SAMTA MARINE KAKINADA, MUMBAI V. ACIT 12(1), MUMBAI

ITA 3239/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5085 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1997-1998
• Appeal Filed On: 15-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: SANJAY R PARIKH
• Section: 143(3); 133A; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3239/MUM/2009 (ASSESSMENT YEAR: 1997-98) M/S. SAMTA MARINE KAKINADA ACIT 12(1) GEO CHEM HOUSE MUMBAI 294, SHAHID BHAGAT SINGH ROAD VS. FORT, MUMBAI 400001 PAN - AAAFS 4024 S APPELLANT RESPONDENT APPELLANT BY: SHRI SANJAY R. PARIKH RESPONDENT BY: SHRI S.K. SINGH O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) XII, MUMBAI DATED 08.04.2009 CONFIRMING THE PENALTY OF ` 1,65,796/- LEVIED UNDER SECTION 271(1)(C). 2. BRIEFLY STATED, ASSESSMENT IN THIS CASE WAS COMPLET ED UNDER SECTION 143(1) ON 22.12.1997. THEREAFTER A SURVEY UNDER SEC TION 133A WAS CONDUCTED ON 05.11.1998, AS A RESULT OF WHICH THE A SSESSEE HAD OFFERED AN AMOUNT OF ` 10,00,000/- AS ADDITIONAL INCOME FOR A.Y. 1997-98. SUBSEQUENTLY THE CASE WAS REOPENED BY ISSUING NOTIC E UNDER SECTION 148 AND THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 WAS COMPLETED ON 36.03.2002 BY ENHANCING THE TOTAL INCOME TO ` 50,82,705. THE ASSESSEE IS A CLEARING AGENT CARRYING ACTIVITIES OF CLEARANCE OF A NUMBER OF CLIENTS. ASSESSEE DERIVES INCOME IN THE FORM OF CLEARING & F ORWARDING SERVICE CHARGES AGAINST WHICH THE ASSESSEE DEBIT THE EXPENSES INCUR RED FOR CARRYING OUT THE ACTIVITIES OF BUSINESS OF CLEARING AGENT SUCH AS PO ST DUES, A.P. CESS, CUSTOM DUES, ETC. FURTHER THE ASSESSEE DEBITS OPERATING AN D ADMINISTRATIVE EXPENSES THEREBY ARRIVING AT NET INCOME. DURING THE COURSE OF ASSESSMENT CERTAIN CASH EXPENSES INSPITE OF GIVING SUFFICIENT OPPORTUNITIES. ACCORDINGLY, ITA NO. 3239/MUM/2009 M/S. SAMTA MARINE KAKINADA 2 50% OF THE TOTAL CASH EXPENSES AMOUNTING TO ` 44,34,369/- WERE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE AND PE NALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE INITIATED BY THE A.O. ON APPEAL THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF ` 4,14,490/-. ACCORDINGLY, RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF K.P. MADHUSUDAN VS. CIT 251 ITR 99, THE A.O. LEVIED A PENALTY OF ` 1,65,769/- ON THE GROUND THAT THE ASSESSEE HAD DELIBERATELY CONCEALED INCOME CHARGEABLE TO TAX. 3. ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND AFTER C ONSIDERING THE CONTENTIONS OF THE ASSESSEE THE CIT(A) CONFIRMED TH E PENALTY STATING AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSION MADE FOR THE APPELLANT, THE PENALTY ORDER AND THE APPELLATE ORDERS. THE ASSESSI NG OFFICER HAD MADE THE ADDITION ON THE FAILURE OF THE APPELLANT TO PRO VE THE GENUINENESS OF THE EXPENSES. THE ADDITION SUSTAINED BY THE CIT(A) THOUGH ON ESTIMATED BASIS WAS ON THE GROUND OF THE FAILURE OF THE APPEL LANT TO FULLY SUBSTANTIATE THE CLAIM OF EXPENSES. THE APPELLANT H AD ALSO NOT BEEN ABLE TO SUBSTANTIATE THE EXPLANATION FILED BY IT ARE BON AFIDE AS NO EVIDENCES HAD BEEN ADDUCED TO THE EFFECT. MERELY STATING THAT THE EXPENSES HAD BEEN INCURRED FOR BUSINESS PURPOSE DOES NOT JUSTIFY THE SAME WHEN MATERIALS SUPPORTING IT ARE NOT FILED. THE CIT(A) H AD OBSERVED THAT THE APPELLANT COULD NOT SUBSTANTIATE BY WAY OF DIRECT E VIDENCE OR ESTABLISH THAT ALL THE EXPENSES WERE INCURRED WHOLLY AND EXCL USIVELY FOR THE PURPOSE OF BUSINESS. THE PROPOSITION OF THE APPELLA NT THAT THERE IS NO DELIBERATE CONCEALMENT OR THAT MENS REA IS AN ESSEN TIAL INGREDIENT FOR LEVYING PENALTY CANNOT BE ACCEPTED. THE HON'BLE SUP REME COURT IN THE CASE OF DHARMENDRA TEXTILES PROCESSORS (2008) 306 I TR 277 HAD HELD THAT WILFUL CONCEALMENT IS NOT ESSENTIAL FOR ATTRAC TING THE CIVIL LIABILITY OF PENALTY. IN VIEW OF THE ABOVE, THE ACTION OF THE AS SESSING OFFICER IN LEVYING PENALTY OF RS.1,65,796/- IS CONSIDERED TO B E JUSTIFIED. THE ASSESSEE IS AGGRIEVED, HENCE THE APPEAL. 4. WE HEARD THE LEARNED D.R. ASSESSEE AND LEARNED COUN SEL FOR THE ASSESSEE. 5. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS ON RECORD. THE CIT(A), VIDE APPELLATE ORDER DATED 17.07.2002 HAS C ONSIDERED THE REASONS FOR DISALLOWANCE BY THE A.O. AND DID NOT AGREE ON REASO NS OF DISALLOWANCE. THE FINDINGS OF THE CIT(A) IN PARAS 6.3 AND 6.4 WITH RE FERENCE TO REASONS OF THE A.O. FOR DISALLOWANCE ARE AS UNDER: - ITA NO. 3239/MUM/2009 M/S. SAMTA MARINE KAKINADA 3 6.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND LOOKED INTO THE FACTS OF THE CASE AND THE VARIOUS D ECISIONS RELIED UPON. IT IS NOTICED THAT A SURVEY TOOK PLACED AT THE APPELLA NTS BUSINESS PREMISES ON 5.11.98 WHICH IS RELEVANT TO A.Y. 99-2000. IT IS ALSO NOTICED THAT THE APPELLANT WAS CONFRONTED WITH VOUCHERS DURING THE C OURSE OF SURVEY WHICH RELATED TO A.Y. 96-97 ONLY. THESE WERE SIX IN NUMBER AND THE STATEMENT OF SHRI RAJESH BEHL IN ANSWER TO QUESTION NO. 3 IN REGARD TO THE AFORESAID VOUCHERS IS TO THE EFFECT THAT AS PE R THE PRACTICE PREVAILING IN KAKINADA, FEW PERSON DO NOT FURNISH SEPARATE DET AILS AND HENCE THEIR SIGNATURES ARE TAKEN ON VOUCHERS. IT IS ALSO NOTIC ED FROM STATEMENT OF SHRI BEHL THAT THE APPELLANT SURRENDERED CERTAIN AM OUNTS IN A.Y. 96-97, 97-98 & 098-99 BUT THE SURRENDER WAS TO COVER THE OTHER DISCREPANCIES IN THE BOOKS OF ACCOUNTS:, AS IS SEEN IN ANSWER TO QUESTION NO. 4. THE APPELLANT HAS ACCEPTED THE ADDITION MADE ON ACCOUNT OF SURRENDER IN A.Y. 96-97 FOR A SUM OF ` 12,00,000/- AND NO APPEAL HAS BEEN FILED. IN A.Y. 97-99, I.E. THE CURRENT YEAR, THE SURRENDER IS FOR RS.10,00,000/- IN WHICH THE ADDITION IS FOR A HIGHER AMOUNT. IT IS AL SO NOTICED THAT IN THE YEAR UNDER CONSIDERATION I.E. A.Y. 97-98 NO VOUCHER S WERE CONFRONTED TO THE ASSESSEE DURING COURSE OF SURVEY. INFACT, IN AN SWER TO QUESTION NO. 5, OF THE SUBMISSIONS SHOWN, IN VIEW OF THE DEFICIE NCIES IN THE MAINTENANCE OF PROPER RECORDS AND IN ORDER TO CO-OP ERATE WITH THE DEPARTMENT AND TO BUY PEACE OF MIND AND IN ANTICIPA TION OF WAIVER OF CONCEALMENT PENALTY, THE APPELLANT AGREED TO DECLAR E AND TO COVER ANY OTHER DISALLOWANCE IN THE BOOKS OF ACCOUNTS. THE AP PELLANT DECLARED VOLUNTARILY RS.10L00,000/- FOR A.Y. 97-98. THIS VOL UNTARY SURRENDER WAS HOWEVER NOT BACKED BY ANY DISCLOSURE IN THE RETURN OF INCOME AND THE CONSEQUENT PAYMENT OF TAX. THE SO CALLED SURRENDER HAS IN FACT BEEN RETRACTED BY THE ASSESSEE IN THE LETTER FILED DURIN G THE ASSESSMENT PROCEEDINGS ON 18.3.2002. THE ASSESSEE DID NOT FILE ANY RETURN IN COMPLIANCE TO NOTICE U/S. 148. 6.4 IT HAS FURTHER BEEN NOTICED THAT THE STATEMENT OF SHRI RAJESH BEHL WAS RECORDED ON OATH DURING THE COURSE OF SURVEY PR OCEEDINGS ON 5.11.98. SEC. 133A PROVIDES FOR RECORDING OF THE ST ATEMENT OF ANY PERSON U/S. 133A(3), WHICH MAY BE USEFUL OR RELEVANT TO AN Y PROCEEDINGS UNDER THE ACT. THIS STATEMENT IS CLEARLY DISTINCT FROM TH E STATEMENT RECORDED U/S. 132(4) WHICH COULD BE USED AS EVIDENCE IN ANY PROVISIONS UNDER THE ACT. THIS STATEMENT IS ALSO DISTINCT FROM THE STATE MENT U/S. 131 WHERE THE AO EXERCISES THE POWERS AS ARE VESTED IN A COUR T UNDER THE CODE OF CIVIL PROCEDURE 1908. THE RELEVANCE OF THE STATEMEN T RECORDED U/S. 133A(3) IS LIMITED TO ITS UTILITY IN RELATION TO TH E PROVISIONS UNDER THE ACT, IN REGARD TO THE SURVEY PART. THIS STATEMENT CANNOT BE USED AS EVIDENCE AGAINST THE ASSESSEE. THIS VIEW FINDS SUPPORT FROM THE DECISION IN THE CASE OF SATYA NARAYAN AGARWALLA REPORTED AT 255 ITR PG 69 (AT) (KOLKATTA B) AND ALSO ON THE DECISION REPORTED AT 1 84 ITR 404 (ALL). IT IS ALSO NOTICED THAT NO DISCREPANCY WHATSOEVER WAS FOU ND DURING THE COURSE OF SURVEY IN RELATION TO ACCOUNTS FOR ASSESS MENT YEAR 97-98. IN SO FAR AS THE ARGUMENT THAT THE CASE EXPENSES WERE NOT SUPPORTED BY ANY INDEPENDENT EVIDENCE EXCEPT SELF MADE VOUCHERS I FI ND THAT THE ASSESSEE ITA NO. 3239/MUM/2009 M/S. SAMTA MARINE KAKINADA 4 HAD FURNISHED 19 SAMPLE VOUCHERS VIDE LETTER DATED 31.3.2002 AND THE AO DID NOT FIND ANY INFIRMITY IN THE SAME. THESE VO UCHERS CONTAINED ALL THE REQUISITE INFORMATION AND NO INDEPENDENT EXAMIN ATION SEEMS TO HAVE BEEN CARRIED OUT BY THE AO SO AS TO DOUBT THE EXPEN SES TO WHICH THEY RELATE. THE AO HAS ALSO NOT ESTABLISHED THAT THESE CASH EXPENSES WERE EXCESSIVE OR NON GENUINE. THERE IS NOTHING ON RECOR D TO SHOW THAT CERTAIN COMPONENT OF THESE EXPENSES WERE INCURRED TO GET UN DUE ADVANTAGE BY INDULGING IN ANY ACTIVITIES PROHIBITED BY LAW. THE RELIANCE OF THE AO ON THE FINDINGS IN THE CASE OF 3 OTHER ASSESSEES ENGAG ED IN SIMILAR NATURE OF TRADE IS ALSO WRONG BECAUSE THE ASSESSEE WAS NEV ER AFFORDED AN OPPORTUNITY TO REBUT THE CONCLUSIONS IN THOSE RESPE CTIVE CASES. IN FACT, I AM SURPRISED AT THE SIMILARITY OF LANGUAGE USED BY THE AO IN PARA 10 TO 18 WHICH EXACTLY MATCHES WITH THE LANGUAGE USED IN THE CASE OF THE OTHER ASSESSEE, M/S. VINAYAK SHIPPING AGENCIES WHER E THE ASSESSMENT WAS MADE BY ANOTHER AO WHO USED THE SAME LANGUAGE O N PAGE 3, PARA 3 TO PAGE 6 IN THE LAST PARA. IT CLEARLY SHOWS THAT THE ASSESSMENT AND THE CONCLUSIONS THEREIN HAVE BEEN DRAWN IN A MECHAN ICAL MANNER WITHOUT ANY APPLICATION OF MIND. 6. HOWEVER, AFTER GIVING THE FINDINGS AS ABOVE, THE CI T(A) ALSO TAKEN INTO CONSIDERATION THE FACT THAT THE GP HAS FALLEN FROM 4.90% TO 3.09% IN THE YEAR AND ACCORDINGLY HE, ON THE GROSS RECEIPT OF ` 229 LAKHS, HAS ADOPTED THE ADDITION ON GP BASIS AND SUSTAINED AN AMOUNT OF ` 4,14,490/-. SINCE THE ADDITION SUSTAINED WAS ON GP BASIS, WITHOUT RECOURS E TO ANY DISALLOWANCE OF THE VOUCHERS OR PROVING ANY CONCEALED INCOME ON THE BASIS OF THE ENTRIES IN THE BOOKS OF ACCOUNTS OR OTHERWISE, WE ARE OF THE O PINION THAT THERE IS NO NEED FOR INVOKING THE PROVISIONS OF SECTION 271(1)( C) JUST BECAUSE PART OF THE DISALLOWANCE MADE BY THE A.O. ON CASH EXPENSES AT 5 0% WAS SUSTAINED TO AN EXTENT OF ` 4,14,490/- ON OTHER GROUNDS. SINCE THE CIT(A) HAS N OT CONSIDERED THE ISSUE OF VOUCHERS AT ALL BUT SUSTAIN ED THE DISALLOWANCE ON THE BASIS OF FALL IN GP AND ADOPTED THE SAME FIGURE OF GP AS IN EARLIER YEARS, WE ARE OF THE OPINION THAT THERE IS NO NEED FOR LEV Y OF PENALTY WHEN THE INCOME WAS ESTIMATED ON GP BASIS. EVENTHOUGH THE CI T(A) IN PENALTY ORDER HAS SUSTAINED THE PENALTY ON THE BASIS OF THE HON'B LE SUPREME COURT JUDGEMENT IN THE CASE OF DHARMENDRA TEXTILES PROCES SORS 306 ITR 277, WE ARE OF THE VIEW THAT THE PRINCIPLES ESTABLISHED BY THE SAID JUDGEMENT IS NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE. EVENTHO UGH PENALTY IS A CIVIL LIABILITY ONE HAS TO CONSIDER THAT THERE IS CONCEAL MENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS SO AS TO LEVY PENALTY UNDER SECTION ITA NO. 3239/MUM/2009 M/S. SAMTA MARINE KAKINADA 5 271(1)(C). JUST BECAUSE ADDITION WAS SUSTAINED ON G P BASIS, IN OUR VIEW PENALTY PROCEEDINGS ARE NOT ATTRACTED. IT IS ALREAD Y AN ESTABLISHED LAW THAT DISALLOWANCE ON VARIOUS CLAIMS DOES NOT ATTRACT PEN ALTY AS CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) AND ADDITION ON THE BASIS OF GP ALSO D OES NOT ATTRACT ANY PENALTY U/S 271(1)(C). IN VIEW OF THIS WE CANCEL TH E PENALTY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD SEPTEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 3 RD SEPTEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.