MANGALA KAMATH, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 72/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0951 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN DR RESERVE FOR
• Section: 40A(3); 133(6); 6; 144

Judgement Text

ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 72/MUM/2015 (ASSESSMENT YEAR-2007-08) MRS. MANGLA KAMATH, C/O S.L. JAIN TAX CONSULTANT , 1302//3 NAVJIVAN COMMERCIAL PREMISES, LAMINGTON ROAD, MUMBAI-8 PAN: AJEPK4644H VS. ITO-20(2)(2), MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L.JAIN (AR) REVENUE BY : SHRI T.A. KHAN (DR) RESERVE FOR ORDER : 12.12.2017 PRONOUNCEMENT ON : 10.01.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS ) -31, MUMBAI DATED 31 OCTOBER 2014, FOR ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; (1) THE LEARNED COMMISSIONER (APPEALS) ERRED IN LAW IN CONFIRMING THE ADDITION, MADE UNDER SECTION 40A(3) OF RS. 1,75,000 /- BASED ON REMAND REPORT OF THE ASSESSING OFFICER, WHICH IS MOST UNJU STIFIED AND ARBITRARY. (2) THE LEARNED COMMISSIONER (APPEALS) ERRED IN LAW IN CONFIRMING THE ADDITION MADE UNDER SECTION 41(1) OF RS. 12,42,256/ -BASED ON REMAND REPORT OF ASSESSING OFFICER WITHOUT VERIFYING THE W HICH IS MOST UNJUSTIFIED AND ARBITRARY. ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 2 2. THE BRIEF FACTS OF THE CASE AS EXTRACTED FROM THE O RDERS OF AUTHORITY BELOW THAT ASSESSEE IS PROPRIETOR OF M/S PRINT IMA GE AND ENGAGED IN THE BUSINESS OF CARD BOARD LABELS, FILED HER RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 31 ST OF OCTOBER 2007 DECLARING TAXABLE INCOME OF RS. 7,90,120/-. THE ASSESSMENT WAS COMPLE TED ON 28 OCTOBER 2009 UNDER SECTION 144 READ WITH SECTION 14 3(3). THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT MADE THE ADDITION ON ACCOUNT OF DISALLOWANCE OF UNSECURED LOAN OF RS.5,8 4,768/-, ADDITION OF ON ACCOUNT OF SUNDRY CREDITORS OF RS.70,09,908/- AND DISALLOWED EXPENSES OF RS. 64,156/-. ON APPEAL BEFORE COMMISSI ONER (APPEALS), THE ADDITION ON ACCOUNT OF UNSECURED LOAN WERE DELE TED, THE ADDITIONS OF EXPENSES WAS PARTLY RESTRICTED. HOWEVER THE ADDI TION ON ACCOUNT OF SUNDRY CREDITORS WAS RESTRICTED TO RS. 12,42,256/- AND MADE ADDITION UNDER SECTION 41(1) AS NO PAYMENTS TO SUNDRY CREDI TORS WERE MADE SINCE FINANCIAL YEAR 2006-07 TILL 2010-11. THE LD C IT(A) ALSO TREATED THE CASH PAYMENT OF RS. 1,75,000/- MADE TO M/S MAN JUNATH ENTERPRISES IN VIOLATION OF SECTION 40A(3) AND ADDE D THE SAME IN THE INCOME OF ASSESSEE. AGGRIEVED BY THE ORDER OF COMMI SSIONER (APPEALS) THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL IN CHALLENGING THE TREATMENT OF SUNDRY CREDITORS UN DER SECTION 41(1) AS CESSION OF LIABILITY AND THE DISALLOWANCE UNDER SEC TION 40A(3). ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 3 3. WE HAVE HEARD THE LD AR FOR THE ASSESSEE AND THE LD DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD AR FOR THE ASSESSEE ARGUED THAT THE AMOUNT PAID TO M/S MANJUNATHA ENTERPRISES IN CASH WAS ALLOWABLE UNDER SECTION 40A (3). M/S MANJUNATHA ENTERPRISES WAS DOING JOB WORK AND THE P AYMENTS WERE MADE FOR LABOUR CHARGES. FOR THE ADDITIONS UNDER SE CTION 41(1) THE LD AR FOR THE ASSESSEE ARGUED THAT THE LD CIT(A) DELET ED THE PENALTY FOR THE SAME ADDITION, COPY OF THE ORDER OF LD CIT(A) I S FILED ON RECORD, THUS THE ADDITIONS ARE LIABLE TO BE DELETED. ON THE OTHER HAND THE LD DR FOR THE REVENUE STRONGLY RELIED ON THE ORDER OF LD CIT(A) AND IT WAS ARGUED THAT THE ORDER WAS PASSED AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER. THE ASSESSEE HAS RAISED T HE GROUNDS OF APPEAL BEFORE LD CIT(A) THAT NO OPPORTUNITY WAS GIVEN TO H ER DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE LD CIT(A) WHICH WERE REFERRED TO ASSESSING OFFICER FOR HIS REMAND REPORT. THE ASSESSING OFFICER SUBMITTED REMAND REPO RT AFTER GIVING THE FULL OPPORTUNITY TO THE ASSESSEE. THE PAYMENT OF RS .1,75,000/- TO M/S MANJUNATHA ENTERPRISES IS IN VIOLATION OF SECTION 4 0A(3) AND THE ASSESSEE HAS NOT SHOWN ANY EXCEPTION PROVIDED UNDER RULE 6DD. FOR THE ADDITIONS UNDER SECTION 41(1) THE LD CIT(A) HAS GIVEN COGENT REASON IN HER ORDER BEFORE DISALLOWING THE AMOUNT. IT WAS ARGUED THAT ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 4 THE PARAMETERS FOR CONSIDERATION OF APPEAL IN QUANT UM ASSESSEE AND IN PENALTY ARE ALTOGETHER DIFFERENT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE LD REPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE RECORD OF THE CASE. WHILE GOING THROUGH THE RECORD WE FIND THAT THE ASSESSEE HAS FI LED WRITTEN SUBMISSIONS ON RECORD, WHICH WAS NOT REFERRED BY LD AR WHILE MAKING ORAL SUBMISSIONS. IN ALL FAIRNESS WE HAVE CONSIDERE D THE WRITTEN SUBMISSIONS OF THE ASSESSEE AS WELL. 5. GROUND NO.1 RELATES TO THE DISALLOWANCE OF RS. 1,75 ,000/-UNDER SECTION 40A(3). THE ASSESSING OFFICER IN ITS REMAND REPORT DATED 01.10.2014 SUBMITTED THAT THE ASSESSEE HAS MADE A C ASH PAYMENT TO M/S MANJUNATHA ENTERPRISES IN CASH OF RS. 1,75,000/ - IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3). THE LD CIT(A) ON THE BASIS OF REPORT OF AO DISALLOWED THE ENTIRE AMOUNT. WE HAVE SEEN TH E LEDGER ACCOUNT OF M/S MANJUNATHA ENTERPRISES, THE PERUSAL OF WHICH REVEALS THAT THE ASSESSEE HAS MADE A CASH PAYMENT TO MANJUNATHA ENTE RPRISES OF RS. 50,000/- ON 30.04.2006 VIDE VOUCHER NO.6, RS. 50,00 0/- ON 30.08.2006 VIDE VOUCHER NO. 35 AND RS. 75,000/- ON 12.12.2006 VIDE VOUCHER NO. 76 (PAGE NO.203OF PB). WE HAVE NOTED T HAT THERE IS NO DISPUTE ABOUT THE PAYMENT MADE IN CASH. THE PARTY H AVE CONFIRMED ON THE NOTICE UNDER SECTION 133(6) SENT TO THEM. THUS THERE IS NO DISPUTE ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 5 ABOUT THE IDENTITY OF THE PARTY TO WHOM THE PAYMENT WAS MADE. THE LOWER AUTHORITY HAS NOT GENUINITY OF THE PAYMENT. 6. THE HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF SRI LAXMI SATYANARAYAN OIL MILL V. CIT [2014] 367 ITR 200/226 TAXMAN 139/49 TAXMANN.COM 363 (AP) HAS HELD THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3) WHERE GENUINENESS OF P AYMENT IS NOT DOUBTED. IT WAS HELD THAT THE TERMS OF SECTI ON 40A(3) ARE NOT ABSOLUTE. CONSIDERATIONS OF BUSINESS EXPEDI ENCY AND OTHER RELEVANT FACTORS ARE NOT EXCLUDED. GENUINE AN D BONA FIDE TRANSACTIONS ARE NOT TAKEN OUT OF THE SWEEP OF THE SECTION. IT IS OPEN TO THE ASSESSEE TO FURNISH TO THE SATISF ACTION OF THE ASSESSING OFFICER THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SECTION 40A(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE. IT IS ALSO OPEN TO THE ASSESSEE TO IDENTIFY THE PERSON WHO HAS RECEIVED THE CASH PAYMENT. FURTHER HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GURDAS GARG V. CIT [2015] 63 TAXMANN.COM 289 (PUNJ. & HAR ) HELD THAT WHERE GENUINENESS OF TRANSACTION MADE IN CASH IN EXCESS OF RS. 20,000/- WAS NOT DISBELIEVED BY THE AUTHORITIES, THE SAME CANNOT BE DISALLOWED ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 6 UNDER SECTION 40A(3). THUS CONSIDERING THE FACT OF THE CASE THE ADDITION / DISALLOWANCE MADE UNDER SECTION 40A(3) F OR RS. 1,75,000/- ARE DELETED. IN THE RESULT THE GROUND NO.1 OF THE A PPEAL IS ALLOWED. 7. GROUND NO.2 RELATES TO DISALLOWANCE UNDER SECTION 4 1(1) FOR RS. 12,42,256/-. THE AO DURING THE REMAND PROCEEDINGS WHILE VERIFYING THE ACCOUNTS SUBMITTED BY THE ASSESSEE, THE AO NOTE D THAT AN AMOUNT OF RS. 12,42,256/- RELATED WITH ALL EIGHT PARTIES WERE OUTSTANDING TILL 16.09.2014. THE AO CONFRONTED THIS FACT TO THE ASSE SSEE, THE REPRESENTATIVE OF THE ASSESSEE, THE LD AR FOR THE A SSESSEE ADMITTED THAT TILL 16.09.2014 THE SAID AMOUNT IS OUTSTANDING. THU S, ON THE BASIS OF THE STATEMENT OF REPRESENTATIVE OF THE ASSESSEE THE AO SUGGESTED TO TREAT THE SAID AMOUNT AS CESSATION OF LIABILITY AND TO MAKE AN ADDITION TO THE INCOME OF THE ASSESSEE. THE LD CIT(A) MADE THE ADDITION ON THE BASIS OF REMAND REPORT OF AO, WHEREIN IT WAS SU BMITTED THAT THE BALANCE OF EIGHT PARTIES ARE OUTSTANDING SINCE 2006 -07 TILL THE FINANCIAL YEAR 2010-11 AND NO PAYMENTS HAD BEEN MADE. THE LD AR FOR THE ASSESSEE ARGUED THAT DURING THE APPEAL AGAINST THE LEVY OF PENALTY THE FACTS RELATED TO THE ADDITIONS WERE EXPLAINED AND T HE PENALTY WAS DELETED BY THE SAME LD CIT(A) VIDE ORDER DATED 23.0 1.2015. 8. WE HAVE CAREFULLY PERUSED THE ORDER OF LD CIT(A) IN APPEAL NO. CIT(A)-36/II-351/ITO 20(20)(2)/10-11 DATED 23.01.20 15. WE HAVE NOTED THAT DURING THE APPELLATE STAGE IN PENALTY PR OCEEDINGS THE ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 7 ASSESSEE EXPLAINED THAT THE AMOUNTS TREATED UNDER S ECTION 41(1) WERE TRADE LIABILITY AS PER BOOKS OF ACCOUNT OF THE ASSE SSEE AND THAT ALL HAVE BEEN FULLY DISCLOSED. THE LD CIT(A) ON THE BASIS OF SUBMISSIONS OF THE ASSESSEE CONCLUDED THAT PENALTY CANNOT BE LEVIED FO R EVERY ADDITIONS OR DISALLOWANCE MADE IN THE ASSESSMENT AND THAT THE AS SESSEE HAS NOT CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME WITH REFERENCE TO THE AMOUNT ADDED UNDER SECTION 41 (1) OF THE ACT. IT IS SETTLED POSITION UNDER THE LAW THAT THE QUANTUM ASSESSMENT AND THE PENALTY PROCEEDINGS ARE SEPARATE WITH EACH OTHER, M OREOVER, DIFFERENT PARAMETER ARE APPLICABLE WHILE DECIDING THE ISSUES INVOLVE THEREIN. THE LD CIT(A) RIGHTLY CONCLUDED THAT NO PENALTY IS LEVIABLE ON THE ASSESSEE AS THE ASSESSEE HAS NEITHER CONCEALED THE INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. WE HAVE NOTED THAT THE LD AR FOR THE ASSESSEE FAILED TO BRING ANY MATERIAL ON RECORD AS TO WHY THE ADDITION MADE UNDER SECTION 41(1) ARE UNCALLED FOR, EXCEPT MAKING THE RELIANCE ON THE ORDER OF THE LD CIT(A) PASSED O N THE APPEAL FILED AGAINST THE PENALTY LEVIED ON ADDITION UNDER SECTIO N 41(1), IN WHICH WE DO NOT FIND ANY CONVINCIBLE FORCE, AS WE HAVE ALREADY OBSERVED THAT QUANTUM AND THE PENALTY PROCEEDINGS ARE SEPARA TE AND ARE DECIDED ON DIFFERENT PARAMETERS OF THE LAW. IN THE RESULT T HE GROUND NO.2 OF THE APPEAL IS DISMISSED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.72/M/2015 (AY 2007-08) MANGLA KAMATH 8 ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF JANUARY 2018. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 10/01/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/