The ITO, Ward-9(1), Surat V. M/s. Bhadiyadra Brothers, Surat

ITA 1196/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89751 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: JP SHAHAR
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1196/AHD/2011 ( / ASSESSMENT YEAR : 2004-05) THE INCOME TAX OFFICER WARD-9(1) SURAT / VS. M/S.BHADIYDRA BORTHERS 9-10, SAVANI DIAMOND ESTATE B/H. JITANJALI CINEMA SURAT ./ ./ PAN/GIR NO. : AAGFM 2845 R ( ' / APPELLANT ) .. ( #' / RESPONDENT ) ' $ / APPELLANT BY : SHRI P.L. KUREEL, SR.DR #' % $ / RESPONDENT BY : SHRI J.P. SHAH, AR &'( % ) / DATE OF HEARING 16/07/2015 *+, % ) / DATE OF PRONOUNCEMENT 23/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-V, SURAT [CIT(A) IN SHORT] DATED 15/12/2010 PERTAINING TO ASSESSMENT YEAR (AY) 2004-05. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.3 8,00,000/- IMPOSED ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 2 - BY THE A.O. U/S.271(1)(C) OF THE ACT DESPITE THE FA CT THAT THE A.O. HAD BROUGHT ON RECORD VARIOUS MATERIAL EVIDENCES ON REC ORD TO PROVE THAT THE ASSESSEE FIRM HAD FURNISHED INACCURATE PAR TICULARS OF INCOME DURING THE ASSESSMENT PROCEEDINGS TO SUPPRES S THE INCOME. 2. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) BE SET ASIDE AND THE ASSESSING OFFICERS PENALTY ORDER BE RESTOR ED. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSMENT U /S.143(3) R.W.S.145(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 26/12/2006, THEREBY THE ASS ESSING OFFICER (AO IN SHORT) MADE ADDITION ON ACCOUNT OF UNEXPLAINED U NPAID WAGES OF RS.96,41,849/-, DISALLOWANCE OF EXCESS CLAIM OF WAG ES OF RS.16,16,505/- AND SUPPRESSION OF LABOUR RECEIPTS OF RS.14,10,390/ -. THE PENALTY PROCEEDINGS WERE ALSO INITIATED BY THE AO BY ISSUIN G NOTICE U/S.271(1)(C) R.W.S.274 OF THE I.T.ACT, 1961. THE PRESENT APPEAL IS AGAINST PENALTY PROCEEDINGS. IN THE QUANTUM PROCEEDINGS, THE MATER TRAVELLED UTPO THE STAGE OF TRIBUNAL (ITAT AHMEDABAD BENCH D) AND TH E TRIBUNAL IN ITA NOS.2743 AND 2789/AHD/2007 FOR AY 2004-05 (BY A SSESSEE & REVENUE RESPECTIVELY) VIDE ITS ORDER DATED 10/12/20 10 WAS PLEASED TO RESTORE THE ISSUE OF UNPAID WAGES OF RECEIPTS OF RS .96,41,849/- TO THE FILE OF AO FOR DECISION AFRESH. THE AO IN PURSUANCE TO THE ORDER OF THE TRIBUNAL, PASSED ANOTHER ASSESSMENT ORDER U/S.143(3 ) R.W.S. 254 OF THE ACT DATED 29/12/2011. THE AO SUSTAINED THE ADDITIO N MADE ON ACCOUNT OF UNEXPLAINED UNPAID WAGES OF RS.96,41,849/-. THI S ISSUE FURTHER TRAVELLED UPTO THE STAGE OF THE TRIBUNAL (ITAT AHME DABAD BENCH D) ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 3 - AND THE TRIBUNAL WAS PLEASED TO RESTRICT THE ADDITI ON TO THE EXTENT OF RS.25 LACS IN ITA NO.1166/AHD/2012 VIDE ITS ORDER D ATED 21/12/2014. THE AO VIDE ORDER DATED 31/03/2009 IMPOSED A PENALT Y OF RS.38 LACS ON ADDITION OF RS.1,13,95,500/- ORIGINALLY MADE BY THE AO IN RESPECT OF UNEXPLAINED UNPAID WAGES, EXCESS CLAIM OF WAGES AND SUPPRESSION OF LABOUR RECEIPTS. AGAINST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS DE LETED THE PENALTY. NOW, THE REVENUE IS IN APPEAL BEFORE US. 3. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND S UBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY . 3.1. ON THE CONTRARY, THE LD.COUNSEL FOR THE ASSESS EE SUBMITTED THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DIFFERENT AND DISTINCT PROCEEDINGS AND STAND ON DIFFERENT FOOTING . HE SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E AO HAS LEVIED THE PENALTY ON ENTIRE ADDITION MADE ORIGINALLY BY THE A O. HE SUBMITTED THAT THE ADDITION IN RESPECT OF THE UNEXPLAINED UNPAID W AGES OF RS.96,41,849/-, THE TRIBUNAL IN ITA NO.1166/AHD/201 2 HAS RESTRICTED THE ADDITION TO RS.25 LACS. HE SUBMITTED THAT THE AO W AS NOT JUSTIFIED IN LEVYING THE PENALTY UNDER THE FACTS OF THE PRESENT CASE. HE SUBMITTED THAT THE ADDITION HAS BEEN MADE PURELY ON AN ESTIMATION BASIS. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE FIRST ROUND OF LITIGATION A TAX ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 4 - APPEAL NO.573 OF 2011 WAS FILED BY THE ASSESSEE BEF ORE THE HONBLE HIGH COURT OF GUJARAT AND THE HONBLE HIGH COURT VI DE ORDER DATED 19/07/2012 WAS PLEASED TO ADMIT THE APPEAL BY FORM ULATING SUBSTANTIAL QUESTION OF LAW WITH REGARD TO RESTORATION TO THE F ILE OF AO THE QUESTION OF DEDUCTIBILITY OF UNPAID WAGES NOT ACCEPTING THE CONTENTION OF THE ASSESSEE THAT WITHOUT PROOF OF PAYMENT THE AO WAS N OT JUSTIFIED IN MAKING THE ADDITION OF UNPAID WAGES AS HAVING BEEN PAID AND AS UNEXPLAINED INCOME AND WITH REGARD TO THE QUESTION THAT A SUM OF RS.13,14,047/- WAS DISALLOWABLE BY INVOKING THE PRO VISIONS OF SECTION 14A(2) OF THE IT ACT, 1961. THE LD.COUNSEL FOR TH E ASSESSEE SUBMITTED THAT IN SECOND ROUND OF LITIGATION, THE TRIBUNAL HA D RESTRICTED THE ADDITION TO THE EXTENT OF DISALLOWANCE OF RS.25 LACS IN ITA NO.1166/AHD/2012 VIDE ORDER DATED 21/02/2014. THIS WAS CHALLENGED B OTH BY THE ASSESSEE AND THE REVENUE RESPECTIVELY BY WAY OF TAX APPEAL NO.863 OF 2014 AND TAX APPEAL NO.875 OF 2014 AND BOTH THE APPEALS HAVE BEEN ADMITTED BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ORDER DA TED 19/08/2014 AND DATED 19/11/2014 RESPECTIVELY BY FORMULATING THE SU BSTANTIAL QUESTION LAW. HE SUBMITTED THAT FIRSTLY, THE PENALTY OUGHT NOT TO HAVE BEEN IMPOSED UNDER THE FACTS OF THE PRESENT CASE AS THE ADDITIONS HAVE BEEN MADE ON THE BASIS OF CONJECTURES AND SURMISES PUREL Y ON AN ESTIMATION BASIS. THERE WAS NO MATERIAL BEFORE THE AO TO MAKE SUCH ADDITION AND, SECONDLY, THE ADDITIONS ON THE BASIS OF WHICH THE P ENALTY HAS BEEN IMPOSED HAS BEEN REDUCED BY THE TRIBUNAL AND THE OR DER OF THE TRIBUNAL ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 5 - WAS CHALLENGED BEFORE THE HONBLE JURISDICTIONAL HI GH COURT WHICH IS PENDING FOR ADJUDICATION BEFORE THE HONBLE JURISDI CTIONAL HIGH COURT. UNDER THESE FACTS, WHEN ALL THE MATERIAL WERE AVAIL ABLE, IT WAS NOT THE CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCUR ATE PARTICULARS OF INCOME. HE FURTHER SUBMITTED THAT THE APPEALS WITH REGARD TO QUANTUM ADDITIONS ARE PENDING FOR ADJUDICATION BEFORE THE H ONBLE HIGH COURT BEING A DEBATABLE ISSUE, PENALTY OUGHT NOT TO HAVE BEEN IMPOSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE B Y OBSERVING AS UNDER:- DECISION: 6. I HAVE CAREFULLY GONE THROUGH THE PENALTY ORDER , QUANTUM APPELLATE ORDER AND THE SUBMISSION OF THE APPELLANT. THE AO S ACTION OF LEVYING PENALTY CANNOT BE APPROVED DUE TO THE FOLLOWING REA SONS: 1. THE ADDITIONS WERE MADE ONLY BECAUSE DETAILS WER E NOT FURNISHED BEFORE THE A.O. THE ADDITIONS CONFIRMED BY THE CIT (A) ARE BASED ON ESTIMATION ONLY. NONE OF THE ADDITIONS HAS BEEN MA DE/CONFIRMED ON THE BASIS OF COGENT MATERIAL. IN MY OPINION THE CONFIRMATION OF AN ADDITION TO IN COME BY ANY HIGHER AUTHORITY OR COURT DOES NOT GIVEN LIBERTY TO THE A. O. TO LEVY THE PENALTY AUTOMATICALLY UNLESS THE BASIS OF ADDITION IS SUCH THAT IT CONCLUSIVELY PROVES THAT THE ASSESSEE HAS EITHER CONCEALED HIS I NCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE A. O. HAS TO PROVE BY WAY OF FURTHER EVIDENCES DURING THE PENALTY PROCEED INGS THAT THE ASSESSEE HAS EITHER CONCEALED HIS INCOME OR HAS FUR NISHED INACCURATE PARTICULARS OF INCOME. MANY HONBLE COURTS HAVE HE LD THAT THE PENALTY BEING HARSHER IN NATURE SHOULD NOT BE LEVIED IN A M ECHANICAL MANNER. ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 6 - HERE WHAT HAS HAPPENED IS THAT THE PENALTY WAS LEVI ED BY THE A.O. ONLY BECAUSE CERTAIN AMOUNT OF ADDITION HAS BEEN CONFIRM ED BY THE CIT(A). IN MY OPINION, THE ESTIMATED ADDITION DOES NOT NECE SSARILY INDICATE TOWARDS CONCEALMENT OF INCOME OR FURNISHING INACCUR ATE PARTICULARS OF INCOME. FURTHER ESTIMATION IS ALWAYS ESTIMATION HO WSOEVER; IT MAY BE SCIENTIFIC OR LOGICAL. HENCE, ON THE ADDITION MADE ON ACCOUNT F ESTIMATION, PENALTY PROCEEDINGS CANNOT BE INVOKED. THIS OPINION HAS BEEN HELD BY MANY HONBLE COURTS OF THE COUNTRY. S OME OF THEM HAVE BEEN QUOTED BY THE A.R. ACCORDINGLY, THE PENALTY LEVIED ON THE ESTIMATED ADDITION IS HEREBY DELETED AND THE APPEAL IS ALLOWED. 5. THE REVENUE HAS NOT DISPUTED THE FACT THAT IN QU ANTUM PROCEEDINGS IN FIRST ROUND THE ISSUE OF DISALLOWANCE MADE ON AC COUNT OF UNEXPLAINED UNPAID WAGES WAS RESTORED TO THE FILE OF AO FOR DEC ISION AFRESH VIDE ORDER DATED 10.12.2010, I.E. SUBSEQUENT TO PENALTY ORDER DATED 31.03.2009. IT IS ALSO NOT IN DISPUTE IN SECOND RO UND OF LITIGATION, THE ASSESSING OFFICER SUSTAINED THE ADDITION AND THE LD .CIT(A) DELETED THE ADDITION. HOWEVER, THE COORDINATE BENCH OF THIS TR IBUNAL IN ITA NO.1166/AHD/2012 PARTLY ALLOWED THE APPEAL OF THE R EVENUE BY CONFIRMING THE ADDITION TO THE EXTENT OF RUPEES TWE NTY FIVE LACS ONLY. IT IS ALSO NOT IN DISPUTE THAT THE TAX APPEAL NOS.8 63 OF 2014, 875 OF 2014 (SECOND ROUND CROSS-APPEALS) AND TAX APPEAL N O.573 OF 2011 (FIRT FOUND BY THE ASSESSEE) HAVE BEEN ADMITTED BY THE HO NBLE JURISDICTIONAL HIGH COURT ON THE QUESTIONS OF QUANTUM ADDITIONS. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO SUSTAIN THE PENALTY AND TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THUS, THIS GROUND OF REVEN UES APPEAL IS DISMISSED. ITA NO.1196 /AH D/2011 ITO VS. M/S. BHADIYADRA BROTHERS ASST.YEAR 2004-05 - 7 - 6. SECOND GROUND OF APPEAL IS GENERAL IN NATURE NEE DS NO SEPARATE ADJUDICATION, SAME IS ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 23 RD DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( PRAMOD KUMAR ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/ 07 /2015 0)..& , '.&../ T.C. NAIR, SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 123 4 / CONCERNED CIT 4. 4 ( ) / THE CIT(A)-V, SURAT 5. 5'6 &23 , ) 23 , , 1 / DR, ITAT, AHMEDABAD 6. 689 :( / GUARD FILE. ! / BY ORDER, #5 //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.7.15 (DICTATION-PAD 11+ PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..17.7.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23.7.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.7.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER