Belgium Glass & Ceramics Pvt. Ltd., Baroda V. The Dy.CIT,Circle-1(1), Ahmedabad

ITA 2581/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9714 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 24-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 18-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Difference of opinion; Corroborative evidences

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE-PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.2581/AHD/2011 / ASSESSMENT YEAR: 2005-2006 BELGIUM GLASS & CERAMICS P.LTD. PADRA JAMBUSAR HIGHWAY ROAD DABHASA VILLAGE, PADRA 391 440. DIST. BARODA. VS DCIT, CIR.1(1) BARODA. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI MUKUND BAKSHI REVENUE BY : SMT.SONIA KUMAR, SR.DR / DATE OF HEARING : 24/06/2015 / DATE OF PRONOUNCEMENT: 17/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(A)-I DATED 21.7.2011 PASSED FOR THE ASSTT.YEAR 2005-06. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.1,65,000/- IM POSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 . 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY, AT THE RELEVANT TIME, WAS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF GLAZE FRIT MIXTURES. IT HAS FILED ITS RETURN OF INCOME O N 31.10.2005N DECLARING INCOME OF RS.57,27,006/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT, AND NOTICE UNDER SECTION 143(2 ) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOU NT, IT REVEALED TO THE AO THAT THE ASSESSEE HAD PAID SALARY OF RS.2,25 ,000/- EACH TO ITA NO.2581/AHD/2011 2 SMT.SEJAL BHAVESH VACHHANI AND SMT.BENABEN HITESH V ACHHANI. THE LEARNED AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE WITH REGARD TO THESE SALARIES ON THE GROUND THAT THE ASSESSEE FAIL ED TO PROVE ANY EVIDENCE EXHIBITING THE FACT THAT THESE LADIES WERE INVOLVED IN THE BUSINESS OR ADMINISTRATIVE ACTIVITIES OF THE ASSESS EE. THE LD.AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)( C) OF THE ACT. HE ISSUED A SHOW CAUSE NOTICE UNDER SECTION 274 R.W. S ECTION 271(1)(C) OF THE ACT ON 28.12.2007 INVITING THE EXPLANATION OF T HE ASSESSEE AS TO WHY PENALTY BE NOT IMPOSED UPON THE ASSESSEE. 4. IN RESPONSE TO THE PENALTY NOTICE, IT WAS CONTEN DED BY THE ASSESSEE THAT BOTH THESE LADIES WERE ACTIVELY ASSOC IATED WITH THE BUSINESS OF THE ASSESSEE, AND THEREFORE, SALARIES W ERE PAID TO THEM. THE DISALLOWANCE HAS BEEN MADE BY THE AO IN THE ASS ESSMENT PROCEEDINGS ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THEIR ACTIVE PARTICIPATION IN THE BUSINESS OF THE ASSESSEE-COMPA NY. THE LD.AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, AND IMPOSED PENALTY OF RS.1,65,000/-, WHICH IS EQUIVALENT TO TAX SOUGHT TO BE EVADED ON THE ADDITION OF RS.4,50,000/-. 5. THE APPEAL TO THE CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 6. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV E, WE HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREF ORE, IT IS PERTINENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** ITA NO.2581/AHD/2011 3 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UN DER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCO ME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HA S CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN ITA NO.2581/AHD/2011 4 WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUT ORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEE MING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATE S TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO T HE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE AS SESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE T WO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWAN CE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. ITA NO.2581/AHD/2011 5 8. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE CASE, THEN IT WILL REVEAL THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OR NOT CONCEALED THE PARTICULARS OF ITS INCOME. THE ASSESSEE HAS PAID SALARIES TO TWO LADY EMPLOYEES, WHICH IN T HE OPINION OF THE AO WAS NOT ADMISSIBLE, BECAUSE THE ASSESSEE FAILED TO PRODUCE SUPPORTING EVIDENCE INDICATING THE FACT THAT THESE LADIES HAVE ACTIVELY PARTICIPATED IN THE BUSINESS ACTIVITIES OF THE ASSESSEE OR THE A DMINISTRATION. THE DIFFERENCE OF OPINION BETWEEN THE AO AND THE ASSESS EE IS BECAUSE OF QUALITY OF EVIDENCE. THE LEARNED AO HAS ALSO NOT B ROUGHT ANY EVIDENCE ON RECORD TO SUGGEST THAT THE CLAIM OF THE ASSESSEE WAS FALSE. IN OTHER WORDS, THE ASSESSEE FAILED TO SUBSTANTIATE ITS EXPL ANATION IN SUPPORT OF THIS EXPENDITURE. THEREFORE, IN OUR OPINION, THE A SSESSEE DOES NOT DESERVE TO BE VISITED WITH THE PENALTY. WE ALLOW T HE APPEAL OF THE ASSESSEE, AND DELETE THE IMPUGNED PENALTY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 17 TH DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- (G.D. AGRAWAL) VICE-PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER