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INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” : HYDERABAD
ITA.No.1718/Hyd/2013 Assessment Year 2003-2004
M/s. Hy-Grow Chemcials Pharmtek P. Ltd (Appellant) vs. ACIT (Respondent)
Date of Order: 05-02-2016
ORDER
PER SMT. P. MADHAVI DEVI, J.M.
This is assessee’s appeal for the A.Y. 2003-04 against the order of the Ld. CIT(A) in confirming the penalty levied by the A.O. under section 271(1)(c) of the I.T. Act, 1961.
2. Brief facts of the case are that the assessee company which is engaged in the business of manufacture of bulk drugs, filed its return of income on 03.11.2003 admitting taxable income of Rs.1,29,12,461. The assessment under section 143(3) was completed on 27.12.2005 determining the total income of Rs.1,43,68,620. Subsequently, the A.O. received information from DDIT (Inv.) Unit-1(3), Mumbai that there was a search operation under section 132 of the I.T. Act on 12.08.2004 in the case of one Mr. Chetan Shah who is an entry operator and during the course of search it came to light that the said Mr. Chetan Shah floated many proprietary concerns which issued bogus bills to various parties. It was further informed that the assessee had issued DDs in favour of M/s. Amit Enterprises, one of the proprietary concern of Mr. Chetan P. Shah on Indian Overseas Bank for a total sum of Rs.17,63,784. On the basis of the said information, the A.O. opined that assessee by utilising the services of Mr. Chetan P. Shah has booked bogus expenditure to an extent of Rs.17,63,784. In view of the same, a notice under section 148 of the Act was issued to the assessee on 30.03.2010. The assessee filed a letter dated 20.05.2010 stating that the return of income already filed on 03.11.2003 may be treated as the return filed in response to the notice under section 148 of the I.T. Act and also sought the reasons for reopening. On receipt of reasons for reopening of the assessment, assessee submitted that he cannot produce any evidence in respect of the expenditure of Rs.17,63,784 claimed in the P & L A/c since no documentary evidence is in the possession of the company in respect of their claim. Therefore, the assessee expressed its no objection for the proposed addition of the expenditure and the assessment was accordingly completed by making the addition. Thereafter, the A.O. initiated penalty proceedings under section 271(1)(c) of the I.T. Act by issuing a show cause notice dated 28.04.2011.
2.1. In reply thereto, the assessee filed a letter dated 25th May, 2011, wherein he has stated that the assessee agreed for the addition since matter was old and the assessee did not retain the relevant evidence for expenditure incurred in 2002-03 and further that assessee did not prefer any appeal in order to avoid protracted litigation as the matter was old. The A.O. was however, was not convinced with the assessee’s contention and has levied the minimum penalty of Rs.6,48,190, against which, the assessee preferred appeal before the Ld. CIT(A) who confirmed the order of the A.O. and the assessee is in second appeal before us.
3. The Ld. Counsel for the assessee, Mr. A.V. Raghuram, while reiterating the submissions made by the assessee before the authorities below, submitted that the assessee had filed its above explanation before the A.O. both during the assessment proceedings as well as the penalty proceedings and the assessee’s contention has not been found to be not bonafide. He has submitted that the relevant assessment year is 2003-04 whereas the reassessment proceedings and also the penalty proceedings were initiated in the years 2010-11. He has submitted that assessee had not retained the relevant documents as the period of six years were already completed and the addition was agreed to only due to his failure to produce necessary evidence and not because there was any positive evidence on record in the possession of the A.O. to demonstrate that these were fictitious expenditure claimed by the assessee. He has submitted that undisputedly the amount was paid by way of DDs and that the Revenue has not brought any evidence to show that the amount has been repaid to the assessee in any other form. Thus, according to him, the penalty is not leviable.
4. The Ld. D.R., on the other hand, supported the orders of the authorities below.
5. Having regard to the rival contentions and the material on record, it is seen that the addition has been made only on the ground that assessee has not been able to produce the evidence in favour of the payments made by the assessee by way of DDs to the proprietary concern of Mr. Chetan P. Shah i.e., Amit Enterprises. There is nothing on record such as documents found during the course of search in the case of Mr. Chetan P. Shah, to show that the payments made by the assessee were fictitious. The only evidence in possession of the Revenue was that Mr. Chentan P. Shah was in the business of issuing accommodation entries. There is nothing on record also to show that all the entries of Mr. Chetan P. Shah including the entries pertaining to the assessee are fictitious. Further, the assessee has submitted his explanation that the assessee is not in possession of the relevant documents due to passage of time and this has not been found to be false by any of the authorities below. The penalty under section 271(1)(c) of the I.T. Act is leviable where the assessee does not file his return of income or does not file explanation to the show cause notice for levy of penalty or where the explanation is found to be not bonafide. None of these circumstances exist in the case before us. In view of the same, we are of the opinion that the penalty under section 271(1)(c) of the Act, is not leviable in the case of the assessee in the absence of any of the above conditions.
6. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 05.02.2016.
(B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Penalty 271(1)(c) quashed for not producing old payment record not in possession due to passage of time and explanation not found to be false | 07-02-2016 |
