Kantilal Kothari L/h of late Bhanwarlal S.Kothari, Ahmedabad V. The ACIT.,(OSD)Ward-2(1), Ahmedabad

ITA 962/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9006 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 05-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MITESH KOTHARI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.962/AHD/2007 A. Y.: 2001-02 LATE BHAWANWARILAL S. KOTHARI, THROUGH LEGAL HEIR KANTILAL KOTHARI, 704/3, SIR CHINUBHAI BUILDING, CROSS LANE, AHMEDABAD PA NO. ABHPK 5973 E VS THE A. C. I. T. (OSD), WARD -2(1) AHMEDABAD, (APPELLANT) (RESPONDENT) ITA NO.963/AHD/2007 A.Y.: 2001-02 SMT. LALITABEN K. S. KOTHARI, PROP. OF M/S. KOTHARI TEXTILEXS, 704/3, SIR CHINUBHAI BUILDING, CROSS LANE, AHMEDABAD PA NO. ABHPK 5971 G VS THE A. C. I. T. (OSD), WARD -2(1) AHMEDABAD, (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MITESH KOTHARI RESPONDENT BY SHRI SANJEEV KASHYAP, DR O R D E R PER BHAVNESH SAINI: BOTH THE APPEALS BY DIFFERENT ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A) -VI, AHMEDABAD FOR ASSESSMENT YEAR 2001-02, CHALLENGING THE LEVY OF PE NALTY U/S 271 (1) (C) OF THE INCOME TAX ACT. SINCE THE ISSUES ARE COMMON IN BOTH THE APPEALS, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER AND THE SAME ARE DISPOSED OFF THROUGH THIS CONSOLIDATED ORDER. ITA NOS.962 AND 963/AHD/2007 LATE BS KOTHARI AND SMT. LALITABEN KS KOTHARI 2 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSI DERED THE MATERIAL AVAILABLE ON RECORD. ITA NO.962/AHD/2007 3. THE LEARNED CIT(A) NOTED IN THE IMPUGNED ORDER T HAT THE PENALTY IS IMPOSED WITH REGARD TO DISALLOWANCE OF COMMISSION P AID TO SHRI V. K. KOTHARI IN A SUM OF RS.20,000/- AND BOGUS PURCHASES OF RS.1,46,172/-. THE LEARNED CIT(A) AS REGARDS COMMISSION PAID TO V. K. TEXTILES OF RS.20,000/- NOTED THAT THE LEARNED CIT(A) ON QUANTU M UPHELD THE ADDITION BECAUSE NO EVIDENCE WAS FILED IN SUPPORT O F THE SAME. THE LEARNED CIT(A) FURTHER NOTED THAT SINCE NO DETAILS WERE MADE AVAILABLE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AS WELL AS BEFORE THE LEARNED CIT(A), THEREFORE, PENALTY SO IMPOSED BY TH E AO ON ACCOUNT OF EXCESS PAYMENT IS JUSTIFIED. AS REGARDS BOGUS PURCH ASES ARE CONCERNED, THE LEARNED CIT(A) FURTHER NOTED THAT THE ASSESSEE HAD PURCHASED GREY CLOTHES FROM V. K. TEXTILES AND KUSUM TEXTILES, BUT THE PURCHASERS COULD NOT BE VERIFIED AND NO SHIFTING OF THE PARTIES FROM THE ADDRESS HAVE BEEN PROVIDED. THE PURCHASERS ARE, THEREFORE, UNVERIFIAB LE AND PENALTY WAS ACCORDINGLY CONFIRMED. 4. THE ASSESSEES REPRESENTATIVE FILED COPY OF THE ORDER OF THE ITAT AHMEDABAD D BENCH IN THE CASE OF THE ASSESSEE IN ITA NO.3380/AHD/2004 DATED 24-7-2009 WHEREBY ADDITION O N ACCOUNT OF BOGUS PURCHASES HAVE BEEN DELETED. HE HAS, THEREFOR E, SUBMITTED THAT PENALTY MAY BE CANCELED TO THAT EXTENT. HOWEVER, AS REGARDS ADDITION OF COMMISSION PAID TO SHRI V. K. KOTHARI, THIS GROUND WAS NOT PRESSED BEFORE THE TRIBUNAL. THEREFORE, ADDITION WAS CONFIR MED. HE HAS NOT MADE FURTHER SUBMISSION AS TO WHY PENALTY IS NOT JUSTIFI ED IN THE MATTER. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT SINCE THE ASSESSEE DID NOT MAKE ANY SUBMISSION ON THE ADDITION MADE ON ACCOUNT OF BOGUS COMMISSION BEFORE THE AO AS WELL AS BEFORE THE LEAN ED CIT(A), THEREFORE, ITA NOS.962 AND 963/AHD/2007 LATE BS KOTHARI AND SMT. LALITABEN KS KOTHARI 3 THE ASSESSEE HAS NO EXPLANATION TO OFFER FOR CANCEL LATION OF THE PENALTY. THEREFORE, PENALTY TO THAT EXTENT MAY BE CONFIRMED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. AS REGARDS PENALTY IMPOSED ON A CCOUNT OF BOGUS PURCHASES IN A SUM OF RS.1,46,172/- IS CONCERNED, T HE TRIBUNAL HAS DELETED, THE ADDITION, THEREFORE, NOTHING SURVIVE I N FAVOUR OF THE REVENUE FOR SUSTAINING OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT. THE PENALTY TO THAT EXTENT IS ACCORDINGLY CANCELLED. HOWEVER, AS R EGARDS PENALTY IMPOSED ON ACCOUNT OF DISALLOWANCE OF COMMISSION PA ID TO SHRI V. K. KOTHARI IN A SUM OF RS.20,000/-, THE ASSESSEE HAS N OT OFFERED ANY EXPLANATION BEFORE THE AO AT THE PENALTY STAGE OR I N THE QUANTUM PROCEEDINGS. THE ASSESSEE AT THE PENALTY STAGE MERE LY SUBMITTED THAT THE MATTER MAY BE KEPT IN ABEYANCE BECAUSE APPEAL ON QU ANTUM IS PENDING. NO OTHER EXPLANATION IS OFFERED TO EXPLAIN AS TO WH Y THE PENALTY SHOULD NOT BE IMPOSED AGAINST THE ASSESSEE. IT WOULD, THER EFORE, PROVE THAT THE ASSESSEE HAS NO EXPLANATION TO OFFER TO EXPLAIN THE COMMISSION PAYMENT. EXPLANATION 1 TO SECTION 271(1) ( C ) OF THE IT ACT READS AS UNDER: [EXPLANATION 1.WHERE IN RESPECT OF ANY FACTS MATE RIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE [ASSESSING] OFFICER OR THE [C OMMISSIONER (APPEALS)] [OR THE COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE [AND FAILS TO PROVE THAT SUCH EXPLANAT ION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6. SINCE IN THIS CASE, THE ASSESSEE HAS FAILED TO O FFER ANY EXPLANATION AND THAT THE ASSESSEE HAS FAILED TO PROVE THAT SUCH EXPLANATION IS BONA ITA NOS.962 AND 963/AHD/2007 LATE BS KOTHARI AND SMT. LALITABEN KS KOTHARI 4 FIDE, THE AUTHORITIES BELOW WERE JUSTIFIED IN HOLDI NG THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. HONBLE DELHI HIGH COURT IN THE CASE OF KAMAL CHAND JAIN VS ITO 277 ITR 429 (DEL) HELD THAT IT IS THE OBLIGATION ON THE ASSESSEE TO SUBSTANTIALLY SUPPORT HIS EXPLANATION IN ALL REASON ABLE MANNERS. NO PROPER EXPLANATION FROM THE ASSESSEE EXCEPT SURREND ERING CERTAIN AMOUNT FOR TAXATION TO BUY PEACE AND AVOID FURTHER LITIGATION. LEVY OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT JUSTIFIED. HONBLE M. P. HIGH COURT IN THE CASE OF VIMAL GINNING AND PRESSING FACTORY V S CIT 279 ITR 100 (MP) HELD THAT WHEN NO SATISFACTORY EXPLANATION IS GIVEN REGARDING THE ADDITION OF AMOUNTS FROM UNDISCLOSED SOURCES, PENAL TY IS JUSTIFIED. HONBLE M. P. HIGH COURT IN THE CASE OF RUKMINI BAI VS CIT 276 ITR 650 (MP) HELD THAT WHEN EXPLANATION OF THE ASSESSEE OFF ERED AT THE TIME OF ASSESSMENT WAS NOT ACCEPTED AND NO EXPLANATION OFFE RED WHEN PENALTY PROCEEDINGS INITIATED, EXPLANATION OFFERED EARLIER CANNOT BE TAKEN INTO CONSIDERATION FOR REFERENCE. PENALTY JUSTIFIED. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AS NOTED ABOVE, IT IS CLEAR THAT THE ADDITION ON ACCOUNT OF DISALLOWANCE OF COMMISSION IS CONFIRMED BY THE LEARNED CIT(A) AND T HE ASSESSEE ACCEPTED THE ADDITION BEFORE THE TRIBUNAL. IT, THEREFORE, ST ANDS PROVED THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION EITHER AT THE STAGE OF QUANTUM OR AT THE PENALTY PROCEEDINGS. THEREFORE, EXPLANATI ON 1 TO SECTION 271 (1) ( C ) OF THE IT ACT IS CLEARLY ATTRACTED. IMPOSITIO N OF PENALTY IS, THEREFORE, JUSTIFIED. WE ACCORDINGLY CONFIRM IMPOSITION OF PEN ALTY U/S 271 (1) ( C ) OF THE IT ACT ON ACCOUNT OF DISALLOWANCE OF COMMISSION . APPEAL OF THE ASSESSEE TO THAT EXTENT IS DISMISSED. APPEAL PARTLY ALLOWED. ITA NO.963/AHD/2007 8. THE LEARNED CIT(A) NOTED THAT PENALTY IS IMPOSED ON ACCOUNT OF GROSS PROFIT ADDITION OF RS.2,84,870/-. IN THE ABSE NCE OF ANY EXPLANATION ITA NOS.962 AND 963/AHD/2007 LATE BS KOTHARI AND SMT. LALITABEN KS KOTHARI 5 FROM THE SIDE OF THE ASSESSEE, THE LEARNED CIT(A) C ONFIRMED THE PENALTY. THE ASSESSEES REPRESENTATIVE FILED COPY OF THE ORD ER OF THE TRIBUNAL AHMEDABAD BENCH IN THE CASE OF THE ASSESSEE FOR SAM E ASSESSMENT YEAR IN ITA NO.3382/AHD/2004 DATED 07-08-2009 WHEREBY TH E TRIBUNAL DELETED THE ADDITION OF RS.2,84,870/- ON ACCOUNT OF GROSS PROFIT ADDITION. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND CANCEL THE PENALTY BECAUSE THERE IS NO BASIS LEFT FOR IMPO SITION OF PENALTY ON THAT ISSUE. THE APPEAL OF THE ASSESSEE TO THAT EXTE NT IS ALLOWED. 9. HOWEVER, AS REGARDS PENALTY IMPOSED ON ACCOUNT O F COMMISSION PAID TO SHRI V. K. KOTHARI OF RS.4,150/-, WE MAY NO TE THAT THE ISSUE IS SAME AS IS CONSIDERED IN EARLIER APPEAL IN ITA NO.9 62/AHD/2007. BY FOLLOWING THE SAME ORDER WE CONFIRM THE ORDERS OF T HE AUTHORITIES BELOW AND UPHOLD THE PENALTY U/S 271 (1) ( C ) OF THE IT ACT ON THAT AMOUNT. AS A RESULT, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 10. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 11. AS A RESULT, BOTH THE APPEALS ARE PARTLY ALLOWE D. ORDER PRONOUNCED ON 05-02-2010 SD/- SD/- (A. N. PAHUJA) ACOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 05-02-2010 LAKSHMIKANT/- ITA NOS.962 AND 963/AHD/2007 LATE BS KOTHARI AND SMT. LALITABEN KS KOTHARI 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD