Illakshi Synthetics Pvt.Ltd., Surat V. The Dy.CIT.,Circle-2, Surat

ITA 2050/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94287 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 18-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGHSR D R
• Keywords: Gross profit estimation; Depreciation
• Section: 143(3); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2050/AHD/2011 ( / ASSESSMENT YEAR : 2004-05) ILLAKSHI SYNTHETICS PVT.LTD. 2/1960, MALI FALIAS RUDERPURA, SURAT / VS. THE DY.CIT CIRCLE-1 SURAT % & ./ ./ PAN/GIR NO. : AAACI 8420 K ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : WRITTEN SUBMISSIONS )*%( , + / RESPONDENT BY : SHRI NARENDRA SINGH, SR.DR -. , /& / DATE OF HEARING 31/07/2015 0123 , /& / DATE OF PRONOUNCEMENT 14/08/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT [CIT(A) IN SHORT] DATED 21/06/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF ASSESSING OFFICER IN ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 2 - IMPOSING PENALTY U/S.271(1)(C) OF THE ACT BY SUSTAI NING THE PENALTY ON THE ADDITION OF RS.1,93,813/- ON ACCOUNT OF LOW G.P. AND RS.19,800/- ON DISALLOWANCE OF DEPRECIATION ON COMP UTER. 2. IT IS THEREFORE PRAYED THAT PENALTY IMPOSED BY ASSE SSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEALS) M AY PLEASE BE DELETED. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 29/11/2006. WHILE FRAMING THE ASSESSMENT ORDER, TH E ASSESSING OFFICER (AO IN SHORT) MADE ADDITION(S) ON ACCOUNT O F UNSECURED LOANS OF RS.67,45,000/- BY INVOKING THE PROVISIONS OF SECTI ON 68 OF THE ACT, GP ESTIMATION OF RS.2,32,586/-, TUF DEPRECIATION OF RS .11,07,580/- AND DISALLOWANCE OF DEPRECIATION ON COMPUTER OF RS.19,8 00/-. THE AO ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT. THE MATTER TRAVELLED UPTO THE STAGE OF TRIBUNAL (ITAT A BENC H AHMEDABAD) AND THE TRIBUNAL IN ITA NO.3208/AHD/2008 FOR AY 2004-05 , ORDER DATED 16/12/2010, WAS PLEASED TO SET ASIDE THE ISSUE OF A DDITION ON ACCOUNT OF UNSECURED LOANS OF RS.67,45,000/- AND IN RESPECT OF GP ESTIMATION THE TRIBUNAL REDUCED THE GP RATE ADOPTED BY THE AO AND DIRECTED THE AO TO WORK OUT THE GP ADDITION BY APPLYING GP RATE OF 9% AND DISALLOWANCE TO BE COMPUTED ACCORDINGLY. MEANWHILE, THE AO IMPOSE D A PENALTY OF RS.24,96,402/- U/S.271(1)(C) OF THE ACT ON RS.69,58 ,613/- [RS.67,45,000 + RS.1,93,813 + RS.19,800/-]. THE ASSESSEE FEELING AGGRIEVED BY THE ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 3 - PENALTY ORDER, PREFERRED AN APPEAL BEFORE THE LD.CI T(A), WHO AFTER CONSIDERING THE SUBMISSIONS, DELETED THE PENALTY ON ADDITION MADE ON ACCOUNT UNSECURED LOANS OF RS.67,45,000/- AND SUSTA INED THE PENALTY ON GP ADDITION AND DISALLOWANCE OF DEPRECIATION ON COM PUTER. 3. ON THE DATE OF HEARING, NO ONE APPEARED ON BEHAL F OF ASSESSEE, HOWEVER A LETTER DATED 29/07/2015 HAS BEEN FILED TO DECIDE THE APPEAL ON THE BASIS OF WRITTEN SUBMISSIONS. THEREFORE, THE T RIBUNAL DECIDED TO PROCEED IN THE MATTER IN THE ABSENCE OF ASSESSEE. 4. THE LD.COUNSEL FOR THE ASSESSEE.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ADDITION H AS BEEN SUSTAINED ON THESE TWO ISSUES UPTO THE STAGE OF THIS TRIBUNAL, T HEREFORE THE LD.CIT(A) WAS JUSTIFIED FOR SUSTAINING THE PENALTY. 5. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AS WELL AS THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. WE FIND THAT THE PENALTY HAS BEEN SUSTAINED ON TWO ITEMS; NAMELY, THE ADDITION M ADE ON ACCOUNT OF ESTIMATION OF GROSS PROFIT AND DISALLOWANCE OF DEPR ECIATION ON COMPUTER. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS ON BOTH THE ISSUES WHICH ARE REPRODUCED HEREUNDER:- SUB: WRITTEN SUBMISSION FOR A.Y. 2004-05 REF: APPEAL PREFERRED AGAINST ORDER U/S. 271(1)(C) DATED 18.03.2010 ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 4 - MAY IT PLEASE TO YOUR HONOUR 1. THE APPEAL IS DIRECTED AGAINST THE ORDER OF TH E CIT(A) CONFIRMING THE PENALTY ON ADDITION OF RS.1,93,813/- ON ACCOUNT OF LOW GROSS PROFIT AND DISALLOWANCE OF RS.19,800/- OF DEPRECIATION ON COMP UTER. THE FACTS LEADING TO THE LEVY OF THE PENALTY ARE DESCRIBED AS UNDER: 2. IN THIS CASE, ASSESSMENT U/S. 143(3) OF THE I. T. ACT WAS COMPLETED ON 29.11.2006 DETERMINING THE TOTAL INCOME AT RS.13,47 ,000/- AS AGAINST THE RETURNED LOSS OF RS.22,27,530/-. WHILE FINALIZING T HE ASSESSMENT THE FOLLOWING ADDITIONS WERE MADE TO THE TOTAL INCOME OF THE ASSE SSEE AND PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE I.T. ACT WERE INI TIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME: I. ADDITION U/S. 68 OF THE I. T. ACT RS. 6 7,45,000/- II. ADDITION ON ACCOUNT OF FALL IN G.P. RS. 2,32,586/- III. DISALLOWANCE OF DEPRECIATION CLAIMED ON COMPUT ER RS. 19,800/- 3. THE ADDITION OF RS. 67,45,000/- WAS SET ASIDE BY HONOURABLE TRIBUNAL TO THE FILE OF ASSESSING OFFICER. THE ASSESSING OFFICER AG AIN MADE ADDITION WHICH WAS DELETED BY ID. CIT(A). THE ID. CIT(A) THEREFORE DEL ETED THE PENALTY ON THIS ADDITION. OUT OF THE ADDITION OF RS.2,32,586/- ON A CCOUNT OF GROSS PROFIT, THE HONOURABLE TRIBUNAL CONFIRMED THE ADDITION OF RS .1,93,813/- BY ADOPTING THE GP RATIO @ 9% AND ALSO CONFIRMED DISALLOWANCE OF DE PRECIATION. THE ID. CIT(A) CONFIRMED THE PENALTY ON THE ADDITIONS SUSTA INED BY THE HONOURABLE TRIBUNAL. 4. THE ASSESSEE'S SUBMISSION ON THE PENALTY SUSTAIN ED BY CIT(A) ON THE ABOVE 2 ADDITIONS ARE AS UNDER: PENALTY ON ADDITION OF RS.1,93,813/- ON ACCOUNT OF LOW GP: 4.1 DURING THE YEAR UNDER CONSIDERATION ASSESSE E HAS SHOWN GROSS PROFIT AT 8.27% ON TURNOVER OF RS. 8.89 LACS, AS AGAINST GROS S PROFIT OF THE PRECEDING ASSESSMENT YEAR AT 10.55% ON TURNOVER OF RS. 25.38 LACS. ASSESSING OFFICER REQUESTED ASSESSEE TO FURNISH THE REASONS FOR DECLI NE IN GROSS PROFIT RATIO. IN RESPONSE TO THE SAME ASSESSEE FURNISHED A COMPARATI VE CHART SHOWING THE G.P. RATIO OF CURRENT YEAR AS WELL AS PRECEDING YEAR. HO WEVER, ASSESSING OFFICER ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 5 - REJECTED THE EXPLANATION OF THE ASSESSEE AND MADE T HE ADDITION OF RS. 2,32,586/- TO THE TOTAL INCOME OF ASSESSEE. THE ASS ESSEE FILED AN APPEAL AGAINST THE ABOVE ADDITION & THE LEARNED CIT(A) ALLOWED PAR T RELIEF BY CONFIRMING ADDITION TO THE EXTENT OF RS.1,93,813/- & ON FURTHE R APPEAL, HONOURABLE ITAT ALLOWED FURTHER RELIEF BY DIRECTING ASSESSING OFFIC ER TO ESTIMATE G.P AT THE RATE OF 9% AS AGAINST 8.27% SHOWN BY ASSESSEE. 4.2 NOW AS REGARDS THE PENALTY IMPOSED ON THE A BOVE G.P. ADDITION OF RS. 1,93,813/-, IT IS SUBMITTED THAT THE HONOURABLE ITA T HAS ALLOWED SUBSTANTIAL RELIEF TO ASSESSEE, AS VIDE ORDER DT. 16.12.2010 HO NOURABLE ITAT DIRECTED TO ESTIMATE G.P. @ 9% AS AGAINST ESTIMATION OF G.P. @ 11% BY ASSESSING OFFICER. IT IS RELEVANT TO MENTION HERE THAT ASSESS EE HAS ALREADY SHOWN G.P. @ 8.27% & THUS THE ADDITION ON ACCOUNT OF G.P. IS SUS TAINED ONLY AT NEGLIGIBLE RATE OF 0.73%. AS ADDITION IS MADE PURELY ON THE BA SIS OF ESTIMATION & THE SAME IS PARTLY SUSTAINED ALSO ON THE BASIS OF ESTIM ATION, THERE IS NO JUSTIFICATION IN LEVYING PENALTY ON SUCH ESTIMATED ADDITION. THER E IS NO MATERIAL ON RECORD WHICH INDICATES THAT ASSESSEE HAS CONCEALED ITS INC OME. IN RESPECT OF SUCH ESTIMATED ADDITIONS NO PENALTY CAN BE IMPOSED IN VI EW OF FOLLOWING CASE LAWS:- I. CIT VS. SMT. K. MEENAKSHI KUTTY 258 ITR 494(MAD ) II. HARIGOPAL SINGH VS. CIT 258 ITR 85(P&H) III. CIT(A) VS. VALIMKBHAI H. PATEL 280 ITR 487(GUJ ) IV. CIT(A) VS. RAJ BANS SINGH 276 ITR 351 (ALL) V. CIT VS. LALLUBHAI JOGIBHAI PATEL 261 ITR 216(GUJ ) VI. CIT VS. SHIVNARAYAN JAMNALAL & CO. 232 ITR 311 (MP). VII. CIT V. SHIVNARAYAN JAMNALAL & CO. - 232 ITR 31 1 (MP) VIII. CIT V. K. L. MANGAL SAIN - 107 ITR 598 (ALL) 4.3 THE ID. CIT(A) HAS WRONGLY CONFIRMED THE PE NALTY ON THE GP ADDITION. THE HONOURABLE TRIBUNAL HAS HELD THAT THE APPLICATI ON OF SAME GP OF LAST YEAR COULD NOT BE JUSTIFIED AS TURNOVER HAS INCREASED 3 TIMES. THE HONOURABLE TRIBUNAL HAS ESTIMATED GP @ 9% CONSIDERING THE NON PRODUCTION OF BOOKS OF ACCOUNTS. THE BOOKS COULD NOT BE PRODUCED AS THEY W ERE DESTROYED IN FLOOD. PENALTY ON ADDITION OF RS. 19,800/- BEING DISALLOWA NCE OF DEPRECIATION ON COMPUTER: ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 6 - 4.4 DURING THE YEAR UNDER CONSIDERATION ASSESSE E HAS CLAIMED DEPRECIATION OF RS. 19,800/- AT 60% ON NEW COMPUTER PURCHASED DU RING THE YEAR OF RS. 33,000/-. HOWEVER, AS PER ASSESSING OFFICER ASSESSE E WAS NOT ABLE TO PRODUCE ANY EVIDENCE FOR THE PURCHASE OF THE SAME. THEREFOR E, ASSESSING OFFICER DISALLOWED THE DEPRECIATION OF RS.19,800/- AND MA DE THE ADDITION OF THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4.5 AS REGARDS THE PENALTY ON THE ADDITION OF R S.19,800/-, IT IS SUBMITTED THAT THE ADDITION HAS BEEN MADE BY WAY OF DISALLOWANCE O F DEPRECIATION ON COMPUTER ON THE GROUND THAT ASSESSEE COULD NOT PROD UCE ANY EVIDENCE IN SUPPORT OF THE PURCHASE OF COMPUTER. IN THIS CONTEX T, IT IS RELEVANT TO POINT OUT THAT ASSESSEE COULD NOT FILE SAID EVIDENCE DUE TO R EASONS BEYOND ITS CONTROL, AS ITS BOOKS OF ACCOUNT & OTHER RECORDS WERE DESTROYED IN FLOOD. ASSESSEE ALSO FILED PROOF IN SUPPORT OF ITS CONTENTION. HOWEVER, IT IS RELEVANT TO MENTION THAT THE EVIDENCE RELATING TO PURCHASE OF COMPUTER WAS D ULY FURNISHED BEFORE THE AUDITOR & THEREFORE, HE HAS CERTIFIED THE ALLOWANCE OF DEPRECIATION ON COMPUTER IN HIS AUDIT REPORT. THE COMPUTER WAS REFL ECTED IN THE AUDITED FINANCIAL STATEMENTS AND THEREFORE CLAIM OF THE AS SESSEE WAS JUSTIFIED. IT IS THUS, THE FACT THAT THE CLAIM OF ASSESSEE IS VERY M UCH BONAFIDE & NO PENALTY CAN BE IMPOSED ON SUCH DISALLOWANCE, AS THERE IS NO CAS E OF ANY CONCEALMENT OF INCOME. THE RELIANCE IS PLACED ON THE DECISION OF H ONOURABLE SUPREME COURT IN CASE OF CIT V/S. RELIANCE PETROPRODUCTS PVT. LTD . - 322 ITR 158 (SC). 5. THE ASSESSEE HAS WRONGLY SOUGHT THE ADJOURNME NT AT THE TIME OF THE HEARING FIXED ON 23.02.2015 & 22.06.2015 ON THE GRO UND THAT THE QUANTUM APPEAL IN ITA NO. 2539/A/2012 IS PENDING. THE QUANT UM APPEAL FILED BY THE DEPARTMENT WAS PENDING IN RESPECT OF ADDITION OF R S. 67,45,000/- U/S. 68 DELETED BY CIT(A) WHICH HAS NO RELEVANCE TO OTHER T WO ADDITIONS CONFIRMED BY THE HONOURABLE TRIBUNAL IN ITA NO. 3208/A/2008 FOR WHICH THE PENALTY WAS SUSTAINED BY CIT(A). 6. IN VIEW OF THE ABOVE, YOUR HONOUR IS REQUES TED TO DELETE THE PENALTY. DATE : 29. 07. 201 5 PLACE: SURAT SIGNED (RASESH SHAH) ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 7 - 5.1. SO FAR AS SUSTENANCE OF PENALTY ON ADDITION ON ACCOUNT OF ESTIMATION OF GP IS CONCERNED, IN QUANTUM, ADDITION HAS BEEN SUSTAINED UPTO THE STAGE OF THIS TRIBUNAL (ITAT A BENCH AH MEDABAD) IN ITA NO.3208/AHD/2008(SUPRA). HOWEVER, THE TRIBUNAL HAS ESTIMATED THE PROFIT @ 9% AS ADOPTED BY THE AO OF 11%. HENCE, THE ENTIRE ADDITION IS PURELY MADE ON THE BASIS OF ESTIMATION. THE CON TENTION IS THAT BOOK OF ACCOUNTS COULD NOT BE PRODUCED BECAUSE OF THE DESTR UCTION IN FLOOD. IT IS SETTLED PRINCIPLE OF LAW THAT THE QUANTUM AND THE P ENALTY PROCEEDINGS ARE TWO DIFFERENT AND DISTINCT PROCEEDINGS. THEREFORE, AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE PRESENT CASE, WE ARE O F THE VIEW THAT LEVY OF PENALTY WOULD NOT BE JUSTIFIED. THEREFORE, WE DIRE CT THE AO TO DELETE THE PENALTY ON ADDITION MADE ON THE BASIS OF ESTIMATION . THUS, THIS ISSUE IS ALLOWED. 5.2. ANOTHER ISSUE IS WITH REGARD TO SUSTENANCE OF PENALTY ON ADDITION OF RS.19,800/-. THE LD.COUNSEL FOR THE ASSESSEE HA S RELIED UPON THE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT.LTD. REPORTED AT (2010) 322 ITR 158(SC). IT IS THE CONTENTION OF ASSESSEE THAT IT HAD PURCHASE D COMPUTER ON WHICH DEPRECIATION WAS CLAIMED. IN VIEW OF THE JUDGEMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETR OPRODUCTS PVT.LTD., WE HEREBY DIRECT THE AO TO DELETE THE PENALTY. THUS, THIS ISSUE IS ALSO ALLOWED AND GROUND NO.1 OF ASSESSEES APPEAL IS ALL OWED. ITA NO.2050/AHD /2011 ILLAKSHI SYNTHETICS P.LTD. VS. DCIT ASST.YEAR 2004-05 - 8 - 6. GROUND NOS.2 & 3 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 14 TH DAY OF AUGUST, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 14/ 08 /2015 6/..-, .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-I, SURAT 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6.8.15(DICTATION-PAD 12 - PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..7.8.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.14.8.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.8.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER