The ITO, Ward-2, GANDHIDHAM V. Shree Laxmi Salt & Alied Ind., GANDHIDHAM

ITA 203/RJT/2011

• Counselvise Citation: 20324914 RSA 2011
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 06-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Bogus purchase; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI T.K. SHARMA,JM AND SHRI D. K. SRIVASTAV A,AM. ITA NO. 203/RJT/2011. (ASSESSMENT YEAR 2003-04) THE I.T.O., WARD-2, VS SHREE LAXMI SALT & ALLIED IND., GANDHIDHAM-KUTCH. 207, WARD 12/B, GOPALPURI ROA D, GANDHIDHAM-KUTCH. PAN:AAIES4930M. (APPELLANT) (RESPONDENT) DATE OF HEARING : 22-03-2012. DATE OF PRONOUNCEMENT : 23-03-2012. REVENUE BY : SHRI M. K. SINGH, D. R. ASSESSEE BY : SHRI KALPESH DOSHI, C. A. O R D E R T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 25-02-2011 OF CIT (A)-XX, AHMEDABAD CANCELING THE P ENALTY OF RS.4,00,000/- LEVIED BY AO U/S.271(1)(C) OF I.T. ACT, 1961 FOR TH E ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED THE FACTS THAT FOR THE ASSESSMENT YEAR UNDER APPEAL, AO LEVIED THE PENALTY OF RS.4,00,000/- U/S.271(1)(C) O N ADDITION OF RS.10,82,450/- MADE AND CONFIRMED BY TRIBUNAL IN RESPECT OF FICTIT IOUS PURCHASES. ON APPEAL, IN THE IMPUGNED ORDER THE LD. CIT(A) DELETED THE SAID PENALTY FOR THE REASONS GIVEN IN PARA-3.3. TO 3.2.A WHICH READS AS UNDER:- 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, PENA LTY ORDER AND THE SUBMISSION FILED BY THE AR OF THE APPELLANT. I FIND THAT THE ADDITION WAS MADE ON ACCOUNT OF UNEXPLAINED PURCHASES OF RS.10,8 2,450/- AS LETTERS ISSUED TO THE CONCERNED PARTIES U/S.133(6) HAD BEEN RETURNED AS UNSERVED. THE APPELLANT CLAIMED THAT THE ONUS HAD BEEN DISCHARGED BY IT IN RESPECT OF THE PURCHASES BECAUSE IT HAD PRODUCED THE BILLS FOR PURCHASES FROM THE PARTIES FROM WHOM PURCHASES WERE MADE, THE PAYMENT DETAILS AS ALSO COPIES OF ACCOUNT OF THE SU PPLIERS. THE A.O. HELD THAT THE PURCHASES WERE BOGUS AS THE PARTIES WERE N ON-EXISTENT. THE AO .MADE THE ADDITION OF RS.10,82,450/-. THE APPELLAN T CARRIED THE MATTER TO CIT(A) WHO DELETED THE ADDITION MADE. THE DEPARTMEN T CARRIED THE MATTER ITA NO 203/RJT/2011. 2 TO ITAT. THE ITAT RAJKOT BENCH CONFIRMED THE ADDIT ION MADE BY THE AO AND SET ASIDE THE ORDERS OF CIT(A). THE APPELLANT FILED AN APPEAL BEFORE THE GUJARAT HIGH COURT. THE APPEAL OF THE APPELLAN T HAS BEEN ADMITTED BY THE HON. GUJARAT HIGH COURT. THEREFORE, IT IS CLEA R THAT THE ISSUE UNDER CONSIDERATION IS THE ONE WHICH INVOLVES SUBSTANTIAL QUESTION OF LAW. .2(I) PENALTY U/S.271(1)(C) CAN BE LEV8IED ONLY WHE N IT IS ESTABLISHED THAT THERE IS SOME ATTEMPT ON THE PART OF THE APPELLANT TO CONCEAL THE PARTICULARS OF INCOME RESULTING IN EVASION OF TAX. HOWEVER, IN THE INSTANT CASE, THE AO HAD MADE THE ADDITION ON THE BASIS OF ALLEGED BOGUS PURCHASES FROM NON-EXISTENT PARTIES. IT IS ALSO SE EN THAT THE APPELLATE AUTHORITIES HAD DIVERGENT VIEWS ON THE ISSUE OF ADD ITION. FURTHER, PENALTY CANNOT BE LEVIED WHEN TWO OPINIONS ARE POSSIBLE. T HE MATTER IS PENDING BEFORE THE HON. GUJARAT HIGH COURT WHERE THE APPEAL HAS BEEN ADMITTED. THIS INDICATES THAT THE HONBLE GUJARAT HIGH COURT OUND THAT THE ISSUE INVOLVED SUBSTANTIAL QUESTION OF LAW. IN SUCH A SI TUATION PENALTY U/S.271(1)(C) IS NOT LEVIABLE. THE ITAT AHMEDABAD A THIRD MEMBER BENCH IN THE CASE OF RUPAM MERCANTILES LTD. (IN LIQ UIDATION) & ORS. V. DCIT REPORTED IN 91 ITD 237 (AHD) HAS HELD A UNDER :- HIGH COURT HAVING ADMITTED APPEAL OF ASSESSEE AGAI NST DISALLOWANCE FINDING A SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE MATTER, THE CLAIM OF ASSESSEE FOR DEDUCTION O ENTIR E AMOUNT IN THE YEAR OF PAYMENT WAS NOT MALA FIDE AND PENALTY UNDER S.271(1)(C) WAS NOT ATTRACTED, THE PENALTY LEVIED U/S. 158BFA(2 ) IS DIRECTED TO BE DELETED. FURTHER, THE ITAT AHMEDABAD IN THE CASE OF MISTRY B UILDERS P LTD. VS. ACIT CIRCLER-I BHAVNAGAR IN ITA NO.1351 AND 1352/AH D/2010 HELD AS UNDER:- THE MATTER IS SUBJUDICE BEFORE THE HONBLE GUJARAT HIGH. THUS, THE MATTER HAS NOT REACHED FINALITY AND THE ASSESSE E HAS BEEN ABLE TO EXPLAIN THAT IT HAS AN ARGUABLE CASE. THE HONB LE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HARSHVARDHAN CHEMICALS & MINERALS LTD. (259 ITR 212) HELD THAT, IF ARGUABLE CLAIM OF DEDUCTION IS MADE OUT, NO PENALTY U/S.271(1)(C) SHOULD BE LEVIDED. 3.2(II) IN VIEW OF THE ABOVE, IT IS CLEAR THAT THER E ARE TWO VIEWS POSSIBLE ON THE ISSUE AND IN SUCH SITUATIONS PENALTY FOR CONCEA LMENT CANNOT BE LEVIED. 3. AGGRIEVED WITH THE ORDER OF LD. CIT(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO 203/RJT/2011. 3 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE REVENUE, SHRI M. K. SINGH, D,R. APPEARED AND CONTENDED THAT IN THE IMPU GNED ORDER, THE LD. CIT(A) CANCELLED THE PENALTY SOLELY ON THE GROUND THAT WIT H RESPECT TO THE QUANTUM ADDITION, THE ASSESSEES APPEAL HAS BEEN ADMITTED B Y HIGH COURT FRAMING SUBSTANTIAL QUESTION OF LAW FOR CONSIDERATION. THE LD. D.R. POINTED OUT THAT SOLELY ON THIS GROUND, PENALTY CANNOT BE DELETED AS HELD B Y HONBLE GUJARAT HIGH COURT IN ORDER ATED15-11-2011 IN TAX APPEAL NO.606 OF 201 0 IN THE CASE OF COMMISSIONER OF INCOME TAX I VS. PRAKASH S. VYAS. THE RELEVANT OBSERVATIONS OF THE GUJARAT HIGH COURT ARE CONTAINED IN PARA-11 AND 12 WHICH READS AS UNDER:- 11. WE ARE OF THE OPINION THAT THE TRIBUNAL ERRED IN DELETING THE PENALTY ON THIS SOLE GROUND. ADMISSION OF A TAX APPEAL BY THE HIGH COURT, IN MAJORITY CASES, IS EX-PARTE AND WITHOUT RECORDING E VEN PRIMA FACIE REASONS. WHETHER EX-PARTE OR AFTER BY-PARTE HEARIN G, UNLESS SOME OTHER INTENTION CLEARLY EMERGES FROM THE ORDER ITSELF, AD MISSION OF A TAX APPEAL BY THE HIGH COURT ONLY INDICATES THE COURTS OPINIO N THAT THE ISSUE PRESENTED BEFORE IT REQUIRED FURTHER CONSIDERATION. IT IS AN INDICATION OF THE OPINION OF THE HIGH COURT THAT THERE IS A PRIMA FAC IE CASE MADE OUT AND QUESTIONS ARE REQUIRED TO BE DECIDED AFTER ADMISSIO N. MERE ADMISSION OF AN APPEAL BY THE HIGH COURT CANNOT WITHOUT THERE BE ING ANYTHING FURTHER, BE AN INDICATION THAT THE ISSUE IS DEBATABLE ONE SO AS TO DELETE THE PENALTY UNDER SECTION 271 (1)(C) OF THE ACT EVEN IF THERE A RE INDEPENDENT GROUNDS AND REASONS TO BELIEVE THAT THE ASSESSEES CASE WOU LD FALL UNDER THE MISCHIEF ENVISAGED IN THE SAID CLAUSE (C) OF SUB-SE CTION (1) OF SECTION 271 OF THE ACT. IN OTHER WORDS, UNLESS THERE IS AN Y INDICATION IN THE ORDER OF ADMISSION PASSED BY THE HIGH COURT SIMPLY BECAU SE THE TAX APPEAL IS ADMITTED, WOULD GIVE RISE TO THE PRESUMPTION THAT T HE ISSUE IS DEBATABLE AND THAT THEREFORE, PENALTY WOULD BE DELETED. 12. THIS IS NOT TO SUGGEST THAT NO SUCH INTENTION CAN BE GATHERED FROM THE ORDER OF COURT EVEN IF SO EXPRESSED EITHER EXPLICIT LY OR IN IMPLIED TERMS. THIS IS ALSO NOT TO SUGGEST THAT IN NO CASE, ADMISS ION OF A TAX APPEAL WOULD BE A RELEVANT FACTOR FOR THE PURPOSE OF DECID ING VALIDITY OF A PENALTY ORDER. THIS IS ONLY TO PUT THE RECORD STRAIGHT INS OFAR AS THE OPINION THAT THE TRIBUNAL AS EXPRESSED IN THE PRESENT IMPUGNED ORDER VIZ. THAT UPON MERE ADMISSION OF A TAX APPEAL ON QUANTUM ADDITIONS, IS AN INDICATION THAT THE ISSUE IS DEBATABLE ONE AND THAT THEREFORE, PENALTY SHOULD AUTOMATICALLY BE DELETED WITHOUT ANY FURTHER REASONS OR GROUNDS EMER GING FROM THE RECORD. 5. THE LD. D.R. POINTED OUT THAT FOLLOWING THE AFOR ESAID ORDER, THE IMPUGNED ORDER OF LD. CIT(A) BE SET-ASIDE AND HE BE DIRECTED TO DECIDE THE APPEAL OF THE ITA NO 203/RJT/2011. 4 ASSESSEE AFRESH AS THE ASSESSEE HAD RAISED OTHER CO NTENTIONS ALSO IN SUPPORT OF APPEAL BEFORE THE LD. CIT(A). 6. SHRI KALPESH DOSHI, C..A. APPEARING ON BEHALF OF THE ASSESSEE FAIRLY CONCEDED THAT HE HAS NO OBJECTION IF THE MATTER IS REMANDED TO THE FILE OF LD. CIT(A). 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDER OF AUTHORITIES BELOW. KEEPING IN VIEW THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT-I VS. PRAKASH S. VYAS (SUPRA), WE S ET-ASIDE THE ORDER OF LD. CIT(A) AND DIRECT HIM TO DECIDE THE APPEAL OF THE A SSESSEE AFRESH CONSIDERING THE OTHER CONTENTIONS RAISED BY ASSESSEE IN ITS APP EAL BEFORE HIM. THE LD. CIT(A) DECIDE THE SAME AFRESH AFTER GIVING OPPORTUNITY OF BEING HERD TO BOTH SIDES. 8. IN THE RESULT, FOR THE STATISTICAL PURPOSES, THE APPEAL OF REVENUE IS TREATED AS ALLOWED. THIS ORDER PRONOUNCED IN THE OPEN COURT ON 23-03-20 12. SD/- SD/- ( D. K. SRIVASTAVA ) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 23-03-2012. NVA/- COPY TO: 1. THE I.T.O., WARD-2, RAJKOT. 2. SHREE LAXMI SALT & ALLIED IND., GANDHIDHAM-KUTCH . 3. THE CIT-I, RAJKOT 4. THE CIT-(A)-XX, AHMEDABAD. 5. THE DR, I.T.A.T., RAJKOT 6. THE GUARD FILE. (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT