S.S. RAJ & CO., MUMBAI V. ITO WD 19(1)(4), MUMBAI

ITA 1570/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0520 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2003-2004
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Assessee Lawyers: PRAKASH K JOTWANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1570/MUM/2016 ASSESSMENT YEAR: 2003 - 04 & ITA NO. 1571/MUM/2016 ASSESSMENT YEAR: 2004 - 05 & ITA NO. 1572/MUM/2016 ASSESSMENT YEAR: 2005 - 06 & ITA NO. 1573/MUM/2016 ASSESSMENT YEAR: 2006 - 07 M/S S. RAJ & CO. ASHIANA, 1 ST FLOOR, 87, LINKING ROAD, SANTACRUZ (W), MUMBAI - 400054. VS. ITO - 19(1)(4) PIRAMAL CHAMBERS, MUMBAI - 400012. PAN NO. AAAFS 9789G APPELLANT RESPONDENT ASSESSEE BY : MR. PRAKASH K. JOTWANI , AR REV ENUE BY : MR. V. VIDHYADHAR , DR DATE OF HEARING : 25 /01/2018 DATE OF PRONOUNCEMENT : 29/01/2018 ORDER PER N.K. PRADHAN, A.M. THE CAPTIONED APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 34 , THANE AND ARISE OUT OF THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER ( AO ) U/S 271(1)(C) OF THE INCOME TAX ACT 1961 (THE ACT). A S COMMON ISSUES ARE S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 2 INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE - FIRM HAD ADVANCED LOANS TO THREE PARTIES, WHO WERE RELATED TO ITS PARTNERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO EXPLAIN WHY INTEREST INCOME WAS NOT SHOWN DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED BEFORE THE AO THAT DUE TO LITIGATION IN RESPECT OF CERTAIN IMMOVABLE PROPERTY, THE PARTIES HAD BECOME HOSTILE AND STOPPED MAKING PAYMENTS AND THEREFORE, THE SAME WAS NOT OFFERED TO TAX. THE AO NO TED THAT THE ASSESSEE HAD OFFERED INCOME FROM INTEREST ON ACCRUAL BASIS DURING THE AY 2001 - 02 AND AY 2002 - 03 AND THEREFORE, CONSISTENCY SHOULD HAVE BEEN MAINTAINED BY OFFERING THE INTEREST INCOME IN THE IMPUGNED ASSESSMENT YEARS. AS THE ASSESSEE HAD NOT OF FERED THE INTEREST INCOME DURING THE IMPUGNED ASSESSMENT YEARS, THE AO LEVIED MINIMUM PENALTY U/S 271(1)(C) OF RS.2,39,730/ - (AY 2003 - 04), RS.2,68,496/ - (AY 2004 - 05), RS.3,00,677/ - (AY 2005 - 06) AND RS.3,09,810/ - (AY 2006 - 07). 3 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) OBSERVED THAT THE SO CALLED DISPUTES CANNOT HAVE ANY BEARING ON THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH THE BORROWER PARTIES AND ALSO ON THE INTEREST INCOME TO BE ACCRUE D ON THE LOANS GIVEN TO THE BORROWER PARTIES. IF SUCH WAS THE CASE, THEN THE APPELLANT COULD HAVE WRITTEN OFF THE LOANS GIVEN TO THE SAID THREE PARTIES IN ITS BOOKS OF ACCOUNT. HOWEVER, IT IS SEEN THAT THE S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 3 APPELLANT - FIRM HAS NOT WRITTEN OFF THE LOANS GIVEN TO THE SAID THREE PARTIES FROM ITS BOOKS OF ACCOUNTS TILL THIS DATE. THE LD. CIT(A) THUS AGREED WITH THE REASONS GIVEN BY THE AO AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4 . BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE ASSESSEE - FIRM HAD ADVANCED LOANS TO THREE PARTIES WHO WERE RELATED TO ITS PARTNERS. TILL THE AY 2002 - 03, THE THREE SAID PARTIES HAD BEEN REGULARLY PAYING THE ASSESSEE THE INTEREST DUE ON THE LOANS AND THE ASSESSEE HAD BEEN DULY REFLECTING THE RECEIPT I N ITS RETURN OF INCOME. HOWEVER, FROM THE AY 2003 - 04 THERE WAS SERIOUS DISPUTE RELATING TO OTHER MATTERS BETWEEN THE ASSESSEE AND THE THREE BORROWERS AND THEY STOPPED PAYING ANY INTEREST TO THE ASSESSEE. THEY ALSO STOPPED CLAIMING DEDUCTION OF THE INTEREST PAYABLE TO THE ASSESSEE IN THEIR RETURN OF INCOME. ON ITS PART, AS THE ASSESSEE IS NOT ACTUALLY IN RECEIPT OF INTEREST, IT HAD NO ALTERNATIVE BUT TO FOLLOW THE ACTION OF THE OTHER PARTIES. IT ALSO STOPPED SHOWING ANY RECEIPT OF INTEREST INCOME WHICH IS TH E FACTUAL POSITION. THE LD. COUNSEL SUBMITS THAT THE ASSESSEE CANNOT BE HELD GUILTY OF CONCEALING AN INCOME WHICH DID NOT IN REALITY RESULT NOR LIKELY TO RESULT IN ANY FORESEEABLE FUTURE. IT IS STATED BY HIM THAT WHAT HAPPENED IN QUANTUM ASSESSMENT IS A DIFFERENT MATTER BUT WHICH SHOULD NOT IN FLUENCE THE PENALTY PROCEEDINGS. RELIANCE IS PLACED BY HIM ON THE DECISION IN ANANTHARAM VEERASINGHAIAH & CO. V. CIT (1980) 123 ITR 457 (SC). S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 4 REFERRING TO THE DECISION IN CIT V. SHOORJI VALLABDAS & CO . 46 ITR 144 (SC), IT IS SUBMITTED BY HIM THAT IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH IN BOOK KEEPING, AN ENTRY IS MADE ABOUT A HYPOTHETICAL INCOME, WHICH DOES NOT MATERIALISE. ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. RELIANCE PETROPRODUCTS (P.) LTD. (2010) 189 TAXMAN 322 (SC). 5 . PER CONTRA , THE LD. DR RELIES ON THE ORDER PASSED BY THE LD. CIT(A). ALSO RELIANCE IS PLACED BY HIM IN THE ORDER OF THE ITAT H BENCH, MUMBAI IN ASSESSEES OWN CASE FOR THE AYS 2003 - 0 4, 2004 - 05, 2005 - 06 AND 2006 - 07 (ITA NOS. 7466, 7467, 7468 & 7471/MUM/2011). THE LD. DR SUBMITS THAT IN THE ABOVE ORDER, THE TRIBUNAL HAS CONFIRMED THE ADDITION MADE BY THE AO OF INTEREST AMOUNTING TO RS.6,68,233/ - (AY 2003 - 04), RS.7,48,222/ - (AY 2004 - 05), RS.8,38,234/ - (AY 2005 - 06) AND RS.9,38,821/ - (AY 2006 - 07). AS THE APPEAL OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS IN QUANTUM ASSESSMENT HAS BEEN DISMISSED BY THE TRIBUNAL, THE LD. DR SUBMITS THAT THE PENALTY LEVIED BY THE AO FOR THE ABOVE ASSESSM ENT YEARS BE CONFIRMED. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND FROM THE ASSESSMENT ORDER FOR THE AY 2003 - 04 THAT THE AO HAS ESTIMATED THE INTEREST INCOME ACCRUED AGAINST LOAN TO THREE PARTIES AS UNDER : SR. NO. LOAN PARTIES OPENING BALANCE AMOUNT (RS.) INTEREST ACCRUED (RS.) @ 12% CLOSING BALANCE AMOUNT (RS.) TDS AMOUNT (RS.) NET CLOSING BALANCE A FTER TDS S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 5 1. KIRTIKA A. WADHWANI 1888528.0 8 226623 2115151 0 2115151 2. WADHWANI ASSOCIATES 2522538 302704 2825242 0 2825242 3. WADHWANI CONSTRUCTIO N 1157558 138906 1296464 0 1296464 TOTAL 668233 A PERUSAL OF THE ABOVE SHOWS THAT THE AO HAS ARRIVED AT INTEREST INCOME OF RS.6,68,233/ - BY ESTIMATING @ 12% ON THE OPENING BALANCE DISCLOSED BY THE ASSESSEE. WE FIND THAT N EITHER THERE WAS ANY CONCEALMENT OF INCOME NOR THE ASSESSEE FILED ANY INACCURATE PA RTICULARS OF SUCH INCOME. AT BEST, IT IS HYPOTHETICAL INCOME. SIMILAR IS THE CALCULATION MADE BY THE AO IN THE OTHER ASSESSMENT YEARS. IN RESPECT OF THE ORDER OF THE ITAT IN QUANTUM ASSESSMENT IN ASSESSEES OWN CASE FOR THE IMPUGNED ASSESSMENT YEARS WE MAY REFER TO THE JUDGMENT OF THE HONBLE SUPREME COURT ANANTHARAM VEERASINGHAIAH & CO . (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE FINDINGS RECORDED IN THE ASSESSMENT ORDER CONSTITUTE GOOD EVIDENCE IN THE PENALTY PROCEEDINGS BUT THOSE FINDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. WHETHER A PENALTY CAN BE IMPOS ED IN A GIVEN CASE, THE ENTIRETY OF THE CIRCUMSTANCES MUST BE TAKEN INTO ACCOUNT. ALL WILL DEPEND ON THE CIRCUMSTANCES OF THE CASE. S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 6 IN RELIANCE PETROPRODUCTS PVT. L TD. (SUPRA), THE HONBLE SUPREME COURT HELD : A GLANCE AT THE PROVISIONS OF SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961, SUGGESTS THA T IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WO RD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EX POSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PEN ALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY U/S 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CA NNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 6 .1 IN THE INSTANT APPEAL, THERE IS NO FINDING BY THE AO THAT THE DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THEREFORE, THERE IS NO QUESTION OF INVITING THE PENALTY S. RAJ CO. ITA NOS. 1570 TO 1573/MUM/2016 7 U/S 271(1)(C). RESPECTFULLY FOLLOWING THE DECISION IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), WE DELETE THE PENALTY LEVIED BY THE AO U/S 271(1)(C) IN THE ABOVE ASSESSMENT YEARS. 7 . IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2018. SD/ - SD/ - (D.T. GARASIA) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 29/01/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI