P.G.Nahar Finance Ltd., CHENNAI V. DCIT, Coimbatore

ITA 1371/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0826 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-02-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 19-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Unexplained cash credit
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.1371/MDS/2012 ASSESSMENT YEAR 2007-08 M/S P.G. NAHAR FINANCE LTD. C/O SHRI AJIT KUMBHAT M/S KUMBHAT & CO. 144, NSC BOSE ROAD CHENNAI 600 079 VS THE DY. CIT COMPANY CIRCLE I(2) COIMBATORE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. ANAND, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, ADDL. CIT DATE OF HEARING : 06-02-2013 DATE OF PRONOUNCEMENT : 12-02-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-I, COIMBATORE, DATED 20.3.2012. 2. THE APPEAL FILED BY THE ASSESSEE IS BARRED BY LI MITATION OF 14 DAYS. THE ASSESSEE HAS FILED CONDONATION PETIT ION EXPLAINING THE REASONS FOR THE DELAY IN FILING THE APPEAL. THE DR HAD NO OBJECTION TO CONDONING THE DELAY AND HEARING THE APPEAL ON MERIT S. HENCE, THE I.T.A.NO.1371/12 :- 2 -: DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR HE ARING AND THE PARTIES WERE ALLOWED TO MAKE THEIR SUBMISSIONS THE REON. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO C ONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT BY T HE CIT(A). 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 SHOWING BUSI NESS LOSS OF ` 1,10,090/-. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD RECEIVED ` 2,75,000/- DURING THE FINANCIAL YEAR 2006-07 FROM FOUR PERSONS AS INVESTMENT IN THE SHARES OF THE ASSESSEE -COMPANY AS FOLLOWS: (I) SHRI M. R. ARVIND ` 35,000/- (II) SHRI LOKESH KAILIWAL ` 80,000/- (III) MRS ROSHINI BOTHRA ` 80,000/- (IV) SHRI RAJEEV OSWAL ` 80,000/- 5. THE ASSESSING OFFICER, IN ORDER TO VERIFY THE INVES TMENTS IN THE SHARES OF THE COMPANY, SENT LETTERS TO ALL THE PERSONS. SHRI ARVIND REPLIED THAT HE HAD NOT INVESTED ANY MONEY TOWARDS PURCHASE OF SHARES OF THE ASSESSEE-COMPANY AND ALSO STATED THAT HE HAD NOT HEARD ABOUT THE EXISTENCE OF THE COMPANY. THEREFORE, THE ASSESSING OFFICER TREATED THE AMOUNT OF ` 35,000/- WAS UNEXPLAINED CASH CREDIT IN THE I.T.A.NO.1371/12 :- 3 -: HANDS OF THE ASSESSEE-COMPANY. FURTHER, LETTERS SE NT TO SHRI LOKESH KAILIWAL AND SHRI RAJEEV OSWAL WERE RETURNED UNSERV ED WITH THE REMARKS NOT KNOWN AND LETTER ISSUED TO SMT. ROSHI NI BOTHRA WAS NOT REPLIED AT ALL. THEREFORE, THE ASSESSING OFFICER H ELD THAT THE ASSESSEE HAD NOT FURNISHED CONCLUSIVE PROOF OF IDENTITY AND CREDITWORTHINESS OF THE PERSONS AND GENUINENESS OF THE TRANSACTIONS IN THE FORM OF COPIES OF CHEQUE/DRAFT RECEIVED FROM THE ABOVE INVESTORS, PAN OR INCOME-TAX PARTICULARS, ETC. HE, THEREFORE, TREATED THE AMOUN T OF ` 2,75,000/- ALSO AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASS ESSEE. 6. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) A ND THE CIT(A) ALSO CONFIRME THE ADDITION MADE BY THE CIT(A ) FOR THE VERY SAME REASONS. THEREAFTER, THE ASSESSING OFFICER IS SUED NOTICE U/S 271(1)(C) OF THE ACT AND LEVIED PENALTY OF 300% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED WHICH COMES TO ` 2,54,925/- FOR CONCEALMENT OF INCOME OF ` 2,75,000/-. 7. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND C ONTENDED THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF S HRI S.K.KALYAN VS ITO, 327 ITR 477, HAS HELD THAT THE ADDITION MADE U/S 69 IS A DEEMING PROVISION AND IT CANNOT BE EXTENDED TO PENA LTY PROCEEDINGS. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE CH ENNAI C' BENCH OF THE TRIBUNAL IN THE CASE OF NEW RAJA JEWELLERY VS I TO, 16 TAXMAN.COM I.T.A.NO.1371/12 :- 4 -: 140 AND THE DECISION F HON'BLE SUPREME COURT IN THE CASE OF CIT VS SMT. P.K.NOORJEHAN, 103 TAXMAN 382. 8. THE CIT(A) CONFIRMED THE LEVY OF PENALTY BY OBSERVI NG THAT THE QUANTUM ADDITIONS MADE BY THE ASSESSING OFFICER WAS CHALLENGED BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ADDI TION MADE BY THE ASSESSING OFFICER BY PASSING A SPEAKING ORDER. THE ASSESSING OFFICER HAS ALSO PASSED ORDER U/S 271(1)(C) OF THE ACT. THE CIT(A) FURTHER HELD THAT HE WAS IN AGREEMENT WITH THE CONCLUSION D RAWN BY THE ASSESSING OFFICER THAT IT IS A CLEAR CASE OF FURNIS HING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. THE CIT(A) FURTHER OBSERVED THAT THE JUDGMENTS RELIED ON BY THE A.R OF THE ASS ESSEE WERE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. I N THE CASE OF THE ASSESSEE, THE ASSESSEE COULD NOT PROVE THE IDENTIT Y OF THE PERSONS WHO HAVE CONTRIBUTED TO THE SHARE INVESTMENT. THE CONFIRMATION LETTERS WERE FILED WITHOUT ANY FURTHER DETAILS. ON EXAMINATION OF CONFIRMATION LETTERS, THE ASSESSING OFFICER WAS NOT ABLE TO GET ANY INFORMATION FROM THE ASSESSEE REGARDING IDENTITY, CREDITWORTHINESS OF THE PERSONS AND GENUINENESS OF TRANSACTIONS. 9. THE A.R OF THE ASSESSEE SUBMITTED THAT WITH REGAR D TO THE SHARE INVESTMENTS OF SHRI LOKESH KAILIWAL, SHRI RA JEEV OSWAL AND SMT. ROSHINI BOTHRA, THEY WERE THE EXISTING SHAREHOLDERS OF THE COMPANY I.T.A.NO.1371/12 :- 5 -: AND THAT INVESTMENT IN SHARES WERE RECEIVED FROM TH EM ON 1.4.2001 BEING ` 20,000/- FROM SHRI LOKESH KAILIWAL, ` 25,000/- FROM SMT. ROSHINI BOTHRA AND ` 20,000/- FROM SHRI RAJEEV OSWAL. THEREFORE, IT WAS CONTENDED THAT THE IDENTITY OF THESE SHARE APPL ICANTS WAS PROVED. WITH REGARD TO THE DETAILS OF CHEQUES/DRAFTS BY WHI CH THE AMOUNTS WERE RECEIVED BY THE ASSESSEE, IT WAS THE SUBMISSI ON OF THE A.R THAT ALL THE SHARE APPLICATION MONEY WERE RECEIVED BY CH EQUE BUT NO DETAILS HAVE BEEN FILED BEFORE US. AT THE END, THE A.R OF THE ASSESSEE SUBMITTED THAT CONSIDERING THE FACTS AND CIRCUMSTAN CES, THE PENALTY LEVIED AT 300% OF THE TAX SOUGHT TO BE EVADED WAS H ARSH AND PLEADED THAT THE SAME MAYBE REDUCED TO 100% OF THE TAX SOUG HT TO BE EVADED. 10. ON THE OTHER HAND, THE DR SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON R ECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER LEVIED PENALTY UNDER SE CTION 271(1)(C) OF ` 2,54,925/- BEING 300% OF TAX SOUGHT TO BE EVADED OF ` 84,975/-. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSE E CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF ` 2,75,000/- AS UNDER:- I.T.A.NO.1371/12 :- 6 -: SL.NO. NAME ` (I) SHRI M.R.ARVIND 35,000/- (II) SHRI LOKESH KAILIWAL 80,000/- (III) SMT.ROSHINI BOTHRA 80,000/- (IV) SHRI RAJEEV OSWAL 80,000/- DURING THE COURSE OF ASSESSMENT , THE ASSESSING OFF ICER OBSERVED THAT SHRI M.R.ARVIND FROM WHOM ASSESSEE CLAIMED TO HAVE RECEIVED SHARE APPLICATION MONEY OF ` 35,000/- DENIED MAKING OF ANY INVESTMENT IN THE SHARES OF THE ASSESSEE-COMPANY. IN CASE OF SHR I LOKESH KAILIWAL AND SHRI RAJEEV OSWAL, THE LETTERS WRITTEN BY THE A SSESSING OFFICER TO CONFIRM THE TRANSACTIONS WERE RETURNED UN-SERVED W ITH THE POSTAL REMARK NOT KNOWN. SMT.ROSHINI BOTHRA HAS NOT GIV EN ANY REPLY AGAINST THE LETTER WRITTEN BY THE ASSESSING OFFICER FOR VERIFYING THE GENUINENESS OF THE SHARE APPLICATION MONEY OF ` 80,000/-. IN THE ABOVE CIRCUMSTANCES, THE ASSESSING OFFICER MADE AN ADDITION OF ` 2,75,000/- TO THE INCOME OF ASSESSEE AND IMPOSED PE NALTY OF ` 2,54,925/-. 12. ON APPEAL, CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. I.T.A.NO.1371/12 :- 7 -: 13. BEFORE US, A.R OF THE ASSESSEE SUBMITTED THAT THE SHARE APPLICATION MONEY WAS RECEIVED BY CHEQUES THROUGH B ANKING CHANNEL. THE ADDITION TO THE INCOME OF ASSESSEE WAS MADE BEC AUSE OF A DEEMING PROVISION ONLY FOR THE REASON THE ASSESSEE COULD NOT LEAD THE MATERIALS TO THE SATISFACTION OF THE ASSESSING OFFI CER. HE PRAYED THAT EVEN IF IT IS FOUND THAT PENALTY IS LEVIABLE, THEN ALSO PENALTY OF 300% IS QUITE EXCESSIVE AND SHOULD BE RESTRICTED TO MINIMUM PERMISSIBLE PENALTY OF 100% OF THE TAX SOUGHT TO BE EVADED. 14. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ADDITIO N WAS MADE BECAUSE OF INABILITY OF THE ASSESSEE TO LEAD E VIDENCES TO THE SATISFACTION OF THE ASSESSING OFFICER UNDER A DEEMI NG PROVISION. NO POSITIVE MATERIAL WAS PRODUCED BY THE DEPARTMENT TO SHOW THAT ` 2,75,000/- WAS IN FACT THE INCOME EARNED BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION APART FROM THE INCOME DISC LOSED IN THE BOOKS OF ACCOUNT BY THE ASSESSEE. IN THE CIRCUMSTANCES AND KEEPING IN VIEW OF THE PLEA OF THE ASSESSEE, IN OUR CONSIDERED OPIN ION, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE TO RESTRICT THE PE NALTY UNDER SECTION 271(1)(C) TO 150% OF THE TAX SOUGHT TO BE EVADED B Y THE ASSESSEE. THEREFORE, THE PENALTY UNDER SECTION 271(1)(C) IS R ESTRICTED TO ` 1,27,463/- AND THE ASSESSEE GETS RELIEF OF ` 1,27,462/-. I.T.A.NO.1371/12 :- 8 -: 15. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 12 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 12 TH FEBRUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR