DCIT, Shimoga V. Shri Vaddanahal Rajanna, Shimoga

ITA 162/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0555 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 04-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZINIK VASHAI
• Assessee Lawyers: V SRINIVASAN

Judgement Text

ITA.162/BANG/2009 P AGE - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A' BEFORE SHRI. K. P. T. THANGAL, VICE PRESIDENT AND SHRI. A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A.NO.162/BANG/2009 (ASSESSMENT YEAR : 2004-05 ) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, SHIMOGA .. APPELLANT V. SHRI.VADDANAHAL RAJANNA, PROP : M/S. VADDANAHAL SHIVALINGAPPA & CO., APMC YARD, SHIMOGA .. RESPONDENT APPELLANT BY : SMT. JACINTA ZINIK VASHAI RESPONDENT BY : SHRI. V. SRINIVASAN O R D E R PER K. P. T. THANGAL, VICE PRESIDENT : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A) CANCELING THE PENALTY LEVIED U/S.271(1)(C). 2. THE FACTS LEADING TO THE DISPUTE BRIEFLY IS AS U NDER. THE ASSESSEE FILED THE RETURN OF INCOME ON 31.10.2004 D ECLARING INCOME OF RS.3,03,910/- AND AGRICULTURAL INCOME OF RS.6,10,00 0-. ASSESSMENT WAS COMPLETED FIXING INCOME AT RS.18,26,561/-. THE ASSESSEE IS IN ITA.162/BANG/2009 P AGE - 2 THE LINE OF SALE OF ARECANUTS. THE ASSESSING OFFIC ER HAS MADE ADDITION MAINLY ON ACCOUNT OF VALUE OF UNDER SALE O F ARECANUT. THE ASSESSEE HAD SHOWN AN OPENING STOCK OF 98,848 KGS O F ARECANUT AND HAD FURTHER PURCHASED ARECANUT TO THE EXTENT OF 6,8 8,921 KGS AND SOLD 7,64,750 KGS WHICH RESULTED IN A CLOSING STOCK OF 2 3,019 KGS. THE ASSESSEE VALUED THE OPENING STOCK OF 98,848 KGS AT RS.149/- PER KG. ON VERIFICATION IT WAS FOUND THAT THE ASSESSEE PURC HASED TWO QUALITIES OF ARECANUT TO THE EXTENT OF 1,39,184 KGS, THE VALU E OF WHICH VARIED BETWEEN RS.27/- TO RS.51/- PER KG AND THE QUANTITY OF ANOTHER QUALITY PURCHASED WAS 5,49,737/- THE PRICE OF WHICH VARIED BETWEEN RS.70/- TO RS.112/- PER KG. THE TOTAL OF THESE TWO QUALITI ES OF ARECANUT CAME TO 6,88,921 KGS. THE ASSESSEE DISCLOSED THE SELLIN G RATE AT RS.50/- TO RS.60/- PER KG WHICH WAS CONSIDERED BY THE AO AS LO W. THE AO VERIFIED WHETHER THE ASSESSEE WAS HAVING THE LOW QU ALITY FOR THE SALES TO THE EXTENT DECLARED. THE ASSESSEE FILED A REPLY BUT IT WAS NOT CONSIDERED HOLDING THAT THESE WERE IRRELEVANT. HE HELD THAT THE ASSESSEE SHOULD HAVE ADOPTED THE SELLING RATE AT AN AVERAGE OF RS.94/- PER KG AND SHOULD HAVE ADOPTED GROSS PROFIT AT 3%. ON THE BASIS OF THE INFORMATION BEFORE HIM UNDER SALE VALUE OF 42,8 16 KGS OF ARECANUT WAS PREPARED AND SHOWN TO THE ASSESSEE FOR EXPLANAT ION WHICH WORKED OUT TO RS.15,22,851/-. THIS AMOUNT WAS ADDE D TO THE INCOME OF THE ASSESSEE. ON THE ABOVE BASIS PENALTY WAS IM POSED. ITA.162/BANG/2009 P AGE - 3 3. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE TRIBUNAL CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. THE COMMISSIONER OF INCOME-TAX(A) HELD THAT IT MAY BE A GOOD CASE FOR MAKING ADDITION BUT WHEN IT COMES TO THE PENALTY, B URDEN IS SHIFTED TO THE ASSESSING OFFICER TO PINPOINT THE EXACT CONCEAL MENT AND THERE CANNOT BE A PENALTY ON ESTIMATED ADDITIONS. HE AGR EED WITH THE ASSESSEE THAT THE ASSESSING OFFICER ADOPTED THE VA LUE OF SUPERIOR QUALITY I.E., RANGING FROM RS.70/- TO RS.112/- PER KG ON ESTIMATE BASIS AND THE DIFFERENCE WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AND FURTHER HE HELD THAT THE ASSESSEE SHOULD HAVE ADOPT ED AVERAGE PRICE AND ON THIS BASIS HE ESTIMATED THE INCOME AND FURTH ER GP WAS ALSO ESTIMATED AT 3% ON THIS ESTIMATE BASIS. THE COMMIS SIONER OF INCOME-TAX(A) HELD THE METHOD ADOPTED BY THE ASSESS ING OFFICER WAS ON ESTIMATE BASIS AND EVEN IF THE HIGHER FORUMS CON FIRMED THE ADDITION, THERE CANNOT BE ANY BASIS FOR PENALTY SIN CE THE ADDITION WAS MADE ON ESTIMATE BASIS. THE REVENUE IS IN APPEAL. 3. THE LEARNED DR BROUGHT OUR ATTENTION TO PARA 5 O F COMMISSIONER OF INCOME-TAX(A)'S ORDER AND PAGE 2 OF THE PENALTY ORDER. THE LEARNED DR SUBMITTED ESTIMATION IS NOT A MERE GUESS WORK AND IT IS DONE ON A SOUND BASIS AND ON THE ABOVE FA CTS RELYING ON THE ITA.162/BANG/2009 P AGE - 4 FOLLOWING JUDGEMENTS SHE SUBMITTED THAT THE ORDER O F THE COMMISSIONER OF INCOME-TAX(A) IS TO BE CANCELLED : (I) R. SRINIVASAN & CO., V. COMMISSIONER OF INCOME- TAX (1974) 97 ITR 431; AND (II) UNION OF INDIA & OTHERS V. DHARMENDRA TEXTILES PROCESSORS AND OTHERS (2009) 306 ITR 277 (SC) 5. AS AGAINST THIS THE LEARNED REPRESENTATIVE FOR T HE ASSESSEE SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME-T AX(A) AND REITERATED THAT THE ADDITIONS WERE MADE ON ESTIMATE BASIS AND THERE IS ALSO NO FIRM BASIS FOR MAKING THE ADDITION. THERE IS NO CLEAR CONCEALMENT. THERE IS NO COMPARATIVE STUDY BY THE ASSESSING OFFICER. HE RELIED ON THE FOLLOWING DECISIONS, (I) UNION OF INDIA V. RAJASTHAN SPINNING & WEAVING MILLS (2009) 224 CTR (SC) 1; AND (II) COMMISSIONER OF INCOME-TAX V. GULAB CHAND KES HARI (1986) 158 ITR 714 (P&H) FOR THE PROPOSITION THAT ESTIMATION CAN BE A BASIS FOR ADDITION BUT IT CANNOT BE A BASIS FOR LEVYING PENALTY. 6. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THE DECISION RELIED BY THE LEARNED DR REPORTED IN 3 06 ITR 277 (SUPRA), IS NOT APPLICABLE TO THE INSTANT CASE. IN THIS CASE, THE HON'BLE ITA.162/BANG/2009 P AGE - 5 SUPREME COURT HELD THAT WHILE LEVYING PENALTY MENSR EA IS NOT ESSENTIAL SINCE PENALTY ATTRACTS CIVIL LIABILITY. IN THE CASE RELIED UPON BY THE LEARNED AR, REPORTE D IN 224 CTR (SC) 1 (SUPRA), THE HON'BLE SUPREME COURT FURTHER H ELD THAT THE DECISION IN DHARMENDRA TEXTILES REFERRED TO ABOVE C ANNOT BE SAID TO APPLY TO EVERY CASE OF NON-PAYMENT OR SHORT-PAYMENT OF DUTY REGARDLESS OF THE CONDITIONS EXPRESSLY MENTIONED IN THE SECTION. THE SUPREME COURT WAS DEALING WITH PENALTY U/S.11AC OF THE CENTRAL EXCISE ACT. 7. IN THE LIGHT OF THE ABOVE, WE AGREE WITH THE FIN DINGS OF THE COMMISSIONER OF INCOME-TAX(A) THAT THERE CANNOT BE PENALTY WHERE THE ADDITION IS MADE ON ESTIMATE BASIS. IT IS DIFF ICULT TO ACCEPT THE CONTENTION OF THE LEARNED DR THAT THE ADDITIONS WER E MADE ON THE BASIS OF WELL-FOUNDED ESTIMATION AND EVIDENCES. TH ERE IS NO COMPARABLE CASE GIVEN AS CONTENDED BY THE LEARNED R EPRESENTATIVE FOR THE ASSESSEE TO SHOW THE BASIS FOR ESTIMATION OF 3% OF GP. WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TAX( A). ITA.162/BANG/2009 P AGE - 6 8. IN THE RESULT, APPEAL BY THE REVENUE FAILS AND I T IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30TH DAY OF OCTOB ER, 2009. SD/- SD/- (A. MOHAN ALANKAMONY) (K. P. T. THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : 30TH OCTOBER, 2009 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE