Appeal details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 2308 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 2 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-12-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
29-10-2015
Assessment Year
2007-2008
Appeal Filed On
17-09-2012
Judgement Text
1 ITA NO. 57 71/MUM/2012 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH:A MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER & SMT. BEENA PILLAI, JUDICIAL MEMBER I.T.A .NO. 5771/MU M /2012 (ASSESSMENT YEAR-2007- 08) ATLANTIC CONSTRUCTION, PLOT NO. 176, ATLANTIC TOWN, R.B. MEHTA MARG, PAREL CHAWLS, GHATKOPAR(E), MUMBAI AAKFA2428A VS DCIT, MATRU MANDIR, GRANT ROAD, MUMBAI APPELLANT BY SHRI S.M. MAKIJA RESPONDENT BY SHRI R.A. DYANI ORDER PER BEENA PILLAI, JUDICIAL MEMBER : THIS IS A PENALTY APPEAL FILED BY THE ASSESSEE, ARI SING OUT OF THE CIT(A)S ORDER DATED 05/07/2012, FOR A.Y. 2007-08 O N THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LEVYING OF PENALTY W ITH REFERENCE TO THE ADDITIONS MADE BY THE LD. ASSESSING OFFICER IN RESPECT OF TWO ITEMS OF EXPENDITURE: DATE OF HEARING 29.10.2015 DATE OF PRONOUNCEMENT 04.12.2015 2 ITA NO. 57 71/MUM/2012 (I) RS. 2,83,000/- REPRESENTING PAYMENTS MADE TO 3 EMPLOYEES OF THE ASSESSEE FIRM AS AND BY WAY OF SAL ARY. (II) RS. 4,48,000/- BEING THE AMOUNT INCURRED FOR PROVID ING ALTERNATIVE ACCOMMODATION TO THE TENANTS WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E IN TOTALITY HOLDING BOTH THE AMOUNTS BE BOGUS EXPENDIT URE ON TECHNICAL GROUNDS. 2. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY WITH REFERENCE TO AN ADDITION OF RS. 1,44,000/- BEING UN PROVED CASH CREDIT IN THE BOOKS. 3. THE APPELLANTS CRAVE LEAVE TO ADD, AMEND, ALTER AND /OR VARY ANY OF THE GROUNDS AT THE TIME OR BEFORE THE HEARIN G OF THIS APPEAL. 4. THE APPELLANT THEREFORE PRAYS THAT PENALTY LEVIED B Y THE LD. ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) M AY PLEASE BE CANCELLED. 2. BRIEF FACTS OF THE CASE ARE AS UNDER; 2.1. THE ASSESSEE FILED ITS RETURN OF INCOME ON 26. 10.2007, DECLARING A TOTAL INCOME AT RS.12,46,506/-. SUBSEQU ENTLY THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U /S.143(2) WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. 2.2. AT THE TIME OF ASSESSMENT, THE LD.AO HAS MADE A DISALLOWANCE OF RS. 9 LAKHS OUT OF CASH EXPENSES CLAIMED AT RS. 12,88,170/-. WHILE MAKING THE DISALLOWANCE OF RS. 9 LAKHS, THE L D.AO REFERRED TO THE SALARY EXPENSES OF RS. 2,83,000/- AND TENANT AC COMMODATION CHARGES OF RS. 4,48,000/-. REGARDING THE DISALLOWAN CE OF SALARY, IT IS POINTED OUT BY THE LD.AO THAT, IN THE IMMEDIATEL Y PRECEDING YEAR THERE WAS NO CLAIM OF SALARY. AS REGARDS THE DISALL OWANCE OF RS. 4,48,000/-, IT WAS POINTED OUT BY THE LD.AO THAT, T HE ASSESSEE HAS NO EVIDENCE IN SUPPORT OF THESE EXPENSES. IT WAS FU RTHER OBSERVED BY THE LD.AO THAT, THE SELF MADE VOUCHERS PRODUCED BY THE ASSESSEE 3 ITA NO. 57 71/MUM/2012 SHOWED POSTAL STAMPS PERTAINING TO YEAR 2009, WHERE AS THE EXPENSES PERTAINED TO F.Y. 2006-07, WHICH IS CLEAR CUT EVIDENCE THAT THE EXPENSES OF SALARY AND TENANT ACCOMMODATIO N CHARGES WERE MANIPULATED. 2.3. REGARDING THE OTHER CASH EXPENSES PERTAINING T O TELEPHONE CHARGES AND TRANSPORT BILLS ETC., IT WAS OBSERVED B Y THE LD.AO THAT, THE ASSESSEE DID NOT HAVE VERIFIABLE THIRD PARTY EV IDENCE, EXCEPT ENTRIES OF CASH PAYMENT IN THE BOOKS OF ACCOUNT. UN DER THESE CIRCUMSTANCES, OUT OF TOTAL EXPENSES OF RS. 12,88,1 70/-, THE LD.AO DISALLOWED EXPENSES OF RS. 9 LAKHS, INCLUDING SPECI FIC DISALLOWANCE OF RS. 7,31,000/-(RS. 2,83,000 OF SALARY + RS.4,48, 000 ON ACCOUNT OF TENANT ACCOMMODATION CHARGES). 2.4. THE LD.AO FURTHER MADE ADDITION OF RS. 1,44,00 0/- IN RESPECT OF SQUARED UP CASH CREDITS AMOUNTING TO RS. 18,000/- E ACH FROM 8 PERSONS. THE LD.AO OBSERVED THAT, THE ASSESSEE HAD ONLY SUBMITTED A STATEMENT OF NAME OF PERSONS, FROM WHOM CASH OF R S. 18,000/- HAS BEEN RECEIVED. ACCORDINGLY, THE ADDITION OF RS, 1,44,000/- WAS MADE U/S. 68 OF THE I.T. ACT AND THE PENALTY PROCEE DINGS U/S. 271(L)(C) WERE ALSO INITIATED ON THE GROUND THAT TH E ASSESSEE HAS CONCEALED ITS INCOME AND FURNISHED INACCURATE PARTI CULARS OF INCOME. 2.5. THE ASSESSMENT PROCEEDINGS U/S.143(3) WAS COMP LETED ON 13.11.2009, DETERMINING THE TOTAL INCOME AT RS.22,9 0,506/-. THE LD.AO DISALLOWED THE EXPENSES AMOUNTING TO RS.10,44 ,000/-. THE LD.AO INITIATED PENALTY PROCEEDINGS IN RESPECT OF T HE ADDITION MADE 4 ITA NO. 57 71/MUM/2012 ON THE DISALLOWANCE OF THE ENTIRE EXPENSES OF RS.10 ,44,000/-. 3. AGGRIEVED BY THE ORDER OF THE LD.AO, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 3.1 IN THE APPEAL PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD NEITHER CONCEALED NOR HAD FURNISHED ANY INACCURATE PARTICULARS OF ITS INCOME. THE ASSESSEET FURTHER SU BMITTED THAT THE ADDITION OF RS. 9 LAKH IS BASED ONLY ON ESTIMATE AN D IT IS NOT THAT THE CLAIM OF PARTICULAR EXPENDITURE HAVING BEEN FOU ND BOGUS. SINCE THE DISALLOWANCE ITSELF IS MADE ON ESTIMATE, THE QU ESTION OF LEVY OF PENALTY DOES NOT ARISE. 3.2. FURTHER ON MERITS OF VARIOUS DISALLOWANCES, IT IS CONTENDED THAT AS REGARDS THE SALARY TO THREE EMPLOYEES AS WE LL AS EXPENSES OF RS. 4,48,000/- ON ACCOUNT OF PAYMENT OF COMPENSATIO N, THE ASSESSEE HAS ALREADY STATED THAT IT WAS A MISTAKE O N THE PART OF THE EMPLOYEES WORKING IN THE ACCOUNT SECTION, WHO DID N OT PREPARE THE VOUCHERS AT THE TIME OF MAKING PAYMENT BUT THE VOUC HERS WERE PREPARED ONLY WHEN THE CASE WAS SELECTED FOR SCRUTI NY, WHICH RESULTED IN CURRENT YEARS REVENUE STAMP AFFIXED ON THE VOUCHERS. IT WAS FURTHER SUBMITTED THAT IT IS ONLY A TECHNICAL L APSE ON THE PART OF THE STAFF BUT IT DOES NOT INDICATE THAT EXPENSES CL AIMED WERE BOGUS. IT WAS ALSO SUBMITTED THAT DUE TO MISTAKE COMMITTED BY THE EMPLOYEES IN NOT PREPARING THE VOUCHERS PROPERLY TH E ASSESSEE JUST TO BUY PEACE, AGREED TO DISALLOW A REASONABLE AMOUN T, WHICH CANNOT BE THE BASIS FOR HOLDING THE EXPENSES CLAIME D WERE BOGUS. AS REGARDS THE REMAINING DISALLOWANCE OF RS. 1,69,0 00/- [RS. 5 ITA NO. 57 71/MUM/2012 9,00,000 - (RS. 2,83,000+ 4,48,000)], THE AO HAS NO T GIVEN ANY DETAILS THAT OUT OF WHICH EXPENSES, THE DISALLOWANC E HAS BEEN MADE. ACCORDINGLY, IT WAS FINALLY SUBMITTED BY THE ASSESSEE THAT THE DISALLOWANCE OF RS. 9 LAKHS IS MADE ONLY ON ESTIMAT ION, ASSUMPTION, PRESUMPTION AND SURMISES AND THE ASSESS EE HAS NOT CONCEALED ANY INCOME OR FURNISHED ANY INACCURATE PA RTICULARS OF INCOME. 3.3. AS REGARDS THE PENALTY ON THE ADDITION OF RS. 1,44,000/- U/S. 68, IT WAS SUBMITTED THAT DUE TO UNAVOIDABLE CIRCUM STANCES, THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS CO ULD NOT PRODUCE THIRD PARTY EVIDENCE I.E CONFIRMATION LETTE RS ETC. IT DOES NOT PROVE THAT LOANS RAISED WERE NON-GENUINE AND REPRES ENTED ASSESSEE'S CONCEALED INCOME. THE APPELLANT HAS ALSO FILED A STATEMENT OF 8 PERSONS FROM WHOM LOANS WERE RAISED BY THE APPELLANT. ON THE BASIS OF ABOVE REFERRED STATEMENT , IT WAS SUBMITTED BY THE APPELLANT THAT PENALTY PROCEEDINGS LEVIED BY THE AO MAY BE DROPPED. 3.4. THE LD.CIT(A) UPHELD THE PENALTY LEVIED BY TH E LD.AO ON THE GROUND THAT THE NEITHER THE ASSESSEE COULD ESTABLIS H THE GENUINENESS OF THE EXPENDITURE NOR COULD HE REBUT T HE FINDINGS OF THE AO BY ANY DOCUMENTARY EVIDENCE THAT, IT HAS ACT UALLY INCURRED ANY GENUINE EXPENDITURE, UNDER THE HEAD SALARY, OR TENANT ACCOMMODATION CHARGES. 3.5. AS REGARDS THE PENALTY LEVIED ON THE ADDITION OF RS. 1,44,000/- IN RESPECT OF CASH CREDITS NOT SATISFACTORILY EXPLA INED, IT IS NOTED 6 ITA NO. 57 71/MUM/2012 THAT NEITHER AT THE TIME OF ASSESSMENT NOR AT THE T IME OF PENALTY PROCEEDINGS, WHILE THE APPELLANT HAS PLENTY OF OPPO RTUNITIES, IT COULD NOT FILE EVEN THE CONFIRMATION FROM SUCH PART IES. THEREFORE, IT IS NOTED THAT PRIMARY ONUS OF PROVING THE GENUINENE SS OF THESE CASH CREDITS HAS NOT BEEN DISCHARGED BY THE APPELLA NT. NOW, IN THE APPEAL PROCEEDINGS, THE APPELLANT HAS FILED THE LIS T OF 8 CASH CREDITORS FROM WHOM THE LOANS IN QUESTION HAVE BEEN TAKEN. FIRST OF ALL IT IS FRESH EVIDENCE FILED AT THE APPELLATE STAGE AND NEITHER THE APPELLANT HAS MADE ANY APPLICATION OF ADMISSION OF FRESH EVIDENCE UNDER RULE 46A NOR IT HAS SHOWN ANY REASON AS TO WH Y IN SPITE OF SUFFICIENT OPPORTUNITIES AVAILABLE TO THE APPELLANT , THE SAME WAS NOT FILED BEFORE THE-AO AT THE TIME OF ASSESSMENT O R PENALTY PROCEEDINGS. UNDER THESE CIRCUMSTANCES, NO COGNIZAN CE IS BEING TAKEN OF THIS LIST. OTHERWISE ALSO, SINCE THE APPEL LANT FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF THES E CASH CREDITS, PENALTY IS LEGALLY JUSTIFIED ON THE ADDITION U/S. 6 8 OF THE I.T. ACT, HENCE THE SAME IS CONFIRMED. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE US. 4.1. WE HAVE PERUSED THE PAPER BOOK FILED BY THE AS SESSEE, THE ORDERS PASSED BY THE AUTHORITIES BELOW AND HEARD TH E ARGUMENTS BY BOTH THE PARTIES. IT IS OBSERVED THAT THE ASSESSEE VIDE ITS LETTER DATED 03.05.2010 AT PAGE 33, HAD SUBMITTED BEFORE T HE LD. AO AGREEING FOR A MINIMUM ADDITION ON ADHOC BASIS FOR TECHNICAL MISTAKES COMMITTED, JUST TO BUY PEACE AND AVOID LIT IGATION. IT IS 7 ITA NO. 57 71/MUM/2012 FURTHER NOTICED THAT THE LD.AO HAS RECORDED THAT TH ERE WAS NO EXPENSES THAT WAS CLAIMED BY THE ASSESSEE IN THE PR EVIOUS ASSESSMENT YEAR. 4.2. WE ARE IN AGREEMENT WITH THE FINDINGS OF THE L D.CIT(A). IN REGARDS TO THE DISALLOWANCE OF SALARY AMOUNTING TO RS. 2,83,000/- AND TENANT ACCOMMODATION CHARGES AMOUNTING TO RS. 4 ,48,000/-, THE LD.AO HAS MADE DISALLOWANCE, BECAUSE HE HAS POI NTED OUT THAT THE VOUCHERS PERTAINING TO THESE TWO HEADS WERE FAB RICATED BY THE APPELLANT BY FIXING THE REVENUE STAMPS OF 2009 ON T HESE VOUCHERS, WHICH WERE CLAIMED TO BE PREPARED IN F.Y. 2006-07. THEREFORE, THE LD.AO, HAS PROVED THAT VOUCHERS OF THESE EXPENSES S UBMITTED BY THE APPELLANT ARE BOGUS. NEITHER AT THE TIME OF ASSESSM ENT STAGE NOR AT THE TIME OF PENALTY PROCEEDINGS OR EVEN DURING APPE AL PROCEEDINGS, THE ASSESSEE HAS REBUTTED THE FINDINGS OF THE LD.AO , BY ANY DOCUMENTARY EVIDENCE THAT, IT HAS ACTUALLY INCURRED ANY GENUINE EXPENDITURE UNDER THE HEAD SALARY, OR TENANT ACCOMM ODATION CHARGES. ONCE THE LD.AO HAS PROVED THAT THE VOUCHER S OF THESE EXPENSES ARE NOT RELIABLE AT ALL, THE ASSESEE COULD HAVE PRODUCED SOME OF THE EMPLOYEES AND THE TENANTS BEFORE THE LD .AO TO DISPROVE THE FINDINGS. AS THE ASSESEE FAILED TO DO SO, THE B ELIEF THAT THE CLAIM OF EXPENSES UNDER THE HEAD SALARY AND TENANT ACCOMM ODATION CHARGES ARE NOT GENUINE, STRENGTHENS. MOREOVER, TH E ASSESSE HAD AGREED FOR AN ADHOC DISALLOWANCE IN RESPECT OF THE TECHNICAL ERRORS TO BUY PEACE AND TO AVOID LITIGATION. FOLLOWING TH E RATION LAID DOWN IN THE CASE OF MAC DATTA PVT.LTD., VS. CIT II, REPO RTED IN (2014) 1 SCC 674, BY THE HONBLE SUPREME COURT, PENALTY LEVI ED ON THE 8 ITA NO. 57 71/MUM/2012 DISALLOWANCE OF RS. 2,83,000/- AND RS. 4,48,000/- I S HEREBY CONFIRMED. 4.3. ACCORDINGLY GROUND NUMBER 1 OF THE ASSESSEES APPEAL IS DISMISSED. 5. AS REGARDS TO GROUND NO. 2, IT IS NOTED THAT NEI THER AT THE TIME OF ASSESSMENT NOR AT THE TIME OF PENALTY PROCEEDINGS, THE ASSESSEE COULD NOT FILE THE CONFIRMATION FROM SUCH PARTIES. THEREFORE, IT HAS BEEN NOTED BY THE AUTHORITIES BELOW THAT THE PRIMAR Y ONUS OF PROVING THE GENUINENESS OF THESE CASH CREDITS HAS N OT BEEN DISCHARGED BY THE APPELLANT. THE LD.CIT(A) HAS RECO RDED THAT IT WAS FOR THE FIRST TIME THE ASSESSEE HAS FILED DETAILS R EGARDING THE 8 PERSONS FROM WHOM LOAN AMOUNTING TO RS.18,000/- EAC H HAS BEEN TAKEN. 5.1. THE LD.CIT(A) HAS RECORDED THAT NEITHER THE AS SESSEE HAS MADE ANY APPLICATION OF ADMISSION OF FRESH EVIDENCE UNDE R RULE 46A, NOR IT HAS SHOWN ANY REASON AS TO WHY IN SPITE OF SUFFI CIENT OPPORTUNITIES AVAILABLE TO THE ASSESSEE, THE SAME W AS NOT FILED BEFORE THE LD.AO, AT THE TIME OF ASSESSMENT OR PENA LTY PROCEEDINGS. UNDER THESE CIRCUMSTANCES, THE LD.CIT(A) HAD NOT TA KEN COGNIZANCE OF DETAILS FILED BY THE ASSESSEE. 5.2. THE LD.AR RELIES UPON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF HAFEEZ S. CONTRACTOR VS. ACIT IN ITA NO. 62 22 & 6223/M/2013, HIREN M.SHAH ITA NO. 6671&6672/M/2013 AND PARINEE DEVELOPERS PVT. LTD VS. ACIT IN ITA NO. 677 2/M/2013. 5.3. IN OUR CONSIDERED OPINION, FROM THE FACTS EMER GING FROM THE 9 ITA NO. 57 71/MUM/2012 RECORD, THE ASSESSEE FAILED TO SUBSTANTIATE THE CAS H CREDITS IN THE NAME OF 8 PERSONS TOTALING TO RS. 1,44,000/-, FROM WHOM THE LOANS IN QUESTION HAVE BEEN TAKEN. THE ASSESSEE COULD NOT FILE LOAN CONFIRMATION FROM ANY OF THESE PARTIES. UNDER THESE CIRCUMSTANCES, THE CASH CREDITS IN THE NAME OF 8 PERSONS TOTALING TO RS. 1,44,000/- WAS HELD BY THE LD.AO AS UNPROVED, AS PER THE PROVI SIONS OF SECTION 68. 5.4. IN ORDER TO HOLD THAT THE ASSESSEE IS GUILTY O F FURNISHING INACCURATE PARTICULARS, WITHIN THE MEANING OF SECT ION 271(1) (C ) OF THE ACT, IT IS IMPERATIVE TO DEMONSTRATE THAT THE A SSESSEE IS FOUND TO HAVE MADE A ERRONEOUS OR A FALSE CLAIM. IN FACT A MERE MAKING OF A CLAIM, WHICH IS NOT FOUND SUSTAINABLE BY THE LD.A O, DOES NOT IPSO FACTO JUSTIFY FURNISHING OF INACCURATE PARTICULARS OF IN COME WITHIN THE MEANING OF SECTION 271 (1) (C ) OF THE ACT, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS LTD., REPORTED IN 322 ITR 58. 5.5. IN THE PRESENT CASE, OSTENSIBLY, THE ASSESSEE HAD FURNISHED THE DETAILS OF THE LOAN TAKEN FROM THE 8 PARTIES ALONG WITH THE PAN NUMBERS BEFORE THE LD.CIT(A). IT WAS SUBMITTED BEFO RE THE LD.CIT(A) THAT DUE TO UNAVOIDABLE CIRCUMSTANCES, THE ASSESSEE COULD NOT PRODUCE THE THIRD PART EVIDENCES I.E., CONFIRMATION LETTERS ETC., AT THE TIME OF ASSESSMENT PROCEEDINGS. THE LD.CIT(A) I NSTEAD OF REMANDING THE DETAILS FURNISHED BY THE ASSESSEE TO THE LD.AO, REJECTED THE SAME WITHOUT GIVING ANY COGENT REASONS . FURTHER IT IS OBSERVED THAT THE LD.AO HAS NOT RECORDED HIS SATISF ACTION IN RESPECT OF THE CASH CREDITS THE AFORESAID FEATURES DOES NOT ESTABLISH THAT 10 ITA NO. 5 771/MUM/2012 THE CASH CREDITS SHOWN IN THE BOOKS OF ACCOUNTS REM AINED UNEXPLAINED. THEREFORE WE ARE INCLINED TO DELETE TH E PENALTY LEVIED BY THE LD.AO ON THE CASH CREDITS AMOUNTING TO RS.1, 44,000/-. GROUND NO. 2 OF THE ASSESSEES APPEAL IS THUS ALLOW ED. THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 4 TH OCTOBER, 2015. SD/- SD/- (RAJENDRA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04.12.2015. *KAVITA, P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
