M/s. Groz Net Industries, New Delhi V. ACIT, New Delhi

ITA 6241/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2992 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: RANO JAIN CA SHRI ASHISH GOEL
• Keywords: Onus to prove
• Section: 43B; 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 6241/DEL/2013 AY: 20 04-05 GROZ NET INDUSTRIES, VS ACIT, C-717, NEW FRIENDS COLONY, CIR CLE-22(1), NEW DELHI. NEW DELHI (PAN: AAAFG8454E) (APPELLANT) (RESPONDENT) APPELLANT BY : MS RANO JAIN CA SHRI ASHISH GOEL, CA RESPONDENT BY : SHRI S.K. JAIN, DR DATE OF HEARING: 9.3 .2017 DATE OF PRONOUNCEMENT : 31.5.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A)-XXIII, NEW DELHI FOR ASSESSMENT YEAR 200 4-05. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 1,51,11,43 0/-. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MA DE DISALLOWANCE U/S 43B OF THE INCOME TAX ACT, 1961 ( THE ACT) ON ACCOUNT OF GRATUITY EXPENSES WHICH WERE NOT PAID BE FORE THE DUE DATE OF FILING THE RETURN OF INCOME AND AMOUNTING T O RS. 33,46,304/-. ANOTHER ADDITION OF RS. 1,93,407/- WAS MADE BY THE I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 2 ASSESSING OFFICER ON THE GROUND OF CESSATION OF LIA BILITY OF SUNDRY CREDITORS. THEREAFTER, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD CONCEALED TRUE PARTICULARS OF INCOME A ND WAS, THEREFORE, LIABLE TO PAY PENALTY ON BOTH THE ADDITI ONS. HE IMPOSED A PENALTY OF RS. 7,87,712/- U/S 271(1)(C ) OF THE ACT. 2.1 MEANWHILE, THE ASSESSEE HAD APPROACHED THE ITAT AGAINST THE QUANTUM ADDITIONS AND THE ITAT VIDE ORDER DATED 25 TH OCTOBER, 2011 IN I.T.A. NO. 3608/DEL/2008 HAD SET A SIDE THE QUANTUM ISSUE OF RS. 33,46,304/- ADDED BACK U/S 43B OF THE ACT TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJU DICATION. THE ITAT ALSO DELETED THE AMOUNT OF RS. 1,93,407/- ON A CCOUNT OF CESSATION OF LIABILITY. 2.2 AGAINST THE PENALTY IMPOSED BY THE ASSESSING OF FICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE PENALTY PERTAINING TO CESSATION OF LIABILITY OF RS. 1,93,407/- ON THE GROUND THAT THE QUANTUM HAD BEEN DELETED BY THE ITAT BUT CONFIRMED THE PENALTY ON THE DISALLOWANCE OF RS . 33,46,304/- MADE U/S 43B OF THE ACT. 2.3 NOW, THE ASSESSEE HAS APPROACHED THE ITAT AND H AS RAISED THE FOLLOWING GROUNDS:- I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 3 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD BOTH IN THE EYE OF LAW AN D ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF AO IN LEVYING PENALTY UNDE R SECTION 271(1)(C) AMOUNTING TO RS.7,87,712/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE ACTION OF AO IN LEVYING PENALTY UNDE R SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOW ANCE MADE ON PAYMENT OF GRATUITY EXPENSES AND CESSATION OF LIABILITY. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE PENALTY DESPITE THE FACT THAT THE AS SESSEE HIMSELF HAS DISCLOSED ALL THE FACTS AND FIGURES AND AS SUCH THERE WAS NO CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N IGNORING THE FACT THAT THE INCOME ASSESSED TAKEN BY THE AO AT RS.1,76,62,349/- IS INCORRECT IN VIEW OF THE WRONG COMPUTATION OF DEDUCTION UNDER SECTION 80HHC POST- JUDGMENT OF THE SUPREME COURT IN THE CASE OF TOPMAN EXPORTS VS. CIT (2012) 342 ITR 49 (SC). 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE PENALTY UNDER SECTION 271(1)(C) OF T HE ACT WITHOUT GIVING ANY FINDING ON THE MERITS REGARDING CONCEALMENT OF INCOME. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N REJECTING THE CONTENTION OF THE APPELLANT THAT THE PENALTY ORDER PASSED BY THE AO IS BARRED BY LIMITATION. 3. THE LD. SR SUBMITTED THAT THE LD. CIT (APPEALS) WAS LEGALLY INCORRECT IN CONFIRMING THE PENALTY DESPITE THE FACT I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 4 THAT THE ASSESSEE ITSELF HAD DISCLOSED ALL THE FACT S AND FIGURES AND AS SUCH THERE WAS NO CONCEALMENT OF INC OME ON THE PART OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT (APPEALS) HAD CONFIRMED THE PENALTY WITHOUT GIVING ANY FINDING ON THE MERITS REGARDING THE CONCEALMENT OF INCOME. IT WAS FURTHER SUBMITTED THAT NO PENALTY UN DER SECTION 271(1)(C) OF THE ACT IS IMPOSABLE IN CASE OF DISALLOWANCE UNDER SECTION 43B OF THE ACT AS IT IS NOT A CASE WHERE ANY INCOME HAS BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FILED. IT WAS SUBMITTED THAT THE PENALTY IMPOSED BE DELETED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE ORDER OF THE AO AS WELL AS OF THE LD. CIT (A PPEALS) AND SUBMITTED THAT THE PENALTY IMPOSED SHOULD BE CONFIR MED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT, IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA 83 ITR 26, HAD LAID DOWN THE POSITION OF LAW BY HOLDING THAT THE ASSESSING O FFICER IS NOT BOUND TO LEVY PENALTY AUTOMATICALLY SIMPLY BECAUSE THE QUANTUM ADDITION HAS BEEN SUSTAINED. ALSO IN CASE OF CIT V. KHODAY ESWARA (83 ITR 369) (SC), INCIDENTALLY REPORTED IN SAME ITR I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 5 VOLUME, IT IS HELD THAT PENALTY CANNOT BE LEVIED SO LELY ON BASIS OF REASONS GIVEN IN ORIGINAL ORDER OF ASSESSMENT. THE HONBLE SUPREME COURT HAS REITERATED THE LAW IN CASE OF DI LIP N. SHROFF V. JT. CIT [2007] 291 ITR 519 BY HOLDING IN PARA 62 THAT FINDING IN ASSESSMENT PROCEEDINGS CANNOT AUTOMATICALLY BE A DOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CON SIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. THE STATUTE REQUIRES A SATISFACTION ON THE PART OF THE ASSESSING OFFICER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT CONCEAL ED THE AMOUNT OR FURNISHED INACCURATE PARTICULARS AND THIS ONUS I S TO BE DISCHARGED BY THE DEPARTMENT. WHILE CONSIDERING WH ETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN THE ASSESSING OFFICER SHOULD NOT BEGIN WITH THE PRESUMPTION THAT HE IS GUILTY. SINCE THE BURDEN OF PROOF IN PENALTY PROCEEDINGS VA RIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN THE ASS ESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CAN NOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE A SSESSMENT PROCEEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALT Y PROCEEDINGS. IN THE PENALTY PROCEEDINGS THE AUTHORI TIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO B E CONSIDERED FROM A DIFFERENT ANGLE. IT IS IMPORTANT TO KEEP IN MIND THE I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 6 FUNDAMENTAL LEGAL PROPOSITION THAT ASSESSMENT PROCE EDINGS ARE NOT CONCLUSIVE. ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. FINDINGS IN ASSESSMENT P ROCEEDINGS DONT OPERATE AS RES JUDICATA IN PENALTY PROCEEDINGS. FOR THIS PROPOSITION RELIANCE IS PLACED ON THE DECISION IN C IT VS. DHARAMCHAND L. SHAH (1993) 204 ITR 462 (BOM). IN VI JAY POWER GENERATORS LTD VS. ITO (2008)6 DTR 64 (DEL) IT WAS HELD THAT IT IS WELL SETTLED THAT THOUGH THEY CONSTITUTE GOOD EV IDENCE DO NOT CONSTITUTE CONCLUSIVE EVIDENCE IN PENALTY PROCEEDIN GS. DURING PENALTY PROCEEDINGS, THERE HAS TO BE REAPPRAISAL OF THE VERY SAME MATERIAL ON THE BASIS OF WHICH THE ADDITION WAS MAD E AND IF FURTHER MATERIAL IS ADDUCED BY THE ASSESSEE IN THE COURSE OF THE PENALTY PROCEEDINGS, IT IS ALL THE MORE NECESSARY T HAT SUCH FURTHER MATERIAL SHOULD ALSO BE EXAMINED IN AN ATTE MPT TO ASCERTAIN WHETHER THE ASSESSEE CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS. THUS, UNDER PENAL TY PROCEEDINGS ASSESSEE CAN DISCHARGE HIS BURDEN BY RE LYING ON THE SAME MATERIAL ON THE BASIS OF WHICH ASSESSMENT IS M ADE BY CONTENDING THAT ALL NECESSARY DISCLOSURES WERE MADE AND THAT ON THE BASIS OF MATERIAL DISCLOSED THERE CANNOT BE A C ASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 7 INCOME. FURTHER IF THERE IS ANY MATERIAL OR ADDITIO NAL EVIDENCE WHICH WAS NOT PRODUCED DURING ASSESSMENT PROCEEDING S SAME CAN BE PRODUCED IN PENALTY PROCEEDINGS AS BOTH ASSE SSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE. IN C IT VS. M/S SIDHARTHA ENTERPRISES (2009) 184 TAXMAN 460 (P & H) (HC) IT WAS HELD THAT THE JUDGMENT IN DHARMENDRA TEXTILE CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. EVEN SO, THE CONCE PT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDG MENT. PENALTY IS IMPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT. 5.1 REVERTING TO THE FACTS OF THE PRESENT CASE, THE PEN ALTY ORDER IS WOEFULLY SILENT ON THE ISSUE AS TO HOW THIS SATI SFACTION OF CONCEALMENT WAS ARRIVED AT. THE QUANTUM ADDITION ON WHICH THE PENALTY HAS BEEN IMPOSED PERTAINS TO DISALLOWANCE U /S 43B BUT THE LD. CIT (A) HAS ALSO NOT EXAMINED THE ISSUE IN DETAIL BUT HAS SIMPLY CONFIRMED THE PENALTY BY RELYING ON THE FIND INGS OF THE AO AND STATING THAT THE ASSESSEE HAS ALSO ACCEPTED THA T THERE WAS A DEFAULT U/S 43B. HOWEVER, THERE IS NO FINDING BY TH E AUTHORITIES BELOW ON THE ISSUE AS TO HOW THE CONCEALMENT HAS COME TO BE ESTABLISHED SO AS TO WARRANT IMPOSITION OF PENALTY. THUS, IT IS I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 8 APPARENT THAT THE PENALTY HAS BEEN IMPOSED AS AN AU TOMATIC OUTCOME OF THE CONFIRMATION OF THE QUANTUM ADDITION . CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, IN O UR VIEW THE IMPUGNED DISALLOWANCE DOES NOT INVITE THE PROVISION S OF SECTION 271(1)(C) OF THE ACT. WE SET ASIDE THE ORDER OF T HE LD. CIT (A) AND DIRECT THE AO TO DELETE THE ENTIRE PENALTY. 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.05.2017. SD/- SD/- (N. K. SAINI) (SUDHANSHU SRIVAST AVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31ST MAY 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSTT. REGISTRAR ITAT NEW DELHI I.T.A. NO. 6241/DEL/2013 ASSESSMENT YEAR 2004-05 9