VIREN DIAMOND EXPORTS LTD, MUMBAI V. ITO 5(3)3, MUMBAI

ITA 2689/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4159 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Keywords: Peak credit; Accommodation entries
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' F ' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 2689 /MUM/201 3 (ASSESSMENT YEAR: 2007 - 0 8 ) M/ S. VIREN DIAMOND EXPORTS LTD. VS. INCOME TAX OFFICER - 5(3)(3) OFFICE NO.1A, 3 RD FLOOR 19, DR. D.D. SATHE MARG OPERA HOUSE, MUMBAI 400004 AYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN - AA ACV3408Q APPELLANT RESPONDENT APPELLANT BY: SHRI RAHUL HAKANI RESPONDENT BY: SHRI SUMIT KUMAR DATE OF HEARING: 01.02 .2016 DATE OF PRONOUNCEMENT: 05 .02 .2016 O R D E R PER JASON P. BOAZ, A.M . THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 9 , MUM BAI DATED 04 . 01 .201 3 FOR A.Y. 2007 - 08 , UPHOLDING THE LEVY OF PENALTY OF ` 12,49,040/ - UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2 . IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS CHALLENGING THE LEVY OF PENALTY OF ` 12,49,040/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT: - 1. THE LEARNED COMM ISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE LEARNED ASSESSING OFFICER FOR LEVYING THE PENALTY 100% U/S. 271(1)(C). 2. THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN TREATING THE ACCOMMODATION ENTRIES OF BANK DEPOSIT /BANK RECEIPTS TRANSACTIONS (BY CHEQUES) AMOUNTING TO RS.3710901/ - AS UNDISCLOSED INCOME FROM BUSINESS. 3. THE LEARNED COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN MAKING ADDITION AND RESULTANTLY LEVYING HEAVY PENALTY ON THE HYPOTHETICAL BASIS AND DISRE GARDING THE FACTS AND RECORDS. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN REJECTING THE BOOKS OF ACCOUNT OF YOUR APPELLANT BY INVOKING THE PROVISIONS OF SECTION 143(3) OF THE INCOME TAX ACT, 1961 THEREFORE LEVIED UNJUSTIFIED HEAVY PENALTY. ITA NO. 2689 /MUM/2013 M/S. VIREN DIAMOND EXPORTS LTD. 2 4. WITH OUT PREJUDICE TO ABOVE THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN ESTIMATING THE RATE OF PROFIT @4% OF THE TURNOVER FOR THE TRADING BUSINESS WITHOUT MAKING ANY ALLOWANCE FOR LEGITIMATE EXPENSES INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF TR ADING BUSINESS OF YOUR APPELLANT AND RESULTANTLY LEVYING HEAVY PENALTY OF THE HYPOTHETICAL BASIS AND DISREGARDING THE FACTS AND RECORDS. 5. THE APPELLANT CRAVES TO ADD, AMEND OR ALTER THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF APPEAL. 2 .1 AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE ADDITION OF ` 37,10,901/ - MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF UNEXPLAINED BANK DEPOSITS WAS THE BASIS FOR LEVY OF PENALTY OF ` 12,49,040/ - UNDER SECTION 271(1 )(C) OF THE ACT VIDE ORDER DATED 19.03.2012. IT WAS SUBMITTED THAT IN THE QUANTUM APPEAL BEFORE THE CO - ORDINATE BENCH OF ITAT, MUMBAI, IN ITS ORDER IN ITA NO. 5628/MUM/2010 AND OTHERS DATED 27.02.2013 FOR A.Y. 2005 - 06 TO 2007 - 08, THE BENCH HAS RESTORED THE ISSUE OF UNDISCLOSED DEPOSITS MADE IN THE BANK ACCOUNT OF THE ASSESSEE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT OF THE TRANSACTIONS OF DEPOSITS AND WITHDRAWALS THEREIN AND TO RESTRICT THE ADDITION TO THE EXTENT OF PEAK CREDIT SO WORKED OUT. THE LEARNED A.R. FOR THE ASSESSEE CONTENDS THAT SINCE THE ADDITION OF ` 37,10,901/ - MADE BY THE AO IN THIS REGARDING BEING SET ASIDE BY THE COORDINATE BENCH FOR DE NOVO CONSIDERATION, THE PENALTY OF ` 12,49,040/ - LEVIED IN THIS REGARD WOULD ALSO NOT NOW SURVIVE AND IS THEREFORE TO BE CANCELLED. 2.2 WE HAVE HEARD BOTH THE LEARNED A.R. FOR THE ASSESSEE AND THE LEARNED D.R. FOR REVENUE IN THE MATTER OF PENALTY OF ` 12,49,040/ - LEVIED UNDER SECTION 271(1)(C) OF THE ACT FOR A.Y. 2007 - 08. AS S UBMITTED BY THE LEARNED A.R. FOR THE ASSESSEE, WE FIND THAT IN THE QUANTUM APPEALS OF THE ASSESSEE BEFORE THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NOS. 5567 & 5568/ MUM/ 2009 AND 5628/MUM/2010 DATED 27.02.2008 THE COORDINATE BENCH HAS SET ASIDE THE ADDIT ION OF ` 37,90,091/ - , ON ACCOUNT OF DEPOSITS FOUND TO BE MADE IN THE ASSESSEES BANK ACCOUNT TREATED AS ASSESSEES UNDISCLOSED INCOME , TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT PEAK CREDIT OF TRANSACTIONS OF DEPOSITS AND WITHDRAWALS REFLECT ED THEREIN AND TO RESTRICT THE ADDITION TO THE EXTENT OF PEAK CREDIT SO WORKED OUT. IN RESPECT OF A.Y. 2007 - 08, THE FINDING OF THE COORDINATE BENCH AT PARA 12 OF ITS ORDER IS EXTRACTED HEREUNDER: - ITA NO. 2689 /MUM/2013 M/S. VIREN DIAMOND EXPORTS LTD. 3 12. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEAR 2007 - 08, GROUND NO. 1 OF WHICH INVOLVES THE SIMILAR ISSUE AS INVOLVED IN THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 RELATING TO THE ADDITION OF RS.37,10,901/ - MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT (APPEALS ) ON ACCOUNT OF DEPOSITS FOUND TO BE MADE IN THE BANK ACCOUNT OF THE ASSESSEE TREATING THE SAME AS ITS UNDISCLOSED INCOME. FOLLOWING OUR DECISION RENDERED IN ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 ON THE SIMILAR ISSUE, WE RESTORE THIS MATTER TO THE FILE OF T HE AO WITH THE SAME DIRECTIONS AS GIVEN BIN ASSESSMENT YEARS 2005 - 06 AND 2006 - 07. GROUND NO. 1 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007 - 08 IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2.3 IN VIEW OF THE AFORESAID FINDING OF THE COORDINATE BENCH (SUPRA), SINCE THE ADDITION OF ` 37,10,901/ - AS UNDISCLOSED INCOME ON ACCOUNT OF UNEXPLAINED DEPOSITS IN THE ASSESSEES BANK ACCOUNT IN THE PERIOD RELEVANT TO A.Y. 2007 - 08 HAS BEEN SET ASIDE, THE CONSEQUENTIAL LEVY OF PENALTY OF ` 12,49,040/ - UNDER SECTION 271(1)(C) OF THE ACT ON THE COUNT WOULD NOT NOW SURVIVE FOR CONSIDERATION. IN THIS VIEW OF THE MATTER, THIS APPEAL BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. 3 . IN THE RESULT, THE ASSESSEES AP PEAL FOR A.Y. 200 7 - 08 IS DISMISSED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY , 2016 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( JASON P. BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 5 TH FEBRUARY , 2016 COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) 9 , MUMBAI 4 . THE CIT 5 MUMBAI 5 . THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.