M/s. Vikshara Trading & Investment Pvt. Ltd.,, Ahmedabad v. The ACIT., Circle-8,, Ahmedabad

ITA 2972/AHD/2009 | 2005-2006
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 297220514 RSA 2009
Assessee PAN AAACV5043P
Bench Ahmedabad
Appeal Number ITA 2972/AHD/2009
Duration Of Justice 2 month(s) 1 day(s)
Appellant M/s. Vikshara Trading & Investment Pvt. Ltd.,, Ahmedabad
Respondent The ACIT., Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 08-01-2010
Assessment Year 2005-2006
Appeal Filed On 06-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI BHAVNESH SAINI JM & SHRI A.N. PAHUJA AM I.T.A. NO.2972/AHD/2009 (ASSESSMENT YEAR 2005-06) VIKSHARA TRADING & INV (P) LTD VS ACIT CIRCLE-8 C/O KETAN H SHAH ADVOCATE AHMEDABAD 903 SAPHIRE COMPLEX NEAR CARGO MOTORS CG ROAD AHMEDABAD [PAN : AAACV5043P] (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE[WRITTEN SUBMISSIONS] REVENUE BY : SHRI MC PANDIT DR O R D E R AN PAHUJA : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 22- 10-2009 OF THE CIT(A)-XIV AHMEDABAD UPHOLDING PEN ALTY OF RS.1 82 895/- LEVIED /S 271(1)(C) OF THE INCOME-TAX ACT 1961[HERE INAFTER REFERRED TO AS THE ACT]. 2. FACTS IN BRIEF AS PER RELEVANT ARE THAT RETURN DECLARING LOSS OF RS.1 81 922/- FILED BY THE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING OF TOOTHPASTE DETERGENT POWDER SHAMPOO COSMETICS P ETROLEUM JELLY SCOURING POWDER ETC. ON 29.10.2005 WAS PROCESSED UNDER SECT ION 143(1) OF THE INCOME TAX ACT 1961 [HEREINAFTER REFERRED TO AS ACT] ON 23.03.2006. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT INTER ALIA W ITH THE DISALLOWANCE OF INTEREST OF RS.4 99 816/- THE ASSESSEE HAVING DIVERTED FUND S TOWARDS NON-BUSINESS PURPOSES. UNDISPUTEDLY THE ASSESSEE HAD INTEREST F REE FUNDS OF ONLY RS.38 42 781 AND ADMITTEDLY THE INTEREST BEARING F UNDS HADBEEN UTILIZED FOR GIVING INTEREST FREE LOANS/ADVANCES TO THREE PARTIE S VIZ. MAHIMA TRADING MUKESH PATEL AND SKYLARK FINANCE LTD. FOR NON-BUSINESS PUR POSES FOR AN AMOUNT OF RS.6 93 00 195/- BESIDES INTEREST FREE ADVANCES TO DIRECTORS TO THE TUNE OF RS.84 22 111/-. SINCE THE LOANS ADVANCED WERE MORE THAN THE INTEREST BEARING I.T.A. NO.2972/AHD/2009 2 FUNDS THE ENTIRE INTEREST PAYMENT WAS DISALLOWED A ND PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3. ON APPEAL THE DISALLOWANCE OF INTEREST WAS UPH ELD BY THE LD. CIT(A) AND LATER BY THE ITAT VIDE THEIR ORDER DATED 1.7.2008 I N ITA NO.960/AHD./2008. SUBSEQUENTLY IN RESPONSE TO A SHOWCAUSE NOTICE BEF ORE LEVY OF PENALTY THE ASSESSEE VIDE LETTER DATED 28-01-2009 RELIED ON TH EIR EARLIER REPLY SUBMITTED ON 07-04-2008 AND REQUESTED TO DROP THE PENALTY PROCEE DINGS. IN THEIR REPLY THE ASSESSEE WHILE REITERATING THEIR SUBMISSIONS DURING THE ASSESSMENT PROCEEDINGS CONTENDED THAT THERE IS NO CASE OF FURNISHING INAC CURATE PARTICULARS AND / OR CONCEALMENT OF INCOME BECAUSE ASSESSEE WAS UNDER BO NA FIDE BELIEF IN VIEW OF ASSESSMENT ORDERS PASSED U/S 143(3) OF THE ACT FOR THE EARLIER YEARS WHERE IN NO SUCH DISALLOWANCE HAD BEEN MADE. AS SUCH SINCE THE OPENING BALANCE HAD BEEN ACCEPTED AND THEREFORE THERE WAS NO REASON THAT IN THE SUBSEQUENT YEAR THE A.O. WOULD DISALLOW INTEREST EXPENDITURE. THERE IS NO ALLEGATION THAT WHATEVER INTEREST PAID AND CLAIMED AS EXPENDITURE U/S 37 CAM E BACK TO THE ASSESSEE. ACCORDINGLY THE ASSESSEE PLEADED THAT PENALTY PROC EEDINGS MAY BE DROPPED. HOWEVER WITHOUT RECORDING ANY FINDINGS AS TO WHETH ER OR NOT THE EXPLANATION OF THE ASSESSEE WAS BONAFIDE THE AO IMPOSED MINIMUM P ENALTY OF RS.1 82 895 @ 100% OF THE TAX SOUGHT TO BE EVADED ON THE AMOUNT OF INTEREST DISALLOWED BY THE AO. 4. ON APPEAL WHILE REITERATING THEIR SUBMISSIONS B EFORE THE AO THE ASSESSEE PLEADED THAT THE PENALTY PROCEEDINGS ARE A LTOGETHER AN INDEPENDENT PROCEEDINGS VIS-A-VIS ASSESSMENT PROCEEDINGS. MEREL Y BECAUSE ADDITION HAS BEEN CONFIRMED DOES NOT IMPLY THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME SINCE THE ASSESSEE WAS UNDER A BONAFIDE BELIEF ON THE GROUND THAT IN THE EARLIER YEARS NO SUCH DISALLOWAN CE HAD BEEN MADE. INTER ALIA THE ASSESSEE PLACED RELIANCE ON CLAUSE B OF EXPLANA TION 1 TO SEC. 271(1)(C) OF THE ACT AND A NUMBER OF DECISIONS IN THE CASE OF IT O VS. WIMCO SEEDLINGS (DEL) 114 TTJ 986 SILICON GRAPHICS 122 TTJ 804 LUCKNOW B ENCH TRIBUNAL IN 313 ITR I.T.A. NO.2972/AHD/2009 3 200 WHEREIN THE DECISION OF KERALA HIGH COURT IN 2 45 ITR 541 HAS BEEN FOLLOWED 26 SOT 58 (JODHPUR) AZAAD TALKIES STAR IN TERNATIONAL (LUCKNOW) 116 ITD 409 GEM GRANITO CHENNAI BENCH 120 TTJ 992 AND NAVBHARAT ENTERPRISE HYDERABAD BENCH 309 ITR(AT) 79. HOWEVER THE LD. C IT(A) REJECTED THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE LEVY OF PENALTY. 5. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AFOR ESAID FINDINGS OF THE LD. CIT(A). NONE APPEARED BEFORE US ON BEHALF OF THE AS SESSEE. HOWEVER IN THEIR WRITTEN SUBMISSIONS THE LEARNED COUNSEL ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE PENALTY HAS BEEN LEVIED MERELY FOR DISALL OWANCE OF INTEREST WHICH HAD BEEN ACCEPTED IN PAST. WHILE RELYING UPON THE WRITT EN SUBMISSIONS FILED BEFORE THE LD. CIT(A) THE LD. AR REFERRED TO THE JUDGME NT OF AHMEDABAD BENCH (TM) IN THE CASE OF DHIRAJLAL MAGANLAL SHAH 126 TTJ 644 (AH D) AND PRAYED THAT SINCE IDENTICAL CLAIM HAS BEEN ALLOWED IN EARLIER YEAR AN D ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THAT THEIR CLAIM WOULD BE ALLOWE D IN THIS YEAR ALSO PENALTY SHOULD BE CANCELLED. THE LEARNED COUNSEL ADDED THAT PENA LTY PROCEEDINGS BEING DIFFERENT FROM ASSESSMENT PROCEEDINGS AND THE DISA LLOWANCE OF INTEREST IN THE FACTS OF CASE IS NOT FREE FROM DOUBT WHILE THE BONA FIDE OF THEIR EXPLANATION HAS NOT BEEN DOUBTED . THE LEARNED DR ON THE OTHER HA ND PLACED HEAVY RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 6 WE HAVE HEARD THE LD. DR AND GONE THROUGH THE WR ITTEN SUBMISSIONS AS ALSO THE FACTS OF THE CASE. WE FIND THAT THE AO IMP OSED PENALTY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INTEREST AMOUNT OF RS. 4 99 816/- DISALLOWED BY TH E AO. THE LD. CIT(A) UPHELD THE LEVY OF PENALTY WITHOUT EXPRESSING ANY OPINION AS TO WHETHER OR NOT THE EXPLANATION GIVEN BY THE ASSESSEE DURING THE PENALT Y PROCEEDINGS WAS BONAFIDE.. NEITHER THE AO NOR THE LD. CIT(A) IN THE IMPUGNED ORDER HAVE BROUGHT OUT AS TO HOW THE ASSESSEE FURNISHED INACCURATE PAR TICULARS OF INCOME ESPECIALLY WHEN NO DISALLOWANCE OF INTEREST WAS MADE IN THE PR ECEDING ASSESSMENT YEARS. THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF IN COME' AND 'HAS FURNISHED I.T.A. NO.2972/AHD/2009 4 INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEF INED EITHER IN SECTION 271 OR ELSEWHERE IN THE ACT. HOWEVER NOTWITHSTANDING THE DIFFERENCE IN THE TWO CIRCUMSTANCES IT IS NOW WELL ESTABLISHED THAT THEY LEAD TO THE SAME EFFECT NAMELY KEEPING OFF A CERTAIN PORTION OF THE INCOME FROM THE RETURN. ACCORDING TO LAW LEXICON THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS C ON+CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO C OVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF ; TO WITHHOLD KNOWLEDGE OF . THE OFFENCE OF CONCEALMENT IS THUS A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOM E OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY 'INACCURATE' HAS BEEN DEFI NED AS : 'NOT ACCURATE NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS ; AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT.' 6.1 IF THE DISCLOSURE OF FACTS IS INCORRECT OR FALSE TO THE KNOWLEDGE OF THE ASSESSEE AND IT IS ESTABLISHED THEN SUCH DISCLOSUR E CANNOT TAKE IT OUT FROM THE PURVIEW OF THE ACT OF CONCEALMENT OF PARTICULARS FO R THE PURPOSE OF LEVY OF PENALTY. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER TH IS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.IT IS WELL SE TTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D DISTINCT AND AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF ANANTHRAMAN VE ERASINGHAIAH & CO. VS. CIT - 123 ITR 457; THE FINDING IN THE ASSESSMENT PR OCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENA LTY PROCEEDINGS. IT IS THEREFORE NECESSARY TO REAPPRECIATE AND RECONSIDER THE MATTER SO AS TO FIND OUT AS TO WHETHER THE ADDITION MADE IN THE QUANTUM PROC EEDINGS ACTUALLY REPRESENTS THE CONCEALMENT ON THE PART OF THE ASSESSEE AS ENVI SAGED IN SEC. 271(1 )(C) OF THE ACT AND WHETHER IT IS A FIT CASE TO IMPOSE THE PENALTY BY INVOKING THE SAID I.T.A. NO.2972/AHD/2009 5 PROVISIONS. EXPLANATION 1 TO SECTION 271(1)(C) IN R ESPECT OF ANY FACT RELATING TO THE COMPUTATION OF TOTAL INCOME STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F AN ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHIC H PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION FOR CON CEALMENT IS NOT ABSOLUTE ONE. THE PRESUMPTION UNDER THE EXPLANATIO N 1 IS REBUTTABLE AND NOT CONCLUSIVE. THE ASSESSEE CAN SUB MIT THE EXPLANATION AS THE ONUS SHIFTS ON TO THE ASSESSEE T O PROVE THAT HE HAS NOT CONCEALED THE PARTICULARS OF THE INCOME. T HE ASSESSEE IN THIS CASE HAS DULY SUBMITTED THE RELEVANT EXPLANATI ON. AS ALREADY STATED THE LD. CIT(A) UPHELD THE LEVY OF PENALTY WITHOUT EXPRESSING ANY OPINION AS TO WHETHER OR NOT THE EXPLANATION GIVEN BY THE A SSESSEE DURING THE PENALTY PROCEEDINGS WAS BONAFIDE WHILE THE ASSESSEE PLEADE D THAT NO DISALLOWANCE ON ACCOUNT OF INTEREST HAVING BEEN MADE IN THE PRECEDI NG YEARS HE WAS UNDER A BONAFIDE BELIEF THAT HIS CLAIM WOULD BE ACCEPTED IN THE YEAR UNDER CONSIDERATION ALSO. THERE IS NOTHING IN THE PENALTY ORDER TO SUGG EST THAT AO DOUBTED THE BONAFIDE OF THIS EXPLANATION. NO COGENT MATERIAL O R EVIDENCE WAS BROUGHT TO OUR NOTICE WHICH MAY PROVE THAT THE REV ENUE HAS DETECTED THE CONCEALMENT OR THE EXPLANATION SUBMITT ED BY THE ASSESSEE WAS FALSE ONE. IN THE INSTANT CASE WE F IND THAT ALL THE RELEVANT FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE. THE ISSU E AS TO WHETHER OR NOT THE INTEREST ON DIVERSION OF FUNDS TOWARDS NON-BUSINE SS PURPOSES IS DISALLOWABLE IS HIGHLY DEBATEABLE. IT IS WELL SETTLED THAT THE C RITERION AND YARDSTICKS FOR THE PURPOSE OF IMPOSING PENALTY U/S 271(L)(C) ARE DIFFE RENT THAN THOSE APPLIED FOR MAKING OR CONFIRMING THE ADDITIONS. WHEN THE ASSESS EE HAS MADE A PARTICULAR CLAIM IN THE RETURN OF INCOME AND HAS ALSO FURNISHE D ALL THE MATERIAL FACTS RELEVANT THERETO THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTO MATICALLY LEAD TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULAR S OF HIS INCOME BY THE ASSESSEE OR FURNISHING OF INACCURATE PARTICULARS TH EREOF . WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BON A-FIDE AND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED I.T.A. NO.2972/AHD/2009 6 THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY U/S 271(L)(C) OF THE ACT. SINCE ALL THE MATERIAL FACTS RELEVANT TO THE S AID CLAIM HAD BEEN FURNISHED BY THE ASSESSEE IN OUR OPINION IT IS NOT A FIT CASE TO ATTRACT THE LEVY OF PENALTY U/S 271(L)(C) OF THE ACT. A MERE REJECTION OF THE CLAIM OF THE ASSESSEE BY RELYING ON DIFFERENT INTERPRETATIONS DOES NOT AMOUNT TO CONCEA LMENT OF THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME BY THE ASSESSEE. WHEN TWO VIEWS ARE POSSIBLE NO PENALTY CAN BE IMPOSED IS A PRINCIPLE THAT HAS BEEN ENUNCIATED IN THE DECISION IN THE CASE OF CIT V. P.K. NARAYANAN [1999] 238 ITR 905 (KER). HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AJAIB SINGH & CO. (2001) 170 CTR (P&H) 489 : (2002) 253 ITR 630 (P&H) HAVE OBSERVED THAT MERELY BECAUSE CERTAIN EXPENSES CLAI MED BY THE ASSESSEE ARE DISALLOWED BY AN AUTHORITY IT CANNOT MEAN THAT PAR TICULARS FURNISHED BY THE ASSESSEE WERE WRONG. IT WAS HELD THAT MERE DISALLOWANCE OF EXPENSES PER SE CANNOT MEAN THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN THE CASE UNDER CONSIDERATION WE FIND THAT THE ASSESSEE HAD GIVEN ALL THE PARTICULARS OF INCOME AND HAD DISCLOSED ALL FACTS T O THE AO. IN SUCH CIRCUMSTANCES HONBLE DELHI HIGH COURT HELD IN TH E CASE OF COMMISSIONER OF INCOME-TAX.VS BACARDI MARTINI INDIA LIMITED. 288 IT R 585(DEL) THAT NO PENALTY WAS LEVIABLE. IN CIT VS. HARSHVARDHAN CHEMICALS & MINERALS LTD. (259 ITR 212) (RAJ) HONBLE RAJASTHAN HIGH COURT UPHELD THE FINDI NG OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAS CLAIMED SOME AMOUNT THOUGH THAT IS DEBATABLE IN SUCH CASES IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED A NY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVASION OF THE TAX. HAVI NG REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS MEN TIONED ABOVE WE ARE OF VIEW THAT THE REVENUE WAS UNABLE TO MAKE OUT A CASE ON W HICH IT COULD BE HELD THAT THE OMISSION TO ADD BACK THE INTEREST TO THE INCOME OF THE ASSESSEE ORIGINALLY WAS A DESIGN ON THE PART OF THE ASSESSEE TO CONCEAL THE PARTICULARS OF INCOME OR FURNISH INACCURATE PARTICULARS THEREOF . 6.2. IN VIEW OF THE FOREGOING AND CONSIDERING TH E ABOVE FACTS AND CIRCUMSTANCES WE HOLD THAT IN THIS CASE NO PENALTY CAN BE LEVIED. I.T.A. NO.2972/AHD/2009 7 THEREFORE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT IS CANCELLED. 7. IN THE RESULT APPEAL IS ALLOWED . . ORDER PRONOUNCED ON 8TH JANUA RY 2010. SD/- SD/- (BHAVNESH SAINI) (A.N. PAHUJA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED :8TH JANUARY 2010 PK/- COPY TO: 1. THE ASSESSEE 2. ACIT CIRCLE-8 AHMEDABAD 3. CIT(A)-XIV AHMEDABAD 4. CIT AHMEDABAD 5. DR C BENCH BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD