SOMA PAPERS AND INDUSTRIES LTD, MUMBAI V. DCIT CIR 2(3), MUMBAI

ITA 2839/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3176 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN DR
• Assessee Lawyers: DR K SIVARAM
• Keywords: Bogus purchase; Initiation of penalty proceedings; Revised return

Judgement Text

1 , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/2839/MUM/2012, /ASSESSMENT YEAR: 2002-03 M/S. SOMA PAPERS & INDUSTRIES LTD. INDIAN MERCANTILE CHAMBERS 3 RD FLOOR, 14 R KAMANI MARG BALLARD ESTATE,MUMBAI-400 001. PAN:AAACS 6835 Q VS. DCIT, CIRCLE 2(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI J. SARAVANAN-DR ASSESSEE BY: DR. K. SIVARAM & MS. NEELAM JADHAV / DATE OF HEARING: 04.07.2016 / DATE OF PRONOUNCEMENT: 24.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER OF THE CIT(A)-6,MUMBAI,DATED 17.02.2012,THE ASSESSEE HAS FILED THE ABOVE APPEAL.THE SOLITARY GROUND RAIS ED BY THE ASSESSEE IS WITH REGARD TO LEVY OF PENALTY U/S. 271(1)(C ) OF THE AC T. 2. ASSESSEE-A PUBLIC LIMITED COMPANY, ENGAGED IN THE B USINESS OF MANUFACTURE AND SALE OF COATED PAPER AND BOARD, FILED ITS RETUR N OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 30.10.2002,DECLARING LOSS OF RS.1. 45CRORES. SUBSEQUENTLY A REVISED RETURN WAS FILED ON 17.06.2003,DECLARING RE VISED LOSS AT RS.1.11 CRORES. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT ON 28.03.2005, ASSESSING TOTAL LOSS AT RS.23,58,890/-. BRIEF FACTS :- 3. DURING THE ASSESSMENT PROCEEDINGS THE AO HAD MADE F OLLOWING ADDITIONS/DISALLOWANCES AND INITIATED PENALTY PROCE EDINGS U/S. 271 FOR FILING INACCURATE PARTICULARS (I) DISALLOWANCE U/S. 224 R.W.S.36(1) RS.1.77 LAK HS II) ADDITION OF INCOME AS PER TDS CERTIFICATE RS.5 .21 LAKHS III) DISALLOWANCE OF CLAIM OF DEBIT BALANCE WRITTEN OFF RS.9.15 LAKHS 2839/MUM/2012(02-03)-SOMA PAPERS 2 IV) BOGUS PURCHASES RS.17.29 LAKHS V) DISALLOWANCE ON ACCOUNT OF BOGUS SUNDRY CREDITOR S RS.3.77 LAKHS VI) DISALLOWANCE ON ACCOUNT OF DISCOUNT PAID RS.44 ,876/- THE FAA UPHELD ALL THE ADDITIONS EXCEPT DISALLOWANC E AT SL.NO.3 I.E. DEBIT BALANCES WRITTEN OFF OF RS.9.15 LAKHS. IN ITS REPLY TO PENALTY NOTICE ASSESSEE SOUGHT ADJO URNMENT. AS PER THE AO ASSESSEE DID NOT FURNISH ANY EXPLANATION. HE HELD T HAT BY MAKING THE CLAIMS OF DEDUCTION THE ASSESSEE HAD FILED INACCURATE PARTICU LARS OF ITS TOTAL INCOME.HE LEVIED PENALTY OF RS.10.17 LAKHS U/S. 271(1)(C)OF T HE ACT. 4. AGGRIEVED BY PENALTY ORDER OF AO THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE FAA.BEFORE HIM IT WAS ARGUED THAT ASSESSEE HAD MADE ALL THE PAYMENTS FOR PROVIDENT FUND AND ESIC BEFORE DUE DATE EXCEPT FOR THE TWO ITEMS, THAT THE PAYMENT WAS MADE BEFORE DUE DATE OF FILING OF RETUR N OF INCOME, THAT THE DISALLOWANCE MADE BY AO WAS NOT AS PER PROVISIONS O F THE ACT,THAT THE ASSESSEE HAD NOT FURNISHED ANY INACCURATE PARTICULARS OF INC OME, THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS WERE TWO SEPARA TE PROCEEDINGS,THAT ASSESSEE HAD FILED A BONAFIDE EXPLANATION WITH REG ARD TO DIFFERENCE IN TDS CERTIFICATE OF RS.5.21 LAKHS,THAT THE DIFFERENCE HA D ARISEN SINCE THE COMPANY HAD CREDITED INCOME NET OF EXPENSES,THAT THE AO HAD CON SIDERED THE GROSS AMOUNT OF JOB WORK,THAT ASSESSEE HAD NOT CLAIMED ANY EXPENSE SEPARATELY IN THE P&L ACCOUNT,THAT RECONCILIATION OF DIFFERENCE COULD NOT BE MADE ON ACCOUNT OF FACTORY BEING CLOSED,THAT IT WAS NOT A CASE OF FILI NG OF INACCURATE PARTICULARS ABOUT DIFFERENCE IN SUNDRY CREDITORS(RS.3.77 LAKHS) ,THAT THE DIFFERENCE WAS BECAUSE OF VARIOUS REASONS LIKE NON PASSING OF ENTR Y OF DISCOUNT, NON RECONCILE - ATION OF SALES FIGURE ETC. THAT NO PENALTY U/S. 271 COULD BE LEVIED FOR SUCH DIFFERENCES.ABOUT THE DISCOUNT PAID OF RS.44,876/- IT WAS CONTENDED THAT BECAUSE OF CLOSURE OF THE FACTORY AND DISCONNECTION OF ELECTRICITY SUPPLY THE ASSESSEE COULD NOT FILE RECONCILIATION. ABOUT THE D IFFERENCE IN PURCHASES(RS.17. 2839/MUM/2012(02-03)-SOMA PAPERS 3 29LAKHS),THE ASSESSEE STATED THAT FACTORY PREMISES WAS CLOSED, THAT THE COMPUTER WAS NOT FUNCTIONING, THE ASSESSEE COULD NOT RECONCI LE THE DIFFERENCE, THAT NO OPPORTUNITY WAS GIVEN BY AO TO RECONCILE THE DIFFER ENCE,THAT THERE WAS NO MALAFIDE INTENTION ON PART OF THE ASSESSEE FOR NOT APPEARING BEFORE THE FAA DURING THE QUANTUM PROCEEDINGS,THAT ASSESSEE WANTED TO CUT COST OF LITIGATION, THAT THE TRIBUNAL HAD QUASHED THE PENALTY LEVIED BY THE AO, WHILE DECIDING THE APPEAL FOR THE AY 2004-05. 5. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE FAA HELD THAT WHILE DECIDING THE APPEAL FOR EARLIER YEAR THE TRIBUNAL HAD MADE CERTAIN OBSERVATIONS, THAT THE ASSESSEE WAS TRYING TO MIS-QUOTE THE ORDER OF THE TRIBUNAL AND WAS ATTEMPTING TO MISLEAD HIM. HE FURTHER OBSERVED THAT ADDITIONS ON ACCOUNT OF PF MADE BY THE AO WERE NOT JUSTIFIABLE AND HENCE, PENA LTY COULD NOT BE LEVIED FOR THE SAID AMOUNT.WITH REGARD TO OTHER ADDITIONS, THE FAA HELD THAT ASSESSEE WAS GIVEN MORE THAN ADEQUATE OPPORTUNITY, THAT IT DID N OT FILE EXPLANATION, THAT THE IT HAD CONCEALED THE INCOME AND FURNISHED INACCURATE P ARTICULARS OF INCOME. FINALLY,HE UPHELD THE LEVY OF PENALTY FOR THE REMAI NING DISALLOWANCE/ ADDITIONS MADE BY THE AO. 6. DURING THE COURSE OF HEARING BEFORE US, THE ASSESSE E RAISED ADDITIONAL GROUND, VIDE LETTER 27.5.15.IT WAS ARGUED THAT IT HAS RAISE D ONLY A LEGAL GROUND AND ALL THE FACTS WERE AVAILABLE ON RECORD.THE DEPARTMENTAL REP RESENTATIVE(DR) LEFT THE ISSUE OF ADMISSION OF ADDITIONAL GROUND TO THE DISC RETION OF THE BENCH.AFTER CONSIDERING THE AVAILABLE MATERIAL WE ARE OF THE OP INION THAT ISSUE RAISED BY ASSESSEE DOES NOT REQUIRE THE FINDING OF FACTS OUT SIDE THE PAPERS AVAILABLE ON THE FILE.AS IT IS A PURELY LEGAL GROUND THE SAME IS BEI NG ADMITTED. THE ADDITIONAL GROUND DEALS WITH PENALTY LEVIED U/S. 271(1)(C)OF T HE ACT,ON ACCOUNT OF DISALLOWANCE OF RS.17. 29 LAKHS FOR BOGUS PURCHASES . 2839/MUM/2012(02-03)-SOMA PAPERS 4 6.1. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) REFERR ED TO PG. NO.157-159 OF THE PB AND STATED THAT ASSESSEE HAD FILED EXPLANAT ION OF EACH AND EVERY ITEM OF ADDITIONS/DISALLOWANCES,THAT IT WAS NOT A CASE OF F ILING OF INACCURATE PARTICU - LARS.WITH REGARD TO ADDITIONAL GROUND,HE STATED THA T AO HAD NOT INITIATED PENALTY WITH REGARD TO ALLEGED BOGUS PURCHASES, THAT THE PE NALTY COULD NOT BE LEVIED IF SAME WAS NOT INITIATED IN THE ASSESSMENT ORDER/PROC EEDINGS. HE RELIED ON THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF TRIVENI ENGINEERING & INDUSTRIES LTD. (369ITR660). HE ALSO RELIED UPON THE CASES OF RELIANCE PETRO PRO DUCTS (322ITR158); SM CONSTRUCTION(60TAXMANN.COM 135), AND CONTROL & SWIT CHGEAR CONTRACTORS LTD. (377ITR215).HE REFERRED TO THE ORDER OF THE TRIBUNA L FOR THE EARLIER YEAR WHERE CERTAIN PRINCIPLES WERE LAID DOWN.THE DR ARGUED THA T ASSESSEE HAD NOT FILED THE RECONCILIATION, THAT IT HAD FILED INACCURATE PA RTICULARS THAT IT HAD NOT RAISED THE ISSUE OF NON-INITIATION OF PENALTY PROCEEDINGS WITH REGARD TO BOGUS PURCHASES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE FAA HAS NOT CONSIDERED THE SUBMISSION S MADE BY THE ASSESSEE.IT WAS SPECIFICALLY MENTIONED THAT FACTORY PREMISES WE RE CLOSED, THAT BECAUSE OF NON-PAYMENT OF DUES ELECTRICITY CONNECTION WAS DISC ONNECTED, THAT THE DATA WAS STORED IN THE COMPUTER AND COULD NOT BE RETRIEVED . IN OUR OPINION FAILURE TO FILE RECONCILIATION STATEMENTS WAS EXPLAINED BY ASSESSEE . CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES THE FAA SHOULD HAVE DECIDED THE ISSUE ON THE BASIS OF THE EXPLANATION FILED BEFORE HIM. THE ADDITION MADE IN THE QUANTUM PROCEEDINGS SHOULD NOT RESULT INTO AUTOMATIC LEVY OF PENALTY.TH E FAA IS SUPPOSED TO GIVE INDEPENDENT FINDING WHILE DECIDING THE PENALTY APPE ALS. IN THE EARLIER YEAR THE TRIBUNAL HAD ALSO HELD THAT ADDITIONS IN THE QUANTU M COULD BE JUSTIFIED , THAT THE 2839/MUM/2012(02-03)-SOMA PAPERS 5 SAME WOULD NOT RESULT IN AUTOMATIC LEVY OF PENALTY. IT IS A FACT THAT BIFR WAS APPROACHED BY THE COMPANY.THE FAA HAD NOT DEALT WIT H THE EXPLANATION FILED BY IT. IT IS ALSO FACT THAT AO HAD NOT INITIATED PE NALTY PROCEEDINGS U/S 271(1)(C)OF THE ACT ON ACCOUNT OF BOGUS PURCHASES AND HENCE NO PENALTY COULD BE LEVIED FOR THE SAID AMOUNT.AFTER CONSIDERING THE ABOVE FACTS C UMULATIVELY WE ARE OF THE OPINION THAT THE ASSESSEE HAD FILED A BONAFIDE EXPL ANATION WITH REGARD TO DISALLOWANCE/ ADDITIONS MADE FOR THE YEAR UNDER CON SIDERATION AND THAT FAA WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY ORDER.T HE CASES RELIED UPON BY THE ASSESSEE SUPPORT THE VIEW TAKEN BY US.SO,REVERSING THE ORDER OF THE FAA WE DECIDE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE . AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS ALLOWED. ! . ORDER PRONOUNCE D IN THE OPEN COURT ON 24 TH AUGUST,2016. ' # $ 24 % , 2016 SD/- SD/- ( . . & / C.N. PRASAD ) ( ''( / RAJENDRA ) ' &% / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 24 .08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.