Shri Pragjibhai Ghusabhai Patel, Surat V. The Income tax Officer,Ward-8(3), Surat

ITA 1163/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1518 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Difference of opinion; Change of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA. NO.1163/AHD/2013 (ASSESSMENT YEAR:2006-07) PRAGJIBHAI GHUSABHAI PATEL 125, SAHAJANAND SOCIETY, B/H. AROGYA KENDRA, KATARGAM, SURAT 395004 APPELLANT VS. ITO, WARD -8 (3), SURAT RESPONDENT PAN: AAVPP6758P & ITA. NO.1164/AHD/2013 (ASSESSMENT YEAR:2006-07) GHANSHYAMBHAI POPATBHAI PATEL 20, NITYANAND SOCIETY, LAXMIKANT ASHRAM ROAD, KATARGAM, SURAT 395004 APPELLANT VS. ITO, WARD -8 (3), SURAT RESPONDENT ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 2 PAN: AGBPP9570F / BY ASSESSEE : SHRI P. M. MEHTA WITH SHRI GULAB THAKOR, A.R. / BY REVENUE : SHRI NARENDRA SINGH, SR. D.R. /DATE OF HEARING : 26.05.2016 /DATE OF PRONOUNCEMENT : 27.05.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: BOTH THESE APPEALS HAVE BEEN FILED BY TWO DIFFERENT ASSESSEE OF SAME GROUP AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-V, SURAT, DATED 06.02.2013 FOR A.Y. 2006- 07. SINCE, BOTH THESE APPEALS INVOLVE COMMON ISSUES, THEREFORE , THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.1163/AHD/2013 FOR A.Y. 2006-07 IN CAS E OF SHRI PRAGBHAI G. PATEL, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE O F THE APPELLANT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY SUSTAINING THE PENALT Y U/S.271(1)(C) OF THE ACT FOR RS.80,940/- WHEN THE S AME IS WHOLLY UNJUSTIFIED AND UNWARRANTED. THE SAME DESERVES TO BE CANCELLED. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING PENALTY ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 3 U/S.271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF EXPENSES & CONCEALMENT OF INCOME PARTICULARLY WHEN DISALLOWANCE OF EXPENSES MADE IN ASSESSMENT WAS TOTALLY ON THE ESTIMATED BASIS. 3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE PENALTY OF RS.80,940/- MAY BE DELETED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSING OFFICER REJECTED THE CLAIM OF EXPENSES BY ASSESSEE OF RS.20,91,320/- UNDER VARIOUS HEADS. THE DISALLOWAN CE OF RS.20,91,320/- WAS RESTRICTED TO RS.3,08,071/- BY I TAT. DURING THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE SUBMITT ED THAT BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED AND THEREFORE D ISALLOWANCE OF EXPENSES IS ONLY ESTIMATION WHICH IS NOT A CONCE ALMENT OF INCOME. ASSESSING OFFICER REJECTED THE CONTENTION OF ASSESSEE AND LEVIED PENALTY OF RS.80,940/- ON CONCEALED INCOME O F RS.3,08,066/-. 4. MATTER WAS CARRIED BEFORE THE LD. CIT(A), WHEREI N CIT(A) CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE AN D CONFIRMED THE ORDER OF ASSESSING OFFICER. 5. SAME HAS BEEN OPPOSED ON BEHALF OF ASSESSEE. LD . AUTHORIZED REPRESENTATIVE HAS RAISED VARIOUS CONTEN TIONS IN FAVOUR OF ASSESSEE AND REQUESTED TO DELETE THE PENA LTY. ON THE OTHER HAND, LD. D.R. SUPPORTED THE ORDERS OF AUTHOR ITIES BELOW. 6. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT ASSESSEE IS ENGAGED IN THE BUS INESS OF DIAMOND MANUFACTURING ON LABOUR BASIS. HE FILED HI S RETURN OF INCOME FOR A.Y. 2006-07 SHOWING TOTAL INCOME OF RS. 1,34,664/-. ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 4 IN CASE OF ASSESSEE, SCRUTINY ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON AN INCOME OF RS.20,91,320/- BY MAK ING 20% LUMP SUM DISALLOWANCE FROM THE FOLLOWING EXPENSES. KARIGAR MAZDOORI EXPENSES RS.1,01,87,570/- FACTORY EXPENSES RS. 1,51,456/- SARAN MANZAI EXPENSES RS. 1,17,571/- ---------------------- TOTAL RS. 1,04,56,597/- ================ DISALLOWANCE 20% OF ABOVE RS. 20,91,320/- ASSESSING OFFICER MADE DISALLOWANCE BY OBSERVING AS UNDER: HOWEVER, IT IS UNDERSTANDABLE THAT WITHOUT LABOUR EXPENSES ONE CANNOT COMPLETE THE JOB WORK. THEREFORE, TAKIN G A LENIENT VIEW AND GIVING A FAIR AND REASONABLE ESTIM ATE I CAME TO CONCLUSION THAT PART OF LABOUR EXPENSES SHO WN IN THE NAME OF THE LABOURS ARE NOT GENUINE. THE ASSES SEE HAS ALSO FAILED TO ESTABLISH THE PAYMENT BY PROVIDING L ABOURS. THUS, HE INITIATED PENALTY U/S.271(1)(C) OF THE ACT FOR THE DISALLOWANCE MADE ON ESTIMATED BASIS. 6.1 IN QUANTUM APPEAL, CIT(A) RESTRICTED THE DISALL OWANCE AT RS.2,26,902/- AND BALANCE DISALLOWANCE OF RS.18,64, 418/- WAS DELETED BY CIT(A). AGAINST THE ORDER CIT(A), DEPAR TMENT FILED APPEAL BEFORE THE ITAT, WHEREIN DISALLOWANCE WAS RE STRICTED AT RS.3,08,071/- BY OBSERVING AS UNDER: CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMST ANCES NOTED ABOVE IN THE LIGHT OF FINDINGS OF THE AO, IT WOULD BE REASONABLE TO DISALLOW APPROXIMATELY 3% OF THE EXPE NSES ON THIS ISSUE AND AS SUCH ADDITION WOULD BE MAINTAINED IN A SUM OF RS.3,00,000/- INSTEAD OF RS.2,00,000/- MAINT AINED BY THE LEARNED CIT(A). ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 5 IT SHOWS THAT ESTIMATED ADDITION ON ACCOUNT OF DISA LLOWANCE CERTAIN EXPENSES HAVE BEEN ESTIMATED WHICH HAS BEEN CHANGED BY CIT(A) AND ITAT AS DISCUSSED ABOVE. THUS, THE D ISALLOWANCES ARE ON ESTIMATED BASIS. IT SHOWS THAT EXPENSES WER E NOT ALTOGETHER FOUND BOGUS. THE BASIS OF PENALTY IS ES TIMATED ADDITION BY MAKING DISALLOWANCE OF CERTAIN EXPENSES . THUS, THE DISALLOWANCE / ADDITION MADE ON THE BASIS OF ESTIMA TION ARE NOT SOUND BASIS OF LEVYING PENALTY. ASSESSMENT PROCEED INGS AND PENALTY PROCEEDINGS ARE DIFFERENT AND DISTINCT FROM EACH OTHER, THEREFORE, THE MERE ADDITION OR DISALLOWANCES ON ES TIMATION BASIS CANNOT BE MADE THE BASIS FOR LEVYING PENALTY U/S.27 1(1)(C) OF THE ACT. APART FROM THIS, IT IS A CHANGE OF OPINION BY DIFFERENT AUTHORITIES AS DISCUSSED ABOVE. IN VIEW OF ABOVE, PENALTY U/S.271(1)(C) OF THE ACT IS NOT JUSTIFIED. THE SAM E IS DIRECTED TO BE DELETED. 7. IN ITA NO.1164/AHD/2013 FOR A.Y. 2006-07 IN CAS E OF SHRI GHANSHYAMBHAI P. PATEL, THE ASSESSEE HAS TAKEN FOLL OWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE O F THE APPELLANT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW BY SUSTAINING THE PENALT Y U/S.271(1)(C) OF THE ACT FOR RS.78,470/- WHEN THE S AME IS WHOLLY UNJUSTIFIED AND UNWARRANTED. THE SAME DESERVES TO BE CANCELLED. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING PENALTY U/S.271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF EXPENSES & CONCEALMENT OF INCOME PARTICULARLY WHEN DISALLOWANCE OF EXPENSES MADE IN ASSESSMENT WAS TOTALLY ON THE ESTIMATED BASIS. ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 6 3. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE PENALTY OF RS.78,470/- MAY BE DELETED. 8. AGAIN IN THIS CASE, ADDITION HAS BEEN MADE BY AS SESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF LABOUR EXPENS ES, FACTORY EXPENSES AND SARAN MANJAL EXPENSES. ASSESSING OFFI CER HAS DISALLOWED 20% OF THESE EXPENSES. IN LABOUR EXPENS ES, CIT(A) RESTRICTED THE SAME TO RS.2,50,000/- AND ITAT TO RS .3,00,000/-, SIMILARLY WITH REGARD TO FACTORY EXPENSES CIT(A) RE STRICTED THE DISALLOWANCE 10%, WHICH WAS REDUCED TO 3% BY ITAT A ND ON SAME LINE, WITH REGARD TO SARAN MANZAI EXPENSES, CI T(A) RESTRICTED TO 10% WHILE ITAT RESTRICTED TO 3%. SO, AGAIN THIS IS A CASE OF ADDITION MADE ON ESTIMATION BASIS ON ACCOUN T OF DISALLOWANCE OF THE EXPENSES AS DISCUSSED IN CASE O F SHRI PRAGBHAI G. PATEL IN ITA NO.1163/AHD/2013, WE HELD THAT ADDITIONS MADE ON ESTIMATED BASIS ARE NOT SOUND BAS IS OF PENALTY U/S.271(1)(C) OF THE ACT. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING, THE PENALTY IN QUESTION IS DIRECTED TO B E DELETED. 9. AS A RESULT, BOTH APPEALS FILED BY ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF MAY, 2016. SD/- SD/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD: DATED 27/05/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ()*+ ,--. ./0 / ITA NOS.1163 & 1164/AHD/13 A.Y. 06-07 [SHRI PRAGJIBHAI G. PATEL & SHRI GHANSHYAMBHAI P. P ATEL VS. ITO] PAGE 7 DR, ITAT, AHMEDABAD 1+2345 / GUARD FILE. BY ORDER / . // ./0