M/s. Kamboj RCC Pipes, Ferozepur V. The Income Tax Officer, Abohar

ITA 128/ASR/2010

• Counselvise Citation: 12820914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 09-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Keywords: Unexplained investment
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AMRITSAR BENC H: AMRITSAR BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM ITA NO. 127 AND 128 /ASR/2010 AY 2001-02 KAMBOJ RCC PIPES V I.T.O. WARD III(3), ABOHAR VILLAGE BALUANA, TEHSIL ABOHAR DISTT. FEROZPUR APPELLANT BY: SHRI ANIL PURI RESPONDENT BY: SHRI AMRIK CHAND DATE OF HEARING: 08.12.2011 DATE OF PRONOUNCEMENT: 16.12.2011 ORDER D K SRIVASTAVA : WHILE THE APPEAL BEARING ITA NO.127/ASR/2010 IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE ADDITION OF RS.1.00 LAKH MADE BY THE AO AS UNEXPLAINED INVESTME NT U/S 69 OF THE INCOME- TAX ACT, 1961 AND FURTHER ADDITION OF RS.2,45,207/- AS ESTIMATED PROFITS ON SALES/MANUFACTURING OUTSIDE THE BOOKS OF ACCOUNT, T HE OTHER APPEAL BEARING ITA NO. 128/ASR/2010 IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) CONFIRMING THE PENALTY OF RS.85319/- LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME-TAX ACT ON THE BASIS OF THE AFORESAID ADDITI ON. FOR THE SAKE OF CONVENIENCE, BOTH THE APPEALS ARE BEING DISPOSED OF F BY A CONSOLIDATED ORDER. 2. IN ITA NO. 127/ASR/2010, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1 THAT THE LD. CIT(A) ERRED BOTH IN LAW AS WELL AS IN RESPECT OF THE FACTS OF THE CASE, WHILE PASSING HIS ORDER DATED 15 .12.2009 IN APPEAL NO. 14-SA/06-07 IN LIEU OF DIRECTIONS OF THE ITAT, AMRITSAR VIDE ITS LD ORDER DATED 6.10.2006 PASSED IN ITA NO. 462(ASR)200 5 AGAINST LD. CIT(A) EARLIER ORDER DATED 21.3.2005 PASSED IN APPE AL NO. 55-IT/LD. CIT(A)/BTI/04/05/. 2. THAT THE LD. CIT(A) WAS ABSOLUTELY UNJUSTIFIED I N UPHOLDING THE ADDITIONS OF RS. 1,00,000 MADE U/S 69 OF THE INCOME -TAX ACT, 1961 KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 2 ALLEGING INVESTMENT MADE IN THE UNACCOUNTED SALES M ADE BY THE AO VIDE HIS ORDER DATED 10.3.2004. 3. HE WAS FURTHER UNJUSTIFIED IN UPHOLDING THE ADDI TION OF RS. 2,45,207/- MADE BY THE AO ALLEGEDLY ESTIMATING PROF IT EARNED ON MANUFACTURING/SALE OUTSIDE THE BOOKS. 4. THECA FAILED TO APPRECIATE THE FINDINGS AND DIRE CTIONS OF THE ITAT VIDE WHICH THE ORDER DATED 21.3.2005 OF THE LD. CIT (A) WAS SET SIDE AND RESTORED BACK TO HIS FILE , FOR LOOKING INTO THE MA TTER A FRESH, FIND OUT THE REASONS WITH EVIDENCES FOR THE DIFFERENCE IN THE AC C OF THE APPELLANT IN THE BOOKS OF M/S BANWARI LAL BHOJ RAJ, ABOHAR. 5. THE LD. CIT(A) FURTHER FAILED TO APPRECIATE THE DIRECTIONS OF THE HONBLE ITAT IN REGARDS TO BRINGING FORWARD ANY COM PARABLE TRADING RESULTS, TO SUPPORT THE ADDITION OF RS. 2,45,207/-M ADE BY THE AO AND WAS ALSO UNJUSTIFIED IN ARBITRARILY UPHOLDING THE S AID ADDITION. 6. THAT ALL THE COMMENTS PASSED BY THE LD. CIT(A) W HILE OVERLOOKING THE DIRECTIONS OF THE HONBLE ITAT IN P ARA 17 OF ITS ORDER DATED 6.10.2006 DISMISSING THE GROUNDS OF APPEAL SE T-SIDE BY THE ITAT, ARE BASED ON SURMISES AND CONJECTURES ONLY, WITHOUT APPRECIATING THE FACTS OF THE CASE JUDICIOUSLY. 7. THE LD. CIT(A) WAS FURTHER UNJUSTIFIED IN UPHOLD ING TWO DIFFERENT ADDITIONS OF RS. 1,00,000 AND RS. 2,45,207/- MADE O N COMMON ALLEGATION OF SALES MADE OUTSIDE THE BOOKS OF ACCOU NT. 8. THAT THE APPELLANT RESERVES HIS RIGHT TO ADD, AM END, ALTER OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE SAME IS F INALLY HEARD. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME RETURNING LOSS OF RS.2,48,520/- ON 23.10. 2001 AGAINST WHICH THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 31.3.2001 AS SESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,44,690/-. PERUSAL OF THE A SSESSMENT ORDER SHOWS THAT THE AO HAD ADDED A SUM OF RS.1.00 LAKH AS UNEXPLAIN ED INVESTMENT AND KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 3 FURTHER SUM OF RS.2,45,207/- AS PROFITS ON MANUFACT URING/SALES OUTSIDE THE BOOKS OF ACCOUNT. THE AFORESAID ADDITIONS MADE BY T HE AO WERE THE SUBJECT MATTER OF APPEAL FIRSTLY BEFORE THE LD. CIT(A) AND THEREAFTER BEFORE THIS TRIBUNAL. THE MATTER WAS HOWEVER RESTORED BY THIS T RIBUNAL BY ITS ORDER DATED 6.10.2006 (ITA NO. 462/ASR/2005) TO THE LD. CIT(A) FOR FRESH DECISION PURSUANT TO WHICH THE LD. CIT(A) HAS NOW PASSED A F RESH ORDER CONFIRMING ONCE AGAIN THE ADDITIONS MADE BY THE AO. THE AFORES AID ORDER OF THE LD. CIT(A) IS NOW THE SUBJECT MATTER OF APPEAL BEFORE THIS TRI BUNAL. 4. THE FACTS GIVING RISE TO THE IMPUGNED ADDITION A RE AVAILABLE ON PP 7-8 OF THE ORDER PASSED BY THE LD. CIT(A) WHICH READ AS UN DER:- WITH REGARD TO THE CONTENTIONS RAISED BY M/S KAMBO J RCC PIPES, VILLAGE BALLUANA IN ITS LETTER, I MAY BE SUBMITTED THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED COPY OF PURCHASE ACCOUNT OF THE MATERIAL USED FOR MANUFACTURING OF R CC PIPES. AS A PART OF ENQUIRIES, A COPY OF ASSESSEES ACCOUNT AS APPEA RING IN THE BOOKS OF M/S BANWARI LAL BHOJ RAJ, ABOHAR WAS OBTAINED. FRO M ITS PERUSAL IT TRANSPIRED THAT M/S BANWARI LAL BHOJ RAJ, ABOHAR HA D ISSUED BILL TO THE ASSESSEE ON 27.3.2001 FOR RS. 29,640/- AND PRIOR TO THIS THERE WERE ALSO CREDIT SALES MADE TO THE ASSESSEE ON 16.8.2000 AT R S. 39,912/- AGAINST WHICH THE ASSESSEE HAD PAID RS. 19,000/- IN CASH ON 6.10.2000. AS ON 31.3.2001. THE ASSESSEE WAS SHOWN AS A DEBTOR BY M /S BANWARI LAL BHOJ RAJ FOR RS. 50,870/- WHILE ON THE OTHER HAND T HE ASSESSEE HAD NOT SHOWN ANY LIABILITY OF THIS AMOUNT IN ITS BALANCE S HEET. THIS FACT WAS DULY CONFRONTED TO THE ASSESSEE VIDE LETTER DATED 2 4.10.2003 TO WHICH THE ASSESSEE STATED IN ITS REPLY DATED 4.11.2003 TH AT THE ENTIRE PAYMENT WAS MADE DURING THE YEAR ITSELF AND THAT BILLS OF R S. 50,870/- WERE RECEIVED DURING THE PERIOD RELEVANT FOR THE AY 2002 -03 AND NOT DURING THE YEAR UNDER CONSIDERATION. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND TENABLE DURING THE ASSESSMENT PROCEEDINGS BEC AUSE THE SELF SERVING EXPLANATION TENDERED WAS NOT SUPPORTED WITH ANY DOCUMENTARY EVIDENCE. ACCORDINGLY, THIS FACT LED TO AN IRRESIS TIBLE CONCLUSION THAT THE PURCHASE ACCOUNT OF THE ASSESSEE WAS NOT RELIABLE A ND THE ASSESSEE WAS KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 4 MAKING PURCHASES OF CEMENT AND BAZRI WITHOUT RECORD ING IN THE BOOKS OF ACCOUNT. SUBSEQUENTLY, THE ASSESSEE VIDE ITS LETTER DATED 2 .6.2003 STATED THAT THE MATERIAL CONSUMED TO MANUFACTURE RCC PIPES I.E. CEMENT, SAND AND BAZRI WERE NORMALLY IN THE RATIO OF 1:2:4. TAKING THE AFORESAID SITUATION INTO CONSIDERATION, FRESH CONSUMPTION CHART OF MATERIAL USE WAS PREPARED. THE ASSESSEE ADMITTED HAVING CONSUMED 33 TRUCKS OF SAND AND IN TERMS OF C UBIC FEET, ITS MEASUREMENT WORKED OUT AT 13200 C.FT. THE CONTENTI ON OF THE ASSESSEE THAT A PART OF SAND GETS WASTED DUE TO BLOWING OF W INDS ETC. AND SOME OF IT IS USED AS A LAYER ON SOIL TO KEEP OFF MOISTU RE ETC., THE CONSUMPTION OF SAND/RETA WAS ADOPTED AS 9600 C.FT AS BASE FOR W ORKING OUT THE TOTAL CONSUMPTION OF CEMENT AND BAZARI IN THE RATIO ADMIT TED BY THE ASSESSEE ITSELF. AS A RESULT OF IT, THE UNACCOUNTED CONSUMP TION OF CEMENT AND BAZRI WORKED OUT AT RS.4,41,600/- AND RS.2,35,000/- RESPECTIVELY. CONSEQUENTLY THE ASSESSEE WAS REQUIRED VIDE LETTER DATED 17.11.2003 TO SHOW CAUSE AS TO WHY THE UNEXPLAINED INVESTMENT MAD E OUTSIDE THE BOOKS OF ACCOUNT BY TAKING THE ROTATION SIX TIMES I N A YEAR IN RESPECT OF THE TOTAL UNEXPLAINED INVESTMENT OF RS. 6,76,000/- WHICH CAME TO RS. 1,00,000/- APPROXIMATELY BE NOT ADDED TO THE INCOME RETURNED IN VIEW OF THE PROVISIONS OF SECTION 69 OF THE INCOME-TAX A CT, 1961 BESIDES THE ADDITION OF RS. 2,58,870/- ON ACCOUNT OF SUPPRESSIO N OF MANUFACTURING/SALE OF RCC PIPES. THE ASSESSEE RAIS ED CERTAIN OBJECTIONS WITH REGARD TO THE VALUE OF CEMENT AND B AZRI WHICH WERE DULY TAKEN NOTE OF AND ULTIMATELY THE SAME WERE DETERMIN ED AT RS.6,40,304/- AND IT WAS SIMULTANEOUSLY HELD THAT THE ASSESSEE PU RCHASED THE MATERIAL TO THE EXTENT MENTIONED ABOVE OUTSIDE THE BOOKS OF ACCOUNT. WHILE COMPLETING THE ASSESSMENT UNEXPLAINED INVESTMENT IN THE PURCHASE OF RAW-MATERIAL AS DETERMINED AT RS.1,00,000/- WHILE F OR SUPPRESSING THE SALE OF RCC PIPES, AN ADDITION OF RS. 2,45,207/- WA S MADE. KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 5 FROM THE AFORESAID SUBMISSIONS YOUR GOODSELF WOULD PLEASE FIND THAT SPECIFIC DISCREPANCIES WERE NOTICED IN THIS CA SE AND THE SAME WERE DULY CONFRONTED TO THE ASSESSEE AND THIS FACT IS CL EAR FROM THE PERUSAL OF ASSESSMENT ORDER ITSELF. THE OTHER OBJECTIONS RAISE D REGARDING USE OF SAND, REASONABLE REBATE WAS ALLOWED WHICH IS PERFEC TLY IN ORDER. ACCORDINGLY, THE VARIOUS CONTENTIONS RAISED BY THE ASSESSEE CAN NOT BE ACCEPTED. 5. IN SUPPORT OF APPEAL, THE LD. COUNSEL FOR THE AS SESSEE REITERATED THOSE VERY SUBMISSIONS WHICH WERE EARLIER MADE BEFORE THE LD. CIT(A). 6. IN REPLY THE LD. DR SUPPORTED THE ORDER PASSED B Y THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE AO HAS ADDED A SUM OF RS. 1 LAKH TOWARDS UNEXPLAINED INVESTMENT IN THE PURCHASE OF RAW MATERIAL IN ADDIT ION TO A FURTHER SUM OF RS.2,45,207/- BEING PROFIT ON SALES EFFECTED OUTSID E THE BOOKS OF ACCOUNT. HE HAS GIVEN DETAILED JUSTIFICATION FOR MAKING THE IMP UGNED ADDITION. BEFORE THE CIT(A) ALSO, THE ASSESSEE HAS FAILED TO RECONCILE T HE DISCREPANCIES POINTED OUT BY THE AO IN THE ASSESSMENT ORDER. IN THIS VIEW OF THE MATTER, THE ORDER PASSED BY THE LD. CIT(A) IS CONFIRMED. APPEAL FILE D BY THE ASSESSEE IS DISMISSED. ITA NO. 128/ASR/2010: AY 2001-02 8. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1 THAT THE LD. CIT(A) ERRED BOTH IN LAW AS WELL IN RESPECT OF THE FACTS OF THE CASE, WHILE PASSING HIS ORDER DATED 15 .12.2009 IN APPEAL NO. 18-IT-CIT(A)/BT/06-07 THEREBY CONFIRMING THE PE NALTY OF RS. 85,319/- IMPOSED VIDE ORDER DATED 10.3.2006 PASSED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 BY THE AO. 2 THAT THE LD. CIT(A) FAILED TO APPRECIATE THE FACT S OF THE CASE JUDICIOUSLY AND ALSO THE DIRECTIONS OF THE HONBLE ITAT, AMRITSAR BENCH, KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 6 AMRITSAR IN PARA 17 OF ITS LD ORDER DATED 6.10.2006 PASSED IN ITA NO. 462(ASR)2005. 3 THAT ALL THE COMMENTS PASSED BY EH LD. CIT(A) WHI LE UPHOLDING THE PENALTY OF RS. 85,319/- ARE CONTRARY TO THE FAC TS OF THE CASE, BASED ON SURMISES AND CONJECTURES ONLY. 4 HE FURTHER FAILED TO APPRECIATE THAT THE AO HAS I MPOSED THE PENALTY DUE TO THE ADDITIONS MADE ON THE BASIS OF A SSUMPTIONS AND PRESUMPTIONS, WITHOUT BRINGING FORWARD ANY EVIDENCE OR MATERIAL ON RECORD TO SUPPORT HIS STAND, AS DIRECTED BY THE ITA T IN ITS LD. ORDER DATED 6.10.2006. 5 THE LD. CIT(A) ALSO OVERLOOKED THE FACTS THAT THE RE WAS NO WILLFUL NEGLECT ON THE PART OF THE APPELLANT TO CONCEAL ANY INCOME EARNED, INTER- ALIA THERE DID NOT EXIST ANY MENS REA TO JUSTIFY AN D SUPPORT THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. 6 THAT THE APPELLANT RESERVES HIS RIGHT TO ADD, AME ND, ALTER OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE SAME IS F INALLY HEARD. 9. WE HAVE HEARD BOTH THE PARTIES. THE CASE OF THE ASSESSEE IS THAT THE IMPUGNED PENALTY HAS BEEN LEVIED ON THE BASIS OF ES TIMATES ARRIVED AT BY THE AO. ACCORDING TO HIM THERE IS NO CONCRETE MATERIAL TO ESTABLISH THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE UNRELIABL E. THE LD. DR HOWEVER SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 10. ON CAREFUL CONSIDERATION OF THE RIVAL SUBMISSIO NS, WE ARE INCLINED TO CANCEL THE IMPUGNED PENALTY LEVIED BY THE AO AND CO NFIRMED BY THE LD. CIT(A). THE IMPUGNED PENALTY HAS BEEN LEVIED AFTER REJECTING THE EXPLANATION OF THE ASSESSEE WITH REGARD TO INVESTMENTS IN THE P URCHASE OF RAW MATERIAL AND ESTIMATION OF PROFIT ON SALES REPORTEDLY MADE OUTSI DE THE BOOKS OF ACCOUNT. MERE REJECTION OF EXPLANATION OFFERED BY THE ASSESS EE IS NOT SUFFICIENT FOR LEVY OF PENALTY. KEEPING IN VIEW THE SCALE OF BUSINESS OF THE ASSESSEE, SMALLNESS OF KAMBOJ RCC PIPES V ITO ITAS NO. 127 AND 128/ASR/2010 7 THE AMOUNT INVOLVED AND THE EXPLANATION OFFERED BY THE ASSESSEE, THE IMPUGNED PENALTY IS CANCELLED. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 16.12.2011 SD/- SD/- (H L KARWA) (D K SRIVASTAVA) VICE PRESIDENT ACCOUNTANT MEMBER AMRITSAR, 16.12.2011 SURESH COPY TO:- 1. THE APPELLANT, KAMBOJ RCC PIPES 2. THE RESPONDENT, ITO 3. THE CIT(A), BATHINDA 4. THE LD. CIT, BATHINDA 5. THE D.R., INCOME TAX DEPARTMENT, AMRITSAR