M/s. Technocraft Enterprise, Ahmedabad V. The Income Tax Officer, Ward-3(1), Ahmedabad

ITA 1189/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9575 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: P M MEHTA; GM THAKOR
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1189/AHD/2015 / ASSESSMENT YEAR: 2006-07 M/S. TECHNOCRAFT ENTERPRISE, PLOT NO.518, GIDC ESTATE, B/H. CHHOTALALS CHAWAL, ODHAV, AHMEDABAD-382415 PAN : AABFT 1793 Q VS. THE ITO, WARD-3(1), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.M. MEHTA & SHRI GM THAKOR, AR REVENUE BY : SHRI VILAS V. SHINDE, DR. !' / DATE OF HEARING : 03/12/2015 / DATE OF PRONOUNCEMENT: 10/02/2016 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-3, AHMEDABAD, DATED 19.02.2015 PASSED FOR ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEALS TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF THE ITAT'S RULES, THEY ARE DESCRIPTI VE AND ARGUMENTATIVE IN NATURE. IN BRIEF, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,14,152/- WH ICH WAS IMPOSED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME-TAX ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN MANUFACTURING AND TRADING OF ROLLS ETC. MACHINERY P ARTS. IT HAS FILED ITS RETURN OF INCOME ON 28.12.2006 DECLARING TOTAL INCO ME AT RS.2,53,076/-. AN ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 2 ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 04.12.200 7 DETERMINING THE TOTAL INCOME AT RS.2,76,980/-. ON PERUSAL OF THE ASSESSM ENT RECORDS, THE LEARNED COMMISSIONER HAS HARBOURED A BELIEF THAT THE ASSESS MENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE; THEREFO RE, ACTION U/S 263 OF THE INCOME-TAX ACT WAS TAKEN. THE LEARNED COMMISSIONER HAS SET ASIDE THE ASSESSMENT ORDER VIDE HIS ORDER DATED 17.03.2010 WI TH A DIRECTION TO REFRAME THE ASSESSMENT ORDER. THE LEARNED ASSESSING OFFICE R HAS PASSED THE FRESH ASSESSMENT ORDER ON 29.12.2010 U/S. 143(3) R.W.S. 2 63 OF THE ACT. HE DETERMINED THE TAXABLE INCOME OF THE ASSESSEE AT RS .9,06,564/-. THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.6,36,2 24/-. THE ADDITION WAS MADE ON THE GROUND THAT EXCISE DEPARTMENT HAS CARRI ED OUT AN INSPECTION ON THE PREMISES OF THE ASSESSEE ON 30.03.2006, WHER EIN THEY HAVE WORKED OUT RECEIPTS OF RS.6,36,224/- AND DIRECTED THE ASSE SSEE TO PAY EXCISE DUTY AT RS.1,03,832/-. THE ASSESSEE HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT EXCISE AUTHORITIES HAVE TAKEN THE INVOICE VALUE ON THE BASIS OF ROUGH NOTING AND JOTTINGS MADE BY THE EMPLOYEES. THE ASSESSEE WA S NOT INTERESTED TO INVOLVE IN THE LITIGATIONS; THEREFORE, DID NOT DISP UTE THE PAYMENT OF EXCISE DUTY, BUT THAT DOES NOT MEAN THAT THE ASSESSEE HAS ACTUALLY RECEIVED SOMETHING OVER AND ABOVE THE ONE DISCLOSED IN THE B OOKS. THE LEARNED ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION OF THE ASSESSEE AND MADE THE ADDITION. THE ASSESSING OFFICER HAS INITI ATED PENALTY PROCEEDINGS AND ULTIMATELY IMPOSED THE PENALTY OF RS.2,14,152/- . 4. APPEAL TO CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE ASSESSEE HAS SHOWN INVOICE VALUE OF RS.9,33,500/- FOR THE PU RPOSE OF EXCISE DUTY. THE EXCISE AUTHORITIES HAVE WORKED OUT SUCH INVOICE VAL UE AT RS.15,69,724/-. THIS INVOICE VALUE HAS BEEN ARRIVED AT ON THE BASIS OF CERTAIN NOTING MADE BY THE EMPLOYEES. THE ACCEPTANCE AT THE END OF THE AS SESSEE FOR PAYMENT OF ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 3 EXCISE DUTY WOULD NOT AUTOMATICALLY AUTHORIZE THE A SSESSING OFFICER TO VISIT THE ASSESSEE WITH THE PENALTY. THE ASSESSING OFFIC ER IN THE ORIGINAL ASSESSMENT PROCEEDINGS VERIFIED THE BOOKS OF ACCOUN TS OF THE ASSESSEE AND DID NOT MAKE ANY ADDITION. IN THE SET ASIDE ASSESSM ENT ORDER, THE ASSESSING OFFICER HAS SIMPLY RELIED UPON THE INFORMATION COLL ECTED FROM EXCISE AUTHORITIES, BUT DID NOT EXAMINE THE MATERIAL COLLE CTED BY THE EXCISE AUTHORITY HIMSELF. THUS, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, NO CASE FOR VISITING THE ASSESSEE WITH THE PENALTY IS MADE OUT. 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF THE LEARNED REVENUE AUTHORITIES BELOW. HE CONTENDED THAT ALL THESE ASPECTS HAVE DULY BEEN CONSIDERED BY THE LEAR NED CIT(A) AND ONLY THEREAFTER PENALTY HAS BEEN CONFIRMED. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. 8. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARI NG ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHICH READ AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDIN GS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 4 EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AN D MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCL OSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUT ING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEE MED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED'. 9. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTIO N CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INT O PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)( C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 5 COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISION S OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLA NATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFI CER OR LEARNED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT , MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPEC T TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PRO VIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT T HAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF TH E ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEE N FURNISHED. 10. IN THE LIGHT OF ABOVE, LET US EXAMINE THE EXPLA NATION OF THE ASSESSEE. THE STAND OF THE ASSESSEE IS THAT INVOICE VALUE SHO WN BY IT WAS OF RS.9,33,500/-. THIS INVOICE VALUE HAS BEEN REVISED BY THE EXCISE AUTHORITIES TO THE FIGURE OF RS.15,69,724/-. IT PUTS A TAX LIAB ILITY OF RS.1,03,832/-. ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 6 KEEPING IN VIEW THE SMALLNESS OF THE AMOUNT INVOLVE D THE ASSESSEE DID NOT LITIGATE WITH THE EXCISE AUTHORITIES. ACCORDING TO THE ASSESSEE, IT DOES NOT MEAN THAT HE HAS ACCEPTED THE CALCULATION MADE BY T HE EXCISE AUTHORITIES, EVEN FOR THE PURPOSE OF VISITING THE ASSESSEE WITH PENALTY. WE HAVE PERUSED THE ASSESSMENT ORDERS, I.E., DATED 04.02.2007 AS WE LL AS 29.12.2010 PASSED U/S 143(3) AND 143(3) R.W.S. 263 OF THE INCOME-TAX ACT. WE FIND THAT THE ASSESSING OFFICER NOWHERE INDEPENDENTLY ANALYZED TH E MATERIAL OR THE EVIDENCES COLLECTED BY EXCISE AUTHORITIES. HE SIMPL Y PROCEEDED AGAINST THE ASSESSEE ON THE BASIS OF INFORMATION COLLECTED FROM EXCISE AUTHORITIES. THE NATURE OF THAT INFORMATION HAS NEVER BEEN ANALYZED FOR THE PURPOSE OF MAKING ADDITION TO THE INCOME OF THE ASSESSEE. THA T TYPE OF EVIDENCE CANNOT BE RELIED UPON FOR THE PURPOSE OF VISITING THE ASSE SSEE WITH PENALTY. THE DEGREE OF EVIDENCE OUGHT TO BE OF A LITTLE HIGHER S TANDARD, BECAUSE THE PENALTY PROCEEDINGS COULD EXPOSE THE ASSESSEE WITH PROSECUTION ALSO. MERELY THE ASSESSEE DID NOT DISPUTE WITH EXCISE AUT HORITIES DOES NOT MEAN THAT, IN CASE OF PENALTY PROCEEDINGS IF IT CHALLENG ES THE VERY BASIS OF ADDITION, IT WILL BE DENUDED FROM HIS RIGHTS TO CHA LLENGE THE NATURE OF EVIDENCE. IN OUR OPINION, THE EVIDENCE RELIED UPON BY THE ASSESSING OFFICER DOES NOT FALSIFY THE EXPLANATION OF THE ASSESSEE AS DISCERNABLE FROM THE NOTE NO.2 OF THE AUDITORS REPORT PREPARED U/S 44AB OF T HE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE APPEAL OF THE ASSESS EE AND DELETE THE PENALTY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10 TH FEBRUARY, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 10/02/2016 BIJU T., PS ITA NO. 1189/AHD/2015 M/S. TECHNOCRAFT ENTERPRISE VS. ITO FOR AY: 2006-07 7 %!&'(')! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' # / CONCERNED CIT 4. ' # ( ) / THE CIT(A) 5. &'( ! , ! , / DR, ITAT, AHMEDABAD 6. (- ./ / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD