The ITO, , Ward-8(4), Ahmedabad V. M/s. Vardhaman Finstock Pvt.Ltd., Ahmedabad

ITA 1598/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0329 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-08-2010
• Assessment Year: 1995-1996
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M G PATEL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI T K SHARMA, JUDICIAL MEMBER AND SHRI N S SAINI, ACCOUNTANT MEMBER ITA NO.1598/AHD/2010 (ASSESSMENT YEAR:-1995-96) THE INCOME-TAX OFFICER, WARD-8(4), AHMEDABAD V/S M/S VARDHMAN FINSTOCK PVT. LTD., 50, HARSIDDH CHAMBERS, ASHRAM ROAD, AHMEDABAD PA NO. AAACV 6342 B [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI K M MAHESH, SR. DR RESPONDENT BY:- SHRI M G PATEL, AR O R D E R PER T K SHARMA (JM): THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 10-02-2010 OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD [THE CIT(A)] FOR ASSESSM ENT YEAR (AY) 1995-96, CANCELING PENALTY OF RS.4,07,263/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 [THE ACT]. 2 BRIEFLY STATED, THE FACTS ARE THAT THE THE AO ON THE BASIS OF ADDITION OF RS.8,76,659/- ON ACCOUNT OF DEEMED DIVI DEND U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961 [THE ACT] IN RESPECT OF LOAN RECEIVED BY THE ASSESSEE COMPANY FROM PADMAVATI ORG ANIZERS PVT. LTD., LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT A MOUNTING TO RS.4,07,263/-. 3 ON APPEAL, THE LEARNED CIT(A) CANCELLED THE SAME FOR THE REASONING GIVEN IN PARA 2.3 OF HIS ORDER, WHICH IS AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT. I AM INCLINED TO ACCEPT THE CONTENTION O F THE APPELLANT. THE ISSUE ITA NO.1598/AHD/2010 FOR AY 1995-96 VARDHMAN FINSTOCK (P) LTD. . 2 ABOUT DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT HAS V ARIOUS INTERPRETATION BY VARIOUS APPELLATE AUTHORITIES AND THE QUESTION O F LOAN & ADVANCES ARE CONTEMPLATED IN THIS SECTION IS SUBJECTED TO VARIED INTERPRETATION. BUT, WITHOUT GOING INTO THE MERIT OF THIS ADDITION SINCE THE SAME IS NOT SUBJECT MATTER OF APPEAL, THE IMPORTANT QUESTION HERE IS WH ETHER IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE ADDITION MADE BY AO U/S. 2(22)(E) OF THE ACT IN THE REASSESSMENT AND AFTER THE DIRECTION OF HON'BLE ITAT IN A SET- ASIDE ORDER JUSTIFY THE IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT ? IN NO STRETCH OF LOGIC IT CAN BE SAID THAT THE ASSESSEE H AS FURNISHED INACCURATE PARTICULARS IN THIS REGARDS SINCE ALL THE MATERIAL FACTS WERE DISCLOSED BY THE APPELLANT AND IT IS ON THE BASIS OF SUCH FACTS, REA SSESSMENT PROCEEDINGS FOR ADDITION U/S. 2(22)(E) OF THE ACT STARTED. AO F AILED TO BROUGHT OUT ON RECORD FAILURE ON THE PART OF APPELLANT ABOUT FURNI SHING OF INACCURATE PARTICULARS. IT IS ONLY APPELLANT'S ASSERTION BEFOR E HON'BLE FTAT THAT ONE OF THE BUSINESS ACTIVITY OF M/S. PADMAVATI ORGANISERS PVT. LTD. (POPL) IS TO ADVANCE LOAN WHICH WAS DIRECTED TO BE EXAMINED FROM THE MEMORANDUM AND ARTICLE OF ASSOCIATION OF THE COMPANY. THE A0 A FTER EXAMINING SUCH FACTS HELD THAT THE SAME IS NOT TRUE AND AGAIN MADE SUCH ADDITION. IT IS ON THIS ACCOUNT AO IMPOSED PENALTY WHICH IS NOT TENABL E IN THE EYE OF LAW SINCE IF SUCH ASSERTION WAS FOUND TO BE NOT TRUE OR CORRECT, IT CANNOT BE SAID THAT APPELLANT HAS CONCEALED INCOME OR FURNISH ED INACCURATE PARTICULARS. THERE ARE VARIOUS CASE LAW IN RESPECT OF SECTION 2(22)(E) OF THE ACT WHERE THE ISSUE 'LOAN AND ADVANCE' AND 'INTERC ORPORATE DEPOSITS' WERE EXAMINED AND IT WAS HELD THAT IF MAJOR PART OF RESO URCES WERE ADVANCED AS LOAN WILL AMOUNT TO BE INTERCORPORATE DEPOSITS IN R EGULAR BUSINESS OF THE COMPANY IT IS THEREFORE THE IMPOSITION OF PENALTY O N THE BASIS OF CONFLICTING INTERPRETATION CANNOT BE HELD JUSTIFIED. THE AO IS DIRECTED TO DELETE THE PENALTY. 4 AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5 AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE, SHRI K M MAHESH, LEARNED SENIOR DR APPEARED AND RELYING ON T HE REASONING GIVEN BY THE AO IN THE PENALTY ORDER, CONTENDED THA T THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE REFORE, THE PENALTY U/S 271(1)(C) AMOUNTING TO RS.4,07,263/- WA S RIGHTLY LEVIED AND THE CIT(A) IS NOT JUSTIFIED IN CANCELING THE SA ME. ITA NO.1598/AHD/2010 FOR AY 1995-96 VARDHMAN FINSTOCK (P) LTD. . 3 6 ON THE OTHER HAND, SHRI M G PATEL, LEARNED COUNSE L FOR THE ASSESSEE APPEARED AND VEHEMENTLY SUPPORTED THE ORDE R OF THE LEARNED CIT(A). 7 AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINEN T TO NOTE THAT WHILE FILING THE RETURN OF INCOME THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT NO ADDITION U/S 2(22)(E) CAN BE MADE. NO INFOR MATION GIVEN IN THE RETURN OF INCOME IS FOUND BY THE AO TO BE INCOR RECT. RECENTLY, THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RE LIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HAS HELD AS UNDER:- A GLANCE AT THE PROVISIONS OF SECTION 271(L)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE H AS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECO NDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(L)(C) WO ULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN TH E RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE 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. TH ERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT P ENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CO RRECT, 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 FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(L)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NO T AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. ITA NO.1598/AHD/2010 FOR AY 1995-96 VARDHMAN FINSTOCK (P) LTD. . 4 IN OUR OPINION, THE AFORESAID JUDGMENT OF THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AND IT IS NOT A FIT CASE TO LEVY PENALTY. IN T HESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT PENALTY OF RS.4,07,263/- LE VIED BY THE AO IS RIGHTLY CANCELLED BY THE CIT(A). WE, THEREFORE, DEC LINE TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHOLD THE SAME. 8 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 13-08-2010 SD/- SD/- (N S SAINI) ACCOUNTANT MEMBER (T K SHARMA) JUDICIAL MEMBER DATE : 13-08-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S VARDHMAN FINSTOCK PVT. LTD., 50, HARSIDDH CH AMBERS, ASHRAM ROAD, AHMEDABAD 2. THE ITO, WARD-8(4), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD