ACIT, Coimbatore V. Sri Rathinam Nagarajan, Coimbatore

ITA 1904/CHNY/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7884 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH C HENN AI BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY , JUDICIAL MEMBER .. ITA NO. 1904 /MDS./ 20 11 ASSESSMENT YEAR: 200 7 - 08 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II I, RACE COURSE ROAD, COIMBATORE 641 018. VS. SRI RATHINAM NAGARAJAN, PROP. VIGNESH METAL PROCESS, 3/14E,VINAYAGAR KOIL STREET, SAI NAGAR, SIDCO, COIMBATORE 641 021. PAN ABEPN 1392 B (APPE LLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASH YAM RESPONDENT BY : SHRI S.SRIDHAR, ADVOCATE DATE OF HEARING : 15 . 1 0.12 DATE OF PRONOUNCEMENT : 15 . 1 0.12 O R D E R PER ABARAHAN P. G EORGE, ACCOUNTANT MEMBER : I N THIS APPEAL FILED BY REVENUE , ITS GRIEVANCE IS THAT THE CIT(A) DELETED THE PENALTY OF ` 3,60,216/ - LEVIED ON THE ASSESSEE UNDER SECTION.271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). ITA . 1904 /MDS/ 12 2 2. A PPEAL HAS BEEN FILED LATE BY 23 DAYS. AN AFFIDAVIT EXPLAINING THE REASONS FOR D EL AY HAS BEEN FILED. SINCE AFFIDAVIT REVEALS JUSTIFIABLE REASONS, WE CONDONE THE DELAY AND THE APPEAL IS ADMITTED. 3. SHORT FACTS APROPOS ARE THAT ASSESSEE, AN INDIVIDUAL, HAD FILED THE RET URN FOR THE ASSESSMENT YEAR 20 07 - 08 DECLARING AN INCOME OF ` 5,85,580/ - . ASSESSEE WAS ENGAGED IN THE BUSINESS OF METAL PROCESSING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT ASSESSEE HAD SHOWN THE FOLLOWING CRED ITORS IN ITS BOOK OF ACCOUNTS . NAME A S ON 31.03.07 ` SRI MURUGAN EQUIPMENTS, CBE 44,012/ - SIVARAM ENGINEERS, CBE - 6 44,207/ - RAJA TRADERS, CBE 21 43,473/ - J V INDUSTRIES, CBE 21 44,552/ - THI AGARAJ INDUSTRIES,CBE 44,215/ - MEENA MACHINE WORKS,CBE 28,828/ - BANU PRIYA ENTERPRISES, CBE 586,535/ - WILLIAM GURUSAMI, CBE 8 401,011/ - TOTAL 12,36,833 / - ITA . 1904 /MDS/ 12 3 LETTERS WERE SENT TO THESE CREDITORS AND AS P ER THE A SSESSING OFFICER, LETTERS TO MANY OF THE ABOVE PERSONS WERE RETURNED AS UNSERVED . HOWEVER, CONFIRMATION S IT SEEM WERE RECEIVED BY THE ASSESSING OFFICER FROM THE FOLLOWING THREE PARTIES. BANU PRIYA ENTERPRISES, CBE 586,535/ - J V ENTERPRIESES , CBE 21 44,552/ - WILLIAM GURUSAMI, CBE 8 401,01 1/ - AS PER ASSESSEE, IN RESPECT OF OTHER PARTIES, THEY HAD CLOSED THEIR BUSINESS DUE TO RECESSION AND COULD NOT BE TRACED . NEVERTHELESS, ASSESSEE DID PRODUCE SHRI WILLIAM GURUSAMY BEFORE THE ASSESSING OFFICER. BUT AS PER ASSESSING OFFICER THE SAID PERSON DID NOT CONFIRM NOR DENY THE TRANSACTIONS WITH THE ASSESSEE. ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE COULD NOT ESTABLISH THE BONA FIDE NATURE OF HIS TRANSACTIO NS WITH THE SAID PARTIES AND GENUINENESS OF THE CREDITS WERE NOT PROVED. HE THEREF ORE, MADE ADDITION OF ` 12,36,833/ - AS PER THE LIST GIVEN ABOVE. 4. THEREAFTER, PROCEEDINGS FOR LEVY OF PENALTY WAS INITIATED. ASSESSEE WAS REQUIRED TO EXPLAIN WHY PENALTY SHOULD NOT BE LEVIED ON THE SUM OF ` 12,36,833/ - ADDED TO HIS INCOME . ASSESSEE T HEREUPON REQUESTED THE ASSESSING OFFICER TO DROP THE ITA . 1904 /MDS/ 12 4 PENALTY PROCEEDINGS . A CCORDING TO THE ASSESSEE, PENALTY OUGHT NOT BE LEVIED JUST FOR A REASON THAT CONFIRMATION LETTERS WERE NOT RECEIVED FROM THE CREDITORS DIRECTLY. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO HIM, CONFIRMATION LETTERS SUBMITTED BY THE ASSESSEE IN RESPECT OF THE PARTIES HAD ADDRESSES MENTIONED THEREIN, LETTERS WERE ISSUED BY HIM ON SUCH ADDRESSES ONLY. ONCE THESE LETTERS WERE RETURNED WITH A NOTICE THAT THERE WAS N O ADDRESSEE IN THE DOOR NUMBER MENTIONED THEREIN, IT WAS CLEAR THAT THE CONFIRMATION S WERE NOT GENUINE. THEREFORE, ACCORDING TO HIM, THERE WA S FACTUAL MIS - REPRESENTATION BY THE ASSESSEE , IN GIVING FALSE ADDRESS OF THE CREDITORS, WHICH RESULTED IN CONCEAL MENT OF INCOME AND WILLFUL ATTEMPT TO EVAD E TAX. HE THEREFORE LEVIED A PENALTY OF ` 3,60,216/ - AT 100% OF THE TAX SOUGHT TO BE EVADED. 5 . IN ITS APPEAL BEFORE THE CIT(A), ARGUMENT OF THE ASSESSEE WAS THAT THE DUES WERE ARISING OUT OF TRADE TRANSACTIONS , IN THE REGULAR COURSE OF HIS BUSINESS. FIVE OF THE PARTIES HAD CLOSED DOWN THE IR BUSINESS. FINANCIAL YEAR CONCERNED WAS 2006 - 07 AND SCRUTINY PROCEEDI NGS WERE DONE ONLY IN THE YEAR 2009. JUST BECAUSE LETTERS SENT BY THE ASSESSING OFFICER WERE NOT SER VED, PENALTY COULD NOT BE LEVIED. AC CORDING TO THE ASSESSEE, THERE ITA . 1904 /MDS/ 12 5 WAS NO FINDING REGARDING ANY CONCEALMENT OR ANY FAILURE ON THE PART OF THE ASSESSEE TO FURNISH THE REQUIRED PARTICULARS. CIT(A) APPRECIATED THE SE CONTENTION S . ACCORDING TO HIM, ONE OF THE CREDITORS HAD PERSONALLY APPEARED. ASSESSEE HAD PRODUCED CONFIRMATION LETTERS FROM OTHERS . THERE WAS NO CONCEALMENT OR INACCURATE PARTICULARS OF INCOME FURNISHED BY THE ASSESSEE. HE DELETED THE PENALTY. 6 . NOW BEFORE US, LD. DEPARTMENTAL REPRESENT ATIVE STRONGLY ASSAILING THE ORDER OF THE CIT(A) SUBMITTED THAT THE ASSESSEE FAILED TO PROVE THE BONA FIDE NATURE OF THE TRANSACTION WITH ITS CREDITORS. ASSESSEE ITSELF HAD GIVEN THE ADDRESS OF THE CREDITORS. IF THE LETTERS SENT TO SUCH CREDITORS WERE RET URNED AS UNSERVED, IT WOULD ONLY MEAN SUCH CREDITORS DID NOT EXIST. A SSESSEE HAS INTENTIONALLY GIVE N WRONG ADDRESS OR ADDRESS OF NON - EXISTENT PARTIES. T HIS BEING THE CASE, INACCURATE PARTICULARS OF INCOME WAS FURNISHED . ACCORDING TO HIM, IN SUCH CIRC UMSTANCES LD. CIT(A) ERRED IN DELETING THE PENALTY. ITA . 1904 /MDS/ 12 6 7 . PER CONTRA LD. A.R. SUPPORTED THE ORDER OF THE CIT(A). 8 . WE HAVE PERUSED THE ORDERS OF LOWER AUTHORITIES AND HEARD RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT ADDITION OF ` 12,36,833/ - WAS ON A CCOUNT OF TRADE CREDITORS AND NOT LOAN CREDITORS. THERE IS ALSO NO DISPUTE THAT AT LEAST, ONE OF THE CREDITORS NAMELY, S HRI WILLIAM GURUSAMY APPEARED BEFORE THE ASSESSING OFFICER. ASSESSING OFFICER MENTIONED THAT THE SAID PERSON HAD NEITHER CONFIRMED NOR DENIED HIS TRANSACTION S WITH ASSESSEE. WE DO NOT UNDERSTAND WHAT THE ASSESSING OFFICER MEANS BY THIS. INSOFAR AS THE OTHER CREDITORS WERE CONCERNED, THERE IS NO FINDING THAT SUCH CREDITS WERE NOT ON ACCOUNT OF TRADING TRANSACTION . IN OTHER WORDS , THE SE CREDIT BALANCE CAME INTO THE BOOKS OF THE ASSESSEE , ON ACCOUNT OF PURCHASE S MADE BY THE ASSESSEE FROM THEM OR SERVICE S RENDERED BY THE SAID PARTIES TO THE ASSESSEE. BOO KS OF ACCOUNTS OF THE ASSESSEE W ERE NEVER REJECTED. INCOME OF ASSESSEE WAS COMPUT ED BASED ON THE RESULTS AS PER THE BOOKS OF ACCOUNTS BUT F OR THE ADDITION MENTIONED ABOVE. I N OUR OPINION WHEN THE PURCHASES WERE NOT DOUBTED, CREDIT BALANCES A RISING OUT OF SUCH PURCHASES COULD NOT HAVE BE EN SIMPLY WISHED AWAY. AS MENTIONED BY THE ASSESS EE, THERE WAS A TIME PERIOD OF TWO YEARS FROM THE END OF THE RELEVANT ITA . 1904 /MDS/ 12 7 ASSESSMENT YEAR AND THE PROCEEDINGS OF SCRUTINY. THEREFORE, THERE IS EVERY CHANCE THAT SOME OF THE CONCERNED TRADERS MIGHT HAVE CLOSED THEIR DOORS. ASSESSEE CANNOT KEEP A WATCH ON E VERY TRADER WITH WHOM HE HAD TRANSACTIONS IN THE COURSE OF HIS REGULAR BUSINESS . NOR CAN HE BE EXPECTED TO HAVE THE WHEREWITHAL TO ENSU RE THAT THEY ARE CONTINUING IN THEIR BUSINESS. IN OUR OP INION, IT MIGHT BE TRUE THAT REQUIREMENTS OF LAW , FOR PROVING A CREDIT , INSOFAR AS THE ISSUE , RELATED TO AN ADDITION UN DER SECTION 68 OR 69 OF THE ACT MIGHT NOT HAVE BEEN SATISFIED. NEVERTHELESS, THE FACTS AND CIRCUMSTANCES SHOW THAT ASSESSEE HAD ADDUCED SUFFICIENT EVIDENCE , BY PRODUCING THE BOOKS OF ACCOUNTS AND CONFIRMATION FROM THE PARTIES, WHICH WOULD ABSOLVE HIM F R OM THE RIGOURS ASSOCIATED WITH CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. REVENUE HAS NO CASE THAT THE PURCHASES WERE SHAM. IN OUR OPINION, THIS WAS NOT A FIT CASE FOR LEVYING PENALTY UNDER SECTION. 271(1)(C) OF THE ACT. PENALTY WAS RIGHTLY DELETED THE CIT(A). NO INTERFERENCE IS REQUIRED. ITA . 1904 /MDS/ 12 8 9 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AF TER CONCLUSION OF HEARING ON MON DAY THE 15 TH OCTOBER , 2012. SD/ - SD/ - (VIKAS AWASTHY) ( ABRAHAM P GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 15 TH OCTOB ER , 2012 . K S SUNDARAM COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE ITA . 1904 /MDS/ 12 9 THE MAIN CONDITION TO BE SATISFIED UNDER SECTION 32A(1) AND (2) OF THE INCOME TAX ACT, 1961 ARE: 1) THE SUBJECT MATTER IS TO BE OWNED BY THE ASSESSEE ; 2) I T IS TO BE WHOLLY USED FOR TH E PURPOSE OF BUSINESS OF ASSESSEE , AND 3) THE SUBJECT MATTER SHOULD COME UNDER ANY OF THE ENUMERATED CATEGORIES OF SEC.32(A) 2), ITA . 1904 /MDS/ 12 10