HARESH R. KRIPLANI, MUMBAI V. ACIT CIR 4(3), MUMBAI

ITA 2884/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8776 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 05-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANU KRISHNA AGGARWAL; ALOK JOHRIDR
• Keywords: Ignorance of law
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUM BAI , BEFORE SHRI RAJENDRA, A.M. AND SHRI PAWAN SINGH,J.M . ./ITA NO.2884/MUM/2016, / ASSESSMENT YEAR: 2010-11 MR. HARESH R. KRIPLANI 20/24, MORARJEE VELJEE BUILDING KOLBHAT LANE, KALBADEVI ROAD MUMBAI-400 002. PAN: AAKPK 3422 A VS. ACIT-CIRCLE-4(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: MS.ANU KRISHNA AGGARWAL & SHRI ALOK JOHRI-DR ASSESSEE BY: SHRI RAKESH JOSHI / DATE OF HEARING: 05.01.2017 / DATE OF PRONOUNCEMENT: 20.01.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA A.M. - CHALLENGING THE ORDER DTD.22.01.2016 OF THE CIT(A)- 9,MUMBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE, AN INDIVIDUAL,FILED HIS RE TURN OF INCOME ON 14/03/2001,DECLARING INCOME OF RS. 10.89 LAKHS.THE ASSESSING OFFICER (AO ) COMPLETED THE ASSESSMENT U/S.143(3)OF THE ACT ON 24 . 12.2012 DETERMINING HI S INCOME AT RS.17.73 LAKHS. 2. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD OBTAINED UNSECURED LOANS FROM VARIOUS PARTIES AMOUNTING TO RS.72.26 LA KHS. HE DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF SUCH LOANS ALONG WITH THE LOAN CONFI RMATIONS.AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE AO HELD THAT THAT THE ASSESSEE HAD TA KEN UNSECURED LOAN OF RS. 6 LAKHS FROM SURESH M RANKA (SRM). HE ASKED THE ASSESSEE TO PROV E THE CREDITWORTHINESS OF SRM. IT WAS STATED THAT THE INCOME SRM WAS LESS THAN BASIC EXEM PTION LIMIT OF RS. 1.60 LAKHS. AFTER GOING THROUGH THE BANK STATEMENTS OF SRM, THE AO HE LD THAT THE LENDER DID NOT POSSESS THE CAPACITY TO ADVANCE RS. 6 LAKHS TO THE ASSESSEE, TH AT THE AMOUNT IN QUESTION HAD BEEN ROUTED THROUGH THREE ACCOUNTS, FURTHER ENQUIRIES WITH BANK REVEALED THAT ONE OF THE ACCOUNTS WAS HELD BY WIFE OF SRM. THE AO HELD THAT ASSESSEE HAD NOT PROVED THE CREDITWORTHINESS OF THE PERSON GIVING UNSECURED LOAN. INVOKING THE PROVISIO NS OF SECTION 68 OF THE ACT, HE MADE AN ADDITION OF RUPEES SIX LAKHS TO THE INCOME OF THE A SSESSEE.THE ASSESSEE DID NOT CONTEST THE ADDITION MADE BY THE AO WHILE COMPLETING THE SCRUTI NY ASSESSMENT. 2884/M/16-HARESH 2 3. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1 )(C) OF THE ACT,FOR FURNISHING INACCURATE PARTICULARS OF INCOME.IN RESPONSE TO THE PENALTY NO TICE, THE ASSESSEE HELD THAT IT WAS A COMMON PRACTICE IN TEXTILE BUSINESS TO ACCEPT UNSEC URED LOANS IN REGULAR COURSE OF BUSINESS, THAT HE HAD OBTAINED LOAN FROM SRM. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,TH E AO HELD THAT SRM DID NOT HAVE THE CAPACITY TO LEND VALUES AMOUNT OF RS. 6 LAKHS,THAT ASSESSEE COULD NOT ESTABLISH THE CREDITWORTHINESS AND SOURCE OF THE DISPUTED AMOUNT. HE LEVIED A PENALTY OF RS. 2.02 LAKHS U/S. 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM, IT WAS ARGUED THAT THE AO HAD IGNORED THE FINANCIAL STATEMENT WHICH CLEARLY SHOWED AND OPENING CAPITAL OF RS. 12.22 LAKHS OF SRM, THAT ALL THE TRANSACTIONS WERE DONE THROUGH BANKING CHANNELS, TH AT ASSESSEE HAD NOT EVADED TAXES, THAT THE LOAN WAS STILL A BEARING IN THE BOOKS OF ACCOUNTS O F THE ASSESSEE, THAT THE ASSESSMENT PROCEEDINGS WERE ATTENDED BY THE EMPLOYEE OF THE AS SESSEE, THAT DUE TO IGNORANCE OF LAW THE ORDER OF THE AO WAS NOT CHALLENGED. HE RELIED UPON THE CASE OF RAMCHANDRA G HALWAI(ITA/253/PNJ/ 2013, DT. 23. 01. 2015). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ORDERS OF THE AO, THE FAA HELD THAT THE ASSESSEE HAD NOT AGITATED QUANTUM ADDITION, THA T THE ASSESSEE HAD RELIED UPON THE MATTER OF RAMCHANDRA G HALWAI (SUPRA), THAT IN THE CASE OF RA MCHANDRA G THE ISSUE WAS ABOUT EXPENSES RELATED TO PETROL AND DIESEL AS WELL AS UN SECURED LOAN TOWARDS CESSATION OF LIABILITY, THAT IN THE CASE UNDER CONSIDERATION PENALTY WAS LE VIED WITH REGARD TO LOAN OF RS. 6 LAKHS, THAT ASSESSEE HAD NOT FILED ANY DOCUMENTARY EVIDENCE TO SHOW THAT HE HAD ACCEPTED THE ADDITION TO AVOID LITIGATION, THAT HE HAD NOT GIVEN ANY SATISFA CTORY EXPLANATION. FINALLY, HE UPHELD THE ORDER OF THE AO. 5. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) ARGUED THAT THE AO HAD INITIATED PENALTY FOR FILING INACCURATE PART ICULARS, THAT HE HAD LEVIED A PENALTY FOR CONSIDERING THE INCOME, THAT PENALTY SHOULD NOT BE LEVIED AUTOMATICALLY WHERE ADDITIONS WERE MADE. HE RELIED UPON THE CASES OF SSAS EMRALD MEAD OWS(242TAXMAN180),MANJUNATH COTTON AND GINNING FACTORY (359 ITR 565) AND DHARAN I DEVELOPERS (61 TAXMANN.COM 208). 2884/M/16-HARESH 3 THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE O RDER OF THE AO/FAA AND STATED THAT THE ASSESSEE HAD TAKEN AN INFORMED DECISION ABOUT NOT C HALLENGING THE QUANTUM ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT AO HAD MADE ADDITION OF RS. 6 LAKHS INVOKING THE PROVI SIONS OF SECTION 68 OF THE ACT WITH REGARD TO UNSECURED LOAN OBTAINED FROM SRM, THAT HE HAD IN ITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) FOR FILING INACCURATE PARTICULARS OF INCO ME, THAT HE LEVIED A PENALTY FOR CONCEALING THE INCOME, THAT THE FAA CONFIRMED THE ORDER OF THE AO. WE FIND THAT THE ISSUE OF LIVING PENALTY-WHERE PENALTY IS INITIATED FOR CONCEALING P ARTICULARS OF INCOME/FURNISHING INACCURATE PARTICULARS AND PENALTY IS NOT LEVIED ON ACCOUNT OF SAME DEFAULT-HAS BEEN DEALT BY THE HONBLE KARNATAKA HIGH COURT AND THE HONBLE SUPREME COURT IN THE CASES OF SSAS EMRALD MEADOWS (SUPRA), MANJUNATH COTTON AND GINNING FACTO RY (SUPRA).THE HONBLE COURTS HAVE HELD THAT WHERE THE AO INITIATES PROCEEDINGS U/S. 2 71(1)(C) FOR CONCEALMENT PARTICULARS OF INCOME BUT LEVIES PENALTY FOR FURNISHING INACCURATE PARTICULARS THE PENALTY ORDER COULD NOT BE SUSTAINED.RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT S OF THE HONBLE COURTS, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. AS A RESULT, APPEAL FILED BY TH E ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY 2017. 20 , 2017 SD/- SD/- ( /PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 20.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.