Captain Polypast Limited, RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Circle-5, RAJKOT-GUJARAT

ITA 18/RJT/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1311 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S CHAKRAVARTY
• Assessee Lawyers: M J RANPURA C D
• Keywords: Principle of natural justice; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 18/RJT/2011 (ASSESSMENT YEAR: 2005-06) CAPTAIN POLYPLAST LIMITED UL-25, ROYAL COMPLEX, BHUTKHANA CHOWK, DHEBAR ROAD, RAJKOT V/S ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5, RAJKOT (APPELLANT) (RESPONDENT) PAN: AAACC8608F APPELLANT BY : SHRI M.J. RANPURA, C.D. RESPONDENT BY : SHRI C.S. CHAKRAVARTY, SR. D .R. ( )/ ORDER DATE OF HEARING : 18 -04-201 6 DATE OF PRONOUNCEMENT : 25 -04-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-IV, RAJKOT DATED 23.06.2009 PERTAINING TO A.Y. 2005-06. ITA NO. 18/R JT/2011 . A.Y. 2005-06 2 2. THIS APPEAL IS LATE BY 514 DAYS. THE ASSESSEE HAS F ILED AN AFFIDAVIT GIVING THE REASONS FOR THE DELAY. THE ASSESSEE HAS FILED AN APPLICATION PRAYING THE CONDONATION OF THE DELAY. THE LD. D.R. STRONGLY OBJECTED TO THIS APPLICATION OF THE ASSESSEE STATING THAT THE A SSESSEE IS A PRIVATE LIMITED COMPANY HAVING CONSULTENTS; THEREFORE, IGNO RANCE OF LAW IS NO EXCUSE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE CONTENTS OF THE AFFIDAVIT. IN OUR CONSIDERED OPINION, THE ASSES SEE WAS PREVENTED BY SUFFICIENT CAUSE FOR NOT FILING THE APPEAL ON TI ME. WE DO NOT FIND ANY REASON AS TO WHAT BENEFIT THE ASSESSEE WOULD DERIVE BY NOT FILING THE APPEAL ON TIME. ON THE CONTRARY, BY NOT ABIDING THE LAW, THE ASSESSEE WOULD PUT ITSELF IN A MORE DISADVANTAGEOUS POSITION . DELAY IS CONDONED 3. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO THE L EVY OF PENALTY U/S. 271(1)(C) OF THE ACT AMOUNTING TO RS. 6,03,793/- WH ICH WAS CONFIRMED BY THE LD. CIT(A). 4. THE ROOTS FOR LEVY OF PENALTY LIE IN THE ASSESSMENT ORDER DATED 24.12.2007 MADE U/S. 143(3) OF THE ACT. THE ASSESSE E IS IN THE BUSINESS OF MANUFACTURING HDPE PIPES AND SPRINKLER IRRIGATION SYSTEMS. DURING THE COURSE OF THE SCRUTINY ASSESSME NT PROCEEDINGS, THE A.O FOUND THAT THE ASSESSEE HAS DEBITED SALES C OMMISSION OF RS. 27,35,764/-. THE A.O SOUGHT EXPLANATION FROM THE AS SESSEE. THE ASSESSEE FILED THE DETAILS OF SALES COMMISSION AND THE PARTIES TO WHOM THE PAYMENTS WERE MADE. ONE OF THE PARTIES WAS M/S. SYNCOM FORMULATION LTD. TO WHOM SALES COMMISSION OF RS. 23 ,57,200/- WAS PAID. ASSESSEE WAS ASKED TO FILE NECESSARY DETAILS IN SUPPORT OF ITS CLAIM. ASSESSEE EXPLAINED THAT THE COMMISSION HAS B EEN PAID BY ACCOUNT PAYEE CHEQUES. DETAILS OF CHEQUE NOS. AND D ATE OF CLEARING WERE FURNISHED. THE A.O MADE NECESSARY INQUIRIES FR OM THE BANK AND ITA NO. 18/R JT/2011 . A.Y. 2005-06 3 THE BANK REPLIED THAT THE CHEQUES WERE NOT DEPOSITE D IN THE ACCOUNT OF SYNCOM FORMULATION LTD. BUT HAVE BEEN ENDORSED IN F AVOUR OF M/S. SANJAY ENTERPRISES. THE PROPRIETOR OF M/S. SANJAY E NTERPRISES WAS SUMMONED AND WHOSE STATEMENTS WERE RECORDED BY THE A.O. THE PROP. OF M/S. SANJAY ENTERPRISES, SHRI GIRISHKUMAR MOHANLAL IN HIS STATEMENT STATED THAT HE IS IN THE BUSINESS OF CHEQ UE DISCOUNTING AND THE IMPUGNED CHEQUES WERE DISCOUNTED BY HIS FIRM AN D THE CASH WAS PAID TO SOME UNKNOWN PERSON. 5. THE A.O WAS OF THE FIRM BELIEF THAT THE ASSESSEE HA S DEBITED SALES COMMISSION IN THE FICTITIOUS NAME AND TREATED THE S AME AS BOGUS SALES COMMISSION AND DISALLOWED THE SAME. 6. PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED F OR CONCEALMENT OF INCOME AND FOR SUBMITTING INACCURATE PARTICULARS OF INCOME. 7. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS ITS ELF, THE ASSESSEE HAS FILED A REVISED RETURN IN WHICH THE CLAIM OF EX PENDITURE OF RS. 23,57,200/- WAS ADDED BACK TO THE RETURNED INCOME. BUT THIS REVISED RETURN OF INCOME WAS NOT ACCEPTED BY THE A.O SINCE IT WAS BARRED BY LIMITATION. 8. IN THE PENAL PROCEEDINGS ONCE AGAIN, THE ASSESSEE W AS ASKED TO EXPLAIN WHY PENALTY SHOULD NOT BE LEVIED ON ADDITIO N OF RS. 23,57,200/- MADE ON ACCOUNT OF BOGUS EXPENDITURE BY WAY OF SALES COMMISSION. IN ITS REPLY, THE ASSESSEE HAS CHALLENG ED THE VALIDITY OF THE NOTICE AND ON MERITS OF THE CASE, IT WAS STRONG LY CONTENDED THAT THE ADDITIONS HAVE BEEN MADE ON THE STATEMENT OF SH RI PRUSWANI WHO ITA NO. 18/R JT/2011 . A.Y. 2005-06 4 WAS ENGAGED IN THE BUSINESS OF CHEQUE DISCOUNTING A ND WHO STATED THAT CASH PAYMENT HAS BEEN MADE TO SOME UNKNOWN PER SON. IT WAS BROUGHT TO THE NOTICE OF THE A.O THAT THE PAYEE OF THE COMMISSION I.E. SYNCOM FORMULATION WAS NOT CO-OPERATING WITH THE AS SESSEE AND, THEREFORE, NECESSARY DETAILS COULD NOT BE FILED AND FOR THE SAME REASON THE ASSESSEE ADDED BACK THE SALES COMMISSION IN HIS REVISED RETURN OF INCOME. THE SUBMISSIONS MADE BY THE ASSESSEE DID NO T FIND ANY FAVOUR WITH THE A.O WHO PROCEEDED BY LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. THE RELEVANT FINDINGS OF THE A.O READ AS UNDER :- HAVING REGARD TO THE ABOVE DISCUSSION AND FACTS AS ALSO THE CIRCUMSTANCES, I AM SATISFIED THAT THE ASSESSEE HAS TRIED DELIBERATELY TO CONCEAL THE INCOME OR FURNISH INACC URATE PARTICULARS OF INCOME BY SHOWING BOGUS PAYMENT OF COMMISSION TO FICTITIOUS PARTY I.E. M/S. SYNCOM FOR MULATION LTD. WHICH THE ASSESSEE HIMSELF COULD NOT PROVE AS EXISTENT 9. PENALTY OF RS. 6,03,793/- WAS LEVIED. 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD . CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AU THORITIES. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. IT IS THE SAY OF THE LD. D.R. THAT THE ASSESSEE ADMITTED THE DISALLOWANCE ONLY AFTER BEING QUESTIONED BY THE A.O DURING THE C OURSE OF THE ASSESSMENT PROCEEDINGS WHICH PROVES THAT THE ASSESS EE HAS DELIBERATELY CLAIMED THE EXPENDITURE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELO W. WE HAVE ITA NO. 18/R JT/2011 . A.Y. 2005-06 5 HIGHLIGHTED ELSEWHERE, THE RELEVANT OBSERVATIONS/FI NDINGS OF THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF THE PENAL PROCEEDINGS. WE HAVE TO STATE T HAT THE A.O WAS NOT CLEAR WHETHER THE ORDER OF PENALTY IS FOR CONCE ALMENT OR FOR FURNISHING INACCURATE PARTICULARS. EVEN IN THE ASSE SSMENT ORDER, THE A.O IS NOT CLEAR WHETHER HE IS INITIATING PENALTY P ROCEEDINGS FOR CONCEALMENT OF INCOME OR FOR SUBMITTING INACCURATE PARTICULARS. 12. ON IDENTICAL SET OF FACTS, THE HONBLE HIGH COURT O F GUJARAT IN THE CASE OF NEW SORATHIA ENGG. CO. VS. 282 ITR 642 AS H ELD AS FOLLOWS;- PENALTY- CONCEALMENT OF INCOME ORDER OF PENALTY MUST CLEARLY STATE WHETHER IT IS FOR CONCEALMENT OR FOR FURNISHING INACCURATE PARTICULARS ORDER STATING PENALTY WAS FOR ONE OF THE OFFENCES NOT VALID INCOME TAX ACT, 1961. 13. THIS VIEW FURTHER FINDS SUPPORT FROM THE DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. LAKHDIR L ALJI REPORTED IN 85 ITR 77, WHEREIN IT WAS HELD AS FOLLOWS: 'THAT THE PENALTY PROCEEDINGS HAD BEEN COMMENCED AG AINST THE ASSESSEE ON A PARTICULAR FOOTING VIZ CONCEALING OF PARTICULA RS OF INCOME, BUT THE FINAL CONCLUSION FOR LEVYING THE PENALTY WAS BASED ON A DIFFERENT FOOTING ALTOGETHER VIZ. ON THE FOOTING OF FURNISHING INACCU RATE PARTICULARS OF INCOME. UNDER THE CIRCUMSTANCES, IT COULD NOT BE SA ID THAT THE ASSESSEE HAD BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD BEFORE THE ORDER IMPOSING THE PENALTY WAS PASSED. THE VERY BASIS FOR PENALTY PROCEEDINGS AGAINST THE ASSESSEE INITIATED BY THE INCOME-TAX OF FICER, DISAPPEARED WHEN THE APPELLATE ASSISTANT COMMISSIONER HELD THAT THERE WAS NO SUPPRESSION OF INCOME OF THE ASSESSEE. THE CONCLUSI ON OF THE TRIBUNAL ITA NO. 18/R JT/2011 . A.Y. 2005-06 6 THAT THE INSPECTING ASSISTANT COMMISSIONER HAD NO J URISDICTION TO IMPOSE A PENALTY U/S 271(1)(C) FOR CONCEALMENT WAS CORRECT . 14. CONSIDERING THE FACTS IN THE LIGHT OF THE AFOREMENT IONED JUDGMENTS OF THE HONBLE HIGH COURT OF GUJARAT AND FROM THE PERUSAL OF THE ORDER OF THE A.O IT IS OBVIOUS THAT THE A.O HAS INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR LEVYING P ENALTY ON ACCOUNT OF CONCEALMENT OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 15. IN OUR CONSIDERED OPINION SUCH ACT OF THE A.O IS BA D IN LAW, SINCE THE ASSESSEE HAS NOT BEEN GIVEN REASONABLE OPPORTUN ITY FOR DEFENDING ITS CASE WITHOUT MENTIONING SPECIFICALLY THE CHARGE . 16. IN OUR UNDERSTANDING OF THE LAW CONCEALING THE PAR TICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS O F INCOME ARE TWO LIMBS OF SECTION 271(1)(C) OF THE ACT FOR IMPOSING PENALTY. 17. KEEPING IN VIEW FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE AND THE AFORESAID JUDGMENTS OF HONBLE GUJARAT HIGH COU RT, WE ARE OF THE VIEW THAT THE PENALTY IN DISPUTE IMPOSED BY THE A.O CANNOT BE UPHELD BY THE LD. CIT(A) AND THE SAME DESERVES TO BE CANCE LLED. ACCORDINGLY, WE DIRECT THE A.O TO DELETE THE PENALTY OF RS. 6,03 ,793/-. 18. FOR THE SAKE OF COMPLETENESS OF ADJUDICATION EVEN O N MERITS OF THE CASE, THE PENALTY LEVIED CANNOT BE SUSTAINED. 19. FIRSTLY, THE ADDITIONS HAVE BEEN MADE ON THE STATEM ENT OF ONE MR. PRUSWANI WHO HAPPENS TO BE IN THE BUSINESS OF B ILLS DISCOUNTING AND WHO IN HIS STATEMENT HAS STATED THAT FOUR CHEQU ES WERE ITA NO. 18/R JT/2011 . A.Y. 2005-06 7 DISCOUNTED FOR WHICH CASH WAS PAID TO SOME UNKNOWN PERSONS. THERE IS NOTHING IN THE ORDER OF THE LOWER AUTHORITIES BY WHICH IT CAN BE KNOWN WHETHER MR. PRUSWANI WAS SUBJECTED TO CROSS-E XAMINATION BY THE ASSESSEE. THIS IS IN GROSS VIOLATION OF THE PRI NCIPLES OF NATURAL JUSTICE. 20. SECONDLY, THERE IS NOT EVEN A WHISPER IN THE ORDERS OF THE LOWER AUTHORITIES WHICH COULD SUGGEST THAT THE CASH HAS B EEN RECEIVED BY THE ASSESSEE. IT IS A SIMPLE CASE OF DISALLOWANCE OF EX PENDITURE CLAIMED AS SALES COMMISSION DISALLOWANCE OF ANY CLAIM CANNOT I PSO FACTO LEAD TO THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THE PENALTY SO LEVIED IS DIRECTED TO BE DELETED. 21. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 04 - 2 016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKO T