VIDHYA SYNTHETIC (I) LTD, MUMBAI V. DCIT PALGHAR THANE, THANE

ITA 3647/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62687 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Assessee Lawyers: H S RAHEJA
• Section: 68; 144; 2; 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , !' !' !' !' , # # # # $ $ $ $ BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 3647/MUM./2011 ( #% & '& / ASSESSMENT YEAR : 200102 ) M/S. VIDHYA SYNTHETIC (I) PVT. LTD. 386/90, DADHOKARWADI, R.L. TRUST BUILDING, KALBADEVI ROAD MUMBAI 400 002 .. () / APPELLANT % V/S DY. COMMISSIONER OF INCOME TAX CIRCLE PALGHAR, THANE .... *+() / RESPONDENT ( . / PERMANENT ACCOUNT NUMBER NO. AABCV5203E #% &, - . / ASSESSEE BY : MR. H.S. RAHEJA / - . / REVENUE BY : MR. M. RAJAN % - / DATE OF HEARING 05.07.2012 ! 01' - / DATE OF ORDER 25.07.2012 ! ! ! ! / ORDER PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE, IS D IRECTED AGAINST THE IMPUGNED ORDER DATED 31 ST JANUARY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)II, THANE. THE SOLE GROUND R AISED BY THE ASSESSEE IS WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS ) WAS JUSTIFIED IN CONFIRMING THE PENALTY OF ` 38,42,906, IMPOSED BY THE ASSESSING OFFICER M/S. VIDHYA SYNTHETIC (I) PVT. LTD. 2 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), ON ACCOUNT OF VARIOUS ADHOC DISALLOWANCES. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN TEXTILE GO ODS. THE RETURN OF INCOME WAS FILED AT A LOSS OF ` 42,08,178, ON 31 ST OCTOBER 2001. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD N OT ATTEND THE PROCEEDINGS AND, ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE ENTIRE LOSS CLAIMED IN THE RETURN OF INCOME AND COMPLETED THE A SSESSMENT AT NIL INCOME, VIDE ORDER DATED 20 TH OCTOBER 2003. IN PURSUANCE OF THE ASSESSMENT ORDER , PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INITIATED. DURING THE FIRST APPELLATE PROCEEDINGS IN QUANTUM, THE LEA RNED COMMISSIONER (APPEALS) CONFIRMED THE ACTION OF THE ASSESSING OFF ICER AND DECIDED THE ISSUE AGAINST THE ASSESSEE, VIDE HIS ORDER DATED 1 ST SEPTEMBER 2004. AGAINST THIS, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. IN THE MEAN TIME, PENALTY ORDER PASSED WAS PASSED IMPOSING PENALTY UNDER SECT ION 271(1)(C), VIDE ORDER DATED 21 ST DECEMBER 2004. THIS PENALTY WAS CHALLENGED BEFORE THE LEARNED COMMISSIONER (APPEALS) WHICH WAS DELETED BY THE LEARNED COMMISSIONER (APPEALS), VIDE ORDER DATED 30 TH MAY 2005. NO APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE SAID O RDER. THEREAFTER, ON 28 TH AUGUST 2008, QUANTUM APPEAL WAS DECIDED BY THE TRIB UNAL AND THE MATTER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER, VIDE ORDER DATED 14 TH DECEMBER 2009, HAS PASSED SET ASIDE ORDER UNDER SE CTION 144 R/W 254 OF THE ACT, AFTER MAKING VARIOUS ADHOC DISALLOWANCE AND, FINALLY, THE ASSESSED INCOME STOOD AT A LOSS OF ` 4,58,660. THE ADDITIONS WHICH WERE MADE IN THE ASSESSMENT ORDER, WERE AS FO LLOWS: DONATION ` 1,500 AS PER SECTION 68 ` 74,000 AS PER SECTION 43B ` 25,69,431 OUT OF PURCHASES ` 61,77,761 25% OUT OF EXPENSES ` 8,93,886 M/S. VIDHYA SYNTHETIC (I) PVT. LTD. 3 3. ON THESE DISALLOWANCES AGGREGATING TO ` 97,16,578, PENALTY OF ` 38,42,906, WAS IMPOSED VIDE ORDER DATED 28 TH JUNE 2010. IN THE PENALTY PROCEEDINGS ALSO, THE ASSESSEE HAS NOT FURNISHED AN Y EXPLANATION. 4. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, I T WAS SUBMITTED BY THE ASSESSEE THAT DUE TO SERIES OF PROBLEMS AND THE ASSESSEES BUSINESS WAS GOING THROUGH A VERY PAD PHASE, REQUISITE INFORMATI ON BEFORE THE ASSESSING OFFICER COULD NOT BE FURNISHED. HOWEVER, IT WAS SUB MITTED THAT EVEN THOUGH THE ADDITIONS MADE IN THE ASSESSMENT ORDER HAS NOT BEEN CHALLENGED, YET PENALTY FOR CONCEALMENT OF INCOME ON FURNISHING OF INACCURATE PARTICULARS OF INCOME CANNOT BE LEVIED AS ALL THE ADDITIONS HAVE B EEN MADE PURELY ON AD HOC BASIS. THE ASSESSEES EXPLANATION HAS BEEN GIVE N IN PARAS9 AND 10 OF THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEA LS). THE LEARNED COMMISSIONER (APPEALS), HOWEVER, CONFIRMED THE PENA LTY, MOSTLY ON THE GROUND THAT NONFILING OF DETAILS REQUIRED BY THE A SSESSING OFFICER RAISES THE PRESUMPTION THAT PARTICULARS OF INCOME FILED BY THE ASSESSEE ARE NOT CORRECT. WHILE CONFIRMING THE PENALTY, HE HAS RELIED UPON VA RIOUS DECISIONS WHICH HAS BEEN GIVEN IN PARAS13 TO 16 OF THE APPELLATE ORDER . 5. BEFORE US, THE LEARNED COUNSEL, ON BEHALF OF THE AS SESSEE, SUBMITTED THAT DUE TO SOME UNAVOIDABLE CIRCUMSTANCES, THE APP EAL IN QUANTUM PROCEEDINGS COULD NOT BE FILED. HOWEVER, ON MERITS ALSO, PENALTY CANNOT BE SUSTAINED AS THERE IS NO MATERIAL BEFORE THE ASSESS ING OFFICER TO HOLD THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME. MOREOVER, ALL THE DETAILS WE RE AVAILABLE IN THE AUDITED STATEMENT OF ACCOUNTS WHICH IS PRIMAFACIE A GOOD E VIDENCE IN SUPPORT OF THE EXPENDITURE CLAIMED AND NOTHING HAS BEEN FOUND ON R ECORD THAT THESE EXPENSES ARE BOGUS OR THESE EXPENSES ARE NOT SUPPOR TED BY ANY EVIDENCE. 6. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT FAILURE TO FURNISH DETAILS AMOUNTS TO FURNISHI NG OF INACCURATE PARTICULARS OF INCOME. HE STRONGLY RELIED UPON THE FINDINGS OF THE LEARNED COMMISSIONER (APPEALS). M/S. VIDHYA SYNTHETIC (I) PVT. LTD. 4 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE NATURE OF DISALLOWANCE, IT CAN BE SEEN THAT MAJOR ITEMS ARE PURELY BASED ON ADHOC BASIS LIKE CLAIM OF FINA NCIAL CHARGES, DISALLOWANCE OF 25% OUT OF PURCHASES AND 25% ON ADM INISTRATIVE EXPENSES. THE OTHER ITEMS RELATE TO CREDIT OF TDS AND DONATIO N OF ` 1,500 AND ALSO UNSECURED LOAN OF ` 74,000. EVEN THOUGH, SUCH DISALLOWANCES HAVE ATTAI NED FINALITY IN THE QUANTUM PROCEEDINGS AS NO APPEAL HA S BEEN PREFERRED. HOWEVER, FOR THE PURPOSE OF PENALTY PROCEEDINGS, SU CH A FINDING CANNOT BE HELD TO BE CONCLUSIVE AS ALL THE RELEVANT DETAILS A RE AVAILABLE IN THE AUDITED BALANCE SHEET AND THERE IS NO MATERIAL ON RECORD TO SHOW THAT THESE EXPENSES ARE BOGUS. SINCE MOST OF THE DISALLOWANCE ARE ADHOC IN NATURE, WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE LEA RNED COMMISSIONER (APPEALS) IN CONFIRMING THE PENALTY. MERE DISALLOWA NCE OF CLAIM OF EXPENSES, PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME CANNOT BE LEVIED. THE RATIO AND PRINCIPLES L AID DOWN BY THE HON'BLE SUPREME COURT IN CIT V/S RELIANCE PETROPRODUCTS PVT . LTD., [2010] 322 ITR 158 (SC) SQUARELY APPLIES TO THE FACTS OF THE PRESE NT CASE, WHERE THEIR LORDSHIPS OBSERVED AND HELD AS FOLLOWS: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' U SED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT C LAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT P ENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT M/S. VIDHYA SYNTHETIC (I) PVT. LTD. 5 AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC ) AND SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 24 9 (SC) RELIED ON. 8. THUS, ON THE FACTS OF THE PRESENT CASE, PENALTY UND ER SECTION 271(1)(C) IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY L EARNED COMMISSIONER (APPEALS) IS HEREBY DELETED. 9. , 2 #% &, - 3 - / 45 6 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ! - 1' 7 8%2 25 TH JULY 2012 1 - 9 6 ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY 2012 SD/- . . R.S. SYAL ACCOUNTANT MEMBER SD/- !' !' !' !' # # # # AMIT SHUKLA JUDICIAL MEMBER MUMBAI, 8% 8% 8% 8% DATED: 25 TH JULY 2012 ! ! ! ! - -- - *# : *# : *# : *# : ;:' ;:' ;:' ;:' / COPY OF THE ORDER FORWARDED TO : (1) #% &, / THE ASSESSEE; (2) / / THE REVENUE; (3) < ( ) / THE CIT(A); (4) < / THE CIT, MUMBAI CITY CONCERNED; (5) :=9 *# #% , , / THE DR, ITAT, MUMBAI; (6) 9>& / GUARD FILE. +: *# / TRUE COPY !% !% !% !% / BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ? ?? ? / 4 4 4 4 / / / / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI