Mahendra Murlidhar Patil, Jalgaon V. Deputy Commissioner Income-tax,

ITA 2136/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1026 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business expenditure
• Section: 69C; 133(6); 131

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.2136/PN/2013 ASSESSMENT YEAR : 2007-08 SHRI MAHENDRA MURLIDHAR PATIL, PROP. OF CHAKRADHAR CONSTRUCTIONS, AT & POST KERHALE, TAL. RAVER, DIST. JALGAON 422 002. PAN : AASPP8378E . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 2, JALGAON. . RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI B. C. MALAKAR / DATE OF HEARING : 06.10.2015 / DATE OF PRONOUNCEMENT: 14.10.2015 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE IS AGAINST THE ORDER OF CIT(A)-2, NASHIK DATED 01.11.2013 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST PENALTY LEVIED UNDER SECTION 271(1) (C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- THE GROUNDS OF APPEAL STATED BELOW ARE WITHOUT PRE JUDICE TO EACH OTHER. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A), ERRED IN CONFIRMING THE PENALTY ORDER U/S. 271(1)(C) OF THE AO. DTD. 19.03.2012, WITHOUT APPRECIATING THE SUBSTANCE OF S UBMISSIONS AND RATIO OF VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPEL LANT. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A), ERRED IN GIVING FINDINGS THAT THE BOOKS OF ACCOUNTS MAINTAINED BY 2 ITA NO.2136/PN/2013 M/S. JOLLY SERVICE CENTRE ARE GENUINE AND REFLECT T HE CORRECT TRANSACTION OF THE APPELLANT PARTICULARLY WHEN THE BOOKS OF ACCOUN TS OF M/S. JOLLY SERVICE CENTRE, NEITHER EXAMINED BY THE A.O. NOR BY THE CIT (A). IT IS ONLY THE ACCOUNT EXTRACTS CALLED FOR BY THE A.O. AND THE DIF FERENCE NOTED THEREIN WAS MADE BASIS FOR ADDITION AND THEREAFTER PENALTY. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A), ERRED IN POINTING OUT THAT THE ASSESSEE DID NOT PRODUCE ANY RELIABLE EVIDENCE IN THE MATTER, IS BASELESS. THE EVIDENCES AND SUBMISSIONS FILED BY THE APPELLANT IN THIS BEHALF HAVE NOT BEEN CONSI DERED BY THE LOWER AUTHORITIES IN ITS RIGHT PERSPECTIVE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A), ERRED IN NOT APPRECIATING THAT EVERY CASE O F ADDITION DOES NOT WARRANT LEVY OF PENALTY AS PENAL PROVISION IS NOT A UTOMATIC AND THE SAME ARE DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED C IT(A) SUSTAINING THE PENALTY, BE QUASHED. (5) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIF Y, DELETE AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HONBLE ITAT, AS PER THE CIRCUMSTANCES OF THE CASE. (6) THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHE R EVIDENCE TO SUBSTANTIATE HIS CASE AS THE OCCASION MAY DEMAND WITH PRIOR PERMISSI ON OF THE HONBLE ITAT. 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE WHEREAS THE LD. DEPARTMENTAL R EPRESENTATIVE, SHRI B.C. MALAKAR APPEARED ON BEHALF OF THE RESPONDENT/REVENU E. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE IN PERSON OR THROUGH AN AUTHORIZED REPRESENTATIVE INSPITE OF SERVICE OF NOTICE, FOLLOWING RULE 24 OF THE INCOME-TAX (APPELLATE TRIBUNAL) RULES, 1963, WE HAVE PROCEEDED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE ASSESSEE AFTER HEARING THE RESPONDENT/REVENUE ON MERITS. 4. IN THIS APPEAL, THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY OF RS.3 ,38,438/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE AC T. 5. BRIEFLY STATED, THE ASSESSEE IS AN INDIVIDUAL AN D ENGAGED IN THE BUSINESS OF CIVIL CONTRACTOR MAINLY DOING WORKS FOR THE GOVE RNMENT DEPARTMENT. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURN ISHED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME AT RS.29,13,22 7/-. THE ASSESSMENT WAS FINALIZED AND TOTAL INCOME OF THE ASSESSEE WAS DETE RMINED AT RS.46,55,052/-. THE BOOKS OF ACCOUNTS WERE AUDITED UNDER SECTION 44 AB OF THE ACT. DURING 3 ITA NO.2136/PN/2013 THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD CALLED FOR AN ACCOUNT EXTRACT OF THE ASSESSEE FROM M/S JOLLY SE RVICE CENTRE, BHUSAWAL UNDER SECTION 133(6) OF THE ACT. IN THE SAID ACCOU NT EXTRACT, A DIFFERENCE OF RS.10,25,466/- WAS NOTED AND IT WAS ADDED TO THE TO TAL INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. AS A SEQUEL TO THE A DDITION, THE ASSESSING OFFICER ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C ) OF THE ACT WHICH WAS QUANTIFIED AT RS.3,38,438/-. THE PENALTY WAS IMPOS ED BY TREATING THE AFORESAID DIFFERENCE OF RS.10,25,466/- AS UNEXPLAINED PURCHAS ES OF DIESEL FUEL UNDER SECTION 69C OF THE ACT. 6. THE QUANTUM APPEAL AGAINST THE ADDITION ON ACCOU NT OF IMPUGNED UNRECORDED PURCHASES UNDER SECTION 69C OF THE ACT W AS CONFIRMED BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OW N CASE IN ITA NO.1185/PN/2010, ORDER DATED 31.10.2012. THE ASSES SING OFFICER ALSO IMPOSED THE PENALTY ON THE IMPUGNED DETECTION OF UN RECORDED PURCHASES WHICH WAS CONFIRMED BY THE CIT(A). 7. AGGRIEVED BY THE PENALTY ORDER OF THE CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 8. A PERUSAL OF THE ORDER THE OF CIT(A) SHOWS THAT THE ASSESSEE CONTENDED BEFORE CIT(A) THAT THE REVENUE/DEPARTMENT COMMITTED ERROR BOTH ON FACTS AND IN LAW IN IMPOSING THE PENALTY. 8.1 AS PER THE WRITTEN SUBMISSIONS ON BEHALF OF THE ASSESSEE REPRODUCED AS PER PARA 5 OF THE IMPUGNED CIT(A) ORDER, IT WAS THE CASE OF THE ASSESSEE BEFORE CIT(A) THAT HE IS A GOVERNMENT CONTRACTOR. FOR THE RELEVANT YEAR IN QUESTION, THE ASSESSEE HAD PURCHASED DIESEL WORTH OF RS.4,00, 000/- ONLY FROM SUPPLIER, M/S JOLLY SERVICE CENTRE, BHUSAWAL. HOWEVER, EXTRA CT OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S JOLLY SERVICE CENTRE, BHUSAWAL PORTRAYED SALE OF DIESEL TO THE ASSESSEE OF THE VALUE OF RS.14,25,466 /-. THE DIFFERENCE OF RS.10,25,466/- WAS THUS ADDED BY THE ASSESSING OFFI CER TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 69C OF THE ACT. 4 ITA NO.2136/PN/2013 8.2 IN JUSTIFICATION OF THE ADDITION FOR DIFFERENCE AMOUNT, THE ASSESSING OFFICER RELIED UPON THE RECORDED STATEMENT OF THE M ANAGER OF THE SUPPLIER UNDER SECTION 131 OF THE ACT, WHEREIN THE MANAGER C ONFIRMED THAT ALL THE SALES SHOWN BY THEM TO THE ASSESSEE WERE CORRECT AND HE R ECEIVED A CASH PAYMENT OF RS.7,40,000/- IN CASH BESIDES RS.4,00,000/- BY CHEQ UE. THE ASSESSING OFFICER OFFERED THE OPPORTUNITY TO CROSS-EXAMINE THE MANAGE R OF THE SUPPLIER REGARDING THE CONTENTS OF THE SHOWING STATEMENT. HOWEVER, TH E ASSESSEE FAILED TO CROSS- EXAMINE THE SAID PERSON. THIS WAS VIEWED AS INFALL IBLE EVIDENCE OF THE ASSERTION THAT SALES AND RECEIPTS SHOWN BY THE SUPP LIER IN THEIR BOOKS OF ACCOUNT WERE CORRECT. IN REBUTTAL BEFORE THE CIT(A) , THE ASSESSEE CONTENDED THAT THE IMPUGNED STATEMENT GIVEN BY THE MANAGER BA SED ON THE BOOKS OF THE SUPPLIER IS NOT WORTHY OF RELIANCE SINCE THE STATEM ENT HAS BEEN GIVEN BY THE PERSON WHO WAS NOT EMPLOYED WITH THE ASSESSEE DURIN G THE RELEVANT PERIOD. THUS THE DEPONENT OF THE STATEMENT WAS NOT PRIVY TO THE REAL FACTS AND THE AVERMENTS MADE WERE BASED ON THE ACCOUNTS EXTRACT O NLY. THE SUPPORTING BILLS AND SIGNATURE OF THE RECIPIENTS OF THE IMPUGNED UNR ECORDED FUEL WERE NOT MADE AVAILABLE TO CORROBORATE THE STATEMENT. THE CROSS E XAMINATION WAS NOT CONDUCTED AS THE ASSESSEE WAS UNWELL AT THE RELEVAN T TIME. NEVERTHELESS, THE STATEMENT OF THE MANAGER CANNOT BE RELIED UPON IN T HE CIRCUMSTANCES. 8.3 IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE TRUCK NO. MH-15-G- 6111 WHICH IS ALLEGED TO HAVE BEEN FUELED NEITHER B ELONG TO THE ASSESSEE NOR DID THE SAID TRUCK WAS ENGAGED IN ASSESSEES BUSINE SS. THE ASSESSEE FILED AFFIDAVIT OF SHRI ATMARAM RATILAL PATIL, WHO IS OWN ER OF CONCERNED TRUCK NO. MH-15-G-6111 TO THE EFFECT THAT DURING THE RELEVANT FINANCIAL YEAR 2006-07, HIS VEHICLE/TRUCK WAS NOT GIVEN ON HIRE TO THE ASSE SSEE, SO ALSO HE HAS NOT TAKEN ANY DIESEL/FUEL FOR HIMSELF OR FOR THE ASSESSEE FRO M THE IMPUGNED SUPPLIER. THE OWNER OF THE TRUCK WAS ALSO STATED TO HAVE BEEN PRO DUCED BEFORE THE AO FOR CROSS EXAMINATION WHICH WAS NOT CARRIED OUT. 8.4 IT WAS FURTHER STATED BEFORE CIT(A) THAT NON-RE CORDING OF IMPUGNED BUSINESS EXPENSES TO ITS OWN DETRIMENT WHILE PAYING TAXES ON RETURN OF INCOME 5 ITA NO.2136/PN/2013 OF RS.29.13 LAKHS IS NOT EXPECTED FROM A PERSON OF ORDINARY INTELLIGENCE AND PRUDENCE. 9. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE RELIED UPON THE ORDER OF THE CIT(A) AS WELL AS ORDER OF THE CO-ORDI NATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN (SUPRA) IN QUANTUM PROCEE DINGS. HE SUBMITTED THAT THE STATEMENT OF MANAGER OF SUPPLIER IS CLINCHING A ND FALSITY OF THE EXPLANATION OF THE ASSESSEE IS DEMONSTRABLE. IT WAS THEREFORE C ONTENDED THAT PENALTY IS ATTRIBUTABLE AND RIGHTLY CONFIRMED BY THE CIT(A). 10. WE HAVE DISPASSIONATELY CONSIDERED THE SUBMISSI ONS OF THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, ORDERS OF THE AUTHORITIES BELOW AND MATERIAL PLACED BEFORE US. AS NOTED ABOVE, THE ADDITION UNDER SECTION 69C OF THE ACT TOWARDS UNRECORDED PURCHASES OF RS.10,25 ,466/- HAS BEEN CONFIRMED BY THE CONCURRENT ORDERS OF THE CIT(A) AND CO-ORDIN ATE BENCH OF THE TRIBUNAL. HOWEVER, IN THE SAME VEIN, IT IS USEFUL TO RECALL T HE LEGAL POSITION THAT THE PENALTY PROVISIONS ARE REQUIRED TO BE STRICTLY CONS TRUED. WHILE THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS CONFIRMED THE ADDITION IN QUANTUM APPEAL THAT BY ITSELF IS NOT CONCLUSIVE FOR THE PURPOSE OF IMPOSIT ION OF PENALTY. IT IS TRITE THAT IMPOSITION OF PENALTY IS NOT AUTOMATIC CONSEQUENCE OF THE QUANTUM PROCEEDINGS. IT IS ALSO TRITE THAT THE PENALTY PROC EEDINGS ARE SEPARATE AND INDEPENDENT OF ASSESSMENT PROCEEDINGS. WE FIND THA T THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER WITHOUT RECORDIN G ANY INDEPENDENT FINDING ON THE APPLICABILITY OF SECTION 271(1)(C) OF THE AC T IN THE FACTS OF THE CASE. THE BASIS FOR ADDITION IS STATEMENT OF THE MANAGER OF T HE SUPPLIER, WHO WAS STATED TO BE NOT IN SERVICES DURING THE RELEVANT PERIOD. THE MANAGER HAD MERELY CONFIRMED THE TRANSACTION WITHOUT SHOWING THE BILLS AND THE SIGNATURES OF THE RECIPIENTS OF THE DIESEL. THE STATEMENT GIVEN IS T HUS BARE AND ALSO NOT BASED ON PERSONAL KNOWLEDGE OF DEPONENT. THE RECORDS FORMING THE BASIS FOR SUCH STATEMENT, AS NOTED ABOVE, IS NOT SUPPORTED BY ACKN OWLEDGMENTS AND BILLS ETC. THEREFORE, SOLE RELIANCE ON SUCH STATEMENTS RECORDE D FOR FACT FINDING IN OUR VIEW WOULD NOT BE CONCLUSIVE IN THE CIRCUMSTANCES I NVOLVING STRICTIER PENALTY PROCEEDINGS. ON PERUSAL OF FACTS, IT IS EVIDENT THA T THE ASSESSEE TOOK THE PAIN TO 6 ITA NO.2136/PN/2013 PRODUCE THE TRUCK OWNER BEFORE AO FOR CROSS-EXAMINA TION WHICH ALBEIT WAS NOT CARRIED OUT. THIS CONDUCT IS ANOTHER INDICATOR OF T HE BONAFIDES OF THE VERSION OF THE ASSESSEE. THE FACTS RECORDED ALSO PORTRAYS THA T THE BUSINESS WITH SUPPLIER WAS DISCONTINUED DUE TO DELINQUENCIES. THE CASE OF THE ASSESSEE THAT ONE SINGLE TRUCK CAN CONSUME THE HUGE DIESEL WORTH OF R S.12,15,116/- DURING THE YEAR IS HIGHLY UNREALISTIC ALSO STRONGLY WEIGHS IN FAVOUR OF THE ASSESSEE IN SO FAR AS THE IMPUGNED PENALTY DISPUTE IS CONCERNED. MERE FAILURE TO CROSS- EXAMINE, THE MANAGER OF THE SUPPLIER SHOULD NOT BEE N SEEN ADVERSELY IN THE PENALTY PROCEEDINGS OWING TO THE ALLEGATION THAT TR ANSACTIONS ARE NOT BACKED BY ACKNOWLEDGEMENT ON BEHALF OF THE ASSESSEE. THERE I S ANOTHER ASPECT WHICH NEEDS TO BE CONSIDERED. A VERY STRONG CIRCUMSTANCE IN FAVOUR OF THE ASSESSEE IS LACK OF RATIONALITY IN NOT CLAIMING BUSINESS EXP ENDITURE WHILE RETURNING INCOME SUCH MAGNITUDE. THE ALLEGED CONSUMPTION OF E XORBITANT AMOUNT OF DIESEL BY ONE TRUCK AS QUESTIONED BY THE ASSESSEE S OMEWHAT FURTHER REINFORCES THE CASE OF THE ASSESSEE IN SO FAR AS THE IMPOSITIO N OF PENALTY IS CONCERNED. IN TOTALITY OF CIRCUMSTANCES NARRATED ABOVE, WE FIND T HAT ENOUGH MITIGATING CIRCUMSTANCES EXIST TO GIVE BENEFIT OF DOUBT TO THE ASSESSEE IN PENALTY PROCEEDINGS. IN OUR CONSIDERED VIEW, THE ASSESSEE HAS DISCHARGED BURDEN CAST UPON IT TO SHOW THAT HIS PLEA STANDS THE TEST OF PR EPONDERANCE OF PROBABILITIES. CONFIRMATION OF QUANTUM ORDER BY THE TRIBUNAL WOULD BY ITSELF IS NOT ENOUGH TO HOLD ADVERSE VIEW IN THE PENALTY PROCEEDINGS. T HEREFORE, IMPUGNED PENALTY ORDER IN PRESENT APPEAL DESERVES TO BE VACATED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED EX PARTE AND THE PENALTY IMPOSED STANDS CANCELLED. ORDER PRONOUNCED ON THIS 14 TH DAY OF OCTOBER, 2015. SD/- SD/- ( SUSHMA CHOWLA ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 14 TH OCTOBER, 2015. 7 ITA NO.2136/PN/2013 & ' ()* +*( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-2, NASHIK; 4) THE CIT-2, NASHIK; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE