Brodweld Pvt.Ltd., Baroda V. The ACIT, Circle-1(1), Baroda

ITA 2073/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63260 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-12-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 29-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR SRDR

Judgement Text

, , , , / // / IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! ! ! ! ' #$, %& % ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. !./ I.T.A.NO.2073/AHD/2009 - ' ) ' ) ' ) ' )/ // / A.Y. 2002-03 2. !./ I.T.A.NO.2074/AHD/2009 - ' ) ' ) ' ) ' )/ // / A.Y. 2003-04 1-2. BRODWELD PVT.LTD. PUSHKARCHAMBERS PROF.MANEKRAO RD DANDIA BAZAR BARODA ' ' ' ' / VS. 1-2. THE ASST.CIT CIRCLE-1(1) BARODA * %& !./+, !./ PAN/GIR NO. : AAACB 7917 N ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) ASSESSEE BY : SHRI SANJAY R.SHAH, A.R. REVENUE BY : SHRI T.SANKAR, SR.D.R. '0 1 & / / / / DATE OF HEARING : 20/12/2012 23) 1 & / DATE OF PRONOUNCEMENT : 31/12/2012 %4 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE ARISING FROM A CONSOLIDATED ORDER OF CIT(A)-I, BARODA DATED 24/04 /2009 PERTAINING TO AYS 2002-03 & 2003-04. FOR BOTH THE YEARS, ALMOST IDENTICALLY WORDED GROUND OF APPEAL HAS BEEN RAISED, REPRODUCED BELOW FROM A.Y. 2002-03. (1) THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS IN CONFIRMING THE PENALTY U/S.271(1)(C) IN RESPECT OF DISALLOWANCE OF SALARY PAID TO SMT. BARTIBEN K.CHO KSHI AND SMT. DARSHNABEN CHOKSHI, TOTALLING TO RS.6,50,000/- (FOR ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 2 - A.Y. 2003-04 RS.3,90,000/-). YOUR APP SUBMITS THAT IT HAS NEITHER CONCEALED NOR FURNISHED ANY INACCURATE PART ICULARS OF INCOME AND HENCE IT IS NOT LIABLE PENALTY U/S.27 1(1)(C) OF THE ACT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T.ACT WERE THAT THE ASSESSEE IS ENGAGED IN WHOLESALE TRADING IN WELDING MATERIALS. A SURVEY A CTION U/S.133A WAS TAKEN ON 09.09.2002, DURING THE COURSE OF WHICH CER TAIN DOCUMENTS WERE IMPOUNDED. DURING THE SURVEY, STATEMENTS OF THE DI RECTORS WERE RECORDED, INCLUDING TWO LADY DIRECTORS, VIZ., SMT.B HARTIBEN K.CHOKSHI AND SMT. DARSHNABEN CHOKSHI. THE TWO LADIES (WIVES OF THE MAIN TWO DIRECTORS) COULD NOT ANSWER QUESTIONS RELATED TO TH E BUSINESS. THE AO THEREFORE CONCLUDED THAT THE PAYMENT OF SALARY TO T HESE TWO LADY DIRECTORS WAS NOT JUSTIFIED. SIMILARLY, IT WAS HELD THAT THE PAYMENT OF SALARY TO SHRI HASUBHAI CHOKSHI (FATHER OF THE MAIN DIRECTOR) WAS UNJUSTIFIED AND NOT ON ACCOUNT OF ANY BUSINESS PURPOSE. THE SAME WAS A LSO DISALLOWED. FURTHER, IN AY 2002-03, PAYMENT OF BONUS AMOUNTING TO RS.70,000/- TO THESE THREE DIRECTORS WAS ALSO DISALLOWED. DISALLO WANCES IN BOTH THE YEARS WERE AS UNDER:- (I) AY 2002-2003 (I) SALARY PAID TO TWO LADY DIRECTORS @ RS.3,25,000 /- EACH RS.6,50,000/- (II) SALARY PAID TO SHRI HASUBHAI CHOKSHI (FATHER) RS.2,60,000/- (III) BONUS PAID TO THE ABOVE MENTIONED THREE DIREC TORS RS. 70,000/- ---------------- TOTAL RS.9,80,000/- (II) AY 2003-2004 (I) SALARY PAID TO TWO LADY DIRECTORS @ RS.1,95,000 /- EACH RS.3,90,000/- (II) SALARY PAID TO SHRI HASUBHAI CHOKSHI (FATHER) RS.1,95,000/- ---------------- TOTAL RS.5,85,000/- ========= ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 3 - IN QUANTUM APPEAL THE LD.CIT(A) CONFIRMED THE DISAL LOWANCE OF SALARY PAID TO THE TWO LADY DIRECTORS AND ALSO CONF IRMED THE DISALLOWANCE OF SALARY PAID TO SHRI HASUBHAI CHOKSHI TO THE EXTE NT OF 50%. WITH REGARD TO BONUS IT WAS HELD THAT THE SAME ALREADY I NCLUDED IN THE PAYMENT OF SALARY. ACCORDINGLY, THE FOLLOWING POSITION EME RGED AFTER CIT(A)S ORDER. DISALLOWANCE CONFIRMED BY THE CIT(A) : (I) AY 2002-2003 (I) SALARY PAID TO TWO LADY DIRECTORS @ RS.3,25,000 /- EACH RS.6,50,000/- (II) SALARY PAID TO SHRI HASUBHAI CHOKSHI, 50% OF RS.2,60,000/- RS.1,30,000/- ---------------- TOTAL RS.7,80,000/- (II) AY 2003-2004 (I) SALARY PAID TO TWO LADY DIRECTORS @ RS.1,95,000 /- EACH RS.3,90,000/- (II) SALARY PAID TO SHRI HASUBHAI CHOKSHI, 50% OF RS.1,95,000/- RS. 97,500/- ---------------- TOTAL RS.4,87,500/- ========= THE AO HAS IMPOSED THE PENALTIES IN QUESTION U/S.2 71(1)(C) IN RESPECT OF RS.4,87,5000/- FOR A.Y. 2003-04 AND RS.8 ,40,000/- FOR A.Y. 2002-03. 2.1. IN RESPECT OF THE QUESTION OF LEVY OF PENALTY WHEN THE MATTER REACHED BEFORE THE LD.CIT(A), IT WAS HELD THAT SINC E DISALLOWANCE IN RESPECT OF SALARY PAID TO THE LADY DIRECTORS HAVE B EEN CONFIRMED IN THE PAST IN QUANTUM APPEAL BY THE TRIBUNAL FOR A.YS. 19 96-97 TO 2001-02 VIDE ORDER DATED 5.12.2008 (ITA NOS.1509 TO 1514/AH D/2004), THEREFORE ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 4 - THE AO WAS JUSTIFIED IN IMPOSING THE PENALTY U/S.27 1(1)(C) OF THE ACT. ACCORDINGLY, IN RESPECT OF ADDITION OF RS.6,50,000/ - FOR A.Y. 2002-03 AND FOR AN ADDITION OF RS.3,90,000/- FOR A.Y. 2003- 04, THE LEVY OF PENALTY WAS CONFIRMED, RELEVANT PARAGRAPH REPRODUCED BELOW: - 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE FACTS OF THE CASE. I FIND THE ITAT HAS CONSIDERED THE ID ENTICAL ISSUE IN RESPECT OF AYS 1996-97 TO 2001-02 IN ITA NOS.1509 T O 1514/AHD/2004 VIDE ORDER DT. 05.12.2008. AT PARA N O.9 OF THE ORDER, THE ISSUE REGARDING PAYMENT OF SALARY PAID T O TWO LADY HAS BEEN DECIDED AND IT HAS BEEN HELD AS UNDER: ON THE BASIS OF THE FACTS BEFORE US WE ARE OF THE V IEW THAT THE ASSESSEE HAS NOT DISCHARGED HIS ONUS AND, THEREFORE , NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT( A) SUSTAINING THE DISALLOWANCE IN RESPECT OF SALARY PAID TO BOTH THE LADY DIRECTORS. 3.4. SIMILARLY, AT PARA 11 THE ISSUE RELATING TO TH E PAYMENT OF SALARY PAID TO SHRI HASUBHAI HAS BEEN DECIDED IN TH E FOLLOWING TERMS: WE, THEREFORE, SET-ASIDE THE ORDER OF THE CIT(A) A ND DIRECT THE AO TO ALLOW THE REMUNERATION PAID TO SHRI HASUB HAI CHOKSHI IN EACH OF THE ASSESSMENT YEARS. THUS, THI S GROUND TAKEN BY THE ASSESSEE STANDS ALLOWED WHILE GROUND N O.1(I) TAKEN BY THE REVENUE STANDS DISMISSED. 3.5. THUS IT IS SEEN THAT THE DISALLOWANCES OF RS.6 ,50,000/- AND RS.3,90,000/- HAVE BEEN CONFIRMED BEING SALARY PAID TO SMT.BHARTIBEN CHOKSHI AND SMT.DARSHNABEN CHOKSHI, W HILE DISALLOWANCES OF RS.1,30,000/- AND RS.97,500/- IN R ESPECT OF SHRI HASUBHAI CHOKSHI HAVE BEE DELETED. SINCE THE ADDIT IONS STAND DELETED IN RESPECT OF SHRI HASUBHAI, WHEREAS THE OT HER ADDITIONS STAND CONFIRMED, IT IS HELD THAT THE AO WAS JUSTIF IED IN IMPOSING PENALTY U/S.271(1)(C) IN RESPECT OF SALARY PAID TO THE TWO LADY DIRECTORS ONLY. ACCORDINGLY, THE IMPOSITION OF PEN ALTY IS CONFIRMED ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 5 - IN RESPECT OF ADDITIONS OF RS.6,50,000/- FOR AY 200 2-03 AND RS.3,90,000/- FOR AY 2003-04 AND THE BALANCE IS DI RECTED TO BE DELETED. 3. WITH THIS BRIEF FACTUAL BACKGROUND, WE HAVE HEAR D BOTH THE SIDES. AT THE OUTSET, LD.AR MR.SANJAY R.SHAH HAS PLACED RE LIANCE ON AN ORDER OF THE TRIBUNAL WHICH RELATED TO TWO AYS 1996-97 TO 20 01-02 DATED 22.09.2008 (ITA NOS.950 TO 955/AHD/2006), WHEREIN A LTHOUGH THE QUANTUM ADDITION WAS CONFIRMED BUT WHILE DEALING WI TH THE PENALTY U/S.271(1)(C) IT WAS HELD AS UNDER:- AS PER THE PROVISIONS OF SECTION 271(1)(C) THE PEN ALTY UNDER THIS SECTION IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONC EALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE PENALTY PROCEEDINGS AND THE ASSE SSMENT PROCEEDINGS BOTH ARE DIFFERENT. EXPLANATION 1 TO S ECTION 271(1)(C) IN RESPECT OF ANY FACT RELATING TO THE COMPUTATION OF TOTAL INCOME STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPU TING THE TOTAL INCOME OF AN ASSESSEE SHALL BE DEEMED TO BE THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEE MING PROVISION FOR CONCEALMENT IS NOT ABSOLUTE ONE. THE PRESUMPTI ON UNDER EXPLANATION 1 IS REBUTTABLE AND NOT CONCLUSIVE. TH E ASSESSEE CAN SUBMIT THE EXPLANATION AS THE ONUS SHIFTED ON THE A SSESSEE TO PROVE THAT HE HAS NOT CONCEALED THE PARTICULARS OF THE IN COME. THE ASSESSEE IN THIS CASE HAS DULY SUBMITTED THE EXPLAN ATION. NO COGENT MATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOW LEDGE WHICH MAY PROVE THAT THE REVENUE HAS DETECTED THE CONCEAL MENT OR THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS FALSE ONE . EVEN THERE IS NO MATERIAL WHICH MAY PROVE THAT THE ASSESSEE WAS N OT ABLE TO SUBSTANTIATE ITS EXPLANATION. MERELY, THE ADDITION HAS BEEN MADE IN THE ASSESSMENT IN OUR OPINION THE ASSESSEE CANNO T BE ENTRUSTED WITH THE PENALTY BY SIMPLY INVOKING EXPLANATION 1. THIS EXPLANATION GIVEN BY THE ASSESSEE CANNOT BE RE GARDED TO BE A FALSE EXPLANATION UNTIL AND UNLESS, IN OUR OPINION, THE REVENUE ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 6 - PROVES THAT THE EXPLANATION GIVEN BY THE ASSESSEE I S FALSE. IN OUR OPINION, NO PENALTY U/S.271(1)(C) CAN BE IMPOSED ON THE ASSESSEE. THE PENALTY IS IMPOSED FOR THE DISALLOWANCE OF SALA RY, SUPPRESSION OF NET PROFITS, DISALLOWANCE OF EXPENSES AND UNEXPL AINED INVESTMENTS. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON.G UJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES V CIT 249 IT R 125 (GUJ.) ON WHICH THE LEARNED AR HAS VEHEMENTLY RELIED. 9. WE ALSO NOTED THAT THE PENALTY HAS BEEN IMPOSED MERELY ON THE BASIS OF ADDITIONS MADE ON ESTIMATE BASIS AND T HE AO HAS HELD THAT HE IS SATISFIED THAT THE ASSESSEE HAS CONCEALE D THE INCOME AND THEREBY COMMITTED THE DEFAULT PUNISHABLE U/S.271(1) (C) OF THE ACT. IT IS NOT A CASE WHERE THE EXPLANATION SUBMITTED BY THE ASSESSEE CAN BE REGARDED NOT TO BE BONA FIDE ONE AND, THEREF ORE, IN OUR OPINION, IT IS A FIT CASE WHERE PENALTY CANNOT BE L EVIED. WE ACCORDINGLY DELETE THE PENALTY IN EACH OF THE ASSES SMENT YEARS. 4. ALTHOUGH FOR THE AYS IN QUESTION THE RESPECTED C OORDINATE BENCH C, ITAT AHMEDABAD VIDE AN ORDER DATED 5/2/2010 FO R A.Y. 2002-03 AND 2003-04 (ITA NOS.945, 1003, 3171, 3311/AHD/2007 ) HAS CONFIRMED THE DISALLOWANCE OF SALARY PAID TO THESE LADIES FOL LOWING THE DECISION OF THE TRIBUNAL, AS CITED ABOVE, FOR AYS 1996-97 TO 20 01-02, BUT NOW THE PRESENT SITUATION IS THAT ON IDENTICAL FACTS WHILE DEALING THE QUESTION OF LEVY OF PENALTY THE ITAT D BENCH AHMEDABAD VIDE A N ORDER DATED 22/09/2008(SUPRA) HAVE TAKEN A CONSCIENTIOUS VIEW N OT TO LEVY CONCEALMENT PENALTY FOR THOSE ASSESSMENT YEARS. UN DER SUCH CIRCUMSTANCES, WE ARE LEFT WITH NO OPTION BUT TO RE SPECTFULLY FOLLOW THAT DECISION OF THE TRIBUNAL THROUGH WHICH THE CONCEALM ENT PENALTY ON ITA NOS.2073 & 2074/AHD/2009 BRODWELD PVT.LTD. VS. ACIT ASST.YEARS - 2003-04 & 2004-05 - 7 - IDENTICAL FACTS HAVE ALREADY BEEN DELETED. IN THE RESULT, WE HEREBY DIRECT TO DELETE THE IMPUGNED PENALTY FOR BOTH THE YEARS UNDER APPEAL. 5. AS A RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE ALLOWED. SD/- S D/- ( ' #$ ) ( ) %& ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31 / 12 /2012 5..', .'../ T.C. NAIR, SR. PS %4 1 .6 7%6) %4 1 .6 7%6) %4 1 .6 7%6) %4 1 .6 7%6)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. !! 8 / CONCERNED CIT 4. 8() / THE CIT(A)-I, BARODA 5. 6;< .' , , / DR, ITAT, AHMEDABAD 6. < =0 / GUARD FILE. %4' %4' %4' %4' / BY ORDER, /6 . //TRUE COPY// > >> >/ // / !+ !+ !+ !+ ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER DATED . 31.12 .12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31.12.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31/12/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/12/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER