Dholu Construction and Projects Ltd., Ahmedabad V. The Income tax Officer, Ward-1(4), Ahmedabad

ITA 413/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8715 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 25-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: S N DIVATIA
• Keywords: Wrong claim
• Section: 271(1)(c); 2

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI AND SHRI D.C. AGARWAL. ITA NO.413/AHD/2007 (ASSESSMENT YEAR: 2001-02 ) DHOLU CONSTRUCTION AND PROJECTS LTD., S-1/A, MURLIDHAR COMPLEX, OPP. SNEH KUNJ SOCIETY, S.M.ROAD, AHMEDABAD-15. VS INCOME TAX OFFICER, WARD 1(4), INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD-14. (APPELLANT) (RESPONDENT) PAN: AABCD 5760 C APPELLANT BY : SHRI S.N. DIVATIA. RESPONDENT BY : SHRI M.C. PANDIT,SR.D.R. ( (( ( )/ )/)/ )/ ORDER PER: SHRI D.C. AGARWAL. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED C.I.T.(A) DATED 24-11-2006 WHEREIN HE HAS CONFIRMED THE PENALTY LEVIED U/S. 271(1) (C ) OF RS.3,95,500/-. 2. THE FACTS OF THE PRESENT CASE ARE DIRECTLY RELAT ED WITH THE FACTS AS DISCUSSED BY US IN ITA. NO.2913/AHD/2004 DECIDED ON THE EVEN DATE. NO PROOF WAS FILED OF ASSESSEE CLAIMING THE EXPENDITUR E OF RS.10 LACS PAID TO SHRI PRABHAKAR REDDY OF M/S. TIRUPATI TRADERS FOR A LLEGEDLY WITHDRAWING FROM THE BIDDING FOR OBTAINING THE CONTRACT FROM GM DC FOR EARTH REMOVING. IT WAS CLAIMED BY THE ASSESSEE THAT THERE WERE 3 BI DDERS FOR OBTAINING CONTRACT FROM GUJARAT MINERAL DEVELOPMENT CORPORATI ON (GMDC) FOR EARTH REMOVING. THE FIRST WAS M/S. J.B. FABRICATOR WHO H AD GIVEN THE LOWEST RATE OF RS.22.91 PER CUBIC METRE. THE NEXT WAS M/S. TI RUPATI TRADERS REPRESENTED BY MR. V. PRABHAKAR REDDY WHO HAD QUIT AND FINALLY IT WAS ASSESSEE WHO HAS QUOTED THE RATE OF RS.24.95 PER CU BIC METRE. J.P. FABRICATOR WITHDREW BECAUSE IT DID NOT HAVE ADEQUATE PLANT AND MACHINERY FOR THE WORK. M/S. TIRUPATI TRADERS WITHDREW ONLY WHEN HE AGREED TO RECEIVE A SUM OF RS.10 LACS FROM THE ASSESSEE AND GMDC AGREED TO AWA RD CONTRACT TO THE ASSESSEE ONLY WHEN ASSESSEE AGREED TO WORK AT THE L OWEST RATE OF RS.22.91 PER CUBIC METRE. ACCORDINGLY ASSESSEE PAID A SUM OF RS.10 LACS TO PRABHAKAR REDDY WHO THEN FILED A LETTER WITH GMDC WITHDRAWING FROM THE BIDDING BUT ALSO EXPRESSED UNWILLINGNESS TO WORK AT THE LOWEST RATE OF RS.22.91 PER CUBIC METRE. AS ASSESSEE HAD AGREED TO WORK AT LOWE ST RATE OF RS.22.91 PER CUBIC METRE AND PRABHAKAR REDDY HAD AGREED TO WITHD RAW FROM BIDDING ASSESSEE PAID RS.10 LACS TO HIM WHICH IS EVIDENCED BY BANK STATEMENT OF THE ASSESSEE SHOWING PAYMENT OF RS.5 LACS EACH ON 13.2. 01 AND 23.2.01. 3. THE ASSESSEE MADE A CLAIM OF THIS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT BUT IT WAS DISALLOWED BY THE A.O. HE ALSO I NITIATED PENALTY PROCEEDINGS IN RESPONSE TO WHICH ASSESSEE REQUIRED THE A.O. TO KEEP THE PROCEEDINGS PENDING AS IT HAD FILED APPEAL BEFORE T HE TRIBUNAL. 4. THE A.O HOWEVER, DID NOT AGREE AND LEVIED THE MI NIMUM PENALTY OF RS.3,95,500/- 5. THE LD. C.I.T.(A) CONFIRMED THE PENALTY ON THE G ROUND THAT THE REAL PURPOSE IS TOTALLY KNOWN TO THE ASSESSEE AND THERE IS NO BUSINESS EXPEDIENCY FOR THE PAYMENT OF THIS AMOUNT. IT WAS ONLY A DEVIC E ADOPTED TO REDUCE THE INCIDENCE OF TAX AND THE SAME AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. AGAINST THIS LD. A.R. FOR THE ASSESSEE S UBMITTED THAT MERELY BECAUSE ADDITION IS CONFIRMED DOES NOT MEAN THAT TH E CLAIM MADE BY THE ASSESSEE WHICH IS DISALLOWED BY THE A.O. WAS INCORR ECT OR FALSE LEADING INFERENCE THAT ASSESSEE HAS FILED INACCURATE PARTIC ULARS OF INCOME. THERE IS EVIDENCE SUBMITTED BY THE ASSESSEE IN THE FORM OF B ANK STATEMENT INDICATING TRANSFER OF MONEY FROM THE ACCOUNT OF THE ASSESSEE TO TIRUPATI TRADERS ON 13.2.01 AND 23.2.01. PRIOR TO THIS THERE IS A LETTE R WRITTEN BY MR. PRABHAKAR REDDY TO GMDC INDICATING HIS INTENTION TO WITHDRAW FROM THE BID. IT ALSO INDICATED THAT PRABHAKAR REDDY WOULD WORK WITH GMDC ONLY AT THE RATE OF 23.95 PER CUBIC METRE AND NOT AT THE LOWEST RATE TE NDERED BY THE FIRST BIDDER WHO QUIT ON ACCOUNT OF NON AVAILABILITY OF ADEQUATE PLANT AND MACHINERY WITH HIM. THERE IS NO MATERIAL WITH THE A.O. TO SHO W THAT EXPLANATION OF THE ASSESSEE WAS FALSE. FURTHER, THE CASE OF THE ASSESS EE COULD NOT BROUGHT INTO MISCHIEF OF EXPLANATION 1B TO SECTION 271(1)(C ) AS ALL THE CONDITIONS LAID DOWN THEREIN ARE NOT SATISFIED. 6. AGAINST THIS LEARNED D.R. RELIED ON ORDERS OF AU THORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW NO GOOD CASE HAS BEE N MADE OUT BY THE A. O. FOR LEVY OF PENALTY. THE ADDITION MADE BY THE A.O. AND BY CONFIRMATION THEREOF BY APPELLATE AUTHORITIES IS ONE THING AND L EVY OF PENALTY IS ANOTHER. 8. ADDITION HAS BEEN CONFIRMED ONLY ON THE GROUND T HAT IT IS CAPITAL IN NATURE OR THAT IT WAS NOT PROVED THAT IT WAS FOR BU SINESS PURPOSES. EVEN IN A CASE WHERE ASSESSEE IS NOT ABLE TO BRING OUT ADEQUA TE EVIDENCE TO PROVE BUSINESS PURPOSE, IT WOULD NOT LEAD AN AUTOMATIC IN FERENCE THAT CLAIM WAS MALAFIDE OR NOT GENUINE. SURROUNDING CIRCUMSTANCES HAS TO BE SEEN TO INFER THAT PAYMENT COULD HAVE BEEN MADE FOR BUSINESS PURP OSES THOUGH NOT PROVED TO THE EXTENT THAT IT CAN BE ALLOWED AS A DEDUCTION . AS ALREADY POINTED OUT ABOVE, PAYMENT HAS GONE FROM THE BANK ACCOUNT OF TH E ASSESSEE TO THE BANK ACCOUNT OF TIRUPATI TRADERS AND TIRUPATI TRADERS HA S FILED A LETTER OF WITHDRAWING FROM THE BID. BOTH ARE IN CLOSE PROXIM ITY WHICH MAY GIVE A PRIMA-FACIE INDICATION THAT ASSESSEE MIGHT HAVE PAI D THE MONEY FOR PERMITTING TIRUPATI TRADERS TO WITHDRAW FROM THE BI D AND THEREBY ENABLING HIM TO GRAB THE CONTRACT FROM GMDC. IT IS UNDISPUTE D POSITION OF LAW THAT PENALTY PROCEEDINGS ARE DIFFERENT FROM THE ASSESS MENT PROCEEDINGS AND ASSESSEE IS ENTITLED TO RENDER FRESH EXPLANATION AN D APPELLATE AUTHORITIES ARE REQUIRED TO APPRAISE THE EXPLANATION AND MATERIAL A VAILABLE ON RECORD IN ORDER TO FIND WHETHER MAIN PROVISION OF SECTION 271(1)(C ) ARE ATTRACTED OR WHETHER THE CASE OF THE ASSESSING AUTHORITY IS COVERED BY E XPLANATION TO SECTION 271(1)(C ). 9. A READING OF PENALTY ORDER OF THE A.O. CLEARLY I NDICATES THAT THE CHARGE OF FILING INACCURATE PARTICULARS HAS BEEN MADE ONLY BY INFERRING THAT CLAIM OF THE ASSESSEE IS WRONG. IN OUR CONSIDERED VIEW THE C HARGE OF FILING INACCURATE PARTICULARS CAN ONLY BE MADE WHEN A.O. IS ABLE TO P OINT OUT MATERIAL DIFFERENCE OUT OF THE DETAILS FURNISHED BY THE ASSE SSEE AS TO WHICH FACT OR PARTICULARS WAS INACCURATE AND WHAT WAS, IN FACT, C ORRECT FACT OR ACCURATE PARTICULARS. INFERENCE OF INACCURATE PARTICULARS CAN BE DRAWN ONLY WHEN IT IS COMPARED WITH ACCURATE PARTICULARS. WITHOUT POINT ING OUT INACCURACY IN THE PARTICULARS FILED BY THE ASSESSEE BY COMPARING WITH ACCURATE PARTICULARS TO BE MARSHALLED BY THE A.O., THROUGH INQUIRIES AND INVES TIGATION A CASE OF FILING INACCURATE PARTICULARS CANNOT BE SUSTAINED. MERELY BECAUSE THE CLAIM MADE BY THE ASSESSEE IS NOT FOUND ACCEPTABLE CANNOT LEAD TO THE INFERENCE THAT CLAIM WAS RATHER FALSE OR PARTICULARS FURNISHED IN SUPPORT OF THE CLAIM WERE INACCURATE. NON ACCEPTANCE OF THE CLAIM IS DIFFEREN T FROM FALSE CLAIM OR INACCURATE PARTICULARS HAVING BEEN FILED IN SUPPORT OF THE CLAIM. IN OUR CONSIDERED VIEW THE CASE OF THE A.O./LD. CIT(A) DOE S NOT FALL IN THE MAIN PROVISO OF SECTION 271(1)(C ) AS THERE IS NO EVIDEN CE TO THIS EFFECT. WHATEVER FINDING IS GIVEN ABOUT FURNISHING INACCURATE PARTIC ULARS IS NOT IN ACCORDANCE WITH THE LAW. 10. IF WE LOOK AT EXPLANATION TO SEC.271(1)(C ), WE NOTICE THAT EXPLANATION 1A IS NOT ATTRACTED BECAUSE ASSESSEE HAS IN FACT FU RNISHED EXPLANATION WHICH HAS BEEN REFERRED BY THE LD. CIT(A) IN HIS ORDER AS UNDER :- WORK OF OVER BURDEN REMOVAL AT GMDC RAJPARDI MINES WAS TO BE AWARDED TO TWO BIDDER NAMELY J.P. FABRICATOR, V. PR ABHAKAR REDDY AND DHOLU CONTRACTS CO., BEING 1 ST , 2 ND AND 3 RD LOWEST BIDDER, THAT GMDC DECIDED TO AWARD THE ABOVE WORK TO J.P. FABRIC ATORS,. M/S. V. PRABHAKAR REDDY BEING 2 ND LOWEST BIDDER WAS GETTING CHANCE TO WORK AT RS.22.91 RATE, THAT DHOLU CONTRACT CO. COULD HAV E ABOVE WORK AT RS.22.91 ONLY IF V. PRABHAKAR REDDY REFUSED TO WORK , THAT THE MATTER WAS DISCUSSED WITH M/S. PRABHAKAR REDDY AND IT WAS CONCLUDED THAT M/S. REDDY WOULD HAVE WAIVE THEIR RIGHT OF WORKING AT THE LOWEST RATE WITH GMDC PROVIDED M/S. V. PRABHAKAR REDDY IS COMPE NSATED BY RS.10 LACS THERE IS NO FINDING THAT THIS EXPLANATION IS FALSE. ACCORDINGLY EXPLANATION 1A IS NOT APPLICABLE. FOR INVOKING EXPLANATION 1B TO SECTION 271(1) (C) W E NOTICE THAT FOLLOWING 3 INGREDIENTS ARE REQUIRED TO BE SATISFIED CUMULATIVE LY THEY ARE :- (I) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. (II) HE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FID E AND (III) THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. (IV) THIS IS CLEARLY INFERABLE FROM PROVISIONS OF SECTION 271(1)(C ), EXPLANATION 1(B) WHICH READS AS UNDER :- SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSE OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 11. UNLESS THE A.O. GIVES A FINDING ON THE BASI S OF MATERIAL ON RECORD THAT ALL THESE CONDITIONS ARE CUMULATIVELY AND SIMULTANE OUSLY SATISFIED, PENALTY UNDER SECTION 271(1)(C) READ WITH EXPLANATION 1(B) CANNOT BE LEVIED. IN THE PRESENT CASE, ASSESSEE HAD OFFERED AN EXPLANATION T O THE EFFECT THAT HE HAD PAID A SUM OF RS.10 LACS FOR GRABING CONTRACT AND M ONEY HAS ACTUALLY PASSED ON TO M/S. TIRUPATI TRADERS. TO THIS EXTENT HE HAS SUBSTANTIATED THE CLAIM. BECAUSE OF THE FACT THERE IS NO WRITTEN AGREEMENT B ETWEEN THE ASSESSEE AND TIRUPATI TRADERS FOR WITHDRAWING FROM THE BID THERE IS NOTHING ELSE WHICH WAS REQUIRED TO BE FURNISHED IN ORDER TO SUBSTANTIA TE THE CLAIM. TO THIS EXTENT WE MAY SAY THAT FIRST INGREDIENT OF EXPLANATION 1B IS SATISFIED AGAINST THE ASSESSEE. REGARDING SECOND INGREDIENT THERE IS NOT HING IN THE RECORD TO SUGGEST THAT EXPLANATION OF THE ASSESSEE WAS NOT BO NAFIDE. SURROUNDING CIRCUMSTANCES AND CONSEQUENCE OF EVENTS DID INDICAT E THAT ASSESSEE MIGHT HAVE PAID MONEY TO GRAB THE CONTRACT FROM GMDC. SIM ILARLY, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY MATERIAL FACT TO THE COMPUTATION OF INCOME WAS IN FACT EXISTING BUT WAS NOT DISCLOSED B Y THE ASSESSEE. HAD THERE BEEN THE AGREEMENT BETWEEN ASSESSEE AND TIRUPATI TR ADERS EXISTING THEN THERE IS APPARENTLY NO REASON FOR THE ASSESSEE TO H IDE THAT AGREEMENT FROM THE DEPARTMENT. THEREFORE, GREATER PROBABILITY IS THAT SUCH AGREEMENT DID NOT ACTUALLY EXIST. IN VIEW OF THIS, INGREDIENT 2 AND 3 ARE NOT SATISFIED AGAINST THE ASSESSEE. THEREFORE, EXPLANATRION 1B ALSO CANNOT BE INVOKED. 12. IN VIEW OF THE ABOVE, WE HOLD THAT T HERE IS NO CASE FOR LEVY OF PENALTY U/S. 271(1)C). LEVY OF PENALTY IS ACCORDING LY CANCELLED. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 /03 /201 0. SD/- SD/- (BHAVNESH SAINI) (D.C.AGARWAL) JUDICIALMEMBER. ACCOUNTANT MEMBER. AHMEDABAD. DATED: 31 / 03 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.