S.K. OSWAL POLYMERS, MUMBAI V. DCIT 24(2), MUMBAI

ITA 6551/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8328 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 16-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: PANNAL CHORDIYA
• Keywords: Opportunity of being heard
• Section: 271(1)(c); 143(3); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI PAWAN SINGH (JM) & SHRI S. RIFAUR RAHM AN (A.M.) ITA NO. 6551/MUM/2018(ASSESSMENT YEAR:2008-09) S.K. OSWAL POLYMERS SHOP NO.1, JAI SAKET CO-OP HOUSING DADI SETH ROAD MALAD (W), MUMBAI-400 064 PAN : AAPFS1095N VS DY.CIT 24(2), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI PANNAL CHORDIYA AR RESPONDENT BY SHRI V. VINODKUMAR SR DR DATE OF HEARING 15-01-2020 DATE OF PRONOUNCEMENT 15-01-2020 O R D E R PER PAWAN SINGH, JM : 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LEARNED CIT(A)- 41, MUMBAI DATED 01-08-2018 CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. PROPER OPPORTUNITY OF BEING HEARD WAS NOT PROVID ED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE DATE OF H EARING FIXED ON 10.07.2018 BUT DUE TO HEAVY RAINS ,THE HEARING COUL D NOT BE ATTENDED .LETTER INFORMING THAT THE ASST. COMMISSIONER OF IN COME TAX 30(3) HAS PASSED THE ORDER FOR GIVING THE EFFECT OF ORDER OF ITAT FILED ON 24.05.2018 NOT CONSIDERED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), HAS ERRED IN CONFIRMING THE LEVY OF THE PENALTY U/S 271(1)(C), W HEREAS THE ASSESSEE HAS OFFERED EXPLANATION DURING COURSE OF PROCEEDING S BEFORE A.O & BEFORE CIT APPEALS, AND HENCE THE SAME IS ARBITRARY AND IL LEGAL. 2 ITA 6551/MUM/2018 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS), WAS NOT JUSTIFIED IN CONFIRMING THE LEVYING THE PENALTY U/S 271(1)(C) AND THE SAME IS ARBITRARY AND ILLEGAL, MAY KINDLY BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS AS CONSIGNOR STOCKIST AND DEALER IN PLASTI C POWDER. IN THE ASSESSMENT COMPLETED U/S 143(3) DATED 30-12-2010, T HE FOLLOWING ADDITIONS WERE MADE, ON WHICH THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT:- I. INTEREST DISALLOWANCE U/S 36(1)(III) RS.7,69, 992/- II. FDR INTEREST RS. 1,38,591/- III. INTEREST FROM STATE BANK OF INDORE RS. 2,42,8 99/- 3. ON APPEAL, THE LD .CIT(A) DELETED ADDITION ON ACCOU NT OF FDR INTEREST AMOUNTING TO RS.1,38,591/-, ADDITION ON ACCOUNT OF INTEREST RECEIVED FROM STATE BANK OF INDORE WAS CONFIRMED; WHEREAS AD DITION ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF RS.7, 69,992/- WAS DIRECTED TO BE VERIFIED AS TO WHETHER THE SOURCE FOR THE INT EREST FREE ADVANCES WERE OUT OF INTEREST FREE LOANS AND THE CAPITAL OF PARTNERS. 4. THE ASSESSING OFFICER WRITES IN THE PENALTY ORDER U/S 271(1)(C) DATED 26-03-2014 THAT THOUGH THE ASSESSEE WAS CLAIMING TH AT THE PARTNERS CAPITAL ACCOUNT LYING WITH THE FIRM WAS RS.1.01 CRO RES, THE BREAK UP DETAILS PARTNER-WISE COULD NOT BE FILED TO SUBSTANT IATE THE ABOVE CLAIM AND THE ASSESSEE ALSO FAILED TO FILE ANY CLARIFICAT ION AS TO WHETHER 3 ITA 6551/MUM/2018 INTEREST WAS PAID TO THE PARTNERS ON CAPITAL. ACCO RDING TO THE ASSESSING OFFICER, AS THE ASSESSEE DID NOT FILE ANY SUCH DETA ILS, NO RELIEF COULD BE GRANTED ON THIS ACCOUNT. THEREFORE, ON THE BASIS O F THE ORDER OF LD. CIT(A), THE ASSESSING OFFICER LEVIED PENALTY OF RS. 3,44,282/- BEING 100% OF THE TAX SOUGHT TO BE EVADED ON THE DISALLOW ANCE CONFIRMED. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A), WHICH DID NOT FIND FAVOUR WITH. FURTHER AGGRIEVED, THE A SSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED AUTHOR ISED REPRESENTATIVE (AR) OF THE ASSESSEE AND THE LD. DEPARTMENTAL REPRE SENTATIVE (DR) FOR THE REVENUE AND PERUSED THE RECORD. THE LD.AR HAS F URTHER SUBMITTED THAT SUBMITTED THAT ON APPEAL AGAINST THE QUANTUM A DDITION, THE ITAT HAS GIVEN FURTHER RELIEF AND THE DISALLOWANCE U/S 3 6(1)(III) HAS BEEN BROUGHT DOWN TO RS.2,18,030/- FROM THE ORIGINAL ADD ITION OF RS. 7,69,992/- . THE LD.AR HAS PLACED BEFORE US, THE CO PY OF ORDER GIVING EFFECT TO ITAT S ORDER PASSED BY THE ASSESSING OFFICER. 6. THE LD.AR OF THE ASSESSEE SUBMITS THAT THE NOTICE I SSUED U/S 274 R.W.S. 271(1)(C) SUFFERS FROM GRAVE MISTAKE INASMUCH AS TH AT THE ASSESSEE DID NOT STRIKE OFF THE INAPPLICABLE PORTION IN THE NOTI CE AND DID NOT SPECIFY THE CHARGE / LIMB UNDER WHICH HE WAS PROPOSING TO I NITIATE PENALTY 4 ITA 6551/MUM/2018 PROCEEDINGS. THEREFORE, THE PENALTY LEVIED U/S 271 (1)(C) ON THE BASIS OF A WRONG NOTICE IS NOT SUSTAINABLE AND IS VOID AB IN ITIO. THE LD AR RELIED ON THE FOLLOWING DECISIONS:- DCIT VS M/S PENNZOIL QUAKER STATE INDIA LTD 7. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE ORDER OF THE LOWER AUTHORITIES CAREFULLY. WE HA VE NOTED THAT THE INITIALLY THE ASSESSING OFFICER INITIATED PENALTY O N THE DISALLOWANCES, (1) INTEREST DISALLOWANCE U/S 36(1)(III) OF RS. 7,69, 992/-, (2) FDR INTEREST RS. 1,38,591/- AND (3) INTEREST FROM STATE BANK OF INDORE OF RS.2,42,899/-. WE HAVE FURTHER NOTED THAT DISALLOWA NCE U/S 36(1)(III) HAS BEEN BROUGHT DOWN TO RS.2,18,030/- FROM THE ORI GINAL ADDITION OF RS. 7,69,992/- AND ADDITION ON ACCOUNT OF FDR INT EREST AMOUNTING TO RS.1,38,591/- WAS DELETED. THUS, THE TWO OF THE ABO VE TWO ADDITIONS WERE EITHER DELETED OR SUBSTANTIALLY DELETED. HENCE , NO PENALTY UNDER SECTION 271(1)(C) IS LEVIABLE ON SUCH ADDITIONS / D ISALLOWANCES. 9. THE THIRD ADDITION ON WHICH PENALTY WAS LEVIED, REL ATES TO INTEREST OF RS. 2,42,899/- FROM STATE BANK OF INDORE. DURING TH E ASSESSMENT THE ASSESSEE EXPLAINED THAT THE CORRESPONDING INCOME HA S BEEN OFFERED IN 5 ITA 6551/MUM/2018 THE NEXT FINANCIAL YEAR. SIMILAR EXPLANATION WAS GI VEN IN RESPONSE TO THE SHOW CAUSE NOTICE. THE EXPLANATION OF THE ASSES SEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER BY TAKING VIEW TH AT THE ASSESSEE NOT OFFERED THE SAID INCOME ON ACCRUAL BASIS AND TREATE D THE SAME AS CONCEALMENT OF INCOME. IN OUR VIEW THE ASSESSEE HAS GIVEN SUFFICIENT EXPLANATION AND BROUGHT THE FACT ON RECORD THAT THE SAID INCOME IS INCLUDED IN THE INCOME OF SUBSEQUENT ASSESSMENT YEA R. NO MATERIAL IS BROUGHT ON RECORD BY ASSESSING OFFICER TO PROVE THE FACT THAT THE SAID INTEREST INCOME WAS NOT OFFERED TO TAX IN NEXT YEAR . THEREFORE, IN OUR VIEW IT WAS A SUFFICIENT EXPLANATION AS PER SECTION 273B, WHICH WE ACCEPT. IN OUR VIEW THE PENALTY ON THIS ADDITION IS ALSO NOT SUSTAINABLE. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. AS WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE ON MERIT, THUS, DISCUSSIONS ON OTHER SUBMISSIONS HAVE BECOME ACADEMIC. ORDER PRONOUNCED IN THE OPEN COURT ON 15-01-2020. SD/- SD/- (S. RIFAUR RAHMAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 15 TH JANUARY, 2020 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 6 ITA 6551/MUM/2018 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI