Dy. CIT, Central Circle, Aurangabad V. M/s. Gangamai Industries & Constructions Ltd., Aurangabad

ITA 672/PUN/2013

• Counselvise Citation: 67224514 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 15-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Keywords: Question of law; Tax effect
• Section: 69C; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDIC IAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NOS.672 & 673/PN/2013 (A.YS: 2006-07 & 2007-08) DY. CIT, CENTRAL CIRCLE, AURANGABAD APPELLANT VS. M/S. GANGAMAI INDUSTRIES & CONSTRUCTIONS LTD., 2 ND FLOOR, TAPADIYA TERRACE, ADALAT ROAD, AURANGABAD. PAN: AABCG2199Q RESPONDENT APPELLANT BY : SHRI P.S. NAIK RESPONDENT BY : NONE DATE OF HEARING : 18.09.2014 DATE OF PRONOUNCEMENT : 22.09.2014 ORDER PER SHAILENDRA KUMAR YADAV, JM: BOTH THE APPEALS FILED BY THE REVENUE ARISING OUT OF THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD, DATED 03.12.2012. 2. IN ITA NO.672/PN/2013 FOR A.Y. 2006-07, THE REVE NUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN PARTLY DELETING TH E PENALTY IMPOSED UNDER SECTION 271(1)(C)OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT PENAL TY IS IMPOSABLE ON REAL INCOME ONLY, WHEREAS ON THE OTHER HAND, HE HAS UPHELD THE PENALTY ON UNEXPLAINED ITA NOS.672 & 673/PN/2013 GANGAMAI INDUSTRIES & CONSTRUCTION LTD. 2 EXPENDITURE OF ILLEGAL NATURE WHICH IS ALSO A DEEME D INCOME, THEREBY GIVING CONTRADICTORY FINDING IN THI S ORDER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING T HE FACT THAT THE PROVISION OF SECTION 69C OF THE ACT DO NOT DIFFERENTIATE THE EXPENDITURE INTO LEGAL & ILLEGAL EXPENDITURE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENAL TY TO THE EXTENT OF CONCEALED INCOME ON ACCOUNT OF EXPENS ES NOT INCURRED ON ILLEGAL GRATIFICATION PAYMENTS, WHE REAS AS PER THE PROVISIONS OF SECTION 69C OF THE ACT ALL THE EXPENSES NEED TO BE CONSIDERED AS 'CONCEALED INCOME '. 5. THE APPELLANT CRAVE LEAVE TO ADD, ALTER, MODIFY, DE LETE AMEND ANY OF THE GROUND, AS PER THE CIRCUMSTANCES O F THE CASE. 6. THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION M AY DEMAND. 2.2 IN ITA NO.673/PN/2013 FOR A.Y. 2007-08, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENAL TY IMPOSED UNDER SECTION 271AAA OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONCLUDING THAT PE NALTY UNDER SECTION 271AAA IS NOT LEVIABLE IN THE CASE OF THE ASSESSEE BECAUSE SEARCH HAS NOT BEEN INITIATED UNDE R SECTION 132 IN THE CASE OF THE ASSESSEE WHEREAS ON THE CONTRARY , THE PROVISIONS OF SECTION 271AAA DO NOT PUT FORTH SUCH PRECONDITION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN REFERRING TO THE PROVISIONS OF SECTION 132(4) OF THE ACT WHICH EMPOW ERS THE AUTHORIZED OFFICER TO RECORD STATEMENT OF ANY P ERSON DURING THE SEARCH WHEREAS THE SECTION 271AAA OF THE ACT CASTS THE BURDEN OF SPECIFYING THE MANNER IN WHICH THE INCOME HAS BEEN DERIVED ON THE ASSESSEE AND NOT ON THE AUTHORIZED OFFICER/ASSESSING OFFICER. ITA NOS.672 & 673/PN/2013 GANGAMAI INDUSTRIES & CONSTRUCTION LTD. 3 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENAL TY BY HOLDING THAT THE ASSESSEE HAD EXPLAINED THE MANNER IN WHICH INCOME WAS DERIVED, WHEREAS ON THE CONTRARY, NO SPECIFIC MANNER OF DERIVING THE INCOME, WAS EXPLAIN ED BY THE ASSESSEE IN THE STATEMENT. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN PLACING RELIANCE O N THE RATIO OF THE CASE I.E. C.I.T. VS MAHENDRA SHAH (299 ITR 305 GUJRAT) WHICH IS DISTINGUISHABLE ON THE FACTS A ND POINTS OF LAW INVOLVED IN THE PRESENT CASE. 6. THE APPELLANT CRAVE LEAVE TO ADD, ALTER, MODIFY, DE LETE AMEND ANY OF THE GROUNDS, AS PER THE CIRCUMSTANCES OF THE CASE. 7. THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION M AY DEMAND. 3. AT THE OUTSET OF HEARING, THE ASSESSEE RAISED A PRELIMINARY OBJECTION BY POINTING OUT INSTRUCTION NO.3/2011 DAT ED 09.02.2011 ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES (CBDT) FIXING THE MONETARY LIMITS FOR FILING OF DEPARTMENT AL APPEALS BEFORE THE TRIBUNAL. IN TERMS OF THE SAID INSTRUCTI ON, MONETARY LIMIT FOR FILING DEPARTMENTAL APPEAL TO THE TRIBUNA L HAS BEEN FIXED AT RS 3 LAKHS. IN OTHER WORDS, IN CASES WHERE THE TAX EFFECT ON THE ADDITIONS DELETED BY THE COMMISSIONER OF INC OME-TAX (APPEALS) IS LESS THAN RS 3 LAKHS, NO APPEAL SHALL BE FILED BY THE DEPARTMENT IN SUCH CASES. ACCORDING TO THE ASSESSEE , THE TAX EFFECT WITH RESPECT TO THE RELIEF ALLOWED BY THE CO MMISSIONER OF INCOME-TAX (APPEALS) IN THE CAPTIONED APPEAL IS BEL OW RS 3 LAKHS. SUCH FACTUAL MATRIX HAS NOT BEEN CONTESTED B Y THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , THOUGH THE RELIEF ALLOWED BY THE COMMISSIONER OF INCOME-TA X (APPEALS) IS SOUGHT TO BE ASSAILED ON MERITS. 4. WE FIND THAT IN A RECENT DECISION, THE CO-ORDINA TE BENCH OF ITAT MUMBAI, IN THE CASE OF ITO V SHRI ASHOK G. DHA NDHARIAI, MUMBAI IN ITA NO.2460/MUM/2010 DATED 28.2.2011 HELD THAT THE REVISED INSTRUCTIONS DATED 9.2.2011 (SUPRA) ARE APPLICABLE TO ITA NOS.672 & 673/PN/2013 GANGAMAI INDUSTRIES & CONSTRUCTION LTD. 4 THE PRESENT CASES ALSO, ALTHOUGH SUCH APPEALS HAVE BEEN FILED ON A PRIOR DATE. 5. IN VIEW OF THE PRECEDENT BROUGHT OUT BY THE LEAR NED REPRESENTATIVE FOR THE RESPONDENT, FACTUALLY THE DEPARTMENTAL APPEAL IS LIABLE TO BE CONSIDERED TO HAVE BEEN FILE D CONTRARY TO THE CBDT INSTRUCTIONS DATED 9.2.2011 (SUPRA). THE T RIBUNAL FOLLOWING THE JUDGMENT OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT V MADHUKAR K. INAMDAR (HUF) (2009) 318 ITR 149 (BOM) AND CIT V PITHWA ENGINEERING WORKS (2005) 276 ITR 519 (BOM) FOUND IT APPROPRIATE TO DISMISS THE DEPARTMEN TAL APPEAL ON THE GROUND THAT TAX EFFECT IS LESS THAN RS 3 LAK HS, EVEN IN A CASE WHERE THE DEPARTMENTAL APPEALS WAS FILED PR IOR TO THE DATE OF THE CBDT INSTRUCTION DATED 9.2.2011 (SUPRA) . THE FOLLOWING DISCUSSION IN THE ORDER IS WORTHY OF NOTI CE: 5. WE HEARD BOTH THE PARTIES. THE CASE OF CIT VS. CHHAJER PACKAGING & PLASTICS PVT. LTD. 300 ITR RELIED ON BY THE DR IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. AT PARA 12 PAGE 184 OF THE DECISION IN THE CASE OF CHHAJER PACKAGING & PLASTICS PVT. LTD. IT HAS BEEN HELD AS FOLLOWS: OTHERWISE ALSO, PARAGRAPH OF THIS CIRCULAR ITSELF SAVES CERTAIN APPEALS FROM BEING OBSTRUCTED DUE TO FINANC IAL LIMITS. PARAGRAPH 3 READS: THE BOARD HAS ALSO DECIDED THAT IN CASES INVOLVING SUBSTANTIAL QUESTION OF LAW OF IMPORTANCE AS WELL AS IN CASES WHERE THE SAME QUESTION OF LAW WILL REPEATEDLY ARISE, EITHER IN TH E CASE CONCERNED OR IN SIMILAR CASES, SHOULD BE SEPARATELY CONSIDERED ON THE MERITS WITHOUT BEING HINDERED BY THE MONETARY LIMITS. IT IS EVIDENT THAT, WHENEVER THERE IS A SUBSTANTIAL QUESTION OF LAW, OR QUESTION OF LAW WHICH IS LIKELY TO RECUR IN FUTURE, THE DEPARTMENT IS NOT PROHIBITED F ROM FILING AND PURSUING APPEALS. WE BELIEVE THAT THE SA VING CLAUSE SAVES THE PRESENT APPEAL SINCE IT INVOLVES A QUESTION OF LAW REGARDING INTERPRETATION OF SECTION 275(1)(C) OF THE ACT, AND MORE PARTICULARLY THE ASP ECT OF MANNER IN WHICH THE LIMITATION SHOULD BE COMPUTED I N THE LIGHT OF THE SAID PROVISIONS. WE HAVE, THEREFOR E, PROCEEDED TO HEAR THE ADVOCATES ON THE MERITS. IN O UR ITA NOS.672 & 673/PN/2013 GANGAMAI INDUSTRIES & CONSTRUCTION LTD. 5 OPINION, THE CASE OF CIT V CHHAJER WAS WITH RESPECT OF INTERPRETATION OF 275(1)(C) OF THE ACT AND HENCE CA ME UNDER THE EXCEPTION CLAUSE UNDER THE CBDT CIRCULAR AND WAS NOT OBSTRUCTED BY THE MONETARY LIMIT OF RS 3 LAKHS PRESCRIBED BY THE CIRCULAR. THEREFORE THE CAS E OF 300 ITR 180 IS INAPPLICABLE TO THE FACTS OF OUR CAS E. FURTHER INSTRUCTION NO. 5 DT. 15.5.2008 FIXING THE MONETARY LIMIT AT RS 2 LAKHS IS SIMILAR TO THAT OF INSTRUCTION NO. 3 DATED 9.2.2011 WHICH THE ASSESSEE HAS BROUGHT TO OUR NOTICE IN SUPPORT OF HIS CONTENT ION. SINCE BOTH THE INSTRUCTION NOS. 5 & 3 ARE IDENTICAL , THE RATIO OF THE DECISION IN THE CASE OF CIT V PITHWA E NGG. WORK WHICH DEALS WITH INSTRUCTION NO. 5 DT. 15.5.20 08 SHALL EQUALLY APPLY TO THE PRESENT CASE WHICH FALLS UNDER INSTRUCTION NO. 3 DATED 9.2.2011. FOLLOWING THE RATIO OF THE DECISION IN THE CASE OF CIT V PITHWA E NGG. WORK WHEREIN IT HAS BEEN HELD THAT IN OUR VIEW, TH E BOARDS CIRCULAR DT. 27 TH MARCH, 2000 IS VERY MUCH APPLICABLE EVEN TO THE OLD REFERENCES WHICH ARE STI LL UNDECIDED, WE DISMISS THE DEPARTMENTAL APPEAL ON THE GROUND THAT THE TAX EFFECT IS LESS THAN 3 LAKHS . 6. FOLLOWING THE AFORESAID PRECEDENT, THE PRESENT A PPEAL FILED BY THE REVENUE IS LIABLE TO BE DISMISSED IN VIEW OF CBDT INSTRUCTION NO. 3 DATED 9.2.2011 (SUPRA) AS THE TAX EFFECT WITH RESPECT TO THE QUANTUM OF RELIEF ALLOWED BY THE COM MISSIONER OF INCOME-TAX (APPEALS) IS BELOW RS.3 LAKHS AND IT HAS NOT BEEN SHOWN THAT THE APPEAL FALLS UNDER ANY OF THE EXCEPT IONS PROVIDED IN PARA 8 OF THE CBDT INSTRUCTION (SUPRA). WE ORDER ACCORDINGLY. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF SEPTEMBER, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED: 22 ND SEPTEMBER, 2014 GCVSR ITA NOS.672 & 673/PN/2013 GANGAMAI INDUSTRIES & CONSTRUCTION LTD. 6 COPY OF THE ORDER FORWARDED TO : 1. DEPARTMENT 2. ASSESSEE 3. CIT(A), AURANGABAD 4. CIT, AURANGABAD 5. THE D.R, PUNE BENCH B PUNE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, PUNE BENCH, PUNE