ACIT 16(1), MUMBAI V. K.D. KOTHARI & CO., MUMBAI

ITA 1293/MUM/2013

• Counselvise Citation: 129319914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: B V JHAVERI

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. : 1293 /MUM/20 1 3 (ASSESSMENT YEAR: 20 0 7 - 0 8 ) ACIT 16(1), 2 ND FL OOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 VS M/S K D KOTHARI AND CO , 1215, PRASAD CHAMBERS, 12 TH FLOOR, OPERA HOUSE, MUMBAI - 400 004 PAN: AAAFK 1373 N (APPELLANT) (RESPONDENT) CO NO. 87/MUM/2014 ARISING OUT OF ITA NO. : 1293/MUM/2013 , AY 2007 - 08 M/S K D KOTHARI AND CO , MUMBAI - 400 004 PAN: AAAFK 1373 N VS ACIT 16(1), MUMBAI - 400 007 (APPELLANT) - CROSS OBJECTOR (RESPONDENT) APPELLANT - CROSS OBJECTOR BY : SHRI B V JHAVERI R ESPONDENT - REVENUE BY : SHRI ASGHAR ZAIN /DATE OF HEARING : 24 - 11 - 2014 DATE OF PRONOUNCEMENT : 5 - 12 - 2014 O R D E R , PER R.C. SHARMA , A .M. : THIS IS AN APPEAL FILED BY THE REVENUE AND CR OSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 30 . 1 1 .201 2 FOR THE ASSESSMENT YEAR 2007 - 08, IN THE MATTER OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT. 2. THERE IS A MARGINAL DELAY OF 12 DAYS IN FILING THE APPEAL. CONSIDERIN G THE CONTENTION OF THE LEARNED DR REGARDING DELAY IN FILING THE PRESENT APPEAL, WE CONDONE THE SAME IN VIEW OF THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI, REPORTED IN 167 ITR 47 1. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. M/S K D KOTHARI AND CO ITA 1293 /MUM/20 1 3 CO 87/MUM/2014 2 4 . FROM THE RECORD, WE FOU ND THAT PENALTY WAS IMPOSED BY AO WITH RESPECT TO THE QUANTUM ADDITION SUSTAINED BY THE CIT(A) . A GAINST THE QUANTUM ADDITION THE ASS ESSEE APPROACHED TO THE TRIBUNAL AND T HE TRIBUNAL VIDE ITS ORDER DATED 25.04.2012 REDUCED THE QUA NTUM ADDITION TO RS. 4,81,040/ - IN RESPECT OF EXCESS STOCK SO FOUND DURING COURSE OF SURVEY, WHEREAS TRADING ADDITION WAS SUSTAINED TO THE EXTENT OF RS.55,12,076/ - . THUS, THE TOTAL ADDITION SUSTAINE D BY ITAT AMOUNTED TO RS.60,73,726/ - (RS.55,12,076 + 5,61,650). 5 . I T WAS CONTENDED BY LD. AR THAT ENTIRE ADDITION HAS BEEN DELETED BY THE TRIBUNAL, THEREFORE, THE CIT(A) SHOULD NOT HAVE DIRECTED TO THE AO TO SUSTAIN THE PENALTY ON SUM OF RS. 2,67,703/ - . 6 . CONTENTION OF THE LD. AR WAS THAT ASSESSEE HAS FILED MA IN RESPECT OF THE QUANTUM ORDER DATED 25.04.2012 WHEREIN, IT WAS PRAYED THAT ONE OF THE GROUNDS WAS NOT DECIDED BY THE TRIBUNAL. 7 . IN MA NO. 41/MUM/2013 FILED BY THE ASSESSEE VIDE ITS ORDER DATED 0 5.07.2013 IN ITA NO. 2286/MUM/2010 FOR AY 2007 - 08, WHILE ADJUDICATING UNDECIDED GROUND NO. 5, T HE TRIBUNAL HELD: 3. IT IS NOTICED THAT THE ASSESSEE WAS FOUND TO BE ENGAGED IN CARRYING ON BUSINESS OUTSIDE ITS BOOKS OF ACCOUNT. THERE WERE TWO TYPES OF TRANS ACTIONS OF UNRECORDED BUSINESS. THE FIRST TOTALED AT RS. 18.37 CRORE AS PER TABLE ON PAGE 4 OF THE ASSESSMENT ORDER. THEN THERE IS ANOTHER SET OF TRANSACTION TOTALING RS. 25.87 LAKH WITH MR. A. DARSHAN. THE ASSESSING OFFICER APPLIED 20% PROFIT RATE ON BOTH THE SETS OF TRANSACTIONS THEREBY MAKING ADDITION OF RS. 3.67 CRORES AND 5.37 LAKH RESPECTIVELY. THE LEARNED CIT(A) REDUCED THE RATE OF PROFIT TO 10% IN RESPECT OF BOTH THE SETS OF TRANSACTIONS. THE ASSESSEE CHALLENGED THE SUSTENANCE OF ADDITION IN RESPECT OF FIRST SET OF TRANSACTIONS THROUGH GROUND NOS. 1 TO 4 AND SECOND SET OF TRANSACTIONS THROUGH GROUND NO.5. THE TRIBUNAL, WHILE PASSING THE ORDER U/S 254(1), HELD THAT THE CORRECT PROFIT PERCENTAGE TO BE APPLIED IS 3% IN CONFORMITY WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR. THE SAID DECISION OF 3% PROFIT RATE THOUGH HAS BEEN REFERRED TO ALL THE GROUNDS OF APPEAL IN COMMON, BUT SPECIFICALLY DEALT WITH ONLY THE FIRST SET OF TRANSACTIONS. WE, THEREFORE, AMEND THE ORDER BY HOLDING T HAT 3% PROFIT RATE SHOULD BE APPLIED IN RESPECT OF SECOND SET OF TRANSACTIONS ALSO TATALING RS. 26.87 LAKH AS AGAINST 20% APPLIED BY THE AO AND REDUCED TO 10% BY THE LD. CIT(A). THE IMPUGNED ORDER IS ACCORDINGLY RECTIFIED TO THIS EXTENT. M/S K D KOTHARI AND CO ITA 1293 /MUM/20 1 3 CO 87/MUM/2014 3 8 . BY THE IMPU GNED ORDER, CIT(A) RESTRICTED THE PENALTY ON AN INCOME OF RS.2,68,703/ - AFTER HAVING THE FOLLOWING OBSERVATIONS : - 5. I HAVE CAREFULLY CONSIDERED THE CONTENTS OF THE PENALTY ORDER AND THE APPELLANTS SUBMISSIONS. IT IS NOTED THAT THE HONBLE ITAT IN ITS AFORESAID ORDERS DIRECTED THAT THE COMMISSION INCOME SHALL BE ASSESSED AT 30% OF UNRECORDED SALES OF RS. 18.37 CRORES RESULTING IN AN ADDITION OF RS. 55,12,076/ - . THE HONBLE ITAT FURTHER HELD THAT AS AGAINST THE AFORESAID COMMISSION INCOME SUSTAINED BY TH EM, THE EXCESS STOCK OF RS. 60.73 LAKHS ASCERTAINED AT THE TIME OF SURVEY SHALL BE TELESCOPED. AFTER ALLOWING THE BENEFIT OF TELESCOPING, THE HONBLE ITAT SUSTAINED THE ADDITION OF RS. 5,61,650/ - ON ACCOUNT OF EXCESS STOCK, WHILE PARTLY ALLOWING THE REVENU ES APPEAL. THUS, ON GIVING EFFECT TO THE HONBLE ITATS ORDER, THE TOTAL INCOME ASSESSED WAS REVISED TO RS. 81,42,628/ - AGAINST THE RETURNED INCOME OF RS. 78,73,927/ - WHICH RESULTED IN AN ADDITION OF RS. 2,68,703/ - . 5.1 DURING THE PROCEEDINGS BEFORE ME, THE AR SUBMITTED THAT THE HONBLE ITAT IN ITS ORDER CONSIDERED THE APPELLANTS GROUND RELATING TO ASSESSING THE COMMISSION INCOME AT 10% OF THE UNRECORDED SALES OF RS. 18.37 CRORES WHILE THE OTHER GROUND RELATING TO ASSESSING THE COMMISSION INCOME AT 10% O F THE UNRECORDED SALES OF RS. 26,87,000/ - WAS LEFT UNDECIDED, RESULTING IN THE AFORESAID ADDITION. IN THIS REGARD, I NOTE THAT WHILE IT IS A FACT THAT APPELLANTS GROUND NO. 5 BEFORE THE HONBLE ITAT WAS OMITTED TO BE CONSIDERED, NEVERTHELESS ANY RELIEF IN THIS REGARD CAN BE GIVEN ONLY BY THE HONBLE ITAT AND NOT BY ANY OF THE LOWER AUTHORITIES. AS SUCH, AS ON TODAY, THE ADDITIONAL INCOME OF RS. 2,68,703/ - STANDS ASSESSED AS A RESULT OF SURVEY CONDUCTED IN THE APPELLANTS PREMISES. IT IS ALSO A FACT THAT SU CH INCOME WAS EARNED OUTSIDE THE BOOKS OF ACCOUNT AND ACCORDINGLY, IT AMOUNTS THAT THE APPELLANT HAS CONCEALED ITS INCOME TO THE ABOVE EXTENT. IN VIEW OF THE ABOVE, LEVYING OF THE PENALTY U/S 271(1)(C) OF THE ACT ON THE TAX SOUGHT TO BE EVADED ON AN INCOME OF RS. 2,68,703/ - IS WARRANTED IN MY CONSIDERED OPINION. IN CASE THE ASSESSED INCOME STANDS REVISED DOWNWARDS ON ACCOUNT OF ANY FURTHER ORDERS OF THE HONBLE ITAT AT A LATER DATE, THE AMOUNT OF PENALTY LEVIED WILL ALSO UNDERGO A CHANGE ACCORDINGLY AND TIL L SUCH TIME I UPHOLD THE PENALTY TO THE EXTENT OF TAX SOUGHT TO BE EVADED ON AN INCOME OF RS. 2,68,703/ - . THE AO IS DIRECTED TO RECOMPUTE THE PENALTY TO BE LEVIED U/S 271(1)(C) OF THE ACT ON THE AFORESAID INCOME ONLY. APPELLANT GETS PART RELIEF. 9 . AGA INST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND ASSESSEE HAS FILED CROSS OBJECTION. 10 . IT WAS ARGUED BY LEARNED AR THAT AFTER CONSIDERING THE ADDITION DELETED BY TRIBUNAL THE CIT(A) HAS SUSTAINED PENALTY ON THE QUANTUM ADDITION OF RS.2,68,703/ - , WHICH WAS ALSO SUBSEQUENTLY DELETED BY THE TRIBUNAL BY PASSING ORDER IN M.A.NO.41/MUM/2013, DATED 5 - 7 - 2013. ACCORDINGLY, AS PER LEARNED AR, NO PENALTY IS SUSTAINABLE. M/S K D KOTHARI AND CO ITA 1293 /MUM/20 1 3 CO 87/MUM/2014 4 1 1 . ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND CONTENDED THAT THE ORDER PASSED BY AO SHOULD BE UPHELD. 1 2 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE QUANTUM ORDER PASSED BY THE TRIBUNAL AS WELL AS ORDER PASSED IN M.A.NO. 41/MUM/2013, DATED 5 - 7 - 2013. WE FOUND THAT QUANTUM ADDITION H AS BEEN REDUCED BY CIT(A) AND TRIBUNAL AS UNDER : - FIRST SET OF TRANSACTION SECOND SET OF TRANSACTION TOTAL TRADING ADDITION ADDITION FOR EXCESS STOCK TOTAL ADDITION QUANTUM AS PER AOS ORDER 3,67,47,146 5,37,400 3,72,84,546 60,73,000 4,33,57,546 QUANTU M AS PER CIT(A)S ORDER 1,83,73,573 2,68,700 1,86,42,273 NIL 1,86,42,273 QUANTUM AS PER TRIBUNALS ORDER(3%) 55,12,076 80,610 55,92,686 4,8 0 , 314 60,73, 000 THUS, THE TOTAL ADDITION AFTER ORDER OF THE TRIBUNAL REMAINS AT RS. 60 , 73 , 000 / - . IN TERMS OF THE OR DER OF THE TRIBUNAL IN ITA NO.2286 & 3742/MUM/2010 , DATED 25 - 4 - 2012 AND M.A.NO.41/MUM/2013, DATED 5 - 7 - 2013, UNACCOUNTED STOCK OF RS.60,73, 000 / - IS TO BE ADJUSTED AGAINST THE QUANTUM ADDITION SO RETAINED. THUS, THERE REMAINS ADDITION OF RS. 4,8 0 , 314 / - (RS.60 ,73, 000 55, 92,686/ - ), ON ACCOUNT OF UNACCOUNTED STOCK. ACCORDINGLY, WE MODIFY THE ORDER OF BOTH THE LOWER AUTHORITIES IN RESPECT OF PENALTY IMPOSED U/S.271(1)(C) AND DIRECT THE AO TO RECOMPUTE THE QUANTUM OF PENALTY WITH REFERENCE TO ADDITION SO RETAINED AFTER ORDER OF TRIBUNAL. AO IS FURTHER DIRECTED TO RE - VERIFY THE QUANTUM ADDITION SO REMAINED AFTER GIVING EFFECT TO ORDER OF TRIBUNAL , AND RECOMPUTE PENALTY THEREON. WE DIRECT ACCORDINGLY. M/S K D KOTHARI AND CO ITA 1293 /MUM/20 1 3 CO 87/MUM/2014 5 1 3 . IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS OBJECT ION FILED BY THE ASSESSEE ARE ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH DECEMBER , 2014 . SD/ - SD/ - ( SANJAY GARG ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE: 5TH DECEMBER , 2014 COPY TO: - THE APPLICANT . 1) THE RESPONDENT. 3) THE CIT (A) - 27 , MUMBAI. 4) 16 , MUMBAI THE CIT - 16 , MUMBAI. 5) A , THE D.R. A BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER [ , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI CHAVAN, SR. PS /PKM,PS