ACIT, CHENNAI vs. M/S. SHANGKALPAM INDUSTRIES PVT. LTD., CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -15, Chennai, dated 25.05.2016 and pertains to assessment year 2009-10, deleting the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').

Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that the Assessing Officer levied penalty of `2,93,28,304/- under Section 271(1)(c) of the Act. Referring to the assessment order, the Ld. D.R. submitted that the assessee has shown the sundry creditors to the extent of `9,00,26,078/-. The assessee claimed before the Assessing Officer that it received advance for export of iron ore. On investigation, according to the Ld. D.R., it was found that the assessee-company has no experience of export of iron ore and in fact, no iron ore was exported even after two years from the date of receipt of advance. The Assessing Officer has also found that the entire purchase money was received in advance. Even though it was claimed to have been received advance for export of iron ore, according to the Ld. D.R., the assessee in fact utilised the advance in purchasing of property at Anna Salai, Chennai. Since the assessee could not explain the source of receipts, the Assessing Officer made addition under Section 68 of the Act. Therefore, according to the Ld. D.R., the Assessing Officer found that the amount said to be received by the assessee for so-called export of iron ore is nothing but unexplained income of the assessee.

The Ld. Departmental Representative further submitted that the assessee filed appeal before this Tribunal against the assessment order in which the addition was made. This Tribunal, in fact, deleted the addition made by the Assessing Officer under Section 68 of the Act. According to the Ld. D.R., an appeal is filed before the High Court under Section 260A of the Act and the same is pending for final disposal. According to the Ld. D.R., it is a clear case of suppression of income or furnishing of inaccurate particulars, therefore, the Assessing Officer has rightly levied penalty under Section 271(1)(c) of the Act.

On the contrary, Sh. N. Devanathan, the Ld.counsel for the assessee, submitted that the Assessing Officer made addition of `8,62,85,097/- under Section 68 of the Act on the ground that no export was made by the assessee for the so-called advance received. According to the Ld. counsel, the fact that the advance received is not in dispute. Merely because there was a breach of contract between the assessee and the persons who placed order for purchase of iron ore, that cannot be a reason for the addition made under Section 68 of the Act. It is not the concern of Income- tax Department to see whether any export was made by the assessee or not. According to the Ld. counsel, the concern of the Department would only be whether the assessee has received money as advance for export of iron ore. Since the assessee has established that the advance was received for export of iron ore, this Tribunal has deleted the addition made by the Assessing Officer under Section 68 of the Act, therefore, there is no question of concealment of income or furnishing of inaccurate particulars of income. Therefore, according to the Ld. counsel, the CIT(Appeals) has rightly deleted the penalty.

We have considered the rival submissions on either side and perused the relevant material available on record. The addition made by the Assessing Officer under Section 68 of the Act in respect of advance received for export of iron ore to the extent of `8,62,85,097/- was admittedly deleted by this Tribunal. Once the addition was deleted, this Tribunal is of the considered opinion that there is no question of any levy of penalty under Section 271(1)(c) of the Act. In other words, it cannot be said whether the assessee has furnished inaccurate particulars or concealed any part of its income. Now the Revenue claims that an appeal is pending before the High Court. This Tribunal is of the considered opinion that mere pending of appeal cannot be a reason for levy of penalty under Section 271(1)(c) of the Act. However, it is open to the Revenue to reinitiate the proceeding if so advised after the judgment of Madras High Court in the appeal said to be pending.

In view of the above observation of this Tribunal in the appeal, the cross-objection filed by the assessee becomes infructuous and thus stands dismissed.

In the result, both the appeal of the Revenue and the cross- objection of the assessee are dismissed.