The ACIT, Circle-1(1), Baroda V. Baroda Earth Pvt.Ltd., Baroda

ITA 1104/AHD/2010

• Counselvise Citation: 110420514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Gross profit estimation; Unexplained expenditure; Depreciation; Opportunity of being heard; Notional interest
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1104/AHD/2010 ASSESSMENT YEAR :2004-05 THE DCIT, CIR.1(1), BARODA V/S . BARODA EARTH PVT. LIMITED 23, AMARDEEP APPTT, PASHABHAI PARK GOTRI, BARODA. PAN NO. AAACG7338N (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI NIMESH YADAV, SR. D.R. /BY RESPONDENT SHRI SUNIL H TALATI, A.R. /DATE OF HEARING 29.05.2012 /DATE OF PRONOUNCEMENT 01.06.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS REVENUES APPEAL AGAINST THE DELETION OF T HE PENALTY OF RS. 10,30,000/- LEVIED U/S 271(1)(C), ARISES OUT OF ORD ER OF CIT(A)-I, BARODA, ORDER DATED 31.12.2009 FOR ASSESSMENT YEAR 2004-05. THE MAIN GROUNDS OF APPEAL ARE AS UNDER:- '1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(APPEALS) HAS ERRED IN DELETING THE PENALTY O F RS.10,30,000/- LEVIED U/S.271(1)(C) OF THE ACT ON THE ADDITIONS AM OUNTING TO RS.28,43,907/-. ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.C!T(APPEALS) ERRED IN DELETING THE PENALTY FOR C ONCEALMENT LEVIED ON THE G.P. ADDITION OF RS.16,13,014/- ON THE GROUND T HAT THE ADDITION WAS ON ESTIMATED BASIS. THE CIT(APPEALS) ERRED IN NOT A PPRECIATING THE FACT THAT THE DISCREPANCIES WERE NOTICED IN THE ACCOUNTS AND THAT THE ASSESSEE HAS NOT AT ALL MAINTAINED STOCK REGISTER. THE ASSESSEE DID NOT PROVIDE CORRECT AND COMPLETE ACCOUNTS OF ITS INCOME , AND THUS, CONCEALED PARTICULARS OF INCOME. THE BOOKS OF ACCOU NT OF THE ASSESSEE WERE, THEREFORE, REJECTED U/S.145 OF THE ACT AND MA DE ADDITION ON THE BASIS OF ESTIMATING PROFIT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ID.CIT(APPEALS) ERRED IN DELETING PENALTY LEVIED ON THE UNEXPLAINED EXPENDITURE AMOUNTING TO RS.8,65,000/-COVERED UNDER THE PROVISIONS OF SECTION 69C OF THE ACT FOR THE PURCHASE OF GOODS, R EPAIR OF MACHINERY AND BUILDING. THE CIT(APPEALS) ERRED IN NOT APPRECI ATING THE FACT THAT THE SESSEE COULD NOT FURNISH DETAILS OF THESE EXPEN DITURE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(APPEALS) ERRED IN DELETING PENALTY LEVIED ON THE CESSION OF LIABILITIES OF RS.71,860/-. THE CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO FURNISH DETAIL S SHOWING THE EFFORTS MADE BY THE PARTIES TO RECOVER THE AMOUNT FROM THE ASSESSEE. THE ASSESSEE'S CLAIM OF PAYMENT OF THE LIABILITY IN THE SUBSEQUENT YEAR WAS NOT RELIABLE ON THE GROUND THAT THE DETAILS FURNISH ED BY THE ASSESSEE IN SUPPORT OF THEIR CLAIM (THE RECEIPT OF PAYMENT) WAS UNDATED AND THERE WERE NO CHEQUE NUMBER IN IT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ID.CIT(APPEALS) ERRED IN DELETING PENALTY LEVIED ON THE ADDITION OF ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 3 RS.2,88,678/- U/S.36(1)(III) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF INTEREST FOR DIVERTING THE INTEREST BEARING BUSINES S FUND FOR NON BUSINESS PURPOSE OF INVESTMENT IN SHARES OF OTHER COMPANIES AND IN THE UNITS OF MUTUAL FUNDS. THE CIT(APPEALS) ERRED IN NOT APPRECI ATING THE FACT THAT IN THIS CASE, THE DIVERSION OF THE INTEREST BEARING BU SINESS FUND FOR NON- BUSINESS PURPOSE WAS DETECTED DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS. 2. THE A.O. OBSERVED IN PENALTY ORDER THAT TOTAL IN COME OF THE ASSESSEE IN A.Y. 2004-05 WAS DETERMINED IN ASSESSMENT ORDER OF RS. 53,23,904/- AND FOLLOWING ADDITIONS WERE MADE:- (A) FURTHER INCOME ESTIMATED ON ACCOUNT OF FALL IN GP RS. 16,13,014/- (B) UNEXPLAINED EXPENDITURE U/S 69C RS. 8,65,000 /- (C) DEPRECIATION ON BORE WELL AND STAFF QUARTERS RS . 5,355/- (D) LONG OUTSTANDING CREDITORS RS. 71,860/- (E) DISALLOWANCE U/S 36 (1)(III) RS. 2,88,678/- TOTAL RS. 28,43,907/ - THE A.O. HAD GIVEN OPPORTUNITY OF BEING HEARD AT TH E TIME OF IMPOSING PENALTY. HE HAS ALSO GIVEN BRIEF FACTS OF THE ADDITION ON PA GE 1 TO 3 OF THE PENALTY ORDER. AFTER CONSIDERING THE ASSESSEES REPLY, HE IMPOSED PENALTY U/S 271(1)(C) AT RS. 10, 30,000/- ON ADDITION OF RS. 28 ,43,907/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE WAS IN FIRST APPEAL BEFORE LD. CIT(A)-I, BARODA, WHO HAS DELETED THE PENALTY ON ADDITION OF RS. 16,13,014/- ON THE BASIS OF GP ADDITION MADE ON ESTIMATED BASIS BY CONSIDERING THE FOLLOWING DECISIONS:- ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 4 (I) CIT V. MC. MILLAN & CO., 33 ITR 182, FOR REJECTION OF BOOKS OF ACCOUNT U/S 145, (II) PANDIT BROTHERS V. CIT. 86 ITR 159 (P UNJAB) FOR LOW GP, (III) LAXMI STORES V. CST, 43 STC 167, (ALLAHABAD HIGH COURT), FOR LOW PROFIT AND REJECTION OF BOOKS OF ACCOUNT, (IV) RNP PERIANNA PI LLAI & CO. V. CIT, 42 ITR 370 (MAD)., FOR COMPARABLE CASE, (V) PUSHPANJALI DYEIN G & PRINTING MILLS (P) LTD. V. JCIT, 72 TJ 886, ITAT, AHMEDABAD BENCH, FOR LOW YIELD AND ADDITION MADE (VI) CIT V. VALIMKBHAI H. PATEL, 280 ITR 487, (GUJA RAT) FOR PENALTY ON ESTIMATE ADDITION, (VII) CIT V. ARJUN PRASAD AJIT KUMAR, 214 CTR 355, (ALLAHABAD HIGH COURT) AND (VIII) CIT V. SANGRUR VANASPATI MILLS LT D, 303 ITR 53, (PUNJAB & HARYANA HIGH COURT), FOR ESTIMATED SALE AND PENALTY U/S 271(1)(C). 4. THE LD. CIT (A) AT PAGE NOS. 6 AND 7 OF THE ORDE R, HAS DELETED THE PENALTY OF ADDITION ON ACCOUNT OF EXPENDITURE INCU RRED OUTSIDE OF BOOKS OF RS. 8,65,000/-, ON THE GROUND OF DOUBLE TAXATION IN THE HANDS OF THE ASSESSEE. HE CONFIRMED THE PENALTY OF ADDITION OF RS. 5,355/- WH ICH WAS NOT CONTESTED BY THE ASSESSEE BEFORE THE LD. CIT(A) AS WRONG DEPRECI ATION ON BORE WELL WAS CLAIMED. THE OTHER ADDITION IN THE ASSESSMENT WAS LONG OUTSTANDING CREDITOR OF RS. 71,860/- ON ACCOUNT OF CESSATION OF LIABILI TY. THE QUANTUM ADDITION WAS CONFIRMED BY THE LD. CIT(A) FOR NON ADMITTING THE E VIDENCE UNDER RULE 46A BUT PENALTY IMPOSED ON THIS AMOUNT HAS BEEN DELETED BY LD. CIT(A) BY OBSERVING THAT MERE NOT ADMITTING THE EVIDENCE IN APPEAL PROC EEDING, THE ISSUE IS DEBATABLE AND PENALTY WOULD NOT BE WARRANTED. THE ANOTHER ADDITION WAS U/S 36(1)(III) ON NOTIONAL INTEREST DISALLOWANCE OF RS. 2,81,678/- ON WHICH PENALTY ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 5 ALSO DELETED BY THE LD. CIT(A) AS ADDITION WAS MADE ON ESTIMATED ON NOTIONAL BASIS. 5. NOW THE REVENUE IS IN SECOND APPEAL BEFORE US. LD. A.R. GAVE THE CHART ALONG WITH COPY OF THE ORDER OF ITAT B BENCH, AHM EDABAD IN ITA NO. 387/A/2008 FOR A.Y. 2004-05 IN ASSESSEES CASE FOR QUANTUM ADDITION. THE SUMMARY OF THE FINDING OF THE ABOVE CO-ORDINATE BEN CH DECISION HAS BEEN MADE BY THE A.R. IN FOLLOWING CHART:- DEPARTMENTAL APPEAL A.Y. 2004-05 PENALTY ITA NO. 1104/AHD/2010 APPEAL NO. GROUNDS PENALTY ORDER PENALTY- CIT(A) QUANTUM- ITAT SHORT SUBMISSION 1 PENALTY FOR CONCEALMENT ON GP ADDITION RS. 1613014 1 3(A) 2 5 5 5.5 3 6 4 10 IN QUANTUM- HON. ITAT DIRECTED THE AO TO VERIFY THE GP WORKING AND DELETE THE ADDITION IF WORKING IS CORRECT. EVEN OTHERWISE THERE CANNOT EB PENALTY ON ESTIMATE GP ADDITION- RELIED ON SUDESH KHANNA VS ACIT, 98 TTJ 106 AHD ITAT, HARIGOPAL SINGH VS CIT, 258 ITR 85 AND CIT VS DHILLON RICE MILLS, 256 ITR 447 APPEAL EFFECT TO THE ORDER OF HON. ITAT NOT YET GIVEN BY AO 2 PENALTY LEVIED ON UNEXPLAINED EXPENDITURE OF RS. 865000/- 2 3(A) 6 7 6 6.3 6 8 11 15 IN QUANTUM-HON. ITAT DELETED THE ADDITION. PL. SEE PARA 13 OF ITAT ORDER 3 PENALTY FOR ADDITION U/S41(1) OF RS.71860/- 3 3(B) 7 8 8 8.4 8 9 16 18 IN QUANTUM- HON. ITAT RESTORED THIS ISSUE TO FILE OF AO. MERE DISALLOWANCE IN ASSESSMENT PROCEEDINGS DOES NOT IPSO FACTO LEADS TO LEVY OF PENALTY. NO INACCURATE PARTICULARS ARE FILLED & THERE IS MERE DISALLOWANCE U/S 41(1) ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 6 REJECTING EXPLANATION. RELIANCE PLACE ON RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) APPEAL EFFECT TO THE ORDER OF HON. ITAT NOT YET GIVEN BY AO 4 PENALTY ON DISALLOWANCE U/S 36(1)(III) 3 3(D) 8 9 9 9.3 9 10 19 22 IN QUANTUM-HON. ITAT DIRECTED THE AO TO VERIFY THE CASH FLOW & READJUDICATE THE MATTER. WORKING AND DELETE THA DDITION IF WORKING IS CORRECT MERE DISALLOWANCE IN ASSESSMENT PROCEEDINGS DOES NOT IPSO FACTO LEADS TO LEVY OF PENALTY. NO INACCURATE PARTICULARS ARE FILLED & THERE IS MERE DISALLOWANCE U/S 36(1)(III) REJECTING EXPLANATION. RELIANCE PLACE ON RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) APPEAL EFFECT TO THE ORDER OF HON. ITAT NOT YET GIVEN BY AO 6. THE LD. D.R. FAIRLY ADMITTED THE FACT BEFORE THE BENCH THAT THE ASSESSEES CASE HAS BEEN SET ASIDE ON QUANTUM ADDI TION BY THE ABOVE CITED JUDGMENT. 7. WE HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW AND SUBMISSION OF BOTH SIDE. THE CO-ORDINATE B BENCH HAS SET ASIDE THE ADDITION MADE ON ACCOUNT OF GP AT RS.16,13,014/-, THE ADDITION U/S 4 1(1) OF RS. 71,860/- AND DISALLOWANCE U/S 36(1)(III) TO THE A.O. BUT ADDITI ON ON ACCOUNT OF UNEXPLAINED EXPENDITURE OF RS. 8,69,796/- HAS BEEN DELETED BY I TAT IN PARAGRAPH 15. WE HAVE CONSIDERED VIEW THAT WHEN THE MATTER HAS BEEN RESTORED BACK TO THE A.O. AND STILL PENDING AS CLAIMED BY THE ASSESSEE A ND ONE OF THE ADDITION HAS BEEN DELETED BY THE CO-ORDINATE BENCH IN ABOVE ORDE R. THEREFORE, THE PENALTY ITA NO. 1104/AHD/2010 A.Y.2004-05 PAGE 7 U/S 271(1)(C) IS NOT JUSTIFIABLE AND ACCORDINGLY IS DELETED. HOWEVER, THE A.O. MAY INITIATE THE PENALTY PROCEEDING U/S 271(1)(C) A T THE TIME OF DECIDING THE SET ASIDE PROCEEDING. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 30.05.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 31.05.2012 4) DATE OF CORRECTION 31.05.2012 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 01.06.2012 7) ORDER UPLOADED ON 01.06.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 01.06.2012