M/s. Unichem Industries, Tal.Nadiad V. The Income tax Officer, Ward-1, Nadiad

ITA 1136/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2238 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-01-2011
• Assessment Year: 1996-1997
• Appeal Filed On: 13-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D K PARIKH
• Keywords: Bogus purchase; Business income; Rectification of order; Set aside
• Section: 271(1)(c); 143(3); 147; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.1136 AND 1137/AHD/2009 [ASSTT. YEAR : 1996-1997 AND 1997-98] DICTATED ON: 17-01-2011 M/S.UNICHEM INDUSTRIES NR. PATEL VADI AT: PIPLAG, TAL. NADIAD. PAN : AAAFU 8009 P VS. ITO, WARD-1 NADIAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.K. PARIKH REVENUE BY : SHRI K. MADHUSUDAN O R D E R PER BHAVNESH SAINI, JUDICIAL MEMBER : BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF T HE LEARNED CIT(A)-IV, BARODA DATED 1.1.2009 FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1) OF THE INCOME TAX ACT, 1961. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUND NO.3 AND 4 IN BOTH THE APPEALS CHALLENGING THE PENALTY TO BE TIME BARRED, WHICH ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE MERELY ARGU ED ON MERIT CHALLENGING THE LEVY OF PENALTY. 4. THE FACTS IN BRIEF ARE THAT IN A.Y.1996-97, IN T HE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147, THE ADDITION OF RS.32,11 ,970/- ON ACCOUNT OF BOGUS PURCHASES HAVE BEEN MADE. THE CIT(A) IN HIS ORDER DATED 2-12-2004 DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF ESTIMATED PROFIT AT THE RATE OF 5% EARNED ON BOGUS SALE BILLS ISSUED. THE EFFECT WAS GIVEN T O THE ORDER OF THE CIT(A) ON 2-12-2005 BY DETERMINING THE TOTAL INCOME AT RS.20, 450/-. SUBSEQUENTLY, THE SAME WAS RECTIFIED UNDER SECTION 154 THROUGH ORDER DATED 17-3-2005 AND THE ITA NO.1136 AND 1137/AHD/2009 -2- INCOME WAS REVISED AT RS.1,92,440/-. THE APPEAL AG AINST THE SAID RECTIFICATION ORDER WAS DISMISSED BY THE CIT(A) VIDE ORDER DATED 24-10-2005. THE PENALTY WAS CHALLENGED BEFORE THE LEARNED CIT(A). ON MERIT IT WAS CONTENDED THAT AS PER THE ORDER OF THE CIT(A) DATED 2-12-2005 THE INC OME WAS WORKED OUT TO RS.20,450/- I.E. THE SAME INCOME WAS ASSESSED ENTIR ELY UNDER SECTION 143(3) OF THE ACT ON 4-1-1999. THEREFORE, NO PENALTY IS LEVI ABLE. THE LEARNED CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE BECAUSE AGAIN THE ORDER WAS RECTIFIED AND THE INCOME WAS DETERMINED AT RS.1 ,92,440/- AND ALSO NOTED THAT THE ASSESSEE WAS FOUND INDULGED IN BOGUS PURCH ASE AND SALES THEREFORE THE PENALTY WAS CONFIRMED. IN THE ASSESSMENT YEAR 1997- 98, THE FACTS ARE SAME AND THE ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 147 WAS PASSED MAKING THE ADDITION OF RS.10,31,800/- ON ACCOUNT OF BOGUS PURCHASES. THE LEARNED CIT(A) VIDE ORDER DATED 29-3-2004 DIRECTED TO ESTIMATE THE PROFIT AT THE RATE OF 5% EARNED ON BOGUS SALES BILLS ISSUED. THE APPEAL EFFECT WAS GIVEN BY THE AO VIDE ORDER DATED 20-4-2004 AND THE TOTAL INC OME WAS DETERMINED AT NIL. SUBSEQUENTLY, THE SAME WAS RECTIFIED UNDER SE CTION 154 OF THE IT ACT DATED 28-3-2005 AND THE INCOME WAS REVISED TO RS.55 ,080/-. THE ASSESSEE MADE SIMILAR CONTENTION, BUT THE CONTENTION OF THE ASSESSEE WAS REJECTED AND THE PENALTY WAS CONFIRMED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS FILED COPIES OF THE ORDERS OF THE AO GIVING APPEAL EFFECT TO THE ORDER OF THE CIT(A) AND THE OR DER UNDER SECTION 154 OF THE IT ACT ALONG WITH THE ORDER OF THE TRIBUNAL CONFIRM ING THE ESTIMATE OF PROFIT BY APPLYING GP RATE OF 5%. HE HAS EMPHASIZED THAT IF THE PROFITS IS SHOWN AS PER THE BOOKS OF ACCOUNTS, BY APPLYING THE TOTAL SALE L ESS BY PURCHASE, THE ASSESSEE HAS SHOWN MORE PROFITS IN THE BOOKS OF ACCOUNTS AS AGAINST THE ESTIMATE OF INCOME ULTIMATELY MADE BY APPLYING 5% AGAINST THE S ALES. HE HAS THEREFORE SUBMITTED THAT SINCE THE ASSESSEE HAS SHOWN MORE PR OFIT IN THE BOOKS OF ACCOUNTS, THEREFORE, IT IS NOT THE CASE OF CONCEALM ENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. HE HAS RELIED UP ON THE ORDER OF THE ITAT, ITA NO.1136 AND 1137/AHD/2009 -3- AHMEDABAD BENCH-B IN THE CASE OF ACIT VS. PRECISION DRILLING (CYPRUS) LTD. 34 SOT 432 (AHD) IN WHICH IT WAS HELD THAT WHEN THE ADDITION IS MADE MERELY ON ESTIMATE BASIS NO PENALTY UNDER SECTION 271(1) I S LEVIABLE AUTOMATICALLY. 6. THE LEARNED DR, RELIED UPON THE ORDERS OF THE AU THORITIES BELOW AND SUBMITTED THAT IN THE CASE OF THE ASSESSEE IT WAS F OUND THAT THE ASSESSEE IS INDULGING IN MAKING BOGUS PURCHASES AND ISSUED BOGU S SALE BILLS, THEREFORE, IT IS A FIT CASE OF LEVY OF PENALTY. HE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS DHAR AMENDRA TEXTILE PROCESSORS, 306 ITR 277 IN WHICH IT WAS HELD THAT W ILLFUL CONCEALMENT IS NOT REQUIRED FOR ATTRACTING CIVIL LIABILITIES. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. THE FACTS ARE NOT IN DISPUTE WITH REGARD TO THE EST IMATE OF INCOME. INITIALLY, THE AO SET UP THE CASE AGAINST THE ASSESSEE THAT THE AS SESSEE IS INDULGING IN MAKING BOGUS PURCHASE AND ADDITIONS WERE ACCORDINGLY MADE. THE LEARNED CIT(A) HOWEVER ON MERIT DIRECTED TO RESTRICT THE ADDITION TO THE EXTENT OF ESTIMATED PROFIT EARNED ON ISSUE OF SALES BILLS ONLY AND DIRE CTED TO APPLY 5% OF THE PROFIT RATE AGAINST THE SALE BILLS ISSUED. THE ORDER OF T HE CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL. THE AO GAVE APPEAL EFFECT TO THE ORDER OF THE CIT(A) DATED 2- 2-2005 FOR A.Y.1996-97, COPY OF WHICH IS PLACED ON RECORD. THE AO NOTED THE SUM OF THE TOTAL SALES MADE BY THE ASSESSEE MINUS T HE PURCHASE AND COMPUTED PROFIT AT RS.2,27,779/- AND AS AGAINST THE PROFIT R ATE APPLIED, THE LEARNED CIT(A) HAS ESTIMATED THE PROFIT AT RS.1,71,987/- MEANING T HEREBY, THERE WAS A NIL INCOME ASSESSED AND THE ULTIMATE INCOME WAS COMPUTE D AT RS.20,450/-, AS WERE DETERMINED IN THE ORIGINAL ASSESSMENT ORDER. THE A O HOWEVER RECTIFIED THIS ORDER AND DID NOT TAKE THE FIGURE OF RS.2,27,779/- IN THE ULTIMATE INCOME AND COMPUTED THE INCOME AT RS.1,92,440/-. IN THE ASSESS MENT YEAR 1997-98, THE AO IN THE APPEAL EFFECT ORDER OF THE CIT(A) NOTED SALE S AND PURCHASE AND WORKED OUT THE PROFIT AT RS.66,278/- AS PER THE BOOKS OF T HE ASSESSEE AND BY APPLYING 5% PROFIT RATE AS PER THE ORDER OF THE CIT(A), THE INCOME WAS WORKED OUT TO ITA NO.1136 AND 1137/AHD/2009 -4- RS.55,079/- MEANING THEREBY, THERE WAS A NIL INCOME ASSESSED. THIS APPEAL EFFECT ORDER WAS ALSO RECTIFIED AND THE FIGURE OF T HE PROFIT AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NOT TAKEN INTO CONSIDE RATION AND THE INCOME WAS WORKED OUT ON ESTIMATE BASIS AT RS.55,080/-. THIS FACTS CLEARLY PROVED THAT EVEN IF THE INCOME IS ESTIMATED ON THE BASIS OF THE APPELLATE ORDER OF THE CIT(A) BY APPLYING 5% PROFIT AGAINST THE SALES, THE BOOK RESULTS SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE HAVE SHOWN MORE PROFIT AS AGAINST THE ULTIMATE INCOME COMPUTED BY THE AO. EVEN IF THE INCOME IS ESTIMATED ULTIMATELY ON ESTIMATE BASIS, T HE BOOK RESULTS PREPARED BY THE ASSESSEE CANNOT BE IGNORED AND WOULD SHOW THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS OF INCOME AND ALSO DID NO T FILE ANY INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME. THU S, IF THE INCOME SO COMPUTED BY THE AO IS COMPARED WITH THE FIGURE OF PURCHASE A ND SALES MAINTAINED IN THE BOOKS OF ACCOUNTS, THE AO TOOK THE LESSER FIGURE, W HICH WAS NOTED BY THE AO IN THE APPEAL EFFECT ORDERS. MAY BE THE AO RIGHT I N COMPUTING THE INCOME BY APPLYING THE PROFIT AT 5% AGAINST THE SALES, BUT TH E DETAILS NOTED ABOVE SHOW THAT THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS INCOME OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE ISSUE BEFORE THE AUTHORITIES BELOW AND HAVE DISCLOS ED COMPLETE DETAILS TO THE AUTHORITIES BELOW. THE HONBLE SUPREME COURT IN TH E CASE OF RAJASTHAN SPINNING AND WEAVING MILLS (2009) TOIL 63 HELD THAT ON EVERY DEMAND, THE PENALTY IS NOT AUTOMATIC. THE HONBLE SUPREME COUR T IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 158 CONSIDERING TH E DECISION OF THE DHARMENDRA TEXTILES PROCESSORS HELD THAT WHERE THER E IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) AND A MERE MAKING OF A CLAIM, WHICH IS NO T SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CA NNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. THE ITAT, AHMEDABAD BENCHE S IN THE CASE OF ACIT VS. PRECISION DRILLING (SUPRA) HELD THAT WHERE THE DISALLOWANCE OR ADDITION IS ITA NO.1136 AND 1137/AHD/2009 -5- MADE MERELY ON AN ESTIMATE BASIS, PENALTY UNDER SEC TION 271(1)(C) CANNOT BE AUTOMATICALLY IMPOSED. CONSIDERING THE FACTS OF TH E CASE, IN THE LIGHT OF THE ABOVE DECISION, WE DO NOT FIND THAT THESE ARE THE F IT CASES FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY UNDER SECT ION 271(1)(C) OF THE ACT. 8. IN RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 ST JANUARY, 2011 SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 21-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD