Suresh P Bokadia, Mumbai V. Deputy Commissioner of Income-tax,

ITA 2601/PUN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2056 (ITAT-PUNE)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDER
• Keywords: Business income; Principle of natural justice; Reasonable cause; Deemed dividend; Revised return
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO S . 2601 & 2602 /P U N/201 6 / ASSESSMENT YEAR S : 20 07 - 08 & 2013 - 14 SURESH P BOKADIA, 2A, HAJI ALLARAKHA RAHIMTULLA, GROUND FLOOR, 9 TH KHETWADI LANE, MUMBAI 400004 . / APPELLANT PAN: A HHPB6115D VS. THE DY. COM MISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), PUNE . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : S HRI ABHIJIT HALDER / DATE OF HEARING : 18 . 1 0 .201 8 / DATE OF PRONOUNCEMENT: 16 . 11 .201 8 / ORDER PER SUSHMA CHOWLA, J M : BOTH T HE APPEAL S FILED BY ASSESSEE ARE AGAINST SEPARATE ORDER S OF CIT (A) , PUNE - 11 , DATED 08 .0 8 .2016 & 31.08.2016 RELATING TO DIFFERENT ASSESSMENT YEAR S 20 07 - 08 AND 2013 - 14 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) AND AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE ACT. ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 2 2. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FIRST, WE SHALL TAKE UP THE APPEAL OF ASSESSEE RELATING TO ASSESSMENT YEAR 2007 - 08. 3. THE ASSESSEE IN ITA NO.2601/PUN/2016, RELATING TO ASSESSMENT YEAR 2007 - 08 HAS RAISED THE FOLLOWING GROUND OF APPEA L: - (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, ON THE GROUND THAT APPELLANT HAS DECLARED THE IMPUGNED INCOME (EARNED ON ESTIMATION BASIS) IN REVISED RETURN ONLY AFTER DETECTION OF THE CONCEALMENT BY THE REVENUE. 4 . DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. IN VIEW OF THE ISSUE RAISED, WE PROCEED TO DECIDE THE APPEAL AFTER HEARING THE LEARNED DE PARTMENTAL REPRESENTATIVE FOR THE REVENUE. 5. THE ISSUE RAISED IN ASSESSMENT YEAR 2007 - 08 IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT HAD NOTED THA T THE ASSESSEE HAD OFFERED ADDITIONAL INCOME OF 32,30,790/ - ON ACCOUNT OF GP RATE OF 2.5%. THE ASSESSING OFFICER HELD THE ASSESSEE TO HAVE OFFERED THIS INCOME IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT AND THEN WENT ON TO HOLD THAT THE ASSESSEE HAD CONCEAL ED PARTICULAR OF INCOME AND INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. FURTHER, THE ASSESSING OFFICER WHILE LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT, HELD THE ASSESSEE TO HAVE CONCEALED THE INCOME OF 32,30,790/ - WITHOUT HAVING ANY REASONABLE CAUSE ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 3 AND LEVIED PENALTY OF 10,87,484/ - . IN OTHER WORDS, SATISFACTION RECORDED BY ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS WAS THAT THE ASSESSEE HAD CO NCEALED PARTICULARS OF INCOME, BUT WHILE LEVYING PENALTY THE ASSES SEE WAS HELD TO HAVE CONCEALED THE INCOME. IN OTHER WORDS, PENALTY PROCEEDINGS WERE INITIATED ON ONE LIMB OF SECTION 271(1)(C) OF THE ACT AND LEVIED PENALTY ON THE OTHER LIMB OF SAID SECTION. 7. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUA RELY COVERED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 WITH OTHER INCOME TAX APPEALS NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, JUDGMENT DATED 05.01.2017. THE HONBLE HIGH COURT HELD THAT WHERE THERE IS NO PROPER SATISFACTION FOR LEVY OF PENALTY AND IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY. 8. IN THE FACTS OF PRESENT CASE, WHERE THE ASSESSING OFFICER HAS RECORD ED SATIS FACTION FOR INITIATING PENALTY PROCEEDINGS AND SHOW CAUSE THE ASSESSEE ON ONE LIMB AND THEREAFTER, LEVIED PENALTY ON THE OTHER LIMB, THEN THE ORD ER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT SUFFERS FROM INFIRMITY AND THE SAME IS BOTH INVALID AND B AD IN LAW. HENCE, WE DELETE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THE GROUND OF APPEAL RAISED BY ASSESSEE IS THUS, ALLOWED. ITA NO.2602/PUN/2016, RELATING TO ASSESSMENT YEAR 2013 - 14 9. NOW, COMING TO THE APPEAL OF ASSESSEE IN ITA NO.2602/P UN/2016, RELATING TO ASSESSMENT YEAR 2013 - 14, WHEREIN THE ISSUE RAISED IS AGAINST ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT AT 73,23,442/ - . THE ASSESSEE ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 4 IS AGGRIEVED BY THE SAID ORDERS OF AUTHORITIES BELOW AND HAS RAISED MULTIPLE ISSUES VIDE GROUND OF APPEAL NO.2, WHICH READS AS UNDER: - (2) ON THE FACTS AND IN LAW AND WITHOUT PREJUDICE TO GROUND NO.1, THE LD. CIT(A) ERRED IN CO NFIRMING ADDITION OF RS.73,23,442/ - MADE U/S 2(22)(E) OF THE ACT: A ) WITHOUT REDUCING THE TAX OUTGO ON CURRENT YEARS PROFIT ACCUMULATED UPTO THE DATE OF GIVING LOANS AND ADVANCES; B ) BY NOT RESTRICTING THE ADDITION TO THE EXTENT OF SHAREHOLDING OF APPELLANT I .E. 71.44% C ) WITHOUT REDUCING THE OPENING BALANCE OF LOANS, FROM ACCUMULATED PROFITS AT THE BEGINNING OF THE YEAR; D ) EVEN THOUGH ADVANCES WERE GIVEN BY THE COMPANY IN THE ORDINARY COURSE OF ITS FINANCE ACTIVITIES; E ) WITHOUT RESTRICTING THE ADDITION TO THE E XTENT OF MAXIMUM DEBIT BALANCE OF RS.27,90,000/ - . 10. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE WAS SHAREHOLDER OF M/S. STEEL AIDS ENTERPRISES PVT. LTD. HOLDING 71.44% SHARE. THE ASSESSEE WAS ALSO DIRECTOR OF THE SAID COMPANY. THE SAID COM PANY WAS FORMED WITH AN OBJECT TO TAKE OVER THE EXISTING BUSINESS OF PROPRIETARY CONCERN OF ASSESSEE. ALL THE ASSETS AND LIABILITIES OF SAID PROPRIETARY CONCERN WERE TAKEN OVER BY THE ASSESSEE COMPANY. THE ASSESSEE CLAIMED THAT OUT OF TOTAL BUSINESS ASSE TS OF 25.92 CRORES, ASSETS OF FINANCING BUSINESS WERE TO THE TUNE OF 10.36 CRORES REPRESENTING 40% OF TOTAL BUSINESS ASSETS , EVEN INCOME FROM FINANCING BUSINESS WAS 53.71 CRORES REPRESENTING 22% OF TOTAL GROSS INCOME OF ASSESSEE. HENCE, IT IS THE PL EA OF ASSESSEE THAT FINANCING ACTIVITY WAS SUBSTANTIAL PART OF BUSINESS INCOME AND THE ADVANCES WERE GIVEN TO THE PROPRIETARY CONCERN OF THE DIRECTOR IN THE ORDINARY COURSE OF SAID BUSINESS. ANOTHER POINT WHICH WAS RAISED BY ASSESSEE WAS THAT THE DEBIT BA LANCE OF PROPRIETARY CONCERN IN THE BOOKS OF ACCOUNT OF THE COMPANY COULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AS THE AMOUNTS WITHDRAWN WERE IN THE NATURE OF CURRENT ACCOUNT, WHERE THERE WERE VARIOUS ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 5 DEBITS AS WELL AS CREDITS THROUGHOUT THE YEAR. AGAINST TOTAL OUTGO OF 1.28 CRORES, THERE WAS ALSO INFLOW OF 1.06 CRORES AND HENCE, THE MAXIMUM DEBIT BALANCE AT ANY POINT OF TIME I.E. ON 16.07.2012 WAS 27,90,000/ - WHICH COULD AT BEST BE TREATED AS EXCESS WITHDRAWAL. 11. T HE NEXT ISSUE WHICH HAS BEEN RAISED IS THAT ACCUMULATIVE PROFIT NEEDS TO BE CONSIDERED. THE LAST AND FINAL PLEA WHICH WAS RAISED THAT WHERE THE ADVANCES WERE GIVEN IN THE ORDINARY COURSE OF FINANCING BUSINESS, THEN NO ADDITION COULD BE MADE UNDER SECTION 2(22)(E) OF THE ACT. IN THE ALTERNATE AND STRICTLY WITHOUT PREJUDICE, IT WAS POINTED OUT THAT AT BEST THE ADDITION IS TO BE RESTRICTED TO LOWER OF MAXIMUM DEBIT BALANCE OF 27,90,000/ - OR THE ACCUMULATIVE PROFITS AS ON THE DATE OF MAXIMUM DEBIT BALANCE OF 58,88,406/ - . THE ASSESSING OFFICER HOWEVER, DID NOT ACCEPT THE PLEA OF ASSESSEE AND MADE ADDITION OF 73,23,442/ - UNDER SECTION 2(22)(E) OF THE ACT HOLDING THAT MONEY LENDING BUSINESS OF ASSESSEE COMPANY WAS ONLY 1.55% OF TOTAL TURNOVER OF THE COMPANY. IT MAY ALSO BE NOTED THAT THE ASSESSING OFFICER HAS COMPUTED THE DEEMED DIVIDEND ON DAY - TO - DAY BASIS AS TABULATED AT PAGES 3 AND 4 OF ASSESSMENT ORDER AND CUMULATIVELY W ORKED OUT THE SAME AT 73,23,442/ - . 12. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WHO UPHELD THE VIEW OF ASSESSING OFFICER THAT ADVANCES MADE BY THE COMPANY TO THE ASSESSEE WERE IN THE NATURE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THE PLEA OF ASSESSEE THA T IT HAD RUNNING ACCOUNT WITH THE COMPANY AND THE PEAK DEBIT BALANCE WAS ONLY OF 27,90,000/ - AS ON 16.07.2012 WAS NOT ACCEPTED. THE CIT(A) NOTED THAT IT IS SEEN THAT THE APPELLANT HAD A DEBIT BALANCE OF 2,64,08,326/ - AT THE BEGINNING OF THE YEAR. DU RING THE YEAR THE COMPANY FURTHER ADVANCED 1,28,20,000/ - ON VARIOUS DATES TO THE APPELLANT. THE ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 6 APPELLANT RETURNED 1,06,15,000/ - ON DIFFERENT DATES. AT THE END OF THE YEAR THE NET DEBIT BALANCE INCREASED TO 2,86,13,326/ - . THE CONCLUSION OF CIT(A) WAS THAT THE ASSESSEES ACCOUNT DID NOT HAVE ANY CREDIT BALANCE AT ANY POINT OF TIME, IN CASE OPENING DEBIT BALANCE IS TAKEN INTO CONSIDERATION. THE ADDITION MADE BY ASSESSING OFFICER WAS UPHELD. THE PLEA OF ASSESSEE IN THIS REGARD WAS BY WAY OF WRITTEN SUBMISSIONS BEFORE THE CIT(A) WHICH ARE REPRODUCED AT PAGES 3 AND 4 OF APPELLATE ORDER AND THE MAIN CONTENTION OF ASSESSEE WAS THAT OPENING DEBIT BALANCE OF 2.64 CRORES WAS IN RESPECT OF BALANCE IN CURRENT ACCOUNT OF PURCHASE AND SALES OF EARLIER YEARS B ROUGHT FORWARD. THE SAID PLEA WAS NOT ACCEPTED. 13. THE ASSESSEE IS IN APPEAL BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST AND FOREMOST ISSUE WHICH ARISES BEFORE US IS IN RESPECT OF ADDITION MADE UNDER SECTION 2( 22)(E) OF THE ACT. THE CASE OF ASSESSEE IS THAT IN CASE THE OUTGO AND INFLOW FOR THE YEAR UNDER CONSIDERATION IS CONCERNED, THEN THERE IS ONLY DEBIT BALANCE OF 27,90,000/ - ON 16.07.2012. HOWEVER, THE CASE OF REVENUE IS THAT IT HAD OPENING DEBIT BALANCE AT THE BEGINNING OF THE YEAR, HENCE DURING THE YEAR AT NO POINT OF TIME THERE WAS ANY CREDIT BALANCE. THE ASSESSEE ON THE OTHER HAND, HAD PLEADED BEFORE THE AUTHORITIES BELOW THAT THE OPENING DEBIT BALANCE OF 2.64 CRORES WAS IN RESPECT OF BALANCE IN CU RRENT ACCOUNT OF PURCHASE AND SALES OF EARLIER YEARS BROUGHT FORWARD. THIS PARTICULAR ASPECT HAS NOT BEEN VERIFIED BY THE AUTHORITIES BELOW. ANOTHER PLEA WHICH HAS BEEN RAISED IS THAT THE ADDITION AT BEST IS TO BE RESTRICTED TO THE EXTENT OF SHAREHOLDING OF ASSESSEE I.E. 71.44%. ANOTHER PLEA WHICH HAS BEEN RAISED IS THAT THE ADVANCES WERE GIVEN BY THE COMPANY IN THE ORDINARY COURSE OF ITS FINANCE ACTIVITY. THE ASSESSEE HAS RAISED VARIOUS FACETS OF THIS ISSUE VIDE GROUND OF APPEAL NO.2. IN ITA NO S . 2601 & 2602 /P U N/20 1 6 SURESH P BOKADIA 7 FAIRNESS AND FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THIS PARTICULAR ASPECT RAISED BY WAY OF GROUND OF APPEAL NO.2 NEEDS VERIFICATION AT THE END OF ASSESSING OFFICER. ACCORDINGLY, WE REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER T O DECIDE THE SAME AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO APPEAR BEFORE THE ASSESSING OFFICER AND FURNISH COMPLETE INFORMATION. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED FOR STAT ISTICAL PURPOSES. 15 . IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS 16 TH DAY OF NOVEMB ER , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CH OWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH NOVEM BER , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , PUNE - 11 ; 4. THE CIT (C) , PUNE ; 5. 6. , , / DR B , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE