RAMANLAL VITHALDAS & CO., MUMBAI V. ASST CIT 14(1), MUMBAI

ITA 7388/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0688 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-04-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7388/M/2012 ASSESSMENT YEAR: 2006-07 M/S. RAMANLAL VITHALDAS & CO., 333, SHAIKH MEMON STREET, CORNER OF MIRCHI GALLI, NEAR JUMMA MASJID, MUMBAI 400 002 PAN: AAAFR1209F VS. ASST. COMMISSIONER OF INCOME TAX, 14(1), 2 ND FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI - 400021 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI NITESH JOSHI, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 09.03.2017 DATE OF PRONOUNCEMENT : 12.05.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 25.09.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2006-07. 2. THE SHORT FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS T HE AO) NOTED THAT ASSESSEE IS MAINTAINING A VERY HIGH LEVEL OF INVENTORY WHICH WA S UNREASONABLY HIGH WITH REGARD TO THE NATURE OF CREDIT OF THE ASSESSEE. TH E AO HAS LEVIED THE PENALTY ON THE GROUND THAT THE LOANS OF RS.47,90,724/- WERE NO T GENUINE AND INTEREST OF RS.3,17,738/- CLAIMED ON THIS LOAN WAS ALSO NOT GEN UINE. THEREFORE, HE ADDED AN AMOUNT OF RS.47,90,724/- UNDER SECTION 68 OF THE ACT AND RS.3,17,738/- UNDER SECTION 36(1)(III) OF THE ACT, 1961. THE AO HAS MENTIONED THE NAMES OF THE LENDERS AGAINST WHOM THE CONFIRMATIONS WITH PAN NUMBERS WERE NOT FILED. ITA NO.7388/M/2012 M/S. RAMANLAL VITHALDAS & CO. 2 THEREFORE, AO HAS MADE THE ADDITION AND LD. CIT(A) HAS CONFIRMED THE SAME AND TRIBUNAL HAS CONFIRMED THE ADDITION. THEREFORE , THIS PENALTY HAS BEEN IMPOSED BY THE AO AND CONFIRMED BY THE LD. CIT(A). 3. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT THE ADDITION HAS BEEN MADE IN RESPECT OF 15 LOANS LISTED IN THE ASSESSMENT ORDER FROM SL.NO.10 TO 15 FOR WHICH THE CONFIRMATIONS HAVE BEE N FILED. HOWEVER, THE AO STATED THAT THESE WERE NOT FILED AND AFFIDAVIT TO T HIS EFFECT WAS FILED BEFORE THE ITAT. SECONDLY, THERE ARE FOUR CATEGORIES OF LOANS . CATEGORY 1 INCLUDES LOANS WHERE THE CONFIRMATIONS WERE FILED. PARTIES HAD PA N NUMBERS AND LOANS WERE ALSO REPAID DURING THE YEAR. CATEGORY- 2 REPRESENT S LOANS WHERE THE LOAN CONFIRMATIONS WERE FILED AND THE CONFIRMATIONS HAD ADDRESSES, THOUGH AO SAYS THERE WAS NO ADDRESS. THESE TWO CASES WHERE THE PA RTIES HAD LENT MONEY TO PV. SANGHVI, HUF IN PAST AND ON THEIR DIRECTION THE SAID LOANS WERE NOW TRANSFERRED TO ASSESSEE. CATEGORY 3 REPRESENTS A L OAN WHERE A CONFIRMATION ALONG WITH PAN NUMBER WAS FILED AND CATEGORY 4 REPR ESENTS THE LOAN WHERE CONFIRMATION WITH PAN NUMBER WAS FILED STILL AO MEN TIONED THAT NO SUCH CONFIRMATION WAS FILED. IT IS THE CASE WHERE THE I NFORMATION PROVIDED BY THE ASSESSEE IS NOT FOUND TO BE FALSE. IT IS NOT A CAS E WHERE THE AO ATTEMPTED TO TRACE THE PARTIES WERE NONEXISTENT OR THAT THESE WE RE CASH CREDITS. IT IS NOT A CASE WHERE THE LOANS WERE BOGUS. THE LD. A.R. HAS RELIED UPON THE FOLLOWING JUDGMENTS: 1. NATIONAL TEXTILE 249 ITR 125 (GUJ.) 2. BHOGILAL VIRCHAND 127 ITR 591 (BOM.) 3. SIKRI & CO. 106 ITR 682 (KOL.) 3. THE LD. D.R. RELIED UPON THE REVENUE AUTHORITIES . 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. IN THE INSTANT CASE WE HAVE GONE THROUGH THE ORDER OF MISCELLANEOU S APPLICATION AND IN THE MISCELLANEOUS APPLICATION IT WAS STATED BY THE ASSE SSEE THAT THEY HAVE FILED THE ITA NO.7388/M/2012 M/S. RAMANLAL VITHALDAS & CO. 3 AFFIDAVIT REGARDING THE CONFIRMATION FILED BEFORE T HE AO BUT THAT CONFIRMATION WAS NOT ON THE RECORD THEREFORE MISCELLANEOUS APPLI CATION WAS DISMISSED. IN THE INSTANT CASE, THE ADDITION WAS CONFIRMED BY THE TRIBUNAL. THE ASSESSEE DISPUTED THAT HE HAS FILED THE CONFIRMATION LETTER BEFORE THE AO. THEREFORE, IN OUR OPINION, THIS IS THE CASE WHERE THE ASSESSEE HA S OFFERED AN EXPLANATION WHICH WAS FOUND BY THE AO TO BE FALSE AND THE ASSES SEE WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION, THEN THE AMOUNT ADDED TO HIS INCOME HAS BEEN DEEMED TO REPRESENT THE CONCEALED INCOME. WE FIND T HAT SECTION 68 PERMITS THE AO TO TREAT UNEXPLAINED CASH CREDIT AS INCOME OR EN ABLING PROVISIONS FOR MAKING CERTAIN ADDITIONS WHERE THERE IS FAILURE BY THE ASSESSEE TO GIVE EXPLANATION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF AO. HOWEVER, ADDITION MADE ON THIS COUNT WOULD NOT AUTO MATICALLY JUSTIFY THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) BY RE COURSE ONLY TO EXPLANATION 1 BELOW SECTION 271(1)(C). IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST. FIRSTLY, THERE MUST BE SOME MATERIA L OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT AMOUNT DOES REPRESEN T ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOU NT HAS BEEN ASSESSED AS INCOME AND SECONDLY THE CIRCUMSTANCES MUST SHOW THA T THERE WAS CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PART ICULARS ON THE PART OF THE ASSESSEE. THE EXPLANATION DOES NOT MAKE THE ASSESS MENT ORDER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE I NCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED, IF THE FACTS AND CIRCUMSTAN CES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRES ENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E. IT IS ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE S CASE IS FALSE, THE EXPLANATION CANNOT HELP DEPARTMENT. BECAUSE THERE WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION IS THE INCOME OF THE AS SESSEE. THEREFORE, WE ARE OF THE VIEW THAT IN THIS CASE, IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAS FILED THE CONFIRMATION IN RESPECT OF CATEGORY NO.1 AND TH E CONFIRMATION IS ALSO ITA NO.7388/M/2012 M/S. RAMANLAL VITHALDAS & CO. 4 PRODUCED DURING THE PENALTY PROCEEDINGS BEFORE US A ND IN CATEGORY NO.2 CONFIRMATION WAS GIVEN BUT NO PAN NUMBER WAS GIVEN. IN CATEGORY NO.3 & 4 THE CONFIRMATION WAS GIVEN, PAN NUMBER WAS AVAILABL E, THEREFORE, WE ARE OF THE VIEW THAT IN THIS CASE THERE IS NO FINDING BY T HE AO SHOWING THAT LOANS WERE BOGUS OR THE PARTIES WERE NONEXISTENT. WE ARE OF T HE VIEW THAT IN THIS CASE, THE CREDITWORTHINESS OF THE LENDERS WAS IN DOUBT. THER EFORE, WE ARE OF THE VIEW THAT IT IS A CASE WHERE THE EVIDENCE WAS FOUND TO B E INADEQUATE. THEREFORE, PRESUMPTIVE ADDITION HAS BEEN MADE BUT THERE IS NO POSITIVE OR REASONABLE INFERENCE OR FALSITY INFORMATION OR FALSITY OF THE CREDITOR, THEREFORE WE DELETE THE PENALTY. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12.05.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.05.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.