M/s. TS-SA Associates, Pathankot V. The Deputy Commissioner of Income tax, Pathankot

ITA 519/ASR/2013

• Counselvise Citation: 51920914 RSA 2013
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: P N ARORA
• Keywords: Business income; Opportunity of being heard; Principle of natural justice
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 PAN: AAFFT0694J M/S. TS-SA ASSOCIATES, VS. DEPUTY COMMI SSIONER OF GURDASPUR ROAD, PATHANKOT INCOME TAX, CIRCLE -VI, PATHANKOT (PUNJAB). (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA, ADVOCATE RESPONDENT BY: SH. AMRIK CHAND, DR DATE OF HEARING: 18.11.2013 DATE OF PRONOUNCEMENT: 21.11.2013 ORDER PER BENCH 1. THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 26.11.2012 PASSED BY LEARNED CIT(A), AM RITSAR, FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS: I. THAT THE ORDER OF THE ASSESSING OFFICER THEREBY LEV YING PENALTY OF RS. 1,60,000/- UNDER SECTION 271(1)(C) OF THE INCOM E-TAX ACT, 1961, AS WELL AS THE ORDER OF THE LD. CIT(APPEALS) THEREBY CONFIRMING THE PENALTY ARE BOTH AGAINST THE FACTS O F THE CASE & UNTENABLE IN LAW. II. THAT THE LD. CIT(APPEALS) HAS GROSSLY ERRED IN CONF IRMING THE PENALTY ORDER OF THE AO WITHOUT APPLYING HIS MIND A ND WITHOUT APPRECIATING THE FACTS OF THE CASE. 2 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 III. THAT THE LD. CIT(APPEALS) DID NOT APPRECIATE THAT T HE PENALTY ORDER IS ILLEGAL, INVALID AND VOID AB-INITIO AND THE PENA LTY ORDER SHOULD HAVE BEEN QUASHED. IV. THAT THE LD. CIT(APPEALS) FAILED TO APPRECIATE THAT IT WAS A CASE OF AN ESTIMATE AND ON THE BASIS OF ESTIMATE, NO PENALT Y CAN BE LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 . V. THAT THE LD. CIT(APPEALS) FAILED TO APPRECIATE THAT THIS CASE DOES NOT FALL WITHIN THE MISCHIEF OF SECTION 271(1)(C) O F THE INCOME-TAX ACT, 1961, AND THE PENALTY LEVIED BY THE AO SHOULD HAVE BEEN CANCELLED BY THE CIT(APPEALS). VI. THAT THE AUTHORITIES BELOW DID NOT APPRECIATE THAT THERE WAS NO CONCEALMENT AT ALL AND AS SUCH THE PENALTY ORDER IS BAD IN LAW AND THE CIT(APPEALS) SHOULD HAVE CANCELLED THE PENALTY LEVIED BY THE AO. VII. THAT THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IS NOT AT ALL CALLED FOR AS NO REASONABL E & PROPER OPPORTUNITY OF BEING HEARD WAS ALLOWED, BEFORE LEVY ING THE PENALTY. VIII. ALTERNATIVELY, THE PENALTY IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IS VERY HIGH & EXCESSIVE. 2. THE FACTS RELATING TO THE ISSUE IN DISPUTE ARE T HAT THE ASSESSEE BEING A CIVIL CONTRACTOR DERIVES BUSINESS INCOME FR OM EXECUTING VARIOUS CONTRACTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 14.11.2007 DECLARING INCOME OF RS. 6,83,540/- AND THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY. NOTICES UNDER SECTION 143(2) & 142(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ALONG WITH QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE BUT THE AUTHORIZED REPRESENTATIVE OF THE A SSESSEE DID NOT FILE COMPLETE INFORMATION. CONSEQUENTLY, THE ASSESSING O FFICER COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS. 11,04,520/- VIDE ORDER DATED 3 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 20.02.2009 PASSED UNDER SECTION 144 OF THE INCOME-T AX ACT, 1961, AFTER REJECTING THE ASSESSEES BOOKS OF ACCOUNT ON THE GR OUND OF ASSESSEES FAILURE TO JUSTIFY THE DISPROPORTIONATE AND EXCESSI VE CLAIM OF RS. 18,42,106/- INCURRED ON FUEL/LUBRICANTS ESPECIALLY WHEN IT HAS NO VEHICLES EXISTING AS PER BALANCE SHEET, AND HELD THAT WHEN T HE SAND WAS PURCHASED AT RS. 58,17,665/- FROM LOCAL OR NEARBY PLACES, THE RE IS NO JUSTIFICATION FOR INCURRING SUCH HIGH EXPENSES AT RS. 18,42,106/- ON FUEL & LUBRICANTS PURCHASED FROM FAR AWAY PLACE. FURTHER, THE ASSESSI NG OFFICER HELD THAT ASSESSEE FIRM FAILED TO ESTABLISH THE GENUINENESS O F THREE SUNDRY CREDITORS OF RS. 2,62,630/- ALTHOUGH NUMBER OF OPPORTUNITIES WERE PROVIDED TO DO THE NEEDFUL, BUT ALL IN VAIN, AND THE ASSESSEE HAS WRONGLY SHOWN ITS INTEREST INCOME OF RS. 19,824/- AS ITS BUSINESS INC OME, WHEREAS THE SAME FELL UNDER THE HEAD INCOME FROM OTHER SOURCES. TH US, AFTER REJECTING THE ASSESSEES BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT, THE ASSESSING OFFICER DETERMINED ASSESSEES CONTRACT IN COME @ 8% OF THE NET RECEIPTS WORKED OUT AT RS. 10,84,701/- AND BY A DDING ITS INTEREST INCOME OF RS. 19,824/- UNDER THE HEAD INCOME FROM OTHER SOURCES, DETERMINED ITS TOTAL ASSESSABLE INCOME AT RS. 11,04 ,520/- AS AGAINST THE RETURNED INCOME OR RS. 6,83,540/-. IN FURTHERANCE T O THE PRELIMINARY SHOW CAUSE PENALTY NOTICE UNDER SECTION 274 R/W SECTION 271 OF THE ACT, 4 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 OPPORTUNITY NOTICE WAS ISSUED ON 05.08.2009. IN RES PONSE THERETO, THE ASSESSEES REPLY FILED ON 20.08.2009 DID NOT FIND F AVOUR WITH THE ASSESSING OFFICER, WHO IN TURN AFTER CAREFULLY CONS IDERING IT AND REBUTTING ALL THE THREE CASE LAWS RELIED UPON BY THE ASSESSEE IN ITS FAVOUR BEING DISTINGUISHABLE AND INAPPLICABLE, PROCEEDED TO LEVY A PENALTY OF RS. 1,60,000/- [IN ROUND FIGURE QUITE NEARER TO THE MIN IMUM PENALTY OF RS. 1,41,701/- @ 100% OF THE TAX SOUGHT TO BE EVADED] V IDE PENALTY ORDER DATED 25.08.2009 PASSED UNDER SECTION 271(1)(C) OF THE ACT. 3. BEING AGGRIEVED WITH THE PENALTY ORDER DATED 25 .08.2009 PASSED UNDER SECTION 271[1][C] OF THE ACT, THE ASSE SSEE FILED AN APPEAL BEFORE THE LEARNED FIRST APPELLATE AUTHORITY, WHO V IDE IMPUGNED ORDER DATED 26.11.2012 DISMISSED THE APPEAL. NOW, BEING A GGRIEVED WITH THE ORDER OF LEARNED FIRST APPELLATE AUTHORITY, THE ASS ESSEE FILED THE PRESENT APPEAL. 4. LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS WRONGLY CONFIRMED THE PENAL TY IMPOSED BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE ASSESSING OFFICER COULD NOT POINT OUT ANY SPECIFIC MISTAKE EXCEPT MAKING GENERAL OBSERVATIONS ABOUT THE EXPENSES CLAIMED. TH E ONLY CLAIM OF THE DEPARTMENT DURING THE ASSESSMENT PROCEEDINGS WAS TH AT THE EXPENSES 5 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 CLAIMED BY THE ASSESSEE ARE DISPROPORTIONATE BUT TH ERE IS NO CLAIM OF THE DEPARTMENT THAT THE EXPENSES ARE BOGUS. LEARNED COU NSEL FOR THE ASSESSEE HAS RELIED UPON A DECISION OF SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PRIVATE LTD, REPORTED IN 322 ITR 158 (SC), IN WHICH HON'BLE SUPREME COURT HAS CONCLUDED THAT MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS . SAME VIEW HAS ALSO BEEN GIVEN IN THE DECISIONS OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. S.L.N. TRADERS, REPORTED IN 243 CTR (KAR), PAGE 407 ; HON'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. K.L. MANG AL SAIN, REPORTED IN 107 ITR, PAGE NO. 598 (ALL); AND HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. HARSH TALWAR, REPORTED IN (2011) 335 ITR , PAGE 200 (DEL). AT LAST, HE REQUESTED THAT THE PENALTY OF RS. 1,60,000 /- LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY LEARNED FIRST AP PELLATE AUTHORITY MAY BE CANCELLED. 5. LEARNED DR RELIED UPON THE ORDER PASSED BY LEARN ED FIRST APPELLATE AUTHORITY. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE AFORESAID JUDGMENTS OF HON'BLE SUPREME COURT AND HI GH COURTS RELIED 6 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 UPON BY THE ASSESSEES COUNSEL, AND WE ARE OF THE V IEW THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME AT RS. 6,83,540/- ON 14.11.2007 AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 17.12.2008. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT A TOT AL INCOME OF RS. 11,04,520/- VIDE ORDER DATED 20.02.2009 UNDER SECTI ON 144 OF THE ACT. ASSESSING OFFICER ALSO ISSUED PENALTY NOTICE TO THE ASSESSEE UNDER SECTION 271(1)(C) READ WITH SECTION 274 OF THE ACT. IN RESP ONSE TO THE SAME, THE ASSESSEE FILED ITS EXPLANATION ON 20.08.2009, IN WH ICH THE ASSESSEE HAS ACCEPTED THE ASSESSMENT ORDER AND HAS NOT PREFERRED ANY APPEAL TO THE HIGHER AUTHORITIES AND ALSO PAID THE TAX ACCORDINGL Y. ASSESSEE FURTHER STATED IN ITS EXPLANATION THAT DUE TO ITS ACT THERE IS NO LOSS TO THE REVENUE AND EVEN THERE IS NO EXISTENCE OF MENS REA TO CAUSE LOSS TO THE REVENUE. THEREFORE, THE PENALTY SHOULD NOT BE LEVIED IN THE CASE OF THE ASSESSEE IN VIEW OF THE DECISIONS MENTIONED BY THE ASSESSEE IN ITS REPLY DATED 20.08.2009. THE ASSESSING OFFICER REJECTED THE EXPL ANATION OF THE ASSESSEE AND LEVIED THE PENALTY IN DISPUTE ON THE G ROUND THAT THE EXPLANATION OF THE ASSESSEE IS NOT PLAUSIBLE BECAUS E INDIRECTLY THE ASSESSEE HAS ACCEPTED THE DEFECTS POINTED OUT IN TH E BOOKS OF ACCOUNT BY NOT FILLING THE APPEAL AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER. 7 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 LEARNED FIRST APPELLATE AUTHORITY HAS ALSO CONFIRME D THE PENALTY IN DISPUTE. 7. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE AND THE AFORESAID JUDGMENTS OF HON'BLE SUPREME COUR T AND HIGH COURTS RELIED UPON BY THE ASSESSEES COUNSEL, WE ARE OF TH E VIEW THAT THE FINDINGS OF THE REVENUE AUTHORITIES ARE AGAINST THE PRINCIPL ES OF NATURAL JUSTICE AND NOT TENABLE IN THE EYE OF LAW BECAUSE IF THE ASSESS EE HAS NOT FILED ANY APPEAL AGAINST THE ADDITION MADE BY THE ASSESSING O FFICER, DOES NOT MEAN THAT THE ASSESSEE HAS ADMITTED ITS FAULT. THERE MIG HT BE MANY REASONS FOR NOT FILING THE APPEAL AGAINST THE ADDITION. ONE OF THE REASONS MIGHT BE TO AVOID LITIGATION WITH THE DEPARTMENT AND THIS SHOUL D BE APPRECIATED BY THE REVENUE AUTHORITY. ENCOURAGE TO DECREASE UNNECE SSARY LITIGATION ON PETTY ISSUES SHOULD BE APPRECIATED BY THE REVENUE A UTHORITY. EVEN OTHERWISE, IN THE PRESENT CASE, THE ASSESSEE HAS CL AIMED SOME EXPENSES WHICH THE ASSESSEE HAS ENTERED IN THE BOOKS OF ACCO UNT. ASSESSEE HAS ALSO PRODUCED EVIDENCE SUPPORTING ITS CLAIM, WHICH WAS F OUND UNSATISFACTORY TO THE REVENUE AUTHORITY, DOES NOT MEAN THAT THE CL AIM OF THE ASSESSEE IS FALSE. IN THE PRESENT CASE, THE ASSESSEE HAS PRODUC ED SUFFICIENT EVIDENCE TO SUBSTANTIATE ITS CLAIM BUT LASTLY THE REVENUE HAS A SSESSED THE INCOME OF THE ASSESSEE @ 8% OF THE NET RECEIPTS WHICH WAS ACC EPTED BY THE ASSESSEE 8 I.T.A. NO. 519(ASR)/2013 ASSESSMENT YEAR: 2007-08 AND PAID THE TAX ACCORDINGLY. IN OUR CONSIDERED VIE W, THE PENALTY IN DISPUTE IS NOT LEVIABLE IN THE EYE OF LAW AND THE S AME IS CONTRARY TO THE FACTS OF THE PRESENT CASE. THUS, THE PENALTY IN DIS PUTE DESERVES TO BE CANCELLED. ACCORDINGLY, WE CANCEL THE PENALTY IN DI SPUTE BY CANCELLING THE IMPUGNED ORDER DATED 26.11.2012 PASSED BY LEARN ED CIT(A), AMRITSAR. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST NOVEMBER, 2013 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. TS-SA ASSOCIATES, GURDASPUR ROAD , PATHANKOT 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-VI, PATHA NKOT (PUNJAB). 3. THE CIT(A), ASR 4. THE CIT, ASR 5. THE SR DR, I.T.A.T., ASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.