M/s Alka International Ltd., Aligarh V. A.C.I.T., Circle-1, Aligarh

ITA 334/AGR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6341 (ITAT-AGRA)
• Duration Of Justice: 5 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 05-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DIPENDRA MOHAN
• Keywords: Bad and doubtful debts; Agreed addition
• Section: 43B; 14A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND D R . MITHA LAL MEENA, ACCOUNTANT MEMBER I.T.A NO . 337/ AGRA/201 4 (ASSESSMENT YEAR - 20 0 8 - 0 9 ) I.T.A NO. 334/ AGRA/201 4 (ASSESSMENT YEAR - 2008 - 09 ) A SSESSEE BY SHRI DIPENDRA MOHAN, AR REVENUE BY SHRI WASEEM ARSHAD, SR . DR. ORDER PER , A. D. JAIN, JUDICIAL MEMBER : THESE APPEAL S HA VE BEEN FILED BY THE ASSESSEE S FOR ASSESSMENT YEAR 2008 - 09 , RESPECTIVELY, AGAINST THE ORDER OF THE LD. CIT ( A ), DATED 24 . 0 7 .201 5 , SUSTAINING THE PENALTIES LE VIED U/S 271(1)(C) OF THE I.T. ACT. M/S ALKA LOCKS (P) LTD. 19/37, JAIN P URI, ALIGARH PAN NO. AABCA1510B (ASSESSEE) V S .. ACIT, CIRCLE - 1 ALIGARH. (R EVENUE ) M/S ALKA INTERNATIONAL LTD., 19/37, JAIN PURI, ALIGARH PAN NO. AABCA1511A (ASSESSEE) VS.. ACIT, CIRCLE - 1 ALIGARH. (REVENUE) DATE OF HEARING 2 0 . 0 3 .201 7 DATE OF PRONOUNCEMENT 15 . 05 .201 7 I.T.A NO. 337 & 334 /AGRA/201 4 2 ITA NO. 337/AGRA/2014 2. THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER DOCUMENTS BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS, SINCE THE RECORDS OF THE ASSESSEE WERE SEIZED BY THE CBI. THIS FACT STANDS RECORDED IN THE ASSESSMENT ORDER. THE AO MADE ADDITION OF RS.4,13,62 0/ - ON ESTIMATION BASIS. THE ASSESSEE ACCEPTED THE ASSESSMENT, AS, ACCORDING TO THE ASSESSEE, ITS MANUFACTURING FACILITY HAD CLOSED DOWN AND IT WAS UNDER CBI I NVESTIGATION. THE PENALTY WAS LEVIED, OBSERVING THAT THE ADDITION WAS ACCEPTED BY THE ASSESSEE AN D THE ASSESSEE CAME UNDER INTENTION OF CONCEALMENT OF INCOME. THE LD. CIT(A) HAS HELD THAT THE BURDEN CAST ON THE ASSESSEE UNDER EXPLANATION - 1 TO SECTION 271(1)(C) OF THE ACT HAD NOT BEEN DISCHARGED. 3. THE ASSESSEE SAYS, AS BEFORE THE A UTHORITIES BELOW, THAT IT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING ITS BOOKS OF ACCOUNT AND OTHER DOCUMENTS BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS, AS CBI INVESTIGATION WAS ON AND THE CBI HAD SEIZED ALL ITS RECORD, AS HAS ALSO BEEN MENTIONED IN THE ASSESSMENT ORDER , AS WELL AS IN THE PENALTY ORDER. IT HAS BEEN SUBMITTED THAT SINCE THE ADDITION WAS BASED ON ESTIMATION AND IT WAS NOT AN AGREED ADDITION AND THERE IS NO CONCEALMENT OF INCOME, THE PENALTY BE DELETED. RELIANCE HAS BEEN PLACED ON THE FOLLOWING CASE LA WS: (I) CIT VS. AERO TRADERS P. LTD, 322 ITR 316 (DEL) . (II) HARI G OPAL S INGH V S. CIT, 258 ITR 85 (P & H) . I.T.A NO. 337 & 334 /AGRA/201 4 3 (III) CIT VS. SUBHASH TRADING COMPANY , 221 ITR 110 (GUJ) . (IV) NARESH CHAND AGRAWAL VS. CIT 357 ITR 514 (ALL) . 4. THE LD. DR, BY WAY OF SYNOPSIS AND THE ARGUMENTS ADVANCED, HAS CONTENDED THAT NOTICE U/S 143(2) OF THE ACT W AS ISSUED TO THE ASSESSEE BEFORE THE CBI ACTION, BUT THE ASSESSEE DID NOT PRODUCE ITS BOOKS OF ACCOUNT; THAT IT IS NOT A CASE OF ESTIMATION SIMPLICITOR, BUT THERE IS AN ELEMENT OF CONCEALMENT INVOLVED; THAT THE OD LIMIT OF THE ASSESSEE WAS MORE THAN ITS TURN OVER; THAT THE WORK - IN - PROGRESS AND STOCK DETAILS WERE NOT PROVIDED; THAT THE BAIL APPLICATIONS (COPIES FILED) S H O W WHY DETAILS OF CREDITORS AND STOCK WERE NOT PROVIDED; AND THAT AS PER SEBI CIRCULAR DATED 09.12.20 0 9 (COPY FILED), IRRESPECTIVE OF THE CBI SEARCH , THERE IS NOT HING IN LAW TO PRECLUDE THE ASSESSEE FROM MAINTAINING BOOKS OF ACCOUNT. 5. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE LD. CIT(A) HAS RELIED ON EXPLANATION - 1 TO SECTION 271(1)(C) OF THE ACT. AS PER THIS EXPLA NATION, WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON, SUCH PERSON FAILS TO OFFER AN EXPLANATION, OR O FFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE, OR OFFERS AND EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTI ATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE AMOUNT ADDED IN COMPUTING THE TOTAL INCOME AS A RESULT THEREOF SHALL B E DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. I.T.A NO. 337 & 334 /AGRA/201 4 4 6. IT IS SEEN THAT EXPLANATION - 1 TO SECTION 271(1)(C) IS NOT APPLICABLE TO THE CASE OF THE ASSESS EE AND IT HAS BEEN MISAPPLIED. THE ASSESSEE ADMITTEDLY COULD NOT PRODUCE ITS BOOKS OF ACCOUNT BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS. THIS WAS BECAUSE THE ASSESSEE WAS UNDER CBI INVESTIGATION AND ITS COMPLETE RECORD HAD BEEN TAKEN AWAY BY THE CBI. THIS WAS THE EXPLANATION OFFERED BY THE ASSESSEE BEFORE THE A UTHORITIES B EL OW. THIS EXPLANATION WAS NOT FOUND TO BE FALSE. RATHER, ITS STANDS RECORDED IN THE ASSESSMENT ORDER, THE PENALTY ORDER AND ALSO IN THE IMPUGNED ORDER (PAGES 11 - 12 THEREOF) . IT IS NOWHERE THE CASE OF THE A UTHORITIES B ELOW THAT THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE ITS E XPLANATION. ON THE CONTRARY, AS PER PAGE 2 OF THE ASSESSMENT ORDER, AS ALSO REPRODUCED AT PAGE 9 OF THE IMPUGNE D ORDER, IT WAS KEEPING IN VIEW THE FACT, ALONG WITH OTHER FACTS, THAT THE ASSESSEES RECORDS HAD BEEN TAKEN AWAY BY THE CB I, THAT THE ADDITION WAS MADE ON THE BASIS OF ESTIMATION. ON THIS VERY BASIS, IT CANNOT BE HELD, AS HAS ALSO NOT BEEN DONE BY THE A UTHORITIES BELOW, THAT THE ASSESSEES EXPLANATION WAS NOT BONA FIDE, OR THAT ALL RELEVANT FACTS HAD NOT BEEN DISCLOSED BY THE ASSESSEE DESPITE CIRCUMSTANCES WITHIN ITS CONTROL. 7. THEREFORE, EXPLANATION - 1 TO SECTION 271(1)(C) CANNOT, IN ANY MANNER, BE SAID TO BE APPLICABLE TO THE ASSESSEES CASE. SINCE, AS PATENT FROM THE RECORD, THE ADDITION WAS BASED ON ESTIMATION AND NO CONC EALMENT WAS INVOLVED, NO CONCEALMENT PENALTY IS ATTRACTED TO SUCH AN ADDITION, AS HELD IN, INTER ALIA, AERO I.T.A NO. 337 & 334 /AGRA/201 4 5 TRADERS, (SUPRA), HARIGOPAL SINGH (SUPRA), SUBHASH TRADING COMPANY (SUPRA) AND NARESH CHAND AGARWAL (SUPRA). 8. APROPOS THE ARGUMENTS OF THE DEPARTMENT, NONE OF THESE ARGUMENTS EMANATES FROM THE IMPUGNED ORDER. IN FACT, NONE OF THESE OBJECTIONS HAVE BEEN RAISED EITHER IN THE PENALTY ORDER, OR IN THE IMPUGNED ORDER. IT IS TRITE THAT NO PARTY CAN BE ALLOWED TO TRY TO MAKE OUT A NEW CASE AT THIS STAGE, SUBSTITUTING OR SU PPLEMENT ING THE REASONING AND FINDINGS OF FACT CONCURRENTLY RECORDED BY THE A UTHORITIES BELOW. IT IS ALSO NOT THE DEPARTMENTS CASE THAT THESE AR GUMENTS PERTAIN TO EVENTS POST THE PASSING OF THE IMPUGNED ORDER, RELEVANT TO THE ISSUE UNDER CONSIDERATION AND THUS REQUIRING BEING TAKEN COGNIZANCE OFF. THEREFORE, THESE ARGUMENTS ARE REJECTED. SO FAR AS REGARDS THE CASE LAWS RELIED ON BY THE DEPARTMENT, IN RATHNAM & CO. VS. ACIT, 124 ITR 376 (MAD), THE ADDIT ION WAS MADE ON AN AGREED BASIS, WHICH IS NOT SO IN THE PRESENT CASE. IN CIT VS. BALASUBRAMANIAN & BROS. CO., 20 TAXMAN 215 (MAD), THE MATTER RELAT ED TO A.YS. 1967 - 68 AND 1969 - 70. THE ASSESSEE HAD SHOWN INCOME FROM SALE OF IMPORT LICENSES. SUCH INCOME WA S FOUND TO BE MUCH BELOW THE MARKET QUOTATION. THE INCOME RETURNED WAS 80% LESS THAN THE INCOME ASSESSED. IT WAS HELD THAT AS PER THE EXPLANATION, PENALTY WAS LEVIABLE. HOWEVER, IT IS SEEN THAT THE LAW STANDS AMENDED W.E.F. 1.4.1976. THAT BEING SO, THIS DE CISION IS NOT APPLICABLE. SIMILAR IS THE POSITION WITH REGARD TO CIT VS. ONKAR SARAN AND SONS, 1992 AIR 1139 (SC). IN CIT VS. ARCOTECH LTD., 262 CTR 278 (DEL), SINCE LOSS FROM SALE OF INVESTMENT HAD BEEN SHOWN AS A REVENUE LOSS, DISALLOWANCE HAD I.T.A NO. 337 & 334 /AGRA/201 4 6 BEEN M ADE U/S 43B OF THE ACT, THE TRUE AND FULL FACTS OF INCOME HAVING BEEN FOUND NOT TO HAVE BEEN DISCLOSED. ON THE OTHER HAND, IN THE PRESENT CASE, THE INCOME WAS ASSESSED ON THE BASIS OF ESTIMATION, TO WHICH, THE ASSESSEE DID NOT AGREE. THERE IS NO FINDING TH AT THE RELEVANT FACTS WERE NOT DISCLOSED. B.A. BALASUBRAMANIAN & BROS. COMPANY. VS. CIT, 236 ITR 977 (SC) IS ALSO NOT APPLICABLE , SINCE IT PERTAINS TO THE P RE - AMENDED PROVISIONS OF SECTION 271(1)(C) OF THE ACT . I N K.P. MADHUSUDHANAN VS. CIT, 251 ITR 99 (SC), THE ASSESSEE WAS UNABLE TO FURNISH EVIDENCE OF LOANS OFFERED AS ADDITIO NAL INCOME. IT IS NOT SO HEARIN . IN M/S HARISH HOSIERY MART VS. ITO, (DPB 25 - 54), ORDER DATED 19.11.2010, PASSED BY THE A H MEDABAD BENCH OF THE TRIBUNAL IN ITA NO.3009/AHD/2007, FOR A.Y. 2001 - 02, THE ASSESSEE, DURING THE SURVEY CONDUCTED, ADMITTED EXISTENCE OF EXCESS STOCK AND DID NOT EXPLAIN THE SOURCE OF INVESTMENT. IN CIT VS. ZOOM COMMUNICATION PVT. LTD., (DPB 55 - 60), ORDER D ATED 24.05.2010, IN - ADMISSIBLE DEDUCTIONS WERE CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. IN GUJ A RAT STATE FINANCIAL SERVICES LTD. VS. ACIT (DPB 61 - 80), DISALLOWANCES WERE MADE U/S 14A OF THE ACT IN BAD DEBTS AND DIMINUTION IN VALUE OF INVESTMENTS BY THE AO, WHERE THE INTENTION OF THE ASSESSEE W AS FOUND TO BE TO CLAIM SUCH DEDUCTION DELIBERATELY AND WITH WILLFUL INTENTION TO EVADE TAX. IN MAK DATA P. LTD. VS. CIT (DPB 81 - 90), IT WAS AFTER THE DEPARTMENT HAD DETECTED DOCUMENTS IN THE SURVEY CONDUCTED THAT THE ASSESSEE MADE SURRENDER DURING THE AS SESSMENT PROCEEDINGS. CLEARLY, THE FACTS IN THESE CASES ARE AT VARIANCE FROM THOSE IN THE CASE OF THE PRESENT ASSESSEE, WHEREIN, I.T.A NO. 337 & 334 /AGRA/201 4 7 THE INCOME WAS ASSESSED ON THE BASIS OF ESTIMATION, WITHOUT THE ASSESSEE AGREEING TO IT. 9. IN VIEW OF THE ABOVE, THE GRIEVANC E OF THE ASSESSEE IS FOUND TO BE JUSTIFIED. IT IS ACCEPTED AS SUCH. THE ORDER UNDER APPEAL IS REVERSED. THE PENALTY IS DELETED. ITA NO. 334/AGRA/2014 10. THE FACTS IN THIS APPEAL ARE, MUTATIS MUTANDIS, EXACTLY SIMILAR TO THOSE IN ITA NO. 337/AGRA/2014. TH EREFORE, OUR ABOVE OBSERVATION S IN ITA NO. 337/AGRA/2014 ARE SQUARELY APP LICABLE TO ITA NO.334/AGRA/2014. T HEREFORE, IN ACCORDANCE THERE WITH , IN THIS APPEAL ALSO, THE GRIEVANCE OF THE ASSESSEE IS ACCEPTED AND THE PENALTY IS DELETED ON REVERSING THE IMPUGNE D ORDER. 11. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 15 / 0 5 / 2017 . SD/ - SD/ - ( D R . MITHA LAL MEENA) (A.D. JAIN) ACCOU N TANT MEMBER JUDICIAL MEMBER DATED 15 / 0 5 /201 7 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR