M/S.KAPIL RAYON (INDIA) PRIVATE LIMITED , MUMBAI V. INCOME TAX OFFICER 4(2)(4), MUMBAI

ITA 5946/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2007-2008
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACHCHIDANAND DUBE
• Assessee Lawyers: B P PUROHIT; LAVAYNA RAJPUROHIT ARS
• Keywords: Unexplained cash credit; Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 115JB; 274; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H, BENCH MUM BAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.5946/MUM/2018 ( ASSESSMENT YEAR: 2007-08 ) KAPIL RAYON (INDIA) PVT.LTD. 127/129, ROOM NO.12-13 1 ST FLOOR, OLD HANUMAN LANE KALBADEVI MUMBAI-400 002 VS. ITO-4(2)(4) 6 TH FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 PAN/GIR NO. AABCK5687M APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI SACHCHIDANAND DUBE, DR ASSESSEE BY SHRI B.P. PUROHIT & LAVAYNA RAJPUROHIT, ARS DATE OF HEARING 0 6/01/2020 DATE OF PRONOUNCEME NT 10 /01/2020 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)02, MUMBAI, DATED 31/07/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- FOLLOWING GROUNDS OF APPEAL ARE SUBMITTED WITHOUT P REJUDICE TO ONE ANOTHER: 1) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD, COMMISSIONER OF INCOME TAX (APPEALS)-2, HAS ERRED I N CONFIRMING THE PENALTY IMPOSED BY THE AO US/ 271(1)(C) WITHOUT SPE CIFYING THE EXACT DEFAULT FOR WHICH THE PENALTY IS IMPOSED IN THE NOT ICE ISSUED U/S 274, HENCE IN VIEW OF CIT V SHRI SAMSON PERINCHERY, CIT V. MANJUNATH COTTON & GINNING FACTORY, ETC, SUSTAINING PENALTY BY CIT(A ) IS NOT JUSTIFIED. ITA NO.5946/MUM/2018 KAPIL RAYON (INDIA) PVT.LTD. 2 2) ON THE FACTS AND HI THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A)-2 HAS ERRED IN PASSING THE IMPUGNED ORDER IG NORING THE FACT THAT THE INCOME OF THE APPELLANT IS ASSESSED U/S 115JB A T RETURNED INCOME, HENCE NO PENALTY CAN BE IMPOSED U/S 271(L)(C) AS HE LD IN CIT V. NALWA SONS INVESTMENTS LTD, ETC, AND CBDT CIRCULARS NO. 2 5/2015 DATED 31/12/2015. HENCE, THE PENALTY CANNOT BE SUSTAINED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT(A)-2 HAS ERRED IN PASSING THE IMPUGNED ORDER WI THOUT APPRECIATING THAT ME AO HAS IMPOSED THE PENALTY AGAINST THE PRIN CIPLES OF NATURAL JUSTICE, WITHOUT GIVING COPIES OF MATERIALS RELIED UPON BY THE AO AND WITHOUT PROVIDING OPPORTUNITY TO CROSS EXAMINE / DE POSE THE WITNESS. THEREFORE, IN VIEW OF JUDGMENT OF HONBLE SUPREME C OURT IN ANDAMAN TIMBER INDUSTRIES V. COMMISSIONER OF CENTRAL EXCISE , THE SAID ORDER IS VOID AND NEEDS TO BE QUASHED. 4) YOUR APPELLANT THEREFORE PRAYS THAT THE PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE CIT(A)-2 MAY KINDLY BE DELETED AND PENALTY ORDER BE QUASHED. 5). YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, A LTER, MODIFY AND/OR DELETE ANY OF THE ABOVE GROUNDS OR TO ADD ANY NEW GROUNDS THERETO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME FOR ASST. YEAR 2007-08 ON 31/10/20 07, DECLARING NIL TOTAL INCOME UNDER NORMAL PROVISION OF THE AC T. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE I.T.ACT, 1961 ON 18/03/2015, DETERMINING THE TOTAL INCOME AT RS. 5 L ACS UNDER NORMAL PROVISION OF THE I.T.ACT, 1961 AND AT RS. 28,54,430 /- UNDER THE PROVISIONS OF SECTION 115JB OF THE I.T.ACT, 1961. T HE SAID ASSESSED INCOME WAS ARRIVED AFTER MAKING ADDITIONS OF RS. 5 LACS U/S 68 OF THE I.T.ACT, 1961, IN RESPECT OF UNEXPLAINED CASH C REDIT BEING LOAN TAKEN FROM M/S NAKSHATRA BUSINESS PVT. LTD. THE ASS ESSEE ACCEPTED THE ASSESSMENT, BECAUSE, THE TAX PAYABLE A S PER THE ASSESSMENT ORDER WAS AT RS. 10/-. THEREAFTER, THE L D. AO INITIATED PENALTY PROCEEDINGS 271(1)(C) OF THE I.T.ACT, 1961 AND AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESEE LEV IED PENALTY OF ITA NO.5946/MUM/2018 KAPIL RAYON (INDIA) PVT.LTD. 3 RS. 1,53,000/- U/S 271(1)(C) OF THE I.T.ACT, 1961, WHICH IS EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVADED. 4. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESSEE HAS CHALLENGED INITIATION OF PENALTY PROCEEDINGS, I N ABSENCE OF PROPER NOTICE ISSUED U/S 271(1)(C) R.W.S. 274 OF TH E I.T.ACT, 1961. THE ASSESSEE HAD ALSO CHALLENGED PENALTY LEVIED , O N THE GROUND THAT IT HAS NEITHER CONCEALED PARTICULARS OF INCOME , NOR FURNISHED INACCURATE PARTICULARS OF INCOME, WHICH WARRANTS LE VY OF PENALTY U/S 271(1)(C) OF THE I.T.ACT, 1961. THE LD. CIT(A) AFTE R CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESEE AND ALSO, BY RE LIED UPON THE DECISION OF HONBLE DELHI COURT, IN THE CASE OF CI T VS. ZOOM COMMUNICATIONS PRIVATE LIMITED 327 ITR 510, CONFIRM ED PENALTY LEVIED BY THE LD. AO U/S 271(1)(C) OF THE ACT, ON T HE GROUND THAT EXPLANATION FURNISHED BY THE ASSESSEE FOR MAKING SU CH A CLAIM IS NOT FOUND TO BE A BONAFIDE. FURTHER, EXPLANATION (1) TO SECTION 271(1)(C) WOULD COME INTO PLAY AND ASSESSEE WILL BE LIABLE TO PAY PENALTY, IF EXPLANATION OFFERED BY THE ASSESSE IS FOUND TO BE FALSE OR WHICH HE IS NOT ABLE TO SUBSTANTIATE. AGGRIEVED, BY THE LD.C IT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR FOR THE ASSESEE SUBMITTED THAT THE LD .CIT(A) HAS ERRED IN CONFIRMED PENALTY LEVIED U/S 271(1)(C) OF THE ACT, 1961, WITHOUT APPRECIATING THE FACT THAT THE INCOME OF TH E ASSESSEE IS ASSESSED U/S 115JB OF THE ACT AT RETURNED INCOME, H ENCE NO PENALTY WAS IMPOSED AS HELD BY THE HONBLE DELHI HIGH COURT , IN THE CASE OF CIT VS NALWA SONS INVESTMENTS LTD (2010) 327 ITR 54 3 (DELHI) AND ALSO, AS PER THE CBDT CIRCULAR NO. 25/2015, DATED 3 1/12/2015. ITA NO.5946/MUM/2018 KAPIL RAYON (INDIA) PVT.LTD. 4 6. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. WE FIND THAT THE HONBLE DELHI HIGH COURT, IN THE CASE OF N ALWA SONS INVESTMENTS LTD. VS CIT (SUPRA) HELD THAT WHEN, THE TAX PAYABLE ON INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE ACT IS LESS THAN, THE TAX PAYABLE UNDER THE DEEMING PROVISIONS OF SEC TION 115JB OF THE ACT, THEN PENALTY U/S 271(1)(C) OF THE I.T.ACT, 1961 COULD NOT BE IMPOSED WITH REFERENCE TO ADDITIONS/DISALLOWANCES M ADE UNDER NORMAL PROVISIONS OF THE ACT. THE CBDT HAD ISSUED A CIRCULAR NO. 25/2015, DATED 31/12/2015, WHERE IT HAS ACCEPTED TH E JUDGMENT OF HONBLE DELHI HIGH COURT AND ACCORDINGLY, ISSUED A CIRCULAR EXPLAINING THE POSITION OF LAW BEFORE INSERTION OF EXPLANATION 4 TO SUB SECTION (1) OF SECTION 271(1)(C) OF THE I.T.ACT, 1 961 BY THE FINANCE, ACT, 2015, WHICH PROVIDE FOR METHOD OF CALCULATING THE AMOUNT OF TAX SOUGHT TO BE EVADED FOR SITUATIONS, WHERE THE I NCOME DETERMINED UNDER THE NORMAL PROVISION IS LESS THAN THE INCOME DECLARED FOR THE PURPOSE OF MAT PROVISIONS U/S 115J B OF THE ACT. ACCORDINGLY, IT HAS CLARIFIED THAT WHERE THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THE NORMAL PROVISION S OF THE ACT IS LESS THAN THE TAX PAYABLE ON THE BOOK PROFITS U/S 1 15JB OF THE ACT, THEN PENALTY U/S 271(1)(C) OF THE ACT IS NOT ATTRAC TED WITH REFERENCE TO ADDITIONS/DISALLOWANCES MADE UNDER NORMAL PROVISION S OF THE ACT. IN THIS CASE, IT IS AN ADMITTED FACT THAT THE LD. AO H AS MADE ADDITIONS TOWARDS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT T O INCOME COMPUTED UNDER NORMAL PROVISIONS OF THE ACT. FURTH ER, EVEN AFTER ITA NO.5946/MUM/2018 KAPIL RAYON (INDIA) PVT.LTD. 5 ADDITIONS, THE TAX PAYABLE UNDER NORMAL PROVISIONS OF THE ACT IS LESS THAN, THE TAX PAYABLE UNDER THE PROVISIONS OF SECTI ON 115JB OF THE I.T.ACT, 1961. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY U/S 271(1)(C) OF THE ACT, CANNOT BE LEVIED WITH REF ERENCE TO ADDITIONS/ DISALLOWANCES MADE TO TOTAL INCOME COMPUTED UNDER N ORMAL PROVISIONS OF THE ACT. HENCE, WE DIRECT THE LD. AO TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE I.T.ACT, 1961. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 /01/ 2020 SD/- (RAM LAL NEGI) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 10/01/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//