DHARIWAL FILMS P.LTD, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 2041/MUM/2013

• Counselvise Citation: 204119914 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 14-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RUDOLPH H DSOUZA
• Keywords: Non-deduction of tax; Reasonable cause; Onus to prove
• Section: 273B; 143(3); 133A; 201(1); 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./I.T.A. NOS.2037, 2040, 2043, 2044, 2046, 2047, 20 50 & 2051/MUM/2013 ( ! ' / ASSESSMENT YEARS :2003-04, 2004-05, 2005-06 & 2006- 07) M/S DHARIWAL FILMS PVT LTD., FLAT NO.4, BUILDING NO.16, OSHWARA MAHADA, ANDHERI (W), MUMBAI-400053 / VS. T HE ADDITIONAL COMMISSIONER OF INCOME TAX, (TDS), RANGE-1, AYURVED PRACHAR SANSTHA, BUILDING, CHARNI ROAD, MUMBAI-400012. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) ./I.T.A. NOS.2038, 2042, 2045 & 2053/MUM/2013 ( ! ' / ASSESSMENT YEARS :2003-04, 2004-05, 2005-2006 & 200 6-07) M/S DHARIWAL FILMS PVT LTD., MUMBAI-400053 / VS. THE INCOME T AX , (TDS), RG - 1(5), AYURVED PRACHAR SANSTHA, BUILDING, CHARNI ROAD, MUMBAI-400012. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) ./I.T.A. NOS.2039, 2041 & 2049/MUM/2013 ( ! ' / ASSESSMENT YEAR :2003-04, 2004-05 & 2005-06) M/S DHARIWAL FILMS PVT LTD., MUMBAI-400053 / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX,-11(1), AYURVED PRACHAR SANSTHA, BUILDING, CHARNI ROAD, MUMBAI-400012. ( #$ / APPELLANT) .. ( %&#$ / RESPONDENT) # ./ () ./ PAN/GIRNO.:AABCD9066F #$ * / ASSESSEE BY : NONE %&#$ + * /RESPONDENT BY : SHRI RUDOLPH H DSOUZA , - + ./ / DATE OF HEARING : 1.10.2014 0'! + ./ /DATE OF PRONOUNCEMENT : 8.10.2014 I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 2 / O R D E R PER BENCH: ALL THESE FIFTEEN APPEALS HAVE BEEN FILED BY THE AS SESSEE CHALLENGING THE ORDERS PASSED BY LD CIT(A) AGAINST DIFFERENT ORDERS PASSED BY THE ASSESSING OFFICER, VIZ., THE ASSESSMENT ORDERS RELATING TO TH E ASSESSMENT YEARS 2003-04 TO 2005-06; ORDERS PASSED U/S 201(1) & 201(1A) RELATIN G TO THE ASSESSMENT YEARS 2003-04 TO 2006-07; PENALTY ORDERS PASSED U/S 271C OF THE ACT FOR ASSESSMENT YEARS 2003-04 TO 2006-07 AND THE PENALTY ORDERS PAS SED U/S 272A(2)(C) OF THE ACT FOR ASSESSMENT YEARS 2003-04 TO 2006-07. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH THE NOTICE OF HEARING WAS SERVED UPON THE ASSESSEE BY REGISTERED POST. HENCE, WE PROCEED TO DISPOSE OF THESE APPEALS EX-PARTE, WITHOUT THE P RESENCE OF THE ASSESSEE. SINCE ALL THESE APPEALS WERE HEARD TOGETHER, THEY A RE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. (A) ITA NO. 2039, 2041 & 2049/MUM/ 2013(AYS : 2003-04 TO 2005-06): 3. WE SHALL FIRST TAKE UP THE APPEALS RELATING TO T HE QUANTUM ASSESSMENT ORDERS PASSED U/S 143(3) R.W.S 147 OF THE ACT AND T HEY PERTAIN TO THE ASSESSMENT YEARS 2003-04 TO 2005-06. THE FACTS RELATING TO TH E CASE ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS A PRODUCER OF FEATURE FILMS. T HE TDS SECTION OF THE DEPARTMENT CONDUCTED A SURVEY OPERATION U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 03-08-2006. AT THE TIM E OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE COMPANY DID NOT FILE ITS RETURN O F INCOME. THE TDS OFFICIALS DID NOT FIND ANY AUDITED BOOKS OF ACCOUNT ALSO. FURTHE R, IT WAS NOTICED THAT THE ASSESSEE DID NOT PAY THE TAX DEDUCTED BY IT AT SOUR CE. THE TDS OFFICIALS INTIMATED THESE DETAILS TO THE ASSESSING OFFICER AN D ACCORDINGLY THE ASSESSING OFFICER RE-OPENED THE ASSESSMENTS RELATING TO THE A SSESSMENT YEARS 2003-04, 2004-05 AND 2005-06. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO RECORDED A STATEMENT FROM SHRI MAHENDRA DHARIWAL, T HE DIRECTOR OF THE ASSESSEE COMPANY, WHERE IN HE DISCLOSED CERTAIN DETAILS ABOU T THE INCOME AND EXPENDITURE. HE ALSO ADMITTED THAT THE ASSESSEE CO MPANY DID NOT FILE FORM NO.52A AS REQUIRED UNDER RULE 9(A) OF THE I.T RULES . THEREAFTER, A PERSON NAMED MR.KANU APPEARED BEFORE THE ASSESSING OFFICER AND FILED COPIES OF I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 3 BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. THE AO NOTICED THAT THE SAID FINANCIAL STATEMENTS HAVE BEEN SIGNED BY MR. KANU H IMSELF AND NOT BY ANY OF THE DIRECTORS OR AUDITORS OF THE ASSESSEE COMPANY. FRO M THE FINANCIAL STATEMENTS, IT WAS NOTICED THAT THE UNSECURED LOANS BALANCE HAS I NCREASED BY THE FOLLOWING AMOUNTS IN EACH OF THE THREE YEARS MENTIONED ABOVE. ASSESSMENT YEAR 2003-04 - RS.1,49,00,511/- ASSESSMENT YEAR 2004-05 - RS.1,01,00,186/- ASSESSMENT YEAR 2005-06 - RS. 69,62,691/- SINCE THE ASSESSEE DID NOT FURNISH ANY DETAILS WITH REGARD TO THE ABOVE SAID LOANS, THE ASSESSING OFFICER ASSESSED THE ABOVE SA ID AMOUNTS AS INCOME OF THE ASSESSEE IN THE RESPECTIVE ASSESSMENT YEARS. THE L D CIT(A) ALSO CONFIRMED THE ASSESSMENT ORDERS, SINCE THE ASSESSEE COULD NOT PRO VE THE LOAN CREDITS IN TERMS OF SEC. 68 OF THE ACT. 4. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. W E NOTICE THAT THE ASSESSEE FURNISHED BEFORE LD CIT(A) CERTAIN DETAILS RELATING TO THE LOAN CREDITORS FOR EACH OF THE YEAR UNDER CONSIDERATION. HENCE TH E LD CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. IN THE R EMAND REPORT, THE ASSESSING OFFICER HAS POINTED OUT THAT THERE WERE DIFFERENCES BETWEEN THE DETAILS SO FURNISHED AND THE BALANCE SHEET OF THE ASSESSEE. F URTHER, IT WAS POINTED OUT BY THE AO THAT THE STATEMENT OF ACCOUNTS CLAIMED TO HA VE BEEN OBTAINED BY THE ASSESSEE FROM THE CREDITORS HAVE BEEN SIGNED BY THE DIRECTOR OF THE ASSESSEE COMPANY. THE LD CIT(A) HAS ALSO NOTICED THAT THE A SSESSEE HAS FAILED TO PROVE THE CREDIT WORTHINESS OF THE CREDITORS. UNDER THES E SET OF FACTS, THE LD CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE COMPANY HA S FAILED TO PROVE THE CASH CREDITS IN TERMS OF SEC. 68 OF THE ACT. IT IS WELL SETTLED PROPOSITION THAT THE INITIAL BURDEN OF PROOF TO PROVE THE CASH CREDITS IS PLACED UPON THE ASSESSEE U/S 68 OF THE ACT, I.E., THE ASSESSEE IS REQUIRED TO PROVE TH REE MAIN INGREDIENTS VIZ., THE IDENTITY OF THE CREDITORS, THE CREDIT WORTHINESS OF THE CREDITORS AND THE GENUINENESS OF TRANSACTIONS. IN THE INSTANT CASES, WE NOTICE THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE INITIAL BURDEN PLACED U PON IT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER PASSED BY LD CIT(A) IN ALL THE THREE YEARS REFERRED ABOVE. I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 4 (B) ITA NOS.2038, 2042, 2045 & 2053/MUM/2013 (AYS :2003-04 TO 2006-07): 5. WE SHALL NOW TAKE UP THE APPEALS RELATING TO T HE ORDERS PASSED U/S 201(1) & 201(1A) OF THE ACT FOR ASSESSMENT YEARS 2003-04 T O 2006-07. AS STATED EARLIER, THE TDS OFFICIALS NOTICED THAT THE ASSESSE E DID NOT REMIT THE TAX DEDUCTED BY IT AT SOURCE. FURTHER THE ASSESSEE DID NOT DEDUC T TAX AT SOURCE IN RESPECT OF CERTAIN PAYMENTS. HENCE, THE ITO (TDS) PASSED ORDER S RAISING FOLLOWING DEMAND:- ASSESSMENT YEAR DEMAND U/S 201(1) INTEREST U /S 201(1A) 2003-04 3,36,938 1,62,984 2004-05 83,372 35,235 2005-06 6,04,451 1,81,884 2006-07 76,373 15,063 THE ASSESSEE CHALLENGED THE ORDERS PASSED BY THE IT O(TDS) BY FILING APPEALS BEFORE LD CIT(A), BUT COULD NOT SUCCEED. HENCE, TH E ASSESSEE HAS FILED THESE APPEALS BEFORE US. 6. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. F ROM THE ORDERS PASSED BY LD CIT(A), WE NOTICE THAT THE ASSESSEE COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE ITO(TDS) EXCEPT POINTING OUT CERTAIN COMPUTA TIONAL ERROR. HENCE THE LD CIT(A) HAS CONFIRMED THE ORDERS REFERRED ABOVE, SUB JECT TO VERIFICATION OF THE ERRORS POINTED OUT BY THE ASSESSEE. BEFORE US, THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO COMPEL US TO INTERFERE WITH THE ORDERS OF LD CIT(A). THOUGH THE ASSESSEE HAS SUBMITTED THAT THE RECIPIENTS HAVE PAI D THE TAX ON THE INCOME RECEIVED BY THEM, YET NO MATERIAL WAS FURNISHED TO SUBSTANTIATE THE SAME. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS P ASSED BY LD CIT(A) FOR THE THREE YEARS MENTIONED ABOVE. (C) ITA NOS. 2037, 2044, 2047 & 2051/MUM/2013( AYS :2003-04,2004-05, 2005-06 & 2006-07 ): 7. WE SHALL NOW TAKE UP THE APPEALS RELATING TO THE PENALTY LEVIED U/S 271C OF THE ACT. THE PROVISIONS OF SEC. 271C READS AS U NDER:- 271C (1) IF ANY PERSON FAILS TO I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 5 (A) DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQ UIRED BY OR UNDER THE PROVISIONS OF CHAPTER XVI-B; OR (B) PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIR ED BY OR UNDER (I) SUB-SECTION (2) OF SECTION 115-O; OR (II) THE SECOND PROVISO TO SECTION 194B, THEN, SUCH PERSON SHALL BE LIABLE TO PAY, BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUC T OR PAY AS AFORESAID. (2) ANY PENALTY IMPOSABLE UNDER SUB-SECTI ON(1) SHALL BE IMPOSED BY THE JOINT COMMISSIONER. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOUR CE AND ALSO FAILED TO PAY THE TAX DEDUCTED AT SOURCE, THE ADDL. COMMISSIONER OF T AX IMPOSED PENALTY U/S 271C OF THE ACT UPON THE ASSESSEE AS DETAILED BELOW:- ASST. YEAR FAILURE TO DEDUCT TDS FAILURE TO PAY TDS TOTAL 2003-04 23,413 3,13,525 3,36,938 2004-05 50,758 32,614 83,372 2005-06 3,19,065 2,85,386 6,04,451 2006-07 54,953 21,420 76,373 THE LD CIT(A) ALSO CONFIRMED THE PENALTY IMPOSED BY THE ADDITIONAL COMMISSIONER. AGGRIEVED, THE ASSESSEE HAS FILED TH ESE APPEALS BEFORE US. 8. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. AS STATED EARLIER, THE ADDITIONAL COMMISSIONER HAS IMPOSED PENALTY FOR FAI LURE TO REMIT THE TAX DEDUCTED AT SOURCE ALSO. HOWEVER, A CAREFUL READIN G OF THE PROVISIONS OF SEC. 271C WOULD SHOW THAT THE PENALTY UNDER THAT SECTION IS LEVIABLE FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF CHAPTE R XVII-B OF THE ACT. HOWEVER, THE PENALTY FOR FAILURE TO REMIT THE WHOLE OR PART OF TAX IS LEVIABLE ONLY IF SUCH FAILURE IS RELATED TO SEC. 115-O(2) RELATING T O DIVIDENDS AND THE SECOND PROVISO TO SEC. 194B OF THE ACT RELATING TO LOTTERY WINNINGS. IN THE INSTANT CASES, THE FAILURE TO REMIT THE TDS AMOUNT IS NOT RELATED TO THE ITEMS REFERRED TO SEC. 115O(2) OR SEC. 194B OF THE ACT. HENCE THE PENALTY LEVIED BY THE ADDITIONAL COMMISSIONER FOR FAILURE TO REMIT THE TDS AMOUNT IS LIABLE TO BE SET ASIDE, AS THE SAME IS NOT IN ACCORDANCE WITH THE MANDATE OF SEC. 271C OF THE ACT. 9. THE PROVISIONS OF SEC. 271C IS SUBJECT TO THE PROVISIONS OF SEC. 273B OF THE ACT. AS PER THE PROVISIONS OF SEC. 273B OF THE ACT, THE PENALTY U/S 271C IS NOT IMPOSABLE IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 6 SAID FAILURE. IT IS WELL SETTLED PROPOSITION THAT THE REASONABLE CAUSE HAS TO BE EXAMINED FROM THE POINT OF VIEW OF A COMMON MAN WIT H REASONABLE MIND. IN THE INSTANT CASES, THE ASSESSEE HAS STATED THAT IT IS F ACING ACUTE FINANCIAL PROBLEMS. IT HAS SUBSTANTIATED THE SAID CLAIM BY STATING THAT IT COULD NOT PAY SALARY TO STAFFS AND FEE TO ITS CHARTERED ACCOUNTANT. THIS CLAIM I S FURTHER FORTIFIED BY THE FACT THAT THE ASSESSEE DID NOT APPEAR OR COULD NOT ENGAGE ANY BODY TO APPEAR BEFORE THE ADDITIONAL COMMISSIONER. FURTHER, THERE WAS DELAY IN FILING APPEALS BEFORE LD CIT(A) FOR IDENTICAL REASONS. ALL THESE FACTS CUMUL ATIVELY SHOW THAT THE ASSESSEE APPEARS TO BE IN DEEP FINANCIAL CRISIS. 10. THE LD CIT(A) HAS TAKEN THE VIEW THAT THE FIN ANCIAL PROBLEMS AND HEAVY LOSSES DO NOT CONSTITUTE REASONABLE CAUSE. WE TEND TO DISAGREE WITH HIS VIEWS. THE FINANCIAL PROBLEM, I.E., LACK OF MONEY, IN OUR VIEW, MAY BE CONSIDERED REASONABLE CAUSE, SINCE THE FINANCIAL PROBLEM HAS M ADE THE STAFFS AND CHARTERED ACCOUNTANT TO LEAVE THE ASSESSEE COMPANY. HENCE, T HERE IS MERIT IN THE SUBMISSION OF THE ASSESSEE THAT IT DID NOT GET PROP ER ASSISTANCE TO COMPLY WITH THE TAX LAWS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE HAS SHOWN THAT THERE WAS REASONABLE CAUSE FOR HIS FAILURE TO DEDUC T TAX AT SOURCE. 11. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) AND DIRECT THE ADDITIONAL COMMISSIONER OF INCOME TAX TO DELETE THE PENALTY LE VIED U/S 271C OF THE ACT IN ALL THE YEARS UNDER CONSIDERATION. (D) ITA NOS. 2040, 2043, 2046 & 2050/MUM/2013 (AYS 2003-04 TO 2006-07): 12. ALL THESE APPEALS RELATE TO THE PENALTY LEVI ED U/S 272A(2)(C) OF THE ACT FOR ASSESSMENT YEARS 2003-04 TO 2006-07.. THE SAID PEN ALTY IS LEVIED FOR NON- FURNISHING IN DUE TIME OF ANY OF THE RETURNS, STATE MENTS OR PARTICULARS MENTIONED IN SECTION 133 OR SECTION 206 OR SECTION 206C OR SE CTION 285B OF THE ACT. THE ADDITIONAL COMMISSIONER OF INCOME TAX LEVIED PENALT Y U/S 272A(2)(C) OF THE ACT UPON THE ASSESSEE AS DETAILED BELOW:- ASSESSMENT YEAR PENALTY AMOUNT 2003-04 1,63,300 2004-05 83,372 2005-06 90,300 2006-07 76,373 I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 7 THE LD CIT(A) ALSO CONFIRMED THE ABOVE SAID PENALTY LEVIED FOR THE ABOVE SAID YEARS. AGGRIEVED, THE ASSESSEE HAS FILED THESE APP EALS BEFORE US. 13. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. THE PROVISIONS OF SEC. 272A(2) IS SUBJECT TO THE PROVISIONS OF SEC. 273B O F THE ACT. AS PER THE PROVISIONS OF SEC. 273B OF THE ACT, THE PENALTY U/S 272A(2) IS NOT IMPOSABLE IF THE ASSESSEE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IT IS WELL SETTLED PROPOSITION THAT THE REASONABLE CAUSE HAS TO BE EXAMINED FROM THE POINT OF VIEW OF A COMMON MAN WITH REASONABLE MIND. WHIL E DEALING WITH THE APPEALS RELATING TO THE PENALTY LEVIED U/S 271C OF THE ACT, WE HAVE HELD THAT THE FINANCIAL CRISIS FACED BY THE ASSESSEE COUPLED WITH THE FACT OF NO STAFFS AND LACK OF HELP FROM CHARTERED ACCOUNTANT MAY BE CONSIDERED TO BE R EASONABLE CAUSE. THE ASSESSEE HAS OFFERED IDENTICAL EXPLANATIONS FOR NON -FURNISHING OF ANNUAL RETURN PRESCRIBED IN SEC. 206 OF THE ACT IN TIME. IN THE INSTANT CASES, THE ASSESSEE DID NOT FILE THE ANNUAL RETURN FOR ALL THE FOUR YEARS U NDER CONSIDERATION. THE REASON FOR THE SAME IS UNDERSTANDABLE, I.E., WHEN THE ASSE SSEE DID NOT REMIT THE TAX DEDUCTED AT SOURCE, THEN IT WOULD NOT BE IN A POSIT ION TO FILE THE ANNUAL RETURN PRESCRIBED IN SEC. 206 OF THE ACT. HENCE, WE ARE O F THE VIEW THAT THERE WAS REASONABLE CAUSE FOR THE ASSESSEE FOR THE FAILURE T O FURNISH THE ANNUAL RETURNS FOR ALL THE YEARS UNDER CONSIDERATION. 14. ACCORDINGLY, WE SET ASIDE THE ORDERS OF LD CIT(A) AND DIRECT THE ADDITIONAL COMMISSIONER OF INCOME TAX TO DELETE THE PENALTY LE VIED U/S 272A(2)(C) OF THE ACT IN ALL THE YEARS UNDER CONSIDERATION. 15. IN THE RESULT, THE APPEALS RELATING TO THE P ENALTIES LEVIED U/S 271C AND 272A(2)(C) OF THE ACT ARE ALLOWED AND OTHER APPEALS ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN C OURT ON 8TH OCT, 2014 . 0'! , 1 2 3 4 OCT , 2014 + 5- 6 SD SD ( . / D. MANMOHAN ) ( . . ,/ B.R. BASKARAN) / VICE- PRESIDENT / ACCOUNTANT MEMBER I.T.A. NO.2037/MUM/2013 AND OTHER 14 APPEALS 8 , - MUMBAI: OCT ,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. #$ / THE APPELLANT 2. %&#$ / THE RESPONDENT. 3. , :. ( ) / THE CIT(A)- CONCERNED 4. , :. / CIT CONCERNED 5. 6. ;<5 %. = , / = ! , , - / DR, ITAT, MUMBAI CONCERNED 5 >- / GUARD FILE. ? , / BY ORDER, TRUE COPY ( (ASSTT. REGISTRAR) / = ! , , - /ITAT, MUMBAI