DCIT CIR 1(1), MUMBAI V. CHEMSTAR ORGANICS (I) LTD, MUMBAI

MA 623/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8811 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 12-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Additional evidence; Set aside
• Section: 271(1)(c); 68; 144

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI C.N. PRASAD , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER MA NO. 623/MUM/2018 ARISING OUT OF ITA NO. 623 /MUM/2016 ASSESSMENT YEAR 2004 - 05 INCOME TAX OFFICER - 1(1)(2), ROOM NO. 534 5 TH FLOOR, AAYAKAR BHAWAN M K MARG, MUMBAI - 400020 V. M/S. CHEMSTAR ORGANICS (INDIA) LTD., 4 TH FLOOR, PNB HOUSE, SIR P.M. ROAD, FORT, MUMBAI - 400001 APPLICANT RESPONDENT REVENUE BY SHRI CHAUDHARY ARUN KUMAR SINGH (DR) ASSESSEE BY SHRI SATISH MODI DATE OF HEARING : 05 - 04 - 2019 DATE OF PRONOUNCEMENT : 05 - 04 - 2019 ORDER PER RAMIT KOCHAR, ACCOUNTANT MEMBER THE R EVENUE HAS MOVE D THIS MISCELLANEOUS APPLICATION(MA) WHEREIN IT IS CLAIMED BY R EVENUE T HAT THERE IS A MISTAKE APPARENT FROM RECORD IN AN ORDER DATED 09.05.2018 PASSED BY INCOME TAX APPELLATE TRIBUNAL, C BENCH, MUMBAI IN ASSESSEES APPEAL IN ITA NO. 623 /MUM/2016 FOR ASSESSMENT YEAR 2004 - 05 , WHEREIN THE TRIBUNAL WHILE ADJUDICATING APPEAL ARISING OUT OF PENALTY LEVIED U/S 271(1)(C) OF THE INCOME - TAX ACT, 1961 BY THE AO WHIC H WAS LATER CONFIRMED BY LEARNED CIT(A) , SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION AND DIRECTED THE AO TO LOOK INTO SATISFACTION OF THE INGREDIENTS AND MANDATE OF S ECTION 68 OF THE 1961 ACT. IT IS CLAIMED BY LD. DR THAT THE APPEAL ADJUDICATED BY THE TRIBUNAL IN ITA NO. MA NO. 623/MUM/2018 ARISING OUT OF ITA NO.623/MUM/2016 2 623/MUM/2016 VIDE ORDER DATED 09.05.2018 FOR AY 2004 - 05 WAS CONCERNING LEVIABILITY OF PENALTY U/S. 271(1)(C) OF THE ACT AND WAS NOT AN APPEAL AGAINST QUANTUM ASSESSMENT AND HENCE NO SUCH DIRECTIONS T O LOOK INTO SATISFACTION OF INGREDIENTS AND MANDATE OF SECTION 68 OF THE 1961 ACT COULD HAVE BEEN GIVEN BY THE TRIBUNAL . IT IS CLAIMED BY LEARNED DR THAT SINCE THE ISSUE IN QUANTUM ASSESSMENT WHEREIN ADDITIONS WERE MADE BY THE AO TO THE TUNE OF RS. 8,86,45 4/ - U/S. 68 HAD ATTAIN ED FINALITY AS THE ASSESSEE CHOSE NOT TO FILE AN APPEAL WITH TRIBUNAL AGAINST APPELLATE ORDER PASSED BY LEARNED CIT(A) CONFIRMING QUANTUM ADDITIONS, THE TRIBUNAL COULD NOT HAVE PASS ED SUCH DIRECTIONS TO SATISFY THE MANDATE AND INGREDI ENTS OF SECTION 68 OF THE 1961 ACT WHICH CONCERNS WITH QUANTUM ADDITIONS WHICH HAD ATTAINED FINALITY , AS THE TRIBUNAL WAS PRESENTLY SEIZED OF ISSUE CONCERNING LEVIABILITY OF PENALTY U/S 271(1)(C) OF THE 1961 ACT. THUS, IT IS PRAYED THAT THE MISTAKE HAS CR EPT IN THE ORDER OF THE TRIBUNAL DATED 09.05.2018 WHILE ADJUDICATING APPEAL AGAINST LEVIABILITY OF PENALTY U/S 271(1)(C) IN ITA NO. 623/MUM/2016 AND SUCH DIRECTION AS ARE GIVEN IN PAGE NUMBER 7 OUGHT TO BE DELETED. 2. THE LD. COUNSEL FOR THE ASSESSEE ON TH E OTHER HAND SUBMITTED THAT THERE IS NO MISTAKE APPARENT FROM RECORD IN AN ORDER PASSED BY TRIBUNAL IN ITA NO. 623/MUM/2016 VIDE ORDER DATED 09.05.2018 WHICH IS A WELL REASONED ORDER WHEREIN THE TRIBUNAL HAS SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION AFTER CONSIDERING EVIDENCES / EXPLANATION TO BE FILED BY THE ASSESSEE IN ITS DEFENCE IN SET ASIDE PROCEEDINGS , WHEREIN THE TRIBUNAL KEPT ALL THE CONTENTIONS OPEN. IT IS EXPLAINED THAT THERE WAS A PECULIAR FACTUAL MATRIX OF THE CASE AS EXP LAINED BY THE ASSESSEE BEFORE THR TRIBUNAL WHICH IS CAPTURED BY THE TRIBUNAL IN ITS ORDER DATED 09.05.2018 IN PAGE NUMBER 6 WHICH LED THE TRIBUNAL TO CONCLUDE THAT THE ASSESSEE DESERVES ONE MORE OPPORTUNITY. THE PRAYER IS MADE TO DISMISS THE MA FILED BY R EVENUE. 3. WE HAVE CONSIDERED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD . WE DO NOT FIND ANY MERIT IN THE M.A FILED BY THE R EVENUE FOR THE REASONS EXPLAINED HEREINAFTER. THE ASSESSEE AS HAD EXPLAINED BEFORE THE BENCH WHEN THE APPEAL WAS HEARD ON 01.05.2018 HAD EXPLAINED THAT IT WAS MA NO. 623/MUM/2018 ARISING OUT OF ITA NO.623/MUM/2016 3 FACED WITH A PECULIAR SITUATION WHEREIN ITS FACTORY AT VADODRA WAS LYING CLOSED AND WAS TAKEN OVER BY GIIC U/S 29 OF THE SFC ACT, 1951 SINCE 2004. IT WAS EXPLAINED THAT T HE BANK ACCOUNTS WERE FROZEN. IT WAS CLAIMED THAT T HE ASSESSEES DOCUMENTS AND RECORDS WERE SEIZED BY GIIC ALONG WITH TAKING OVER OF THE FACTORY IN 2004, WHICH MAINLY PREVENTED ASSESSEE IN PRODUCING THESE DOCUMENTS IN THE PROCEEDINGS CONDUCTED BY THE AUTHORITIES. THE ASSESSEE IN THE MEANTIME HAS TO SURVI VE AND MEET EXPENSES . THUS, IT WAS CLAIMED THAT THE DIRECTORS OF THE ASSESSEE FUNDED THESE EXPENSES WHICH WERE PAID FROM THE BANK ACCOUNTS OF THE DIRECTORS AND BROUGHT INTO BOOKS OF ACCOUNTS OF THE ASSESSEE AS UNSECURED LOANS FROM DIRECTORS . THE CONFIRMAT IONS FROM DIRECTORS ALONG WITH THEIR PAN AND BANK STATEMENTS ARE CLAIMED TO BE NOW AVAILABLE AND THE ASSESSEE IS NOW IN A POSITION TO PRODUCE ALL THE RELEVANT AND COGENT EVIDENCES TO ESTABLISH ITS BONAFIDE. THESE ARE PENALTY PROCEEDINGS U/S 271(1)(C) OF TH E 1961 ACT WHICH ARE DIFFERENT FROM ASSESSMENT PROCEEDINGS. FACED WITH PECULIAR EXTRAORDINARY SITUATIONS, THE ASSESSEE WAS DEPRIVED FROM PRODUCING THESE EVIDENCES/EXPLANATIONS BEFORE THE AUTHORITIES BELOW WHICH THE ASSESSEE IS NOW CLAIMING TO BE IN A POSITION TO PRODUCE THE SAME BEFORE THE AUTHORITIES. IN THE MEANTIME , ASSESSMENT PROCEEDINGS GOT CONCLUDED AND THESE UNSECURED LOANS REFLECTED IN ASSESSEES BOOKS OF ACCOUNTS TO THE TUNE OF RS. 8,86,454/ - STOOD ADDED U/S 68 OF THE 1961 ACT BY THE AO . THE ASSESSMENT ORDER IN QUANTUM WAS AN BEST JUDGMENT ASSESSMENT U/S 144 OF THE 1961 ACT. THE APPEAL FILED BY THE ASSESSEE AGAINST QUANTUM ADDITIONS BEFORE LEARNED CIT(A) ALSO STOOD DISMISSED AS THE LEARNED CIT(A) WAS OF THE VIEW THAT EVIDENCES ARE NOT SA TISFACTORY /SUFFICIENT TO DISCHARGE ONUS CAST ON THE ASSESSEE U/S 68 OF THE 1961 ACT. THERE WERE SOME ADDITIONAL EVIDENCES FILED BY THE ASSESSEE BEFORE LEARNED CIT(A) WHICH WERE ADMITTED UNDER RULE 46A OF THE INCOME - TAX RULES, 1962 BY LEARNED CIT(A) AND RE MAND REPORT WAS CALLED FROM THE AO BUT STILL THE SAID EVIDENCES WERE HELD BY LEARNED CIT(A) TO BE NOT SATISFACTORY /SUFFICIENT TO DISCHARGE ASSESSEE FROM ITS BURDEN U/S 68 OF THE 1961 ACT IN QUANTUM PROCEEDINGS AND THE APPEAL IN QUANTUM STOOD DISMISSED. TH E ASSESSEE HAS ACCEPTED QUANTUM ASSESSMENT AND NO APPEAL WAS FILED WITH TRIBUNAL AGAINST LEARNED CIT(A) UPHOLDING ADDITIONS IN MA NO. 623/MUM/2018 ARISING OUT OF ITA NO.623/MUM/2016 4 QUANTUM. THUS, QUANTUM ADDITIONS WERE SET TO REST AND ATTAINED FINALITY. T HE REVENUE PROCEEDED TO LEVY PENALTY U/S. 271(1)(C) R. W.S. 274 OF THE ACT. THE SAID PENALTY WAS LATER CONFIRMED BY LD. CIT(A). THE ASSESSEE IN THE APPELLANT PROCEEDING BEFORE THE TRIBUNAL IN PENALTY PROCEEDING HAD CONTENDED THAT ITS FACTORY NEAR VADODARA WAS LYING CLOSED AND WAS TAKEN OVER BY GIIC U/S. 29 OF THE SFC ACT, 1951 SINCE 2004 . THE BANK ACCOUNTS OF THE ASSESSEE WERE FROZEN AND IN ORDER TO MEET NECESSARY EXP ENSES AND SUSTAIN THE ASSESSEE COMPANY D IRECTORS WERE MAKING PAYMENTS ON THE BEHALF OF THE ASSESSEE COMPANY FROM THE IR PERSONAL BANK ACCOUNT S WHI CH WERE BROUGHT INTO THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AS UNSECURED LOANS . THE ASSESSEE COMPANY HAS FILED LOANS CONFIRMATION FROM D IRECTORS ALONGWITH PAN NUMBER BEFORE THE TRIBUNAL . THE MANAGING D IRECTOR OF THE ASSESSEE COMPANY WAS PRESENT BEFORE THE B ENCH AND MAD E AVERMENTS THAT SINCE THE DOCUMENTS OF THE ASSESSEE COMPANY WERE SEIZED BY GIIC ALONGWITH TAKE OVER OF THE FACTORY PREMI SES IN THE YEAR 2004 WHICH WAS THE MAIN REASON FOR NON - PRODUCTION OF DOCUMENTS BEFORE THE AUTHORITIES BELOW DUR ING ASSESSMENT AS WELL AS PENALTY PROCEEDINGS AND IT WAS SUBMITTED THEN NOW ALL THE DOCUMENTS WILL BE PRODUCED BEFORE THE AUTHORITIES AS THE ASSESSEE IS NOW IN A POSITION TO PRODUCE ALL THESE DOCUMENTS AS EARLIER THE ASSESSEE WAS PREVENTED FROM PRODUCING THESE DOCUMENTS BEFORE THE AUTHORITIES DUE TO REASON S BEYOND ITS CONTROL. UNDER THESE FACTUAL MATRIX OF THE CASE AND KEEPING IN VIEW THAT THE ASSESSEE HAS NOT CHALLENGE D THE QUANTUM ASSESSMENT WHICH ATTAINED FINALITY, THE APPEAL AGAINST PENALTY ORDER WAS D ECIDED BY TRIBUNAL VIDE ORDERS DATED 09.05.2018 IN ITA NO. 623/MUM/2016 BY SET TING ASIDE THE ISSUE OF LEVIABILITY OF PENALTY U/S 271(1)(C) TO THE FILE OF THE AO WITH THE DIRECTION S TO LOOK INTO THE ENTIRE SPECTR UM OF EVIDENCES AND EXPLANATIONS TO BE FILE D BY THE ASSESSEE BEFORE THE AO IN SET ASIDE PENALTY PROCEEDING S U/S 271(1)(C) TO ARRIVE AT A DECISION BASED ON MERITS IN ACCORDANCE WITH LAW AS TO SUSTAINABILITY OF PENALTY U/S. 271(1)(C) OF THE 1961 ACT WHICH ALSO INCLUDED VERIFYING THE EVIDENCES AND EXP LANATIONS AS TO SATISFYING THE INGREDIENTS AND MANDATE OF SECTION 68 OF THE 1961 ACT BECAUSE CLAIM IS SET UP THAT THESE UNSECURED LOANS ARE PAYMENTS MADE BY THE DIRECTORS TOWARDS EXPENSES OF THE ASSESSEE MA NO. 623/MUM/2018 ARISING OUT OF ITA NO.623/MUM/2016 5 COMPANY PAID BY DIRECTORS OF THE ASSESSEE COMPANY OU T OF THEIR PERSONAL BANK ACCOUNTS WHICH ARE THEN BROUGHT INTO BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY AS UNSECURED LOAN S PAYABLE TO DIRECTORS . THE ASSESSEE HAS CLAIMED EARLIER DUE TO REASONS BEYOND ITS CONTROL, IT WAS PREVENTED FROM PRODUCING ALL THESE E VIDENCES/EXPLANATIONS BEFORE THE AUTHORITIES BELOW BOTH IN ASSESSMENT AS WELL PENALTY PROCEEDINGS BUT NOW THE ASSESSEE HAS WITH IT RELEVANT COGENT EVIDENCES TO SUBSTANTIATE ITS BONAFIDE INCLUDING SATISFYING MANDATE AND INGREDIENTS OF SECTION 68 TO ESTABLIS H THAT ITS EXPLANATION IS BONAFIDE AND TRUTHFUL WHICH CAN THEN TAKE IT OUT OF CLUTCHES OF PENALTY LEVIED BY AUTHORITIES U/S 271(1)(C) OF THE 1961. THE EXPLANATION 1 TO SECTION 271(1)(C) WILL BECOME RELEVANT. PENALTY PROCEEDINGS U/S 271(1)(C) ARE DISTINCT P ROCEEDINGS THAN ASSESSMENT PROCEEDINGS . THE ASSESSEE HAS ACCEPTED AND CONCEDED TO THE ASSESSMENT FRAMED BY THE AO IN QUANTUM AS NO APPEAL AGAINST QUANTUM ADDITIONS WAS FILED WITH TRIBUNAL BUT THAT DOES NOT PREVENT ASSESSEE FROM SETTING UP ITS CLAIM THAT EV EN ADDITIONS UNDER SECTION 68 WERE NOT WARRANTED IF THE ASSESSEE IS ABLE TO NOW BRING ON RECORD COGENT EVIDENCES AND EXPLANATIONS AS EARLIER THE ASSESSEE WAS PREVENTED DUE TO REASONS BEYOND ITS CONTROL, WHIC H EXPLANATIONS/EVIDENCES IF MEETING THE MANDATE O F EXPLANATION 1 TO SECTION 271(1)(C) WILL TAKE THE ASSESSEE OUT OF CLUTCHES OF PENALTY U/S 271(1)(C). THE TRIBUNAL IN ITS ORDER DATED 09.05.2018 HAS KEPT ALL THE CONTENTIONS OPEN AND THE ONUS IS ON THE ASSESSEE TO PROVE THAT NO PENALTY IS EXIGIBLE ON IT WI THIN MANDATE OF SECTION 271(1)(C) OF THE 1961 ACT READ WITH EXPLANATION 1 TO SECTION 271(1)(C) . THE ASSESSEE HAS ALSO TO BRING ON RECORD COGENT EVIDENCES /EXPLANATIONS TO SUBSTANTIATE THAT ITS CONTENTIONS ARE TRUTHFUL AND BONAFIDE . THE AO WILL BE FREE TO DECIDE WHETHER PENALTY IS EXIGIBLE U/S 271(1)(C) OF THE 1961 ACT OR NOT AFTER EVALUATING EVIDENCES AND EXPLANATIONS FILED BY THE ASSESSEE IN ITS DEFENC E IN SET ASIDE PROCEEDINGS , ON MERITS IN ACCORDANCE WITH LAW. THUS, IN OUR CONSIDE RED VIEW AS PER OUR DETAILED DISCUSSIONS ABOVE, T HIS MA LACKS MERIT AND IS HEREBY ORDERED TO BE DISMISSED. WE ORDER ACCORDINGLY. MA NO. 623/MUM/2018 ARISING OUT OF ITA NO.623/MUM/2016 6 4 . THUS, THIS M.A. NO. 623/MUM/2018 ARISING OUT OF APPEAL IN ITA NO. 62 3 /MUM/2016 FOR AY 2004 - 05 FILED BY THE R EVENUE IS DISMI SSED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 05.04.2019 05.04.2019 S D / - S D / - (C. N . PRASAD) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 05.04.2019 COPY TO NISHANT VERMA SR. PRIVATE SECRETARY 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. 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