Septu India (P) Ltd, Gurgaon V. ACIT, Gurgaon

ITA 1194/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8146 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-06-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 30-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAMITA
• Assessee Lawyers: S R WADHWA
• Keywords: Unexplained cash credit
• Section: 271(1)(c); 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `D : NEW DELHI) BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL ITA NO.1194/DEL./2009 (ASSESSMENT YEAR : 2002-03) SEPTU INDIA (P) LTD., VS. ACIT, CIRCLE 12/7, URBAN ESTATE, GURGAON. GURGAON (PAN/GIR NO.AAFCS0224A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.R. WADHWA, ADV. REVENUE BY : MS. NAMITA PANDEY, SR.DR ORDER PER K.G. BANSAL, AM THIS APPEAL OF THE ASSESSEE EMANATES FROM THE ORDER OF THE LD.COMMISSIONER OF INCOME-TAX (APPEALS), PANCHKULA, PASSED ON 19.1.200 9 IN APPEAL NO.9/GGN/08-09 AND IT PERTAINS TO ASSESSMENT YEAR 2002-03. THE ASSESSEE HAS TAKEN UP FOUR SUBSTANTIVE GROUNDS IN THE APPEAL, THE SUM AND SUBSTANCE OF WHICH IS TH AT THE LD.CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY OF RS.78,076 U/S 271(1)(C) OF T HE ACT. IT IS MENTIONED THAT THE PENALTY IS NOT IMPOSABLE AS TRADE CREDIT WAS WRONGLY TREATE D AS UNEXPLAINED CASH CREDIT U/S 68. IT IS FURTHER MENTIONED THAT THE PENALTY WAS NOT IMPOS ABLE AS THE ASSESSMENT FINALLY RESULTED INTO A LOSS. HOWEVER, GROUND NO.4 TO THE AFORESAID EFFECT WAS NOT PRESSED IN THE COURSE OF THE HEARING BEFORE US. IT IS ALSO MENTIONED THAT T HE ORDER PASSED BY THE LD.CIT(A) WAS BAD IN LAW AND ON FACTS. 2. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME DECLARING LOSS OF RS.42,12,240 WAS FILED ON 31.10.02. THE ASSESSMENT WAS COMPLETE D U/S 143(3) ON 24.3.05 AT LOSS OF RS.37,38,700. WHILE COMPLETING THE ASSESSMENT, AN AMOUNT OF RS.2,18,700 WAS REDUCED FROM THE LOSS. THIS AMOUNT REPRESENTED A CREDIT IN THE BOOKS OF THE ASSESSEE. PENALTY PROCEEDINGS WERE ALSO INITIATED IN THE COURSE OF AS SESSMENT, WHICH WERE COMPLETED ON ITA NO.1194/DEL./2009 (ASSESSMENT YEAR : 2002-03) 2 28.3.2008. IN THIS ORDER, IT WAS HELD THAT THE ASS ESSEE FAILED TO OFFER AN EXPLANATION IN RESPECT OF THE CREDIT OF RS.2,18,700. THEREFORE, P ENALTY OF RS.78,076 WAS LEVIED, REPRESENTING THE MINIMUM PENALTY LEVIABLE UNDER THE SECTION. AGGRIEVED BY THE ORDER, THE ASSESSEE MOVED APPEAL BEFORE THE LD.CIT(A), PAN CHKULA. THE CIT(A) CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS BEFORE HIM. IT W AS MENTIONED THAT THE ADDITION MADE BY THE AO, AMOUNTING TO RS.2,18,700 WAS UPHELD BY THE LD.CIT(A) BY STATING THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE CONFIRMATION FROM THE CREDITOR ALTHOUGH IT WAS SUBMITTED THAT THE CREDITOR WAS A WELL-KNOWN PERSON , BEING THE CONFEDERATION OF INDIAN INDUSTRIES (CII), WHICH INTER-ALIA HOLDS EXHIBITION S IN PURSUANCE OF ITS OBJECTS. THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE CRE DIT EVEN IN THE PENALTY PROCEEDINGS. A REFERENCE WAS MADE TO THE PROVISION CONTAINED IN EX PLANATION 1 TO SECTION 271(1)(C) OF THE ACT. RELYING ON THIS PROVISION, IT WAS HELD TH AT THE AMOUNT IN RESPECT OF WHICH THE EXPLANATION WAS NOT FURNISHED IS DEEMED TO BE THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE EXPLANATION. IT WAS ALSO STATED THAT THE MOUNT HAS NOT BEEN PAID EVEN TILL NOW AFTER LAPSE OF A LONG PERIOD OF TIME. THEREFORE, THE ACTION OF THE AO WAS UPHELD. 3. BEFORE US, THE LD.COUNSEL REFERRED TO PARAGRAPH 2 OF THE STATEMENT OF FACTS FILED BEFORE THE LD.CIT(A), IN WHICH IT WAS SUBMITTED THA T THE ASSESSEE TOOK PART AN EXHIBITION, WHICH WAS ORGANIZED BY THE CII. THE TOTAL AMOUNT P AYABLE FOR BOOKING THE SPACE IN THE EXHIBITION WAS RS.3,68,020, WHICH INCLUDED SECURITY DEPOSIT OF RS.31,320. THE ASSESSEE PAID TWO SUMS OF RE.1 LAKH AND RS.1,000 IN JANUARY, 2001 AND FEBRUARY, 2001, RESPECTIVELY. THE BALANCE AMOUNT OF RS.2,26,700 WA S ALSO PAID IN FEBRUARY, 2001. THE CHEQUE WAS NOT ENCHASED BY THE CII. THEREFORE, THE ENTRY WAS REVERSED IN THE SUBSEQUENT FINANCIAL YEAR 2001-02, RELEVANT TO ASSESSMENT YEAR 02-03. FURTHER, HE DREW OUR ATTENTION TOWARDS PAGES 50 AND 53 OF THE PAPER BOOK, WHICH CO NTAIN THE BILL DATED 23.12.2000 FROM CII FOR RS.3,68,020; THE BREAK-UP OF THE BILL; RE CEIPT OF RE.1 LAKH DATED 08.01.2001 AND THE LEDGER ACCOUNT OF THE CII FOR THE PERIOD 01.04. 2000 TO 31.03.2001, SHOWING CREDIT OF RS.3,68,020 AND DEBIT OF RE.1 LAKH. PAGE 54 CONTAI NS THE LEDGER ACCOUNT FOR THIS YEAR WHICH SHOWS CREDIT OF RS.2,26,700 WITH THE NARRATIO N CHEQUE RETURN AFTER SIX MONTHS. IT MAY BE MENTIONED HERE THAT THE PAPER BOOK OF THE ASSESSEE STARTS FROM PAGE 50. ON THE ITA NO.1194/DEL./2009 (ASSESSMENT YEAR : 2002-03) 3 BASIS OF THESE FACTS, IT WAS SUBMITTED THAT THE TRA NSACTION PERTAINED TO THE IMMEDIATELY PRECEDING YEAR IN WHICH THE WHOLE OF THE AMOUNT WAS PAID TO THE CII, BUT THE CREDIT IN THIS YEAR AROSE ON ACCOUNT OF REVERSAL OF AN ENTRY OF RS .2,26,700 ON ACCOUNT OF NON- PRESENTATION OF CHEQUE BY THE CII. AFTER MAKING SO ME ADJUSTMENT, AN AMOUNT OF RS.2,18,700 WAS CARRIED FORWARD TO FINANCIAL YEAR 2 002-03. IN THE LIGHT OF THE BILL OF THE CII AND OTHER EVIDENCES, IT WAS ARGUED THAT THE ASS ESSEE HAD DISCLOSED ALL THE FACTS AND THE BALANCE REPRESENTED THE OUTSTANDING AMOUNT PAYABLE TO THE CII. THUS, IT WAS ARGUED THAT THE LEVY OF PENALTY WAS BAD IN LAW. 4. IN REPLY, THE LD.DR RELIED ON THE ORDER OF THE A SSESSING OFFICER, IN WHICH IT WAS HELD THAT THE CREDIT WAS NOT SATISFACTORILY EXPLAIN ED U/S 68 OF THE ACT. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND RIV AL SUBMISSIONS. FROM THE FACTS NARRATED ABOVE, IT IS SEEN THAT THE ASSESSEE HAD IN CURRED AN EXPENDITURE OF RS.3,68,020 IN ASSESSMENT YEAR 2001-02 FOR THE PURPOSE OF ADVERTIS EMENT BY HIRING SPACE IN THE EXHIBITION ORGANIZED BY THE CII. THE BILL AMOUNT WAS PAID BY WAY OF THREE CHEQUES, BUT THE CHEQUE OF RS.2,26,700 WAS NOT ENCASHED BY THE C II. THEREFORE, THE PAYMENT REPRESENTED BY THIS ENTRY WAS REVERSED IN THIS YEAR . IT WAS NOT A CASE WHERE ANY FRESH MONEY WAS INTRODUCED IN THE BOOKS OF ACCOUNT EITHER BY WAY OF CASH OR BY WAY OF CHEQUE. THE REVENUE HAS ALSO NOT PROVED THAT THE L IABILITY OF RS.2,26,700 CEASED TO EXIST AND THE ASSESSEE AVAILED ANY BENEFIT IN RESPECT OF THIS EXPENDITURE IN THIS YEAR SO AS TO ATTRACT THE PROVISIONS OF SECTION 41(1). THEREFORE , THE EXPLANATION FURNISHED BY THE ASSESSEE IS BONA-FIDE. THUS, NO CASE HAS BEEN MADE BY THE LOWER AUTHORITIES FOR LEVY OF PENALTY. IN THE ABSENCE OF THAT, THE LEVY OF DELET ED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. 7. ORDER PRONOUNCED IN OPEN COURT ON 19 TH JUNE, 2009. (R.P. TOLANI) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: JUNE 19, 2009. *SKB* ITA NO.1194/DEL./2009 (ASSESSMENT YEAR : 2002-03) 4 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-, PANCHKULA, HARYANA. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT