Artistic Stone Pvt.Ltd., Navsari V. The ACIT., Navsari Circle, Navsari

ITA 1028/AHD/2014

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4706 (ITAT-SURAT)
• Duration Of Justice: 7 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 40(a)(ia); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./ITA NO. 1028/AHD/2014 ( [ [ / ASSESSMENT YEARS: (2006-07) (VIRTUAL COURT HEARING) ARTISTIC STONE PRIVATE LIMITED, C/O. MANOJ C. PATEL, AT: BORICH, POST: ASHTAGAM, TAL. & DIST. NAVSARI, NAVSARI-396433. VS. THE ACIT, NAVSARI CIRCLE, NAVSARI. ./ ./ PAN/GIR NO.: AACCA3987H (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI SAKAR SHARMA, CA REVENUE BY : SHRI RITESH MISHRA CIT(DR) & MS ANUPAMA SINGLA, SR. DR / DATE OF HEARING : 09/03/2021 /DATE OF PRONOUNCEMENT : 13/05/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO THE ASSESSMENT YEAR (AY) 2006-07, IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD [IN SHORT THE LD. CIT(A)] IN APPEAL NO. CIT(A)/VLS/08/2012-13, DATED 20.01.2014 WHICH IN TURN ARISES OUT OF A PENALTY ORDER PASSED BY ASSESSING OFFICER (IN SHORT THE AO) UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] DATED 19.03.2012. THE GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1.THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING PENALTY U/S 271(1)(C) AMOUNTING TO RS. 87,13,169/-. THE ASSESSEE CRAVES PERMISSION TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF APPEAL. 2. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL ON RECORD, ARE AS FOLLOWS. THE ASSESSEE BEFORE US IS A COMPANY AND HAD FILED ITS RETURN OF INCOME PAGE | 2 ITA NO.1028/AHD/2014 ASSESSMENT YEARS.2006- 07 ARISTIC STONE PRIVATE LIMITED DECLARING TOTAL LOSS OF RS.3,65,41,284/- ON 01-02-2007. IN THIS CASE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, WAS FINALIZED ON 31-12-2008 BY DETERMINING TOTAL INCOME AT RS.5,06,41,879/-. THIS INCLUDED ADDITION ON ACCOUNT OF SHORTAGE OF CASH OF RS.1,19,07,027/-, ADDITION ON ACCOUNT OF EXCESS OF STOCK OF RS.31,63,406/-,ADDITION ON ACCOUNT OF EXPORT MARGIN OF RS.81,15,394/- AS FOUND BY THE SURVEY PARTY AND ADDITION MADE ON ACCOUNT OF LAND DEVELOPMENT CHARGES OF RS.27,00,000/-. PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE I.T. ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME WAS SEPARATELY INITIATED BY ISSUING NOTICES UNDER SECTION 274 R.W.S. 271(1)(C) OF THE I.T. ACT, 1961. BEING AGGRIEVED WITH THE ASSESSMENT ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A), VIDE HIS ORDER DATED 28- 01-2011, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BUT CONFIRMED THE ADDITION ON ACCOUNT OF SHORTAGE OF CASH OF RS.1,19,07,027/-, ADDITION ON ACCOUNT OF EXCESS OF STOCK OF RS.31,63,406/-,ADDITION ON ACCOUNT OF EXPORT MARGIN OF RS.81,15,394/-AS FOUND BY THE SURVEY PARTY AND ADDITION MADE ON ACCOUNT OF LAND DEVELOPMENT CHARGES OF RS.27,00,000/-. DURING THE PENALTY PROCEEDINGS, THE ASSESSEE SUBMITTED ITS REPLY, VIDE LETTER DATED 24-02-2012, MENTIONING THAT IT IS A 100% EXPORT ORIENTED UNIT AND HAD NEITHER FURNISHED ANY INACCURATE PARTICULARS OF INCOME NOR CONCEALED ANY INCOME DURING THE ASSESSMENT YEAR 2006-07. HOWEVER, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND OBSERVED THAT ASSESSEE IN ITS SUBMISSION DID NOT FURNISH ANY ARGUMENT IN ITS FAVOUR THAT WHY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME SHOULD NOT BE LEVIED IN ITS CASE. SINCE THE ASSESSEE DID NOT FILE PROPER REPLY, THEREFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT IT IS A FIT CASE TO LEVY PENALTY UNDER SECTION 271(1) (C) OF THE ACT. THUS, ASSESSING OFFICER LEVIED THE PENALTY OBSERVING AS FOLLOWS: THUS, THERE IS A CLEAR FINDING ABOUT THE CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. AS DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS CONCEALED ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME, PAGE | 3 ITA NO.1028/AHD/2014 ASSESSMENT YEARS.2006- 07 ARISTIC STONE PRIVATE LIMITED HENCE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, I LEVIED PENALTY UNDER SECTION 271(L)(C) OF THE ACT OF RS.85,42,322/-. THE MINIMUM PENALTY LEVIABLE @ 100% OF THE TAX SOUGHT TO BE EVADED WORKS OUT TO RS.87,13,169/-, WHEREAS, THE MAXIMUM PENALTY LEVIABLE @ 300% OF THE TAX SOUGHT TO BE EVADED WORKS OUT TO RS.2,61,39,507/-ACCORDINGLY, MINIMUM PENALTY OF RS.87,13,169/- IS LEVIED. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO HAS CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. LEARNED AUTHORIZED REPRESENTATIVE (IN SHORT THE LD. AR) STATED THAT IN ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREAS IN PENALTY PROCEEDINGS THE ASSESSING OFFICER HAS IMPOSED THE PENALTY ON ACCOUNT OF BOTH THE LIMBS, THAT IS, FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME, HENCE CHARGE OF PENALTY ITSELF IS NOT CERTAIN, THEREFORE, THE PENALTY SHOULD NOT BE IMPOSED. ON MERITS, LD AR SUBMITS THAT ASSESSEE COMPANY HAS DISCLOSED ALL THE PARTICULARS OF INCOME AND HAS NOT CONCEALED ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. LEARNED AR ALSO SUBMITS THAT ORDER OF PENALTY U/S 271(L)(C) LEVYING PENALTY AMOUNTING TO RS. 87,13,169/- PASSED ON 19.03.2012 BY THE ASSESSING OFFICER IS CONTRARY TO THE FACTS OF THE CASE AND LAW AND PREJUDICIAL TO ASSESSEE, HENCE SUCH PENALTY MAY BE DELETED. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSIONS PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACTS OF THE CASE INCLUDING THE FINDINGS OF THE LD. CIT(A) AND OTHER MATERIAL BROUGHT ON RECORD. THE MAIN REASON TO LEVY THE PENALTY IS THAT DURING THE SURVEY OPERATIONS DEFICIT IN CASH OF RS.1,19,07,027/- AND PAGE | 4 ITA NO.1028/AHD/2014 ASSESSMENT YEARS.2006- 07 ARISTIC STONE PRIVATE LIMITED EXCESS STOCK OF RS. 31,63,406/- WAS DETECTED BY THE SURVEY PARTY AND THE ASSESSEE DID NOT FURNISH ANY EXPLANATION TO THE ABOVE DISCREPANCY NEITHER DURING THE SURVEY NOR AFTER THE SURVEY. IN THE RETURN OF INCOME FILED, THE ASSESSEE DID NOT DISCLOSE AFORESAID AMOUNT AS INCOME. FURTHER IT WAS FOUND BY THE SURVEY PARTY THAT THE ASSESSEE HAD EARNED RS.81,15,394/- FROM EXPORT MARGIN BY EXPORTING THE GOODS BOUGHT FROM ARTISTIC TILES AND THIS FACT WAS ADMITTED BY SHRI CHHAGANBHAI M. PATEL, AND THE DIRECTOR OF THE COMPANY SHRI MANOJ C. PATEL IN HIS STATEMENT RECEDED ON OATH. THE CIT(A), VALSAD VIDE HIS ORDER DATED 28.01.2011 UPHELD THE ADDITION MADE BY THE AO ON ACCOUNT OF SHORTAGE OF CASH OF RS.1,19,07,027/-, EXCESS STOCK OF RS.31,63,406/-, EXPORT MARGIN OF RS.81,15,394/- AND LAND DEVELOPMENT CHARGES OF RS.27,00,000/-. 7. BEFORE US, LD AR SUBMITTED THAT NOTICE UNDER SECTION 271(1)(C) OF THE ACT, DATED 31.12.2008 ISSUED BY THE ASSESSING OFFICER IS DEFECTIVE, AS IT DOES NOT GIVE ANY PARTICULARS ABOUT CONCEALMENT OF INCOME OR ABOUT INACCURATE PARTICULARS OF INCOME. BESIDES, THERE IS NO FIX CHARGE FOR LEVY OF PENALTY. THE CHARGE FOR LEVY OF PENALTY IN ASSESSMENT ORDER IS DIFFERENT FROM THE CHARGE MENTIONED IN THE PENALTY ORDER. WE NOTE THAT DURING THE ASSESSMENT STAGE, THE ASSESSING OFFICER HAS INITIATED THE PENALTY ON ACCOUNT OF ONE LIMB, THAT IS, FURNISHING INACCURATE PARTICULARS OF INCOME IN CASE OF EXCESS STOCK, AND CASH DEPOSIT, VIDE PAGE 2 OF THE ASSESSMENT ORDER. IN RESPECT OF PROFIT EARNED ON EXPORT OF MANUFACTURED GOODS PURCHASED FROM M/S. ARTISTIC TILES PVT. LTD., THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME, VIDE PAGE 3 OF ASSESSMENT ORDER. 8. HOWEVER, DURING THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON BOTH THE LIMBS VIDE PAGE 4 AND PARA NO.8 OF THE PENALTY ORDER WHEREIN THE ASSESSING OFFICER HAS MENTIONED AS FOLLOWS: THUS, THERE IS A CLEAR FINDING ABOUT THE CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. AS DISCUSSED ABOVE, I AM OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS CONCEALED ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME, HENCE LIABLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, I LEVIED PENALTY UNDER SECTION 271(L)(C) OF THE ACT OF PAGE | 5 ITA NO.1028/AHD/2014 ASSESSMENT YEARS.2006- 07 ARISTIC STONE PRIVATE LIMITED RS.85,42,322/-. THE MINIMUM PENALTY LEVIABLE @ 100% OF THE TAX SOUGHT TO BE EVADED WORKS OUT TO RS.87,13,169/-, WHEREAS, THE MAXIMUM PENALTY LEVIABLE @ 300% OF THE TAX SOUGHT TO BE EVADED WORKS OUT TO RS.2,61,39,507/- ACCORDINGLY, MINIMUM PENALTY OF RS.87,13,169/- IS LEVIED. 9. WE NOTE THAT THE FIRST GRIEVANCE OF THE LD. AR IS THAT THERE IS NO ANY DEFINITE CHARGE/ ACCUSATION ON THE ASSESSEE, WHETHER INITIATION OF PENALTY PROCEEDING IS ON ACCOUNT OF CONCEALMENT OF INCOME OR ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME. LET US FIRST EXAMINE THE CHARGE IN THE ASSESSMENT ORDER AND PENALTY ORDER. WE NOTE THAT IN ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREAS IN PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS IMPOSED THE PENALTY ON ACCOUNT OF BOTH THE LIMBS, THAT IS, FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME, HENCE CHARGE OF PENALTY ITSELF IS NOT CERTAIN, THEREFORE, THE PENALTY SHOULD NOT BE IMPOSED. WE NOTE THAT HON`BLE SUPREME COURT IN THE CASE OF T ASHOK PAI - 292 ITR 11 (SC) HELD. THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE HON`BLE GUJARAT HIGH COURT IN CASE OF MANU ENGINEERING WORKS -122 ITR 306 (GUJ.) HELD. THAT THE PENALTY ORDER HAS TO BE CLEAR AS TO LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. FURTHER, ON THE IDENTICAL FACTS, HON`BLE GUJARAT HIGH COURT IN CASE OF NAYAN C. SHAH VS. ITO [TAX APPEAL NO. 543 OF 2012 (GUJ- HC)] HELD. AS FOLLOWS: '11. ANOTHER NOTABLE ASPECT OF THE MATTER IS THAT WHILE THE ASSESSING OFFICER HAS IMPOSED PENALTY ON THE GROUND THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME, THE TRIBUNAL HAS SET ASIDE THE ORDER OF THE COMMISSIONER (APPEALS) BY HOLDING THAT THE ASSESSEE HAS SUPPRESSED THE ACTUAL PARTICULARS OF INCOME BY NOT MAKING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THUS, THE ASSESSING OFFICER HAS IMPOSED PENALTY ON THE GROUND OF FURNISHING INACCURATE PARTICULARS, WHEREAS THE TRIBUNAL HAS UPHELD THE ORDER OF THE ASSESSING OFFICER ON THE GROUND OF CONCEALMENT OF PARTICULARS. IT IS BY NOW WELL SETTLED THAT WHILE ISSUING A NOTICE UNDER SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER IS PAGE | 6 ITA NO.1028/AHD/2014 ASSESSMENT YEARS.2006- 07 ARISTIC STONE PRIVATE LIMITED REQUIRED TO SPECIFY AS TO WHAT IS THE DEFAULT ON THE PART OF THE ASSESSEE, AS TO WHETHER THE CASE IS ONE OF FURNISHING INACCURATE PARTICULARS, OR WHETHER IT IS A CASE OF CONCEALMENT OF INCOME, OR BOTH. IN THE FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER HAS PROCEEDED ON THE FOOTING THAT INACCURATE PARTICULARS WERE FILED BY THE ASSESSEE, WHEREAS THE TRIBUNAL HAS HELD THAT THE ASSESSEE HAD SUPPRESSED PARTICULARS FOR THE YEAR UNDER CONSIDERATION. UNDER THE CIRCUMSTANCES, THE TRIBUNAL, HAVING CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER ON THE GROUND OF SUPPRESSION OF ACTUAL PARTICULARS IN RESPECT OF WHICH THE ASSESSEE WAS NOT PUT TO NOTICE, THE ORDER OF THE TRIBUNAL IS RENDERED UNSUSTAINABLE ON THIS GROUND ALSO.' 10. THUS, WE NOTE THAT THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON ONE FOOTING AND CONCLUDED ON OTHER FOOTING. IN INSTANT CASE, FOR FURNISHING INACCURATE PARTICULARS OF INCOME WAS NOT THE CHARGE AGAINST THE ASSESSEE; THE CHARGE WAS CONCEALMENT OF PARTICULARS OF INCOME . THEREFORE, IN OUR OPINION, THE BASIS OF LEVY OF PENALTY ITSELF IS NOT CORRECT, HENCE PENALTY ORDER UNDER SECTION 271(1)(C) OF THE ACT NEEDS TO BE QUASHED. ACCORDINGLY, WE QUASH THE PENALTY ORDER UNDER SECTION 271(1) (C ) OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED ON 13/05/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER LWJR /SURAT / DATE:13/05/2021 SAMANTA COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR/AR, ITAT, SURAT 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR/SR. PS/PS ITAT, SURAT