SWASTIK REALTORS, MUMBAI V. ASST CIT 15(3), MUMBAI

ITA 5087/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9034 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 31-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Principle of natural justice; Additional evidence; Wrong claim; Accommodation entries
• Section: 143(3); 133A; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5087/MUM/2014 (ASSESSMENT YEAR-2007-08) M/S SWASTIK REALTORS 312, SWASTIK DISHA CORPORATE PARK, KOHINOOR TEXTILE PRINTING COMPOUND, OPP. SHREYAS CINEMA, LBS MARG, GHATKOPAR(W), MUMBAI-400086. PAN: ABAFS2576A VS. ACIT 15(3), MATRU MANDIR, I.T. OFFICE, NANA CHOWK, GRANT ROAD, MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JAYANT BHATT (AR) REVENUE BY : SHRI V. JUSTIN (SR. DR) D ATE OF HEARING : 31.07.2017 DATE OF PRONOUNCEMENT : 11.10.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-26, MUMBAI DATED 16.06.2014 FOR ASSESSMENT YEAR (AY) 2007-08. THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE HONOURABLE COMMISSIONER OF INCOME TAX (A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVY OF PENALTY U/S 271 (1) (C) OF THE I.T. ACT FOR A.Y. 2007-08. B) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE COMMISSIONER OF INCOME TAX (A) SHOULD NOT HAVE CONFIRMED THE PENALT Y LEVIED U/S 271 (1) (C) OF THE I.T. ACT BY THE LEARNED ASSISTANT COMMISSION ER OF INCOME TAX; 15(3), MUMBAI. ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 2 C) THE APPELLANT SUBMITS THAT THE PENALTY LEVIED BY THE LEARNED ASSISTANT COMMISSIONER AND CONFIRMED BY THE HON'BLE COMMISSIO NER OF INCOME TAX (A) 26 IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND IS BAD IN LAW. D) THE APPELLANT PRAYS THE HONOURABLE MEMBERS TO DE LETE THE PENALTY LEVIED U/S 271(1) (C) OF THE I.T. ACT, BY ASSISTANT COMMIS SIONER AND CONFIRMED BY THE HONOURABLE COMMISSIONER OF INCOME TAX (A) 26, MUMBA I. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 26.10.2007. THE ASSESSMENT WAS COMPL ETED ON 26.11.2009 U/S 143(3) OF THE ACT. THE ASSESSING OFFICER (AO) W HILE PASSING THE ASSESSMENT ORDER MADE THE ADDITION OF RS. 1.00 CROR E ON ACCOUNT OF FICTITIOUS UNSECURED LOAN AND RS. 93,000/- ON ACCOU NT OF INTEREST ON SUCH LOAN. ON APPEAL BEFORE THE LD. CIT(A) IN QUANTUM AS SESSMENT, THE ADDITION OF UNSECURED LOAN AND CONSEQUENTIAL INTEREST CLAIM OF RS. 93,000/- WAS CONFIRMED VIDE ORDER DATED 30.11.2011. AFTER DISMIS SAL OF APPEAL IN QUANTUM ASSESSMENT, THE AO ISSUED A SHOW-CAUSE NOTI CE U/S 274 R.W.S. 271(1)(C) DATED 31.01.2013. IN RESPONSE TO THE NO TICE, THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT THE ASSESSEE HAS FILED APP EAL BEFORE THE TRIBUNAL AND THE MATTER MAY BE KEPT TILL THE DISPOSAL OF APP EAL BY TRIBUNAL. IT WAS FURTHER CONTENDED THAT THE TRANSACTION OF LOAN WAS TAKEN THROUGH BANKING CHANNEL AND THE ADDITION WAS MADE ON THE BASIS OF A SSUMPTIONS. THE ASSESSEE HAS PROVED THE GENUINENESS OF LOAN AND THE PENALTY IS NOT LEVIABLE ON SUCH DISALLOWANCE. THE CONTENTION OF THE ASSESSE E WAS NOT ACCEPTED BY AO HOLDING IN THE SURVEY ACTION U/S 133A AT THE PRE MISES OF M/S MOXDIAM, IT WAS REVEALED THAT MOXDIAM WAS INCLUDING IN PROVI DING ACCOMMODATION ENTRIES. THE APPEAL FILED BY ASSESSEE ON THE QUANTU M ASSESSMENT HAS BEEN ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 3 DISMISSED BY LD. CIT(A). THE AO LEVIED THE PENALTY @ 100% HOLDING THAT THE ASSESSEE HAS NOT ONLY CONCEALED THE PARTICULAR OF INCOME BUT HAS FURNISHED INACCURATE PARTICULAR THEREOF. THE AO LEV IED THE PENALTY OF RS. 33,97,304/-. ON APPEAL BEFORE THE LD. CIT(A), THE P ENALTY WAS CONFIRMED. THUS, FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE PRESENT APPEAL IS FILED BEFORE US. 3. WE HAVE HEARD THE LD. AR FOR THE ASSESSEE AND THE L D DR FOR REVENUE AND PERUSED THE RECORD. THE LD. AR FOR THE ASSESSEE ARG UED THAT THE ASSESSEE MADE A BONAFIDE CLAIM OF LOAN. THE ASSESSEE FURNISH ED ALL THE DOCUMENTARY EVIDENCES RELATED WITH THE TRANSACTION OF LOAN. THE ASSESSEE HAS PROVED THE TRANSACTION OF LOAN, TRANSACTION OF LOAN WAS THROUG H RTGS OR A/C PAYEE CLAQUES. THE ASSESSEE HAS FILED CONFIRMATION OF LOA N, COPY OF LEDGER ACCOUNT OF LENDER, COPY OF BANK STATEMENT FOR LAST THREE YE ARS, FINANCIAL ACCOUNTS, TRADING ACCOUNTS, P/L ACCOUNTS AND THE RETURN OF IN COME. MERELY TREATING THE LOAN AMOUNT AS INCOME OF THE ASSESSEE BY ASSESSING OFFICER WOULD NOT AUTOMATICALLY ATTRACT THE PENALTY. ON THE OTHER HA ND THE LD. DR FOR THE REVENUE WHILE MAKING SUBMISSIONS SUPPORTED THE ORDE R OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUED THAT THE A SSESSEE HAS AVAILED ACCOMMODATION ENTRY OF LOAN FROM THE HAWALA ENTRY P ROVIDER. THE ASSESSEE HAS SHOWN A LOAN OF RS. 1.00 CRORE FROM M/S MOXDIAM . THE INVESTIGATION TEAM OF THE DEPARTMENT MADE A SURVEY AT THE PREMISE S OF MOXDIAM UNDER SECTION 133A ON 07.07.2008. M/S MOXDIAM WAS A PARTN ERSHIP FIRM MANAGED ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 4 BY SH. NITESH JAIN AND SH. BASANT D JAIN. IN THE S AID SURVEY IT WAS REVEALED THAT M/S MOXDIAM WAS INDULGING IN PROVIDING HAWALA ENTRY TO VARIOUS INTERESTED BENEFICIARY IN THE MARKET. IT WAS FURTH ER ARGUED THAT THE APPEAL AGAINST THE QUANTUM ASSESSMENT HAS ALREADY BEEN DIS MISSED BY CIT(A) ON 30.11.2011. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF PARTIES AND GONE THROUGH THE RECORDS OF THE CASE AND THE ORDERS PASSED BY LOWER AUTHORITIES. THE AO WHILE FRAMING THE ASSESSMENT MADE THE DISALLOWANCE OF UNSECURED LOAN OF RS. 1.00 CRORE AND THE INTEREST PAYMENT OF RS. 93,0 00/-ON THE SAID LOAN. THE AO DISALLOWED THE LOAN AND ITS CONSEQUENTIAL INTERE ST ON THE BASIS OF THE SURVEY CONDUCTED ON 07.07.2008 UNDER SECTION 133A O F THE ACT, AT THE PREMISES OF M/S MOXDIAM. DURING THE ASSESSMENT THE ASSESSEE FILED DOCUMENTARY EVIDENCES RELATED WITH THE TRANSACTION OF LOAN. THE ASSESSEE HAS FILED THE EVIDENCES RELATED WITH THE TRANSACTIO N OF LOAN, SHOWING THAT TRANSACTION OF LOAN WAS THROUGH RTGS OR A/C PAYEE C LAQUES. THE ASSESSEE HAS FILED CONFIRMATION OF LOAN, COPY OF LEDGER ACCO UNT OF LENDER, COPY OF BANK STATEMENT FOR LAST THREE YEARS, FINANCIAL ACCO UNTS, TRADING ACCOUNTS, P/L ACCOUNTS AND THE RETURN OF INCOME OF THE LENDER. TH E AO INSTEAD OF MAKING ANY INDEPENDENT ENQUIRY RELIED ON THE STATEMENT OF PARTNER OF M/S MOXDIAM ALLEGEDLY RECORDED DURING THE SURVEY ACTION AND TRE ATED THE UNSECURED LOAN AS UNEXPLAINED UNSECURED LOAN OF RS. 1,00,000/- (ON E CRORE ONLY) AND ALSO DISALLOWED THE INTEREST OF RS. 93,000/-ON SUCH LOAN . THE AO LEVIED THE ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 5 PENALTY @100% OF TAX SOUGHT TO BE EVADED. DURING TH E FIRST APPELLATE STAGE THE ASSESSEE FURTHER FILED ADDITIONAL EVIDENCE AND CLAIMED THAT THE PARTNER OF M/S MOXDIAM APPEARED BEFORE THE AO IN RESPONSE TO T HE NOTICE UNDER SECTION 133(6) AND CONFIRMED THE FACTS AND THE GENU INENESS OF THE TRANSACTION. THE ASSESSEE FURTHER SUBMITTED THAT TH E SAID UNSECURED LOAN WAS REPAID BY THE ASSESSEE ON 18.09.2008, 17.12.2008 ON 20.03.2009 VIDE CHEQUE NO 526402 FOR RS.38,00,000/-, CHEQUE NO 5264 03 FOR RS.60,00,000/- BOTH DRAWN ON ICICI BANK AND ON 20.0 3.2009 BY CHEQUE NO.115328 OF RS. 7,03,498/- DRAWN ON THANE CO-OPERA TIVE BANK. THE ASSESSEE ALSO SUBMITTED THAT REVENUE HAS ACCEPTED T HE SOURCE AND INVESTMENT OF LENDER I.E. M/S MOXDIAM AS GENUINE IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) RWS 147, AFTER THE SAID SURVEY ACTION. 5. WE HAVE NOTED THAT THE AO IN PARA 7 OF HIS ORDER PA SSED UNDER SECTION 271(1)( C) OF WHILE LEVYING THE PENALTY HAS REFERR ED THAT THE SH. BASANT JAIN PARTNER OF M/S MOXDIAM APPEARED BEFORE HIM ON 23/06 /2011 IN RESPONSE TO THE NOTICE UNDER SECTION 133(6) AND FILED DETAILS O F LOAN TRANSACTION CONFIRMING THE FACTS AND THE GENUINENESS OF THE TR ANSACTION. THE AO FURTHER REFEREED IN PARA 8 OF HIS ORDER THAT THE SAID UNSEC URED LOAN WAS CLAIMED TO HAVE BEEN REPAID BY THE ASSESSEE ON 18.09.2008, 17. 12.2008 ON 20.03.2009 VIDE CHEQUE NO 526402 FOR RS.38,00,000/- , CHEQUE N O 526403 FOR RS.60,00,000/- BOTH DRAWN ON ICICI BANK AND ON 20.0 3.2009 BY CHEQUE NO.115328 FOR RS. 7,03,498/- DRAWN ON THANE CO-OPER ATIVE BANK. ONE OF ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 6 THE PROPRIETOR OF MOXDIAM SH. BASANT JAIN HAS RETRA CTED THE STATEMENT VIDE HIS AFFIDAVIT DATED 18.02.2011. THE AFFIDAVIT OF OT HER PARTNER OF M/S MOXDIAM SH. NITIN JAIN WAS ALSO FILED BEFORE AO. T HE AO NOT ACCEPTED THE CONFIRMATION OF THE LOAN FURNISHED BY PARTNER OF M/ S MOXDIAM IN THE FORM OF AFFIDAVIT. THE PARTNER OF M/S MOXDIAM APPEARED I N PERSON TO CORROBORATE THE FACTS. THE AO INSTEAD OF BRINGING ANY MATERIAL ON RECORD RELIED ON THE INFORMATION OF THE SURVEY PROCEEDINGS CONDUCTED ON THE PREMISES OF M/S MOXDIAM. IT IS NOT IN DISPUTE THAT ON APPEAL AGAIN ST THE QUANTUM ASSESSMENT, THE ADDITION HAS BEEN CONFIRMED BY LD C IT (A) IN ITS ORDER DATED 30.11.2011. HOWEVER, THE PENALTY PROCEEDINGS ARE SE PARATE AND INDEPENDENT. IN OUR VIEW THE ASSESSEE DURING THE P ENALTY PROCEEDING AND FIRST APPELLATE STAGE HAS PRIMA FACIE HAS BROUGHT O N RECORD THE EVIDENCES TO ESTABLISH THE FACTS ABOUT THE IDENTITY, CREDITWORTH INESS OF PARTY AND GENUINITY OF THE TRANSACTION OF UNSECURED LOAN. THE ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS. THE AO HAS NOT DISPUTED THE FACT THAT THE REVENUE HAS ACCEPTED THAT THE INVESTMENTS / LOAN AND ADVANCES A ND ITS SOURCE AS GENUINE IN THE ASSESSMENT ORDER OF LENDER I.E. M/S MOXDIAM UNDER SECTION 143(3) RWS 147 FOR AY 2007-08, WHICH WAS PASSED AFTER SURV EY UNDER SECTION 133A. 6. THE ASSESSEE THROUGHOUT THE PROCEEDINGS CLAIMED THA T ALL DETAILS AND PARTICULARS WERE FURNISHED AND THE ASSESSMENT WAS F RAMED ON THE BASIS THOSE PARTICULARS, MERE THE CLAIM OF THE ASSESSEE WERE NO T ALLOWED, IT DOES NOT ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 7 AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE HAVE SEEN THAT THE DISALLOWANCE WAS MADE ONLY ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. AS PER THE CONTENTION OF THE ASSESSEE, THE ASSESSEE HAS MADE BONAFIDE CLAIM. THE CLAIMS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDE R. IT IS SETTLED LAW THAT MERE DISALLOWANCE OF THE CLAIM WOULD NOT AUTOMATICA LLY LEAD TO LEVY OF PENALTY UNLESS THE AO SPECIFIED THAT THE ASSESSEE H AS CLAIMED WRONG CLAIM WHICH WAS NOT ADMISSIBLE OR CLAIMED WITH MALAFIDE I NTENTION. IN OUR VIEW, THE AO MADE THE DISALLOWANCE OF UNSECURED LOAN AND ITS INTEREST PAYMENT ON THE BASIS OF THIRD PARTY INFORMATION. THE AO LEV IED THE PENALTY HOLDING THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN OUR VIEW, THE INACCURACY OF PARTICULAR CAN BE JUDGED IN ACCORDANC E WITH THE FACT OF THE CASE. THE HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) HELD THAT MERE MAKING OF CLAIM W HICH IS NOT ACCEPTED BY AO, WOULD NOT AUTOMATICALLY LEADS TO LEVY OF PENALT Y. THE HONBLE COURT FURTHER HELD THAT THE WORDS INACCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. IN THE ABSENCE OF A FINDING BY THE AO THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND T O BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF I NVITING PENALTY U/S 271(1)(C). WE HAVE NOTICED THAT THERE IS NO FINDI NG OF THE AO THAT THE PARTICULARS FURNISHED BY ASSESSEE WERE FOUND TO BE INCORRECT OR ERRONEOUS. IN ITA NO. 5 087/M/2014- M/S SWASTIK REALTORS 8 VIEW OF THE ABOVE DISCUSSION THE ORDER OF LEVY OF P ENALTY UNDER SECTION 271(1) (C) IS NOT SUSTAINABLE AND THE SAME IS SET-A SIDE AND THE PENALTY LEVIED BY AO IS DELETED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DAY OF OCTOBER 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 11/10/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/