The ITO, Ward-1(4),, Surat v. M/s Navpad Textile Industries Ltd.,, Surat

ITA 1887/AHD/2011 | 2006-2007
Pronouncement Date: 21-11-2014 | Result: Dismissed

Appeal Details

RSA Number 188720514 RSA 2011
Bench Ahmedabad
Appeal Number ITA 1887/AHD/2011
Duration Of Justice 3 year(s) 3 month(s) 23 day(s)
Appellant The ITO, Ward-1(4),, Surat
Respondent M/s Navpad Textile Industries Ltd.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-11-2014
Date Of Final Hearing 19-11-2014
Next Hearing Date 19-11-2014
Assessment Year 2006-2007
Appeal Filed On 28-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER. ITA.NO.1887/AHD/2011 (ASSESSMENT YEAR:2006-07) INCOME-TAX OFFICER WARD-1(4) ROOM NO.115 1 ST FLOOR AAYAKAR BHAVAN MAJURAGATE SURAT. APPELLANT VS. M/S. NAVPAD TEXTILE INDUSTRIES LIMITED 2 ND FLOOR AMAR SHILP APARTMENT NANPURA TIMALIAWAD SURAT RESPONDENT PAN: AACN7695P /BY APPELLANT : SHRI V. K. SINGH SR.D.R. /BY RESPONDENT : SHRI TUSHAR HEMANI A. R. !' /DATE OF HEARING : 20.11.2014 #$% !' /DATE OF PRONOUNCEMENT : 21.11.2014 ORDER PER SHAILENDRA KUMAR YADAV J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I SU RAT DATED 27.05.2011 FOR A.Y. 2006-07 ON THE FOLLOWING GROUND S: I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 2 [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A)-II SURAT HAS ERRED IN DELETIN G THE PENALTY LEVIED U/S. 271(1)(C) OF THE I.T.ACT 1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) ERRED IN ADMITTING ADDITIONAL EVIDENCES IN RESPECT OF CESSATION OF LIABILITY DURI NG THE COURSE OF APPELLATE PROCEEDINGS THUS VIOLATING PRO VISION UNDER RULE 41(1) OF I.T. ACT. 2. ASSESSEE IS ENGAGED IN PROCESSING OF ART SILK CL OTH ON JOB WORK BASIS. THE CASE WAS SELECTED IN SCRUTINY AND THE ASSESSING OFFICER COMPLETED THE ASSESSMENT PROCEEDI NGS U/S. 143(3) OF THE ACT ON 30.12.2008 AFTER MAKING THE FO LLOWING ADDITIONS OF RS. 4 99 35 475/- ON ACCOUNT OF CESSAT ION OF LIABILITY U/S. 41(1) OF THE ACT. 2.1 ASSESSEE HAD FURNISHED A LIST OF CREDITORS FOR MORE THAN THREE YEARS. ASSESSEE COMPANY FURNISHED CONFIRMATI ONS OF SIX PARTIES IN ORDER TO VERIFY THE GENUINENESS OF TRANS ACTION. NOTICES U/S.133(6) WERE ISSUED TO FOLLOWING PARTIE S AND THEY WERE ASKED TO FURNISH THE CONFIRMATIONS OF OUTSTAND ING BALANCE IN RESPECT OF ASSESSEE COMPANY WHICH WAS OUTSTANDI NG FOR MORE THAN 3 YEARS. I. RELIANCE INDUSTRIES LTD. RS.4 82 59 239/- II. NOVA PETROCHEMICALS LTD. RS. 12 24 613/- I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 3 III. GARDEN SILK MILLS LTD. RS. 4 06 987/- IV. COULOURTX LTD. RS. 44 636/- IN REPLY TO THE NOTICE U/S. 133(6) ISSUED TO THE RE LIANCE INDUSTRIES LTD. A LEDGER ACCOUNT OF ASSESSEE WAS R ECEIVED AND ON VERIFICATION OF THE SAME IT WAS FOUND THAT NO D EBIT BALANCE OF RS.4 82 59 239/- AS CLAIMED BY ASSESSEE WAS OUTS TANDING. SIMILARLY IN REPLY TO NOTICE U/S. 133(6) ISSUED TO M/S. NOVA CHEMICALS LTD. THE SAID COMPANY SPECIFICALLY STATE D THAT THEY HAVE NO ACCOUNT OF ASSESSEE IN THEIR BOOKS OF ACCOU NT FOR A.Y. 2006-07 WHICH MEANS THIS PARTY HAD NOT SHOWN ANY D EBIT BALANCE OF ASSESSEE IN ITS BOOKS OF ACCOUNT BUT ASS ESSEE COMPANY HAD SHOWN OUTSTANDING BALANCE OF RS.12 24 6 13/-. IN RESPECT OF M/S. GARDEN SILK MILLS LTD. THE OUTS TANDING BALANCE AS SHOWN BY ASSESSEE COMPANY AMOUNTING TO RS.4 06 987/- WAS NOT CONFIRMED BY THE PARTY. FURT HER IN RESPONSE TO NOTICE U/S. 133(6) ISSUED TO M/S. COLO URTEX LTD. A REPLY WAS FURNISHED WHEREIN PARTY HAD SHOWN SOME TRANSACTIONS WITH ASSESSEE COMPANY DURING F.Y. 2005 -06 FOR WHICH IT HAD ENCLOSED ITS CONFIRMATION AS WELL. HO WEVER IT HAD NOT CONFIRMED ANY OUTSTANDING DEBIT BALANCE OF ASSE SSEE FOR MORE THAN 3 YEARS AS CLAIMED. ASSESSEE HAS SHOWN C REDIT OF RS.44 636/-. THUS ASSESSING OFFICER CONCLUDED THA T ASSESSEE COMPANY HAD NOT PAID OUTSTANDING DUES IN RESPECT OF ABOVE FOUR PARTIES FOR MORE THAN 3 YEARS WHICH MEANS THA T ASSESSEE COMPANY WAS NOT REQUIRED TO PAY THE LIABILITY TO TH E ABOVE PARTIES. ULTIMATELY IT WAS FOUND THAT ABOVE PARTI ES WERE NOT HAVING ANY DEBIT BALANCE AGAINST ASSESSEE COMPANY LIABILITY OF I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 4 ASSESSEE COMPANY HAD CEASED TO BE OPERATIVE. THERE FORE TOTAL LIABILITY AMOUNTING TO RS. 4 99 35 475/- OUTSTANDIN G IN RESPECT OF ABOVE PARTIES WHICH WAS TREATED AS CESSATION OF LIABILITY U/S. 41(1) OF THE ACT AND ASSESSING OFFICE ADDED THE SAM E TO THE TOTAL INCOME OF ASSESSEE COMPANY. 3. AGGRIEVED BY THE SAME ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHICH WAS DISMISSED. PENALTY PROCEEDINGS WERE INITIATED IN RESPONSE TO PENALTY N OTICE. ASSESSEE SUBMITTED THAT RELIANCE INDUSTRIES LTD. N OVA PETROCHEMICALS AND GARDEN SILK MILLS LTD. HAD WRITT EN OFF THE RECEIVABLES FROM OUR COMPANY IN THEIR BOOKS OF ACCO UNTS AS A PRE-EMPTIVE ACT SINCE OUR COMPANY HAD BEEN DECLARED SICK INDUSTRIAL UNIT BY BIFR NEW DELHI SINCE LAST 9 YEA RS. AT RELEVANT POINT OF TIME COMPANY WAS IN PROCESS OF P REPARING THE REHABILITATION SCHEME TO BE COMPLETED BY BIFR. ASS ESSEE COMPANY FURNISHED THE LIST OF CREDITORS SHOWN OUTST ANDING BALANCES FOR MORE THAN THREE YEARS THE TOTAL CREDI TORS ARRIVED AT RS.5 34 10 732/. OUT OF THE TOTAL CREDITORS ASSESSEE FAILED TO GIVE JUSTIFICATION FOR THE UNMATCHED BALANCES WI TH RELIANCE INDUSTRIES LTD NOVA PETROCHEMICALS & GARDEN SILK M ILLS LTD. ASSESSING OFFICER STATED THAT HOW IT IS POSSIBLE TH AT M/S. RELIANCE INDUSTRIES LTD HAS WRITTEN OFF SPECIFIC AM OUNT (RS. 4 82 59 239/-) OF DUES AGAINST ASSESSEE COMPANY WIT HOUT KNOWLEDGE OF ASSESSEE COMPANY AND IS ALSO IN CONTIN UATION WITH CURRENT BUSINESS ACTIVITIES WITH A DEFAULTER D EBTOR. SIMILARLY IN CASE OF M/S. NOVA PETROCHEMICALS LTD. & M/S. COLOURTEX LTD. ASSESSEE HAS DELIBERATELY SHOWN NON -EXISTED I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 5 LIABILITY IN ITS BOOKS OF ACCOUNT TO AVOID TAXATION AND HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO CONCE AL ITS TRUE INCOME FOR ADVANTAGE OF TAX EVASION. THE PLEAS OF ASSESSEE COMPANY THAT CREDITORS HAVE SUO-MOTO WRITTEN OFF DU ES AGAINST AND IT HAS NO KNOWLEDGE OF THE SAME AS NO SUCH CRED IT NOTE/DEBIT NOTE WAS ISSUED BY THOSE CREDITORS TILL THE ASSESSMENT PROCEEDINGS FOR A. Y. 2006-07 WAS FOUND WITHOUT SUBSTANCE. THUS ASSESSING OFFICER CONCLUDED THAT A SSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO A VOID TAXATION WHICH LEAD TO CONCEALMENT OF INCOME ASSES SING OFFICER LEVIED PENALTY U/S.271(L)(C) OF THE I.T.ACT OF RS.1 68 03 287/-. 4. MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHOR ITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) DELETED THE P ENALTY IN QUESTION. 5. SAME HAS BEEN OPPOSED BEFORE US. LD. DEPARTMENT AL REPRESENTATIVE VEHEMENTLY OBJECTED THE DELETION OF PENALTY LEVIED U/S. 271(1)(C) OF THE ACT FOR FURNISHING INA CCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. L D. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT CIT(A) W AS NOT JUSTIFIED IN REACHING THE CONCLUSION OF CESSATION O F LIABILITY DURING COURSE OF APPELLATE PROCEEDINGS. ACCORDINGL Y LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ORDER OF CIT(A) ON THE ISSUE BE SET ASIDE AND THAT OF ASSESSING OFFICE R BE RESTORED I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 6 AND ON OTHER HAND LD. AUTHORIZED REPRESENTATIVE SU PPORTED THE ORDER OF CIT(A) WHO HAS DELETED THE PENALTY IN QUESTION. 6. AFTER GOING THROUGH THE RIVAL SUBMISSION AND MAT ERIAL AVAILABLE ON RECORD WE FIND THAT ESSENTIAL CONDITI ON FOR INVOKING THE DEEMING PROVISIONS OF SEC.41(1) IS THA T ASSESSEE SHOULD HAVE OBTAINED ANY BENEFIT IN RESPECT OF TRAD ING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. ASSESS EE IS ADMITTEDLY A SICK COMPANY AND KNOWING ITS FINANCI AL CONDITION THE CREDITORS WROTE OFF THE AMOUNT IN THEIR BOOK AS A PRECAUTIONARY MEASURE WITHOUT ISSUIN G ANY CREDIT NOTE TO ASSESSEE TO THIS EFFECT. IN SUCH SITUATION ASSESSEE CONTINUED TO REFLECT IT AS GEN UINE LIABILITY IN ITS BOOKS OF ACCOUNT. ONCE ASSESSEE IS NOT AWARE O F CREDITORS UNILATERAL ACT IT CANNOT BE SAID THAT ASSESSEE HA D OBTAINED BENEFIT AS LAID DOWN IN PROVISIONS OF SECTION 41(1) OF THE ACT. PROVISION OF SECTION 41(1) IS NOT A CHARGING SECTI ON. IT IS A DEEMING PROVISION AND HENCE IT CANNOT BE STATED TH AT IT SHOULD BE CONSTRUED STRICTLY. IT HAS TO BE CONSTRUED A MAN NER WHEREBY THE LEVY OF THE TAX IS EFFECTIVE AND THE MACHINERY OF ASSESSMENT IS WORKABLE. ASSESSEE HAS VOLUNTARILY OFFERED THIS AMOUNT BY WRITING OFF AS PER SEC.41(1) OF THE ACT IN A.Y. 200 8-09 WHEN THEY CAME TO KNOW OF WRITE OFF BY THE CREDITORS. M OREOVER THERE ARE HEAVY LOSSES TO ASSESSEE BEING SICK COMPA NY AND ASSESSEE HAD NOT ENRICHED ITSELF AT THE COST OF EXC HEQUER BY NOT OFFERING THE AMOUNT IN A.Y. 2006-07. THE WRITING O FF THE AMOUNT IN A.Y. 2006-07 AS DONE BY DEPARTMENT OR A.Y .2008-09 AS DONE BY ASSESSEE IS REVENUE NEUTRAL AS ASSESSEE COMPANY I.T.A. NO. 1887/AHD/2011 A.Y. 06-07 (ITO VS. M/S. NAVPAD TEXTILE INDUSTRIES LTD.) PAGE 7 CONTINUES TO BE A SICK COMPANY WITH HEAVY LOSSES AN D THERE IS NOT EVEN A REMOTE POSSIBILITY OF COMING UNDER TAXAB LE BRACKET ON ACCOUNT OF HEAVY LOSSES BOTH IN A.Y. 2006-07 AND A.Y. 2008-09. ASSESSEE ITSELF OFFERED THIS AMOUNT IN A. Y. 2008-09 ( WHEN HE CAME TO KNOW ABOUT IT ) IS AS PER LAW. IN V IEW OF ABOVE DISCUSSION CIT(A) WAS JUSTIFIED IN DELETING THE PE NALTY IN QUESTION. SAME IS UPHELD. 7. AS A RESULT APPEAL FILED BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF NOVEMBER 2014. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR Y ADAV) ACCOUNTANT MEMBER JUDICIAL MEM BER TRUE COPY S.K.SINHA & & & & ' ' ' ' ('% ('% ('% ('% / COPY OF ORDER FORWARDED TO:- 1. + / REVENUE 2. / ASSESSEE 3. // 0 / CONCERNED CIT 4. 0- / CIT (A) 5. '45 / DR ITAT AHMEDABAD 6. 589 :; / GUARD FILE. BY ORDER / &