ROOPAM ELECTRIC STORES, MUMBAI V. ITO 14(2)(2), MUMBAI

ITA 3524/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8026 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-03-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 29-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Assessee Lawyers: C V DHARKAR
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI T.R.SOO D (A.M) ITA NO.3523/MUM/2009(A.Y.1999-2000) ITA NO.3524/MUM/2009(A.Y. 2000-2001) M/S. ROOPAM ELECTRIC STORES, 40, JAI MAHAL ESTATE, LOHAR CHAWL, MUMBAI 02. PAN:AAFR 3555P (APPELLANT) VS. THE ITO 14(2)(2), 3 RD FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI 21. (RESPONDENT) APPELLANT BY : SHRI C.V.DHARKAR RESPONDENT BY : SHRI SHRAVAN KUMAR ORDER PER N.V.VASUDEVAN, J.M, THESE ARE APPEAL BY THE ASSESSEE AGAINST TWO ORDER S BOTH DATED 5/3/2009 OF CIT(A), XIV, MUMBAI RELATING TO ASSESSM ENT YEAR 1999-2000 AND 2000-2001. IN BOTH THESE APPEALS THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A), WHEREBY THE CIT(A) HAS CONFIRM ED THE ORDER OF THE AO IMPOSING PENALTY ON THE ASSESSEE UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF TRADING IN ELECTRICAL ITEMS. THE ASSESSEE IN THE COURSE OF ITS BUSINESS HAD TRANSACTION WITH M/S. USHA SHRIRAM (INDIA). THE ASSESSEE HAD S HOWN OUTSTANDING PAYABLE TO M/S. USHA SHRIRAM (INDIA) IN ITS BOOKS O F ACCOUNT. A NOTICE UNDER SECTION 133(6) OF THE ACT HAD BEEN ISSUED BY THE AO TO M/S. USHA SHRIRAM (INDIA) AND AS PER THEIR BOOKS OF ACCOUNTS NO AMOUNT WAS RECEIVABLE FROM THE ASSESSEE. IN VIEW OF THE ABOVE THE AO HE LD THAT THE LIABILITY SHOWN ITA NO.3523/MUM/2009(A.Y.1999-2000) ITA NO.3524/MUM/2009(A.Y. 2000-2001) ) 2 BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT NO LONGER E XISTS AND HE, THEREFORE, TREATED THE AMOUNT SHOWN AS OUTSTANDING IN THE NAME OF M/S. USHA SHRIRAM (INDIA) BY THE ASSESSEE, AS A LIABILITY WHI CH NO LONGER EXISTS AND APPLYING THE PROVISIONS OF SECTION 41(1) OF THE ACT , THE AO TREATED THE SAME AS INCOME AND BROUGHT TO TAX. THE AMOUNT SO BROUGH T TO TAX IN A.Y 2000-01 AND 1999-2000 WAS RS. 7,61,000/- AND RS. 1,52,949/- RESPECTIVELY. IT IS IN RESPECT OF THE AFORESAID ADDITION MADE IN THE COURS E OF ASSESSMENT PROCEEDINGS THAT THE AO IMPOSED PENALTY ON THE ASSE SSEE HOLDING THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME . 3. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT IT HAD NOT RECEIVED ANY COMMUNICATION FROM M/S. USHA SHRIRAM (INDIA) THAT T HE ASSESSEES LIABILITY TOWARDS IT HAD BEEN GIVEN UP. IT WAS ALSO SUBMITTE D THAT IT IS ONLY BECAUSE OF THE DEEMING PROVISIONS OF SECTION 41(1) THAT THE ADDITION HAS BEEN MADE. IT WAS SUBMITTED THAT AS FAR AS ASSESSEE IS CONCERN ED IT HAD ALWAYS TREATED ITS LIABILITY TO M/S. USHA SHRIRAM (INDIA) AS SUBSI STING. IT WAS, THEREFORE, SUBMITTED THAT THE ADDITION MADE THOUGH CONFIRMED B Y THE ITAT IN THE QUANTUM PROCEEDINGS, PENALTY CANNOT BE IMPOSED ON T HE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE C IT(A), HOWEVER, AFTER REFERRING TO THE FINDING OF THE TRIBUNAL IN THE QUA NTUM PROCEEDINGS CONFIRMED THE ORDER OF THE AO. 4. AGGRIEVED, BY THE ORDER OF THE CIT(A) THE ASSESS EE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT IN THE QUANTUM PROCEEDINGS THE ADDITION HAS BEEN SUSTAINED PURELY ON THE BASIS THAT THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE. THIS BASIS MAY HOLD GOOD FOR MAKING THE ADDITION IN QUANTUM PROCEEDINGS, BUT IN THE PENALTY PROCEEDINGS ITA NO.3523/MUM/2009(A.Y.1999-2000) ITA NO.3524/MUM/2009(A.Y. 2000-2001) ) 3 WE HAVE TO LOOK AT THE BONA FIDES OF THE CLAIM MADE BY THE ASSESSEE. ADMITTEDLY THERE IS NO EVIDENCE ON RECORD TO SHOW T HAT THE ASSESSEE WAS AWARE OF THE FACT THAT M/S. USHA SHRIRAM (INDIA) HA VE WRITTEN OFF THE AMOUNT WHICH THE ASSESSEE IT HAD TO PAY THEM. THE ADDITIO N HAS BEEN MADE ONLY ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNT OF M/S . USHA SHRIRAM (INDIA). THE ADDITION HAS BEEN MADE BY INVOKING THE PROVISIO NS OF SECTION 41(1) OF THE ACT. SINCE THE ASSESSEE WAS NOT AWARE OF THE W RITE OFF BY M/S. USHA SHRIRAM (INDIA), IT CONTINUED TO SHOW ITS LIABILITY TO M/S. USHA SHRIRAM (INDIA) AS OUTSTANDING IN ITS BOOKS. IN THE CIRCUM STANCES IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED PARTICULARS OF INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME. THIS ASPECT OF THE CASE HAS BEEN OVERLOOKED BY THE AO AS WELL AS THE CIT(A). THE LAW IS WELL SETTLED THAT THE FACT THAT THE ADDITION HAS BEEN CONFIRMED IN THE QUANTUM PROCEEDI NGS IS NOT CONCLUSIVE. IN THIS REGARD, WE MAY USEFULLY REFER TO THE DECIS ION OF THE ITAT MUMBAI IN THE CASE OF ITO VS. PARIKH INVESTMENT & DEVELOPMEN T PVT. LTD. (2001) 43 SOT 537 (MUM), WHEREIN THE TRIBUNAL HAD EXPLAINED T HAT PENALTY IS NOT AUTOMATIC. WHENEVER ADDITIONS ARE MADE, THE FINDIN GS GIVEN IN THE ASSESSMENT IS GOOD EVIDENCE, BUT NOT CONCLUSIVE IN PENALTY PROCEEDINGS. THE TRIBUNAL THEREAFTER EXPLAINING THE DECISION IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD., 189 TAXMAN 322 AND DHARMENDRA T EXTILE PROCESSORS, 306 ITR 277 HELD THAT BONA FIDE BELIEF OR EXPLANATI ON OFFERED BY THE ASSESSEE, IF NOT FOUND TO BE FALSE OR UNTRUE THEN IT CANNOT B E SAID THAT THERE WAS ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR VIEW THE RATIO LAID DOWN IN THE AFORESAID DECISION IS SQ UARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE ARE OF THE VIEW THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS BONA FIDE AND IN THE CIRCUMSTANCES NO PENALTY CAN BE IMPOSED ON THE ASSESSEE. IN OUR VIEW THE FACTS AND CIRCUMSTANCES OF THE ITA NO.3523/MUM/2009(A.Y.1999-2000) ITA NO.3524/MUM/2009(A.Y. 2000-2001) ) 4 PRESENT CASE DOES NOT JUSTIFY IMPOSITION OF PENALTY ON THE ASSESSEE. WE, THEREFORE, DIRECT THE AO THAT THE PENALTY IMPOSED B E CANCELLED. 6. IN THE RESULT, BOTH THE APPEAL OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 23 RD DAY OF MARCH, 2011. SD/- SD/- (T.R.SOOD) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 23RD MARCH, 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RD BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3523/MUM/2009(A.Y.1999-2000) ITA NO.3524/MUM/2009(A.Y. 2000-2001) ) 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 17/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 17/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER