PACIFIC ORGANICS P.LTD, AMBERNATH V. JCIT RG 1, KALYAN

ITA 5420/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0689 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 21-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABI RAMA KARTIKYAN
• Keywords: Unexplained expenditure; Set aside
• Section: 271(1)(c); 69C; 201; 274; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI BEFORE S HRI RAJESH KUMAR ( AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 5420/MUM/2018 ASSESSMENT Y EAR: 2011 - 12 M/S PACIFIC ORGANICS PVT. LTD., PLOT NO. N4, ADDITIONAL AMBERNATH MIDC, ANAND NAGAR, AMBERNATH (E), 421506 PAN: AABCP8168Q VS. THE JCIT, RANGE - 1, 1 ST FLOOR, MOHAN PLAZA WAYLE NAGAR, KHANDAKPARA, KALYAN (WEST) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHARAT KUMAR (A R) REVENUE BY : SHRI ABI RAMA KARTIKYAN (D R) DATE OF HEARING: 26/04 /201 9 DATE OF PRONOUNCEMENT: 31 / 0 5 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 11.07.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 (FOR SHORT THE CIT (A) ) , PUNE , FOR THE ASSESSMENT YEAR 2011 - 12 , WHEREBY THE LD. CIT (A) HAS DISMISSED T HE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY AO U/S 271(1((C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF BROMIDE AND BROMINE (CHEMICALS) , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 80,00,861/ . S INCE IT WAS NOTICED THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION BILLS WITHOUT ACTUALLY PURCHASING THE GOODS FROM HAWALA OPERATORS AMOUNTING TO RS. 1,61,93,400/ DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AO INITIATED ENQUIRY . SINCE TH E ASSESSEE FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES IN QUESTION THE 2 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 AO MADE ADDITION OF THE SAID AMOUNT AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE A CT. ON THE BASIS OF THE AFORE SAID ADDITION , THE AO INITIATED PROCEEDINGS UNDER SECTION 270 ( 1 )( C ) OF THE A CT AND IMPOSED PENALTY OF RS. 5 3,79,043/ - FOR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A). THE L D. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL AND CONFI RMED THE PENALTY LEVIED BY THE AO. THE ASSESSEE IS IN APPEAL AGAINST THE SAID FINDINGS OF THE LD. CIT (A) . 3. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) BY RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING STAND OF THE A.O. WHEREIN THE LD. A.O. HAD NOT STRUCK OFF RELEVANT LIMB OF PENALTY IN THE NOTICE ISSUE U/S 274 OF THE ACT, ON 05/02/2014. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN PLACING RELIANCE ON THE CASE OF CIT V/S. SMT. KAUSHALYA (1995) 216 ITR 660 (BOM) WHICH IS NOT APPLICABLE TO THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN PLACING RELIANCE ON THE CASE OF EARTH MOVING EQUIPMENT SERVICE CORPORATION V/S. DCIT IN ITA NO. 6617/M/2017 WHICH WAS NOT SPEAKING ORDER AND THE LD. CIT (A) HAD NOT DISCUSSED THE CASE LAWS, INCLUDING JURISDICTIONAL HIGH COURT DECISION, RELIED ON SUBMISSION MADE BY LD. AR. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING STAND OF A.O. THE LD. AO HAD INITIATED THE PENALTY FOR FURNISHING INACCURATE PARTICULARS AND HAD LEVIED THE PENALTY FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. 3 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CONFIRMING PENALTY U/S 271 (1)(C) OF RS. 53,79,043 WITHOUT CONSIDERING ORDER OF ITAT WHERE PART RELIEF HAD BEEN GRANTED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED CONFIRMING STAND OF A.O. WHERE THERE IS BONA - FIDE CLAIM WAS MADE IN BOOKS OF ACCOUNT AND DUE TO LACK OF CERTAIN DOCUMENTS ON ACCOUNT OF GENUINE PURCHASES AND IT I S DISCLOSED IN ITS INCOME. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE AO HAD ISSUED THE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT ON A STANDARD PROFORMA WITHOUT POINTING OUT AS TO UNDER WHICH OF THE LIMB S OF SECTION 271(1(C) OF THE ACT IS GOING TO BE INITIATED AGAINST THE ASSESSEE RESPONDENT, THE LD. CIT(A) OUGHT TO HAVE SET ASIDE THE IMPUGNED ORDER PASSED THE LD. CIT(A). THE LD. COUNSEL FURTHER POINTED OUT THAT THE L D. CIT (A) HAS WRONGLY RELIED ON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF SMT. KAUSHALYA 216 ITR 660 BOMBAY AS THE RATIO LAID DOWN IN THE SAID CASE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT THE AO HA D HELD THAT THE IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FU RNISH ED INACCURATE PARTICULARS AND THEREBY CONCEALED ITS INCOME , HOWEVER, THE PENALTY WAS LEVIED FOUR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. COUNSEL FURTHER POINTED OUT THAT SINCE, THE AO H AS ISSUED THE NOTICE IN A MECHANICAL MANNER WITHOUT STRIKING OFF ONE OF THE TWO LIMBS UNDER WHICH THE PENALTY WAS PROPOSED, THE ASSESSEE WAS DEPRIVED OF THE OPPORTUNITY TO DEFEND THE SPECIFIC CHARGE, THE IMPUGNED ORDER IS NOT SUSTAINABLE IN LAW THEREFORE, THE SAME IS LIABLE TO BE SET ASIDE. THE LD. COUNSEL RELIED UPON THE FOLLOWING DECISIONS OF THE MUMBAI BENCHES OF THE ITAT TO SUBSTANTIATE ITS CONTENTIONS: - 1. SHRI ANIL V. MEHTA ITA NO 1324/MUMBAI 2013, 2. PRINCE CONSULTANCY P LTD. ITA NO 6068/MUM/2016 ; 3. M/S SI GROUP INDIA LTD. ITA 3425/M/2015; 4 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 4. SHRI SHAILESH G SHETH ITA NO 701/MUM/2012; 5. M/S PENNZOIL QUAKER STATE INDIA LTD ITA 7386/MUM2014; 6 M/S WADWA ESTATE & DEVELOPERS ITA NO 2158/MUM/2016. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIV E DR RELYING ON THE ORDER PASSED BY THE AUTHORITIES BELOW SUBMITTED THAT SINCE THE EXPLANATION OFFERED BY THE ASSESSEE WAS FOUND TO BE FALSE, THE LD CIT(A) HAS RIGHTLY LEVIED THE PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1((C) OF THE ACT. SO FAR AS THE STRIKING OFF OF INAPPLICABLE LIMB OF THE SECTION IS CONCERNED, SINCE THE ASSESSEE HAS PARTICIPATED IN THE PROCEEDINGS BEFORE THE AUTHORITIES BELO W AND DEFENDED ITS CASE, NO PREJUDICE HAS BEEN CAUSED TO THE RESPO NDENT/ASSESSEE . THE LD. DR FURTHER SUBMITTED THAT SINCE NO PREJUDICE HAS BEEN CAUSED TO THE ASSESSEE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. C IT(A) TO INTERFERE WITH THE SAME. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE ENTIRE M ATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTIES IN THE LIGHT OF THE RIVAL CONTENTIONS OF THE PARTIES WE NOTICE THAT THE AO HAS HELD IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME AND THEREBY CO NCEALED ITS INCOME. WE FURTHER NOTICED THAT THE AO HAS ISSUED A SHOW CAUSE NOTICE AS TO WHY AND ORDER IMPOSING PENALTY SHOULD NOT BE PASSED UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE ACT WITHOUT STRIKING OFF ONE OF THE TWO LIMBS OF THE SAID SECTI ON. THE CONTENTS OF NOTICE READ AS UNDER: IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME 7. SO AS PER THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER , THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME WHERE AS IN THE NOTICE THE AO HAS DELIBERATELY KEPT THE COMPLETE SENTENCE AFORESAID WITHOUT STRIKING OFF ONE OF THE INAPPLICABLE PORTION, WHICH GIVES THE IMPRESSION THAT THE 5 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 ASSESSEE HAS EITHER CONCEALED T HE PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME. THEREFORE, INFERENCE CAN BE DRAWN THAT THE AO HIMSELF WAS NOT SURE WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. UNDER THESE CIRCUMSTANCES THE QUESTION ARISES AS TO WHETHER THE ORDER PASSED PURSUANT TO THE SAID NOTICE IS SUSTAINABLE IN LAW? AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, THE COORDINATE BENCHES OF THE TRIBUNAL HAVE DEALT WITH THE IDENTICAL ISSUE IN THE CASES RELIED UPON BY THE ASSESSEE AND THE TRIBUNAL HAS SET ASIDE THE ORDER CONFIRMED BY THE LD. CIT(A) PASSED BY THE AOS UNDER THE SIMILAR SET OF FACTS. RECENTLY, THE A BENCH OF THE MUMBAI TRIBUNAL HAS DEALT WITH THE IDENTICAL ISSUE IN THE CA SE OF SHRI ANIL V. MEHTA ITA NO 1324/MUMBAI 2013, AND DECIDED THE SAME IN FAVOUR OF THE ASSESSEE. THE OPERATIVE PART OF THE ORDER OF THE TRIBUNAL READS AS UNDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE IMPU GNED ORDER AND DECISIONS REFERRED BY BOTH THE PARTIES. THE UNDISPUTED FACTS ARE THAT THE AO, WHILE FRAMING THE ASSESSMENT UNDER SECTION 143 (3) OF THE A CT INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME AND FILING OF INACCURATE PARTICULARS OF INCOME , THUS THEREBY INITIATING PENALTY PROCEEDINGS FOR BOTH THE LIMBS. SIMILARLY, WHILE ISSUING PENALTY NOTICE UNDER SECTION 274 R.W.S.2 71 (1)(C) OF THE A CT DATED 27.12.2010 DID NOT STRIKE OF F ONE OF THE TWO LIMBS WHICH WAS RELEVANT THUS THE ASSESSEE WAS NOT APPR AISED OF THE EXACT CHARGED ON WHICH PENALTY WAS PROPOSED TO BE LEVIED. THUS WE ARE OF THE VIEW THAT IT IS MANDATORY ON THE PART OF THE AO TO SPECIFY SPECIFICALLY THE CHARGE ON WHICH PENALTY IS PROPOSED TO BE LEVIED AND NON - STRIKING OF RELEVANT PORTION WOUL D GO TO THE ROOT OF THE JURISDICTION OF THE AO TO PASS PENALTY ORDER. THE CASE OF THE ASSESSEE IS CLEARLY COVERED BY THE JUDGMENTS OF THE HONORABLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND G AINING F ACTORY 359 ITR 565 AND M/S. SSAS EMERALD MEADOWS IN ITA NUMBER 380 OF 2015 DATED 23. 11. 2015 WHEREIN THE SLP FILED BEFORE THE HON BLE SUPREME COURT WAS ALSO DISMISSED. IN THE CASE OF SAMSUN PERINCHERY IN ITA NUMBERS 1154 OF 2014, 953 OF 6 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 2014, 1097 OF 2014 AND 1126 OF 2014 DATED 05. 01. 2017 THE HONBLE BOMBAY HIGH COURT HAS HELD THAT THE ORDER IMPOSING PENALTY UNDER SECTION 27 1(1)(C) OF THE A CT HAS TO BE MADE ONLY ON THE GROUND ON WHICH PENALTY PROCEEDINGS HAS BEEN INITIATED. IN VIEW OF THE RATIO LAID DOWN IN THESE DECISIONS WE ARE OF THE VIEW TH AT IN THE ASSESSMENT ORDER WAS INITIATED ON BOTH THE LIMBS WHEREAS IT WAS FINALLY IMPOSED OF ORDERS PASSED BY THE AO UNDER SECTION 274 READ WITH SECTION 271(1)(C) IMPOSING PENALTY SUFFER FROM SERIOUS JURISDICTIONAL DEFECT AND THEREFORE HAS TO BE REVISED. W E THEREFORE SET ASIDE THE ORDER OF THE CIT (A) AND DELETE THE PENALTY. 8. WE NOTICE THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO THE ISSUE INVOLVED IN THE CASE OF SHRI ANIL V. MEHTA (SUPRA) . THE COORDINATE BENCH HAS DECIDED THE ISSUE IN QUES TION IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE RATIO OF LAW LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND G AINING F ACTORY ( SUPRA) AND THE JURISDICTIONAL HIGH COURT IN THE CASE OF SAMSUN PERINCHERY (SUPRA) . THE OTHER CAS ES RELIED UPON BY THE LD. COUNSEL FURTHER SUPPORT THE ASSESSEES CONTENTION. HENCE, WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL DISCUSSED ABOVE, ALLOW THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE LD. C IT(A) AND DELETE THE PENALTY. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 I S ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST . MAY , 2019 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 31 / 0 5 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 7 ITA NO. 5420/MUM/2018 ASSESSMENT YEAR: 2011 - 12 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI