M/s. Meenal Leather Exports, CHENNAI V. ACIT, CHENNAI

ITA 1832/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64164 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained investment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1832/MDS/2011 (ASSESSMENT YEAR : 2006-07) M/S MEENAL LEATHER EXPORTS, NO.1, MUTHU GARAMANI STREET, PERIAMET, CHENNAI - 600 003. PAN : AAFFM8432M (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE XI, CHENNAI - 600 006. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI K.E.B. RENGA RAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 05.09.2012 DATE OF PRONOUNCEMENT : 05.09.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL, ASSESSEE IS AGGRIEVED THAT CIT(AP PEALS) UPHELD THE LEVY OF PENALTY OF ` 44,767/- UNDER SECTION 271(1)(C) OF INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. FACTS APROPOS ARE THAT ASSESSEE, A LEATHER EXPOR TER, HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR, WHICH WAS SUBJECTED TO I.T.A. NO. 1832/MDS/11 2 SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT . THE RETURNED INCOME WAS ` 17,14,700/- AGAINST WHICH ASSESSED INCOME WAS ` 18,47,700/-. IT SEEMS THERE WAS AN INSPECTION BY C OMMERCIAL TAX DEPARTMENT ON 22.9.2005 WHEREBY STOCK OF THE ASSESS EE WAS FOUND TO BE HIGHER BY A VALUE OF ` 1,33,000/-. AS PER THE A.O., DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE COULD NOT EXPLAIN THE STOCK DIFFERENCE. THEREFORE, HE MADE AN ADDITION OF LIKE AMOUNT IN INCOME- TAX ASSESSMENT. THEREAFTER, PENALTY PROCEEDINGS WE RE INITIATED UNDER SECTION 271(1)(C) FOR CONCEALMENT OF PARTICUL ARS OF INCOME. EXPLANATION OF THE ASSESSEE WAS THAT DIFFERENCE IN STOCK FOUND AT THE TIME OF INSPECTION BY COMMERCIAL TAX DEPARTMENT COU LD NOT LEAD TO A CONCLUSION THAT ASSESSEE HAD CONCEALED ITS INCOME. AS PER THE ASSESSEE, THE SAID ADDITION WAS MADE ON AN ESTIMATE BASIS AND NOT FOR FILING ANY INACCURATE PARTICULARS. HOWEVER, TH E A.O. WAS NOT IMPRESSED. ACCORDING TO HIM, THE ADDITION OF STOCK VALUE OF ` 1,33,000/- MADE BY COMMERCIAL TAX DEPARTMENT COULD NOT BE IGNORED. ASSESSEE WAS UNABLE TO EXPLAIN OR DISCLOS E THE STOCK DIFFERENCE IN ITS RETURN OF INCOME. THEREFORE, A.O . CAME TO A CONCLUSION THAT ASSESSEE HAD DELIBERATELY CONCEALED THE STOCK DIFFERENCE. IN THIS VIEW OF THE MATTER, HE LEVIED MINIMUM PENALTY OF ` 44,767/- ON THE SUM OF ` 1,33,000/-. I.T.A. NO. 1832/MDS/11 3 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT IT WAS ONLY AN ESTIMATED ADDITION MADE BY COMMERCIAL TAX DEPARTMENT AND THERE WAS NO CONCEALMENT WHATSOEVER BY THE ASSESSEE. HOWEVER, CIT(APPEALS) WAS NOT IMPRESSED. ACCORDING TO HIM, VERY FACT THAT THERE WAS DISCREPANCY IN THE ST OCK VALUE WHICH COULD NOT BE EXPLAINED BY THE ASSESSEE, CLEARLY SHO WED THAT THERE WAS AN UNEXPLAINED INVESTMENT BY THE ASSESSEE. ACC ORDING TO HIM, THE PENALTY LEVIED BY THE A.O. WAS JUSTIFIED. 4. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT ADDITION WAS DONE ON E STIMATE BASIS BY COMMERCIAL TAX DEPARTMENT. ASSESSEE ALSO AGREED TO THE ADDITION WHICH WAS ON ACCOUNT OF VALUATION OF STOCK. IT WOU LD NOT TANTAMOUNT TO CONCEALMENT OF INCOME BY THE ASSESSEE. 5. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. WITHOUT DISPUTE, THE ADDITION MADE IN THE INCOME-TA X ASSESSMENT WAS BASED ON A STOCK DIFFERENCE FOUND BY COMMERCIAL TAX DEPARTMENT (CTO). THE AMOUNT OF STOCK VALUE CONSID ERED BY CTO I.T.A. NO. 1832/MDS/11 4 FOR ADDITION WAS ` 1,33,000/-. AS PER THE A.O., ASSESSEE COULD NOT EXPLAIN SUCH DIFFERENCE IN STOCK VALUE DURING ASSES SMENT PROCEEDINGS. IN OTHER WORDS, THE ADDITION WAS MADE BY THE ASSESSING OFFICER ONLY FOR A REASON THAT THERE WAS A STOCK DIFFERENCE FOUND BY COMMERCIAL TAX DEPARTMENT ON AN INSPECTION DONE BY THEM. HOW THIS STOCK DIFFERENCE WAS ARRIVED AT OR WHETHER THIS WAS AN ESTIMATE OR BASED ON ANY DETAILED WORK-OUT, HAS NOT BEEN MENTIONED BY THE ASSESSING OFFICER. APPARENTLY, TH E AMOUNT BEING A ROUND FIGURE WAS AN ESTIMATE ONLY. VALUATION OF ST OCK WILL ALWAYS HAVE IN IT AN ELEMENT OF SUBJECTIVITY. A VALUATION OF STOCK MADE ON FIFO BASIS AND A VALUATION MADE UNDER LIFO BASIS, C AN GIVE DIFFERENT FIGURES. METHOD OF KEEPING INVENTORY AS ALSO THE M ETHOD OF STOCK ACCOUNTING FOR SALES AND PURCHASES ALSO HAVE A BEAR ING ON THE STOCK VALUATION FOR ANY GIVEN DAY. THERE CAN BE DIFFEREN CE IN VALUE OF STOCK BECAUSE OF SUCH ELEMENTS OF ESTIMATION INVOLVED. J UST BECAUSE THE STOCK VALUE WAS DIFFERENT ON AN ESTIMATION DONE BY COMMERCIAL TAX DEPARTMENT, WOULD NOT MEAN THAT THERE WAS ANY CONCE ALMENT. NOTHING IS THERE ON THE RECORD TO SHOW THAT ASSESSE E HAD CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS. DI FFERENCE IN STOCK VALUE BY ITSELF WOULD NOT MEAN THAT THERE WAS ANY R EAL INCOME TO THE ASSESSEE. THERE IS NO FINDING BY THE ASSESSING OFF ICER THAT ANY I.T.A. NO. 1832/MDS/11 5 PARTICULARS WERE NOT FURNISHED BY THE ASSESSEE OR A NY PARTICULARS FILED BY THE ASSESSEE WERE INACCURATE. WE ARE OF THE OPI NION THAT THIS WAS A CASE WHERE AN ELEMENT OF MENS REA COULD NEVER BE FASTENED ON THE ASSESSEE, FOR HAVING CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS. LEVY OF PENALTY WAS NOT WARRANTED. T HE PENALTY LEVIED IS CANCELLED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 5 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH SEPTEMBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)- IV, CHENNAI-34 (4) CIT-IX, CHENNAI (5) D.R. (6) GUARD FILE