ACIT, Gurgaon V. Shri Shailesh Mital, Gurgaon

ITA 2556/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2746 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 26-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: SUNIL JAIN
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER I.T.A. NO.2556/DEL/2012 ASSESSMENT YEAR : 2008-09 ASSTT. I.T., VS. SHRI SHAILESH MITAL, CIRLE-2, GURGAON 297, SECTOR-IV, IMT MANESAR, GURGAON PAN NO.AAAPM 685 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NIRAJ KUMAR, SR. DR RESPONDENT BY : SHRI SUNIL JAIN, CA ORDER PER U.B.S. BEDI, JM: THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A), FARIDABAD DATED 5 TH MARCH, 2012 RELEVANT TO ASSESSMENT YEAR 2007-08 WHE REBY DELETION OF PENALTY OF ` 6,26,911/- IMPOSED U/S 271(1)(C) OF THE ACT HAS BEEN CHALLENGED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME DECLARING INCOME OF `72,15,074/- WAS FILED B Y THE ASSESSEE ON 31.10.2007. THE ASSESSMENT WAS COMPLET ED U/S 143(3) OF THE ACT ON 18.12.2009 DETERMINING TOTAL I NCOME AT I. T.A. NO.2556-2012 2 `93,35,070/- AFTER MAKING SEVERAL ADDITIONS/DISALLO WANCE INCLUDING ADDITION OF `18,59,478/- ON ACCOUNT OF UN CONFIRMED TRADE CREDITORS SURRENDERED BY THE ASSESSEE. THE A SSESSEE IS ENGAGED IN THE BUSINESS OF FABRICATION AND EXPOR T OF BAGS. WHILE COMPLETING THE ASSESSMENT, PENALTY PROCEEDING S U/S 271(1)(C) OF THE ACT WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE DID NOT PREFER APPEAL AGAINST THE ASSESSMENT ORDER. DURING THE COURSE OF PENALTY PROCEEDINGS, A SHOW CAUSE NOTICE FOR LEVY OF PENALT Y U/S 271(1)(C) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 09.06.2010. IN COMPLIANCE, THE ASSESSEE SUBMITTED T HAT IN RESPECT OF SUNDRY CREDITORS, THE LIABILITY DID NOT CEASE TO EXIST BUT THE OUTSTANDING AMOUNT WAS SURRENDERED TO AVOID LITIGATION AND NO PENALTY WAS LEVIABLE. THE AO, HAS HOWEVER, HELD THAT THE ASSESSEE CANNOT ESCAPE PENALTY MERELY ON THE GROUND THAT HE HAD SURRENDERED THE AMOUNT AND IMPOS ED PENALTY OF RS.6,26,911/-, BEING 100% OF THE AMOUNT OF TAX SOUGHT TO HAVE BEEN EVADED, U/S 271(1)(C ) OF THE A CT. 2.1 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICE R, ASSESSEE PREFERRED APPEAL AND IT WAS CONTENDED THAT THE AMOUNT WAS OFFERED FOR TAXATION ONLY UNDER THE IMPR ESSION THAT PENALTY PROCEEDINGS SHALL NOT BE INITIATED IN THE MATTER. THE AMOUNT WAS OFFERED VOLUNTARILY AND TO AVOID LIT IGATION WITH THE DEPARTMENT. IT WAS NOT A CASE OF DETECTIO N OF ANY INACCURATE PARTICULARS DURING THE PROCEEDINGS. THE ADDITION I. T.A. NO.2556-2012 3 HAS BEEN MADE BY RESORTING TO PROVISIONS OF SECTION 41(1)(A). THE PROVISIONS ARE DEEMING PROVISIONS TO THE EXTENT THAT IN CASE ANY CESSATION/REMISSION OF LIABILITY, THE AMOU NT IS TO BE TREATED AS INCOME OF THE ASSESSEE. THE ADDITION IS NOT IN THE NATURE OF UNEXPLAINED CASH CREDIT U/S 68. ASSESSEE STILL MAINTAINS THAT THE LIABILITY ARE STILL PAYABLE. TH ERE IS NO CESSATION/REMISSION OF LIABILITY BY THE CREDITOR. THE LIABILITIES HAVE NOT BEEN WRITTEN BACK IN THE BOOKS OF ACCOUNTS . SINCE THE CONFIRMATIONS WERE NOT RECEIVED, IT WAS ONLY A PRESUMPTION THAT LIABILITIES HAVE CEASED TO EXIST. OTHERWISE THEN THAT ASSESSEE HAS NO RIGHT TO UNILATERALLY DEC IDE THAT THE LIABILITY HAS CEASED TO EXIST. IT IS THE ASSES SEE HIMSELF WHO FURNISHED COMPLETE DETAILS OF CREDITORS WITH NA MES AND ADDRESS. IT WAS ONLY TO COOPERATE WITH THE DEPARTM ENT THAT THE AMOUNT WAS OFFERED FOR TAXATION. HOW COULD ASS ESSEE ANTICIPATE THAT AT THE TIME OF ASSESSMENT PROCEEDIN GS THE PARTIES WILL NOT CO-OPERATE. THERE WAS NO CAUSE FO R THE ASSESSEE TO OFFER THESE CREDITORS FOR TAXATION IN T HE RETURN OF INCOME. THEREFORE, THE CONTENTION THAT ASSESSEE FI LED INACCURATE PARTICULARS IS NOT TENABLE AT LAW AT ALL . IT IS WELL SETTLED LAW THAT THERE CANNOT BE UNILATERAL CESSATION/REMISSION OF LIABILITY. 2.2 IT IS THE ASSESSEE HIMSELF WHO FURNISHED COMPL ETE DETAILS OF CREDITORS WITH NAMES AND ADDRESSES. IT WAS ONLY TO COOPERATE WITH THE DEPARTMENT THAT THE AMOUNT WAS O FFERED I. T.A. NO.2556-2012 4 FOR TAXATION. HOW COULD ASSESSEE ANTICIPATE THAT A T THE TIME OF ASSESSMENT PROCEEDINGS THE PARTIES WILL NOT COOP ERATE. THERE WAS NO CAUSE FOR THE ASSESSEE TO OFFER THESE CREDITORS FOR TAXATION IN THE RETURN OF INCOME. THEREFORE, T HE CONTENTION THAT ASSESSEE FILED INACCURATE PARTICULA RS IS NOT TENABLE AT ALL. IT IS WELL SETTLED LAW THAT THERE CANNOT BE UNILATERAL CESSATION/REMISSION OF LIABILITY. 2.3 RELIANCE WAS PLACED ON COMMISSIONER OF INCOME TAX-II, MAHAVIR IRRIGATION P. LTD. (2011) 13 TAXMAN N.COM 58 (DELHI: CIT BANGALORE VS. S.L.N. TRADERS (2011) 14 TAXMANN.COM 85 (KAR.); CIT VS. SMT. SITA DEVI JUNEJ A (2010) 187 TAXMAN 96 (P&H);MADRAS HIGH COURT AT 286 ITR 49 9 IN THE CASE OF CIT VS. SRI SARADHA TEXTILE PROCESSORS PVT. LTD. AND H.P. STATE FOREST CORPORATION LTD. VS. DCIT (20 05) 93 ITD 442 (CHD.). 2.4 LEARNED CIT(A) WHILE REPRODUCING THE RELEVANT PROVISIONS OF SECTION 271(1) AND DISCUSSING SOME CA SE LAWS HAS CONCLUDED TO DELETE THE IMPUGNED PENALTY AS PER PARA 6.1 OF THE ORDER AS UNDER:- 6.1 IN THE FACTS OF APPELLANT'S CASE, THERE IS NO DISPUTE THAT THE AMOUNT OF RS.18,59,478/- WAS OUTSTANDI NG AS ON 31.03.2007 IN RESPECT OF FOUR TRADE CREDITORS. T HE AO ASKED THE ASSESSEE TO FILE CONFIRMATIONS BUT NO SUCH CONFIRMATIONS WERE FILED. THE INQUIRY CONDUCTED BY T HE AO U/S 133(6) OF THE ACT ALSO DID NOT YIELD ANY RESULT A S THE LETTER WERE RECEIVED BACK UNSERVED IN RESPECT OF THRE E CREDITORS AND ONE CREDITOR DID NOT MAKE ANY COMPLIAN CE. ON BEING ASKED TO PRODUCE THE CREDITORS, THE ASSESSEE I. T.A. NO.2556-2012 5 CONTENDED THAT THE CREDITORS HAD NOT CEASED TO EXIST B UT IN ORDER TO AVOID LITIGATION, THE AMOUNT WAS SURRENDERED . IT CANNOT BE HELD AS AN INFLEXIBLE RULE THAT WHEN THE A SSESSEE AGREES TO HAVE CERTAIN ITEMS INCLUDED IN HIS TOTAL INC OME, HE MAKES AN ADMISSION WHICH BY ITSELF WOULD WARRANT TH E IMPOSITION OF PENALTY. WHEN THE APPELLANT AGREED TO THE INCLUSION OF ADDITIONAL AMOUNT ON ACCOUNT OF SURREND ER OF SUNDRY CREDITORS IN THE INCOME DECLARED BY HIM IN HIS RETURN TO PURCHASE PEACE OR TO AVOID BOTHERATION OR LITIGATION, ANY ADMISSION SURRENDERING A PARTICULAR AM OUNT AS HIS INCOME WOULD NOT BY ITSELF JUSTIFY THE IMPOSITION OF PENALTY, UNLESS THERE WAS AN EVIDENCE SHOWING THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HI S INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT HAS BEEN HELD BY THE HON'BLE MADHYA PRADESH HIGH COURT I N THE CASE OF ADDL. CIT VS. BHARTIYA BHANDAR (122 ITR 6 22) THAT WHEN A SURRENDER IS MADE TO PURCHASE PEACE OR FO R OTHER SIMILAR REASONS OR TO AVOID BOTHERATION, THE SURR ENDER CANNOT AMOUNT TO AN ADMISSION CONSTITUTING EVIDENCE OF CONCEALMENT IN PENALTY PROCEEDINGS. IT WOULD BE A WR ONG NOTION DECIDING THE PENALTY PROCEEDINGS THAT ONCE A SURRENDER IS MADE OF ANY AMOUNT, THE ASSESSEE CAN BE STRAIGHTAWAY PENALIZED WITHOUT ASKING THE ASSESSING OFFICER TO BRING SOME OTHER MATERIAL AND FURTHER PRO OF ESTABLISHING THE DISHONEST CONCEALMENT OF THE UNDISCLOSED INCOME AND THE FALSITY OF THE RETURN AND WITHOUT AFF ORDING THE ASSESSEE AN OPPORTUNITY TO SHOW THAT THE SURRENDERED AMOUNT WAS IN REALITY HIS UNDISCLOSED INCOME OR THAT IT WAS FOR CERTAIN OTHER REASONS THAT THE ASSESSEE HAD MADE SURRENDER OF THE AMOUNT. I FIND THAT NO ADDITION ON ACCOUNT OF SUNDRY CREDITORS CAN BE MADE UNLESS THE TRADE LIABI LITY HAD CEASED TO EXIST, EVEN IF NO CONFIRMATIONS ARE FILE D, AS HELD BY THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. SITA DEVI JUNEJA (187 TAXMAN 96) RELI ED UPON BY THE LEARNED COUNSEL. FURTHER, THE PENALTY LE VIED ON ADDITION OF TRADE LIABILITIES HAS NOT BEEN HELD TO BE JUSTIFIED IN THE TWO DECISIONS RELIED UPON BY THE APPELLANT IN PARA 6(I) AND 6(II) OF THE WRITTEN SUBMISSIONS. MERE FACT O F SURRENDER COULD NOT NECESSARILY BE AN ADMISSION OF ASSESSEE THAT AMOUNT SURRENDERED WAS UNDISCLOSED INCOME AND LIABLE TO BE SUBJECTED TO PENALTY. THE DECISIONS IN THE CASES OF CIT OF CIT VS. PUNJAB TYRES (1 62 ITR 517)(MP), KRISHAN LAL SHIVCHAND RAI (88 ITR 293) (P&H) AND S. V. ELECTRICAL PVT. LTD. (274 ITR 334) (MP) C LEARLY SUPPORT THE CASE OF APPELLANT THAT NO PENALTY U/S. 271 (1)(C) CAN BE LEVIED WHEN THE ASSESSEE HAS SURRENDERED CERTAIN I. T.A. NO.2556-2012 6 AMOUNT IN THE ASSESSMENT PROCEEDINGS. IN THE CASE OF GUMANI RAM SIRI RAM VS. CIT 5 ITR 67), THE HON'BLE P UNJAB AND HARYANA HIGH COURT HAS HELD THAT IN THE ONLY CIRCUMSTANCES THAT THE AMOUNT WAS SURRENDERED BY THE ASSESSEE, AN INFERENCE HAD BEEN DRAWN THAT THE AMOUNT REPRESENTED THE INCOME OF THE ASSESSEE. THIS CONCLUSION WAS NOT INEVITABLE. THERE MIGHT BE HUNDRED REASONS FOR THE ASSESSEE TO SURRENDER THIS AMOUNT IRRESPECTIVE OF THE FACT WHETHER IT WAS HIS INCOME OR NOT AND IT WAS INCUMBENT, IN VIEW OF THE OBSERVATIONS OF THE SUPREME COURT IN CIT V. ANWAR ALI CASE (76 ITR 696). FOR THE ITO TO FIND ON EVIDENCE THAT THE AMOUNT REPRESENTED THE INCOME OF THE ASSESSEE. THEREFORE, THE REQUIREMENTS OF SECTIONS 271(1)(C) HAD NOT BEEN SATISFIED SO AS TO BRING THE CASE OF THE ASSESSEE WITHIN THE SAME. THUS, THE PENALTY COULD NOT BE LEVIE D ON THE AMOUNT SURRENDERED BY THE ASSESSEE, UNLESS THERE WAS MATERIAL ON THE RECORD TO SHOW THAT THE SURRENDERED ITEM WAS HIS INCOME. IN THE LIGHT OF ABOVE JUDICIAL RULING S AND THE FACTS OF THIS CASE, I FIND THAT THERE WAS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO MAKE THE APPELLANT LIABLE FOR PENAL CONSEQUENCES. THEREFORE, THE ORDER PASSED BY THE AO U/S 271(1)(C) LEVYING PENALTY OF RS.6,26,911/- IS CANCELLED. 2.5 AGGRIEVED BY THIS ORDER OF LEARNED CIT(A), DEPARTMENT HAS COME UP IN APPEAL AND PLEADED THAT O N THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD, C1T(A) HAS ERRED ON THE FACTS AND IN LAW, IN DELETING THE PENA LTY OF RS.6,26,911/- WHICH WAS LEVIED BY THE ASSESSING OFF ICER ON ACCOUNT OF UNPROVED TRADING LIABILITY IN THE NAME O F 4 CREDITORS. THE EXPLANATION OFFERED BY ASSESSEE REGA RDING IDENTITY AND GENUINENESS OF THESE CREDITORS WERE FO UND TO BE FALSE ON ENQUIRIES MADE BY ASSESSING OFFICER. ON T HE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS E RRED ON THE FACTS AND IN LAW, IN APPRECIATING THE FACT THAT SURRENDER WAS NOT MADE SUO MOTA BY ASSESSEE BUT ON BEING I. T.A. NO.2556-2012 7 CONFRONTED BY ASSESSING OFFICER THAT EXPLANATION OF FERED BY HIM WERE FOUND TO BE FALSE AND REMAINED UNPROVED, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED ON THE FACTS AND IN LAW, IN DELETING THE PENALTY BY HOLDING THAT NO PENALTY U/S 271(1)(C) CAN BE LEVIED WHEN TH E ASSESSEE HAS SURRENDERED CERTAIN AMOUNT IN THE ASSE SSMENT PROCEEDINGS. AS PER EXPLANATION 1 TO SECTION 271(1) (C) PENALTY IS CLEARLY LEVIABLE IN THIS CASE. THE ASSES SEE'S CLAIM THAT HE HAD MADE THE SURRENDER TO BUY PEACE WITH TH E IT DEPARTMENT WOULD ALSO NOT PREVENT LEVY OF PENALTY F OR CONCEALMENT OF INCOME AS THERE CAN BE NO AGREEMENT OR ESTOPPEL AGAINST THE STATUTE. IN THE CASE OF K.P. MADHUSUDHANAN VS, CIT (2001) 169 CTR (SC) 489 : (20 01) 251ITR 99 (SC), IT WAS HELD THAT IT CANNOT BE LAID DOWN AS A GENERAL PRESCRIPTION THAT NO PENALTY CAN BE LEVIED FOR ASSESSMENT . 2.6 RELIANCE WAS PLACED ON DELHI HIGH COURT DECISI ON IN THE CASE OF CIT VS. MAK DATA LTD. DATED 22.01.20 13; AND ITAT A BENCH DECISION IN THE CASE OF AJAY JAIN VS . ACIT; ASSESSMENT YEAR 2007-08 IN I.T.A. NO.918/D/2012; DA TED 01.10.2012, SANJAY ENTERPRISES (P) LTD. VS. INCOME- TAX OFFICER (2012) 17 TAXMANN.COM 94 (DELHI) AND IT WAS STRONGLY PLEADED FOR REVERSAL OF THE ORDER OF LEARN ED CIT(A) AND TO RESTORE THAT OF THE ASSESSING OFFICER. I. T.A. NO.2556-2012 8 2.7 LEARNED COUNSEL FOR THE ASSESSEE WHILE RELYING UPON THE ORDER OF LEARNED CIT(A) HAS PLEADED FOR IT S CONFIRMATION. IT WAS FURTHER SUBMITTED THAT IN ORD ER TO BUY PEACE, ASSESSEE HAS SURRENDERED THE AMOUNT AND WHEN NOTHING WAS PLACED ON RECORD TO SHOW THAT EITHER AS SESSEE CONCEALED ANY INCOME OR FILED INACCURATE PARTICULAR S OF INCOME, SO WHILE RELYING UPON THE BASIS AND REASONI NG WAS GIVEN BY LEARNED CIT(A), THE AR OF THE ASSESSEE HAS FURTHER RELIED UPON I BENCH DECISION IN THE CASE OF INCOM E-TAX OFFICER VS. RAKESH KUMAR GUPTA (2012) 21 TAXMANN.CO M 323 DELHI TO PLEAD FOR CONFIRMATION OF THE IMPUGNED ORD ER AS IT IS CLEAR CASE OF SURRENDER IN ORDER TO BUY PEACE, THER EFORE, ORDER OF LEARNED CIT(A) IS LIABLE TO BE CONFIRMED, WHICH MAY BE CONFIRMED. 2.8 WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERIAL ON RECORD AS WELL AS CASE LAW CITED BY RIV AL SIDES AND FIND THAT WHILE DECIDING THE APPEAL LEARNED CIT (A) HAS DEALT WITH THE ISSUE APPROPRIATELY AS PER PARA 6.1 REPRODUCED IN EARLIER PARAGRAPHS. THE BASIS AND REASONING GIV EN BY LEARNED CIT(A) HAVE BEEN CAREFULLY PERUSED BY US AN D FIND THAT THE SAME IS BASED ON SOUND REASONING. DEPARTM ENT IN THIS CASE HAS NOT BEEN ABLE TO PLACE ON RECORD ANY HIGHER COURTS ORDER IN WHICH SIMILAR VIEW HAS BEEN REVE RSED ON IDENTICAL FACTS. THEREFORE, IN VIEW OF THE FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD, WE DO NOT FIN D ANY I. T.A. NO.2556-2012 9 REASONABLE BASIS TO INTERFERE IN THE ORDER PASSED B Y LEARNED CIT(A), WHOSE ACTION IS CONFIRMED AND APPEAL OF THE DEPARTMENT IS DISMISSED. 3. AS A RESULT APPEAL OF THE REVENUE GETS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.07.2013 . SD/- SD/- ( S.V. MEHROTRA ) ( U.B.S. BED I ) ACCOUANTANT MEMBER JUDICIAL MEMBER DT. :31/7/2013 NS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A), FARIDABAD. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).