The ACIT,(OSD)-1,Range-4, Ahmedabad V. Manish Organics India Ltd., Ahmedabad

ITA 2155/AHD/2010

• Counselvise Citation: 215520514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-11-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 24-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. MOHAN ALANKAMON Y, AM. ASSTT. CIT, RANGE-4, AHMEDABAD. VS. MANISH ORGANICS INDIA LTD.,7-A, RATNAM SHETH, C.G. ROAD, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI A. K. PATEL, SR.DR RESPONDENT BY:- SHRI SUNIL TALATI, AR DATE OF HEARING : 24/11/2011 DATE OF PRONOUNCEMENT : 30/11/11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 15.03.2010. 2. THE EFFECTIVE GROUND RAISED IN THIS APPEAL IS RE GARDING DELETION OF PENALTY OF RS.6,29,093/- LEVIED U/S 271(1)(C) OF TH E ACT. THE FACTS OF THE CASE ARE THAT THE AO LEVIED PENALTY MENTIONING THAT IN THE ASSESSMENT ORDER THE AO MADE ADDITION ON VARIOUS ISSUES OUT OF WHICH FOLLOWING TWO ADDITIONS HAVE BEEN SUSTAINED BY THE CIT(A) AND HON BLE ITAT: ITA NO.2155/AHD/2010 ASST. YEAR :1994-95 ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 2 1. INTER CORPORATE DEPOSITS AND INTEREST THEREON R S.12,91,500/- 2. SALES COMMISSION RS. 53,010/- 3. FACTORY MISCELLANEOUS EXPENSES RS. 23,084/ - ------------- --------- RS.13,67, 594/- MENTIONING THE DECISIONS OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BANARAS TEXTORIUM VS. CIT (1988) 169 ITR 782 AND IN THE CASE OF ZEEKOO SHOE FACTORY VS. CIT (1981) 127 ITR 827 AND THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF JAMNADAS & CO. VS. CIT (1994) 210 ITR 218 THE AO HELD THAT THE ASSESSEE HA S FURNISHED INACCURATE PARTICULARS OF INCOME. HE, THEREFORE, LE VIED PENALTY ON THE ADDITIONS SUSTAINED OF RS.13,67,594/- ON THE TAX WO RKED OUT THEREON. THE AO LEVIED MINIMUM PENALTY OF RS.6,29,093/-. THE ASS ESSEE WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE LD. AUTHORIZED REPRESENTATIVE VIDE WRITTEN SUBMISSION SUBMITTED AS UNDER :- FURTHER TO THE STATEMENT OF FACTS AND GROUNDS OF A PPEAL YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE ORDER PASSED BY THE L D. AO SUFFERS FROM VICE OF APPLICATION OF MIND AS STATED IN GROUND NO.1 SIN CE BEFORE THE LD. AO PASSED THE ORDER ON 29.01.2009 THE REPLY TO SHOW CA USE NOTICE WAS ALREADY FURNISHED, A COPY OF WHICH IS ENCLOSED HERE WITH AS EXHIBIT-A. IT WAS EXPLAINED IN THE SAID REPLY THAT ALL THE PARTIC ULARS WERE DULY FURNISHED IN THE AUDITED ACCOUNTS AND THERE WAS NO CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS CONNECTION YOUR APPELLANT RELIES UPON THE DECISION OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF CIT VS. SCIENTIFIC CHEMICALS (2005) 198 CTR (GUJ) 661, A COPY OF WHICH IS ENCLOSED HEREWITH AS EXHIBIT-B, WHEREIN TH E HIGH COURT HAS HELD THAT WHEN AN EXPLANATION TO SHOW CAUSE HAS BEEN FUR NISHED AND THE SAME IS NOT CONSIDERED BY HOLDING THAT NO EXPLANATION IS FURNISHED THE ORDER OF PENALTY SUFFERS FROM LACK OF APPLICATION OF MIND AN D IS LIABLE TO BE QUASHED. THE PENALTY BE CANCELLED NOW. ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 3 IT IS FURTHER SUBMITTED THAT THE AO HAS DISALLOWED COMMISSION PAYMENT ON THE GROUND THAT DETAILS OF SERVICES AND CONFIRMATIO NS ARE NOT AVAILABLE. THE CIT(A) GRANTED PARTIAL RELIEF AND FOR THE BALAN CE ADDITION SUSTAINED THE ITAT DID NOT GRANT RELIEF ON THE GROUND THAT NO FURTHER FRESH EVIDENCES HAVE BEEN FURNISHED BY THE ASSESSEE. SIMILARLY, THE SECOND ADDITION WAS OF FACTORY MISCE LLANEOUS EXPENSES. THESE WERE ALSO DISALLOWED ON THE GROUND OF INADEQU ATE PROOF AND EVIDENCES. IT IS SUBMITTED THAT BOOKS OF ACCOUNTS A RE SUBJECT TO INTERNAL AUDIT, STATUTORY AND TAX AUDIT. FOR ALL EXPENSES TH ERE ARE ALWAYS POSSIBILITY OF FULL DETAILS AND EVIDENCES ARE NOT A VAILABLE OR PRESERVED. BUT MERELY BECAUSE OF THAT IF THE AO DISALLOWED SOM E SMALL EXPENDITURE OF SUCH A BIG PUBLIC LIMITED COMPANY, THE ADDITION AUTOMATICALLY CANNOT RESULT INTO A VIEW THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAS SUBMITTED INADEQUATE PARTICULARS. SO FAR AS INTER-CORPORATE DEPOSITS AND INTEREST ARE CONCERNED, IT IS SUBMITTED THAT IT IS A PUBLIC LIMITED COMPANY AND D EPOSITS OF CRORES OF RUPEES WERE RECEIVED EVERY YEAR U/S 58A OF THE COMP ANIES ACT. MERELY BECAUSE COMPANY LAW DEPARTMENT AND ACCOUNTS DEPARTM ENT OF THE COMPANY WERE NOT METICULOUS TO OBTAIN FULL DETAILS OF DEPOSITORS IT CANNOT BE ADDED AS UNEXPLAINED CASH CREDIT OF THE COMPANY. HOWEVER, BY VIRTUE OF STRICT INTERPRETATION OF SECTION 68, NON-SUBMISS ION OF CERTAIN DETAILS BY DEPOSITORS, IT COULD BE A CASE FOR ADDITION U/S 68 BUT IT CANNOT BE A GROUND FOR LEVY OF PENALTY INASMUCH AS THE ASSESSEE HAD SUBMITTED ALL THE DETAILS AND DEPOSITS ARE NOT ACCEPTED BY THE MANAGE MENT BUT BUT STAFF AS A PUBLIC LIMITED COMPANY. AT IT IS HELD BY GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT (2000) 249 ITR 125 AND CONSISTENTLY FOLLOWED BY TRIBUNALS, MERELY BECAUSE ADDITIONS ARE MADE U/S 68 AND SUSTAINED PEN ALTY CANNOT BE LEVIED. COPY OF DECISION IS ENCLOSED. HOWEVER, SIMPLY BECAUSE AN ADDITION HAS BEEN MADE A ND CONFIRMED, IT CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTI CULARS OF INCOME. FOR THE SAKE OF REPETITION, IT IS SUBMITTED THAT THE AC COUNTS OF THE APPELLANT WERE DULY AUDITED AND TAX AUDITED AND NO SUCH DISCR EPANCY WAS EVER POINTED OUT BY THE AUDITOR. THE LD. AO HAS SIMPLY L ISTED OUT SOME OF THE CASE LAWS WHICH ARE NOT RELEVANT AND APPLICABLE TO THE FACTS OF THE CASE AND IT APPEARS THAT IN THE REASONS THE LD. AO HAS S IMPLY STATED THAT THE ADDITIONS HAVING BEEN CONFIRMED AND IN VIEW OF THE PARAGRAPHS EXTRACTED FROM THE JUDGMENT HE WAS SATISFIED THAT INACCURATE PARTICULARS OF INCOME ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 4 WERE FURNISHED. IN DOING SO HE HAS IGNORED THE DETA ILED EXPLANATION GIVEN IN REPLY TO SHOW CAUSE NOTICE BY HOLDING THAT THE A SSESSEE HAS FAILED TO SUBMIT ANY REPLY. THE PENALTY THUS LEVIED IS WITHOU T APPLICATION OF MIND AND SIMPLY BECAUSE ADDITION HAS BEEN MADE, THE SAME IS LEVIED. THE SAME DESERVES TO BE CANCELLED AND THE SAME BE CANCELLED. THE LD. AO HAS RELIED UPON THE DECISION OF THE SUPR EME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS 166 TAXMAN 65 (SC) BY HOLDING THAT PENALTY IS CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT AS IS CASE IN MATTER OF PROSECUTION AND THAT ADDITION MADE WILL BE FOLLOWED BY PENALTY. HOWEVER, THE LD. AO HAS FAILED TO APPRECIATE THAT IN VIEW OF EXPLANATION (1) TO SE CTION 271(1)(C), WHEN THE ASSESSEE HAS SUBMITTED A PLAUSIBLE EXPLANATION AND HIS BONA FIDES BY CARRYING THE ISSUE OF DISALLOWANCE RIGHT UPTO THE T RIBUNAL, IT WAS NOT A FIT CASE FOR LEVY OF PENALTY. IT BE SO HELD NOW. IT MAY ALSO BE STATED THAT THE DECISION OF THE SUPREME COURT IN THE CASE OF DHARME NDRA TEXTILE PROCESSORS HAS BEEN LATER EXPLAINED BY THE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING M ILLS LTD. (2009) 224 CTR (SC) 1, COPY ENCLOSED AND ALSO IN THE FOLLOWING CASES. (I) ACIT VS. VIP INDUSTRIES (2009) 21 DTR (MUM. TRIBUNA L) 153 (II) KANBAY SOFTWARE INDIA (P) LTD. VS. DCIT (2009) 22 S TR (PUNE) TRIB) 481 (III) ADDL.CIT VS. PREMCHAND GARD (2009) 123 TTJ (DELHI)( T.M.) 433. (IV) CIT VS. SIDDHARTH ENTERPRISE ITA 908/P &H DATED 14 TH JULY 2009 COPY ENCLOSED. CONSIDERING THE ENTIRETY OF THE FACTS OF THE CASE A ND IN VIEW OF THE CONTINUOUS LEGAL PROCEEDINGS AFTER LAPSE OF AS MANY AS 15 YEARS WHEN HEAVY LOSSES WERE INCURRED, THERE COULD BE NO IMAGI NABLE INTENTION TO CONCEAL ANY INCOME OR FURNISHING ANY INACCURATE PAR TICULARS OF INCOME. IN VIEW OF THE FACTS OF YOUR APPELLANTS CASE AND T HE DECISIONS CLARIFYING THE LATEST POSITION, THE PENALTY OF HUGE AMOUNT OF RS.6,29,093/- BE DELETED. THE LD. CIT(A) CONSIDERING THE FACTS AND CIRCUMSTAN CES OF THE CASE AS ALSO THE SUBMISSIONS OF THE ASSESSEE DELETED THE PE NALTY HOLDING THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY AND IS ACCEPTI NG DEPOSIT IN LARGE ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 5 NUMBER FROM PUBLIC. IF THE ASSESSEE FAILS TO PRODUC E SOME OF THE DEPOSITORS TO PROVE THE GENUINENESS AND CREDITWORTH INESS INSPITE OF THE EFFORTS MADE IT MAY RESULT INTO ADDITION U/S 68 BUT IT CANNOT LEAD TO PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. THE LD. DR RELIED ON THE PENALTY ORDER AND SUBMI TTED THAT PENALTY U/S 271(1)(C) IS CIVIL LIABILITY AND FOR ATTRACTING SUCH CIVIL LIABILITY, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT AS IS CA SE IN MATTER OF PROSECUTION U/S 276C UNION OF INDIA VS. DHARAMENDR A TEXTILE PROCESSORS (SUPRA). ANY CONCEALMENT OR INACCURACY I N THE PARTICULARS OF INCOME IN THE RETURN OCCURRING AT ANY STAGE UPTO AN D INCLUSIVE OF THE ULTIMATE STAGE OF WORKING OUT OF TOTAL INCOME WOULD ATTRACT THE PENALTY PROVISION OF SECTION 271(1)(C). EVERY FIGURE IN THE RETURN WHICH IS SET OPPOSITE TO THE ITEM OF INCOME IS A PARTICULAR INCO ME, WHETHER THE FIGURE IS ONE OF WHICH IS STATED INDEPENDENTLY OF ANY THIN G ELSE THAT APPEARS IN THE RETURN OR THE DOCUMENTS ACCOMPANYING IT OR WHET HER IT IS SOMETHING DERIVED FROM OTHER FIGURES ELSEWHERE STATED IN SUCH RETURN OR DOCUMENTS. FALSE RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MORE OF THE CONSTITUENT ITEMS IN THE RETURN. THE WORDS INACCUR ATE PARTICULARS WOULD COVER FALSITY IN THE FINAL FIGURE AS ALSO THE CONST ITUENT ELEMENTS OR ITEMS. THEY SIMPLY WOULD MEAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPECT ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 6 WHETHER IN THE CONSTITUENT OR SUBORDINATE ITEMS OF SOME OR THE END RESULT. THE AO WAS SATISFIED THAT ASSESSEE HAD FURNISHED IN ACCURATE PARTICULARS OF INCOME IN RESPECT OF THE ISSUES DISCUSSED IN THE AS SESSMENT ORDER AND CONFIRMED BY THE JUDGMENTS OF CIT(A) AND THE TRIBUN AL AND IT IS A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C). THEREF ORE, THE PENALTY IN RESPECT OF THE INCOME SOUGHT TO BE EVADED WAS RIGHT LY LEVIED AND THE LD. CIT(A) IS NOT CORRECT IN DELETING THE SAME. THE LD. DR PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE LD. COUNSEL OF THE ASSESSEE HEAVILY RELIED O N THE ORDER OF LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE T HE FIRST APPELLATE AUTHORITY. HE SUBMITTED THAT LD. CIT(A) HAS CORRECT LY APPRECIATED THE FACTS OF THE CASE AND DELETED THE PENALTY. HIS ORDER MAY KINDLY BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY HAVING HUGE TURNOVER BUT SUFFERING LOSSES A ND HAS ULTIMATELY BEEN CLOSED DOWN. THE NET LOSS RETURNED IS RS.59,54 ,460/- AND THERE WAS NO INTENTION TO REDUCE ANY TAXABLE INCOME. EVEN AFT ER ADDITIONS THE ASSESSED INCOME REMAINED A LOSS. THE ACCOUNTS ARE SUBJECT TO INTERNAL AUDIT, STATUTORY AUDIT AND TAX AUDIT. THE AO HAS LE VIED PENALTY ON THE ADDITIONS RS.13,67,594/- SUSTAINED BY THE APPELLATE AUTHORITIES ON THE TAX WORKED OUT THEREON. THE AO LEVIED MINIMUM PENALTY O F RS.6,29,093/-. ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 7 THIS IS A CASE WHERE EXPLANATION OF THE ASSESSEE HA S NOT BEEN ACCEPTED BY THE DEPARTMENT. THE LEVY OF PENALTY IS MERELY ON DI SALLOWANCE OF EXPENDITURE AND NOT FINDING OF CONCEALMENT OF ANY P ARTICULARS OR MALA FIDE INTENTION TO REDUCE THE TAXABLE INCOME. THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT 249 ITR 125 HAS HELD THAT PROVISIONS OF SECTION 68 PERMITS THE AO TO TREAT UN EXPLAINED CASH CREDITS AS INCOME FOR MAKING CERTAIN ADDITIONS IF THERE IS FAILURE BY THE ASSESSEE TO GIVE AN EXPLANATION. HOWEVER, THE ADDITION MADE ON THIS COUNT AUTOMATICALLY CANNOT JUSTIFY THE PENALTY LEVIED U/S 271(1)(C). HONBLE HIGH COURT FURTHER HELD THAT FOR LEVY OF PENALTY U/ S 271(1)(C) TWO FACTORS MUST CO-EXIST (I) THERE MUST BE SOME MATERIAL OR C IRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES R EPRESENT THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS, I.E. CONSCIOUS CONCEALMENT OR ACT OF FU RNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. EXPLANATIO N -1 TO SECTION 271(1)(C) HAS NO BEARING ON FACTOR NO.1 BUT HAS A BEARING ONL Y ON FACTOR NO.2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONC LUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE A SSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE E QUALLY CONSISTENT WITH ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 8 THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT C ONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE T HAT THE ASSESSEES CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMEN T BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. THIS CASE IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL, AHMEDABAD IN THE CASE OF ACIT VS. EXCEL FORGING (P) LTD. IN ITA NO.1709/AHD/2005 DATED 26.12.2008 WHEREIN IT HAS BE EN HELD THAT NON- AVAILABILITY OF CONFIRMATION AND OTHER DETAILS ARE VALID POINTS FOR MAKING ADDITION U/S 68. BUT BECAUSE THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE GENUINENESS OF DEPOSITS IS NOT ACCEPTED, IT CANNOT STRAIGHT AWAY RESULT INTO PENALTY. IN THE PRESENT CASE THE ASSESS EE IS A PUBLIC LIMITED COMPANY ACCEPTING DEPOSIT IN LARGE NUMBER FROM PUBL IC. THE ASSESSEE FAILED TO PRODUCE SOME OF THE DEPOSITORS TO PROVE T HE GENUINENESS AND CREDITWORTHINESS INSPITE OF THE EFFORTS MADE, IT RE SULTED INTO ADDITION U/S 68 BUT IT CANNOT LEAD TO PENALTY FOR FURNISHING INA CCURATE PARTICULARS OF INCOME. THEREFORE, IN OUR CONSIDERED OPINION THE LD . CIT(A) HAS RIGHTLY DELETED THE PENALTY. THERE IS NO INFIRMITY IN HIS O RDER. WE UPHOLD THE SAME. THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.2155/AHD/2010 ASST. YEAR 1994-95 9 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 30.11.11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 28/11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 28/11/2011 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 DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..