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Income Tax Appellate Tribunal, ‘SMC’, CHANDIGARH
Before: MS. DIVA SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA No. 1269/Chd/2017 (Assessment Year: 2012-13) M/s Anubhuti Cold Chains Vs. The ITO Pvt. Ltd.,SCO 363-364, Ward 4(4), 2nd Floor, Sector 35-B, Chandigarh Chandigarh PAN No. AAGCA7238R (Appellant) (Respondent)
Assessee By : Sh. Sahil Chadha Revenue By : Shri Manoj Kumar Date of hearing : 20/06/2018 Date of Pronouncement : 04.09.2018
ORDER PER DIVA SINGH, J.M.
The present appeal has been filed by the assessee assailing the correctness of the order dt. 29/06/2017 of CIT(A)-2, Chandigarh pertaining to A.Y. 2012-13 on the following grounds: 1. That the Ld. CIT(A) has erred in confirming penalty u/s 271(1)(c) under Income Tax Act, 1961 levied by Ld. Assessing officer on the addition of Rs. 12,58.918/- in violation of section 40A (3) of the Income Tax Act, 1961 without considering the facts and supportive judgments when no concealment of income has taken place. 2 That the Ld. CIT(A) has erred in confirming penalty u/s 271(1)(c) under Income Tax Act, 1961 levied by Ld. Assessing officer on the addition of Rs. 5,00,000/- on disallowance of share application money introduced without considering the facts and figures when no concealment of income has taken place.
The ld. AR inviting attention to the grounds raised submitted that in the penalty proceedings, the additions sustained in serial No. 1 and 3 of page 2 para 5.1 of the CIT(A) are being addressed as qua the additions at Sl. No. 2, the CIT(A) has accepted the assessee's explanation. Thus, the said issue is not before the ITAT.
Addressing the facts, it was his submission that the assessee was engaged in the business of sale of fruits, vegetables and cold storage business. Additions were made on account of violation of Section 40A(3) for car Running & Maintenance expense amounting to Rs. 57,200/-; purchases made from Mr. Rakesh Bhatia & Mr. Jaspal. Apart from these purchases in cash, purchases at times were also noticed from M/s Shiva Traders amounting to Rs. 5,76,100/-. Apart from that, it was submitted
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penalty had also been levied for enhancement of authorized capital which has been confirmed without giving any reason. 3.1. Addressing the addition made in violation of Section 40A(3) it was submitted that the Car Running and Maintenance Expenses for which payments have been made in cash, the arguments before the Ld. CIT(A) as per written submission dated 27.06.2017 available on record were relied upon. Referring to para 2 of the same, it was submitted, that the payment was for repair of car of Shri Rajinder Garg, Director of the company. It was submitted the mechanics do not accept cheque payments and insist on cash payment. On going through the submission it was noticed that the statement of Director for the said submission is found recorded . However necessary details as to which car Agency etc. was used, there appears to be no discussion. 3.2. The Ld. AR sought to place on record some details of car Agency stating that it was made available at the assessment stage however for want of discussion in the order the correctness of the statement could not be ascertained. Similarly for the cash payment to Shri. Rakesh Bhatia and Jaspal Singh as well as M/s Shiva Trader the Ld. AR submitted that Rakesh Bhatia and Jaspal Singh were Agriculturist / Fruit grower and payment were made on account of business exigencies and though M/s Shiva Trader had been paid by RTGS/ Cheque etc. however one cash payment was necessitated on the grounds of commercial expediency. Reading from the submission before the Ld. CIT(A) it was submitted that these pleadings have been made and remain unaddressed on record.
The ld. Sr.DR relying on the order submitted that no supporting evidence or affidavit etc. is placed on record and these were agreed additions submitted that the order accordingly, may be confirmed.
I have heard the submissions and seen the record. Considering the lack of evidences which is material in view of the vehement departmental stand that the assessee in the course of the assessment proceedings conceded that addition be made and has not offered any explanation and even in the penalty proceeding though the Sr.DR agreed that some explanation appears to have been given, however it has not been substantiated. In the said background, having heard the submissions, I find that ld. CIT(A) in para 5.3 of his order has misdirected himself in not addressing the explanations offered. It is seen that the penalty order is
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confirmed on the reasoning that addition has been made in the assessment order. The said rationale/reasoning of the CIT(A) cannot be upheld. It is well settled that penalty proceedings and quantum proceedings are separate and distinct. The mere fact that addition had been sustained per se will not attract the levy of penalty. Accordingly, it is deemed appropriate after hearing the parties to remand the issue back to the file of the CIT(A) to address the explanation offered and if it is found to be insufficient or incomplete, provide the assessee opportunity to file supporting evidences etc. if any and thereafter pass an order in accordance with law. Accordingly ground no. 1 of the assessee stands restored.
The facts relatable to the second issue raised by the assessee are that the assessee in the course of the assessment proceedings was required to justify the amount of Rs. 5 Lacs paid by Shri Suresh Himalvi. The assessee admittedly accepted the addition and failed to offer any explanation. As a result thereof, penalty was levied and confirmed u/s 271(1)(c). The assessee is aggrieved by the said findings. The ld. AR argued that all the relevant documents in support of its claim were made available and since the assessee could not produce the said party, then it was the responsibility of the AO to issue summons to the said person to be present.
The Ld. Sr. DR on the other hand inviting attention to the facts noted in para 6 to 6.3 by the AO submitted that the said person as per record has introduced fresh capital in cash as share application money from Shri Suresh Himalvi an unknown person whose whereabouts the assessee fails to demonstrate despite opportunity. The cash has been introduced on the following dates as per the following chart:
Sr. No. Date Mode of payment Amount 1 25/04/2011 Cash Rs. 1,50,000/- 2 27/05/2011 Cash Rs. 1,00,000/- 3 20/09/2011 Cash Rs. 50,000/- 4 08/02/2012 Cash Rs. 1,25,000/- 5 10/03/2012 Cash Rs. 75,000/- Total Rs. 5,00,000/-
7.1. The assessee was required to prove the genuineness of the claim. For the said purpose, show cause notice etc. was issued. Ultimately Director of the Company Shri Rajinder Garg was confronted with these facts and his statement was recorded. Reliance was placed on the same.
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Relevant discussion in para 6.2 of the assessment order is extracted hereunder:
6.2 The director of the company Sh. Ra]inder Garg was confronted on this issue and his statement was recorded. The relevant part of his statement is reproduced as under: Q During the year 2011-12 (A.Y. 2012-13) you have introduced Capital in the shape of share application money in the names Vinayak Singh, Sh. Kedar Singh, Sh. Suresh Himalvee, in your name and your HUF. Vide order sheet entry entered on 16.01.2015, you were requested to produce all the persons & furnish their copy & ITR, KYC & credit worthiness. Till date you have not produced Sh. Suresh Himalvee and also no document what so ever has been submitted in support of genuineness of this transaction? Ans;- Sh Suresh Himaalvee belongs to Vill Theong (HP), could not be produced because in spite of best efforts, he could not be contracted. That is why he has not been produced. Q You have stated that Sh. Suresh Himalvee could not be produced as he is not available in this Village. Please show cause as to why share application money amounting to Rs. 5 lac shown in the name of Sh, Suresh Himalvee should not treated as company's income earned from undisclosed sources introduced in the shape of share Capital? Ans :- I have already stated that Sh. Suresh Himalvee could not be contacted at the give address. We are unable to produce the above person. The share application money shown in this name in the books of accounts of the company should be added in the total income of the company as its income earned from undisclosed sources. It was submitted that the addition was made by the AO holding as 7.2. under :
6.3 The assessee company has failed to discharge its duty to prove the genuineness of the transaction. The onus was on the Assessee Company to prove that the person who has given Share Application Money is genuine and man of means. Keeping in view the admission on the part of the Director of the company, an addition of Rs5,00,000/- is to the total income of the assessee company by treating the same as its income earned from undisclosed sources introduced in the shape of share application money. No deduction u/s 80-IB (11A)shall be allowed. Penalty proceedings u/s 271(1) (c) of the Income Tax Act, 1961 is being initiated separately for concealing and furnishing of inaccurate particulars of income.
Accordingly, heavy reliance was placed on the order passed. 7.3.
I have heard the submissions and perused the material on record. The ld. AR in the above peculiar facts and circumstances was required to address whether there was any document, evidence, or argument to assail the said findings and to refer to any explanation placed before Tax Authorities. The Ld. AR pleaded his inability to trace the said person or make any other submission. In these peculiar facts I find that in the absence of any further explanation in the penalty proceedings, the order confirming the penalty deserves to be confirmed as no argument let alone an acceptable argument was made on behalf of the assessee. The assessee admittedly has been unable to justify that Mr. Suresh Himalvi had the resources to apply for shares and advanced 5 lacs. The person admittedly
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is untraceable, the transaction has not been shown to be genuine. No lack of opportunity is pleaded. The insistence that AO may summon a person whose address is not available is a facile meaningless argument. No explanation let alone an acceptable explanation for the transaction which patently is not genuine, is made available. Accordingly, in the facts of the consistent findings which stand unrebutted on record, ground No. 2 of the assessee is dismissed.
In the result appeal of the assessee is partly allowed for statistical purposes.
Order Pronounced in the Open Court on 04.09. 2018.
Sd/- (DIVA SINGH) JUDICIAL MEMBER
AG/Poonam Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4 The CIT(A) 5. The DR
Asstt. Registrar ITAT Chandigarh