NARYAN NIVRUTI SHINDE, NAVI MUMBAI V. ITO 22(3)(3), NAVI MUMBAI

ITA 578/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88215 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAK SASH L PATHADE
• Keywords: Unexplained cash credit; Tax effect; Revised return; Reason to believe
• Section: 143(3); 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH , JM AND SHRI SANJAY ARORA , AM ./ I .T.A. NO. 578/MUM/2013 ( / ASSESSMENT YEAR: 2004 - 05 ) NARAYAN NIVRUTI SHINDE, PRO. NARAYAN N. SHINDE & SONS, J - 395, APMC MARKET, FRUIT SECTION, TURBHE, NAVI MUMBAI - 400 705 / VS. ITO - 22(3)(3), 3 RD FLOOR, TOWER NO. 6, VASHI RAILWAY ST ATION COMPLEX, NAVI MUMBAI 400 703 ./ ./ PAN/GIR NO. AADPS 1052 P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI DEVENDRA JAIN / RESPONDENT BY : SHRI PRAK SASH L. PATHADE / DATE OF HEARING : 15.02.2016 DATE OF ORDER : 19 .02.2016 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 10 , MUMBAI (CIT(A) FOR SHORT) DATED 05.11.2012 , CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) B Y THE ASSESSING OFFICER (A.O.) VIDE HIS ORDER DATED 06.5.2010, I.E., SUBSEQUENT TO THE FRAMING OF THE ASSESSMENT U/S. 143(3) R/W S. 147 OF THE ACT DATED 26.11.2009 FOR THE ASSESSMENT YEAR (A.Y.) 2004 - 05. 2 ITA NO. 578/MUM/2013 (A.Y. 2004 - 05) NARAYAN NIVRUTI SHINDE VS. ITO 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - INDIVIDUAL, A COMMISSION AGENT IN FRUITS , WAS DURING THE ASSESSMENT PROCEEDINGS FOUND TO HAVE RAISED UNSECURED LOANS FROM TEN DIFFERENT PERSONS IN AN AGGREGATE SUM OF RS.5 LA C S, DULY REFLECTED IN HIS AUDIT ED FINAL ACCOUNTS , F URNISHED ALONG WITH THE RETURN OF INCOME FOR THE YEAR, FILED AT A LOSS OF RS.3.91 LACS (BESIDES AGRICULTURAL INCOME AT RS.89,161/ - ). THE ASSESSEE E XPRESSED HIS INABILITY TO FURNISH LOAN CONFIRMATIONS IN - AS - MUCH AS THE SAID LOANS HAD BEEN ARRANGED THROUGH THE AGENCY OF A BROKER , KISHAN CHATURMAL, WHO HAD EXPIRED IN 2006, AVERRING THE SAME PER AN A FFIDAVIT. THE INGREDIENTS OF SECTION 68 OF THE ACT BEIN G NOT MET, THE ASSESSING OFFICER ( A.O. ) TREATED THE SAME AS HIS INCOME ON ACCOUNT OF UNEXPLAINED CREDITS, WHICH WAS ACCEPTED AND NOT CONTESTED BY THE ASSESSEE IN THE APPELLATE PROCE E D INGS . THE PRESENT PROCEEDINGS ARE IN PURSUANCE TO THE PENALTY, INITIATED ALONG WITH, SINCE LEVIED. THE ASSESSEE IN THE PENALTY PROCEEDINGS REITERATED HIS STAND, STATING OF HAVING FAILED TO, DESPITE BEST EFFORTS, PROCURE THE CONFIRMATIONS FROM THE CREDITORS. THE LOANS WERE OUTSTANDING EVEN AS ON 31.3.2008 , AND NO INTEREST HAD BE EN PAID AT ANY TIME. THE A.O. , NOTING THESE FACTS , LEVIED PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED, I.E., AT RS.1,50,000/ - . THE LD. CIT(A) FOUND NO REASON TO INTERFERE THEREWITH IN VIEW OF THE UNDISPUTED FACTS, FINDING THE ASSESSEES EXPLANATION AS N OT BONA FIDE AND , FURTHER , THAT NO EXPLANATION HAD IN FACT BEEN OFFERED BY THE ASSESSEE (REFER PARA 4 OF THE IMPUGNED ORDER). AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. BEFORE US, THE ASSESSEES CONTENTION, THROUGH HIS LD. AUTHORIZED REPRESENTATIVE (AR) , WAS OF THE CONTINUING INABILITY TO FURNISH THE ADDRESS ES AS THE LOANS WERE ARRANGED THROUGH A BROKER, NO LONGER ALIVE, RELYING ON THE DECISION BY THE T RIBUNAL IN HERANBA INDUSTRIES LTD. VS. DY. CIT (IN ITA NO. 2292/MUM/2013 DATED 08.4.2015 ), PLACIN G THE COPY THEREOF ON RECORD. T HE LD. DEPARTMENTAL REPRESENTATIVE (DR) , ON THE OTHER HAND, REL IED ON THE ORDERS BY THE AUTHORITIES BELOW. 3 ITA NO. 578/MUM/2013 (A.Y. 2004 - 05) NARAYAN NIVRUTI SHINDE VS. ITO 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. WE ARE COMPLETELY UNABLE TO APPRECIATE THE ASSESS EES CASE. THERE IS FIRSTLY NO QUESTION OF SURRENDER BY THE ASSESSEE, TO PURCHASE PE A CE OF MIND OR OTHERWISE AND, ACCORDINGLY, IT IS NOT A CASE OF SURRENDER BUT OF A COMPLETE ABSENCE OF ANY SUBSTANTIATION OF THE CLAIM OF THE CREDITS BEING GENUINE. IN FACT, THE ASSESSMENT FOR THE YEAR WAS REOPENED ONLY ON THE BASIS OF A REASON TO BELIEVE ESCAPEMENT FROM ASSESSMENT OF INCOME WITH REFERENCE TO THE IMPUGNED CREDITS , WITH HE , RATHER, FILING A REVISED RETURN (ON 31.3.2006) , MODIFYING THE LOSS TO RS.2,12,289/ - , SUBSEQUENT TO THE FILING OF RETURN ON 02.11.2004 . ALL THAT THE ASSESSEE HAS DONE , BOTH IN THE ASSESSMENT AS WELL AS THE PENALTY PROCEEDINGS, IS TO EXPRESS HIS INABILITY TO PROVE THE CREDITS IN VIEW OF THE DEATH OF THE PERSON WHO HAD ARRANGED FOR THE LOANS ON HIS BEHALF. THE SAME HAS BEEN LEVIED AND CONFIRMED CONSIDERING THE ASSESSEES EXPLANATION , HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THERE IS , FIRSTLY , NO MATERIAL TO SHOW THAT THE LOANS WERE INDEED ARRANGED BY THE SAID BRO KER. AGAIN, THE AMOUNTS HAVING BEEN RECEIVED ONLY BY CHEQUE /S , IT IS NOT UNDERSTOOD AS TO WHY THE IDENTITY AND , CONSEQUENTLY , THE ADDRESSES OF THE CONCERNED CREDITORS COULD NOT BE FOUND , EVEN IF NO T NOTE D AT THE TIME OF TAKING THE LOANS. THIS , IN FACT , IS ALSO THE REPORTING REQUIREMENT OF THE AUDIT REPORT , REQUIRED TO BE FURNISHED U/S. 44AB OF THE ACT. WHY, THE ASSESSEE STATING OF BEING UNABLE TO, DESPITE BEST EFFORTS, PROCURE THE CONFIRMATIONS FROM THE CREDITORS, ITSELF IMPLIES THEIR IDENTITY BEING IN HIS KNOWLEDGE, FOR, HOW COULD IN ITS ABSENCE HE EVEN PROCEED TO DO SO, I.E., MAKE ANY EFFORT IN THIS REGARD. WE HAVE IN ANY CASE FOUND TH E PLEA AS NOT MAINTAINABLE AS THE CREDITS HAVE BEEN RECEIVED ONLY THROUGH THE BANKING CHANNEL, SO THAT THE IDENTITY OF THE CREDITORS CANNOT B E UNKNOWN. THEN, AGAIN, SURPRISINGLY , NO INTEREST , EVEN AS CONFIRMED BY THE LD. AR BEFORE US , IS CHARGED , AND THUS PAID TO THE PARTIES, WHO WOULD IN THEIR OWN INTEREST NOT ONLY NOT E THE ASSESSEES ADDRESS BUT ALSO HI S COMPLETE PARTICULARS , PART AS THEY DO WITH THE IR HARD EARNED MONEY IN HIS FAVOUR. WHY, THEY HAVE BEEN FAILED TO APPROACH HIM FOR A RETURN OF THE IR MONE Y , WHICH WAS 4 ITA NO. 578/MUM/2013 (A.Y. 2004 - 05) NARAYAN NIVRUTI SHINDE VS. ITO AGAIN CONFIRMED BY THE LD. AR, AND CONTINUE S TO OUTSTAND AS ON DATE. IT IS THUS A C ASE OF NO EXPLANATION AND, IN ANY CASE, NO SATISFACTORY EXPLANATION . THE APEX COURT IN CIT V. MUSSADILAL RAM BHAROSE , 165 ITR 14 (SC), SPEAKING IN THE CONTEXT OF AN EXPLANATION UNDER SECTION 271(1)(C) OF THE ACT, ENDORSING THE FULL BENCH JUDGMENT OF THE PATNA HIGH COURT (IN CIT V. NAT HULAL AGARWALA & SONS , 153 ITR 292 (PAT.) (FB)), CLARIFIED THAT THE EXPLANATION CONTEMPLATED BY THE PROVISION ONLY IMPLIES AN ACCEPTABLE EXPLANATION, I.E., ACCEPTABLE TO THE FACT - FINDING BODY. AND THAT THE BURDEN ON THE ASSESSEE WOULD NOT STAND DISCHARGED BY ANY FANTASTIC OR UNACCEPTABLE EXPLANATION. IN OTHER WORDS, SUCH AN EXPLANATION IS OF NO MOMENT, AND NOT AN EXPLANATION IN THE EYES OF LAW. THE SAME STANDS RECENTLY ENDORSED BY THE HONBLE COURT IN CIT VS. P. MOHANKALA [2007] 291 ITR 278 (SC) , CLARIFYING THAT THE EXPRESSION OFFERS NO EXPLANATION MEANS WHERE THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS REGARDS THE SUMS FOUND CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM. COMING TO THE ORDER IN HERANBA INDUSTRIES LTD. (SUPR A), THE SAME IS DELIVERED FOLLOWING THE DECISION IN CIT VS. SURESH CHANDRA MITTAL [2001] 251 ITR 9 (SC). AS A READING OF THE SAID DECISION WOULD SHOW, THERE WAS A SURRENDER OF INCOME BY THE ASSESSEE IN THE FACTS OF THAT CASE AFTER PERSISTENT QUERIES BY TH E A.O. , WHO ALSO REGULARIZED THE REVISED RETURN FILED BY THE ASSESSEE. I T WAS UNDER T HESE CIRCUMSTANCES THAT THE HON BLE COURT HELD THAT THE ASSESSEE EXPLAN ATION OF HAVING DECLARED INCOME ONLY TO BUY PE A CE OF MIND AND C OME OUT OF VEXED LITIGATION COULD BE TREATED AS BONA FIDE . THE SAID DECISION CAN THUS ONLY BE CONSIDERED AS RENDERED IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WHICH WE HAVE FOUND AS MATERIALLY DIST INGUISHABLE FROM THAT OBTAINING IN TH E PRESENT CASE ; THERE BEING IN FACT NO SURRENDE R BY THE ASSESSEE, WHO OSTENSIBLY F AIL ED TO FURNISH ANY EXPLANATION, SO THAT BOTH THE NATURE AND SOURCE OF THE IMPUGNED CREDITS REMAIN S UNEXPLAINED. THE LAW IN THE MATTER OF PENALTY IN THE CASE OF SURRENDER OF INCOME DURING SEARCH AND SURVEY OPERATIONS BY THE REVENUE STANDS CLARIFIED BY THE A PEX C OURT IN CIT VS. MAK DATA P. LTD. [2013] 35 8 5 ITA NO. 578/MUM/2013 (A.Y. 2004 - 05) NARAYAN NIVRUTI SHINDE VS. ITO ITR 593 (SC) AS NO T EXCLUD ING THE OPERATION OF THE PROVISION OF LAW. PENALTY U/S. 271(1)(C) , IN THE EVENT OF EXPLANATION (1A) OR (1B) THERETO BEING ATTRACTED , WOULD BECOME LEV IABLE. AS SUCH, EVEN IN SUCH A CASE, ABSENCE OF ANY EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF INCOME , OR THE INABILITY TO SUBSTANTI ATE THE EXPLANATION COUPLED WITH DISCLOSURE OF MATERIAL FACTS , AS THE CASE MAY BE, SHALL ATTRACT PENA LTY U/S. 271(1) (C) . AS REGARDS THE DECISION BY THE TRIBUNAL, THE SAME STANDS RENDERED IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LAW IN THE MATTER , WHICH ONLY HAS PRECEDENT VALUE, HAVING BEEN ALREADY CLARIFIED BY US WITH REFERENCE TO THE SETTLED LAW BY THE A PEX C OURT. THE DECISION IN HERANBA INDUSTRIES LTD. (SUPRA) IS A CASE OF VOLUNTARY SURRENDER BY THE ASSESSEE, AND IN FACT RENDERED WITHOUT REFERENCE TO THE LAW CLARIFIED IN MAK DATA P. LTD. (SUPRA). EVEN ALLOWING FOR A CORRECT APPLICATION OF THE PRINCI PLES, WHERE THE TRIBUNAL AS A FACT FINDING BODY COMES TO A CONCLUSION IN THE MATTER, THE SAME IS A CONCLUSION OF THE FACT ( MUSSADILAL RAM BHAROSE ( SUPRA ) , AT PG. 23) . THE FINDING AND THE CONCLUSION OF THE TRIBUNAL WAS UNDER THE CIRCUMSTANCES A PURE QUESTIO N OF FACT (REFER: CIT VS. SHUNCHUI AI [1995] 216 ITR 154, 155 (GAU)) . IN KUMAR AGENCIES (INDIA) VS. ASST. CIT [2003] 87 ITR 69 (MUM) (TM), CONFIRM ATION S BEARING PANS WERE FILED FROM THE LOAN CREDITORS, WHO STOOD REPAID PER ACCOUNT PAYEE CHEQUES. IT WAS UND ER THE SE CIRCUMSTANCES T HAT THE TRIBUNAL HELD THE ASSESSEES EXPLANATION, WHO COULD NOT PRODUCE THE PERSONS FOR CROSS - EXAMINATION, AS BEING NOT LIABLE FOR PENALTY U/S. 271(1)(C). THAT PENALTY COULD BE LEVIED WHERE THE INCOME IS BROUGHT TO TAX U/S. 68, WHIC H PRO VIDES FOR DEEMING A CREDIT BY LAW AS INCOME IN THE ABSENCE OF A SATISFACTORY EXPLANATION AS TO IS NATURE AND SOURCE, IS WELL SETTLED (REFER : CHUHARMAL VS. CIT [1988] 172 ITR 250 (SC) ; HINDUSTAN TOOLS MFG. CO. VS. CIT [1976] 102 ITR 174 (PUNJ) , ETC. ) . THE DECISION BY THE HONBLE COURT IN CIT VS. KIRAN & CO. [1996 ] 217 ITR 326 (BOM), IS RENDERED ON THE EDIFICE OF THE FACTUAL FINDINGS BY THE TRIBUNAL, WHILE THAT IN JA I PALACE VS. CIT [2014] 51 TAXMANN.COM 462 (ALL), THE HONBLE COURT FOUND IT TO BE A VOLU NTARY SURRENDERED BY THE ASSESSEE. IN THE PRESENT CASE, IT MAY BE NOTED, THE CREDITS REMAIN UNPROVED ON ALL THE THREE PARAMETERS, VIZ. 6 ITA NO. 578/MUM/2013 (A.Y. 2004 - 05) NARAYAN NIVRUTI SHINDE VS. ITO IDENTITY, CAPACITY AND GENUINENESS . THE SAID DECISIONS WOULD THEREFORE NOT SUPPORT THE ASSESSEES CASE. WE , IN VIEW OF THE FOREGOING , CONFIRM THE LEVY OF PENALTY. BEFORE PARTING WITH OUR ORDER, WE MAY ADD THAT THE LD. AR WOULD SUBMIT THAT THE PENALTY AMOUNT HAS BEEN WRONGLY WORKED OUT BY ASSUMING TAX AT THE AVERAGE RATE OF 30% ON THE IMPUGNED SUM, I.E., RATHER THAN BY W ORKING OUT THE TAX EFFECT THEREO F . THE PROVISION OF EXPLANATION 4 TO SECTIONS 271(1)(C) IS EXPLICIT IN THIS REGARD. WE, ACCORDINGLY, DIRECT THE A.O. TO COMPUTE THE AMOUNT OF PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED IN ACCORDANCE WITH THE LAW. WE DECI DE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUAR Y 15 , 201 6 SD/ - SD/ - ( JOGINDER SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 19 . 02 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI