Sivasundram & Co., CHENNAI V. ITO, CHENNAI

ITA 204/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8973 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 09-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH J
• Assessee Lawyers: RANGA RAMANUJAMC A
• Keywords: Difference of opinion; Onus to prove
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.204/MDS./2016 / ASSESSMENT YEAR : 2008-09 M/S.SIVASUNDRAM & CO., 231,ARCOT ROAD, VADAPALANI,CHENNAI 600 026. VS. THE INCOME TAX OFFICER, BUSINESS WARD V(2), PRESENTLY NCW 14(2),CHENNAI-34. [PAN AACFS 4757 J ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.RANGA RAMANUJAM,C.A /RESPONDENT BY : MR.A.V.SREEKANTH, JCIT,DR / DATE OF HEARING : 09 - 06 - 201 6 / DATE OF PRONOUNCEMENT : 29 - 06 - 2016 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-14,CHENNAI DATED 23.11.2015 PASSED UNDER SECTION 271(1)(C) OF THE ACT PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ITA NO.204/MDS./2016 :- 2 -: 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIR M IS ENGAGED IN WHOLESALE TRADING IN WHEAT, SUGAR AND OTHER GOOD GR AIN ITEMS AND FILED ITS RETURN OF INCOME ON 29.09.2008. SURVEY U/S.133 A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 27 .02.2008. CONSEQUENTLY, THE AO ADOPTED THE INCOME AS ADMITTED BY A PARTNER DURING THE SURVEY PROCEEDINGS U/S.133A OF THE ACT I N THE ASSESSMENT PROCEEDINGS U/S.143(3). THE UNDISCLOSED INCOME WAS AS FOLLOWS: 1. DISCREPANCY IN STOCK ` 25 LAKHS 2. INFLATED EXPENSES ` 25 LAKHS AGGRIEVED, THE ASSESSEE FIRM CARRIED THE APPEAL BEF ORE THE LD.CIT(A). THE CIT(A) SOUGHT REMAND REPORT FROM THE AO. IN THE REMAND REPORT, THE AO FIXED THE DIFFERENCE DUE TO STOCK DISCREPANC Y AT ` 17,51,420/- AS AGAINST OF ` 25.00 LAKHS ADOPTED BY THE AO IN THE FORIGINAL ASSESSMENT ORDER. THE REMAND REPORT ALSO CONFIRME D THE ADDITION OF ` 25 LAKHS ON ACCOUNT OF INFLATION OF EXPENDITURE. T HE CIT(A) ON THE BASIS OF THE REMAND REPORT CONFIRMED THE ADDITIONS MADE BY THE AO IN FULL WITHOUT GRANTING THE REDUCTION REPORTED IN THE REMAND REPORT OF ` 7,48,760/- IN RESPECT OF ALLEGED DISCREPANCY IN STO CK. AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE FILED APPEAL BEFO RE THE TRIBUNAL. THE TRIBUNAL IN ITS ORDER DATED 11.09.2013 REDUCED THE DISALLOWANCE ON ACCOUNT OF INFLATION OF EXPENSES TO ` 10.00 LAKHS FROM ` 25.00 LAKHS ADOPTED BY THE AO AND CONFIRMED THE ADDITION ON ACC OUNT OF STOCK ITA NO.204/MDS./2016 :- 3 -: DISCREPANCY AT ` 17,51,240/- AS PER THE REMAND REPORT. THE AO LEVIE D PENALTY UNDER SECTION 271(1)(C) OF THE ACT TO THE EXTENT OF TAX PAYABLE I.E. ` 5,41,133/-, ON THE ADDITION CONFIRMED BY THE TRIBUN AL IN RESPECT OF EXCESS EXPENSES CLAIMED AND DISCREPANCY IN STOCK OF ` 17,15,240/- AFTER CONSIDERING THE SUBMISSIONS FILED BY THE ASS ESSEE FIRM IN RESPECT OF DISCREPANCY IN STOCK. NOW, THE APPEAL WAS FILED AGAINST THE LEVY OF PENALTY BEFORE LD.CIT(A) BY THE ASSESSEE. 3.1. ON APPEAL, THE LD.CIT(A) OBSERVED THAT THE AD DITION IN THIS CASE WAS CONFIRMED BY THE TRIBUNAL IN ITA NO.1669/MDS./2 012 VIDE ITS ORDER DATED 11.09.2013 WHEREIN HELD AS FOLLOWS:- 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS A WELL SETTL ED LAW THAT ADDITION CANNOT BE MADE MERELY ON THE BASIS OF STAT EMENT MADE U/S. 133A OF THE ACT. CORROBORATIVE EVIDENCE I S NECESSARY FOR MAKING ADDITIONS. THIS VIEW HAS REPEA TEDLY BEEN TAKEN IN VARIOUS ORDERS OF THE TRIBUNAL. THE H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. S. KHADAR KHAN SON REPORTED AS 300 ITR 157 (MDS) HAS ALSO TAKEN A SIMILAR VIEW. A PERUSAL OF THE REMAND REPORT WHICH IS AT PG NOS.19 TO 25 OF THE PAPER BOOK FILED BY THE ASSESSE E SHOWS THAT THE ASSESSING OFFICER HAS CATEGORICALLY STATED THAT THE DIFFERENCE IN ACTUAL STOCK AS PER THE BOOK S OF ITA NO.204/MDS./2016 :- 4 -: ACCOUNT IS `17,51,240/-. THIS FACT HAS ALSO BEEN RE CORDED BY THE CIT(APPEALS) IN HIS IMPUGNED ORDER. HOWEVER, WHILE CONCLUDING THE ORDER, THE CIT(APPEALS) HAS DISMISSE D THE APPEAL OF THE ASSESSEE IN FULL. WE MODIFY THE ORDER OF THE CIT(APPEALS) ON THIS GROUND AND CONFIRM THE ADDITIO N TO THE EXTENT OF ` 17,51,240/- INSTEAD OF ` 25.00 LAKHS AS HELD IN THE ASSESSMENT ORDER. 6. AS REGARDS ADDITION MADE ON ACCOUNT OF BOOSTING OF EXPENSES, THE ASSESSING OFFICER HAS MADE CONSOLIDAT ED ADDITION OF ` 25.00 LAKHS. DURING THE APPELLATE PROCEEDINGS, IN THE REMAND REPORT THE ASSESSING OFFICER HAS MENT IONED THAT THERE IS NO DISCREPANCY NOTED WITH REGARD TO T HE PAYMENT OF RENT AND VEHICLE MAINTENANCE EXPENSES. I N RESPECT OF OTHER EXPENSES RELATING TO LOADING AND U N- LOADING, PAYMENT TO MISTRY, SALARY AND MESS EXPENSE S, THE ASSESSING OFFICER HAS SUPPORTED HIS ORDER. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A WHOLESALE DEALER. DURIN G THE COURSE OF HIS BUSINESS ACTIVITIES LOADING AND UN-LO ADING EXPENSES ARE ROUTINE AFFAIR FOR WHICH OBTAINING VOU CHERS FROM EACH AND EVERY LABOUR WHO ARE MOSTLY ILLITERAT E AND ARE WORKING AS CASUAL LABOURERS IS EXTREMELY DIFFICULT. AS REGARDS SALARY TO EMPLOYEES, MESS EXPENSES AND PAYM ENTS TO MAISTRY IS CONCERNED, THE AR HAS NOT BEEN ABLE T O ITA NO.204/MDS./2016 :- 5 -: CONTROVERT THE FINDINGS OF THE REVENUE. THE ASSESSE E IS DUTY BOUND TO MAINTAIN PROPER BOOKS OF ACCOUNT WITH SUPPORTING VOUCHERS ETC. THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE HIS STAND WITH DOCUMENTARY EVIDENCE EI THER BEFORE THE ASSESSING OFFICER OR CIT(APPEALS). 7. AFTER TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NATURE OF BUSINESS A CTIVITIES OF THE ASSESSEE, THE HEADS OF EXPENSES AND THE REMA ND REPORT, IT WOULD BE APPROPRIATE IF THE ADDITION MAD E BY THE ASSESSING OFFICER IS REDUCED FROM ` 25.00 LAKHS TO ` 10.00 LAKHS IN RESPECT OF INFLATED EXPENSES. 4. THE LD.A.R SUBMITTED THAT THE ADDITION WAS MAD E ON ESTIMATE BASIS. THERE WAS NO CONCLUSIVE EVIDENCE THAT THERE IS DIFFERENCE IN STOCK DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCO UNTS AND PHYSICAL STOCK DURING THE COURSE OF SURVEY ON 27.02.2008 CAR RIED ON U/S.133A OF THE ACT. ACCORDING TO HIM, THE DIFFERENCE IN ST OCK WAS ARRIVED AT BY THE AUTHORITIES BY APPLYING GROSS PROFIT AT 1.61% A DMITTED FOR ASSESSMENT YEAR 2007-08. ACCORDING TO HIM, THEY WE RE NOT CONSIDERED THE VARIOUS DIRECT EXPENDITURE INCURRED BY THE ASSE SSEE WHILE ARRIVED STOCK DIFFERENCE AT ` 36,95,857/-. FURTHER, IT WAS SUBMITTED THAT EVEN APPELLATE STAGE, FINALLY ADDITION TOWARDS DIFFERENC E IN STOCK SUSTAINED AT ` 17,51,240/- BY TRIBUNAL. AS SUCH THERE WAS DIFFER ENCE OF OPINION ITA NO.204/MDS./2016 :- 6 -: REGARDING THE DIFFERENCE IN STOCK AND THAT ITSELF C ANNOT BE REASON FOR LEVY OF PENALTY. 5. ON THE OTHER HAND, LD.D.R SUBMITTED THAT PENALT Y LEVIED NOT ON ESTIMATE BASIS AND ACCORDING TO HIM, WHILE COMPARIN G THE BOOKS OF STOCK AND PHYSICAL STOCK DURING THE COURSE OF SURVE Y U/S.133A OF THE ACT, THERE IS DIFFERENCE AT ` 36,95,857/-, LATER THAT THE TRIBUNAL CONFIRMED THE ADDITION TO THE EXTENT OF ` 17,51,240/- AND THE SAME FIGURE WAS CONSIDERED BY THE AO FOR LEVY OF PENALTY AND ACCORDING TO HIM, THE PENALTY TO BE CONFIRMED. FURTHER DEPARTME NTAL REPRESENTATIVE RELIED ON THE JUDGMENT OF SUPREME CO URT IN THE CASE OF B. A. BALASUBRAMANIAM AND BROS. CO. VS. CIT REPORTE D IN [1999] 236 ITR 977 (SC) WHEREIN HELD THAT IT IS FOR THE ASSES SEE TO DISCHARGE THE ONUS AS CONTEMPLATED IN THE EXPLANATION TO SECTION 271 OF THE ACT. SINCE THE ONUS HAS NOT BEEN DISCHARGED, THE PENALTY U/S.271(1)(C) OF THE ACT IS LEVIABLE. FURTHER, LD.D.R RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S. KRISHNASWAMY & SONS REPORTED IN [1996] 219 ITR 157(MAD.) WHEREIN HELD T HAT EVEN ASSUMING THAT ASSESSMENT WAS BASED ON AN ESTIMATE, PENALTY COULD BE LEVIED. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, IN THIS CASE ORIGINALLY THE STOCK DIFFERENCE WAS ARRIVED AT ` 36,95,857/- BY THE SURVEY AUTHORITIES, FOR HAVING T HE ITA NO.204/MDS./2016 :- 7 -: DIFFERENCE IN STOCK THEY WERE APPLIED GP RATE AT 1. 62% AS DECLARED BY THE ASSESSEE AT THE ASSESSMENT YEAR 2007-08. HOWEVE R, THIS WAS REDUCED BY THE TRIBUNAL AT ` 17,51,240/-. AT THE STAGE OF ASSESSMENT ITSELF, THERE IS A DIFFERENCE OF OPINION ABOUT THE DIFFERENCE IN STOCK. THERE IS NO CONCLUSIVE EVIDENCE TO SHOW THAT THE EX ACT DIFFERENCE IN STOCK WAS ARRIVED BY APPLYING THE GP RATE. IN ANY YEAR GP RATE IS NOT CONSTANT. IT CANNOT BE PRESUMED THAT RATE OF PROFIT EARNED IN ONE YEAR IS CONSTANT AT ALL TIME, IT IS DEPENDING UPON MARKE TING CONDITIONS, DEMAND AND SUPPLY, INFLATIONARY POSITION AND ECONOM IC CONDITION. THE PERSON EARNING A HIGH PROFIT IN ONE YEAR, ANOTHER Y EAR HE MAY BE INCURRED LOSS ALSO. HENCE, WHEN WE APPLY THE GP RAT E TO DETERMINE THE PROFIT, THERE IS ALWAYS GUESS WORK AND IT DOES NOT HAVE FULL PROOF. WHEN THERE IS NO FULL PROOF OR CONCLUSIVE PROOF, TH E LEVY OF PENALTY FOR CONCEALMENT OF INCOME IS NOT PROPER. IN THE OPINI ON OF THE SURVEY TEAM, THERE IS DIFFERENCE IN STOCK AS COMPARED TO T HE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, AND IT DOES N OT BY ITSELF SUFFICIENT FOR ARRIVING AT A CONCLUSION THAT THE AS SESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME FOR ATTRACTING THE PENALTY OR CONCEALED PARTICULARS OF INCOME U/S.271(1)(C) OF THE ACT. T HE PRIMARY BURDEN OF PROOF OF FURNISHING INACCURATE PARTICULARS OF INCOM E IS ON THE SHOULDER OF REVENUE. IT IS ONLY ON DISCHARGE OF PRIMARY BURD EN THAT PROVING BURDEN OF PROOF WOULD SHIFT ON THE ASSESSEE. AS TH E IMPOSING OF ITA NO.204/MDS./2016 :- 8 -: PENALTY IS IN NATURE OF QUASI CRIMINAL PROCEEDINGS, IN SUCH CIRCUMSTANCES WHEN THE DIFFERENCE IN STOCK IS ESTIM ATED BY APPLYING THE GP RATE, PENALTY U/S.271(1)(C) OF THE ACT CANNO T BE LEVIED. FOR THIS PURPOSE, WE PLACE RELIANCE ON THE JUDGMENT OF JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. SMT.MEENAKSHI KUTY REPORTED IN 258 ITR 494(MAD.) WHEREIN IT WAS HELD THAT THE ESTIMATE GIV EN BY THE ASSESSEE WAS NOT THE RESULT OF ANY GROSS OR WILFUL NEGLIGENC E AND THAT PENALTY WAS NOT CALLED FOR. NOW, COMING TO THE RELIANCE PLA CED BY THE DEPARTMENTAL REPRESENTATIVE IN THE CASE OF CIT VS. S.KRISHNASWAMY & SONS(SUPRA), IN OUR OPINION THE FACTS OF THAT CASE IS ENTIRELY DIFFERENT. IN THE CASE OF S.KRISHNASWAMY & SONS BEFORE MADRAS HIGH COURT, FOR ASSESSMENT YEAR 1979-80 ORIGINAL ASSESSMENT WAS COM PLETED ON A TOTAL INCOME OF ` 81,370/- ON 30.06.1979, FOR ASSESSMENT YEAR 1980-81 THE ASSESSEE WAS COMPLETED ON A TOTAL INCOME OF ` 53,610/- ON 30.09.1980. SUBSEQUENTLY, THERE WAS A RIDE IN THE PREMISES OF ASSESSEE IN FEBRUARY, 1981. DURING THE COURSE OF S EARCH, THE TRIP SHEETS WERE SEIZED RELATING TO TRANSPORT BUSINESS W HICH SHOWED SUPPRESSION OF COLLECTION FROM BUSES OF ` 42,324/- FOR ASSESSMENT YEAR 1979-80 AND ` 1,01,787/- FOR ASSESSMENT YEAR 1980-81. COLLECTION FOR 33 DAYS IN 1979-80, AND COLLECTION FOR 54 DAYS IN 1 980-81 WERE FULLY SUPPRESSED. DURING THE COURSE OF DISCUSSION, THE A SSESSEE ADMITTED THE SUPPRESSION, HOWEVER REQUESTED FOR CERTAIN EXPE NDITURE OUT OF ITA NO.204/MDS./2016 :- 9 -: SUPPRESSION RECEIPTS. BUT IN THE CASE PRESENT BEFO RE US, THE FACTS ARE THAT THE AO COMPARING THE STOCK BETWEEN THE BOOKS A ND ACTUAL PHYSICAL STOCKS AND ACCORDING TO THE AO, BOOK STOCK S TO BE ARRIVED BY APPLYING THE GP RATE. AS WE DISCUSSED EARLIER, THE GP RATE CANNOT BE CONSTANT FIGURE IN ALL THE ASSESSMENT YEARS. IN VIE W OF THIS, WE ARE OF THE OPINION THAT THE PENALTY U/S.271(1)(C) OF THE A CT IS NOT LEVIABLE IN THIS CASE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON 29 TH JUNE, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 29 TH JUNE, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF