M/s. Gopal Ceramic Works, Gandhinagar V. The ACIT.,GNR Circle, Gandhinagar

ITA 3024/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6332 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-05-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 10-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K PATEL
• Assessee Lawyers: S N DIVATIA
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 3024/AHD./2009 : ASSESSMENT YEAR 199 8-99 M/S. GOPAL CERAMIC WORKS, PILVAI VS- ACIT, GANDHINAGAR CIRCLE, GANDHINAGAR (PAN : AABFG 3928Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. N. DIVATIA, A.R. RESPONDENT BY: SHRI A.K.PATEL, D.R. O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. CIT(A), GANDHINAGAR DATED 02.09.2009 CONFIRMING THE PENALTY OF RS.90,000/- LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE I.T. ACT, 1961 FO R THE ASSESSMENT YEAR 2006-2007. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING SANITARY PIPES AND FITTIN GS. IT WAS CONSTITUTED ON 10.04.1997 AND COMMENCED THE BUSINESS ACTIVITIES FROM NOVEMBER , 1997. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 30.10.1998 DECLARING LOSS OF RS. 1,84,265/-. THE AO FRAMED THE ASSESSMENT UNDER SECT ION 143(3) OF THE I.T. ACT, 1961 ON 28.02.2001 AT A TOTAL INCOME OF RS.13,81,200/-. IN THIS ASSESSMENT ORDER, THE AO MADE AN ADDITION OF RS.10,04,224/- TOWARDS UNEXPLAI NED DEPOSITS FROM OUTSIDERS AND DISALLOWED THE INTEREST THEREON AMOUNTING TO RS.65, 931/-. ON APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL INASMUCH AS ADDITION OF R S.2,47,900/- IN RESPECT OF 15 DEPOSITORS WAS CONFIRMED OUT OF THE 50 DEPOSITORS I N RESPECT OF WHOM THE ADDITION OF RS.10,04,224/- WAS MADE BY THE AO. THE ASSESSEE PRE FERRED FURTHER APPEAL TO ITAT. THE ITAT C BENCH VIDE ORDER DATED 18.02.2008 IN I TA NO.2154/AHD/2004 CONFIRMED THE ADDITION OF RS.2,47,900/- IN RESPECT OF 15 DEPOSITORS. SUBSEQUENTLY, IN 2 ITA NO.3024/AHD./2009 RESPECT OF AFORESAID 15 CREDITORS, THE AO LEVIED TH E PENALTY OF RS.90,000/-. THE REASONING GIVEN BY THE AO IN THE PENALTY ORDER IS T HAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS EXPLANATION WITH EVIDENCE TO THE S ATISFACTION OF THE AO. THEREFORE, THE ASSESSEE FIRM HAD FURNISHED INACCURATE PARTICULARS OF INCOME. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE CO NTENDED THAT MERELY BECAUSE THE ADDITION HAS BEEN CONFIRMED IN APPEAL, ESPECIAL LY WHEN THE EXPLANATION OFFERED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE UNTRUE, THE P ENALTY CANNOT BE LEVIED UNDER SECTION 271(1)(C). REFERRING TO TABLE-A AT PAGE 20 OF THE CIT(A)S ORDER, IT WAS CONTENDED THAT THE ASSESSEE HAD FURNISHED EVIDENCE RELATING TO OWNERSHIP OF LAND AND EVEN PROOF OF SALE OF AGRICULTURAL PRODUCE IN MOST OF THE CASES, EXCEPT FOR DEPOSITORS AT SERIAL NOS. 1,3 AND 11. THUS, AS FAR AS 12 DEPOSITO RS ARE CONCERNED, THE ASSESSEE HAD OFFERED EXPLANATION WITH EVIDENCE. IT WAS FURTHER C ONTENDED THAT THE ASSESSEE FIRM HAD COMMENCED THE BUSINESS ONLY IN NOVEMBER, 1997, WHER EAS THE DEPOSITS PERTAINED TO MAY, 1997. THEREFORE, THE SAID DEPOSITS HAVE BEEN R ECEIVED PRIOR TO THE COMMENCEMENT OF BUSINESS AND CANNOT BE TREATED AS U NDISCLOSED INCOME OF THE ASSESSEE. 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, TH E LD. CIT(A), IN THE IMPUGNED ORDER, OBSERVED THAT ITAT, VIDE ITS ORDER DATED 18. 02.2008 HAS CONSIDERED THE ENTIRE ISSUE IN DETAIL AND HAS GIVEN ITS FINDING IN UPHOLD ING THE ADDITION OF RS.2,47,900/-. 3.2 WITH REGARD TO APPLICABILITY OF EXPLANATION TO SECTION 271(1)(C), THE LD. CIT(A) OBSERVED THAT A.R OF THE ASSESSEE HAD ADMITTED THAT AS FAR AS THE NAMES FEATURING AT SERIAL NOS. 1,3 AND 11 ARE CONCERNED, NO EVIDENCE W HATSOEVER HAS BEEN FILED WITH RESPECT OF THEIR LAND OWNERSHIP AND CAPACITY TO ADV ANCE THE SUM IN QUESTION. REGARDING THE BALANCE 12 NAMES, THE LD. CIT(A) OBSE RVED THAT THERE IS NO WAY ONE CAN SAY THAT THE ASSESSEE HAS FURNISHED SATISFACTORY EX PLANATION I.E. AGAINST SERIAL NO.7, NO EVIDENCE WAS FILED BECAUSE DEPOSITOR WAS CLAIMED TO HAVE BEEN DIED AND AGAINST SERIAL NO.2, NO EVIDENCE WAS FILED FOR AGRICULTURAL INCOME OF THE RELEVANT PARTY. SIMILARLY, FOR DEPOSITORS AT SERIAL NOS. 4,5,6,12,13 AND 15, MEREL Y FILING OF THE OWNERSHIP DOCUMENTS 3 ITA NO.3024/AHD./2009 WOULD NOT TANTAMOUNT TO PROVING THE AVAILABILITY OF INCOME OR THE FILING OF SATISFACTORY EXPLANATION. THE SATISFACTORY EXPLANATIONS HAVE TO BE UNDERSTOOD IN THE REALM OF PREPONDERANCE OF PROBABILITY AND THE ONUS WOULD BE ON THE ASSESSEE TO EXPLAIN IT TO THE SATISFACTION OF THE AO. THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE THAT THE ADDITION WAS MERELY ON TECHNICAL GROUNDS. THE LD. C IT(A) HELD THAT ADDITION HAS BEEN MADE BECAUSE THE ASSESSEE HAS NOT DISCHARGED ITS ON US OF PROVIDING APPROPRIATE EVIDENCE OR EXPLANATION ABOUT THE CAPACITY OF THE L ENDERS. 3.3 ON THE BASIS OF THE ABOVE, THE LD. CIT(A) CONCL UDED THAT RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DHARMEN DRA TEXTILE PROCESSORS REPORTED IN 306 ITR 227 WOULD BE SQUARELY APPLICATION. THE E XPLANATION TO SECTION 271(1)(C) IS FULLY APPLICABLE AND THE AO HAS BEEN ABLE TO SHOW T HAT THERE HAS BEEN A CASE OF FURNISHING INACCURATE PARTICULARS. HE ACCORDINGLY C ONFIRMED THE PENALTY OF RS.90,000/. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 4. AT THE TIME OF HEARING BEFORE US, SHRI S. N. DIV ATIA APPEARED ON BEHALF OF THE ASSESSEE AND, RELYING ON THE JUDGMENT OF THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT-VS- BHARTESH JAIN REPORTED IN 323 ITR 358 (DELH I), CONTENDED THAT PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF CASH CREDIT CANNOT BE LEVIED IN CASE THE AO DOUBTS THE SOURCE OF SOURCE. HE POINTED OUT THAT THE RATIO OF THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS OF ASSESSEES CASE. 5. ON THE OTHER HAND, SHRI A.K.PATEL, D.R. APPEARIN G ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). T HE LD. D.R. DREW OUR ATTENTION TO THE RELEVANT PORTION OF THE TRIBUNALS ORDER WHEREB Y THE ADDITION OF RS.2,47,900/- MADE BY THE AO UNDER SECTION 68 OF THE I.T. ACT WAS CONFIRMED. THE LD. D.R. FURTHER POINTED OUT THAT AUTHORISED REPRESENTATIVE OF THE A SSESSEE BEFORE THE LD. CIT(A), POINTED OUT THAT IN RESPECT OF NAMES AT SERIAL NOS. 1,3 AND 11, NO EVIDENCE WHATSOEVER HAS BEEN FILED WITH RESPECT TO THEIR LAND OWNERSHIP . THUS, ADDITION IN RESPECT OF THESE THREE CREDITORS, THE CAPACITY WAS NOT PROVED BEFORE THE AO. 4 ITA NO.3024/AHD./2009 5.1 IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE P OINTED OUT THAT IN CASE THE ASSESSEE FAILED TO FURNISH THE DOCUMENTARY EVIDENCE THAT DOE S NOT MEAN THAT CREDITORS ARE NOT HAVING ANY SOURCE. THE COUNSEL OF THE ASSESSEE FINA LLY CONCLUDED THAT FOR WANT OF MATERIALS OR NECESSARY EVIDENCE, THE ADDITION HAD B EEN CONFIRMED IN QUANTUM PROCEEDINGS BUT THAT DOES NOT MEAN THE CASH CREDIT WAS BOGUS. THEREFORE, IT MAY BE HELD THAT THE ASSESSEE HAS SUBSTANTIATED THE CLAIM AND FURNISHED THE NECESSARY DETAILS. THEREFORE, BOTH THE DEPARTMENTAL AUTHORITIES BELOW OUGHT TO HAVE TAKEN THE LENIENT VIEW IN THE PENALTY PROCEEDINGS UNDER SECTION 271(1 )(C) OF THE I.T. ACT, 1961. 6. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN REPLY TO SHOW-CAUSE NOTICE, B EFORE THE AO, THE ASSESSEE HAS FURNISHED THE FOLLOWING EXPLANATION. ' WE WOULD LIKE TO CLARIFY THAT THE ADDITION WHATEVER AS MADE BY THE RESPECTIVE AUTHORITIES ON THE GROUND OF NON SATISFACTION OR NO N ACCEPTANCE OF THE MATERIALS AND OTHER RECORDS AS PRODUCED BY US DURIN G THE PERIOD OF OUR APPEAL. THEREFORE, UNDER SUCH CIRCUMSTANCES IS NOT JUSTIFIE D TO CONCLUDE THAT PENALTY SHOULD BE 'LEVIED, ON ACCOUNT OF ANY DELIBERATE CON CEALMENT OF INCOME BY US. IN VIEW OF THE ABOVE FACTS AND CIRCUM STANCES YOU ARE REQUESTED TO KINDLY DROP THE PENALTY PROCEEDINGS PROPOSED TO BE INITIATED BY YOU UNDER SECTION 271(L)(C).' 6.1 IN QUANTUM APPEAL, THE TRIBUNAL CONFIRMED THE A DDITION OF RS.2,47,900/- IN RESPECT OF CREDITORS MENTIONED IN TABLE-A FOR THE D ETAILED REASONS GIVEN IN ORDER DATED 18.02.2008 IN C.O. NO.150/AHD/2007 (ARISING OUT OF ITA NO.2154/AHD/2004). FROM THE FINDING OF FACT RECORDED BY THE TRIBUNAL, IT CA N BE SEEN THAT ADDITION OF RS.2,47,900/- HAS BEEN CONFIRMED BY THE TRIBUNAL IN QUANTUM APPEAL, MAINLY ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE THE SOURCE OF SOURCE/CREDITWORTHINESS OF THE CREDITORS. IN THESE CIRCUMSTANCES, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF BHARTESH JAIN ( SUPRA ) IS SQUARELY APPLICABLE. IN THIS JUDGMENT, THE HON BLE DELHI HIGH COURT HELD THAT EXPLANATION-1 TO SECTION 271(1 )(C) IS NOT APPLICABLE WHEN AO WAS DOUBTING THE SOURCE OF SOURCE WHICH SHOULD NOT BE THE BASIS OF IMPOSING PENALTY UNDER SECTION 271(1)(C). WE, THEREFORE, FOLLOWING T HE DECISION OF THE HONBLE DELHI 5 ITA NO.3024/AHD./2009 HIGH COURT IN THE CASE OF BHARTESH JAIN ( SUPRA ), CANCEL THE PENALTY OF RS.90,000/-, WHICH IS CONFIRMED BY THE LD. CIT(A), IN THE IMPUGN ED ORDER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 24.06.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24/06/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.