A.C.I.T.Cir - 51,Kol., Kolkata V. Shri Hrishikesh Kundu, Kolkata

ITA 1777/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78375 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 04-12-2012
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA PRASAD
• Assessee Lawyers: MIRAJ SHAH
• Keywords: Question of law; Reasonable cause; Deemed dividend; Ignorance of law
• Section: 143(3)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1777/KOL/2012 #$ %&/ ASSESSMENT YEAR: 2004-05 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. SHRI HR ISHIKESH KUNDU CIRCLE-51, KOLKATA. (PAN: AFTDK7611K) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 14.07.2014 DATE OF PRONOUNCEMENT: 16.07.2014 FOR THE APPELLANT: SHRI RAJENDRA PRASAD, JCIT, SR. DR FOR THE RESPONDENT: SHRI MIRAJ SHAH, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT(A)-XXXII, KOLKATA IN APPEAL NO. 28/XXXII/11-12/CIR-51/KOL DATED 08.10.2012. AS SESSMENT WAS FRAMED BY ACIT, CIRCLE- 51, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2004-05 VIDE HIS ORDER DATED 11.09 .2006. PENALTY IN DISPUTE WAS LEVIED BY DCIT, CIRCLE-51, KOLKATA U/S. 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 31.03.2011. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE PENALTY LEVIED BY AO U/S. 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME IN RESPECT TO DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 3 . BRIEFLY STATED FACTS ARE THAT THE ASSESSMENT WAS CO MPLETED FOR THE RELEVANT AY 2004-05 U/S. 143(3) OF THE ACT DATED 11.09.2006 AND ADDITIO N ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT WAS MADE AT RS.56,06,165/-, EVE NTUALLY WHICH WAS ENHANCED BY CIT(A) AT RS.80 LAKHS VIDE HIS APPELLATE ORDER DATED 23.07.20 07. THE ASSESSEE PREFERRED APPEAL BEFORE ITAT AGAINST THE CIT(A)S ORDER AND ITAT RESTORED T HE MATTER BACK TO THE FILE OF THE CIT(A). THE CIT(A) ADJUDICATED THE MATTER VIDE ORDER DATED 27.03.2009 AND RESTRICTED THE ADDITION OF DEEMED DIVIDEND TO RS.56,06,165/-. NO FURTHER APPE AL AGAINST THIS QUANTUM ADDITION WAS PREFERRED BY ASSESSEE AS CONCEDED BY LD. COUNSEL FO R THE ASSESSEE BEFORE US BY MAKING A STATEMENT AT BAR. 2 ITA NO. 1777/K/2012 HRISHIKESH KUNDU. AY 2004-05 4. THE ASSESSEE IS A MANAGING DIRECTOR OF HI-TECH GRAPHIC PRIVATE LTD. (HGPL) AND ASSESSEE CLAIMED IN RESPONSE TO PENALTY NOTICE THAT AS PER AGREEMENT WITH THE HGPL, ASSESSEE IS ENTITLED TO COMMISSION AND IN LIEU OF THAT ASSESSEE RECEIVED ADVANCE OF RS.80 LACS I.E. COMMISSION RECEIVABLE ON THE CONDITION THAT COMMISS ION PAYABLE WOULD BE ADJUSTED AGAINST THIS SUM. IT WAS EXPLAINED THAT WHEN THIS ADVANCE OF RS.80 LACS WAS TAKEN IT WAS ESTIMATED THAT THE ASSESSEE WOULD BE ENTITLED TO A COMMISSION OF A BOUT RS. 80 LACS, HENCE, THE COMPANY AGREED TO MAKE ADVANCE BUT WITH A CONDITION THAT THE SAID AMOUNT WOULD BE ADJUSTED WITH THE COMMISSION PAID. THE ASSESSEE FURTHER EXPLAINED TH AT AS MANY OF THE MAJOR CONTRACTS FOR WHICH ASSESSEE WAS WORKING ON BEHALF OF THE COMPANY DID N OT MATERIALIZE AND AS A RESULT THE COMMISSION PAYABLE WAS ONLY TO THE EXTENT OF RS.23, 93,830/- IN PLACE OF THE TOTAL ADVANCE PAYABLE AGAINST COMMISSION AT RS.80 LACS. THE ASSE SSEE EXPLAINED THAT THE NET AMOUNT OF RS.56,06,165/- STOOD TO THE CREDIT OF THE COMPANY I N THE BOOKS OF THE ASSESSEE ON ACCOUNT OF ADVANCE COMMISSION PAYMENT. THE ASSESSEE DURING TH E COURSE OF PENALTY PROCEEDINGS EXPLAINED THAT HE WAS SOLICITING BUSINESS FOR THE C OMPANY AGAINST WHICH THE COMPANY PAID COMMISSION AND IN FACT COMMISSION TO THE EXTENT OF RS.23,93,830/- WAS PAID DURING THE CURRENT ASSESSMENT YEAR AND THE SAID AMOUNT WAS ADJUSTED FR OM THE ADVANCE OF RS.80 LACS, WHICH IS NOT IN DISPUTE. ACCORDING TO ASSESSEE, THE ADVANCE TAK EN BY THE ASSESSEE WAS PURELY FOR A BUSINESS CONNECTION AND NOT WITH ANY INTENTION TO VIOLATE TH E PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US ALSO ARG UED THAT THE ISSUE IS COVERED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DR. MINATI CHAKRABORTY IN ITA NO. 98 OF 2009 DATED 16.07.2010 WHEREIN FOLLOWING QUESTION OF LAW WAS RE FERRED: WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME- TAX APPELLATE TRIBUNAL IS CORRECT IN DELETING PENALTIES OF RS. 15 ,05,548/- AND RS.3,33,802/- IMPOSED UNDER SECTION 271(1)(C) WITH REFERENCE TO NON-INCLU SION OF THE INTEREST FREE ADVANCES OF RS. 27,50, 162/- AND RS.11,00,000/- RECEIVED AS INT EREST FREE ADVANCES IN THE PERIOD RELEVANT TO THE ASSESSMENT YEARS 2001-02 AND 2002-0 3, RESPECTIVELY FROM NITRILE INDIA PVT. LTD., IN WHICH SHE HAD SUBSTANTIAL INTEREST IN TERMS OF PROVISIONS OF SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961, TO THE EFFECT THAT THE AMOUNTS WOULD BE DEEMED TO BE DIVIDEND AND WOULD BE INCLUDIBLE IN THE INCOME OF T HE RECIPIENT, IN VIEW OF THE DECISION OF THE DECISION OF THE HONBLE SUPREME COURT IN CAS E OF UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSOR 306 ITR 277 TO THE EFFECT THAT TH E PENALTY IS IN THE NATURE OF A CIVIL LIABILITY? 5. LD. COUNSEL FOR THE ASSESSEE STATED THAT THE JUR ISDICTIONAL HIGH COURT DISMISSED THE APPEAL OF REVENUE AND CONFIRMED THE ORDER OF ITAT W HEREIN IT IS HELD THAT IN RESPECT OF ADDITION ON ACCOUNT OF DEEMED DIVIDEND NO PENALTY U/S. 271(1 )(C) OF THE ACT FOR CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME IS WARR ANTED. LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF SUNIL CHANDRA VOHRA VS. ACIT (2009) 3 ITA NO. 1777/K/2012 HRISHIKESH KUNDU. AY 2004-05 32 SOT 365 (MUM) WHEREIN THE IGNORANCE OF THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT WAS HELD TO BE REASONABLE CAUSE FOR DELETING THE PENALT Y. THE TRIBUNAL HELD AS UNDER: THE TAX LAWS IN THIS COUNTRY ARE SO COMPLEX AND CO MPLICATED THAT EVEN A PERSON SPECIALIZING IN THIS FELD, NCLUDING TAX ADMINISTR ATORS, MAY NOT UNDERSTAND THE LAW IN THE CORRECT PERSPECTIVE OR A PARTICULAR PROVISION M AY GO UNNOTICED BECAUSE OF THE NUMBER OF AMENDMENTS MADE TO THE TAX ENACTMENTS FRO M YEAR TO YEAR. UNDER THESE CIRCUMSTANCES, IT WOULD BE A TRAVESTY OF TRUTH AND JUSTICE TO HOLD THAT AN ASSESSEE OUGHT TO HAVE KNOWN THE CORRECT LAW AND COMPLY THEREWITH, EVEN THOUGH HE WAS NOT AWARE OF THE PROVISIONS. IN THE CASE OF KAUSHAL DIWAN VS. IT O (1983) 3 ITD 432 (DEL) (TM), THE LEARNED AM OBSERVED, ON AN ANALOGOUS SITUATION, THA T THE TAX PROVISIONS ARE SO COMPLEX THAT EVEN HE WAS NOT AWARE OF THE PROVISION IN QUESTION TILL THE MATTER WAS PLACED BEFORE THE BENCH. SIMILAR VIEW WAS TAKEN IN THE CASE OF WTO VS S. P. JAYAKUMAR (1983) 3 ITD 221 (MAD). THE BENCH OBSERVE D THAT THE PLEA OF IGNORANCE OF LAW CAN BE TREATED AS A PROPER EXPLANATION. SUCH EX PLANATION CAN BE SAID TO HAVE BEEN SUBSTANTIATED WHEN IT IS SHOWN THAT: (A) HE WAS ASS ISTED BY A PROFESSIONAL CHARTERED ACCOUNTANT WHO HAS NOT BROUGHT TO HIS NOTICE THE AP PLICABILITY OF PROVISIONS OF S. 2(22)(E) OF THE ACT AND (B) BY MAKING A STATEMENT T HAT THIS IS THE FIRST YEAR IN WHICH THESE PROVISIONS CAME TO BE APPLED IN ASSESSEE S C ASE. IT COULD THUS BE SEEN THAT THE ASSESSEE TENDERED AN EXPLANATION WHICH WAS SUBSTANT IATED AND THUS THE BURDEN IS CAST UPON THE REVENUE TO PROVE THAT THE EXPLANATION IS F ALSE SO AS TO INVOKE EXPLN. 1 TO S. 271(1)(C) OF THE ACT. EXCEPT MERELY STATING THAT TH E ASSESSEE OUGHT TO HAVE FURNISHED THE LOAN PARTICULARS VOLUNTARILY, ALONG WITH THE RETURN OF INCOME, NO OTHER REASON WAS ASSIGNED BY THE TAX AUTHORITIES TO DISPUTE THE BONA FIDES OF THE EXPLANATION. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES AND IN THE LIGHT O F DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT T HE EXPLANATION OF THE ASSESSEE IS BONAFIDE AND HENCE THE CASE FALLS OUTSIDE THE AMBIT OF EXPLN. 1 TO S. 271(1) (C) OF THE ACT. IN OTHER WORDS, NO CASE WAS MADE OUT BY THE T AX AUTHORITIES TO LEVY PENALTY UNDER S. 271(1)(C) OF THE ACT. WE, THEREFORE, SET ASIDE T HE ORDERS OF THE TAX AUTHORITIES AND CANCEL THE PENALTY LEVIED BY THE AO. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. FROM THE ABOVE, IT SEEMS THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JURISDICTIONAL HIGH COURT DECISI ON IN THE CASE OF DR. MINATI CHAKRABORTY, SUPRA AND THE DECISION OF COORDINATE BENCH OF MUMBA I TRIBUNAL IN THE CASE OF SUNIL CHANDRA VOHRA, SUPRA. RESPECTFULLY FOLLOWING ALL THE PROPO SITIONS STATED ABOVE, WE CONFIRM THE ORDER OF CIT(A) DELETING THE PENALTY LEVIED U/S. 271(1)(C) O F THE ACT. APPEAL OF REVENUE IS DISMISSED. 6. IN THE RESULT APPEAL OF REVENUE IS DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.07.2 014. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16TH JULY, 2014 -. #/0 1 JD.(SR.P.S.) 4 ITA NO. 1777/K/2012 HRISHIKESH KUNDU. AY 2004-05 2 *3 4 3%5- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ACIT, CIRCLE-51, KOLKATA. 2 *+() / RESPONDENT SHRI HRISHIKESH KUNDU, BG-10, SEC-II , SALT LAKE, KOL- 91. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:; *# / DR, KOLKATA BENCHES, KOLKATA +3 */ TRUE COPY, #