HOE Leather Garments Private Limited,, Hyderabad v. ITO, Ward 2(2), Hyderabad

ITA 339/HYD/2013 | 2006-2007
Pronouncement Date: 18-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 33922514 RSA 2013
Assessee PAN AAACH8235M
Bench Hyderabad
Appeal Number ITA 339/HYD/2013
Duration Of Justice 6 month(s) 30 day(s)
Appellant HOE Leather Garments Private Limited,, Hyderabad
Respondent ITO, Ward 2(2), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 18-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 18-10-2013
Assessment Year 2006-2007
Appeal Filed On 19-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B' HYDERABAD BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO.339/HYD/13 : ASSESSMENT YEAR 2006 - 07 M/S. HOE LEATHER G ARMENTS PVT. LTD. HYDERABAD (PAN AAACH 8235 M) V/S. INCOME - TAX OFFICER WARD 2(2) HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.V.ANJANEYULU RESPONDENT BY : SHRI MALLIKARJUN DR DATE OF HEARING 20.08.2013 DATE OF PRO NOUNCEMENT 18.10.2013 O R D E R PER SAKTIJIT DEY JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD DATED 1.2.2013 FOR THE ASSESSMENT YEAR 2006 - 07. 2. THE SOLITARY ISSUE ARISING OUT OF THE GROUNDS RAISED BY THE ASSESSEE RELATES TO CIT(A) CONFIRMING THE IMPOSITION OF PENALTY UN DE R S.271(1 ) ( C ) OF THE ACT AMOU N TING TO RS .95 93 100. 3. BRIEFLY FACTS ARE THAT THE ASSESSEE COMPA N Y IS ENGAGED IN TH E BU S I NE SS OF MANUFA CTURE OF LEATHER GARMENTS. FOR THE IMPU G N E D ASSESSMENT YEAR THE ASSESSEE FIL E D ITS RETURN OF IN C OM E ON 28.11.06 ADMITTING INCOME OF RS .45 62 866 WHICH WAS REDUCED TO NIL AFTER SET OFF OF BROUGHT FORWARD LOSS. DURING THE SCRUTINY ASSESSMENT PROCEEDING THE ASSESSING OFFICER ON EXAMINING INFORMATION AND M A TERIALS ON RECORD FOUND THAT THE ASSESSEE HAS SHOWN UNSECURED LOANS OF R S .2 85 00 000 FROM THE D IRECTORS. THOUGH THE ASSESSEE IN RESPON S E TO QUERY MADE BY TH E ASSESSING OFFICER FURNISHED SOME E XPLANATIO N RE G ARDING THE UNSECURED I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 2 LOAN BUT THE ASSESSING OFFICER WAS NO T CONVINCED WITH THE SAME AND TR E ATED THE ENTIRE UNSECURED LOAN AS UNEXPLAINED AND ADDED TO THE INCOME O F THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. 4. THE ASSESSEE CHALLENGED THE ASSES SMENT ORDER BEFORE THE CIT(A). DURIN G TH E APPE A L PROCEEDING BEFORE HIM THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER ON THE SUBMISSIONS MADE BY THE ASSESSEE. A F TER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE VIS - A - VIS THE COMMENTS M ADE BY THE ASSESSING OFFICER IN THE REMAND REPORT THE CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE UNSECURED LOANS AND ACCORDINGLY CONFIRMED THE ADDITION BY DISMISSING THE APPEAL. THE ASSESSEE DID NOT CHALLENGE THE ORDER P ASSED BY THE CIT(A) BY PREFERRING ANY APPEAL BEFORE THE ITAT. THUS SO FAR AS THE ADDITION OF RS.2 85 00 000 TOWARDS UNSECURED LOANS IS CONCERNED THE SAME HAS ATTAINED FINALITY WITH THE ORDER OF THE CIT(A). 5. AFTER THE DISMISSAL OF APPEAL BY TH E CIT( A) THE ASSESSING OFFICER ISSUED A SHOW - CAUSE NOTICE TO TH E ASSESSEE DIRE C TING HIM TO SHOW CAUSE AS TO WHY PENALTY UNDER S.271( 1) (C) SH OULD NOT B E IMPOSED FOR CONCEALING TH E PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. DURIN G THE PENALTY PROCEEDINGS THE ASSESSING OFFICER A G AIN CALLED UPON THE ASSESSEE TO FURNISH TH E SOU R CE OF THE UN S E C U R ED LOAN OF R S . RS.2 85 00 000 ALON G WITH OTHER DETAILS SUCH AS THE BANK FROM WHICH THE COMPANY OBTAINED LOAN DETAILS OF MODE AND RECEIPT OF SALE CON S ID E RATION DETAILS OF MODE AND DATE OF PAYMENT TO THE BANK AND ALSO THE CORRESPO N D E N C E WITH THE BANK FOR RELEASING THE DOCUM E N T S. IN RESPONSE THERETO THE ASSESSEE SUBMITTED ITS EXPLANATION STATING THEREIN THAT THE SOU R CES FOR LOAN REPAYMENT IS OUT OF SALE PROCEEDS OF THE PROPERTY HELD BY THE DIRECTORS NAMELY SHRI SAYED AFSAR HASAN SHRI SAYAD BAQUAR HAS S AN AND THEIR MOTHER SMT.(LATE) HOORJAHAN BEGUM. ASSESSEE ALSO FURNISHED DETAILS OF CERTAIN BANK ACCOU N TS WHEREIN THE SALE PROCEEDS WE R E I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 3 STATED TO HAVE BEEN CREDITE D AND ALSO THE PAYMENTS WERE MAD E OUT OF THE SAME TO THE BANK. ASSESSEE ALSO FURNISHED D ETAILS REGARDING THE PAYMENTS MADE TO THE BANK AMOUN T IN G TO RS .3 49 98 000. THE ASSESSING OFFICER AFTER VERIFYING THE BANK ACCOUNTS AND OT HER DETAILS PRODUCED BY THE ASSESSEE CAME TO A CON C LU S ION THAT SO FAR AS THE PAYMENT OF R S .72 45 250 F ROM BANK A C CO U N T OF SHRI SYED IFRAN HASSAIN IN PNB LANCER BRANCH IT IS FOUND TO BE NOT OUT OF CREDIT OF R S .70 02 270 ON 29.12.2005. HOWEV E R THE ASSESS EE COULD NOT ESTABLISH THE SOURCES OF SUCH DEPOSIT. EVEN THE INFORMATION RECEIVED FROM THE BANK AUTHO R ITI E S DISCLOSE THAT THEY W E RE ALSO UNABLE TO E XPLAIN THE INITIAL SOU R CE FOR DEPOSIT OF R S .69 24 500 IS ACTUALLY OUT OF SAVINGS BANK ACCOUNT O F SYED IRF AN HUSSAIN. REGARDING THE DEBIT OF AN AMOUNT OF RS .87 50 000 FROM THE ACCO U N T OF SMT. LATE HOORJAN BEGUM THE ASSESSING OFFICER FELT THAT IT IS NO T CLEAR WHETHER THE SAME WAS TOWARDS THE REPAYMENT OF BANK LOAN BECAU S E THE BANK AUTHORITIES IN R E SPON S E TO THE QUERY MADE BY THE ASSESSING OFFICER HAVE STATED THAT THE SBI OVERSEAS BRANCH HYDERABAD HAS ISSUED A TDR IN THE NAME OF SHRI SYED ZAIMULABIDIN MOOSAVI AND SHRI SYED ALINAQRI MOOSAVI FOR RS.87 50 000 ON 24.6.2005. HE FURTHER NOTED THAT SHRI HOORJ AHAN BEGUM HAS MADE AN FDR OF RS.69 24 00 0 ON 29.6.2005 OUT OF SALE PROCEEDS OF RS.70 48 000 CREDITED ON 7.6.2005. IN THE AFORESAID CIRCUMSTANCES THE ASSESSING OFFICER NOTED THAT IT IS NOT CLEAR HOW THE SALE PRO CE EDS FROM HOOR JAHAN BEGUM W E RE UT I LISED FOR THE PU R POSE OF PAYMENT TO BANK. 6. THE ASSESSING OFFICER WAS ALSO O F THE VIEW THAT EVEN PART OF THE SOU R CES AMOUNTING TO R S .37 50 000 UTILI S ED FOR PAYMENT OF R S .87 50 000 TO BANK AS CLAIMED BY TH E ASSESSEE IS NO T OUT OF SALE PROC E EDS BUT FORM TWO JOINT ACCOUNTS OF SYED BAQAR HASAN AND SYED FARHAN HASAN AND SYED BAQAR HASAN AND SYED AFSAR HASAN. IT WAS FU R THE R NOTICED BY THE ASSESSING OFFICER THAT THOUGH RS.1 30 62 500 WAS OUT OF SMT. HOORJAHAN ACCOUNT THE SOU R CES FOR THE SAME COULD N O T BE EXPLAINED BY THE ASSESSEE PROPERLY NOR IT WAS SUPPORT E D BY ANY I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 4 DOCUMENTARY EVIDENCE. THE ASSESSING OFFICER FURTHER OBSERV E D THAT THOUGH THE ASSESSEE COMPANY STATED THAT AN AMOUNT OF R S .55 31 250 WAS PAID TO B ANK FROM JOINT ACCOUNT OF SHRI BAQAR H A S AN AND FARHAN HASAN THE S O URCE FOR CREDIT OF R S .56 22 650 ON 29.12.2005 WHICH WAS UTILIZED FOR REPAYING THE LOAN WAS NO T PROPERLY EXPLAINED BY THE ASSESSEE. THE ASSESSING OFFICER AFTER EXAMI N IN G THE DETAILS O F SALE PROC E EDS RECEIVED BY BOTH THE DIRECTORS ALONGWITH THEIR MOTHER AS SUBMITTED BEFORE HIM W A S OF THE VIEW THAT THOUGH IT MAY BE A FACT T HAT BOTH THE DIRECTORS ALONGWITH THEIR MOTH E R MIGHT HAVE SOLD THE PROPERTY AND CREDITED THE SALE PROCEEDS IN RESPECTIVE BANK ACCOUNTS THEY NEVER ADMITTED THE CAPITAL GAIN ON SALE OF PROPERTY. HOWEVER AT THE TIM E OF SCRUTINY PROCEEDINGS WHEN TH E COMPA N Y WAS ASKED TO FURNISH THE SOU R CES FOR LOAN THE ASSESSEE COMPANY DID NO T FURNISH THE SAME. THE ASSESSING OFFICER ALSO FELT THAT IF THE ORIGINAL DOCUMEN TS WITH REGARD TO PROPERTIES WERE WITH THE BANK HOW COULD THE ASSESSEE COULD HAVE EFFECTED THE SALE WITHOUT THE DOCUMENTS. THE ASSESSING OFFICER FINALLY CAME TO A CON C LU S ION THAT ALL THESE FACTS HAVING BEEN CON S I D ERED IN THE REMAND REPORT AND THE CIT(A ) HAVING SUSTAINED THE ADDITION BY TR E ATING THE UN SE CU R ED LOANS AS UN E XPLAIN E D THE CONCEALMENT OF INCOME ON THE P A RT OF THE ASSESSEE AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME IS PROVED. THE ASSESSING OFFICER THEREFORE PROCEEDED TO PASS ORDER DATED 30.3.2012 IMPO SI N G PENALTY OF R S .95 93 100 UN D ER S.271(1)(C) OF THE ACT. 7. BEING AGGRIEVED WITH THE IMPOSITION OF PENALTY ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSID E RING THE ELABORATE SUBMI S SION S O F TH E ASSESS EE CONFIRMED THE IMPOSITION OF P E N A LTY BY HOLDING THAT SIN C E THE ASSESSEE HAS FAIL E D TO P R OVE EITHER THE CREDITWORTHINESS OF THE CREDITORS OR THE GENUINENESS OF THE TRANSACTION THE UN SE CURED LOANS H A VE BEEN TR E ATED AS UN E X P LAIN E D AND THE ASSESSEE H A S A L SO FAILED TO SUBSTANTIATE THESE THINGS EVEN DURIN G THE PENALTY PROCEEDINGS BY FURNISHING ANY CREDIBLE EVIDENCE. HE FURTHER OBSERVED THAT I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 5 THE ASSESSEE HAS ONLY COOKED UP STORY TO DISPROVE THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTI C UL A RS OF I NCOME. THE CIT(A) ALSO RELIED UPON CERTAIN JU D I C I A L PRONOUNCEMENTS AND UPHELD THE IMPOSITION OF PENALTY. BEING AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 8. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US REITE R ATING THE STAND TAKEN BEFORE TH E LOWER AUTHO R ITI E S THAT THE PROPERTY WAS SOLD ON 23.6.2005 AND THE DATE OF PAYMENT TO THE BANK WAS 31.12.2005. THER E FORE DURING THE IN TE RMITT E NT PERIOD MONEY WAS KEPT IN THE AC C OUN T S OF THE DI R ECTORS AND THEIR MOTHER. EXPLAINING THE SOU RC E S THE LEAR NED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE FIRST DISCHARGE OF RS.87 50 000 WAS OUT OF THE JOIN T ACCOUNT OF SYED ZAINUL ABDEEN MOOSAVI AND M AIRAJ FATIMA WITH SYNDICATE BANK ACCOUNT NO.30062010056907. IT WAS FURTHER SUBMITTED T HAT THIS AMOUNT WAS TRA NSFERRED FROM SMT LA T E HOORJAHAN BEGUM ACCOUNT NO.52188974642 OF SBH SHANTINAGAR VIDE CHEQUE NO.07122. 9. EXPLAININ G THE SOU R CE OF SUCH DEPOSITS IN THE ACCOUNT OF SMT. HOORJAHAN BEGUM IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT TH IS CON S TITU T ED OF AD V ANCE AMOUNTS RECEIVED TOWARDS SALE CON S ID E RATION AMOUNTING TO RS.50 00 000 THROUGH CHEQUE NO.857143 DATED 21.6.2005; RS.18.75 LAKHS WAS TRANSFERRED TO SMT. HOORJAHAN BEGUMS ACCOUNT NO.5218897 SHANTINAGAR FROM JOINT ACCOUNT O F S YED BA QAR HASAN AND SYED AFSAR HASAN BEING ACCOUNT NO.52188980930 WITH SBH SHANTINAGAR OUT OF TOTAL ADVANCE AMOUNT RECEIVED OF RS.25 LAKHS VIDE CHEQUE NO.844128 ; AND R S .18.75 LAKHS AGAIN WAS TRAN S FE R RED TO THE BANK A CC O UN T OF SMT. LATE HOORJAHAN BEGUM A/ C. NO.52188974642 SBH SHANTINAAR FROM JOIN T ACCOUNT OF SYED BAQAR HASAN AND SYED FARHAN HASAN VIDE CHEQUE NO.497511 ACCOUNT NO.52188981139 SBH SHANTINAGAR. I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 6 10. EXPLAINING THE SOU R CE FOR SECOND DISCHARGE OF RS.1 30 62 500 IT WAS SUB M I T TED THAT THE AMO UNT HAS BEEN PAID FROM THE BANK ACCOUNT OF LATE HOORJAHAN BEGUM BEING NO. 52188974642 VIDE CHEQUE NO.07125 AND THE SOU R CE FOR SUCH DEPO S ITS INTO THE ACCOUNT OF SMT.HOORJAHAN B EGUM WAS STATED TO BE OUT OF RS.70 48 0000 CREDIT BEING SALE CONSIDERATION O N 27.6.2005 REPR E SENTED BY STDR TAKEN IN THE NAME OF HOORJAHAN BEGUM AND SYED AFSAR HASAN VI D E CHEQUE NO.007123 FOR RS.69 24 500. THI S STDR MATURED ON 29.12.2005 AND M ATURITY PROCEEDS HAS BEEN TRANSFERRED TO THE ACCOUNT OF HOORJAHAN BEGUM BEING ACCOUNT N O. 52188974642 WITH SBH SHANTINAGAR . 11. ANOTHER STDR WAS STATED TO HAVE BEEN TAKEN IN THE NAME OF SYED AFSAR HASAN AND HOORJAHAN BEGUM VIDE CHEQUE NO.844129 FOR RS.69 24 500 IN SBH SHANTINAGAR OUT OF CREDITS OF SALE CONSIDERATION IN ACCOUNT NO. 52188980 930 OF SYED BAQAR HASAN AND SYED AFSAR HASA N SITH SBH SHANTINAGAR. THIS STDR MATURED ON 29.12.2005 AND MATURITY PROCEE D S HA VE BEEN TRANSFERRED TO HOORJAHAN BEGUM ACCOUN T NO. 52188974642 WITH SBH SHANTINAGAR FROM TDR A/C. NO.52189010007 WITH SBH SHANTINAGAR . 12. SO FAR AS THIRD PAY M ENT OF RS.55 31 250 IT IS STATED THAT THIS WAS PAID DIR E CTLY TH R OUGH A CHEQUE FROM THE JOINT ACCOUNT OF SYED BAQAR HASAN AND SYED FARHAN HASAN BEING AC C OUNT N O .52188981139 VIDE CHEQUE NO.49751. EXPLAINING THE SOUR C E FOR THI S AMOUNT IT WAS SUBMITTED THAT AN AMOUNT OF R S .47 74 000 HAS BEEN TRA N SFERRED F R OM ACCOUNT NO.52188980930 IN SBH SHANTINAAR OUT OF SALE PROCEEDS. A N STDR HAS BEEN TAKEN IN THE NAME OF SYED BAQAR HASAN AND SYED FARHAN HASAN VIDE CHEQUE NO.497512 FOR RS.53 99 000. THIS DEPOSIT MATURED ON 30.12.2005 AND THE MATURITY PROCEEDS OF THIS DEPOSIT HAVE BEEN CREDITED INTO THE JOIN T ACCOUNT OF SYED BAQAR HSAN AND SYED FARHAN HASAN BEIN G ACCOUN T NO.52188981139 VIDE CHEQUE NO.49751 WITH SBH SHANTINAGAR. I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 7 13. EXPLAI NING THE FOURTH PAYMENT OF RS.75 31 250 IT WAS SUBMITTED THAT THIS W A S OUT OF MATURITY PROC E EDS OF TDR OF RS.69 24 500 HELD IN THE NAME OF SYED FARHAN HASAN AND SYEED IRFAN HASAN AND SOUR C E FOR THIS W A S SALE PROCEEDS CREDITED IN ACCOUNT NO.8472 WITH PU N J AB NATIONAL BANK SECOND LANCER BRANCH HYDERABAD . IT WAS FURTHER SUBMITTED THAT AN AMOUNT OF R S .5 39 980 AND RS.1 25 000 REPR E SENTS INTEREST ON FIXED DEPOSITS. 14. TAKING US THROUGH THE VARIOUS OBSERVATIONS O F THE ASSESSING OFFICER AND THE CIT(A) IN THE ORDERS PASSED BY THEM IN THE QUANTUM PROCEEDINGS LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IT IS ONLY ON ACCOUNT OF INADEQUACY OF EVIDENCE FURNISHED BY THE ASSESSEE THAT THE ADDITIONS HAVE BEEN MADE IN THE QUANTUM PROCEEDINGS BUT THAT ADDITIO N BY ITSELF CANNOT JUSTIFY IM P OSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT AS FOR LEVYING A PENALTY INDEPENDENT CONCLUSIONS HAVE TO BE ARRIVED AT WITH REGARD TO THE DEFAULTS COMMITTED BY THE ASSESSEE. IT IS SUBMITTED THAT THE CIT(A) DISPOSED THE APP EAL OF THE ASSESSEE IN QUANTUM PROCEEDINGS BY ALLEGING THAT NO SATISFACTORY EVIDENCE WAS FURNISHED BEFORE HIM TOWARDS RS.2.85 CRORES THOUGH IN THE REMAND REPORT SUBMITTED BEFORE HIM THE ASSESSING OFFICER HIMSELF STATED THAT THE AMOUNTS IN QUESTION ARE FROM OUT OF SALE PROCEEDS OF THE IMMOVABLE PROPERTY. IT IS ALSO SUBMITTED THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) IGNORED THE FACT THAT CHEQUES WERE GIVEN BY THE RESPECTIVE DIRECTORS AND BY THE LATE MOTHER FROM THEIR INDIVIDUAL ACCOUNTS TO DISCH ARGE THE DEBT AND THIS FACT HAS ALSO BEEN CONFIRMED BY THE BANK DURING THE INVESTIGATION DIRECTLY MADE BY THE ASSESSING OFFICER WHICH HAS ALREADY BEEN BROUGHT ON RECORD. IT IS SUBMITTED THAT MERELY BECAUSE THE ASSESSEE HAS NOT PREFERRED AN APPEAL AGAIN ST THE ORDER OF THE CIT(A) IN THE QUANTUM PROCEEDINGS NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE SO AS TO JUSTIFY PENALTY. THERE MAY BE VARIOUS REASONS FOR THE I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 8 ASSESSEE FOR NOT PREFERRING AN APPEAL AGAINST AN ORDER OF THE CIT(A). IN THE PRES ENT CASE IT IS EXPLAINED THAT SUCH AN APPEAL WAS NOT FILED AS THERE WERE NO TAX IMPLICATIONS AND COMPANY SUFFERED SEVERE FINANCIAL HARDSHIP D U E TO RECESSION IN EUROPEAN MARKET. HE SUBMITTED THAT VARIOUS REASONS PUT FORTH BY THE ASSESSING OFFICER TO JUSTI FY THE PENALTY IN HIS ORDER DATED 30.3.2012 ARE TOTALLY UNTENABLE AND THE CIT(A) IN THE IMPUGENED ORDER SIMPLY OBSERVING THAT NEITHER THE CREDITWORTHINESS OF THE DIRECTORS NOR LTHE GENUINENESS OF THE TRANSACTIONS HAS BEEN PROVED BY THE ASSESSEE CONFIRME D THE FINDINGS OF THE ASSESSING OFFICER. THE LEARNED COUNSEL ALSO POINTED OUT THAT THE DEPARTMENT HAS INITIATED PROCEEDINGS UNDER S.148 ON TWO DIRECTORS AND ON THEIR MOTHER (LATE) SMT. HOORJAHAN BEGUM AND THE MATTER IS SUB JUDICE . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) EITHER DURING THE QUANTUM PROCEEDINGS OR EVEN DURING THE PENALTY PROCEEDINGS HAVE GIVEN A FINDING THAT THE ASSESSEE HAS FILED ANY INACCURATE PARTICULARS OR CONCEALED ANY IN COME AND IN FACT IT IS CLEARLY ESTABLISHED FROM THE STATEMENT THAT THERE IS NO INTRODUCTION OF ANY CREDIT IN THE FORM OF CASH OR CHEQUE EXCEPT JOURNAL ENTRY TO NULLIFY THE EXISTING LOAN ACCOUNT WHICH WAS DISCHARGED FROM THE PERSONAL ACCOUNT OF DIRECTORS AND WHICH WAS CONFIRMED BY THE BANK. TAKING US THROUGH THE PROVISIONS OF S.271(1)(C) AND S.68 OF THE ACT LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IN THE PRESENT CASE THERE CAN BE NO DISPUTE ABOUT THE IDENTITY OF THE PARTIES OR THEIR CREDITWORTHI NESS SINCE IT IS THE TWO DIRECTORS CUM SHAREHOLDERS WHO ARE INVOLVED IN THE TRANSACTIONS LEADING TO THE DISCHARGE OF THE DEBT IN THE NAME OF THE ASSESSEE COMPANY WHICH RESULTED IN THE ADDITION UNDER S.68 OF THE ACT. IN THE CIRCUMSTANCES IT IS SUBMITTED THAT PROVISIONS OF S.68 AND S.271(1)(C) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 9 15. THE LEARNED AUTHORISED REPRESENTATIVE INVITED OUR ATTENTION TO CERTIFICATE ISSUED BY THE BANK AS WELL AS THE CORRESPONDING BANK ACCOUNT STANDING I N THE NAMES OF DIFFERENT PERSONS TO DEMONSTRATE THAT THE AMOUNTS WERE ACTUALLY PAID OUT OF SUCH BANK AC C OUN T S. IT W A S THEREFORE SUBMITTED THA T THE ASSESSEE H A VIN G RECONCILED THE SOURCE OF THE PAYMENT THERE IS NO CA S E FOR IMPOSITION OF PENALTY UN D ER S.271 (1)(C) OF THE ACT. IN SUPPORT OF SUCH CONTENTION S THE AUTHORISED REPRESENTATIVE RELIED ON THE FOLLOWI N G DECISIONS - ( A ) CHENNAKESAVA PHARMACEUTICALS V/S CIT ( 349 I TR 196 ) - AP ( B ) CIT V/S. RAMPUR ENGG. CO. LTD. (309 ITR 143) DEL. (FB) ( C ) NATIONAL TEXTILES V/.S. CIT (249 ITR 125) - G UJ 16. THE LEARNED DEPARTMENTAL REPRESENTATIVE S TRONGLY RELYING ON THE ORDERS OF THE LOWER AUTHORITIES SUBMITTED THAT THE ASSESSEE HAS NOT DISCHARGED THE ONUS CAST ON IT TO SUBSTANTIATE ITS CLAIMS WITH REGARD TO THE SOURCES FOR THE REPAYM ENT OF DEBT BY IT TO THE BANK EITHER IN THE ASSESSMENT PROCEEDINGS OR IN THE PENALTY PROCEEDINGS. THE ASSESSEE HAS CLEARLY CONCEALED ITS INCOME AND EVEN OTHERWISE IT IS CLEARLY GUILTY OF FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREFORE IT IS A FIT CASE FOR THE IMPOSITION OF PENALTY. HE DISTINGUISHED THE CASE LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THE PRESENT APPEAL BEING DEVOID OF MERIT SHOULD BE DISMISSED. 17. WE HAVE H E ARD THE SUBMI S SION S O F THE A SSESSEE AND PERUSED THE M A TE R IAL ON R ECORD AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIES. WE HAVE ALSO CAREFULLY EXAMINED THE DECISION S RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE. THE SUM AND SUB S TAN C E OF THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE ARE TO THE EFFECT THAT THE UNSECURED LOAN OF RS.2 85 00 000 ON THE BASIS OF WHICH THE PENALTY HAS BEEN IMPOSED UNDER S.271(1)(C) IS FROM EXPLAINED SOURCES AND I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 10 THROUGH BANKING CHANNELS AND MERELY ON THE BASIS OF ADDITION MAD E IN THE QUANTUM PROCEEDINGS PENALTY HAS BEEN IMPOSED. ACCORD I NG TO THE LEARNED AUTHORISED REPRESENTATIVE MERELY ON THE BASIS OF ADDITION MADE IN THE QUANTUM PROCEEDINGS PENALTY CANNOT BE IMPOSED UNDER S.271(1)(C) OF TH E A C T. IN THIS CONTE X T T H E LEARN ED AUTHORISED REPRESENTATIVE SUBMITTED A C ER T IFICATE DATED 3.8.2013 ISSUED BY THE STATE BANK OF IN D IA SHOWING THE DETA IL S OF PAYMENTS MADE TOWARDS ONE TIME SETTLEMENT OF THE LOAN ACCOUNT OF THE ASSESSEE COMPANY AND M/S. HANSA OVERSEAS EN T ERPRI S ES. THE DE TAILS O F THE PAYM E N T MADE AS PER TH E SAID CERTIFICATE ARE AS UNDER - SL. NO. DATE TRANSFERRED FROM A/C. NO. BRANCH NAME AMOUNT (IN RS.) REMARKS 1. 24/06/2005 30062010056907 SBI OVERSEAS BRANCH 87 50 000 ADJUSTED TOWARDS UPFRONT FEES OUT OF PROCEED S OF TDR 2. 30/12/2005 52188974642 (OLD ACCOUNT NO.01190013843) CHEQUE NO.007125 SBH SHANTINAGAR HYDERABAD 1 30 62 500 ADJUSTED TOWARDS OTS 3. 30/12/2005 52188981139 (OLD ACCOUNT NO 01190015199 CHEQUE NO.497515 SBH SHANTINAGAR HYDERABAD 55 31 250 ADJ USTED TOWARDS OTS 4. 30/12/2005 A/C.8471 VIDE PAY ORDER NO.067540 PNHB SECOND LANCERS BRNACH HYDERABAD 75 31 250 ADJUSTED TOWARDS OTS. CASH ORDER HAS BEEN ISSUED OUT OF PROCEEDS OF CHEQUE NO.781517 GRAND TOTAL 3 48 75 000 18. THE ASSESSEE HA S SUBMI T TED A CHART SHOWING THE DE T AILS O F PAYM E N T AS PER THE CERTIFICATE ISSUED BY THE BANK AND ALSO SHOWING THE SOU R CES THEREFO R WHI CH IS AT PAGE 6 OF THE PAPER - BOOK. AS CAN BE SEEN FROM THE SAID CHART AN AMOUNT OF R S .87 50 000 WAS OUT O F THE T D R IN THE I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 11 NAME OF SYED ZAINUL ABDEEN MOOSAVI WHICH WAS DEPOSITED INTO THE SAVINGS ACCOUNT HELD BY HIMSELF AND HIS WIFE MAIRAJ FATIMA IN SYNDICATE BANK BEARING NO.30062010056907 COPY OF WHICH IS AT PAGE 11 OF THE PAPER - BOOK. SIMILARLY AN AMOUNT OF RS.1 30 62 500 IS STATED TO HAVE COME FROM THE SAVINGS BANK ACCOUNT NO.52188974642 VIDE CHEQUE NO.07125 DATED 30.12.2005 TOWARDS ADJUSTMENT OF OTS. IN THIS CONTEXT LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE SAVINGS B ANK ACCOUNT OF HOO R JAHAN BEGU M WITH S BH SHANTINAGAR BEING A/C NO. 52188974642 COPY OF WHICH IS AT PAGE 9 OF THE PAPER - BOOK. SIMILARLY AN AMOUNT OF R S.75 31 250 WAS DIRECTLY TRANSFERRED FORM THE JOINT ACCOUNT OF SYED BAQAR HA S AN AND SYED F A RHAN HASAN WITH SBH SHANTINAGAR BEIN G AC COUN T NO.52188981139 VIDE CHEQUE N O.49751. A COPY OF THE SAID ACCOUNT I S PL A CED AT PAGE 30 OF THE PAPER - BOOK. SIMILARLY AN AMOUNT OF RS.65 31 259 WAS DIRECTLY TRANSFERRED FROM THE JOINT ACCOUNT OF SHRI SYED B AQAR HASAN AND SYED IF R AN HASAN BEIGN ACCOU NT NO.8471 WITH PUNJAB AND NATIONAL BANK VIDE PAY ORDER NO.067540 DATED 30.12.2005 AND A DJU S TED TOWARDS OTS. THE ASSESSEE HAS ALSO TRIED TO EXPLAIN THE SOU R CE OF DEPOSITS TO TH E RESPECTIVE INDIVI D U A L BANK AC C OUN T S AND T D R DEPOSI T S . 19. ALL TH E ABOV E FACTUAL ASPECTS TO SOME E X TENT INDICATE THE IMMEDIATE SOU R C E OF PAYMENT MADE TOWARDS ONE TIME SET T LEMENT OF THE DEBT. THOUGH IT I S A FACT THAT THE UNSECURED LOANS SHOWN BY TH E ASSESSEE TOWARDS PAYM E NT MADE TO THE BANK FOR ONE TIME SETTLEMENT HAS BEE N TR E ATED AS UN E XPLAINED INVESTMENT IN THE QUANTUM ASSESSMENT AND HAS BEEN CONFIRMED BY THE FIRST APPELL A TE AUTHORITY AND IT IS ALSO A FACT THAT THE SAID ADDITION HAS B E EN ACCEPTED BY THE ASSESSEE ONCE THE SAME HAS BEEN CONFIRMED BY THE CIT(A) SINCE T HE ASSESSEE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) CON F IR M ING THE SAID ADDITION. BUT THE ADDITION MADE IN TH E QUA N TUM PROCEEDINGS IPSO FACTO WILL NO T LEAD TO THE CONCLUSION THAT THERE IS EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO ATTRACT PENALTY I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 12 UNDER S.271(1)(C) OF THE ACT. BEFORE IMPOSING THE PENALTY UN D ER S.271(1)(C) THE FACT OF EITH E R CONCEALMENT OF INCOME OR FURNI S HIN G OF INACCURATE PARTICULARS OF INCOME BY THE ASS ESSEE HAS TO B E ESTABLISHED BY THE ASSESSING OFFICER BY BRINGING ON RECORD ADEQUATE MATERIAL TO ARRIVE AT SUCH A CON C LU S ION. THE MERE FACT THAT THE ASSESSEE S EXPLANATION DURING THE QUANTUM PROCEEDINGS WAS FOUND TO BE U NACCEPTABLE WOULD NOT ITSELF CONS TITUTE A VALID GROUND TO IMPOSE PENALTY UNDER S.271(1)(C) AS THE QUANTUM PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE DIFFERENT AND THE CON C LU S ION ARRIVED IN THE FORMER DOES NOT LEAD TO ANY AUTOMATIC INFERENCE IN THE LATER. MAGNITUDE OF EVIDENCE REQUI RED VARIES BETWEEN QUANTUM PROCEEDINGS WH E RE ONE HAS TO GO BY THE PREPONDERANCE OF PROBABILITIES AND THE PENALTY PROCEEDINGS WHICH BEING PENAL IN NATURE CASTS A GREATER BURDEN ON THE ASSESSING OFFICER TO BRING ON RECORD EVIDENCE OF GREATER MAGNITUDE TO ESTABLISH THE FACT OF EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE SO AS TO JUSTIFY PENALTY. 20. THE ASSESSEE B EFORE US HAS MADE AN ATTEMPT TO EXPLAIN THE SOU R CES FOR THE PAYMENTS MADE TO THE BANK TOW A RDS ONE T I M E SETTLEMENT OF THE D EBT AND HAS PRODUCED CERTAIN SUPPORTING EVIDENCE BY WAY OF CERTIFICATE ISSUED BY THE BA N K AS WELL AS COPIES OF BANK ACCOUNTS OF THE INDIVIDUALS FROM WHOM THE PAYMENTS ARE STATED TO HAVE BEEN MADE TOWARDS ONE TIM E SETTLEMEN T OF THE LOAN. AS IT APPEARS F R OM THE IMPU G N E D PENALTY ORDER OR THE APPELL AT E ORDER PASSED BY TH E CIT(A) ALL TH E SE FACTS HAVE NOT BEEN PROPERLY EXAMINED BY THEM BEFORE ARRIVING AT THEIR CON C LUSIONS JUSTIFYING THE IMPUGNED PENALTY UNDER S.271(1)(C) OF TH E A C T. IN OUR CON S IDER E D VIEW THE SUPPORTING EVIDENCES AND MATERIAL PRO D U C ED BY THE ASSESSEE ARE REQUIRED TO BE EXAMINED IN PROPER PERSPECTIVE AND THE ASSESSEES EXPLANATION IN THIS CONTE X T ALSO REQUIRES TO BE EXAMINED IN AN OBJECTIVE MANNER BEFORE CO MING TO A CONCLUSION EITHER AS TO CONCEALMENT OF INCOME OR AS TO FURNI S HIN G OF INACCURATE PARTICULARS OF I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 13 INCOME BY THE ASSESSEE . WITHOU T CONSIDERING ALL TH E SE MATERIALS IT WOULD BE NOT PROP E R TO IMPOSE PENALTY UN D ER S .271(1)(C) OF THE ACT. SINCE THE FA CTS A N D MAT E RIALS HAVE NOT BEEN EXAMINED BY THE L O W E R AUTHO R ITI E S IN A PROPER PERSPECTIVE WE ARE INCLINED TO REMIT THE ENTIRE ISSUE OF IMPOSITION OF PE N ALTY UNDER S.271(1)(C) OF TH E A C T TO THE FIL E O F THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THE A SSESSING OFFICER IS REQUIRED TO GO THROUGH THE ENTIRE EVIDEN C E SU B MI T TED BY TH E ASSESSEE EXPLAINING THE SOURCE OF PAYMENT S MADE TO THE BANK TOWARDS SETTLEMENT OF THE LOAN ACCOUNT TO FIND OUT WHETHER THE SOURCES ARE PROPERLY EXPLAINED OR NOT AND ONLY TH EREAFTER WITHOUT BEING BOUND BY THE CONCLUSIONS ARRIVED AT IN THE QUANTUM PROCEEDINGS PROCEED TO EXAMINE THE JUSTIFICATION OR OTHERWISE FOR THE PENALTY UNDER S.271(1)(C) OF THE ACT. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL AFFORD REASONABLE OPPORTUN ITY OF HEARING TO THE ASSESSEE AND REDECIDE THE MATTER AFRESH IN ACCORDANCE WITH LAW BY PASSING A SPEAKING ORDER ON ALL ASPECTS OF THE MATTER. 21. IN THE RESULT ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COUR T ON 18.10.2013 SD/ - SD/ - (CHANDRA POOJARI) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED/ - 18 TH OCTOBER 2013 COPY FORWARDED TO: 1 M/S. H OE LEATHER GARMENTS PVT. LTD. C/O. M/S. ANJANEYULU & CO. CHARTERED ACCOUNTANTS 30 L BHAGYALAKSHMI NAGAR GANDHI NAGAR HYDERABAD 500 080 2 INCOME TAX OFFICER WARD 2(2) HYDERABAD I TA NO. 339 / HYD/201 3 M/S. H OE LEATHER GARMENTS PVT. LTD. HYDERABAD 14 3 COMMISSIONER OF INCOME - TAX (APPEALS) - III HYDERABAD 4 COMMISSIONE R OF INCOME - TAX II HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD B.V.S