SHAKTI GEMS & JEWELLERY, MUMBAI v. ITO 14(1)(4), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI T.R. SOOD ACCOUNTANT MEMBER. ITA NOS.717 & 718/MUM/10 (ASSESSMENT YEARS : 2004-05 & 2005-06) M/S. SHAKTI GEMS & JEWELLERY 82/84 2 ND FLOOR SHEIKH MEMON STREET ZAVERI BAZAR MUMBAI-400 002 PAN AAOFS6589E VS. INCOME TAX OFFICER 14(1)(4) MUMBAI. APPELLANT. RESPONDENT. APPELLANT BY : SHRI VINOD JAIN. RESPONDENT BY : SMT. AMRITA MISRA. O R D E R PER D.K. AGARWAL : THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE DI RECTED AGAINST THE SEPARATE ORDERS DT.13.11.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEARS 2004-05 AND 2005-06 SUSTAINING THE PENALTY OF RS.35 55 213 AND RS.53 05 687 RESPECTIVE LY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE I NCOME TAX ACT 1961 (THE ACT). SINCE FACTS ARE IDENTICAL AND ISSUE INVOLVED IS COMMON BOTH THESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR TH E SAKE OF CONVENIENCE. ITA NOS.717 & 718/MUM//10 - 2 - 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO.717/MUM/10 FOR THE ASSESSMENT YEAR 2004-05 ARE THAT THE ASSESSEE F IRM IS ENGAGED IN THE BUSINESS OF RESELLER OF BULLION/MANUFACTURING AND E XPORT OF GOLD AND JEWELLERY. THE RETURN WAS FILED DECLARING LOSS OF RS.1 06 96 9 10. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER INTER ALIA OBSERVED THAT THE ASSESSEE HAD RECEIVED ADVANCE AGAINST SALE FROM M/S . SHAKTI JEWELLERY PVT. LTD. TO THE TUNE OF RS.89 10 000 AS PER SCHEDULE B OF T HE BALANCE SHEET OF THE FIRM AS ON 31.3.2004. TAKING NOTE OF THE FACT THAT THE PARTNERS OF THE FIRM ARE INTERESTED IN THE SAID COMPANY HE ASKED THE ASSESS EE TO SUBMIT A CERTIFIED COPY OF THE BALANCE SHEET OF M/S. SHAKTI JEWELLERY PVT. LTD. AS ON 31.3.2004 ALONGWITH THE DETAILS OF ITS SHARE HOLDING PATTERN. HE NOTED THAT THE ASSESSEE FIRM M/S. SHAKTI GEMS AND JEWELLERY WAS SHOWN TO HA VE BEEN ADVANCED RS.1 09 10 000. HE FURTHER NOTED THAT THE PERCENTA GE OF SHARES IS 25% BY SRI MAHESH KUMAR KOTHARI 33.33% BY SRI BHARAT J. JAGAD A AND 33.33% BY SRI PRAKASH GAMU. THE ASSESSING OFFICER AFTER CONSIDERING VARIOUS CASE LA WS HELD THAT THE PROVISIONS OF SECTION 2(22)(E) ARE ATTRACT ED AND THEREFORE AFTER CONSIDERING THE RECONCILIATION STATEMENT FURNISHED BY ASSESSEE MADE AN ADDITION OF RS.89 10 000 UNDER SECTION 2(22)(E) OF THE ACT. ON APPEAL THE LEARNED CIT(A) WHILE CONFIRMING THE ACTION OF THE ASSESSING OFFICER DIRECTED THE ITA NOS.717 & 718/MUM//10 - 3 - ASSESSING OFFICER TO ASSESS THE DEEMED DIVIDEND OF RS.99 10 000. ON FURTHER APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL THE TRI BUNAL IN ASSESSEES OWN CASE IN ITA NOS.5389 & 5390/MUM/08 FOR ASSESSMENT YEARS 2004-05 AND 2005-06 VIDE ORDER DT.6.8.2010 BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ACIT VS. BHAUMIK COLOUR (P) LTD. 118 I TD 1 (MUM) (SB) AND CIT VS. HOTEL HILLTOP 313 ITR 116 (RAJ) ALLOWED THE APPEAL OF THE ASSESSEE. 3. IN THE MEANWHILE THE ASSESSING OFFICER AFTER CON SIDERING THE ASSESSEES EXPLANATION IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT RS.35 55 213 AND RS.53 05 687 FOR ASSESSMENT YEARS 2004-05 AND 2 005-06 RESPECTIVELY VIDE SEPARATE ORDERS DT.29.01.2009. ON APPEAL THE LEAR NED CIT(A) VIDE HIS EX-PARTE ORDERS DT.13.11.2009 WHILE CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT DISMISSED THE ASSESSEES APPEAL. 4. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) TH E ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS FOR THE A SSESSMENT YEARS 2004-05 & 2005-06 SUSTENANCE OF PENALTY IMPOSED BY THE ASSES SING OFFICER UNDER SECTION 271(1)(C) OF THE ACT. 5. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE QUANTUM APPEAL OF THE ASSESSEE THE TRIBUNAL HAS DELETED THE ADDITION ITA NOS.717 & 718/MUM//10 - 4 - MADE BY THE ASSESSING OFFICER THEREFORE THE PENAL TY IMPOSED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) BE DELE TED. 6. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND LEARNED CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE SIMILAR IN BOTH THE ASSESSMENT YEARS AND THE SAME ARE NOT IN D ISPUTE. IN VIEW OF THE FACT THAT THE QUANTUM APPEALS HAVE BEEN DECIDED IN FAVOU R OF THE ASSESSEE VIRTUALLY THE BASIS FOR IMPOSITION OF LEVY OF PENALTY UNDER S ECTION 271(1)(C) IS NOT AVAILABLE. WHEN SUCH IS THE POSITION THE IMPOSITI ON OF PENALTY IS NOT IN ACCORDANCE WITH LAW. ACCORDINGLY THE PENALTY IMPO SED BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) FOR BO TH THE ASSESSMENT YEARS ARE DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE TH EREFORE ALLOWED. 8. IN THE RESULT THE ASSESSEES APPEALS STAND ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 04. 02.2011. SD/- SD/- (T.R. SOOD) (D.K. AGARWAL) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI DT.04.02.2011. *GPR ITA NOS.717 & 718/MUM//10 - 5 - TRUE COPY COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE ITAT MUMBAI. BY ORDER DY./ASST.REGISTRAR ITAT MUMBAI ITA NOS.717 & 718/MUM//10 - 6 - DATE INITIALS 1. DRAFT DICTATED ON 21.01.2011 2. DRAFT PLACED BEFORE AUTHOR 3. DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER 4. DRAFT DISCUSSED & APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO A.R. 10. DATE OF DISPATCH OF ORDER.