ACIT CIR - 18(2), MUMBAI V. M/s. JEXPORT, MUMBAI

ITA 972/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7798 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 02-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 02-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Keywords: Recovery proceedings
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI N.V.VASUDEVAN, JM ITA NO.972/MUM/2007 : ASST.YEAR 2001-2002 THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 18(2) MUMBAI. VS. M/S.JEXPORT PLOT NO.505, PRAKASH POWER LAUNDRY BLDG. V.S.AGAHE LANE, OFF S.B.MARG DADAR, MUMBAI 400 028. PA NO.AAAF0754C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI L.K.AGRAWAL RESPONDENT BY : SHRI PRAKASH PANDIT O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 8.11.2006 D ELETING THE PENALTY OF RS.1,35,37392 IMPOSED BY THE ASSESSING OFFICER U/S. 271(1)(C) IN RELATION TO THE ASSESSMENT YEAR 2001-2002. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS CARRYING ON THE BUSINESS OF MANUFACTURING. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS U/S.143(3) THE ASSESSING OFFICER NOTED THE REMARK IN THE AUDIT REPORT : THE QUANTITATIVE DETAILS OF THE STOCK IS NOT MADE AVAILABLE FOR VERI FICATION TO THE AUDITORS. IT WAS NOTICED THAT NO DETAILS IN RESPECT OF STOCK VIS--V IS VALUE OF SALE WERE FILED. THE BOOKS RESULT SHOWN BY THE ASSESSEE WERE REJECTED AN D THE LOSS OF RS.3,45,34,160 CLAIMED BY THE ASSESSEE WAS DISALLOWED. ACCORDINGLY PENALTY PROCEEDINGS WERE INITIATED U/S.271(1)(C) IN THIS RESPECT. DURING THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE FILED REPLY THAT THE DETAILS CALLED FOR DU RING THE ASSESSMENT PROCEEDINGS WERE NOT READILY AVAILABLE DUE TO CERTAIN REASONS B EYOND THE ASSESSEES CONTROL AND THE SAME WERE FILED VIDE ASSESSEES LETTER DATED 24 .3.2004. THE LEARNED A.O. OBSERVED THAT THE DISALLOWANCE OF LOSS MADE IN THE ASSESSMENT PROCEEDINGS WAS UPHELD BY THE LEARNED CIT(A) AND NO SECOND APPEAL W AS FILED BY THE ASSESSEE. HE, THEREFORE, IMPOSED PENALTY FOR CONCEALMENT. THE LE ARNED CIT(A), HOWEVER, ON THE ITA NO.972/MUM/2007 M/S.JEXPORT. 2 PERUSAL OF VARIOUS DETAILS FILED BEFORE HIM, CAME TO THE CONCLUSION THAT THE PENALTY WAS NOT EXIGIBLE FOR TWO REASONS, VIZ., FIRSTLY TH E JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PRITHIPAL SINGH AND CO. [(2001) 249 ITR 670 (SC)] AND SECONDLY ON MERITS OF THE CASE THE ASSESSEE H AS DISCHARGED THE ONUS CAST UPON IT AS PER EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. INSOFAR AS THE RELIANCE OF THE LEARNED CIT( A) ON THE JUDGEMENT OF THE HONBLE APEX COURT IN PRITHIPAL SINGH AND CO.(SUPRA) IS CONCERNED WE FIND THAT THE SAME IS NO MORE GOOD LAW IN VIEW OF THE LATER D ECISION BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. GOLD COIN HEALTH FOOD P.LTD. [(2008) 304 IT R 308 (SC)] . THIS FINDING GIVEN BY THE LEARNED CIT(A) IS, THER EFORE, VACATED. 4. COMING TO THE MERITS OF THE PENALTY WE FIND T HAT THE ASSESSEE CLAIMED LOSS OF RS.3.45 CRORE WHICH WAS NOT ALLOWED FOR THE REASON THAT THE ASSESSEE HAD NOT FURNISHED ANY EXPLANATION. AS AGAINST THE PASSING O F ASSESSMENT ORDER ON 19.3.2004, THE ASSESSEE FILED DETAILS CALLED FOR BY THE A.O. VIDE ITS LETTER DATED 24.3.2004 I.E. AFTER PASSING OF THE ASSESSMENT ORDE R. OBVIOUSLY SUCH DETAILS COULD NOT HAVE BEEN TAKEN INTO CONSIDERATION AT THE TIME OF PASSING OF THE ASSESSMENT ORDER. HOWEVER WHEN PENALTY PROCEEDINGS WERE INITIA TED, THE ASSESSEE REFERRED TO ITS LETTER FILED WITH THE A.O. ON 24.3.2004 GIVING COMPLETE DETAIL ABOUT THE STOCK SOLD AT LOWER PRICES. IT WAS SPECIFICALLY MENTIONED THAT ALL THE BUSINESS OPERATIONS WERE CLOSED AND THE BANK, AFTER STOPPING CREDIT LIM ITS STARTED RECOVERY PROCEEDINGS. IT WAS ALSO STATED THAT THERE WAS TREMENDOUS PRESSU RE FROM CREDITORS FOR GOODS AND FOR EXPENSES. THE ASSESSEE WAS LEFT WITH NO ALTERNA TIVE BUT TO DISPOSE OF AND LIQUIDATE THE STOCK AT WHATEVER BEST PRICE AVAILABL E SO AS TO MEET THE FIXED AND RECURRING COSTS. IT WAS FURTHER STATED THAT THE OP ENING STOCK WAS LYING WITH VARIOUS JOB WORKERS IN SEMI-FINISHED / FINISHED FORM AND SI NCE THE EXPORT ORDERS GOT CANCELLED, THE ASSESSEE DID NOT HAVE MONEY TO LIFT GOODS. AS AND WHEN THE ITA NO.972/MUM/2007 M/S.JEXPORT. 3 SETTLEMENT WAS MADE WITH SUPPLIERS, THE JOB WORKERS WERE PAID BY SELLING THE GOODS AT THE BEST AVAILABLE MARKET PRICES. IT IS A MATTER OF RECORD THAT THE ASSESSEE SOLD ITS PLANT AND MACHINERY DURING THE YEAR WHICH IS EVIDEN T FROM THE COPY OF PROFIT AND LOSS ACCOUNT PLACED ON RECORD. THE LEARNED A.R. FUR THER CONTENDED THAT IT WAS THE LAST YEAR OF THE BUSINESS OPERATIONS AND DUE TO CON TINUED LOSSES, THE BUSINESS WAS CLOSED. 5. NOW WE COME TO THE VIEW POINT OF THE A SSESSING OFFICER THAT IN VIEW OF THE CONFIRMATION OF ADDITION BY THE LEARNED CIT(A), THE PENALTY SHOULD AUTOMATICALLY FOLLOW IF NO APPEAL IS FILED IN QUANT UM PROCEEDINGS BEFORE THE TRIBUNAL. WE ARE UNABLE TO SUBSCRIBE TO THIS VIEW F OR THE REASON THAT PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEE DINGS. THE ASSESSEE HAS EVERY RIGHT TO MAKE OUT A CASE FOR NON-IMPOSITION OF PENA LTY EVEN IF THE ADDITION HAS BEEN SUSTAINED OR NO APPEAL IS FILED. THERE IS NO DEARTH OF JUDGMENTS/ TRIBUNAL ORDERS HOLDING SO. THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. BALRAJ SAHANI [(1979) 119 ITR 36 (BOM.)] HAS HELD ACCORDINGLY. 6. NOW TURNING TO THE MERITS OF THE PENALTY IT IS OBSERVED THAT THE ASSESSEE SUFFERED LOSS ON THE SALE OF THE LEFT OVER STOCK D UE TO THE CANCELLATION OF EXPORT ORDERS AND DOWNWARD TREND IN ITS BUSINESS, WHICH EV ENTUALLY ENDED WITH THE CLOSURE OF THE BUSINESS. UNDER THESE COMPELLING CI RCUMSTANCES AND TREMENDOUS MENTAL PRESSURE TO COME OUT OF THE PILING FINANCIAL OBLIGATIONS, THE ASSESSEE WAS LEFT WITH NO ALTERNATIVE TO DISPOSE OF THE STOCK AT THE BEST AVAILABLE PRICES. THE BANK HAD ALSO STOPPED THE EXTENSION OF CREDIT FACIL ITIES AND RATHER PROCEEDED TO RECOVER THE AMOUNT ALREADY ADVANCED. IN SUCH A SITU ATION THE ASSESSEE HAD NO ALTERNATIVE BUT TO PROCEED IN THE MANNER IN WHICH I T DID. EVEN THOUGH THE RELEVANT DETAILS AND EXPLANATION WAS FILED BY THE ASSESSEE A FTER THE PASSING OF THE ASSESSMENT ORDER, THE SAME OUGHT TO HAVE BEEN CONSI DERED BY THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS, TO WHICH THE AOS ATTEN TION WAS DRAWN DURING THE ITA NO.972/MUM/2007 M/S.JEXPORT. 4 PENALTY PROCEEDINGS. PAGES 6 TO 9 ARE ITEM-WISE DE TAIL OF QUANTITY AND RATE AT WHICH GOODS WERE SOLD. SUCH DETAILS, THOUGH AVAILAB LE WITH THE AO AT THE TIME OF PASSING PENALTY ORDER, HAVE NOT BEEN ADVERSELY CO MMENTED UPON BY THE ASSESSING OFFICER. EXPLANATION (1) TO SECTION 271(1)(C) CLEARLY PROVIDES THAT THE AMO UNT ADDED OR DISALLOWED SHALL BE DEEMED TO REPRESENT TH E INCOME IF THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE A.O. TO BE FALSE OR THE ASSESSEE OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY HIM.HERE IS A CASE IN WHICH THE ASSESSEE TENDERED COMPLETE EXPL ANATION ABOUT SALE OF GOODS DURING THE PENALTY PROCEEDINGS. THE ASSESSING OFFI CER DID NOT FIND ANYTHING WRONG WITH SUCH EXPLANATION. IN VIEW OF THE FACT TH AT THE ASSESSEE DID SELL ITS GOODS AT CHEAPER PRICES SO AS TO OVERCOME THE FINANCIAL B URDEN ON IT, WE FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS BONA FIDE . THE MUMBAI BENCH OF THE TRIBUNAL IN ACIT VS. VIP INDUSTRIES LTD. [(2009) 30 SOT 254] HAS HELD THAT NO PENALTY CAN BE IMPOSED WHEN THE EXPLANATION GIVEN BY THE ASSESS EE IS BONA FIDE AND THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME WERE DISCLOSED BY HIM. THE VIEW TAKEN BY THE LEARNED CIT (A) , BEING IN CONSONANCE WITH THE FINDING OF THE MUMBAI BENCH OF THE TRIBUNA L IN THE AFORE NOTED CASE, DOES NOT CALL FOR ANY INTERFERENCE. WE, THEREFORE, UPHOL D THE IMPUGNED ORDER. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF FEBRUARY, 2010. SD/- SD/- (N.V.VASUDEVAN) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI : 3 RD FEBRUARY, 2010. DEVDAS* ITA NO.972/MUM/2007 M/S.JEXPORT. 5 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A)-XVIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI. ITA NO.972/MUM/2007 M/S.JEXPORT. 6 DATE INITIAL 1. DRAFT DICTATED ON 02.02.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 02.02.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 9. DATE OF DISPATCH OF ORDER. *