REMEX PHARMACEUTICALS LTD, MUMBAI V. ACIT 9(1)(3), MUMBAI

ITA 2234/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2929 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-01-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRA
• Assessee Lawyers: S C TIWARI
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 2234 / MUM/20 1 3 ( / ASSESSMENT YEA R : 20 0 4 - 05 ) REME X PHARMACEU TICALS LTD., PARADIGM BUSINESS CENTRE, UNIT NO.504, 5 TH FLOOR, SAFED POOL, ANDHERI - KURLA ROAD, ANDHERI(E), MUMBAI - 400072. / VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE NO. 9(1)(3), MUMBAI . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACR1769C / APPELLANT BY SHRI S C TIWARI / R EVENUE BY SHRI A RAMCHANDRA / DATE OF HEARING : 8.9 . 201 5 / D ATE OF PRONOUNCEMENT: 14. 10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 4.12.2012 PASSED BY THE LD.CIT(A) - 20, MUMBAI FOR THE ASSESSMENT YEAR 2004 - 05 CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(1)( C) OF THE INCOME TAX A CT, 1961 ON THE ADDITION MADE UNDER SECTION 68 OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE - COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF MEDICINES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE VARIOUS ADDITIONS WHICH INCLUDE D AN ADDITION MADE UNDER SECTION 68 OF THE ACT I N RESPECT OF LOAN AMOUNT OF RS.70.05 LAKHS TAKEN FROM SHRI JAFIR T IBRAHIM . ITA NO. 2234 /MUM/201 3 2 THE AO ASKED THE ASSESSEE TO PROVE LOAN IN TERMS OF SEC TION 68 OF THE ACT . THE CREDITOR WAS A NRI AND THE ASSESSEE FURNISHED COPIES OF BANK STATEMENT AND SOME OTHER DETAILS. SINCE THE ASSESSEE DID NOT FURNISH ANY EVIDENCE TO PROVE THE CREDIT WORTHINESS OF THE CREDITOR, THE AO ASSESSED THE AMOUNT OF RS.70.05 LAKHS AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . THE ASSESSEE COULD NOT SUCCEED WITH REGARD TO THIS ADDITION BOTH B EFORE THE LD.CIT(A) AS WELL AS ITAT IN THE QUANTUM ASSESSMENT PROCEEDINGS . THE PENALTY LEVIED BY THE AO ON THIS ADDITION U/S 271(1)(C) OF THE ACT WAS ALSO CONFIRMED BY THE LD.CIT(A) FOR THE REASON THAT THE ADDITION WAS CONFIRMED BY THE ITAT IN THE QUANTUM PROCEEDINGS. AGGRIEVED, ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3 . THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD FURNISHED CERTAIN EVIDENCES TO PROVE THE CREDITWORTHINESS OF THE CREDITOR , WHICH CONSISTED OF A BANK CERTIFICATE CERTIFYING THE QUANTUM OF BANK DEALINGS AND FURTHER DETAILS OF DONATION GIVEN BY THE ASSESSEE ALONG WITH FAMILY MEMBERS TO THE TUN E OF RS.3.86 CRORES FOR CONSTRUCTION OF NAZA N I BAUG. THE LD. AR SUBMITTED THAT BOTH THE DOCUMENTS SUFFICIENTLY PROVE THE C REDITWORTHINESS OF THE OF THE CREDITOR . HOWEVER, THE SA ID DOCUMENTS W ERE NOT FOUND TO BE ADEQUATE BY THE TRIBUNAL AND HENCE THE A DDITION WAS SUSTAINED BY IT. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSMENT OF CASH CREDIT WITHOUT ACCEPTING THE EVIDENCES FURNISHED BY THE ASSESSEE WOULD NOT AUTOMATICALLY GIVE RISE TO PENALTY. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE MATERIALS AVAILABLE WITH IT AND ALSO OFFERED EXPLANATIONS AND THEY HAVE NOT BEEN FOUND TO BE FALSE. ACCORDINGLY, BY TAKING SUPPORT OF EXPLANTION 1 TO SECTION 271(1)(C) OF THE ACT, T HE LD. AR CONTENDED THAT THE PENALTY LEVIED ON CASH CREDIT ADDITIO N SHOULD BE CANCELLED . ITA NO. 2234 /MUM/201 3 3 4 . ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE CASH CREDIT ADDITION MADE BY THE AO HAS SINCE BEEN CONFIRMED BY THE TRIBUNAL AND HENCE, THE LD.CIT(A) WAS JUSTIFIED IN CONFIRMING THE PENALTY LEVIED ON THAT ADDITION. 5. WE HAVE HE ARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. IT IS STATED THAT SHRI JAFIR T IBRAHIM IS ALSO A SHAREHOLDER OF THE ASSESSEE COMPANY AND HE IS RESIDING IN HONGKONG. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE HAS FURNISHED TH E COPIES OF BANK ACCOUNT AND CERTAIN OTHER DETAILS . WE NOTICE THAT THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTION HAVE BEEN ESTABLISHED BY THE ASSESSEE. HOWEVER, THE BANK ACCOUNT COPY WAS NOT FOUND TO BE ADEQUATE TO PROVE THE CREDIT WORTHINESS OF THE CREDITOR. HENCE THE ASSESSEE HAS FILED A CERTIFICATE OBTAINED FROM THE BANK, WHEREIN THE BANK HAS CERTIFIED THAT THE ASSESSEE HAD A BANKING RELATIONSHIP OF USD 500,000 . I N ADDITION TO THAT , THE ASSESSEE HAS FURNISHED A CERTI FICATE TO SH OW THAT THE CREDITOR AND HIS FAMILY MEMBERS HAVE DONATED A SUM OF RS.3.68 CRORES FOR CONSTRUCTION OF NAZA N I BAUG. IT WAS CONTENDED THAT THE DONATION OF HUGE AMOUNT AND ALSO THE BANK CERTIFICATE SUFFICIENTLY PROVE THE CREDIT WORTHINESS OF THE CREIDOT. H OWEVER, THESE DOCUMENTS WERE NOT FOUND TO BE ADEQUATE BY THE TRIBUNAL AND HENCE THE CASH CREDIT ADDITION WAS SUSTAINED BY IT. 6. IT IS WELL SETTLED PROPOSITION THAT ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS WOULD NOT AUTOMATICALLY GIVE RIS E TO PENALTY UNDER SECTION 271(1)(C ) OF THE ACT. DURING THE COURSE OF PENALTY PROCEEDINGS , THE AO IS REQUIRE D TO EXAMINE THE ENTIRE ISSUE AFRESH AND FOR THAT PURPOSE THE DELIBERATIONS MADE IN THE ASSESSMENT ORDER CAN BE TAKEN AS A GUIDE. IN THE INSTANT C ASE, THE PENALTY HAS BEEN LEVIED U/S 68 OF THE ACT IN RESPECT OF LOAN TAKEN BY THE ASSESSEE , SINCE THE EVIDENCES FURNISHED BY ITA NO. 2234 /MUM/201 3 4 THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDITOR WAS FOUND TO BE INADEQUATE . IT IS ALSO PERTINENT TO NOTE THAT THE ADDI TION PRESCRIBED U/S 68 OF THE ACT IS A LEGAL FICTION AND THE SAME NEED NOT NECESSARILY AS A RESULT OF CONCEALMENT OF PARTICULARS OF INCOME. WHETHER A CASH CREDIT ADDITION WOULD FALL IN THE CATEGORY OF CONCEALMENT OF PARTICULARS OF INCOME OR NOT WOULD DEPE ND UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. 7. IT IS PERTINENT TO NOTE THAT THE IDENTITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION HAVE NOT BEEN FOUND FAULT WITH. WE FURTHER NOTICE THAT T HE EXPLAN A TION S AND DOCUMENTS FURNISHED BY THE AS SESSEE TO PROVE THE CREDITWORTHINESS WERE ONLY FOUND TO BE INADEQUATE AND NOT FOUND TO BE FALSE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE EXPLANATION 1 TO SECTION 271 (1)(C) OF THE ACT WOULD COME TO THE HEL P OF THE ASSESSEE. HENCE, ON CONSPE CTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE ADDITION OF CASH CREDITS CONFIRMED BY THE ITAT, IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE , WOULD NOT NECESSITATE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT , AS THE SAME, IN OUR VIEW, CANNOT B E CONSIDERED TO BE CONCEALMENT OF PARTICULARS OF INCOME . ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED ON THE CASH CREDIT ADDITION . 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 14TH OCT , 2015. 14TH OCT , 2015 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 14TH OCT , 2015 . . . ./ SRL , SR. PS ITA NO. 2234 /MUM/201 3 5 / COPY OF THE ORDE R FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI