Shri Jimmy Sorabji Patalwala, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 16/AHD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0456 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Unexplained cash credit; Initiation of penalty proceedings
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 16/ AHD/2013 (ASSESSMENT YEAR 2005-06) JIMMY SORABJI PATALWALA, 28E, ROAD 6E, UDHANA UDYOGNAGAR, UDHANA, SURAT -398210 VS. ITO, WARD 2(1), SURAT PAN/GIR NO. : ABCPP9769L (APPELLANT) .. (RESPONDENT) APPELLANT BY: MRS. URVASHI SHODHAN, AR RESPONDENT BY: SHRI T SANKAR, SR. DR DATE OF HEARING: 26.02.2013 DATE OF PRONOUNCEMENT: 22.03.2013 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) II, SURAT DATED 3.11.2012 FOR THE ASSESSMENT YEAR 2005-06. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING PENALTY LEVIED BY AO U/S 271(L)(C) OF THE ACT OF RS .1, 89, 800/- THAT IS WHOLLY UNSUSTAINABLE IN LAW AND ON FACTS. L D. CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT NEI THER FURNISHED INACCURATE PARTICULARS NOR CONCEALED ANY INCOME. TH E PENALTY LEVIED BEING WITHOUT ANY MERITS AND JUSTIFICATION D ESERVES TO BE QUASHED. 2. BOTH THE AUTHORITIES ERRED IN LAW AND ON F ACTS IN CONFIRMING PENALTY ON ADDITIONS MADE U/S 68 OF THE ACT THAT IS A DEEMING PROVISION IGNORING THE FACT THAT DUE TO PASSAGE OF TIME FAILURE TO PRODUCE THE DEPOSITORS RESULTING IN ADDITION IN QUA NTUM I.T.A.NO.16 /AHD/2013 2 PROCEEDINGS WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY TREATING IT AS DELIBERATELY ATTEMPT TO FURNISH INAC CURATE PARTICULARS OF INCOME. 2. A THE VERY OUTSET, IT WAS SUBMITTED BY THE LD. A .R. THAT NO SUCH SATISFACTION WAS RECORDED BY THE A.O. IN THE ASSESS MENT ORDER ABOUT CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME AND HENCE, THE PENALTY PROCEEDINGS INITIATED BY THE A.O. ARE NOT MAINTAINABLE. IN SUPPORT OF THIS CONTENTION RELIAN CE WAS PLACED BY HER ON A JUDGEMENT OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF MS. MADHUSHREE GUPTA & BRITISH AIRWAYS PLC VS UOI & ANO THER AS REPORTED IN 317 ITR 107 (DEL.). SHE SUBMITTED THAT THIS JUDGEMENT OF HONBLE DELHI HIGH COURT IS AFTER THE INSERTION OF SECTION 271(1B) IN THE INCOME TAX ACT, 1961 BY FINANCE ACT 2008 WITH RETRO SPECTIVE EFFECT FROM 01.04.1989 AND IT WAS HELD THAT SATISFACTION OF THE A.O. THAT THE CASE MAY DESERVE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER PASSED DURING THE COURSE OF PROCEEDINGS. AT T HE VERY OUTSET, SHE SUBMITTED THAT SINCE IN THE PRESENT CASE, SATISFACT ION OF THE A.O. IS NOT EVEN DISCERNIBLE FROM THE ASSESSMENT ORDER AND, THE REFORE, PENALTY PROCEEDING INITIATED BY THE A.O. U/S 271(1)(C) IS N OT SUSTAINABLE. 3. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THE SATISFACTION IS NOT REQU IRED TO BE NOTED IN THE ASSESSMENT ORDER AND IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE ON TWO JUDGEMENTS OF HONBLE GUJARAT HIGH COURT AS NOT ED UNDER: (A) 282 ITR 642 NEW SORATHIA ENGINEERING CO. VS CIT AS REPORTED IN 282 ITR 642 (GUJ.) (B) SNITA TRANSPORT PVT. LD. VS ACIT TAX APPEAL NO. 474 OF 2012 (GUJ.) DATED 11.12.2012. 4. LD. D.R. ALSO SUBMITTED A COPY OF THE 2 ND UNREPORTED JUDGEMENT OF HONBLE GUJARAT HIGH COURT. I.T.A.NO.16 /AHD/2013 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY BOTH THE SIDES. WE FIND THAT S UB-SECTION (1B) WAS ADDED IN SECTION 271 BY FINANCE ACT 2008 WITH RETRO SPECTIVE EFFECT FORM 01.04.1989, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 271(1B): WHERE ANY AMOUNT IS ADDED OR DISALLOWED I N COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDE R OF ASSESSMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIREC TION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECT ION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE A.O. FOR INITIATION OF THE PENA LTY PROCEEDINGS UNDER THE SAID CLAUSE (C). 6. IN THE CASE OF MS. MADHUSHREE GUPTA (SUPRA), THE HONBLE DELHI HIGH COURT HAS CONSIDERED THIS AMENDMENT AND AFTER THIS, IT WAS HELD THAT THIS SUB-SECTION OF SECTION 271 IS NOT IN VIOLATION OF EQUALITY CLAUSE UNDER ARTICLE 14 OF THE CONSTITUTION. AFTER HOLDING SO, IT WAS ALSO HELD BY HONBLE DELHI HIGH COURT THAT THE POSITION OF LAW B OTH PRE AND POST AMENDMENT IS SIMILAR, IN AS MUCH AS, THE A.O. WILL HAVE TO ARRIVE AT A PRIMA FACIE SATISFACTION DURING THE COURSE OF PROCE EDINGS WITH REGARD TO THE ASSESSEE HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS, IF HE INITIATES PENALTY PRO CEEDINGS. ON SUCH PRIMA FACIE SATISFACTION OF THE A.O., THE CASE MAY DESERV E OF IMPOSING PENALTY, IF SATISFACTION IS DISCERNIBLE FROM THE ASSESSMENT ORDER PASSED DURING THE COURSE OF SUCH PROCEEDING. IT WAS ALSO HELD THAT O RDER PASSED BY THE A.O. NEED NOT REFLECT SATISFACTION VIS-A-VIS EACH AND EV ERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. NOW, IN THE LIGHT OF THIS JUDGEMENT OF HONBLE DELHI HIGH COURT, WE EXAMINE THE ASSESSMENT ORDER A ND FIND OUT AS TO WHETHER IT IS DISCERNIBLE FROM THE SAME ABOUT THE P RIMA FACIE SATISFACTION I.T.A.NO.16 /AHD/2013 4 OF THE A.O. THAT THE IMPOSITION OF PENALTY MAY BE C ALLED FOR. THE ASSESSMENT ORDER IS OF 8 PAGES BUT UP TO PAGE 6, TH E DISCUSSION IS REGARDING THOSE CASES WHERE THE A.O. HAS SATISFACTI ON ABOUT THE EXPLANATION OF THE ASSESSEE AND NO ADDITION WAS MAD E BY HIM. FROM PAGE 6, THE OPINION OF THE A.O. IS DISCUSSED ABOUT THOSE CASH CREDITS BEING 32 IN NOS. FOR WHICH THE ASSESSEE WAS NOT IN A POSITIO N TO FURNISH IDENTITY AND CONFIRMATION OF THE DEPOSITORS. IT IS NOTED BY THE A.O. THAT THE ASSESSEE FAILED TO PRODUCE THEM ALSO. THEREAFTER, THE A.O. HELD THAT UNDER THE CIRCUMSTANCES, THE PRIMARY OBLIGATION LAID UPON THE ASSESSEE TO PROVE THE GENUINENESS OF LOAN TRANSACTION REMAINS TO BE DISCH ARGED. THEREAFTER, HE HELD THAT FOR THIS REASON, THE LOAN AMOUNT OF RS.5, 70,250/- IS TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX AC T, 1961 AND TAXED IN THE HANDS OF THE ASSESSEE. IN OUR CONSIDERED OPINI ON, THE SATISFACTION OF THE A.O. IS NOT EVEN DISCERNIBLE FROM THE ASSESSMEN T ORDER THAT THERE IS ANY ALLEGED CONCEALMENT OF INCOME BY THE ASSESSEE O R ALLEGED FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE ON THE BASIS OF WHICH, PRIMA FACIE SATISFACTION OF THE A.O. WAS THERE FOR IMPOSING THE PENALTY. HENCE, IN OUR CONSIDERED OPINION, AS PER THIS JUDGE MENT OF HONBLE DELHI HIGH COURT, THE PENALTY PROCEEDINGS INITIATED BY TH E A.O. EVEN AFTER INSERTION OF SUB-SECTION (1B) TO SECTION 271 IS NOT JUSTIFIED. 7. NOW, WE CONSIDER THE APPLICABILITY OF TWO JUDGEM ENTS OF HONBLE GUJARAT HIGH COURT CITED BY THE LD. D.R. FIRST, W E DISCUSS THE JUDGEMENT RENDERED IN THE CASE OF SNITA TRANSPORT PVT. LTD. ( SUPRA). IN THAT CASE, IT IS NOTED BY HONBLE GUJARAT HIGH COURT IN PARA 4 OF TH IS JUDGEMENT THAT THE A.O. VIDE HIS ORDER DATED 29.03.2005, REJECTED THE ASSESSEES CONTENTION. THE A.O. HAS NOTED THAT DURING THE COURSE OF SURVEY , THE ASSESSEE HAD ADMITTED ABOUT THE BOGUS CREDITORS AND THAT IT HAS DEBITED SUCH AMOUNTS UNDER VARIOUS HEADS IN THE BOOKS OF ACCOUNT. THE A .O. CONCLUDED THAT I.T.A.NO.16 /AHD/2013 5 BOGUS CREDIT AND BOGUS EXPENSE WERE PART OF THE RET URN OF INCOME AND THIS WAS A CLEAR CASE OF CONCEALMENT OF INCOME ON THE PA RT OF THE ASSESSEE. IN THE LIGHT OF THESE FACTS THAT THE ASSESSEE HAS ADMI TTED IN THE COURSE OF SURVEY ABOUT THE BOGUS CREDIT AND HE HAD DEBITED SU CH AMOUNT IN VARIOUS HEADS IN THE BOOKS OF ACCOUNT, THE SATISFACTION OF THE A.O. REGARDING CONCEALMENT OF INCOME IS APPARENT AND SINCE IN THE PRESENT CASE THIS ADDITION IS MADE BY THE A.O. U/S 68 FOR THIS REASON ALONE THAT THE ASSESSEE COULD NOT PROVIDE THE REQUIRED DOCUMENTS IN SUPPORT OF CASH CREDIT, THE FACTS IN THE PRESENT CASE ARE DIFFERENT AND THEREFO RE, THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THE PRESENT CASE. 8. THE ANOTHER JUDGEMENT CITED BY THE LD. D.R. IS T HE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NEW SORATHIA ENGINEERING CO. (SUPRA). IN OUR CONSIDERED OPINION , WRONG RELIANCE HAS BEEN PLACED BY THE LD. D.R. ON THIS JUDGEMENT BECAU SE THE SAME IS IN FAVOUR OF THE ASSESSEE AND IT WAS HELD BY THE HONB LE GUJARAT HIGH COURT IN THAT CASE THAT THE A.O. HAS TO GIVE CLEAR CUT FI NDING IN THE PENALTY ORDER AS TO WHETHER THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR WHETHER THE ASSESSEE IS GUILTY OF FURNISHING INACCURATE PAR TICULARS OF INCOME AND IN THE ABSENCE OF SUCH CLEAR FINDING OF THE A.O., PENA LTY IS NOT JUSTIFIED. IN THE PRESENT CASE, THE CLAIM OF THE ASSESSEE IS DIFF ERENT THAT NO SATISFACTION IS DISCERNIBLE FROM THE ASSESSMENT ORDER AND, THERE FORE, THIS JUDGEMENT IS ALSO OF NO HELP TO THE REVENUE IN THE PRESENT CASE. 9. IN VIEW OF OUR ABOVE DISCUSSION, WE HAVE NOTED T HAT BOTH THE JUDGEMENTS CITED BY THE LD. D.R. ARE OF NO HELP TO THE REVENUE IN THE PRESENT CASE WHEREAS, AS PER THE JUDGEMENT OF HONB LE DELHI HIGH COURT RENDERED IN THE CASE OF MS. MADHUSHREE GUPTA (SUPRA ), EVEN AFTER THE AMENDMENT BY FINANCE ACT 2008, AS PER WHICH SECTION 271(1B) WAS INSERTED IN THE STATUTE BOOK WITH RETROSPECTIVE EFF ECT, PRIMA FACIE I.T.A.NO.16 /AHD/2013 6 SATISFACTION OF THE A.O. SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER BUT THE SAME IS NOT DISCERNIBLE IN THE PRESENT CASE FROM THE ASSESSMENT ORDER AND HENCE, WE ARE OF THE CONSIDERED OPINION T HAT AS PER THIS JUDGEMENT OF HONBLE DELHI HIGH COURT, PENALTY PROC EEDINGS INITIATED BY THE A.O. IN THE PRESENT CASE IS NOT SUSTAINABLE. W E, THEREFORE, DELETE THE ENTIRE PENALTY. 10. IN VIEW OF OUR DECISION IN THE ABOVE PARA, NO A DJUDICATION IS CALLED OR ON THE MERIT OF THE PENALTY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 18/03/2013 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/03/2013.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 22/3/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.1/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 01/04/2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .