VIKAS BHALCHANDRA PATHARKAR, MUMBAI V. ACIT CIR 23(3), MUMBAI

ITA 441/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92441 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 05-11-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAWAN KU MAR BEERLA
• Assessee Lawyers: C N VAZE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , , BEFORE SHRI G. S. PANNU , A M AND SHRI AMIT SHUKLA , J M ./ I.T.A. NO. 441/MUM/2013 ( / ASSESSMENT YEAR: 2002 - 03 ) VIKAS BHALCHANDRA PATHARKAR B - 44, CHEMBUR BLUE DIAMOND CHS, CHEMBUR, MUMBAI - 400 071 / VS. ASST. CIT - 23(3), PRATYAKSHAKAR BHAVAN, B.K.C., BANDRA, MUMBAI - 400 051 ./ ./ PAN/GIR NO. AGVPP 9259 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI C. N. VAZE / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 16.04.2 015 / DATE OF PRONOUNCEMENT : 24 .04.2015 / O R D E R PER G. S. PANNU , A. M.: THIS IS AN APPEA L BY THE ASSESSEE D IRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 34 , MUMBAI (CIT(A) FOR SHORT) DATED 29.10.2012 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER (A.O.) DATED 24.03.2008 U/S .271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 2002 - 03. 2. AT THE OUTSET, THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS A DELAY OF 6 DAYS IN FILING OF APPEAL. HE MADE A REFERENCE TO AN AFFIDAVIT FILED BY THE ASSESSEE IN SUPPORT OF THE REASONS FOR THE DELAY. THE BONAFIDES OF THE REASONS HAVE NOT 2 ITA NO. 441/MUM/2013 (A.Y. 2002 - 03) VIKAS BHALCHANDRA PATHARKAR VS. ASST. CIT BEEN CHALLENGED BY THE REVENUE, AND AS A CONSEQUENCE THE DELAY WAS CONDONED, AS ANNOUNCED AT THE TIME OF HEARING. 3 . IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESSEE IS AGAINST THE SUSTENANCE OF PENALTY OF RS.3,23,224/ - IMPOSED U/S.271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCES OF RS.8 ,65,104/ - AND RS.1,70,630/ - , REPRESENTING UNPROVED SUNDRY CREDITORS AND ADHOC DISALLOWANCE RESPECTIVELY. 4 . BRIEFLY PUT , THE RELEVANT FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF ELECTRICAL CONTRACTING IN THREE PROPRIETA RY CONCERN S, NAMELY M/S. LUSTRE ENGG. CORPORATION, TRAFOTEK ELECTRICALS AND DIAMOND ELECTRICALS. FOR THE A.Y. 2002 - 03, ASSESSEE FILED HIS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS. 18,84,520/ - , WHICH WAS SUBJECT TO SCRUTINY ASSESSMENT U/S.143(3) OF TH E ACT DATED 31.01.2005 . IN THE ASSESSMENT, THE TOTAL INCOME WAS ASSESSED AT RS.32,80,780/ - , WHICH INTER - ALIA , INCLUDED T W O ADDITIONS RELATING TO UN PROVED SUNDRY CREDITORS AND NON - VERIFIABLE AND PERSONAL EXPENSES OF R S.8,65,104/ - AND RS.1,72,630/ - RESPECTIV ELY. SUBSEQUENTLY, ASSESSEE HAS BEEN FOUND GUILTY FOR CONCEALMENT OF INCOME QUA THE AFORE - SAID ADDITIONS WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT , BY WAY OF AN ORDER DATED 24.03.2008. ACCORDINGLY, THE A.O. LEVIED PENALTY U/S. 271(1)(C) OF THE ACT TO THE EXTENT OF RS.3,22,224/ - , BEING 100% OF THE TAX SOUGHT TO BE EVADED WITH RESPECT TO THE IMPUGNED TWO DISALLOWANCES. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE A.O. , AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 5 . BEFORE US, THE LD. REPRESE NTATIVE OF THE ASSESSEE VEHEMENTLY POINTED OUT THAT THOUGH THE TWO ADDITIONS HA VE BECOME FINAL BECAUSE THE APPEAL OF THE ASSESSEE IN THE QUANTUM PROCEEDINGS HAS ALSO BEEN DISMISSED BY THE CIT(A) , H OWEVER, THE SAME DOES NOT INVITE PENALTY U/S.271(1)(C) OF T HE ACT, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. IT HAS BEEN POINTED OUT THAT THE ADHOC DISALLOWANCE WAS MADE ON MERE SU RMISE AND CONJECTURES AND NOT ON THE BASIS OF ANY PARTICULAR EV IDENCE OF THE ASSESSEE HAVING CLAIMED ANY NON - BUSINESS E XPENDITURE. EVEN WITH REGARD TO THE ADDITION ON ACCOUNT OF UNPROVED SUNDRY CREDITORS, OUR ATTENTION WERE INVITED TO THE DISCUSSION IN THE ASSESSMENT ORDER TO 3 ITA NO. 441/MUM/2013 (A.Y. 2002 - 03) VIKAS BHALCHANDRA PATHARKAR VS. ASST. CIT POINT OUT THAT NO FALSITY WAS ESTABLISHED BY THE A.O. WITH REGARD TO THE BALANCE OF THE IMPUGNED S UNDRY CREDITORS. 6 . THE LD. REPRESENTATIVE POINTED OUT THAT IN THE COURSE OF QUANTUM PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE HAD DULY SUBMITTED ALL THE DETAILS AND SUPPORTING S AND THAT IN THE REMAND PROCEEDINGS, THE ASSESSEE HAD PRODUCED VARIOUS PART IES ALSO FOR CROSS VERIFICATION. NECESSARY CONFIRMATIONS WERE ALSO FILED DURING THE STAGE OF THE REMAND PROCEEDINGS , T H OUGH ASSESSEE COULD NOT FURNISH THE SAME IN COURSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE A.O. ON ACCOUNT OF MEDICAL AILMENT S . THE LD. REPRESENTATIVE POINTED OUT THAT SUCH SUBMISSIONS HAD BEEN DISMISSED BY THE CIT(A) IN THE QUANTUM PROCEEDINGS IN THE ROUTINE MANNER. 7 . ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GEN UINENESS OF THE CREDITORS AND, THEREFORE, THE PENALTY U/S.271(1)(C) OF THE ACT HAS BEEN RIGHTLY SUSTAINED BY THE CIT(A). T HE LD. DR ALSO REFERRED TO THE DISCUSSION IN THE IMPUGNED ORDER OF THE CIT(A) WHICH SHOWED THAT THE CONFIRMATION LETTERS FURNISHED BY THE ASSESSEE INDICATED EITHER BOGUS OR NON - EXISTING PAN S AND, THEREFORE, THE CIT(A) HAS MADE NO MISTAKE IN SUSTAINING THE PENALTY U/S.271(1)(C) OF THE ACT. 8 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. INSOFAR AS THE ADHOC DISALLOWANCE OF RS.1,7 2,630/ - IS CONCERNED, WE FIND THAT IN THE C OURSE OF ASSESSMENT PROCEEDINGS, THE A.O. TREATED CERTAIN PERCENTAGE OF EXPENSES INCURRED ON TELEPHONE, VEHICLE, ETC. AS RELATABLE TO PERSONAL USE AND, THEREFORE, DISALLOWED A SUM OF RS.1,72,630/ - IN AN ADHOC MANN ER . THE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT IT IS A PURE ADHOC DISALLOWANCE WITHOUT ANY SPECIFIC EVIDENCE BROUGHT OUT BY THE A.O. IN OUR CONSIDERED OPINION, SUCH AN ADDITION DOES NOT IPSO FACTO LEAD TO A CONCLUSION OF CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ASPECT AND DIRECT THE A.O. TO DELETE THE PENALTY WITH RESPECT TO THE SAID ADDITION. EVEN WITH REGARD TO 4 ITA NO. 441/MUM/2013 (A.Y. 2002 - 03) VIKAS BHALCHANDRA PATHARKAR VS. ASST. CIT THE ADDITION MADE ON ACCOUNT OF UNPROVED SUNDRY CREDITOR S , THE DISCUSSION IN THE ASSESSMENT ORDER REVEALS THAT IT IS A CASE , WHERE THE ASSESSEE FAILED TO SUBSTANTIATE THE BALANCE L YING TO THE CREDIT OF THE SUNDRY CREDITORS , AND IT IS NOT A CASE WHERE T HE CREDIT BALANCE S HAVE BEEN FOUND TO BE FA L S E OR BOGUS. THOUGH THE A.O. HELD THAT IN THE ABSENCE OF REQUISITE CONFIRMATIONS FROM THE RESPECTIVE CREDITORS , THE AMOUNTS WERE TO BE TREATED AS INCOME . S O, HOWEVER, MERE NON - FURNISHING OF CONFIRMATION BY A CRED ITOR CANNOT BE TAKEN TO MEAN THAT THE CREDIT BALANCE REPRESENT ED BOGUS LIABILIT Y . WHILE, NON - FURNISHING OF CONFIRMATIONS MAY BE A GOOD GROUND FOR MAKING AN ADDITION, SO HOWEVER IT CANNOT BE TAKEN AS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF IN COME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. WITH REGARD TO THE OBSERVATIONS OF THE CIT(A) IN THE QUANTUM PROCEEDINGS THAT THE ASSESSEE HA D FURNISHED NON - GENUINE PAN S , THE SAME IN OUR VIEW IS NOT JUSTIFIED. WE FIND THAT THE CIT(A) INFERRED SO , MERELY ON THE BASIS OF PERUSAL OF THE PAN S AND NOT ON THE BASIS OF ANY VERIFICATION EXERCISE. IN FACT, ASSESSEE EXPLAINED THAT THE CIT(A) WAS UNDER AN IMPRESSION THAT THE PAN NUMBER BELONG ED T O A PARTNERSHIP FIRM , WHEREAS IT WAS A CASE OF AN INDIVIDUAL / PR OP RIETOR SHIP AND OBVIOUSLY THE PAN NUMBER WOULD BE REFLECTIVE OF THE STATUS OF THE PERSON AS THAT OF AN INDIVIDUAL. BE THAT AS IT MAY, WE FIND THAT THE CIT(A) MISDIRECTED HIMSELF IN CO NCLUDING THAT THE PAN NUMBER S WERE BOGUS AND NON - EXISTING WITHOUT CARRYI NG OUT THE NECESSARY VERIFICATION EXERCISE. THEREFORE, IN OUR VIEW, HAVING REGARD TO THE ENTIRE CONSPECTUS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT THE SUNDRY CREDITORS IN QUESTION WERE FOUND TO BE BOGUS SO AS TO JUSTIFY THE IMPOS ITION OF PENALTY U/S.271(1)(C) OF THE ACT. IN FACT, IT IS MERELY A CASE WHERE THE ASSESSEE FAILED TO SUBSTANTIATE THE SUNDRY CREDITORS AND IT IS NOT A CASE WHERE THE SUNDRY CREDITOR S WERE FOUND TO BE BOG US OR REPRESENTING A NON - EXISTING LIABILITY. THUS, TH E ADDITION OF RS.8,65,104/ - ON ACCOUNT OF UNPROVED CREDITORS DOES NOT ATTRACT THE PROVISION OF SECTION 271(1)(C) OF THE ACT, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 9 . AS A CONSEQUENCE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT TH E A.O. TO DELETE THE PENALTY LEV IED AT RS .3,23,224/ - U/S.271(1)(C) OF THE ACT. 5 ITA NO. 441/MUM/2013 (A.Y. 2002 - 03) VIKAS BHALCHANDRA PATHARKAR VS. ASST. CIT 10 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 24 TH , 201 5 S D/ - SD/ - ( AMIT SHUKLA ) ( G. S. PANNU ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 2 4 . 0 4 .201 5 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI