M/s. Ishwar Arts, Mumbai V. The Income tax Officer,Ward-2(2), Baroda

MA 115/AHD/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8863 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 1993-1994
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Diversion of income; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) M. A. NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 AY: 1993-94) M/S. ISWAR ARTS, 4 TH FLOOR, KAMANI MARG, BELLARD ESTATE, MUMBAI, P. A. NO. AAEFM 1875 B VS THE INCOME TAX OFFICER, WARD-2 (2), BARODA (APPLICANT) (RESPONDENT) APPLICANT BY SHRI MEHUL K. PATEL, AR RESPONDENT BY SHRI D. K. SINGH, SR. DR DATE OF HEARING: 03-08-2012 DATE OF PRONOUNCEMENT: 09-08-2012 ORDER PER A. MOHAN ALANKAMONY : THIS MISC. APPLICATION IS FILED BY THE ASSESSEE SEEKING RECALLING THE ORDE R PASSED BY THE TRIBUNAL IN ITA NO.3631/AHD/2008 FOR ASSESSMENT YEA R 1993-94 DATED 02-03-2012. 2. IN THE MISC. PETITION, THE ASSESSEE HAS GIVEN EL ABORATE SUBMISSIONS. THE SAME IS REPRODUCED FOR REFERENCE H EREIN BELOW: (1) THAT THE ABOVE APPEAL FILED BY THE ASSESSEE AGA INST LEVY OF PENALTY U/S 271 (1) (C) OF THE ACT WAS HEARD ON 19.01.2012. THE PENALTY IS LEVIED ON ACCOUNT OF ALL EGED DIVERSION OF INCOME TO SISTER CONCERN NAMELY M/S. M ILTON EXPORTS. MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 2 (2) AT THE TIME OF HEARING OF THIS APPEAL, IT WAS P OINTED OUT BY THE ADVOCATE FOR THE ASSESSEE, SHRI MEHUL K. PATEL THAT EXACTLY ON THIS SIMILAR ISSUE, PENALTY WAS LEVIED I N THE CASE OF OTHER TWO SISTER CONCERNS NAMELY M/S VIKRAM PLASTICS AND M/S PANORAMA PLASTICS AND THE APPEALS IN THOSE CASES BEARING ITA.NOS. 1444/2008 AND 1445/200 8 WAS REFERRED TO HON'BLE THIRD MEMBER, AND THE HON'B LE THIRD MEMBER HAD HEARD THE APPEALS ON 16.01.2012, A ND THE ORDER WAS AWAITED. IN THE CIRCUMSTANCES, IT WAS SUBMITTED BY SHRI MEHUL K. PATEL, ADVOCATE THAT THE ABOVE APPEAL MAY BE HEARD AND WHATEVER DECISION IS TAKEN BY HON'BLE THIRD MEMBER IN THE GROUP CASES AS STATED ABOVE, MAY KINDLY BE FOLLOWED IN THIS APPEAL ALSO. THE LEARNED DR ALSO AGREED TO THIS PROPOSITION AND ON THIS BASIS, THE APPEAL WAS TREATED AS HEARD. (3) HOWEVER, ON PERUSAL OF THE ORDER DATED 2.3.2012 , IT IS SEEN THAT THERE IS NO REFERENCE TO THE APPEALS OF G ROUP CASES AND THE ORDER OF HON'BLE THIRD MEMBER AND THE ENTIRE APPEAL IS DECIDED AND DISMISSED ON MERITS. I T IS RESPECTFULLY SUBMITTED THAT THE APPEAL WAS NEVER AR GUED ON MERITS AT ALL BY EITHER SIDE AND THE APPEAL WAS TREATED AS COVERED BY WHATEVER DECISION WAS TO BE RENDERED IN THE CASES OF M/S VIKRAM PLASTICS AND M/S PANORAMA PLASTICS. IN FACT, THE HONBLE THIRD MEMBER HAS DEC IDED THOSE APPEALS IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 25.01.2012 WHEREBY THE PENALTY LEVIED ON SIMILAR IS SUE U/S 271(1) (C) IS DELETED AND THE ASSESSEE'S APPEAL S ARE ALLOWED. THE SAID ORDER IS ANNEXED HEREWITH AS ANNE XURE 'A'. THE EFFECT TO THE SAID ORDER OF HON'BLE THIRD MEMBER IS ALSO GIVEN BY DIVISION BENCH VIDE ORDER DATED 17.02.2012. THE SAID ORDER IS ANNEXED AS ANNEXURE ' B'. (4) HENCE, IT IS RESPECTFULLY SUBMITTED THAT THE AB OVE ORDER DATED 02.03.2012 MAY KINDLY BE RECALLED, AND/OR MOD IFIED AS STATED ABOVE, AND OBLIGE. MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 3 3. THE LEARNED AR HUMBLY SUBMITTED BEFORE US THAT D UE TO THE ABOVE SAID REASONS HE WAS PREVENTED FROM ARGUING TH E CASE ON MERITS SINCE HE WAS UNDER THE IMPRESSION THAT THE B ENCH WOULD FOLLOW THE DECISION OF THE THIRD MEMBER CITED SUPRA. THE L EARNED AR FURTHER SUBMITTED BEFORE US THAT ORDER OF THE THIRD MEMBER IN THE CASE OF VIKRAM PLASTIC VS ITO CITED IN 136 ITD 275 AND ARGU ED THAT WITH RESPECT TO THE IDENTICAL ISSUE VIZ. DIVERSION OF INCOME BY SALE TO SISTER CONCERN (WHOSE BUSINESS ACTIVITY IS EXPORT) AT A LESSER SELLING PRICE IN ONE OF THE GROUP CONCERNS HONBLE VICE PRESIDEN T HAS HELD THAT PENALTY CANNOT BE IMPOSED AND SINCE T HE BENCH HAD AGREED TO FOLLOW THE DECISION OF THE THIRD MEMBER C ITED SUPRA, THE EARLIER ORDER PASSED BY THE TRIBUNAL MAY BE RECALLE D AND RELIEF MAY BE GRANTED TO THE ASSESSEE. 4. THE LEARNED DR ON THE OTHER HAND OPPOSED TO THE SUBMISSION OF THE LEARNED AR AND PRAYED THAT THE ORDER OF THE TRIBUNAL MAY BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. WE DO AGREE TO THE SUBMISSIONS OF THE LEARNED AR. AT THE TIME OF HEARING, THE LEARNED AR HAD STAT ED THAT ON AN IDENTICAL ISSUE WITH RESPECT TO ONE OF THE GROUP CO NCERNS WAS PENDING BEFORE THE THIRD MEMBER AND DECISION WAS AWAITED. T HE LEARNED AR HAD ALSO REQUESTED THE BENCH TO FOLLOW THE DECISION OF THE THIRD MEMBER IN THE PRESENT ASSESSEES CASE AND FURTHER H E PROMISED TO FURNISH THE DECISION OF THE THIRD MEMBER SHORTLY; H OWEVER, HE HAD NOT COMPLIED WITH THE PROMISE. THE CASE WAS HEARD ON 19 -01-2012 AND MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 4 AFTER WAITING FOR A LONG PERIOD THE BENCH PROCEEDED TO PASS THE ORDER ON 02-03-2012. THUS THOUGH THERE WAS A LACKNESS ON THE PART OF LEARNED AR, IT IS PERTINENT TO MENTION THAT THE THI RD MEMBER DECISION WHICH WAS PASSED ON 25-01-2012 IS BINDING ON THE TR IBUNAL FOR THE SUBSEQUENT DECISIONS AND SINCE THE SAME WAS NOT MAD E AVAILABLE BEFORE THE BENCH, IT COULD NOT BE CONSIDERED WHILE PASSING ORDER ON 02-03-2012,. THUS FOR NON CONSIDERATION AND FOLLOW ING THE EARLIER ORDER PASSED BY THE TRIBUNAL IT COULD BE CONSTRUED TO BE A MISTAKE APPARENT ON THE ORDER OF THE TRIBUNAL WHICH REQUIRE D TO BE RECTIFIED. FURTHER ON PERUSING THE FACTS OF THE CASE, WE FIND THE ISSUE DECIDED BY THE HON. THIRD MEMBER IN THE CASE CITED ABOVE TO BE IDENTICAL AS SUBMITTED BY THE LEARNED AR I.E. DIVERSION OF INCOME BY SALES TO SISTER CONCERN (WHOSE BUSINESS ACTIVITY IS EXPORT) FOR A LOWER PRICE . THE HONBLE VICE PRESIDENT, MR. G. C. GUPTA (THIR D MEMBER) HAD DELETED THE PENALTY ON THIS ISSUE FOR THE FOLLO WING REASONS:- REGARDING THE OTHER ISSUE OF PENALTY LEVIED FOR DI VERSION OF INCOME BY SALE TO ME, IT IS FOUND THAT QUANTUM OF ADDITION MADE ON THE ISSUE WAS REDUCED FROM RS.7,02,950 TO RS.4,18,965 BY THE COMMISSIONER (APPEALS) AND PART RELIEF WAS ALLOWED BY THE COMMISSIONER (APPEALS). THE CASE OF THE ASSESSEE WAS THAT THE ADDITION ON THIS ISSUE WAS AL SO MADE ON ESTIMATE BASIS ONLY. THE ADDITION WAS MADE DUE TO T HE REASON THAT THE ASSESSEE-FIRM HAD DISCLOSED LOWER PROFIT O N SALE MADE TO ME. THE REVENUE HAD NOT BROUGHT ANY MATERIAL O N RECORD TO SUGGEST THE ASSESSEE HAD DELIBERATELY MADE THE SALE TO ITS SISTER CONCERN ME AT A PRICE LOWER THAN THE NORMA L SALE PRICE OF THE PRODUCT. THE TRIBUNAL IN ITS ORDER FOR THE E ARLIER ASSESSMENT YEAR 1992-93 IN THE CASE OF THE ASSESSEE , AFTER ELABORATE DISCUSSION HELD THAT THE DIVERSION OF INC OME WAS TO BE DETERMINED NOT ON THE COMPARISON OF THE DOMESTIC SALES BY THE CORRECT METHOD WAS TO COMPARE THE SALES EXECUTE D BY ME MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 5 TO FOREIGN BUYERS AND THE DIFFERENCE WAS THE PROFIT DIVERTED BY THE ASSESSEE TO ME. THERE IS FORCE IN THE ARGUMEN T OF THE ASSESSEE THAT NO TRADER IS BOUND TO MAKE MAXIMUM PR OFIT OUT OF ITS BUSINESS TRANSACTION. THE MAIN THRUST OF THE RE VENUE IN JUSTIFYING THE PENALTY UNDER SECTION 271 (1) (C) WA S ON THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR EAR LIER ASSESSMENT YEA 1992-93 WHEREIN, THE TRIBUNAL HAS C ONCLUDED THAT APPARENTLY, IT WAS A COLLUSIVE ARRANGEMENT WI TH MOTIVE TO EVADE TAX THEREON. IT IS WELL SETTLED THAT THE ASS ESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE INDEPEN DENT TO EACH OTHER. THERE ARE DIFFERENT PARAMETERS TO JUDGE THE VALIDITY OF CERTAIN ADDITIONS MADE IN THE ASSESSMENT CASE OF THE ASSESSEE AND WHILE JUDGING VIRES OF THE PENALTY FOR CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTI CULARS OF INCOME, OF THAT VERY AMOUNT ADDED AS INCOME, IN THE ASSESSMENT OF THE ASSESSEE. THERE IS NO DEFINITE FI NDING THAT THE TRANSACTION OF SALE MADE TO ME WAS A SHAM TRA NSACTION. THE FIGURES OF SAME MADE TO ME WERE DISCLOSED IN THE ACCOUNTS STATEMENT AND THOSE FIGURES HAD NOT BEEN D ISPUTED BY THE DEPARTMENT. THE CONDUCT OF THE ASSESSEE WAS BON A FIDE. THE ADDITION WAS MADE ON THIS ISSUE AS IT WAS FOUND THAT THE ASSESSEE-FIRM HAD DISCLOSED LOWER RATE OF PROFIT ON SALE MADE TO ME. THE TRIBUNAL HAS DIRECTED TO MAKE THE ADDI TION ON THE BASIS OF SALE PRICE OF THE PRODUCTS MADE BY THE ME TO THE FOREIGN BUYERS. THE MATERIAL PARTICULARS WITH REGAR D TO THE SALE MADE TO ME WERE DISCLOSED BY THE ASSESSEE, AT THE TIME OF FILING OF ITS RETURN OF INCOME WITH THE DEPARTMENT. THE FACTS OF THE CASE MAY JUSTIFY THE ADDITION MADE ON ACCOUNT O F LOW RATE OF PROFIT ON SALE MADE TO THE SISTER CONCERN BUT WERE NOT SUFFICIENT TO SUSTAIN THE PENALTY IMPOSED UNDER SECTION 271 (1 ) (C ). [PARA 9] THE ACCOUNTANT MEMBER HAS SUSTAINED THE PENALTY BY OBSERVING THAT THE ASSESSEE HAS SUBMITTED THE EXPLA NATION WHICH IT FAILED TO SUBSTANTIATE DURING THE ASSESSME NT AND PENALTY PROCEEDINGS. HE HAS OBSERVED THAT IT IS NOT A LAW THAT EACH AND EVERY EXPLANATION OF THE ASSESSEE HAS TO B E ACCEPTED. HE FURTHER OBSERVED THAT IN MATTERS OF EC ONOMIC OFFENCES, THE RULES OF INTERPRETATION CONTEMPLATE A STRICT INTERPRETATION RATHER THAN A LIBERAL AND WIDER INTE RPRETATION. HE MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 6 HAS FURTHER OBSERVED THAT THE CLASSICAL VIEW THAT NOMENS REA, NO CRIME HAS LONG AGO BEEN ERODED, ESPECIALLY REGA RDING ECONOMIC CRIMES. HE HAS OBSERVED THAT UNLESS THE LA NGUAGE OF THE STATUTE INDICATES THE NEED TO ESTABLISH THE ELE MENT OF MENS REA, IT IS GENERALLY SUFFICIENT TO PROVE THAT A DEF AULT IN COMPLYING WITH THE STATUTE HAS OCCURRED AND IT IS WHOLLY UNNE CESSARY TO ASCERTAIN WHETHER SUCH A VIOLATION WAS INTENTIONAL OR NOT. THE ACCOUNTANT MEMBER HAS FURTHER OBSERVED THAT A VERY HEAVY ONUS WAS PLACED ON THE ASSESSEE TO EXPLAIN THE DIFF ERENCE BETWEEN THE ASSESSED INCOME AND RETURNED INCOME AND THE ASSESSEE DID NOT DISCHARGE THE SAID ONUS. THESE OBS ERVATIONS OF THE ACCOUNTANT MEMBER CANNOT BE AGREED WITH. THE CONDUCT OF THE ASSESSEE WHETHER BONA FIDE OR MALA FIDE HAS TO BE JUDGED IN THE BACKGROUND OF FACTS OF EACH CASE AND NO PENALTY UNDER SECTION 271 (1) (C) FOR CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME CAN BE LEVIED IN T HE CASE OF BONA FIDE OR GENUINE MISTAKE OR IN CASE WHERE THERE IS AN HONEST DIFFERENCE OF OPINION WITH REGARD TO SOME IS SUES BETWEEN THE DEPARTMENT AND THE ASSESSEE RESULTING I N ADDITION MADE IN THE ASSESSMENT OF THE ASSESSEE. MERELY BECA USE, THERE IS A DIFFERENCE IN THE RETURNED INCOME AND AS SESSED INCOME OF THE ASSESSEE, IT DOES NOT FOLLOW THAT HEA VY ONUS IS PLACED ON THE ASSESSEE TO PROVE THE REASONS FOR SUC H A DIFFERENCE. [PARA10]. IN THE FACTS OF THE CASE AND IN ACCORDANCE WITH THE RELEVANT PROVISIONS OF LAW, IT HAS TO BE HELD THAT THE PENALTY UNDER SECTION 271 (1) (C) WAS NOT LEVIABLE ON THE A SSESSEE. [PARA11]. 5.1 CONSIDERING THE PRAYER OF THE LEARNED AR TO BE GENUINE AND REASONABLE AND SINCE THE DECISION RENDERED BY THE A HMEDABAD TRIBUNAL BENCHES (THIRD MEMBER) IS BINDING ON THE S UBSEQUENT DECISIONS OF THE TRIBUNAL AND FURTHER OBSERVING THE FACTS AND ISSUE OF THE CASE PRESENT BEFORE US BEING IDENTICAL TO THE D ECISION RENDERED BY THE THIRD MEMBER, AHMEDABAD BENCH CITED SUPRA, WE H EREBY RECALL THE ORDER OF THE TRIBUNAL IN ITA NO.3631/AHD/2008 F OR CONFIRMING THE MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 7 LEVY OF PENALTY IMPOSED DUE TO DIVERSION OF INCOME FOR EFFECTING SALES AT A LOWER PRICE TO THE ASSESSEES SISTER CONCERN E NGAGED IN EXPORT BUSINESS. FURTHER, FOLLOWING THE DECISION OF THE TH IRD MEMBER OF THE AHMEDABAD TRIBUNAL CITED SUPRA, WE HEREBY DELETE TH E LEVY OF PENALTY DUE TO THE AFORESAID REASONS IN THE ASSESSE ES APPEAL IN ITA NO. 3631/AHD/2008 FOR THE ASSESSMENT YEAR 1993-94. 6. IN THE RESULT, THE MISC. APPLICATION FILED BY TH E ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09-08-2012. SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - 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 MA NO.115/AHD/2012 (IN ITA NO.3631/AHD/2008 (AY 1993- 94) M/S. ISHWAR ARTS VS ITO, CIR 2(2), BARODA 8 1. DATE OF DICTATION: DIRECT DICTATION - 03-08-2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER:06-08-2012 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: