The DCIT, Bharuch Circle, Bharuch V. Devshree Syntex Pvt.Ltd., Bharuch

ITA 1481/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63254 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SHANKAR
• Keywords: Unexplained cash credit; Depreciation; Deemed to accrue or arise in india; Difference of opinion

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! '#, $% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.1481/AHD/2010 ( ! ) ! ) ! ) ! ) / / / / ASSESSMENT YEAR : 2003-04) DY.CIT BHARUCH CIRCLE BHARUCH ! ! ! ! / VS. DEVSHRE SYNTEX PVT.LTD. 2/1, PHASE-1 GIDC NARMADA NAGAR BHARUCH * $% ./+, ./ PAN/GIR NO. : AAACD 6508 K ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) AND CO NO.189/AHD/2010 A.Y. 2003-04 (ARISING OUT OF ITA NO.1481/AHD/2010 A.Y. 2003-0 4) DEVSHREE SYNTEX P.LTD. VS. THE DCIT BHARUCH (CROSS OBJECTOR) .. (RESPONDENT) REVENUE BY : SHRI T.SHANKAR, SR.D.R. ASSESSEE BY : SHRI SUNIL TALATI, A.R. !0 1 % / / / / DATE OF HEARING : 20/12/2012 23) 1 % / DATE OF PRONOUNCEMENT : 31/12/2012 $4 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE (AND THE CROSS OBJECTION BY THE ASSESSEE THEREOF) ARISING FROM THE ORDER OF LD.CIT( APPEALS)-VI, VADODARA DATED 20.01.2010 AND THE GROUND RAISED BY THE REVEN UE IS REPRODUCED BELOW:- ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 2 - 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE PENALTY TO THE EXTENT OF RS.22,57,M607/- OUT OF PENALTY OF RS.23,44,867/- LE VIED U/S.271(1)(C) OF THE ACT, BY DIRECTING NOT TO LEVY PENALTY ON THE FOLLOWING ADDITIONS: I) VARIATION IN STOCK FOUND DURING SURVEY : RS. 39,68,371 II) VARIATION OF STOCK AS PER BOOKS AND BANK STATEMENT : RS.18,09,800 III)DEPRECIATION ON ASSETS : RS. 3,64,979 1(II) THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE ALSO ACCEPTED THE DISCREPANCY OF STOCK IN THE STATEMENT RECORDED DURING THE SURVEY U/S.133A. SIMILARLY, TH E ASSESSEE COULD NOT OFFER ANY EXPLANATION IN RESPECT OF VARIATION O F STOCK AS PER BOOKS AND SHOWN TO BANK. FURTHER, IN RESPECT OF DE PRECIATION CLAIM, THE ASSESSEE COULD NOT PRODUCE THE BILLS, VO UCHERS, LABOUR BILLS ETC. IN RESPECT OF ADDITION TO ASSETS BEING C ONSTRUCTION OF FACTORY BUILDING, STORES, COMPOUND WALL, ETC. THE PENALTY U/S.271(1)(C) WAS THEREFORE RIGHTLY LEVIED BY THE A SSESSING OFFICER, ON THE ABOVE ADDITIONS, IN VIEW OF EXPLANATION 1 OF SECTION 271(1)(C) OF THE ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S.271(1)(C) OF THE ACT DATED 02/03/2009 A ND THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S.144 OF THE ACT DATED 14/03/2006 WERE THAT THE ASSESSEE-COMPANY IS IN THE BUSINESS OF MANUFACT URING OF YARN AS WELL AS TRADING OF FABRICS AND FOOD PRODUCTS. A SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES ON 02/01/2 003. AT THE TIME OF ASSESSMENT, IT WAS MENTIONED THAT THE BOOKS OF ACCO UNTS WERE DESTROYED IN FIRE DUE TO WHICH COMPLETE DETAILS COULD NOT BE FURNISHED. IT WAS ALSO NOTED BY THE AO THAT THE GP RATIO FOR THE F.Y. 2000 -01 WAS 18.75%, FOR F.Y. 2001-02 GP RATIO WAS 16.40%, HOWEVER FOR F.Y. 2002-03 GP RATIO ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 3 - WAS (-)9.96% (A.Y. 2003-04). BECAUSE OF THE FALL IN GP RATIO, THE PROCEEDINGS WERE INITIATED AND THEREAFTER CERTAIN A DDITIONS WERE MADE AND THE FOLLOWING ADDITIONS WERE CONFIRMED BY LD.CIT(A) . (I) VARIATION IN STOCK FOUND DURING SURVEY RS.3968371 (II) VARIATION OF STOCK AS PER BOOKS AND BANK STATEMENT RS.1809800 (III) DEPRECIATION ON ASSETS RS. 364979 (IV) UNEXPLAINED CASH CREDIT RS. 212000 (V) INTEREST DISALLOWED RS. 25440 2.1. BECAUSE OF THE CONFIRMATION OF THE ADDITION, T HE PENALTY PROCEEDINGS WERE INITIATED. THE AO HAS NOTED THAT AS PER THE INVENTORY MADE AT THE TIME OF SURVEY, THERE WAS EXCESS STOCK OF RAW-MATERIAL. IT WAS ALSO NOTICED THAT THERE WAS A SHORTAGE OF STOCK OF FINISHED PRODUCTS OF YARD. FURTHER, IT HAS ALSO BEEN NOTED THAT THE ASS ESSEE HAD SHOWN EXCESS STOCK TO THE BANK FOR AVAILING CREDIT FACILITY. ON ACCOUNT OF THOSE DISCREPANCIES SINCE THE IMPUGNED ADDITIONS WERE MAD E AND CONFIRMED BY THE FIRST APPELLATE AUTHORITY, THEREFORE THE AO HAD RECORDED HIS SATISFACTION THAT THE ASSESSEE HAD CONCEALED THE PA RTICULARS OF INCOME, HENCE LEVIED A PENALTY OF RS.23,44,867/-. THE ACTI ON OF THE AO WAS CHALLENGED. BEFORE LD.CIT(A), EACH ADDITION WAS DI SCUSSED FOR THE PURPOSE OF LEVY OF PENALTY AND THEREAFTER IT WAS HE LD AS UNDER:- [A] VARIATION IN STOCK FOUND DURING SURVEY - ADDITI ON OF RS.39,68,371/- IN THIS REGARD, LD.CIT(A) HAS HELD AS UNDER :- ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 4 - 3.1. IN APPEAL, IT WAS SUBMITTED BY THE APPELLANT THAT DURING THE COURSE OF SURVEY PROCEEDINGS THE DISCREPANCIES WERE ACCEPTED BY THE DIRECTORS TO BUY PEACE OF MIND AND ADDITION CAN NOT BE MADE MERELY ON THE BASIS OF STATEMENT RECORDED DURING TH E COURSE OF SURVEY PROCEEDINGS AND HENCE, IMPOSITION OF PENALTY WAS INCORRECT. FURTHER, THE APPELLANT RELIED ON DECISI ON IN CASE OF ACIT VS. VIP INDUSTRIES AND KANBAY SOFTWARE INDIA ( P) LTD. VS. DCIT, ITAT PUNE (2009) WHEREIN THE DECISION IN CA SE OF DHARMENDRA TEXTILES PROCESS 306 ITR 277 (SC) IS DIS TINGUISHED, WHEREIN IT WAS HELD THAT PENALTY U/S.271(1)(C) IS A CIVIL LIABILITY AND THAT WILLFUL CONCEALMENT AND MENS REA ARE N OT ESSENTIAL INGREDIENTS FOR IMPOSING PENALTY CANNOT BE READ TO MEAN THAT IN ALL CASES WHERE ADDITION IS CONFIRMED, PENALTY SHALL ME CHANICALLY FOLLOW. IN ORDER TO ATTRACT S.271(1)(C), THERE MU ST BE CONCEALMENT THE FACT THAT THE SAME IS WILLFUL O R UNINTENTIONAL IS IRRELEVANT; BUT WHERE AN ASSESSEE GENUINELY CLAI MS A DEDUCTION AFTER DISCLOSING NECESSARY FACTS, THERE IS NO CONC EALMENT EVEN IF THE CLAIM IS REJECTED. IF PENALTY IS IMPOSED UNDER SUCH CIRCUMSTANCES ALSO THERE WILL REMAIN NO COURSE OPEN TO AN ASSESSEE TO RAISE DISPUTED CLAIMS AND SUCH PROPOSIT ION IS BEYOND RECOGNIZED CANONS OF LAW. UNDER SUCH CIRCUMSTANCES, THE APPELLANT HAS NOT CONCEALED HIS INCOME AND CAN NOT BE CAUGHT WITHIN THE FOUR CORNER OF SECTION 271(1)(C). 3.2.1. REGARDING VALUATION OF STOCK DURING SURVEY AND VARIATION IN STOCK AS PER BOOKS AND STOCK AS PER BA NK STATEMENT AFTER GOING THROUGH THE SUBMISSION MADE BY THE APPE LLANT AND THE POINTS ARGUED BY THE LD.AR I AM OF THE VIEW THAT AS MATERIAL WAS AVAILABLE ON RECORD, PENALTY LEVIED IS UNJUST AND U NCALLED FOR AND HENCE, I DIRECT THE AO TO DELETE THE PENALTY ON THE AFORESAID ADDITION. [B] VARIATION OF STOCK AS PER BOOKS AND BANK STATE MENTS - ADDITION OF RS.18,09,800/- ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 5 - IN THIS REGARD, THE VIEW EXPRESSED BY LD.CIT(A) WA S AS UNDER:- 3.1.1. REGARDING VARIATION IN STOCK AS PER BOOKS A ND STOCK AS PER BANK STATEMENT THE APPELLANT ARGUED THAT SIN CE THE BOOK RESULTS WERE REJECTED AND THE INCOME WAS ESTIMATED, NO FURTHER ADDITION WAS JUSTIFIED AND FURTHER PENALTY IS NOT J USTIFIED ON SUCH ADDITION AND RELIED UPON VARIOUS CASE LAWS. [C] DEPRECIATION ON ASSETS ADDITION OF RS.3,64, 979/- IN THIS REGARD, THE VIEW EXPRESSED BY LD.CIT(A) WA S AS UNDER:- 3.1.2. REGARDING EXCESS CLAIM OF DEPRECIATION RS.3 ,64,979/- THE APPELLANT SUBMITTED THAT DISALLOWANCE OF DEPREC IATION WAS UNJUST AND THAT IT DOES NOT AMOUNT TO CONCEALMENT O F INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME AN D HENCE, PENALTY LEVIED IS UNJUST AND UNCALLED FOR. THE APP ELLANT RELIED ON THE FOLLOWING DECISIONS:- - CIT V. MICA WOODS (P.) LTD. [2008] 170 TAXMAN 256 ( DELHI) - CIT VS. EICHER GOODEARTH LTD. [2008] 170 TAXMAN 27 (DELHI). . . 3.2.2. REGARDING EXCESS CLAIM OF DEPRECIATION, I AM OF THE VIEW THAT PENALTY IS NOT LEVIABLE ON A TECHNICAL PO INT AND I DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY. [D] UNEXPLAINED CASH CREDIT - ADDITION OF RS.2,12 ,000/- IN THIS REGARD, LD.CIT(A) HAS HELD AS UNDER :- 3.1.3. REGARDING PENALTY ON UNEXPLAINED CASH CREDI T IT IS SUBMITTED THAT SINCE THE NECESSARY CONFIRMATIONS WE RE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HENCE, PEN ALTY LEVIED SHOULD BE DELETED. ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 6 - . 3.2.3. REGARDING PENALTY ON UNEXPLAINED CASH CRE DITS MERE SUBMISSION OF BALANCE CONFIRMATION CERTIFICATES DOE S NOT PROVE THE GENUINENESS OF THE TRANSACTIONS AND HENCE THE CONTE NTION OF THE APPELLANT CANNOT BE ACCEPTED. HENCE, THE PENALTY S O IMPOSED ON THIS ADDITION IS SUSTAINED. [E] INTEREST DISALLOWED - ADDITION OF RS.25,440/- IN THIS REGARD, LD.CIT(A) HAS HELD AS UNDER:- 3.1.4. REGARDING PENALTY ON DISALLOWANCE OF INTERE ST ON THE DEPOSITS TAKEN THE APPELLANT ARGUED THAT PENALTY CA NNOT BE IMPOSED ON THE INTEREST DISALLOWED SINCE THE DEPOSI TS WERE GENUINE. . . 3.2.4. REGARDING PENALTY ON DISALLOWANCE OF INTER EST ON THE DEPOSITS TAKEN, I AM OF THE VIEW THAT THE CONTENTIO N OF THE APPELLANT IS NOT PLAUSIBLE AND THE PENALTY LEVIED IS JUSTIFIE D. 2.2. THE RESULT OF THE ABOVE FINDING OF CIT(A) WAS THAT THE PENALTY WAS DELETED IN RESPECT OF VARIATION IN STOCK FOUND DURI NG SURVEY, VARIATION OF STOCK AS PER BANK STATEMENT AND DEPRECIATION OF ASS ETS. HOWEVER, LD.CIT(A) HAS CONFIRMED THE PENALTY IN RESPECT OF U NEXPLAINED CASH CREDIT AND DISALLOWANCE OF INTEREST. BECAUSE OF THE PART RELIEF, NOW BOTH THE SIDES ARE BEFORE US. 3. WE HAVE HEARD THE ARGUMENTS AND ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS FAR AS THE VARIATION IN STO CK FOUND DURING THE SURVEY WAS CONCERNED, THE ADMITTED FACTUAL POSITION WAS STATED TO BE THAT A STATEMENT WAS RECORDED AND TO BUY PEACE OF MIND A N OFFER WAS MADE. THE ASSESSEE HAS ALSO STATED THAT AS THE BAD LUCK W OULD HAVE IT, CERTAIN ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 7 - RECORD WAS DESTROYED IN FIRE. UNDER THESE CIRCUMST ANCES, WE ARE ALSO OF THE VIEW THAT LD.CIT(A) HAS RIGHTLY DELETED THE PEN ALTY. IN RESPECT OF VARIATION OF STOCK AS PER BOOKS AND AS PER BANK STA TEMENT, THERE WAS A DISCREPANCY IN VALUATION, HOWEVER LD.CIT(A) HAS THO UGHT IT PROPER THAT THE CONSIDERING THE MATERIAL AVAILABLE ON RECORD, T HE PENALTY WAS UNCALLED FOR. WE HEREBY AFFIRM THE VIEW TAKEN BY THE LD.CIT (A). FURTHER, IT RESPECT OF DEPRECIATION, WE HEREBY HOLD THAT LD.CIT (A) HAS RIGHTLY CONSIDERED THAT A TECHNICAL POINT FOR DISALLOWANCE OF DEPRECIATION SHOULD NOT BE MADE THE BASIS FOR LEVY OF PENALTY. 3.1. UPTO THIS EXTENT, THE ISSUES RAISED BY THE REV ENUE DEPARTMENT ARE HEREBY DEALT WITH AND IN THE RESULT, WE FIND NO FOR CE IN THE GROUND RAISED BY THE REVENUE, HENCE DISMISSED. ASSESSEES CROSS OBJECTION NO.189/AHD/2010 4. GROUND RAISED READS AS UNDER: YOUR APPELLANT BEING DISSATISFIED WITH THE ORDER PA SSED BY THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) VI BARODA DATED 20/01/2010 FILLING CROSS OBJECTION: 1. THE LEARNED CIT(A) HAS ERRED IN LEVYING THE PEN ALTY OF RS.87,260/- ON UNEXPLAINED CASH CREDIT OF RS.2,12,0 00/- AND ON THE DISALLOWANCE OF INTEREST ON THE DEPOSIT TAKEN OF RS .25,400/-. AO HAS MADE THE ADDITION WITHOUT CONSIDERING THE FACTS . HENCE, PENALTY LEVIABLE IS UNJUSTIFIED AND THE SAME BE DEL ETED. 4.1. AS NOTED ABOVE, LD.CIT(A) HAS CONFIRMED THE LE VY OF PENALTY IN RESPECT OF UNEXPLAINED CASH CREDIT. IN THIS REGARD , OUR ATTENTION HAS BEEN DRAWN ON TWO DECISIONS; NAMELY DY.CIT VS. ROHINI BU ILDERS (2002) 256 ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 8 - ITR 360(GUJ.) AND NEMI CHAND KOTHARI VS. CIT & ANR . (2003) 264 ITR 254(GAU). IN THESE TWO DECISIONS, THE HONBLE HIG H COURT HAS OPINED THAT BY INVOCATION OF SECTION 68, A DEEMED INCOME I S ASSESSED IN THE HANDS OF THE ASSESSEE BUT THAT SHOULD NOT BE MADE T HE BASIS FOR LEVY OF PENALTY. RESPECTFULLY FOLLOWING THESE DECISIONS, W E HEREBY DIRECT TO DELETE THE PENALTY. AS FAR AS THE CONFIRMATION OF PENALTY ON INTEREST DISALLOWANCE, WE HAVE NOTED THAT THE AO HAS ADOPTED AN ADHOC PERCENTAGE OF INTEREST BY STATING THAT THE SAID PER CENTAGE WAS THE PREVAILING RATE OF INTEREST AND, THEREFORE, THE IMP UGNED ADDITION WAS MADE. HOWEVER, THE REASON GIVEN WAS NOT SUFFICIENT FOR LEVY OF PENALTY BECAUSE THE AO HAS NOT DEMONSTRATED THAT THERE WAS CONCEALMENT OF FACTS OR EVEN FURNISHING OF INACCURATE PARTICULARS REGARD ING THE PAYMENT OF INTEREST. IT WAS SIMPLY A DIFFERENCE OF OPINION IN RESPECT OF CHARGING OF RATE OF INTEREST, THEREFORE NOT FIT FOR LEVY OF PEN ALTY. IN THE RESULT, WE HEREBY HOLD THAT LD.CIT(A) HAS WRONGLY CONFIRMED TH E PENALTY, HENCE DIRECT TO DELETE THE SAME. 5. AS A RESULT, REVENUES APPEAL IS DISMISSED, WHER EAS CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. SD/- SD/- ( ! '# ) ( ) $% ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31 / 12 /2012 5..!, .!../ T.C. NAIR, SR. PS ITA NO.1481/AHD/2010 (BY REVENUE) AND CO NO.189/AHD/2010 (BY ASSESSEE) DEVSHREE SYNTEX PVT.LTD. VS. DCIT ASST.YEAR 2003-04 - 9 - $4 1 .6 7$6) $4 1 .6 7$6) $4 1 .6 7$6) $4 1 .6 7$6)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 8 / CONCERNED CIT 4. 8() / THE CIT(A)-VI, BARODA 5. 6;< .! , , / DR, ITAT, AHMEDABAD 6. < =0 / GUARD FILE. $4! $4! $4! $4! / BY ORDER, /6 . //TRUE COPY// > >> >/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER ..28/12/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.12.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 31.12.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.12.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER