M/s. Chirag Embroiders Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Surat

ITA 12/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57259 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Capital asset; Depreciation; Unabsorbed depreciation

Judgement Text

ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH , AHMEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 12 & 13/AHD/2012. (ASSESSMENT YEAR: 2006-07 & 2007-08) M/S.CHIRAG EMBROIDERS PVT. LTD., SHED NO.C-1, 3519/3609, OPP.CONDOR FOOTWEAR (I) LTD., ROAD NO.3,SACHIN GIDC, SURAT-394230 (APPELLANT) VS. INCOME TAX OFFICER, WARD 1(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAACE 6404D APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY : SHRI SAMIR TEKRIWAL, SR. D. R. ( )/ ORDER DATE OF HEARING : 1-3-2012 DATE OF PRONOUNCEMENT : 16-3-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LD. CIT (A)-I, SURAT AGAINST TWO DIFFERENT ORDERS IN APPEAL NO.CAS-I/62/2011-12 & NO.CAS-I/63/2011-12 BOTH DATED 30-9-2011 FOR THE AS SESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. 2. THE ONLY GRIEVANCE OF THE ASSESSEE FOR A.Y. 2006 -07 IS REGARDING CONFIRMING THE PENALTY LEVIED OF RS.24,036/- LEVIED UNDER SECT ION 271(1) (C) OF THE INCOME TAX ACT, 1961. ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 2 ITA NO.12/AHD/2012 A.Y. 2006-07. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS DOING THE BUSINESS OF EMBROIDERY JOB WORK AND TRADING OF YARN. THE ASSES SEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. NIL. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER MADE THE FOLLOWIN G ADDITIONS AND PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOM E BY WAY OF FURNISHING OF INACCURATE PARTICULARS. 1. ON ACCOUNT OF INFLATION OF CONSUMPTION RS. 61,4 09/- 2. UNEXPLAINED EXPENDITURE. RS. 10,000/- --------------- RS. 71,409/- ========= 4. DURING THE COURSE OF PENALTY PROCEEDINGS BEFOR E THE A.O. THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS WHICH IS REFERRED TO IN PARA 5 OF THE PENALTY ORDER DATED 23-3-2011 PASSED U/S. 271 (1)(C). YOUR GOODSELF HAS MADE AN ADDITION OF RS. 61,409/- ON ACCOUNT OF INFLATION OF CONSUMPTION. IT IS URGED THAT THERE WA S SUM TECHNICAL MISTAKE IN ARRIVING AT THE FIGURE.KINDLY NOTE THAT ON TURNOVER OF RS.3.50 CRORE, SMALL ADDITION ON SUCH TECHNICAL MISTAKE DOES NOT TANTAMO UNT OF CONCEALMENT OF INCOME. YOUR GOOD SELF HAS FURTHER RESUMED ADDITION OF RS.1 0,000/- ON ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE. IT IS URGED THA T NO SEPARATE EXPENSES ON FITTING ETC., ARE CHARGED BY THE SUPPLIER OF A.C. A ND FITTING AND INSTALLATION WAS INCLUSIVE OF PURCHASE VALUE OF RS. 1,50,000/-.S INCE THE ADDITION IS ON PRESUMPTION BASE, NO PENALTY BE LEVIED. THE A.R. HAS CITED A NUMBER OF JUDICIAL PRONOUNCEME NT BUT RELIED STRONGLY ON THE LATEST JUDGMENT BY THE APEX COURT I N THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS (200 9) 224 CTR (SC)1 AND ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 3 IS HELD THAT NO PENALTY OUGHT TO BE LEVIED MERELY B ECAUSE THE ADDITIONS ARE SUSTAINED. 5. THE ASSESSING OFFICER REJECTED THE CONTENTIONS O F THE ASSESSEE AND RELYING ON THE HONBLE ITAT DECISION OF MUMBAI BENCH IN THE CA SE OF ARMOUR CHEMICALS LTD. VS. ACIT (ITA NO.309/MUM/06, JAN 2007) IMPOSED PENALTY OF RS.24,036/-. 6. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) CONFIRMED THE PENALTY LEVIED OF RS.24,036/- BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE SUBMISSION, THE SUBMISSIO N FURNISHED BY THE AR BUT THE SAME IS NOT TENABLE FOR THE REASON THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSEE COMPANY WAS NOT ABLE TO PU T FORTH THE COUNTER ARGUMENT AND NOR WAS ABLE TO PRODUCE ANY DOCUMENTAR Y CORROBORATIVE EVIDENCE. THE ARGUMENT PUT FORTH BY THE LD. AR OF THE ASSESSEE-COMPANY THAT THE SMALL AMOUNT ON SUCH BIG AMOUNT DOES NOT T ANTAMOUNT TO CONCEALMENT IS NOT ACCEPTABLE BECAUSE, HOWEVER BE T HE AMOUNT SMALL OR BIG CONCEALMENT IS AGAINST THE LAW. IN SHORT THE AR OF THE ASSESSEE WAS NOT ABLE TO PROVE THE POINT THAT THE AMOUNT OF RS.61,409/- I S NOT CONCEALMENT. FOR THE SECOND POINT THE ASSESSEE HAS ARGUED THAT EXPENDITU RE WAS PART AND PARCEL OF THE PURCHASE VALUE OF THE A.C. BUT THE SAME WAS NOT PRODUCED DURING THE COURSE OF ASSESSMENT NOR DURING THE COURSE OF PENAL TY PROCEEDING. SO AS PER THE ABOVE DISCUSSION I AM OF THE VIEW THAT THE ASSE SSEE HAS CONCEALED THE PARTICULARS OF INCOME AS STATED ABOVE OF RS.71,409/ - AND PENALTY IS LEVIABLE UNDER SECTION 271(1) (C ) R.W.S. 274 FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME AND THEREBY CONCEALED THE INCOME. AGAINST THIS ORDER OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. THE ASSESSEE FILED WRITTEN SUBMISSIONS AND STATED THAT THE ADDITION OF RS.10,000/- THAT WAS MADE BY THE A.O. WAS MADE JUST ON PRESUMPTION A ND NOT ON THE BASIS OF ANY EVIDENCE. THE APPELLANT STATED THAT IT IS REQUIRED TO PREPARE AUDIT REPORT IN SPECIFIC TABULAR FORM WHEREIN THE FIGURE OF CONSUMPTION IS A RRIVED AT BY TAKING OPENING STOCK + ISSUE OF GOODS CLOSING STOCK AND IN THAT WORKING, TECHNICAL MISTAKE ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 4 RESULTED INTO ADDITION OF RS.61,409/- . THE APPELLA NT URGED THAT IT WAS NEVER FOUND THAT THERE WAS SOME INTENTIONAL INCORRECT WORKING I N A PARTICULAR ITEM LIKE OPENING, PURCHASE AND CLOSING STOCK. THE APPELLANT FURTHER R ELIED ON THE FOLLOWING DECISIONS:- 1. CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD., (201 0) 322 ITR 158 (SC) 2. UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILLS (2009) 224 CTR (SC) 1 WHEREIN IT WAS HELD THAT NO PENALTY OUGHT BE LEVIED MERELY BECAUSE THE ADDITIONS ARE SUSTAINED. THE APPELLANT FURTHER STRONGLY URGED THAT IN THE AB OVE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO FILING OF INACCURATE PARTICUL ARS OF INCOME MORE PARTICULARLY WHEN THE ADDITIONS ARE HIGHLY DISPUTED AND SUBJECT TO TWO OPINIONS. 6. BEFORE US, THE LD. DR STATED THAT THE MATTER BE DECIDED ON MERITS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDER OF THE AUTHO RITIES BELOW. IN THE PRESENT CASE WE FIND THAT THE ASSESSEE HAS OFFERED THE EXPL ANATION BUT THE SAME WAS NOT ACCEPTED BY THE A.O. IT IS NOT THE CASE OF NON FUR NISHING OF PARTICULARS OR THE CASE OF FURNISHING OF INACCURATE PARTICULARS. ACCORDINGL Y, WE ARE OF THE CONSIDERED OPINION THAT ON THE PRESENT FACTS THE LEVY OF PENAL TY IS NOT SUSTAINABLE AND THEREFORE IT NEEDS TO BE DELETED. WE THEREFORE, DIRECT TO DEL ETE THE PENALTY. THUS, THE APPEAL NO ITA 12/AHD/2012 IS ALLOWED. 8. ITA NO.13/AHD/2012. A.Y. 2007-08. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS E-RETURN SHOWING TOTAL INCOME AT RS. NIL. THE ASSESSMENT WAS COMPLET ED ON 11-9-2009 MAKING AN ADDITION OF RS.4,40,763/- WHICH WAS ADJUSTED AGAINS T THE UNABSORBED DEPRECIATION. ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 5 IN THE ASSESSMENT PROCEEDINGS, THE FOLLOWING ADDITI ONS AND PENALTY PROCEEDINGS U/S. 271(1) (C ) WERE INITIATED FOR CONCEALMENT OF INCOME BY WAY OF FURNISHING OF INACCURATE PARTICULARS. 1. SUPPRESSION OF CLOSING STOCK RS. 15,080/- 2. OUT OF DEPRECIATION. RS. 2,501/- 3. UNACCOUNTED PURCHASE AND SALES. RS.1,97,182/- ---------------- RS.2,14,763/- ========== 9. DURING THE COURSE OF PENALTY PROCEEDINGS BEFORE THE A.O. THE ASSESSEE MADE FOLLOWING SUBMISSIONS WHICH IS REFERRED TO IN PARA- 3 OF THE PENALTY ORDER DATED 23- 3-2011 PASSED U/S. 271(1) (C ). YOUR GOOD SELF HAD MADE AN ADDITION OF RS.15,080/- ON ACCOUNT1 OF WORK IN PROGRESS. IT IS URGED THAT THE ASSESSEE COM PANY FOLLOWS A [PARTICULAR METHOD OF ACCOUNTING YEAR AFTER YEAR WHEREBY THE IT EMS LIKE TAPES, ROLL, PACKING MATERIAL, ETC, ARE NOT INCLUDED IN THE CLOS ING STOCK. THE SAID METHOD OF ACCOUNTING WAS ACCEPTED ALSO. IT IS FURTHER URGE D THAT, IN ORDER TO ARRIVE AT THE CORRECT PROFIT, ONE SHOULD ALSO MAKE A SIMIL AR ADJUSTMENT IN THE OPENING STOCK. IF SUCH ADJUSTMENTS ARE MADE BOTH IN OPENING AS WELL AS CLOSING STOCK, THERE MAY BE NO ADDITIONS ON THIS IS SUE. KINDLY ALSO NOTE THAT THE ADDITION MADE ON PRESUMPTION AND ESTIMATE BASE BY ADOPTING SOME AVERAGE METHOD. KINDLY ALSO NOTE THAT HONBLE CIT ( A) HAS RECENTLY DELETED PENALTY UNDER SECTION 271(1)(C ) OF THE ACT IN THIS ISSUE. YOUR GOOD SELF HAD FURTHER MADE AN ADDITION OF RS.2 ,501/- ON ACCOUNT OF DISALLOWANCE OUT OF DEPRECIATION. IT IS SUBMITTED T HAT THERE WAS PURCHASE OF CEMENT AND PVC PIPES, IT WAS PRESUMED THAT THERE WA S NO CONSTRUCTION AS THERE WAS NO CORRESPONDING EXPENSES ON STEEL, LABOU R ETC. IN THIS YEAR. THUS, THERE WAS NO CONSTRUCTION IIN THE CURRENT YEAR AND, THEREFORE, THE DISALLOWANCE OF DEPRECIATION WAS MADE. IT IS SUBMIT TED THAT THE DEPRECIATION WAS CLAIMED UNDER BONAFIED BELIEF ON ACCOUNT OF ADD ITION IN THE CAPITAL ASSET. ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 6 YOUR GOOD SELF HAS ALSO INITIATED PENALTY ON ACCOUN T OF ADDITION OF RS.1,97,182/- BEING DIFFERENCE OF PURCHASE AND SALE S BETWEEN THE FIGURES OF THE PROFIT AND LOSS ACCOUNT AND THE FIGURES AS PER VAT RETURN. IT IS SUBMITTED THAT THE VAT RETURN HAS TO BE FILED EVERY MONTH AND THERE ARE GENUINE MISTAKES IN GIVING THE DETAILS OF SALES AND PURCHAS E FOR THE VAT RETURN. IT IS STRONGLY URGED THAT THERE ARE SEVERAL SALES WHICH A RE CANCELLED OR GOODS RETURNED IN THE NEXT MONTH AND SUCH SALES ARE DIREC TLY DELETED FROM THE SALES REGISTER IN THE NEXT MONTH. IT IS URGED THAT MANY A TIMES, THE GOODS ARE SENT ON APPROVAL BASE ON SALE BILL ITSELF, HOWEVER, THE SAME ARE FOUND TO BE NOT APPROVED IN THE NEXT MONTH AND BILLS WERE REQUIRED TO BE CANCELLED. IN VIEW OF SUCH REASONS, THERE IS DIFFERENCE IN PURCHASE AN D SALES FIGURES BOTH AS PER ACCOUNTS AND AS PER VAT RETURN ---. THE ASSESSEE COMPANY RELIES ON CERTAIN JUDICIA L PRONOUNCEMENT BUT MOST STRONGLY URGES ON THE LATEST JUDGMENT BY THE APEX C OURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS ( 2009) 224 CTR (SC)1 AND IS HELD THAT NO PENALTY OUGHT TO BE LEVIED MERE LY BECAUSE THE ADDITIONS ARE SUSTAINED. 10. THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF THE ASSESSEE AND RELYING ON THE HONBLE ITAT DECISION OF MUMBAI BENCH IN THE CASE OF ARMOUR CHEMICALS LTD. VS. ACIT (ITA NO.309/MUM/2006, JAN, 2007) IMPO SED PENALTY OF RS. RS.59,155/-. 11. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT (A). THE LD. CIT (A) GAVE PARTIAL RELIEF TO THE ASSESSEE BY OBSE RVING AS UNDER:- ARGUMENTS OF THE ASSESSING OFFICER AS WELL AS APP ELLANT HAVE BEEN CONSIDERED. APPELLANT HAS RIGHTLY POINTED OUT THA T ADDITION OF RS.15,000/- ON ACCOUNT OF WORK-IN-PROGRESS DOES NOT ATTRACT PEN ALTY U/S. 271(1) (C ). SUCH ADDITIONS ARE REVENUE NATURE AS IN SUBSEQUENT YEAR CREDIT HAS TO BE GIVEN IN OPENING STOCK. THUS,. IT IS HELD THAT NO PENALTY CA N BE LEVIED IN RESPECT OF ADDITION OF RS.15,000/- ON ACCOUNT OF WORK-IN-PROGR ESS. ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 7 COMING TO DISALLOWANCE OF RS.2501/- ON ACCOUNT OF DEPRECIATION, THE ASSESSING OFFICER DOES NOT SEEM TO BE JUSTIFIED IN IMPOSING PENALTY AS NO CASE HAS BEEN MADE OUT THAT APPELLANT IS GUILTY OF CONCEALMENT. THUS, IT IS HELD THAT NO PENALTY CAN BE IMPOSED FOR ADDITION OF RS.2501/- ON ACCOUNT OF DISALLOWANCE. NOW COMING TO THE ADDITION OF RS.1,97,182/- UNDER T HE HEAD OF UNABSORBED PURCHASE AND SALES, THE ASSESSING OFFI CER HAS ESTABLISHED THAT APPELLANT IS GUILTY IN TERMS OF SECTION 271(1)(C ). THERE IS DEMONSTRABLE DIFFERENCE BETWEEN FIGURES OF SALE AND PURCHASE SHO WN IN VAT RETURN AND THAT SHOWN IN I.T. RETURN. THUS, THE ASSESSING OFFI CER HAS PROVED THAT APPELLANT HAS FURNISHED IN ACCURATE PARTICULARS OF INCOME. APPELLANT HAS FAILED TO PUT UP A CREDIBLE DEFENSE. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER HAS JUSTIFIABLY LEVIED PENALTY IN RESPECT O F ADDITION OF RS. 1,97,182/-. IN VIEW OF THE ABOVE, PENALTY U/S. 271(1)(C ) IS UP HELD ONLY IN RESPECT OF ADDITION OF RS. 1,97,182/-. AS REGARDS THE PENAL TY IN RESPECT OF BALANCE ADDITION OF RS. 15,000/- AND RS.2501/-, PENALTY IS NOT SUSTAINED. 12. BEFORE US, THE LD. DR STATED THAT THE MATTER BE DECIDED ON MERITS. 13. BEFORE US, THE ASSESSEE RELIED ON FOLLOWING DE CISIONS:- 1. CIT VS. GAURISHANKAR SURESH PRASAD 224 ITR 27 ( PAT.) 2. BURMA SHELL OIL STORAGE & DISTRIBUTORS OF INDIA CO. VS. ITO 112 ITR 592 (CAL) 3. CIT VS. RAMSWAMI NAIDU 208 ITR 377 (MAD.) 4. CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010 ) 322 ITR 158 (SC). 5. UNION OF INDIA VS. RAJASTHAN SPINNING & WEAVING MILLS (2009) 224 CTR (SC)-1. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDER OF THE AUTHO RITIES BELOW. IN THE PRESENT CASE WE FIND THAT THE ASSESSEE HAS OFFERED THE EXPL ANATION BUT THE SAME WAS NOT ACCEPTED BY THE A.O. IT IS NOT THE CASE OF NON FUR NISHING OF PARTICULARS OR THE CASE OF FURNISHING OF INACCURATE PARTICULARS. ACCORDINGL Y, WE ARE OF THE CONSIDERED ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 8 OPINION THAT ON THE PRESENT FACTS THE LEVY OF PENAL TY IS NOT SUSTAINABLE AND THEREFORE IT NEEDS TO BE DELETED. WE THEREFORE, DIRECT TO DEL ETE THE PENALTY. THUS, THE APPEAL NO ITA 13/AHD/2012 IS ALLOWED. 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 3 - 201 2. SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO.12 & 13/AHD/2012 A.YRS. 2006 -07 & 2007-08. 9 1.DATE OF DICTATION 1 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 5 / 3 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 13 - 3 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 16 - 3 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 16 - 3 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 6 - 3 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 1 6-3-12 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..