M/s. Vipul Shipyard, Surat V. The ACIT.,Circle-6, Surat

ITA 2629/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0494 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-11-2009
• Assessment Year: 1996-1997
• Appeal Filed On: 22-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: KK SHAH
• Keywords: Capital asset; Set aside; Liquidation
• Section: 271(1)(c); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING: 25.11.2009 DRAFTED ON:25.11. 2009 ITA NO.2629/AHD/2009 ASSESSMENT YEAR : 1996-97 M/S. VIPUL SHIPYARD MAGDALLA PORT, DUMAS ROAD, SURAT. VS. ACIT, CIRCLE-6, SURAT. PAN/GIR NO. : AACFV 0869N (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI K.K.SHAH RESPONDENT BY: SHRI SHELLEY JINDAL, CIT D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VI, SURAT, DATE D 13.08.2009 IN APPEAL NO.CAS-IV/209/2008-09. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE ASSESSEE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) GROSSLY ERRED N CONFIRMING LEVY OF PENALTY OF RS.1,58,904/- UNDER SECTION 271(1)(C) OF THE AC T. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, IT HAS COME TO THE NOTICE OF THE LEARNED ASSESSING OFF ICER THAT SEVERAL CASH CREDIT WERE REFLECTED IN THE ASSESSEES BOOKS OF ACCOUNT. THESE DEPOSITORS (PARTIES) WERE IN 13 NUMBERS. ON CROSS EXAMINATION, CONFIRMATION L ETTERS, CONTRA- ACCOUNTS, BANK PASS BOOKS, IT HAS BEEN FOUND THAT OUT OF 13 DEPOSI TORS, THE FOLLOWING 4 (FOUR) DEPOSITORS HAD DEPOSITED CASH/CHEQUES IN THEIR ACC OUNT EITHER A DAYS ADVANCE OR ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 2 - ON THE SAME DAY ON WHICH THE CHEQUES WERE ISSUED TO THE ASSESSEE BY THE CREDITORS AND THE TRANSACTIONS HAD BEEN TREATED AS BOGUS:- SR.NO. NAME OF THE DEPOSITORS AMOUNT DEPOSITED 1. SHRI SHRENIK SHAH RS.75,000/- 2. SHRI JAYANTILAL T. MEHTA RS. 1,00,000/- 3. SHRI KALPESH A. BHATIA RS.1,00,000/- 4. SHRI HARSHAD P. SHAH RS. 1,00,000/- TOTAL RS.3,75,000/- FOR REMAINING UNPAID DEPOSITS, INTEREST THEREON, I NCAPABILITY OF ADVANCING MONEY AND NON-REFLECTION OF ENTRY IN THE BANK ACCOUNT, TH E LEARNED ASSESSING OFFICER MADE THE ADDITION FOR THE AMOUNT OF SUCH DEPOSITS B EING FAILURE OF THE GENUINENESS OF THE CREDITWORTHINESS OF THE CASH CREDITS AMOUNTI NG TO RS.3,75,000/- BY THE APPELLANT AND INITIATED PENAL PROCEEDINGS UNDER SEC TION 271(1)(C) OF THE INCOME TAX ACT, FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME ON THE SAME. 4. IN APPEAL, BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE S UBMITTED THAT CASH CREDITS WERE RECEIVED BY A/C. PAYEE CHEQUES AND INTEREST TH EREON WAS ALSO PAID. THE APPELLANT FURTHER SUBMITTED THAT THE DEPOSITORS HAD PERSONALLY ATTENDED AND ACCEPTED THE DEPOSITS. HOWEVER, TO AVOID LITIGATIO N AND TO BUY PEACE OF MIND, THEY AGREED TO THE ADDITION ON ABOVE SAID DEPOSITS. SINCE, THE PENALTY WAS INITIATED, THE ADDITION WERE DISPUTED BEFORE THE CI T(A) WHO HAD DELETED THE SAME. ON REVENUES APPEAL, THE HON'BLE ITAT REVERSED THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND CONFIRMED T HE ADDITIONS. HOWEVER, APPELLANT FURTHER SUBMITTED THAT THE ADDITIONS ARE HIGHLY DISPUTED AND SINCE GENUINENESS OF TRANSACTIONS WERE PROVED, THE ADDITI ON WAS MADE MERELY BECAUSE OF THE SURRENDER OF CASH CREDITS AND SUCH ADDITIONS DOES NOT TANTAMOUNT TO CONCEALMENT OF INCOME. THE APPELLANTS AR HAS CITED SEVERAL JUDICIAL PRONOUNCEMENTS WHERE THE PENALTY HAS BEEN DELETED O N SUCH CIRCUMSTANCES. ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 3 - 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVED AS UNDER: I HAVE CONSIDERED THE CONTENTS OF THE PENALTY ORDE R AND ALSO THE SUBMISSION OF THE A.R. OF THE APPELLANT. THE CRUX O F THE MATTER IS THE APPELLANT ITSELF HAD AGREED TO ADDITION AND ACCORDI NGLY HAD TO SURRENDER THE SAME. ALTHOUGH CIT(A) HAD DELETED THE ADDITION THE HON'BLE ITAT REVERSED THE APPELLANT FINDING OF THE FIRST APPELLA TE AUTHORITY AND CONFIRMED THE LEARNED ASSESSING OFFICERS ACTION. IT GOES WIT HOUT SAYING THAT ITAT BEING THE HIGHEST FACT FINDING AUTHORITY HAD ENDORS ED THE CONCLUSION OF THE LEARNED ASSESSING OFFICER AND HENCE AT LEAST THE CH ARGE OF FURNISHING OF INACCURATE PARTICULARS IS ESTABLISHED. 6. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED AS UNDER : THE APPELLANT STRONGLY URGES THAT FOLLOWING FACTS A RE QUITE IMPORTANT FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A) THE APPELLANT HAD RECEIVED THE DEPOSITS BY ACCOUNT PAYEE CHEQUES AND THE SAME WAS ALSO PAID BY ACCOUNT PAYEE CHEQUES. B) THE APPELLANT USED TO PAY INTEREST ON SUCH DEPOSITS (THIS IS IMPORTANT BECAUSE, MANY A TIMES, NO INTEREST IS PAID IF IT IS AN ACCOMMODATION ENTRY). C) THE DEPOSITORS WERE CALLED AND STATEMENTS WERE RECO RDED UNDER SECTION 131 OF THE ACT AND THEY HAD ACCEPTED HAVING MADE DE POSITS WITH THE FIRM. D) THE ADDITION ITSELF WERE HIGHLY DISPUTED BECAUSE TH E SAME WERE DELETED BY THE LEARNED CIT(A) AND WAS REVERSED BY THE ITAT, AHEMDABAD. E) THE ADDITIONS WAS SUSTAINED BECAUSE THERE WERE TWO OPINIONS ABOUT THE CREDITWORTHINESS. F) DESPITE THE VERIFICATION OF THE DEPOSITORS, IT WAS NO ESTABLISHED THAT THERE WAS OPENING/OPERATION OF BANK ACCOUNT BY THE APPELLANT. IT WAS NOT ESTABLISHED THAT THE APPELLANTS MONIES WERE DE POSITED IN THE BANK ACCOUNT OF THE DEPOSITORS AND THE CHEQUE WAS ISSUED . ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 4 - 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, ON ASSESSMENT A SUM OF RS.3,75,000/- WAS ADDED TO THE RETURN INCOME OF THE ASSESSEE BY THE LEARNED ASSESSING OFFICER AS THE ASSESSEES CLAIM OF RECEIVING OF LOAN OF RS.3,75,000/- FROM SHRI SHRENIK SHAH RS.75,000/-, S HRI JAYANTILAL T. MEHTA RS. 1,00,000/-, SHRI KALPESH A. BHATIA RS.1,00,000/-, SHRI HARSHAD P. SHAH RS. 1,00,000/- WERE NOT ACCEPTED AS GENUINE. ON APPEAL, LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ENTIRE ADDITION OF RS.3,75,000/- WHICH WAS REVERSED ON A FURTHER APPEAL BY THE TRIBUNAL. THE L EARNED ASSESSING OFFICER IN THE IMPUGNED ORDER HELD THAT THE ASSESSEE WAS GUILTY O F CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE OF PARTICULARS OF INCOME I N RESPECT OF AFORESAID AMOUNT OF RS.3,75,000/- AND THEREFORE, LEVIED PENALTY UNDER SECTION 271(1)(C) OF RS.1,58,904/-. ON APPEAL , LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT TRIBUNAL BEING FINAL FACT FINDING AUTHORITY AN D AS THE TRIBUNAL HAS DECIDED THE CASE AGAINST THE ASSESSEE IN THE QUANTUM APPEAL AND THEREFORE, THE LEARNED ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING PENALTY UNDER SECTION 271 (1)(C) OF THE ACT. WE FIND THAT ASSESSMENT PROCEED INGS ARE DISTINCT AND DIFFERENT FROM PENALTY PROCEEDINGS AND DIFFERENT CONSIDERATIO N APPLIES. AN ADDITION IN THE ASSESSMENT PROCEEDINGS MAY BE MADE ON ACCOUNT OF AS SESSEES INABILITY TO SUBSTANTIATE ITS RETURN OF INCOME. UNPROVED AND DIS PROVED ARE TWO DISTINCT AND DIFFERENT SITUATIONS. FOR LEVYING OF PENALTY, THE R EVENUE MUST LEAD SOME MATERIAL TO SHOW THAT ASSESSEE HAS IN FACT CONCEALED ITS INC OME OR FURNISHED ANY INACCURATE PARTICULARS OF INCOME AND IT IS NOT SUFFICIENT ONLY TO SHOW THAT THE ASSESSEE WAS UNABLE TO SUBSTANTIATE IT CLAIM WITHOUT FINDING THA T THE CLAIM WAS BOGUS. COMING TO THE FACTS IN THE INSTANT CASE, WE FIND THAT THE TRIBUNAL CONFIRMED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BY OBSERVING AS UNDER:- ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 5 - IN THIS CASE, THE ADVANCES HAVE NOT BEEN STATED TO BE OUT OF LIQUIDATION OF NAY CAPITAL ASSET BY THE DEPOSITORS, AND THEY HAVE BEEN CLEARLY UNABLE TO SUPPORT OF THEIR CONTENTION OF THE SAME BEING SOURC ED OUT OF PREVIOUS LOANS. THEIR INCOME LEVEL, GOING BY THEIR OWN VERSION, AND CONSEQUENTLY THE DISPOSAL INCOME, DOES NOT JUSTIFY THE CREDITWORTHIN ESS TO BE ABLE TO ADVANCE THE SAID LOANS. NONE OF THEM HAS BEEN ABLE TO SUBST ANTIATE THE ACCUMULATION OF SAVINGS OVER A PERIOD OF TIME EVEN AS THEY HAD B AN ACCOUNTS FOR THE LAST SEVERAL YEARS, AND WHICH WOULD BE AMONG THE PREFERA BLE, AND AN ENABLING, AVENUE FOR SAVINGS, AS APART FROM SAFE-KEEPING, IT ALSO YIELDS INCOME(INTEREST). IN FACT ALL HAVE FAMILY RESPONSIB ILITY, SO THAT THE ACTUAL EFFECT OF THE SAVINGS, ITSELF IS DOUBTFUL. IN FACT, THE ASSESSEES ADMISSION OF THE SAID CREDITS, AND CONSEQUENTLY, THE INTEREST ALLOWE D THEREON, AS BEING ITS INCOME, AND WHICH IS NOT STATED TO BE OUT OF ANY CO ERCION OR INFLUENCE EXERCISED BY THE REVENUE, AND FURTHER, EFFECTIVELY SEALS THE ASSESSEES CASE AGAINST IT. THUS, IT IS OBSERVED THAT ADDITION UNDER SECTION 68 WAS MADE IN THE INSTANT CASE BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO S ATISFY AUTHORITIES IN RESPECT OF CREDITWORTHINESS OF THE LOAN CREDITORS AND NOT BECA USE ANY MATERIAL WAS FOUND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS TO SHOW THAT THE CASH CREDIT CLAIMED BY THE ASSESSEE WAS BOGUS. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE ASSESSEE HAS ADMITTED AT A NY POINT OF TIME THAT THE AMOUNT OF CASH CREDIT IN QUESTION WAS HIS CONCEALED INCOME. TO SURRENDER AN AMOUNT AND TO AGREE TO PAY TAX ON AN AMOUNT TO BUY PIECE OF MIND IN ITSELF WILL NOT ENTITLE THE REVENUE TO LEVY PENALTY UNDER SECTI ON 271(1)(C) IN RESPECT OF THE SAME. THE ABOVE PROPOSITION IS WELL SETTLED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SIR SHANDILAL SUGAR & GENERAL MILLS LTD. VS. CIT (168 ITR 705) (SC). IN THE INSTANT CASE, WE FIND TH AT THE ASSESSEE HAS EXPLAINED THAT THE LOANS WERE TAKEN BY ACCOUNT PAYEE CHEQUES AND PRINCIPLE AMOUNT OF LOAN WERE ALSO REPAID BY ACCOUNT PAYEE CHEQUES AND FURTH ER THE LOANS CREDITORS ALSO APPEARED BEFORE THE LEARNED ASSESSING OFFICER AND I N THEIR STATEMENTS BEFORE THE LEARNED ASSESSING OFFICER, THEY ADMITTED THE FACT O F ADVANCING OF LOAN BY THEM TO THE ASSESSEE. WE FIND THAT NO DEFECT IN THE ABOVE E XPLANATION OF THE ASSESSEE COULD BE POINTED OUT BY THE REVENUE. THE REVENUE HAS BROU GHT NO MATERIAL TO SHOW THAT ANY CASH WAS GIVEN BY THE ASSESSEE TO THE LOAN CRED ITORS IN LIEU OF CHEQUES ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 6 - RECEIVED BY THE ASSESSEE. IN THE ABOVE CIRCUMSTANCE S, IN OUR CONSIDERED VIEW, NO PENALTY UNDER SECTION 271(1)(C) IS EXIGIBLE IN THE INSTANT CASE IN RESPECT OF ADDITION MADE FOR CASH CREDIT. FURTHER, IT IS ALSO OBSERVED THAT THE PENALTY ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS UNSUSTAI NABLE ON ONE MORE COUNT. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER HAS NOT GIVEN A CLEAR FINDING AS TO WHETHER THE ASSESSEE WAS GUILTY OF CONCEALMENT OF I NCOME OR HE WAS GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE LE ARNED ASSESSING OFFICER IN THE CONCLUDING PARAGRAPH OF THE IMPUGNED ORDER HAS HELD AS UNDER:- IT CAN ONLY LEAD TO THE CONCLUSION THAT THE ASSESS EE HAS DELIBERATELY CONCEALED THE PARTICULARS OF ITS INCOME AND HAS FUR NISHED INACCURATE PARTICULARS THEREOF, WITH A VIEW TO EVADE TAXES WIT HIN THE MEANING OF PROVISIONS OF SECTION 271(1)(C) OF THE I. T. ACT, 1 961. 9. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF N EW SORATHIA ENGINEERING CO. VS. COMMISSIONER OF INCOME TAX (2006) 282 ITR 6 42 (GUJ) HAS HELD AS UNDER: 11. IN THE CASE OF CIT VS. MANU ENGINEERING WORKS ( SUPRA) THIS IS WHAT IS LAID DOWN BY THIS COURT AT PAGE NO. 310 OF THE REPORTS : '.. WE FIND FROM THE ORDER OF THE IAC, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA 4 OF THE ORDER : 'I AM OF THE OPI NION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND /OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. NOW, THE LA NGUAGE OF 'AND/OR' MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER O R FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULA RS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT F INDING WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN.' THE PENALTY ORDER AND TH E ORDER OF CIT(A) SHOW THAT NO CLEAR-CUT FINDING HAS BEEN REACHED. THE TRI BUNAL HAS FAILED TO APPRECIATE THIS LEGAL ISSUE. APPLYING THE RATIO TO THE FACTS OF THE CASE IT IS APPARENT THAT THE ORDER OF PENALTY CANNOT BE SUSTAI NED AND THE TRIBUNAL COULD NOT HAVE SUSTAINED THE SAME. THE TRIBUNAL HAV ING FAILED TO TAKE INTO CONSIDERATION AND DEAL WITH THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IT WOULD CONSTITUTE AN ERROR IN LAW WHICH GOES TO THE VERY BASIS OF THE CONTROVERSY INVOLVED AND HENCE, THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE UPHELD. ITA NO .2629/AHD/2009 M/S.VIPUL SHIPYARD ASST.YEAR -1996-97 - 7 - 10. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE PENALTY OF RS.1,58,904/- LEVIED UNDER SECTION 271(1 )(C) OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED AT THE CLOSE OF THE HEARING IN THE PRESENCE OF THE PARTIES IN THE COURT ON 25/11/2009. SD/- SD/- ( T.K. SHARMA ) ( N.S. SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD; DATED 25/11/2009 PREPARED AND COMPARED BY : PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD