ACIT,Circle-56,Kolkata, Kolkata v. M/S. Arti & Sons, Kolkata, Kolkata

ITA 2132/KOL/2009 | 2006-2007
Pronouncement Date: 07-04-2014

Appeal Details

RSA Number 213223514 RSA 2009
Assessee PAN AAEFA6622J
Bench Kolkata
Appeal Number ITA 2132/KOL/2009
Duration Of Justice 4 year(s) 3 month(s) 21 day(s)
Appellant ACIT,Circle-56,Kolkata, Kolkata
Respondent M/S. Arti & Sons, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-04-2014
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 07-04-2014
Date Of Final Hearing 03-06-2013
Next Hearing Date 03-06-2013
Assessment Year 2006-2007
Appeal Filed On 17-12-2009
Judgment Text
C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE /AND . . . . ' '' ''# '#'# '# $% ) [BEFORE SHRI MAHAVIR SINGH JM & SHRI ABRAHAM P. GEORGE AM] & & & & / I.T.A NO. 2132/KOL/2009 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX VS. M/S. AR TI & SONS KOLKATA CIRCLE-56 KOLKATA. (PAN: AAEFA6622J) ( - /APPELLANT ) (./ -/ RESPONDENT ) & & & & & / I.T.A NO. 319/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2006-07 M/S. ARTI & SONS KOLKATA VS. ADDL. COMMISSIONE R OF INCOME-TAX CIRCLE-56 KOLKATA. ( - /APPELLANT ) (./ -/ RESPONDENT ) DATE OF HEARING: 18.03.2014 DATE OF PRONOUNCEMENT: 07.04.2014 FOR THE REVENUE: SHRI RABIN CHOWDHURY JCIT SR. DR FOR THE ASSESSEE: SHRI D. K. DE SARKAR $0 / ORDER PER SHRI MAHAVIR SINGH JM: THESE CROSS APPEALS BY REVENUE AND ASSESSEE ARE ARI SING OUT OF ORDER OF CIT(A)- XXXVI KOLKATA IN APPEAL NO. 419/CIT(A)-XXXVI/KOL/C IR-56/08-09 DATED 29.09.2009. ASSESSMENT WAS FRAMED BY ADDL. CIT RANGE-56 KOLKA TA U/S.143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASS ESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 31.03.2008. PENALTY ORDER U/S. 271(1)(C) OF THE AC T WAS PASSED BY ADDL. CIT RANGE-56 KOLKATA VIDE HIS ORDER DATED 30.09.2008. 2. THE ONLY COMMON ISSUE IN THESE TWO CROSS APPEALS IS AS REGARDS TO THE ORDER OF CIT(A) RESTRICTING THE PENALTY LEVIED BY AO U/S. 271(1)(C) OF THE ACT. FOR THIS REVENUE HAS RAISED FOLLOWING GROUND: 1. THAT THE CIT(A) ERRED BOTH IN FACTS AND IN LAW IN CANCELLING PENALTY U/S. 271(1)(C) ON ACCOUNT OF DISALLOWANCE OF BUSINESS LOSS OF RS.7 45 645/- INSPITE OF THE FACTS THAT ASSESSEE DELIBERATELY FAILED TO ESTABLISH ALLEGED LOSS BY PR ODUCING EVIDENCE OF FIR FILING DETAILS OF FIR AND NOT CLAIMING FOR REIMBURSEMENT OF PAYMENT M ADE ON ACCOUNT OF PRIZE WINNING TICKET (PWT) FROM THE PRINCIPALS. 2 ITA NO.2132/K/2009 & 319/K/2010 M/S. ARTI & SONS AY:2006-07 THE ASSESSES HAS RAISED FOLLOWING GROUND: 1. FOR THAT THE PENALTY IMPOSED ON THE DISALLOWANC E OF INTEREST PAID TO BANK FOR PAYMENT OF INTEREST FREE ADVANCES TO OTHER CONCERN IS BAD IN LAW AS WELL AS ON FACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FIRM FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2006-07 ON 30.10.2009 WITHIN THE D UE DATE OF FILING OF RETURN U/S. 139(1) OF THE ACT. THIS RETURN OF INCOME WAS FILED ALONG WIT H AUDITED ACCOUNTS U/S. 44AB OF THE ACT. THIS RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 19.09.2007 AND SUBSEQUEBNTLY NOTICE U/S. 143(2) OF THE ACT DATED 22.10.2007 WAS ISSUED AND S ERVED ON THE ASSESSEE. THE AO FRAMED ASSESSMENT U/S. 143(3) OF THE ACT VIDE HIS ORDER DA TED 31.03.2008 MAKING DISALLOWANCE OF INTEREST ON THE PREMISE THAT THE INTEREST CLAIMED O N BANK OVERDRAFT AND BANK CHARGES ARE RELATED TO INTEREST FREE ADVANCES GIVEN TO SISTER CONCERN O R RELATIVES AND OTHER DEBTORS. THE AO ALSO MADE THE FOLLOWING TWO: (I) DISALLOWANCE OF INTEREST AT RS.32 84 594/- II) DISALLOWANCE OF LOSS ON ACOUNT OF PRIZE WINNING TICKETS AT RS.7 45 645/-. THE ASSESSEE FIRM ACCEPTED THE ASSESSMENT FRAMED U/ S. 143(3) OF THE ACT AND ADDITIONS WERE NOT CHALLENGED IN APPEAL. WHILE FRAMING ASSESSMENT THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE AO STARTED THE PENALTY PROCEEDINGS AND REQUIRED THE ASSESSEE TO EX PLAIN WHY PENALTY U/S./ 271(1)(C) OF THE ACT ON THE ABOVE TWO ITEMS BE NOT LEVIED. THE ASSESSE E BEFORE THE AO FILED WRITTEN SUBMISSIONS ON 25.09.2008 STATING THAT ADDITIONS WERE MADE ON ESTI MATE BASIS AND ALL MATERIAL FACT RELATING TO THIS ASSESSMENT HAS BEEN DISCLOSED IN THE AUDITED A CCOUNTS OF THE ASSESSEE. ASSESSEE ALSO CLAIMED THAT THE COMPLETE PARTICULARS REGARDING LOA N CREDITORS LOAN TAKEN FROM BANK AND OVERDRAFT WERE FILED IN THE AUDITED ACCOUNTS AND CO MPLETE DISCLOSURE WAS MADE IN THE AUDIT REPORT. IT WAS ALSO CLAIMED THAT THE COMPLETE DETAI LS OF LOSS ON ACCOUNT OF PRIZE WINNING TICKETS WAS ACCOUNTED FOR AND CLEARLY DEPICTED IN THE ACCOU NTS AND COMPLETE DETAILS WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE BEFORE THE AO STATED THAT IT IS NOT A CASE WHERE AO HAS DETECTED SOMETHING WHICH WAS NOT BEFOR E HIM OR NOT FILED BY THE ASSESSEE AND IN SUCH CIRCUMSTANCES THIS IS A BONAFIDE AND GENUINE C LAIM. AS FAR AS NOT FILING AN APPEAL BEFORE THE APPELLATE AUTHORITIES AGAINST ADDITION ASSESSE E CONTENDED THAT THESE WERE ACCEPTED AND ONLY ON THOSE PREMISE PENALTY CANNOT BE LEVIED. 4. BUT THE AO LEVIED THE PENALTY AND THE RELEVANT O BSERVATIONS IN THE PENALTY ORDER U/S. 271(1)(C) OF THE ACT READS AS UNDER: 3 ITA NO.2132/K/2009 & 319/K/2010 M/S. ARTI & SONS AY:2006-07 NOTICE U/S. 271(1)(C)/274 OF THE I.T.ACT WAS SERVE D ON 31.03.2008 FIXING THE HEARING ON (21.04.2008 ON WHICH DATE NON APPEARED. FOR THE SAK E OF NATURAL JUSTICE ANOTHER SHOW- CAUSE NOTICE WAS ISSUED ON 22.09.2008 FIXING HEARIN G ON 29.09.2008. THE ASSESSEE FILED A WRITTEN SUBMISSION ON 25.09.2008 PRAYING FOR WAIV ER OF PENALTY PROCEEDINGS ON THE GROUND THAT ALL THE ADDITIONS WERE MADE ON ESTIMATE D BASIS. THE ASSESSEE ALSO OPINED THAT ALL MATERIAL FACTS HAD BEEN DISCLOSED BY THE A SSESSEE AND THERE WAS NO CONCEALMENT OF INCOME. THE MATERIALS AVAILABLE ON RECORD AND ASSESSEES SU BMISSION ARE CONSIDERED AND IT IS FOUND THAT ASSESSEES PLEA FOR DROPPING OF PENALTY PROCEEDINGS IS NOT ACCEPTABLE FOR THE FACT THAT ARE CLEAR-CUT DISALLOWANCE ON THE BASIS O F FACTS AND LAW. EVEN THE ASSESSEE HAD ALSO ACCEPTED THESE ADDITIONS AS IT CLEAR FROM THE FACT THAT THE ASSESSEE HAD NOT FILED ANY APPEAL. IN VIEW OF THIS I HELD THAT THIS IS A CASE FIT FOR LEVYING PENALTY U/S. 271(1)(C) OF THE I.T.ACT AND AS SUCH PENALTY @ 100% ON ACCOUNT OF DISALLOWAN CE OF INTEREST FOR RS.32 84 594/- ADDITION ON ACCOUNT OF PWT OF RS. 7 45 645/- IS IMP OSED CALCULATED AS UNDER: 5. AGGRIEVED AGAINST PENALTY ASSESSEE PREFERRED AP PEAL BEFORE CIT(A) WHO DELETED THE PENALTY IN RESPECT TO DISALLOWANCE OF BUSINESS LOSS FOR WHICH REVENUE IS IN APPEAL AND CONFIRMED THE PENALTY ON DISALLOWANCE OF INTEREST A ND BANK CHARGES FOR THAT ASSESSEE IS IN APPEAL. THE OBSERVATIONS OF CIT(A) ARE AS UNDER: REGARDING THE DISALLOWANCE OF INTEREST AND BANK CH ARGES OF RS.32 84 594/- I FIND THAT NO APPEAL WAS FILED BY THE APPELLANT AGAINST THE AB OVE DISALLOWANCES. IT IS ALSO NOTED THAT THE APPELLANT HAD MADE THE INTEREST FREE ADVAN CES TO ITS RELATED PERSONS/CONCERNS OUT OF BORROWED FUNDS. THEREFORE THE APPELLANT WAS AWARE THAT THE ABOVE LIABILITY WAS NOT PERTAINING TO THE APPELLANTS BUSINESS. THEREFO RE CLAIMING THAT IT WAS A MERE DISALLOWANCE AND THAT THE APPELLANT HAD DISCLOSED A LL THE FACTS IN RESPECT OF BORROWERS AND THE ADVANCES IS NOT CORRECTED AND THEREFORE N OT ACCEPTABLE. EVEN THOUGH THE APPELLANT HAS DISCLOSED THE FACT OF ADVANCES AND BO RROWERS IN ITS RETURN OF INCOME FILED THE ASSESSING OFFICER WITH DUE DILIGENCE HAS GONE INTO THE ISSUE AND BROUGHT TO LIGHT THE FACT THAT INTEREST FREE ADVANCES WERE MADE TO ITS R ELATED PARTY OUT OF INTEREST BEARING BORROWED FUNDS. IN VIEW OF THE ABOVE I AM OF THE V IEW THAT THE APPELLANT HAS MADE THE CLAIM EVEN THOUGH THE LIABILITY DOES NOT RELATE TO ITS BUSINESS. THEREFORE THE ASSESSING OFFICER HAS RIGHTLY CONCLUDED THAT THE APPELLANT HA S KNOWINGLY FURNISHED INACCURATE PARTICULARS OF ITS INCOME. REGARDING THE DISALLOWANCE OF BUSINESS LOSS OF RS.7 45 645/- I AM OF THE VIEW THAT THE SAME CANNOT BE TAKEN AS FURNISHING INACCURATE PART CULARS BECAUSE THE ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE CLAIM WAS FALSE AND TH AT THERE WAS NO LOSS OF PRIZE WINNING TICKETS. THE ASSESSING OFFICER HAS HELD THAT THE AP PELLANT HAS NOT SUBSTANTIATED THE CLAIM OF THE ABOVE LOSS WITH NECESSARY EVDENCE. IN VIEW O F THE ABOVE I AM OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR TREATING THE BUSINESS LOSS AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE REFORE THE ASSESSING OFFICER IS DIRECTED TO DELETE RS.7 45 645/- FROM INCOME ON WHI CH TAX WAS SOUGHT TO BE EVADED. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AS REGARDS TO FIRST ISSUE OF DISALLOWANCE OF INTERE ST AND BANK CHARGES WE FIND THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST ON BANK OVERDRAFT AT RS.23 69 393/- AND BANK CHARGES A T RS.9.15.201/-. THE AO ALSO NOTED FROM 4 ITA NO.2132/K/2009 & 319/K/2010 M/S. ARTI & SONS AY:2006-07 THE BALANCE SHEET THAT IT HAD GIVEN VARIOUS LOANS A ND ADVANCES INCLUDING RELATIVES AND SISTER CONCERNS IN TOTALLING TO RS.6 74 79 352/-. ACCORDI NG TO AO THE ASSESSEE COULD NOT ESTABLISH THAT THESE LOANS AND ADVANCES WERE GIVEN FOR BUSINE SS PURPOSES HE MADE DISALLOWANCE OF INTEREST ON BANK OVERDRAFT AT RS.23 69 393/- AND BA NK CHARGES AT RS.9 15 201/- TOTALLING TO AN AMOUNT OF RS. 32 84 594/-. THE ASSESSEE BEFORE AO AS WELL AS BEFORE CIT(A) AND EVEN NOW BEFORE US CONTENDED THAT THE MAJOR AMOUNTS IN THE N AME OF AKASH CHOWRASIA CURRENT ACCOUNT APOLLO INTERNATIONAL TERMINALS ARTI FOOD PRODUCTS AND VALUABLE MEDIA PVT. LTD. ABOUT RS.5 24 85 158/- PERTAINS TO BUSINESS LOSS AND THES E ARE DIRECTLY RELATED TO BUSINESS CONCERNS. ACCORDING TO ASSESSEE THESE PARTIES ARE DIRECTLY D OING THE LOTTERY BUSINESS OF ASSESSEE AND THE BALANCE AMOUNT OF RS.1 49 94 194/- IS TO VARIOUS IN DIVIDUAL AS INTEREST ADVANCES. LD. COUNSEL FOR THE ASSESSEE NOW BEFORE US STATED THAT THESE A DVANCES ARE MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND THIS YEARS INCOME ASSESSED BY THE AO IS AT ABOUT RS.2 48 69 062/-. ACCORDING TO LD. COUNSEL THIS I S MORE THAN THE INTEREST FREE ADVANCES NOT RELATED TO BUSINESS. IN VIEW OF THE ABOVE FACTS L D. COUNSEL FOR THE ASSESSEE STATED THAT THERE IS NO QUESTION OF ANY DISALLOWANCE WHAT TO TALK OF PE NALTY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ON THE OTHER HAND LD. SR. DR SUPPORTED THE ORDER OF THE CIT(A) AS WELL AS THAT OF THE AO LEVYI NG PENALTY. FROM THE ABOVE FACTS AND CIRCUMSTANCES IT IS CLEAR THAT THE INTEREST FREE A DVANCES NOT RELATED TO BUSINESS ARE AMOUNTING TO RS. 1 49 94 194/- AND ASSESSEE HAS INTEREST FREE FU NDS AVAILABLE AS CAPITAL AS WELL AS THIS YEARS PROFITS ASSESSED BY AO AT RS.2 48 69 062/- WHICH I S MORE THAN THE INTEREST FREE ADVANCES THERE IS NO SCOPE FOR ANY DISALLOWANCE BUT NOW THAT CHAPT ER IS CLOSED AND ASSESSEE HAS NOT FILED ANY APPEAL AGAINST QUANTUM ADDITION THE PENALTY U/S. 2 71(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME IN ANY CASE CANNOT BE LEVIED. WE DELETE THE PENALTY CONFIRMED BY CIT(A) AND LEVIED B Y AO. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 7. AS REGARDS TO THE DISALLOWANCE OF LOSS ON ACCOUN T OF PRIZE WINNING TICKETS LOST BY ASSESSEE. ASSESSEE BEFORE AO HAS GIVEN COMPLETE DE TAILS AND THIS FACT IS RECORDED IN ITS LEDGER. THE ASSESSEE HAS EVEN NOW BEFORE US FILED COMPLETE DETAIL OF LOSS CLAIMED ON LOST PRIZE WINNING TICKETS AT RS.7 45 645/-. HERE WE ARE IN AGREEMEN T WITH THE FINDINGS OF CIT(A) BECAUSE THE ASSESSEE FILED COMPLETE PARTICULARS OF INCOME IN IT S ACCOUNTS FILED ALONG WITH THE RETURN OF INCOME AND THE AO IN ITS PENALTY ORDER HAS NO WHERE BROUGHT OUT THAT HOW THIS IS A CONCEALMENT. ACCORDING TO AO IN HIS PENALTY ORDER CLEARLY SAYS THAT THIS IS A CLEAR CUT DISALLOWANCE BASED ON THE FACTS SUBMITTED BY ASSESS EE. ONCE THIS IS MERELY A DISALLOWANCE OF 5 ITA NO.2132/K/2009 & 319/K/2010 M/S. ARTI & SONS AY:2006-07 LOSS WHICH WAS CLAIMED BY ASSESSEE ON THE BASIS OF EVIDENCES AND THE AO IS UNABLE TO BRING OUT ANY REASON FOR LEVY OF PENALTY U/S. 271(1)(C) O F THE ACT IN HIS ORDER THE SAME HAS RIGHTLY BEEN DELETED BY CIT(A). WE CONFIRM THE ORDER OF CI T(A). THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT APPEAL OF REVENUE IS DISMISSED AN D THAT OF ASSESSEE IS ALLOWED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 7TH APR IL 2014 SD/- SD/- . . . . ' '' ''# '#'# '# $% (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 7 TH APRIL 2014 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . - / APPELLANT- ACIT CIRCLE-56 KOLKATA/ADDL.CIT CIRC LE-56 KOLKATA. 2 ./ - / RESPONDENT M/S. ARTI & SONS 167/4 LENIN SARAN I KOLKATA-700 072. 3 . 0' ( )/ THE CIT(A) KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR KOLKATA BENCHES KOLKATA / ./ TRUE COPY $0'>/ BY ORDER ' /ASSTT. REGISTRAR .