Shri Karim K.Lakhani, Surat V. The ACIT.,Cent.Circle-1, Surat

ITA 2586/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9517 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 09-11-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 01-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2586/AHD/2013 / ASSTT. YEAR: 2004-2005 KARIM K. LAKHANI 51, KARIMABAD SOCIETY GHODDOD ROAD SURAT. VS ACIT, CC - 1 SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI RUSHI J. PARIKH WITH SHRI JAYRAJ DHAKAN, AR REVENUE BY : SHRI MUDIT NAGPAL, SR.DR / DATE OF HEARING : 09/11/2016 / DATE OF PRONOUNCEMENT: 12/01/2017 $%/ O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)- IV, AHMEDABAD DATED 26.8.2013 PASSED FOR THE ASSTT. YEAR 2004-05. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS.3,41,232/- WHICH WAS IMPOS ED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACT OF THE CASE ARE THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 1.11.2004 DECLARING TOTAL INCOME AT RS.4,66,590/ -. THE ASSESSEE AT RELEVANT TIME WAS RUNNING A PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF LAXMI STEELS. AN ASSESSMENT ORDER WAS PASSED ON 28.12.006 UNDER SECTION 143(3) OF THE ACT, AND TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS.6,20,570/-. IT WAS FOUND THAT THE ASSESSEE HAD OBTAINED LOAN OF RS.9,85,500/- FROM FIVE CONCERNS. ACCORDING TO THE AO, THESE LOANS WERE ITA NO.2586/AHD/2013 2 ACCEPTED IN CASH, THEREFORE PENALTY PROCEEDINGS UND ER SECTION 271D OF THE INCOME TAX ACT, 1961 WERE INITIATED. DURING THE PE NALTY PROCEEDINGS, THE ASSESSEE HAS PRODUCED SHRI MAYUR RANA, REPRESENTATI VE OF S.N. TRADERS FROM WHOM A LOAN OF RS.2,07,500/- ALLEGED TO HAVE BEEN T AKEN. SHRI RANA COULD NOT SUBSTANTIATE THAT HE HAD GIVEN LOAN TO THE ASSESSEE . THEREFORE, LOAN WAS TREATED AS BOGUS, PENALTY PROCEEDINGS UNDER SECTION 271D WERE DROPPED AND REASONS WERE RECORDED FOR REOPENING OF THE ASSESSME NT. THE LD.AO HAS INITIATED RE-ASSESSMENT PROCEEDINGS. HE MADE AN AD DITION OF RS.9,85,500/-. THE REOPENING WAS UPHELD UPTO THE ITAT, AND THE APP EAL OF THE ASSESSEE BEARING ITA NO.1363/AHD/2009 WAS DISMISSED. THE IT AT HAS UPHELD REOPENING AS WELL AS CONFIRMED ADDITIONS WHICH WERE MADE WITH THE AID OF SECTION 68 OF THE ACT. THE LD.AO HAS INITIATED PEN ALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND ULTIMATELY, HE IMP OSED A PENALTY OF RS.3,41,232/- WHICH IS EQUIVALENT TO THE TAX SOUGHT TO BE EVADED. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE . 4. BEFORE ME, LD. COUNSEL FOR THE ASSESSEE CONTENDE D THAT THE ASSESSEE HAS FILED CONFIRMATION. HE HAS FILED THEIR PANS, COPY OF BALANCE SHEET, CAPITAL ACCOUNT AND COPY OF RETURN. IN THE PENALTY PROCEED INGS, THE LD.AO DID NOT GRANT ADEQUATE OPPORTUNITY TO PRODUCE ALL THESE CRE DITORS BEFORE HIM. IT WAS ALSO PLEADED THAT THE ASSESSEE IS TRADING IN SCRAP. THESE ARE SMALL VENDORS, WHO SUPPLIED HIM SCRAP AND ALSO PURCHASED SCRAP FRO M HIM. THEY BELONGED TO DISORGNISED SECTOR OF BUSINESS COMMUNITY. ALL T HE REPRESENTATIVE OF FIVE CONCERNS CAME TO THE AAYKAR BHAVAN DURING THE ASSES SMENT PROCEEDINGS, AND AFTER KNOWING THE QUESTIONING AND THREAT GIVEN TO T HE FIRST PERSON, ALL OF THEM FLED AWAY . THEREFORE, IT WAS CONTENDED THAT NO PE NALTY BE IMPOSED UPON THE ASSESSEE. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE AO. ITA NO.2586/AHD/2013 3 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REP RESENTATIVES, AND GONE THROUGH THE RECORD. SECTION 271(1)(C) OF THE ACT HA S A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, IT IS PERTINENT TO TAKE NOT E OF THIS PROVISION, WHICH READS AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (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 CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LE SS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICULARS 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 OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (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 EXPLANATION IS BONA FI DE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR SUCH PE RSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF TH IS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED.' 6. 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 BEFORE THEM SH OULD BE SATISFIED, THAT THE ITA NO.2586/AHD/2013 4 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 UNDER 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 OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); 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 AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME 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 ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND ITA NO.2586/AHD/2013 5 MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 7. IN THE LIGHT OF THE ABOVE, IF EXPLANATION OF THE ASSESSEE IS BEING EXAMINED, THEN IT WOULD REVEAL THAT THOUGH ON PAPER THE ASSESSEE HAS TRIED TO FULFILL THE REQUIREMENT OF SECTION 68 I.E. HE HAS T RIED TO PROVE THE IDENTITY OF ALLEGED CREDITORS AND GENUINENESS OF ALLEGED TRANSA CTIONS, BUT IT IS IMPORTANT TO NOTE THAT WHEN THE AO HAS CROSS-VERIFIED ITS DETAIL S AND CALLED FOR CREDITORS, THEY COULD NOT SUBSTANTIATE THE DETAILS I.E. ONE OF THE CREDITORS WHO DEPOSED BEFORE THE AO FAILED TO SUBSTANTIATE THAT LOAN WAS GIVEN TO THE ASSESSEE. AS PER THE ASSESSEE HIMSELF, OTHER PERSONS HAD RUN AWA Y FROM THE INCOME TAX OFFICE WHEN THEY KNEW ABOUT THE QUESTIONING OF FIRS T PERSON BY THE DEPARTMENT. IT ITSELF SUGGEST THAT THEY WERE NOT TE LLING THE TRUTH. THE LD.CIT(A)HAS CONFIRMED THE PENALTY BY OBSERVING AS UNDER: 5. HAVING GONE THROUGH THE FACTS, THE ORDERS OF TH E AUTHORITIES, FINDINGS OF THE A.O. AND THE ARGUMENTS OF THE AR, I AM OF THE OPINION THAT THE ORDER LEVYING PENALTY IS REQUIRED TO BE UP HELD. THE APPELLANT HAS AS ALSO OPINED BY THE ITAT AND AT NO STAGE ESTA BLISHED THE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS A ND CREDITWORTHINESS OF THE PERSONS. THOUGH IT IS CLAIMED THAT THE APPEL LANT WISHED TO PRODUCE THE CREDITORS IN PENALTY PROCEEDINGS BUT WA S NOT ALLOWED BY THE A.O. IS NOT BORNE OUT BY RECORDS AND THE ASSESS EE HAS FAILED TO SHOW THAT SUCH A CLAIM HAD ACTUALLY BEEN MADE AND REFUSE D BY THE A.O. THE CORRECTNESS OF SUCH A CLAIM IS LAID BARE BY THE FAC T THAT THE APPELLANT HIMSELF STATES THAT IF IT COULD NOT PRODUCE THE CRE DITORS THE A.O. SHOULD HAVE SUMMONED THEM. THE APPELLANT'S RELIANCE ON THE FACT THAT MR. MAYUR RANA PRESENTED HIMSELF AND ACCEPTED GIVING AD VANCE TO THE ITA NO.2586/AHD/2013 6 APPELLANT HAS BEEN REJECTED AS NOT OF ANY HELP TO T HE APPELLANT BY THE HON'BLE TRIBUNAL. THE PLEA OF THE APPELLANT THAT IT HAD FILED CONFIRMATIONS BEFORE THE A.O. IS ALSO OF NO AVAIL A S THESE CONFIRMATORY LETTERS WERE NOT SIGNED BY THE PARTIES AND NO ADDRE SS AND PAN WERE MENTIONED IN THE LETTERS AND THEREFORE THEY HAVE NO EVIDENTIARY VALUE. THAT IT IS SO IS CLEAR FROM THE PARA-10 OF THE HON' BLE ITAT ORDER IN QUANTUM APPEAL WHERE THIS FACT HAS BEEN MENTIONED. THE CLAIM OF THE APPELLANT THAT HE HAD GIVEN AN EXPLANATION WHICH HE HAS BEEN ABLE TO SUBSTANTIATE IS BASED ON THESE CONFIRMATIONS WHICH ARE UNSIGNED AND DO NOT CARRY PAN OR ADDRESS OF THE CREDITOR. THE CLAIM OF SUBSTANTIATION IS WITHOUT ANY BASIS AND CANNOT BE ACCEPTED. THE APPEL LANT IS CLEARLY CAUGHT WITHIN THE MISCHIEF OF EXPLANATION-1 TO SEC. 271(L)(C). HIS CLAIM THAT THE A.O. SHOULD HAVE CARRIED OUT INVESTIGATION S CANNOT HELP THE APPELLANT ANY MORE THAN HIS CLAIM THAT A.O. HAS NOT BROUGHT ANYTHING ABOUT POSITIVE INCOME. THE FACTS ON RECORD WERE THA T THE CREDITORS WERE BOGUS AND IN PENALTY PROCEEDINGS IT WAS FOR THE APP ELLANT TO SHOW THAT HIS EXPLANATION THAT AMOUNT HAD BEEN RECEIVED FROM CREDITORS WAS SUBSTANTIATED. THE APPELLANT HAS FAILED TO DO SO. H IS RELIANCE ON THE DECISION IN THE CASE OF BHARTHESH JAIN, WHICH IS CL AIMED TO BE DIRECTLY APPLICABLE, ALSO DOES NOT HELP HIM AS THE FACTS ARE DIFFERENT. IN THAT CASE, IN RESPONSE TO SUMMONS THE CREDITORS HAD APPE ARED AND ACCEPTED THAT THE CHEQUE IN QUESTION HAD BEEN GIVEN BY THEM TO THE ASSESSEE, I.E. CONFIRMATION OF CREDITOR WAS ON RECORD. IN THE CASE OF THE APPELLANT- THERE HAS BEEN NO APPEARANCE BY THE CREDITORS OR AN Y VALID CONFIRMATIONS. THE ARGUMENTS OF THE APPELLANT ARE R EJECTED. PENALTY OF RS.3,41,232/- LEVIED U/S. 271(L)(C ) AT MINIMUM RAT E OF 100% OF TAX SOUGHT TO BE EVADED IS CONFIRMED. 8. THE LD.COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT, 114 TAXMAN 203 (GUJ). ON THE STRENGTH OF THESE DECISIO NS, IT WAS CONTENDED BY THE LD.COUNSEL FOR THE ASSESSEE THAT MERE CONFIRMAT ION OF ADDITION UNDER SECTION 68 WOULD NOT AUTHORIZE AO TO VISIT THE ASSE SSEE WITH PENALTY. HE ALSO CONTENDED THAT AO INQUIRED SOURCE OF SOURCE FOR MAK ING ADDITION. 9. I HAVE DULY CONSIDERED THIS DECISION. BUT I FIN D THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE ALLEGED LOANS GIVEN BY FIVE ENT ITIES. ACCORDING TO THE ASSESSEE, REPRESENTATIVES OF ALL THE CONCERN CAME T O INCOME-TAX DEPARTMENT IN ITA NO.2586/AHD/2013 7 THE QUANTUM PROCEEDINGS BUT AFTER EXAMINATION OF ON E, REST OF THEM RAN AWAY. IT SHOWS THAT TRANSACTION WAS NOT GENUINE. FACTS I N THE CASE OF NATIONAL TEXTILES (SUPRA) RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE ARE QUITE DISTINGUISHABLE. THEREFORE, CONSIDERING WELL REASO NED FINDING OF THE LD.CIT(A), I FIND NO REASONS TO INTERFERE IN THE OR DER OF LD. CIT(A), THE SAME IS CONFIRMED AND THE APPEAL OF THE ASSESSEE IS DISMISS ED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 12 TH JANUARY, 2017 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER