M/s. Shree Ganesh Textiles, Surat V. The Income tax Officer,Ward-5(4), Surat

ITA 805/AHD/2012

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2186 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: P M JAGASHETH
• Keywords: Bonafide belief
• Section: 131; 271(1)(c)

Judgement Text

SHREE GANESH TEXTILES V. ITO -5(4)SURAT /I.T.A. NO.805/AHD/2012/A.Y.05-06 PAGE 1 OF 5 , , INCOM TAX APPELLATE TRIBUNAL-SURAT-BENCH-SURAT . . , . . , BEFORE C .M. GARG, JM & O. P. MEENA, AM . . ./ I.T.A NO.805/AHD/2012: / ASSESSMENT YEAR :2005-06 SHREE GANESH TEXTILES , PLOT NO. 6, GANDHI ESTATE, NAVAGAM, KAMREJ , SURAT 394185 PAN:AAKFM0703G V. INCOME TAX OFFICER WARD-5(4), SURAT APPELLANT /RESPONDENT ASSESSEE BY SHRI P. M. JAGASHETH, CA REVENUE BY MS. ANUPAMA SINGLA, SR. D.R. DATE OF HEARING 30.08.2018 DATE OF PRONOUNCEMENT 18. 09.2018 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 25.01.2012 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT(IN SHORT THE CIT (A)) FOR THE ASSESSMENT YEAR 2005-06. 2. THE SOLE GROUND OF APPEAL RELATES TO CONFIRMING OF PENALTY OF RS.76,673 LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 3. THE SHORT FACTS ARE THAT THE ASSESSEE HAS RECEIVED LOANS FROM THREE PERSONS NAMELY SHRI KANTIBHAI RAMANI-RS.19,500, SHRI RAJUBHAI RADDAIA RS.45,534 AND SHRI SURESHBHAI RAMANI RS. 19,500 AGGREGATING TO RS. 84,534. SINCE THE ASSESSEE COULD NOT PRODUCED THESE CREDITORS AND CONFIRMATION FILED DID NOT BEAR PAN , THE AO TREATED THE SAME AS UNEXPLAINED, WHICH CAME TO BE CONFIRMED BY CIT (A) ALSO. SIMILARLY, THE ASSESSEE HAS RECEIVED LOAN OF RS. 1,25,000 FROM SHRI CHATURBHAI RAMANI, ONE OF THE PARTNER OF THE ASSESSEE FIRM OF WHICH CONFIRMATION, LEDGER ACCOUNT, BALANCE SHEET WERE FILED. HOWEVER, THE LOAN ENTRY WAS NOT REFLECTED IN THE ACCOUNTS OF THE PARTNER, THEREFORE, THE AO TREATED THE SHREE GANESH TEXTILES V. ITO -5(4)SURAT /I.T.A. NO.805/AHD/2012/A.Y.05-06 PAGE 2 OF 5 SAME AS UNEXPLAINED AND ADDED TO TOTAL INCOME. THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE ALSO INITIATED. SINCE THESE ADDITIONS WERE CONFIRMED BY THE CIT (A), THEREFORE, THE AO LEVIED A PENALTY OF RS. 76,673 BEING 100% OF TAX SOUGHT TO BE EVADED. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). WHEREIN IT WAS CONTENDED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION, PAN, COPY OF LEDGER ACCOUNT OF PARTNER, HENCE, THE ONUS HAS BEEN DISCHARGED AND THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY ERROR IN THE BOOKS OF ACCOUNTS OF THE LENDER. WITH REGARD, ADDITION OF RS. 84,534,IT WAS SUBMITTED THAT THE AO HAS ISSUED SUMMONS UNDER SECTION 131 TO THEM ON THE BASIS OF ADDRESS SUPPLIED BY THE ASSESSEE, HENCE, IDENTITY OF CREDITORS WAS DULY ESTABLISHED. THE ASSESSEE CANNOT FORCE ATTENDANCE OF THE CREDITORS. IT WAS CONTENDED THAT THE APPELLANT DID NOT FURNISH NON-GENUINE EVIDENCES. THEREFORE, IT WAS FOR THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE HAS DELIBERATELY AND CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF INCOME AS HELD IN THE CASE OF NATIONAL TEXTILE 249 ITR 125 (GUJARAT) AND NEW SORATHIA ENGINEERING CO. V. CIT [2006] 282 ITR 642 (GUJ)/ 155 TAXMAN 513 (GUJRAT). HOWEVER, CIT (A) VIEWED THAT IT IS IMPROBABLE THAT PARTNER WOULD GIVE LOAN AND SAME WOULD NOT BE RECORDED IN HIS BOOKS OF ACCOUNTS. FURTHER, THE THREE CREDITORS COULD NOT ATTEND BEFORE THE AO HENCE, EXPLANATION SUBMITTED BY THE ASSESSEE COULD NOT BE FOUND RELIABLE. IN VIEW OF THIS MATTER, THE CIT (A) CONFIRMED THE LEVY OF PENALTY. 5. FEELING AGGRIEVED AND DISSATISFIED, THE ASSESSEE HAS COME UP BEFORE THIS TRIBUNAL BY WAY OF THIS APPEAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THE CONFIRMATION OF CREDITORS WITH CORRECT ADDRESS WAS FURNISHED TO THE AO. ON THE BASIS OF SAID CONFIRMATION THE AO ISSUED SUMMONS WHICH WERE DULY SERVED. THEREFORE, THE ASSESSEE HAS DISCHARGED ITS ONUS AND IDENTITY OF CREDITOR WAS ESTABLISHED. SIMILARLY, THE ASSESSEE HAS FILED COPY OF SHREE GANESH TEXTILES V. ITO -5(4)SURAT /I.T.A. NO.805/AHD/2012/A.Y.05-06 PAGE 3 OF 5 LEDGER ACCOUNT , BALANCE SHEET , AUDIT REPORT IN THE CASE OF LOAN OF RS. 1.25 LAKH FROM SHRI CHATURBHAI RAMANI, PARTNER. JUST BECAUSE THE AMOUNT OF LOAN DID NOT FIGURE IN HIS BOOKS, THE ASSESSEE-FIRM CANNOT BE HELD RESPONSIBLE FOR THAT. SUCH EVIDENCES FURNISHED WERE NOT NON- GENUINE. THE PENALTY PROCEEDINGS ARE QUASI-CRIMINAL IN NATURE AND SEPARATE FROM ASSESSMENT PROCEEDINGS. FURTHER THE AO HAS NOT SPECIFIED THE SPECIFIC CHARGE IN THE SHOW- CAUSE NOTICE OF PENALTY WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, HENCE, NON SATISFACTION OF CHARGE, THE PENALTY CANNOT BE IMPOSED AS HELD BY THE HON`BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATH COTTON GINNING FACTORY [2013] 359 ITR 565 (KAR)/263 CTR 153/ 93 DTR 111(KARN). THE LEARNED COUNSEL RELIED IN THE CASE OF GUJARAT CREDIT CORPORATION LTD. 113 ITD 33 (AHMEDABAD) IN SUPPORT OF HIS CONTENTIONS. 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER AND PENALTY ORDER REVEALS THAT THE AND WAS MADE AS THE CREDITORS COULD NOT ATTEND BEFORE THE AO AND THERE WAS NO COUNTER ENTRY IN BOOKS OF PARTNERS. HOWEVER, IT IS ALSO A FACT THAT THE ASSESSEE CANNOT BE FORCED TO PRODUCE THE CREDITORS. THE ASSESSEE HAS SUPPLIED ADDRESS ON WHICH SUMMONS WERE DULY ISSUED. THUS, IDENTITY WAS DULY ESTABLISHED. THE ASSESSEE-FIRM FILED CONFIRMATION FROM PARTNER AND HIS BALANCE SHEET AND COPY OF LEDGER ACCOUNT. THUS, THE ASSESSEE HAS DISCHARGED ITS ONUS. THEREFORE, ADDITION HAVE BEEN MADE ON THE BASIS OF FACTS AS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE FIND THAT THE ASSESSEE HAS FURNISHED ALL RELEVANT FACTS; THEREFORE, THE PENALTY CANNOT BE LEVIED MERELY SHREE GANESH TEXTILES V. ITO -5(4)SURAT /I.T.A. NO.805/AHD/2012/A.Y.05-06 PAGE 4 OF 5 BECAUSE THAT IT WAS NOT ACCEPTABLE TO THE AO. WHERE THE EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS NOT LEVIABLE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE, THE ASSESSEE HAS OFFERED AN EXPLANATION DURING THE COURSE OF PENALTY PROCEEDINGS, BUT THE AO FAILED TO CONSIDER THE SAME. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE HAD OFFERED EXPLANATION AND THE SAID EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE AND ACCORDINGLY ITS CASE IS NOT COVERED BY CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. CLAUSE (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES. IT IS ALSO SEEN THAT THERE WAS NO SPECIFIC CHARGE WAS MADE IN PENALTY NOTICE AS WELL AS IN ASSESSMENT ORDER, WHETHER PENALTY PROCEEDINGS ARE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME, HENCE, NO PENALTY LEVIABLE IN THE LIGHT OF RATIO LAID DOWN IN THE CASE OF CIT V. MANJUNATHA COTTON GINNING FACTORY [2013] 359 ITR 565 (KAR)/263 CTR 153/ 93 DTR 111(KARN)[2012] 82 CCH 282 KAR HC. THUS, JUDICIAL OPINION ALSO SUPPORTS THE CASE OF SHREE GANESH TEXTILES V. ITO -5(4)SURAT /I.T.A. NO.805/AHD/2012/A.Y.05-06 PAGE 5 OF 5 THE ASSESSEE. BASED ON THE ABOVE FACTS OF THE CASE; IT CAN BE HELD THAT THE ASSESSEE HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL NOT AUTOMATICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT, 1961. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN LAW. WE THEREFORE, DELETE THE SAME. ACCORDINGLY, SOLE GROUNDS OF APPEAL IS THEREFORE, ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18-09-2018. SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 18/9/2018. / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) THE CIT(A)4. / PR. CIT 5. , / D.R. (ITAT) 6. / GUARD FILE ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT