DCIT CC 3(2) CEN RG 3, MUMBAI V. WORTHINGTON NITIN CYLINDERS P.LTD, MUMBAI

ITA 3030/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2438 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 27-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KAVITHA
• Assessee Lawyers: DR P DANIEL
• Keywords: Bogus purchase; Income from undisclosed sources; Transactions in derivatives; Valuation report
• Section: 131

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL G BENCH MUMB AI BEFORE, SHRI SHAMIM YAHYA, JUDICIAL MEMBER AND SHRI PAWAN SINGH, ACCOUNTANT MEMBER ITA NO. 3030/MUM/2017 (ASSESSMENT YEAR 20 08-09 ) DCIT, CC-3(2) ROOM NO. 1913, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI-400021. VS. M/S WORTHINGTON NITIN CYLINDERS P. LTD. 501, DELTA TECHNOLOGY STREET, HIRANANDANI GARDENS, POWAI, MUMBAI-400076. PAN: AACCN3694A APPELLANT RESPONDE NT APPELLANT BY : R. KAVITHA (DR) RESPONDENT BY : DR. P. DANIEL (ADVOCATE) DATE OF HEARING : 28.08.2018 DATE OF PRONOUNCEMEN T : 28.08.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-51, MUMBAI DATED 05 .05.2015, WHICH IN TURN ARISES FROM THE PENALTY LEVIED BY ASSESSING OF FICER UNDER SECTION 271(1)(C) OF THE ACT DATED 30.03.2015 FOR ASSESSMEN T YEAR 2008-09. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE DISALLOWANCE OF CAPITALIZ ATION OF AMOUNTS OF RS. 3.71 CRORE AND RS. 2.66 ON THE BASIS OF WHICH THE P ENALTY OF RS. 1.95 CRORE UNDER SECTION 271(1) ( C) WAS LEVIED BY ASSESSING O FFICER HAS ALREADY BEEN DELETED BY TRIBUNAL IN APPEAL AGAINST THE QUANTUM A SSESSMENT IN ITA NO. 3153/MUM/2013 DATED 17.02.2017. THE LD. AR OF THE A SSESSEE FILED A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO. 3153/MUM/20 13 DATED 17.02.2017. ITA NO. 3030 MUM 2017-MS WORTHINGTON NITIN CYLINDER S P. LTD. 2 3. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT TH E NAME OF ASSESSEE HAS BEEN CHANGED FROM M/S NITIN CYLINDERS LTD. TO M/S WORTHINGTON NITIN CYLINDERS P. LTD. COPY OF FRESH CERTIFICATE OF INCO RPORATION ISSUED BY REGISTRAR OF COMPANIES, MAHARASHTRA DATED 27.12.201 1 IS ALSO PLACED ON RECORD. 4. THE LD. AR FURTHER SUBMITS THAT EVEN ON MERIT, THE PENALTY LEVIED BY ASSESSING OFFICER UNDER SECTION 271(1)(C) IS NOT SU STAINABLE AS THERE WAS SEARCH IN ASSESSEES CASE ON 06.09.2007 AND THE ASS ESSMENT SHOULD HAVE BEEN FRAMED UNDER SECTION 153A, HOWEVER, THE ASSESS MENT ORDER WAS FRAMED UNDER SECTION 143(3). NO PENALTY PROCEEDING WAS INITIATED IN THE ASSESSMENT ORDER. EVEN OTHERWISE PENALTY WOULD HAVE BEEN INITIATED UNDER SECTION 271AAA INSTEAD OF SECTION 271(1)(C) OF THE ACT. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE AFTER GOING THROUGH THE ORDER OF TRIBUNAL IN ITA NO. 3153/MUM/2013 DATED 17.02.20 17, FAIRLY CONCEDED THAT THE ADDITION/ADJUSTMENT ON THE BASIS OF WHICH THE PENALTY WAS LEVIED HAS BEEN DELETED BY THE TRIBUNAL, THEREFORE, THE OR DER OF PENALTY WOULD NOT SURVIVE. 6. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE C O-ORDINATE BENCH OF TRIBUNAL IN APPEAL FOR QUANTUM ASSESSMENT PASSED TH E FOLLOWING ORDER: 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS OF THE CASE THAT THE A SSESSEE HAS PRODUCED LEDGER EXTRACTS OF THE PARTIES, CONFIRMATIONS FROM THESE P ARTIES, BANK STATEMENTS AND ALSO ITA NO. 3030 MUM 2017-MS WORTHINGTON NITIN CYLINDER S P. LTD. 3 CERTIFICATE FROM THE REGISTER VALUER TO PROVE THE C ONSTRUCTION OF BUILDING, WHICH ULTIMATELY PROVES PROCUREMENT OF STEEL. ADMITTEDLY ON BOTH THE ISSUES PAYMENTS WERE MADE BY CHEQUE AND THE CAPITALIZATION WAS DENI ED ONLY ON THE BASIS OF STATEMENT OF SHRI SOUMIL M PARIK RECORDED UNDER SECTION 131 OF THE ACT BY THE DEPARTMENT ON 28- 11-2007. THIS RECORDING OF STATEM ENT HAS ALREADY BEEN NEGATED BY THE COORDINATE BENCH OF TRIBUNAL IN THE GROUP CONCE RNS CASE I.E. SHRI NITIN M SHAH IN ITA NO.4433/MUM/2013 FOR THE AY 2008-09, WHEREBY TRIBUNAL HAS CONSIDERED THIS ISSUE BY OBSERVING AS UNDER:- '11. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF TH E LD. REPRESENTATIVES OF THE PARTIES. IN OUR VIEW, THE LD. CIT(A) HAS RIGHTLY OB SERVED THAT THE ASSESSEE HAD DECLARED A SUM OF RS. 5 CRORES FOR THE YEAR UNDER C ONSIDERATION. THE SAID DISCLOSURE WAS ON ACCOUNT OF VARIOUS DISCREPANCIES/ DEFICIENCIES THAT MAY BE NOTED IN RELATION TO CLAIM OF ADDITIONS TO THE FIXE D ASSETS IN THE CASE OF M/S. NITIN CYLINDERS LTD. AND ALSO TO TAKE CARE OF OTHER ISSUE S. SO FAR THE CONTENTION OF THE DEPARTMENT THAT THE ASSESSEE HAD STATED THE SAME AS UNACCOUNTED INCOME IN RELATION TO COMMODITY TRANSACTIONS IN GREY MARKET I S CONCERNED, IT MAY BE OBSERVED THAT NEITHER ANY EVIDENCE IN THIS REGARD W AS FOUND DURING THE COURSE OF SEARCH ACTION NOR IN THE INVESTIGATIONS DURING ASSE SSMENT PROCEEDINGS. THE AO HAD MADE NO ENQUIRIES IN THIS RESPECT. HE HAS JUST RELIED UPON THE STATEMENT OF THE ASSESSEE MADE DURING SEARCH ACTION, THAT IN THE SE TYPE OF TRANSACTIONS, NO EVIDENCE GENERALLY IS AVAILABLE. WHEN THERE WAS NO EVIDENCE FOUND OR DETECTED NOR THERE IS ANY CONTENTION OF THE REVENUE THAT ANY EVIDENCE IN THIS RESPECT HAS BEEN CONCEALED BY THE ASSESSEE, THEN UNDER SUCH CIR CUMSTANCES, IT HAS NOT BEEN EXPLAINED BY THE DEPARTMENT AS TO WHAT PROMPTED THE ASSESSEE TO MAKE SUCH A DECLARATION IN RESPECT OF INCOME FROM COMMODITY TRA NSACTIONS. IT HAS ALSO NOT BEEN EXPLAINED AS TO EVEN WHY THE AO HAD NOT MADE A NY ENQUIRIES IN THIS RESPECT DURING THE ASSESSMENT PROCEEDINGS. THE FACTS ON THE FILE CLEARLY REVEAL THAT THE DECLARATION WAS MADE BY THE ASSESSEE IN RELATION TO DISCREPANCIES FOUND DURING THE SEARCH ACTION IN THE CASE OF NITIN CYLINDERS LT D. THE NAMING THE DISCLOSURE AS FROM COMMODITY TRADING IN THE GREY MARKET WAS MADE AS WAS THEN ADVISED TO THE ASSESSEE. IT IS EVIDENT ON THE FILE THAT DISCLOSURE OF RS. 5.36 CRORES AS PER THE RETURN OF INCOME WAS TO COVER RS.3.51 CRORES CAPITA LIZED IN M/S NITIN CYLINDERS CONSIDERED AS BOGUS PURCHASE AND FURTHER THE SUM OF RS.1.82 CRORES FOR COVERING VARIOUS ISSUES AS EXPLAINED BY THE ASSESSEE IN HIS LETTER DATED 22.12.2009. THE ASSESSEE HAS ALSO CLAIMED THAT THE DISCLOSURE BE AL SO CONSIDERED FOR DIFFERENCE IN PURCHASE OF STEEL IN M/S NITIN CYLINDERS LTD. THE L D. CIT(A) THOUGH HAS HELD THAT THE SUM TOTALLY ACCOUNTED FOR WAS AT RS.4,97,0 0,000/-, HOWEVER HE HAS NOT ALLOWED THE CLAIM OF THE REMAINING AMOUNT TOWARDS D IFFERENCE IN PURCHASE OF STEEL. HE HAS CONFIRMED THE ADDITION OF RS. 2,66,03 ,042/- IN RELATION TO DIFFERENCE IN PURCHASE OF STEEL AS UNACCOUNTED INCOME OF THE A SSESSEE. THE ASSESSEE HAS HOWEVER, NOT PREFERRED ANY APPEAL IN THIS RESPECT. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN DELETIN G THE FURTHER ADDITIONS MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES CAPITALIZED IN THE ACCOUNT OF NITIN CYLINDERS AS THE SAME HAVE ALREADY BEEN COVERED IN THE INCOME DECLARED OF RS.5 CRORE BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERAT ION. THERE IS NO MERIT IN THE APPEAL OF THE REVENUE, THE SAME IS THEREFORE, HEREB Y DISMISSED.' ITA NO. 3030 MUM 2017-MS WORTHINGTON NITIN CYLINDER S P. LTD. 4 9. WE FURTHER FIND FROM THE ABOVE FACTS THAT THE AS SESSEE HAS PRODUCED COPIES OF INVOICE FOR PURCHASES AND ALSO THE DETAILS OF OPENI NG STOCK, PURCHASES, SALES AND CLOSING STOCK. EVEN THE ASSESSEE HAS PROVED THE RAW MATERIAL USED IN CONSTRUCTION OF BUILDING, WHICH IS SUPPORTED BY VALUATION REPORT. M ERELY ON A STATEMENT, WHICH WAS NEVER CONFRONTED OR NO OPPORTUNITY TO CROSS EXAMINE THE PARTY WAS ALLOWED, IN THAT EVENTUALITY THE CAPITALIZATION CANNOT BE DENIED TO THE ASSESSEE. WE AGREE WITH THE REVENUE THAT THE STATEMENT RECORDED BY REVENUE IS A GOOD STARTING POINT FOR MAKING FURTHER INVESTIGATION BUT IT IS NOT CONCLUSIVE. THE REVENUE SHOULD HAVE MADE FURTHER INVESTIGATION AND TAKE IT TO LOGICAL CONCLUSION BUT THE AO LEFT THE JOB AT THE INITIAL POINT ITSELF, WHICH IS CLEAR FROM THE ASSESSMENT OR DER. EVEN THE CIT(A) HAS NOT CARRIED THIS MATTER FURTHER. WE ARE OF THE VIEW THA T SUSPICION HOWEVER HIGH, CANNOT TAKE PLACE OF EVIDENCE. IN SUCH CIRCUMSTANCES AND T HE COORDINATE BENCH HAS ALREADY CONSIDERED THE ISSUE IN GROUP CONCERNS CASE, WE ALL OWED TO THESE INTERCONNECTED ISSUES IN ASSESSEE'S APPEAL DIRECTING THE AO TO ALL OWED CAPITALIZATION ON BOTH THE COUNTS. ACCORDINGLY, THESE TWO INTERCONNECTED ISSUE S OF THE ASSESSEE'S APPEAL ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. 7. CONSIDERING THE DECISION OF TRIBUNAL, WE DO NOT FIN D ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENUE. WE ALSO NOTED THAT THE LD. CIT(A) WHILE DELETING THE PENALTY HAS CATEGORICALLY HELD T HAT PROVISIONS OF SECTION 271(1)(C) WAS INCORRECTLY INVOKED BY THE ASSESSING OFFICER AND THE APPROPRIATE PROVISION FOR LEVY OF PENALTY UNDER SEC TION 271AAA AND DELETED THE PENALTY. CONSIDERING THE ABOVE FACTUAL AS WELL AS LEGAL POSITION, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL R AISED BY REVENUE HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28/08/2 018. SD/- SD/- SHAMIM YAHYA PAWAN SINGH ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 28.08.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT ITA NO. 3030 MUM 2017-MS WORTHINGTON NITIN CYLINDER S P. LTD. 5 5. DR F BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI