PATROCHEM LTD, v. ACIT CC-16,

ITA 650/DEL/2007 | 1997-1998
Pronouncement Date: 19-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 65020114 RSA 2007
Bench Delhi
Appeal Number ITA 650/DEL/2007
Duration Of Justice 3 year(s) 9 day(s)
Appellant PATROCHEM LTD,
Respondent ACIT CC-16,
Appeal Type Income Tax Appeal
Pronouncement Date 19-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 19-02-2010
Date Of Final Hearing 11-01-2010
Next Hearing Date 11-01-2010
Assessment Year 1997-1998
Appeal Filed On 09-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMEBR AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A NO. 650/DEL/07 ASSESSMENT YEAR 1997-98 PAR PETROCHEM LTD. 1208 BAHADURGARH ROAD NEW DELHI. VS. ACIT CENTRAL CIRCLE-16 NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GURJEET SINGH ADVOCATE RESPONDENT BY: SHRI N.K. CHAND SR. DR ORDER PER RAJPAL YADAV JM: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LD. CIT(A) DATED 20 TH NOVEMBER 2006 PASSED FOR ASSTT. YEAR 1997-98. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONAN CE WITH RULE 8 OF ITAT RULES. IN BRIEF THE GRIEVANCE OF ASSESSEE IS T HAT LD. CIT(A) HAS ERRED IN UPHOLDING THE IMPOSITION OF PENALTY AMOUNT ING TO RS. 17 09 520/- U/S 271 (1)(C) OF THE INCOME TAX ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED RETURN OF INCOME ON 30 TH NOVEMBER 1997 DECLARING A LOSS OF RS. 5 57 266/-. THE ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 2 ASSTT. WAS FRAMED U/S 143 (3) ON 30 TH MAY 2000 WHEREBY TOTAL TAXABLE INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 91 57 376/-. THE AO HAS MAINLY MADE FOLLOWING ADDITIONS:- 1. BOGUS SUNDRY CREDITORS RS. 47 94 410/- U/S 68 OF INCOME TAX ACT 2. BOGUS ADVANCES FROM CUSTOMERS RS. 42 73 807/- U/S 68 OF THE INCOME TAX ACT. 3. ON A/C OF TRADING A/C RS. 6 46 425/- 3. THE LD. CIT (A) HAS DELETED ALL THE ADDITIONS. H OWEVER REVENUE CARRIED THE DISPUTE IN APPEAL BEFORE THE TRIBUNAL A ND THE TRIBUNAL HAS SET ASIDE THE ORDER OF LD. CIT(A) QUA ITEM NO. 2 RE PRESENTING BOGUS ADVANCES FROM CUSTOMERS AND CONFIRMED THE ADDITION OF RS. 42 73 807/-. THIS AMOUNT RELATES TO THREE PARTIES NAMELY NEW ERA POLYMERS 32 43 807/- BHORA PARISTHAN 9 00 000/- RATERIAL LAMINATIORS P. LTD. 1 30 000/- 4. THE LD. CIT(A) HAS REPRODUCED THE FINDING OF THE ITAT VIDE WHICH THE ADDITION OF RS. 42 73 807/- WAS CONFIRMED AND T HAT FINDING AVAILABLE AT PAGE 6 &7 OF THE LD. CIT(A)S ORDER READ AS UNDE R :- AS REGARDS THE REMAINING CREDITS AMOUNTING TO RS. 42 73 807/- APPEARING IN THE NAME OF THE CONCERNED CREDITORS IN THE BOOKS OF THE ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 3 ASSESSEE THE SAME REPRESENTED ADVANCE OF MONEY REC EIVED BY THE ASSESSEE FROM ITS CUSTOMERS AGAINST SALE OF GOODS. THE NATURE AND CHARACTER OF THE SAID TRANSACTIONS THUS WAS CASH CR EDITS AS CONTEMPLATED IN SECTION 68 AND THE ONUS WAS ON THE ASSESSEE TO EXPL AIN THE SAME IN TERMS OF SECTION 68 BY ESTABLISHING THE IDENTITY AS WELL AS CREDITWORTHINESS OF THE CONCERNED CREDITORS AND GENUINENESS OF THE CONC ERNED TRANSACTIONS. IN THIS REGARD IT IS OBSERVED THAT SPECIFIC OPPORTUNI TY WAS GIVEN BY THE AO TO THE ASSESSEE TO EXPLAIN THE SAID CREDITS. HOWEVE R THE CONFIRMATION LETTERS OF THE SAID CREDITORS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DID NOT BEAR THEIR COMPLETE ADDRESS AS WELL INCOME TAX PARTICULARS. THE ASSESSING OFFICER THEREFORE REQUIRED THE ASSE SSEE TO PRODUCE THESE CREDITORS FOR VERIFICATION AND DESPITE SUFFICIENT O PPORTUNITY HAVING BEEN AFFORDED BY HIM IN THIS REGARD THE ASSESSEE FAILED TO PRODUCE THE SAID CREDITORS BEFORE THE ASSESSING OFFICER FOR EXAMINAT ION. EVEN BEFORE THE LEARNED CIT (A) MERELY A COPY OF RELEVANT ITS BANK ACCOUNT WAS PRODUCED BY THE ASSESSEE TO SHOW THAT THE ADVANCES IN QUESTION HAD BEEN RECEIVED BY IT FROM THE CONCERNED CUSTOMERS THROUGH ACCOUNT PAYEE DEMAND DRAFTS AND RELYING ON THE SAME THE LD. CIT (A) HELD THE CONCERNED CASH CREDITS TO BE PROPERLY EXPLAINED. IN OUR OPINION EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE BEFORE THE ASSESS ING OFFICER AS WELL AS BEFORE THE LD. CIT (A) WAS NOT SUFFICIENT TO ESTABL ISH THE IDENTITY AND CREDITWORTHINESS OF THE CONCERNED CREDITORS AS WELL AS GENUINENESS OF THE RELEVANT TRANSACTIONS AND THUS THE PRIMARY ONUS LAY ON IT IN TERMS OF EXPLAINING THE RELEVANT CASH CREDITS U/S 68 WAS NOT DULY DISCHARGED. AS SUCH CONSIDERING ALL THE FACTS AND CIRCUMSTANCES O F THE CASE WE HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER U/S 68 W AS SUSTAINABLE TO THE EXTENT OF RS. 42 73 807/- AND THE LEARNED CIT(A) WA S NOT JUSTIFIED IN DELETING THE SAME FULLY. HIS IMPUGNED ORDER ON THIS ISSUE IS THEREFORE MODIFIED AND ADDITION MADE BY THE ASSESSING OFFICER U/S 68 IS SUSTAINED TO THE EXTENT OF RS. 42 73 807/-. GROUND NO. 1 OF T HE REVENUES APPEAL IS ACCORDINGLY ALLOWED IN PART. 5. LD. AO HAS INITIATED PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE INCOME TAX ACT FOR CONCEALING THE PARTICULARS OF IN COME BY FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND THEREFORE DESERVES TO BE VISITED WITH PENALTY. HE WAS OF THE OPINION THAT AT THE LEV EL OF TRIBUNAL IT HAS ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 4 BEEN HELD THAT THESE ENTRIES ARE BOGUS AND ASSESSEE FAILED TO PROVE IDENTITY AND CREDITWORTHINESS OF THESE ALLEGED PURC HASERS. IN THIS WAY PENALTY OF RS. 17 09 520/- EQUIVALENT TO THE TAX SO UGHT TO BE EVADED HAS BEEN LEVIED. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. LD. COUNSEL FOR THE ASSESSEE WHILE IMPUGNING THE ORDERS OF REVENUE AUTHORITIES SUBMITTED THAT IN THE CASE OF N EW ERA POLYMERS CORPN. THE OPENING BALANCE AS ON 31 ST JUNE 1996 WAS RS. 3 79 952.50 . THE ASSESSEE HAS MADE SALES OF RS. 15 14 547/- DURI NG THE PERIOD 21 ST JUNE 1996 UPTO 31 ST MARCH 1997 TO THIS CONCERN. IT HAD RECEIVED A PAYMENT OF RS. 51 38 307/-. ALL THESE PAYMENTS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE. THE DETAILS OF THE BANK WERE SUBMITTED TO THE AO IN THE PENALTY PROCEEDINGS. HE FURTHER POINTED O UT THAT ADDRESS OF THIS PARTY IS 3 RATAN MANSION 1 ST FLOOR M.I. ROAD JAIPUR. IN ORDER TO PROVE THE ADDRESS OF THIS CONCERN ASSES SEE SOUGHT TO FILE A COPY OF FORM NO. F WHICH IS ISSUED UNDER THESE CENT RAL SALES TAX BY WAY OF ADDITIONAL EVIDENCE BEFORE LD. CIT(A). IN THIS F ORM NO. F THE REGISTRATION WITH THE SALES TAX AUTHORITIES IN THE RAJASTHAN OF M/S. NEW ERA POLYMERS IS EXHIBITING. THE ADDRESS OF THIS CON CERN IS ALSO REFLECTING. ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 5 LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT CA PACITY OF THIS CONCERN BEING BENEFICIAL OWNER OF THE TRANSACTION WAS ALSO EXPLAINED TO THE AO. THE AO DIRECTED THE ASSESSEE TO PRODUCE THIS PARTY BUT DID NOT ISSUE SUMMONS / WARRANTS FOR ENFORCING THE PRESENCE OF TH E PERSONS OF THIS PARTY. SIMILARLY THE ASSESSEE HAS GIVEN THE DETAILS OF BOHRA PRATISTHAN. THE AO DID NOT ISSUE ANY SUMMON TO THIS CONCERN ALS O EVEN IN THE PENALTY PROCEEDINGS IN ORDER TO VERIFY THE GENUINEN ESS OF THE ADDRESSES SUBMITTED BY THE ASSESSEE. WITH REGARD TO THIRD CONC ERN ASSESSEE HAS POINTED OUT THAT ADDRESS OF THIS CONCERN WAS ALSO G IVEN TO THE AO. BUT AGAIN AO FAILED TO ISSUE THE SUMMONS. LD. COUNSEL F OR THE ASSESSEE FURTHER SUBMITTED THAT THE ADDITIONS MADE BY THE AO IN THE ASSTT. ORDER WAS CHALLENGED BEFORE THE LD. CIT(A). LD. CIT(A) HA S ACCEPTED THE CONTENTIONS OF ASSESSEE AND DELETED THIS ADDITION. IT INDICATE THAT BETWEEN THE TWO AUTHORITIES OF THE DEPARTMENT THERE WAS A DIFFERENCE OF OPINION ON AN ISSUE. THE ADDITIONS HAVE BEEN RESTOR ED BY THE TRIBUNAL ON THE APPEAL OF REVENUE. HOWEVER ASSESSEE HAS CHA LLENGED THE ORDER OF THE TRIBUNAL AND ITS APPEAL HAS BEEN ADMITTED BY THE HONBLE HIGH COURT. THUS A QUESTION OF LAW HAS ARISEN WITH REGAR D TO THE FINDING RECORDED BY THE TRIBUNAL. ON THE STRENGTH OF THIRD MEMBER ORDER OF ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 6 ITAT AHEMDABAD IN THE CASE OF ROOPAM MERCHANTILE LT D. VS. DCIT LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPECT OF A PLEA OR CLAIM HONBLE HIGH COURT HAS ADMITTED THE APPEAL WOULD IN DICATE THAT SUBSTANTIAL QUESTION OF LAW HAS ARISEN THEN IT CANN OT BE TREATED AS FRIVOLOUS OR MALAFIDE SO AS TO ATTRACT LEVY OF PE NALTY U/S 271 (1)(C) OF THE ACT. HE PREYED THAT ADDITIONS MIGHT HAVE BEEN C ONFIRMED BY THE TRIBUNAL BUT ASSESSEE CANNOT BE VISITED WITH PENALT Y FOR CONCEALMENT OF INCOME ON ACCOUNT OF FURNISHING INACCURATE PARTICUL ARS OF ITS INCOME. 7. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F LD. CIT (A). HE POINTED OUT THAT AS A MATTER OF FACT IT HAS BEEN CO NCLUDED BY THE TRIBUNAL THAT CLAIM OF THE ASSESSEE IS BOGUS. IN SU CH SITUATION ASSESSEE DESERVED TO BE VISITED WITH PENALTY. HE EMPHASIZED ON THE FINDING OF THE TRIBUNAL EXTRACTED BY THE LD. CIT(A) ON PAGE 6 AND 7 OF THE IMPUGNED ORDER (EXTRACTED SUPRA). 8. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. IT IS TRUE THAT HONBLE HIGH COURT HAS ADMITTED THE FOLLOWING QUESTION OF LAW FOR CONSIDERATION :- ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 7 WHETHER THE INCOME-TAX APPELLATE TRIBUNAL WAS CORREC T IN LAW IN DELETING THE ADDITION OF RS. 47 94 410/- SHOWN AS R EPRESENTING TRADING TRANSACTIONS AND IN CONFIRMING THE ADDITION OF RS. 42 73 807/- TREATING THE SAME TO BE UNEXPLAINED CAS H-CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT 1961?? 9. THE ADDITION IN THE QUANTUM APPEAL HAS BEEN CONF IRMED BY THE TRIBUNAL ON THE GROUND THAT ASSESSEE FAILED TO GIVE THE COMPLETE ADDRESS AS WELL AS INCOME TAX PARTICULARS OF ALLEGED PURCH ASER WHO HAS GIVEN IT ADVANCES FOR THE PURCHASE OF GOODS. IT WAS FOR THE ASSESSEE TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE CONCERN CR EDITORS. THUS ACCORDING TO THE ASSESSEE THE ADDITION IN THE QUANT UM PROCEEDING WAS CONFIRMED BY THE ITAT ON ACCOUNT OF ITS FAILURE TO PRODUCE QUALITATIVE AS WELL AS QUANTITATIVE EVIDENCE IN SUPPORT OF ITS CLA IM BUT THAT WOULD NOT IPSOFACTO DENUDE THE ASSESSEE TO CLAIM FOR A FRESH INQUIRY IN THE PENALTY PROCEEDING. THE AO FAILED TO ISSUE ANY SUMMONS TO T HESE THREE PARTIES. HE PROCEEDED ON THE BASIS OF FINDING RECORDED IN TH E QUANTUM PROCEEDING. ON THE OTHER HAND ASSESSEE SOUGHT TO PL ACE ON RECORD COPY OF FORM NO. F EXHIBITING THE ADDRESS OF M/S. NEW ER A POLYMERS CORPN. BY WAY OF ADDITIONAL EVIDENCE. THIS FORM HAS BEEN I SSUED UNDER THE CENTRAL SALES TAX ACT AND IT INDICATES THE ADDRESS WHICH WOULD PROVE THE IDENTITY OF THIS PARTY. THE ORDER OF THE LD. CIT(A) IS SILENT ABOUT THE ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 8 APPLICATION FOR PRODUCING ADDITIONAL EVIDENCE WHOSE COPIES ARE PLACED ON PAGE NO. 58 59 OF THE PAPER BOOK. THE HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SIDHARTHA ENTERPR ISES LUDHIANA ITA NO. 908/2008 DECIDED ON 14 TH JULY 2009 HAS CONSIDERED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE 306 ITR 277 AND OBSERVED THAT THE DECISION OF HONBLE SUPREME C OURT CANNOT BE READ AS LAYING DOWN THAT IN EVERY CASE WHERE PARTIC ULARS OF INCOME ARE INACCURATE PENALTY MUST FOLLOW. ACCORDING TO THE HO NBLE HIGH COURT WHAT HAS BEEN LAID DOWN IN THAT DECISION IS THE QUA LITY DIFFERENCE BETWEEN CRIMINAL PROCEEDING U/S 276 AND PENALTY PRO CEEDINGS U/S 271C HAD TO BE KEPT IN MIND AND APPROACH ADOPTED TO A TR IAL OF THE CRIMINAL CASE NEED NOT TO BE ADOPTED WHILE CONSIDERING THE L EVY OF PENALTY. ACCORDING TO THIS DECISION PENALTY CAN BE IMPOSED W HEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT AND NOT ON A MERE MIS TAKE. THE AO OUGHT TO HAVE CONSIDERED THE STAND OF ASSESSEE IN THE PEN ALTY PROCEEDING AFRESH. ACCORDING TO THE ASSESSEE THE AO WAS REQUIR ED TO EXAMINE THE ISSUE IN THE PENALTY PROCEEDING INDEPENDENTLY PART ICULARLY WHEN ASSESSEE WAS CLAIMING THAT THESE PARTIES ARE GENUIN E AND THEY ARE EXISTING ON THE ADDRESSES GIVEN BY IT. THE ADVANCES RECEIVED BY THE ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 9 ASSESSEE ARE BEING TREATED AS UNEXPLAINED CASH CRED IT ONLY BECAUSE ASSESSEE FAILED TO PRODUCE SUFFICIENT EVIDENCE FOR EXPLAINING THE ENTRIES BUT ON THE BASIS OF MATERIAL CAN IT BE CONCLUDED TH AT THE CLAIM OF THE ASSESSEE WAS FALSE. ON DUE CONSIDERATION OF THIS ST AND OF ASSESSEE PARTICULARLY KEEPING IN MIND THE VIEW POINT OF TWO REVENUE AUTHORITIES I.E. AO WHO MADE THE ADDITION AS WELL AS LD. CIT(A ) WHO DELETED THE ADDITION IN QUANTUM APPEAL ON A PARTICULAR ITEM COU PLED WITH THE ADMISSION OF THE APPEAL BY THE HONBLE HIGH COURT WE ARE OF THE OPINION THAT THIS ISSUE REQUIRED FRESH ADJUDICATION AT THE LEVEL OF AO. BECAUSE ASSESSEE HAS PLACED ON RECORD COPY OF FORM NO. F ISSUED BY THE CENTRAL SALES TAX AUTHORITIES EXHIBITING THE ADDRES S OF NEW ERA POLYMERS WHO HAS GIVEN THE MAJOR ADVANCE FOR THE PURCHASES I S A RELEVANT MATERIAL. IF NOTICE IS BEING ISSUED AND THIS PARTY FOUND AT THAT ADDRESS OR RESPOND TO THE NOTICE THEN AT LEAST PENALTY QUA THI S AMOUNT WOULD NOTBE IMPOSABLE. THUS WE SET ASIDE THE ISSUE TO THE FILE TO AO FOR READJUDCATION. HE SHALL CONDUCT A FRESH INQUIRY AND ISSUE NOTICES TO THE THREE PARTIES ON THE ADDRESSES GIVEN BY THE ASSESSE E. THE LD. AO SHALL ALSO CONSIDER THE DECISION OF THIRD MEMBER IN THE C ASE OF ROOPAM ITA NO. 650DEL/07 ASSTT. YEAR 1997-98 10 MERCHANTILE LTD. BEFORE DECIDING THE ISSUE WHETHER ASSESSEE DESERVES TO BE VISITED WITH PENALTY OR NOT. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.2.2010. [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT