SYKZ HAIR AND SKIN SOLUTIONS P.LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 1440/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7156 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 16-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N AVNEET KUMAR ARORA
• Keywords: Business income; Wrong claim

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NOS.1440 & 1583/MUM/2016 ASSESSMENT YEAR: 2011-12 M/S SKYZ HAIR AND SKIN SOLUTIONS PVT. LTD. 201/214, SAMARTH VAIBHAV OFF NEW LINK ROAD, LOKHANDWALA ANDERI (WEST) MUMBAI-400053 / VS. INCOME TAX OFFICER - 11(3)(2), MUMBAI ( '# $ /ASSESSEE) ( % / REVENUE) P.A. NO. AAGFA5134P '# $ / ASSESSEE BY SHRI NAVNEET KUMAR ARORA % / REVENUE BY SHRI V. JUSTIN-DR & % ' $ ( / DATE OF HEARING : 24/05/2018 ' $ ( / DATE OF ORDER: 24/05/2018 M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THESE TWO APPEALS ARE BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 29/01/2016 OF THE LD. FIRST AP PELLATE AUTHORITY, MUMBAI. FIRST, WE SHALL TAKE UP THE APPE AL IN ITA NO.1440/MUM/2016, WHEREIN, THE ONLY GROUND AGITATED BY THE ASSESSEE WITH RESPECT TO VALUATION OF STOCK AT COST OR MARKET PRICE AND ENTITLEMENT OF CLAIM OF WRITE OFF OF ACTUAL INVENTORY DESTROYED IN THE YEAR. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI NAVNEET KUMAR ARORA, EXPLAINED THAT THE ASSESS EE IS IN THE BUSINESS OF BEAUTY SPA RELATED TO HAIR AND SKIN THERAPY DISCARDED THE EXPIRED OR DAMAGED STOCK WHICH COULD NOT BE USED IN THE BUSINESS OF THE ASSESSEE. ON THE OTHER HAND, SHRI V. JUSTIN, LD. DR, DEFENDED THE ADDITION. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BEAUTY SPA RELATED TO HAIR AND SKIN THERAPY, DECLARED NIL INCO ME IN ITS M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 3 RETURN FILED ON 30/09/2011. ON PERUSAL OF ADMINIS TRATIVE EXPENSES, IT WAS FOUND THAT THE ASSESSEE DEBITED SU M OF RS. 26,23,595/- ON ACCOUNT OF MATERIAL CONSUMPTIONS. IN ASSESSMENT YEAR 2010-11, SUCH CONSUMPTION WAS SHOWN AT RS.13,88,398/- AND THE BUSINESS RECEIPT WERE RS.1,05,81,975/- AS AGAINST RS.87,83,984/-. THE ASS ESSEE WAS ASKED TO JUSTIFY THE CLAIM FOR INCREASING CONSU MPTION OF MATERIAL. THE ASSESSEE SUBMITTED THE BREAKUP OF ITE MS WHICH WERE CONSUMED. AS PER THE REVENUE, FOR AMOUNT OF RS.7,39,814/- (AS STOCK CONSUMED) NO DETAILS WERE F ILED. THE ASSESSEE CLAIMED THAT THIS STOCK WAS DISCARDED DUE TO EXPIRY AND WAS UN-USEABLE. HOWEVER, THE LD. ASSESSING OFFI CER IN THE ABSENCE OF ANY EVIDENCE OF HAVING DISCARDED THE STO CK ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, BEFORE TH E LD. COMMISSIONER OF INCOME TAX (APPEAL), THE ADDITION S O MADE WAS AFFIRMED. THE ASSESSEE IS IN FURTHER APPEAL BEF ORE THIS TRIBUNAL. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 4 ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, THE MAIN REASON FOR THE ADDITION WAS THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENC E WITH RESPECT TO THE EXPIRY OF THE CLAIMED PRODUCT/MATERI AL. HOWEVER, WE FIND THAT EVEN IN THE ASSESSMENT ORDER IN PARA-4, THE LD. ASSESSING OFFICER HIMSELF HAS MENTIONED THA T IN RESPONSE TO THE SAME, THE ASSESSEE SUBMITTED THE BR EAKUP OF ITEMS, WHICH WERE CONSUMED. THE ADDITION WAS MAD E MERELY ON THE BASIS THAT THE ASSESSEE COULD NOT PRODUCE AN Y EVIDENCE WITH RESPECT TO THE STOCK, WHICH WAS DISCARDED ON E XPIRY AND WAS NOT USED. CONSIDERING THE TOTALITY OF FACTS, W E FIND MERIT IN THE CLAIM OF THE ASSESSEE BUT AT THE SAME TIME, AS CONTENDED BY LD. DR, THE NECESSARY DETAILS WERE NOT FURNISHED, THEREFORE, BY TAKING A LENIENT VIEW, THE ADDITION IS REDUCED TO 50% (AS AGAINST THE TOTAL ADDITION OF RS .7,39,814/- ), WHICH COMES TO RS.3,69,907/-. THUS, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 3. NOW, WE SHALL TAKE UP THE PENALTY APPEAL OF THE ASSESSEE IMPOSED U/S 271(1)(C) OF THE ACT ON THE AF ORESAID ADDITION. UNDER THE AFOREMENTIONED FACTS, WE FIND T HAT A M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 5 PENALTY OF RS.2,29,000/- WAS IMPOSED. EVEN IT IS PR ESUMED THAT A WRONG CLAIM WAS MADE BY THE ASSESSEE, IT CAN NOT BE SAID THAT SOMETHING WAS HIDE FROM THE DEPARTMENT. P OSSIBLY, IT MAY BE A CASE FOR QUANTUM ADDITION BUT CERTAINLY NOT FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT BECAUSE D UE TO NON- FILING OF FULL DETAILS THE ADDITION WAS MADE. THE A SSESSEE PRESUMABLY DISCARDED THE EXPIRED MATERIAL DUE TO IG NORANCE OR IN GOOD FAITH. STILL THE ASSESSEE AS MENTIONED I N THE ASSESSMENT ORDER FILED BY THE BIFURCATION OF SUCH M ATERIAL, THEREFORE, WE ARE OF THE VIEW, EVEN IF A WRONG CLAI M IS MADE BY THE ASSESSEE, THAT IPSO FACTO , CANNOT LEAD TO CONCEALMENT. EVEN IF A WRONG CLAIM HAS BEEN MADE, IT MAY BE A GO OD CASE FOR QUANTUM ADDITION BUT CERTAINLY NOT FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. THIS PROPOSITION IS SHELT ERED BY THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF REL IANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158 (SC) AND CIT VS AJAI B SINGH & COMPANY 253 ITR 630(P &H). WHILE COMING TO THIS CON CLUSION, THE HON'BLE APEX COURT IN RELIANCE PETRO PRODUCTS P VT. LTD. (SUPRA) OBSERVED AS UNDER:- M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 6 A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACC URATE PARTICULARS. 3.1. IN THE LIGHT OF THE ABOVE OBSERVATION, WE ARE REPRODUCING HEREUNDER THE RELEVANT SECTION 271(1)(C ) OF THE ACT FOR READY REFERENCE AND ANALYSIS:- SECTION 271(1)(C) IS AS UNDER:- '271(1) IF THE ASSESSING OFFICER OR THE COMMISSIONE R (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY P ERSON- (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' 3.2. A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN ORDER TO BE COVERED UNDER THIS SECTION FIRSTLY, THE RE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE AND SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INAC CURATE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THERE FORE, THE M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 7 WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C) WO ULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MAD E. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFOR MATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR IN ACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPL IED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PR IMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING IN ACCURATE PARTICULARS. THE WORDS ARE PLAIN AND SIMPLE. IN ORD ER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN I NCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCU RATE PARTICULARS. IN COMMISSIONER OF INCOME TAX, DELHI V S. ATUL MOHAN BINDAL [2009(9) SCC 589], WHERE HON'BLE APEX COURT WAS CONSIDERING THE SAME PROVISION, THE COURT OBSER VED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PE RSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. HON'BLE COUR T REFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS [2008(13) SCC 369], AS ALSO, M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 8 THE DECISION IN UNION OF INDIA VS. RAJASTHAN SPG. & WVG. MILLS [2009(13) SCC 448] AND REITERATED IN PARA 13 THAT:- '13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST.' 3.3. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOW N THAT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST B EFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EV ERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE BECAUSE THAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN F URNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS AR E FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. [20 07(6) SCC 329], HON'BLE COURT EXPLAINED THE TERMS 'CONCEA LMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. TH E COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO ATTRACT TH E PENALTY UNDER SECTION 271(1)(C), MENS REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGNIFIES A DEL IBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO H OLD THAT CLAUSE (III) OF SECTION 271(1) PROVIDED FOR A DISCR ETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, INASMUCH AS THE M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 9 AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT O F PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURA TE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AN D, THEREFORE, IT WAS HELD THAT FURNISHING OF AN ASSESS MENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHI NG INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT TH E ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPL ANATION IS NOT ONLY BONA FIDE BUT ALL THE FACTS RELATING TO TH E SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOM E. THE COURT ULTIMATELY WENT ON TO HOLD THAT THE ELEMENT O F MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. WAS UPSET. IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), AFTER QUOTING FROM SECTION 271 EXTENSIVELY AND ALSO CONSIDERING S ECTION M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 10 271(1)(C), THE COURT CAME TO THE CONCLUSION THAT SI NCE SECTION 271(1)(C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURA TE PARTICULARS WHILE FILING RETURN, THERE WAS NO NECES SITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIN D ENACTMENT OF SECTION 271(1)(C) READ WITH EXPLANATIO NS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING R EMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIAB ILITY AND, THEREFORE, WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE M ATTER OF PROSECUTION UNDER SECTION 276-C OF THE ACT. THE BAS IC REASON WHY DECISION IN DILIP N. SHROFF VS. JOINT COMMISSIO NER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA) WAS OVERRUL ED BY HON'BLE APEX COURT IN UNION OF INDIA VS. DHARAMENDR A TEXTILE PROCESSORS (CITED SUPRA), WAS THAT ACCORDING TO THE COURT THE EFFECT AND DIFFERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276-C OF THE ACT WAS LOST SIGHT OF IN CASE OF DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CI TED SUPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN UNI ON OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), N O FAULT M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 11 WAS FOUND WITH THE REASONING IN THE DECISION IN DIL IP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA), WHERE THE COURT EXPLAINED THE MEANING OF TH E TERMS 'CONCEAL' AND INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENCE IN DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TA X, MUMBAI & ANR. (CITED SUPRA) TO THE EFFECT THAT MENS REA WAS AN ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTI ON 271(1)(C) THAT THE DECISION IN DILIP N. SHROFF VS. JOINT COMM ISSIONER OF INCOME TAX, MUMBAI & ANR. (CITED SUPRA) WAS OVERRUL ED. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA . HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE P ARTICULARS. IN WEBSTER'S DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS:- 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT'. 3.4. WE HAVE ALREADY SEEN THE MEANING OF THE WORD 'PARTICULARS' IN THE EARLIER PART OF THIS ORDER. RE ADING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SU PPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CO RRECT, NOT M/S. SYKZ HAIR & SKIN SOLUTIONS PVT. LTD. ITA NOS.1440 & 1583/MUM/2016 12 ACCORDING TO TRUTH OR ERRONEOUS. IN THE LIGHT OF TH E FOREGOING DISCUSSION, AND SINCE, WE HAVE REDUCED THE QUANTUM ADDITION TO 50%, THEREFORE, THE PENALTY WILL BE LEVIABLE ACC ORDINGLY AND DIRECT THE LD. ASSESSING OFFICER TO REDUCE THE PENA LTY TO 50% WHICH COMES TO RS.1,14,500/-. THUS, THE PENALTY APP EAL IS ALSO PARTLY ALLOWED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALL OWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/05/2018. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & MUMBAI; * DATED : 24/05/2018 F{X~{T? P.S / +% %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 & 2$ ( ,- ) / THE CIT, MUMBAI. 4. 1 1 & 2$ / CIT(A)- , MUMBAI 5. 4%5 $ , 1 ,-( , 6 , & / DR, ITAT, MUMBAI 6. 7' / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI,