DCIT, Circle-2(1)(2), Ahmedabad V. M/r. Marg Biotech P. Ltd, Ahmedabad

ITA 735/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7722 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.S. SHUKLA
• Keywords: Search and seizure; Tax effect
• Section: 132; 271(1)(c); 143(1); 191; 43; 48; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL AT AHMEDABAD] BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER& Ms. MADHUMITA ROY, JUDICIAL MEMBER I .T .A . N o . 7 3 5/ A h d /2 0 19 ( A s s e s s me nt Y ea r : 20 0 6- 07 ) D C I T C ir cl e - 2( 1) ( 2) , A h m e d a ba d V s . M/ s . M ar g B io te c h Pv t. Lt d. 10, A bh is h r ee C o r p or a te P a r k, A m bl i B o p al R oa d, N e a r Sw ag a t B u ng lo w B RT S , Ah me da bad [ P A N N o . A A D C M 00 07 F ] (Appellant) .. (Respondent) Revenue by : Shri S. S. Shukla, Sr. DR Assessee by : Shri P. D. Shah, AR D a t e of H ea r i ng 07.10.2021 D a t e of P r o no u n ce me nt 25.11.2021 O R D E R PER Ms. MADHUMITA ROY - JM: The instant appeal filed by the Revenue is directed against the order dated 27.01.2019 passed by the Commissioner of Income Tax (Appeals)-2, Ahmedabad arising out of the penalty order dated 31.03.2016 passed by the ITO, Ward – 2(1)(2), Ahmedabad under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year (A.Y.) 2006-07 whereby and whereunder the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 (“the Act”) passed by the Ld. AO has been deleted. 2. Penalty under Section 271(1)(c) of the Act to the tune of Rs. 55,53,800/- is the issue before us. ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 2 - 3. Initially search action under Section 132 of the Act was carried out in the group cases of Riddhi Siddhi Group on 22.09.2011. Notice under Section 153C of the Act dated 23.08.2013 was issued to the assessee directing filing of return of income pursuant to that the return of income was filed on 16.09.2013 declaring Rs. 1,65,00,000/- including the income disclosed during the course of search under Section 132 of the Act of Rs. 1,65,00,000/- under the head income from other sources. It is also a fact that during the assessment proceeding the assessee submitted details of disclosure as called for and it was admitted by Shri Shankarlal Chowdhary in his statement recording during the course of search on 19.11.2011of an amount of Rs. 1,65,00,000/- on account of introduction of share premium and the share capital in the company. Such income as disclosed during the search and seizure action under Section 132(1) of the Act to the tune of Rs. 1,65,00,000/- since not found declared in the original return of income has been added to the total income of the assessee and penalty proceeding under Section 271(1)(c) read with Explanation 5A of the Act was initiated separately for furnishing of inaccurate particulars of income and thereby concealment of income by the assessee. Finally by and under the order dated 31.03.2016 the penalty proceeding was concluded by the Ld. AO imposing penalty of Rs. 55,53,800/- under Section 271(1)(c) of the Act on the same count of willful and deliberate concealment of income by not filing return of income by the assessee which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us. 4. We have heard the respective parties, we have also perused the relevant materials available on record. 5. It appears from the records that the Ld. CIT(A) relying upon the order passed by the Hon’ble Bombay High Court in the case of PCIT (Central), ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 3 - Nagpur vs. Rajkumar Gulab Badgujjar in ITA No. 897, 898, 901 & 914/Mum/2016, deleted the penalty imposed against the assessee. 6. We also find while levying penalty the Ld. AO observed as follows:- “5. In the instant case, the assessee company filed the return of income originally declaring total income at Rs.3,54,915/-. Thereafter, a search action was carried out in the case of the assessee company during the course of which, the assessee disclosed an amount of Rs.1,65,00,000/- under the head income from other sources. Accordingly, the assessee company offered the said income for taxation in the return of income filed in response to notice u/s. 153C of the Act. It is pertinent to mention here that had the search action not earned out in the case of the assesee company, the assessee would never have offered the amount of Rs.1,65,00,000/-for taxation. If the intention of the assesee company was honest and fair, it would have disclosed the income of Rs.1,65,00,000/- in the original return of income itself. However, the assessee company opted not to do that instead, as a result of search, it was left with no option but to disclose the undisclosed income as a result of search action. This shows that deliberate intention on the part of the assessee company to conceal the true income and to evade tax. 6. It is also worthwhile to mention here that the assessee had consciously furnished inaccurate particulars of its income. In this case, Explanation 1 below 271(1)(c) is clearly applicable and it is a case of furnishing of inaccurate particulars of income and thereby concealing the true income. In support of the revenue reliance is placed on the following judicial pronouncements.- (i) The judgment of Hon'ble Gujarat High Court in the case of A.M Shah & Co. Vs Commissioner of income-tax (2000) 108 Taxman 137 wherein it is held as under- "The penal provisions would operate where there is a failure of duty to disclose fully and truly particulars of income, imposed under the Act and the rules there under. The duty is enjoined upon a person to make a correct and complete disclosure of his income and it is only when he fails in his duty by not disclosing his income or part thereof he conceals the particulars of his income. Therefore, if the disclosure made of particulars of income is incorrect then he commits breach of his duly. Such defaults entail the penal consequences contemplated by section 271(1)(c)(iii) of the Act." (ii) In the decision in the case CIT vs Zoom Communication Reported in 191 Taxman 179 the Hon’ble Delhi HC has held as under:- "The court overlooks the fact that only a small percentage of the Income Tax Returns are picked up for scrutiny, if the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bonafide, it would be difficult to say that the view that a claim which is wholly untenable in law and has absolutely no foundation on when it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessee to make wholly untenable and unsustainable claims without there being any basis making them in the hope that their return would not be picked up for ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 4 - scrutiny and they would be assessed on the basis of self-assessment under section 143(1) of the Act, and even if their case is selected for scrutiny they can get away merely by paying the tax, which in any case, was payable by them, The consequence would be that the persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny This would take away the deterrent effect, which these penalty provisions in the Act have". (iii) In the judgment of Hon'ble Apex Court in the case of MAK Data Pvt. Ltd Vs. CIT-II in Civil Appeal No. 9772 of 2013, it has been held that explanation to section 271(1) passes a presumption of concealment when a difference is noticed by the AO between reported and assessed income. The burden is then on the assessee to show otherwise by cogent and reliable evidence. When the initial onus placed by the Explanation has been discharged by him the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise. In the instant case the appellant has failed to discharge the onus cast upon him by adducing cogent and reliable evidences showing that in fact losses were genuinely deductible against the current year's income only and not against preceding years income only and not against preceding year's income. (iv) 44 Tax mann com 140( Mum) (trib) J.M Baxi and Co. (v) 43 Tax mann com 92(P & H) Anish Kurnar (vi) 37 Tax mann.com 347(Del) HCIL Kalinde Arsspl (vii) 352 ITR 588 (Del) Splender Construction, (viii) 336 ITR 162 (Dei) ECS Ltd. (ix) 340 ITR 595 (Dei) Kanchenjunga Advertising (P) Ltd, (x) 41 Tax mann.com 447(All) U.P Matsya Vikas Nigam Ltd, (xi) 43 Tax mann.com 325(Mum) Smt Shantidevi Mahavir Prasad Gupta (xii) 46 Tax mann.com 89 (Mumbai) (Trib) Deloitle Consulting India (P) Ltd. (xiii) 48 Tax mann.com 145 (Mum) (Tnb) Mitusba Systems (India) (P) Ltd, (xiv) 54 Taxman.com 257 (Mum) Clariant Chemicals Ltd (India) (xv) 52 Taxmann com 248 (SC) Kuldeep Wines (xvi) 366 ITR 449 (Del) Global Associates 7. In view of the above, since it is established that the assesses has willfully and deliberately concealed income by not filing the return of income, the assessee company is liable for penalty within the meaning of Section 271(1) (c) read with Explanation 5A of the Act. The minimum penalty leviable u/s. 271(1) (c) of the Act is 100% of tax effect which works out to Rs. 55,53,800/- and maximum penalty is 300% of tax effect which works out to Rs. 1,66,61,700/-. However, considering the facts and circumstances of me case, minimum penalty of Rs. 55,53,800/- is hereby levied u/s 271(1) (c) of the Act.” 7. It also appears from the records particularly the order passed by the Ld. CIT(A) that alongwith the assessee there are number of companies who has raised share capital the details whereof is mentioned at Page 2 of the Ld. CIT(A) which is reproduced hereinbelow: ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 5 - Assessment Year in which the amount is disclosed Sr. No. Name of the Company 2006-07 2007-08 2008-09 2009-10 Total (Rs.) 1 Shreepal Starch Products Pvt. ltd. - - 9000000 - 9000000 2 Siwana Agri Marketing Pvt. Ltd. - 13000000 3500000 - 16500000 3 Vicas Vehicles Pvt. Ltd. - 9500000 8500000 500000 18500000 4 Creelotex Engg. Pvt. Ltd. - 9900000 8500000 - 18400000 5 Marg Biotech Pvt. Ltd. 16500000 13200000 7000000 - 36700000 6 Safari Biotech Pvt. Ltd. 13250000 9200000 8800000 - 31250000 7 Telecon Infotech Pvt. Ltd. 10000000 9500000 9800000 - 29300000 8 Vascroft Design Pvt. Ltd. - 9000000 12000000 - 21000000 Total 39750000 73300000 67100000 500000 180650000 8. The Ld. AR brought to our notice that out of the above companies the penalty imposed against Creelotex Engineering Pvt. Ltd. as appearing at Sr. No. 4 and also against Safari Biotech Pvt. Ltd., Telecon Infotech Pvt. Ltd. and Vascroft Design Pvt. Ltd. appearing at Sr. Nos. 6, 7 & 8 respectively in the chart were challenged by the assessee before the Hon’ble Tribunal. 9. We also find by and under an order dated 15.02.2019 in IT(SS)A Nos. 129&130/Ahd/2015 for A.Y. 2007-08 & 2008-09 in the case of Vascroft Design Pvt. Ltd. vs. ACIT and IT(SS)A Nos. 131, 132 & 133/Ahd/2015 for A.Y. 2006-07, 2007-08 & 2008-09 in the case of Telecon Infotech Pvt. Ltd. vs. ACIT and in IT(SS)A Nos. 134, 135 & 136/Ahd/2015 for A.Y. 2006-07, 2007- 08 & 2008-09 in the case of Safari Biotech Pvt. Ltd. vs. ACIT and order dated 29.07.2019 in the case of Creelotex Engineers Pvt. Ltd. vs. DCIT the penalty imposed against those companies by the authorities below have been deleted by the Coordinate Bench. A copy of each of the said order has been provided to us by the Ld. AR. The relevant portion whereof is as follows: ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 6 - “IT(SS)A Nos. 129&130/Ahd/15 & 131-133/Ahd/15 & 134-136/Ahd/15 8.6 Having regard to peculiar facts of the case, the action of Revenue is clearly bereft of merits. Consequently, we hold the first proposition framed above in favour of the assessee and against the Revenue. 8.7 We do not consider it expedient to address ourselves on propositions (ii) to (iv) raised on behalf of the assessee at this stage in the light of our observations on first proposition itself. 9. We are thus of the firm opinion that action of the AO in imposing the penalty is not sustainable in law. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the penalty imposed under s.271(1)(c) of the Act. 10. In the result, appeal of the Assessee is allowed. 11. Other appeals in IT(SS)A Nos. 129 to 133, 135 & 136/Ahd/2015 also rests on similar facts and involves identical issue towards imposition of varied penalties. In parity with the reasonings in IT(SS)A No. 134/Ahd/2015 (supra), all other captioned appeals of the assessees concerning AYs. 2006-07, 2007-08 and 2008-09 are allowed with consequential directions to AO to delete respective penalties. 12. In the combined result, all appeals filed by captioned assessees are allowed. ITA No. 651/Ahd/2018 8. There is no debate with regard to the proposition that in order to attract Explanation 5A appended to section 271(1)(c) there should be a search and during that search assessee should be found to be owner of any money, bullion, jewellery and other valuable article or things and the assessee claims such assets has been acquired by him by utilizing wholly or partly of his income of any previous year or any income based on any entry in any books of accounts or other documents or transaction found during the course of search, and the assessee claims that such entries in the books of accounts or other documents or transaction represent his income from any previous year, which has ended before the date of search, then notwithstanding such income is declared by him in any return of income furnished on or after the date of search, he shall for the purposes of imposition of a penalty under clause (c) of sub-section (1) would be deemed to have concealed the particulars of income or furnished inaccurate particulars of income. In other words, if any money, bullion, jewellery or valuable showing income in the hands of the assessee, and such income was not from explained source, then after search in response to the notice under section 153A, if the assessee has admitted that income, then deeming fiction for concealment of income would attract. The question before us is that no money, bullion, jewellery or book entry was found at the time of search. The only evidence against the assessee is that an admission ofadditional income was made in the statement under section 132(4). The question is this admission akin to disclosure of money, bullion, jewellery or diary and income disclosed representing this statement is to be considered as concealed income ? This aspect has been considered in both these orders, wherein it has been held that on the strength of authoritative pronouncement of Hon’ble High Courts that solely on the basis of declaration addition is not possible unless the assessee did not retract the statement. - a corroboration for such disclosure ITA No.735/Ahd/2019 DCIT vs. M/s. Marg Biotech P. Ltd. Asst.Year –2006-07 - 7 - would require. In the case of Shri Mansukhbhai R. Sorathia (supra) this aspect has duly been considered by the Tribunal and dealt with in para-13 and 14 of the extracted portion (above. Therefore, respectfully following the above decisions, we find force in the contentions of the ld.counsel for the assessee and delete the penalty. Upon going through the judgments as relied upon by the assessee we find that the case is identical to that of the assessee and hence, taking into consideration the entire aspect of the matter particularly the order passed by the Coordinate Bench in the identical cases in deleting penalty imposed by the authorities below and the order passed by the Hon’ble Bombay High Court in the case of PCIT (Central), Nagpur vs. Rajkumar Gulab Badgujjar (Supra), we find no ambiguity in the order passed by the Ld. CIT(A) in deleting the penalty against the assessee. Hence, the appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed. 10. In the result, the appeal preferred by the Revenue is, thus, dismissed. This Order pronounced in Open Court on 25/11/2021 Sd/- Sd/- (PRADIP KUMAR KEDIA) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 25/11/2021 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad