M/s Narindera Industries, Mandi Gobindgarh V. ACIT, Mandi Gobindgarh

ITA 77/CHANDI/2015

• Counselvise Citation: 7721514 RSA 2015
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SIDHU
• Assessee Lawyers: H R SALDI
• Keywords: Question of law; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT ITA NO.77/CHD/2015 ASSESSMENT YEAR:2007-08 M/S NARINDERA INDUSTRIES, VS. ACIT G.T. ROAD CIRCLE MANDI GOBINDGARH MANDI GOBINDGARH PAN NO. AACFN6902E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.R. SALDI RESPONDENT BY : SHRI D.S. SIDHU DATE OF HEARING : 06/08/2015 DATE OF PRONOUNCEMENT : 12/08/2015 ORDER PER H.L.KARWA, VP THIS IS AN APPEAL DIRECTED AGAINST THE ORDER OF CIT (A), PATIALA DT. 28/11/2014. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A) PATIALA HAVE ERRED IN CONFIRMIN G THE PENALTY OF RS. 1,80,805/- U/S 271(1)(C) WHICH IS ILLEGAL BAD IN LA W AND AGAINST THE FACTS OF THE CASE. HENCE IS LIABLE TO BE DELETED. 2. THAT THE LD. CIT(APPEAL) HAVE ERRED IN CONFIRMIN G THE PENALTY IMPOSED ON THE BASIS OF ESTIMATED ADDITION IN THE ASSESSMENT O RDER. 3. THAT THE LD. CIT(A) HAVE IGNORED THE WRITTEN SUB MISSIONS OF THE APPELLANT THAT THERE WAS A REASONABLE CAUSE AND THE CASE OF T HE APPELLANT WAS ON SIMILAR FACTS AS ACCEPTED IN THE EARLIER YEAR. 3. BRIEFLY STATED, THE ASSESSEE IS A TRADER OF IRON & STEEL GOODS. FOR THE IMPUGNED AY THE ASSESSEE FILED HIS RETURN OF INCOME ON 13-11-07,DECLARING LOSS OF RS. 5,37,150/-. DURING ASSESSMENT PROCEEDINGS, THE A.O OBSERVED THAT IN THE PRECEDING YEAR, I.E AY 2006-07, DURING ASSESSMENT P ROCEEDING, AN INSPECTOR WAS 2 DEPUTED TO MAKE LOCAL INQUIRIES ABOUT THE ASSESSEE AND REPORT THEREAFTER. THE INSPECTOR REPORTED THAT THE ASSESSEE WAS UNDER HEAV Y DEBT AND NOT INVOLVED IN ACTIVE BUSINESS ACTIVITIES. IN VIEW OF THESE FACTS, ASSESSMENT FOR A.Y 2006-07 WAS FRAMED ON THE ASSESSE AT NIL INCOME IGNORING LOSS OF 27,53,350/-. IN THE ASSESSMENT PROCEEDINGS FOR THE IMPUGNED AY THE ASSE SSE, VIDE HIS LETTER DT. 30/11/2009 SUBMITTED AS FOLLOWS: THE ABOVE REFERRED CASE IS FIXED FOR HEARING BEFO RE YOUR HONOUR AN SOME INFORMATION IS CALLED FOR. BUT THE POSITION IS THE SAME AS PER LAST YEAR AS NO EMPLOYEE OR ACCOUNTANT IS THERE TO PREPARE THE INFO RMATION. THE HISTORY OF THE CASE IS THE SAME AS SUCH IT IS REQUESTED THAT T HE ASSESSMENT MAY BE FRAMED AT NIL INCOME IGNORING THE LOSS FOR WHICH AS SESSE HAS NO OBJECTION SUBJECT TO NO PENALTY & PENAL ACTION. 4. THE AO ,AGREEING WITH THE ABOVE PLEA OF THE ASSE SSE ,IGNORED THE LOSS OF RS. 5,37,150/- BUT REJECTED THE CONDITIONAL OFFER O F NO LEVY OF PENALTY AND INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) ON THE ADDITION MADE. 5. THE AO IN PENALTY PROCEEDINGS HELD THAT THE ASSE SSE HAD BY AGREEING TO IGNORE THE LOSS, FURNISHED INACCURATE PARTICULARS O F INCOME AND HAD GIVEN NO JUSTIFIABLE CAUSE FOR THE SAME ALSO. HE THEREFORE H ELD THE ASSESSE LIABLE TO PAY PENALTY U/S 271(1)(C) AND IMPOSED PENALTY OF RS.1,8 0,805/-, ON THE ADDITION OF RS. 5,37,150/- @ 100% OF TAX SOUGHT TO BE EVADED ,VIDE HIS ORDER DT. 27/03/2012. 6. THE CIT(A) CONFIRMED THE LEVY OF PENALTY, VIDE O RDER DT. 28-11-2014, OBSERVING AS UNDER : 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSE D BY THE A.O. IN A NUMBER OF CASES, IT IS HELD THAT NO AGREEMENT IS PO SSIBLE FOR NON LEVY OF PENALTY. IN THE CASE OF CIT VS. LALCHAND TIRATH RSM 225 ITR 675 (P&H), IT IS HELD THAT MERE OFFERING OF EXPLANATION IS NOT ENOUG H BUT EXPLANATION TO BE SUBSTANTIATED BY COGENT AND RELIABLE EVIDENCE. I N THIS CASE, THE APPELLANT HAS NOT SUBMITTED DETAILS OF LOSS CLAIM. FURTHER, MENS-REA IS NOT ESSENTIAL FOR CIVIL LIABILITY OF PENALTY (UOI VS. D HARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC). LOOKING INTO THE ENTIRETY OF THE FACTS, I AM OF THE OPINION THAT PENALTY IS RIGHTLY LEVIED IN THIS CASE. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSE HA S FILED THIS APPEAL BEFORE THE TRIBUNAL 3 8. BEFORE ME, THE DR ARGUED THAT IT IS A FIT CASE F OR LEVY OF PENALTY SINCE THE ASSESSE HAD VOLUNTARILY SURRENDERED HIS INCOME/LOSS AND THAT TOO WITHOUT GIVING ANY EXPLANATION FOR THE SAME. HE RELIED ON THE ORDE R OF THE CIT(A). THE AR ON THE OTHER HAND SUBMITTED THAT SINCE THE ASSESSE WAS NO LONGER CONTINUING HIS BUSINESS AND HAD SUFFERED HUGE LOSSES, HE WAS UNABL E TO PROVIDE THE REQUIRED INFORMATION DURING THE COURSE OF ASSESSMENT PROCEED INGS. HE THEREFORE OFFERED TO SURRENDER HIS LOSSES. HE FURTHER STATED THAT HIS EXPLANATION WAS EVIDENCED BY THE ENQUIRY CONDUCTED BY THE DEPARTMENT ITSELF IN T HE PRECEDING YEAR AND THE REPORT OF THE INSPECTOR REVEALED THAT THIS GROUP IS UNDER HEAVY DEBT AND IS NOT INVOLVED IN ACTIVE BUSINESS ACTIVITIES. HE REITERAT ED THAT THE ASSESSE HAD VOLUNTARILY SURRENDERED HIS LOSSES AND GIVEN DUE EX PLANATION FOR THE SAME ALSO. HE FURTHER SUBMITTED THAT IN THE PRECEDING YEAR I.E .; AY 2006-07 IN SIMILAR CIRCUMSTANCES LOSS HAD BEEN IGNORED AND PENALTY PRO CEEDING INITIATED THEREON HAD BEEN DROPPED. THUS , AS PER THE AR ,THERE WAS N O CASE FOR LEVY OF PENALTY AT ALL U/S 271(1)(C) OF THE ACT. 9. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE OR DERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED ON RECORD. 10. I FIND THAT THE AO HAS RECORDED A FINDING OF FA CT IN HIS ASSESSMENT ORDER THAT DURING THE PERIOD WHEN ASSESSMENT WAS BEING FR AMED ON THE ASSESSEE, THE ASSESSEE WAS UNDER THE BURDEN OF HEAVY DEBT AND WAS NOT INVOLVED IN ANY BUSINESS ACTIVITIES. THIS FINDING OF FACT WAS BASED ON THE REPORT OF THE INSPECTOR DEPUTED TO MAKE ENQUIRIES REGARDING THE ASSESSEE DU RING ASSESSMENT PROCEEDING FOR AY 2006-07. UNDER SUCH DIFFICULT CIR CUMSTANCES THE ASSESSEE HAD EXPRESSED INABILITY TO FURNISH ANY DETAIL/ INFORMAT ION DURING ASSESSMENT PROCEEDINGS AND AS A CONSEQUENCE SURRENDERED THE LO SS WHICH HE HAD RETURNED IN HIS RETURN OF INCOME, BOTH FOR THE AY 2 006-07 AND THE IMPUGNED ASSESSMENT YEAR. APPARENTLY THE ASSESSEE HAD SURRE NDERED HIS LOSSES TO BUY 4 PEACE IN VIEW OF THE IMPOSSIBILITY FACED BY HIM IN FURNISHING ADEQUATE DETAILS DURING ASSESSMENT PROCEEDING AND SUBSTANTIATE HIS C LAIM OF LOSS. THE REASON GIVEN BY THE ASSESSEE FOR MAKING THE ALLEGED SURREN DER APPEARS TO BE PLAUSIBLE AND REASONABLE FROM A COMMON MANS POINT OF VIEW. TH E AO HAS ACCEPTED THE SURRENDER WITHOUT ANY OBJECTION OR RESERVATION THER EOF AND NO INFIRMITY HAS BEEN POINTED OUT EITHER BY THE AO /CIT(A) IN THE EXPLANA TION GIVEN BY THE ASSESSEE FOR MAKING THE ALLEGED SURRENDER OF LOSSES. MOREOVE R, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSE HAD ACTUALLY NOT EARNED TH E LOSSES AND BY CLAIMING THE SAME IN THE RETURN OF INCOME HAD FURNISHED INAC CURATE PARTICULARS OF INCOME. IN FACT, THE ADDITION TO THE INCOME OF THE ASSESSE HAS BEEN MADE SOLELY ON ACCOUNT OF THE SURRENDER MADE BY THE ASS ESSE WITHOUT RELYING ON ANY ADVERSE MATERIAL. NEITHER THE AO NOR THE CIT(A) HAS GIVEN A FINDING OF FACT THAT THE ASSESSE HAD NOT ACTUALLY MADE ANY LOSSES DURING THE YEAR. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I HAVE NO HESITATION TO HOLD THAT THE ASSESSE MADE THE SURRENDER VOLUNTARILY IN PECULIAR CIRCUMST ANCES OF THE CASE. ASSESSING OFFICER HIMSELF ACCEPTED IT AND ASSESSED THE INCOME ON EXACTLY THE SAME AMOUNT. THERE BEING NO ADVERSE MATERIAL AVAILABLE O N RECORD OR ANY RELIANCE THEREON, THE OBSERVATIONS OF AO AND CIT(A) ABOUT CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE NOT BORNE OUT FROM RECORD . 11. I AGREE WITH THE CIT(A) THAT MERE AGREEMENT CAN NOT BE THE BASIS FOR NON- LEVY OF PENALTY. I ALSO AGREE WITH THE CIT(A) THAT AN UNSUBSTANTIATED EXPLANATION ATTRACTS PENALTY. BUT, I FIND , THAT THE CIT(A) HAS FAILED TO APPRECIATE THE FACTS OF THE PRESENT CASE CORRECTLY. IN THE CASE AT HAND, TH E ASSESSEE HAS MADE AN AGREEMENT FOR NO PENALTY, AND AT THE SAME TIME GIVE N AN EXPLANATION FOR THE SAME WHICH IS DULY SUBSTANTIATED BY THE REPORT OF T HE INSPECTOR OF THE DEPARTMENT ITSELF. THEREFORE EVEN BY THE ADMISSION / STANDARDS OF THE CIT(A) ALSO, IT IS NOT A FIT CASE FOR LEVY OF PENALTY. THE HONBLE PUNJAB & HARYANA HIGH 5 COURT IN THE CASE OF CIT VS CAREERS EDUCATION & I NFOTECH (P) LTD.(2011) 336 ITR 257 (P&H) HAS HELD AS UNDER: NO DOUBT EVEN VOLUNTARY SURRENDER OF CONCEALED IN COME MAY NOT EXONERATE THE ASSESSEE OF ITS LIABILITY TO PAY PENA LTY IF IT CAN BE HELD THAT THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS. IN THE PRESENT CASE, THE TRIBUNAL HAS RECORDED A CA TEGORICAL FINDING THAT THERE WAS NO MATERIAL TO INFER CONCEALMENT OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS. THE CONTENTION THAT IN EVER Y CASE WHERE SURRENDER IS MADE INFERENCE OF CONCEALMENT OF INCOME MUST BE DRAWN UNDER S. 58 OF THE EVIDENCE ACT CANNOT BE ACCEPTED. NO SUBSTANT IAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED. IN THE CASE OF CIT VS. GEM GRANITES TAX CASE (APPEA L) NO. 504 OF 2009 (MADRAS) THE HONBLE HIGH COURT VIDE ITS ORDER DATE D 12/11/2013 HAS HELD AS UNDER : THUS, A MERE FACT THAT THE ADDITION IN THIS CASE HAS BEEN SUSTAINED BY THIS COURT BY ITSELF WOULD NOT LEAD TO THE AUTOMATI C APPLICATION TO SECTION 271(1)(C), THE TRIBUNAL WENT INTO THE EXPLANATION O FFERED BY THE ASSESSEE AS REGARDS THE CHARGING OF A HIGHER AMOUNT IN THE C ASE OF J.B. EXPORTS. ALTHOUGH, THE TRIBUNAL REJECTED THE EXPLANATION FOR THE PURPOSE OF ASSESSMENT OF GOODS, IT CONSIDERED IT AS A GOOD GRO UND FOR CANCELLATION OF PENALTY, WHEN THE EXPLANATION ON THE DIFFERENTIAL A MOUNT WAS GIVEN BY THE ASSESSEE THAT THE ENTRIES WERE MADE IN THE ACCO UNT AND THE ACCOUNTANT HAD NOT MADE THE CORRECT ENTRY. IN A RECENT DECISION OF THE HONBLE SUPREME COURT I N CIVIL APPEAL NO. 9772 OF 2013, DATED 30.10.2013 (MAK DATA P. LTD., V S. COMMISSIONER OF INCOME TAX-II), THE HONBLE SUPREME COURT WHILE CON SIDERING THE EXPLANATION TO SECTION 271(1), HELD THAT THE QUESTI ON WOULD BE WHETHER THE ASSESSEE HAD OFFERED AN EXPLANATION FOR CONCEAL MENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME AND THE EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE ASSESSING OFFICER BE TWEEN THE REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE AND WHEN THE INITIA L ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY THE ASSESSEE, T HE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTIT UTED THEIR INCOME AND NOT OTHERWISE. FACTUALLY, WE FIND THAT THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED BY GIVING A COGENT AND RELIABLE EXPLANATION. THEREFORE, IF THE DEPARTMENT DID NOT AGREE WITH THE EXPLANATION, THEN THE ONUS WAS ON THE DEPARTMENT TO PROVE THAT THERE WAS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. IN THE INSTANT CASE, SUCH ONUS WHICH SHIFTED ON THE DEPART MENT HAS NOT BEEN DISCHARGED. IN THE CIRCUMSTANCES, WE DO NOT FIND T HAT THERE IS ANY GROUND FOR THIS COURT TO SUBSTITUTE OUR INTERFERE WITH THE FINDING OF THE TRIBUNAL ON THE ASPECT OF THE BONAFIDES OF THE CONDUCT OF THE A SSESSEE. IN THE CIRCUMSTANCES, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT, WE UPHOLD THE ORDER OF THE TRIBUNAL AND THE TAX CASE APPEAL STANDS DISMISSED. NO COSTS. 12. IN THE INSTANT CASE THERE IS NO MATERIAL ON REC ORD TO SHOW THAT THE ASSESSEE HAD CONCEALED THE INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME. IN MY OPINION THE DECISI ON OF HONBLE 6 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CA REERS EDUCATION & INFOTECH (P) LTD. REFERRED TO ABOVE IS SQUARELY APP LICABLE TO THE FACTS OF PRESENT CASE. CONSIDERING THE ENTIRE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE, I HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE THE PENALTY LEVIED OF RS. 1,8 0,805/- ,U/S 271(1) OF THE ACT, IS DELETED AND THE APPEAL OF THE ASSESSE I S ALLOWED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12/08/2015 SD/- (H.L. KARWA) VICE PRESIDENT DATED: 12/08/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR