P.K.Mills, Palladam V. ITO, Tiruppur

CO 115/CHNY/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6342 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 20-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: T N PRAKASH J
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1578/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) THE ITO WARD I(2) TIRUPUR VS M/S ANANDAJOTHI CERAMICS 30, ERUKKADU THOTTAM II STREET KARUVAMPALAYAM TIRUPUR 641 604 [PAN AAIFA0005B] (APPELLANT) (RESPONDENT) C.O. NO. 112/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) M/S ANANDAJOTHI CERAMICS 30, ERUKKADU THOTTAM II STREET KARUVAMPALAYAM TIRUPUR 641 604 VS THE ITO WARD I(2) TIRUPUR (CROSS OBJECTOR) (RESPONDENT) I.T.A NO. 1579/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) THE ITO WARD I(2) TIRUPUR VS M/S THE SOUTH INDIA AGENCIES 253, MANGALAM ROAD TIRUPUR 641 604 [PAN AACFT4323K] (APPELLANT) (RESPONDENT) ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 2 -: C.O. NO. 113/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) M/S THE SOUTH INDIA AGENCIES 253, MANGALAM ROAD TIRUPUR 641 604 VS THE ITO WARD I(2) TIRUPUR (CROSS OBJECTOR) (RESPONDENT) I.T.A NO. 1580/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) THE ITO WARD I(2) TIRUPUR VS M/S SIVASAKTHI THREADS 38, SIDCO INDL. ESTATE GOUNDAMPALAYAM TIRUPUR 641 605 [PAN AALFS6870B] (APPELLANT) (RESPONDENT) C.O. NO. 114/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) M/S SIVASAKTHI THREADS 38, SIDCO INDL. ESTATE GOUNDAMPALAYAM TIRUPUR 641 605 VS THE ITO WARD I(2) TIRUPUR (CROSS OBJECTOR) (RESPONDENT) ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 3 -: I.T.A NO. 1627/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) THE ITO WARD I(2) TIRUPUR VS M/S P.K. MILLS 37, SIDCO, INDL. ESTATE GOUNDAMPALAYAM TIRUPUR 641 605 [PAN AADFP8218L] (APPELLANT) (RESPONDENT) C.O. NO. 115/MDS/2010 (ASSESSMENT YEAR : 2007-08 ) M/S P.K.MILLS 37, SIDCO INDL. ESTATE GOUNDAMPALAYAM TIRUPUR 641 605 VS THE ITO WARD I(2) TIRUPUR (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI T.N.PRAKASH, JCIT/DR RESPONDENT BY : SHRI S.SRIDHAR, ADVOCATE DATE OF HEARING : 06-09-2011 DATE OF PRONOUNCEMENT : 16-09-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE ABOVE CAPTIONED MATTERS WERE HEARD TOGETHE R AND THEREFORE, WE PROCEED TO DECIDE THEM BY A COMMON OR DER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 4 -: I.T.A.NO. 1579/MDS/2010 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A WHOLESALE DEALER FOR SEWING AND EMBROIDERY THREAD S MANUFACTURED BY ITS SISTER CONCERNS, VIZ. M/S P.K.MILLS AND M/S SIVASAKTHI THREADS. THERE WAS A SEARCH U/S 132 OF THE ACT ON 27.9.2006 IN THE PREMISES OF SHRI K.PERIASAMY, WHO IS CONNECTED WITH THE FOLLOWI NG CONCERNS (I) M/S P.K.MILLS (II) M/S SIVASAKTHI THREADS (III) M/S SOUTH INDIA AGENCIES 3. CONSEQUENTLY, ORDER U/S 143(3) R.W.S 153B OF THE A CT WAS PASSED DETERMINING TOTAL ASSESSABLE INCOME AT ` 15,75,285/- AS AGAINST ADMITTED INCOME OF ` 7,88,600/- , FOR ASSESSMENT YEAR 2007- 08. THE MAIN ADDITION WAS ON ACCOUNT OF EXCESS STO K OF ` 7,86,685/- COMPUTED AFTER DETAILED ANALYSIS OF THE WORKING GIV EN BY THE ADIT(INV.) AS WELL AS BY THE ASSESSEE. THE RELEVAN T PORTION OF THE ASSESSMENT ORDER IN THIS REGARD IS AS UNDER: ' IN THIS CONNECTION THE SEIZED MATERIALS HAVE BEEN V ERIFIED AND COMPARED WITH THE DATA AVAILABLE IN THE RETURNS IN THIS RESPECT AND IT IS SEEN THAT, (I) THE OPENING STOCK COLUMN AS ON 01 . 04 . 2006 I N BOTH THE ABOVE WORKINGS IS INCORRECT AND THE CORRECT OPENING STOCK AS ON 01.04 . 2006 IS FOUND TO BE ` 17 , 95,739/- ONLY AS PER THE CLOSING STOCK FIGURE AS ON 31.03.2006 IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07. IN THE ASSESSEE'S WORKING , THE MAIN ATTEMPT IS TO REWORK AND ADJUST THE OPENING STOCK ITSELF, BUT ONCE A FIGURE IS RETURNED FOR ASSESSMENT YEAR 2006-07, THAT FIGURE IS TO BE ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 5 -: TAKEN WITHOUT RESORTING TO ADJUSTMENTS TO OFFSET THE PHYSICAL STOCK POSITION ON THE DATE OF SEARCH. (II) IN THE INITIAL WORKING THE PURCHASES WERE TAKEN AT ` 4,09,36 , 580/- . IN THE COURSE OF THE HEARING , THE ASSESSEE REQUESTED TO ADD A FURTHER SUM OF ` 32,40 , 815/ - AS PURCHASES OMITTED. HOWEVER , ON VERIFICATION OF THE ACCOUNTS AND O N COMPARISON WITH THE CHEQUE PAYMENTS I T IS SEEN THAT THE BASIC DATA RELIED UPON BY THE ASSESSEE WAS NOT AVAILABLE ON THE DATE OF SEARCH AND THE FIGURES INCORPORATED IN THE BOOKS AFTER THAT DATE WITHOUT SUPPORT TO THE SEIZED MATERIALS IS NOT ACCEPTABLE . SO THE NEW FIGURES CAN NOT BE ALLOWED TO BOOT UP THE PURCHASES. (III) SIMILARLY THE COST OF SALES WORKS OUT TO ` 97,09,900/- AFTER ADJUSTING THE SALES ( ` 1,14,07,300/-) WITH THE AVERAGE G.P OF 14.88%. (IV) ON A SALES OF RS.370,69,778/- THE COST OF SALES IS WORKED OUT BY THE ASSESSEE AT ` 338,44,707/- BY APPLYING A GP RATE OF 8.7% BUT APPLYING THE AVERAGE GP RATE OF 6.22% AS PER RECORDS THE COT OF SALES WORKS OUT TO ` 34,764,038/-. (V) SIMILARLY, THE VALUE OF PHYSICAL STOCK TAKE N AT ` 144,79,348/- ALSO IS ADJUSTED BY THE AVERAGE GP RATE OF 6.22% AND THE RESULTANT VALUE OF PHYSICAL STOCK IS RS.135,78,733/-. (V) SUBJECT TO THESE MODIFICATIONS, THE EXCESS STOCK IS QUANTIFIED AS UNDER: OPENING STOCK AS ON 01.04.2006 17,95,739 PURCHASES AND EXPENSES 409,36,580 TOTAL 427,32,320 LESS: COST OF SALES AS PER PARA (IV) ABOVE 347,64,038 BOOK STOCK (A) 79,6 8,282 LESS: PHYSICAL STOCK (B) 135,78,73 3 ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 6 -: DIFFERENCE 56,10,451 LESS: SIVASAKTHI THREADS(DEFICIT STOCK) AS PER PARA 11.3 48,23,766 EXCESS STOCK IN SOUTH INDIA AGENCIES 7,86,685 ACCORDINGLY, THE EXCESS STOCK OF ` 7,86,685/- IS BROUGHT TO ASSESSMENT IN THIS CASE IN ASSESSMENT YEAR 2007-08 4. BEING SATISFIED THAT THERE WAS EXCESS PHYSICAL STOC K WHICH REPRESENTED SUPPRESSED PROFIT, THE ASSESSING OFFICE R HAS LEVIED A MINIMUM PENALTY OF ` 2,36,000/- U/S 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 18.6.2009. BEING AGGRIEVED, THE ASSESS EE PREFERRED FIRST APPEAL AND THE LD. CIT(A) HAS DELETED THE ENTIRE PE NALTY. NOW, THE REVENUE IS AGGRIEVED. 5. IT WAS ARGUED BY THE LD.DR THAT AS PER EXPLANATION UNDER SECTION 271(1)(C) OF THE ACT, THE ASSESSEE HAS TO P ROVE THAT THE FAILURE TO FILE THE CORRECT INCOME DID NOT ARISE FROM ANY B REACH OR WILLFUL NEGLECT ON HIS PART AND THAT FAILURE TO ADMIT THE C ORRECT INCOME HAS TO BE INFERRED AS A CONCEALMENT OF PARTICULARS OF INCO ME OR OF FURNISHING INACCURATE PARTICULARS OF INCOME. ON THE OTHER HAN D, THE LD.AR HAS HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE CON VINCED THAT DISCREPANCY IN STOCK WAS DEFINITELY FOUND DURING SE ARCH PROCEEDINGS. ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 7 -: THE DISCREPANCY IN STOCK HAS TO BE EXPLAINED BY THE ASSESSEE WHEN IT COMES TO PENALTY PROCEEDINGS WHICH ARE DEFINITELY S EPARATE AND DISTINCT FROM QUANTUM PROCEEDINGS. IT IS AN ADMITT ED FACT THAT THE ASSESSEE HAD ACCEPTED THE ADDITION MADE ON ACCOUNT OF DISCREPANCY FOUND IN THE STOCK BUT SIMPLY BY ADMITTING THE FAUL T THE ASSESSEE CANNOT ESCAPE THE GUILLOTINE OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. EXPLANATION APPENDED TO SECTION 271(1)(C) OF THE ACT CASTS A HEAVY ONUS ON THE ASSESSEE TO DISPROVE THAT THERE W AS NO CONCEALMENT OF ANY PARTICULARS OF INCOME OR OF FURN ISHING OF ANY INACCURATE PARTICULARS OF INCOME. THE ASSESSING OF FICER IS BOUND TO GO INTO ALL THE DETAILS SEPARATELY EVEN AFTER ADMISSIO N HAD BEEN MADE BY THE ASSESSEE. WE ARE IN FULL AGREEMENT WITH THE L D.AR THAT ADDITIONS PER SE DO NOT IPSO FACTO LEAD TO CONCEALMENT AS IS ENVISAGED IN SECTION 271(1)(C) OF THE ACT. THIS IS NOT THE CASE IN WHIC H ONLY ON ACCOUNT OF ADDITION MADE BY THE ASSESSING OFFICER, PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN LEVIED. THIS IS A CASE OF DISCREPANCY NOTICED DURING SEARCH PROCEEDINGS. WE ARE OF THE OPINION THAT TH E ENTIRE ISSUE OF LEVY OF PENALTY NEEDS TO BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 7. THE OTHER APPEALS ARE ALSO ON THE SAME LINES AND T HEREFORE, WE RESTORE ALL THE APPEALS TO THE FILE OF THE ASSES SING OFFICER WITH A DIRECTION THAT HE SHALL DECIDE THE ISSUE OF LEVY OF PENALTY IF IT CAN BE ITA 1578 TO 1580 & 1627/10 CO 12 TO 15/10 :- 8 -: LEVIED IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASES, DE NOVO. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHAL L GIVE OPPORTUNITY OF HEARING TO THE ASSESSEES AS PER LAW. 8. THE CROSS OBJECTIONS FILED BY THE ASSESSEES HAVE B ECOME INFRUCTUOUS IN VIEW OF OUR ABOVE FINDING, BUT IN AN Y CASE, THE ASSESSEES ARE AT LIBERTY TO TAKE ANY GROUND OR ARGU MENT BEFORE THE ASSESSING OFFICER. 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTIONS OF TH E ASSESSEE STAND DISMISSED HAVING BECOME INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 16-9-2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 16 TH SEPTEMBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR