M/s Fusion Apparels Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 80/BANG/2011

• Counselvise Citation: 8021114 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Keywords: Unexplained cash credit; Principle of natural justice; Initiation of penalty proceedings; Non passing of speaking order
• Section: 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.80/B ANG/2011 (ASST. YEAR - 2005-06) M/S FUSION APPARELS PVT. LTD., #58, MAJARA HOSAHALLI, KASABA HOBLI, DODDABALLAPUR, BANGALORE-561 201. . APPELLANT PAN NO.AAAF2776 K. VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(3), BANGALORE. . RESPONDENT APPELLANT BY : SHRI RAGHAVENDRA CHAKRAVARTHY, C A RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT DATE OF HEARING : 18-04-2012 DATE OF PRONOUNCEMENT : 26-04-2012 O R D E R PER SHRI N.K SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - I, BANGALOR E DATED 07.10.2010. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL: 1. THE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS LEVYING PENALTY U/S 271(1)(C) OF THE ACT AGAINST THE APPELLANT ARE OPPO SED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUM STANCES OF THE CASE. ITA NO.80/B/ 11 2 2. THE ORDER LEVYING PENALTY U/S 271(1)(C) OF THE A CT, IS BAD IN LAW IN AS MUCH AS, THE LEARNED AO HAS NEITHER REACHED ANY SATISFACTION NOR HAS SUCH SATISFACTION BEEN RECORDED IN THE ASSESSME NT ORDER AND CONSEQUENTLY, THE VERY INITIATION OF PROCEEDINGS U/ S 271(1)(C) OF THE ACT, IS NOT IN ACCORDANCE WITH THE REQUIREMENT OF S EC. 271(1) OF THE ACT AND CONSEQUENTLY, THE ORDER OF PENALTY FOUNDED ON THE INVALID INITIATION OF PENALTY PROCEEDINGS IS LIABLE TO BE C ANCELLED. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO I S NOT JUSTIFIED IN LEVYING A PENALTY OF RS.84,87,489/- U/S 271(1)(C) O F THE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS C ASE. 4. THE LEARNED AO FAILED TO APPRECIATE THAT THE APP ELLANT HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTI CULARS OF INCOME TO WARRANT LEVY OF PENALTY AND THEREFORE, TH E PENALTY LEVIED U/S 271(1)(C) OF THE ACT REQUIRES TO BE CANCELLED. 5. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEVI ED IS HIGHLY EXCESSIVE AND LIABLE TO BE REDUCE SUBSTANTIALLY AS EVEN AFTER THE ADDITIONS AND DISALLOWANCES THE TAX PAYABLE IS NIL. 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLA NT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO OR DER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS .. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF PENALTY AMO UNTING TO RS.84,87,489/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME-TAX AC T. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE IS A MANUFACTURER AND EXPORTER OF READY MADE GARMENTS. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.11.205 DECLARING A LOSS OF RS.1,99,15, 080/-. THE CASE WAS ITA NO.80/B/ 11 3 SELECTED FOR SCRUTINY. THE AO COMPLETED THE ASSES SMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 26.12.2007 AND ADDED THE FOLLO WING DISALLOWANCES : DISALLOWANCE U/S 40(A)(IA) - RS.37,066/- AND DISALLOWANCE U/S 68(A)(IA) - RS.2,36,59,510/- 5. THE AO DETERMINED THE LOSS AT RS.37,81,496/- AND SET OFF OF BROUGHT FORWARD LOSS. THE INCOME ASSESSED IS NIL. FOR THE ABOVE ADDITIONS, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT SEPARATELY AND LEVIED THE PENALTY OF RS.84,87,489/-. 6. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A) AND RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED AO IN SO FAR AS LEVYING P ENALTY U/S 271(1)(C) OF THE ACT AGAINST THE APPELLANT IS OPPOS ED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUM STANCES OF THE CASE. 2. THE ORDER LEVYING PENALTY U/S 271(1)(C) OF THE A CT, IS BAD IN LAW IN AS MUCH AS, THE LEARNED AO HAS NEITHER REACHED ANY SATISFACTION NOR HAS SUCH SATISFACTION BEEN RECORDED IN THE ASSESSME NT ORDER AND CONSEQUENTLY, THE VERY INITIATION OF PROCEEDINGS U/ S 271(1)(C) OF THE ACT, IS NOT IN ACCORDANCE WITH THE REQUIREMENT OF S EC. 271(1) OF THE ACT AND CONSEQUENTLY, THE ORDER OF PENALTY FOUNDED ON THE INVALID INITIATION OF PENALTY PROCEEDINGS IS LIABLE TO BE C ANCELLED. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO I S NOT JUSTIFIED IN LEVYING A PENALTY OF RS.84,489/- U/S 271(1)(C) OF T HE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS C ASE. 4. THE LEARNED AO FAILED TO APPRECIATE THAT THE APP ELLANT HAS NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTI CULARS OF INCOME TO WARRANT LEVY OF PENALTY AND THEREFORE, TH E PENALTY LEVIED U/S 271(1)(C) OF THE ACT REQUIRES TO BE CANCELLED. ITA NO.80/B/ 11 4 5. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEVI ED IS HIGHLY EXCESSIVE AND LIABLE TO BE REDUCE SUBSTANTIALLY AS EVEN AFTER THE ADDITIONS AND DISALLOWANCES THE TAX PAYABLE IS NIL. 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 7. THE ASSESSEE SUBMITTED TO THE LEARNED CIT(A) TH AT THE LEVY OF PENALTY WAS NOT PROPER BECAUSE NEITHER CONCEALMENT HAD BEEN ESTABLISHED NOR IT WAS A CASE OF FILING OF INACCURATE PARTICULARS OF INCOM E. THE LEARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING I N PARA 6 OF THE IMPUGNED ORDER AS UNDER : SO FAR AS TO ISSUE OF LEVY OF PENALTY IS CONCERNED TOO I SEE NO MERIT IN THE ARGUMENT THAT THE AO HAS FAILED TO EST ABLISH THE CONCEALMENT. THE AO HAS MADE ADDITION OF RS.2,36,5 9,510/- U/S 68 OF I.T ACT WHICH SPEAKS OF UNEXPLAINED CREDIT. THE AO HAS CALLED FOR CONFIRMATION LETTERS. IT HAS NOT BEEN PROVIDED. I NSTEAD OF SHIFTING THE BURDEN BY PROVIDING THE DETAILS AS TO COMPLETE ADDRESS ETC., OF THE CREDITORS, IT HAS EXPLAINED THE REASONS BY SAYI NG THAT IT FELL INTO A DEBT TRAP AND HAD NO TIME TO LOOK INTO THE AFFAIRS WHICH ITSELF IS ENOUGH TO PROVE THAT CREDITORS ARE NOT GENUINE AND EVADE TAX THEREON. IT IS ALSO A CASE OF FILING OF INACCURATE PARTICULARS OF INCOME BECAUSE EVEN AFTER AUDITORS REPORT, THE GROS S RECEIPT OF RS.37,066/- HAS NOT BEEN ADDED BACK IN THE COMPUTAT ION SHEET OF TOTAL INCOME. THUS ON MERIT ALSO THE GROUNDS OF AP PEAL IS DISMISSED. 8. NOW THE ASSESSEE IS IN APPEAL. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE LEARNED CIT(A) ITA NO.80/B/ 11 5 HAD NOT ADJUDICATED GROUND NO.5 RAISED BEFORE HIM AND HAD NOT GIVEN ANY FINDING ON THE SUBMISSION OF THE ASSESSEE THAT EVEN AFTER THE ADDITIONS AND DISALLOWANCES, THE TAX PAYABLE WAS NIL, SO PENALTY WAS NOT LEVIABLE. 10. IN HER RIVAL SUBMISSIONS, THE LEARNED DR STRONG LY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 11. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND THE MATERIAL ON RECORD, WE FIND SUBSTANCES IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO FINDING HAS BEEN GIVEN BY THE LEAR NED CIT(A) ON GROUND NO.5 RAISED BEFORE HIM. IN THE PRESENT CASE, IT IS ALSO NOTICED THAT THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE AO FOR LE VYING THE PENALTY U/S 271(1)(C) HAS NOT GIVEN HIS INDEPENDENT FINDING AND EVEN HE HAS NOT MENTIONED WHAT WERE THE SUBMISSIONS OF THE ASSESSEE . HE SIMPLY STATED THAT HE DID NOT SEE ANY MERIT IN THE ARGUMENTS OF THE AS SESSEE THAT THE AO HAD FAILED TO ESTABLISH THE CONCEALMENT. HOWEVER, IT IS NOT MENTIONED IN THE IMPUGNED ORDER WHAT WERE THE ARGUMENTS PUT FORTH B Y THE ASSESSEE BEFORE THE LEARNED CIT(A). THEREFORE, THE ORDER PASSED B Y THE LEARNED CIT(A) IS NON SPEAKING ORDER AND DEVOID OF REASONS SO, IT IS A CRYPTIC ORDER IN THE EYES OF LAW AND NOT SUSTAINABLE. 12. IT IS WELL SETTLED THAT THE ORDER/JUDGMENT UNSU PPORTED BY REASON IS NOT A JUDGMENT IN THE EYES OF LAW. IT IS ALSO TRUE THAT THE REASONS ARE THE LINK BETWEEN THE MATERIAL ON RECORD AND THE CONCLUSION T HEREAFTER BY THE ITA NO.80/B/ 11 6 COURT/APPELLATE AUTHORITY. IN OUR VIEW THE LD. CIT (A) SHOULD HAVE PROPERLY CONSIDERED THE ARGUMENTS OF THE ASSESSEE AS WELL AS FINDINGS GIVEN BY THE ASSESSING OFFICER AND THEREAFTER HE SHOULD HAVE MAD E INDEPENDENT FINDINGS EITHER IN FAVOUR OR AGAINST THE ASSESSEE. CONSIDERI NG THE ENTIRE FACTS, WE ARE OF THE OPINION THAT THE LD. CIT(A) HAD NOT PASSED A PROPER ORDER IN THE EYES OF LAW. AT THIS STAGE, WE MAY REFER TO THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF GUJARAT THEMIS BIOSYN LTD. VS. J.C.I.T., (2000) 74 ITD 339 (AHD) . THE ITAT AHMEDABAD BENCH, WHILE INTERPRETING THE PROVISIONS OF SECTION 250(6) OF THE I.T. ACT, 1961 HELD AS UND ER: 'THE PROVISIONS OF SECTION 250(6) PROVIDES THAT THE APPELLATE ORDERS OF THE COMMISSIONER (APPEALS) ARE TO STATE THE POIN TS ARISING IN THE APPEAL, THE DECISION OF THE AUTHORITY THEREON AND T HE REASONS FOR SUCH DECISION. THE UNDERLYING RATIONALE OF THE PROV ISIONS IS THAT SUCH ORDERS ARE SUBJECT TO FURTHER APPEAL TO THE TR IBUNAL. SPEAKING ORDER WOULD OBVIOUSLY ENABLE A PARTY TO KNOW PRECIS E POINTS DECIDED IN HIS FAVOUR OR AGAINST HIM. ABSENCE OF TH E FORMULATION OF THE POINT FOR DECISION FOR WANT OF CLARITY IN A DEC ISION UNDOUBTEDLY PUTS A PARTY IN QUANDARY. SECTION 250(6) EXPRESSLY EMBODIES THE PRINCIPLE OF NATURAL JUSTICE AND SUCH A PROVISION I S CLEARLY MANDATORY IN NATURE. THE IMPUGNED ORDER PASSED BY T HE COMMISSIONER (APPEALS) IN VIOLATION OF THE PROVISIO NS OF SECTION 250(6) COULD NOT, THEREFORE, BE SUSTAINED.' 13. THE RATIO LAID DOWN BY THE ITAT AHMEDABAD BENCH IN THE AFORESAID REFERRED TO CASE IS SQUARELY APPLICABLE TO THE FACT S OF THE PRESENT CASE. ITA NO.80/B/ 11 7 14. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V PALWAL COOPERATIVE SUGAR MILLS LTD. (2006) 284 ITR 153 HAS HELD AS UNDER: 'EVERY JUDICIAL/QUASI JUDICIAL BODY / AUTHORITY MUS T PASS A REASONED ORDER WHICH SHOULD REFLECT THE APPLICATION OF MIND OF THE CONCERNED AUTHORITY TO THE ISSUES / POINTS RAISED BEFORE IT. THE REQUIREMENT OF RECORDING REASONS IS AN IMPORTANT SAFEGUARD TO ENSU RE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIFY, CHECKS T HE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE DECISION MAKING PROCESS. ANOTHER REASON WHIC H MAKES IT IMPERATIVE FOR QUASI JUDICIAL AUTHORITIES TO GIVE R EASONS IS THAT THEIR ORDERS ARE NOT ONLY SUBJECT TO THE FIGHT OF THE AGG RIEVED PERSONS TO CHALLENGE THEM BY FILING STATUTORY APPEAL AND REVIS ION BUT ALSO BY FILING WRIT PETITION UNDER ARTICLE 226 OF THE CONST ITUTION. SUCH DECISIONS CAN ALSO BE CHALLENGED BY WAY OF APPEAL U NDER ARTICLE 136 OF THE CONSTITUTION OF INDIA. THE HIGH COURTS H AVE THE POWER TO ISSUE WRITS OF CERTIORARI TO QUASH THE ORDERS PASSE D BY QUASI JUDICIAL AUTHORITIES / TRIBUNALS. LIKEWISE IN APPEAL THE SUP REME COURT CAN NULLIFY SUCH ORDER / DECISION. THE POWER OF JUDICI AL REVIEW CAN BE EFFECTIVELY EXERCISED BY THE SUPERIOR COURTS ONLY I F THE ORDER UNDER CHALLENGE CONTAINS REASONS. IF SUCH ORDER IS CRYPT IC AND DEVOID OF REASONS, THE COURTS CAN NOT EFFECTIVELY EXERCISE TH E POWER OF JUDICIAL REVIEW. 15. THE HON'BLE SUPREME COURT IN THE CASE OF MANGALORE GANESH BEEDI WORKS VS. CIT AND ANOTHER (2005) 273 ITR 56 HAS HELD AS UNDER: 'THOUGH IN AN ORDER OF AFFIRMATION IN AN APPEAL U/S 260A OF INCOME TAX ACT, 1961 REPETITION OF THE REASONS ELABORATELY MAY NOT BE NECESSARY, THE ARGUMENTS ADVANCED / POINTS URGED HA VE TO BE DEALT WITH. REASONS FOR AFFIRMATION HAVE TO BE INDICATED, THOUGH IN APPROPRIATE CASES THEY MAY BE BRIEF. IT HAS FURTHER BEEN HELD : ITA NO.80/B/ 11 8 'RECORDING OF REASONS IS A PART OF FAIR PROCEDURE. REASONS ARE THE HARBINGER BETWEEN THE MIND OF THE MAKER OF THE DECI SION IN THE CONTROVERSY AND THE DECISION OR CONCLUSION ARRIVED AT. THEY SUBSTITUTE SUBJECTIVITY WITH OBJECTIVITY. FAILURE T O GIVE REASONS AMOUNTS TO DENIAL OF JUSTICE. 16. AS WE HAVE ALREADY POINTED OUT THAT IN THE PRES ENT CASE, THE LD. CIT(A) HAS NOT RECORDED ANY REASON IN SUPPORT OF HIS DECIS ION, THEREFORE, THE FAILURE TO GIVE REASONS AMOUNTS TO DENIAL OF JUSTICE AS PER THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE AFORESAID CASE AND THE PRESENT CASE REQUIRES READJUDICATION AT THE LEVEL OF LD. CIT(A). WE, THE REFORE, CONSIDERING THE FACTS OF THE PRESENT CASE, ARE OF THE OPINION THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) IS A NON-SPEAKING ORDER IN TH E EYES OF LAW. ACCORDINGLY, WE DEEM IT APPROPRIATE TO SET ASIDE TH IS CASE BACK TO THE FILE OF THE LEARNED CIT(A) AND DIRECT HIM TO PASS A WELL-RE ASONED AND SPEAKING ORDER, AFTER PROVIDING DUE AND REASONABLE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH APRIL, 2012. SD/- SD/- (P MADHAVI DEVI) (N.K SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER VMS. BANGALORE DATED : 26/04/2012 ITA NO.80/B/ 11 9 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.