M/s Octave Exports, Ludhiana V. DCIT, Ludhiana

ITA 117/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80990 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 117/CHD/2012 ASSESSMENT YEAR: 2005-06 M/S OCTAVE EXPORTS, VS. THE DCIT, CIRCLE VII, LUDHIANA LUDHIANA PAN NO. AAAFO4946P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 11/11/2014 DATE OF PRONOUNCEMENT : 19/11/2014 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 28.11.2011 OF CIT(A)-II, LUDHIANA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 9,16,120/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THAT PENALTY US/ 271(1)(C) HAS BEEN CONFIRMED BY LD. CIT(A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND SUBMISSIONS MADE BY US HAS NOT BEEN CONSIDERED PROPERLY. 3. THAT THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT ALL THE PARTICULARS REGARDING CLAIM OF DEDUCTION U/S 80IC W ERE FILED AND NOTHING WAS CONCEALED AND NO INACCURATE PARTICULARS WERE FILED. 2 4. THAT THE LD. CIT(A) HAS FAILED TO ADMIT THE ADDI TIONAL EVIDENCE AS FILED BEFORE HIM WITHOUT ASSIGNING ANY REASONS. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT ORIG INALLY DEDUCTION U/S 80IC WAS DENIED BY THE ASSESSING OFFICER BY HOLDING THAT ASSESSEE IS NOT DOING ANY MANUFACTURING AT PARWANOO UNIT. FURTHER, CERTAIN DI SCREPANCIES WERE FOUND IN TRANSPORTING OF MATERIAL TO PARWANOO AS IT WAS FOUN D BY ASSESSING OFFICER BY COLLECTING CERTAIN EVIDENCE THAT CERTAIN TRUCKS HAD NOT CROSSED THE PARWANOO BARRIER. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE ALSO INITIATED. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUB MITTED REPLY VIDE LETTER DATED 15.3.2010 WHICH READS AS UNDER:- IT IS MOST RESPECTFULLY SUBMITTED THAT THE ASSESS MENT IN THE ABOVE CASE WAS FRAMED U/S 143(3) OF THE INCOME TAX ACT, 1961. THE ASSESSEE FILED AN APPEAL BEFORE THE HON'BLE CIT(A), LUDHIANA WINCH IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE EXEMPTION U/S 80IC WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IS ALLOWED AS EXEMPTION IN THE APPEAL IN A DETAILED ORDER DATED 1 6/08/2008. REGARDING THE PENALTY PROCEEDINGS U/S 271(1)(C), IT IS FURTHER SUBMITTED THAT PENALTY PROCEEDINGS AND ASSESSMENT P ROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS AND ASSESSMENT PR OCEEDINGS ARE SEPARATE AND INDEPENDENT PROCEEDING AND DISALLOWANC E OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FU RNISHED INCORRECT PARTICULARS OF ITS INCOME. ACIT V MODERN COAL COMPANY AS REPORTED IN 103 (TTJ) ASR 726 CIT VS. BHOJ RAJ AND CO. (2001) 247 ITR 696 IP&H) CIT V AJAIB SINGH & CO. (2002) 253 ITR 630 (P&H) CIT V CHETAN DASS LACHMANN DASS (1995 214 ITR 630 (P&H) HARIJAN CO-OP SOCIETY LTD VS ASSESSING OFFICER (200 7) 34. I.T. REP 549 THUS IN VIEW OF THE ABOVE, SINCE THERE IS NO CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, IT IS PRAY ED BEFORE YOUR GOOD SELF THAT THE PENALTY PROCEEDINGS SHALL NOT BE IMPOSED. 3 FURTHER WE ARE ENCLOSING THE ABOVE SAID JUDGMENTS F OR HOUR KIND REFERENCE. HOWEVER, THE ASSESSING OFFICER DID NOT FIND FORCE I N THE SAME AND LEVIED PENALTY @ 100% U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 19,16,120/-. 4. ON APPEAL ACTION OF THE ASSESSING OFFICER WAS CO NFIRMED BY LD. CIT(A). 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS FAR AS THE ISSUE REGARDING DEDUCTION U/S 80IC OF THE ACT, THE TRIBUN AL HAS HELD AFTER DETAILED DISCUSSIONS IN ITA NOS. 779/CHD/2008 & OTHERS THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IC OF THE ACT. AS FAR AS SECOND A SPECT OF DENIAL OF DEDUCTION ON ESTIMATED PORTION OF THE GP AMOUNTING TO RS. 25, 03,574/-, THE SAME HAS BEEN CONFIRMED BY THE TRIBUNAL. HOWEVER, NO PENAL ACTIO N IS ATTRACTED IN THIS REGARD BECAUSE FIRST OF ALL THIS ADDITION WAS MADE BY COLL ECTING THE EVIDENCE AT THE BACK OF THE ASSESSEE AND IN ANY CASE PARTICULARS AND BAR RIER REPORTS FROM EXCISE & TAXATION DEPARTMENT OF HIMACHAL PRADESH WERE FILED BEFORE CIT(A) WHICH CLEARLY SHOWS THAT BILL NUMBERS SHOWN BY THE ASSESS EE TALLY WITH THE BILL NUMBERS SHOWN IN THE COMPUTERIZED STATEMENTS. IN TH IS REGARD, HE REFERRED TO THE VARIOUS COMPUTERIZED SLIPS AND COPIES OF THE BILLS IN THE PAPER BOOK FILED ON 9.10.2014. HE CONTENDED THAT THESE DOCUMENTS WERE N OT CONSIDERED BY LD. CIT(A). IN ANY CASE THIS PORTION OF DEDUCTION WAS D ENIED ON ESTIMATED BASIS, THEREFORE, ABOVE PENAL ACTION IS NOT CALLED FOR. 6. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT DEDUCTION U/S 80IC HAS BEEN HELD TO BE ALLOWABLE BY THE CHANDIGARH BEN CH OF THE TRIBUNAL IN THEC CASE OF ASSESSEE ITSELF IN ITA NO. 779/CHD/2008 AND OTHERS (SUPRA) WHEREIN THE 4 ISSUE REGARDING PART OF DENIAL OF DEDUCTION HAS BEE N DISCUSSED AT A PARAS 54 TO 57 WHICH READS AS UNDER:- 54. NOW THE ONLY OTHER ITEM LEFT FOR DELIBERATION IS THE MODE OF TRANSPORT USED FOR TRANSPORTING THE RAW MATERIAL FROM LUDHIANA TO PARWANOO. THE CASE OF THE ASSESSEE BEF ORE THE AUTHORITIES BELOW AND BEFORE US WAS THAT THE PARTNE RS USED TO SELECT THE RAW MATERIAL AT LUDHIANA AND TRANSFER TH E SAME BY VARIOUS MODES TO PARWANOO. THE REQUISITE DETAILS OF THE SAID TRANSFER OF RAW MATERIAL VIDE DIFFERENT VEHICLES IS INCORPORATED IN CHART-A ANNEXED TO THE COMMISSIONER OF INCOME TA X (APPEALS)S ORDER. THE ASSESSING OFFICER OBTAINED INFORMATION FROM THE EXCISE & TAXATION COMMISSIONER, HIMACHAL P RADESH VIS--VIS VEHICLES WHICH HAD CROSSED THE BARRIER BE TWEEN KALKA AND PARWANOO AND CERTAIN DISCREPANCIES WERE NOTED I MPLYING THAT THE GOODS HAD NOT CROSSED THE BARRIER. HOWEVER , THE ASSESSEE EXPLAINED THE DISCREPANCIES IN RESPECT OF QUOTING OF THE VEHICLE NUMBER AND ALSO STATED THAT CERTAIN GOO DS HAD BEEN TRANSPORTED THROUGH THE BARRIER AT MOHALI, PUNJAB A ND NOT THROUGH THE BARRIER BETWEEN KALKA AND PARWANOO. 55. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE P ARAS 5.21 TO 5.24 HAD CARRIED OUT THE EXERCISE OF INVEST IGATING THE CLAIMS MADE BY THE ASSESSEE AND HAD OBSERVED THAT T HE DISCREPANCIES STAND EXPLAINED BY THE ASSESSEE TO SO ME EXTENT. HOWEVER, IN RESPECT OF FEW VEHICLES, THE EXPLANATIO N GIVEN BY THE ASSESSEE WAS FOUND TO BE INCORRECT AND CONSEQUE NTLY PROFIT TO THE EXTENT OF RS. 25,03,572/- WAS WORKED OUT TO BE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE AC T. THE RELEVANT PARA 6 IN THIS REGARD OF COMMISSIONER OF I NCOME TAX (APPEALS) READS AS UNDER : 6. IN VIEW OF THE ABOVE DISCUSSIONS, THOUGH TH E CONCLUSIONS OF THE AO. THAT NO MANUFACTURING ACTIVITIES WERE CARRIED O UT BY THE APPELLANT AT PARWANOO AND THAT FURTHER THE APPELLANT WAS NOT LEGALLY ENTITLED TO DEDUCTION U/S 80IC COULD NOT BE ACCEPTED, IN THE LA CE OF THE DISCREPANCIES WITH REGARD TO SOME VEHICLES REMAINING UNEXPLAINED, AS DISCUSSED IN THE PRECEDING PARAGRAPHS, IT HAS TO BE CONSIDERED THAT THE MATERIAL CLAIMED TO HAVE BEEN TRANSPORTED BY THESE VEHICLES WAS NOT AVA ILABLE FOR MANUFACTURING GOODS AT PARWANOO. AS PER THE DETAILS GIVEN IN ANNE XURE 'A' TO THIS ORDER, THE TOTAL OF THE RAW MATERIAL CLAIMED TO BE TRANSPO RTED THROUGH THESE VEHICLES COME TO RS.45, 33,495/-. THE APPELLANT HAS SHOWN GP OF 37% FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE COST OF RA W MATERIAL OF 5 RS.45,33,495/- WOULD CORRESPOND TO SALES OF RS. 67, 66,410/-. APPLYING THE G.P. RATE OF 37% TO THESE SALES THE PROFIT WOULD CO ME TO RS.25,03,572/-. THEREFORE, IT HAS TO BE HELD THAT THE PROFIT OF RS. 25,03,572/- INCLUDED IN THE PROFIT OF RS. 1,22,38,136/- BY THE APPELLANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT THE PRO FIT EARNED FROM MANUFACTURING ANY GOODS AT PARWANOO AS CLAIMED. THE APPELLANT, WAS, THEREFORE, NOT ENTITLED FOR ANY DEDUCTION U/S 80IC ON THIS INCOME OF RS.25,03,572/-. THEREFORE, THE ALLOWABLE DEDUCTION U/S 80IC TO THE APPELLANT WOULD COME TO RS.97,34,564/-. AFTER ALLOW ING DEDUCTION U/S 80IC(2)(A) OF THE ACT TO THE APPELLANT AT RS.97,34, 564/-, THE TAXABLE INCOME WOULD REMAIN AT RS.25,03,572/-. THE A.O. IS, THEREF ORE, DIRECTED TO CONSIDER THE TOTAL TAXABLE INCOME OF THE APPELLANT AT RS.25,03,572/- AND THE APPELLANT WOULD GET A RELIEF OF RS. .97,34,564/ -. 56. IN VIEW OF THE EXPLANATION FILED BY THE ASSESSE E BEFORE THE ASSESSING OFFICER AND ALSO BEFORE COMMISSIONER OF INCOME TAX (APPEALS) AND IN VIEW OF THE DISCREPANCIES IN M ENTIONING THE NUMBERS OF VARIOUS VEHICLES AND ALSO CO-RELATIN G THE INFORMATION RECEIVED FROM THE COMMISSIONER EXCISE & TAXATION, HIMACHAL PRADESH WITH THE FACTS OF THE CA SE, WE ARE IN CONFORMITY WITH THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. WE, ACCORDINGLY UPHOLD T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND IN VIEW OF THE FACT THAT THE ASSESSEE HAS FAILED TO RECONCILE THE PASSA GE OF VEHICLE THROUGH THE BARRIER CARRYING THE RAW MATERIAL, CERT AIN DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC IS MER ITED IN THE CASE. THE TOTAL COST OF RAW MATERIAL CLAIMED TO BE TRANSPORTED THROUGH SUCH VEHICLES WAS RS. 45,33,495/- AND THE S AME CORRESPONDS TO SALES OF RS. 67,66,410/-. THE ASSES SEE HAD DECLARED GP RATE OF 37% AND APPLYING THE SAME TO TH E SALES, THE PROFIT WORKS OUT TO RS. 25,03,572/-. THEREFORE , WE HOLD THAT THE PROFITS OF THE ELIGIBLE BUSINESS ARE TO BE RE-WORKED AND PROFITS TO THE EXTENT OF RS. 25,03,572/- ARE NOT LI ABLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. HOWEVE R, DEDUCTION UNDER SECTION 80IC(2)(A)(II) OF THE ACT I S TO BE ALLOWED TO THE ASSESSEE ON BALANCE SALES OF RS. 97, 34,564/-. 57. UPHOLDING THE ORDER OF COMMISSIONER OF INCOME T AX (APPEALS), WE DISMISS GROUNDS OF APPEAL RAISED BY T HE REVENUE AND ALSO THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE. 6 8. THE ABOVE CLEARLY SHOWS THAT ULTIMATELY PART OF THE DEDUCTION HAS BEEN DENIED ON SOME ESTIMATED PROFITS ON CERTAIN SALES. IT IS ALMOST SETTLED NOW THAT PENAL ACTION CANNOT BE TAKEN ON THE BASIS OF ESTIMA TED ADDITIONS. A REFERENCE MAY BE MADE TO THE DECISION OF HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS RAVAIL SINGH AND CO. 254 ITR 191 AND COMMISSIONER OF INCOME TAX VS SANGRUR VANASPATI MIL LS LTD. 303 ITR 53. THEREFORE, IN OUR OPINION, THIS IS NOT A FIT CASE FOR LEVY OF PEN ALTY BECAUSE THE PART OF THE DEDUCTION WAS DENIED ON THE BASIS OF SOME ESTIMATED ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THE PE NALTY. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/11/2014. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : NOVEMBER, 2014 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR 7