CHARLA INTERNATIONAL LTD, MUMBAI V. ITO 9(1)(2), MUMBAI

ITA 4829/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79473 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-03-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 24-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.4829/M/2008 ( / ASSESSMENT YEAR: 1997 - 1998 ) M/S. CHARLA INTERNATIONAL LTD., 3, VARMA APARTMENT, KHANDWALA LANE, DAFTARY ROAD, MALAD (E), MUMBAI - 97. / VS. ITO - 9(1)(2), MUMBAI. ./ PAN : AAACC3304J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : MS. AASIFA KHAN / RESPONDENT BY : SHRI RAVINDER SINDHU / DATE OF HEARING : 14.7.2014 / DATE OF PRONOUNCEMENT : 18 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 24.7.2008 IS AGAINST THE ORDER OF THE CIT (A) - IX, MUMBAI DATED 21.4.2008 FOR THE ASSESSMENT YEAR 1997 - 98. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE CIT (A) ERRED IN CONFIRMING THE PENALTY LEVIED OF RS. 34,96,169/ - U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE AS S ESSEE COMPANY HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 2. THE CIT (A) ERRED IN COMING TO THE CONCLUSION THAT THE PERSONS TO WHOM SHARES OF RS. 33,71,000/ - WERE ALLOTTED, PERSONS FROM WHOM SHARE APPLICATION MONEY OF RS. 41,60,000/ - WERE RECEIVED AND PERSONS FROM WHOM LOANS OF RS. 5,70,000/ - WERE TAKEN ARE NON - EXIS TENT AND THEREFORE, THE IDENTITY AND CREDITWORTHINESS OF THE PARTIES WERE NOT ESTABLISHED , HENCE, THE ASSESSEE COMPANY WAS LIABLE TO PENALTY U/S 271(1)(C) OF THE ACT. 3. THE CIT (A) FAILED TO APPRECIATE THAT THE ASSESSEE COMPANY HAD GIVEN ALL THE EVIDENCES LIKE THE CONFIRMATION LETTERS, INCOME TAX DETAILS, BANK STATEMENTS, ASSESSMENT ORDERS ETC REGARDING THE ADDITIONS MADE IN RESPECT OF EACH OF THE PARTIES, EVEN THEN THE PENALTY WAS CONFIRMED. 4. THE CIT (A) ERRED IN CONSIDERING THE FACT THAT THE PARTIES HA D CONFIRMED OF MAKING INVESTMENT IN THE ASSESSEE COMPANY AND EVEN THE EVIDENCES IN 2 RESPECT OF EACH PARTIES WERE SUBMITTED AND THEREFORE, THERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. DURING THE PROCEEDINGS BEFORE US, A T THE OUTSET, MS. AASIFA KHAN, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS IS THE CASE OF LEVY OF PENALTY U/S 271(1)(C)OF THE ACT IN CONNECTION WITH THE ADDITIONS MADE BY THE AO U/S 68 OF THE ACT INVOLVING SHARE APPLICATION MONEY, LOANS ETC. LD COUNSEL ALSO MENTIONED T HAT THE SAID ADDITIONS ARE CONFIRMED BY THE TRIBUNAL AND THE ASSESSEE IS IN APPEAL BEFORE THE HONBLE HIGH COURT AND THE SAME IS ADMITTED TOO . IN THE BACKGROUND OF THE ABOVE FACTS, LD COUNSEL FOR THE ASSESSEE TRIED TO DEMONSTRATE THAT THE CASE MAY HAVE TO BE REMANDED TO THE FILE OF THE AO FOR A FRESH ADJUDICATION. IN THIS REGARD, SHE MENTIONED THAT THE AO IS UNDER ERRONEOUS ASSUMPTION THAT THE ASSESSEE HAS NOT FILED THE CONFIRMATION LETTERS, WHICH WERE ACCORDINGLY FILED. SHE ALSO MENTIONED THAT THE SAID C ONFIRMATION LETTERS WERE FILED AS EVIDENT FROM THE ORDER OF THE CIT (A). TO DEMONSTRATE THE SAME, LD COUNSEL READ OUT THE RELEVANT PARAS FROM THE ASSESSMENT ORDER AND DEMONSTRATED THAT AO ERRED IN MENTIONING THAT THE CONFIRMATION LETTERS WERE NOT FILED BEF ORE HIM. FOR PENALTY PROCEEDINGS, THIS ASPECT GO ES TO THE ROOT OF THE MATTER. FURTHER, AO LEVIED THE PENALTY UNDER THE WRONG ASSUMPTION . T HEREFORE, AS PER THE LD COUNSEL, THERE IS NO NEED FOR REMAND. SHE ALSO ARGUED STATING THAT IN THE CIRCUMSTANCES WHER E THE SHAREHOLDERS OR LOAN CREDITORS ARE ASSESSED TO TAX, WHERE THE COPIES OF THE ASSESSMENTS WERE MADE AVAILABLE TO THE LEVY OF PENALTY, MERELY BASING ON THE ORDER OF THE TRIBUNAL, WHICH CONFIRMS THE ADDITIONS, IS NOT SUSTAINABLE IN PENALTY MATTERS. THUS, THE GENUINENESS OF SHARE HOLDERS SUBSCRIPTIONS / LOANS IS THE DEBATABLE ONE. SHE ALSO ARGUED STATING THAT ANY CASE WHERE THE APPEAL IS ADMITTED BY THE HONBLE HIGH COURT, THE D EBATABILITY BECOMES CRYSTALLIZED, AND THEREFORE, THE PENALTY IS NOT SUSTAINABLE IN LAW. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES AND THE ORDER OF THE TRIBUNAL AND MENTIONED THAT THE PENALTY SHOULD NOT BE DISTURBED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUS ED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES ON THE LIMITED ISSUE, WHETHER IT CALLS FOR REMANDING THE ISSUE TO THE FILE OF THE AO AND FROM THE RELEVANT PARAS FROM THE ORDERS OF THE REVENUE AUTHORITIES THAT ARE 3 READ OUT BEFORE US, WE FIND THE AO HAS ENTERED INTO AN ERROR ZONE IN MENTIONING THAT CONFIRMATION LETTERS WERE NOT FILED BEFORE HIM. WHILE THE ASSESSEE CONTENDS THAT THE SAME WERE FILED, SUPPORTED BY THE ORDER OF THE CIT (A), THE ASSESSMENT ORDER SPEAKS DIFFERENT. THUS, DEBATE MUST BE CONCLUDED FIRST AS IT TOUCHES UPON THE GENUINENESS OF THE CREDITS INTO THE SYSTEM. CONSIDERING THE PRIMACY OF THE ADMINISTRATION OF JUSTICE, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMAN DED T O THE FILE OF THE AO AND THE AO SHOULD PASS A SPEAKING PENALTY ORDER AND NOT MERELY RELYING ON THE FINDING OF THE TRIBUNAL ON QUANTUM APPEALS. AO SHOULD KNOW THE PENALTY PROCEEDINGS ARE ENTIRELY DIFFERENT AND THE PRINCIPLES RELATING TO THE PENALTY PR OCEEDINGS ARE DIFFERENT. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE S . ORDER PRON OUNCED IN THE OPEN COURT ON 18 TH JULY, 2014. SD/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 18 .7.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI