The DCIT, Circle-4, Surat V. Shree Gurjari Industries Ltd., Surat

ITA 1124/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62922 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1124/AHD/2012 ASSESSMENT YEAR :2004-05 D.C.I.T. CIRCLE-4, ROOM NO.223, AAYAKAR BHAVAN, SURAT V/S . M/S. SHREE GURJARI INDUSTRIES LTD. AM-4, PRESIDENT PLAZA, RING ROAD, SURAT PAN NO. AA ACG8146N (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI T. SANKAR, SR. D.R. /BY RESPONDENT SHRI M.K. PATEL, A.R. /DATE OF HEARING 26.07.2012 /DATE OF PRONOUNCEMENT 31.08.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-IV, SURAT, ORDER DATED 16. 02.2012 FOR ASSESSMENT YEAR 2004-05. THE SOLE GROUND OF APPEAL IS DELETIN G THE PENALTY U/S.271(1)(C) OF RS. 38,42,006/- (WRONGLY MENTIONED IN GROUNDS OF APPEAL RS.34,17,368/-) BY THE CIT(A). 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE APPEL LANT IS A MANUFACTURER OF PAVER BLOCKS. IT FILED RETURN OF INCOME ON 1.11.20 05 DECLARING TOTAL INCOME OF ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 2 RS.38,35,650/-. IT HAS SHOWN INCOME FROM MANUFACTU RING, CONTRACT WORK, COMMISSION INCOME AND INCOME FROM DIVIDEND. INCOME FROM DIVIDEND WAS CLAIMED AS EXEMPT. DURING ASSESSMENT PROCEEDING, B OOKS OF ACCOUNTS WERE NOT PRODUCED AND IT WAS CLAIMED THAT BOOKS OF ACCOU NTS HAVE BEEN LOST AND COMPUTERS DAMAGED DUE TO FLOODS AND FOR WHICH FIR H AD BEEN LODGED WITH POLICE STATION, RANDER, SURAT. IT WAS FOUND BY THE A.O. THAT THERE WERE DISCREPANCIES IN THE TAX AUDIT REPORT. THOUGH THE APPELLANT HAD CLAIMED LOSS ON SHARES OF RS.10,60,000/- THE TAX AUDIT REPORT ME NTIONED THAT ASSESSEE WAS NOT DEALING IN SHARES. ON FURTHER INVESTIGATION IT WAS FOUND BY THE A.O. THAT THE CLAIM OF SHARE LOSS WAS BOGUS AS NO SUCH TRANSA CTIONS HAD TAKEN PLACE. SHARE LOSS TO THE EXTENT OF RS.5.30/- LACS WAS ON A CCOUNT OF WRONG/DOUBLE ENTRIES. THEREFORE, THE BOOK RESULT OF THE ASSESSE E WAS REJECTED AND THE INCOME FROM DIFFERENT ACTIVITIES/SOURCES WAS ESTIMA TED AS FOLLOWS :- 1) INCOME FROM COMMISSION AND LIAISON (@ 20% OF REC EIPTS) RS.37,04,960/- 2) INCOME FROM CONTRACT (@ 8% OF RECEIPTS) RS.5 2,63,899/- 3) PROFIT FROM MFG. ACTIVITY (@ 8% OF RECEIPTS) RS.47,14,293/- 4) LOSS ON SHARES DISALLOWED RS.10,60,000/- 5) INCOME CLAIMED TO BE DIVIDEND RS. 1,23,660 /- THE TOTAL INCOME WAS DETERMINED AT RS. 1,48,12,810 /- THE ADDITION WAS CONFIRMED BY THE CIT(A)-I, SURAT, VIDE HIS ORDER DATED 31.12.2007. THE ITAT, AHMADABAD, DISMISSED THE APP EAL OF THE ASSESSEE FOR WANT OF PROSECUTION. THE LD. A.O. IMPOSED PENALTY U/S. 271(1)(C) AFTER CONSIDERING THE VARIOUS CASE LAWS CITED BY THE APPE LLANT RELYING ON FOLLOWING DECISIONS AT THE TIME OF IMPOSING PENALTY: 1. GRUH FINANCE LTD. VS. ACIT (2009) 121 TTJ (AHD) 527 ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 3 2. ITO VS. RAVI KHURANA (2008) 114 TTJ (DEL) 561 3. SHYAM NATHANI VS. ITO (2007) 109 TTJ (JP) 421 4. SURESH N. SHAH VS. ACIT (2002) 77 TTL (MUMBAI) 8 97 THE LD. A.O. ALSO RELIED ON FOLLOWING DECISIONS: I) UOI & ORS. V/S. DHARMENDRA TEXTILES PROCESSORS 306 ITR 277 (SC) II) K.P. MADHUSUDHAN V/S. CIT 251 ITR 99 (SC) III) CIT(ADDL.) VS. JEEVANLAL SAH 205 ITR 244 (SC) IV) CIT VS. WARASAT HUSSAIN 171 ITR 405 (PAT) V) DR. KD ARORA VS. CIT 162 ITR 481 (PAT) VI) CIT VS. SWARUP COLD STORAGE & GENERAL MILLS 13 6 ITR 435 (ALL) VII) CIT VS. KEDDAR NATH RAM NATH 106 ITR 172 (ALL) VIII) CIT VS. E V RAJAN 151 ITR 189 (MAD) IX) ADDL. CIT VS. LAKSHMI IND. & COLD STORAGE CO. LTD. 146 ITR 492 (ALL) FINALLY, AFTER CONSIDERING THE ASSESSEES REPLY, HE IMPOSED PENALTY AT RS.38,42,006/- U/S.271(1)(C). 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A)-IV, SURAT, WHO HAS ALLOWED THE PENALTY PARTLY. THE OPERATIVE PART IS AS UNDER:- 2.3 I HAVE GONE THROUGH THE FACTS OF THE CASE, THE PENALTY ORDER AND THE ARGUMENTS OF THE APPELLANT. I AM IN AGREEMENT WITH THE ARGUMENTS OF THE APPELLANT THAT PENALTY U/S.271(1)(C) CANNOT BE LEVIED UNLESS THERE IS EVIDENCE OF INACCURATE PARTICULARS IN THE RETURN . FOR LEVY OF PENALTY IT HAS TO BE SHOWN THAT THERE HAS BEEN WRONG DOING ON THE PART OF THE APPELLANT. IN MY OPINION, PENALTY CAN BE LEVIED ON LY IF THE ESTIMATION OF INCOME IS MADE BECAUSE OF EXISTENCE OF MATERIAL EVI DENCE AGAINST THE APPELLANT AND NOT MERELY FOR EVERY ENHANCEMENT. AT THE TIME OF LEVY OF PENALTY THE ORDER OF THE ITAT DISMISSING ITS APPEAL HAD BEEN AGITATED IN MISCELLANEOUS APPLICATION WHICH WAS ALLOWED AND THE APPEAL WAS FINALLY DISPOSED OFF BY THE HONBLE ITAT VIDE ITS ORDER DAT ED 14.05.2010. ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 4 INCOME FROM MANUFACTURING, CONTRACT AND COMMISSION WAS ESTIMATED ON THE BASIS OF PAST RECORDS OF THE APPELLANT AS BOOKS OF ACCOUNTS AND VOUCHERS HAD BEEN DESTROYED DURING THE FLOODS IN SU RAT. THERE WAS NO EVIDENCE OF FURNISHING OF ANY INACCURATE PARTICULAR S OF INCOME IN THE RETURN OR ANY WRONG DOING AGAINST THE APPELLANT SO FAR AS INCOME FROM THESE ACTIVITIES IS CONCERNED. THEREFORE NO PENALT Y COULD BE LEVIED FOR ENHANCEMENT OF INCOME FROM THESE ACTIVITIES IS CONC ERNED. THEREFORE NO PENALTY COULD BE LEVIED FOR ENHANCEMENT OF INCOM E FROM THESE SOURCES. THE SAME HOWEVER CANNOT BE SAID WITH REGA RD TO CLAIM OF LOSS ON SHARE TRANSACTIONS AND CLAIM OF EXEMPTION ON INC OME FROM DIVIDEND. THE APPELLANT HAD CLAIMED LOSS ON SALE OF SHARES FO R RS.10,60,000/- WHICH WERE FOUND TO BE BOGUS ON VERIFICATION BY THE A.O. AS ONE OF THE BROKERS THROUGH WHOM TRANSACTIONS WERE CLAIMED TO H AVE BEEN CARRIED OUT HAD DENIED ANY DEALINGS WITH THE APPELLANT AND THE OTHER BROKER HAD CEASED TO FUNCTION. DIVIDEND INCOME OF RS.1,23,660 /- FROM SUCH TRANSACTIONS WAS CLAIMED AS EXEMPT. THE HONBLE IT AT UPHELD THE ACTION OF THE A.O. IN TREATING THE DIVIDEND INCOME AS INCOME FROM OTHER SOURCES, AND HENCE TAXABLE, AS THE TRANSACTIONS OF ACQUISITION OF SHARES IN THE COURSE OF WHICH SUCH INCOME WAS EARNED COULD NOT BE ESTABLISHED BY THE APPELLANT AND THE FINDINGS OF TH E A.O. IN THIS REGARD WERE NOT CONTROVERTED. THE ADDITION MADE ON ACCOUN T OF LOSS ON SHARES WAS DELETED ONLY FOR THE REASON THAT THE COMPUTATIO N OF INCOME MADE BY THE A.O. DID NOT START FROM NET PROFIT AS PER P &L ACCOUNT BUT INCOME FROM DIFFERENT ACTIVITIES HAD BEEN SEPARATELY ESTIM ATED AND THEREFORE NO FURTHER DISALLOWANCE WAS REQUIRED IN RESPECT OF THE CLAIM OF LOSS ON SHARES. THE HONBLE ITAT HAS UPHELD THE FINDINGS O F THE A.O. WITH REGARD TO THE ACQUISITION OF SHARES BEING BOGUS. T HEREFORE THE ARGUMENTS OF THE APPELLANT THAT THE ADDITION HAS BE EN DELETED AND THEREFORE NO PENALTY SHOULD BE LEVIED FOR CLAIM OF LOSS ON SHARES CANNOT BE ACCEPTED. THERE IS POSITIVE EVIDENCE AGAINST TH E ASSESSEE FOR MAKING A WRONG CLAIM OF LOSS AND THEREBY REDUCE ITS TAXABLE INCOME. ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 5 SIMILARLY, THE CLAIM OF THE APPELLANT THAT DENIAL O F EXEMPTION IN RESPECT OF DIVIDEND INCOME WOULD NOT AMOUNT TO FURNISHING O F INACCURATE PARTICULARS HAS TO BE REJECTED. IT IS NOT A SIMPLE CASE OF DENIAL OF EXEMPTION BUT THE A.O. HAS TREATED THIS INCOME AS I NCOME FROM OTHER SOURCES BECAUSE THE SOURCE OF THIS INCOME, I.E. ACQ UISITION OF SHARES HAS BEEN SHOWN NOT TO EXIST AND THEREFORE UNEXPLAIN ED. HENCE PENALTY U/S.271(1)(C) WAS REQUIRED TO BE LEVIED IN RESPECT OF CLAIM OF LOSS ON SHARES AND CLAIM OF EXEMPTION IN RESPECT OF DIVIDEN D INCOME FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. PE NALTY IS THEREFORE CONFIRMED TO THE EXTENT LEVIED FOR WRONG CLAIMS MAD E ON ACCOUNT OF LOSS ON SHARES AND INCOME CLAIMED TO BE FROM DIVIDEND, I .E. RS. 11,83,660/- (RS.10,60,000/- + RS.1,23,660/-). PENALTY LEVIED O N ESTIMATES OF INCOME FROM MANUFACTURING, CONTRACT AND COMMISSION IS REQUIRED TO BE DELETED. THE A.O. IS DIRECTED TO ACCORDINGLY RE-COMPUTE THE PENALTY LEVIED . 4. NOW THE REVENUE IS BEFORE US. LD. D.R. RELIED U PON THE ORDER OF A.O. WHEREAS LD. COUNSEL FOR THE ASSESSEE FILED A COPY O F ITAT ORDER IN ASSESSEES CASE FOR QUANTUM ADDITION OF THE CO-ORDINATE D BE NCH IN ITA NO.781/AHD/2008 FOR A.Y. 04-05 IN WHICH THE ADDITIO NS MADE BY THE A.O. OF RS.37,04,960/- ON ACCOUNT OF COMMISSION INCOME @ 20 % WHICH WAS ACCEPTED BY THE CO-ORDINATE BENCH @ 10%. THE SECOND AND THI RD ADDITIONS OF RS.52,63,899/- AND RS.47,14,293/- WERE ON ACCOUNT O F LOW NP IN CONTRACT BUSINESS WHICH WAS ESTIMATED BY THE AO @ 8%. THE C O-ORDINATE BENCH ALSO REDUCED THESE ADDITIONS IN QUANTUM APPEAL AND ESTIM ATED NP @ 4% OF THE GROSS RECEIPTS OF THE SAID BUSINESS AND APPEAL WAS SET ASIDE TO THE A.O. FOR RE-COMPUTATION OF BUSINESS INCOME AND APPEAL WAS PA RTLY ALLOWED BY THE CO- ORDINATE BENCH ON ALL THREE ISSUES. ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 6 5. WE HAVE PERUSED THE ASSESSMENT ORDER OF THE A.O. , CIT(A) ORDER ON QUANTUM ADDITION, PENALTY ORDER OF A.O. AS WELL AS CIT(A) AS DISCUSSED ABOVE ADDITIONS ON ACCOUNT OF COMMISSIONS AND LOW NET PRO FIT HAD BEEN SENT BACK TO A.O. FOR RE-CALCULATION. THE PENALTY ORDER DOES NO T SURVIVE DUE TO MATTER WAS SENT BACK TO THE A.O. THE A.O. IS FREE TO INITIATE PENALTY PROCEEDING AT THE TIME OF RE-COMPUTING THE INCOME. THE REMAINING PEN ALTY IS PERTAINED TO BOGUS SHARE LOSS AND DIVIDEND & INTEREST INCOME WHICH HAS BEEN CONFIRMED BY THE CIT(A). THEREFORE, WE ARE NOT GIVING ANY FINDING O N IT. WE HAVE CONSIDERED VIEW THAT NO PENALTY IS SURVIVED IN ABSENCE OF QUAN TUM ADDITION. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A). 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 31.08.2012 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( ; ITA NO. 1124/AHD/2012 A.Y. 04-05 PAGE 7 STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 28 .08.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 29.08.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION ,, ,, 6) DATE OF INITIAL SIGN BY MEMBERS 31.08.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 31.08.2012