Shri Shamjibhai Laxmanbhai Thumar, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 1484/AHD/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5947 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: KAMLESH N BHATT A R
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ! ! ! ITA NO. 1484/AHD/2010 ASSESSMENT YEAR :2004-05 SHAMJIBHAI LAXMANBHAI THUMAR ROAD NO. 6-G, UDYOGNAGAR, UDHNA, SURAT 394 210 V/S . ITO, WARD-2(1), AAYKAR BHAVAN, MAJURA GATE, SURAT. PAN NO. A A IPT4 575H (APPELLANT) .. (RESPONDENT) ITA NO. 1720/AHD/2010 ASSESSMENT YEAR : 2004-05 ITO, WARD-2(1), AAYKAR BHAVAN, MAJURA GATE, SURAT. V/S . SHAMJIBHAI LAXMANBHAI THUMAR ROAD NO. 6-G, UDYOGNAGAR, UDHNA, SURAT 394 210 (APPELLANT) .. (RESPONDENT) '# $ % / BY REVENUE SHRI K. C. MATHEWS, SR. D.R. # $ % /BY ASSESSEE SHRI KAMLESH N. BHATT, A.R. &'#( $ ) /DATE OF HEARING 01.04.2014 *+, $ ) /DATE OF PRONOUNCEMENT 29.04.2014 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE TWO APPEALS ARE CROSS APPEALS FILED BY THE AS SESSEE AND REVENUE, ARISING OUT OF THE ORDER OF LD. COMMISSION ER OF INCOME-TAX (APPEALS)-II, SURAT, DATED 05.02.2010, FOR A.Y. 04- 05 IN BOTH APPEALS. THE ITA NOS. 1484 & 1720/AHD/10 FOR A.Y. 04-05 SHAMJIBHAI L. THUMAR VS. ITO PAGE 2 SOLE GROUND OF APPEAL OF THE ASSESSEE AS WELL AS RE VENUE IS AGAINST CONFIRMING AND DELETING PENALTY U/S. 271(1)(C). 2. THE A.O. OBSERVED THAT IN THIS CASE, ASSESSMENT U/S. 143(3) WAS FINALIZED ON 30.11.2006 AND VARIOUS ADDITIONS WERE MADE BY THE A.O. AND INCOME WAS DETERMINED AT RS. 1,11,54,040/- AGAINST RETURN INCOME NIL. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE CIT(A). THE LD. CIT(A) ALLOWED THE APPEAL PARTLY AND HAD GIVEN RELIEF OF RS.44,34, 334/-. BEFORE IMPOSING THE PENALTY U/S. 271(1)(C), THE A.O. GAVE REASONABLE OP PORTUNITY OF BEING HEARD. BUT NO REPLY WAS RECEIVED FROM THE ASSESSEE. ON RE PEATED HEARING, THE A.O. HELD THAT ASSESSEE HAD SUPPRESSED JOB RECEIPTS AS W ELL AS SUPPRESSED PRODUCTION AMOUNTING TO RS.94,56,380/-, WHICH WAS C ONFIRMED BY THE CIT(A). ON WHICH A.O. HAD INITIATED PENALTY PROCEEDING U/S. 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THEREBY CONCEALIN G THE INCOME. THERE WAS A DOWNFALL IN GP RATE OF 16.80% DURING THE ASSESSMENT PROCEEDING. THE ASSESSING OFFICER PERUSED MONTH-WISE DETAILS OF PRO DUCTION AND COMPARED WITH THE CONSUMPTION OF ELECTRICITY IN TERMS OF UNI TS. HE FOUND THAT THE PRODUCTION PER UNIT CONSUMPTION OF ELECTRICITY WAS IN THE RANGE OF 0.09KG TO 1.90KG. IN THE PRECEDING YEAR, WHEREAS DURING THE Y EAR UNDER CONSIDERATION, THE PRODUCTION IS IN THE RANGE OF 0.47 TO 1.48 KG P ER UNIT CONSUMPTION OF ELECTRICITY. THE AVERAGE PRODUCTION DURING THE YE AR UNDER CONSIDERATION IS 0.67KG PER UNIT, WHEREAS IT WAS 0.85KG. PER UNIT IN THE PRECEDING YEAR. THE ASSESSEE HAD CONSUMED RAW MATERIAL FOR OWN CONSUMPT ION AT RS.88,37,969/- ITA NOS. 1484 & 1720/AHD/10 FOR A.Y. 04-05 SHAMJIBHAI L. THUMAR VS. ITO PAGE 3 WHICH WORKS OUT TO 93.44% OF TOTAL RECEIPTS WHEREAS DURING HE IMMEDIATE PRECEDING YEAR, THE ASSESSEE HAD SHOWN RAW MATERIAL CONSUMPTION FOR OWN PRODUCTION AT RS.4,02,53,624/-, WHICH WORKS OUT TO 81.68%. THE A.O. HELD THAT ASSESSEE HAD NOT ONLY SUPPRESSED HIS PRODUCTIO N AND RECEIPTS BUT ALSO INFLATED EXPENSES AT LARGE SCALE. THE A.O. REJECTE D THE BOOK RESULT U/S. 145(3) OF THE IT ACT IN QUANTUM PROCEEDING. AFTER ANALYZI NG THE RECEIPT AS WELL AS EXPENSES OF THE ASSESSEE, THE LD. A.O. MADE ADDITIO N OF RS.94,56,380/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION AND JOB RECEIP TS. WHEN THERE IS NOT RESPONSE FROM THE ASSESSEE, THE LD. A.O. IMPOSED PE NALTY U/S. 271(1)(C), 100% OF TAX SOUGHT TO BE EVADED I.E. RS.31,20,600/- . 3. BEING AGGRIEVED BY THE ORDER OF THE A.O. THE ASS ESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER: 6.3 THE ASSESSED HAD SHOWN A NEGATIVE GP RATIO OR LOSS OF 13.12% DURING THE YEAR AS AGAINST THE GP RATIO OF 3.68% IN THE IMMEDIATELY PRECEDING YEAR. THE ADDITION WAS ON ACCOUNT OF SUP PRESSION OF PRODUCTION TO THE TUNE OF RS.94,56,380/-. WHILE IN PRINCIPLE THE AOS ACTION OF LEVYING PENALTY U/S. 271(1)(C) OF THE ACT ON SUCH SUPPRESSION OF PRODUCTION WAS JUSTIFIED, AS THE ASSESSED HAD FAILE D TO FURNISH A PLAUSIBLE AND BONAFIDE EXPLANATION IN COURSE OF THE PENALTY P ROCEEDINGS YET, IT MUST BE APPRECIATED THAT THE SUM OF RS.94,56,380/- REPRE SENTED SUPPRESSIONS OF PRODUCTION AND NOT INCOME. THEREFORE, I AM OF T HE VIEW THAT IT WOULD BE FAIR AND JUST IF THE GP RATIO OF THE IMMEDIATELY PR ECEDING YEAR I.E. 3.68% IS APPLIED TO SUCH SUPPRESSED PRODUCTION TO WORK OUT T HE UNDISCLOSED INCOME OF THE ASSESSED FROM SUCH PRODUCTION. THE A O IS DIRECTED TO WORK OUT THE TAX EVADED ON SUCH UNDISCLOSED INCOME AND L EVY PENALTY U/S ITA NOS. 1484 & 1720/AHD/10 FOR A.Y. 04-05 SHAMJIBHAI L. THUMAR VS. ITO PAGE 4 271(1)(C) OF THE ACT OF A SUM WHICH IS EQUAL TO 100 % OF THE TAX SOUGHT TO BE EVADED ON SUCH INCOME. 4. NOW THE ASSESSEE AS WELL AS REVENUE IS BEFORE US . LD. A.R. SUBMITTED THAT THE ASSESSEES APPEAL IN QUANTUM APPEAL HAS BE EN DISMISSED FOR NON APPEARING BUT HE ARGUED THAT FOR PENALTY, THE ADDIT IONS WERE MADE ON ESTIMATED BASIS AND NO MATERIAL HAD BEEN BROUGHT ON RECORD BY THE A.O. THAT ASSESSEE HAS CONCEALED THE INCOME. HE SIMPLY COMPA RED THE PREVIOUS YEARS RECEIPTS AS WELL AS EXPENSES AND ESTIMATED T HE SUPPRESSION OF PRODUCTION AND JOB WORK. THE LD. CIT(A) REDUCED TH E GROSS PROFIT TO 3.68%. HE FURTHER RELIED UPON FOLLOWING CASES: I. CIT VS. AJAIB SINGH & CO. (2002) 253 ITR 630 (P&H), II. CIT VS. AURIC INVESTMENTS AND SE CURITIES LTD. (2009) 310 ITR 121 (DELHI), III. CIT VS. RELIANCE PETROPRODUCT S PVT. LTD. (2010) 322 ITR 158 (SC), IV. CIT VS. BHARTESH JAIN (2010) 323 ITR 358, V. CIT VS. ZOOM COMMUNICATIONS PVT. LTD. (2010) 327 ITR 510 (DELHI) , VI. DEVSONS PVT. LTD. VS. CIT (2010) 329 ITR 483 (DELHI), VII. KARAN RAGH AV EXPORTS P. LTD. VS. CIT (2012) 349 ITR 112 (DELHI) & VIII. CIT VS. MILEX CA BLE INDUSTRIES (2003) 261 ITR 675 (GUJ.) AND REQUESTED TO DELETE THE PENALTY. AT THE OUTSET, LD. SR. D.R. ARGUED THAT A.O. HAD GIVEN CATEGORICALLY FINDINGS I N QUANTUM AS WELL AS PENALTY PROCEEDING THAT ASSESSEES PRODUCTION AS WE LL AS JOB RECEIPT HAD BEEN SUPPRESSED. THEREFORE, LD. A.O. RIGHTLY IMPOSED TH E PENALTY U/S. 271(1)(C), WHEREAS LD. CIT(A) WAS WRONG IN APPLYING THE GP RAT E IN PENALTY ORDER ON SUPPRESSED PRODUCTION OF RS.94,56,380/-. HE FURTHE R RELIED UPON IN CASE OF A. M. SHAH & CO. VS. CIT 238 ITR 415 (GUJ.), WHEREIN P ENALTY WAS IMPOSED ON ITA NOS. 1484 & 1720/AHD/10 FOR A.Y. 04-05 SHAMJIBHAI L. THUMAR VS. ITO PAGE 5 ESTIMATED ADDITIONS MADE BY THE A.O. THUS, HE REQU ESTED TO CONFIRM THE ORDER OF THE A.O. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE A.O. MADE ADDITION ON THE BASIS OF COM PARISON MADE BETWEEN EXPENDITURE DEBITED IN THE P&L ACCOUNT FOR THE YEAR UNDER CONSIDERATION WITH EXPENDITURE DEBITED IN PRECEDING YEARS UNDER THE SA ME HEAD AS WELL AS RECEIPTS ALSO. THE LD. A.O. HAD FINALLY MADE ADDIT ION OF RS.94,56,380/- ON ACCOUNT OF SUPPRESSED RECEIPTS DUE TO SUPPRESSION O F PRODUCTION, WHICH WAS CONFIRMED BY THE LD. CIT(A). THE CIT(A) AT THE TIM E OF DISPOSING OF PENALTY PROCEEDING, HAD CATEGORICALLY HELD THAT THE ADDITIO N WAS MADE BY THE A.O. ON THE BASIS OF ESTIMATION BUT IT WAS BASED ON FIGURES WORKED OUT IN EACH HEAD OF EXPENDITURE FOR THE TWO YEARS. THE PRODUCTION RATI O HAD BEEN COMPUTED ON THE BASIS OF PRODUCTION FIGURE DISCLOSED BY THE ASS ESSEE. FINALLY, THE ADDITION REMAINS ESTIMATED. THE BOOKS HAD BEEN AUDITED AND ALL THE PARTICULARS OF INCOME AS WELL AS EXPENDITURE HAVE BEEN DISCLOSED B Y THE ASSESSEE. THE CASE LAWS CITED BY THE REVENUE IS NOT SQUARELY APPL ICABLE AS IN THIS CASE, THE SERIOUS DISCREPANCIES WERE FOUND IN BOOKS OF ACCOUN T AND EXCESS SALES WERE SHOWN AND PURCHASES WERE NOT SHOWN. BOGUS PURCHASE S WERE CLAIMED AND PURCHASES WERE NOT SHOWN IN SALES OR STOCK. ADDITI ON WAS MADE IN GP. IN ASSESSEES CASE, NO SUCH FINDINGS WERE GIVEN BY THE A.O. THAT THERE WAS SPECIFIC DISCREPANCY FOUND IN PURCHASE AND SALE. VA RIOUS HIGH COURTS AS WELL AS SUPREME COURT HAD HELD THAT ON ESTIMATED ADDITIO N, NO PENALTY U/S. ITA NOS. 1484 & 1720/AHD/10 FOR A.Y. 04-05 SHAMJIBHAI L. THUMAR VS. ITO PAGE 6 271(1)(C) CAN BE IMPOSED. THE ASSESSEE HAD OFFERED AN EXPLANATION BEFORE THE CIT(A), WHICH WAS NOT FOUND FALSE. THEREFORE, PENALTY IMPOSED BY THE A.O., IS DELETED. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 29.04.2014 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA - - - - $ $$ $ .)/ .)/ .)/ .)/ 0/,) 0/,) 0/,) 0/,) / COPY OF ORDER FORWARDED TO:- 1. '# / REVENUE 2. # / ASSESSEE 3. 44 ) &5 / CONCERNED CIT 4. &5- / CIT (A) 5. /#9 .)' , , / DR, ITAT, AHMEDABAD 6. ; <= / GUARD FILE. BY ORDER/ - , >/ 4' , !