ITO 16(3)(3), MUMBAI V. M. AMBALAL & CO, MUMBAI

ITA 2331/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8171 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU JIT BANGAR
• Keywords: Question of law
• Section: 27

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , , BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMB ER . / ITA NO. 2331 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 1 02 ) INCOME TAX OFFICER WARD 16(3)(3), MATRU MANDIR TARDEO ROAD, MUMBAI 400 007 .. / APPELLANT V/S M/S. M. AMBALAL & CO. C/O SHRI ASHOK P. JHAVERI 5, ROOPRAJ, 497, S.V.P. ROAD MUMBAI 400 004 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER AAAFM2214N / REVENU E BY : SHRI SUJIT BANGAR / ASSESSEE BY : SHRI B HUPENDRA SHAH / DATE OF HEARING 09 .0 9 .2014 / DATE OF ORDER 19.09.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 17 TH JANUARY 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXVIII , MUMBAI , IN RELATION TO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) , FOR THE ASSESSMENT YEAR 20 0 8 09 , ON THE FOLLOWING GROUNDS: M/S. M. AMBALAL & CO. 2 ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY UNDER SECTION 271(1)(C) HOLDING THAT SINCE THE ORDER OF THE TRIBUNAL IN RESPECT OF PENALTY WAS NOT CHALLENGED, THE SAME HAS BECOME FINAL AND CANNOT BE REVISITED BY THE ASSESSIN G OFFICER SINCE CONSEQUENT TO THE ORDER OF HIGH COURT REVISION THE ASSESSMENT ORDER, AN ORDER IMPOSING PENALTY CAN BE PASSED AS PER THE PROVISION OF SECTION 275(IA) OF THE ACT. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN DIA MOND AND IN SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THERE WERE THREE CREDITORS, WHICH WERE SHOWN AS LIABILITY IN THE BALANCE SHEET OUTSTANDING FOR MORE THAN ONE YEAR. OUT OF THE THREE PARTIES, THE LIABILITY SHO WN IN THE CASE OF AKSH A T CORPORATION AT ` 79,18,597, COULD NOT BE PROVED BY THE ASSESSEE AS IT WAS NOT TRACEABLE AT THE ADDRESS PROVIDED BY THE ASSESSEE. THEREFORE, HE ADDED THE SAME BY TREATING IT TO BE CESSATION OF LIABILITY UNDER SECTION 41(1) . 3. IN THE FIRST APPEAL, THE SAID ADDITION WAS CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS), VIDE ORDER DATED 30 TH NOVEMBER 2004. IN THE MEAN TIME, THE PENALTY PROCEEDINGS WERE ALSO INITIATED AND LEVIED. THE SAID PENALTY TOO GOT CONFIRMED FROM THE STAGE OF FIRST A PPEAL. AGGRIEVED BY THE SAID ORDER S , THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL BEING ITA NO.459/MUM./2006 AND ITA NO.58/MUM. /2006 , BOTH THE QUANTUM AND PENALTY . THE TRIBUNAL, VIDE ORDER DATED 22 ND OCTOBER 2008, NOT ONLY DELETED THE SAID ADDITION O F ` 79,18,597, BUT ALSO DELETED THE PENALTY AS A CONSEQUENCE. THE DEPARTMENT M/S. M. AMBALAL & CO. 3 AGGRIEVED BY THE ORDER OF THE TRIBUNAL PREFERRED APPEAL BEFORE THE HONBLE HIGH COURT UNDER SECTION 260A, ONLY IN RELATION TO THE QUANTUM OF ADDITION. AGAINST THE PENALTY ORDER, I T APPEARS THAT NO APPEAL UNDER SECTION 260A, WAS PREFERRED. BEFORE THE HIGH COURT, THE LEARNED COUNSEL APPEARING O N BEHALF OF THE ASSESSEE STATED THAT THE ASSESSEE IS READY TO ACCEPT THE ADDITION MADE BY THE ASSESSI NG OFFICER, HOWEVER, IT RESERVES THE RIGH T TO CONTEST THE APPEAL AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) , IF THE APPEAL IS FILED BY THE REVENUE. THE HIGH COURT, ADMITTING SUCH PLEA, SET ASIDE THE ORDER OF THE TRIBUNAL WITH REGARD TO THE QUANTUM PROCEEDINGS WITHOUT GIVING ANY DEC ISION ON MERITS AND IN THE ORDER IT WAS CLEARLY STATED THAT ASSESSEE MAY URGE ALL THE CONTENTIONS ON MERITS IN THE PENALTY PROCEEDINGS. IN CONSEQUENCE OF THE HIGH COURT ORDER, THE ASSESSING OFFICER AGAIN IMPOSED THE PENALTY OF ` 31,04,090, UNDER SECTION 27 1(1)(C). 4. THE LEARNED COMMISSIONER (APPEALS), AFTER DISCUSSING THE ENTIRE BACKGROUND AND THE FACTS OF THE CASE, DELETED THE PENALTY AFTER OBSERVING AND HOLDING AS UNDER: 3.6 THUS, IT IS CLEAR FROM THE PERUSAL OF QUESTION RAISED BEFORE THE HIGH COURT TH AT THERE WAS NO APPEAL AGAINST DELETION OF PENALTY BY THE TRIBUNAL BEFORE THE HIGH COURT I T GETS FURTHER CLEAR FROM THE SEQUENCE OF EVENTS MENTIONED ABOVE. THE COUNSEL OF THE ASSESSEE HAS CLEARLY MENTIONED BEFORE THE HIGH COURT THAT ASSESSEE RESERVED THE RIGHT TO CONTEST THE ISSUE WITH REGARD TO IMPOSITION OF PENALTY IN THE EVENT OF R EVENUE FILING AN APPEAL BEFORE THE HIGH COURT . THE DISCLAIMER PUT UP BY THE COUNSEL OF THE ASSESSEE THAT CONCESSION MADE (WITH REGARD TO ACCEPTANCE OF ADDITION FOR A Y 2001 02 SHOULD NOT BE HELD AGAINST THE ASSESSEE AND ASSESSEE RESERVED THE RIGHT TO ARGUE THE ISSUE OF PENALTY ON MERIT. IN VIEW OF THIS CLEAR STATEMENT BEFORE THE HIGH COURT BY THE COUNSEL OF THE M/S. M. AMBALAL & CO. 4 ASSESSEE, IT IS APPARENT THAT DEPARTMENT DID NOT FILE ANY APPEAL AGAINST ORDER OF PENALTY BY WAY OF SUBSTANTIAL QUESTION OF LAW RAISED IN INCOME TAX APPEAL NO. 2606 OF 2009. IT CANNOT BE INFERRED FROM THE FACT THAT THE ASSESSEE HAS ACCEPTED THE ADDITION MADE U/S 41(1) OF THE ACT BEFORE THE HIGH COURT, THAT ASSESSEE ALS O AGREED TO REVISITING THE ISSUE OF LEVY OF PENALTY BY THE DEPARTMENT. 3 .7 FROM THE ABOVE, IT IS APPARENT THAT DELETION OF PENALTY BY THE TRIBUNAL HAD BECOME FINAL IN THE BACKGROUND THAT THIS ORDER OF TRIBUNAL WAS NOT CHALLENGED BY THE REVENUE. CONSEQUE NTLY, THE AO WAS NOT JUSTIFIED IN REVISITING THE ISSUE OF PENALTY U/S 271(1)(C) AS NO PENALTY PROCEEDINGS WERE PENDING BEFORE HIM. I ALSO FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT EVEN ON MERIT, MERELY BECAUSE THE CREDITOR M/S . AKSHAT CORPORATION W AS NOT AVAILABLE AT THE ADDRESS PROVIDED BY THE ASSESSEE THAT DOES NOT OBLITERATE THE DEBT JUSTIFYING LEVY OF PENALTY FOR CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS WITH REGARD TO CESSATION OF LIABILITY. ON SIMILAR FACTS, DELHI TRIBUNAL IN THE C ASE OF KAPS ADVERTISING HELD THAT NEITHER SECTION 41(1) NOR 2H(IV) WERE APPLICABLE. 3.8 I ALSO FIND THAT IN THE ASSESSMENT ORDER, THE AO HAS MADE ADDITION ON THE GROUND THAT UNPROVED CREDIT INTRODUCED IN BOOKS IN EARLIER YEAR WAS NOT G ENUINE WHERE ANYTHI NG HAS BEEN BROUGHT ON RECORD TO PROVE THAT DURING THE CONCERNED ASSESSMENT YEAR, THERE WAS 'CESSATION OF LIABILITY'. MERELY BECAUSE ASSESSEE HAS AGREED FOR THE ADDITION DOES NOT IPSO F ACTO IMPLY THAT ASSESSEE AGREED THAT HE CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE RATIO OF THE DECISIONS OF CIT VS RELIANCE PETROPRODUCTS LTD. 327 ITR 158(SC); C I T V/S BRAHMAPUTRA CONSORTIUM LTD. ITA NO.1582 OF 2008 (DEL); UNIFLEK CABLE LTD. V/S COMMISSIONER OF CENTRAL EXCISE CIVIL APP EAL 0.5870(SC) IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. MERELY BECAUSE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO THAT ITSELF WOULD NOT ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. 3.9 THUS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D ALSO ON MERIT, I FIND THE AO WAS NOT JUSTIFIED IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT. THE MATTER HELD ALREADY REACHED FINALITY IN THE ORDER OF TH E ITAT ITA N O.58/MUM/2006. T HE AO IS DIRECTED TO DELETE THE PENALTY . 5. BEFORE US, THE LEARNED DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT ONCE THE HIGH COURT HAD SET ASIDE THE QUANTUM PROCEEDINGS, THE ISSUE RELATING TO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AUTOMATICALLY GETS REVIVE D . SIMPLY BECAUSE THE TRIBUNAL HAS DELETED M/S. M. AMBALAL & CO. 5 THE PENALTY IN CONSEQUENCE OF THE DELETION OF ADDITION IN THE QUANTUM PROCEEDINGS, IT DOES NOT MEAN THAT THE SAID PENALTY CANNOT BE INITIATED OR LEVIED AGAIN, ONCE THE SAID QUANTUM ORDER HAS BEEN SET ASIDE BY THE HIGH COURT. THUS, THE PENALTY HAS BEEN RIGHTLY INITIATED AND LEVIED BY THE ASSESSING OFFICER. 6. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT FIRST OF ALL , WHEN THE TRIBUNAL HAS DELETED THE PENALTY, THE DEPARTMENT DID NOT PREFER ANY APPEAL BEFORE THE HIGH COURT. FROM THE PLAIN READING OF THE HIGH COURT DECISION, IT CAN BE SEE N THAT THE ASSESSEE HAD RESERVED ITS RIGHT TO CHALLENGE THE APPEAL AGAINST THE IMPOSITION OF PENALTY IF THE REVENUE FILES AN APPEAL BEFORE THE HIGH COURT . S INCE NO APPEAL HAS BEEN FILED, THEREFORE, THE DELETION OF PENALTY BY THE TRIBUNAL HAS ATTAINED FINAL ITY. IN AN Y O THER CASE, THE LEARNED COMMISSIONER (APPEALS) HAS ALSO CONSIDERED THE ISSUE OF PENALTY ON MERITS WHICH IS EVIDENT FROM PARA 3.7 AND 3.8 OF THE APPELLATE ORDER. FURTHER, ON MERITS, HE RELIED UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT I N CIT V/S BHOGILAL RAMJIBHAI ATARA, [2014] 43 TAXMAN.COM 55 (GUJ.). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SUBJECT MATTER OF PENALTY IS ADDITION OF ` 79,18,597, WHICH HAS BEEN MADE BY THE ASSESSING OFFICER BY TREATING THE AMOUNT OUTSTANDING IN CASE OF ONE CREDITOR , AKSHAT CORPORATION AS CESSATION OF LIABILITY UNDER SECTION 4 1 (1). THE SAID ADDITION WAS DELETED BY THE TRIBUNAL AND SO ALSO THE PENALTY UNDER SECTION 271(1)(C). THE M/S. M. AMBALAL & CO. 6 ORDER OF THE TRIBUNAL IN THE QUAN TUM PROCEEDINGS, HAS BEEN SET ASIDE BY THE HIGH COURT ON THE ADMISSION OF THE ASSESSEE THAT THE SAID ADDITION MAY BE DECIDED AGAINST THE ASSESSEE, HOWEVER, SUCH AN ADMISSION WAS WITH A RIDER THAT ASSESSEE RESERVE S THE RIGHT THAT IT WILL HAVE THE RIGHT TO C ONTEST THE APPEAL AGAINST THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON MERITS. SINCE NO APPEAL WAS PREFERRED BY THE REVENUE, THE PENALTY DELETED BY THE TRIBUNAL IN OUR OPINION SHOULD SUBSIST. HOWEVER, WITHOUT GOING INTO THIS ASPECT, WE FIND THAT ON M ERITS ALSO THERE IS NO CASE FOR LEVY OF PENALTY FOR THE REASON THAT FIRSTLY , THERE IS NOTHING IN THE RECORD TO SHOW THAT THERE HAS BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSIDERATION AND S IMPLY BECAUSE THE SAID PARTY WAS NOT AVAILA BLE ON THE GIV EN ADDRESS, THIS ITSELF DOES NOT MEAN THAT THE LIABILITY HAS CEASED TO EXIST IN THIS YEAR; SECONDLY, I F THE SAID LIABILITY WAS BOGUS, THEN THE SAME SHOULD HAVE BEEN ADDED IN THE YEAR IN WHICH SUCH LIABILITY WAS BOOKED IN THE BALANCE SHEET ; AN D LASTLY, IN THE CASE OF THE ASSESSEE, DIFFERENT COURTS HAVE TAKEN DIFFERENT VIEW, AS THE TRIBUNAL HAS DELETED THE SAID ADDITION ON MERITS AFTER DETAIL DISCUSSION AND THE MATTER WAS SET ASIDE BY THE HIGH COURT NOT ON MERITS BUT ONLY ON THE ADMISSION OF THE ASSESSEE. THUS, IT CANNOT BE CONCLUSIVELY HELD THAT SUCH AN ADDITION WARRANTS ANY PENALTY , EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING ANY INACCURATE PARTICULARS OF INCOME. THUS, ON MERITS, WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND AFFIRM THE FINDINGS GIVEN IN M/S. M. AMBALAL & CO. 7 PARA 3.7 AND 3.8 OF THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, THE GROUND RAISED BY THE DEPARTMENT IS DISMISSED. 8. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 19 TH SEPTEMBER 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 19 TH SEPTEMBER 2014 SD/ - . . R.C. SHARMA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 19 TH SEPTEMBER 2014 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE ; (2) / THE REVENUE; (3) ( ) / THE CIT(A ) ; (4) / THE CIT, MUMBAI CITY CONCERNED ; (5) , , / THE DR, ITAT, MUMBAI ; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI