Dishman Pharmaceuticals & Chemicals ... vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD "A" BENCH AHMEDABAD आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद यायपीठ ',,'

Before Shri Mukul Kumar Shrawat, Judicial Member and ौी मुकुल कुमार ौावत, याियक सदःय एवं Shri Anil Chaturvedi, Accountant Member ौी अिनल चतुवद , लेखा सदःय के सम# ।

ITA No. 1138/Ahd/2011 Assessm ent Year :2004-05

M/s. Dishman Pharmaceuticals & V/s. The ACIT (OSD), Chemicals Ltd., Range-1, Ahm edabad Bhadraraj Cham bers, Nr. Swastik Cross Roads, Navrangpura, Ahmedabad P AN No. AAACD4164D (Appellant) .. (Respondent)

अपीलाथ& क' ओर से /By Appellant Shri Tushar P. Hemani, A.R. ू*यथ& क' ओर से/By Respondent Shri Dinesh Singh, Sr. D.R. सुनवाई क' तार ख/Date of Hearing 13.02.2015 घोषणा क' तार ख/Date of Pronouncement 20.02.2015

ORDER

PER : Shri Anil Chaturvedi, Accountant Member

This appeal is filed by the assessee against the order of ld. CIT(A)-VI,

Ahmedabad, dated 03.03.2011 for the assessment year 2004-05.

2. The facts as culled out from the materials on record are as under:

3. The assessee is a Company stated to be engaged in the business of

manufacturing of bulk drugs and fine chemicals. The assessee filed its return

of income for A.Y. 04-05 declaring total income at Rs.3,17,30,999/-. The case

was selected for scrutiny and thereafter the assessment was framed I. T . A. No. 1 13 8/ A hd /2 01 1 A . Y. 04- 0 5 ( M/ s . Dis h m a n P har m a c eu t ic al s & Ch em ic a ls Lt d. v s . T he A CI T( O S D) Page 2

u/s.143(3) vide order dated 29.12.2006 and the total income was determined

at Rs.8,38,88,973/- by inter alia making addition with respect to dividend

income of Rs.27,993/-, disallowance of domestic and foreign travel of

Rs.1,33,825/- and unexplained cash credit of Rs.15 lacs, which was also

confirmed by CIT(A) and on aforesaid additions which were confirmed by

CIT(A), A.O. vide penalty order dated 27.03.2009 levied penalty of

Rs.5,96,176/- u/s. 271(1)(c) of the Act. Aggrieved by the aforesaid order of

A.O., assessee carried the matter before the CIT(A) who vide order dated

03.03.2011 confirmed the penalty only on addition of unexplained cash credit.

Aggrieved by the aforesaid order of CIT(A), assessee is now in appeal before

us and has raised following ground:

"1. The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in levying penalty u/s 271(1)(c) of the Act on disallowance of Rs. 15,00,000/- being unexplained cash credit under section 68 of the Income tax Act, 1961.

2. The penalty levied is wholly unsustainable in law and on facts and as such the appellant could not be charged with any guilt of furnishing inaccurate particulars of income or concealing particulars of income within mischief of Section 271(1 )(c) of the Act. The levy of penalty being without jurisdiction and totally uncalled for, deserves to be quashed.

3. In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal.

4. In any case, quantification of the penalty is erroneous and excessive.

5. The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order. I. T . A. No. 1 13 8/ A hd /2 01 1 A . Y. 04- 0 5 ( M/ s . Dis h m a n P har m a c eu t ic al s & Ch em ic a ls Lt d. v s . T he A CI T( O S D) Page 3

6. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed."

4. Before us, ld. A.R. submitted that though various grounds have been

raised but the issue is only respect to levy of penalty u/s. 271(1)(c) on

unexplained cash credit.

5. Before us, ld. A.R. submitted that assessee had purchased raw

materials from some parties and on behalf of assessee the payments were

made by Janki Shah (Rs. 7 lacs), Piyush G. Shah (Rs. 5.5 lacs) and Piyush G.

Shah HUF (Rs.2.5 lacs). He further submitted that aforesaid sum were not

cash credits but were trade credits and they cannot be treated as cash credit

for the purpose of making addition u/s. 68. He further submitted that A.O.

never doubted the purchases made from the concerned persons to whom the

aforesaid persons have made payments. He further submitted that once the

figures of purchases and corresponding sales are not doubted, the balances

of trade creditors who have made payments to the concerned persons on

behalf of assessee cannot be treated as unexplained cash credits. He further

submitted that assessee had furnished full details of the aforesaid persons

and thus, had discharged initial burden cast on it. He further submitted that

quantum proceedings and penalty proceedings are distinct and different and

Section 68 creates a legal fiction whereby cash credits received are deemed I. T . A. No. 1 13 8/ A hd /2 01 1 A . Y. 04- 0 5 ( M/ s . Dis h m a n P har m a c eu t ic al s & Ch em ic a ls Lt d. v s . T he A CI T( O S D) Page 4

to be unexplained for want of necessary evidences and consequently addition

is made u/s.68. He further submitted that when addition is made by invoking

legal fiction it is not necessary that penalty u/s. 271(1)(c) should also be

levied. Ld. A.R. further submitted that the total turn over of the assessee was

in excess of Rs.50 crore and the profits of business was in excess of Rs.3.26

crore. In such cases, it would be highly improbable that assessee would

indulge in furnishing inaccurate particulars with respect to Rs.15 lacs which is

a very small figure as compared to the turnover and profit to avoid the tax

liability. He also relied on the decision in case of Amitabh Construction P. Ltd.

vs. ACIT, 335 ITR 523 (Jharkhand), CIT vs. Pancham Dass Jain, 156 Taxman

50 (Allahabad) and the decision in case of Reliance Petroproducts Pvt. Ltd.

reported in 322 ITR 158 (SC). He therefore submitted that the penalty levied

u/s. 271(1)(c) be deleted. Ld. D.R. on the other hand supported the orders of

A.O. and CIT(A).

5. We have heard the rival submissions and perused the material on

record. It is undisputed facts that on the addition of Rs.15 lacs made u/s. 68

by A.O. penalty u/s. 271(1)(c) has been levied by A.O., which has also been

confirmed by CIT(A). It is also a fact that assessee has disclosed all the

material facts before the A.O. and has also submitted the explanation which

has not been found to be false. It is a well settled law that penalty

proceedings are entirely distinct from assessment proceedings and however

relevant and good, the findings in assessment proceedings may not be

conclusive so far as penalty proceedings are concerned. It is well settled that I. T . A. No. 1 13 8/ A hd /2 01 1 A . Y. 04- 0 5 ( M/ s . Dis h m a n P har m a c eu t ic al s & Ch em ic a ls Lt d. v s . T he A CI T( O S D) Page 5

the parameters of judging the justification for addition made in the assessment

proceedings is different from the penalty imposed on account of concealment

of income or filing of inaccurate particulars of income and that certain

disallowance/additions could legally be made in the assessment proceedings

on the preponderance of probabilities but no penalty could be imposed

u/s.271( 1 )(c) of the Act on preponderance of probability and the Revenue

has to prove that the claim of the assessee was not genuine or was inflated its

tax liability. Further merely because additions have confirmed in appeal or no

appeal has been filed by assessee against additions made, it cannot be the

sole ground for coming to the conclusion that assessee has concealed any

income. Considering the aforesaid and peculiar facts of the case, we are of

the view that in the present case, no case for penalty has been made. We

thus direct the deletion of penalty.

6. In the result, the appeal of the assessee is allowed.

This Order pronounced in open Court on 20/02/2015

Sd/- Sd/- (Mukul Kumar Shrawat) (Anil Chaturvedi) Judicial Member Accountant Member

True Copy S.K.Sinha

आदे श क' ूितिल0प अमे0षत / Copy of Order Forwarded to:-

1. अपीलाथ& / Appellant

2. ू*यथ& / Respondent

3. संबंिधत आयकर आयु6 / Concerned CIT

4. आयकर आयु6- अपील / CIT (A)

5. 0वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad I. T . A. No. 1 13 8/ A hd /2 01 1 A . Y. 04- 0 5 ( M/ s . Dis h m a n P har m a c eu t ic al s & Ch em ic a ls Lt d. v s . T he A CI T( O S D) Page 6

6. गाड> फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।