ITO 9(2)(4), MUMBAI V. PARAMOUNT APPARELS P. LTD, MUMBAI

ITA 2539/MUM/2011

• Counselvise Citation: 253919914 RSA 2011
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2539/MUM/2011 (ASSESSMENT YEAR: 2004-05) INCOME-TAX OFFICER 9(2)(4), ROOM NO.255, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 ...... APPELLANT VS M/S. PARAMOUNT APPARELS PVT. LTD., SOMANI GRAM, SOMANI IND. ESTATE, RAM MANDIR ROAD, GOREGAON (W), MUMBAI -400 104 ..... RESPONDENT PAN: AAACC 0223 F APPELLANT BY: SHRI N.K. MEHTA RESPONDENT BY: SHRI VIJAY MEHTA DATE OF HEARING: 25.01.2012 DATE OF PRONOUNCEMENT: 31.01.1012 O R D E R PER R.S. PADVEKAR, JM : THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A) -20, MUMBAI DATED 17.01.20 11 FOR THE A.Y. 2004-05 DELETING THE PENALTY LEVIED BY THE A.O. U/S .271(1)(C) OF THE ACT. THE REVENUE HAS ADMITTED THE FOLLOWING EFFECT IVE GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (A) ERRED IN CANCELLING THE PENALT Y OF ` 15,56,975/- IMPOSED BY THE ASSESSING OFFICER U/S.27 1(1)(C) OF THE I.T. ACT, 1961, DESPITE THE FACTS HIGHLIGHTED IN TH E ASSESSMENT ORDER TO THE EFFECT THAT THE ASSESSEE HAD OMITTED T O DISCLOSE THE INCOME TAXABLE AS DEEMED DIVIDEND U/S.2(22)(E) OF T HE I.T. ACT, 1961, AND OVERLOOKING THE FACT THAT THE ASSESSEES CASE IS DISTINGUISHABLE FROM THOSE OF RELIANCE PETRO PRODUC TS PVT. LTD. ITA 2539/M/2011 M/S. PARAMOUNT APPARELS PVT. LTD. 2 [322 ITR 158] (SC) AND ATUL MOHAN BINDAL [317 ITR 1 ](SC) RELIEF ON BY THE CIT (A). 2. THE FACTS REVEALED FROM THE RECORDS ARE AS UNDER . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXPORTER, MAN UFACTURER & TRADER OF READYMADE GARMENTS & OTHER MATERIALS. TH E ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2004-05 DECLARING TOTAL INCOME AT ` 6,90,990/-. THE ASSESSEES CASE WAS SELECTED FOR S CRUTINY AND ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. TH E A.O. MADE THE ADDITION UNDER SEC.56 R.W.S.2(22)(E) OF THE ACT TO THE EXTENT OF ` 43,40,000/-, TREATING THE SAME AS DEEMED DIVIDEND IN RESPECT OF THE ADVANCES RECEIVED FROM M/S. SAEMA FASHION EXPORT PV T. LTD. THE ADDITION WAS CONFIRMED BY THE LD. CIT (A). THE ASS ESSEE CARRIED THE ISSUE OF ADDITION BEFORE THE TRIBUNAL. AGAIN THE A SSESSEE LOST THE APPEAL AS THE TRIBUNAL CONFIRMED THE ADDITION MADE BY THE A.O. U/S.2(22)(E) OF THE ACT. THE A.O. LEVIED THE PENAL TY U/S.271(1)(C) ON THE ADDITION MADE U/S.2(22)(E) OF THE ACT TREATING IT AS DEEMED DIVIDEND TO THE EXTENT OF ` 15,56,975/-. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT (A) AND LD. CIT (A ) DELETED THE SAME. THE OPERATIVE PART OF THE ORDER OF THE LD. CIT (A) IS AS UNDER: 4. I HAVE CONSIDERED THE ISSUE IN CIT V ATUL MOHAN BINDAL, 317 ITR 1 (SC) THE APEX COURT HELD THAT FOR APPLICA BILITY OF SECTION 271(1)(C ) THE CONDITIONS STATED THEREIN MUST EXIST . THE CONDITIONS ARE THAT THE ASSESSEE SHOULD HAVE CONCEALED THE PAR TICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME BEFORE THE PENALTY U/S 271(1)(C ) COULD BE LEVIED THIS HAS BEEN REITERATED IN A RECENT DECISION OF THE APEX COURT IN C.I.T. V RELIANCE PETRO PRODUCTS P. LTD, 322 ITR 158, WHEREIN HONBLE APEX COURT INTERPRETED THE MEANING OF THE EXPRESSIONS, CONCEA LMENT INACCURATE, AND PARTICULARS USED IN CLAUSE (C) OF SECTION 271(1) AND HELD THAT EVERYTHING WOULD DEPEND UPON THE RETU RN OF INCOME FILED BECAUSE THAT WAS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME. THE APEX CO URT HELD THAT WHEN THE ASSESSEE FURNISHED ALL DETAILS OF EXPENDIT URE AS WELL AS ITA 2539/M/2011 M/S. PARAMOUNT APPARELS PVT. LTD. 3 INCOME IN ITS RETURN WHICH DETAILS IN THEMSELVES WE RE NOT FOUND TO BE INACCURATE NOR COULD BE VIEWED AS THE CONCEALMEN T OF INCOME ON ITS PART. IT WAS UP A AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NOT AND MERELY BECAUSE THE ASSESSEE HAD MADE THE CLAIM WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE AS THE SAME WAS NOT SUSTAINABLE IN LAW, THA T BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1)( C). THE APEX COURT HELD THAT WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, UNTRUE OR FALSE THE LIABILITY OF PENALTY WOULD ARIS E 5. IN THE INSTANT CASE THE APPELLANT HAD MADE A CLA IM THAT THE IMPUGNED CAN WAS NOT DEEMED DIVIDEND U/S.2(22)(E), A CLAIM WHICH WAS HELD BY THE A.O. INADMISSIBLE UNDER THE L AW. THE CLAIM WAS REJECTED BASED ON THE PARTICULARS FURNISH ED BY THE APPELLANT WHICH WERE NOT FOUND TO BE INACCURATE OR FALSE. AS HELD IN THE CASE OF RELIANCE PETRO (SUPRA) A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME. THE CONDITIONS PR ESCRIBED IN SECTION 271(1)(C) DO NOT EXIST IN RESPECT OF THIS A DDITION. I THEREFORE, CANCEL THE PENALTY LEVIED OF RS.15,56.97 5. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. THE LD. D.R. SUBMITS THAT THE ASSESSEE WAS REPRESENTED BY THE CHARTERED ACCOUNTANT AND HE WAS KNOWING THAT THE ASSESSEE SHOULD HAVE DECLARED THE AMOUNT OF THE DEEMED DIVID END IN ITS RETURN AND HENCE, THE ASSESSEE HAS FILED INACCURATE PART ICULARS OF INCOME. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS ONLY DIFFERENT VIEW OF THE A.O. AND ALL PARTICU LARS WERE FILED BY THE ASSESSE. MERELY BECAUSE THE ASSESSEES CLAIM IS REJ ECTED BY THE A.O. THAT CANNOT AUTOMATICALLY ATTRACT THE PENAL CONSEQU ENCES. THE LD. COUNSEL ALSO RELIED ON THE DECISION OF THE ITAT PUN E BENCH IN THE CASE OF SHRI ULHAS S. SABANE VS. ITO 2007-(ID2)-GJX-0762 -TPUN ORDER DATED 30.08.2007. IN THE SAID CASE, THE ADDITION W AS MADE U/S.2(22)(E) AND THE A.O. LEVIED THE PENALTY ON THE SAID ADDITION. THE ITA 2539/M/2011 M/S. PARAMOUNT APPARELS PVT. LTD. 4 TRIBUNAL DELETED THE PENALTY FOLLOWING THE DECISION IN THE CASE OF DILIP N. SHROFF 291 ITR 519 (SC). IN THE PRESENT CASE, W E FIND THAT THE ASSESSEE PLEADED BEFORE THE A.O. AS WELL AS BEFORE THE APPELLATE AUTHORITIES THAT M/S. SAEMA FASHION EXPORT PVT. LTD . WHICH IS AN ASSOCIATED CONCERN WAS ALSO CARRYING OUT ITS BUSINE SS FROM THE PREMISES OF THE ASSESSEE COMPANY ON PAYMENT OF RENT . IT WAS ALSO SUBMITTED THAT THE GOODS BELONGING TO THE SAID COMP ANY WERE BEING STORED IN THE SAID PREMISES AND EVEN THE JOB WORK W AS ALSO GIVEN BY THE SAID COMPANY TO THE ASSESSEE IN THE SUBSEQUENT YEARS. IT WAS ALSO PLEADED THAT EVEN IF THE AMOUNT TAKEN FROM M/S. SAE MA FASHION EXPORT PVT. LTD. WAS SHOWN AS UNSECURED LOANS BY TH E ASSESSEE, BUT IN FACT, THE SAID AMOUNT WAS ACTUALLY TAKEN AS DEPO SIT AGAINST THE JOB WORK AND SAID AMOUNT WAS FINALLY ADJUSTED AGAINST T HE JOB WORK DONE BY THE ASSESSEE. IN SUM AND SUBSTANCE THE ASSESSEE PLEADED THAT THE ADVANCE TAKEN BY THE ASSESSEE OUT OF THE BUSINESS T RANSACTIONS BUT THE SAME WAS REJECTED BY THE AUTHORITIES BELOW AS W ELL AS THE TRIBUNAL AND ADDITION WAS CONFIRMED. WE FIND FORCE IN THE A RGUMENT OF THE LD. COUNSEL THAT MERELY BECAUSE THE PLEA OF THE ASSESSE E HAS BEEN REJECTED THAT MAY NOT AUTOMATICALLY ATTRACT THE PEN AL CONSEQUENCES, MORE PARTICULARLY UNDER SEC. 271(1)(C). WE FIND TH AT DEEMED DIVIDEND IS A LEGAL FICTION CREATED U/S.2(22)(E) OF THE ACT. THE AMOUNT WOULD PARTAKES CHARACTER OF THE DIVIDEND AND SAME CAN BE BROUGHT TO TAX AS DEEMED DIVIDEND. IN OUR OPINION, THIS IS NOT FIT C ASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FILED INACCURATE PARTICULARS OF INCOME. GIVEN OUR ANXIOUS CONSIDERA TION TO THE FINDING OF THE CIT (A), IN OUR OPINION, NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, THE ORDER OF THE LD. CI[T (A) IS CONFI RMED. 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 1ST JANUARY, 2012. SD/- ( R. S. SYAL ) ACCOUTANT MEMBER SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 31ST JANUARY, 2012 ITA 2539/M/2011 M/S. PARAMOUNT APPARELS PVT. LTD. 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT -20, MUMBAI. 4) THE CIT-9, MUMBAI. 5) THE D.R. C BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN