TOP SYRINGE MANUFACTURING CO, MUMBAI V. ACIT 12(1), MUMBAI

ITA 6539/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92771 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 28-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: SAMEER G DALAL
• Keywords: Reasonable cause
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS.6538 & 6539/M/2011 ASSESSMENT YEARS: 2003-04 & 2004-05 M/S. TOP SYRINGE MANUFACTURING CO., 10/11, PROSPECT CHAMBERS ANNEXE, 317-21, DR. D.N. ROAD, FORT, MUMBAI 400 001 PAN: AABFT 9732D VS. ASST. ACIT 12(1), ROOM NO.117, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 20 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SAMEER G. DALAL, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 16.06.2015 DATE OF PRONOUNCEMENT : 16.06.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEARS 2003-04 & 2004-05 BOTH DATED 15.07.2011. THE ASSESSEE IN BOTH THE APPEALS HAS AG ITATED THE LEVY/CONFIRMATION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FACTS FOR THE SAKE OF CONVENIENCE HAVE BEEN TAKEN FROM ITA NO.6538/M/2011 . 2. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARIN G TOTAL LOSS AT RS.72,50,897/-. THE ASSESSEE FIRM HAS BEEN ENGAGED IN THE BUSINESS OF MANUFACTURING OF SURGICAL AND SCIENTIFIC GOODS. TH E ASSESSEE CLAIMED EXPENDITURE UNDER VARIOUS HEADS LIKE SALARIES, WAGE S, BONUS AND LOSS ON SALE OF ITA NOS.6538 & 6539/M/2011 M/S. TOP SYRINGE MANUFACTURING CO. 2 FIXED ASSETS, PROFESSIONAL CHARGES, CONVEYANCE ETC. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPENDITURE INCURRED THROUGH DOCUMENTARY EVIDENCE. NO BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER (HEREINA FTER REFERRED TO AS THE AO). THE AO COMPLETED THE ASSESSMENT UNDER SECTION 144 O F THE ACT AND DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE AND ASSESSE D THE TOTAL INCOME OF THE ASSESSEE AT RS.NIL. PENALTY PROCEEDINGS WERE INITI ATED UNDER SECTION 271(1)(C) OF THE ACT. IN THE PENALTY PROCEEDINGS, THE ASSESS EE VIDE LETTER DATED 23.03.10 EXPLAINED AS UNDER: 5. IN CONNECTION TO THIS WE HAVE TO STATE THAT WE ARE PASSING THROUGH GREAT FINANCIAL DIFFICULTIES. OUR FACTORY DOES NOT RUN AL L THE 12 MONTHS IN THE YEAR AND WE DO NOT HAVE MONEY TO PAY TO THE WORKERS. OUR WAGES BILLS IS MORE THAN OUR SALES. WE HAVE HUGE LIABILITY PAYABLE TO T HE BANKERS NAMELY CANADA BANK. WE ARE NOT IN A POSITION TO PAY THE AMOUNT TO THE BANKERS AND THEY HAVE FILED A SUIT IN THE DEBT RECOVERY TRIBUNAL. WE ARE ALSO TAKING LOANS FROM PRIVATE PARTIES WHICH ALSO COULD NOT BE REPAID AND THEY HAV E TAKEN ACTION UNDER SECTION 138 OF CRIMINAL PROCEDURE CODE AND VARIOUS PROCEEDI NGS ARE GOING ON IN DIFFERENT COURTS. WE'RE ALSO NOT DEPOSITED THE DUES OF THE WO RKERS AND PF AUTHORITIES HAVE ALSO UNDERTAKEN ACTION AGAINST OUR FIRM. WE ARE ALS O NOT PAID SALES TAX LIABILITY. MOST OF THE ADMINISTRATIVE STAFF HAVE LEFT THE ORGA NISATION. WE ARE SUFFERING HUGE LOSSES. WE WOULD SUBMIT THAT SINCE LAST ONE AN D A HALF MONTH DUE TO NON-PAYMENT OF ELECTRICITY BILLS THE COMPANY HAS DI SCONTINUED THE ELECTRIC SUPPLY. DUE TO NON-PAYMENT TO WORKERS THEY ARE NOT ALLOWING US TO ENTER THE FACTORY PREMISES TILL DATE. ALL THE RECORDS ARE IN THE FACT ORY PREMISES AND WE ARE NOT ABLE TO HAVE ACCESS TO THE BOOKS AND RECORDS. WE ARE TRY ING TO SURVIVE AND IN THIS PROCESS, WE COULD NOT ATTEND BEFORE YOU AT THE APPO INTED TIME. IN VIEW OF THIS FACT MAY REQUEST YOU TO KINDLY TREAT OUR NON-COMPLI ANCE AS REASONABLE CAUSE AND WE WOULD LIKE TO STATE THAT THE TWO UNAVOIDABLE CIR CUMSTANCES WE ARE NOT IN A POSITION TO ATTEND BEFORE YOU. AT THE TIME OF SCRUT INY AND CIT(A), YOU ARE NOT IN A POSITION TO PRODUCE OUR BOOKS AND RECORDS ON THE ABOVE MENTIONED GROUNDS.' 3. THE AO, HOWEVER, DID NOT AGREE WITH THE ABOVE EX PLANATION OF THE ASSESSEE. HE HELD THAT SINCE THE ASSESSEE HAD FAIL ED TO PRODUCE EVIDENCE IN SUPPORT OF HIS CLAIM OF EXPENDITURE, HENCE THE CLAI M OF EXPENDITURE MADE BY THE ASSESSEE WAS BOGUS. HE, THEREFORE, LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT THE RATE OF 100% OF THE TAX SOUGHT TO BE EVADED WHICH WAS WORKED OUT AT RS.26,01,259/-. ITA NOS.6538 & 6539/M/2011 M/S. TOP SYRINGE MANUFACTURING CO. 3 3. IN APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY SO LEVIED BY THE AO. THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. 4. THE LD. A.R. OF THE ASSESSEE, BEFORE US, HAS REI TERATED HIS SUBMISSIONS AS REPRODUCED ABOVE AND FURTHER STATED THAT THE BOOKS OF ACCOUNTS COULD NOT BE PRODUCED BECAUSE THE SAME WERE NOT IN POSSESSION OF THE ASSESSEE BUT WERE SEIZED BY THE POLICE ON THE COMPLIANT OF OFFICIALS OF PROVIDENT FUND DEPARTMENT. HE HAS FURTHER SUBMITTED THAT THE CLAI M OF EXPENDITURE OF THE ASSESSEE WAS NOT BOGUS. THERE WAS NO ATTEMPT TO EV ADE THE TAX. THE AO HAS NOT ASSESSED ANY POSITIVE INCOME OF THE ASSESSEE. IT HAS ALSO BEEN AN ADMITTED FACT THAT THE COMPANY WAS RUNNING INTO GREAT FINANC IAL HARDSHIP. THERE WERE LABOUR PROBLEM ALSO AND THE WORKERS DID NOT ALLOW T HE DIRECTORS EVEN TO ENTER THE PREMISES. HE HAS FURTHER INVITED OUR ATTENTION TO THE OBSERVATIONS MADE BY THE LD. CIT(A) IN PARA 2.3 OF THE IMPUGNED ORDER WH EREIN THE LD. CIT(A), AFTER CONSIDERING THE DOCUMENTARY EVIDENCE ON THE F ILE HAS, HIMSELF, OBSERVED THAT THE IMMOVABLE PROPERTY OF THE ASSESSEE WAS ATT ACHED. THE FACTORY OF THE ASSESSEE WAS CLOSED FROM OCTOBER, 1980 TO DECEMBER, 2000. IT WAS ALSO PROVED THAT THE ASSESSEE WAS UNDER FINANCIAL PROBLE MS FROM FINANCIAL YEAR 1999-2000 TO 2004-05. EVEN THE JOINT COMMISSIONER, SALES TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE IN TAX AND INTEREST ON ACCOUNT OF FINANCIAL PROBLEMS FACED BY THE ASSESSEE. EVEN THE ORDER OF MAHARASHTRA SALES TAX TRIBUNAL DATED 26.04.12 ALSO SPEAKS OF LABOUR TROUB LES AND HAS CONDONED THE DELAY OF FILING APPLICATIONS. THE LD. A.R. HAS FUR THER INVITED OUR ATTENTION TO LETTER DATED 29.01.10 MOVED BY THE DEPUTY COMMISSIO NER OF SALES TAX TO SENIOR POLICE INSPECTOR OF KASHMIRA POLICE STATION REQUESTING HIM TO ARRANGE TO SEND THE RECORD OF THE ASSESSEE FOR THE PERIOD 0 1.04.02 TO 31.03.05 AS THE SAME WAS IN HIS POSSESSION BEING SEIZED ON THE COMP LIANT OF OFFICIALS OF PROVIDENT FUND DEPARTMENT. THE LD. A.R. HAS FURTHE R SUBMITTED THAT THE ITA NOS.6538 & 6539/M/2011 M/S. TOP SYRINGE MANUFACTURING CO. 4 ASSESSEE TILL DATE HAS NOT SET OFF ANY OF THE LOSSE S CLAIMED IN EARLIER YEARS. EVEN THE FACTORY IS CLOSED SINCE 2006. 5. FROM THE ABOVE FACTUAL POSITION ON RECORD, WE FI ND THAT THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT, RELEVANT EV IDENCES BECAUSE OF THE FINANCIAL PROBLEMS, LABOUR PROBLEMS AND HIS RECORD BEING SEIZED BY THE OTHER AUTHORITIES. THE DISALLOWANCE OF EXPENDITURE HAD B EEN MADE BY THE AO BECAUSE THE ASSESSEE COULD NOT PRODUCE THE RELEVANT EVIDENCES. HOWEVER, IN THIS CASE, WE DO NOT FIND ANY ATTEMPT OF CONCEALMEN T OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME F OR THE PURPOSE OF EVADING THE TAX. THE ASSESSEE HAS NOT CLAIMED THE SET OFF OF T HE LOSSES EVEN TILL DATE. IT HAS BEEN TIME AND AGAIN HELD BY THE HIGHER COURTS THAT EVERY CASE OF DISALLOWANCE OF EXPENDITURE CANNOT BE AUTOMATICALLY HELD AS A CA SE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IN VIEW OF THE ABOVE STATED PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE , WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES IN LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE SAME IS ACCORD INGLY ORDERED TO BE DELETED. IN VIEW OF OUR FINDING GIVEN ABOVE ON IDENTICAL FAC TS, THE PENALTY IN RELATION TO THE A.Y. 2004-05 IN ITA NO.6539/M/2011 IS ALSO ORDE RED TO BE DELETED. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.06.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 07.10.2015. * KISHORE, SR. P.S. ITA NOS.6538 & 6539/M/2011 M/S. TOP SYRINGE MANUFACTURING CO. 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.