Shri Mukeshchandra A.Lakdawala, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 1200/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60299 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 20-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 1200/ AHD/2007 (ASSESSMENT YEAR 2001-02) SHRI MUKESHCHANDRA A LAKDAWALA, VS. ITO, WARD 2(1) , PROP. OF SHREE GANESH SHAKTI TEXTILE, SURAT 109, NAVSARJAN IND. SOC. UDHNA MAGDALLA ROAD, SURAT VS. PAN/GIR NO. : AAOPL5015G (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RASESH SHAH, AR RESPONDENT BY: SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 07.03.2012 DATE OF PRONOUNCEMENT: 27.04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A)- II, SURAT DATED 31.01.2007 FOR THE ASSESSMENT YEAR 2001-02. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LD CIT(A) HAS ERRED IN CONFIRMI NG THE ACTION OF THE A.O. IN IMPOSING PENALTY OF RS.5,00,000/- U/S 2 71(1)(C) OF THE ACT. IT IS THEREFORE, PRAYED THAT ABOVE ADDITIONS MADE BY THE A.O. AND CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. I.T.A.NO.1200 /AHD/2007 2 2. BRIEF FACTS TILL THE STAGE OF IMPOSITION OF PENA LTY BY THE A.O. ARE NOTED BY LD. CIT(A) IN PARA 3, 4, 4.1 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 3. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143 (3) OF THE I. T. ACT VIDE ORDER DTD. 27/2/2004 DETERMINING THE AS SESSEE'S TOTAL INCOME AT RS. 18,21,546 AGAINST THE DECLARED INCOME OF RS. 2,03,379. THE ASSESSMENT WAS SUBSEQUENTLY RECTIFIED U/S. 154 OF THE I. T. ACT, DETERMINING THE TOTAL INCOME AT RS. 18,71,546. AN ADDITION OF RS. 16,68,167 WAS MADE ON ACCOUNT OF UN EXPLAINED EXPENDITURE/INVESTMENT. IN APPEAL, THE CIT(A) GRANT ED RELIEF TO THE EXTENT OF RS. 2,68,167 AND CONFIRMED THE ADDITION O F RS. 14 LAKH. THIS WAS THE SUM WHICH REPRESENTED PURCHASES MADE B Y THE ASSESSEE FROM M/S. DAYA RAYONS PVT. LTD. AND M/S. S ILVASSA INDUSTRIES LTD., AND WHICH THE ASSESSEE WAS UNABLE TO EXPLAIN AFTER HE WAS CONFRONTED WITH THE CONTRA-ACCOUNTS J FROM T HE BOOKS OF THESE PARTIES. THE ASSESSEE HAD AGREED TO THE ADDIT ION OF THE SUM IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED BY THE AO. AT THE SAME TIME, THE AO INITIATED PROCEEDINGS U/S. 274 R. W.S. 271 OF THE I. T. ACT. VIEW TAKEN BY THE ASSESSING OFFICER (A. O.) IN PENALTY PROCEEDINGS: 4. IN COURSE OF THE PENALTY PROCEEDINGS, THE AO IS SUED A SHOW- CAUSE NOTICE TO THE ASSESSEE DTD. 3/1/2005 ASKING T HE ASSESSEE TO EXPLAIN WHY PENALTY SHOULD NOT BE LEVIED U/S. 271(L )(C) OF THE I. T. ACT FOR FURNISHING INACCURATE PARTICULARS IN RESPEC T OF THE UNACCOUNTED PURCHASES AMOUNTING TO RS. 14 LAKH. THE ASSESSEE MADE A DETAILED SUBMISSION VIDE LETTER DTD. 2/2/200 5 WHICH HAS BEEN REPRODUCED BY THE AO IN PARA-4 (PAGES 3-5) OF THE ASSESSMENT ORDER. THE ASSESSEE SUBMITTED THAT THE EXPLANATION- 1 TO SECTION 271(L)(C) RAISES A REBUTTABLE PRESUMPTION WHICH CAN BE DISCHARGED BY THE ASSESSEE ON THE BALANCE OF PROBABILITY. IN P ENALTY PROCEEDINGS, IT WAS NOT NECESSARY FOR THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION TO THE SATISFACTION OF THE AO. WHAT WAS ONLY REQUIRED WAS AN EXPLANATION WHICH WAS PLAUSIBLE. RE LYING UPON SEVERAL CASE-LAWS, IT WAS CONTENDED BY THE ASSESSEE THAT HIS EXPLANATION WAS BONAFIDE AND SINCE, IT WAS NOT FOUN D TO BE FALSE AND SIMPLY BECAUSE THE EXPLANATION WAS NOT SUBSTANT IATED WITH EVIDENCE OR PROOF, NO PENALTY COULD BE LEVIED FOR C ONCEALMENT. IT WAS ALSO SUBMITTED THAT PENALTY PROCEEDINGS WERE AS SESSMENT I.T.A.NO.1200 /AHD/2007 3 PROCEEDINGS ARE SEPARATE AND CONCEALMENT HAD TO BE SEPARATELY AND INDEPENDENTLY ESTABLISHED IN PENALTY PROCEEDINGS BE FORE PENALTY COULD BE LEVIED. 4.1 THE AO REJECTED THE ASSESSEE'S SUBMISSIONS AND , REFERRING TO THE FINDINGS IN THE ASSESSMENT PROCEEDINGS (PARA -6, PAGES 6-9), TOOK THE VIEW THAT THE ASSESSEE HAD BEEN UNABLE TO PROVIDE ANY SATISFACTORY EXPLANATION IN RESPECT OF THE PURCHASE S MADE FROM THE SAID TWO ENTITIES. CONSEQUENTLY, THE ASSESSEE HAD A CCEPTED AND AGREED TO THE ADDITION OF A SUM OF RS. 14 LAKH. THI S ADMISSION OF THE ASSESSEE HAD RESULTED FROM DETAILED INQUIRIES M ADE IN ASSESSMENT PROCEEDINGS. THE AO FURTHER OBSERVED THA T THE ASSESSEE HAD BEEN UNABLE TO REBUT THE PRESUMPTION R AISED IN ASSESSMENT PROCEEDINGS, THAT THE SUM OF RS. 14 LAKH REPRESENTED HIS CONCEALED INCOME. HE HAD ALSO FAILED TO SHOW TH AT THE EXPLANATION PROVIDED WAS BONAFIDE. THE CASE-LAWS RE LIED UPON BY THE ASSESSEE WERE NOT RELEVANT TO THE PECULIAR FACT S OF THE ASSESSEE'S CASE AND THEREFORE, THEIR RATIOS WERE NO T APPLICABLE. IN FACT, BECAUSE OF THE INQUIRIES CONDUCTED BY THE AO, THE ASSESSEE WAS FORCED TO ACCEPT THE FACT THAT PURCHASES TO THE EXTENT OF RS.14 LAKH SHOWN TO HAVE BEEN MADE FROM THE SAID TWO PART IES, COULD NOT BE EXPLAINED WITHIN THE MEANING OF SECTION 69C OF T HE I. T. ACT. CONSEQUENTLY, THE A.O. LEVIED THE PENALTY OF RS.5 L AKH UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE I. T. ACT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 4. IT IS SUBMITTED BY THE LD. A.R. THAT OUT OF THE TOTAL PURCHASES FROM SEVEN PARTIES AS NOTED BY THE A.O. ON PAGE 3 OF THE ASSESSMENT ORDER, ADDITION WAS MADE BY THE A.O. IN RESPECT OF THREE P ARTIES WHICH ARE MENTIONED BY THE A.O. AT SL. NOS. 2, 6 & 7 OF THE C HART APPEARING ON PAGE 3 OF THE ASSESSMENT ORDER. HE FURTHER SUBMITTED TH AT FOR ALL THE THREE PARTIES, THE ASSESSEE HAS SUBMITTED EXPLANATION BUT THE A.O. WAS NOT SATISFIED AND THEREFORE, IN ORDER TO BUY PEACE AND TO AVOID LONG DRAWN PROCESS OF LITIGATION, THE ASSESSEE OFFERED AN INCO ME OF R.14 LACS AND THE I.T.A.NO.1200 /AHD/2007 4 FINAL ADDITION IS ON THE BASIS OF THE OFFER OF THE ASSESSEE. HE FURTHER SUBMITTED THAT OUT OF THE ADDITION MADE BY THE A.O. IN RESPECT OF THREE PARTIES, ADDITION MADE BY THE A.O. IN RESPECT OF ON E PARTY I.E. MICROSYNTH FABRICS (INDIA) P. LTD. AT SL. NO.6 OF THE CHART OF PAGE 3 OF THE ASSESSMENT ORDER, WAS DELETED BY LD. CIT(A). REGARDING THE R EMAINING TWO PARTIES, M/S. DAYA RAYONS PVT. LTD. AND M/S. SILVASSA INDUST RIES LTD., IT WAS SUBMITTED THAT EXPLANATION WAS SUBMITTED BY THE ASS ESSEE BEFORE THE A.O. TO EXPLAIN THE DISCREPANCY IN RESPECT OF THESE TWO PARTIES. HE SUBMITTED THAT FOR DISCREPANCY IN CONNECTION WITH M/S. DAYA R AYONS PVT. LTD., IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE A.O. THAT THE ASSESSEE HAS SHOWN PURCHASES FROM THIS PARTY AT RS.77.90 LACS WH EREAS THIS PARTY HAS SHOWN SALE OF RS.89.76 LACS OUT OF WHICH THERE IS P URCHASE RETURN OF RS.10.22 LACS AND HENCE, THE NET SALE AS PER THIS P ARTY ALSO WAS AT RS.79.54 LACS AFTER EXCLUDING THE PURCHASE RETURN A ND THEREFORE, THE DIFFERENCE IS ONLY FOR THE AMOUNT OF RS.1,64,209/- REGARDING DIFFERENCE IN CLOSING BALANCE SHOWN BY THE ASSESSEE IN THE ACC OUNT OF THIS PARTY AND SHOWN BY THIS PARTY IN THE BOOKS, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT INADVERTENTLY THE ENTRY FOR ONE PAYME NT OF RS.7,31,253/- MADE BY CHEQUE NO.91427 DATED 17.11.2006 TO THIS PA RTY WAS WRONGLY DEBITED TO M/S. DAYA SYNTHETICS AND HENCE, THE NET DIFFERENCE IS AMOUNTING TO RS.17,233/- OUT OF WHICH THERE WAS AN ENTRY PASSED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR ON ACCOU NT OF VATV KASAR INCOME OF RS.11,736/- AND THEREFORE, DURING THE PR ESENT YEAR, ASSESSEE HAS SHOWN DEBIT OF RS.5,497/- AND THEREFORE, THERE IS NO DIFFERENCE AT ALL IN RESPECT OF THIS PARTY. 5. REGARDING THE DIFFERENCE IN ACCOUNT OF M/S. SILV ASSA INDUSTRIES LTD., IT WAS SUBMITTED THAT THE ASSESSEE HAS SHOWN PURCHASES OF RS.108.10 I.T.A.NO.1200 /AHD/2007 5 LACS WHEREAS THE SAID PARTY HAS SHOWN SALE OF RS.10 9.40 LACS TO THE ASSESSEE. HE FURTHER SUBMITTED THAT THIS PARTY HA S ALLOWED NET DEBIT TO THE ASSESSEE OF RS.1,35,002/- AND, THEREFORE, THE NET D IFFERENCE IS ONLY OF RS.4,131/-. IT IS SUBMITTED THAT THESE ARE BONA FI DE EXPLANATION OF THE ASSESSEE AND THEREFORE, FOR ADDITION FINALLY CONFIR MED BY LD. CIT(A) ON THE BASIS OF INCOME OFFERED BY THE ASSESSEE, PENALT Y IS NOT JUSTIFIED. 6. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT VARIOUS DIFFERENCES ARE NOTED BY THE A.O. IN T HE ASSESSMENT ORDER IN RESPECT OF PURCHASE AMOUNT AND CLOSING BALANCE OF T HREE PARTIES FOR WHICH ADDITION HAS BEEN MADE OF RS.16,68,167/-. WE FIND THAT THE ADDITION FOR ONE PARTY MENTIONED AT SL. NO.6 IN THE CHART PREPAR ED BY THE A.O. ON PAGE 3 OF THE ASSESSMENT ORDER WAS DELETED BY LD. CIT(A) AND THE BALANCE ADDITION WAS CONFIRMED BY LD. CIT(A) ON THE BASIS OF OFFER MADE BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS OF RS. 14 LACS. IT IS NOTED BY THE A.O. ON PAGE 7 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS MADE OFFER OF RS.14 LACS AS INCOME IN ORDER TO BUY PEACE AND SUBJECT TO NON LEVY OF PENALTY AND TO AVOID LONG DRAWN PROCESS OF LITIGATION AND TO COVER ANY OTHER PROBABLE DEFECT. REGARDING VARIOUS DISCREPANCIES NOTED BY THE A.O. IN THE ASSESSMENT ORDER, THE ASSESSEE H AS FURNISHED EXPLANATION AS HAS BEEN NOTED BY THE A.O. ALSO. RE GARDING THE DIFFERENCE IN PURCHASE AMOUNT FROM DAYA RAYON, IT WAS SUBMITTE D BY THE ASSESSEE THAT THERE IS ONE AMOUNT OF RS.10,22,033/- IN RESPE CT OF PURCHASE RETURN AND REGARDING DIFFERENCE IN CLOSING BALANCE, IT WA S EXPLAINED THAT ONE PAYMENT OF RS.731253/- WAS WRONGLY DEBITED TO M/S. DAYA SYNTHETICS INSTEAD OF DAYA RAYONS PVT. LTD. REGARDING M/S. SI LVASSA INDUSTRIES I.T.A.NO.1200 /AHD/2007 6 LTD., PURCHASES SHOWN BY THE ASSESSEE IS OF RS.108. 01 LACS WHEREAS SALE SHOWN BY THIS PARTY IS OF RS.109.40 LACS. THERE IS ONE MORE DIFFERENCE OF RS.1.35 LACS AND HENCE, THE ACTUAL DISCREPANCY IS O F RS.4,131/- ONLY. THE ASSESSEE COULD NOT SUBSTANTIATE THESE EXPLANATIONS BUT THE A.O. COULD NOT ESTABLISH THAT THESE EXPLANATION OF THE ASSESSEE AR E NOT BONA FIDE AND ARE FALSE. AS PER EXPLANATION (1) TO SECTION 271(1)(C) OF THE ACT, IF IT IS FOUND THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS BONA FIDE ALTHOUGH THE ASSESSEE COULD NOT SUBSTANTIATE THE SAME, AND A LL THE FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THEN, IT IS NOT A CASE OF CONCEALMENT OF INCOME. IN OUR CONSIDERED OPINION, IN THE PRESENT CASE, EXPLANATION (1) TO SECTION 271(1)(C) IS NOT APPLICABLE BECAUSE THE A.O. COULD NOT ESTABLISH THAT THE ASSES SEES EXPLANATION IS NOT BONA FIDE AND, THEREFORE, IN OUR CONSIDERED OPINION , PENALTY IS NOT JUSTIFIED FOR SUCH AN ADDITION. WE, THEREFORE, DEL ETE THE PENALTY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.1200 /AHD/2007 7 1. DATE OF DICTATION 20/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER23/4.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 27/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.27/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27/4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .