The ACIT, Range-5,, Ahmedabad v. Neptune Equipment Pvt. Ltd.,, Ahmedabad

ITA 2611/AHD/2006 | 2001-2002
Pronouncement Date: 31-08-2010 | Result: Dismissed

Appeal Details

RSA Number 261120514 RSA 2006
Bench Ahmedabad
Appeal Number ITA 2611/AHD/2006
Duration Of Justice 3 year(s) 8 month(s) 26 day(s)
Appellant The ACIT, Range-5,, Ahmedabad
Respondent Neptune Equipment Pvt. Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 31-08-2010
Date Of Final Hearing 19-08-2010
Next Hearing Date 19-08-2010
Assessment Year 2001-2002
Appeal Filed On 04-12-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.2611/AHD/2006 & ITA NO.1431/AHD/2007 ASSESSMENT YEAR:2001-02 DATE OF HEARING:19.8.10 DRAFTED:23.8.10 ACIT CIRCLE-5 AHMEDABAD V/S . NEPTUNE EQUIPMENTS PVT. LTD. 603 SHILP BUILDING C.G. ROAD NAVRANGPURA AHMEDABAD-38009 PAN NO.AAAACN5344F (APPELLANT) .. (RESPONDENT) ITA NO.4458 & 4390/AHD/2007 ASSESSMENT YEAR: 2004-05 NEPTUNE EQUIPMENTS PVT. LTD. 603 SHILP BUILDING C.G. ROAD NAVRANGPURA AHMEDABAD-38009 PAN NO.AAAACN5344F DCIT CIRCLE-5 AHMEDABAD V/S . V/S . ADDL. COMMISSIONER OF INCOME-TAX ANGE-5 AHMEDABAD NEPTUNE EQUIPMENTS PVT. LTD. 603 SHILP BUILDING C.G. ROAD NAVRANGPURA AHMEDABAD-38009 PAN NO.AAAACN5344F (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI C.N. SHAH AR REVENUE BY:- SHRI A.K. DHANESTA DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- OUT OF THESE FOUR APPEALS THREE BY THE REVENUE AN D 1 BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-XI AHMEDABAD IN ITA NO.2611/AHD/2006 14311 4458& 4390/AHD/2007 A.YS01-02 & 04-05 ACIT CIR-5 ABD V. NEPTUNE EQUIPMENT PVT. LTD . PAGE 2 APPEAL NOS. CIT(A)-XI/169 193 130/06-07/07-08 BY DI FFERENT DATES I.E. 20-09-2006 08-12-2007 AND 04-12-2007. THE ASSESSMENTS WERE FRA MED BY ITO WARD-5(1) AHMEDABAD U/S143(3) OF THE INCOME TAX ACT 1961 (HE REINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDERS DATED 23-03-2001 AND 30-11-20 06. THE PENALTY UNDER DISPUTE WAS LEVIED BY ACIT CIRCLE-5 U/S 271(1)(C) OF THE A CT VIDE HIS ORDER DATED 20-03-2006 AND PENALTY U/S 271D WAS LEVIED BY THE ADDL. CIT AH MEDABAD RANGE-5 AHMEDABAD VIDE HIS ORDER DATED 29-03-2007. FIRST WE WILL TAKE UP REVENUES APPEAL IN ITA NO.14 31/AHD/2007. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF PRIOR PERIOD EXPENSES. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LD. COMMISSIONER OF INCOME-TAX(A)-XI AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW THE PRIOR PERIOD EXPENSES OF RS.16 78 056/-. 3. AT THE OUTSET LD DR SHRI A.K.DHANESTA STATED THA T CIT(A) HAS NOT GIVEN ANY FINDING AS REGARDS TO CRYSTALLIZATION/QUANTIFICATIO N OF LIABILITY OF PRIOR PERIOD EXPENSES. HE REFERRED THE FINDINGS OF CIT(A) IN PARA-4.2 AS UNDER:- 4.2 AS IT COULD BE SEEN FROM THE ABOVE DECISIONS O F I.T.A.T. AHMEDABAD BENCH A AHMEDABAD THAT THE LIABILITY TOWARDS EXP ENDITURE COULD BE ALLOWED ON THE BASIS OF CRYSTALLIZATION AND QUANTIFICATION OF THE SAID LIABILITY IN THE YEAR IN WHICH THEY ARE CRYSTALLIZED AND QUANTIFIED EVEN THOUGH SAID EXPENSES COULD HAVE BEEN PERTAINED TO EARLIER YEAR. IN APPELLANTS CASE THE A.O DID NOT ALLOW THE EXPENSES AT RS.16 78 056/- ON ACCOUNT OF THAT THEY APPEARING AS PRIOR PERIOD EXPENSES. HOWEVER AT IT IS UNDERSTOOD FROM THE ARGUMENTS OF THE A.R THAT THE SAID EXPENSES THOUGH PERTAINED TO PREVIOUS YEAR BUT THE SAME ARE PAID BY THE APPELLANT ON BASIS OF CRYSTALLIZATION A ND QUANTIFICATION OF THE LIABILITY IN THE YEAR UNDER CONSIDERATION. THEREFOR E I FIND THAT THE DECISION OF HONOURABLE ITAT AHMEDABAD BENCH AS CITED ABOVE IS SQUARELY APPLICABLE IN APPELLANTS CASE THEREFORE THE A.O IS DIRECTED TO ALLOW THE EXPENSES OF RS.16 78 056/- AND RECOMPUTE THE INCOME OF THE APPE LLANT. HE STATED THAT IT IS NOT CLEAR FROM THE ABOVE ORDER THAT WHEN THE LIABILITY GOT CRYSTALLIZED ON ACCOUNT OF PRIOR PERIOD EXPENSES AN D WHEN THESE EXPENSES WERE PAID. ACCORDINGLY HE STATED THAT THE RELEVANT FIND ING OF CIT(A) REQUIRES A SPEAKING ORDER. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY STAT ED THAT THE FACTS ARE NOT ARISING OUT OF THE ORDER OF ASSESSING OFFICER AS WELL AS THE OR DER OF CIT(A) AND HE REQUESTED FOR SETTING ASIDE OF THIS ISSUE TO THE FILE OF ASSESSIN G OFFICER. ITA NO.2611/AHD/2006 14311 4458& 4390/AHD/2007 A.YS01-02 & 04-05 ACIT CIR-5 ABD V. NEPTUNE EQUIPMENT PVT. LTD . PAGE 3 4. WE FIND FROM THE ASSESSMENT ORDER THAT EVEN THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING EITHER OF THE ISSUE OF CRYSTALLIZ ATION OF THE LIABILITY OF PRIOR PERIOD EXPENSES AND WHEN THESE WERE PAID. AS THE FACTS ARE NOT AT ALL CLEAR WHETHER THE LIABILITY HAS CRYSTALLIZED DURING THIS YEAR OR IN E ARLIER YEARS AND IN THE ABSENCE OF ANYTHING WE ARE UNABLE TO DECIDE THIS ISSUE AS TH E ORDERS OF LOWER AUTHORITIES ARE VERY CRYPTIC AND WITHOUT ANY FACTS. IN THE ABSENCE OF THESE WE ARE OF THE VIEW THAT THE ISSUE MAY BE REMITTED BACK TO THE FILE OF THE A SSESSING OFFICER AND ASSESSEE IS REMINDED THAT THIS IS A SECOND INNINGS AND HE HAS T O CO-OPERATE WITH THE DEPARTMENT AND WILL FILE COMPLETE DETAILS IN RESPECT OF PRIOR PERIOD EXPENSES. IN VIEW OF THE ABOVE CIRCUMSTANCES WE SET ASIDE THIS ISSUE TO THE FILE OF AO AND ASSESSEE IS DIRECTED TO CO-OPERATE WITH AO AND WILL FILE COMPLETE DETAILS I N RESPECT OF PRIOR PERIOD EXPENSES. AO IS DIRECTED TO PASS A SPEAKING ORDER. ACCORDINGL Y THIS ISSUE OF REVENUES APPEAL IS SET ASIDE TO THE FILE OF ASSESSING OFFICER AS IN DICATED ABOVE AND REVENUES ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. NOW COMING TO REVENUES APPEAL IN ITA NO.2611/AHD/2 006. 5. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE LEVY OF PENALTY ON PRIOR PERIOD EXPENS ES. AS THE ABOVE QUANTUM APPEAL HAS BEEN SET ASIDE TO THE FILE OF ASSESSING OFFICER THE PENALTY WILL NOT SURVIVE. ACCORDINGLY WE DELETE THE PENALTY BUT WITH LIBERTY TO THE REVENUE TO REINITIATE THE PENALTY IN CASE DURING THE COURSE OF REFRAMING OF ASSESSMENT IF HE COMES ANYTHING ON THE CONCEALMENT. THIS ISSUE OF THE REVENUES APP EAL IS DISMISSED. NOW COMING TO ITA NO.4458/AHD/2007 OF ASSESSEES AP PEAL AND IN ITA NO.4390/AHD/2007 OF REVENUES APPEAL. 6 THE ONLY COMMON ISSUE IN THESE CROSS APPEALS IS A S REGARDS TO THE ORDER OF CIT(A) IN RESTRICTING THE PENALTY LEVIED BY THE ADD L. CIT AT RS.5 37 500/- AS AGAINST RS.62 92 130/-. FOR THIS THE ASSESSEE HAS RAISED T HE FOLLOWING GROUND NO.1-3 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)XI AHMEDABAD R EFERRED TO AS (CIT) ERRED IN CONFIRMING PENALTY OF RS.5 37 500/- IMPOSE D BY ADDITIONAL COMMISSIONER OF INCOME-TAX UNDER SECTION 271D OF TH E INCOME-TAX ACT 1961. 2. THE CIT OUGHT TO HAVE FOLLOWED THE JUDGMENT OF H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. IDHAYAM P LTD. 285 ITR 221 LA YING DOWN THAT THE TRANSACTION BETWEEN THE ASSESSEE AND THE DIRECTOR-C UM-SHAREHOLDER WAS NOT A LOAN OR DEPOSIT AND IT WAS ONLY A CURRENT ACCOUNT IN NATURE AND NO INTEREST ITA NO.2611/AHD/2006 14311 4458& 4390/AHD/2007 A.YS01-02 & 04-05 ACIT CIR-5 ABD V. NEPTUNE EQUIPMENT PVT. LTD . PAGE 4 WAS BEING CHARGED FOR THE ABOVE TRANSACTION AND HEN CE PENALTY WAS NOT JUSTIFIABLE. 3. THE LEARNED CIT OUGHT TO HAVE APPRECIATED THAT S HRI S.P. SHAH MANAGING DIRECTOR WHO HAS GIVEN MONEY IN CURRENT ACCOUNT FOR THE URGENT NEEDS OF THE BUSINESS OF THE COMPANY IS A TAX PAYER ON RECORD AN D IS FILING RETURN OF INCOME AND AMOUNTS GIVEN TO THE COMPANY ARE ACCEPTED AS GE NUINE AND BONAFIDE TRANSACTIONS AND NOTHING WAS ADDED UNDER SECTION 68 OF THE INCOME-TAX ACT 1961 IN COURSE OF ASSESSMENT PROCEEDINGS CARRIED OU T UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961. AND FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI AHME DABAD HAS ERRED IN LAW AND ON FACTS IN REDUCING THE PENALTY IMPOSED UNDER SECTION 271D OF THE I.T. ACT 1961 FROM RS.62 92 130/- TO RS.5 37 500/-. 6. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS LD. DR FAIRLY SATED THAT AS REGARDS TO DELETION OF PENALTY BY THE CIT(A ) IN RESPECT OF TRANSACTION DONE THROUGH CHEQUES AND JOURNAL ENTRIES THE CIT(A) HAS MERELY DELETED ON THE BASIS THAT THESE PAYMENTS ARE BY CHEQUE OR JOURNAL ENTRIES AND HE HAS NOT VERIFIED ANYTHING FROM FACTS. AS REGARDS TO THE CONFIRMATION OF LEVY OF PENALTY THE ARGUMENT OF THE ASSESSEE THAT THESE LOANS ARE FROM DIRECTORS OR SHA REHOLDERS OF THE COMPANY AND IN VIEW OF THE HONBLE MADRAS HIGH COURT DECISION IN T HE CASE OF CIT V. IDHAYAM PUBLICATIONS LTD. (2006) 285 ITR 221 (MAD) THE CIT(A) HAS NOT CONSI DERED ANYTHING AND CONFIRMED THE LEVY OF PENALTY. 7. AFTER HEARING BOTH THE SIDES WE HAVE GONE THROU GH THE APPELLATE ORDER OF CIT(A) PARAS 3.2.2 TO 3.2.2.5 WHICH READS AS UNDER:- 3.2.2 THEREFORE HAVING VERIFIED THE FACTS OF THE CASE AND ALSO RELYING UPON THE DECISION OF HONOURABLE ITAT AS DISCUSSED ABOVE AND ALSO AFTER PERUSING THE ARGUMENTS PUT FORTH BY THE A.R I AM OF THE OPI NION THAT EXCEPT WITH REGARD TO TRANSACTION OF RS.5 357 500/- OTHER TRANSACTIONS ARE ONLY BY WAY OF CHEQUES AND JOURNAL ENTRIES THEREFORE THERE IS NO CASH ACC EPTANCE OR DEPOSIT BY THE APPELLANT HENCE THE PENALTY LEVIED BY THE ADDL. C IT IS NOT JUSTIFIABLE ON RS.51 29 000/- AND DRS.6 29 630/-. THE PENALTY IF ANY TO BE IMPOSED IT COULD BE ONLY FOR RS.5 37 500/- AS THE APPELLANT HAS VIOL ATED THE PROVISIONS OF SECTION 269SS OF ACT. 3.2.3 WITH REGARD TO CASH TRANSACTIONS IT IS TO BE FURTHER SEEN THAT THE APPELLANT HAD RECEIVED CASH LOANS FROM THE M.D. OF THE APPELLANT WHO HAS BEEN ASSESSED TO INCOME-TAX. THE REASONS FOR TAKING CASH LOAN IS STATED TO HAVE BEEN FOR CERTAIN URGENT PAYMENTS TO OTHER PART IES. ITA NO.2611/AHD/2006 14311 4458& 4390/AHD/2007 A.YS01-02 & 04-05 ACIT CIR-5 ABD V. NEPTUNE EQUIPMENT PVT. LTD . PAGE 5 3.2.4 IT IS ALSO SEEN THAT THE ONLY REASON ADVANCED FOR HAVING TAKEN CASH LOAN IS THAT THERE WAS AN URGENT NEED OF MONEY FOR MAKIN G CERTAIN PAYMENTS TO CERTAIN PARTIES. HOWEVER IT IS NOT CLEAR IN WHAT W AY THE APPELLANT WAS PREVENTED FROM ACCEPTING CROSSED CHEQUES OR DEMAND DRAFTS WHEN THE LENDER OF THE CREDIT IS ASSESSED TO INCOME-TAX AND POSSIBL Y ALSO SHAVING BANK ACCOUNTS. EVEN FOR MAKING URGENT PAYMENTS THE APPEL LANT COULD HAVE ACCEPTED THE CROSSED CHEQUES OR DEMAND DRAFTS FROM THE M.D OF THE APPELLANT WHO HAS LENT THE MONEY AND ISSUED THE CHEQUES. SINC E THE BANKING FACILITIES ARE VERY MUCH IMPROVED AND EVEN GETTING CHEQUES CRE DITED ON THE SAME DAY IS NOT DIFFICULT THEREFORE THE CLAIM OF THE APPELL ANT THAT FOR URGENT BUSINESS NEEDS IT HAD TO ACCEPT CASH IS NOT ACCEPTABLE. 3.2.5. THEREFORE HAVING CONSIDERED THE FACTS AND C IRCUMSTANCES OF THE CASE THE PENALTY LEVIED WITH REGARD TO TRANSACTIONS OF R S.5 37 500/- IS SONLY CONFIRMED AND FOR THE BALANCE AMOUNT THERE CANNOT B E ANY PENALTY U/S.271D OF THE I.T. ACT. THEREFORE ADDL. C.I.T. IS DIRECTE D TO MODIFY THE PENALTY ORDER IN THE LIGHT OF ABOVE DISCUSSION. 8. WE FIND FROM THE ABOVE THAT THE CIT(A) HAS NOT PASSED A SPEAKING ORDER AND IN THE ABSENCE OF THE FACTS WE CANNOT DECIDE THE I SSUE OF LEVY OF PENALTY U/S.271D OF THE ACT OF THE ASSESSEES APPEAL AS WELL AS THE APP EAL OF REVENUE. ACCORDINGLY THIS PENALTY IN THE APPEALS OF REVENUE AS WELL AS ASSESS EE IS SET ASIDE TO THE FILE OF ASSESSING OFFICER TO CONSIDER THE ARGUMENTS OF ASSE SSEE AND PASS A SPEAKING ORDER. THE AO WILL CONSIDER THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF IDHAYAM PUBLICATIONS LTD. (SUPRA). ACCORDINGLY THIS COMMON ISSUE OF CROSS A PPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT REVENUES APPEAL IN ITA NO.2611/AHD/2006 IS DISMISSED AND THAT OF ASSESSEES APPEAL IN ITA NO.4458/AHD/20 07 AND REVENUES APPEAL IN ITA NO.1431/AHD/20074390/AHD/2007 ARE ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 31/08/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 31/08/2010 *DKP ITA NO.2611/AHD/2006 14311 4458& 4390/AHD/2007 A.YS01-02 & 04-05 ACIT CIR-5 ABD V. NEPTUNE EQUIPMENT PVT. LTD . PAGE 6 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD