ITO 9(2)-2, MUMBAI V. KNIK ENGINEERS P. LTD, MUMBAI

ITA 4581/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55175 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2001-2002
• Appeal Filed On: 03-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARSHASARTHI NAIR
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI. PRAMOD KUMAR (A.M.) AND SHRI. VIJAY PA L RAO (J.M) ITA NO.4581/MUM/2010 ASSESSMENT YEAR : 2001-2002 THE I.T.O.9(2)-2 R.NO.225, 2 ND FLR., AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. VS. KNIK ENGINEERS PVT. LTD. 113, NIRMAN INDL ESTATE, LINK ROAD, MALAD (W) MUMBAI 400 064. PAN : AABCK7272L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PARSHASARTHI NAIR. RESPONDENT BY : NONE. O R D E R PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 24.03.2010 ARISING FROM PENALTY ORDER PASSED U/S.27 1(1)(C) OF THE I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2001-2002. 2. THE REVENUE HAS RAISED ONLY GROUND IN THIS APPEA L: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE P ENALTY OF ` 9,49,852/- IMPOSED U/S.271(1)(C) OF THE ACT, BY HOL DING THAT THE DISALLOWANCE OR ADDITION WERE QUITE CONTENTIOUS AND DEBATABLE AND THAT THE ASSESSEE COULD ESTABLISH THAT THE EXPL ANATION OFFERED WAS BONAFIDE, WITHOUT APPRECIATING THE FACT THAT THE ADDITIONS MADE IN THE ASSESSMENT ORDER WERE HELD UNAMBIGUOUS BOTH BY THE LEARNED CIT(A) AND THE HON BLE ITAT AND THAT THE ASSESSEE FAILED TO PROVE CREDITWORTHIN ESS. 3. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE/RESP ONDENT WHEN THIS APPEAL WAS CALLED FOR HEARING THEREFORE, WE PROPOSE TO HEAR AND DISPOSE OF THE APPEAL EX-PARTE. DURING THE YEAR THE ASSESSEE HAS SHOWN SUNDRY CREDITORS ` 16,61,963/-. TO VERIFY THE GENUINENESS OF THIS CL AIM, THE ASSESSING OFFICER ISSUED NOTICE U/S.133(6) TO VARIO US PARTIES. MOST OF THE NOTICES EITHER RETURNED UNSERVED OR THERE WAS NO RE SPONSE FORM THE PARTY. SOME OF THE CREDITORS CONFIRMED AND IN SOME CASES T HE AMOUNT SHOWN AS ITA NO.4581/MUM/2010 ASSESSMENT YEAR : 2001-2002 2 OUTSTANDING DID NOT MATCH. ACCORDING TO THE ASSES SING OFFICER HELD THAT THE WORTHINESS AND GENUINENESS OF THE CREDITORS REMAINE D UNPROVED AND ADDED A SUM OF ` 15,44,649/- TO THE ASSESSEE. APART FROM THIS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD TAKEN CASH LO AN OF ` 14,47,000/- FROM ITS DIRECTOR SHRI ROSHAN SINGH (SINCE DECEASED). THOUGH THE DIRECTOR CONFIRMED THE LOAN AND STATED THAT HE HAS ASSESSED TO TAX AND THE SOURCE OF THE LOAN WAS SAVINGS FROM THE SALARY, DIVIDEND, INT EREST AND SALE OF AGRICULTURAL PRODUCE. THE ASSESSING OFFICER WAS NO T SATISFIED AND ADDED THE SAID AMOUNT AS INCOME FROM UNDISCLOSED SOURCE. ON APPEAL, THE LEARNED CIT(A) CONCURRED WITH THE ASSESSING OFFICER AND CON FIRMED ADDITIONS MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. THE ASS ESSING OFFICER INITIATED THE PENALTY PROCEEDINGS U/S.271(1)(C) AND LEVY PENALTY OF ` 9,49,852/- VIDE ORDER DATED 28.04.2008. THE ASSESSEE CHALLENGED THE LEV Y OF PENALTY BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) DELETED THE PEN ALTY VIDE IMPUGNED ORDER. 4. WE HAVE HEARD THE LEARNED DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LEARNED DR HAS SUBMITTED THAT THE A SSESSING OFFICER HAS GIVEN A FINDING ABOUT THE GENUINENESS AND WORTHINES S OF THE CREDITOR AND THEREFORE IT IS A CASE OF BOGUS CLAIM OF CREDITOR. HE HAS FURTHER SUBMITTED THAT THE LOAN CLAIMED TO HAVE BEEN TAKEN FROM THE D IRECTOR WAS ALSO REMAINED UNEXPLAINED AS TO THE SOURCE OF THE FUNDS. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER AND THE APPEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL WAS ALSO DISMISSED FOR WANT OF PROSECUTION. THUS THE LEARNED DR HAS SUBMITTED THAT IT IS A FIT CASE FOR LEVY OF PENALTY SINCE THE ASSESSEE HAS FAILED TO SHOW ITS CLAIM ON THE ADDITION MADE BY THE ASSESSING OFFICER HAS CONFIRMED AND CONTENDED THE P ENALTY. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DR AND FACTS EMERGING FROM THE RECORD WE FIND THAT THE ASSESSEE COULD NOT PURSUE ITS APPEAL BECAUSE THE DIRECTOR NAMED ABOVE LATER ON DI ED IN A TRAGIC ROAD ACCIDENT. WE FURTHER NOTE THAT THE ASSESSEE CONTEN DED BEFORE LOWER AUTHORITIES THAT THE CREDITORS WERE OLD AND NO ADVE RSE INTERFERENCE WAS TAKEN BY THE REVENUE IN EARLIER YEARS AS REGARDS CA SH LOAN FROM THE DIRECTOR. ITA NO.4581/MUM/2010 ASSESSMENT YEAR : 2001-2002 3 IT HAS TO BE NOTED THE IDENTITY OF THE CREDITOR CAN NOT BE DISPUTED BECAUSE THE CREDITOR WAS NONE OTHER THAN DIRECTOR OF THE ASSESS EE WHO WAS SUBJECT TO TAX. FURTHER THE SOURCE OF THE LOAN ALSO EXPLANATI ON BEFORE THE ASSESSING OFFICER THOUGH THE ASSESSING OFFICER WAS NOT SATISF IED WITH THE EXPLANATION. IN VIEW OF THE FACT THAT THE CREDITORS WERE OLD AND NOT INTRODUCED FIRST TIME IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE YEAR UN DER CONSIDERATION AND THE DIRECTOR OF THE ASSESSEE WAS SUBJECT TO TAX THEN EV EN IF THE ADDITION MADE BY THE ASSESSING OFFICER BECAUSE OF THE REASON THAT TH E EXPLANATION WAS NOT FOUND TO THE SATISFACTION OF THE ASSESSING OFFICER THE SAME DOES NOT AUTOMATICALLY ATTRACT THE PROVISION U/S.271(1)(C). 6. WE ARE OF THE VIEW THAT EVEN THOUGH THE EXPLANAT ION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY HOWEVER, IT WAS BONAFIDE AND BASED ON THE UNDISPUTED FACT ABOUT PRE-EXISTENCE OF THE CREDITOR , AS WELL AS AND IDENTITY AND CREDIT WORTHINESS OF THE DIRECTOR OF THE ASSESS EE. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158(SC), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LEARNED CIT(A) IN CA NCELLING THE PENALTY LEVIED U/S.271(1)(C) OF THE I.T. ACT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON THIS 7 TH DAY OF SEPTEMBER, 2011. SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) MUMBAI, DATED 07.09.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUM BAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI