ITO, Ward 3(3), Malegaon V. Shri Maheshkumar Tulsiram Patodiya, Malegaon

ITA 1054/PUN/2013

• Counselvise Citation: 105424514 RSA 2013
• Duration Of Justice: 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Assessee Lawyers: SHINDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1054/PN/2013 (A.Y: 2004-05) ITO, WARD 3(3), MALEGAON APPELLANT VS. SHRI MAHESHKUMAR TULSIRAM PATODIYA, PROP. OF SHRI RAM TEXTILES, SHREEJI PRASAD BUILDING, NEAR SWAMI NARAYAN MANDIR, MALEGAON 423203 PAN: AAYPP8488J RESPONDENT APPELLANT BY : SHRI P.L.PA THADE RESPONDENT BY : SHRI M.R . SHINDE DATE OF HEARING: 30.04.2014 DATE OF ORDER : 30.04.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, [IN SHORT CIT(A)] NASHIK, DATED 11.02.2013 FOR A.Y. 2004-05 ON THE FO LLOWING GROUNDS. 1. THE DELAY IN FILING THE APPEAL MAY KINDLY BE CONDON ED. 2. THE LEARNED CIT(A)-I, NASIK HAS ERRED ON APPRECIATI NG THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN D ELETING THE PENALTY U/S.271(1)(C) LEVIED BY THE ASSESSING OFFIC ER IN AS MUCH AS THE ASSESSING OFFICER HAD OBSERVED THAT THE CLAI M OF THE ASSESSEE FOR JOB WORK CHARGES WAS INCORRECT AND ON ITS BASIS THE PENALTY U/S.271(1)(C) BY THE ASSESSING OFFICER. TH E LEARNED CIT(A)-I, NASIK HAS NOT APPRECIATED THE DETAILED FA CTS MENTIONED IN THE PENALTY ORDER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) 2 BE VACATED AND THAT OF THE ASSESSING OFFICER WARD 3 (3), NASIK, BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADDITION, AMEND AND A LTER ANY GROUND(S) OF APPEAL. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN MANUFA CTURE AND SALE OF YARN AND CLOTH IN THE NAME AND STYLE OF M/S . SHRI PATODIA TEXTILES AT SHRIJI PRASAD BUILDING, MALEGAON. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT 8,55,344/- ON 04.11.2004. IN THE CASE OF ASSESSEE, A SEARCH ACTI ON WAS CONDUCTED AT THE OFFICE PREMISES, WAREHOUSE AND FAC TORY OF THE ASSESSEE AND AT MALEGAON SPINNING MILL LTD. BY THE OFFICE OF DIRECTOR GENERAL, CENTRAL EXCISE INTELLIGENCE WITH THE ASSISTANCE OF LOCAL CENTRAL EXCISE OFFICE ON 29.03.2003. CONS EQUENTLY, A NOTICE U/S.148 OF I.T. ACT WAS ISSUED TO THE ASSESS EE ON 16.05.2007. THE ASSESSING OFFICER ASSESSED THE INC OME OF ASSESSEE AT 3,65,66,880/- BY MAKING DISALLOWANCE ON ACCOUNT OF JOB WORK CHARGES AMOUNTING TO 3,57,11,536/- ON ESTIMATED BASIS. IN FIRST APPEAL, THE CIT(A) CONFIRMED THE A DDITION TO THE EXTENT OF 2,82,05,145/-. THE ASSESSING OFFICER THEREAFTER, IMPOSED THE PENALTY OF 93,30,000/- U/S.271(1)(C). IN SECOND APPEAL FILED BY THE ASSESSEE TO ITAT, QUANTUM ADDIT ION WAS REDUCED TO 10,00,000/- VIDE ITS ORDER DATED 06.11.2012 IN ITA NO.592/PN/2010. AS A RESULT OF ITAT ORDER, THE ASS ESSING OFFICER ACTING U/S.275(1A) HAS REVISED IMPUGNED PEN ALTY FROM 93,30,000/- TO 3,49,503/-. 3. THE ASSESSEE BEING AGGRIEVED WITH THE SAME, TOOK THE MATTER TO FIRST APPELLATE AUTHORITY, WHEREIN, THE CIT(A) H AVING CONSIDERED THE SUBMISSION MADE ON BEHALF OF ASSESSEE, HAS GRAN TED RELIEF TO THE ASSESSEE ON THE POINT OF PENALTY IN QUESTION. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE DELETION OF PENALTY U/S.271(1)(C ) LEVIED BY THE ASSESSING OFFICER IS NOT JUSTIFIED. ACCORDINGLY, T HE ORDER OF CIT(A) 3 ON THE POINT OF DELETION OF PENALTY BE SET ASIDE AN D THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER O F CIT(A). 4. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE IMPUGNED PENALTY WAS LEVIE D ON ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF THE JO B WORK CHARGES. THE ASSESSEE HAS CLAIMED JOB WORK CHARGES IN THE RETURN OF INCOME. THE ASSESSING OFFICER HAS DISALL OWED THE WHOLE JOB WORK CHARGES CLAIMED BY THE ASSESSEE AMOUNTING TO 3,57,11,536/-. IN FIRST APPEAL, THE CIT(A) CONFIRM ED THE ADDITION TO THE EXTENT OF 2,82,05,145/-. THE ASSESSING OFFICER THEREAFTER, IMPOSED THE PENALTY OF 93,30,000/- U/S.271(1)(C). IN SECOND APPEAL FILED BY THE ASSESSEE TO ITAT, QUA NTUM ADDITION WAS REDUCED TO 10,00,000/- VIDE ITS ORDER DATED 06.11.2012 IN ITA NO.592/PN/2010. THE ITAT, PUNE IN ITA NO.592/P N/2010 HAS HELD AS UNDER: CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT PR ODUCE ALL THE WEAVERS TO WHOM JOB WORK CHARGES HAVE BEEN PAID , AND FURTHER CONSIDERING THE FACT THAT THE VOUCHERS PROD UCED BEFORE THE AO WERE FOUND TO BE DEFECTIVE SUCH AS DI FFERENT VOUCHERS ISSUED TO SOME OF THE VOUCHERS, THE ENTIRE JOB WORK CHARGES PAID IN OUR OPINION CANNOT BE TREATED AS GENUINE. UNDER THESE PECULIAR FACTS AND CIRCUMSTAN CES OF THE CASE, ADDITION OF RS.10 LAKHS ON ADHOC BASIS IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. 4.1 A LETTER WAS SENT TO THE ASSESSING OFFICER BEAR ING NO.NSK/CIT(A)-I/23/2011-12/259 DATED 21.01.2013. I N RESPONSE TO SAME, THE ASSESSING OFFICER REPLIED AS UNDER: IT IS SUBMITTED THAT HONBLE ITAT, PUNE BENCH A HAS DECIDED THE APPEAL FOR A.Y. 2004-05 IN FAVOUR OF TH E ASSESSEE BY RESTRICTING THE DISALLOWANCE TO RS.10,0 0,000/- ONLY. AFTER GIVING EFFECT TO THAT ORDER, THE TAX O N REVISED 4 INCOME COMES TO RS.5,83,633/- AND THE TAX ON TOTAL INCOME EXCLUDING THE CONCEALED INCOME COMES TO RS.2,34,160 /-. AS A RESULT THE PENALTY U/S 271(1)(C) OF THE I.T. ACT, 1961 IS REVISED TO RS.3,49,503/- 4.2 IN THIS BACKGROUND, THE CIT(A) OBSERVED THAT T HE ASSESSEE HAS DISCLOSED FULL FACTS REGARDING PAYMENT OF JOB W ORK CHARGES. THE ITAT IS A FACT FINDING AUTHORITY, WHEREIN, THE ADDITION OF 10,00,000/- ON ESTIMATED BASIS HAS BEEN CONFIRMED O UT OF THE TOTAL ADDITION OF 3,57,11,536/- MADE BY THE ASSESSING OFFICER. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT MENTIONED ANY EXPLANATION U/S.271(1)(C) WHILE IMPOSING THE PENALT Y. IT IS A SETTLED LEGAL POSITION THAT THE PENALTY U/S.271(1)( C) IS NOT AUTOMATIC ON THE BASIS OF QUANTUM ADDITION. A FIND ING RECORDING IN ASSESSMENT ORDER MAY CONSTITUTE GOOD EVIDENCE FO R THE PURPOSES OF PENALTY PROCEEDINGS BUT THOSE FINDING C OULD NOT BE REGARDED AS CONCLUSIVE FOR THE PURPOSE OF PENALTY P ROCEEDINGS. IT IS NOT IN DISPUTE THAT THE ADDITION TO THE INCOME I S THE STARTING POINT OF THIS EXERCISE, BUT NOT ONLY THAT IN THE AS SESSMENT PROCEEDINGS ITSELF. THE ASSESSING OFFICER HAS TO B E SATISFIED THAT THE ADDITION OR SUCH THAT PENALTY PROCEEDINGS U/S.2 71(1)(C) ARE REQUIRED TO BE INITIATED BUT ALSO BEFORE ANY PENALT Y PROCEEDINGS U/S.271(1)(C) COULD BE IMPOSED. EACH SUCH CASE WIL L HAVE TO BE EXAMINED IN THE LIGHT OF SCHEME OF THINGS AS ENVISA GED U/S.271(1)(C) READ ALONG WITH EXPLANATION THERETO. IN THE PRESENT CASE, THERE WAS NO CONCEALMENT AS THE ASSESSEE HAD MADE CLAIM OF EXPENDITURE INCURRED IN THE RETURN OF INCOME. RAISING A LEGAL CLAIM EVEN IT ULTIMATELY FOUND TO BE LEGALLY UNACCE PTABLE, CANNOT AMOUNT TO FURNISHING OF INADEQUATE PARTICULARS OF I NCOME. DEEMING FICTION IN EXPLANATION-1 TO SECTION 271(1)( C) IS ALSO NOT ATTRACTED AS IT RELATES ONLY TO FACTUAL ASPECTS AND THE PRESENT CONTROVERSY IS ABOUT LEGALITY OF ASSESSEES CLAIM A ND NO DEFICIENCY IN FACTS IS POINTED OUT ON BEHALF OF THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, IT WAS FOUND BY CIT(A) IT IS NOT A F IT CASE FOR 5 IMPOSING PENALTY AND THE SAME WAS DELETED. THIS RE ASONED FINDING OF CIT(A), WHEREIN, HE HAS DELETED THE PENA LTY IN QUESTION BY OBSERVING THAT NO CASE FOR EITHER CONCEALMENT OF INCOME OR FURNISHING INADEQUATE PARTICULARS OF SUCH INCOME WA S MADE OUT, NEEDS NO INTERFERENCE FROM OUR SIDE. ACCORDINGLY, CIT(A) WAS JUSTIFIED IN CANCELLING THE PENALTY IN QUESTION. W E UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH OF APRIL, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH APRIL, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE