M/s. Ravi Jewellers, Surat V. The ACIT.,Circle-9, Surat

ITA 1477/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9358 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 11-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Unexplained expenditure; Loose papers; Set aside
• Section: 69C

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, D - BENCH,AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI N.S.SAINI, ACCOU NTANT MEMBER. ITA NO. 1477 /AHD/2009 (ASSESSMENT YEAR 2003 - 04) M/S.RAVI JEWELLERS, 230 - 231, PODDARARCADE, KHAND BAZAR,VARAC HHA ROAD, SURAT. PAN AAFFR 3012 G VERSUS THE ACIT, CIRCLE 9, SURAT. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: NONE (WRITTEN SUBMISSION) FOR THE RESPONDENT SHRI M.C.PANDIT, DR ORDER SHRI T.K.SHARMA, JUDICIAL MEMBER : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER DT.13.2.2009 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) V, SURAT CONFIRMING THE PENALTY OF RS.1,17,645 LEVIED U/S.271(1)(C) OF THE INCOME - TAX ACT,1961 FOR THE ASSESSMENT YEAR 2003 - 04. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. BUT THE ASSESSEE HAS FILED A WRITTEN SUBMISSION. THEREFORE, THE CASE WAS HEARD EXPARTE QUA ASESSEE. THE LEARNED DR WAS HEARD AND THE WRITTEN SUBMISSION CONSIDERED. 3. AT THE OUTSET, IT IS PERTINENT TO NOTE THAT THE REGISTRY HAS POINTED OUT THAT THERE IS A SHORT APPEAL FEE OF RS.9,500. IN THIS CASE, THE ASSESSEE PAID APPEAL FEE OF RS.500. HONBLE PATNA HIGH COURT IN THE CASE OF DR. AJITKUMAR PANDEY ( 310 ITR 195). IN THE SAID CASE, T HE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL AGAINST LEVY OF PENALTY UNDER SECTION 271 OF THE INCOME - TAX ACT, 1961, AND PAID RS. 500 TOWARDS COURT FEES. THE APPEAL WAS DECIDED EX PARTE AND THE ASSESSEE APPROACHED THE TRIBUNAL FOR RECALLING OF THE EX PARTE ORDER. THE TRIBUNAL AGREED TO RECALL THE EXPA RTE ORDER AND TO DECIDE THE APPEAL ON MERITS PROVIDED THE ASSESSEE FURNISHED THE DEFICIT COURT FEE OF RS.8,330. ON A WRIT PETITION, HONBLE HIGH COURT HAS HELD - 2 THAT IN THE CASE OF AN APPEAL FILED ON OR AFTER OCTOBER 1, 1998, THE APPEAL MUST BE ACCOMPAN IED BY A FEE AS PROVIDED IN CLAUSES (A) TO (D) OF SUB - SECTION (6) OF SECTION 253 OF THE ACT. IN THE CASE OF AN APPEAL WHERE THE TOTAL INCOME OF THE ASSESSEE WAS ASCERTAINABLE FROM THE APPEAL ITSELF, I. E. WHEN THE APPELLANT WAS SEEKING TO CHALLENGE THE ASS ESSMENT OF HIS TOTAL INCOME, FEES AS MENTIONED IN CLAUSES (A), (B) AND (C) WOULD BE REQUIRED TO BE PAID. CLAUSE (D) DEALS WITH OTHER APPEALS. IMPOSITION OF PENALTY UNDER SECTION 272 OF THE ACT HAD NO CONNECTION OR BEARING WITH THE TOTAL INCOME OF THE ASSES SEE. IF A PERSON AGGRIEVED BY AN ORDER IMPOSING PENALTY APPROACHES THE TRIBUNAL BY PREFERRING AN APPEAL, IMPOSITION OF PENALTY HAVING NO NEXUS WITH THE TOTAL INCOME OF THE ASSESSEE, IT WOULD BE NOT BE DISCERNIBLE WHAT IS THE TOTAL INCOME OF THE APPELLANT A ND ACCORDINGLY SUCH AN APPEAL WOULD BE COVERED BY CLAUSE (D) . THE IMPORTANT WORDS USED IN CLAUSES (A), (B) AND (C) OF SUB - SECTION (6) OF SECTION 253 ARE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE APPELLANT MUST BE AN ASSESSEE AND THE APPEAL MUST DEMONS TRATE WHAT IS HIS TOTAL INCOME. IN THE CASE OF IMPOSITION OF PENALTY THAT MAY NOT BE DISCERNIBLE. THE ORDER OF THE TRIBUNAL WAS LIABLE TO BE SET ASIDE AND THE APPEAL WAS REMITTED FOR DECISION ON THE MERITS. IN VIEW OF SUCH JUDICIAL PRONOUNCEMENT, SINCE T HE ASSESSEE HAS PAID RS.500 TOWARDS APPEAL FEES IN THE INSTANT CASE, WHILE FILING THE APPEAL BEFORE THE TRIBUNAL, WE ADMIT THE APPEAL. 4. NOW COMING TO THE MERITS, AFTER HEARING THE LEARNED DR AND PERUSING THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSING OFFICER IMPOSED PENALTY U/S.271(1)(C) OF THE INCOME - TAX ACT,1961 IN RESPECT OF THREE ADDITIONS , (I) RS.1,23,252 ON THE GROUND OF UNACCOUNTED SALES, (2) RS.73,058 ON ACCOUNT OF VALUA TION OF STOCK FOUND AT THE TIME OF SURVEY, AND (3) RS.1,23,812 ON THE GROUND OF UNEXPLAINED EXPENDITURES AS PER LOOSE PAPERS FOUND. 5. THE ASSESSEE - FIRM IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF GOLD, DIAMOND AND SILVER ORNAMENTS. ON VERIFICATION OF TRADING ACCOUNT, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.47,616 ON THE GROSS SALES OF RS.3,77,690 WHICH COMES TO 12.61%. BUT IN THE POST SURVEY PERIOD THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS.65,729 ON THE GROSS 3 S ALES OF RS.13,75,389 WHICH COMES TO 4.83. THUS THE ASSESSEE HAS SHOWN GROSS PROFIT AT LOW BY 7.83% ON THE SALES IN THE POST SURVEY PERIOD. THE ASSESSING OFFICER THEREFORE, ESTIMATED THE GROSS PROFIT AT 12.61% FOR WHOLE OF THE YEAR, WHICH RESULTED IN ADDIT ION OF RS.1,23,252. THIS HAS BEEN CONFIRMED IN THE QUANTUM APPEAL BY THE LEARNED CIT(A). FROM THE ABOVE IT IS SEEN THAT THE ADDITION IS BASED ON ESTIMATION OF GROSS PROFIT ON THE SALES FOR THE POST SURVEY PERIOD. LAW IS WELL SETTLED THAT U NDER SECTION 271( 1)(C) OF THE ACT THE AUTHORITY IS GIVEN THE DISCRETION TO LEVY A PENALTY IF THERE IS CONCEALMENT OF PARTICULARS OF INCOME AND EVEN AS REGARDS THE QUANTUM OF THE PENALTY THERE IS A DISCRE TION. OF GREATER IMPORTANCE IS THE NECESSITY FOR A DEFINITE FINDING T HAT THERE IS CONCEALMENT, AS WITHOUT SUCH A FINDING OF CONCEALMENT, THERE CAN BE NO QUESTION OF IMPOSING ANY PENALTY. THE MERE REVISION OF THE INCOME TO A HIGHER FIGURE BY THE ASSESS ING AUTHORITY DOES NOT AUTOMATICALLY WARRANT AN INFERENCE OF CONCEALMENT OF INCOME OR PARTICULARS OF INCOME. HERE IN THE INSTANT CASE AT HAND THE ADDITION OF RS.1,23,252 WAS MADE CONSEQUENT UPON ESTIMATION OF GROSS PROFIT ON THE SALES FOR THE POST SURVEY PERIOD. THEREFORE, IN OUR CONSIDERED VIEW, THE ADDITION BEING BASED ON EST IMATION OF GROSS PROFIT DOES ON ATTRACT LEVY OF PENALTY U/S.271(1)(C) OF THE ACT AS THERE IS NO CONCEALMENT OF INCOME OR PARTICULARS OF INCOME. THEREFORE, THE PENALTY LEVIED U/S.271(1)(C) IN RESPECT OF SUCH ADDITION CANNOT BE SUSTAINED AND IT IS CANCELLED. 6. AS REGARDS THE ADDITION OF RS.73,058, WE FIND IT WAS THE RESULT OF VALUATION OF STOCK FOUND AT THE TIME OF SURVEY. DURING THE COURSE OF SURVEY 1979.958 GMS GOLD ORNAMENTS WERE FOUND IN THE STOCK. THE ASSESSEE HAS VALUED THE SAID STOCK @ RS.470 AND LAB OUR CHARGES @ RS.30 PER GRAM. THE ASSESSING OFFICER , ON EXAMINATION OF PURCHASE VOUCHERS, FOUND THAT THE ASSESSEE HAD PURCHASED 24 CT GOLD AT THE RATE OF RS. 532/ - PER GRAM. THEREFORE, THE VALUE OF THE COMPONENT OF GOLD IN 22 CT GO L D ORNAMENTS SHOULD BE RS .487/ - PER GRAM (I.E. RS. 532 24 X 22). THUS, CONSIDERING THE AMOUNT OF LABOUR CHARGES DECLARED BY THE A SSESSEE ITSELF, THE VALUE OF GOL D ORNAMENTS WAS WORKED OUT TO RS. 5 17/ - PER GRAM (RS. 4 87/ - + RS. 30/ - ). ACCORDINGLY, THE ASSESSING OFFICER HELD THAT T HE VALUE OF THE EXCESS QUANTITY OF GOLD ORNAMENTS OF 1979.954 GRAMS AT RS. 4 10,23636/ - (I.E. 1979.954 X 517) INSTEAD OF RS. 9,50,578/ - . HE , THEREFORE, ADD ED A SUM OF RS. 73,058/ - (I.E. RS. 10,23,636 9,50,578) TO THE TOTAL INCOME OF THE ASSESSEE. THE SAID AD DITION HAS BEEN CONFIRMED BY THE LEARNED CIT(A) IN QUANTUM APPEAL. HERE AGAIN, WE FIND THAT THE IMPUGNED ADDITION IS BASED ON ESTIMATION. THEREFORE, WE ARE OF THE VIEW THAT THOUGH THE REASONS DISCUSSED BY THE ASSESSING OFFICER MAY BE A GOOD REASON FOR MAKI NG THE ADDITION, BUT IT CANNOT BE A GROUND FOR LEVY OF PENALTY U/S.271(1)(C) SINCE THERE IS NO CONCEALMENT OF INCOME OF SUBMISSION OF PARTICULARS OF INCOME BECAUSE THE ADDITION IS BASED ON MERE ESTIMATION. THEREFORE, WE CANCEL THE PENALTY LEVIED U/S.271(1) (C) IN RESPECT OF THIS ADDITION. 7. AS REGARDS THE ADDITION OF RS.1,23,812, THE FACTS ARE THAT IT REPRESENTED THE UNEXPLAINED EXPENDITURE AS PER LOOSE PAPERS (I.E., PAGE NOS.39, 85 AND 113) FOUND AT THE TIME OF SURVEY. PAGE NO.39 CONTAINS THE DETAILS OF P URCHASE OF GOLD AND SILVER COINS OF THE VALUE OF RS.40,462 AND RS.21,375 TOTALLING TO RS.61,837. THE ASSESSING OFFICER OBSERVED THAT THESE ITEMS WERE NOT REFLECTED IN THE BOOKS OF ACCOUNTS. SIMILARLY OUT OF THE EXPENDITURE ON ACCOUNT OF PURCHASE OF FURNITU RE AND FITTINGS AND ITS LABOUR TOTALING TO RS.54,550 AS PER PAGE NO.85 (LOOSE PAPER), THE ASSESSEE HAS NOT REFLECTED THE SUM OF RS.30,550 PAID IN CASH. PAGE NO.113 CONTAINS THE DETAILS OF LABOUR CHARGES PAID TOTALING TO RS.31,425 . THE ASSESSEE HAS NOT RECO RDED IN THE BOOKS OF ACCOUNT THE BALANCE OF RS.15 ( I.E., RS.150 PER GRAM SHOWN IN THE LOOSE PAPER MINUS RS.135 SHOWN IN THE BOOKS OF ACCOUNT). FROM THE ABOVE, IT IS SEEN THAT SOME OF THE EXPENDITURES HAVE NOT BEEN REFLECTED IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS ALSO FURNISHED NO EXPLANATION FOR SUCH LAPSES. INSTEAD, I T IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS ALREADY DISCLOSED A SUM OF RS.7,74,480 BEING SALES NOT SHOWN AND SINCE THAT AMOUNT HAS BEEN SHOWN IN THE RETURN OF INCOME, THIS CAN BE CONSIDERED AS AVAILABLE FOR ANY EXPENDITURE WHICH HAD PROBABLY REMAINED TO BE ACCOUNTED FOR. IN OUR VIEW, THIS CONTENTION OF THE ASSESSEE C ANNOT EXONERATE THE ASSESSEE FROM THE INFERENCE THAT THE ASSESSEE HAS CONCEALED THE EXPENDITURE TO THE EXTENT OF RS.1,23,812 WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNTS. THIS ADDITION WAS MADE BY THE ASSESSING OFFICER AND 5 IN QUANTUM APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE SAME AND AGAINST THIS NO FURTHER APPEAL HAS BEEN FILED BY THE ASSESSEE MEANING TH ERE BY THE ASSESEE HAS ACCEPTED THIS ADDITION. THE ASSESSEE HAS ALSO FAILED TO CONVINCE BOTH THE DEPARTMENTAL AUTHORITIES BELOW IN QUANTUM PROCEEDINGS THAT THESE EXPENDITURES ARE COVERED BY THE DISCLOSED SUM OF RS.7,74,480. NO OUT GOING EXPENDITURE OF RS.1 ,23,812 HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNT. PROVISO TO SECTION 69C I NSERTED BY THE FINANCE (NO. 2) ACT, 1998, W.E.F. 1 - 4 - 1999 PROVIDES THAT UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME. IN VIEW OF THE ABOVE, IN OUR CONSIDERED OPINION, PENALTY LEVIED U/S.271(1)(C) IN RESPECT OF THE ADDITION OF RS.1,23,812 IS JUSTIFIED., WHICH NEEDS NO INTERFERENCE AND AS SUCH THE SAME IS UPHELD. 8. IN VIEW OF THE ABOVE DISCUSSIO N, WE PARTLY ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE PENALTY IN THE LIGHT OF OUR FINDINGS RECORDED IN THE FOREGOING PARAGRAPHS. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER IS PRONO UNCED IN OPEN COURT ON DT.21.08.09 SD/ - SD/ - ( N.S.SAINI) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIAL MEMBER DATE: 21.8.09 (H.K.PADHEE) SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.