ATP International Ltd., Kanpur V. Income Tax Officer, Kanpur

ITA 768/LKW/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4398 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKESH GARG S MT NIDHI VER
• Assessee Lawyers: CHEMICALS AMO UNTING TO RS

Judgement Text

I.T.A. NO.768/LKW/15 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ITA NO.768/LKW/2015 ASSESSMENT YEAR:2011-12 M/S ATP INTERNATIONAL LTD., G-37, PANKI INDUSTRIAL AREA, KANPUR. PAN:AACCS0101K VS. INCOME TAX OFFICER, RANGE-6(1), KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER P. K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, KANPUR DATED 24/11/2015. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES T O THE SUSTENANCE OF PENALTY OF RS.1,54,000/- IMPOSED U/S 271(1)(C) OF T HE I.T. ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER NO TED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT WHEN HE ASKED FOR THE C ONFIRMATION OF THE SUNDRY CREDITORS, THE ASSESSEE COULD NOT GET THE CO NFIRMATION OF TWO CREDITORS NAMELY M/S TYAGI SILICONS & CHEMICALS AMO UNTING TO RS.1,12,171/- AND M/S PEERUKA SALES CORPORATION AMOUNTING TO RS.3 ,83,797/-. THE ASSESSING OFFICER THEREFORE, MADE THE ADDITION IN T HE INCOME OF THE ASSESSEE IN RESPECT OF THESE CREDITORS TOTALING TO RS.4,95,9 68/- AND ULTIMATELY AFTER ISSUING THE SHOW CAUSE NOTICE TO THE ASSESSEE, LEVI ED THE PENALTY FOR WILLFULLY APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY S MT. NIDHI VERMA, D.R. DATE OF HEARING 26/04/2016 DATE OF PRONOUNCEMENT 25 / 05 /2016 I.T.A. NO.768/LKW/15 2 CONCEALING THE PARTICULARS OF ITS INCOME AND ALSO F URNISHING OF INACCURATE PARTICULARS OF INCOME BEING 100% OF THE TAX SOUGHT TO BE EVADED ON THIS INCOME AMOUNTING TO RS.1,54,000/-. WHEN THE MATTER WENT BEFORE CIT(A), THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFF ICER. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY C ONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT [200 1] 249 ITR 125 (GUJ) IN WHICH THE HON'BLE HIGH COURT ON THE SIMILAR FACTS, WHEN THE PENALTY WAS IMPOSED U/S 271(1)(C) IN RESPECT OF THE ADDITIONS M ADE ON ACCOUNT OF THE SUNDRY CREDITORS, DELETED THE PENALTY BY OBSERVING AS UNDER: IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTOR S MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADIN G TO THE REASONABLE CONCLUSION THAT THE AMOUNT DOES REPRESEN T THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME, AND (II) THE CIRCUMSTA NCES MUST SHOW THAT THERE WAS ANIMUS, I.E., CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. EXPLANATION 1 TO SECTION 271(1)(C) HAS NO BEARING O N FACTOR NO. 1 BUT HAS A BEARING ONLY ON FACTOR NO. 2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORDER CONCLUSIVE EVIDENCE THAT THE A MOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCE ALED INCOME WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GI VES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NO T ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POS ITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THERE WILL BE NO MATERIAL TO SHO W THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY, TREATING THE EXPLANATION AS DEALING WITH BOTH THE I NGREDIENTS (I) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES EXPLANAT ION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MIND ON HIS PART. EVEN IN THIS VIEW OF THE M ATTER THE EXPLANATION ALONE CANNOT JUSTIFY LEVY OF PENALTY. A BSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQUATED WITH FRAUD OR WILFUL DEFAULT. I.T.A. NO.768/LKW/15 3 HELD, THAT, IN THE INSTANT CASE, THE CASH CREDITS W ERE NOT SATISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WH O HAD ADVANCED THE ALLEGED TEMPORARY LOANS WERE NEITHER D ISCLOSED NOR WERE THERE ANY SUPPORTING DOCUMENTS ON RECORD. THE ACCOUNTANT, WHO HAD ARRANGED THE LOANS WAS NOT PRODUCED AND IT WAS STATED THAT HE HAD LEFT THE SERVICE AS RELATIONS WITH HIM WERE STRAINED. IN THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCE EDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATING THE CASH CREDI TS AS INCOME OF THE ASSESSEE, BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLANATION 1, PENALTY UNDER SECTION 271(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO C OME TO THE CONCLUSION THAT THE CASH CREDITS COULD IN NO CIRCUM STANCES HAVE BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PA RTIES. ADMITTEDLY, THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN P ENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. THEREFORE , IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASON ABLE AND POSITIVE INFERENCE THAT THE EXPLANATION THAT CASH C REDITS WERE ARRANGED AS TEMPORARY LOANS WAS FALSE. THE FACTS AN D CIRCUMSTANCES WERE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT TH EY COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DI FFERENT PARTIES. THEREFORE, THE IMPOSITION OF PENALTY WAS NOT JUSTIF IED. 4. NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDG E BY LEARNED D. R. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE GUJA RAT HIGH COURT, WE DELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 25/05/2016) SD/. SD/. ( MAHAVIR PRASAD ) ( P. K. BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:25/05/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR