D.N. DALAL HUF, MUMBAI V. ASST CIT 16(1), MUMBAI

ITA 1640/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2441 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Keywords: Reasonable cause
• Section: 143(3); 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ./ I .T.A. NO. 1640 /MUM/201 1 ( / ASSESSMENT YEAR S : 200 5 - 06 ) SHR I D N DALAL, HUF, 120/123 ARUN CHAMBER, TARDEO ROAD, MUMBAI - 400 0 34 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX . 1 6 ( 1 ), MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 0 07 ./ PAN : AA A HD1795F / ASSESSEE BY SHRI VIJ AY MEHTA / REVENUE BY SHRI VIJAY KUMAR BORA / DATE OF HEARING : 8.9.2016 / DATE OF PRONOUNCEMENT : 14 . 10 .2016 / O R D E R PER RAJESH KUMAR , A M T HIS IS A N APPEAL FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 6.12.2010 PASSED BY THE LD.CIT(A) - 27, MUMBAI CONFIRM ING THE ACTION OF AO IN IMPOSING THE PENALTY U/S 271(1)( C) OF THE INCOME TAX ACT, 1961 WHICH PERTAINS TO ASSESSMENT YEAR 2005 - 06. 2. THE IS SUE RAISED IN GROUNDS OF APPEAL NO.1 AND 2 IS WITH RESPECT TO CONFIRMATION OF PENALTY AS IMPOSED BY THE AO UNDER SECTION 271(1)( C ) OF THE ACT . 2 ITA NO. 1640 / MUM/ 201 1 3. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.3.2007 ADMITTING TOTAL INCOME OF R S.72,00,439 / - . THE ASSESSMENT WAS COMPLETED U /S 143(3) VIDE ORDER DATED 18.12.2007 ASSESSING THE TOTAL INCOME AT RS.73,65,265/ - BY MAKING AN ADDITION OF RS.2,22,581/ - ON ACCOUNT OF INTEREST RECEIVABLE FROM SHRI BUDHA WA NI ON THE AMOUNT ADVANCED FOR THE I PO ISSUES M/S GATEWAY DISTRIPARKS AND PUNJAB NATIONAL BANK ON THE MERCANTILE SYSTEM OF ACCOUNTING WHICH WAS NOT ACCOUNTED BY THE ASSESSEE AND ADDED BY THE AO TO THE INCOME OF THE ASSESSEE ACCORDINGLY. IN THE PENALTY PROCEEDINGS, THE AO ISSUES SHO W CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE PENALTY SHOULD NOT BE IMPOSED FOR CONCEALMENT OF INCOME WHICH WAS RECEIVED BY THE ASSESSEE LETTER DATED 24.6.2008 BY SUBMITTING THAT THE ASSESSEE HAD TRANSACTIONS WITH MR.BHUDHWANI AND INTEREST RECEIVED IS AC COUNTED FOR AS INCOME AS AND WHEN ACTUALLY RECEIVED. THE ASSESSEE FAIRLY ADMITTED AT THE TIME OF FINALIZATION OF THE ACCOUNT THAT THE INTEREST COMPONENT ESCAPED THE ATTENTION OF THE ASSESSEE AND WAS NOT PROVIDED FOR DUE TO PRE - OCCUPATION OF THE ASSESSEE IN ATTENDING VARIOUS AUTHORITIES AS SUCH DURING SURVEY PROCEEDINGS U/S 133A BY THE IT DEPARTMENT IN THE MONTH OF OCTOBER, 2005 WHICH WAS FOLLOWED BY THE SEBI AND CBI IN THE MONTH OF DECEMBER,2005 . THE ASSESSEE ALSO SUBMITTED THAT HE WAS NOT AWARE WHET HER TDS WAS DEDUCTED BY MR.BHUDHWANI AND UNDER THESE CIRCUMSTANCES THE INCOME COULD NOT BE OFFERED FOR TAXATION. THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME BY NOT SHOWING INTEREST 3 ITA NO. 1640 / MUM/ 201 1 INCOME RECEIVED AS INCOME WHI CH CAME TO THE LIGHT OF DEPARTMENT ONLY DURING THE COURSE OF SURVEY CONDUCTED U/S 133A OF THE ACT BY INVESTIGATION WING ON 24.10.2005 AND ACCORDINGLY LEVIED PENALTY OF RS.74,898/ - U/S 271(1)( C) OF THE ACT AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED FOR CONCEALMENT OF INCOME. BEFORE THE FIRST APPELLATE AUTHORITY (FAA), THE LD. CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE CONTENTS OF THE PENALTY ORDER. IT IS A FACT THAT SURVEY U/S.133A WAS CONDUCTED IN THE APPELLANT'S PREMISES IN OCTOBER, 2005, FOLLOWED BY ACTION OF SEBI AND CBI. NEVERTHELESS FOR THE YEAR UNDER CONSIDERATION THE APPELLANT GOT HIS ACCOUNTS AUDITED ON 27.3.2 007 AND FILED THE RETURN OF INCOME ON 29.3.2007. IN OTHER WORDS, AMPLE TIME OF 17 MONTHS WAS AVAILABLE TO THE APPELLANT FROM THE DATE OF SURVEY TO COLLECT THE INFORMATION AND TO PROVIDE FOR THE INTEREST RECEIVABLE FROM MR. PURSHOTTAM BUDHWANI. THE VERY FAC T THAT SURVEY U/S.133A WAS CONDUCTED BY THE DEPARTMENT FOLLOWED BY AN ACTION OF SEBI AND CBI SHOULD HAVE MADE THE APPELLANT MORE VIGILANT WHILE FINALIZING THE ACCOUNTS AND TO COLLECT ALL THE RELEVANT DETAILS, ESPECIALLY WHEN THE APPELLANT HAD TAKEN 17 MONT HS TIME TO GET HIS ACCOUNTS AUDITED. HAVING REGARD TO THE FACT THAT THE APPELLANT HAD BEEN CONSISTENTLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND ADVANCED AMOUNTS TO MR. BUDHWANI IN THE NORMAL COURSE OF HIS BUSINESS ACTIVITIES, THE EXPLANATION OF THE A PPELLANT THAT THE OMISSION TO OFFER THE SAID INCOME TO TAX WAS INADVERTENT IS NOT ACC EPTABLE. IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE AO HAS COME TO THE CORRECT CONCLUSION THAT THERE WAS NO VALID EXPLANATION FROM THE APPELLANT TO HIS PENALTY NOTIC E U/S 271(1)( C ). ACCORDINGLY, I HOLD UPHOLD THE PENALTY LEVIED BY THE AO. 4 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS NOT ACCOUNTED FOR THE INTEREST RECEIVABLE FROM MR.BHUDHWANI ON THE LOAN ADVANCED TO HIM TO THE TUNE OF RS. RS.2,22,581 / - WHICH WAS NOT RECEIVED AND 4 ITA NO. 1640 / MUM/ 201 1 COULD NOT BE PROVIDED FOR. THE REASONS STATED WAS PRE - OCCUPATION OF THE APPELLANT IN ATTENDING VARIOUS GOVERNMENT AUTH ORITIES IN INCOME TAX MATTER DURING SURVEY PROCEEDINGS U/S 133A IN THE MONTH OF OCTOBER, 2005 AND SEBI AND CBI INQUIRIES IN THE MONTH OF DECEMBER, 2005. THE ASSESSEE SUBMITTED THAT HE WAS UNDER TREMENDOUS PRESSURE AND THEREFORE, AT THE TIME OF FINANAL ISTION OF THE ACCOUNT, THE INTEREST RECEIVED FROM MR.BHUDHWANI COULD NOT BE PROVIDED FOR AND HE HAD NO INTENTION TO EVADE OR CONCEAL THE SAID INCOME. 5. THE LD. COUNSEL ALSO PRODUCED LETTER DATED 7.9.2016 RECEIVED FROM MR.P BUDHAWANI IN WHICH IT HAS BE EN STA T ED THAT INTEREST H A S BEEN PROVIDED IN THE BOOKS OF ACCOUNT OF MR. BUDHAWANI FOR THE FINANCIAL YEAR ENDED ON 31.3.2005 WAS NOT PAID SUBSEQUENTLY AND ULTIMATELY THE SAID INTEREST WAS WRITTEN BACK IN FY 2011 - 12 BY CREDITING THE SAME TO THE PROFIT AN D LOSS ACCOUNT. CLOSE ANALYSIS OF THE SUBMISSION S OF THE LD.AR BEFORE THE AO AND THE LETTER OF MR.BUDHWANI, WE FIND THAT THE INTEREST WAS NOT RECEIVED IN THE SUBSEQUENT YEAR ALSO AND COULD NOT BE PROVIDED DUE TO THE REASONS STATED ABOVE. IN OUR OPINION, THIS CONSTITUTES REASONABLE CAUSE FOR WHICH PENALTY COULD NOT BE IMPOSED. THE STAND OF THE ASSESSEE IS FURTHER FORTIFIED AND RE - INFORCED THAT THE LO A NEE DID PAY INTEREST TO THE LO A NER WHICH WAS TO BE PAID AND WR OTE BACK THE SAID AMOUNT IN TH E FINANCIA L YEAR 2011 - 12. IN OUR CONSIDERED OPINION, THE PENALTY IMPOSED BY THE AO IS NOT CORRECT AND THE LD. CIT(A) HAS ALSO WRONGLY SUSTAINED THE SAME AS THE INCOME WHICH WAS NEVER RECEIVED COULD NOT BE SAID TO HAVE BEEN ACCRUED TO THE 5 ITA NO. 1640 / MUM/ 201 1 ASSESSEE MAY BE BY REASO NS OF THE FACTS WHICH AROSE SUBSEQUENT TO THE CLOSING OF THE FINANCIAL YEAR. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY . 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14. 10 .2016 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 14. 10. 2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT( A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI