M/s Golden Laminates Ltd., Chandigarh V. DCIT, Chandigarh

ITA 1113/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5171 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTALDR
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA N O. 1113/CHD/2016 AS SESSMENT YEAR: 2009-10 M/S GOLDEN LAMINATES LTD., VS. THE DCIT , SCO 14, SECTOR 7-C, CIRCLE 1(1), CHANDIGARH. CHANDIGARH. (NOW KNOWN AS STYLAM INDUSTRIES LTD.) PAN NO. AAACG5969R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI S.K.MITTAL,DR DATE OF HEARING : 03.04.2017 DATE OF PRONOUNCEMENT : 09.05.2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A SSAILING THE CORRECTNESS OF THE ORDER DATED 23.08.2016 OF CIT(APPEALS)-2 AMRITS AR CAMP AT CHANDIGARH PERTAINING TO 2009-10 ASSESSMENT YEAR ON THE GROUND THAT THE P ENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT HAS BEEN UPHELD. 2. THE LD. AR INVITING ATTENTION TO THE ASSESSMENT ORDER SUBMITTED THAT THE ASSESSEE DECLARED ITS INCOME FROM BUSINESS & PROFESSION UNDE R THE HEAD 'INCOME FROM BUSINESS & PROFESSION' . IN THE COURSE OF THE SURVEY UNDER SECTION 133A OF THE ACT CONDUCTED AT ITS BUSINESS PREMISES, ADDITION OF RS. 36,80,228/- WAS MADE ON THE BASIS OF STOCK VALUATION. FOR READY REFERENCE, PARA 5.3 AND 5.4 OF THE ASSESSMENT ORDER WERE HEAVILY RELIED UPON. SAME ARE REPRODUCED HEREUNDER : 5.3 THE STOCK VALUATION, BASED ON THE PHYSICAL VE RIFICATION OF FINISHED STOCK UNDERTAKEN BY THE DEPARTMENT WAS COMPLETED. THE STOCK VALUATION W AS BASED ON THE DOCUMENTS IMPOUNDED DURING THE SURVEY AND THE OTHER EVIDENCES ON RECORD . AFTER COMPARING THE STOCK VALUATION AS AVAILABLE WITH THE ASSESSEE AND STOCK VALUATION DON E BY THE DEPARTMENT, DIFFERENCE IN STOCK VALUATION WAS FOUND TO BE RS. 36,80,228/- AS EXCESS STOCK LYING AT THE BUSINESS PREMISES OF THE ASSESSEE. 5.4 WIDE THIS OFFICE LETTER DATED 30-8-2011 ASSESS EE WAS REQUIRED TO SHOW CAUSE AS TO WHY THE DIFFERENCE OF THE CLOSING STOCK OF FINISHED GOO DS AMOUNTING TO RS. 36,80,228/- SHOULD NOT BE ADDED IN ITS TOTAL INCOME FOR THE PERIOD RELEVAN T FOR ASSESSMENT YEAR 2009-10. CONTENTS OF THE LETTER ARE REPRODUCED AS BELOW: 'PLEASE REFER TO THE ONGOING ASSESSMENT PROCEEDINGS IN YOUR CASE. YOUR ATTENTION IN INVITED TO THE SURVEY OPERATIONS CONDUCTED BY TH E DEPARTMENT ON 18.09.2008. DURING THE COURSE OF SURVEY OPERATIONS, VARIOUS BOOKS OF A CCOUNTS AND LOOSE DOCUMENTS WERE EXAMINED. DURING THE COURSE OF SURVEY OPERATIONS TH E STOCK INVENTORY WAS PREPARED PHYSICALLY. THE STOCK VALUATION IS BASED ON THE DOC UMENTS IMPOUNDED DURING THE SURVEY AND OTHER EVIDENCE ON RECORD. AN EXCESS STOC KS WERE FOUND DURING THE COURSE OF SURVEY OPERATIONS TO THE EXTENT OF RS. 36, 80,228/- . THE DETAILS ARE RE-PRODUCED AS UNDER: SALE PRICE AS PER ANNEXURE A-E RS. 87,62,172 /- EXPERT GOODS (PACKED) RS. 75,86,250/- 2 TAKING G.P. RATE OF 20% EXCISE DUTY HAS BEEN INCLUDED ABOVE RS. 1,63,48,422/- COST OF GOODS RS. (-) 32, 69 ,684 / - ADD: COST OF GOODS AS PER ANNEX. FI RS. 62,93,640/- RS. 25,12,850/- RS. 2,18,85,228/- FINISHED GOODS CLOSING STOCK AS GIVEN BY THE ASSESSEE. RS. 1,82,05,000/- DIFFERENCE RS. 36,80,228/- 'YOU ARE HEREBY REQUIRED TO SHOW CAUSE AS TO WHY TH E DIFFERENCE OF THE CLOSING STOCK OF FINISHED GOODS AMOUNTING TO RS. 36,80,228/- SHOULD NOT BE ADDED IN YOUR INCOME FOR THE PERIOD RELEVANT FOR ASSESSMENT YEAR 2009-10. YOUR E XPLANATION/WRITTEN SUBMISSIONS SHOULD BE FILED ON 13.09.2011 POSITIVELY. 3. IT WAS SUBMITTED THAT THE ASSESSEE CHALLENGED TH E ADDITION BEFORE THE CIT (APPEALS) IN THE QUANTUM PROCEEDINGS WHEREIN THE AD DITION WAS REDUCED TO RS. 11,67,378/-. THE SAID ORDER WAS FURTHER CHALLENGED BEFORE THE ITAT RESULTING IN AN ADDITION OF RS. 7 LACS BEING SUSTAINED. REFERRING TO THE ORDER DATED 15.07.2014 PASSED BY THE ITAT IN THE QUANTUM PROCEEDINGS (ITA NO. 24 & 37/CHD/2013) IT WAS SUBMITTED THAT THE ADDITION HAS BEEN SUSTAINED ONLY ON THE GR OUND OF ESTIMATION CANNOT BE THE BASIS OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT . THE ASSESSING OFFICER IN THE PENALTY PROCEEDINGS HAS PROCEEDED ON THE FOOTING THAT SOLEL Y BECAUSE THE ADDITION HAS BEEN PARTIALLY SUSTAINED BY THE CIT (APPEALS), IT HAD TO BE LEVIED AND THE CIT (APPEALS) HAS ONLY GIVEN RELIEF TO THE EXTENT OF THE PARTIAL RELI EF IN THE QUANTUM PROCEEDINGS GIVEN BY THE ITAT AND HAS FAILED TO ADDRESS THE FACT THAT TH E ADDITION SUSTAINED WAS ONLY ON THE BASIS OF ESTIMATION. IN THESE CIRCUMSTANCES, IT WA S HIS PRAYER THAT THE PENALTY MAY BE DIRECTED TO BE QUASHED. 4. THE LD. SR.DR HEAVILY RELYING UPON THE IMPUGNED ORDER AND THE ORDER OF THE ITAT IN THE QUANTUM PROCEEDINGS SUBMITTED THAT THE ADDIT ION HAS BEEN SUSTAINED AND AS A RESULT THEREOF, PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN CORRECTLY LEVIED. 5. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. I FIND THAT THE ADDITION HAS BEEN SUSTAINED ON THE GROUNDS OF STOCK VALUATION AND THE PRESENT CASE IS NOT A CASE WHERE THERE WAS ANY INFI RMITY IN PHYSICAL GRATIFICATION IN THE SURVEY PROCEEDINGS. THIS FACT IS EVIDENT FROM PARA S 12 TO 14 OF THE ORDER PASSED BY THE ITAT IN THE QUANTUM PROCEEDINGS. THE SAME IS REPRO DUCED HEREUNDER : 12. NOW COMING TO THE GROUND OF APPEAL RAISED BY T HE ASSESSEE AGAINST THE UPHOLDING OF ADDITION TO THE EXTENT OF RS. 11,6 7,378/- ON ACCOUNT OF THE DIFFERENCE IN STOCK VALUATION I.E. THE VALUE OF STOCK FOUND DURING THE COURSE OF SURVEY AND THE STOCK AVAILABLE AS PER THE BOOKS OF ACCOUNT. THE MAIN PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT W HILE COMPUTING THE COST OF GOODS, GP RATE OF 20% WAS APPLIED TO THE SALE VA LUE OF THE GOODS. HOWEVER, THE ASSESSEE HAD SHOWN GP RATE OF 23% DURI NG THE YEAR UNDER CONSIDERATION WHICH SHOULD HAVE BEEN APPLIED TO COM PUTE THE COST OF 3 GOODS. ANOTHER ASPECT RAISED BY THE ASSESSEE WAS T HAT THE SURVEY REPORT WAS PREPARED ON A LATER DATE AND IT WAS NOT CONFRON TED TO THE ASSESSEE. 13. THE LD. DR FOR THE REVENUE ON THE OTHER HAND, S TRONGLY OPPOSED THE CONTENTION OF THE ASSESSEE. 14. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE FACT THAT THE STOCK HAS BEEN VALUED BY ADOPTING THE MARKET VALUE OF THE PRODUCTS AND THEREFROM DEDUCTING THE GP AND IN TURN COMPUTING THE COST OF GOODS I.E. THE VALUE OF STOCK INVENTORY AVAILABL E WITH THE ASSESSEE, ON ESTIMATE BASIS. WHILE COMPUTING THE SAID VALUATION , GP RATE OF 20% HAS BEEN APPLIED BY THE ASSESSING OFFICER AS AGAINST 23 % DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF THE SAME, WE RESTRICT THE ADDITION TO RS. 7,00,000/- AS AGAINST RS. 11,67,378/- MADE BY THE ASSESSING OFFICER. WE FIND NO MERIT IN THE PLE A OF THE ASSESSEE THAT STOCK INVENTORY PREPARED AT THE TIME OF SURVEY WAS NOT CONFRONTED TO ASSESSEE. THUS, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 5.1 IN THE AFOREMENTIONED PECULIAR FACTS AND CIRCUM STANCES WHERE THE ADDITION HAS BEEN SUSTAINED ONLY ON THE GROUND OF QUANTIFICATION , THAT TOO ON AN ESTIMATE BASIS. I FIND THAT PENALTY ORDER AND THE IMPUGNED ORDER CANNOT BE UPHELD. IT IS WELL SETTLED THAT QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEP ARATE AND DISTINCT. THE EXPLANATION OFFERED IN THE QUANTUM PROCEEDINGS VIS- A-VIS THE PENALTY PROCEEDINGS HAS TO BE CONSIDERED AFRESH IN THE LIGHT OF THE REQUIREMEN TS OF THE PENAL PROVISIONS. IN FACTS WHERE THE ADDITION HAS BEEN SUSTAINED ONLY ON THE B ASIS OF ESTIMATION, THE OCCASION TO LEVY PENALTY DOES NOT ARISE. REFERENCE MAY BE MADE TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS AERO TRADERS PVT. LTD. (2010) 322 ITR 316 (DEL). SIMILARLY, THE HON'BLE PUNJAB & HARYANA HIGH COURT IN HARI GOPAL SINGH VS CIT (2002) 258 ITR 85 (P&H) AND THE DECISION OF THE GUJRAT HIG H COURT IN THE CASE OF CIT VS SUBHASH TRADING CO. 221 ITR 110 (GUJ) SUPPORTS THE SAME LEGAL POSITION. IN VIEW OF THE AFORESAID PRECEDENT, WHERE THE BACKGROUND OF THE IN STANT PENALTY IS THE ESTIMATED VALUATION OF CLOSING STOCK, THEN THE SAME CANNOT BE SUSTAINED. IN THE RESULT, PENALTY IS DIRECTED TO BE QUASHED. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED 9 TH MAY, 2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.