M/s. Ganpati Associates, Meerut V. ITO, Meerut

ITA 1692/DEL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7113 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-11-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Keywords: Question of law
• Section: 43(5); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.O.P.KANT, ACCOUNTANT MEMBER I.T.A .NO.-1692/DE L/2012 (ASSESSMENT YEAR-1996- 97) GANPATI ASSOCIATES, 169-A, ABU LANE, MEERUT PAN-AAEFG3543J (APPELLANT) VS ITO, WARD-1(2), MEERUT (RESPONDENT) APPELLANT BY SH.M.P.RASTOGI, ADV. RESPONDENT BY SH.T.VASANTHAN, SR.DR ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 24.01.2012 OF CIT(A) , MEERUT PERTAINING TO 1996- 97 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS:- 1. THAT THE PENALTY AS LEVIED BY THE A.O. U/S 271(1)( C) OF THE ACT AND SUSTAINED BY THE CIT(A) IS ARBITRARY, UNJUST AN D ILLEGAL. 2. THAT THE ASSESSEE HAS NEITHER CONCEALED ANY PARTICU LARS OF INCOME NOR HAS FURNISHED ANY INACCURATE PARTICULARS AND CONSEQUENTLY THE PENALTY AS LEVIED BY THE A.O. U/S 271(1)(C) OF THE ACT AT RS.4,20,000/- AND SUSTAINED BY CIT(A) IS ARBITRARY, UNJUST AND AT ANY RATE VERY EXCESSIVE. 3. THAT THE CIT(A) IS WRONG THAT THE ASSESSEE HAS FAIL ED TO SUBSTANTIATE ITS EXPLANATION AND HENCE, THE PENALTY AS LEVIED BY THE A.O. U/S 271(1)(C) OF THE ACT AT RS.4,20,000 /- AND SUSTAINED BY CIT(A) IS BAD IN LAW. 2. THE LD.AR INVITING ATTENTION TO THE COPY OF THE ORDER DATED 05.12.2012 OF THE HONBLE HIGH COURT SUBMITTED THAT THE APPEAL FI LED BY THE ASSESSEE AGAINST THE QUANTUM ORDER WHEREIN THE ADDITIONS HAVE BEEN U PHELD BY THE ITAT HAS BEEN ADMITTED BY THE HONBLE HIGH COURT HOLDING THA T A SUBSTANTIAL QUESTION OF LAW AROSE IN THE APPEAL. COPY OF THE SAID ORDER IT WAS SUBMITTED IS PLACED AT PAGES 84 TO 88 OF THE SUPPLEMENTARY PAPER BOOK FILE D. DATE OF HEARING 16.11.2015 DATE OF PRONOUNCEMENT 08.02.2016 I.T.A .NO.-1692/DEL/2012 PAGE 2 OF 4 3. ACCORDINGLY IT WAS HIS SUBMISSION THAT WHEN THE SUBJECT MATTER OF THE ADDITIONS SUSTAINED BY THE ITAT HAS BEEN ADMITTED B Y THE HONBLE HIGH COURT ACCEPTING THE ASSESSEES APPEAL ON THE GROUND THAT A SUBSTANTIAL QUESTION OF LAW AROSE, IN THESE CIRCUMSTANCES IT WAS HIS SUBMIS SION THAT ADMITTEDLY ON THE MERITS OF THE ADDITIONS THE ISSUE BECOMES DEBATABLE AS FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED. IN VIEW THEREOF THE PEN ALTY PROCEEDINGS IT WAS SUBMITTED DESERVE TO BE QUASHED. 4. APART FROM THAT ON THE MERITS OF THE CASE ALSO I T WAS HIS SUBMISSION THAT EVEN ON THE BASIS OF THE TWO ADDITIONS MADE LEVY OF PENALTY COULD NOT HAVE BEEN UPHELD. 4.1. ADDRESSING THE FIRST ADDITION OF RS.5,93,664/- MADE ON ACCOUNT OF DISALLOWANCE OF THE INTEREST, IT WAS SUBMITTED THAT THE ADDITION HAS BEEN MADE ON THE GROUND THAT THE FUNDS BORROWED HAVE BEEN UTI LIZED FOR THE PURPOSES OF MAKING INTEREST FREE ADVANCES TO THE PARTNERS. THE SAID ISSUE HAS BEEN ADMITTED ON WHICH THE QUESTION OF LAW IS PENDING BEFORE THE HONBLE HIGH COURT. 4.2. THE SECOND ADDITION IT WAS SUBMITTED WAS MADE ON ACCOUNT OF DISALLOWANCE OF LOSS IN TRADING OF COTTON OF RS.4,5 0,675/- WHICH ISSUE ALSO HAS BEEN ADMITTED BY THE HONBLE HIGH COURT. INVITING ATTENTION TO THE EXPLANATION IN REGARD TO THESE TWO ADDITIONS, IT WAS SUBMITTED WOULD SHOW THAT THERE WAS NO CONCEALMENT ON THE PART OF THE ASSESSEE AS ALL MATE RIAL FACTS WERE FULLY DISCLOSED BEFORE THE TAX AUTHORITIES. IT WAS SUBMITTED THAT ALTHOUGH ON MERITS, THE TAX AUTHORITIES HAD NOT ACCEPTED THE ASSESSEES EXPLANA TION AND MADE THE ADDITIONS BY WAY OF DISALLOWANCE WHICH HAD BEEN UPHELD RIGHT UPTO THE ITAT BUT THE FACTS REMAINS ONCE A QUESTION OF LAW AGITATED BEFORE THE JURISDICTIONAL HIGH COURT HAS BEEN ADMITTED THE ADDITION ON MERITS ITSELF BECOMES DEBATABLE THUS PENALTY IMPOSED CANNOT BE UPHELD. IN THE ALTERNATIVE IT WA S ARGUED THAT EVEN OTHERWISE, AS PER SETTLED LEGAL PRECEDENCE PENALTY WAS NOT ATTRACTED WHERE THE ADDITIONS ARE MADE BY WAY OF DISALLOWANCE WHERE ALL MATERIAL FACTS HAVE BEEN DISCLOSED,. 5. THE LD. SR. DR RELIED UPON THE PENALTY ORDER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE HONBLE ALLAHABAD HIGH COURT IN ITA NO.48 OF 2009 VIDE ITS ORDER DATED 05.12.2012 ALLOWING THE ASSESS EE TO REFRAME ITS ORIGINAL (I) TO I.T.A .NO.-1692/DEL/2012 PAGE 3 OF 4 (VIII) SUBSTANTIAL QUESTION OF LAW BY PERMITTING, R EFRAMING AND THEREAFTER ADMITTING THE FOLLOWING QUESTIONS:- QUESTIONS:- (I) WHETHER THE ITAT RIGHTLY UPHELD THE INITIATION OF P ROCEEDINGS U/S 147 OF THE ACT IN VIEW OF CLAUSE (B) OF EXPLANA TION 2 TO SECTION 147 FOLLOWING THE DECISION OF APEX COURT IN CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS P. LTD. 291 IT R 500 (SC) ALONE WHEREAS THE ITAT HAS FAILED TO CONSIDER THAT REQUIREMENT OF SECTION 147 OF THE ACT WAS NOT FULFI LLED WHICH IS CONDITION PRECEDENT FOR INITIATION OF PROCEEDINGS U/S 147/148 OF THE ACT AS HELD IN CASE OF PRASHANT S.JOSHI VS I TO (2010) 324 ITR 154 (BOM.). (II) WHETHER THE ITAT WAS JUSTIFIED IN ADJUDICATION THE CLAIM OF LOSS OF RS.4,50,675 ON PURCHASE AND SALE OF COTTON WHICH WAS NOT AN ISSUE IN THE REASON RECORDED FOR INITIATION OF 148 PROCEEDINGS IGNORING THE DECISION OF VIPIN KHANNA V S CIT (2002) 255 ITR 220 P&H AND PRASHANT S. JOSHI VS ITO (BOM.) (2010) 324 ITR 154 (BOM.). (III) WHETHER THE ITAT WAS RIGHT IN CONFIRMING THE DISALL OWANCE OF INTEREST OF RS.5,93,644 WHEN THE LOAN WAS USED FOR BUSINESS PURPOSE AND ALL THE CONDITIONS OF SECTION 36(1)(III ) OF THE ACT WAS FULFILLED AS HELD IN CASE OF CIT VS RADICO KHAI TAN LTD. (2005) 274 ITR 354 (ALLD.)? (IV) WHETHER THE ITAT IS RIGHT IN DISALLOWING THE LOSS O F RS.4,50,675 ON PURCHASE AND SALE OF COTTON ON GROUN D OF SPECULATION APPLYING SECTION 43(5) OF THE ACT, WHEN THE TRANSACTION WAS ON DELIVERY BASIS CARRIED THROUGH P AKKA ARHATIYA? 7. CONSIDERING THE FACTS AS PLEADED WHICH HAVE NOT BEEN REBUTTED BY THE REVENUE, WE FIND THAT SINCE ON MERIT ITSELF THE ADD ITIONS CANNOT BE SAID TO BE FINALIZED AS ADMITTEDLY QUESTION OF LAW ARISING FRO M THE ORDER OF THE ITAT IN THE QUANTUM PROCEEDINGS HAS BEEN ADMITTED BEFORE THE HO NBLE HIGH COURT ACCORDINGLY RELYING UPON THE DECISION OF THE APEX C OURT IN K.C. BUILDERS CASE AND THE ORDER DATED 05.10.2010 IN ITA NO.240/2009 I N CIT VS LIQUID INVESTMENT & TRADING CO. CITED BEFORE US (COPY FILE D), THE PENALTY ORDER IS DIRECTED TO BE QUASHED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED IN TERMS OF THE PRONOUNCEMENT MADE AT THE TIME OF HEARING. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08 TH OF FEBRUARY, 2016. SD/- SD/- (O.P.KANT) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:08/02/2016 *AMIT KUMAR* I.T.A .NO.-1692/DEL/2012 PAGE 4 OF 4 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTAN T REGISTRAR ITAT NEW DELHI