M/S. C.V. TRADING & INVESTMENTS CO. P. LTD, V. THE ACIT CIR 4(1),

ITA 9599/MUM/2004

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7282 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 02-06-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 30-12-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S K SINGH
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI I BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, HONBLEPRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 C.V.TRADING & INVESTMENTS CO.P.LTD. .. APPELLAN T C/O SHRI HEMANT CHIKHAL, 5, OLD HANUMAN, 1 ST CROSS LANE, 4 TH FLOOR, KALBADEVI ROAD, MUMBAI-02. PA NO. VS ACIT, CIRCLE 4(1) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: P K PARIDA, FOR THE APPELLANT S.K.SINGH, FOR THE RESPONDENT DATE OF HEARING : 02-06-2011 DATE OF PRONOUNCEMENT: 05 -08-2011 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT H AS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 1 ST OCTOBER, 2004, IN PARTIALLY CONFIRMING THE PENALTY UNDER SECTION 271(1)(C) OF T HE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 1993-94. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE; THE LD. CIT(A) ERRED IN UPHOLDING THE PENALTY LEVI ED @100% U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 ON THE I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 2 DISALLOWANCE OF COMMISSION AMOUNTING TO ` `` ` .7,86,683 PAID TO VARIOUS PARTIES WITHOUT APPRECIATING THE FACT THAT THE PAYMENT OF COMMISSION HAS BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE, ALL THE PARTIES CONFIRMED HAVING RECE IVED THE SAID COMMISSION, THE PARTIES ARE IDENTIFIABLE, THE RECIPIENTS ARE INCOME TAX ASSESSES AND THEY HAVE SHOWN THE COMMISSION INCOME IN THEIR PROFIT AND LOSS ACCOUNT. 3. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` .7,86,683 ON THE GROUND THAT, INTER ALIA, THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF SERVI CES RENDERED BY THE AGENTS NOR THE ASSESSEE PRODUCED ANY DOCUMENTA RY EVIDENCE IN SUPPORT OF THE COMMISSION. IN THE STATEMENT RECORDED DURIN G SURVEY, OF THE DIRECTORS OF THE COMPANY ADMITTED THAT THE ASSESSEE IS NOT IN A POSITION TO SUBSTANTIATE THE CLAIM OF DEDUCTION FOR COMMISSION, AND, ACCORDI NGLY, HE OFFERED THE SAME TO TAX. THIS STATEMENT WAS, HOWEVER, LATER RETRACT ED BY THE ASSESSEE. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER EXAMINED T HE CLAIM FOR COMMISSION PAYMENT, AS MADE BY THE ASSESSEE. BEFORE THE AO, THE ASSESSEE FURNISHED A STATEMENT SHOWING NAME OF THE PARTY, QUANTUM OF COM MISSION PAID OR PAYABLE ACCOMPANIED BY INCOMPLETE CONFIRMATIONS. SUMMONSES WERE ISSUED TO THESE PERSONS BUT NONE APPEARED. THE ASSESSEE I NITIALLY SHOWED HIS WILLINGNESS TO PRODUCE THESE PARTIES BUT BACKED OUT LATER ON THE GROUND THAT THE ASSESSEE DOES NOT HAVE LEGAL POWER TO ENFORCE A TTENDANCE OF THESE PARTIES BEFORE THE ASSESSING OFFICER. THE AO WAS OF THE VIEW THAT MERE SUBMISSION OF PAYMENT DETAILS WILL NOT ENTITLE THE ASSESSEE TO DEDUCTION IN RESPECT OF COMMISSION SO PAID. HE THUS DISALLOWED THE PAYMENT OF COMMISSION. THE DISALLOWANCE SO MADE BY THE AO AND UPHELD BY THE CI T(A), AND, VIDE OUR ORDER OF EVEN DATE, BY US. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US IT IS IN CONNECTION WITH THIS QUANTUM DISAL LOWANCE THAT PENALTY PROCEEDINGS U/S.271(1)(C) WERE INITIATED AGAINST THE A SSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. AFTER CONSIDERING THE ASSESSEES SUBMISSION, THE AO ALSO LEVIED PENALTY OF PENALTY BEING 100% OF TAX SOUGHT TO BE EVADED ON THE COMMISSION PAYMENT OF ` .7,86,683. LEARNED CIT(A) CONFIRMED THE PENALTY A ND HELD I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 3 THAT IT IS CLEARLY A CASE OF CONCEALMENT OF PARTICU LARS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLI CABLE LEGAL POSITION. 5. WE HAVE NOTED THAT THE IMPUGNED PENALTY HAS BEEN LEVIED BECAUSE THE ASSESSEE HAS NOT GIVEN COMPLETE DETAILS OF THE SERVICES FOR WHICH THE PAYMENT OF COMMISSION WAS MADE. THE ASSESSEE, HOWEVER, DID NOT SUBMI T THE PARTICULARS OF THIS CLAIM, QUANTUM OF COMMISSION PAID, AND ALSO HAS NO T FURNISHED CONFIRMATIONS FROM PERSONS TO WHOM THESE PAYMENTS HAVE BEEN MADE. I N EFFECT THUS, WHILE THE ASSESSEE HAS GIVEN THE BASIC DETAILS, THE CLAIM FOR DEDUCT ION HAS BEEN DECLINED ON THE GROUND THAT SPECIFIC DETAILS OF SERVICES ARE NOT SU BSTANTIATED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, WHILE SUCH NON-FURNISHING OF DETA ILS DOES INDEED DEPRIVE THE ASSESSEE OF DEDUCTION IN RESPECT OF COMMISSION SO PAID, AS H AS BEEN HELD IN OUR ORDER OF EVEN DATE DEALING WITH THE QUANTUM DISALLOW ANCE, IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY INASMUCH AS MERELY BECAUSE THE ASSE SSEE HAS NOT BEEN ABLE TO FURNISH THE DETAILS JUSTIFYING THE GRANT OF DEDUCTION IN RESPECT OF THE SAME, IT CANNOT BE INFERRED THAT THE AMOUNT SO CLAIMED AS DEDUCTION CONSTITUTE CONCEALED INCOME. THE ASSESSEE HAS GIVEN AN EXPLANATION WHICH HAS NOT BEEN FOUND TO BE REASONABLE BY US BUT THEN JUST BECAUSE THE ASSESSEES EXPLANATION IS NOT SU FFICIENT TO JUSTIFY THE CLAIM OF DEDUCTION, IT DOES NOT BY ITSELF LEAD TO THE CONCLUSION THAT IT IS A FIT CASE FOR IMPOSITION OF PENALTY ALSO. IN VIEW OF THESE DISCUSSIONS AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW T HAT THE IMPUGNED PENALTY IN RESPECT OF DISALLOWANCE OF COMMISSION IS NOT JUSTIFIED. WE, ACCORDINGLY, DELETE THE SAME. 6. GROUND NO.1 IS THUS ALLOWED. 7. IN SECOND GROUND, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THE LD CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIE D U/S.271(1)(C) OF THE INCOME TAX AT, 1961 ON ` `` ` .11,76,480 PAYABLE TO M/S. RAIPUR FLOUR MILLS PVT.LTD., ON ACCOUNT OF SALES I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 4 COORDINATION AND BUSINESS DEVELOPMENT EXPENSES WITH OUT APPRECIATING THE FACT THAT THE SAID LIABILITY IS CO NFIRMED BY M/S. RAIPUR FLOUR MILLS PVT. LTD. THEIR BALANCE SHEET SH OWING THE SAME AMOUNT RECEIVABLE FROM THE APPELLANT AND CREDIT NOT E FOR THE SAME MADE AVAILABLE EVEN DURING THE COURSE OF SURVE Y. 8. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONC ERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF SCR UTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SUM OF RS 15 ,67,521, SHOWN AS PART OF OTHER LIABILITIES, IS APPEARING IN THE NAME OF RA IPUR FLOUR MILLS PVT LTD. HOWEVER, WHEN A COPY OF ACCOUNT OF THE RAIPUR FLOUR MILLS PVT LTD WAS CALLED AND EXAMINED, THE ASSESSING OFFICER NOTED THAT THE AMOUNT DUE CONSISTS OF RS 11,76,480 BROUGHT FORWARD FROM OTHER YEARS AND COMM ISSION PAYABLE AMOUNTING TO RS 3,91,041. THE ASSESSEE DID NOT FURN ISH ANY FURTHER PARTICULARS IN THIS REGARD. DURING THE COURSE OF S URVEY PROCEEDINGS, HOWEVER, A CREDIT NOTE WAS FOUND WHICH WAS ISSUED BY THE ASS ESSEE IN FAVOUR OF RAIPUR FLOUR MILLS. AS NOTED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER, THIS CREDIT NOTE WAS FOR RS 15,67,521 AND IT WAS STATED TO BE FOR SALES COORDINATION AND BUSINESS DEVELOPMENT CHARGES FOR T HE PERIOD 1/4/92 TO 31/3/93. CONSIDERING THIS NARRATION AND ASSESSEES FAILURE TO GIVE ANY EXPLANATION REGARDING NATURE OF DEALINGS WITH RAIPU R FLOUR MILLS LTD, THE ASSESSING OFFICER PROCEEDED TO TREAT THE BALANCE A MOUNT, I.E. AMOUNT AS PER CREDIT NOTE AT RS 15,67,521 SHOWN IN THE LIABILITY SIDE AND THE AMOUNT SHOWN AS COMMISSION PAYABLE AT RS 3,91,041, WHICH WORKED OUT TO RS 11,76,480 AS UNEXPLAINED CREDIT IN THE HANDS OF THE ASSESSEE. T HE APPEAL FILED BY THE ASSESSEE BEFORE THE CIT(A) AS ALSO BEFORE US, DID N OT YIELD ANY RESULT. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDING S UNDER SECTION 271(1)(C) WERE INITIATED FOR FURNISHING INACCURATE PARTICULAR S OF INCOME. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) BUT WITHOUT ANY SUCCESS. AGGRIEVED FURTHER, THE ASSESSEE IS IN APPE AL BEFORE US. 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE IMPUGNED ADDITION HAS BEEN MADE BECAUSE THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT ACCEPTED DUE TO CERTAIN I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 5 INCONSISTENCY IN THE CLAIM OF THE ASSESSEE AND ENTR IES AS MADE IN THE BOOKS OF ACCOUNT. THE DISALLOWANCE WAS THUS MADE FOR ASSESS EES INABILITY TO GIVE FURTHER DETAILS AND RECONCILE THE ENTRIES. THERE W AS ABSOLUTELY A CONFUSION IN THE ACCOUNTING ENTRIES IN RESPECT OF THE AMOUNT PAY ABLE TO RAIPUR FLOUR MILLS PVT LTD., AND IT WAS IN CONSIDERATION OF THE MATERI AL PRODUCED BEFORE US THAT VIDE OUR ORDER OF EVEN DATE, WE UPHELD THE QUANTUM ADDITION AND THAT THE MERE FACT THAT THIS QUANTUM ADDITION HAS BEEN UPHEL D DUE TO ASSESSEES INABILITY TO GIVE FURTHER DETAILS OR INCONSISTENCY IN THE STAND VIS--VIS ACCOUNTING ENTRIES BY ITSELF DOES NOT LEAD TO THE C ONCLUSION THAT THE AMOUNTS REPRESENT CONCEALED INCOME. IT IS ONLY A CASE OF A SSESSEES INABILITY TO SUBSTANTIATE THE EXPLANATION GIVEN BY HIM. IN VIEW OF THIS DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE DO NOT THINK IT A FIT CASE FOR IMPOSITION OF PENALTY. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE SAME. 10. GROUND NO.2 IS THUS ALLOWED. 11. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: THE LD CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIE D U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 FOR ADDIT ION ON ACCOUNT OF COMMISSION OF ` `` ` .2,06,400 WITHOUT APPRECIATING THE FACT THAT THE COMMISSION RECEIVED ACCOUNT AND COMMISSION PAID ACCOUNT IS SHOWN ON NET BASIS IN TH E PROFIT AND LOSS ACCOUNT, HENCE COMMISSION INCOME OF ` `` ` .2,06,400 DULY ACCOUNTED IN THE BOOKS AND, THEREFORE, THERE I S NO CONCEALMENT OF INCOME. 12. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSING OFFICER NOTICED THAT WHILE, AS PER TDS CERTIFICATES ON RECORD, THE ASSESSEE HAS A COMM ISSION INCOME OF RS 2,06,440, NO SUCH INCOME IS REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE SHOW CAUSE NOTICE ISSUED BY THE ASSES SING OFFICER REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THIS COMMISSION IN COME NOT BE ADDED TO THE INCOME, APPARENTLY DID NOT YIELD ANY REPLY FROM THE ASSESSEE. IT WAS IN THIS BACKGROUND THAT THE ASSESSING OFFICER MADE AN ADDIT ION OF RS 2,06,440 IN RESPECT OF COMMISSION INCOME OF RS 2,06,440. THE CI T(A) CONFIRMED THE I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 6 SAME. THE AO ALSO INITIATED PENALTY PROCEEDINGS A ND AFTER CONSIDERING THE ASSESSEES SUBMISSION, LEVIED PENALTY FOR WILLFULLY SUPPRESSED THE COMMISSION INCOME. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 13. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT WHILE IT HAS BEEN THE CLAIM OF THE ASSESSEE THAT INCOME OF ` .2,06,440 HAS ALREADY BEEN INCLUDED IN THE COMMISSI ON ACCOUNT, THERE IS NOTHING ON RECORD TO SUBSTANTIATE THE CLAIM SO MADE AND IT IS FOR THIS REASON THAT THE RELATED QUANTUM ADDITION HAS BEEN CONFIRME D BY US VIDE OUR ORDER OF EVEN DATE. EVEN IN THE COURSE OF PENALTY PROCEEDIN GS, NO ATTEMPT HAS BEEN MADE BY THE ASSESSEE TO SUBSTANTIATE THE CLAIM THAT SUM OF ` .2,06,440 IS INCLUDED IN THE COMMISSION ACCOUNT AND ONLY THE NET FIGURE HAS BEEN OFFERED TO TAX. IN THESE CIRCUMSTANCES AND IN THE ABSENCE OF ANYTHING TO EVEN SUPPORT THE CLAIM OF THE ASSESSEE, WE SEE NO REASON TO INTE RFERE IN THE ORDERS OF THE AUTHORITIES BELOW ON THIS POINT. WHEN THE ASSESSEE HAS NO EXPLANATION OR ASSESSEES EXPLANATION REMAINS TOTALLY UNSUBSTANTIA TED, THE PENALTY HAS TO BE UPHELD. ACCORDINGLY, WE UPHOLD THE PENALTY. 14. GROUND NO.3 IS THUS DISMISSED. 15. IN GROUND NO.4, THE ASSESSEE HAS RAISED THE FOL LOWING GRIEVANCE: THE LD CIT(A) ERRED IN UPHOLDING THE PENALTY LEVIE D U/S.271(1)(C) OF THE INCOME TAX ACT, WITHOUT APPREC IATING THE FACT THAT THERE IS NO CONCEALMENT OF INCOME AS INTEREST INCOME OF ` `` ` .40,856 HAS BEEN ACCOUNTED IN A.Y. 1994-95. 16. SO FAR AS THE ABOVE GRIEVANCE IS CONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE RELATED QUANTUM ADDITION HAS B EEN MADE IN THIS YEAR BECAUSE TDS CERTIFICATE DID NOT PERTAIN TO THIS YEA R. THE ASSESSEE HAS OFFERED THIS INCOME TO TAX IN THE SUBSEQUENT ASSESSMENT YEA R BECAUSE THE ASSESSEE RECEIVED TDS CERTIFICATE LATER. VIDE OUR ORDER OF EVEN DATE, WE HAVE HELD THAT THE AMOUNT OF THE INCOME HAS BEEN RIGHTLY BROUGHT T O TAX IN THIS YEAR AND WE I .T.A NO.9599/ MUM/2004 ASSESSMENT YEAR: 1993-94 7 HAVE DIRECTED THAT IN THE SUBSEQUENT ASSESSMENT YEA R IN WHICH THE ASSESSEE HAS OFFERED THE SAME TO TAX, THE ADDITION MAY BE DE LETED. IN EFFECT THUS, THE ENTIRE CONTROVERSY ONLY SURROUNDED THE QUESTION AS TO IN WHICH YEAR THIS INCOME IS TO BE TAXED. HOWEVER, ON THIS QUANTUM AD DITION ALSO, THE AO HAS IMPOSED PENALTY UNDER SECTION 271(1)(C), WHICH HAS BEEN CONFIRMED IN APPEAL BY THE CIT(A). THE ASSESSEE IS NOT SATISFIE D AND IS IN FURTHER APPEAL BEFORE US. 17. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING P ERUSED THE MATERIAL ON RECORD, WE FIND THAT IT IS A CLEAR NOT A CONCEALMEN T OF INCOME BUT THE DISPUTE IS CONFINED TO QUESTION AS TO WHICH YEAR THE INCOME HAS TO BE TAXED. WHILE THE ASSESSEE HAS CLAIMED THAT THE INCOME IS TO BE T AXED IN SUBSEQUENT YEAR, WE HAVE UPHELD THE AOS STAND TO THE EFFECT THAT TH E INCOME IS TO BE TAXED IN THE CURRENT YEAR. THIS DISPUTE, IN OUR CONSIDERED OPINION, BY NO STRETCH OF IMAGINATION, BE TREATED AS A CONCEALMENT OF INCOME. WE, THEREFORE, DELETE THE IMPUGNED PENALTY. 18. GROUND NO.4 IS THUS ALLOWED. 19. IN THE RESULT, APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2011 SD/- (R.V.EASWAR) PRESIDENT SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER MUMBAI, DATED 5 TH AUGUST, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),IV, MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY-IV , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI