M/s. J.K. Enterprises(PD), Baroda V. The ACIT., Circle-2, Baroda

ITA 1114/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6310 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 22-06-2011
• Assessment Year: 1992-1993
• Appeal Filed On: 28-03-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: M K PATEL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 22/06/2011 DRAFTED ON: 2 2/06/2011 ITA NO.1114/AHD/2008 ASSESSMENT YEAR : 1992-93 M/S.J.K.ENTERPRISES (PD) 2 ND FLOOR, STERLING CENTRE R C DUTT ROAD ALKAPURI, BARODA VS. THE ASST.CIT CIRCLE-2 BARODA PAN/GIR NO. : AABFJ 1741 N ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M.K. PATEL, A.R. RESPONDENT BY: SHRI B.L. YADAV, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-II, BARO DA DATED 29/02/2008 AND THE SUBSTANTIVE GROUND IS AS UNDER:- 1) THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING THE ORDER PASSED UNDER SECTION 271(1)(C) OF THE INCOME-TAX, 1961, IM POSING PENALTY OF RS.9,51,000/- (AND NOT RS.11,02,000/-, A S STATED IN THE APPELLATE ORDER). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG PENALTY ORDER PASSED U/S. 271(1)(C) R.W.S. 275(1A) OF THE I.T. ACT, 1961 DAT ED 29/05/2007 AND THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 250 OF TH E I.T.ACT DATED 22/03/2002 WERE THAT THE ASSESSEE-FIRM IS DISTRIBUTOR OF M/S .INDIAN PETROCHEMICALS CORPORATION LTD. (IPCL). A SEARCH WAS CONDUCTED U/ S.132 OF THE I.T.ACT. CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND ON T HAT BASIS, IT WAS NOTICED THAT THE ASSESSEE WAS SELLING THE PRODUCT ON CASH B ASIS AND ALSO CHARGING PREMIUM @ 27.5% IN CASH. THEREUPON, AN ADDITION OF RS.31,69,259/- WAS ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 2 - MADE BEING AN INCOME EARNED BY WAY OF PREMIUM CHARG ES. THE ASSESSING OFFICER HAS WORKED THE TOTAL SALES ON WHICH PREMIUM @ 27.5% WAS ALLEGED TO HAVE BEEN RECEIVED AND PREPARED A LIST OF THOSE PAR TIES AS FOLLOWS:- S.NO. NAME OF THE PARTY IN WHOSE NAME BILLS HAVE BEEN PREPARED AMOUNT (1) (2) (3) 1. M/S.ARIHANT THERMOWARE PVT.LTD. RS.4,90,000 2. M/S.ANUP PLASTICS RS.4,11,000 3. M/S.SYNTHO PLAST RS.4,05,000 4. M/S.PLAS COLOUR RS.4,05,000 5. M/S.JAVERI POLYMER PVT.LTD. RS.11,61,000 6. M/S.DEVIDAYAL PLASTICS IND.PVT.LTD. (SISTER-CONCERN OF ASSESSEE) RS.71,15,000 7. M/S.FOZDAR INDUSTRIES RS.1,42,612 8. M/S.FLOVIN PLASTICS RS.1,76,608 9. M/S.HITECH PLASTICS RS. 68,359 10. M/S.R.M.P.PLASTOPACK RS.12,00,000 RS.1,15,24,579 3. THE MATTER WAS CARRIED BEFORE THE FIRST APPEL LATE AUTHORITY AND THE LEARNED CIT(APPEALS)-IV, BARODA VIDE ORDER DATED 21/03/1996 HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND GRANTED RELIEF WITH THE OBSERVATION THAT M/S.JAVERI PLOYMER PVT.LTD., M/S.ARIHANT THERMOWARE PVT.LTD. AND M/S.ANUP PLASTICS HAVE CONFIRMED THE TRANSACTIONS WITH THE A PPELLANT AND THE SALES SHOWN TO THEM WERE ALSO ACCOUNTED FOR IN THEIR RESPECTIVE BOOKS OF ACCOUNT. HE HAS, THEREFORE, COMMENTED THAT WHETHER THOSE SALES WERE MADE IN THE OPEN MARKET OR THE SALES WERE MADE TO THOSE PARTIES WAS IN DISP UTE AND SINCE THERE WAS NO INDEPENDENT EVIDENCE THE SALES WITH REFERENCE TO TH OSE PARTIES WERE HELD AS VERIFIABLE. THE LEARNED CIT(APPEALS) HAS ALSO COMM ENTED THAT THE CHARGING OF PREMIUM SHOULD HAVE BEEN RESTRICTED WITH REFEREN CE TO THOSE SALES WHICH WERE NOT VERIFIABLE AND ALLEGEDLY MADE IN THE OPEN MARKET IN CASH. BEFORE THE LEARNED CIT(APPEALS), IT HAS ALSO BEEN CONTESTED TH AT THE ASSESSEE HAS RECEIVED INTEREST ON DELAYED PAYMENT. FURTHER, OUT OF THE T OTAL SALES, THE LEARNED ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 3 - CIT(APPEALS) HAS RECORDED THAT SALES AMOUNTING TO R S.71,15,000/- MADE TO M/S. DEVIDAYAL PLASTICS INDUSTRIES, BOMBAY. IN RES PECT OF THOSE SALES ALSO A FINDING WAS GIVEN BY THE LEARNED CIT(APPEALS) THAT THE EVIDENCES HAVE ESTABLISHED THE BUSINESS TRANSACTION. FINALLY, IT WAS HELD THAT THERE WAS NO CASE AGAINST THE ASSESSEE TO HOLD THE GUILTY OF CHARGING THE PREMIUM OF RS.31,69,259/- WHICH ACCORDING TO HIM THE ASSESSING OFFICER HAS WRONGLY TAXED IN THE HANDS OF THE ASSESSEE. THE SAID DECIS ION OF THE LEARNED CIT(APPEALS) WAS CHALLENGED BY THE REVENUE. 4. THE RESPECTED ITAT B BENCH AHMEDABAD IN ITA NO.3128/AHD/1996 FOR A.Y. 1992-93 (ASSESSEES OWN C ASE) VIDE AN ORDER DATED 08/09/2006 HAS REVERSED SOME OF THE POINTS OF THE L EARNED CIT(APPEALS) AND CONFIRMED THE ADDITION OF RS.31,29,259/-. AT THIS JUNCTURE, AN OBSERVATION OF THE TRIBUNAL WAS POINTED OUT BY THE LEARNED DEPARTM ENTAL REPRESENTATIVE IN RESPECT OF SALES TO M/S.DEVIDAYAL PLASTICS INDUSTRI ES PVT.LTD. AND IN THIS REGARD IT WAS COMMENTED BY THE TRIBUNAL THAT THE PREMIUM MIGHT HAVE BEEN RECEIVED BY THE ASSESSEE ON THOSE SALES. 5. THE LEARNED AUTHORISED REPRESENTATIVE MR. M.K.PA TEL HAS INFORMED THAT THE SAID ORDER OF THE TRIBUNAL HAS NOW BEEN CH ALLENGED BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT AND IN TAX APPEAL NO.398 OF 2007 VIDE AN ORDER DATED 10/04/2008 FOLLOWING QUESTION HAS BEEN ADMITT ED. ?S WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE TRIBUNAL IS RIGHT IN LAW IN RESTORING THE ADDITION OF RS.31,69,259/- ON ACCOUNT OF ALLEGED PREMIUM ON ALLEGED CASH SALES?? ? 6. WITH THIS BRIEF FACTUAL BACKGROUND, LEARNED AUTH ORISED REPRESENTATIVE HAS CONTESTED THAT ONCE A QUESTION HAS BEEN ADMITTE D BY THE HON'BLE COURT, THEREFORE, THE ISSUE BEING CONTROVERSIAL, HENCE, MU ST NOT BE SUBJECT TO LEVY OF ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 4 - CONCEALMENT PENALTY. HE HAS ALSO CONTESTED THAT NA MES OF SOME OF THE PARTIES WERE NOT EVEN ON THE LOOSE-PAPERS, THEREFORE, THE ASSESSING OFFICER HAD GONE WRONG IN PRESUMING THAT THE ASSESSEE HAD CHARGED PR EMIUM IN RESPECT OF THESE SALES. THE SAID PRESUMPTION OF THE ASSESSING OFFIC ER WAS AGAINST THE FACTS AND UNTENABLE IN THE EYES OF LAW. HE HAS POINTED OUT T HAT EVEN THE ASSESSING OFFICER HAS ADMITTED THAT THE CASH SALES WERE MADE IN RESPECT OF ONLY FEW PARTIES WHICH WAS AT RS.27,69,970/- AS IS APPARENT FROM THE OBSERVATION OF THE ASSESSING OFFICER, FOR READY REFERENCE; REPRODUCED BELOW:- 5.1. THE ABOVE ENTRIES AND NOTE WRITTEN BY MR.JAGD ISH L.MEHTA INDICATES THAT THE GOODS VALUED AT RS.27,69,970/- W ERE SOLD IN CASH AND BILLS WERE PREPARED IN THE NAME OF ABOVE PARTIES. PAGE-49 CONTAINS THE NAME OF SAME PARTIES AND SAME AMOUNTS WITH WORKING 27.5%. THE CONTENTS OF THIS PARE ARE AS UNDER: ENTRIES IN THE HAND WRITING OF MR.J.L.MEHTA AMOUNT O/S.SINCE ARIHANT THERMOWARE PVT.LTD. 1,37,500 RS.5,00,000 MARCH, 92 ANUP PLASTIC 94,000 RS.3,45,446 MARCH, 92 FOZDAR INDUSTRIES 39,000 RS.1,42,612 MARCH, 92 FLOVIN PLASTICS 34,000 RS.1,23,608 SEPT., 92 HI-TECH. PLASTICS 18,000 RS. 68,359 MARCH, 92 PLAS COLOUR 77,000 RS.2,79,155 MARCH, 92 SYNTHO PLAST 29,000 RS.1,07,790 MARCH, 92 R.M.P.PLATIC PACT 2,27,000 RS.12,00,000 MARCH, 92 6,65,000 RS.27,69,970 50% 3,32,750 7. FROM THE SIDE OF THE REVENUE, LEARNED DEPARTMENT AL REPRESENTATIVE B.L. YADAV APPEARED AND PLACED STRONG RELIANCE ON THE ORDER OF THE TRIBUNAL AND ARGUED THAT THE INCOME OF PREMIUM WAS DULY ESTA BLISHED AS PER THE LOOSE- PAPERS, THEREFORE, THE SAME BEING DETECTED CONSEQUE NCE UPON THE SEARCH, HENCE, SUBJECT TO LEVY OF CONCEALMENT PENALTY. ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 5 - 8. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION FILED AND THE JUDGEMENTS CITED. THERE IS NO DENIAL OF TH IS FACT THAT AT ONE STAGE OF PROCEEDINGS THE LEARNED CIT(APPEALS) VIDE AN ORDER DATED 29/03/1996 HAS DELETED THE IMPUGNED ADDITION. HOWEVER, THAT ORD ER OF THE FIRST APPELLATE AUTHORITY WAS REVERSED BY THE RESPECTED CO-ORDINATE BENCH VIDE ORDER DATED 08/09/2006. THESE TWO APPELLATE ORDERS THUS GIVE A CLEAR INDICATION THAT THE QUESTION OF EARNING OF PREMIUM ON SALES WAS CONTROV ERSIAL. THE EXISTENCE OF CONTROVERSY HAS FURTHER BEEN ESTABLISHED BY THE FAC T THAT THE HON'BLE GUJARAT HIGH COURT HAS ADMITTED THE ISSUE OF ALLEGED RECEIP T OF PREMIUM. IF WE EXAMINE THE ORIGINAL ASSESSMENT ORDER WHICH IS DATE D 29/03/1995, IT IS EVIDENT THAT THE LOOSE-PAPERS WERE ONLY IN RESPECT OF THE C ASH SALES TO THE TUNE OF RS.27,69,970/-, LIST HAS ALREADY BEEN REPRODUCED AB OVE. IN ADDITION TO THE ABOVE CASH SALES, THE ASSESSING OFFICER HAS ADDED TWO MORE NAMES, I.E. M/S.DEVIDAYAL PLASTICS IND.PVT.LTD. A SUM OF RS.71, 15,000/- AND M/S.JAVERI POLYMER PVT.LTD. A SUM OF RS.11,61,000/-, THOUGH T HE SALES WERE ROUTED THROUGH BANK ACCOUNT AND IN RESPECT OF THOSE SALES THERE WAS NO INCRIMINATING MATERIAL TO SUGGEST THAT THE PREMIUM WAS CHARGED BY THE ASSESSEE. IT APPEARS THAT THE TRIBUNAL WAS ALSO CONSCIOUS OF THIS FACT, THEREFORE, WHILE DISCUSSING THESE TWO PARTIES IT WAS OBSERVED THAT, QUOTE PREMIUM MIGHT HAVE BEEN RECEIVED UNQUOTE. THE SAID INFERENCE WAS PRIMARILY BASED U PON THE STATEMENT OF ONE OF THE DIRECTORS AND ON THAT BASIS THE TRIBU NAL HAS COMMENTED THAT ONCE IT WAS HELD THAT THE PREMIUM WAS RECEIVED IN THE CA SE OF M/S.DEVIDAYAL PLASTICS IND.PVT.LTD., THEREFORE, THE ISSUE HAD ALS O RECEIVED PREMIUM ON SALES MADE TO M/S.JAVERI POLYMER PVT.LTD. THOUGH THE LEA RNED AUTHORISED REPRESENTATIVE HAS CITED A DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. JAGABANDHU PRASANNA KUMAR RUPLAL SEN PODDAR REPORTED AT ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 6 - [1982] 133 ITR 150 (CAL.) FOR THE LEGAL PROPOSITION THAT IF THERE IS NO FIN DING OF FACT BASED UPON SOME EVIDENCES THAT INACCURATE P ARTICULARS HAVE BEEN FURNISHED, THEN THE CONCEALMENT PENALTY IS NOT VALI D. THE HON'BLE COURT HAS APPROVED THE FINDING OF THE APPELLATE TRIBUNAL WHIC H HAS HELD THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS NOT ABLE TO SHOW TH AT APART FROM THE INADEQUACY OF THE EXPLANATION REGARDING THE NATURE AND SOURCE OF THE CORRECT DEPOSIT, WHICH WAS TREATED AS ASSESSEES INCOME, TH ERE WAS NO MATERIAL TO SHOW THAT THE ACCOUNT REPRESENTED BY THE CASH DEPOSITS W ERE THE ASSESSEES INCOME. THERE WAS RELIANCE ON THE DECISION OF HON'BLE GUJAR AT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS. CIT REPORTED AT [2001]24 9 ITR 125 (GUJ.) FOR THE LEGAL PROPOSITION THAT IN THE ABSENCE OF ANY POSIT IVE EVIDENCE THAT EXPLANATION WAS FALSE, THERE WAS NOTHING ON RECORD TO SHOW THAT CASH CREDITS CONSTITUTED INCOME OF THE ASSESSEE, THE PENALTY WAS HELD AS UNJ USTIFIED. THESE TWO DECISIONS HAVE LAID DOWN GENERAL PROPOSITION AND DE SCRIBED THE INCIDENCE WHEN A CONCEALMENT PENALTY CAN BE LEVIED BUT IN THE PRESENT CASE A REMARKABLE DISTINCTION IS THAT CONSEQUENCE UPON THE SEARCH CER TAIN LOOSE-PAPERS WERE RECOVERED ON WHICH THE INCIDENCE OF CHARGING OF PRE MIUM WAS RECORDED. NOW THE QUESTION IS THAT FOR THE PURPOSE OF LEVY OF PEN ALTY WHETHER THE ENTIRE SALES SHOULD BE TREATED AS THE SALES ON WHICH THE ASSESSE E MIGHT HAVE RECEIVED THE ALLEGED PREMIUM OR THE CONCEALMENT SHOULD CONFINE T O THOSE SPECIFIC PARTIES WHOSE NAMES WERE FOUND WRITTEN IN THE LOSSE-PAPERS. A SPECIFIC QUESTION WAS RAISED DURING THE COURSE OF HEARING BEFORE US AND L EARNED AUTHORISED REPRESENTATIVE HAS CLARIFIED THAT IN RESPECT OF TWO PARTIES; NAMELY M/S. JAVERI POLYMER PVT.LTD. (SALE AMOUNT OF RS.11,61,000/-) AN D IN RESPECT OF ANOTHER PARTY, NAMELY, DEVIDAYAL PLASTICS IND.PVT.LTD. (SA LE AMOUNT OF RS.71,15,000/-) THERE WAS NO EVIDENCE IN POSSESSION OF THE REVENUE DEPARTMENT IN RESPECT OF ALLEGED CHARGE OF PREMIUM. SINCE WE ARE NOT DEALIN G WITH THE CORRECTNESS OF THE QUANTUM ADDITION, THEREFORE, WE ARE NOT IN A PO SITION EITHER TO AFFIRM OR ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 7 - DISCARD THE EXPLANATION OF THE ASSESSEE BUT ONE THI NG IS DEFINITE THAT WHILE AFFIRMING THE ADDITION EVEN THE RESPECTED TRIBUNAL HAS NOWHERE SPECIFICALLY MENTIONED THAT ON THOSE SALES THERE WAS AN EVIDENCE OF CHARGE OF PREMIUM. AS WE HAVE NOTICED HEREINABOVE, DUE TO THIS UNCERTAINT Y ABOUT THE CHARGE OF PREMIUM IN RESPECT OF THESE TWO PARTIES, THE TRIBUN AL HAS RECORDED THAT THE PREMIUM MIGHT HAVE BEEN RECEIVED FROM THESE PARTIES BY THE ASSESSEE. AGAI N, WE HEREBY CLARIFY THAT ANY OF OUR OBSERVATION SHALL NOT EFFECT THE INCIDENCE OF TAX IN QUANTUM APPEAL BEING SUBJUDICE BEFORE THE HO N'BLE HIGH COURT AND, THEREFORE, OUR OBSERVATION IS LIMITED FOR THE PURPO SE OF DECIDING THIS APPEAL CONCERNING SEC.271(1)(C) PENALTY ONLY. WE, THEREFO RE, HOLD THAT THE INCIDENCE OF CHARGING OF PREMIUM PERTAINING TO M/S.DEVIDAYAL PLASTICS IND.PVT.LTD. AND M/S.JAVERI POLYMER PVT.LTD. BEING CONTROVERSIAL, HE NCE, SHOULD NOT COME WITHIN THE PURVIEW OF CONCEALMENT PENALTY. IN RES PECT OF REST OF THE PARTIES BECAUSE THERE WAS INCRIMINATING MATERIAL IN THE SHA PE OF LOOSE-PAPERS ON WHICH THE CHARGE OF PREMIUM WAS NOTED, THEREFORE, RIGHTLY COVERED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE I.T.ACT. RE SULTANTLY, WE HEREBY DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE QUANTUM OF P ENALTY IN THE LIGHT OF OUR ABOVE OBSERVATION MADE SUPRA. THIS GROUND, THEREFO RE, PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 24 TH JUNE, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 24 / 06 /2011 T.C. NAIR, SR. PS ITA NO.1114/AHD /2008 M/S.J.K.ENTERPRISES (PD) VS. ACIT ASST.YEAR - 1992-03 - 8 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION.. 22/06/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22/06/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S24.6.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 24.6.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER