MEHTA SULFITES (I) LTD, MUMBAI V. ACIT 10(2), MUMBAI

ITA 4771/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2376 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SONI
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Unexplained cash credit
• Section: 143(3); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI JOGINDER SINGH, JM AND SHRI RAJESH KUMA R, AM ./ I.T.A. NO.4771/MUM/2013 ( / ASSESSMENT YEAR: 1996-97) M/S MEHTA SULFITES (INDIA) LTD. C/O ATUL S. DESAI. A-302, GOLDENOAK, HIRANANDANI GARDENS, POWAI, MUMBAI-400 076 / VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE 10 (2) R. NO.474, AAYAKAR BHAVAN, MUMBAI -400 020 ./ ./PAN/GIR NO. AAACM3109R ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI M. SUBRAMANIAN / RESPONDENT BY : SHRI VIJAY KUMAR SONI / DATE OF HEARING : 27/10/2015 !'# / DATE OF PRONOUNCEMENT : 20/11/2015 / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 08.04.2013 OF COMMISSIONER OF INCOME TAX (APPEALS) 22, MUMBAI (HE REINAFTER CALLED AS THE CIT(A) FOR ASSESSMENT YEAR 1996-97. THE ASSESSEE HAS RAISE D FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, ORDER U/S 271(1)(C) DATED 30-03-2012 IS INVALID AND BAD IN LA W. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.I.T.(A) ERRED IN CONFIRMING PENALTY U/S 271(1)(C) RS.213771/- WITHOUT CONSIDERING OUR SUBMISSION PROPERLY. I.T.A. NO.4771/MUM/2013 (A.Y.1996-97) M/S MEHTA SULFITES (INDIA) LTD. VS. CIT 2. THE ONLY ISSUE RAISED IN BOTH THE GROUNDS BY THE A SSESSEE RELATES TO UPHOLDING THE PENALTY U/S 271(1)(C) OF THE ACT OF RS. 2,13,7 71/- BY THE LD. CIT(A) . THE FACTS IN BRIEF ARE THAT THE ASSESSMENT OF THE APPELLANT WA S FRAMED ON 28/02/2002 U/S. 144 OF THE ACT. THE ASSESSEE WENT INTO APPEAL BEFORE THE C IT(A) AND THE TRIBUNAL AGAINST THE IMPUGNED ASSESSMENT ORDER. THE TRIBUNAL VIDE ORDER DATED 05/05/2008 DIRECTED THE AO TO MAKE FRESH ASSESSMENT BY ADMITTING FRESH EVIDENC E AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. ASSESSMENT WAS COMPLETED AND FRAMED U /S 143(3) OF THE ACT VIDE ORDER DATED 24/12/2009 AT RS.21,09,920/- BY ADDING RS.4, 45,000/- ON ACCOUNT OF UNPROVED UNSECURED LOANS AND INTEREST THEREON OF RS.19,719/- . 3. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT 95% OF THE CONFIRMATIONS FROM VARIOUS PARTIES WERE PRODUCED B EFORE THE AO OUT OF TOTAL MONEY RAISED DURING THE YEAR OF RS. 1,58,19,960/- AND IT WAS ONLY WITH RESPECT TO RS.4,45,000/- THE CONFIRMATIONS COULD NOT BE FURNIS HED WHILE STRONGLY SUBMITTING THAT ALL THESE LOANS WERE TAKEN AND REPAID BY ACCOUNT PAYEE CHEQUES. THE ASSESSEE DURING THE YEAR RAISED UNSECURED LOANS OF RS.1,58,19,960/- OUT OF WHICH THE CONFIRMATION IN RESPECT OF RS.4,45,000/- WERE NOT FURNISHED BEFORE THE AO. THE AO FURTHER STATED THAT THE ASSESSEE COULD NOT PROVE THE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE CREDITORS AND THE SAME WERE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE CIT(A) REJECTED THE APPEAL OF THE ASSESSEE AND CON FIRMED THE DECISION. THE LD. AO VIDE ORDER DATED 28/03/2012 IMPOSED A PENALTY OF RS .2,13,771/- U/S 271(1)(C) BY HOLDING THAT ASSESSEE COMMITTED DEFAULT BY FURNISHI NG WRONG PARTICULARS OF INCOME. THE LD. CIT(A) CONFIRMED THE IMPOSITION OF PENALTY OF RS.2,13,771/- BY HOLDING THAT THE CASE OF THE ASSESSEE IS COVERED BY U/S 271(1)(C ) OF THE I.T. ACT WHICH SAYS THAT IF A PERSON FAILS TO SUBSTANTIATE THE EXPLANATION OFFERE D BY HIM OR WHICH IS FOUND TO BE FALSE, PENALTY IS LEVIABLE . THE LD CIT(A) CONFIRME D THE PENALTY BY HOLDING THAT THE I.T.A. NO.4771/MUM/2013 (A.Y.1996-97) M/S MEHTA SULFITES (INDIA) LTD. VS. CIT ASSESSEES EXPLANANTION WAS NOT BONA FIDE AND PENALTY WAS RIGHTLY IMPOSED U/S 271(1)(C). 4. THE LD. AR SUBMITTED THAT THE ASSESSEE BORROWED MONEY FROM LOAN CREDITORS ON WHICH INTEREST WAS PAID AFTER DEDUCTING TDS. THE LD . AR SUBMITTED THAT ALL THESE TRANSACTIONS WERE ACCEPTED AND REPAID BY ACCOUNT PA YEE CHEQUES AND EVEN THE INTEREST ON OUTSTANDING LOAN WERE PAID THROUGH BANKS. HE FUR THER SUBMITTED THAT THE ASSESSEE HAD GONE THROUGH A SEVERE BUSINESS FINANCIAL CRUNCH AND SUFFERED HUGE LOSSES DUE TO INFLUX OF CHINESE MATERIAL INTO INDIAN MARKET THERE BY THE ASSESSEE LOST ITS ENTIRE MARKET SHARE AND EVENTUALLY THE BUSINESS WAS CLOSED . IT WAS ONLY IN THIS GROUND THE ASSESSEE HAD TO RAISE HUGE MONEY ON INTEREST FROM T HE MARKET AND WHICH WERE DULY REPAID. HE FURTHER SUBMITTED THAT OUT OF TOTAL MONE Y RAISED OF RS.1,58,19,960/- THE CONFIRMATIONS COULD NOT BE PRODUCED IN RESPECT LOA N CREDITORS OF ONLY RS.4,45,000/- WHICH WAS BORROWED FROM 13 PARTIES . HE FURTHER ARGUED THAT ALL THESE LOANS WERE REPAID WITH INTEREST BY ACCOUNT PAYEE CHEQUES AND T HE MERE ACCEPTING THE ORDER OF CIT(A) IN QUANTUM APPEAL OR NOT FILING APPEAL I N QUANTUM APPEAL BEFORE TRIBUNAL SHOULD NOT BE CONSTRUED AS THAT THE ASSE SSEE ADMITTED THAT THESE LOANS WERE NOT GENUINE. HE FURTHER SUBMITTED THAT THE ASS ESSEE HAD NOT FURNISHED ANY WRONG PARTICULARS OF INCOME AND THE PENALTY IMPOSE D U/S271(1)(C) WAS UNWARRANTED AND UNCALLED FOR AND THEREFORE THE SAM E DESERVED DELETION BY REVERSING THE ORDER OF CIT(A). HE STRONGLY PLACED R ELIANCE ON SHREE NIRMAL COMMERCIAL LTD. VS. COMMISIONER OF INCOME TAX 218 C TR(581) BOMBAY HIGH COURT AND NATIONAL TEXTILES VS COMMIS SIONER OF INCOME TAX 249 ITR 125 GUJRAT HIGH COURT. THE LD. D R WHILE RELYING ON THE ORDERS OF AUTHORITIES BELOW REQUESTED FOR SUSTAININ G THE ORDER OF CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD AND FIND THAT THE ASSESSEE COULD NOT PRODUCE CONFIRMATIONS IN RESPECT OF 13 PARTIES FROM WHOM THE ASSESSEE HAD RAISED UNSEC URED LOANS AMOU NTING TO I.T.A. NO.4771/MUM/2013 (A.Y.1996-97) M/S MEHTA SULFITES (INDIA) LTD. VS. CIT RS.4,45,000/-. HE FURTHER NOTED THAT THE ASSESSEE R AISED THIS MONEY AND LIQUIDATED THE SAME THROUGH ACCOUNT PAYEE CHEQUES . THE ASSESSEE D ID NOT CHALLENGE THE QUANTUM ORDER OF CIT(A) CONFIRMING THE ADDITION OF RS.4,45 ,000/- U/S 68 OF THE ACT AND INTEREST OF RS.19,719/- . WE FURTHER NOTE THAT THE LD. AO LEVIED PENALTY OF 271(1)(C) BY OBSERVING THAT THE ASSESSEE FURNISHED THE INACCURAT E PARTICULARS OF INCOME WHICH WAS CONFIRMED BY CIT(A) ON THE GROUND THAT THE ASSESSEE E CASE WAS COVERED BY EXPLANATION 1 TO SECTION 271 OF THE ACT. BUT WE D IFFER WITH THE OBSERVATION OF CIT(A) AND ARE OF THE VIEW THAT THE MERE CONFIRM ATION OF ADDITION BY CIT(A) THE PENALTY CANNOT BE LEVIED AND SUSTAINED. THE ASSESSE E RAISED THE MONEY THROUGH ACCOUNT PAYEE CHEQUES AND OUTSTANDING UNSECURED LOA NS ALONG WITH INTEREST WERE ALSO REPAID BY CHEQUES. IN THE CASE OF SHREE NIRMAL COMMERCIAL LTD. VS. COMMISIONER OF INCOME TAX (SUPRA) THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE THE ASSESSEE NO WHERE ADMITTED THAT THE AMOUNT ADDED U/S 68 WAS HIS CONCEALED INCOME , NO PENALTY U/S 271(1)(C) COULD BE LEVIED. IN THE CASE OF NATIONAL TEXTILES VS COMMISSIONER OF INCOME TAX 2 49 ITR 125 , THE HONBLE GUJRAT HIGH COURT HAS BEEN HELD THAT PROVISION SECTION 68 OF THE ACT , PERMITTING THE ASSESSING OFFICER TO TREAT THE UNEXPLAINED E CASH CREDIT AS INCOME ARE ENABLING PROVISION FOR MAKING CERTAIN ADDITION S WHERE THE THERE IS A FAILURE BY THE ASSESSEE TO GIVE EXPLANATION OR WHERE THE EXPLANATI ON IS NOT TO THE SATISFACTION OF THE ASSESSING OFFICER AND THE ADDITION MADE ON THIS ACC OUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOSITION OF PENALTY UNDER EXPLANATION 1 T O U/S 271(1)(C). THE FACTS OF THE ASSESSEE ARE SQUARELY COVERED BY THE ABOVE DECISION S. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THESE DECISIONS, WE REVERSE THE ORDE R OF CIT(A) AND DELETE THE PENALTY AND THEREFORE THE APPEAL OF THE ASSESSEE IS THEREFO RE ALLOWED. IN THE RESULT, THE ASSESSEES ALLOWED. I.T.A. NO.4771/MUM/2013 (A.Y.1996-97) M/S MEHTA SULFITES (INDIA) LTD. VS. CIT &#'( )*+& , -. / ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 20 TH , 2015 SD/- SD/- (JOGINDER SINGH ) (RAJESH KUMAR) 0) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' MUMBAI; 2 DATED :20.11.2015 ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 3 ( ) / THE CIT(A) 4. 3 / CIT - CONCERNED 5. 678 ))9* , 9*# , ' / DR, ITAT, MUMBAI 6. 8;+ < / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) $%, ' / ITAT, MUMBAI