The DCIT, Circle-2, Surat V. Abhishek Exports, Surat

ITA 150/AHD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5328 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 20-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 16-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: KK SHAH

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.150/AHD/2013 [ASSTT.YEAR : 2004-2005] DCIT, CIR.2 SURAT. /VS. ABHISHEK EXPORT ABHISHEK HOUSE OPP: JIVAN BHARTI SCHOOL NANPURA, SURAT. PAN : AAEFA 8406 E ITA NO.2609/AHD/2010 [ASSTT.YEAR : 2005-2006] ACIT, CIR.2 SURAT. /VS. ABHISHEK EXPORT ABHISHEK HOUSE OPP: JIVAN BHARTI SCHOOL NANPURA, SURAT. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI K.C. MATHEWS, SR.DR 4& 1 2 )/ ASSESSEE BY : SHRI K.K. SHAH 5 1 &(*/ DATE OF HEARING : 20 TH JANUARY, 2014 678 1 &(*/ DATE OF PRONOUNCEMENT : 07.02.2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THESE TWO APPEALS OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-2006 AND 2004-2005 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). SINCE IDENTICAL ISSUE IS INVOLVED I N BOTH THESE APPEALS, THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER: ITA NO..2609/AHD/2010 AND 150/AHD/2013 -2- 2. THE ONLY ISSUE IN THESE APPEALS PREFERRED BY THE REVENUE IS REGARDING VALIDITY OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 3. THE LEARNED DR SUBMITTED THAT VARIOUS DEFECTS WE RE POINTED OUT BY THE AO IN THE ASSESSMENT ORDER WITH REGARD TO THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF EXPENDITURE UNDER THE HEAD WAGES. H E SUBMITTED THAT THE ASSESSEE HAS CLAIMED WORKERS WAGES TO THE TUNE OF RS.2,98,52,958/- IN THE ACCOUNTS OF THE HEAD OFFICE UNDER THE HEAD MANUFAC TURING EXPENSES. HE SUBMITTED THAT THE AO FOUND THAT THE ASSESSEE WAS S HOWING IN GARMENT ACCOUNT ALL THE PAYMENTS IN CASH FOR DAILY WAGES AND NO ATT ENDANCE REGISTER WAS FOUND TO BE THERE. THE VOUCHERS PRODUCED FOR THE VERIFICATI ON BY THE ASSESSEE WERE ALSO FOUND UNRELIABLE. THE AO HAS OBSERVED THAT THERE W ERE NO VOUCHER NUMBERS OF THESE VOUCHERS AND THE ADDRESSES OF THE RECIPIENTS WERE ALSO NOT THERE. HE SUBMITTED THAT VOUCHER NUMBER MENTIONED IN THE CASH BOOK COULD NOT BE TALLIED WITH THE VOUCHER NUMBER FOUND IN THE BUNCH OF VOUCH ERS. THE LEARNED DR SUBMITTED THAT THE QUANTUM APPEAL TO THE CIT(A) WAS UNSUCCESSFUL, AND THE ASSESSEE DID NOT FILE ANY FURTHER APPEAL TO THE TRI BUNAL. HE SUBMITTED THAT DURING THE PENALTY PROCEEDINGS, THE AO HAS GIVEN FR ESH OPPORTUNITY TO THE ASSESSEE TO PROVE ITS CASE, BUT THE ASSESSEE FAILED TO DO SO. HE SUBMITTED THAT IN THE CASE OF NON-GENUINENESS OF THE EXPENSES, THE PE NALTY SHOULD BE IMPOSED AND RELIED ON THE DECISION IN VIJAY PROTEINS LTD. VS. A CIT, 2 SOT 116 (RAJ) AND SHAGOON EMPORIUM V. INCOME-TAX OFFICER, 48 TAXMAN 220 (DEL)(MAG). HE RELIED ON THE ORDER OF THE AO. HE ALSO RELIED ON S ERIES OF DECISIONS IN TRIBHOVANDAS CHELARAM VS. ACIT, (2011) 16 TAXMANN.C OM 112 (AHD), ACIT VS. HARVEY HEART HOSPITALS LTD., (2013) 32 TAXMANN. COM 348 (CHENNAI), SANGHVI SWISS REFILLS P. LTD. VS. ACIT, (2012) 28 T AXMANN.COM 208 (BOM), SHYOURAJSINGH B. CHAUHAN VS. ACIT, (2010) 41 SOT 45 3 (AHD), SANJAY ENTERPRISES (P) LTD. VS. ITO, (2012) 17 TAXMANN.COM 94 (DELHI), OM PRAKASH GUPTA VS. ITO, (2002) 81 ITD 55 (CHD), DCIT VS. GRE Y CAST FOUNDRY WORKS, (2006) 99 ITD 515 (AHD), NEW HOLLAND TRACTORS (INDI A) P. LTD. VS. ITO, ITA NO..2609/AHD/2010 AND 150/AHD/2013 -3- (2004) 4 SOT 35 (DELHI), MAK DATA (P) LTD. VS. CIT, (2013) 38 TAXMANN.COM 448 (SC). 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ON ACCOUNT OF CASH PAYMENTS IN THE WAGES ACCOUNT, THE DISALLOWANCE AT FLAT RATE OF 20% WAS MADE BY THE AO AND THIS IS A CLEAR CASE OF CERTAIN DISAL LOWANCE MADE BY THE DEPARTMENT. HE SUBMITTED THAT THE ASSESSEE HAD MAI NTAINED VOUCHERS FOR ALL THE EXPENDITURE INCURRED UNDER THE HEAD WAGES TO WORKE RS AND THIS HAS BEEN ADMITTED BY THE AO. THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE HAS DECLARED HIGHER GP AT 21.77% DURING TH E YEAR, AS AGAINST 8.92% IN THE EARLIER YEARS ON THE SEGMENT OF GARMENT SALES. REGARDING DIFFERENCE IN THE VOUCHER NUMBERS, HE SUBMITTED THAT VOUCHER NUMBER W AS GENERATED BY THE COMPUTER, AND THEREFORE, COULD NOT TALLY WITH THE N UMBER FOUND ON THE VOUCHER ITSELF IN THE VOUCHERS PRODUCED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS FILED A DETAILED EXPLANATION, AND THER E IS NO MATERIAL ON RECORD TO SUGGEST THAT THE EXPLANATION OF THE ASSESSEE WAS NO T BONA FIDE . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT MERELY BECA USE THERE WAS A DISALLOWANCE MADE OUT OF CERTAIN EXPENSES CLAIMED BY THE ASSESSE E, SHALL NOT JUSTIFY THE IMPOSITION OF THE PENALTY UNDER SECTION 271(1)(C) A ND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED WITH THE DECISION OF THE HONBLE A PEX COURT IN CIT VS. RELIANCE PETRO PRODUCTS P. LTD., (2010) 322 ITR 158 (SC). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE DECISIONS CITED AT BA R. WE FIND THAT IT IS A CASE OF CERTAIN DISALLOWANCE MADE OUT OF THE WAGES TO W ORKERS ON ACCOUNT OF CASH PAYMENTS MADE TO THE WORKERS AND SOME DEFECTS IN TH E MAINTENANCE OF SUPPORTING VOUCHERS. WE FIND THAT THE PLEA OF THE DEPARTMENT THAT THERE WAS A DISCREPANCY IN THE MENTION OF VOUCHER NUMBER IS DEV OID OF ANY MERIT, AS THE VOUCHER NUMBER IN THE CASH BOOK WAS GENERATED BY TH E COMPUTER AND THAT COULD NOT TALLY WITH THE ACTUAL VOUCHER NUMBER FOUND IN T HE VOUCHER ITSELF IN THE BULK ITA NO..2609/AHD/2010 AND 150/AHD/2013 -4- OF VOUCHERS PRODUCED BY THE ASSESSEE. WE FIND THAT THE ASSESSEE HAS FILED AN EXPLANATION WITH REGARD TO THE PAYMENTS MADE TO THE WORKERS AND THE EXPLANATION OF THE ASSESSEE COULD NOT BE SAID TO BE NOT BONA FIDE . THE ASSESSEE HAS SHOWN BETTER TRADING RESULT DURING THE RELEVANT PERIOD AS COMPARED TO THE EARLIER YEARS IN THE GARMENTS SALES. THE DISALLOWA NCE AT FLAT RATE OF 20% OUT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE H EAD WAGES TO WORKERS WAS MADE DUE TO CASH PAYMENTS MADE TO THE WORKERS AND C ERTAIN DEFECTS IN THE SUPPORTING VOUCHERS MAINTAINED BY THE ASSESSEE. TH ESE FACTS OF THE CASE MAY JUSTIFY A CERTAIN AMOUNT OF DISALLOWANCE OUT OF THE EXPENDITURE OF WAGES CLAIMED BY THE ASSESSEE, BUT ARE NOT SUFFICIENT TO JUSTIFY IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. WE FIND THAT I N THE ABSENCE OF COMPLETE AND CONVINCING CORROBORATIVE EVIDENCE, THE REVENUE MAY JUSTIFIABLY DISALLOW CERTAIN PART OF THE EXPENSES CLAIMED BY THE ASSESSEE, BUT I N THE MATTER OF PENALTY PROCEEDINGS, THE ONUS LIES HEAVILY ON THE REVENUE T O PROVE THAT THE ASSESSEE HAD CONCEALED ITS INCOME OR HAS FILED INACCURATE PARTIC ULARS OF ITS INCOME. IN THIS CASE, THE REVENUE HAS FAILED TO PROVE THAT THE CLAI M OF THE EXPENSES UNDER THE HEAD WAGES TO WORKERS WERE NON-GENUINE OR WERE IN FLATED BY THE ASSESSEE. MERELY BECAUSE CERTAIN EXPENSES HAVE BEEN CLAIMED B Y THE ASSESSEE TO HAVE INCURRED IN CASH AND WERE NOT SUPPORTED BY DOCUMENT ARY EVIDENCE TO THE SATISFACTION OF THE REVENUE AUTHORITIES, IT COULD N OT BE SAID THAT THE REVENUE HAS PROVED THAT THE EXPENSES CLAIMED WERE INFLATED OR N ON-GENUINE. IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FO R ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSESSEE IS DIFFERENT FROM T HE PENALTY IMPOSED ON ACCOUNT OF CONCEALMENT OF INCOME OR FILING OF INACC URATE PARTICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALL Y BE MADE IN THE ASSESSMENT PROCEEDING ON THE PREPONDERANCE OF PROBABILITIES, B UT NO PENALTY COULD BE IMPOSED UNDER SECTION 271(1)(C) OF THE ACT ON THE P REPONDERANCE OF PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLA IM OF THE EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED TO REDUCE ITS TAX LIABILITY. NO SUCH MATERIAL HAS BEEN PRODUCED BY THE AO TO SUGGEST THA T THE ASSESSEE HAS INFACT ITA NO..2609/AHD/2010 AND 150/AHD/2013 -5- INFLATED ITS EXPENSES OR NON-GENUINE EXPENSES WERE CLAIMED UNDER THE HEAD WAGES TO WORKERS. THE DECISIONS RELIED UPON BY T HE REVENUE ARE DISTINGUISHABLE SINCE IN THESE CASES SOME CORROBORA TIVE EVIDENCE TO SUPPORT THE CHARGE OF CONCEALMENT OF INCOME OR FILING OF INACCU RATE PARTICULARS OF INCOME WAS PRODUCED. THE DECISION OF THE HONBLE APEX COU RT IN CIT VS. RELIANCE PETRO PRODUCTS P. LTD., (SUPRA) IS APPLICABLE TO TH E FACTS OF THE CASE OF THE ASSESSEE. IN THESE FACTS OF THE CASE, WE HOLD THAT IT IS NOT A FIT CASE TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT, WHICH W AS RIGHTLY CANCELLED BY THE CIT(A) AND THE GROUNDS OF THE APPEAL OF THE REVENUE BEING WITHOUT ANY MERIT ARE DISMISSED. 6. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( .. /G.C. GUPTA ) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD