The Asst. Commissioner of Income Tax-8(3),Room No. 217,Aayakar Bhavan,M.K. Marg,Mumbai-400 020. Vs. Santogen Silk Mills Limited, 69A, MIDC, Andheri (East),Mumbai-400 093.
October, 23rd 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E" MUMBAI
[^ .., . /
BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER /AND
^ ], ..
SHRI RAJENDRA, ACCOUNTANT MEMBER
. / ITA No. 7448/M/2011
[ [ /Assessment Year 2006-07
The Asst. Commissioner of M/s. Sahney Kirkwood
Income Tax 10(2), P. Ltd.,
Room No. 432, 27, Kirol,
4th Floor, Aayakar Bhavan, Vs. Vidyavihar (West),
M.K. Road, Mumbai-400 086.
PAN: AAACS 5304 A
( /Appellant) ( / Respondent)
Revenue by : Shri V. Krishnamoorthy
Assessee by : Shri Ronak G. Doshi
/ Date of Hearing : 18-10-2012
/ Date of Pronouncement : 18-10-2012
/ O R D E R
PER RAJENDRA, AM
This appeal is directed against the order of the CIT(A)-22, Mumbai
dtd. 08-08-2011. Assessing officer (AO) has raised following Ground of appeals:
"1.Whether on the facts and the circumstances of the case as well as in law, the Ld.
CIT(A) erred in deleting penalty U/s. 271(1)(c) amounting to Rs. 43,70,622/- ignoring
the fact that the amount received by Minicon on account of letting out of premises
were liable to be assessed in the hands of the assessee and the transaction between
the assessee and Minicon was a sham and bogus transactions"
2.The appellant prays that the order of CIT(A) on the above ground be set aside and
that of the Assessing Officer be restored.
3.The appellant craves leave to amend or alter any grounds or add a new ground
which may be necessary."
2 ITA No. 7448/M/2011
M/s. Sahney Kirkwood P. Ltd.,
2. Assessee-company, engaged in the business of manufacturing and marketing of
commutator and electrical insulation materials, filed its return of income on
31-10-2006 declaring total income of Rs. 3,39,71,700/-. Assessment was completed
u/s.143(3) on 23-12-2008 determining total income at Rs. 4,21,94,770/-. During the
assessment proceedings AO noted that assessee was owner of building at Vidyavihar
which was given on rent to M/s. Minicon Insulated Wires P. Ltd., a related concern.
Assessee had received rent of Rs.19,74,000/- while M/s. Minicon Insulated Wires P.
Ltd. (MIWPL) had received, by subletting it, rent of Rs.l,49,10,4l2/- in A.Y. 2003-04
this transaction was held as sham by AO which was upheld by the First Appellate
Authority (FAA) and ITAT. Relying on same AO treated the transaction as sham and
taxed the net rent received by Minicon in the hands appellant. AO initiated Penalty
proceedings u/s.271(1)(c) of the Act and penalty amounting to Rs. 43,70,622/- was
3. Assessee filed an appeal before the FAA. During the course of appellate
proceedings, against penalty order passed by the AO, assessee-company filed written
submissions wherein it was stated that Hon'ble jurisdictional High Court vide their
order ITA No 1494/1501/l509/1515 / 1516/1517 of 2007 dated 29-07-2011 in
appellant's own case, had held the transaction as genuine. FAA reproduced relevant
portion of the order that read as:
"By a Leave and Licence Agreement dated 29.05.1995, the assessee had let out a part of its
premises, to Minicon Insulated Wires Ltd on a monthly rent of Rs. 47,000/- per month.
Thereafter, Minicon let out the said premises on leave and license to various third parties,
first of such agreement was dated 19.09.1996. The A.0.sought to tax the amount received by
Minicon from various persons in the hands of the assessee on the ground that the leave and
licence agreement between the appellant assessee and Minicon was a Sham transaction.
Appeal filed by the assessee against the assessment order was dismissed by the CIT(A) and
also the ITAT. Hence, the assessee has filed these appeals u/s.260A of the Income Tax Act,
It is not in dispute that the amounts received by Minicon have been taxed in the hands of
Minicon and the assessment orders passed to that effect have attained finality If the
amounts received by Minicon by letting out the premises taken on leave and license
agreement from the assessee, have been taxed in the hands of Minicon, then taxing the very
same amount once again in the hands of the assessee would amount to taxing an income
twice which is not permissible in law. In similar circumstances, this Court in the case of
Akshay Textile Trading & Agencies P. Ltd. reported in (2008) 304 ITR 401 (Born) has held
that in the absence of any cogent evidence to show that the transaction was not genuine, the
amounts received by an intermediary cannot be assessed in the hands of the assessee. In the
present case, save and except the fact that one of the directors of the assessee company was
also a director in Minicon, there is nothing on record to show that the transaction between
the assessee and Minicon is a sham transactions. In these circumstances, in our opinion,
the decision of the Tribunal in holding that the amounts received by Minicon on account of
letting out the premises were liable to be assessed in the hands of the on the ground that the
transactions between the assessee and Minicom was a bogus transaction cannot be
accepted. Accordingly, the second question is answered in favour of the assessee"
4. FAA held that the quantum addition made by the AO had been held as not
assessable in the hands of assessee by the Hon. Jurisdictional High Court, that penalty
u/s.271(1)(c) was quantified and levied on that basis only, that since the addition
made by the AO stood deleted-the penalty thereon would not survive. Relying upon
more than 10 cases he deleted the penalty imposed by the AO.
3 ITA No. 7448/M/2011
M/s. Sahney Kirkwood P. Ltd.,
5. Before us, Departmental Representative (DR) relied upon the orders of the AO.
Authrorised Representative(AR)submitted that similar issue for the AY 2006-07 was
decided in favour of the assessee by the `E' Bench of ITAT, Mumbai vide its order
date 29-02-2012 (ITA No.1500/Mum/2010). We find that following the order of the
Hon'ble jurisdictional High Court, Tribunal had deleted the addition made by the AO.
We find that the addition is directly related to the quantum addition and after the
order of the Hon'ble jurisdictional High Court there is no justification for
levying/upholding the penalty u/s. 271(1)(c) of the Act.
In our opinion order of the FAA does not suffer from any infirmity. Therefore,
upholding his order we dismiss the appeal filed by the AO.
Order pronounced in the open court on 18th October, 2012.
(.. / B.R. MITTAL ) (] / RAJENDRA)
/ JUDICIAL MEMBER / ACCOUNTANT MEMBER
Date: 18th October, 2012
/Copy of the Order forwarded to :
3. The concerned CIT (A)
4. The concerned CIT
5. DR "E" Bench, ITAT, Mumbai
6. Guard File
/ BY ORDER,
, / ITAT, Mumbai