KATHIRAVAN PAPER & BOARDS PRIVATE LIMITED, TIRUNELVELI V. DCIT SPECIAL RANGE II, MADURAI

ITA 1642/CHNY/2007

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 6830 (ITAT-CHENNAI)
• Duration Of Justice: 12 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 11-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P MUTHUSHANKAR
• Assessee Lawyers: G BASKAR
• Keywords: Opportunity of being heard; Set aside
• Section: 271(1)(c)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1642/MDS/2007 / ASSESSMENT YEAR : 1989-90 M/S. KATHIRAVAN PAPER & BOARD (P) LTD., 37, D, SUNHOUSE, PERUMALPURAM, TIRUNELVELI. [PAN: 49-007-CX-6321/S.R.II] VS. DEPUTY COMMISSIONER OF INCOME TAX, SPECIAL RANGE II, MADURAI. ( / APPELLANT) ( #$& /RESPONDENT ) & ' / APPELLANT BY : SHRI. G. BASKAR, ADVOCATE #$& ' / RESPONDENT BY : SHRI. P. MUTHUSHANKAR, JCIT ' /DATE OF HEARING : 30.09.2019 ' /DATE OF PRONOUNCEMENT : 23.12.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: CONSEQUENT TO THE DIRECTIONS OF THE HONBLE JURIS DICTIONAL HIGH COURT IN TC(A) NO. 854/2009 DATED 10.04.2019, WHERE IN, THIS TRIBUNAL ORDER IN ITA NO. 1642/MDS/2007 FOR ASSESSMENT YEAR 1989-90 DATED :-2-: ITA NO.1642/MDS/2007 04.12.2008 WAS SET ASIDE TO DECIDE THE APPEAL ON ME RITS, THIS APPEAL WAS TAKEN UP. 2. THE LD. AR SUBMITTED THAT WHILE MAKING THE ASSES SMENT FOR ASSESSMENT YEAR 1989-90, THE AO EXAMINED THE INTRO DUCTION OF SHARE CAPITAL OF RS. 11,30,000/- FROM SHARE HOLDERS AND R EQUIRED THE ASSESSEE TO FILE CONFIRMATION LETTERS FROM THE SHARE HOLDERS . THE ASSESSING OFFICER SUMMONED THE SHAREHOLDERS TO PROVE THE GEN UINENESS OF MONEY INTRODUCED BY THEM. THERE WAS RESPONSE TO THE EXTE NT OF RS. 8,10,000/- AND HENCE THE AO CONSIDERED THE BALANCE TO BE AN UNEXPLAINED INCOME AND ADDED TO THE INCOME AND INIT IATED PENALTY PROCEEDINGS. DURING THE PENALTY PROCEEDINGS, THE A SSESSEE SUBMITTED BY ITS LETTER DATED 05.09.1992 BEFORE THE DEPUTY CO MMISSIONER, SPECIAL RANGE (THE AO) THAT THE LIST OF SHARE HOLDERS, THE IR HOLDINGS AND OTHER PARTICULARS HAVE BEEN PROPERLY FILED WITH THE ASSES SING OFFICER. EVEN THE LETTERS REQUIRED WITH REGARD TO THE SOURCES OF SHARE HOLDERS AND DIRECTORS FOR THEIR INVESTMENTS IN COMPANY HAVE BEE N FILED. SOME OF THE LETTERS MIGHT HAVE BEEN RECEIVED BY THE AO AFTER HE HAS PASSED THE ORDER. EVEN IF THE CONTRIBUTION OF ANY PARTICULAR SHARE HOLDER OR DIRECTOR IS NOT EXPLAINED, IT CANNOT BE ASSESSED IN THE HAN DS OF THE COMPANY. SUCH AMOUNT SHOULD BE TAKEN AS INCOME OF THE PARTIC ULAR SHAREHOLDER OR DIRECTOR AND ASSESSED IN HIS HANDS ONLY. HOWEVER, THE LD. AO WITHOUT :-3-: ITA NO.1642/MDS/2007 CONSIDERING THE THEM AND WITHOUT AFFORDING ANY OPPO RTUNITY TO THE ASSESSEE LEVIED THE PENALTY U/S. 271(1)(C) TO THE A SSESSEE, INTER ALIA, ON THIS ISSUE. AGGRIEVED, THE ASSESSEE FILED AN APPEA L BEFORE THE CIT(APPEALS)-1, MADURAI. INVITING OUR ATTENTION TO THE STATEMENTS OF FACTS AND GROUNDS OF APPEALS FILED BEFORE THE LD. C IT(A), THE LD. AR SUBMITTED THAT THE CONTENTS OF ASSESSEES REPLY BY ITS LETTER DATED 05.09.1192 WAS BROUGHT TO THE NOTICE OF THE LD. CIT (A). FURTHER, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE MD WAS PER SONALLY PRESENT WITH ALL RELEVANT FACTS, BOOKS, DOCUMENTS ETC., ON APPOINTED DATE AND TIME BEFORE THE AO DURING THE PENALTY PROCEEDINGS, BUT HE WAS NOT GIVEN AN OPPORTUNITY TO EXPLAIN THE MATTER. ON THE CONTRARY, THE ORDER HAS BEEN PASSED BY THE DEPUTY COMMISSIONER ON 17.09 .1992. THUS, IT WAS ESTABLISHED THAT THE ASSESSEE HAS NOT BEEN GIVE N AN OPPORTUNITY OF BEING HEARD. FURTHER, IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE DEPUTY COMMISSIONER IS WRONG IN SAYING THA T THERE IS NO RESPONSE FROM THE SHAREHOLDERS TO THE EXTENT OF RS. 3,20,000/-. HE HAS NOT STATED THE NAMES OF THE SHAREHOLDERS FROM WHOM CONFIRMATION HAS NOT BEEN RECEIVED. IN FACT, EXCEPT TWO SHAREHOLDER S NAMELY SHRI. KANAGASABAPATHY (SHARES FOR RS. 10,000/-) AND SHRI K.S. KRISHNA PILLAI (SHARES FOR RS. 15,000/-), CONFIRMATION LETTERS HAV E BEEN FILED FROM ALL OTHER SHAREHOLDERS. CONFIRMATION FROM THE ABOVE TW O SHAREHOLDERS COULD NOT BE GOT AS THEY WERE DECEASED AT THE TIME OF THE LETTERS FROM :-4-: ITA NO.1642/MDS/2007 THE DEPUTY COMMISSIONER. HOWEVER, THE LD. CIT(A) U PHELD THE ABOVE LEVY WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANC ES OF THE CASE PROPERLY. FURTHER, THE LD. AR SUBMITTED THAT THE CO MPANY COMMENCED ITS OPERATION OF MANUFACTURING DURING THE YEAR 1988 ONLY AND THUS, THE YEAR UNDER APPEAL IS THE FIRST YEAR OF ASSESSMENT. THEREFORE, IT IS CLEAR THAT THE LD. AO WITHOUT EXAMINING THE MATERIAL PLAC ED BEFORE HIM, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT AFFORDING DUE OPPORTUNITY TO THE ASSESSEE LEVIED TH E PENALTY. ALTHOUGH, THE ENTIRE FACTS WERE BROUGHT BEFORE THE LD. CIT(A) , THE LD. CIT(A) ALSO WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES, UP HELD THE PENALTY AND THEREFORE, THE LD. AR PLEADED THAT THE IMPUGNED PEN ALTY BE DELETED. 3. PER CONTRA, THE LD. DR SUBMITTED THAT WITH REGAR D TO THE SHARE CAPITAL, THE ASSESSEE HAS NOT DISCHARGED ITS RESPON SIBILITY OF PROVING THE GENUINENESS OF ITS RECEIPTS. THE MERE IDENTIFICAT ION OF SHAREHOLDERS IS NOT SUFFICIENT, IT IS FOR THE ASSESSEE TO PROVE GEN UINENESS OF THE SHARE CAPITAL WITH REFERENCE TO THE FINANCIAL STRENGTH OF THE PARTIES. IN THE ASSESSEES CASE, THE AO TOOK STEPS, ISSUED NOTICE N OT ONLY TO THE ASSESSEE, BUT ALSO TO THE SHAREHOLDERS ALSO. SINCE , SOME OF THE SHAREHOLDERS RESPONDED, PART OF THE SHARE CAPITAL W AS ACCEPTED AS GENUINE. WITH REGARD TO THE REMAINING PORTION, THE RE WAS NO ATTEMPT ON THE ASSESSEES PART TO ESTABLISH ITS CLAIM. SIN CE, THE ASSESSEE FAILED :-5-: ITA NO.1642/MDS/2007 TO FURNISH CLEAR AND CONVINCING REPLY WITH REGARD T O GENUINENESS OF THE SHARE CAPITAL, THE AO WAS FORCED TO DRAW ADVERSE IN FERENCE. THEREFORE, IT IS A CASE OF DELIBERATE CONCEALMENT OF PARTICULA RS. THEREFORE, THE LEVY OF PENALTY IS JUSTIFIED. THEREFORE, THE LD. DR SUP PORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HEARD THE RIVAL SUBMISSIONS. IT IS CLEAR FRO M THE ASSESSEES SUBMISSIONS THAT THE ASSESSEE COMPANY COMMENCED ITS OPERATION OF MANUFACTURING DURING THE YEAR 1988 ONLY AND THUS, T HE YEAR UNDER APPEAL IS THE FIRST YEAR OF ASSESSMENT. THE ASSESS EE IN ITS LETTER DATED 05.09.1992, FILED BEFORE THE ASSESSING OFFICER DURI NG THE PENALTY PROCEEDINGS CLEARLY SUBMITTED THAT BUT FOR THE TWO PERSONS, CONFIRMATION LETTERS HAVE BEEN FILED IN RESPECT OF ALL OTHERS. HOWEVER, THE AO WITHOUT DEALING ON THIS ASPECT AND WITHOUT AFFORDING ANY OP PORTUNITY TO THE ASSESSEE ON ITS EXPLANATION LEVIED THE IMPUGNED PEN ALTY. ON THIS GROUND ALONE THE PENALTY IS NOT SUSTAINABLE. FURT HER, THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) IN THE STA TEMENTS OF FACTS AND GROUNDS OF APPEAL ALL THE ABOVE ASPECTS. THE LD. CIT(A) ALSO WITHOUT CONSIDERING THE ASSESSEES PLEA DISPOSED THE APPEAL . FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEES EXPLANATION HAS NOT BEEN PROPERLY CONSIDERED WHILE LEVYING THE PENALTY AND IN SUSTAIN ING THE PENALTY. THEREFORE, THE LEVY OF PENALTY CANNOT BE SUSTAINED ON THESE GROUNDS :-6-: ITA NO.1642/MDS/2007 ALSO. IN THIS CASE, THE PENALTY IS LEVIED ONLY ON THE BASIS OF THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSIT ION OF PENALTY EMANATE FROM THE ASSESSMENT PROCEEDINGS, ARE ESSENT IALLY INDEPENDENT AND SEPARATE PROCEEDINGS. FINDINGS GIVEN IN THE ASS ESSMENT PROCEEDINGS ARE CERTAINLY RELEVANT AND HAVE PROBATI VE VALUE, BUT SUCH FINDINGS ARE MATERIAL ALONE AND MAY NOT JUSTIFY THE IMPOSITION OF PENALTY IF THE CONCEALMENT IS NOT PROVED BY THE ASSESSING O FFICER . IN THIS CASE, THOUGH THE ASSESSEE LAID RELEVANT MATERIAL DURING T HE PENALTY PROCEEDINGS, THE AO LEVIED THE PENALTY WITHOUT APPR ECIATING THOSE MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABL E ON RECORD. THUS, THE LEVY LACKS DEFINITE FINDING ABOUT THE CONCEALME NT IN THE ORDER. SINCE, THE AO HAS NOT BROUGHT ANY MATERIAL TO PROVE THE CONCEALMENT OF INCOME, THE LEVY OF PENALTY CANT BE SUSTAINED ON T HIS GROUND ALSO. ON THE TOTALITY, THE PENALTY LEVIED ON THE ASSESSEE IS UNJUSTIFIED AND HENCE, WE DIRECT THE AO TO DELETE THE PENALTY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON 23 RD DECEMBER, 2019 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER :-7-: ITA NO.1642/MDS/2007 /CHENNAI, 0 /DATED: 23 RD DECEMBER, 2019 JPV '#1232 /COPY TO: 1. & / APPELLANT 2. #$& /RESPONDENT 3. 4 ) ( /CIT(A) 4. 4 /CIT 5. 2# /DR 6. 7 /GF