MANOJ AILANI ( PROP OF M.S, TEJSONS), MUMBAI V. ITO 14(1)(2), MUMBAI

ITA 283/MUM/2009

• Counselvise Citation: 28319914 RSA 2009
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 13-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: P S CHHAJED
• Keywords: Gift; Commercial expediency
• Section: 2; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) MR. MANOJ AILANI (PROP. OF M/S. TEJSONS), 140-L, CAVEL CROSS LANE, DR.VEIGAS STREET, MUMBAI-400002, PAN: ADGPA6988C INCOME TAX OFFICER, 14(1)(2), MUMBAI. APPELLANT V/S RESPONDENT DATE OF HEARING : 11.8.2011 DATE OF PRONOUNCEMENT : 24.8.2011 APPELLANT BY : SHRI P.S.CHHAJED RESPONDENT BY : SHRI R.K.GUPTA O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20.11.2008 PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2002-03. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF FABRICS. THE RETURN WAS FILED DEC LARING TOTAL INCOME OF RS.6,28,360/-. HOWEVER, THE ASSESSMENT WA S COMPLETED AT AN INCOME OF RS.11,98,340/- INCLUDING THE DISALLOWANCE OF GIFT OF RS.23,000/- AND INTEREST OF RS.4,58,765, VIDE ORDER DATED 28.3.2005 PASSED UNDE R ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 2 SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHO RT THE ACT). THE AO WHILE COMPLETING THE ASSESSMENT ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN RESPONSE, TO SHOW CAUSE NOTICE AS TO WHY THE PENALT Y UNDER SECTION 271 (1)(C) SHOULD NOT BE IMPOSED, IT WAS SU BMITTED BY THE ASSESSEE THAT THERE HAS BEEN NO INTENTION IN ANY WAY TO GIVE INACCURATE PARTICULARS OF INCOME OR DEFRAUD THE REVENUE AND REQUIRED DETAILS HAVE BEEN SUBMITTED A LONG WITH THE RETURN OR WHENEVER CALLED FOR, THEREFORE, THE PENALTY PROCEEDINGS INITIATED BE DROPPED. HOWEVER, THE AO WAS OF THE VIEW THAT IN VIEW OF THE DECISION OF THE HONBL E SUPREME COURT REPORTED IN 251 ITR 99 (SC), IF THERE IS A N ENHANCEMENT OF RETURNED INCOME, THERE COMES INTO EX ISTENCE A PRESUMPTION OF CONCEALMENT OF INCOME AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT THERE IS NO CONCEALMENT. SINCE THE ONUS HAS NOT BEEN DISCHARGED AND THE ASSESSEE H AS DELIBERATELY SUBMITTED INACCURATE PARTICULARS OF IN COME, LIABLE TO PENALTY AND ACCORDINGLY, HE IMPOSED MINIM UM PENALTY OF RS.1,50,977/- VIDE ORDER DATED 2.9.2005 PASSED UNDER SECTION 271(1) (C) OF THE ACT ON APPEAL, TH E LEARNED COMMISSIONER OF INCOME TAX (A) WHILE AGREEING WITH THE VIEWS OF THE AO CONFIRMED, THE PENALTY IMPOSED BY T HE AO. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE ASSESSEE IS IN APPEAL ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 3 BEFORE US CHALLENGING IN THE, SOLE GROUND OF APPEAL , SUSTENANCE OF PENALTY IMPOSED BY THE AO. 4. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAS FILED COMPLE TE PARTICULARS OF INCOME ALONGWITH AUDIT REPORT AND MERELY BECAUSE THE AO HAS NOT ACCEPTED THE GIFT OF RS.23, 000/- AND MADE ESTIMATED DISALLOWANCE OF RS.4,58,765/- OUT OF INTEREST PAID AND THE ASSESSEE HAS NOT FILED ANY APPEAL AGA INST THE ASSESSMENT ORDER DOES NOT MEAN THAT THE ASSESSEE HA S CONCEALED PARTICULARS OF INCOME, THEREFORE, THE PEN ALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) BE DELETED. 5. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTS THE ORDER OF THE AO AND THE LEARNED COMMISSIONER OF INCOME T AX (A). 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECO RD, WE FIND THAT THERE IS NO DISPUTE THAT THE AO HAS ACCEPTED T HE TRADING AND MANUFACTURING RESULTS AS SHOWN BY THE ASSESSEE . HOWEVER, THE AO HAS MADE CERTAIN DISALLOWANCES WH ICH INTERALIA INCLUDED DISALLOWANCE OF GIFT OF RS.23, 000/- ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FILE ANY SUP PORTING MATERIAL AND DISALLOWANCE OF ESTIMATED INTEREST OF RS.4,58,765/- BEING 10% OF ADVANCE OF RS.45,87,654 /- NOT ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 4 RELATING TO BUSINESS AS THE ASSESSEE HAS MADE INTER EST FREE ADVANCES. IN MAKING SUCH DISALLOWANCE OF INTEREST, THE AO OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED FUND F LOW STATEMENT, THEREFORE, IN VIEW OF THE DECISION OF T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S MOTOR GENE RAL FINANCE LTD., 254 ITR 449 (DEL) AN ADVERSE VIEW CAN BE TAKEN. HOWEVER, WE FIND THAT THE AO, IN THE SAME PARAGRAPH HAS OBSERVED THAT THE ASSESSEE HAS FURNISHED PROOF OF ADVANCE OF RS.22,52,349/- ON ACCOUNT OF BUSINESS O F M/S SITA DYEING PVT.LTD. AND M/S RAM KISHOR TEXTILES P VT.LTD AND THE AO AFTER VERIFICATION OF THE SAME HAS FOUND TO BE IN ORDER, THEREFORE, KEEPING IN VIEW THAT THE ASSESSE E HAS FILED COMPLETE FINANCIAL STATEMENT ALONGWITH THE TAX AUD IT REPORT APPEARING AT PAGES 14 TO 51 OF THE ASSESSEES PAPE R BOOK, WE ARE OF THE VIEW THAT THERE IS NO DEFAULT ON THE PART OF THE ASSESSEE IN MAKING THE COMPLIANCE. WE FURTHER FIND THAT IT IS ALSO NOT IN DISPUTE THAT THE AO HAS MADE ESTIMAT ED DISALLOWANCE OF INTEREST OF RS.4,58,765/-. 7. IN S. A. BUILDERS LTD. V/S COMMISSIONER OF INCOM E-TAX (APPEALS) (2007) 288 ITR 1 (SC), IT HAS BEEN OBSERV ED BY THEIR LORDSHIPS (HEAD NOTE, PAGE 2 ): TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUCTION UND ER SECTION 36(1)(III) OF INTEREST PAID BY THE ASSESSEE ON AMOUNTS BORROWED BY IT FOR ADVANCING TO A SISTER CONCERN, THE AUTHORITIES AND THE COURTS SHOULD EXAM INE ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 5 THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MON EY AND WHAT THE SISTER CONCERN DID WITH THE MONEY. THA T THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIE W WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS . ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN T HE ARM- CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFITS. 8. APPLYING THE RATIO OF THE ABOVE DECISION TO TH E FACTS OF THIS CASE, WE FIND THAT IN THIS CASE IT HAS NOT B EEN ESTABLISHED BY THE REVENUE THAT THE AMOUNT WAS NO T ADVANCED FOR THE PURPOSE OF BUSINESS OR IT WAS NOT ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND MERELY BE CAUSE THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCES TO HI S SISTER CONCERNS DOES NOT MEAN THAT THE ASSESSEE HAS CONCEA LED ITS PARTICULARS OF INCOME. 9. IN ORDER TO APPLY THE PROVISIONS OF SECTION 271( 1)(C) THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOM E, SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURAT E PARTICULARS OF INCOME. 10. IN A RECENT JUDGMENT OF THE HONBLE APEX COURT IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC) ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 6 THEIR LORDSHIPS, AFTER CONSIDERING VARIOUS DECISION S INCLUDING DILIP N. SHROFF VS. JCIT (2007) 291 ITR 519(SC), UN ION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277(SC) AND SREE KRISHNA ELECTRICALS VS. STATE OF T AMIL NADU (2009) 23 VST 249 (SC) HAVE OBSERVED AND HELD (PAGE 158 HEADNOTES) AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME- TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDL Y, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXP OSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTL Y COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKIN G AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCUR ATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHI NG WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, T HE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DET AILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS . WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIE D BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 7 11. BY APPLYING THE RATIO OF THE ABOVE DECISION TO THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAS FURNISHED COMPLETE PARTICULARS OF HIS INCOME AND MERELY BECAUSE THE ASSESSEE HAS NOT FILED THE A PPEAL AGAINST THE ASSESSMENT ORDER DOES NOT MEAN THAT T HE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND K EEPING IN VIEW THAT THE DISALLOWANCE OF INTEREST IS A DEBA TABLE ISSUE AND IT IS A SETTLED LAW THAT ON DIFFERENCE OF OPI NION OR TWO VIEWS ARE POSSIBLE OR ON ESTIMATED DISALLOWANCE NO PENALTY IS NOT LEVIABLE, WE ARE OF THE VIEW THAT NO PENALT Y IS LEVIABLE ON THE DISALLOWANCE OF INTEREST OF RS.4,58,765/- A ND ACCORDINGLY, THE SAME IS DELETED. HOWEVER, IN THE ABSENCE OF ANY SUPPORTING MATERIAL EVEN AT THIS STAGE TO PR OVE GENUINENESS OF THE GIFT OF RS.23,000/-, WE ARE OF THE VIEW THAT THE ASSESSEE IS LIABLE TO PENALTY ON THE SAID AMOUNT OF GIFT OF RS.23,000/- AND TO THIS EXTENT THE ASSESS EE HAS CONCEALED THE PARTICULARS OF HIS INCOME AND ALSO FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME. ACCORDINGL Y, THE AO IS DIRECTED TO IMPOSE MINIMUM PENALTY ON THE ADDITI ON OF UNPROVED AMOUNT OF GIFT OF RS.23,000/- AND DELETE THE BALANCE AMOUNT OF PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (A). THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE PARTL Y ALLOWED. ITA NO.283/MUM/2009 (ASSESSMENT YEAR:2002-03) 8 12. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH AUGU ST,2011. SD SD (RAJENDRA SINGH) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 24TH AUGUST, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI