M/s Power Drugs Limited, Chandigarh v. DCIT, Chandigarh

ITA 151/CHANDI/2012 | 2005-2006
Pronouncement Date: 31-07-2012 | Result: Partly Allowed

Appeal Details

RSA Number 15121514 RSA 2012
Assessee PAN AABCP7960J
Bench Chandigarh
Appeal Number ITA 151/CHANDI/2012
Duration Of Justice 5 month(s) 24 day(s)
Appellant M/s Power Drugs Limited, Chandigarh
Respondent DCIT, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-07-2012
Date Of Final Hearing 23-07-2012
Next Hearing Date 23-07-2012
Assessment Year 2005-2006
Appeal Filed On 06-02-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI T.R. SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.151CHD/2012 (ASSESSMENT YEAR:2005-06) POWER DRUGS LIMITED VS. THE D.C.I.T. HOUSE NO.2342 SECTOR 23-C CIRCLE 3(1) CHANDIGARH. CHANDIGARH. PAN: AABCP7960J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL KUMAR RESPONDENT BY : SMT.JAISHREE SHARMA DR DATE OF HEARING : 23.07.2012 DATE OF PRONOUNCEMENT : 31.07.2012 O R D E R PER SUSHMA CHOWLA J.M. : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DAT ED 15.11.2011 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST PENALTY LEVIED U/S 271(1)(C) OF INCOME TAX ACT 1961 (IN SHORT THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THAT THE ORDER OF THE LRD. COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LRD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT JUSTIFIED IN UP-HOLDING ORDER OF LRD. A.O. LEVYING PENALTY U/S 271(1)(C) ON ADDITION MADE U/S 41(1) OF INCOME TAX ACT1961. 3. THAT THE LRD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT JUSTIFIED IN UP-HOLDING ORDER OF LRD. A.O. LEVYING PENALTY U/S 271(1)(C) ON ADDITION MADE U/S 68 OF INCOME TAX ACT1961. 2 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS ADDITIONS WERE MADE UNDER SECTION 41(1) OF THE ACT TOTALING RS.1 88 556/- AND ADDITION UNDE R SECTION 68 OF THE ACT WAS MADE AT RS.42 78 756/-. ANOTHER ADDITI ON UNDER SECTION 2(24)(X) OF THE ACT WAS MADE AT RS.4869/-. THE ASSESSING OFFICER HELD THE ASSESSEE LIABLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON ACCOUNT OF THE THREE ADDITIONS MADE IN T HE HANDS OF THE ASSESSEE AND CONSEQUENTLY PENALTY OF RS.16 04 395/- WAS LEVIED. 5. THE CIT (APPEALS) IN APPEAL CONFIRMED THE ABOVE SAID PENALTY LEVIED U/S 271(1)(C) OF THE ACT EXCEPT ON THE ADDIT ION OF RS.4896/- MADE UNDER SECTION 2(24(X) OF THE ACT. 6. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE POINTE D OUT THAT THE FIRST ADDITION UNDER SECTION 41(1) OF THE ACT HAS B EEN DELETED BY THE TRIBUNAL AND THE SECOND ADDITION HAS BEEN CONFI RMED BY THE TRIBUNAL. HOWEVER IT WAS POINTED OUT BY THE LEAR NED A.R. FOR THE ASSESSEE THAT THE COPIES OF SHARE APPLICATION FORMS AND ALLIED DOCUMENTS WERE FURNISHED BEFORE THE ASSESSING OFFIC ER AND NO PENALTY IS LEVIABLE U/S 271(1)(C) OF THE ACT ON THE AFORESAID ADDITIONS MADE IN THE HANDS OF THE ASSESSEE. 7. THE LEARNED D.R. FOR THE REVENUE STRESSED THAT I N VIEW OF THE EXPLANATION-I TO SECTION 271(1)(C) OF THE ACT WHERE THE PERSON HAS NOT BEEN ABLE TO SUBSTANTIATE ITS EXPLANATION THEN THE SAID AMOUNT ADDED IN THE HANDS OF THE ASSESSEE IS DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 3 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE WHERE THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXPLANATION-I U/S 271(1)(C) OF THE 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 [* **] [COMMISSIONER (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 EXPLANATION IS BONA F IDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM] THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 9. THE EXPLANATION BELOW SECTION 271(1)(C) OF THE A CT POSTULATES THAT WHERE ANY PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER / CIT (APPEALS) TO BE FALSE IN RESPECT OF ANY AMOUNT ADDED OR DISAL LOWED IN COMPUTING THE TOTAL INCOME OR WHERE THE PERSON IS N OT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THA T SUCH EXPLANATION WAS BONAFIDE AND ALSO FAILS TO PROVE THAT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL RELEVANT TO COMPUTATION OF TO TAL INCOME HAD BEEN DISCLOSED THEN SUCH AMOUNT ADDED OR DISALLOW ED WHILE COMPUTING THE TOTAL INCOME OF SUCH PERSON WOULD BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULA RS HAD BEEN CONCEALED AND THE ASSESSEE WAS LIABLE FOR PENALTY U /S 271(1)(C) OF THE ACT. 10. NOW COMING TO THE FACTS OF THE PRESENT CASE WE FIND THAT WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFIC ER HAD MADE ADDITION UNDER SECTION 41(1) AND 68 OF THE ACT WHI CH WAS CONFIRMED BY THE CIT (APPEALS). THE TRIBUNAL IN IT A NO.706/CHD/2009 RELATING TO ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 22.10.2010 HAD DELETED THE ADDITION MADE UNDE R SECTION 41(1) 4 OF THE ACT BUT HAD CONFIRMED THE ADDITION ON ACCOU NT OF SHARE APPLICATION MONEY MADE UNDER SECTION 68 OF THE ACT. IN VIEW OF THE FINDING OF THE TRIBUNAL WE FIND NO MERIT IN TH E LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON THE ADDITION MADE UNDER SECTION 41(1) OF THE ACT AND THE SAME IS DELETED. 11. THE SECOND ASPECT OF THE PENALTY U/S 271(1)(C) OF THE ACT IS THE ADDITION MADE UNDER SECTION 68 OF THE ACT. THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION HAD RA ISED SHARE APPLICATION MONEY OF RS. 42 78 756. THE ENTIRE SHA RE APPLICATION MONEY WAS RECEIVED IN CASH AND AS PER THE CLAIM OF THE AS SESSEE THE SUM WAS RECEIVED FROM 28 PERSONS. THE ASSESSEE HAD FURNISH ED ON RECORD THE COPIES OF SHARE APPLICATION FORMS SUBMITTED FOR ALL OCATION OF SHARES COPIES OF WHICH ARE PLACED AT PAGES 7 TO 34 OF THE PAPER BOOK. THE PERUSAL OF SAID SHARE APPLICATION FORMS REVEALED TH E ASSESSEE TO HAVE FURNISHED THE NAMES FATHERS NAME AND ADDRESSES OF THE PARTIES WHICH WERE FOUND TO BE INCOMPLETE BY THE ASSESSING OFFICE R/CIT(A). IN SOME CASES EVEN THE ADDRESS WERE FOUND TO BE INCOMPLETE. 12. THE TRIBUNAL IN ASSESSEES OWN CASE WHILE CONF IRMING THE ADDITION IN THE HANDS OF THE ASSESSEE OBSERVED AS U NDER: 11. THE ISSUE INVOLVED IN THE PRESENT GROUND CAME UP FOR CONSIDERATION BEFORE THE HON'BLE APEX COURT IN CIT VS. LOVELY EXPORTS (P) LTD (SUPRA). THE HIGH COURT WH ILE DECIDING THE ISSUE AS REPORTED IN LOVELY EXPORTS (P ) LTD VS CIT 299 ITR 268 WAS OF THE VIEW THAT IN THE CONTEXT OF SECTION 68 OF THE INCOME TAX ACT THE ASSESSING OFF ICER HAS TO PRIMA-FACIE ESTABLISH (I) THE IDENTITY OF THE CR EDITOR II) THE GENUINENESS OF THE TRANSACTIONS WHETHER TRANSM ITTED THROUGH BANKING INDISPUTABLE CHANNELS III) THE CREDITWORTHINESS OR FINANCIAL STRENGTH OF THE CREDI TOR. THE COURT FURTHER OBSERVED THAT IF THE RELEVANT DETAILS OF THE ADDRESS OR PAN IDENTITY OF THE CREDITOR / SUBSCRIBE R WERE FURNISHED ALONG WITH OTHER DETAILS I.E. SHARE HOLDE R REGISTER SHARE APPLICATION FORM SHARE TRANSFER REGISTER ETC . IT WOULD CONSTITUTE ACCEPTABLE PROOF OR ACCEPTABLE EXPLANATI ON BY THE ASSESSEE. THE ONUS OF THE ASSESSEE THEREIN WAS HEL D TO STAND DISCHARGED WHERE THE IDENTITY OF THE CREDITOR / SUB SCRIBER WAS PROVED AND IT WAS FURTHER HELD THAT THE ASSESSI NG OFFICER WAS DUTY BOUND TO INVESTIGATE THE CREDITWOR THINESS OF THE CREDITOR / SUBSCRIBER AND THE GENUINENESS OF THE TRANSACTIONS AND THE VERACITY OF THE REPUDIATION OF THE CREDITOR / SUBSCRIBER. THE SPECIAL LEAVE PETITION F ILED BY THE 5 REVENUE AGAINST THE SAID DECISION OF THE COURT WAS DISMISSED BY THE SUPREME COURT VIDE ITS DECISION RE PORTED IN (2008) 216 CTR SC 195 WHICH READS AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER SECTION 68 OF THE INCOME T AX ACT? WE FIND NO IN SPECIAL LEAVE PETITION FOR THE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEI VED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S WHOSE NAMES ARE GIVEN TO THE ASSESSING OFFICER THE N THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. HENCE NO INFI RMITY IS FOUND WITH THE IMPUGNED JUDGMENT. 12. THE HON'BLE DELHI HIGH COURT IN CIT V WINSTRAL PETRO CHEMICALS PVT LTD (ITA NO. 592/2010 DATE OF JUDGM ENT 12.5.2010 AFTER RELYING ON THE RATIO LAID DOWN BY T HE APEX COURT IN LOVELY EXPORTS (P) LTD (SUPRA) OBSERVED TH AT WHERE THE IDENTITY OF THE SUBSCRIBER HAS BEEN ESTABLISHED BY WAY OF DIFFERENT PROOFS FILED IN THIS REGARD AND IF THE AS SESSING OFFICER ENTERTAINS ANY DOUBT ABOUT THE GENUINENESS OF THE DOCUMENTS THE SAME COULD HAVE BEEN VERIFIED BY HIM FROM THE RECORDS AVAILABLE WITH THE AUTHORITIES. FROM THE ABOVE SAID IT TRANSPIRES THAT THE ONUS IS UPON THE ASSES SEE TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER IN RELATIO N TO THE SHARE APPLICATION MONEY RECEIVED. WHERE THE ASSES SEE FAILS TO ESTABLISH THE IDENTITY OF THE SUBSCRIBER THE ON US CAST UPON THE ASSESSEE TO PROVE THAT THE CREDITS ARE GEN UINE DOES NOT STAND DISCHARGED. THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ON THE PERUSAL OF THE INFORMATION FURNISHED BY THE ASSESSEE FOUND THE ASS ESSEE TO HAVE ONLY DISCLOSED THE NAMES OF THE PERSONS AND IN COMPLETE ADDRESSES WERE FURNISHED BY THE ASSESSEE AND SOME O F THE SHARE APPLICATIONS WERE BEARING ONLY THUMB IMPRESSI ON. THE TOTAL SHARE APPLICATION MONEY WAS RECEIVED IN C ASH AND NOT THROUGH BANKING CHANNELS AND NONE OF THE SAID P ERSONS WERE INCOME TAX ASSESSEES NOR HAD ANY PAN NUMBERS. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS FAI LED TO PROVE THE IDENTITY OF THE SUBSCRIBER AND APPLYING T HE RATIO LAID DOWN IN THE CASE OF LOVELY EXPORTS (P) LTD (SU PRA) WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) AND UPHO LD THE ADDITION OF RS.42 78 756/-. 13. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ITA NO.194 OF 2011 - DATE OF DECISION 14.7.2011 HAVE UPHELD THE O RDER OF THE TRIBUNAL AND CONFIRMED THE ADDITION IN THE HANDS OF THE ASSESSEE. 14. THE ADDITION WAS MADE IN THE HANDS OF THE ASSES SEE COMPANY IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED IN CASH AS IT HAD FAILED TO PROVE THE IDENTITY OF THE SUBSCRIBERS AND EVEN THE COMPLETE ADDRESSES OF THE SUBSCRIBERS WERE NOT FURN ISHED BY THE ASSESSEE. THE ASSESSEE THUS FAILED TO FURNISH COMP LETE DETAILS AND 6 MATERIAL RELEVANT TO COMPUTATION OF ITS INCOME RES ULTING IN THE AFORESAID ADDITION. 15. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS C LAIM OF RECEIPT OF SHARE APPLICATION MONEY IN CASH AND THE ADDITION BE ING MADE IN THE HANDS OF THE ASSESSEE ON THIS ACCOUNT MAKES THE AS SESSEE EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN VI EW THEREOF WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE PENAL TY LEVIED U/S 271(1)(C) OF THE ACT ON THE SAID ADDITION MADE UNDE R SECTION 68 OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSES SEE ARE THUS PARTLY ALLOWED. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF JULY 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 31 ST JULY 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH