BY THE ASSESSING OFFICER ASKING THE ASSESSEE TO FURNISH THE CONFIRMATION OF THE CREDITORS, THE ASSESSEE SU RRENDERED THE AMOUNT. IT IMPLIEDLY MEANS THAT THE OUTSTANDING AMOU NTS WERE NO LONGER PAYABLE. THE ASSESSEE, AGGRIEVED WITH THE ORDER OF LEARNED CIT(A), IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED AT LENGTH SO AS TO JUSTIFY THAT THE ADDITION SUSTAINED BY THE LEARNED CI T(A) U/S 41(1) IS UNCALLED FOR. HE ALSO RELIED UPON SEVERAL DECISIONS. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) AND HE STATED THAT THE ASSESSEE DID NOT FURNISH ANY DETAIL BEFORE THE ASSESSING OFFICER BUT, ON THE OTHER H AND, HE SURRENDERED THE AMOUNT. ON THESE FACTS, LEARNED CIT(A ) WAS FULLY JUSTIFIED IN DRAWING THE INFERENCE THAT THE LIABILIT Y HAS CEASED OTHERWISE THE ASSESSEE WOULD HAVE FURNISHED THE NECESSARY CONFIRMAT ION FROM THE CREDITORS. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AN D HAVE PERUSED THE MATERIAL PLACED BEFORE US. IN OUR OPINIO N, THE MATTER NEEDS FURTHER EXAMINATION AT THE END OF THE ASSESSING OF FICER. THE ASSESSING OFFICER STARTED THE INVESTIGATION INTO THE MATT ER BY ASKING THE ASSESSEE TO FURNISH THE CONFIRMATION FROM CERTAIN CR EDITORS. THE ASSESSEE, INSTEAD OF FURNISHING THE CONFIRMATION, SURRENDE RED THE AMOUNT. THEREFORE, THE ASSESSING OFFICER STOPPED FURTHE R INVESTIGATION INTO THE MATTER AND COMPLETED THE ASSESSMENT BY ACCEPTI NG THE SURRENDER MADE BY THE ASSESSEE. THE ASSESSEE HAD ALSO ACCEPT ED THE ASSESSMENT ORDER BUT DUE TO SUBSEQUENT DEVELOPMENT, THE A SSESSEE ITA-1116/DEL/2012 & 4065/DEL/2009 5 FILED THE APPEAL. ONCE THE ASSESSEE IS AGITATING THE A DDITION, IT WOULD BE IN THE FITNESS OF THINGS THAT THE ASSESSING OFFICER IS ALLOWED AN OPPORTUNITY TO INVESTIGATE THE MATTER WHICH HE INTE NDED TO DO BUT HAD STOPPED BECAUSE OF SURRENDER OF INCOME BY THE ASSESSEE. W E, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICE R AND DIRECT HIM TO READJUDICATE THE ISSUE AFRESH AFTER MAKING PROPER INVE STIGATION IN THE MATTER AS HE DEEMS FIT. NEEDLESS TO MENTION THAT HE WI LL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WH ILE READJUDICATING THE ISSUE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.4065/DEL/2009 : ITA NO.4065/DEL/2009 : ITA NO.4065/DEL/2009 : ITA NO.4065/DEL/2009 :- -- - 9. THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 -08 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT, FARIDABAD DATED 9 TH SEPTEMBER, 2009 PASSED U/S 263 OF THE ACT WHEREIN THE CIT HAS SET ASIDE THE ORDER OF THE ASSESSING OFFICER DATED 24 TH MARCH, 2009. 10. WHILE DECIDING THE ASSESSEES APPEAL VIDE ITA NO.111 6/DEL/2012, WE HAVE SET ASIDE THE ISSUE OF ADDITION OF `5,71,59,665 /- U/S 41(1) TO THE FILE OF THE ASSESSING OFFICER. ONCE THE ADDITION I TSELF HAS BEEN SET ASIDE TO THE FILE OF THE ASSESSING OFFICER, ORDER U/S 263 HAS BECOME INFRUCTUOUS BECAUSE, BY ORDER U/S 263, LEARNED CIT H AS SET ASIDE THE PENALTY ORDER DATED 24 TH MARCH, 2009 WHEREIN THE ASSESSING OFFICER HAS DROPPED THE PENALTY PROCEEDINGS INITIATED U/S 271( 1)(C). ONCE THE ADDITION IN RESPECT OF WHICH THE PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED IS SET ASIDE, IT CANNOT BE SAID THAT THE PENALTY ORDER DATED 24 TH MARCH, 2009 WAS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS ITA-1116/DEL/2012 & 4065/DEL/2009 6 OF THE REVENUE. IN THE PRESENT CIRCUMSTANCES, WE, THE REFORE, QUASH THE ORDER PASSED BY THE LEARNED CIT U/S 263 DATED 9 TH SEPTEMBER, 2009. HOWEVER, BEFORE WE PART WITH THE MATTER, WE MAY MENTION THAT THE ASSESSING OFFICER WILL BE AT LIBERTY TO REINITIATE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WHILE GIVING EFFECT TO OUR ORDER IN ITA NO.1116/DEL/2012, IF THE FACTS SO WARRANT. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE D EEMED TO BE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 19.05.2016. SD/- SD/- (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, SHRI PAWAN KUMAR MALHOTRA, PROP. M/S NEUMANN ENGINEERING WORKS, PROP. M/S NEUMANN ENGINEERING WORKS, PROP. M/S NEUMANN ENGINEERING WORKS, PROP. M/S NEUMANN ENGINEERING WORKS, 16/4, MATHURA ROAD, FARIDABAD (HARYANA). 16/4, MATHURA ROAD, FARIDABAD (HARYANA). 16/4, MATHURA ROAD, FARIDABAD (HARYANA). 16/4, MATHURA ROAD, FARIDABAD (HARYANA). 2. RESPONDENT : INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD- -- -1(5), FARIDABAD. 1(5), FARIDABAD. 1(5), FARIDABAD. 1(5), FARIDABAD. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR