Shri Prakashchand Makhija P/o M/s Prakash Radio & Watch Co., Indore V. The ITO, Indore

ITA 350/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0047 (ITAT-INDORE)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-07-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Gift
• Section: 271(1)(c); 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.II) BENCH : INDORE BEFORE SHRI M.L.GUSIA,A.M. PAN NO. : ABMPM6099G I.T.A.NO. 350/IND/2009. A.Y. : 2004-05 SHRI PRAKASHCHAND MAKHIJA, ITO, PROP. M/S. PRAKASH RADIO & WATCH CO., VS 5(2), C/O ARORA BANTHIA & TULSIYAN, C.AS. SILVER ARC PLAZA, 6 TH FLOOR, 20/1, NEW PALASIA, INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI AJAY TULSIYAN, C. A. RESPONDENT BY : SMT. APARNA KARAN, ADDL. CIT DR O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-II, INDORE, ON 18.3.2009, FOR THE ASSES SMENT YEAR 2004-05. 2. IN THE APPEAL MEMO, THE ASSESSEE HAS TAKEN AS MANY AS THREE GROUNDS OF APPEAL. HOWEVER, GROUND NOS. 2, & 3 HAVE NOT BEEN PRESSED. THEREFORE, THE SAME ARE DISMISSED. -: 2 :- 2 3. GROUND NO.1 IS THAT THE LD.CIT(A) ERRED IN UPHOLDIN G THE PENALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT, OF RS . 17,100/-. 4. THE FACTS ARE THAT THE ASSESSEE CLAIMED TO HAVE TAK EN LOAN IN CASH FROM THREE PERSONS I.E. SHRI MOHAN CHOUHAN, SH RI SONU AND SHRI SANJAY SINGH OF RS. 19,000/- EACH TOTALING TO RS. 5 7,000/-. 5. DURING COURSE OF EXAMINATION OF BOOKS OF ACCOUNT IN ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THESE AMO UNTS WERE TAKEN IN THE YEAR UNDER CONSIDERATION AND THE SAME HAS ALSO BEEN REPAID TO THE CREDITORS. THUS, THE ACCOUNTS WERE SQUARED UP IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE. ON BEING ASKED TO FURNISH DETAILS OF THE ABOVE LOAN, THE ASSESSEE FILED CONFIRMATION, BUT COULD NOT PRODUCE THESE CREDITORS FOR EXAMINATION BY THE ASSESSING OFFICER. IT IS EXPLAIN ED TO THE AO BY THE ASSESSEE VIDE LETTER DATED 20 TH SEPTEMBER, 2006, THAT THE ASSESSEE HAD RECEIVED LOANS ON 19000/- EACH FROM SHRI MOHAN CHOU HAN, SHRI SONU AND SHRI SANJAY SINGH ON 15.3.2003. THESE LOANS WER E TAKEN DURING THE FINANCIAL YEAR I.E. 3 YEARS AGO FROM THE EMPLOYEES OF THE ASSESSEE SHRI MOHAN CHOUHAN AND SHRI SONU. SHRI SANJAY SINGH WAS THE FRIEND OF SHRI SONU. AT THE TIME OF ASSESSMENT PROCEEDINGS, S HRI MOHAN CHOUHAN AND SHRI SONU LEFT THE JOB FROM THE ASSESSE ES CONCERN. -: 3 :- 3 THEREFORE, THE CREDITORS COULD NOT BE PRODUCED AND THE TOTAL AMOUNT WAS OFFERED FOR ADDITION WITH THE RIDER THAT NO CON CEALMENT PENALTY WOULD BE INITIATED. IT IS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO HAS WRONGLY MENTIONED AT PARA 5 OF PAGE 3 OF THE ASSESSMENT ORDER THAT THE ABOVE LOAN, ADMITTED TO B E THE CASH OF THE ASSESSEE HIMSELF. HOWEVER, IT WAS EXPLAINED THAT TH E ASSESSEE WAS NOT IN A POSITION TO PRODUCE THE CREDITORS AS HE WAS NO T AWARE ABOUT THEIR WHEREABOUTS AFTER A LAPSE OF THREE YEARS FROM THE D ATE OF TRANSACTION. THEREFORE, TO AVOID LITIGATION, THE ASSESSEE HAS AG REED TO PAY TAX ON THE SAID AMOUNT. IN VIEW OF THE ABOVE, IT IS CONTENDED THAT MERELY BY AGREEING TO ADDITION WITH A VIEW TO BUY PEACE AND M AINTAIN CORDIAL RELATIONSHIP WITH THE DEPARTMENT, DOES NOT CALLED F OR ANY PENALTY OF CONCEALMENT. IN SUPPORT OF HIS CONTENTION, HE PLACE D RELIANCE ON THE CASE LAW OF PANNALAL R. SHIVHARE, 47 TTJ 577 (BOM) . 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE ARGUED THAT THE ASSESSEE SURRENDERED THE ABOVE AMOU NT, WHEN THE AO RAISED SPECIFIC QUERIES. THE ASSESSEE HAS NO OTHER ALTERNATIVE BUT TO OFFER THE SAME FOR TAX. THEREFORE, THE PENALTY HAS RIGHTLY BEEN LEVIED U/S 271(1)(C) OF THE I.T. ACT. -: 4 :- 4 7. I NOTED THAT IN PARA 5 OF THE ASSESSMENT ORDER, THE AO HAS WRONGLY MENTIONED THAT THE ASSESSEE HAS ADMITTED TH AT THE ABOVE CASH LOAN, IN FACT, IS HIS OWN MONEY, THEREFORE, OFFERED FOR TAX. HOWEVER, I NOTED FROM LETTER DATED 20 TH SEPTEMBER, 2006 OF THE ASSESSEE, ADDRESSED TO THE AO, WHEREIN IT IS STATED THAT THE LOANS WERE TAKEN THREE YEARS AGO FROM ITS EMPLOYEES AND THOSE EMPLOYEES ARE NO LONGE R IN EMPLOYMENT OF THE ASSESSEE AND THE ASSESSEE IS NOT AWARE OF TH EIR WHEREABOUTS. THEREFORE, HE AGREED FOR THE ADDITION SUBJECT TO TH E CONDITION THAT NO PENALTY PROCEEDINGS SHALL BE INITIATED. IN THIS REG ARD, HE PLACED RELIANCE ON THE DECISION OF THIRD MEMBER BENCH OF I.T.A.T.,D ELHI IN THE CASE OF ADDL. CIT VS. PREMCHAND GARG, 24 DTR (DEL)(T.M.)(TR IB) 513, WHEREIN AT PAGE 515, IT IS HELD AS UNDER :- THE GIFTS ARE SURRENDERED TO BE TAXED IN ORDER TO BUY PEACE AND TO AVOID LITIGATION IN THE MATTER. IT WAS MADE SUBJECT TO THE CONDITION THAT PENALTY PROCEEDINGS BE NOT INITI ATED. IT IS TRUE THAT LETTER OF SURRENDER DOES NOT OBLITERATE T HE ORIGINAL RETURN AND SUPPRESSION OF INCOME THEREIN BUT WHEN T HE SURRENDER WAS MADE BEFORE DETECTION OR WITHOUT ANY MATERIAL ON RECORD SUGGESTING INCOME WITHHELD, IT W OULD BE -: 5 :- 5 A CASE OF VOLUNTARY OFFER AND WOULD IN THAT CASE BE NOT A CONCEALMENT OF INCOME BY THE ASSESSEE. IT IS TRUE T HAT THE ASSESSMENTS CANNOT BE MADE BY BARGAINING AND THE AO IS WITHIN HIS RIGHT TO CONSIDER THE WHOLE ISSUE AS PER LAW FOR INITIATION AND LEVY OF THE PENALTY, BUT ON THE BASI S OF MATERIAL ON RECORD. IT WAS A VOLUNTARY ACTION OF TH E ASSESSEE TO COME FORWARD AND STATE ITS TRUE INCOME AND THERE FORE IT WOULD NOT BE A CASE OF CONCEALMENT BY THE ASSESSEE AT THE TIME WHEN THE ASSESSMENT WAS TAKEN UP. AFTER THE DE CISION OF THE SUPREME COURT IN UNION OF INDIA VS. DHARMEND RA TEXTILE PROCESSORS (2008) 219 CTR ( SC) 617 THERE I S NO REQUIREMENT OF MENS REA TO BE ESTABLISHED AND IT IS ONLY A CIVIL LIABILITY AND THEREFORE DECISION OF THE SUPRE ME COURT IN K. C.BUILDERS & ANR. VS. ACIT, (2004) 186 CTR ( S.C.) 721: (2004) 265 ITR 562 ( S. C. ) HOLDING THAT THE WORD CONCEALMENT INHERENTLY INVOLVES THE MENTAL CONDIT ION OF THE ASSESSEE WITH REGARD TO THE DEFAULT MAY NOT BE A GOOD LAW. HOWEVER, THAT DOES NOT MEAN THAT THE PROVISION CONTAINED IN EXPLANATION 1 ARE GIVEN A COMPLETE GO BYE AND -: 6 :- 6 ARE NOT APPLICABLE. THE SURRENDER OF THE AMOUNT AFT ER RECEIPT OF THE QUESTIONNAIRE CANNOT LEAD TO AN INFE RENCE THAT IT WAS NOT VOLUNTARY IN ABSENCE OF ANY MATERIAL ON RECORD SUGGESTING IT TO BE BOGUS OR UNTRUE OR THE INCOME O F THE ASSESSEE BEFORE SUCH SURRENDER. CIT VS. SURESH CHA NDRA MITTAL, (2001) 170 CTR (S.C.)182: (2001) 251 ITR 9 ( S.C.) RELIED ON ; K.P.MADHUSUDHANAN VS. CIT, (2001) 169 CTR ( S.C.) 489: (2001) 251 ITR 99 ( S. C.) DISTINGUISHED. 8. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , AS DISCUSSED ABOVE AND ALSO PLACING RELIANCE ON THE DE CISION OF I.T.A.T., DELHI BENCH, THIRD MEMBER BENCH (SUPRA), THE PENALT Y OF RS. 17,100/- IS CANCELLED. THUS, THIS APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED ON 10TH AUGUST, 2009 . SD/- (M.L.GUSIA) ACCOUNTANT MEMBER DATED : 10 TH AUGUST, 2009. CPU* 297