Deputy Commissioner of Income-tax, V. Construction Catalysers Pvt. Ltd., Pune

ITA 1548/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4320 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-08-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS SHWETA MISHRA
• Keywords: Initiation of penalty proceedings; Accommodation entries; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , ' BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NOS. 1547 & 1548/PUN/2016 $ $ / ASSESSMENT YEARS : 2009-10 & 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), PUNE ....... / APPELLANT / V/S. CONSTRUCTION CATALYSERS PVT. LTD., 484/37, MITRAMANDAL COLONY, OPP. ADITYA RESIDENCY, PARVATI, PUNE 411 009 PAN : AADCC1059R / RESPONDENT APPELLANT BY : MRS. SHWETA MISHRA RESPONDENT BY : SHRI C.H. NANIWADEKAR / DATE OF HEARING : 01.08.2018 / DATE OF PRONOUNCEMENT : 03.08.2018 / ORDER PER D. KARUNAKARA RAO, AM THERE ARE TWO APPEALS FILED BY THE REVENUE UNDER CONSIDE RATION INVOLVING A.YRS. 2009-10 AND 2011-12. THEY ARE FILED AGAINS T THE SEPARATE ORDERS OF CIT(A)-1, PUNE COMMONLY DATED 24-05-2016. BOTH THE APPEALS ARE FILED AGAINST THE PENALTIES LEVIED U/S.271(1)(C) OF THE ACT. APPE AL-WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS. 2 ITA NOS.1547 & 1548/PUN/2016 CONSTRUCTION CATALYSERS PVT. LTD., ITA NO.1547/PUN/2016 A.Y. 2009-10 2. GROUNDS RAISED BY THE REVENUE ARE EXTRACTED BELOW : 1. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUM STANCES OF THE CASE, IN DELETING THE PENALTY U/S.271(1)(C) OF THE ACT AGAIN ST ADDITIONAL INCOME OFFERED IN RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S .148 OF THE ACT. 2. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUMS TANCES OF THE CASE IN RELYING THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY AND HON. MUMB AI TRIBUNAL IN THE CASE OF VIPUL LIFE SCIENCE LTD. IN PRESENT CASE ALTHOUGH THE CASE LAWS ARE NOT APPLICABLE IN THE PRESENT FACTS OF THE CASE. 3. BEFORE US, AT THE OUTSET, LD. AR FOR THE ASSESSEE SUBM ITTED THAT THE TAX EFFECT IN THE FILED BY THE REVENUE IS BELOW RS.20 LAKHS. HE SUBMITTED THAT THE APPEAL FILED BY THE DEPARTMENT IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. THE LD. AR POINTED THAT AS PER CBDT CIRCULA R NO.3/2018 DATED 11 TH JULY, 2018, THE MONETARY LIMIT FOR FILING OF APPEAL BY THE DEPARTMENT BEFORE THE TRIBUNAL IS RS.20 LAKHS, THEREFORE , THE APPEAL FILED BY THE DEPARTMENT IS NOT MAINTAINABLE. 4. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE DEFENDE D THE ASSESSMENT ORDER AND PRAYED FOR REVERSING THE FINDINGS O F THE CIT(A) IN THE APPEAL. HOWEVER, THE LD. DR FAIRLY ADMITTED THAT THE TAX EFFECT IN THE PRESENT APPEAL FILED BY THE DEPARTMENT IS LESS THAN RS.20 LAKHS. 5. BOTH SIDES HEARD. ON PERUSAL OF THE ORDERS OF THE RE VENUE, WE FIND UNDISPUTEDLY THIS IS A CASE WHERE PENALTY LEVIED BY THE AO U/S.271(1)(C) OF THE ACT IS RS.13,84,920/-. THE CBDT CIRCULAR NO.3/2018 DA TED 11 TH JULY, 2018 RAISED THE MONETARY LIMIT OF TAX EFFECT FOR FILING OF APPEA L BY THE DEPARTMENT BEFORE THE TRIBUNAL TO RS.20 LAKHS. THE CIRCU LAR APPLIES TO THE PENDING APPEALS OF THE DEPARTMENT BEFORE THE TRIBUNAL T OO. THUS, IN VIEW OF 3 ITA NOS.1547 & 1548/PUN/2016 CONSTRUCTION CATALYSERS PVT. LTD., THE CBDT CIRCULAR, WE ARE OF THE OPINION THAT THE PRESEN T APPEAL OF THE REVENUE IS LIABLE TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFEC T WITHOUT GOING INTO THE MERITS OF THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1548/PUN/2016 A.Y. 2009-10 7. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THAT ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF PROVIDING SERVICES OF DESIGNING, DEVELOPING, BUILDING, CONSTRUCTING AND ALLIED ACTIVITIES PERTAINING TO CONSTRUCTION INDUSTRY. ASSESSEE FILED THE RETURN OF INCOME ON 29-09-2011 DISCLOSING INCOME OF RS.2,98,09,974/-. BASED ON THE INFORMATIO N RECEIVED FROM THE MAHARASHTRA SALES TAX DEPARTMENT, AO NOTICED T HAT ASSESSEE MADE PURCHASES FROM SUPPLIERS NAMELY, (1) M/S. SUNRISES ENTERPRIS E; (2) M/S. BALKRISHNA TRADING PVT. LTD. AND (3) M/S. SAGAR ENTERPRISE AMOUNTING TO RS.82,16,409/-. THE SAID SUPPLIERS ARE FOUND TO BE IN THE LIS T OF SUSPECTED SUPPLIERS WHO PROVIDED ACCOMMODATION ENTRIES TO THE ASSE SSEE. AT THE END OF THE ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 147 OF THE ACT, AFTER EXAMINING THE DETAILS RELEVANT TO THE SAID PURCHASES, THE AO DISALLOWED THE SAID SUM OF RS.82,16,409/-. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WAS INITIATED ON THE ASSESSEE AND LEVIED PENALTY OF RS.27,92,760/-. 8. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) RELYING O N THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA C OTTON & GINNING FACTORY 359 ITR 565 (KAR.) AND THE DECISION OF MUM BAI BENCH OF THE TRIBUNAL IN THE CASE OF VIPUL LIFE SCIENCES LTD. REPORTED IN 5 7 TAXMANN.COM 25 DELETED THE SAID PENALTY LEVIED BY THE AO. 4 ITA NOS.1547 & 1548/PUN/2016 CONSTRUCTION CATALYSERS PVT. LTD., 9. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS : 1. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUM STANCES OF THE CASE, IN DELETING THE PENALTY U/S.271(1)(C) OF THE ACT AGAIN ST ADDITIONAL INCOME OFFERED IN RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S .148 OF THE ACT. 2. THE LD.CIT(A) HAS ERRED ON THE FACTS AND CIRCUMS TANCES OF THE CASE IN RELYING THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY AND HON. MUMB AI TRIBUNAL IN THE CASE OF VIPUL LIFE SCIENCE LTD. IN PRESENT CASE ALTHOUGH THE CASE LAWS ARE NOT APPLICABLE IN THE PRESENT FACTS OF THE CASE. 10. BEFORE US, AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE THE AO FAILED TO RECORD VALID SATISFACT ION IN THE ASSESSMENT ORDER DURING WHICH THE PENALTY PROCEEDINGS W ERE INITIATED. HIGHLIGHTING THE LEGAL REQUIREMENT OF MAKING A SPECIFIC REFERENC E TO THE SPECIFIC LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELY ING ON VARIOUS BINDING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINC HERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 3 59 ITR 565 LD. COUNSEL DEMONSTRATED THAT THE PENALTY LEVIED BY THE AO IS UNSUSTAINABLE IN LAW. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO THE AS SESSMENT ORDER AS WELL AS THE PENALTY ORDER HIGHLIGHTING THE ABOVE LEGAL DEFICIENCIES . THUS, HE PRAYED FOR CONFIRMING THE ORDER OF THE CIT(A). 11. PER CONTRA, LD. DR FOR THE REVENUE RELIED ON THE ORDER OF AO. 12. WE HEARD BOTH THE PARTIES ON THIS SPECIFIC LEGAL ISSUE, I.E . RECORDING OF PROPER SATISFACTION BY THE AO. WE PERUSED THE ORDER OF THE AO AND FIND THE SATISFACTION RECORDED BY THE AO FOR INITIATING THE PENALTY P ROCEEDINGS U/S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THEREFO RE, THE SAME IS REPRODUCED AS UNDER : 5 ITA NOS.1547 & 1548/PUN/2016 CONSTRUCTION CATALYSERS PVT. LTD., 0 5. .FURTHER, THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME. PENALTY PROCEEDINGS UNDER SECTION 271 (1)(C) OF THE ACT ARE BEING INITI ATED SEPARATELY. 12.1 WE ALSO PERUSED THE PENALTY ORDER DATED 26.06.2014 AND FIND THE SATISFACTION RECORDED BY THE AO FOR LEVYING THE PENALTY U/ S.271(1)(C) OF THE ACT IS RELEVANT FOR EXTRACTION. THE SAID SATISFACTION READS AS UNDER: 6.3.THIS FACT ON ITS OWN, AS A SOLITARY FA CTOR MAY NOT BE SUFFICIENT BUT READ IN CONJUNCTION WITH OVERALL CON DUCT OF THE ASSESSEE WOULD DEFINITELY BE A POINTER TO THE FACTUM OF THE ASSESS EE HAVING INDULGED IN AN ACT OF CONCEALMENT OF INCOME IN THE FORM OF BOGUS PURCH ASES. IN VIEW OF ABOVE FACTS IT IS HELD THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF T HE ACT ONLY WITH A VIEW TO AVOID TAX AND HAS COMMITTED DEFAULT IN VIEW OF PROVISIONS OF SECTION 271(1)(C) AND EXPLANATION THERE OFF, HENCE HE IS LI ABLE FOR PENALTY . FROM THE ABOVE, IT IS EVIDENT THAT AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT, AO MENTIONED BOTH LIMBS OF CLAUSE (C) OF SECTION 271(1) OF THE ACT. BUT IN THE PENALTY ORDER, THE AO MENTIONED ONLY ONE LIMB I.E. FURNISHED INACCURATE PARTICULARS OF INCOME. THIS MANNER OF RECORDING OF SATISFACTION SUGGESTS THE EXISTENCE OF AMBIGUIT Y IN THE MIND OF THE AO WITH REFERENCE TO THE APPLICABLE LIMB OF CLAUSE (C). THEREFORE, WE ARE OF THE OPINION THAT CONSIDERING THE ABOVE REFERRED BINDING JUDGMENTS SUCH PENALTY ORDER IS UNSUSTAINABLE IN LAW LEGALLY. AO IS UNDER O BLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL A S AT THE TIME OF LEVY OF PENALTY. IN VIEW OF THE ABOVE DELIBERATION ON THIS ISSUE, WE ARE OF THE OPINION THAT THE PENALTY ORDER IS LIABLE TO BE QUASHED ON THIS LEGAL ISSUE. THUS, WE SET ASIDE THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY. ACCORDINGLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED AND ALLOWED IN FAVOUR OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 6 ITA NOS.1547 & 1548/PUN/2016 CONSTRUCTION CATALYSERS PVT. LTD., 14. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 03 RD DAY OF AUGUST, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 03 RD AUGUST, 2018. SATISH ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-1, PUNE 4. THE PR.CIT-1, PUNE 5. , , ' , / DR, ITAT, B BENCH, PUNE. 6. % / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.