PANKAJ R GANDHI, MUMBAI V. ITO 19(2)(4), MUMBAI

ITA 3235/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2487 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C W ANGOLKAR
• Keywords: Unexplained expenditure; Opportunity of being heard
• Section: 69C; 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER I.T.A. NO.3235/MUM/2014 (ASSESSMENT YEAR: 2008-09) SH.PANKAJ R. GANDHI C/O MR SANJAY C. SHAH B-3, OM JOSHI APARTMENT, LALLUBHAI PARK ROAD, ANDHERI WEST, MUMBAI 400 058 / V. INCOME TAX OFFICER, WARD 19(2)(4), PIRAMAL CHAMBERS, MUMBAI PAN/GIR NO. AIJPG2872P ( A PPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI SANJAY C. SHAH RESPONDENT BY : SHRI C.W. ANGOLKAR DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 13.11.2015 O R D E R PER RAMIT KOCHAR,ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDERS BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 18, MUMBAI (H EREINAFTER CALLED THE CIT(A) ) DATED 19.02.2014 . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN MEMO OF APPEAL FILED ARE AS UNDER: 1. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING PENALTY LEVIED U/S 271(1)(C) OF THE ACT BY LEARNED ASSESSING OFFICER ON THE PLEA THAT THE APPELLANT HAS NEITHER SUBMITTED ANY W RITTEN REPLY NOR APPEARED BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND ACCORDINGLY APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF I NCOME. 2 I.T.A. NO.3235/MUM/2014 (ASSESSMENT YEAR: 2008-09) APPELLANT SUBMITS THAT IN VIEW OF THE FACTS AND CIR CUMSTANCES OF THE CASE AS WELL AS IN LAW IN SAID PENALTY LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND DESERVES TO BE DELETED. 2.THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS INCOME FROM BUSINESS BEING SHARE OF PROFIT FROM THE FIRM M/S. IMP ELECTRONICS. THE RETURN OF INCOME WAS SELECTED TO FRAME ASSESSMENT U/S 143(2) OF INCOME TAX ACT,1961(HEREINAFTER CALLED THE ACT) READ WITH 143(3) OF THE ACT. THE ASSESSEE DID NOT ATTEND THE AFORE-STATED ASSESSMENT PROCEEDINGS . ON LOCAL ENQU IRIES MADE BY THE LD. ASSESSING OFFICER (HEREINAFTER CALLED THE AO) THROUGH INSPE CTOR , IT WAS REVEALED THAT THE ASSESSEE HAS SOLD HIS SHOP AS WELL AS THE HOUSE AND SHIFTED TO HIS NATIVE PLACE IN GUJARAT. SINCE THE ASSESSMENT WAS GETTING TIME BAR RED AS PER THE TIME PROVIDED UNDER THE ACT , THE AO COMPLETED THE QUANTUM ASSESS MENT EX-PARTE AS PER THE PROVISIONS OF SECTION 144 OF THE ACT VIDE ORDERS DA TED 27 TH DECEMBER 2010 WHEREBY AN ADDITION OF RS.12,04,026/- WAS MADE TO T HE RETURNED INCOME FOR PAYMENT AGAINST CREDIT CARD BILLS U/S 69C OF THE ACT AS SOURCE OF EXPENDITURE COULD NOT BE VERIFIED AND THE SAME WAS TREATED BY T HE AO AS UNEXPLAINED EXPENDITURE, THE SAID INFORMATION ABOUT CREDIT CARD PAYMENT OF RS.12,04,026/- BEING CAPTURED BY THE REVENUE FROM THE AIR . THIS A DDITION IN QUANTUM ASSESSMENT OF RS.12,04,026/- WAS UPHELD AND CONFIR MED BY THE CIT (APPEALS) BY DISMISSING THE APPEAL OF THE ASSESSEE WHILE IN THE SECOND APPEAL THE SAID QUANTUM ADDITION OF RS.12,04,026/- MADE U/S 69C OF THE ACT WAS DELETED BY HONBLE ITAT, MUMBAI VIDE ORDERS DATED 28 TH AUGUST 2015 IN ITA NO. 4020/MUM/2014 IN THE MANNER AS LAID DOWN IN THE ORDERS . 3 I.T.A. NO.3235/MUM/2014 (ASSESSMENT YEAR: 2008-09) 3.T HE AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT WHEREBY NOTICE U/S 274 OF THE ACT READ WITH SECTION 271(1)(C) OF T HE ACT WAS ISSUED TO THE ASSESSEE ON 27 TH DECEMBER 2010, WHICH WAS RETURNED BACK BY POSTAL A UTHORITIES WITH THE REMARKS LEFT AND DESPITE SEVERAL OPPORTUNITIES, NONE APPEARED FOR THE ASSESSEE. THE ASSESSING OFFICER LEVIED THE PENALTY OF RS.5,00 ,000/- U/S 271(1)(C) OF THE ACT READ WITH EXPLANATION (1) TO SECTION 271(1)(C ) OF THE ACT VIDE ORDERS DATED 28 TH JUNE 2011 ON THE INCOME OF RS.12,04,026 SOUGHT TO B E EVADED BY THE ASSESSEE VIDE QUANTUM ASSESSMENT ORDERS U/S 144 OF THE ACT DATED 27 TH DECEMBER 2010. 4.THE SAID AFORE-STATED ORDER OF PENALTY WAS UPHELD AND CONFIRMED BY THE CIT(A) VIDE ORDERS DATED 19 TH FEBRUARY 2014 WHEREBY AN APPEAL OF THE ASSESSEE WA S DISMISSED AND PENALTY OF RS.4,43,598/-(SHOULD BE RS .5,00,000/- AS LEVIED BY AO BUT SEEMS MISTAKENLY TAKEN TO BE FIGURE OF RS.4,43, 598/- BY THE CIT(A)) WAS CONFIRMED BY THE CIT(A). 5.AGGRIEVED BY THE ORDERS OF THE CIT(A) DATED 19 TH FEBRUARY 2014, THE ASSESSEE IS IN AN APPEAL BEFORE US AND THE ASSESSEE SUBMITTED T HAT IN THE QUANTUM PROCEEDINGS THE ADDITIONS OF RS.12,04,026/- U/S 69C OF THE ACT HAVE BEEN DELETED BY HONBLE ITAT, MUMBAI VIDE ORDERS DATED 28 TH AUGUST 2015 IN APPEAL NO ITA NO. 4020/MUM/2014 FOR ASSESSMENT YEAR 2008-09 IN THE MA NNER LAID DOWN IN THE ORDERS. HENCE, THE ASSESSEE SUBMITTED THAT THE PENALTY CANN OT BE SUSTAINED AS THE QUANTUM ADDITION HAS ALREADY BEEN DELETED BY THE TRIBUNAL . 6. THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORI TIES BELOW. 4 I.T.A. NO.3235/MUM/2014 (ASSESSMENT YEAR: 2008-09) 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE OBSERVED THAT THE QUANTUM ADDITIONS HAVE BEEN DELETED BY THE MUMBAI TRIBUNAL IN ITA NO. 4020/MUM/2014 VIDE ORDERS DATE D 28 TH AUGUST 2015 WHICH ARE REPRODUCED BELOW WHEREBY THE MUMBAI TRIBUNAL HE LD AS UNDER:- WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORD ERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED ON RECORDS. THE CORE ARGUMENT OF THE ASSESSEE IS THAT THE SIMILAR BUSIN ESS OPERATIONS WERE DONE BY THE ASSESSEE IN THE YEAR RELEVANT TO THE AY 2009 -2010 AND NO ADDITION WAS MADE IN THAT ASSESSMENT YEAR U/S 69C OF THE ACT . SIMILAR DOCUMENTATION WAS FURNISHED TO THE AO DURING THE SCRUTINY ASSESSM ENT PROCEEDINGS. GP ADDITION APPLYING THE RATE OF 12% WAS FINAL IN THAT AY. ON GOING THROUGH THE PAPERS FILED BEFORE THE TRIBUNAL, WE FIND THE CREDI T CARDS IN QUESTION WERE UTILIZED FOR BUSINESS PURPOSES AND FOR BUYING THE E LECTRONIC GOODS FROM M/S. IMP ELECTRONICS AND FRIGKING. NOW THE QUESTION IS W HAT HE HAS DONE WITH SUCH ELECTRONIC PURCHASES FROM THE SAID CONCERNS, I F NOT FOR SALES. ASSESSEE IS UNDISPUTEDLY IN THIS LINE OF BUSINESS FOR MANY Y EARS AS ACCEPTED BY THE ASSESSING OFFICER. BEFORE US ALSO THERE IS NO EXPLA NATION OF THE ASSESSEE AS TO WHY THE GP RATE FOR THE YEAR UNDER CONSIDERATION IS ONLY 9.84% (PAGE 15 OF THE PAPER BOOK) WHICH IS MUCH LESS THAN 12% AS A CCEPTED BY THE ASSESSEE IN THE LATER ASSESSMENT YEARS. IN THESE CIRCUMSTANC ES, IT IS REASONABLE TO INFER THAT THE GOODS PURCHASED USING THE SAID CREDI T CARD WERE SOLD AND THE SAID SALE PROCEEDS SHOULD CONSTITUTE EXPLANATION FO R EXPLAINING THE SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNT WITH SHAMRAO VITT HAL COOPERATIVE BANK. WE ALSO ACCEPT THE FACT THAT NO ADDITION WAS MADE U /S 69C OF THE ACT IN THE AY 2009-2010 UNDER COMPARABLE CIRCUMSTANCES AND FAC TS. THUS, IN MY CONSIDERED OPINION, IT IS ALSO A CASE FOR GP ADDITI ON, IF ANY, IF THE GP OF THE YEAR UNDER CONSIDERATION IS BELOW 12%. THUS, I FIND THIS IS NOT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT A ND THE AO SHOULD RESTRICT THE ADDITION IF ANY TO THE GP RATIOS AS DONE BY THE AO IN THE SUBSEQUENT ASSESSMENT YEARS. AO IS DIRECTED TO GIVE A REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE PRINCIPLES OF NATU RAL JUSTICE IN THE SET ASIDE PROCEEDINGS FOR MAKING ADDITION IN THE LINES MADE F OR THE AY 2009-10. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE ARE ALLOWED PROTANTO. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN THE ABOVE MENTIONED MANNER. 5 I.T.A. NO.3235/MUM/2014 (ASSESSMENT YEAR: 2008-09) THE MUMBAI TRIBUNAL HAS IN THE APPEAL RELATED TO Q UANTUM ASSESSMENT HAS HELD THAT ADDITION OF RS.12,04,026/- BEING PAYMENTS MADE FOR CREDIT CARD BILLS IS NOT SUSTAINABLE U/S 69C OF THE ACT WHILE THE TRIBUNAL H AS DIRECTED TO APPLY GP RATE OF 12%. SINCE THE QUANTUM ADDITIONS HAS ALREADY BEEN D ELETED IN THE MANNER AS STATED ABOVE, THE PENALTY LEVIED U/S 271(1)( C) OF THE ACT BASED ON THE SAME ADDITIONS CANNOT BE SUSTAINED AND HENCE, WE ORDER DELETION OF THE PENALTY OF RS.5,00,000/- LEVIED BY THE AO U/S 271(1)(C ) OF THE ACT VIDE ORD ERS DATED 28 TH JUNE 2011 AND AS CONFIRMED BY THE CIT(A) VIDE ORDERS DATED 19 TH FEBRUARY 2014. 8.IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 13, 2015 SD/- SD/- ( SHAILENDRA KUMAR YADAV) (RAMIT KOCH AR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 13 .11.2015 PS . POOJA K. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI