MOHIT DIAMONDS P.LTD, MUMBAI V. ADDL CIT 5(2), MUMBAI

ITA 3313/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2630 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 11-05-2012
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Initiation of penalty proceedings; Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTAN T MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER . / ITA NO . 3313 / MUM./ 2012 ( / ASSESSMENT YEAR : 20 0 5 06 ) MOHIT DIAMONDS PVT. LTD. BC 7011, TOWER B CENTRAL BLOCK, BHARAT DIAMOND BOURSE G BLOCK, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN AAACM2843A . . / APPELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE 5(2), AAYAKAR BHAWAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT / ASSE SSEE BY : SHRI B.V. JHAVERI / REVE NUE BY : SHRI SAMIR TEKRIWAL / DATE OF HEARING 0 8 . 10 .2015 / DATE OF ORDER 30.10.2015 / ORDER , / PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST TH E ORDER DATED 16 TH FEBRUARY 2012, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 9, MUMBAI, SUSTAINING THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF MOHIT DIAMONDS PV T. LTD. 2 THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2005 06. 2. BRIEFLY THE FACTS ARE THE A SSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF DIAMOND AND STUDDED JEWELLERY. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH OCTOBER 2005, DECLARING TOTAL INCOME OF ` 9,71,76,944. DURING T HE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ADVANCED LOANS TO ITS SISTER CONCERN EMAAR DIAMONDS LTD. AND AS ON 1 ST APRIL 2004, THE OPENING BALANCE WAS ` 2,33,26,000. HE, THEREFORE, CALLED UPON THE ASSESSEE TO FURNISH THE C ONFIRMATION FROM THE CONCERNED DEBTOR. ON VERIFYING THE LOAN CONFIRMATION, IT WAS NOTICED THAT THE ASSESSEE HAD CREDIT BALANCE IN RESPECT OF EMAAR DIAMONDS LTD. FOR THE FINANCIAL YEAR 2004 05. WHEN THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE WITH A QUERY AS TO WHY IT SHOULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AS THE SAID COMPANY IS A SHAREHOLDER, THE ASSESSEE IN LETTER DATED 26 TH DECEMBER 2008, REPLIED THAT THE ADVANCES GIVEN BY THE ASSESSEE TO THE SISTER CONCERN CANN OT BE CONSIDERED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). THE ASSESSING OFFICER, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED, THOUGH THE PROVISIONS OF DEEMED DIVIDEND IS NOT APPLICABLE IN CASE OF LOAN AD VANCED BY THE ASSESSEE TO EMAAR MOHIT DIAMONDS PV T. LTD. 3 DIAMONDS LTD. BUT THE PROVISIONS OF DEEMED DIVIDEND IS ATTRACTED IN RELATION TO CREDIT BALANCE IN THE HANDS OF THE ASSESSEE OUTSTANDING TOWARDS M/S. EMAAR DIAMONDS LTD. HE OBSERVED, OUT OF THE TOTAL LOAN ADVANCED, THE ASSESS EE RECEIVED PAYMENT FROM M/S. EMAAR DIAMONDS LTD. ON VARIOUS DATES AND ON 27 TH SEPTEMBER 2004, IT RECEIVED PAYMENT OF ` 1.50 CRORES FROM M/S. EMAAR DIAMONDS LTD., AS A RESULT OF WHICH ON THE PARTICULAR DATE THE ASSESSEE HAD CREDIT BALANCE OF ` 42,74,000. T HE ASSESSING OFFICER OBSERVED THAT AS THE ASSESSEE IS HAVING MORE THAN 10% SHARE IN M/S. EMAAR DIAMONDS LTD., PROVISIONS OF SECTION 2(22)(E) IS ATTRACTED. HE, THEREFORE, TREATING THE AMOUNT OF ` 42,74,000, AS DEEMED DIVIDEND ADDED BACK TO THE RETURN OF INC OME. THE ADDITION MADE UNDER SECTION 2(22)(E) WAS ALSO CONFIRMED BY THE COMMISSIONER (APPEALS). THOUGH , THE ASSESSEE CHALLENGED THE ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT BEFORE THE TRIBUNAL , BUT , AS IT APPEARS FROM THE MATERIAL ON RECORD THE GROU ND RAISED ON THE ISSUE BEFORE THE TRIBUNAL WAS NOT PRESSED AT THE TIME OF HEARING OF APPEAL. THEREFORE, THE ADDITION MADE UNDER SECTION 2(22)(E) ATTAINED FINALITY. ON THE BASIS OF ADDITION MADE AS AFORESAID, PROCEEDING FOR IMPOSITION OF PENALTY UNDER SECTI ON 271(1)(C) WAS INITIATED BY THE ASSESSING OFFICER WITH ISSUANCE OF A SHOW CAUSE NOTICE. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE IN ITS EXPLANATION, OBJECTED TO THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, BUT THE MOHIT DIAMONDS PV T. LTD. 4 ASSES SING OFFICER , HOWEVER, WAS OF THE VIEW THAT AS ADDITIONS MADE UNDER SECTION 2(22)(E) WAS ACCEPTED BY THE ASSESSEE BEFORE THE TRIBUNAL IT IS PROVED THAT THE ASSESSEE BY NOT OFFERING THE DEEMED DIVIDEND OF ` 42,47,000 AS INCOME HAS FURNISHED INACCURATE PARTI CULARS OF INCOME . ACCORDINGLY, HE PROCEEDED TO IMPOSE PENALTY OF ` 15,54,083, BEING 100% OF THE TAX SOUGHT TO BE EVADED. CHALLENGING THE IMPOSITION OF PENALTY, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). 3. THE LEARNED COMMISSION ER (APPEALS), HOWEVER, CONFIRMED THE IMPOSITION OF PENALTY BY HOLDING THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, EXPLAINING THE FACTS LEADING TO THE ADDITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E ) OF THE ACT SUBMITTED BEFORE US THAT THE ASSESSEE HAD ADVANCED LOAN OF ` 2,33,26,000 TO M/S. EMAAR DIAMONDS LTD., IN IMMEDIATELY PRECEDING ASSESSMENT YEAR AND THE SAID LOAN WAS BROUGHT FORWARD AND SHOWN AS OPENING BALANCE ON 1 ST APRIL 2004. DURING THE CUR RENT PREVIOUS YEAR, M/S. EMAAR DIAMONDS LTD., STARTED REPAYING THE LOAN ON DIFFERENT DATES AND ON 23 RD SEPTEMBER 2004, M/S. EMAAR DIAMONDS LTD., BY MISTAKE PAID AN AMOUNT OF ` 1.50 CRORES AS A RESULT OF WHICH THERE WAS A CREDIT BALANCE OF ` 42,74,000 AGAIN ST M/S. EMAAR DIAMONDS LTD. MOHIT DIAMONDS PV T. LTD. 5 HOWEVER, SINCE M/S. EMAAR DIAMONDS LTD., IS BASED IN SURAT, IMMEDIATELY AFTER THE MISTAKE WAS NOTICED , THE ASSESSEE ON 28 TH SEPTEMBER 2004 PAID BACK AN AMOUNT OF ` 50 LAKH TO THE SAID COMPANY . T O PROVE SUCH FACT THE ASSESSEE REF ERRED TO THE STATEMENT OF ACCOUNT OF LOAN TO M/S. EMAAR DIAMONDS LTD. AS SUBMITTED IN PAPER BOOK. HE, THEREFORE, SUBMITTED , ONLY BECAUSE THE ASSESSEE HAS ACCEPTED THE ADDITION OF ` 42,70,000, UNDER SECTION 22(2)(E) IN THE QUANTUM PROCEEDINGS THAT WILL NOT AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C). HE SUBMITTED , AS THERE IS NO DELIBERATE ATTEMPT BY THE ASSESSEE TO FURNISH INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME IMPOSITION OF PENALTY UNDER SECTION 271 (1)(C) IS NOT JUSTIFIED. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE FOLLOWING DECISION. I) SUNILCHANDRA VOHRA V/S ASSTT. COMMISSIONER OF INCOME TAX, [2009] 32 SOT 365 (MUM.) II) GITANJALI GHATE V/S DY. COMMISSIONER OF INCOME TAX, ITA NO.6560/MUM./2010, ORDER DATED 23 RD MAY 2012; III) ACIT V/S M/S. PATEL HOLDINGS LTD. ITA NO.2199/MUM./2011, ORDER DATED 30 TH MAY 2012; IV) ITO V/S PARAMOUNT APPARELS PVT. LTD., ITA NO.2539/MUM./2011, ORDER DATED 31 ST JANUARY 2012; AND V) SHRI ULHAS S. SABANE V/S ITO, [2007] (ID2) GJX 0762 TPUN] DATED 30 TH AUGUST 2007. MOHIT DIAMONDS PV T. LTD. 6 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THERE IS A CREDIT BALANCE IN RESPECT OF M/S. EMMAR DIAMONDS LTD., APPEARING IN THE BOOKS OF THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR. IT IS ALSO A FACT THAT THE ASSESSEE IS A SHAREHOLDE R IN M/S. EMAAR DIAMONDS LTD. IT IS ALSO A FACT ON RECORD THAT THE CREDIT BALANCE APPEARING IN THE NAME OF M/S. EMAAR DIAMONDS LTD. HAS BEEN TREATED AS A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AND IN THE QUANTUM OF APPEAL BEFORE THE TRIBUNAL, TH E ASSESSEE HAS ACCEPTED THE ADDITION BY NOT PRESSING THE GROUND RAIS ED. HOWEVER, THESE FACTS ALONE W OULD NOT BE SUFFICIENT TO CONCLUDE THAT ASSESSEE HAS EITHER FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME SO AS TO IMPOS E PENALTY UNDER SECTION 271(1)(C). IT IS WELL KNOWN THAT ASSESSMENT PROCEEDINGS AND PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) ARE TWO DISTINCT AND SEPARATE PROCEEDINGS. THEREFORE, IN THE PROCEEDING FOR IMPOSITION OF PENALTY UNDER SECTIO N 271(1)(C) THE FACTS AND EVIDENCE HAVE TO BE EXAMINED AND RE APPRECIATED A FRESH TO FIND OUT WHETHER A CASE FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME O R CONCEALMENT OF INCOME IS MADE OUT. I N THE FACTS OF THE PRESENT CASE, ON A REFERENCE TO THE STA TEMENT OF ACCOUNT OF LOAN TRANSACTION WITH M/S. EMAAR MOHIT DIAMONDS PV T. LTD. 7 DIAMONDS LTD., A COPY OF WHICH HAS BEEN SUBMITTED AT PAGE 8 OF THE PAPER BOOK , IT IS VERY MUCH CLEAR THAT THE ASSESSEE HAD AN OPENING BALANCE OF LOAN TO M/S. EMAAR DIAMONDS LTD. AMOUNTING TO ` 2,32,26,0 00. DURING THE YEAR, THE ASSESSEE HAS ALSO RECEIVED PAYMENT AGAINST THE AFORESAID LOAN TO M/S. EMAAR DIAMONDS LTD., ON DIFFERENT DATES STARTING FROM 2 ND AUGUST 2004. AS IT APPEARS ON 23 RD SEPTEMBER 2004, THE ASSESSEE RECEIVED AN AMOUNT OF ` 1.50 CRORES FRO M M/S. EMAAR DIAMONDS LTD., AS A RESULT OF WHICH THERE WAS A CREDIT BALANCE IN FAVOUR OF THE SAID PARTY. IT IS THE CONTENTION OF THE ASSESSEE THAT M/S. EMAAR DIAMONDS LTD. PER MISTAKE REPAID IN EXCESS. HOWEVER, IMMEDIATELY AFTER SUCH MISTAKE CAME TO THE NO TICE THE ASSESSEE ON 28 TH SEPTEMBER 2004, PAID BACK AN AMOUNT OF ` 50 LAKH TO M/S. EMAAR DIAMONDS LTD. ON A PERUSAL OF THE STATEMENT OF ACCOUNT THE EXPLANATION OF THE ASSESSEE APPEARS TO BE CORRECT. IT IS SEEN FROM THE STATEMENT OF ACCOUNT THAT THE ASSESSE E IS REGULARLY ADVANCING LOAN TO M/S. EMAAR DIAMONDS LTD., THEREFORE, THE CLAIM OF THE ASSESSEE THAT ON 23 RD SEPTEMBER 2004, M/S. EMAAR DIAMONDS LTD., WHILE MAKING REPAYMENT HAS PAID BACK EXCESS AMOUNT PER MISTAKE IS QUITE PLAUSIBLE. CONSIDERING THE AFORES AID FACTS , WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE ACCRUED OF FURNISHING IN ACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME. THEREFORE, IMPOSITION OF MOHIT DIAMONDS PV T. LTD. 8 PENALTY UNDER SECTION 271(1)(C) IN THE PRESENT CASE, IN OUR VIEW, IS NOT JUSTIFIE D. ACCORDINGLY, WE DELETE THE PENALTY IMPOSED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.10.2015 SD/ - RAJENDRA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEM BER MUMBAI, DATED : 30.10.2015 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE REVENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI