SONU SYNTHETIC LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 1705/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3048 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1705/MUM/2014 ( %' ( / ASSESSMENT YEAR: 2006-07) M/S. SONU SYNTHETIC LTD. 131/B, MITTAL ESTATE, BUILDING NO.6, ANDHERI KURLA ROAD, ANDHERI (EAST) MUMBAI - 400059 ' / VS. INCOME TAX OFFICER 9(3)(1) AAYAKAR BHAWAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AADCS5012J ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 14.09.2016 !' /DATE OF PRONOUNCEMENT: 21.09.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 25.10.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 18, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE ASSESSEE BY: SHRI DHARMESH SHAH DEPARTMENT BY: SHRI VIKRAM BATRA ITA NO.1705/M/2014 A.Y. 2006-07 2 A.Y.2006-07 WHEREIN THE PENALTY LEVIED BY THE ASSES SING OFFICER WAS CONFIRMED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND FACTS IN PASSING THE ORDER U/S.250 OF TH E ACT AND DISMISSING THE APPEAL FILED BY THE APPELLANT. 2. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE VA LID SATISFACTION WAS NOT RECORDED BEFORE INITIATING THE PENALTY U/S.271(1)(C) OF THE ACT. 3. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE LEVY OF PENAL TY OF RS.3,41,71,980/- U/S.271(1)(C) OF THE ACT. 3. THE OTHER POINT WHICH HAS BEEN RAISED BY THE DEP ARTMENTAL REPRESENTATIVE IS THAT THE APPEAL FILED BY THE ASSE SSEE IS TIME BARRED BY 63 DAYS. THE ASSESSEE FILED AN APPLICATION ALONG W ITH AN AFFIDAVIT STATING THAT THE ASSESSEE DID NOT CARRY OUT ANY BUS INESS ACTIVITY SINCE F.Y.2005-06. THE ASSETS OF THE COMPANY WERE AUCTIO NED AND COMPANY CLOSED ITS BUSINESS OPERATIONS IN A.Y.2006- 07. THE COMPANY DID NOT HAVE THE QUALIFIED STAFF OR PROPER PROFESSIONAL SERVICES WHO WOULD LOOK AFTER ITS FINANCIAL AND TAX MATTERS. DUE TO LACK OF QUALIFIED STAFF OR PROFESSIONAL ADVICE THE COMPANY WAS UNABLE TO FILE THE PRESENT APPEAL WITHIN THE STIPULATED TI ME. IN VIEW OF THE REASONS RECORDED ABOVE AS WELL AS CONSIDERING THE F ACT THAT THE MAIN APPEAL FILED BY THE REVENUE IS YET TO BE DECIDED, T HEREFORE, WE ARE OF ITA NO.1705/M/2014 A.Y. 2006-07 3 THE VIEW THAT THERE ARE SUFFICIENT AND REASONABLE GROUND ON RECORD TO CONDONE DELAY IN FILING THE APPEAL, HENCE APPLICATI ON FOR CONDONATION OF DELAY IS FILED IS HEREBY ALLOWED. 4. THE BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 29.11.2006 DECLARING TOTAL LOSS TO THE TU NE OF RS.1,92,78,249/-. ORDER U/S.143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) WAS PASSED ON 19.12.2008 WITHOUT M AKING ANY VARIATION IN THE RETURNED INCOME. SUBSEQUENTLY, TH E CASE OF THE ASSESSEE WAS REOPENED U/S.147 OF THE ACT DUE TO THE FOLLOWING REASONS:- IT IS SEEN THE ENTIRE ASSETS OF THE ASSESSEE COMPA NY HAD BEEN SOLD THROUGH AUCTION BY THE LEADING FINANCIAL INSTI TUTION I.E. ASSET RECONSTRUCTION COMPANY (I) LTD IN NOVEMBER 20 05 FOR A SALE CONSIDERATION OF RS.19,25,00,000/-. THE ASSES SEE COMPANY HAD SHOWN RS.10,82,65,830/- AS PROFIT ON SALE OF AS SETS IN THE P & L A/C. BELOW THE LINE AND THE SAID PROFIT HAD BEE N ADJUSTED AGAINST BROUGHT FORWARD BUSINESS LOSS. HOWEVER, TH E ASSESSEE HAD NOT OFFERED ANY CAPITAL GAIN IN THE COMPUTATION OF INCOME AS PER PROVISIONS OF SECTION 50 OF THE I.T.ACT AND UNABSORBED BUSINESS LOSSES CANNOT BE SET OFF AGAINST CAPITAL G AINS. SHORT TERM CAPITAL GAINS LIABLE TO BE TAXED WORK OUT TO RS.10,15,21,034/- ITA NO.1705/M/2014 A.Y. 2006-07 4 5. ACCORDINGLY, NOTICE U/S.148 OF THE ACT WAS ISSUE D ON 26.03.2010 AND SERVED UPON THE ASSESSEE ON 27.03.20 10. THE ASSESSEE SOUGHT THE REASON BY VIRTUE OF LETTER DATED 28.04.2 010 WHICH WAS GIVEN TO THE ASSESSEE BY VIRTUE OF LETTER DATED 11. 05.2010. THEREAFTER, THE NOTICE U/S.148 OF THE ACT WAS ISSUED. HOWEVER, NO REPLY WAS GIVEN. SINCE THE ENTIRE ASSETS OF THE COMPANY WAS SOLD THROUGH AUCTION FOR A CONSIDERATION OF RS.19,25,00,000/- AN D THE ASSESSEE RECORDED THE ENTRIES IN ITS BOOKS OF ACCOUNTS AND H AD WRITTEN OFF THE ENTIRE OF ASSETS, THE INCOME ON SALE OF SUCH ASSETS WAS CHARGEABLE TO TAX AS PER THE PROVISIONS OF SECTION 50 OF THE ACT. THEREFORE, THE ASSESSING OFFICER COMPUTED THE SHORT TERM CAPITAL G AIN ARISING ON TRANSFER OF SUCH ASSETS TO THE TUNE OF RS.10,15,21, 034/-. SINCE THE ASSESSEE DID NOT OFFER THE SAID AMOUNT OF TAX, THER EFORE NOTICE U/S.271(1)(C) OF THE ACT WAS ISSUED AND PENALTY TO THE TUNE OF RS.3,41,71,980/- WAS LEVIED WHICH WAS CONFIRMED BY THE CIT(A), MUMBAI BY VIRTUE OF ORDER IN QUESTION, THEREFORE TH E ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 6. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D. THE SOLE CONTENTION OF THE ASSESSEE IS THAT THE ORDER DATED 25.10.2013 IN QUESTION WHEREIN THE PENALTY LEVIED BY THE ASSESSIN G OFFICER IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW SPECIFI CALLY IN THE CIRCUMSTANCES WHEN THE QUANTUM ORDER HAS BEEN SET ASIDE BY THE ITA NO.1705/M/2014 A.Y. 2006-07 5 TRIBUNAL BY VIRTUE OF ORDER DATED 21.11.2014. HOW EVER, ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SU PPORTED THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE COPY OF ORDE R IN ITA NO.3588/M/2012 IN THE ASSESSEES OWN CASE FOR THE A .Y.2006-07 IS ON THE FILE IN WHICH IT IS QUITE CLEAR THAT THE HONBL E ITAT HAS SET ASIDE THE QUANTUM OF ORDER DATED 20.12.2012. IN THE SAID CIRCUMSTANCES THE BASE ORDER ON THE BASIS OF WHICH THE PENALTY WAS LE VIED HAS BEEN ORDERED TO BE SET ASIDE. THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES THE PRESENT PENALTY IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE C IT(A) IN QUESTION FOR CONFIRMING THE PENALTY U/S.271(1)(C) OF THE ACT AND DELETE THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 21 ST SEPTEMBER, 2016 MP MP MP MP ITA NO.1705/M/2014 A.Y. 2006-07 6 * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI