M/s. Tayal Concast (P) Ltd., Muzaffarnagar V. ITO, Muzaffarnagar

ITA 1146/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8327 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 01-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 26-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V R SONBHA DRA SENIOR
• Assessee Lawyers: PREM PRAKASH; AASISH AGARWAL S
• Keywords: Gross profit estimation; Search and seizure; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1146/DEL./2015 (ASSESSMENT YEAR : 2005-06) M/S. TAYAL CONCAST (P.) LTD., VS. ITO, WARD 2 (4), 321, SANJAY MARG, MUZAFFARNAGAR. MUZAFFARNAGAR 251 001. (PAN : AABCT1327P) (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI PREM PRAKASH AND AASISH AGARWAL, ADVOCATES REVENUE BY : SHRI V.R. SONBHADRA, SENIOR DR DATE OF HEARING : 01.03.2016 DATE OF ORDER : 12.04.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. TAYAL CONCAST (P.) LTD. (HEREINAFT ER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 01.12.2014 PASSED BY THE C OMMISSIONER OF INCOME-TAX, MUZAFFARNAGAR QUA THE ASSESSMENT YEA R 2005-06 ON THE GROUNDS INTER ALIA THAT :- 1. THAT THE ORDER IS AGAINST LAW & FACTS ON RECORD . ITA NO.1146/DEL./2015 2 2. THAT LD. CIT (A) WAS WRONG IN CONFIRMING THE PENALTY U/S 271(1)(C) WITHOUT CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT. 3. THAT LD. CIT (A) WAS WRONG IN NOT CONSIDERING TH E LEVY OF PENALTY WITHOUT POINTING OUT THE DEFAULTS F OR WHICH PENALTY U/S 271(1)(C) HAS BEEN IMPOSED, I.E. WHETHER FOR CONCEALMENT OF INCOME OR FILING INACCUR ATE PARTICULARS OF INCOME OR OF BOTH. 4. THE LD. CIT (A) WAS WRONG IN NOT CONSIDERING VARIOUS RULINGS CITED BY THE APPELLANT. 5. THE LD. CIT (A) WAS WRONG IN MENTIONING .WHEN THESE WAS NO EXPLANATION REGARDING CASH CRE DIT- -- ALTHOUGH DISPUTE WAS ABOUT PENALTY OF CONCEALME NT U/S 271(1)(C). 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY ENGAGED INTO T HE MANUFACTURING AND SALE OF CEMENT, FILED RETURN OF I NCOME QUA ASSESSMENT YEAR 2005-06 SHOWING LOSS AT RS.13,64,00 0/-. DURING ASSESSMENT, IT WAS NOTICED THAT THE ASSESSEE HAS DE CLARED GROSS PROFIT AT RS.23,53,539/- I.E. @ 37.56% ON THE TOTA L TURNOVER OF RS.62,06,215/- IN THE IMMEDIATELY PRECEDING YEAR AN D AFTER APPLYING THE SAME GP RATE IN THE YEAR UNDER CONSIDE RATION, THE GROSS PROFIT WAS ESTIMATED ON PROPORTIONATE ENHANCE D SALE OF RS.74,31,010/-, WHICH CAME TO BE RS.27,86,629/- AND CONSEQUENTLY, AN ADDITION OF RS.27,86,629/- HAS BEEN MADE TO THE INCOME OF THE ASSESSEE. ASSESSEE CARRIED THE MATTER BEFORE THE C IT (A) WHO HAS EXTENDED THE PARTIAL RELIEF TO THE ASSESSEE. THEN THE ASSESSEE FILED ITA NO.1146/DEL./2015 3 AN APPEAL BEFORE THE TRIBUNAL AND ITS APPEAL HAS BE EN ALLOWED DIRECTING THE AO TO PASS A SPEAKING ORDER. 3. DURING THE SECOND ROUND OF ASSESSMENT PROCEEDING S COMPLETED U/S 143(3)/147 OF THE INCOME-TAX ACT, 196 1 (HEREINAFTER THE ACT), THE AO MADE THE FOLLOWING ADDITION :- (I) ON ACCOUNT OF G.P. ON MANUFACTURED ITEMS RS.15 ,50,757/- (II) ON ACCOUNT OF N.P. ON TRADING ITEMS RS. 45,018/- (III) UNSECURED LOANS SUNDRY CREDITORS ETC. UNEXPLAINED RS. 2,03,481/- (IV) ON ACCOUNT OF LATE PAYMENT OF UPFC INTEREST RS. 2,59,152/- THEN, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD . CIT (A) WHO HAS EXTENDED THE RELIEF OF RS.2,03,481/- ON ACCOUNT OF UNEXPLAINED UNSECURED LOANS AND SUNDRY CREDITORS, HOWEVER, AFFI RMED THE REMAINING ADDITION AND DIRECTED TO INITIATE THE PEN ALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR THE AY 2005-06. ON TH E BASIS OF EVIDENCE WHICH HAS COME ON RECORD DURING THE ASSESS MENT PROCEEDINGS, THE AO CAME TO THE CONCLUSION THAT ASS ESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND THER EBY IMPOSED A PENALTY OF RS.6,00,000/- U/S 271(1)(C) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT (A) WHO HAS AFFIRMED THE PENALTY ORDER. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL. ITA NO.1146/DEL./2015 4 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE LD. AR FOR THE ASSESSEE CHALLENGING THE IMPU GNED ORDER CONTENDED INTER ALIA THAT NO FINDINGS HAVE BEEN RET URNED BY THE LD. CIT (A) ON TECHNICAL OBJECTIONS RAISED BY THE ASSES SEE NOR HE HAS DEMANDED OR PERUSED BOOKS OF ACCOUNTS, REGISTER, ET C.; THAT EVEN IN THE REMAND REPORT, THE AO HAS FAILED TO CONTROVERT ANY OF THE CONTENTIONS RAISED BY THE ASSESSEE; THAT THE AO HAS NOT CONSIDERED THE CHANGED PROCESS FOR MANUFACTURING OF CEMENT RAT HER BOTH THE AO AS WELL AS THE CIT (A) HAVE PROCEEDED TO MAKE AN ADDITION ON THE BASIS OF ESTIMATED GROSS PROFIT; THAT NO PENALT Y CAN BE IMPOSED ON THE BASIS OF ESTIMATED ADDITION. HOWEVER, ON TH E OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDERS PASSED BY THE AO AS WELL AS THE CIT (A). 7. UNDISPUTEDLY, IN THE FIRST ROUND OF LITIGATION, THE AO APPLIED THE GP RATE AT 37% ON ESTIMATED TURNOVER OF RS.7,43 ,100/-, HOWEVER LD. CIT (A) REDUCED THE ESTIMATED TURNOVER TO RS.61,44,381/- AND APPLIED THE GP RATE OF 33%. THE N, IN THE SECOND ROUND OF LITIGATION, THE AO PASSED ASSESSMEN T ORDER AND ITA NO.1146/DEL./2015 5 ASSESSED THE ESTIMATED GROSS PROFIT OF RS.55,99,627 /- BY APPLYING THE GP RATE OF 33%. 8. NOW, THE QUESTION ARISES FOR DETERMINATION IS, AS TO WHETHER THE PENALTY CAN BE IMPOSED ON THE BASIS OF ESTIMATE D ADDITION BY APPLYING THE GROSS PROFIT ON THE BASIS OF IMMEDIATE PRECEDING YEARS GROSS PROFIT ON THE ESTIMATED TURNOVER? 9. WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY O RDER PASSED BY THE AO AND AFFIRMED BY THE LD. CIT (A) VIDE IMPU GNED ORDER IS NOT SUSTAINABLE IN THE EYES OF LAW FOR THE FOLLOWIN G REASONS :- (I) THAT THE ENTIRE EXERCISE AS TO THE ASSESSMENT O F THE INCOME ON THE BASIS OF RETURN OF INCOME QUA THE ASSESSMENT YEAR 2005-06, HAS BEEN MADE ON THE ESTIMATION BASIS WITHOUT PERUSING AND REJECTING THE BOOKS OF ACCOUNTS; (II) THAT IN THE FIRST ROUND OF LITIGATION, THE AO ESTIMATED THE TURNOVER OF THE ASSESSEE AT RS.74,31,000/- AND GP RATE AT 37%, HOWEVER THE LD. CIT (A) REDUCED THE TURNOVER TO RS.61,44,381/- AND APPLIED THE GP RATE OF 33% AGAIN ON THE BASIS OF GUESSWORK; (III) THAT IN THE SECOND ROUND OF LITIGATION, ASSES SMENT ORDER WAS PASSED ON THE BASIS OF ESTIMATED TURNOVER OF ITA NO.1146/DEL./2015 6 RS.55,99,627/- AND ESTIMATED GP RATE OF 33%, WHICH CAME TO BE RS.15,50,757/- WITHOUT REJECTING THE BOO KS OF ACCOUNT; (IV) THAT IN THE PENALTY NOTICE DATED 01.05.2013, T HE AO SOUGHT TO INITIATE THE PENALTY PROCEEDINGS AGAINST ASSESSEE BY PROPOSING MINIMUM PENALTY OF RS.5,72,484/- BUT PROCEEDED TO IMPOSE PENALTY OF RS.6,00,000/- WITHOUT ANY EXPLANATION; (V) THAT THE AO AS WELL AS LD. CIT (A) ARE NOT CLEA R ENOUGH AS TO WHETHER THE PENALTY HAS BEEN IMPOSED/ AFFIRMED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR HAVING CONCEALED THE PARTICULARS OF INCOME, PARTICULARLY WHEN THE ENTIRE EXERCISE IS ON THE BASIS OF ESTIMATED TURNOVER AND ESTIMATED GROSS PRO FIT, THAT TOO WITHOUT REJECTING THE BOOKS OF ACCOUNTS. ONE CANNOT BE ASSUMED TO HAVE FURNISHED INACCURATE PARTICULARS, WHEN HE HAS ALREADY CONCEALED THE PARTICULARS OF INCOME; (VI) THAT THE AO AS WELL AS THE LD. CIT (A) PROCEED ED TO IMPOSE THE PENALTY ON THE GROUND THAT THERE ARE GLA RING DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE. ITA NO.1146/DEL./2015 7 BUT WE ARE OF THE CONSIDERED VIEW THAT AGAIN ON THE BASIS OF MERE DISCREPANCIES IN THE ACCOUNT BOOKS, PARTICULARLY WHEN BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED THE PENALTY CANNOT BE IMPOSED; (VII) THAT WHEN THE BOOKS OF ACCOUNTS HAVE BEEN MAINTAINED, PRODUCED BEFORE AO WHO HAS SIMPLY FOUND THE DISCREPANCIES BUT HE HAS NOT FOUND SUFFIC IENT REASON TO REJECT THE BOOKS OF ACCOUNTS, THE ESTIMAT ED TURNOVER AND ESTIMATE GROSS PROFIT CANNOT BE TAKEN INTO CONSIDERATION TO IMPOSE THE PENALTY; (VIII) THAT THE AO HAS NOT RECORDED HIS SATISFACTIO N TO IMPOSE THE PENALTY BUT MERELY RECORDING THE FINDING THAT, S INCE THE EVIDENCE HAS ALREADY BEEN PROVED IN THE ASSESSMENT ORDER AND THE ADDITIONS HAVE BEEN CONFIRMED BY THE LD. CIT (A), HENCE IT IS A FIT CAS E FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE I.T. ACT FOR THE A.Y. 2005-06 ON THE FOLLOWING ADDITIONS, AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME :- (I) ON ACCOUNT OF G.P. ON MANUFACTURED ITEMS:RS.15,50,7 57/- (II) ON ACCOUNT OF N.P. ON TRADING ITEMS : RS. 45,018/- ITA NO.1146/DEL./2015 8 SINCE THE EVIDENCE HAS BEEN PROVED IN THE ASSESSMEN T ORDER AND THE ABOVE ADDITIONS HAVE BEEN CONFIRMED B Y THE LD. CIT (A), M. NAGAR, ACCORDINGLY A SHOW CAUSE NOTICE U/S 271(1)(C) OF THE I.T. ACT DATED 1.5.2013 WAS DULY SERVED UPON THE ASSESSEE FIXING THE CASE FOR 17.5.2013. IN COMPLIANCE TO THE SHOW CAUSE NOTICE, COUNSEL OF THE ASSESSEE ATTENDED AND SOUGHT ADJOURNMENT. IN THE MEANTIME COUNSEL OF THE ASSESS EE FILED REPLY WHICH WAS RECEIVED IN THIS OFFICE ON 23.5.2013 MENTIONING INTER ALIA AS UNDER :- ..FOR THE ADDITION ABOUT G.P. NO PENALTY IS VALID AS HAS BEEN HELD IN VARIOUS RULINGS. I HAVE GONE THROUGH THE REPLY AND FOUND NO FORCE. CONSIDERING ALL THE FACTS, IT IS SEEN THAT IT IS A FIT CASE FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE I.T. ACT FOR THE A.Y. 2005-06. SO FROM THE AFORESAID FINDINGS, SATISFACTION OF THE AO IS NOT REFLECTED RATHER HE HAS ACTED AS POST OFFICE ON THE BASIS OF ASSESSMENT PROCEEDINGS. (IX) THAT THE PENALTY ORDER HAS BEEN PASSED BY THE AO WITHOUT APPLYING HIS MIND AND WITHOUT CONSIDERING T HE ITA NO.1146/DEL./2015 9 REPLY FILED BY THE ASSESSEE AND THE ORDER ITSELF IS A CRYPTIC ONE; (X) THAT AT THE SAME TIME, LD. CIT (A) HAS ALSO AFF IRMED THE PENALTY ON THE BASIS OF ESTIMATED TURNOVER AND ESTIMATED GROSS PROFIT WITHOUT LOOKING INTO THE FAC T IF THE AO HAS MADE HIMSELF SATISFIED TO IMPOSE THE PENALTY FOR FURNISHING THE INACCURATE PARTICULARS O R HAVE CONCEALED THE PARTICULARS OF INCOME; (XI) THAT AO AS WELL AS CIT (A) BEING QUASI-JUDICIA L AUTHORITIES ARE REQUIRED TO PROVIDE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE PARTY BEFORE IMPOSING PENALTY, WHICH IS MISSING IN THIS CASE AND AS SUCH, THE IMPUGNED ORDER IS NOT SUSTAINABLE; (XII) THAT WHEN THE PENALTY HAS BEEN IMPOSED MERELY ON THE BASIS OF ESTIMATED TURNOVER AS WELL AS ESTIMATED GR OSS PROFIT, NECESSARY INGREDIENTS OF SECTION 271(1)(C) THAT, CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE MISSING AND AS SUCH, THE AO IS PRECLUDED FROM IMPOSING PENALTY; (XIII) THAT CIT (A) IN ITS ORDER DATED 07.01.2013 H AS NOT MADE ANY INDEPENDENT ENQUIRY OR CALLED ANY REMAND ITA NO.1146/DEL./2015 10 REPORT IF THE ASSESSEE HAS ACTUALLY INDULGED IN MAK ING SALES AND PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS B UT BLINDLY FOLLOWED THE ASSESSMENT ORDER PASSED BY THE AO; (XIV) THAT THE AO HAS ALSO PROCEEDED TO PASS THE AS SESSMENT ORDER WITH BIASED MIND THAT THE RAID WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE ON1 2.09.2004 AND FIR WAS REGISTERED REGARDING SEIZURE OF THREE TRUCKS OF SPURIOUS CEMENT. BUT, MERELY ON THE BASIS OF REGISTRATION OF FIR, NO ORDER TO THE PREJUDICE TO T HE ASSESSEE CAN BE PASSED THAT HE HAD BEEN MAKING SALE S AND PURCHASES OUTSIDE THE BOOKS OF ACCOUNTS. UNDISPUTEDLY, NO SUCH MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO NOR CALLED UPON BY THE CIT (A) DURING APPELLATE PROCEEDINGS, IF THE ALLEGATIONS LEVELLED IN THE SAID FIR HAVE BEEN PROVED IN THE CO URT; (XV) THAT AO PROCEEDED TO ADOPT THE ESTIMATED GROSS PROFIT AT 33% ON THE GROUND THAT, IN THE ASSESSMENT YEAR 2000-01, A TEP WAS RECEIVED BY THE DEPARTMENT WHEREIN IT WAS INFORMED THAT THE APPELLANT HAD INDULGED IN MAKING SALES AND PURCHASES OUTSIDE THE ITA NO.1146/DEL./2015 11 BOOKS. SUCH OLD HABITS SELDOM VANISH AND THE SAME IS INDICATED IN TERMS OF DISCREPANCIES POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS AND THE EXCISE DEPARTMENT HAS ALSO REPORTED EVASION OF TAX. THES E OBSERVATIONS OF THE AO ARE BASED UPON CONJECTURE AN D SURMISES WITHOUT HAVING ANY COGENT MATERIAL ON RECORD WHICH HAVE BEEN CONFIRMED BY THE CIT (A) IN MECHANICAL MANNER AND THEN THE SAID ORDER HAS BEEN BLINDLY ADOPTED BY THE AO TO PASS THE PENALTY ORDER ; (XVI) THAT MERELY ON THE BASIS OF THE FACT THAT THE EXCISE DEPARTMENT HAS CONDUCTED RAID ON THE BUSINESS PREMISES OF THE ASSESSEE AND DETECTED TAX EVASION, THE ASSESSMENT ORDER CANNOT BE PASSED THAT TOO ON THE BASIS OF ESTIMATED TURNOVER AND ESTIMATED GROSS PRO FIT IN THE FACE OF BOOKS OF ACCOUNTS WHICH HAVE NEVER BEEN REJECTED BY THE REVENUE AUTHORITIES; (XVII) THAT THE AO EVEN IN THE ORIGINAL ASSESSMENT PROCEEDINGS HAVE NOT GIVEN ANY REASON AS TO WHY IN HIS OPINION IT WAS JUST AND PROPER TO INITIATE THE PENALTY PROCEEDINGS. RELIANCE IN THIS REGARD IS PL ACED UPON ORDER PASSED BY THE COORDINATE BENCH IN THE CA SE ITA NO.1146/DEL./2015 12 OF BRITISH AIRWAYS PLC VS. DEPUTY DIRECTOR OF INCOME-TAX (2008) 114 TTJ (DEL.) 220; (XVIII) THAT THE REASONING GIVEN BY THE ASSESSEE FO R LOW GP, DURING THE YEAR UNDER CONSIDERATION, DUE TO THE CHA NGE IN THE PROCESS OF MANUFACTURING OF CEMENT HAS NEVER BEEN CONSIDERED AND REPLIED WITH BY THE AO. 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, THE P RESENT APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF APRIL, 2016. SD/- SD/- (S.V. MEHROTRA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH DAY OF APRIL, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT, MUZAFFARNAGAR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.