ITO-12(3)(2), MUMBAI V. MR. SADRUDDIN TEJANI, MUMBAI

ITA 3714/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48386 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 07-04-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 08-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ASHIMA GUPTA
• Assessee Lawyers: D V LAKHANI
• Keywords: Opportunity of being heard; Difference of opinion
• Section: 68; 148; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI RAJENDRA S INGH (A.M.) ITA NO. 3712 TO 3714/MUM /2009 ASSESSMENT YEARS 1994-95, 1995-96 & 1997-98 INCOME TAX OFFICER, WARD 12(3)(2), ROOM NO. 102, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. MR. SADRUDDIN TEJANI, PROP. M/S JOLLY SHOES, F-63/64, OBEROI TOWERS, NARIMAN POINT, MUMBAI. 400 021. PAN : AAAPT7814P (APPELLANT) (RESPONDENT) APPELLANT BY : MRS. ASHIMA GUPTA RESPONDENT BY : SHRI D.V. LAKHANI O R D E R PER D.K. AGARWAL, J.M. ALL THESE APPEALS PREFERRED BY THE REVENUE ARE DIR ECTED AGAINST SEPARATE ORDERS ALL DATED 30.3.2009 PASSED BY THE L D. CIT (A) FOR THE A.YRS. 1994-95, 1995-96 & 1997-98. SINCE FACTS ARE IDENTICAL AND THE ISSUE INVOLVED IS COMMON, ALL THESE APPEALS WERE HE ARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO. 3712/MUM/2009 FOR A.Y. 1994-95 ARE THAT THE ORIGINA L ASSESSMENT WAS FINALISED U/S 143(3)/144 OF THE INCOME TAX ACT, 196 1 (THE ACT) ON 8.2.1999 DETERMINING TOTAL INCOME AT ` 31,99,845/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITIONS MADE BY THE A.O. ON FURTHER APPEAL, THE TRIBUNAL IN ITA NO. 5813 TO 5824/M/2002 DATED 28.8. 2004 RESTORED THE ISSUE TO THE FILE OF A.O. FOR ASSESSMENT IN ACCORDA NCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 2 PURSUANT TO THE ORDER OF THE TRIBUNAL, THE A.O. OBS ERVED IN THE IMPUGNED ASSESSMENT ORDER DATED 13.3.2006 PASSED U/S 143(3) R.W.S. 254 OF THE ACT THAT RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.10.94 DECLARING INCOME OF ` 1,64,510/-. THE RETURN WAS PROCESSED U/S 143(1)(A ) OF THE ACT ON 20.1.1995. THEREAFTER, INFORMATION WAS RECEI VED FROM THE ECONOMIC OFFENCES WING OF THE MUMBAI POLICE THAT CE RTAIN LEATHER CO- OPERATIVE SOCIETIES WERE ENGAGED IN THE BUSINESS OF ISSUING ACCOMMODATION BILLS TO VARIOUS ASSESSEES WHO WERE S HOWING PURCHASES FROM SUCH SOCIETIES. IN FACT, NO SALE OR PURCHASE WAS BEING DONE THROUGH THESE SOCIETIES AND ONLY BILLS WERE BEING OBTAINED FROM THEM. THE PAYMENT WAS MADE BY CHEQUES TO THESE SOCIETIES AND THEY WERE RETURNING BACK THE ENTIRE AMOUNT IN CASH TO THE ALLEGED PURCH ASERS AFTER KEEPING CERTAIN COMMISSION, WHICH GENERALLY RANGED FROM TWO TO THREE PERCENT. AFTER OBTAINING THIS INFORMATION FROM THE MUMBAI PO LICE, NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE ON 26.3.1997. THE ASSES SEE FILED RETURN OF INCOME ON 24.04.1997 SHOWING A TOTAL INCOME OF ` 1,64,510/-. IN RESPONSE TO THE NOTICE ISSUED U/S 142(1) AND SUBSEQ UENT NOTICES, THE ASSESSEE DID NOT FILE ALL THE DETAILS AS CALLED FOR , THEREFORE, THE A.O. COMPLETED THE ASSESSMENT AT AN INCOME OF ` 26,43,845/- WHEREIN HE HAS MADE ADDITION OF COMMISSION AND BROKERAGE ` 4,10,007/-, COMPENSATION EXPENSES ` 56,000/-, UNEXPLAINED LOANS ` 3,59,980/- AND G.P. ADDITION ` 16,53,348/- TOTALLING TO ` 24,79,335/- VIDE ORDER DATED 13.3.2006. WHILE COMPLETING THE ASSESSMENT, THE A.O. ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. ACCORDINGLY, THE A.O. IS SUED SHOW CAUSE NOTICE AS TO WHY PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOS ED. IN RESPONSE, THE ASSESSEE VIDE HIS LETTER DATED 29.2.2008, INTER ALI A, STATED AS UNDER (PARA 11 OF PENALTY ORDER) :- (1) THERE IS NO CAUSE FOR ACTION FOR INITIATION OF THE PENAL PROCEEDINGS UNDER SEC. 271(1)(C). ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 3 (2) THE ADDITIONS MADE IN RESPECT OF GP IS BASED ON SURMISED AND ESTIMATES AND HAS NOT BEEN SUBSTANTIATED BY AND LOG ICAL REASONING. (3) THE EXPLANATION SUBMITTED BY THE ASSESSEE AT TH E TIME OF THE FIRST ASSESSMENT AND AGAIN AT REASSESSMENT LEVEL HAVE NOT BEEN CONSIDERED AND REJECTED WITHOUT GIVEN ANY VALID AND ACCEPTABLE CAUSE FOR REJECTION. (4) THE ADDITION MADE U/S 68 DO NOT AUTOMATICALLY P ENAL PROCEEDINGS. (5) DISALLOWANCE OF EXPENSES DOES NOT AMOUNT TO ANY PENAL ACTION. (6) THE ASSESSEE HAS DISCHARGED HIS ONUS AS REQUIRE D UNDER LAW. (7) WHERE INCOME ASSESSED IS MORE THAN 80% THE QUES TION OF ANY WRONGFUL DISCLOSURE AND ANY WILLFUL NEGLECT. HOWEVER, THE A.O. DID NOT ACCEPT THE ASSESSEES SUB MISSION AND HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME TO THE EXTENT OF ` 4,56,275/- (UNEXPLAINED LOAN ` 1,09,980/- AND G.P. ADDITION ` 3,46,295/-) AND HENCE THE ASSESSEE IS LIABLE TO PEN ALTY AND ACCORDINGLY HE IMPOSED PENALTY OF ` 2,04,410/- VIDE ORDER DATED 27.3.2008 PASSED U/S 271(1)(C) OF THE ACT. ON APPEAL, THE LD. CIT(A ) WHILE OBSERVING THAT THE MATTER OF ADDITION OF UNEXPLAINED LOAN HAS BEEN RESTORED BACK BY THE TRIBUNAL TO THE FILE OF THE A.O., FURTHER OBSERVED THAT WITH REGARD TO THE G.P. ADDITION OF ` 3,46,295/-, THE ASSESSEE HAS DECLARED G.P. RATE OF 23.62% WHICH WAS ENHANCED BY THE A.O. TO 48%. HOWE VER, THE LD. CIT (A), IN QUANTUM APPEAL, HAS REDUCED THE SAME TO 30% . HE FURTHER OBSERVED THAT IN THE APPELLATE ORDER IN THE QUANTUM APPEAL, IT WAS ALSO OBSERVED THAT THE ESTIMATION MADE BY THE A.O. WAS N OT JUSTIFIED AS NO BASIS FOR ADOPTING THE G.P. RATE AT 48% HAD BEEN GI VEN. HE FURTHER OBSERVED THAT IT IS SETTLED LAW THAT THE PENALTY CA NNOT BE IMPOSED ON ESTIMATED ADDITIONS, UNLESS THERE IS A FINDING OF H AVING CONCEALED THE PARTICULARS OF INCOME OR FILING OF INACCURATE PARTI CULARS WHICH ARE ABSENT IN THE PRESENT CASE AND ACCORDINGLY HE CANCELLED TH E PENALTY LEVIED ` 2,04,410/-. ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 4 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN DIRECTING THE A.O. TO DELETE THE PE NALTY LEVIED U/S 271(1)(C) OF THE I.T. ACT 1961 AMOUNTING TO ` 2,04,410/- WITHOUT APPRECIATING THE FACT THAT THE ADDITION TO GROSS PR OFIT WAS MADE ON THE GROUND THAT PURCHASES WERE MADE FROM THE SOCIETIES WHICH HAVE A HISTORY OF ISSUING ACCOMMODATION BILLS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED. 4. AT THE TIME OF HEARING, THE LD. D.R. SUBMITS THA T IN THE QUANTUM PROCEEDINGS, THE TRIBUNAL HAS UPHELD THE G.P. ADDIT ION SUSTAINED BY THE LD. CIT(A), THEREFORE, THE LD. CIT(A) WAS NOT JUSTI FIED IN DELETING THE PENALTY IMPOSED BY THE A.O. ON THE SUSTENANCE OF G. P. ADDITION. SHE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE REVERSED AND THAT OF A.O. BE RESTORED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) FURTHER SUBMITS THAT THE G.P. ADDITION WAS MADE ON ESTIMATED BASIS AND IT IS A SETTLED LAW THA T ON ESTIMATION OF ADDITION, PENALTY IS NOT LEVIABLE AND, THEREFORE, T HE LD. CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE A.O. AND HIS ORDER BE UPHELD. 6. WE HAVE CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE PENALTY WAS IMPOSED ON THE SUSTENANCE OF G.P. ADDITION OF ` 3,46,295/-. ORIGINALLY, THE G.P. ADDITION WAS MADE AT ` 16,53,348/- BY APPLYING THE G.P. RATE AT 48% ON THE SALES OF ` 67,81,140/-. HOWEVER, ON APPEAL IN QUANTUM PROCEEDINGS, THE LD. CIT(A) HAS REDUCED THE G.P. RA TE AT 30% AS AGAINST 48% APPLIED BY THE A.O. AND CONSEQUENTLY THE G.P. A DDITION WAS REDUCED ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 5 TO ` 3,46,295/- WHICH WAS ALSO UPHELD BY THE TRIBUNAL, IN QUANTUM APPEAL. THE A.O. ON THE G.P. ADDITION AND ON THE UN EXPLAINED LOANS OF ` 1,09,980/-, THE ADDITION OF WHICH HAS BEEN RESTORED BACK TO THE FILE OF THE A.O. HAS IMPOSED IMPUGNED PENALTY. SINCE THE AD DITION OF UNEXPLAINED LOAN HAS BEEN RESTORED BACK BY THE TRIB UNAL TO THE A.O., THEREFORE, NO PENALTY IS LEVIABLE ON THE SAID ADDIT ION. AS REGARDS THE PENALTY ON THE ENHANCEMENT OF G.P. RATE SHOWN BY TH E ASSESSEE AT 23.62%, ENHANCED BY THE A.O. AT 48% AND REDUCED BY THE LD. CIT(A) TO 30% WHICH HAS ALSO BEEN UPHELD BY THE TRIBUNAL, WE ARE OF THE VIEW THAT IT IS NOT THE CASE OF REVENUE THAT THE G.P. RATE SH OWN BY THE ASSESSEE AT 23.62% WAS TOO LOW IN THIS LINE OF THE BUSINESS OR THE G.P. RATE APPLIED BY THE A.O. IS BASED ON RELEVANT MATERIAL OR THE G. P. RATE SUSTAINED BY THE LD. CIT(A) IS NOT BASED ON THE ESTIMATION OR IT IS NOT A CASE OF DIFFERENCE OF OPINION OR THE EXPLANATION SUBMITTED BY THE ASSESSEE WAS FOUND TO BE FALSE OR UNTRUE, WE ARE OF THE VIEW THA T ESTIMATED RATE OF PROFIT APPLIED ON THE TURNOVER OF THE ASSESSEE DOES NOT AMOUNT TO CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME. 7. IN CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. [201 0] 322 ITR 158 (SC) AT PAGE 166 IT HAS BEEN OBSERVED AND HELD THAT :- ......MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE E XPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVE NUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED B Y THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF T HE LEGISLATURE. 8. RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE DE CISION AND FOR THE REASONS AS STATED ABOVE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY THE A.O. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 6 ITA NO. 3713/M/2009, A.Y. 1995-96 ITA NO. 3714/M/2009, A.Y. 1997-98. 9. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE REVENUE, WE FOR THE REASONS AS DISCUSSED ABOVE HOLD THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THERE IS NO CON CEALMENT ON THE PART OF THE ASSESSEE AND ACCORDINGLY THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE PENALTY IMPOSED BY THE A.O. THE COMMO N GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 10. IN THE RESULT, REVENUES APPEALS STAND DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15.4.201 1 SD/ - (RAJENDRA SINGH) ACCOUNTANT MEMBER SD/ - (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 15.04.2011 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 34, MUMBA I 4. COMMISSIONER OF INCOME TAX, 24, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 3712 TO 3714/M/09 MR. SADRUDDIN TEJANI 7 1 DRAFT DICTATED ON 7 . 4 .11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 8 .4.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS