JCIT, Meerut V. M/s. Pearson Chemical Corporation, Meerut

ITA 5662/DEL/2012

• Counselvise Citation: 566220114 RSA 2012
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 27-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHANDER MEHRA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI T.S.KAPOOR, ACCOUNTANT MEMBER I.T.A .NO.-5662 & 5663/DEL/20 12 (ASSESSMENT YEAR-2005-06) JCIT, AAYAKAR BHAWAN, RANGE-2, MEERUT (APPELLANT) VS M/S PEARSON CHEMICAL CORPORATION, 5-A, MURARI PURAM, MEERUT. PAN-AAEFP5929R (RESPONDENT) APPELLANT BY SH. NEEHAR RANJAN PANDEY, SR. DR RESPONDENT BY SH. CHANDER MEHRA, CA ORDER PER DIVA SINGH, JM THESE ARE TWO APPEALS FILED BY THE REVENUE AGAINST THE SEPARATE ORDER DATED 16.08.2012 OF CIT(A), MEERUT PERTAINING TO 2005-06 ASSESSMENT YEAR QUASHING THE PENALTY IMPOSED BY THE AO U/S 271D & 271E RESPECTIV ELY. BOTH THESE APPEALS ARE BEING DISPOSED BY A COMMON ORDER FOR THE SAKE OF CO NVENIENCE AS FACTS AND ARGUMENTS QUA THE ISSUE INVOLVED REMAINED IDENTICAL . 2. IN ITA NO-5662/DEL/2012, THE GROUNDS RAISED BY T HE REVENUE READ AS UNDER :- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW IN DELETING THE PENALTY OF RS.1755000/- IMPOSED U/S 27 1D OF THE IT ACT, 1961 HOLDING THAT THE ORDER WAS ERRONEOUS AND PERVERSE IGNORING THAT THE PROCEEDINGS UNDER THE FISCAL STAT UTE ARE NOT IN THE NATURE OF JUDICIAL PROCEEDINGS AND THE EXECUTIO N OF JURISDICTION IN A WRONGFUL MANNER CANNOT RESULT IN NULLITY AND IS A CURABLE DEFECT AS HELD IN THE CASE OF DEEPAK AGRO FOODS VS STATE OF RAJASTHAN AND OTHERS (SC) 2008 TIOL 134-SC CT, WHILE DELETING PENALTY OF GROUND NO.1. I.T.A .NO.-5662 & 5663/DEL/2012 2 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW IN IGNORING THE PROVISIONS OF SECTION OF 292B OF THE I T ACT 1961 WHICH COMMANDS THE PROCEEDINGS VALIDITY IF THE SAME IS IN SUBSTANCE AND EFFECT IN CONFIRMEDLY WITH OR ACCORDI NG TO THE INTENT AND PURPOSE OF THE ACT, WHILE DELETING THE P ENALTY IN GROUND NO 1. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN L AW IN DELETING THE PENALTY OF GROUND NO 1 IGNORING ALL TH E PLENARY POWERS VESTED IN HIM TO CORRECT ALL ERRORS IN THE P ROCEEDINGS UNDER APPEAL AND TO ISSUE NECESSARY APPROPRIATE DIR ECTION TO THE AUTHORITY AGAINST WHOSE DECISION THE APPEAL IS PREFERRED TO AND DISPOSE OF THE WHOLE OR ANY OF THE MATTER AFRES H UNLESS FORBIDDEN FROM DOING SO BY THE STATUTE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/ OR DELETE ANY GROUND(S) OF APPEAL. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF THE A.O. RESTORED. 2.1. THE LD. SR. DR, SH.NEEHAR RANJAN PANDEY RELIES ON THE PENALTY ORDER U/S 271D WHICH READS AS UNDER :- THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME D ECLARING TAXABLE INCOME OF RS. 75,820/-. THE ASSTT. U/S 143(3) WAS M ADE AT RS. 1,19,470/- ON 05-10-2007. ON EXAMINATION OF THE DET AILS OF THE CASE AND DOCUMENTS BEFORE THE ASSESSING OFFICER DURING T HE ASSESSMENT PROCEEDING, IT WAS FOUND THAT THE ASSESSEE FIRM ACC EPTED LOANS OF RS. 5 LAC FROM SHRI MOHD. YONUS DURING THE F.Y. 2001-02 A ND FROM SHRI MOHD. FARMAN MALIK IN CASH AMOUNTING TO RS. 12,55,0 00/- DURING THE F.Y. 2003-04, TOTALING TO RS. 17,55,000/- THE SAME WAS UTILIZED FOR THE CONSTRUCTION OF THE PROPERTY OF THE FIRM. THE LOAN OF RS.17,55,000/- AS MENTIONED ABOVE WAS CREDITED TO THE CAPITAL OF THE PARTNER. THE ABOVE MENTIONED AMOUNTS WERE ACCEPTED IN CASH WHICH IS IN CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE INCOME TAX AC T, 1961. NOTICE U/S 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 DATED 15-11-2010 WERE ISSUED TO SHOW CAUSE AS TO WHY THE PENALTY U/S 271D OF THE INCOME TAX ACT MAY NOT BE I MPOSED UPON FOR THE CONTRAVENTION OF ABOVE PROVISIONS. IN COMPLIANC E TO THE ABOVE NOTICE SHRI CHANDER MEHARA CA ATTENDED AND FILED TH E LETTER ALONG WITH POWER OF ATTORNEY DATED 22-11-2010. AFTER SEEK ING ADJOURNMENT I.T.A .NO.-5662 & 5663/DEL/2012 3 BY THE COUNSEL OF THE ASSESSEE, THE REPLY DATED 02. 05.2011 WAS RECEIVED FROM THE PARTNER OF THE FIRM SHRI RAKESH C HANDRA RASTOGI. AFTER GOING THROUGH THE RECORDS AND REPLY I HOLD T HAT THE ASSESSEE IS IN DEFAULT IN ACCEPTING THE CASH OF RS. 17,55,000/- FROM THE ABOVE TWO PARTIES IN VIEW OF THE PROVISION OF SECTI ON 269SS OF THE INCOME TAX ACT. ACCORDINGLY I IMPOSED A PENALTY OF RS. 17,55,000/- U/S 271D OF THE INCOME TAX ACT, 1961 EQUIVALENT TO AMOUNT ACCEP TED IN CASH AS LOAN FROM THE ABOVE PARTIES. 3. AGGRIEVE BY THE PENALTY ORDER THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) C ONSIDERING THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE DECIDED THE ISSUE IN THE FOLLOWING MANNER:- 7. DECISION AND REASONS THEREFOR:- I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND GONE THROUGH THE AOS ORDER AND THE ARS SUBMISSIONS. T HE PENALTY ORDER PASSED BY THE AO IS, ON THE FACE OF IT, ERRONEOUS A ND PERVERSE. THE AO HAS IMPOSED PENALTY FOR A.Y.2005-06 WHILE THE TR ANSACTION THAT HE CONSIDERED FOR IMPOSITION OF THE SAME RELATED TO A. YRS. 2002-03 AND 2004-05. DURING THE ASSESSMENT PROCEEDINGS FOR A.Y .2005-06, THE AO HAD ISSUED A NOTICE ON 13.7.2007 TO WHICH THE APPEL LANT RELIED THAT THE AMOUNTS WHICH WERE BEING CONSIDERED WERE NOT LOANS OR DEPOSITS BUT ADVANCES IN RESPECT OF SALE OF LAND. THE AO DID NO T TAKE ANY ACTION AT THAT POINT OF TIME. HOWEVER, HE AGAIN ISSUED NOTIC E DATED 11.1.2011 FOR A.YRS. 2002-03 AND 2004-05 FOR THE IMPOSITION OF PENALTY U/S 271D. NO PROCEEDINGS FOR A.YRS. 2002-03 AND 2004- 05 WERE PENDING BEFORE HIM. IN MY CONSIDERED VIEW, ALL INCOME-TAX PROCEEDINGS ARE BASED ON THE FUNDAMENTAL PRINCIPLE OF A UNIT YEAR O F ASSESSMENT WHICH IS ASSESSMENT YEAR. THE AO COULD NOT IMPOSE A PENA LTY FOR A.Y. 2005-06 FOR ALLEGED TRANSACTIONS RELATING TO F.YRS. 2001-02 AND 2003- 04. IN ANY CASE, THE AO COULD HAVE IMPOSED PENALTY FOR A.YRS 2002- 03 AND 2004-05 ONLY IF THE PROCEEDINGS FOR THE IMPO SITION OF PENALTY WERE VALIDLY INITIATED FOR THESE ASSESSMENT YEARS. EVEN SUCH PENALTY COULD HAVE BEEN IMPOSED WITHIN A TIME LIMIT OF THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS FOR IMPOSIT ION OF PENALTY WERE INITIATED OR SIX MONTHS FROM THE END OF THE MONTH I N WHICH SUCH ACTION WAS INITIATED, WHICHEVER PERIOD EXPIRED LATER. ON THE BASIS OF THESE FACTS, THE AOS ORDER IS HELD TO BE ERRONEOUS AND P ERVERSE. THERE IS NO NEED TO GO INTO THE MERIT OF THE APPELLANTS SUB MISSIONS WHETHER THE TRANSACTIONS WERE LOANS OR DEPOSITS OR WERE ADV ANCES TOWARDS I.T.A .NO.-5662 & 5663/DEL/2012 4 SALE OF LAND. THE ARS RELIANCE ON THE JUDGEMENT O F THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS NHK JAPAN BROADCAS TING CORPORATION (2008) 305 ITR 137 IS VERY RELEVANT. 4. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. THE LD. SR. DR PLACED RELIANCE UPON THE PENALTY ORDER, HOWEVER IN ALL FAIRNESS HE WAS UNABLE TO EXPLAIN AS TO HOW THE FACTS RELATABLE TO 2002-03 & 2004-05 ASSESSMENT YEAR COULD BE TAKEN INTO CONSIDERATION FOR IMPOSING PENALTY IN 20 05-06 ASSESSMENT YEAR. THE LD. AR ON THE OTHER HAND RELIES UPON THE IMPUGNED ORDER . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER. PENALTY IF AT ALL WAS IMPOSABLE IT COULD HAVE BEEN IMPOSED ON ACCOUNT OF THE FACTS FOR THE YEAR UNDER CONSIDERATI ON. THE STATUTE DOES NOT PERMIT THE AO TO LEVY PENALTY IN A PARTICULAR ASSESSMENT Y EAR ON FACTS WHICH ARE RELATABLE TO SOME OTHER ASSESSMENT YEAR. IN THE ABSENCE OF A NY COGENT ARGUMENTS, REFERRING TO ANY PROVISION OF THE ACT OR, A LEGAL PRECEDENT, WE CONFIRM THE FINDING OF THE CIT(A) AND DISMISS THE DEPARTMENTAL GROUND. IN THE RESULT ITA NO.-5622/DEL/2012 IS DISMISSED. 6. IDENTICAL GROUND HAS BEEN RAISED IN THE ITA NO-5 663/DEL/2012 QUA THE PENALTY IMPOSED U/S 271E BY THE AO AGAIN ON ACCOUNT OF THE FACTS WHICH ARE PERTAINING TO 2002-03 & 2004-05 ASSESSMENT YEARS I. E THE VERY SAME FACTS. FOR READY-REFERENCE, WE REPRODUCE THE PENALTY ORDER HER EUNDER ON WHICH RELIANCE IS PLACED BY THE DEPARTMENT:- THE ASSESSEE FIRM FILED ITS RETURN DECLARING TAXAB LE INCOME OF RS. 75,820/-. THE ASSTT. U/S 143(3) WAS MADE AT RS. 1,1 9,470/- ON 05-10- 2007. ON EXAMINATION OF THE DETAILS OF THE CASE IT WAS FOUND THAT THE ASSESSEE FIRM ACCEPTED LOANS OF RS. 5 LAC FROM SHRI MOHD. YONUS DURING THE FY 2001-02 AND ALSO ACCEPTED LOANS FROM SHRI MOHD FARMAN MALIK IN CASH DURING THE FY 2003-04 AND THE SAME WAS UTILIZED FOR THE CONSTRUCTION OF THE PROPERTY OF TH E FIRM. THE ABOVE MENTIONED AMOUNTS WERE ACCEPTED IN CASH WHICH IS IN CONTRAVENTION OF PROVISIONS OF SECTION 269SS OF THE INCOME TAX AC T, 1961. THE LOAN I.T.A .NO.-5662 & 5663/DEL/2012 5 ACCEPTED IN CASH WAS TRANSFERRED TO THE CAPITAL ACC OUNT OF THE PARTNER AND THE SAME WAS REPAID IN CASH. IN VIEW OF THE PRO VISIONS CONTAINED IN SECTION 269T OF THE IT ACT, MENTIONS THAT THE A MOUNT OF LOAN REPAID IN CASH IS IN-CONTRAVENTION OF PROVISION OF SECTION 269T OF THE IT ACT. NOTICE U/S 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 DATED 15-11-2010 WERE ISSUED TO SHOW CAUSE AS TO WHY THE PENALTY U/S 271T OF THE INCOME TAX ACT MAY NOT BE IMPOSED UPON FOR THE CONTRAVENTION OF ABOVE PROVISIONS. IN COMPLIAN CE TO THE ABOVE NOTICE SHRI CHANDER MEHARA, CA, ATTENDED AND FILED THE LETTER ALONG WITH POWER OF ATTORNEY DATED 22-11-2010. AFTER SEE KING ADJOURNMENT BY THE COUNSEL OF THE ASSESSEE , THE REPLY DATED 2. 05.2011 WAS RECEIVED FROM THE PARTNER OF THE FIRM SHRI RAKESH C HANDRA RASTOGI. AFTER GOING THROUGH THE RECORDS AND CONSIDERING TH E REPLY I HOLD THAT THE ASSESSEE IS IN DEFAULT OF REPAYING TH E AMOUNT IN CASH OF RS.17,55,000/- FROM THE ABOVE TWO PARTIES IN VIEW O F THE PROVISION OF SECTION 269T OF THE INCOME TAX ACT. ACCORDINGLY I IMPOSED A PENALTY OF RS.17,55,000/- U/S 271E OF THE INCOME TAX ACT, 1961 EQUIVALENT TO THE AMOUNT R EPAID IN CASH TO THE ABOVE PARTIES. 7. CONSIDERING SIMILAR ARGUMENTS AND FACTS, THE CIT (A) CAME TO AN IDENTICAL FINDING IN THE FACTS OF THE CASE. SINCE THE ARGUME NTS ADVANCED ON BEHALF OF THE PARTIES REMAINED THE SAME, ACCORDINGLY OR REASONS G IVEN IN ITA NO.-5622/DEL/2012, ITA NO-5623/DEL/2012 IS ALSO DISMISSED AS PER THE P RONOUNCEMENT MADE IN THE OPEN COURT IN THE PRESENCE OF THE PARTIES AT THE TI ME OF HEARING. IN THE RESULT, THE DEPARTMENTAL APPEALS ARE DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 6 TH OF DECEMBER 2013. SD/- SD/- (T.S.KAPOOR) (DIVA SINGH) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED:- 06/12/2013 *AMIT KUMAR/R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) I.T.A .NO.-5662 & 5663/DEL/2012 6 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI