DCIT, CHENNAI V. Shri R.Bhujangan, CHENNAI

ITA 1352/CHNY/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8317 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-08-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 24-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: V KAMAN
• Keywords: Difference of opinion
• Section: 271(1)(c); 133(6); 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL M EMBER) ..... I.T.A. NOS. 1352 / MDS/2009 ASSESSMENT YEAR: 2006-07 THE D.C.I.T, BUSINESS CIRCLE X, KANNAMMAL BUILDING 3 RD FLOOR, 611 ANNA SALAI CHENNAI 600 006 (APPELLANT) V. SHRI R. BHUJANGAN NEW NO. 298, OLD NO. 101 M.S. KOVIL STREET, ROYAPURAM CHENNAI 600 013. PAN : AAPR 6287 N (RESPONDENT) ASSESSEE BY : SHRI V. KAMAN DEPARTMENT BY : SHRI P.B. SEKARAN O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE LD. CIT(A) FOR THE IMPUGNED ASSESSMENT YEAR 2006-07, DE LETING PENALTY OF RS. 5,33,632/- LEVIED ON ASSESSEE BY THE ASSESSI NG OFFICER U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 [IN SHORT, TH E ACT]. 2. SHORT FACTS GIVING RISE TO THIS PENALTY ARE THAT ASSESSEE, WHO WAS DOING BUSINESS AS CLEARING AGENT AT CHENNAI POR T TRUST, HAD FILED I.T.A. NOS. 1352/MDS/2009 2 RETURN OF INCOME ADMITTING TOTAL INCOME OF RS. 16, 24,891/-. DURING THE COURSE OF ASSESSMENT, IT WAS NOTED THAT ASSESSI NG OFFICER ISSUED NOTICE U/S 133(6) OF THE ACT TO VARIOUS SUNDRY CRED ITORS OF THE ASSESSEE. ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF SUNDRY CREDITORS BY ASSESSING OFFICER. VIDE ITS LETTER DAT ED 30.4.2008, ASSESSEE EXPLAINED THE POSITION REGARDING SUNDRY CR EDITORS AS UNDER: THE POSITION WITH REGARD TO SUNDRY CREDITORS IS AS FOLLOWS FOR THE ASST. YEAR 2006-07 NAME OPENING BALANCE OF FERED AS INCOME FOR THE A.Y. 2007-08 BALANCE BALU & CO. 689844-75 94602-42 585242-33 JAYALAKSHMI TRANSPORT 470000-00 NIL 470000-00 LEADKING AIRSERVICES PVT. LTD. 520770-50 NIL 520770-50 R.S. NATHAN & BROS 790307-65 790307-65 NIL S.M. KESAVARAM & CO. 300397-58 300397-58 NIL TOTAL 2771320-48 1185307-65 1586012-83 I.T.A. NOS. 1352/MDS/2009 3 THE ABOVE CREDITORS WERE OUR CLIENTS AND THE CREDIT S AROSE IN THE NORMAL COURSE OF BUSINESS. THE AMOUNT WAS HELD BACK BY US DUE TO CERTAIN DIFFERENCE OF OPINION WITH REGARD TO BUSINESS TRANSACTIONS. WE WISHED TO CONTINUE THE B USINESS AND ADJUST THE ULTIMATE AMOUNTS AGAINST THE FUTURE BUSINESS. THE PARTIES WERE NOT AVAILABLE DUE TO CHANGE OF ADD RESS ETC. WE COULD NOT RETURN THE AMOUNTS TO THE PARTIES FOR THE VARIOUS REASONS AS THERE WERE DISPUTES IN THE BUSIN ESS TRANSACTIONS. THE PARTIES WERE FREE TO MAKE THE DE MANDS AGAINST US AT ANY TIME. HENCE, WE COULD NOT WRITE BACK THE AMOUNTS AS INCOME. CONSIDERING THE DATES OF TRANSA CTION AND ALSO THE LAPSE OF TIME, WE HAD OFFERED A PORTION OF THE DUES AS INCOME IN THE ASSESSMENT FOR THE YEAR 2007-08 AS ABOVE AS THE AMOUNTS DUE IN THE NAMES OF R.S. NATHAN & BROS, S.M. KESAVARAMAN & CO AND ALSO A PART OF AMOUNT IN THE N AME OF BALU & CO. SINCE THERE IS NO DEMAND FROM THE CREDI TORS WE HAD ALREADY OFFERED THE BALANCE AMOUNTS IN THE ASST . YEAR 2008-09. I.T.A. NOS. 1352/MDS/2009 4 I WAS ASKED TO FILE CONFIRMATION LETTERS WITH REGAR D TO THE ABOVE CREDITORS. SINCE THEY HAVE SHIFTED THEIR ADD RESSES I AM UNABLE TO CONTACT THEM. HENCE IN ORDER TO PURCHASE PEACE AND GIVE A QUIETES TO THE WHOLE ISSUE AND TO CARRY ON THE BUSINESS SMOOTHLY, I COME FORWARD TO OFFER THESE AM OUNTS FOR 2006-07 A.Y. UNDER CONSIDERATION. I WISH TO SUBMIT THAT I HAVE ALREADY OFFERED A PORT ION OF CREDITORS ON MY OWN IN THE RETURN FOR THE ASSESSMEN T 2007- 08. I AM ALSO VOLUNTARILY OFFERING THE BALANCE OF CREDITORS FOR ASSESSMENT FOR ASSESSMENT YEAR 2006-07. I HAVE ALS O FULLY CO- OPERATED IN THE MATTER OF ENQUIRY AND COMPLETION OF ASSESSMENT. I UNDERTAKE TO PAY THE RESULTANT TAXES ALSO IMMEDIATELY. CONSIDERING ALL THESE ABOVE AND THE F ACT THAT I HAD ALREADY OFFERED THE AMOUNT IN THE ASST. YEAR 20 08-09, I REQUEST YOU NOT TO INITIATE ANY PENALTY PROCEEDINGS . IN CASE THE AMOUNTS IN QUESTION IS ADDED AS INCOME OF THIS YEAR, I MAY BE PERMITTED TO EXCLUDE THE SAME IN THE ASST, F OR 2008- 09. I.T.A. NOS. 1352/MDS/2009 5 3. ASSESSING OFFICER CONSIDERING ASSESSEES OFFER O F INCOME FOR ASSESSMENT YEAR 2007-08 AT RS. 11,85,307.65, LIMITED HIMSELF TO THE BALANCE SUM OF RS. 15,86,012.83 OUT OF TOTAL OPENING BALANCE OF SUNDRY CREDITORS AT RS. 27,71,320.48 FOR THE IMPUGNE D ASSESSMENT YEAR AND COMPLETED THE ASSESSMENT. NOTICE INITIATIN G PENALTY PROCEEDINGS WAS ISSUED. REPLY OF THE ASSESSEE WAS THAT THESE CREDITS WERE LONG TIME BALANCES, WHICH WERE CARRIED FORWARD FROM YEAR TO YEAR AND WAS NOT SETTLED DUE TO VARIOUS DIF FERENCE OF OPINION WITH CONCERNED CREDITORS. ACCORDING TO THE ASSESSEE, CONFIRMATIONS COULD NOT BE OBTAINED FROM THESE CRED ITORS FOR THIS REASON. HOWEVER, ASSESSING OFFICER WAS OF THE OPIN ION THAT BUT FOR THE SCRUTINY, ASSESSEE WOULD NOT HAVE ADMITTED CRED ITS TO THE EXTENT MENTIONED ABOVE AND HENCE THERE WAS CLEAR CA SE OF FURNISHING INACCURATE PARTICULARS OF INCOME. HE, T HEREFORE, LEVIED PENALTY AT RS. 5,33,632/- BEING THE TAX SOUGHT TO B E LEVIED ON THE AMOUNT OF RS. 15,86,012.83. 4. IN ITS APPEAL BEFORE THE LD. CIT(A), ARGUMENT OF THE ASSESSEE WAS THAT CREDITORS WERE GENUINE AND IT WAS ONLY BEC AUSE OF ITS DIFFICULTY IN OBTAINING CONFIRMATION THAT THE AMOUN T WAS OFFERED AS I.T.A. NOS. 1352/MDS/2009 6 INCOME. ACCORDING TO THE ASSESSEE, SUCH ADDITIONAL INCOME OFFERED WAS IN GOOD FAITH AND TO BUY PEACE AND THERE WAS NO FALSE EXPLANATION GIVEN BY IT NOR ANY INACCURATE PARTICUL ARS FURNISHED. LD. CIT(A) HELD THAT THIS WAS NOT A FIT CASE FOR LE VY OF PENALTY AND DELETED IT. 5. NOW BEFORE US, THE LD. D.R. SUBMITTED THAT THERE WAS NO CREDIBLE EXPLANATION OFFERED BY ASSESSEE AS TO WHY THE AMOUNT WAS NOT DISCLOSED IN THE ORIGINAL RETURN. ACCORDING TO LD. D.R., ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE EXPLANATION NOR AB LE TO PROVE THAT THE EXPLANATION WAS BONAFIDE AND, THEREFORE, IT WAS DEEMED CONCEALMENT, LIABLE FOR PENALTY U/S 271(1)(C) OF TH E ACT. LD. D.R. FURTHER ARGUED THAT ONCE THERE WAS ADMISSION OF CON CEALMENT AND VOLUNTARY OFFER, THE ONUS WAS ON THE ASSESSEE TO DI SPROVE CONCEALMENT. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF K.P. MADHUSUDANAN VS. CI T 251 ITR 99 AND UOI VS. DHARMENDRA TEXTILE PROCESSORS & OTHERS 306 ITR 277. 6. PER CONTRA, THE LD. A.R. STRONGLY SUPPORTED THE O RDER OF THE LD. CIT(A). I.T.A. NOS. 1352/MDS/2009 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS. LET THE FACTS SPEAK FOR THEMSELVES. WE WILL MOVE T O THE PERIPHERY. BALANCE OF SUNDRY CREDITORS AS ON 1.4.2005 WAS RS. 27,71,320.05 IN ASSESSEES ACCOUNT. OUT OF THIS, ASSESSEE OFFERED RS. 11,85,307.65 IN ITS ASSESSMENT FOR PREVIOUS YEAR RELEVANT TO ASS ESSMENT YEAR 2007-08. THE DIFFERENCE, ON WHICH PENALTY WAS LEVI ED WAS OFFERED BY IT DURING COURSE OF ASSESSMENT OF THE IMPUGNED A SSESSMENT YEAR. THE QUESTION NOW IS, DO THESE FACTS LEAD TO A CONCL USION THAT THERE WAS ANY CONCEALMENT OR FURNISHING OF INACCURATE PAR TICULARS? SUNDRY CREDITORS PERTAINED TO EARLIER YEARS. IN SUCH EARL IER YEARS, SUNDRY CREDITORS WOULD HAVE COME INTO EXISTENCE, MIGHT BE THROUGH GENUINE TRADING OPERATIONS OR MIGHT BE THROUGH INFL ATION OF PURCHASES. BUT, NEVERTHELESS, THESE CREDITS, UNDOUB TEDLY PERTAINED TO EARLIER YEARS AND INCOME IF ANY, THEREFROM ALSO PERTAINED TO SUCH EARLIER YEARS. JUST BECAUSE ASSESSEE OFFERED A PAR T THEREOF IN THE IMPUGNED ASSESSMENT YEAR AND / OR LATER ASSESSMENT YEAR, WOULD NOT CONVERT THE OFFERED AMOUNT, ITS INCOME FOR SUCH YEARS. THE INCOME, IF ANY, PERTAINED TO EARLIER YEARS IN WHICH THE CREDITS CAME ABOUT. NOW MOVING FROM PERIPHERY TO THE CRUX, WHEN THERE IS NO I.T.A. NOS. 1352/MDS/2009 8 ACTUAL INCOME BUT ONLY AN ADDITION COMING OUT THROU GH AN OFFER MADE BY THE ASSESSEE, CAN WE SAY THAT THERE IS CONC EALMENT? CAN WE SAY THAT THERE IS FURNISHING OF INACCURATE PARTI CULARS? EVEN SUPPOSING THAT ASSESSEE COULD NOT PRODUCE ANY EVIDE NCE FOR CREDIT BALANCES, AS MENTIONED BY US, IT WOULD RELATE BACK TO THE EARLIER YEARS ONLY. NO DOUBT, WHERE THE ASSESSEE FAILS TO SUBSTANTIATE AN EXPLANATION GIVEN BY IT AS BONAFIDE, IT IS LIABLE F OR PENALTY U//S 271(1)(C) OF THE ACT. AS AFORESAID, HERE THE QUEST ION IS ONE NOT ON SUBSTANTIATION. FACT OF THE MATTER IS THAT THERE W AS NOT ANY CONCEALMENT OR FURNISHING OF ANY INACCURATE PARTICU LARS WITH REGARD TO ANY INCOME WHICH AROSE TO THE ASSESSEE, IN THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. ASSESSEE HAD OFFE RED IT, NOT BECAUSE IT COULD NOT SUPPORT THE CLAIM, BUT BECAUSE IT WANTED TO AVOID LITIGATION. ASSESSEE HAD ALSO NOT ADMITTED A T ANY POINT THAT DEMANDS OF THE CREDITORS GOT ABATED. NO DOUBT, IN THE CASE DHARMENDRA TEXTILE PROCESSORS LIMITED [SUPRA], IT W AS HELD BY THE HON'BLE APEX COURT THAT STRICT INTERPRETATION OF PE NAL PROVISIONS ARE CALLED FOR, IN FAVOUR OF THE REVENUE. BUT THIS CANN OT BE EXTENDED TO MEAN THAT EVEN WHEN THERE IS NO INCOME WHICH COU LD BE CONSIDERED AS CONCEALED OR NO PARTICULARS WHICH COU LD BE CONSIDERED I.T.A. NOS. 1352/MDS/2009 9 INACCURATELY FURNISHED, EVEN THEN A LEVY OF PENALTY SHOULD BE MADE U/S 271(1)(C) OF THE ACT. IN THIS VIEW OF THE MATT ER, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS WELL JUS TIFIED IN DELETING THE PENALTY LEVIED ON THE ASSESSEE. NO INTERFERENC E IS CALLED FOR. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMI SSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 13.08.2010 . SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH AUGUST, 2010. VL/ COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A) (4) CIT (5) DR (6) GUARD FILE