M/s. G.N. Ship Breakers, Bhavnagar V. The ACIT., Circle-2, Bhavnagar

ITA 325/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73167 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-03-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 07-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Section: 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.325/AHD/2011 A.Y. 1997-98 M/S. G.N. SHIP BREAKERS, 206 MADHAV DARSHAN WAGHAWADI ROAD BHAVNAGAR. PAN: AACFG 7195A VS THE ASSISTANT COMMISSIOINER OF INCOME TAX, CIRCLE-2 BHAVNAGAR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P.L. KUREEL, SR.D.R. ASSESSEE(S) BY : SHRI SANJAY R. SHAH, A.R. / DATE OF HEARING : 24/03/2014 / DATE OF PRONOUNCEMENT: 31/03/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-XX, DATED 20.09.2010 AND THE ONLY GR OUND OF THE APPEAL IS AS UNDER: THE HONBLE CIT(A) HAS ERRED IN FACTS AND IN LAW I N CONFIRMING LEVY OF PENALTY OF RS.4,16,000/- U/S. 271(1)(C) LEVIED ON A DDITION ON ACCOUNT OF CASH CREDIT OF RS.10,00,000/- AND INTEREST THEREON OF RS .90,000/- 2. AN ASSESSMENT WAS MADE U/S.143(3) R.W.S. 147, DA TED 29.03.2005 WHEREIN IN ADDITION OF RS.10 LAC WAS MADE BY INVOKI NG THE PROVISIONS OF SECTION 68 OF IT ACT THEREAFTER PENALTY U/S.271(1)( C) WAS IMPOSED VIDE AN ORDER DATED 31.03.2008. AS FAR AS THE QUANTUM AD DITION IS CONCERNED, THE SAME WAS CONFIRMED BY THE HONBLE ITAT B BENC H AHMEDABAD IN ITA NO.247/AHD/2006, A.Y. 1997-98, VIDE ORDER DATED 2 ND OF MARCH, 2012. ITA NO.325/AHD/2011 M/S. G.N. SHIP BREAKERS VS. ACIT CIRCLE-2 BHAVNAGAR . A.Y.1997-98 - 2 - 3. ON HEARING BOTH THE SIDES, THE FIRST ISSUE WHICH WAS AGITATED BEFORE US IS THAT IN A SITUATION WHEN THE QUANTUM ADDITION HAS BEEN CONFIRMED BY THE FINAL FACT FINDING AUTHORITY, I.E., TRIBUNAL, T HEN ON THAT BASIS PENALTY IMPOSED U/S. 271(1)(C) SHOULD ALSO BE CONFIRMED OR NOT. ACCORDING TO US, PENALTY PROCEEDINGS ARE TO BE DEALT WITH INDEPENDEN TLY. ALTHOUGH, THE FACTS AND CIRCUMSTANCES ARE NECESSARILY REQUIRED TO BE TAKEN INTO ACCOUNT WHICH WERE DISCUSSED IN THE QUANTUM PROCEEDINGS, BU T A COURT IS REQUIRED TO SEE INDEPENDENTLY WHETHER ON THOSE CIRC UMSTANCES CONCEALMENT PENALTY WAS STILL LEVIABLE OR NOT. 3.1 BY KEEPING THE ABOVE OBSERVATION IN MIND, WE HA VE NOTED FEW SALIENT FEATURES OF THIS CASE. THE ADMITTED FACTUAL POSITION WAS THAT ONE SRI IMTIYAZ LAKHANI PROPRIETOR OF M/S. AFTAB ENTERP RISES HAS ISSUED TWO CHEQUES OF RS.5 LAC EACH AS A LOAN TO THE ASSESSEE FIRM. IT IS ALSO AN ADMITTED FACTUAL POSITION THAT LATER ON THE SAID SU M OF RS.10 LAC WAS REPAID BY CHEQUE TO THE SAID CREDITOR. IN THE COMPI LATION, A COPY OF ACCOUNT OF THE SAID CREDITOR IN THE BOOKS OF THE AS SESSEE FIRM HAS BEEN PLACED THROUGH WHICH WE HAVE NOTED THAT ON 14 TH OF MAY, 1996 TWO CHEQUES OF 5 LAC EACH WERE ISSUED AND THEREAFTER ON 19.10.1996 THE ASSESSEE HAD ISSUED A CHEQUE OF RS.10 LAC IN FAVOUR OF THE SAID CREDITOR. THE SAID ACCOUNT HAS ALSO REVEALED THAT ON THE AMOU NT OF INTEREST, TDS OF RS.7,792/- WAS DEDUCTED BY THE ASSESSEE FIRM. 3.2 AN ANOTHER FACT HAS ALSO BEEN BROUGHT TO OUR NO TICE THAT IN AN ANOTHER CASE OF M/S. L.G. INDUSTRIES, THERE WAS ALS O A LOAN FROM THE SAME PARTY, I.E., M/S. AFTAB ENTERPRISES AND THAT LOAN W AS FOUND ACCEPTABLE BY HONBLE ITAT B BENCH AHMEDABAD IN ITA NO.245/AHD/ 2006, A.Y. ITA NO.325/AHD/2011 M/S. G.N. SHIP BREAKERS VS. ACIT CIRCLE-2 BHAVNAGAR . A.Y.1997-98 - 3 - 1997-98, ORDER DATED 04.09.2009. SO THE ARGUMENT BE FORE US IS THAT IN ONE CASE THE LOAN FROM M/S. AFTAB ENTERPRISES WAS ACCEP TABLE BUT IN THE CASE OF THE ASSESSEE IT WAS NOT ACCEPTABLE TO THE TRIBUN AL. 3.3 ONE MORE FACT HAS ALSO BEEN BROUGHT TO OUR NOTI CE THAT FOR A.Y. 1995-96 VIDE AN ORDER U/S. 143(3), DATED 30 TH OF MARCH, 1998 THE INCOME OF SRI IMTIYAZ YUSUF LAKHANI WAS ASSESSED AT RS.51, 64,420/- WHEREIN THE BROKERAGE INTEREST WAS ADMITTED AT RS.46,62,280/-. HENCE, THE ARGUMENT OF LEARNED AR BEFORE US IS THAT THE SAID CREDITOR W AS HAVING SUBSTANTIAL INCOME OUT OF WHICH THE IMPUGNED LOAN WAS ADVANCED AND THAT THE SAID CREDITOR IS A PERSON OF MEANS. 4. FURTHER, IT HAS ALSO BEEN PLACED ON RECORD THAT AGAINST THE CONFIRMATION OF SECTION 68 ADDITION BY THE TRIBUNAL , THIS ASSESSEE HAD PREFERRED AN APPEAL BEFORE HONBLE GUJARAT HIGH COU RT AND VIDE AN ORDER DATED 21.01.2013, THE SAID APPEAL WAS ADMITTED. DUR ING THE COURSE OF HEARING BEFORE US A QUESTION WAS RAISED THAT MERELY BY ADMISSION OF AN APPEAL IT IS PROPER TO DELETE THE PENALTY ON THE GR OUND THAT THE ISSUE BEING DEBATABLE; HENCE, OUT OF THE AMBITS OF THE PENALTY PROVISIONS. THIS QUESTION HAS BEEN ANSWERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRAKASH, VIDE AN ORDER DATED 15.11.2011 IN TAX APPEAL NO.606 OF 2010 IN THE FOLLOWING MANNER: 10. HAVING, THUS HEARD LEARNED COUNSEL FOR THE PAR TIES, WE REITERATE THAT THE SOLE GROUND ON WHICH THE TRIBUNAL DELETED THE PENAL TY WAS THAT WITH RESPECT TO THE QUANTUM ADDITIONS, THE ASSESSEE HAD APPROACHED THE HIGH COURT AND HIGH COURT HAD ADMITTED THE APPEAL FRAMING SUBSTANTIAL Q UESTIONS OF LAW FOR CONSIDERATION. IN VIEW OF THE TRIBUNAL, THIS WOULD INDICATE THAT THE ISSUE WAS DEBATABLE AND THAT THEREFORE, NO PENALTY UNDER SECT ION 271(1)(C) COULD BE IMPOSED. 11. WE ARE OF THE OPINION THAT THE TRIBUNAL ERRED I N DELETING THE PENALTY ON THIS SOLE GROUND. ADMISSION OF A TAX APPEAL BY THE HIGH COURT, IN MAJORITY ITA NO.325/AHD/2011 M/S. G.N. SHIP BREAKERS VS. ACIT CIRCLE-2 BHAVNAGAR . A.Y.1997-98 - 4 - CASES, IS EX-PARTE AND WITHOUT RECORDING EVEN PRIMA FACIE REASONS. WHETHER EX-PARTE OR AFTER BY-PARTE HEARING, UNLESS SOME OTH ER INTENTION CLEARLY EMERGES FROM THE ORDER ITSELF, ADMISSION OF A TAX A PPEAL BY THE HIGH COURT ONLY INDICATES THE COURTS OPINION THAT THE ISSUE P RESENTED BEFORE IT REQUIRED FURTHER CONSIDERATION. IT IS AN INDICATION OF THE O PINION OF THE HIGH COURT THAT THERE IS A PRIMA FACIE CASE MADE OUT AND QUESTIONS ARE REQUIRED TO BE DECIDED AFTER ADMISSION. MERE ADMISSION OF AN APPEAL BY THE HIGH COURT CANNOT WITHOUT THERE BEING ANYTHING FURTHER, BE AN INDICAT ION THAT THE ISSUE IS DEBATABLE ON SO AS TO DELETE THE PENALTY UNDER SECT ION 2741(1)(C) OF THE ACT EVEN IF THERE ARE INDEPENDENT GROUNDS AND REASONS T O BELIEVE THAT THE ASSESSEES CASE WOULD FALL UNDER THE MISCHIEF ENVIS AGED IN THE SAID CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT. IN OT HER WORDS, UNLESS THERE IS ANY INDICATION IN THE ORDER OF ADMISSION PASSED BY THE HIGH COURT SIMPLY BECAUSE THE TAX APPEAL IS ADMITTED, WOULD GIVE RISE TO THE PRESUMPTION THAT THE ISSUE IS DEBATABLE AND THAT, THEREFORE, PENALTY SHOULD BE DELETED. 5. IN THE LIGHT OF THE ABOVE OBSERVATIONS, OUR ATTE NTION HAS FURTHER BEEN DRAWN UPON THE ORDER OF HONBLE HIGH COURT. WH ILE ADMITTING THE APPEAL AGAINST THE QUANTUM ADDITION IT WAS OBSERVED THAT IN SIMILAR CIRCUMSTANCES BASED UPON SAME EVIDENCES THE TRIBUNA L HAD DELETED THE ADDITION IN THE CASE OF SISTER CONCERN OF THE ASSES SEE. BECAUSE OF THE SAID OBSERVATIONS, LEARNED AR HAS ARGUED THAT THE ISSUE HAPPENED TO BE A DEBATABLE ONE; HENCE, PENALTY WAS WRONGLY IMPOSED. 6. FURTHER ON MERITS, FEW CASE LAWS HAVE BEEN CITED , NAMELY, NATIONAL TEXTILES VS. CIT, 114 TAXMAN 203 (GUJ) , WHEREIN A CONCEALMENT PENALTY WAS DELETED WHICH WAS LEVIED ON ACCOUNT OF ADDITION U/S.68 OF IT ACT. THE OBSERVATION OF THE C OURT IS REPRODUCED BELOW: 18. ON THE STATE OF THE ABOVE FACTS AND THE REASON ING ADOPTED ON BEHALF OF THE DEPARTMENT, THE MAIN QUESTION ON WHICH THE ANSW ER OF ALL OTHER QUESTIONS DEPENDS IS WHETHER ADDITION OF CASH CREDITS TO THE INCOME OF THE ASSESSEE BY RECOURSE TO SECTION 68 WOULD JUSTIFY THE IMPOSITION OF PENALTY WITH AID OF EXPLANATION 1 AS IT STOOD IN THE RELEVANT ASSESSMEN T YEAR OR AS IT EXISTS ON THE STATUTE BOOK AT THE TIME OF PASSING THE ORDER OF PE NALTY UNDER SECTION 271(1)(C). 24. IN THE INSTANT CASE, THE CASH CREDITS WERE NOT SATISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WHO HAD ADVANCE D THE ALLEGED ITA NO.325/AHD/2011 M/S. G.N. SHIP BREAKERS VS. ACIT CIRCLE-2 BHAVNAGAR . A.Y.1997-98 - 5 - TEMPORARY LOANS WERE NEITHER DISCLOSED WITH THEIR P ARTICULARS NOR ANY SUPPORTING DOCUMENTS WERE ON RECORD. ONLY 2 ENTRIES WERE EXPLAINED, THE ACCOUNTANT WHO HAD ARRANGED THE LOANS WAS NOT PRODU CED STATING THAT HE HAD LEFT THE SERVICE AND RELATIONS WITH HIM ARE STRAINE D. ON THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPART MENT WAS JUSTIFIED IN TREATING THE CASH CREDIT AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLANATION 1, PENALTY UNDER SECTION 27 1(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHE R EFFORT TO VARIOUS PARTIES. THE ASSESSEE IN THE QUANTUM PROCEEDINGS FA ILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN PENALTY PROCE EDINGS MADE NO EFFORT TO SUMMON HIM. APPLYING THE TEST (II) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THERE WAS AS TEMPORARY LOANS, WAS FALSE. THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT IT COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DIFFERENT PARTIES. I N OUR OPINION, THEREFORE, EVEN TAKING RECOURSE TO EXPLANATION 1, SAME CIRCUMS TANCES OR STATE OF EVIDENCE ON WHICH THE CASH CREDITS WERE TREATED AS INCOME, COULD NOT BY THEMSELVES JUSTIFY THE IMPOSITION OF PENALTY WITHOU T ANYTHING MORE ON RECORD PRODUCED BY THE ASSESSEE OR THE DEPARTMENT. 7. AFTER HEARING BOTH THE SIDES AND IN THE LIGHT OF THE DISCUSSION MADE HEREINABOVE, ESPECIALLY, FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, WE HEREBY HOLD THAT IN A SITUATION WHEN THE IMPUGNED LOAN WAS THROUGH CHEQUE AND THE REPAYMENT WAS ALSO THROU GH CHEQUE AND THAT TDS WAS DEDUCTED ON THE INTEREST AMOUNT AND THAT ON SIMILAR FACTS IN THE CASE OF A SISTER CONCERN, THE ADDITION U/S. 68 HAD BEEN DELETED AND THAT THE STATEMENT RECORDED OF THE SAID CREDITOR WAS IN CONF IRMATION OF THE ADVANCE OF LOAN, WE HEREBY HOLD THAT IN TERMS OF EX PLANATION 1 TO SECTION 271(1)(C) THE CONCEALMENT PENALTY DESERVES TO BE DE LETED. WE HOLD ACCORDINGLY, HENCE, THE GROUND IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 31/03/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : ITA NO.325/AHD/2011 M/S. G.N. SHIP BREAKERS VS. ACIT CIRCLE-2 BHAVNAGAR . A.Y.1997-98 - 6 - 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD