Santoshi Polymers, Daman V. The Income Tax Officer, Vapi Ward-4, Daman

ITA 2578/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2124 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 04-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: JAYESH P BAGRECHA
• Keywords: Income from undisclosed sources
• Section: 68; 271(1)(c); 143(3); 142(1); 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2578/AHD/2015/SRT / ASSESSMENT YEAR: 2005-06 SANTOSHI POLYMERS, S.NO.372/8/8, HINGRAJ INDL. ESTATE, DABHEL, DAMAN 396 170. [PAN: AAWFS 7379E] VS. INCOME TAX OFFICER, VAPI WARD-4, DAMAN. ( / APPELLANT) ( !' /RESPONDENT) / ASSESSEE BY : SHRI JAYESH P. BAGRECHA, C.A /REVENUE BY : SHRI R.P. RASTOGI, SR. D.R /DATE OF HEARING : 19-04-2018 /DATE OF PRONOUNCEMENT : 25-04-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), VALSAD (CIT( A) FOR SHORT) DATED 01.06.2015 FOR THE ASSESSMENT YEAR (A.Y) 2005-06 PA SSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT T HE ACT). 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS: 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN LEVYING PENALTY OF RS. 16,4 9,500/- U/S 271(1)(C) OF THE ACT, ON ADDITION OF RS. 45,07,520/ ON FOLLOWING HEA DS : 2 ITA NO.2578/AHD/2015/SRT (A.Y: 2005-06) SHRI SANTOSHI POLYMERS 1 EXCISE DUTY U/S 145A RS. 2,03,158 2 CAPITAL INTRODUCTION RS. 1,25,000 3 UNSECURED LOAN RS. 4,00,000 4 DISALLOWANCE U/S 40A RS. 1,99,848 5 INTEREST INCOME RS. 23,644 6 DISALLOWANCE OF DEDUCTION. U/S 80IB RS. 35,55,863 WHICH IS WHOLLY UNSUSTAINABLE IN LAW AND ON FACTS A ND AS SUCH THE APPELLANT COULD NOT- BE CHARGED WITH ANY GUILT OF F URNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME WITHIN MISCHIEF OF SECTION 271(1)(C) OF THE ACT. THE LEVY OF PENALTY BEING WITHOUT JURISDICTION AND TOTALLY UNCALLED FOR DESER VES TO BE QUASHED. 2. THE LD CIT(A) HAS NOT CONSIDERED OUR LETTER DATE D 17/04/2014 (INCONTINUITY WITH OUR SUBMISSION DATED 15/06/2011 )AND PASSED THE ORDER WITHOUT GIVING ANY FURTHER OPPORTUNITY OF BEI NG HEARD WHICH RESULTED IN UNJUSTIFIED CONFIRMATION OF PENALTY ORD ER BECAUSE THE LD CIT(A) HAS NOT CONSIDERED THE MATTER IN LIGHT OF OR DERS PASSED BY ITAT AND ASSESSING OFFICER AS FOLLOWS: A. THE LD CIT(A) HAS NOT CONSIDERED THE ORDER PASSE D BY THE TRIBUNAL I.T.A. NO.1623/AHD/2009 A.Y. 2005 - 06 IN WHICH THE TRIBUNAL HAS REMIT CERTAIN ISSUE TO ASSESSING OFFIC ER. B. THE ASSESSING OFFICER ISSUED A NOTICE U/S 143(2) AND 142(1) DATED 11/11/2014 FOLLOWING THE DIRECTIONS OF HOUNAR ABLE ITAT AHMEDABAD. C. THE A.O. HAS PASSED AN ORDER U/S 143(3) R.W.S 25 4 OF INCOME TAX, 1961 ON DATED 27/03/2015 AND ALLOWED THE FOLLO WING CLAIMS. I. DEDUCTION U/S 80IB RS. 39,58,869 (AFTER CONSIDER ING EXCISE DUTY U/S . 145A RS.2,03,158 AND DISALLOWANCE . U/S 40A(IA) RS. 1,99,848 AND CALCULATED BUSINESS IN COME AS NIL. II. THE . ASSESSING OFFICER HAS ALSO ALLOWED CAPITAL INTRODUCTION RS. 1,25,000 AND INTEREST INCOME OF RS.23,644. III. THE ASSESSING OFFICER HAS RETAINED THE DISALLOWANCE REGARDING UNSECURED LOAN RS. 4,00,000. 3. AS THE QUANTUM HAS ALREADY BEEN DELETED BY LD. AO A S MENTIONED ABOVE THEREFORE PENALTY SHOULD BE DELETED . 3 ITA NO.2578/AHD/2015/SRT (A.Y: 2005-06) SHRI SANTOSHI POLYMERS 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBU NAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT IN QUANTUM APPEA L ITA NO.1623/AHD/2009 THE ITAT, AHMEDABAD ORDER DATED 31 .07.2013 RESTORED THE VARIOUS ISSUED TO THE FILE OF THE A.O FOR VERIF ICATION AND EXAMINATION AND IN PURSUANT THERETO THE AO HAS PASSED ORDER ON 27.0 3.2015 U/S. 143(3) R/W. 254 OF THE ACT, WHEREIN EXCEPT ADDITION OF RS.4,00, 000/- HAS BEEN UPHELD AND AMOUNT OF RS. 34,354/- BEING COMMISSION INCOME ON ACCOUNT OF SAID UNSECURED LOAN WAS NOT FOUND TO BE ELIGIBLE FOR DED UCTION U/S. 80IB OF THE ACT. THE LD. AR SUBMITTED THAT THE UNSECURED LOAN FROM SHRI JAYANTHIBHAI D. SHAH WAS PROPERLY EXPLAINED BY THE ASSESSEE BY SUBM ITTING COPY OF HIS PROVIDENT FUND AND SAVING A/C. PASS BOOK ESTABLISHI NG THE IDENTITY AND CREDITWORTHINESS OF CREDITOR AND GENUINENESS TRANSA CTION, BUT THE ASSESSEE WAS UNABLE TO PROVIDE HIS PAN NUMBER WHICH WAS NOT TAKEN BY THE ASSESSEE FROM THE CREDITOR AND THE CREDITORS INCOME WAS NOT TAXABLE AT THAT POINT OF TIME AND HE SHIFTED TO USA ON THE ADDRESS AS SHOWN IN THE CONFIRMATION LETTER. THEREFORE, ADDITION WAS CONFIRMED. 4. THE LD. AR SUBMITTED THAT THE AMOUNT OF UNSECURE D LOAN WAS DULY DECLARED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS T HEREFORE, ALLEGATION OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME CANNOT BE MADE AGAINST THE ASSESSEE AND HENCE, PENA LTY CANNOT LEVIED MERELY BECAUSE IN ABSENCE OF PAN NUMBER AND SOME OT HER FORMALITIES ADDITION WAS SUSTAINED. 4 ITA NO.2578/AHD/2015/SRT (A.Y: 2005-06) SHRI SANTOSHI POLYMERS 5. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) STRONGLY SUPPORTED THE PENALTY ORDER AS WELL AS FIR ST APPELLATE ORDER AND SUBMITTED THAT THE ASSESSEE SHOWN UNSECURED LOAN WH ICH WAS NOT FOUND TO BE ACCEPTABLE THEREFORE, PENALTY WAS RIGHTLY LEVIED U/S. 271 (1)(C) OF THE ACT. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, AT THE VERY OUTSET, WE OBSERVE THAT THE AO HAS PASSED APPEAL EFFECT ORD ER IN PURSUANT TO THE ORDER OF THE TRIBUNAL DATED 27.03.2015 (SUPRA) AND EXCEPT ADDITION OF RS. 4,00,000/- ON ACCOUNT OF UNSECURED LOAN OTHER ADDIT IONS HAVE NOT BEEN FOUND TO BE SUSTAINABLE AND AO HIMSELF HAS DELETED THE SA ME. THEREFORE, PENALTY, EXCEPT ON THE ADDITION OF UNSECURED LOAN, CANNOT BE UPHELD AS THE VERY BASIS I.E., ADDITIONS MADE BY THE AO IN THE FIRST ROUND O F PROCEEDINGS HAVE BEEN DELETED BY HIMSELF WHILE PASSING ORDER IN PURSUANT TO THE TRIBUNAL ORDER THUS, PENALTY, EXCEPT ON THE ISSUE OF UNSECURED LOAN, I.E ., ON OTHER ADDITIONS/DISALLOWANCES IS DIRECTED TO BE DELETED. 7. FURTHER, ON CAREFUL CONSIDERATION OF ENTIRE FACT S AND CIRCUMSTANCES AND DOCUMENTS ON RECORD, WE ARE OF THE VIEW THAT FROM C OPY OF PASS BOOK OF BANK OF INDIA A/C. NO. 8072 OF SAID CREDITOR SHRI J AYANTHILAL D. SHAH, IT IS CLEAR THAT HE WITHDREW RS. 3,85,000/- AND RS. 27,00 0/- ON 24.04.2004 AND 30.04.2004 RESPECTIVELY AND THEREAFTER, ON 03.05.20 04 CASH OF RS. 4,00,000/- WAS DEPOSITED TO THE SAME BANK A/C. AND ON VERY SAM E DATE RS. 4,00,700/- WAS TRANSFERRED TO THE ASSESSEES ACCOUNT THIS FACT IS ALSO CONFIRMED FROM THE CONFIRMATION LETTER PLACED AT PG. 41 OF THE ASSESSE ES PAPER BOOK. FROM 5 ITA NO.2578/AHD/2015/SRT (A.Y: 2005-06) SHRI SANTOSHI POLYMERS COPY OF PUBLIC PROVIDENT SCHEME PASS BOOK NO.315 WI TH STATE BANK OF INDIA OF SAID CREDITOR SHRI JAYANTHILAL D. SHAH, IT IS AL SO CLEAR THAT HE WAS HAVING BALANCE OF RS. 7,53,102/- AS ON 31.03.2005 WHICH SH OWS HIS CAPACITY AND CREDITWORTHINESS. FROM COPY OF ASSESSMENT ORDER PA SSED IN PURSUANT TO ITAT ORDER DATED 27.03.2015, IT IS APPARENT THAT TH E AO AGAIN MADE ADDITION U/S. 68 OF THE ACT ON ACCOUNT OF UNSECURED LOAN OF RS. 4,00,000/- AS PER DIRECTIONS OF ITAT PERHAPS IN ABSENCE OF PAN NUMBER OF CREDITOR. AT THE SAME TIME, WE OBSERVE THAT THE AUTHORITIES BELOW HA S NOT CONTROVERTED THIS FACT THAT AT THE TIME OF GRANTING LOAN IN A.Y 2005- 06 THE INCOME OF SAID CREDITOR SHRI JAYANTHILAL D. SHAH WAS NOT WITHIN TH E TAXABLE LIMIT AND PERHAPS THEREFORE, HIS PAN NUMBER COULD NOT BE PLACED BEFOR E THE AO. SO FAR AS CREDITWORTHINESS, CAPABILITY AND IDENTITY OF CREDIT OR IS CONCERNED, AND GENUINENESS OF TRANSACTION IS CONCERNED THE DOCUMEN TS PLACED BEFORE US AT PGS. 41-45 CLEARLY ESTABLISH THAT THE SAID CREDITOR WAS HAVING CAPABILITY AND CREDITWORTHINESS OF GRANTING LOAN TO THE ASSESSEE A ND TRANSACTION OF UNSECURED LOAN WAS TRUE AND CORRECT. IN THIS SITUA TION, WHEN THE ASSESSEE HAS SHOWN UNSECURED LOAN IN HIS BOOKS OF ACCOUNTS T HEN, ALLEGATION OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME CANNOT BE LEVELED AGAINST THE ASSESSEE WITHOUT BRINGING OU T ANY COGENT AND RELEVANT MATERIAL AGAINST THE ASSESSEE SHOWING THAT THE ASSE SSEE FOUND INTRODUCED HIS OWN UNACCOUNTED INCOME BY WAY OF SHOWING UNSECU RED LOAN FROM IMAGINARY CREDITOR. THUS, WE ARE INCLINED TO HOLD THAT THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS NOT VALID AND SUSTAINABLE. HENCE, 6 ITA NO.2578/AHD/2015/SRT (A.Y: 2005-06) SHRI SANTOSHI POLYMERS WE DIRECT THE AO TO DELETE THE PENALTY ON ACCOUNT O F UNSECURED LOAN. ACCORDINGLY, GROUNDS OF ASSESSEE ARE ALLOWED AND AO IS DIRECTED TO DELETE THE ENTIRE PENALTY IMPOSED U/S. 271(1)(C) OF THE AC T . 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5 TH APRIL, 2018. / SURAT ; DATED : 25 TH APRIL, 2018 EDN ! $ / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. # ( ) / THE CIT (A) , VALSAD; 4. CCIT, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // ) / ASSISTANT REGISTRAR , / ITAT, SURAT SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER