M/s Shiva Opticals, New Delhi V. ACIT, New Delhi

ITA 1340/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0116 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 14-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SINJANI MOHANTY
• Assessee Lawyers: SM MATHUR
• Section: 271(1)(c); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 1340(DEL)/2010 ASSESSMENT YEAR: 2003-04 M/S SHIVA OPTICALS-SOUTH END, AS SISTANT COMMISSIONER OF SHOP NO. 4, NEW MARKET, VS. IN COME-TAX, CIRCLE 23(1), MALVIYA NAGAR, NEW DELHI. N EW DELHI. PAN-AACFS1152P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.M. MATHUR, C.A. RESPONDENT BY : SMT. SINJANI MOHANTY, DR ORDER PER K.G. BANSAL :AM THE ASSESSEE HAS TAKEN TWO GROUNDS IN THE APPEAL , THE SUM AND SUBSTANCE OF WHICH IS THAT THE LD. CIT(APPEALS) ERRED IN SUSTAINING THE PENALTY OF RS. 96,360/-, LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. BRIEFLY, THE FACTS ARE THAT SURVEY U/S 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 10.1.2003. THE STOCK FOUND IN THE COURSE OF SURVEY WAS VALUED. IT WAS COMPARED WI TH THE BOOKS STOCK. THE COMPARISON LED TO DISCREPANCY OF AN AMOUNT OF RS . 27,18,806/-, WHICH WAS SURRENDERED FOR TAXATION BY THE ASSESSEE. HOWEVER, IN THE RETURN OF ITA NO. 1340(DEL)/2010 2 INCOME FILED ON 30.9.2003, THE DISCREPANCY WAS WORKED OUT AT RS. 20,74,847/- AND THIS AMOUNT WAS ADDED TO THE TOT AL INCOME. THE AO COMPLETED ASSESSMENT BY TAKING THE AMOUNT OF D ISCREPANCY AT RS. 27,18,806/-. THE LD. CIT(APPEALS) QUANTIFIED THE DISCREPANCY AT RS. 22,73,018/- AND GAVE PART RELIEF TO THE ASSESSE E. THE POSITION FINALLY EMERGING IN THIS BEHALF CAN BE SUMMARIZED AS U NDER:- PARTICULARS AS PER SURVEY OFFICIALS & AO AS PER ASSESSEE AS PER CIT(A) VALUE OF STOCK AS CALCULATED BY SURVEY OFFICIAL ON 10.01.2003 AT TAG PRICE LESS: DISCOUNT ON TAG PRICE LESS: VALUE OF STOCK AS PER BOOKS OF ACCOUNTS AS ON 10.1.2003 AS PER PROVISIONAL TRADING ACCOUNT 80,43,234/- (25%) 20,10,809/- 60,32,426/- 33,13,619/- 27,18,807/- 80,43,234 (30%) 24,71,054/- 55,72,180/- 33,13,619/- 22,58,561/- 80,43,234 (28.26%) 22,73,018/- 57,70,216/- 33,13,619/- 24,56,597/- A) VALUE OF EXCESS STOCK SURRENDERED AT THE TIME OF SURVEY ON 10.1.2003 RS. 27,18,807/- B) VALUE OF EXCESS STOCK SURRENDERED/DECLARED IN RETURN OF INCOME RS. 20,74,847/- C) VALUE OF EXCESS STOCK AFTER APPEAL EFFECT RS. 24,56,597/- D) VALUE OF CONCEALMENT IN STOCK (RS. 27,18,807 RS. 24,56,597) RS. 2,62,210/- ITA NO. 1340(DEL)/2010 3 3. THE AO INITIATED PENALTY PROCEEDINGS U/S 271( 1)(C) IN THE COURSE OF ASSESSMENT. THESE PROCEEDINGS WERE COMPLETED ON 26.11.2007 BY LEVYING PENALTY OF RS. 96,360/- IN RESPECT OF THE AMOUNT CONFIRMED BY THE LD. CIT(APPEALS). THE LD. CIT(APPEALS) CAME TO THE CONCLUSION THAT THE ASSESSEE DID FURNISH AN EXPLANATION BUT WAS NOT ABLE TO SUBSTANTIATE IT BEYOND THE SHADOW OF DOUBT. ACCORDING TO HIM, WHERE A PRESUMPTION IS RAISED, IT IS FOR THE ASSESSEE TO PROVE BEYOND DOUBT THAT THE ADDITION MADE TO THE RETURNED INCOME WAS NOT ON ACCOUNT OF ANY FRAUD, OR GROSS OR WILLFUL NEGLECT ON HIS PART. 4. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE E XPLANATION IS IN REGARD TO THE DISCOUNT TO BE GIVEN ON TAG PRICE OF THE GOODS TO ARRIVE AT THE COST PRICE. THE AO ALLOWED DISCOUNT OF 25%, WHICH WAS LOWER THAN THE GROSS PROFIT RATIO DECLARED BY THE ASSESSEE. T HERE WOULD BE SOME DISCOUNT GIVEN THROUGH PROFIT AND LOSS ACCOUNT ALSO. THEREFORE, THE ESTIMATION OF THE ASSESSEE OF DISCOUNTING THE TAG PRICE BY 30% WAS FAIR AND REASONABLE. THE LD. CIT(APPEALS) HAS ALLOW ED DISCOUNT OF 28.26% AND GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. HOWEVER, ALL THESE CALCULATIONS ARE APPROXIMATE ONLY. THEREFORE, TH ERE IS NOTHING IN THE EXPLANATION OF THE ASSESSEE WHICH WILL LEAD TO A CONCLUSION OF FRAUD, OR ITA NO. 1340(DEL)/2010 4 WILLFUL NEGLECT ETC. IN REPLY, THE CASE OF TH E LD. DR IS THAT THE DISCOUNT WAS TAKEN AT 25% AT THE TIME OF SURVEY AND IT WA S ACCEPTED BY THE ASSESSEE. IN ANY CASE, EVEN THE LD. CIT(APPEAL S) ALLOWED DISCOUNT ONLY AT 28.26%. THEREFORE, THE FURTHER DIFFERENCE OF 1.74% REMAINS UNEXPLAINED FOR WHICH THERE IS NO BONA FIDE EX PLANATION. SHE STRONGLY RELIED ON THE FINDING OF THE LD. CIT(APPEALS) T HAT THE ASSESSEE HAS BEEN UNABLE TO SUBSTANTIATE THE EXPLANATION. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. IT IS NO DOUBT TRUE THAT THE ASSESS EE OFFERED AN AMOUNT OF RS. 27,18,806/- FOR TAXATION IN THE STATEMENT RECORDE D DURING THE COURSE OF SURVEY. THE STATEMENT RECORDED AT THAT TIME CO ULD ONLY BE TENTATIVE IN RESPECT OF VALUATION OF STOCK BECAUSE OF LACK O F TIME. IN ANY CASE, AFTER DETAILED DISCUSSION, EVEN THE LD. CIT(APPEALS) ALLOWED DEDUCTION OF 28.26%, I.E., MORE THAN 25% TAKEN AT THE TIME OF SURVEY AND ADOPTED BY THE AO. THE ASSESSEE CLAIMED 30% DISCOUNT IN THE RETURN OF INCOME, WHICH IS MARGINALLY ABOVE THE ESTIMATE ARRIVED AT BY THE LD. CIT(APPEALS). NONETHELESS, ALL THESE FIGURES C AN ONLY BE APPROXIMATE. ACTUALLY, VALUATION OF STOCK HAS TO BE WORKED O UT ON THE BASIS OF RECOGNIZED METHOD, NAMELY, THE COST, OR THE COST O R MARKET PRICE, WHICH EVER ITA NO. 1340(DEL)/2010 5 IS LESSER. THAT HAS NOT BEEN DONE IN ASSESSMENT PROCEEDINGS OR IN THE FIRST APPEAL. IN SUCH CIRCUMSTANCES, WE ARE OF THE V IEW THAT NO MALA FIDE CAN BE ATTRIBUTED TO THE ASSESSEE. THEREFORE, THE EXPLANATION HAS TO BE TAKEN AS BONA-FIDE. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 MARCH, 2011. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH MARCH, 2011. SP SATIA COPY OF THE ORDER FORWARDED TO: M/S SHIVA OPTICALS SOUTH END, NEW DELHI. ACIT, CIRCLE 23(1), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REG ISTRAR.