META TILES P.LTD, MUMBAI V. ITO 1(2)3, MUMBAI

ITA 8760/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4560 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 27-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAVRYA PRATAP
• Assessee Lawyers: VISHWAS V MEHENDALE
• Keywords: Deemed to accrue or arise in india; Difference of opinion
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI JOGINDER SINGH, JM AND SHRI RAJESH KUMA R, AM ./ I.T.A. NO. 8760/MUM/2011 ( / ASSESSMENT YEAR: 2003-04) M/S. META TILES PRIVATE LIMITED NEW INDIA CENTER, 5 TH FLOOR 17, COOPERAGE ROAD MUMBAI 400 039. / VS. INCOME TAX OFFICER 1 (2) 3, ROOM NO. 536, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 020. ./ ./PAN/GIR NO. AAACT 3954F ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VISHWAS V. MEHENDALE / RESPONDENT BY : SHRI MAVRYA PRATAP / DATE OF HEARING : 12/10/2015 !'# / DATE OF PRONOUNCEMENT : 07/01/2016 $% / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.10.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI (HER EINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2003-04.THE ASSESSEE H AS RAISED FOLLOWING GROUNDS OF APPEAL: 2 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW 1. THE LEARNED CIT (A) ERRED IN CONFIRMING THE PENALT Y U/S 271(1)(C) OF RS.45633/- ON THE FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE LEARNED CIT (A) ERRED IN NOT APPRECIATING THE F ACT THAT ADDITION OF RS.124170/- MADE BY THE AO U/S.41(1)(A) WAS SOLELY ON ACCOUNT OF DIFFERENT VIEWS TAKEN ON THE SAME SET OF FACTS WHICH AT THE B EST CAN BE TERMED AS DIFFERENCE OF OPINION AND CERTAINLY NOT CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. 3. THE LEARNED CIT (A) FURTHER ERRED IN APPRECIATING T HE FACT THAT THE APPELLANT COMPANY WAS LEGALLY BOUND TO ENTERTAIN THE CLAIM OF CREDITOR OF RS.1,24,170/- REFLECTED IN APPELLANT COMPANYS BOOKS OF ACCOUNT F OR A PERIOD OF THREE YEARS DURING WHICH CREDITOR CAN MAKE THEIR CLAIM FOR THEI R DUES. 2. THE ONLY ISSUE RAISED IN ALL THE GROUNDS OF APPE AL RELATES TO CONFIRMATION OF PENALTY U/S 271(1)(C) OF RS.45,633/- BY CIT(A) FOR THE ADDITION MADE U/S 41(1)(A) TO THE TUNE OF RS.1,24,170/-. THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSMENT WAS FRAMED AT A LOSS OF RS.1,06,890/- VIDE ORDER DATED 08.02.2006 AGAINST RETURNED LOSS OF RS.3,85,938/- BY MAKING VARIOUS ADDITIONS INTER ALIA OF RS.1,24,170/- ON ACCOUNT OF UNEXPLAINED EXPENSES/CESSATION OF LIABILITY. THE PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) R.W.S. 274 ON 08.02.2006. T HE QUANTUM APPEAL IS CONFIRMED BY THE CIT(A) AND ASSESSEE HAD NOT GONE INTO FURTHE R APPEAL AGAINST THE ORDER OF THE CIT(A) IN QUANTUM PROCEEDINGS. DURING THE COUR SE OF ASSESSMENT THE AO FOUND THAT ASSESSEE HAD SHOWN A LIABILITY OF RS.1,5 3,119/- PAYABLE TO M/S. PUNIT 3 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO AGENCY. THE LD. AO ISSUED A NOTICE U/S 133(6) TO PU NIT AGENCY AND IN REPLY TO THE SAID NOTICE STATED THAT A SUM OF RS.28,949/- WAS D UE FROM ASSESSEE AS ON 31.03.2003 AND NOT RS.1,53,119/- AS CLAIMED BY THE ASSESSEE AND ADDED RS.1,24,170/- U/S 41(1)(A) OF THE ACT BY HOLDING TH AT DIFFERENCE BETWEEN THE CONFIRMATION FROM M/S. PUNIT AGENCY AND IN THE BOO KS OF ASSESSEE REPRESENTED THE CESSATION OF LIABILITY AND HENCE CONSIDERED AS THE INCOME IN THE HANDS OF THE ASSESSEE. THE LD. AO IMPOSED THE PENALTY OF RS.45,6 33/- ON THE GROUND THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME BY OVERSTATING ITS LIABILITY. 3. THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO BY OBS ERVING AS UNDER:- AFTER EXAMINING THE FACTS AND CIRCUMSTANCES OF TH E CASE, I FIND THAT IT WAS DUE TO THE EFFORTS OF THE ASSESSING OFFICER THE DIF FERENCE IN THE ACCOUNTS OF M/S. PUNIT AGENCY P. LTD VIS A VIS BOOKS OF ACCOUNT S OF THE APPELLANT WAS DETECTED. THE ADDITION IN THE QUANTUM OF APPEAL HAS ALREADY BEEN CONFIRMED BY MY PREDECESSOR, CIT(A) DUE TO CESSATION OF LIABI LITY AMOUNTING TO INCOME OF RS.1,24,170/- IN THE HANDS OF THE APPELLANT COMP ANY. THE ARGUMENT OF THE AUTHORIZED REPRESENTATIVE THAT THIS INCOME HAS BEEN SUBSEQUENTLY, OFFERED FOR TAXATION IN THE A.Y. 2006-07 IS WITHOUT ANY MER IT AND THE SAME IS NOT ACCEPTABLE. SINCE THE APPELLANT COMPANY HAS FURNISH ED INACCURATE 4 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO PARTICULARS OF INCOME, THEREFORE, IT IS LIABLE TO P AY PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT. I FIND NO REASON TO INTERFERE W ITH THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER IN THIS CASE AND AC CORDINGLY, PENALTY IMPOSED BY THE ASSESSING OFFICER IS CONFIRMED. 4. THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD CORRECTLY ACCOUNTED FOR ALL THE TRANSACTIONS ENTERED INTO WITH M/S. PUNIT A GENCY AND IT WAS ONLY THE MISTAKE IN THE BOOKS OF M/S. PUNIT AGENCY WHICH HAD RESULTED IN THE DIFFERENCE OF RS.1,24,170/-. THE LD. COUNSEL FURTHER SUBMITTED TH AT PENALTY COULD NOT BE LEVIED U/S 271(1)(C) OF THE ACT WHERE THERE WAS THE DIFFER ENCE OF OPINION ON THE ISSUE . THE LD. COUNSEL FURTHER ARGUED THAT THE ADDITION WA S MADE U/S 41(1)(A) OF THE ACT WHICH WAS IN RESPECT OF REMISSION OR CESSATION OF L IABILITY AND FURTHER ARGUED THAT THE PENALTY COULD NOT EVEN BE IMPOSED IN THAT CASE. THE LD. AR DEFENDED THE CASE OF THE ASSESSEE WHILE RELYING ON THE DECISION OF TH E GUJRAT HIGH COURT IN CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA 43 TAXMANN.COM55(G UJRAT). THE LD. DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON THE BASIS OF THE FACTS BEFORE US, WE FIND THAT THER E WAS A DIFFERENCE OF RS.1,24,170/- 5 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO WHICH WAS ADDED U/S 41(1)(A) OF THE ACT. THE DI FFERENCE HAD ARISEN BETWEEN THE CONFIRMATION AS RECEIVED BY THE AO AND BOOKS OF THE ASSESSEE WHEN THE AO CALLED FOR INFORMATION U/S 133(6) OF THE ACT. THE AO ADDE D THE SAID DIFFERENCE TO THE INCOME OF THE ASSESSEE BY HOLDING THAT TRADING LIAB ILITY OF THE ASSESSEE HAD CEASED AND IMPOSED THE PENALTY OF RS.45,633/- U/S 271(1)(C ) FOR FURNISHING THE IN ACCURATE PARTICULARS OF INCOME. THE ASSESSEE SUBMITTED BEFOR E THE AO THAT THE SAID DIFFERENCE WAS ONLY BECAUSE OF WRONG ENTRIES IN THE BOOK OF M/S PUNIT AGENCY PVT LTD AND TRIED TO EXPLAIN THE SAME THROUGH A RECONCI LIATION STATEMENT LISTING OUT VARIOUS REASONS OF DIFFERENCES WHICH WAS FILED BEFO RE THE AO AS WELL AS BEFORE THE CIT(A) WHICH IS PLACED ON PAGE NO.20 OF THE PAPER B OOK IN WHICH THE ENTIRE DIFFERENCE WAS EXPLAINED. THE ASSESSEE ALSO FILED T HE COPIES OF THE BILLS ISSUED BY OF M/S. PUNIT AGENCY PRIVATE LTD. WHICH IS PLACED A T PG NO. 21-23 OF THE PAPER BOOK. THE ASSESSEE ALSO FILED VARIOUS PAYMENT VOUCH ERS ON PG. NO. 24-26 OF THE PAPER BOOK WHICH IS REGARDING THE VARIOUS PAYMENTS MADE TO M/S. PUNIT AGENCY PRIVATE LTD. IT IS CLEAR FROM THESE FACTS THAT THIS IS NOT A CASE OF CONCEALING THE PARTICULARS OF INCOME NOR INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAD EVEN DENIED THAT THE LIABILITY WAS CEASED DURING THE YEA R. IN OUR VIEW THIS IS A CASE OF DIFFERENCE OF OPINION IN WHICH THE CASE THE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. 6 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO THE CASE OF THE ASSESSEE ALSO FIND SUPPORT FROM THE CASE OF CIT VS. BHOGILAL RAMJIBHAI ATARA(SUPRA) WHEREIN THE HONBLE GUJRAT H IGH COURT HAS HELD AS UNDER:- SECTION 41(1) WOULD APPLY IN A CASE WHERE THERE HA S BEEN REMISSION OR CESSATION OF LIABILITY DURING THE YEAR UNDER CONSID ERATION SUBJECT TO THE CONDITIONS CONTAINED IN THE STATUE BEING FULFILLED. ADDITIONALLY SUCH CESSATION OR REMISSION HAS TO BE DURING THE PREVIOUS YEAR REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE INSTANT CASE, BOTH ELEMENTS ARE MISSING. THE RE WAS NOTHING ON RECORD TO SUGGEST THAT THERE WAS REMISSION OR CESSATION OF LIABILITY THAT TOO DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 007-08. IT IS UNDOUBTEDLY A CURIOUS CASE. EVEN THE LIABILITY ITSELF SEEMS UND ER SERIOUS DOUBT. THE ASSESSING OFFICER UNDERTOOK THE EXERCISE TO VERIFY THE RECORDS OF THE SO CALLED CREDITORS. MANY OF THEM WERE NOT FOUND AT ALL IN TH E GIVEN ADDRESS. SOME OF THEM STATED THAT THEY HAD NO DEALING WITH THE ASSES SEE. IN ONE OR TWO CASES, THE RESPONSE WAS THAT THEY HAD NO DEALING WITH THE ASSSSEE, NOR DID THEY KNOW HIM. OF COURSE, THESE INQUIRIES WERE MADE EX P ARTE AND IN THAT VIEW OF THE MATTER, THE ASSESSEE WOULD BE ALLOWED TO CONTES T SUCH FINDINGS. NEVERTHELESS, EVEN IF SUCH FACTS WERE ESTABLISHED T HROUGH BI PARTE INQUIRIES. THE LIABILITY AS IT STANDS PERHAPS HOLDS THAT THERE WAS NO CESSATION OR 7 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO REMISSION OF LIABILITY. THEREFORE, THE AMOUNT IN QU ESTION CANNOT BE ADDED BACK AS DEEMED INCOME UNDER SECTION 41(1). THIS IS ONE OF THE STRANGE CASES WHERE EVEN IF THE DEBT ITSELF IS FOUND TO BE NON GENUINE FROM THE VERY INCEPTION, AT LEAST IN TE RMS OF SECTION 41(1) THERE IS NO CURE FOR IT. THEREFORE, THE APPEAL FILED BY T HE REVENUE WAS LIABLE TO BE DISMISSED. 5.1 IN THE CASE OF THE ASSESSEE, THERE WAS NO CESSA TION OF TRADING LIABILITY DURING THE YEAR AND THE ASSESSEE HAD EVEN DENIED THE DIFFE RENCE IN ITS BOOKS OF ACCOUNTS AND THE REASONS OF DIFFERENCE WERE EXPLAINED THROUG H RECONCILIATION AND ALSO FILED THE COPIES OF THE BILLS OF THE SAID PARTY AND DETAI LS OF VOUCHERS QUA PAYMENTS MADE. IN OUR OPINION THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY ABOVE DECISION AND WE RESPECTFULLY FOLLOWING THE SAME DECISION DELETE THE PENALTY LEVIED BY THE AO BY ALLOWING THE APPEAL OF THE ASSESSEE. THE AO IS DIRE CTED ACCORDINGLY. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 8 ITA NO.8760/MUM/2011 M/S. META TILES PRIVATE LIMITED VS.ITO ORDER PRONOUNCED IN THE OPEN COURT ON 7TH JANUARY, 2016 SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) &' $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER ( ) MUMBAI; *$ DATED : 07.01.2016 PS. ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI