Elefur Indutries India Pvt.Ltd., Baroda V. The ACIT.,Circle-1(2), Baroda

ITA 1704/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85705 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 27-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: ANIL R SHAH
• Keywords: Bogus purchase; Principle of natural justice; Assessment record
• Section: 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUN TANT MEMBER ELEFUR INDUSTRIES INDIA PVT. LTD, 312-313, CAMPS CORNER, NR. NARHARI HOSPITAL, FATEHGUNJ, BARODA PAN: AAACE4999B (APPELLANT) VS THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 1(2), BARODA, BARODA ASSESSEE BY: SHRI ANIL R. SHAH, A.R. REVENUE BY: SHRI DINESH SINGH, SR. D.R. DATE OF HEARING : 05-02-2015 DATE OF PRONOUNCEMENT : 20-02- 2015 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- BOTH THESE APPEALS ARE IN RESPECT OF THE SAME ASSE SSEE, ONE FILED AGAINST THE QUANTUM ADDITION AND THE OTHER AGAINST THE PENALTY LEVIED U/S. 271(1)(C) ARISING FROM TWO SEPARATE ORDER CIT-I, BA RODA BOTH IDENTICALLY DATED 20 TH APRIL, 2011. ITA NO. 1704 & 1705/AHD/2014 ASSESSMENT YEAR 2003-04 I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 2 2. FIRST WE SHALL TAKE UP THE MAIN APPEAL IN RESPEC T OF QUANTUM ADDITION AND THE GROUNDS RAISED ARE AS UNDER:- A. ITA 1704/AHD/2011 1 THE LD. AO HAD ERRED IN LAW AND ON FACTS IN MAKI NG THE ADDITION OF RS. 8,01,196/- IN EX-PARTE ASSESSMENT ORDER U/S R.W .S. 147 OF THE I.T. ACT. THE HONBLE CIT(A) HAS ALSO ERRED IN CONFIRMI NG THE ACTION OF THE LD. A.O. AND DISMISSING THE APPEAL. 2. THE LD. AO HAD ALSO ERRED IN LAW AND ON FACTS IN ARRIVING PROFIT AT RS. 8,01,961/- BEING PROFIT CHARGES @ 8% ON DEEMED TURN OVER OF RS. 1,00,24,523/-. THE LD. AO HAD ADOPTED AVERAGE OF T HE TURNOVER FOR A.Y. 2001-02 AND A.Y. 2002-03. THE APPELLANT HAD C LOSED DOWN THE BUSINESS SINCE MID 2002 WITH NO PLACE OF OFFICE, NO EMPLOYEE AND IT HAS GONE TO GBIFR AS SICK UNIT. THE HONBLE CIT(A) HAS ALSO ERRED IN CONFIRMING THE ADDITION. 3. THE LD. A.O. AND THE HONBLE CIT(A) BOTH HAVE NO T THE SET OFF OF PAST YEARS LOSSES THROUGH THE LOSSES WERE DETERMINE D BY THE LD. A.O. TO CARRIED FORWARD IN SUBSEQUENT YEARS. 3. APROPOS TO GROUND NO. 1, NO SPECIFIC ARGUMENT HA S BEEN RAISED AND STATED THAT THE GROUND BEING GENERAL IN NATURE HENC E NEEDS NO LEGAL ADJUDICATION. THIS GROUND IS THEREFORE DISMISSED B EING NOT PRESSED. 4. APROPOS TO GROUND NO. 2, FACTS IN BRIEF AS EMERG ED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 144 R.W. S. 147 OF IT ACT DATED 28-11-2006 WERE THAT THE ASSESSEE COMPANY WAS STATED TO BE IN THE BUSINESS OF MANUFACTURING AND TRADING OF STEEL FURN ITURE. THE ADMITTED FACTUAL POSITION WAS THAT NO RETURN OF INCOME WAS F URNISHED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT IS A LSO EVIDENCED FROM THE ASSESSMENT ORDER THAT A NOTICE U/S. 148 WAS ISSUED BUT EVEN THEN NO RETURN WAS FILED. THE AO HAS ALSO GIVEN OPPORTUNIT IES OF HEARING DUE TO I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 3 NON-COMPLIANCE. AO HAS NOTICED THAT THERE WAS NO OPTION BUT TO PROCEED EX-PARTE U/S. 144 OF I.T. ACT. THEREAFTER IT WAS FOUND BY THE AO AS PER THE ASSESSMENT RECORD THAT FOR A.Y. 2002-03 THE SALES W ERE OF RS. 87,28,458/- AND FOR A.Y. 20001-02 IT WAS RS. 1,13,20,587/-. ON THAT BASIS, THE AO HAS WORKED ABOUT AN AVERAGE TURN OVER AT RS. 1,00,24,52 3/-. THE AO HAS FURTHER NOTED THAT HE HAD NO OPTION BUT TO ASSESS N ET PROFIT RATIO AT 8% ON THE SAID TURNOVER AND THEREUPON WORKED OUT THE NET PROFIT AT RS. 8,01,961/-. IT HAS ALSO BEEN NOTED BY THE AO THAT SINCE THE ASS ESSEE HAS NOT FURNISHED THE INCOME TAX RETURN, THEREFORE, NOT ENT ITLED FOR SET OFF OF CARRY FORWARD LOSSES. 5. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE TH E FIRST APPELLATE AUTHORITY. 6. BEFORE LD. CIT(A), A WRITTEN SUBMISSION WAS FILE D IN WHICH IT WAS STATED THAT THE ASSESSEE-COMPANY WAS CLOSED FOR OVE R 8 YEARS AND IN THE PAST SUFFERED LOSSES. EVEN THE BOOKS OF ACCOUNTS W ERE IMPOUNDED BY THE SALES TAX DEPARTMENT, BHARUCH. IT WAS ALSO INFORME D THAT DUE TO RIOTS IN THE YEAR 2002, THE FACTORY WAS CLOSED DOWN. HOWEVE R, LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAS NOT FURNISHED ANY IN FORMATION ABOUT ITS TURN-OVER ETC. THE AO HAD MADE AN ALLEGATION THAT THE ASESSEE WAS A BENEFICIARY OF BOGUS PURCHASE BILLS, THEREFORE, LD. CIT(A) HAS AFFIRMED THE ACTION OF THE AO. 7. WITH THIS BRIEF FACTUAL BACKGROUND, LD. AR. SHRI ANIL R. SHAH, HAS STATED THAT AS PER THE COMPARATIVE CHART, THE ASSES SEE HAS EARNED GROSS PROFIT FOR A.Y. 2000-01 @ 40.07% AND IN 2001-02 IT WAS 25.17%. HOWEVER THERE WAS NET LOSS SUFFERED BY THE ASSESSEE. LD. A R HAS ALSO FURNISHED CERTAIN ACCOUNTS FOR A.Y. 2001-02 TO DEMONSTRATE TH AT THE ASSESSEE WAS I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 4 FACING FINANCIAL DIFFICULTY AND SUFFERED LOSSES IN THE PAST FEW YEARS. THE MAIN PLANK OF ARGUMENT BEFORE US IS THAT DUE TO FIN ANCIAL PROBLEMS THE ASSESSEE-COMPANY WAS NOT HAVING ANY INCOME TO OFFER TO THE REVENUE DEPARTMENT RATHER CLOSED DOWN ITS BUSINESS. THERE WAS NO ONE TO LOOK AFTER FINANCIAL MATTERS. THE AVAILABLE RECORD WAS WITH THE SALES TAX DEPARTMENT. IN SUCH CIRCUMSTANCES, A REASONABLE VI EW MAY BE TAKEN TO ARRIVE AT THE PERCENTAGE OF NET PROFIT BECAUSE THE NET PROFIT @ 8%, AS ADOPTED BY THE AO, WAS TOWARDS HIGHER SIDE. 8. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE, LD. DR, SHRI DINESH SINGH, HAS VEHEMENTLY SUPPORTED THE VIEW TAK EN BY THE REVENUE AUTHORITIES. HE HAS PLEADED THAT THE NON-COOPERATIV E CONDUCT OF THE ASSESSEE DESERVES NO SYMPATHY. THE ASSESSEE HAS NO T FURNISHED ANY DETAIL TO THE AO, THEREFORE, HE HAD NO OPTION BUT T O ESTIMATE THE INCOME. THE MAIN CONTENTION WAS THAT THE PERCENTAGE OF PROF IT AS ADOPTED BY THE AO SHOULD BE UPHELD. 9. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES AS VEHEMENTLY STATED BY LD. AR BEFORE US; WE ARE OF THE VIEW THAT THE PAST HISTORY OF THE PROFIT/LOSS SHOULD NOT BE IGNORED SO AS TO ARRIVE A T A LOGICAL ASSESSMENT OF PROFIT. ALTHOUGH THIS ASSESSEE HAS NOT COOPERATED WITH THE REVENUE DEPARTMENT BUT STILL THE NATURAL JUSTICE DEMANDS TO ASSESS A TAXPAYER ON AN INCOME WHICH IS LEGITIMATELY CORRECT/ACCEPTABLE. D UE TO THIS REASON, WE HAVE CONSIDERED THE COMPARATIVE CHART AND OTHER DET AILS AS FURNISHED IN THE PAPER BOOK FILED BY THE ASSESSEE AND THEREUPON CONSIDER IT REASONABLE TO ESTIMATE THE PROFIT AT 4% ON THE TURN-OVER AS DETERMINED BY THE AO. WE MAY LIKE TO ADD THAT ALTHOUGH THERE IS NO SOUND BASIS FOR THIS ESTIMATION BUT TO PUT AN END TO A LITIGATION SOME T IMES IT IS DESIRABLE TO I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 5 WORK OUT A MIDDLE PATH SOLELY WITH THE PURPOSE TO R ESOLVE AN UNFRUITFUL CONTROVERSY. AS WE HAVE FOUND IN THIS CASE THAT TH E COMPANY HAD ALREADY BEEN CLOSED DOWN. THEREFORE, WE DIRECT THE AO TO RE -COMPUTE THE ASSESSABLE INCOME BY ADOPTING NET PROFIT RATIO AT 4 % ON THE TURN OVER OF RS. 1,00,24,523/-. RESULTANTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 10. APROPOS TO GROUND NO. 3 THE QUESTION OF GRANTIN G SET OFF OF PAST YEAR LOSSES HAS ALREADY BEEN DECIDED CORRECTLY BY LD. CI T(A) HENCE THE LEGAL VIEW AS TAKEN BY HIM NEED NOT TO BE DISTURBED. THI S GROUND OF ASSESSE IS DISMISSED. 11. IN THE RESULT, THIS QUANTUM APPEAL OF THE ASSES SEE IS PARTLY ALLOWED. B. ITA NO. 1705/AHD/2011 12. GROUNDS RAISED ARE REPRODUCED BELOW:- 1. THE AO HAD ERRED IN LAW AND ON FACTS IN LEVYING PENALTY OF RS. 2,88,000/- U/S 271(1)(C) OF THE I.T. ACT AND THE HO NBLE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. A.O. 2. THE LD AO HAD ALSO ERRED IN LAW AND ON FACTS IN LEVY OF PENALTY THOUGH THE APPELLANT HAS NEITHER CONCEALED THE INCOME NOR FURNISHED THE INACCURATE PARTICULARS OF INCOME AND THE HONBLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE PENALTY. 3. THE LD. A.O. HAD ALSO ERRED IN LAW AND ON FACTS IN LEVYING PENALTY BECAUSE THE APPELLANT HAS CLOSED DOWN THE B USINESS DURING THE YEAR. THERE WAS NO INCOME. THE LD. A.O. HAD T AKEN THE INCOME OF RS. 8,01,961/- ON ESTIMATE BASIS @ 8% ON DEEMED TURNOVER OF RS. 1,00,24,523/- (THE LD. A.O. ADOPTED AVERAGE OF TURNOVER FOR A.Y. 2001-02 & A.Y. 2002-03). THE HONBLE CIT(A) CIT(A) HAS ERRED IN CONFIRMING THE PENALTY THOUGH THE SAME IS BASED ON ESTIMATE. WHERE THE ADDITION IS MADE SOLELY ON THE BASIS OF E STIMATE WITHOUT ANY PROOF OF CONCEALMENT, BY WAY OF BEST JUDGMENT A SSESSMENT, I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 6 THERE COULD HARDLY BE ANY CASE FOR PENALTY AS PER H ONBLE ITAT CHENNAI BENCH (2009) 314 ITR (AT) 290. 13. WE HAVE HEARD BOTH THE SIDES IN THE BACKGROUND OF THE FACTS AS STATED HEREINABOVE. ALTHOUGH THE ADMITTED FACTUAL P OSITION WAS THAT THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME AND BECAUSE OF THAT REASON AN EX-PARTE ORDER WAS PASSED BY THE AO; STIL L WE HAVE NOTED THAT THERE WAS NO SPECIFIC INFORMATION ABOUT SPECIFIC CO NCEALMENT OF INCOME BY THE ASSESSEE. THIS IS NOT THE CASE WHERE THE REVEN UE DEPARTMENT HAD DETECTED SOME INFORMATION LEADING TO ASSESS THE CON CEALED INCOME. ALTHOUGH IT IS CORRECT THAT AN ESTIMATED FIGURE OF SALES AND ESTIMATE OF PROFIT WAS ADOPTED BY THE AO, BUT SIMULTANEOUSLY IT IS ALS O CORRECT THAT THE AO HAD NO OPTION BUT TO ADOPT AN ESTIMATION TO ASSESS THE TAXABLE INCOME. CONSIDERING BOTH THE ASPECTS, WE CAN ARRIVE AT A RE ASONABLE CONCLUSION THAT IN SUCH CIRCUMSTANCES WHEN ONE ESTIMATION IS P ITTED AGAINST ANOTHER ESTIMATION THEN IN GENERAL NOT A FIT CASE FOR LEVY OF CONCEALMENT PENALTY. HOWEVER, WE ARE ALSO AWARE OF THIS FACT IN THIS CAS E THAT THE ESTIMATION WAS THE ONLY OPTION AVAILABLE TO THE REVENUE AUTHOR ITIES BECAUSE OF NON- FILING OF THE RETURN AND NON-PRODUCTION OF RECORDS. THEREFORE, WE AGAIN DRAW A MIDDLE PATH REDUCING THE PENALTY TO AN ESTIM ATED FIGURE OF RS. 25,000/- AND REST OF THE PENALTY IS HEREBY DELETED. THE PENALTY LEVIED U/S. 271(1)(C) IS THEREFORE RESTRICTED TO RS. 25,000/-. WE ORDER ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE THEREFORE PA RTLY ALLOWED. 14. BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A NO. 1704 & 1705/AHD/2011 A.Y. 2003-04 PAGE NO ELEFUR INDUSTRIES PVT LTD VS. ACIT 7 AHMEDABAD : DATED 20/02/2015 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,