POONAM PROPERTY CONSTRUCTION CO. P. L;TD, MUMBAI V. ITO 9(2)(4), MUMBAI

ITA 3634/MUM/2010

• Counselvise Citation: 363419914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALEXANDER CHANDY
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI B RAMAKOTAIAH, ACCOUNTANT MEMBER I T A NO: 3634/MUM/2010 (ASSESSMENT YEAR: 2005-06) POONAM PROPERTY CONSTRUCTION CO. P. LTD. APPELLAN T MUMBAI (PAN: AAACP3995L) VS INCOME TAX OFFICER 9(2)(4), MUMBAI RESPONDENT ASSESSEE BY: MR K GOPAL REVENUE BY: MR ALEXANDER CHANDY DATE OF HEARING: 1 ST AUGUST 2011 DATE OF PRONOUNCEMENT: 10 TH AUGUST 2011 O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE LEVY OF PENALTY FOR CONCEALMENT OF INCOME UNDER SECTION 271(1)(C) O F THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IS A COMPANY WHICH WAS ONCE ENGAGED IN THE BUSINESS AS BUILDER BUT FOR THE PAST SEVERAL YEARS THERE WAS NO ACTIVITY EXCEPT TO MAINTAIN THE ESTABLISHMENT. IN THE YEAR UNDER APPEAL THE ASSESSEE INCURRED EXPENSES AND DEPRECIAT ION OF ` 14,036/- AND FILED A RETURN DECLARING THE SAME AS B USINESS LOSS. THE ASSESSING OFFICER WHILE EXAMINING THE BALANCE S HEET ACCOMPANYING THE RETURN OF INCOME, NOTICED THAT AN AMOUNT OF ` 11,93,029/- WAS SHOWN AS LIABILITY IN THE BALANCE S HEET TO M/S EVEREST CONSTRUCTION. A CONFIRMATION WAS DIRECTED TO BE FILED FROM ITA NO: 3634/MUM/2010 2 THE CREDITOR, WHICH THE ASSESSEE COULD NOT COMPLY W ITH. IN THE ABSENCE OF ANY DETAILS OR CONFIRMATION FROM THE CRE DITOR, THE ASSESSING OFFICER PROPOSED TO ADD BACK THE LIABILIT Y UNDER SECTION 41(1) OF THE ACT. THE ASSESSEE PROTESTED BY POINTI NG OUT THAT THE CREDITOR HAD FILED A SUIT IN THE BOMBAY HIGH COURT, WHICH WAS PENDING AND ONLY ON DISPOSAL OF THE SUIT WILL THE A SSESSEE KNOW WHETHER THE AMOUNT IS PAYABLE OR NOT. IT WAS ALSO STATED THAT THE LIABILITY WILL CONTINUE TO REMAIN IN THE ASSESSEES BOOKS TILL THE VERDICT OF THE COURT AND CANNOT BE WRITTEN BACK DUR ING THE PENDENCY OF THE SUIT. THE EXPLANATION OF THE ASSESSEE WAS N OT ACCEPTED BY THE ASSESSING OFFICER, WHO NOTED THAT NO DETAILS OF THE SUIT, COPY OF THE PLAINT, ETC. WERE MADE AVAILABLE AND THEREFORE THERE WAS NO POSSIBILITY OF VERIFYING THE ASSESSEES CLAIM. HE THEREFORE INVOKED SECTION 41(1) AND ADDED BACK THE AMOUNT OF THE LIAB ILITY AS THE INCOME OF THE ASSESSEE. THE ADDITION WAS ACCEPTED BY THE ASSESSEE AND NO APPEAL WAS FILED. 3. THE ASSESSING OFFICER THEREAFTER INITIATED PENAL TY PROCEEDINGS FOR CONCEALMENT OF INCOME. THE ASSESSE E SUBMITTED THAT IT HAD PLACED ALL THE FACTS BEFORE THE ASSESSI NG OFFICER INCLUDING THE BALANCE SHEET WHERE THE LIABILITY WAS SHOWN AS OUTSTANDING AND THUS THERE WAS NO INTENTION TO CONCEAL ANY INCOME. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD EVEN FILED WITH THE ASSESSING OFFICER A COPY OF ITS SOLICITORS LETTER DATED 13 TH JUNE 1991, IN WHICH IT WAS STATED THAT THE SUIT WAS DISMISSED ON 11 TH JUNE 1989 BUT THE CREDITOR HAD FILED A RESTORATION APPLICATION WHICH WAS LIKELY TO COME UP FOR HEARING ON 29 TH JUNE 1991. THE ASSESSING OFFICER HOWEVER ITA NO: 3634/MUM/2010 3 HELD THAT THE ASSESSEE COULD NOT GIVE ANY DETAILS A BOUT THE SUIT AND ACCORDINGLY HELD THAT THERE WAS NO LIABILITY IN EXI STENCE, ABOUT WHICH THE ASSESSEE WAS ALSO AWARE AND THUS THERE WAS A DE LIBERATE ATTEMPT TO CONCEAL THE REAL NATURE OF THE LIABILITY AND CONSEQUENTLY EVADE TAX. HE ACCORDINGLY IMPOSED A PENALTY OF ` 4,36,560/-. 4. ON APPEAL, THE CIT(A) CONFIRMED THE PENALTY STAT ING THAT ALL THE CONDITIONS OF EXPLANATION 1 TO SECTION 271(1)(C ) WERE SATISFIED. HENCE THE PRESENT APPEAL. 5. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE R IVAL CONTENTIONS. THERE IS NO DISPUTE THAT THE ASSESSEE HAD SHOWN THE LIABILITY IN ITS BALANCE SHEET AS ON 31.03.2005. T HERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAD FURNISHED A COPY OF I TS SOLICITORS LETTER DATED 13 TH JUNE 1991 TO THE ASSESSING OFFICER. THERE IS NO DISPUTE THAT THE AMOUNT HAD BEEN ALLOWED IN THE EAR LIER YEARS AS DEDUCTION. THE LETTER OF THE SOLICITOR SHOWS THAT THE SUIT WAS DISMISSED ON 11 TH JUNE 1989. IF THAT IS SO, THE LIABILITY CEASED IN THE PREVIOUS YEAR ENDED 31.03.1990 AND THEREFORE THE PR OPER YEAR OF ASSESSMENT SHOULD HAVE BEEN THE ASSESSMENT YEAR 199 0-91. THE SOLICITORS LETTER ALSO SHOWS THAT THE RESTORATION APPLICATION WAS LIKELY TO COME UP FOR HEARING ON 29 TH JUNE 1991. THEREAFTER THERE IS NO INFORMATION ON RECORD AND NEITHER THE ASSESSEE N OR THE ASSESSING OFFICER IS AWARE AS TO WHAT DEVELOPMENTS HAD TAKEN PLACE. THE ASSESSEE NO DOUBT HAS ACCEPTED THE ADDI TION UNDER SECTION 41(1) OF THE ACT, BUT WE ARE NOT SURE WHETH ER THE ADDITION CAN BE PROPERLY MADE IN THE ASSESSMENT YEAR 2005-06 MERELY BECAUSE THE ASSESSEE WAS NOT ABLE TO FURNISH THE DE TAILS OF THE ITA NO: 3634/MUM/2010 4 SAME WHEN THE SUIT ITSELF HAD BEEN DISMISSED MUCH E ARLIER. THE CORRECTNESS OF THE ADDITION IN THE YEAR UNDER APPEA L CAN BE CANVASSED EVEN IN THE PENALTY PROCEEDINGS EVEN THOU GH THE ADDITION HAD BEEN ACCEPTED AND IT HAS BEEN SO HELD BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JAINARAYAN BABULAL VS. CIT (1988) 170 ITR 399 (BOM). WHEN THE ADDITION ITSELF IS NOT MADE ON FIRM GROUNDS, IT CANNOT BE SAID THAT THE ASSESSEE H AD CONCEALED ITS INCOME. MOREOVER, THE ASSESSEE HAS SHOWN THE AMOUN T IN ITS BALANCE SHEET AS STILL OUTSTANDING EVEN AS ON 31.03 .2005 AND ALL THAT CAN BE SAID IS THAT NO FURTHER DETAILS HAVE BE EN FORTHCOMING. BUT THE SOLICITORS LETTER SHOWS NO FURTHER DETAILS ABOUT THE SUIT OR THE RESTORATION APPLICATION AND THEREFORE THERE WAS NO OTHER WAY THE ASSESSEE COULD HAVE COLLECTED THE DETAILS. IN ANY CASE THE ASSESSEE HAVING MADE SUCH DISCLOSURE AS WAS POSSIBL E UNDER THE CIRCUMSTANCES OF THE CASE, THE CHARGE OF CONCEALMEN T OF INCOME CANNOT STAND. THE RATIO OF THE JUDGMENT OF THE SUP REME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) ALSO APPLIES TO THE PRESENT CASE. WE ARE THEREFORE SATISFIED THAT THERE IS NO MERIT IN THE PENALTY IMP OSED, WHICH IS HEREBY CANCELLED AND THE APPEAL ALLOWED WITH NO ORD ER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST 2011. SD/- SD/- (B RAMAKOTAIAH) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 10 TH AUGUST 2011 SALDANHA ITA NO: 3634/MUM/2010 5 COPY TO: 1. POONAM PROPERTY CONSTRUCTION CO. P. LTD. 12, UDYOG SAGAR, S V ROAD GOREGAON (WEST), MUMBAI 400 062 2. ITO 9(2)(4), MUMBAI 3. CIT-9, MUMBAI 4. CIT(A)-20, MUMBAI 5. DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI