The ITO, Ward-1(1), Ahmedabad V. M/s. Akshar Finance Ltd., Ahmedabad

ITA 702/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6067 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTAN T MEMBER THE ITO, WARD-1(1), AHMEDABAD (APPELLANT) VS AKSHAR FINANCE LTD, C/O, M/S. JANI & CO,. 708, SAKAR-V, B/H, NATRAJ CINEMA, ASHRAM ROAD, AHMEADABAD PAN: AABCA6184H (RESPONDENT) REVENUE BY: SRI J.P. JHANGID, SR.D.R. ASSESSEE BY: SRI SAMIR JANI, A.R. DATE OF HEARING : 09-06-2014 DATE OF PRONOUNCEMENT : 27-06-20 14 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-VI, AHMEDABAD DATED 20-01-2011 DELETING THE PENALTY OF RS. 7,90,269/- LEVIED U/S. 271(1)(C) BY THE AO. ITA NO. 702/AHD/2011 ASSESSMENT YEAR 2005-06 I.T.A NO.702/AHD/2011 A.Y. 2005-06 PAGE NO ITO VS. AKSHAR FINANCE LTD 2 2. AO WHILE LEVYING PENALTY U/S. 271(1)(C) HAS OBSE RVED AS UNDER:- 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON SC RUTINY OF THE DETAILS FAMISHED AND THE FINAL ACCOUNTS, IT WAS NOTICED THA T THE ASSESSEE- COMPANY HAD TAKEN UNSECURED LOANS FROM ITS FOUR DIR ECTORS AND HAD PAID THEM INTEREST @ 15% P.A. ON FURTHER SCRUTINY OF DE TAILS, IT WAS ALSO NOTICED THAT THE ASSESSEE HAD ADVANCED LOANS TO ITS TWO ASSOCIATE CONCERNS AND HAD CHARGED INTEREST @ 10% P.A, FROM B OTH OF THEM. ALL THE FOUR DIRECTORS FROM WHOM DEPOSITS WERE RECEIVED WER E ALSO CLOSELY RELATED TO THE ASSOCIATE CONCERNS TO WHOM THE ASSESSEE COMP ANY HAD ADVANCED LOANS AT LOWER RATE OF INTEREST. THE NAMES OF THE DIRECTORS FROM WHOM LOANS WERE RECEIVED WERE S/SHRI NATWARLAL VACHHRAJ DHOLAKIA, GIRISHKUMAR VACHHRAJ DHOLAKIO, DIPAKKUMAR NATWARLAL DHOLAKIA AND JUGALKISHORE NATARLAL DHOLAKIA, THE NAMES OF THE TW O ASSOCIATE CONCERNS, TO WHOM THE ASSESSEE-COMPANY HAD ADVANCED LOANS AT LOWER RATE OF INTEREST AND WHEREIN THE ABOVE FOUR PERSONS WERE EI THER DIRECTORS OR PARTNERS, WERE M/S. C.V.M. JEWELS PVT. LTD, AND M/S . CHOKSI VACHHRAJ MAKANJI & CO. SINCE THE APPEAL OF THE ASSESSEE HAS BEEN DISMISSED BY BOTH THE APPELLATE AUTHORITIES, IN ORDER TO FINALIZE THE PEN ALTY PROCEEDINGS AND TO GIVE THE ASSESSEE AN OPPORTUNITY OF HEARING, A LETT ER DATED 09.10.2009 WAS ISSUED TO THE ASSESSEE COMPANY, SERVED ON 12.10 .2009, AND THE ASSESSEE WAS REQUESTED TO EITHER FURNISH ITS RETURN SUBMISSION WITHIN TEN DAYS OF THE RECEIPT OF THE LETTER OR TO ATTEND THE OFFICE FOR HEARING ON 26. 10.2009 AT 10.30 AM. HOWEVER, THE ASSESSEE HAS NOT AVAILED THE OPPORTUNI TY OF MAKING ANY SUBMISSION AND HAS NOT ATTENDED FOR PERSONAL HE ARING ALSO. IT IS, THEREFORE, DEEMED THAT THE ASSESSEE HAS NOTHING TO SAY IN THE MATTER AND HAS NO OBJECTION FOR LEVY OF THE PENALTY. THE FACTS EMERGE FROM THIS CASE SHOW THAT THE TRANS ACTIONS ENTERED INTO BY THE ASSESSEE WAS NOTHING BUT A PLAN TO DECE IVE THE REVENUE BY FURNISHING INACCURATE PARTICULARS OF INCOME IN AS M UCH AS BORROWING MONEYS FROM THE DIRECTORS AT HIGHER RATE OF INTERES T OF 15% AND THEN TO HAND OVER THE SAID MONEYS AT LOWER RATE OF INTEREST OF 10% TO THE SISTER CONCERNS WHERE THE DIRECTORS ARE INTERESTED AS DIRE CTORS OR PARTNERS AND THEREBY DIVERTING ITS PROFITS TO THE INDIVIDUAL DIR ECTORS TO THE EXTENT OF RS. 21,59,648/-. I AM, THEREFORE, SATISFIED THAT THE AS SESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND HAS THUS WILLF ULLY COMMITTED A DEFAULT WITHIN THE MEANING OF THE PROVISIONS OF SEC. 271(1) (C) OF THE IT ACT. IN VIEW OF THE EXPLANATION 4 TO SEC. 271(1)(C) OF THE I T. ACT, THE PENALTY IS IMPOSABLE ON THE ENTIRE AMOUNT OF DISALLOWANCE OF I NTEREST EXPENSE OF RS. I.T.A NO.702/AHD/2011 A.Y. 2005-06 PAGE NO ITO VS. AKSHAR FINANCE LTD 3 2I,59,648/- AND THE AMOUNT OF TAX SOUGHT TO BE EVAD ED IS CALCULATED THEREON. THE MINIMUM AMOUNT OF PENALTY LEVIABLE IN THIS CASE COMES TO RS. 7,90,269/-, WHICH IS 100% OF THE TAX SOUGHT TO BE EVADED, AS AGAINST THE MAXIMUM PENALTY OF RS. 23,70,,807/-, WHICH IS 3 00% OF THE TAX SOUGHT TO BE EVADED. CONSIDERING THE FACTS OF THE CASE, A MINIMUM PENALTY OF RS. 7,90,269/- IS IMPOSED ON THE ASSESSEE U/S. 271( 1)(C) OF THE I.T. ACT, 1961. 3. LD. CIT(A) HOWEVER AFTER TAKING INTO CONSIDERATI ON THE SUBMISSION OF THE ASSESSEE WHICH HAS BEEN REPRODUCED BY HIM IN PA RA 2.2 OF HIS ORDER DELETED THIS PENALTY BY OBSERVING AS UNDER:- 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE; PENA LTY ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER MADE ADDI TION ON ACCOUNT OF EXCESS INTEREST PAID TO THE RELATED PARTY UNDER SEC TION 40 A (2) (B) OF IT ACT. THE SAID ADDITION IS CONFIRMED BY ITAT. ASSESS ING OFFICER LEVIED PENALTY FOR THIS CONFIRMED ADDITION. APPELLANT SUBM ITTED THAT COMPLETE FACTS WERE DISCLOSED AND THERE WERE NO INACCURATE PARTICU LARS FURNISHED BY IT. APPELLANT RELIED UPON THE DECISION OF BOMBAY ITAT I N THE CASE OF JHAVAR PROPERTY PRIVATE LTD VERSUS ACIT REPORTED IN 123 IT D 429. THIS DECISION IS ON THE ISSUE OF LEVY OF PENALTY ON ADDITIONS MADE U NDER SECTION 40A (2). THE RELEVANT EXTRACT OF THE SAID DECISION IS QUOTED BELOW- ' THE PROVISIONS OF SECTION 40A (2) BY ITS VERY NAT URE ARE SOMETHING WHICH THE AO HAS TO DETERMINE BY USING HIS DISCRETI ON, SUBJECT TO THE LIMITATIONS LAID DOWN IN THIS BEHALF IN THE PROVISI ONS. IT IS NOT POSSIBLE FOR AN ASSESSEE TO ANTICIPATE WHETHER AO WOULD INVOKE H IS DISCRETION AND MAKE DISALLOWANCE IN THE PROVISIONS OF SECTION 40A( 2) (B). THEREFORE THERE CON NOT BE DISCLOSURE OF INCOME RESULTING FROM DI SALLOWANCE MADE UNDER SECTION 40A(2) (B). THE FORM IN WHICH RETURN OF INC OME IS TO BE FILED BY CORPORATE ASSESSEE DOES NOT CONTEMPLATE ANY DISCLOS URE OF INCOME BY THE ASSESSEE WHICH COULD BE SUBJECT TO SCRUTINY UND ER SECTION 40A(2) (B). IN THE FORM OF TAX AUDIT REPORT TO BE GIVEN UNDER S ECTION 44 AB, THE AUDITORS ARE OBLIGED TO POINT OUT TRANSACTIONS IF A NY WHICH ARE COVERED UNDER THE PROVISIONS OF SECTION 40A(2) (B). WHEREVE R LEGISLATURE DEEMS A DISCLOSURE NECESSARY IN THE RETURN OF INCOME WITH R EFERENCE TO A PARTICULAR SITUATION IF HAS MADE SUCH PROVISIONS. FOR EXAMPLE, THE PROVISIONS OF SECTION 64 THERE IS ON OBLIGATION ON THE PART OF TH E PARENTS OF MINOR CHILDREN TO CLUB THE INCOME OF MINOR IN THEIR HANDS AND DISCLOSURE IN THE RETURN OF INCOME IN THIS BEHALF. NO SUCH PROVISION IS AVAILABLE WITH REFERENCE TO THE PROVISIONS OF SECTION 40A (2) (B) IN THE RETURN OF INCOME. I.T.A NO.702/AHD/2011 A.Y. 2005-06 PAGE NO ITO VS. AKSHAR FINANCE LTD 4 SINCE NO SPECIFIC FORM OF DISCLOSURE IS CONTEMPLATE D BY THE ACT AS WELL AS THE RULES AND THE FORM OF RETURN PRESCRIBED, AN ASS ESSEE CAN NEVER BE HELD TO BE GUILTY OF NONDISCLOSURE OF INCOME WHICH IS DETERMINED BY APPLYING THE PROVISIONS OF SECTION 40A(2) (B). THE REFORE IN ABSENCE OF ANY PROVISIONS ON THE DISCLOSURE OF THE TRANSACTION IN QUESTION, THE DISCLOSURE OF THE SAME IN ITS BOOKS OF ACCOUNT AS DONE BY THE ASSESSEE WAS SUFFICIENT IN LAW. THERE CANNOT BE ANY CHARGE OF FURNISHING INACCURATE PARTICULARS AS WELL. THIS IS BECAUSE- THE ASSSSSEE HAS FURNISHED A LL THE DETAILS AND THE DETAILS ADMITTEDLY WERE CORRECT. BY APPLYING DEEMIN G PROVISIONS OF LAW THE DISALLOWANCE HAS BEEN MADE BY THE AO. BUT FOR THESE DEEMING PROVISIONS, THE AO COULD NOT HAVE MADE ANY DISALLOW ANCE, IS ADMITTEDLY THE GENUINENESS AS WELL AS THE INCURRING OF THE EXP ENDITURE, HAVE NOT BEEN DOUBTED OR DISPUTED BY THE AO. THE DISALLOWANCE UN DER SECTION 40A(2) (B) THEREFORE CANNOT BE CONSIDERED A S CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. CONSEQUENTLY THE FACTS OF T HE CASE DOES NOT WARRANT PENALTY UNDER SECTION 271 (1) (C)' FACTS OF THE APPELLANT'S CASE ARE IDENTICAL. ASSESS ING OFFICER' LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME TO THE EXTENT THE AMOUNT OF ADDITION WAS MADE UNDER SECTION 40A (2) ( B), IN VIEW OF THE AFORESAID DECISION OF ITAT MURNBAI, PENALTY FOR FUR NISHING INACCURATE PARTICULARS OF INCOME CANNOT BE LEVIED ON THE ADDIT IONS MADE UNDER SECTION 40A (2) (B). RESPECTFULLY FOLLOWING THE DEC ISION IN THE AFORESAID CASE, PENALTY LEVIED BY THE ASSESSING OFFICER IS DE LETED. THE OTHER DECISIONS RELIED UPON BY THE APPELLANT ARE NOT DISC USSED SINCE THE ABOVE MENTIONED DECISION IS DIRECT ON THE ISSUE AND AS PE R THAT PENALTY CANNOT BE LEVIED. IN THE FINAL RESULT, APPEAL IS ALLOWED. SINCE LD. CIT(A) HAS DELETED THE PENALTY FOLLOWING THE DECISION OF HONBLE MUMBAI BENCH IN THE CASE OF JHAVAR PROPERTY PVT LTD VS. ACIT REPORTED IN 123 ITD 429 AND NO CONTRARY BINDING DECISION HAS BE EN CITED BY THE REVENUE, WE FEEL NO NEED TO INTERFERE WITH THE ORDE R PASSED BY LD. CIT(A) AND THE SAME IS HEREBY UPHELD. I.T.A NO.702/AHD/2011 A.Y. 2005-06 PAGE NO ITO VS. AKSHAR FINANCE LTD 5 4. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 27/06/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,