Dishman Pharmaceuticals & Chemicals Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 1138/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85713 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: TUSHAR P HEMANIAR
• Keywords: Unexplained cash credit; Principle of natural justice
• Section: 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , , , , , ,, , BEFORE SHRI MUKUL KUMAR SHRAWAT , JUDICIAL MEMBER AND , SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER , !' ! # $ ! # $ ! # $ ! # $ ITA NO. 1138/AHD/2011 ASSESSMENT YEAR :2004-05 M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD., BHADRARAJ CHAMBERS, NR. SWASTIK CROSS ROADS, NAVRANGPURA, AHMEDABAD V/S . THE ACIT (OSD), RANGE-1, AHMEDABAD PAN NO. AAACD4164D (APPELLANT) .. (RESPONDENT) %& ' ( ! /BY APPELLANT SHRI TUSHAR P. HEMANI, A.R. )*%& ' ( ! /BY RESPONDENT SHRI DINESH SINGH, SR. D.R. + ' ' /DATE OF HEARING 13.02.2015 ,-. ' ' /DATE OF PRONOUNCEMENT 20.02.2015 O R D E R PER : SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT(A)-VI, AHMEDABAD, DATED 03.03.2011 FOR THE ASSESSMENT YEAR 2004-05. 2. THE FACTS AS CULLED OUT FROM THE MATERIALS ON RE CORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF MANUFACTURING OF BULK DRUGS AND FINE CHEMICALS. TH E ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 04-05 DECLARING TOTAL INCOME AT RS.3,17,30,999/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED I.T.A. NO. 1138/AHD/2011 A.Y. 04-05 (M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. THE ACIT(OSD) PAGE 2 U/S.143(3) VIDE ORDER DATED 29.12.2006 AND THE TOTA L INCOME WAS DETERMINED AT RS.8,38,88,973/- BY INTER ALIA MAKING ADDITION W ITH RESPECT TO DIVIDEND INCOME OF RS.27,993/-, DISALLOWANCE OF DOMESTIC AND FOREIGN TRAVEL OF RS.1,33,825/- AND UNEXPLAINED CASH CREDIT OF RS.15 LACS, WHICH WAS ALSO CONFIRMED BY CIT(A) AND ON AFORESAID ADDITIONS WHIC H WERE CONFIRMED BY CIT(A), A.O. VIDE PENALTY ORDER DATED 27.03.2009 LE VIED PENALTY OF RS.5,96,176/- U/S. 271(1)(C) OF THE ACT. AGGRIEVED BY THE AFORESAID ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO VIDE ORDER DATED 03.03.2011 CONFIRMED THE PENALTY ONLY ON ADDITION O F UNEXPLAINED CASH CREDIT. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), ASSESSE E IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT ON DISALLOWANCE OF RS. 15,00,000/- BEING UNEXPL AINED CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 2. THE PENALTY LEVIED IS WHOLLY UNSUSTAINABLE IN LA W AND ON FACTS AND AS SUCH THE APPELLANT COULD NOT BE CHARGED WITH ANY GU ILT OF FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PART ICULARS OF INCOME WITHIN MISCHIEF OF SECTION 271(1 )(C) OF THE ACT. T HE LEVY OF PENALTY BEING WITHOUT JURISDICTION AND TOTALLY UNCALLED FOR , DESERVES TO BE QUASHED. 3. IN ANY CASE, THE IMPUGNED PENALTY ORDER IS BARRE D BY LIMITATION AND THUS WITHOUT JURISDICTION AND ILLEGAL. 4. IN ANY CASE, QUANTIFICATION OF THE PENALTY IS E RRONEOUS AND EXCESSIVE. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN INITIATING AND LEVYING PENALTY UNDE R SECTION 271(1)(C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMPLATED UNDER THE ACT AT THE TIME OF FRAMING THE ASSESSMENT ORDER. I.T.A. NO. 1138/AHD/2011 A.Y. 04-05 (M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. THE ACIT(OSD) PAGE 3 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED I N GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 4. BEFORE US, LD. A.R. SUBMITTED THAT THOUGH VARIOU S GROUNDS HAVE BEEN RAISED BUT THE ISSUE IS ONLY RESPECT TO LEVY OF PEN ALTY U/S. 271(1)(C) ON UNEXPLAINED CASH CREDIT. 5. BEFORE US, LD. A.R. SUBMITTED THAT ASSESSEE HAD PURCHASED RAW MATERIALS FROM SOME PARTIES AND ON BEHALF OF ASSESS EE THE PAYMENTS WERE MADE BY JANKI SHAH (RS. 7 LACS), PIYUSH G. SHAH (RS . 5.5 LACS) AND PIYUSH G. SHAH HUF (RS.2.5 LACS). HE FURTHER SUBMITTED THAT AFORESAID SUM WERE NOT CASH CREDITS BUT WERE TRADE CREDITS AND THEY CANNOT BE TREATED AS CASH CREDIT FOR THE PURPOSE OF MAKING ADDITION U/S. 68. HE FUR THER SUBMITTED THAT A.O. NEVER DOUBTED THE PURCHASES MADE FROM THE CONCERNED PERSONS TO WHOM THE AFORESAID PERSONS HAVE MADE PAYMENTS. HE FURTHER S UBMITTED THAT ONCE THE FIGURES OF PURCHASES AND CORRESPONDING SALES ARE NO T DOUBTED, THE BALANCES OF TRADE CREDITORS WHO HAVE MADE PAYMENTS TO THE CO NCERNED PERSONS ON BEHALF OF ASSESSEE CANNOT BE TREATED AS UNEXPLAINED CASH CREDITS. HE FURTHER SUBMITTED THAT ASSESSEE HAD FURNISHED FULL DETAILS OF THE AFORESAID PERSONS AND THUS, HAD DISCHARGED INITIAL BURDEN CAST ON IT. HE FURTHER SUBMITTED THAT QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE DIS TINCT AND DIFFERENT AND SECTION 68 CREATES A LEGAL FICTION WHEREBY CASH CRE DITS RECEIVED ARE DEEMED I.T.A. NO. 1138/AHD/2011 A.Y. 04-05 (M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. THE ACIT(OSD) PAGE 4 TO BE UNEXPLAINED FOR WANT OF NECESSARY EVIDENCES A ND CONSEQUENTLY ADDITION IS MADE U/S.68. HE FURTHER SUBMITTED THAT WHEN ADD ITION IS MADE BY INVOKING LEGAL FICTION IT IS NOT NECESSARY THAT PENALTY U/S. 271(1)(C) SHOULD ALSO BE LEVIED. LD. A.R. FURTHER SUBMITTED THAT THE TOTAL TURN OVER OF THE ASSESSEE WAS IN EXCESS OF RS.50 CRORE AND THE PROFITS OF BUSINES S WAS IN EXCESS OF RS.3.26 CRORE. IN SUCH CASES, IT WOULD BE HIGHLY IMPROBABL E THAT ASSESSEE WOULD INDULGE IN FURNISHING INACCURATE PARTICULARS WITH R ESPECT TO RS.15 LACS WHICH IS A VERY SMALL FIGURE AS COMPARED TO THE TURNOVER AND PROFIT TO AVOID THE TAX LIABILITY. HE ALSO RELIED ON THE DECISION IN CASE OF AMITABH CONSTRUCTION P. LTD. VS. ACIT, 335 ITR 523 (JHARKHAND), CIT VS. PANCHAM DASS JAIN, 156 TAXMAN 50 (ALLAHABAD) AND THE DECISION IN CASE OF RELIANCE PETROPRODUCTS PVT. LTD. REPORTED IN 322 ITR 158 (SC). HE THEREFORE SUBMITTED THAT THE PENALTY LEVIED U/S. 271(1)(C) BE DELETED. LD. D.R. ON THE OTHER H AND SUPPORTED THE ORDERS OF A.O. AND CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACTS THAT ON THE ADDITI ON OF RS.15 LACS MADE U/S. 68 BY A.O. PENALTY U/S. 271(1)(C) HAS BEEN LEVIED BY A .O., WHICH HAS ALSO BEEN CONFIRMED BY CIT(A). IT IS ALSO A FACT THAT ASSESS EE HAS DISCLOSED ALL THE MATERIAL FACTS BEFORE THE A.O. AND HAS ALSO SUBMITT ED THE EXPLANATION WHICH HAS NOT BEEN FOUND TO BE FALSE. IT IS A WELL SETTL ED LAW THAT PENALTY PROCEEDINGS ARE ENTIRELY DISTINCT FROM ASSESSMENT P ROCEEDINGS AND HOWEVER RELEVANT AND GOOD, THE FINDINGS IN ASSESSMENT PROCE EDINGS MAY NOT BE CONCLUSIVE SO FAR AS PENALTY PROCEEDINGS ARE CONCER NED. IT IS WELL SETTLED THAT I.T.A. NO. 1138/AHD/2011 A.Y. 04-05 (M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. THE ACIT(OSD) PAGE 5 THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADD ITION MADE IN THE ASSESSMENT PROCEEDINGS IS DIFFERENT FROM THE PENALTY IMPOSED O N ACCOUNT OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF IN COME AND THAT CERTAIN DISALLOWANCE/ADDITIONS COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDINGS ON THE PREPONDERANCE OF PROBABILITIES BUT NO PENALT Y COULD BE IMPOSED U/S.271( 1 )(C) OF THE ACT ON PREPONDERANCE OF PROB ABILITY AND THE REVENUE HAS TO PROVE THAT THE CLAIM OF THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED ITS TAX LIABILITY. FURTHER MERELY BECAUSE ADDITIONS HA VE CONFIRMED IN APPEAL OR NO APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ADDITIONS MADE, IT CANNOT BE THE SOLE GROUND FOR COMING TO THE CONCLUSION THAT ASSES SEE HAS CONCEALED ANY INCOME. CONSIDERING THE AFORESAID AND PECULIAR FAC TS OF THE CASE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, NO CASE FOR PENA LTY HAS BEEN MADE. WE THUS DIRECT THE DELETION OF PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/02/2015 SD/- SD/- ( MUKUL KUMAR SHRAWAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA !/ !/ !/ !/ ' '' ' )0 )0 )0 )0 1!0. 1!0. 1!0. 1!0. / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )*%& / RESPONDENT 3. 6 / CONCERNED CIT 4. 6- / CIT (A) 5. 0:; ) , , / DR, ITAT, AHMEDABAD I.T.A. NO. 1138/AHD/2011 A.Y. 04-05 (M/S. DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. THE ACIT(OSD) PAGE 6 6. ;=> ?@ / GUARD FILE. BY ORDER/ !/ !, A/ C , $