Sri.A.Younus Kunju, Kollam V. DCIT, Kollam

ITA 281/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69082 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 26-11-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 09-05-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: N S RAJAGOPAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 281/COCH/2013 ASSESSMENT YEAR : 2001-02 SHRI A.YOUNUS KUNJU, YOUNUS CASHEW INDUSTRIES, VADAKKEVILA, KOLLAM. [PAN: AERPK 1800K] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI N.S. RAJAGOPAL, CA REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 26/11/2013 DATE OF PRONOUNCEMENT 06/12/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28-02-2013 PASSED BY THE LD. CIT(A), TRIVANDRUM AND IT RELATES TO THE ASSESSMENT YEAR 2001-02. 2. THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT, HA VING BEEN PARTIALLY CONFIRMED BY THE LD. CIT(A), THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER PASSED BY THE LD. CIT(A). 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS A CASHEW EXPORTER. HE HAS FILED HIS RETURN OF INCOME FOR TH E YEAR UNDER CONSIDERATION DECLARING A LOSS OF RS. 50.82 LAKHS. THE ASSESSMENT WAS COMPLE TED BY DETERMINING THE LOSS AT RS.15.17 LAKHS, BY MAKING THE FOLLOWING ADDITIONS: (A) DISALLOWANCE OF INTEREST ON ACCOUNT OF DIVERSI ON OF FUNDS RS.20,47,500. I.T.A. NO. 281 /COCH/2013 2 (B) DISALLOWANCE TOWARDS INFLATION OF EXPENSES OU T OF WAGES -RS. 10.00 LAKHS. (C) ADDITION OF BANK INTEREST RECEIPTS RS. 1,63, 962/-. THE ASSESSING OFFICER PASSED THE PENALTY ORDER ON 0 4-03-2011 BY LEVYING A MINIMUM PENALTY OF RS.10,96,804/- U/S 271(1)(C) OF THE ACT ON ALL THE THREE ADDITIONS STATED ABOVE. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) DEL ETED THE PENALTY LEVIED ON BANK INTEREST REFERRED ABOVE AND CONFIRMED THE PENALTY L EVIED ON THE REMAINING TWO ITEMS. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE FOLLOWING EXPLA NATION IN RESPECT OF THE TWO ADDITIONS NOW UNDER CONSIDERATION: 1. DISALLOWANCE OF INTEREST ON ACCOUNT OF DIVERSION OF FUNDS RS. 20,47,500/- THERE IS NO CONCEALMENT ON THIS ACCOUNT. THE GENUI NENESS OF THE EXPENDITURE IS NOT IN DOUBT. THE DISALLOWANCE IS M ADE ON THE PRESUMPTION THAT INTEREST BEARING FUNDS MIGHT HAVE BEEN DIVERTE D FOR NON-BUSINESS PURPOSES. I HAD SUFFICIENT NON-INTEREST BEARING FU NDS FOR THE ALLEGED DIVERSION. THE DISALLOWANCE IS PURELY ARBITRARY AN D BASED ON SURMISES. I HAVE DISCLOSED ALL THE FACTS AND THERE IN NO FURNIS HING OF INACCURATE PARTICULARS AND HENCE THERE IS NO OFFENCE WARRANTING IMPOSITION OF CONCEALMENT PENALTY IN RESPECT OF THIS ITEM. 2. LUMP SUM DISALLOWANCE OUT OF EXPENSES RS. 10,00, 000/- AS STATED IN THE ASSESSMENT ORDER, THIS IS ONLY A L UMP SUM DISALLOWANCE OUT OF EXPENSES AND NOT ATTRIBUTABLE TO ANY CONCEALMENT . THE DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF CERTAIN CORRECTIONS SEEN IN THE BOOKS OF ACCOUNTS. I HAVE INCURRED HUGE LOSS IN THE CASHEW BUSINESS AND HENCE THERE IS NO MOTIVE FOR INFLATING THE EXPENSES. EVEN AFTER MAKING VARIO US ADDITIONS AND DISALLOWANCES IN THE ASSESSMENT ORDER, I HAVE BEEN ASSESSED AT A NET LOSS OF RS. 15,17,226/-. THERE IS NO ALLEGATION THAT I HAV E MADE THE CORRECTIONS WITH A MALAFIDE INTENTION TO REDUCE THE TAXABLE INCOME. THE CORRECTIONS WERE MADE IN THE NORMAL COURSE OF BUSINESS. THE A.O. HA S NOT STATED WHICH EXPENSES ARE INFLATED. IN THE ASSESSMENT ORDER IT IS STATED THAT THE CORRECTIONS IS IN THE RECEIPT SIDE OF THE CASH BOOK . THE DISALLOWANCE IS PURELY ARBITRARY, VAGUE, ESTIMATED AND MADE ON SHAK Y GROUNDS. THERE IS NO OFFENCE WARRANTING IMPOSITION OF CONCEALMENT PENALT Y IN RESPECT OF THIS ESTIMATED LUMP SUM DISALLOWANCE. I.T.A. NO. 281 /COCH/2013 3 6. BEFORE US, THE LD A.R ALSO PLACED RELIANCE O N THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT LTD (2010)(322 ITR 158)(SC) AND REITERATED THAT THE ASSESSEE DID NOT CONCEAL AN Y PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. ON THE CONTRARY, THE LD D.R STRONGLY PLACED RELIANCE ON THE ORDER PASSED BY LD CIT. 7. THE FIRST ITEM DISALLOWED BY THE AO RELATES TO THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. THE CASE OF THE AO IS THAT THE ASSES SEE HAS DIVERTED INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES AND ACCORDINGLY HE MADE IMPUGNED DISALLOWANCE OUT OF THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE . THE GENUINENESS OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE HAS NOT BEEN DO UBTED BY THE AO. THE IMPUGNED DISALLOWANCE HAS BEEN MADE BY REJECTING THE EXPLANA TION OF THE ASSESSEE THAT HE HAD SUFFICIENT INTEREST FREE FUNDS, WHICH WERE UTILISED TO GIVE LOANS TO SISTER CONCERNS. HENCE, THERE IS MERIT IN THE CONTENTIONS OF THE ASS ESSEE THAT THERE IS NO CONCEALMENT OF PARTICULARS OF INCOME IN RESPECT OF THIS DISALLOWAN CE, I.E., THE ASSESSEE HAS DULY CLAIMED THE INTEREST EXPENDITURE ON THE LOANS OBTAINED BY I T. HENCE, IN OUR VIEW, THE IMPUGNED DISALLOWANCE WILL NOT FALL EITHER IN THE CATEGORY O F CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT LTD (SUPRA), SHALL, IN OUR VIEW, SQUARELY APPLY TO THE FACTS OF THIS ADDITION. 8. THE NEXT ITEM OF ADDITION RELATES TO THE LU MP SUM DISALLOWANCE OF RS.10.00 LAKHS MADE OUT OF EXPENDITURE CLAIMED UNDER THE HEAD WAG ES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED CERTAIN CORR ECTIONS IN THE WAGES ACCOUNT, BY WHICH EXPENDITURE WAS FOUND INCREASED BY RS.1.00 LA KH ON EACH OCCASION. TO A SPECIFIC QUERY RAISED BY THE AO ON THIS POINT, THE ASSESSEE SUBMITTED THAT THE CORRECTIONS WERE MADE BY HIM TO RECTIFY THE ERRORS. HOWEVER, DISBEL IEVING THE SAID EXPLANATION, THE AO MADE A LUMP SUM DISALLOWANCE OF RS.10.00 LAKHS FROM OUT OF WAGES CLAIM. THE EXPLANATION OF THE ASSESSEE IS THAT THERE WAS NO NE CESSITY FOR HIM TO INFLATE THE EXPENSES, SINCE HE WAS ALREADY INCURRING LOSSES IN THE BUSINESS. WE ALSO NOTICE THAT I.T.A. NO. 281 /COCH/2013 4 THE ASSESSEE HAD DECLARED A LOSS OF RS.50.82 LAKHS FROM BUSINESS AND HENCE, IN THE NORMAL CIRCUMSTANCES, THERE WAS NO INCENTIVE FOR TH E ASSESSEE IN INFLATING THE EXPENSES. ON A PERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THA T THE ASSESSING OFFICER DID NOT MAKE FURTHER ENQUIRIES TO ESTABLISH THE VERACITY OF THE EXPLANATIONS OF THE ASSESSEE OR TO SUBSTANTIATE THE INFERENCE DRAWN BY HIM. THUS, IT IS SEEN THAT THE DISALLOWANCE HAS BEEN MADE ON AN AD-HOC BASIS BY DRAWING CERTAIN ADV ERSE INFERENCES. HENCE, IN OUR VIEW, THIS DISALLOWANCE WILL ALSO NOT FALL IN THE C ATEGORY OF EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. 9. EVEN OTHERWISE, IT IS SEEN THAT THE ASSESSEE HAS OFFERED EXPLANATIONS WITH REGARD TO THE ABOVE SAID TWO ADDITIONS AND THE SAME WAS NO T FOUND TO BE FALSE. ACCORDINGLY, WE ARE OF THE VIEW THAT PENALTY U/S 271)(1)(C) IS N OT EXIGIBLE ON THE TWO ADDITIONS DISCUSSED ABOVE. ACCORDINGLY, WE SET ASIDE THE ORD ER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY LEVIED THEREON. 10. BEFORE US, THE ASSESSEE HAS ALSO RAISED ADDI TIONAL GROUNDS ON LEGAL POINTS. SINCE WE HAVE DELETED THE PENALTY ON MERITS, WE DO NOT FI ND IT NECESSARY TO ADJUDICATE THE SAID LEGAL ISSUES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 06 -12-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 6TH DECEMBER, 2013 GJ I.T.A. NO. 281 /COCH/2013 5 COPY TO: 1. SHRI A.YOUNUS KUNJU, YOUNUS CASHEW INDUSTRIES, V ADAKKEVILA, KOLLAM. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDR UM. 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN