Late Sri. Ajayraj Shah, Tumkur V. DCIT, Tumkur

ITA 1486/BANG/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57528 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Cost of acquisition

Judgement Text

PAGE 1 OF 8 ITA NO.14 86/BANG/2010 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N K SAINI, ACCOUNANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1486/BANG/2010 (ASST. YEAR 2005-06) (LATE) SHRI AJAYRAJ SHAH, BY L/R SURENDRA SHAH, M/S MAHAVEER AUTOMOBILES & APPLIANCES, B H ROAD, TUMKUR. PA NO.ABOPS 9175R VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, TUMKUR. (APPELLANT) (RESPONDENT) DATE OF HEARING : 01.03.20 12 DATE OF PRONOUNCEMENT : 09.03.2012 APPELLANT BY : SHRI H N KHINCHA, C.A. RESPONDENT BY : SMT. SUSAN THOMAS JOSE, J CIT O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE IMPUGNED ORDER OF THE LD. CIT (A)-II, BANGALORE, DATED 6.9.2 010 [U/S 271(1)(C) OF THE ACT.]. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THOUGH THE ASSESSEE HAS RAISED FIVE GROUNDS IN HIS GROUNDS OF APPEAL, THE CRUX OF THE ISSUE IS CONFINED TO A SOLI TARY GROUND, NAMELY, THE CIT (A) ERRED IN CONFIRMING THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. PAGE 2 OF 8 ITA NO.14 86/BANG/2010 2 THE RELEVANT FACTS OF THE ISSUE, IN B RIEF, ARE AS UNDER: 3. THE ASSESSEE, AN INDIVIDUAL, WAS IN THE BUSINES S OF HOME APPLIANCES, REFRIGERATORS, WASHING MACHINES ETC., F URNISHED HIS RETURN OF INCOME FOR THE AY UNDER CHALLENGE, ADMITTING A TOTA L INCOME OF RS.6.12 LAKHS WHICH WAS, HOWEVER, DETERMINED BY THE ASSESSING OFFI CER AT RS.10.54 LAKHS FOR THE REASON THAT AN ADDITION OF RS.4.42 LAKHS WA S MADE BASED ON THE DIFFERENCE IN THE ACCOUNT BALANCE OF FIVE CREDITORS /SUPPLIERS. THE ASSESSEE HAD CONCEDED FOR THE ADDITION PROVIDED NO PENAL PRO CEEDINGS WOULD BE LAUNCHED. HOWEVER, THE AO HAD SIMULTANEOUSLY INITIAT ED PENAL PROCEEDINGS U/S 271(1)(C) OF THE ACT AND SUBSEQUENTLY, AFTER D UE CONSIDERATION OF THE ASSESSEES CONTENTIONS PUT FORTH DURING THE COURSE OF PENAL PROCEEDINGS, IMPOSED A PENALTY OF RS.1.63 LAKHS U/S 271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE IMPOSITION OF PENALTY UNDER SECT ION 271(1)(C) OF THE ACT, THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT (A) AFTER ANALYZING THE ISSUE IN DEPTH AND D UE CONSIDERATION OF THE ASSESSEES CONTENTIONS AS RECORDED IN HIS IMPUGNED ORDER UNDER DISPUTE, THE CIT (A) HAS OBSERVED THUS: 4.2. A CLOSE ANALYSIS OF THE FACTS SHOW THAT THE APPELLANT DEALS WITH THE COMPANIES MENTIONED IN THE CHART GIVEN ABOVE FOR THE LAST SEVERAL YEARS AND HAS ADMITTED THAT THE COMPANIES USUALLY ON THEIR OWN GIV E CREDIT FOR DISCOUNT ON REGULAR PAYMENTS. THUS, IT I S A REGULAR FEATURE AND THE APPELLANT WAS AWARE OF THE AMOUNT OF SUCH DISCOUNTS, INCENTIVES OR SCHEMES TO PROMOTE THEIR PRODUCTS. OBVIOUSLY, HE HAS KEPT TRAC K OF SUCH DISCOUNTS AND INCENTIVES PROVIDED BY THE SUPPLI ERS. PAGE 3 OF 8 ITA NO.14 86/BANG/2010 3 4.3. IT IS ALSO CONTENDED THAT, SOMETIMES, CREDIT NOTES WERE RECEIVED BY HIM AT THE FAG END OF MARCH AND WOU LD BE ACCOUNTED BY HIM IN APRIL NEXT YEAR. IN THIS CONT EXT, IT IS TO BE MENTIONED THAT DISCOUNT/INCENTIVE RECEI VED ON PURCHASES MADE DURING PARTICULAR YEARS SHOULD BE ACCOUNTED FOR IN THE SAME YEARS AND THE SAME CANNOT BE SHIFTED TO SUBSEQUENT YEARS. THE SUPPLIERS HAVE ISS UED CREDIT NOTES WHICH FORM TRADE DISCOUNTS AND ULTIMAT ELY REDUCED THE PURCHASE COST FOR THE PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN VIE W OF HE FACT THAT THE APPELLANT IS MAINTAINING MERCANTIL E SYSTEM OF ACCOUNTING AND THE BOOKS OF ACCOUNT WERE G OT AUDITED ON 22/10/2005 AND FURNISHED ALONG WITH THE RETURN OF INCOME, THE APPELLANT HAD SUFFICIENT TIME TO RECONCILE THE ACCOUNTS WITH THE PARTIES. THE AUDIT OR ALSO COMPLETED THE AUDIT AFTER OBTAINING CONFIRMATION FR OM THE CREDITORS/DEBTORS. HOWEVER, DISCREPANCIES WERE DETECTED BY THE AO BY CROSS VERIFYING WITH THE SUPPLIE RS ACCOUNTS AND SINCE THE APPELLANT FAILED TO RECONCIL E THE FIGURES, HE OFFERED THE AMOUNT FOR TAXATION. IT IS OBVIOUS THAT THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME IN ORDER TO AVOID TAX INCIDEN CE. EVEN IN RESPECT OF THE PLEA THAT THE DIFFERENCE IN HE ACCOUNT OF PARTIES WERE FROM SEVERAL YEARS AND MOSTL Y THE DIFFERENCES ARE ON ACCOUNT OF NON-INCOME TRANSACTIONS, THE APPELLANT DID NOT SUBSTANTIATE BY ADDUCING NECESSARY EVIDENCE OR MATERIALS. THUS, IT IS EVIDENT THAT THE APPELLANT IS NOT ABLE TO ESTABLISH THE REASONING ADDUCED BY HIM. IT WOULD BE RELEVANT TO QUOTE THE DECISIONS IN THE FOLLOWING CASES: (I) WESTERN AUTOMOBILES (INDIA) V. CIT 112 ITR 1048 (BOM); & (II) CIT V. DR. R.C.GUPTA & CO. 122 ITR 567 (DEL) (I) IN THE CASE OF WESTERN AUTOMOBILES (INDIA) V. C IT (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD THAT, SI NCE THE AO HAD DETECTED AND BROUGHT TO TAX HUNDI LOAN O F PAGE 4 OF 8 ITA NO.14 86/BANG/2010 4 RS.90,000/- AS UNDISCLOSED INCOME WHICH HAD BEEN CONFIRMED BY THE ITAT AS A FACT, THE LEVY OF PENALTY U /S 271(1)(C) WAS JUSTIFIED. (II) IN THE CASE OF CIT V. DR. R.C. GUPTA & CO., (S UPRA), THE FACT WAS THAT THE ASSESSEE WAS FOUND TO HAVE CONCED ED INCOME IN RESPECT OF SALE OF IMPORTED CYCLE PARTS TO THE TUNE OF RS.19,164/-, WHICH WAS ADMITTED BY THE ASSES SEE AS HAVING NOT BEEN DISCLOSED IN THE RETURN OF INCOM E. THE HONBLE DELHI HIGH COURT HELD THAT, IN SUCH CIRCUMSTANCES, THERE WAS NO NEED TO PROVE FOR THE A O THAT SUCH INCOME CONSTITUTED CONCEALMENT AND THAT T HE PENALTY LEVIED WAS JUSTIFIED. 4.4. IN THE LIGHT OF THE FACTS OF THE APPELLANT, IN MY CONSIDERED OPINION, THE APPELLANT FAILED TO EXPLAIN THE DIFFERENCE IN ACCOUNTS AND COULD NOT ESTABLISH HIS CASE WITH SUPPORTIVE EVIDENCE AND MATERIALS. IN THE LIG HT OF THE TWO DECISIONS CITED ABOVE, THE PENALTY ORDER PAS SED BY THE AO U/S 271(1)(C) OF THE ACT IS UPHELD. 5. AGGRIEVED BY THE DISMISSAL OF APPEAL BY THE FIRST APPELLATE AUTHORITY, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. A.R. REITERATED MORE OR LESS WHAT HAS BEEN PORTRAYED BEFORE THE CIT (A). IN FURTHERANCE, IT WAS CONTENDED THAT THE SUPPLIERS OF GOODS, ON THEIR OWN ACCORD, GAVE CREDITS FOR THE DISCOUNTS ON REGULAR PAYMENTS, PROVIDED EXTRA CR EDIT ON REGULAR BASIS FOR MORE OFF TAKE GOODS HAVE SOMETIME GIVEN INCENTI VE SCHEME TO PROMOTE THEIR PRODUCTS, THAT ALL SUCH ENTRIES MADE BY THEM I N HIS ACCOUNTS WAS DRAWN TO HIS KNOWLEDGE AND SOME TIMES, THE INCENTIVE SO E XTENDED HAD NOT COME TO HIS ATTENTION. IT WAS, FURTHER, SUBMITTED THAT WHE NEVER SUCH INFORMATION WAS RECEIVED, THE INCENTIVE/CREDIT NOTES, CORRESPON DING ENTRIES WERE MADE IN HIS BOOKS. IT WAS ALSO SUBMITTED THAT DURING TH E COURSE OF PENALTY PROCEEDINGS, THE ASSESEE WAS SUPPLIED WITH COPIES O F ACCOUNT OF THOSE PAGE 5 OF 8 ITA NO.14 86/BANG/2010 5 COMPANIES FROM WHOM INCENTIVE/CREDIT NOTES RECEIVED AND ON CROSS VERIFICATION, IT WAS CONTENDED, ALL THOSE WERE TALL IED WITH HIS BOOKS OF ACCOUNT, HOWEVER, THE DIFFERENCE OCCURRED DUE TO TH E FACT THAT THE CREDIT NOTES WHICH WERE SENT BY THE COMPANIES AT THE FAG E ND OF THE ACCOUNTING PERIOD AND RECEIVED BY HIM IN APRIL AND, THUS, THEY W ERE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT NEXT ASSESSMENT YEAR AND, SIMILARLY, PAYMENTS MADE BY THEM AT THE FAG END OF MARCH WERE REFLECTED IN THE BOOKS OF ACCOUNT OF THE COMPANIES NEXT YEAR. IT WAS ALLEGED THAT THE ASSESS ING OFFICER, FOR THAT MATTER, HAD NOT EITHER DURING THE ASSESSMENT PROCEE DING OR PENAL PROCEEDINGS POINTED OUT SPECIFICALLY THE EXACT ITEM OF CREDIT NOTES WERE OMITTED TO BE ACCOUNTED FOR. IT WAS, FURTHER, POIN TED OUT THAT THE PENALTY WAS IMPOSED ONLY ON THE OVERALL DIFFERENCE WITHOUT P ROVIDING SPECIFIC INSTANCE. IN CONCLUSION, IT WAS SUBMITTED THAT IT HAS NOT BEEN SPECIFICALLY BROUGHT OUT IN THE ASSESSMENT ORDER THAT INCOME FOR THE YEAR HAS BEEN CONCEALED; THAT THE DIFFERENCE IN ACCOUNT OF PARTIE S WERE THERE FROM SEVERAL YEARS AND MOSTLY THE DIFFERENCES WERE ON ACCO UNT OF NON-INCOME TRANSACTION; AND THAT THERE WAS NO DELIBERATE CONCE ALMENT OF INCOME AS ALLEGED BY THE AO. IT WAS, THEREFORE, PLEADED THAT T HE PENALTY IMPOSED WAS UNWARRANTED WHICH REQUIRES TO BE DELETED. TO SUBST ANTIATE HIS CLAIMS, THE ASSESSEE THROUGH HIS LD. A R FURNISHED TWO PAPER BO OKS CONTAINING, INTER ALIA, COPIES OF (I) CORRESPONDENCES WITH AUTHORITIE S BELOW; (II) FINANCIAL STATEMENT; (III) LEDGER EXTRACTS OF PARTIES FROM 20 04-05 TO 2007-08 ETC., 5.1. ON THE OTHER HAND, THE LD. D.R. ARGUED THAT T HE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, NOTICED THAT THERE WAS DISCREPANCY IN THE ACCOUNTS IN THE BOOKS OF THE SUPPLIERS TO THE EXTENT PAGE 6 OF 8 ITA NO.14 86/BANG/2010 6 OF RS.4,42,100/-, ON BEING QUERIED, THE ASSESSEE HA D ULTIMATELY CONCEDED FOR SUCH AN ADDITION. IT WAS THE CASE OF THE REVENUE T HAT THE ASSESSEE DELIBERATELY CONCEALED THE PARTICULARS AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME WHICH HAS BEEN BROUGHT OUT ON RECORD BY THE AO. THIS HAS ULTIMATELY CULMINATED IN IMPOSING PENALTY U/S 271(1) (C) OF THE ACT. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AUTHORITIE S BELOW REQUIRES TO BE SUSTAINED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE RELEVANT CASE RECORDS AND ALSO THE EVIDENCES ADDUCE D BY THE LD. A R IN THE SHAPE OF PAPER BOOKS. 6.1. AS A MATTER OF FACT, WHEN THERE WERE CERTAIN DISCREPANCIES NOTICED IN THE ACCOUNTS IN THE BOOKS OF ACCOUNT, NO TABLY, IN THE FIVE CREDITORS AS MENTIONED IN THE IMPUGNED ORDER UNDER CONSIDERATION AND AFTER OBTAINING THE RELEVANT CONFIRMATIONS FROM SUCH PART IES CONCERNED, THE ASSESSEE WAS REQUIRED TO CLARITY THE POSITION. THE ASSESSEE HAD INITIALLY CONTENDED THAT HE HAD CROSS CHECKED AND VERIFIED TH E ENTRIES AS RELATING TO PURCHASE AND REMITTANCES AND ASSERTED THAT ALL THES E ENTRIES TALLIED AND WERE DULY REFLECTED IN HIS BOOKS OF ACCOUNT WITH THE DIFFERENCES THAT THE DISPATCHES MADE BY THE SUPPLIERS IN THE FAG END OF M ARCH WERE REFLECTED IN THE BOOKS OF COMPANIES NEXT YEAR. HOWEVER, THE ASSE SSEE HAD ULTIMATELY CONCEDED FOR SUCH ADDITION. 6.1.1. THE AO HAD, INDEED, BROUGHT ON RECORD WITH DOCUMENTARY EVIDENCE IN THE SHAPE OF CONFIRMATIONS FROM THE PAR TIES CONCERNED TO THE EFFECT, AS RIGHTLY HIGHLIGHTED BY THE CIT (A), THAT T HE ASSESSEE VIDE HIS PAGE 7 OF 8 ITA NO.14 86/BANG/2010 7 LETTER DATED 26.12.2007 ADMITTED THAT THE CREDITS R ECEIVED FROM THE SUPPLIERS WERE INADVERTENTLY LEFT TO BE INCLUDED AS INCOME IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE, HOWEVER, AD MITTED THAT THERE WAS DISCREPANCY AS REGARDS THE DISCOUNT AND INCENTIVES C REDITED BY THE SUPPLIERS IN HIS ACCOUNT AND REFLECTED IN HIS BOOKS OF ACCOUN T TO THE EXTENT OF RS.4.42,104/- AND THAT HE HAD NO OBJECTION IN ADDING THE SAME TO HIS INCOME FOR THE AY 2005-06. (SOURCE: PARA 4.1. OF THE CIT(A )S ORDER.) 6.1.2. IT IS PERTINENT TO MENTION HERE THAT THE AS SESSEE HAS SINCE BEEN MAINTAINING MERCANTILE SYSTEM OF ACCOUNTING AND HIS BOOKS OF ACCOUNT WERE GOT AUDITED ON 22.10.2005 (NEARLY AFTER THE E XPIRY OF SIX MONTHS FROM THE YEAR-ENDED I.E., 31.3.2005) AND, THUS, THE ASSESSEE HAD ADEQUATE TIME AT HIS DISPOSAL TO RECONCILE THE ACCOUNTS WITH THE PARTIES CONCERNED. THE AUDITOR WHO AUDITED THE ACCOUNTS COULD HAVE FIN ALIZED ACCOUNTS AFTER OBTAINING CONFIRMATIONS FROM THE CREDITORS. IF IT WERE TO BE SO, THERE WOULD NOT HAVE BEEN ANY DISCREPANCY AS UNEARTHED BY THE AO BY RESORTING TO CROSS-VERIFYING WITH THE SUPPLIERS ACCOUNTS. THIS HAS RESULTED IN TO COME TO A CONCLUSION WITH DOCUMENTARY PROOF TO THE EFFECT TH AT THE ASSESSEE HAD, INDEED, FURNISHED INACCURATE PARTICULARS OF HIS INC OME WITH A DELIBERATE INTENTION TO AVOID TAXATION OF HIS CONCEALED INCOME TO THE TUNE OF RS.4.42 LAKHS. THIS VERY FACT HAS NOT BEEN REPUDIATED /CONT RADICTED BY THE ASSESSEE WITH ANY DOCUMENTARY EVIDENCE. 6.1.3. TAKING INTO ACCOUNT ALL THESE FACTS AND CIR CUMSTANCES OF THE ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE FINDI NGS OF THE CIT (A) REQUIRE PAGE 8 OF 8 ITA NO.14 86/BANG/2010 8 NO INTERVENTION OF THIS BENCH. IN ESSENCE, THE ORD ER OF THE CIT (A) IS SUSTAINED. 7. IN THE RESULT , THE ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF MARCH, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.