The ACIT,(OSD)Circle-9, Ahmedabad V. Shri Pravin Dhanjibhai Rajpara, Ahmedabad

ITA 1758/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85691 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: H V GANDHI
• Section: 143(3)

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 ACIT (OSD), CIR. 9, AHMEDABAD (APPELLANT) VS SHRI PRAVIN DHANJIBHAI RAJPARA, BUNGLOW NO. 310, LANE 16, SATYAGRUH CHHAVANI CO.OP. HOUSING SOCIETY, SATELLITE, AHMEDABAD REVENUE BY: SHRI DINESH SINGH, SR. D.R. ASSESSEE BY: SHRI H.V. GANDHI, AR DATE OF HEARING : 05-02-2015 DATE OF PRONOUNCEMENT : 13-02- 2015 / ORDER PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:- THIS IS AN APPEAL FILED BY THE REVENUE EMANATING F ROM THE ORDER OF LD. CIT(A)-XV, AHMEDABAD DATED 13 TH MAY, 2011. REVENUE IS AGGRIEVED BY THE DELETION OF PENALTY OF RS. 3,37,397/- LEVIED U/S. 271(1)(C) OF I.T. ACT. ITA NO. 1758/AHD/2011 ASSESSMENT YEAR 2007-08 I.T.A NO. 1758/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. PRAVIN DHANJIBHAI RAJPARA 2 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S. 271(1)(C) DATED 23 RD JUNE, 2010 AND ASSESSMENT PASSED U/S 143(3) DATED 29-12-2009 WERE THAT THE ASSESSEE IN I NDIVIDUAL CAPACITY IS IN THE BUSINESS OF BUILDING DEVELOPMENT. IT WAS NOTE D BY THE AO THAT THERE WAS A DIFFERENCE IN THE CLOSING STOCK TO THE TUNE O F RS. 8,73,809/- WHICH ACCORDING TO HIM WAS UNDERSTATED BY THE ASSSESSEE. THE ASSESSEES EXPLANATION WAS AS UNDER:- WHILE PREPARING WORKING OF VALUATION OF CLOSING ST OCK WORK-IN- PROGRESS INADVERTENTLY THROUGH OVERSIGHT AND EXHAUS TED MENTAL CONDITION ACCOUNTANT PUT FIGURE RS. 7,00,000/- INST EAD FOR RS. 15,73,809/-. ON ACCOUNT OF THIS CLERICAL OVERSIGHT ERROR, CLOSING STOCK WAS UNDER STATED BY RS. 8,73,809/-. BUT HOWEVER, O VERALL THERE WILL BE NO MATERIAL EFFECT ON INCOME, AS CLOSING STOCK O F THIS YEAR WILL BECOME THE OPENING STOCK OF THE NEXT YEAR. HENCE, IF WE INCREASE THE CLOSING STOCK OF THIS YEAR THEN CORRESPONDINGLY OPENING STOCK OF THE NEXT YEAR WILL BE INCREASED. THUS PROFIT OF THI S YEAR WILL BE INCREASED BY THE AMOUNT OF INCREMENTAL VALUE OF CLO SING STOCK AND PROFIT OF THE NEXT YEAR WILL DECREASED BY THE AMOUN T OF INCREMENTAL VALUE OF OPENING STOCK. HENCE OVERALL IT WILL NOT EFFECT THE INCOME. SINCE THE AO WAS NOT CONVINCED HENCE ADDITION WAS M ADE AND IN CONSEQUENCE THEREUPON A PENALTY OF RS. 3,37,397/- W AS IMPOSED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY THE EXPLANATION OF THE ASSESSEE WAS AS UNDER:- 3. PENALTY HAS BEEN LEVIED BY THE AO ON TWO ADDITI ONS MADE IN SECURITY ASSESSMENT - OF RS 8,73,809 OF CLOSING STO CK LESS REPORTED, AND OF 1,28,580 ON ACCOUNT OF CESSATION OF LIABILIT Y. NO APPEAL WAS FILED AGAINST THE QUANTUM ADDITIONS. IN THE STATEME NT OF FACTS IT HAS BEEN STATED THAT ALL INFORMATION/DETAILS WERE SUBMI TTED TO THE AO AT THE TIME OF SCRUTINY PROCEEDINGS AND THE DISCREPANC Y IN CLOSING STOCK FIGURE CREPT IN DUE TO THE CLERICAL MISTAKE OF THE CLERK OF THE APPELLANT WHO WAS PREPARING THE STATEMENT. DECISION OF HONBL E SUPREME COURT IN THE CASE OF ASHOK PAI 292 ITR 11 HAS BEEN CITED. IT HAS ALSO BEEN STATED THAT THE APPELLANT WOULD NOT GAIN ANYTHING AS THE I.T.A NO. 1758/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. PRAVIN DHANJIBHAI RAJPARA 3 CLOSING STOCK OF THIS YEAR BECOMES OPENING STOCK OF THE SUCCEEDING YEAR. FOR CESSATION OF LIABILITY ADDITION IT HAS BE EN STATED THAT THE LIABILITY IS STILL STANDING, THAT ADDRESS AND NAME ARE AVAILABLE. IT HAS ALSO BEEN STATED THAT ONLY TWO NOTICES WERE ISSUED FOR PASSING PENALTY ORDER AND THAT THE SECOND NOTICE MENTIONED IN THE PENALTY ORDER WAS NOT RECEIVED BY THE APPELLANT. CONSIDERING THE FACTS OF THE CASE LD. CIT(A) HAS DE LETED THE PENALTY IN RESPECT OF BOTH ADDITIONS. 4. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH T HE SIDES. FROM THE SIDE OF THE REVENUE LD D.R., SHRI DINESH SINGH, HAS SUPPORTED THE PENALTY ORDER, HOWEVER, LD. AR, SHRI H.V. GANDHI, HAS SUPPO RTED THE ORDER OF LD. CIT(A) AND CITED A DECISION OF HINDUSTAN STEEL LTD 83 ISDTR 26 AND BHARAT STEEL AND IRON INDUSTRIES 199 ITR 67 AND KES ARIA TEA COMPANY 234 ITR 434 (SC). 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAS FURNISHED AUDITED PR OFIT AND LOSS AND BALANCE SHEET. THE ASSESSEE HAS DISCLOSED A CLOSIN G STOCK OF RS. 7,00,000/- ,HOWEVER, CLOSING STOCK OF WORK IN PROGR ESS WAS LATER ON REVISED TO RS. 15,73,809/-. AO HAS NOT POINTED OUT ANY DEF ECT IN THE BOOKS OF ACCOUNTS BUT NOTED THAT THE CLOSING STOCK WAS UNDER -VALUED. THE ASSESSEE HAS CONTESTED THAT SUCH ASSESSMENT IN THE CLOSING STOCK WAS TAX NEUTRAL HENCE THERE IS NO MALAFIDE INTENTION OF ANY CONCEALMENT. LIKEWISE IN THE CASE OF ADDITION MADE ON ACCOUNT CESSATION O F LIABILITY OF RS. 1,28,560/-, THE ASSESSEES SUBMISSION WAS THAT THE IDENTIFICATION AND ADDRESS OF THE SAID CREDITOR WAS AVAILABLE AND THAT LIABILITY WAS NOT WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IT HAS ALSO BEEN PLE ADED THAT THE MISTAKE OF THE ACCOUNTANT HAD PUT A ROUND FIGURE OF RS. 7,00,0 00/- IN THE BALANCE I.T.A NO. 1758/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. PRAVIN DHANJIBHAI RAJPARA 4 SHEET. THE MISTAKE WAS A PARDONABLE MISTAKE AS HEL D IN THE CASE OF CIT VS. PITAMBARDAS DULICHANDRA 273 ITR 271. JUDGED IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DEEM IT PROPER TO QUOTE. HELD PORTION OF HINDUSTAN STEEL LTD 83 ITR 26 (SC) AS UNDER:- AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBL IGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF IT S OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PE RFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORI TY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVA NT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHOR ITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE P ROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF T HAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE S TATUE. 6. FURTHER WE ARE OF THE VIEW THAT IN THE LIGHT OF THE KESARIA TEA COMPANY DECISION (SUPRA), THE ASSESSEE HAS FURNISHE D ALL THE DETAILS TO ESTABLISH THAT THERE WAS CESSATION OF LIABILITY HEN CE IT WAS WRONG TO CONCLUDE THAT THERE WAS CONCEALMENT OF INCOME BY FU RNISHING OF INACCURATE PARTICULARS. RESULTANTLY, THE VIEW TAKEN BY THE LD . CIT(A) IS HEREBY UPHELD AND THE GROUNDS RAISED BY THE REVENUE IS DISMISSED. 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 AHMEDABAD : DATED 13/02/2015 AK I.T.A NO. 1758/AHD/2011 A.Y. 2007-08 PAGE NO ACIT VS. PRAVIN DHANJIBHAI RAJPARA 5 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,