M/s. L.G. Industries, Bhavnagar v. The ACIT., Circle-2,, Bhavnagar

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL A M M/S L. G. INDUSTRIES 206 MADHAV DARSHAN WAGHAWADI ROAD BHAVNAGAR. VS. THE ASSTT. CIT CIR-2 BHAVNAGAR. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S. R. SHAH AR RESPONDENT BY:- SHRI K. MADHUSUDAN SUDAN. O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 15/10/2008 CONFIRMING PENALTY UNDER SE CTION 271(1)(C) RAISING FOLLOWING GROUND :- (1) THE HONBLE CIT(A) HAS ERRED IN FACTS AND IN LAW IN CONFIRMING LEVY OF PENALTY OF RS70 740/- U/S 271(1)(C). 2. THIS APPEAL WAS FILED LATE BY THREE DAYS. THE RE ASONS GIVEN FOR CONDONATION OF DELAY BY THE TAX CONSULTANT SHWETA D. PAREKH C.A. ARE AS UNDER :- I SHWETA D. PAREKH CHARTERED ACCOUNTANTS AGE 35 YEARS 103 CITY CENTER KALANALA BHAVNAGAR DO HEREBY DECLARE THAT I AM THE REGULAR CONSULTANT OF AGGARWAL GROUP M/S L. G. INDUSTRIES IS ONE OF THE CONCERN OF AGGARWAL GROUP. IT IS THE GENERAL PRACTICE OF TH E GROUP THAT THEY SENT THE PAPERS AFTER GETTING MY CONSENT. ALL THE PAPERS WERE READY BUT SINCE ITA NO.614/AHD/2009 ASST. YEAR 1998-99 ITA NO.614/AHD/2009 ASST. YEAR 1998-99 2 DUE TO MY UNPLANNED PERSONAL WORK DURING THE PERIOD I HAVE TO REMAIN OUT OF STATION WHICH HAS RESULTED INTO LATE CONSENT FROM MY SIDE AND RESULTED INTO DELAY IN LATE FILING APPEAL NO.614/A/ 09 BEFORE ITAT AHMEDABAD FOR ASST. YEAR 1998-99 BY THREE DAYS. THE ABOVE DELAY IS HIGHLY REGRETTED. THE ABOVE STATEMENT IS TRUE AND CORRECT. SOLEMNLY DECLARE ON OATH ON THIS 1 ST FEBRUARY 2011. SD/- S.D. PAREKH (SHWETA D. PAREKH) 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOIN G THROUGH THE MATERIAL ON RECORD WE CONDONE THE DELAY AND ADMIT THE APPEAL. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. 5. THE FACTS OF THE CASE ARE THAT IN ASST. YEAR 199 7-98 THE AO FOUND THAT ASSESSEE HAS BORROWED A SUM OF RS.13 LACS FROM M/S AFTAB ENTERPRISES PROP. SHRI IMTIAZ LAKHANI. THE AMOUNT WAS NOT FOUND GENUINE AND HENCE ADDITION WAS MADE IN THAT YEAR DI SALLOWING DISALLOWANCE OF INTEREST PAID ON SUCH CREDIT. THE M ATTER WENT IN APPEAL BEFORE THE TRIBUNAL WHICH IN ITA NO.245/AHD/2008 AS ST. YEAR 1997-98 HELD THAT LOAN IS GENUINE BY OBSERVING AS UNDER :- 3. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY CONSIDERED THEIR RIVAL SUBMISSIONS. WE HAVE ALSO GONE THROUGH THE OR DER OF THE TAX AUTHORITIES BELOW AS WELL AS THE ORDER OF THE ITAT AHMEDABAD BENCH-D IN THE ASSESSEES OWN CASE FOR ASST. YEAR 1995-96 I N REVENUES APPEAL IN ITA NO.784/RJT/2003 WITH C.O.NO.25/RJT/2006 WHEREI N THE TRIBUNAL VIDE PARA -5 OF ITS ORDER DATED 14.03.2008 HAS DELETED T HE ADDITION OBSERVING AS UNDER :- ITA NO.614/AHD/2009 ASST. YEAR 1998-99 3 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE PARTIES AND CONSIDERED THE RIVAL SUB MISSIONS. IN SO FAR AS THE ASSESSEE IS CONCERNED THE AMOUNT WAS RE CEIVED BY IT FROM M/S AFTAB ENTERPRISE BY CHEQUE AND THE SOURCE OF M/S AFTAB ENTERPRISES WAS THE PAYMENT OF AN EQUIPMENT AMOUNT BY M/S AGGARWAL INDUSTRIES ON 8.2.1995. THEREFORE THE ASS ESSEE HAS EXPLAINED THE SOURCE SATISFACTORILY. WHY THE PAYMEN T OF RS.10.00 LAKHS MADE BY M/S AGGARWAL INDUSTRIES TO M/S AFTAB ENTERPRISES IS NOT THE CONCERN OF THE AO. BE THAT AS IT MAY IT WAS RECEIVED BY M/S AFTAB ENTERPRSES BY CHEQUE AND OUT OF THE PROCE EDS OF THAT CHEQUE THE PARTY HAS MADE PAYMENT TO THE ASSESSEE. FURTHER THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT EITHER DUR ING THE SEARCH PROCEEDINGS OR THEREAFTER THERE WAS ANY MATERIAL T O THE EFFECT THAT THE TRANSACTION WAS NOT GENUINE OR THERE WAS ANY DO UBT IN RESPECT OF THE SAID LOAN. IN THESE CIRCUMSTANCES IN OUR OP INION THE CIT(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE IN DELETING THE ADDITION AND CONSEQUENTLY ALLOWING THE INTEREST T HEREOF. SINCE THE FACTS AND ISSUE INVOLVED IN THE PRESENT A SSESSMENT YEAR ARE ADMITTEDLY EXACTLY SIMILAR AND THEREFORE RESPECTF ULLY FOLLOWING THE SAID DECISION OF THIS TRIBUNAL WE REVERSE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED ADDITION. ON THE BASIS OF ABOVE DECISION THE LD. AR ARGUED TH AT ONCE A LOAN IS FOUND GENUINE BY THE TRIBUNAL IN QUANTUM PROCEEDINGS THEN QUESTION OF LEVY OF PENALTY FOR ALLEGED DISALLOWANCE OF PAYMENT OF INTE REST SHOULD NOT ARISE. 6. THE LD. DR ON THE OTHER HAND SUBMITTED THAT THER E WAS A SEARCH IN THE PREMISES OF THE ASSESSEE DURING FY 1999-00. AS A RESULT THEREOF NOTICE UNDER SECTION 158BC WAS ISSUED. IN RESPONSE TO THIS ASSESSEE HAD FILED RETURN OF INCOME ON 29.10.1998 DECLARING NIL INCOME. HOWEVER ON THE BASIS OF DOCUMENTS SEIZED IT REVEALED TO THE AO THAT THE LOAN CLAIMED TO BE RECEIVED FROM AFTAB ENTERPRISE WAS NOT GENUIN E AND ACCORDINGLY ADDITION OF RS.13 LACS WAS MADE BY THE AO IN THE BL OCK ASSESSMENT ORDER. A REFERENCE HAS BEEN MADE BY THE AO OF THE BLOCK AS SESSMENT PROCEEDINGS IN THE PENALTY ORDER AS PER PARA 4 AS U NDER :- ITA NO.614/AHD/2009 ASST. YEAR 1998-99 4 4. THE AO AFTER CONDUCTING NECESSARY INQUIRIES A S DISCUSSED ABOVE MADE ADDITION OF RS.13 00 000/- AS DEEMED INCOME U/ S 68 OF THE IT ACT 1961 IN THE BLOCK ASSESSMENT U/S 158BC. THE ASSESSE E FILED APPEAL AGAINST THIS ADDITION BEFORE CIT(A). THE LD.CIT(A) HAD DELETED THE ADDITION ON THE GROUND THAT THIS ADDITION WAS NOT C OVERED IN THE UNDISCLOSED INCOME OF THE ASSESSEE FOR BLOCK PERIOD AS THE DETECTION OF BOGUS CASH CREDIT WAS NOT DIRECTLY RELATABLE TO THE MATERIAL SEIZED DURING COURSE OF SEARCH. THE LD. CIT(A) HAD GIVEN HIS FIND INGS THAT THE STATEMENT OF SHRI (IMTIAZ LAKHANI HAD BEEN RECORDED BY THE DD IT (INV.) ON 5.7.1999 WHICH WAS AFTER FINAL CONCLUSION OF THE SE ARCH IN THE CASE OF THE ASSESSEE. 5. IN VIEW OF THE APPEAL ORDER CASE WAS REOPENED A ND NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE. DURING COURSE OF FRESH ASSESSMENT PROCEEDINGS ORDER OF ITAT RAJKOT BENCH RAJKOT WA S ALSO RECEIVED. THE ITAT RAJKOT BENCH RAJKOT VIDE ITA NO.(SS) 17(RJT) OF 2002 DATED 27.01.2005 HAD HELD THAT THE ORDER OF LD. CIT(A) WA S NOT CORRECT REGARDING HIS FINDINGS THAT AMENDMENT IN SUB-SECTIO N (1) OF SECTION 158BB WAS W.E.F. 01.06.2002. IT WAS HELD THAT THE A MENDMENT WAS MADE WITH RETROSPECT EFFECT FROM 01.07.1995 AND THE LD. CIT(A) HAD MADE WRONG RELIANCE ON THE PROVISIONS OF THE IT ACT AND HAD EXCLUDED ADDITIONS WHICH WERE AS PER THE MATERIAL FOUND DURI NG THE COURSE OF SEARCH. 7. ON THE BASIS OF MATERIAL FOUND IN THE SEARCH THE AO INITIATED PROCEEDINGS UNDER SECTION 148 TO DISALLOW INTEREST SHOWN TO HAVE BEEN PAID ON THIS AMOUNT AND THEREAFTER WHEN ASSESSMENT UNDER SECTION 148(1)/147 WAS CONCLUDED INTEREST OF RS.1 01 163/- WAS DISALLOWED. THUS THERE WERE TWO PROCEEDINGS GOING PARALLEL. ONE PROC EEDING WAS FOR ADDITION OF RS.13 LACS IN BLOCK ASSESSMENT AND THE OTHER WAS ABOUT DISALLOWANCE OF INTEREST THEREON AFTER REOPENING TH E ASSESSMENT UNDER SECTION 147/148. THE EARLIER REGULAR ASSESSMENT IN WHICH ADDITION OF RS.13 LACS WAS MADE WAS CONSIDERED BY THE TRIBUNAL IN ASST. YEAR 1997- 98 AND IT WAS DECIDED IN FAVOUR OF THE ASSESSEE BY DELETING THE ADDITION OF RS.13 LACS FROM REGULAR ASSESSMENT. ON THE STRENGTH OF THIS ORDER OF THE TRIBUNAL THE LD. AR HAS ARGUED THAT INTEREST SHOUL D ALSO BE DELETED ITA NO.614/AHD/2009 ASST. YEAR 1998-99 5 WITHOUT POINTING OUT THAT THIS DISALLOWANCE OF INTE REST HAS ARISEN DUE TO EVIDENCE FOUND IN THE SEARCH TO THE EFFECT THAT LOA N OF RS.13 LACS WAS NOT FOUND GENUINE. FURTHER THE LD. AR DID NOT POINT OUT THAT THE TRIBUNAL RAJKOT HAS LEFT THE ISSUE OPEN TO THE AO TO DECIDE AFRESH IN THE BLOCK ASSESSMENT PROCEEDINGS. THUS IT IS NOT CLARIFIED BY THE PARTIES THAT WHETHER THE LD. CIT(A) WHILE CANCELING THE PENALTY HAS EXAMINED OR NOT EXAMINED AS TO HOW PENALTY UNDER SECTION 271(1)(C) CAN BE LEVIED IN RESPECT OF AN AMOUNT WHICH APPARENTLY PERTAINED TO THE DOMAIN OF BLOCK ASSESSMENT. 8. WE ACCORDINGLY RESTORE THE MATTER TO THE FILE OF LD. CIT(A) TO DECIDE THE ISSUE AFRESH - (1) WHETHER ANY ADDITION IN RESPECT OF INTEREST ON THE SUSPECTED LOAN OF RS.13 LAC WAS MADE IN THE BLOCK ASSESSMENT. (2) WHETHER ADDITION OF INTEREST ON THIS SUSPECTED LOAN WOULD FALL FOR CONSIDERATION IN THE DOMAIN OF BLOCK ASSESSMENT OR IN THE DOMAIN OF REGULAR ASSESSMENT. (3) WHETHER PENALTY CAN STILL BE LEVIED ON AN AMOUN T WHOSE PRINCIPALS HAVE BEEN DELETED IN THE IN THE CHANNEL OF REGULAR ASSESSMENT. SINCE THERE IS A COMPLEXITY OF FACTS WHICH REQUIRE TO BE THRASHED OUT BETWEEN BLOCK ASSESSMENT AND REGULAR ASSESSMENT WE RESTORE THE ISSUE TO THE LD. CIT(A) TO DECIDE IT AFRESH IN ACCORDANCE WI TH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS A RE SULT APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. ITA NO.614/AHD/2009 ASST. YEAR 1998-99 6 9. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 11.2.11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD DATED : 11.2.11. MAHATA/- 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 DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 3/2/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 7/2/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..