ITO 19(2)-1, MUMBAI V. ATLANTIC TRADING CORPORATION ( NOW KNOWN AS M.S, NOVAMED PHARMACEUTICALS P.LTD), MUMBAI

ITA 5949/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2511 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-04-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.5949 AND 5950/MUM/2011 ASSESSMENT YEAR:1997-98 ITO-19(2)(1), ROOM NO.312, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / VS. M/S ATLANTIC TRADING CORPORATION NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. 159, CST ROAD, KALINA, SANTACRUZ (EAST), MUMBAI-400098 ( / REVENUE) ( ! ' /ASSESSEE) PAN. NO. AAAFA5725G / REVENUE BY SHRI MOHAMMED RIZWAN ! ' / ASSESSEE BY MS. VASANTIBEN PATEL # $ % ' & / DATE OF HEARING : 01/12/2015 % ' & / DATE OF ORDER: 03/12/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDERS BO TH DATED 29/06/2011 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. FIRST, WE SHALL TAKE UP THE APPEAL IN ITA NO.5950/MUM/2011, WHEREIN, THE REVENUE IS AGGRIEVED IN ATLANTIC TRADING CORPORATION( NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. ITA NO.5949 & 5950/MUM/2011 2 DELETING THE ADDITION OF RS.43,47,083/- ON ACCOUNT OF DISCOUNT CHARGES, MADE BY THE ASSESSING OFFICER, W ITHOUT APPRECIATING THAT THE ASSESSEE FIRM WAS NOT ABLE TO PROVE THAT THE DISCOUNTING CHARGES WERE PAID WHOLLY AND EXCLUS IVELY FOR THE BUSINESS PURPOSES OF THE ASSESSEE AND FURTHER I N SPITE OF PROVIDING OPPORTUNITY TO PRODUCE THE COPIES OF BILL S OF DISCOUNTING/FINANCE CHARGES, THE ASSESSEE DID NOT P RODUCE DURING ORIGINAL ASSESSMENT AS WELL AS FRESH ASSESSM ENT. 2. DURING HEARING OF THIS APPEAL, THE LD. DR, SHRI MOHAMMED RIZWAAN, ADVANCED ARGUMENTS, WHICH IS IDEN TICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. CO UNSEL FOR THE ASSESSEE, MS. VASANTIBEN PATEL, INVITED OUR ATT ENTION TO PAGE 31 OF THE PAPER BOOK BY CONTENDING THAT THE LD . FIRST APPELLATE AUTHORITY GRANTED RELIEF TO THE ASSESSEE AFTER DULY ANALYZING THE FACT AND THE DECISION IN DELTA INTERN ATIONAL (PAGES 13 TO 17 OF THE PAPER BOOK). IT WAS ALSO CO NTENDED THAT NO SUCH DIRECTION WAS ISSUED BY THE TRIBUNAL A S HAS BEEN ELABORATED BY THE ASSESSING OFFICER. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACT S, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN INVESTMENT IN SHARES, SECURITIES AND FINANCING, DEC LARED LOSS OF RS.1,41,38,785/- IN ITS RETURN FILED ON 29/10/19 97. THE LD. ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 27/03/2000 DETERMINING TOTAL LOSS AT RS.93,30,010/- U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). IN ATLANTIC TRADING CORPORATION( NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. ITA NO.5949 & 5950/MUM/2011 3 WHICH, DISALLOWANCE WAS MADE OF RS.43,47,083/- OF DISCOUNTING CHARGES, INTEREST RECEIVED ON DEBENTURE S AMOUNTING TO RS.4,61,692/- WAS TAXED SEPARATELY. O N APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX ( APPEALS), THE ADDITION WAS CONFIRMED IN RESPECT OF DISCOUNTIN G CHARGES, BUT ON INTEREST ON DEBENTURES RELIEF WAS GRANTED. T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE T RIBUNAL, WHEREIN, VIDE ORDER DATED 15/12/2006 (ITA NO.410/MUM/2004), THE ISSUE WAS RESTORED TO THE FIL E OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. PURSUANT TO THE DIRECTION OF THE TRIBUNAL, THE ASSESSING OFFICER CO MPLETED THE ASSESSMENT ON 20/12/2007 BY MAKING SAME DISALLOWANCES/ADDITIONS AS MADE DURING ORIGINAL ASS ESSMENT PROCEEDINGS. THE STAND OF THE ASSESSEE IS THAT THE ASSESSING OFFICER WAS EXPECTED TO VERIFY THE NATURE OF FINANC E CHARGES/BILL DISCOUNTING BUT THAT WAS NOT DONE. IT WAS ALSO CLAIMED THAT NECESSARY DETAILS, LEDGER, ACCOUNTS WI TH RESPECT TO DISCOUNTING CHARGES PAID AND RECEIVED WERE DULY F ILED BEFORE THE ASSESSING OFFICER. WE NOTE THAT THE TRI BUNAL DIRECTED THE ASSESSING OFFICER, THE CLAIM OF FINANC E CHARGES INCURRED BY THE ASSESSEE AND ITS JUSTIFIABILITY FRO M THE BUSINESS PERSPECTIVE OF THE ASSESSEE. HOWEVER, WE NOTE THAT THE LD. ASSESSING OFFICER MISDIRECTED HIMSELF AND M ADE THE ADDITION AS WAS ORIGINALLY DONE WITHOUT EXAMINING T HE TRUE NATURE OF THE CLAIM OF THE ASSESSEE. IT IS FURTHER NOTE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVI DENCE THAT BORROWED FUNDS WERE DIVERTED FOR NON-BUSINESS ATLANTIC TRADING CORPORATION( NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. ITA NO.5949 & 5950/MUM/2011 4 PURPOSES. IN FACT, AS NOTED BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS) ALSO, THE ASSESSEE RECEIVED FI NANC CHARGES OF RS.83,59,701/- AND PAID INTEREST ON SUCH FINANCE CHARGES AMOUNTING TO RS.1,27,06,784/-. FROM THE AU DITED ACCOUNTS ON YEAR ENDING 31/03/1997, IT IS OBSERVED THAT THE PURCHASES WERE TO THE TUNE OF RS.9,95,807/- AND SAL E WAS MADE TO THE TUNE OF RS.1,42,75,635/- WHEREAS THE OP ENING STOCK WAS RS.3,28,49,700/- WHEREAS THE CLOSING STOC K WAS AT RS.89,85,307/-. THE TOTALITY OF FACTS, CLEARLY IND ICATES THAT LOAN LIABILITY HAD GONE DOWN DURING THE YEAR. IT IS ALSO NOTED THAT THE ASSESSEE WAS NOT HAVING OWN FUNDS AND THE BUSINESS OPERATION AND ASSETS I.E. CLOSING AND DEBT ORS WERE FINANCED BY BORROWINGS. THE LD. ASSESSING OFFICER HAS IGNORED ALL THESE FACTS AND FURTHER IT IS FIND THAT THE FINANCE CHARGES ARE RECORDED IN THE BOOKS OF ALL CONCERNED PARTIES I.E. RECEIVERS/PAYERS BOOKS OF ACCOUNTS. THE ENTRIES IN THE BOOKS OF ACCOUNTS IS A GOOD PIECE OF EVIDENCE. THE ASSESS ING OFFICER IS NOT EXPECTED TO ACCEPT ONE PART OF THE TRANSACTI ON AND REJECT THE OTHER PART, THUS, WE FIND NO INFIRMITY I N THE DIRECTION TO THE ASSESSING OFFICER TO DELETE THE DI SALLOWANCE OF RS.43,47,083/- ON ACCOUNT OF FINANCE CHARGES. THE A PPEAL OF THE REVENUE, CONSEQUENTLY, IS DISMISSED. 3. NOW, WE SHALL TAKE UP THE APPEAL OF THE DEPARTM ENT (ITA NO.5949/MUM/2011) WITH RESPECT TO DELETING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. THE LD. C OUNSEL FOR THE ASSESSEE CONTENDED THAT THIS APPEAL WILL BE DE PENDENT UPON THE RESULT OF THE DEPARTMENT APPEAL (SUPRA) AS THE ATLANTIC TRADING CORPORATION( NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. ITA NO.5949 & 5950/MUM/2011 5 PENALTY WAS IMPOSED ON THE BASIS OF QUANTUM ADDITIO N SUSTAINED BY THE ASSESSING OFFICER. SINCE, WE HAVE AFFIRMED THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) IN DELETING THE QUANTUM ADDITION, ON THE BASIS OF WHIC H PENALTY WAS IMPOSED, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. OUR VIEW FINDS SUPPORTS FROM THE DECISION OF THE TR IBUNAL IN M/S PARLE BOTTLING PVT. LTD. (ITA NO.1209/MUM/2014) ORDER DATED 23/11/2015 AND THE RATIO LAID DOWN IN CIT VS S.P VIZ CONSTRUCTION COMPANY 176 ITR 47 (PATNA) AND K.C. BU ILDERS VS ACIT 265 ITR 562 (SUPREME COURT). WE ARE OF THE VIEW THAT WHERE THE PENALTY FOR CONCEALMENT OR FURNISHIN G INACCURATE PARTICULARS WAS LEVIED AND AFTER DELETIN G THE QUANTUM ADDITION, THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENALTY. ORDINARILY, PENALTY CANNOT STAND IN I TSELF IF THE ADDITION MADE IN THE ASSESSMENT ITSELF IS SET ASIDE OR CANCELLED BY THE SUPERIOR AUTHORITY/COURT. THE PEN ALTY CANNOT STAND BY ITSELF BECAUSE FALSE RESULT MAY BE PRODUCED BY THE FALSITY OF ONE OR MORE OF THE CONSTITUENT IT EMS IN THE RETURN. THE WORD INACCURATE PARTICULARS WOULD CO VER FALSITY IN THE FINAL FIGURE AND ALSO THE CONSTITUENT ELEMEN TS OR ITEMS. THEY SIMPLY WOULD MEAN INACCURATE IN SOME SPECIFIC OR DEFINITE RESPECT WHETHER IN THE CONSTITUENT OR SUBO RDINATE ITEMS OF INCOME OR THE END RESULT. CONCEALMENT OR FURNISHING INACCURATE PARTICULARS IMPLIES SOME DELIBERATE ACT ON THE PART OF THE ASSESSEE IN WITHHOLDING THE TRUE FACTS FROM THE AUTHORITIES. SINCE, THE BASIS OF LEVYING PENALTY R EMAINS NO MORE IN EXISTENCE, AFTER DELETION OF QUANTUM ADDITI ON, ATLANTIC TRADING CORPORATION( NOW KNOWN AS M/S NOVAMED PHARMACEUTICALS PVT. LTD. ITA NO.5949 & 5950/MUM/2011 6 THEREFORE, FROM THIS ANGLE, THE STAND OF THE LD. CO MMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED . FINALLY, BOTH THE APPEALS OF THE REVENUE ARE DISMIS SED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES, AT THE CONCLUSION OF THE HEARING ON 01/12/2015. SD/- SD/- ( RAJENDRA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ( DATED : 03/12/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1' ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1' / CIT(A)- , MUMBAI 5. 34 .' , 0 *+& * 5 , # $ / DR, ITAT, MUMBAI 6. 6 7$ / GUARD FILE. / BY ORDER, /3+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI