ACIT, CHENNAI V. Narasimhulu Gali Munusami, CHENNAI

ITA 452/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4396 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Wrong claim

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: CHENNAI . . . , !.. $ , ) BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.452/MDS/2017 * * /ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-15, CHENNAI. VS. SHRI NARASIMHULU GALI MUNUSAMI, 14/01, KRISHNAM AACHARI AVENUE, ADYAR, CHENNAI-600 020. [PAN: AAFPM 2699 Q ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR.P.RADHAKRISHNAN, JCIT ./- 0 /RESPONDENT BY : MR.G. BASKAR, ADV. 0 /DATE OF HEARING : 19.04.2017 0 /DATE OF PRONOUNCEMENT : 07.06.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 18.10.2016 OF COMMISSIONER OF INCOME TAX (APPEALS)- 15, CHENNAI, IN ITA NO.292/CIT(A)-15/2015-16 FOR THE AY 2012-13 AND RA ISED THE FOLLOWING GROUNDS: ITA NO.452/MDS/2017 :- 2 -: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THE LD CIT (A) ERRED TO DIRECTING THE AO TO DELETE TH E PENALTY U/S.271(1)(C)FOR RS.12,42,668/-. 2.1 THE LD CIT(A) FAILED TO APPRECIATE THAT THIS IS A D ELIBERATE ATTEMPT WAS MADE TO CONCEAL THE INCOME OF THE ASSESSEE, FOR THE ASSESSM ENT YEAR 2012-13, BY FURNISHING INACCURATE PARTICULARS OF INCOME, SPECIF ICALLY WITH REGARD TO THE UNDISCLOSED INCOME AS PER FORM-26AS, DISALLOWANCE O F DEPRECIATION AND ADDITION OF SUNDRY CREDITORS AMOUNTING TO RS.41,42,224/-. 2.2 THE LD.CIT(A) ERRED IN PLACING RELIANCE ON THE DECIS ION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT LTD., (322 ITR 158) WHEN NO DIVERGENT VIEWS ON THE ISSUE EXISTS AND THE FACTS WERE DISTORTED SO AS TO MAKE BOGUS CLAIM OF FORM 26AS, DEPRECIATION AND SUNDRY CREDITORS. 2.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE DETAILS OF INCOME AND DEPRECIATION AND SUNDRY CREDITORS AND ACCEPTED FOR DISALLOWANCE WHIC H IS A CLEAR INDICATION OF FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. 2.4 THE LD CIT(A) ERRED IN PLACING RELIANCE ON THE DECIS ION OF THE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT LTD., (322 ITR 158) AS IT IS DISTINGUISHABLE WITH REFERENCE TO THE FACTS OF THE CASE, WHEN A DIRECT R ULING WAS AVAILABLE IN THE CASE OF SUNIL CHAND GUPTA VS CIT (218 TAXMANN 128(ALLAHABAD ) AND IN THE CASE OF M/S.PALKHI INVESTMENTS & TRADING CO.(P) LTD VS ITO, M UMBAI (288 ITR 473) (BOMBAY) IN RELATION TO THE FACTS OF THE PRESENT CAS E. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASID E AND THAT OF THE ASSESSING OFFICER RESTORED. 2.0 DELAY: THE REVENUE FILED APPEALS WITH DELAY OF 32 DAYS AND THE LD.AO FILED THE CONDONATION PETITION EXPLAINING THE REASON FOR DELAY. WE HEARD BOTH THE PARTIES AND CONDONE THE DELAY. 3.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO THE IMPOSITION OF PENALTY U/S.271(1)(C) OF IT ACT. FOR THE AY 2012-13, THE A SSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,07,28,130/- O N 28.09.2012. THE ASSESSMENT WAS COMPLETED U/S.143(3) ON TOTAL INCOME OF RS.1,48,70,350/-. THE AO MADE ADDITION TO THE RETU RN OF INCOME AS UNDER: ITA NO.452/MDS/2017 :- 3 -: ADDITION OF UNDISCLOSED INCOME AS PER SEC.26AS RS. 16,09,085.00 DISALLOWANCE OF DEPRECIATION RS. 2,11,846.00 ADDITION OF SUNDRY CREDITORS RS. 23,21,294.00 TOTAL RS. 1,48,70,350.00 4.0 THE AO INITIATED PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS AND ISSUED NOTICE TO THE ASS ESSEE CALLING FOR HIS EXPLANATION. THE ASSESSEE EXPLAINED THAT THERE WAS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS AND THE ADDITION MADE BY THE AO WAS RELATED TO THE ADVANCE RECEIVED FROM BRI TANNIA INDUSTRIES FOR SALE OF PRODUCTS WHICH CANNOT BE ASSESSED AS INCOME AS PER IT ACT, BUT ACCEPTED TO PURCHASE PEACE WITH THE DEPARTMENT. TH E ASSESSEE FURTHER STATED THAT THE EXCESS DEPRECIATION WAS CLAIMED INA DVERTENTLY. THE ASSESSEE AGREED FOR THE ADDITION TO AVOID PROTRACTE D LITIGATION WITH THE DEPARTMENT AND RELIED ON THE DECISION OF CIT V. MAN JUNATHA COTTON JINNING FACTORY V CIT AND ARGUED THAT THE NOTICE IS SUED U/S.271(1) WAS DEFECTIVE BY NOT MAKING KNOWN THE OFFENCE FOR WHICH THE PENALTY IS INITIATED. ACCORDINGLY, ARGUED THAT THE NOTICE ISS UED U/S.274 R.W.S.271 NEEDS TO BE QUASHED. NOT BEING CONVINCED WITH THE E XPLANATION OF THE ASSESSEE, THE AO LEVIED THE PENALTY OF RS.12,42,668 /- BEING 100% TAX SOUGHT TO BE EVADED. AGAINST THE ORDER OF THE AO PASSED U/S.271(1)(C) R/W 274, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT (A) AND THE LD.CIT(A) DELETED THE PENALTY HOLDING THAT THERE IS NO CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. 5.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. ITA NO.452/MDS/2017 :- 4 -: THE AO IN THE ASSESSMENT ORDER MADE THE ADDITION O F RS.15,20,000/- MAINLY DUE TO THE DIFFERENCE IN THE FORM 26AS. THE ASSESSEE EXPLAINED BEFORE THE AO THAT THE AMOUNT OF RS.15,20,000/- REPRESENTED LOAN AMOUNT AND A SUM OF RS.89,085/- W AS REIMBURSEMENT OF EXPENSES. BOTH THE COMPONENTS OF LOAN AND REIMB URSEMENT DOES NOT CONSTITUTE INCOME. DURING THE APPEAL HEARING, THE LD.AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF FRANCHISE MA NUFACTURER OF BREAD PRODUCTS AND HAS CONTRACT FOR MANUFACTURING OF RUSK S FOR BRITANIA INDUSTRIES LTD. DURING THE PREVIOUS YEAR RELEVANT TO THE AY, THE ASSESSEE HAS RECEIVED A SUM OF RS.15,20,000/- AS ADVANCE FRO M THE BRITANIA INDUSTRIES LTD. FOR WHICH THE CONVERSION BILL WAS N OT RAISED AND THE AMOUNT WAS OUTSTANDING AS LOAN AGAINST CONVERSION. THE REMAINING AMOUNT OF RS.89,085/- WAS REIMBURSEMENT OF UNLOADIN G CHARGES. THE LD.AR ALSO PRODUCED THE LEDGER ACCOUNT COPY AND REC ONCILIATION STATEMENT WITH FORM-26AS. WHEREIN THE ASSESSEE HAS RECEIVED A SUM OF RS.20.00 LAKHS AS LOAN AGAINST CONVERSION ON 27.12.2011 OUT OF WHICH RS.15,20,000/- WAS OUTSTANDING. FORM-26AS REPRESEN TS ALL THE RECEIPTS RELATING TO INCOME LOANS AND OTHER MISCELLANEOUS RE CEIPTS ON WHICH TDS REQUIRED TO BE DEDUCTED. IN THE INSTANT CASE, THE LD.AR HAS FURNISHED SUFFICIENT EVIDENCE TO SHOW THAT THE AMOUNT OF RS.1 5,20,000/- WAS AN ADVANCE AND THE SAME FACT WAS ACCEPTED BY THE AO IN THE ASSESSMENT ORDER. A SUM OF RS.89,085/- WAS ACCEPTED AS REIMBU RSEMENT OF UNLOADING CHARGES. THESE FACTS ARE NOT DISPUTED BY THE REVENUE. THE AO MERELY ADDED BACK THE LOAN AND REIMBURSEMENT OF EXP ENSES TO THE ITA NO.452/MDS/2017 :- 5 -: RETURNED INCOME. THE AO HAS NEITHER PROVED IT AS CO NCEALMENT OF INCOME NOR ESTABLISHED THAT THE AMOUNT REPRESENTS FURNISHI NG OF INACCURATE PARTICULARS HENCE DOES NOT ATTRACT PENALTY U/S.271( 1)(C) AND THE PENALTY IMPOSED BY THE AO ON SUM OF RS.16,09,085/- TO DIFFE RENCE IN FORM-26AS IS CANCELLED. 6.0 THE NEXT ISSUE IS RELATED TO THE PENALTY ON DISALL OWANCE OF DEPRECIATION: THE AO MADE THE ADDITION OF RS.2,11,846/- ON ACCOU NT OF DISALLOWANCE OF DEPRECIATION. THE ASSESSEE HAS PUR CHASED THE MACHINERY FOR RS.25,93,624/- OUT OF WHICH THE ASSETS WORTH RS .30,26,359/- WAS USED FOR LESS THAN 180 DAYS AND CLAIMED FULL AMOUNT OF D EPRECIATION. THOUGH THE ASSESSEE AT THE TIME OF ASSESSMENT EXPLAINED TH AT IT WAS A MISTAKE, IT IS OBLIGATION ON THE PART OF THE ASSESSEE TO CLAIM CORRECT AMOUNT OF DEPRECIATION. HAD THE CASE HAS BEEN NOT SELECTED F OR SCRUTINY, THIS ISSUE WOULD NOT HAVE COME TO THE NOTICE OF THE DEPARTMENT AND THE EXCESS DEPRECIATION OF RS.2,11,845/- CONTINUED TO ESCAPE T HE INCOME. THEREFORE, THIS IS A CLEAR CASE OF CONCEALMENT AND THE PENALTY LEVIED BY THE AO ON THE ISSUE OF EXCESS DEPRECIATION IS CONFIRMED AND THE A SSESSEES APPEAL ON THIS GROUND IS DISMISSED. 7.0 THE NEXT ISSUE IS RELATED TO THE LEVY OF PENALTY O N SUNDRY CREDITORS AMOUNTING TO RS.23,21,294/-: ITA NO.452/MDS/2017 :- 6 -: THE AO HAS MADE THE ADDITION OF SUNDRY CREDITORS S INCE THE OUTSTANDING WAS MORE THAN THREE YEARS. NO OTHER RE ASON HAS BEEN ASSIGNED BY THE AO IN THE ASSESSMENT ORDER. THE LD .AR ARGUED THAT THE AMOUNT OF RS.7,34,348/- IS RELATING TO AG INDUSTRIE S AND THE SUM OF RS.15,86,976/- RELATING TO QUALITY PRINT PACK ARE O PENING BALANCES AND THE AO CANNOT IMPOSE PENALTY U/S.271(1)(C) ON THE OPENI NG BALANCES. IT IS UNDISPUTED FACT THAT THE ASSESSEE COULD NOT BE ESTA BLISHED THE GENUINENESS OF OUTSTANDING BALANCES. THEREFORE, TH E AO MADE THE ADDITION TO THE RETURNED INCOME. THE AO HAS NOT EST ABLISHED THAT THE SUNDRY CREDITORS ARE NOT GENUINE AND NO EVIDENCE WA S BROUGHT ON RECORD TO SHOW THAT THE AMOUNT OUTSTANDING WAS BOGUS. BOT H THE SUNDRY CREDITORS ARE OPENING BALANCES. WHEN THE OPENING BA LANCES ARE ADDED TO THE RETURNED INCOME, THERE IS NO CASE FOR PENALTY U /S.271(1)(C), UNLESS IT IS PROVED BY THE AO THAT THE OUTSTANDING BALANCE WA S BOGUS. IN THIS CASE, NO SUCH FINDING WAS GIVEN BY THE AO. THEREFORE, WE ARE UNABLE TO UPHOLD THE PENALTY IMPOSED BY THE AO AND CONFIRM THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THE ASSESSEES APPEAL ON THIS GROUND I S ALLOWED. 8.0 THE NEXT ISSUE IS DEFECT IN THE NOTICE ISSUED U/S 274 R.W.S 271 FOR NON-STRIKING OF IRRELEVANT COLUMN RELATING TO CONCE ALMENT OF INCOME/FURNISHING INACCURATE PARTICULARS. THE ASSES SEE RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON JINNING FACTORY. FROM THE PENALT Y ORDER IT IS CLEAR THAT ITA NO.452/MDS/2017 :- 7 -: THE AO HAS LEVIED THE PENALTY FOR CONCEALMENT OF IN COME AND FURNISHING INACCURATE PARTICULARS. THEREFORE THE AO HAS INITIA TED PENALTY FOR BOTH THE OFFENCES OF FOR CONCEALMENT OF INCOME AND FURNISHIN G INACCURATE PARTICULARS AND THERE IS NO DEFECT IN THE NOTICE. H ENCE THIS ARGUMENT IS NOT TENABLE AND DISMISSED. 9.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! . . $ ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 7 TH JUNE, 2017. TLN 0 .$6 76 /COPY TO: 1. - /APPELLANT 4. 8 /CIT 2. ./- /RESPONDENT 5. 6 . /DR 3. 8 ( ) /CIT(A) 6. * /GF