Speciality Agrochem Ltd., Kheda V. The ACIT.,Kheda Circle, Nadiad

ITA 21/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9093 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-02-2010
• Assessment Year: 1994-1995
• Appeal Filed On: 01-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETU SHAH
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Depreciation; Opportunity of being heard; Valuation report; Revenue expenditure
• Section: 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC, AHMEDABAD BEFORE SHRI I.S. VERMA, JUDICIAL MEMBER I.T.A. NO.20/AHD/2010 (ASSESSMENT YEAR 1994-95) SPECIALITY AGROCHEM LTD VS ACIT, KHEDA CIRCLE KAPADWANJ ROAD NADIAD DAKOR PAN : AAGCS9964B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL H TALATI RESPONDENT BY: SMT. NEETU SHAH O R D E R IN THIS APPEAL ASSESSEE HAS OBJECTED TO THE ORDER OF CIT(A)-IV, BARODA DATED 28-10-2010 FOR THE ASSESSMENT YEAR 1994-95 BY WAY OF FOLLOWING GROUNDS: YOUR APPELLANT BEING AGGRIEVED BY THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, BARODA, PR ESENTS THIS APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OT HER GROUNDS. 1. THE LEARNED C.I.T. (APPEALS) ERRED BOTH IN LAW A ND ON FACTS IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER LE VYING PENALTY U/S 2711)(C) WITH REGARD TO THE DISALLOWANC E OF DEPRECIATION OF RS.4,97,980/- AND REGARDING THE CRE DIT (LIABILITY) IN THE BOOKS AMOUNTING TO RS.1,18,730/- . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DETAILED REPLY FURNISHED BEFORE THE ASSESSING OFFIC ER AND SUBMISSIONS MADE BEFORE THE LEARNED C.I.T. (APPEALS ), THE ENTIRE PENALTY U/S 271(1)(C) OUGHT TO HAVE BEEN CAN CELLED. IT BE SO HELD NOW AND THE PENALTY TO THE EXTENT RETAIN ED BY THE LEARNED C.I.T. (APPEALS) BE CANCELLED IN TOTO. 2. THE LEARNED C.I.T. (APPEALS) FAILED TO APPRECIAT E THAT THE APPELLANT HAD FURNISHED FULL DETAILS AND PARTICULAR S, WHICH WERE AVAILABLE DURING THE COURSE OF THE QUANTUM PROCEEDI NGS AND IN THE APPELLATE PROCEEDINGS AND THAT THERE WAS NO FALSE C LAIM OF ANY DEPRECIATION BY WITHHOLDING ANY PARTICULARS FURNISH ING INACCURATE PARTICULARS. ALSO THE UNPAID LIABILITIES AS PER BO OKS WAS SHOWN IN THE REGULAR BOOKS OF ACCOUNTS AND CONSIDERING THE L ENGTH OF THE ITA NO.20/AHD/2010 2 PERIOD THAT HAD ELAPSED, IT WAS PRACTICALLY DIFFICU LT TO GIVE THE DETAILED PARTICULARS THEREOF. CONSIDERING THESE FA CTS AND THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, THE LEARNED C.I.T. (APPEALS) OUGHT TO HAVE HELD THAT PROVISIONS OF SEC . 271(1)(C) ARE NOT ATTRACTED IN THE CASE OF THE APPELLANT. IT BE SO HELD NOW AND THE PENALTY BE CANCELLED IN TOTO. 3. THE LEARNED C.I.T. (APPEALS) FAILED TO APPRECIAT E THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER U/S 2 71(1)(C) WAS BAD IN LAW AND SUFFERED FROM VICE OF APPLICATION OF MIND. IT BE SO HELD NOW. 4. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER AND / OR TO AMEND ALL OR ANY OF THE GROUNDS BEFORE THE FINAL HEARING. 2. PARTIES HAVE BEEN HEARD. THE BRIEF FACTS RELATI NG TO THE ISSUE AND AS HAS BEEN REVEALED FROM THE RECORDS ARE THAT THE ASSESSE E HAD FURNISHED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 1994-95 ON 30-11-1994 DE CLARING A LOSS OF RS.6,94,360. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED DEPRECIAT ION ON PLANT AND MACHINERY TAKING TOTAL COST AT RS.23.56 LAKHS. THE DEPRECIAT ION CLAIMED AMOUNTED TO RS.6.56 LAKHS (@25%). THE ASSESSING OFFICER CALLED THE DETAILS OF ASSETS SOLD TO THE ASSESSEE BY CONCERN, M/S JABUKA LABORATORY (JL) AND AS PER INFORMATION, THE DETAILS OF ASSETS SOLD TO THE ASSESSEE AND PARTICUL ARS THEREOF WAS AS UNDER: 1. LAND DULY FENCED RS. 5.40 LACS (ALL COST OF DEVELOPMENT INCLUDED) 2. BUILDING & ELECTRICAL FITTINGS RS. 7.36 LA CS M/S JABUCA RSEARCH AND MANUFACTURERS (JRMF) SOLD O FF FOLLOWING ASSETS AVAILABLE. 1. LAND DULY FENCED RS. 5.60 LACS (COST OF DEVELOPMENT INCLUDED) 2. BUILDING & ELECTRICAL FITTINGS RS. 4.70 LA CS 3. PLANT & MACHINERY, SPARES PARTS RS. 8.50 LA CS STOCK OF RAW MATERIALS, GOODS ETC. ITA NO.20/AHD/2010 3 THE ASSESSING OFFICER, THEREFORE, CONSIDERED THE PR ICE OF PLANT & MACHINERY AT RS.6.56 LAKHS AND ALLOWED DEPRECIATION @25% TOTALIN G TO RS.1.71 LAKHS WHICH RESULTED IN A DISALLOWANCE OF CLAIM OF DEPRECIATION TO THE EXTENT OF RS.5.8 LAKHS. 3. THE ASSESSING OFFICER FURTHER MADE AN ADDITION O F RS.1,18,730 BY CONSIDERING THE LIABILITY AMOUNTING TO THIS AMOUNT AS UNEXPLAINED, AS PER FINDINGS GIVEN AT PARAGRAPH 9 OF THE ASSESSMENT ORDER, WHICH READS AS UNDER: 9. IN ADDITION THE BALANCE SHEET OF ASSESSEE SHOWS A LIABILITY OF RS.1,18,730/- IN THE NAME OF JRMF UNDER THE HEAD S UNDRY CREDITOR. HOWEVER, AS PER THE OFFICE FINDINGS AS DISCUSSED IN AFORESAID PARA AND THE INFORMATION SUPPLIED BY THE FIRM, NO SUCH AMOUNT IS OUTSTANDING IN THE NAME OF FIRM. FURTHER , SINCE THE FIRM DISSOLVED, THERE WAS NO OTHER TRANSACTIONS WITH THE ASSESSEE WHICH COULD HAVE CREATED SUCH A LIABILITY. THIS IS FURTH ER SUBSTANTIATED AND CONFIRMED BY THE ACCOUNTANT OF THE FIRM IN ASSE SSEES BOOKS OF ACCOUNTS FURNISHED BY THE ASSESSEE TOWARDS THE END OF ASSESSMENT PROCEEDING. AS SUCH THE SUM OF RS.1,18, 730/- IS CONSIDERED AS UNEXPLAINED AND IS THEREFORE ADDED TO THE INCOME OF ASSESSEE INITIATING PENALTY U/S 271(1)(C) OF THE AC T. 4. THE MATTER WAS TAKEN BY THE ASSESSEE TO THE LEVE L OF TRIBUNAL, WHO SET ASIDE ISSUES BACK TO THE CIT(A) AND, THEREFORE, CIT (APPEALS) DISPOSED OF ISSUES RELATING TO DISALLOWANCE OF DEPRECIATION AND ADDITI ON U/S 68 AMOUNTING TO RS. 1,18,730 AS PER FINDINGS CONTAINED AT PARAGRAPHS 2. 2 AND 4.2 RESPECTIVELY OF HIS ORDER DATED 28-10-2009 WHICH READ AS UNDER: 2.2 I HAVE CONSIDERED THE MATTER. THE PURCHASE OF BUILDING AS WELL AS PLANT AND MACHINERY, IN RESPECT OF WHICH DE PRECIATION OF RS.4.9 LAKH WAS DISALLOWED, WAS MADE BY THE APPELLA NT FROM M/S JABUKA LABORATORIES & M/S JABUKA RESEARCH AND MANUF ACTURING LABORATORIES. THE ASSESSING OFFICER RELIED UPON CO ST OF THESE ASSETS AS PER MOUS ON STAMP PAPER BETWEEN APPELLANT AND THESE TWO PARTIES, WHICH WERE SUBMITTED TO THE ASSESSING OFFICER BY THESE TWO PARTIES. THE COST AS PER THESE MOUS DIFFERED F ROM THAT AS PER MOUS FILED BY THE APPELLANT BEFORE ASSESSING OFFICE R AND THE PAYMENT AGREEMENTS. THE ASSESSING OFFICER OBSERVED THAT THE MOUS FURNISHED BY THE APPELLANT WERE ON PLAIN PAPER AND NOT ON STAMP PAPER AND THUS, THE MOUS FURNISHED BY THE TWO FIRMS WHICH ITA NO.20/AHD/2010 4 WERE ON STAMP PAPER WERE RELIABLE DOCUMENTS. IT WA S ALSO OBSERVED BY THE ASSESSING OFFICER THAT THE AGREEMEN T FOR FULL AND FINAL PAYMENTS DID NOT CONTAIN ANYU BIFURCATION OF THE ASSETS AND THEIR VALUE SEPARATELY, WHICH WAS AN IMPORTANT INFO RMATION REQUIRED FOR JUSTIFYING THE ACTUAL COST OF ASSETS TRANSFERRE D. AS AGAINST THIS, THE MOUS ON STAMP PAPER FILED BY THE TWO PARTIES PR OVIDERD NEAT BIFURCATION AND SPECIFICATION OF ASSETS TRANSFERRED . I AM IN AGREEMENT WITH THE ASSESSING OFFICER THAT MERELY BE CAUSE PAYMENT AGREEMENTS SHOWED A PARTICULAR VALUE, THE SAME CANN OT BE ACCEPTED TO BE COST OF ASSETS, IN THE ABSENCE OF DE TAILED BIFURCATION OF ASSETS IN THE PAYMENT AGREEMENTS. APPELLANTS C ONTENTION IS THAT NO PERSON WOULD MAKE PAYMENTS MORE THAN THE COST OF ASSETS. IN THE ABSENCE OF DETAILED BIFURCATION OF ASSETS IN TH E PAYMENT AGREEMENT AND ONE TO ONE CO-RELATION BETWEEN COST O F SUCH ASSETS AND THE TOTAL PAYMENTS, IT CANNOT BE SAID THAT THE PAYMENTS AS PER THE PAYMENT AGREEMENT WERE SOLELY FOR BUILDING & PL ANT AND MACHINERY. AS NOTED BY THE ASSESSING OFFICER, M/S JABUKA LABORATORIES / JABUKA RESEARCH & MANUFACTURING LABO RATORIES CLAIMED TO HAVE SOLD OFF STOCK, KNOW-HOW ETC. ALSO TO THE APPELLANT. THUS, THE TOTAL PAYMENT COULD BE COVERING STOCK, KN OW-HOW ETC. AS WELL. THE REPORT OF THE VALUE, R.D. ENGINEERS AND ASSOCIATES CANNOT BE TAKEN AS AUTHENTIC PROOF OF THE COST OF A SSETS, WHEN THE PARTIES SELLING THE ASSETS HAVE FILED MOUS ON STAMP PAPER SHOWING DIFFERENT COST. MOST IMPORTANTLY, APPELLANT HAS NO T BEEN ABLE TO SATISFACTORILY EXPLAIN REASON FOR DIFFERENT VALUES IN MOUS DULY EXECUTED ON STAMP PAPER. APPELLANTS CONTENTION TH AT THESE MOUS WERE PROVISIONAL, CANNOT BE BELIEVED IN THE ABSENCE OF CORROBORATION BY THE SELLERS. THE ACTION OF THE AS SESSING OFFICER IN ADDING BACK DEPRECIATION TO THE EXTENT OF RS.4,97,9 80/- IS UPHELD. 4.2 I HAVE CONSIDERED THE MATTER. APPELLANT HAS N OT BEEN ABLE TO OFFER ANY WORTHWHILE EXPLANATION IN THE MATTER. MERELY BECAUSE BOOKS OF ACCOUNTS WERE AUDITED, DOES NOT EXPLAIN TH E NATURE OF LIABILITY. ADDITION OF RS.1,18,730/- U/S 68 IS CON FIRMED. 5. THE ASSESSEES CASE BEFORE THE CIT(A) WITH RESPE CT OF COST OF PLANT AND MACHINERY AS REPRODUCED BY THE CIT(A) AT PARAGRAPH 2.1 WAS AS UNDER: 2.1 . THAT THE LEARNED ASSESSING OFFICER FAILED TO CONSIDER DETAILED SUBMISSIONS MADE BY THE APPELLANT AT THE T IME OF ASSESSMENT BY ITS LETTER DATED 26.3.1997, COPY OF W HICH WAS FILED. IT WAS SUBMITTED THAT AS ALREADY EXPLAINED, APPELLA NT HAD MADE FULL AND FINAL PAYMENTS AS PER AGREEMENT, TOWARDS THE AS SETS ACQUIRED FROM M/S JABUKA LABORATORIES AND M/S JABUKA RESEARC H & MANUFACTURING LABORATORIES. COPIES OF THE SAID FUL L AND FINAL ITA NO.20/AHD/2010 5 PAYMENT CONTRACTS EXECUTED ON STAMP PAPER WERE FILE D AND IT WAS CLAIMED THAT COMPLETE DETAILS OF LAND AND BUILDING AND PLANT AND MACHINERY WERE ENCLOSED. APPELLANT FURTHER SUBMITT ED THAT THE ACTUAL COST OF AFORESAID ASSETS WAS QUITE IN CONSON ANCE WITH THE VALUATION REPORT OBTAINED FROM COMPETENT VALUERS, N AMELY R.D. ENGINEERS & ASSOCIATES DATED 128.1.1993, COPY OF WH ICH WAS FILED AT THE TIME OF ASSESSMENT. IT WAS CLAIMED THAT ALL THESE DOCUMENTS WERE FURNISHED TO THE ASSESSING OFFICER AND DETAILE D EXPLANATIONS WERE GIVEN DURING THE COURSE OF HEARING BY LETTER D ATED 20.9.1996, A COPY OF WHICH WAS FILED. APPELLANT CONTENDED THA T THE LEARNED ASSESSING OFFICER HAD BLINDLY, BEHIND THE BACK OF A PPELLANT, GIVEN UNDUE WEIGHTAGE TO THE SO CALLED PROVISIONAL MOUS O BTAINED FROM PARTNERS OF M/S JABUKA LABORATORIES AND M/S JABUKA RESEARCH & MANUFACTURING LABORATORIES. IT WAS CONTENDED THAT THE LEARNED ASSESSING OFFICER DID NOT GRANT OPPORTUNITY TO CROS S EXAMINE THE TWO FIRMS. MOREOVER, NO PERSON WOULD MAKE FULL AND FINAL PAYMENTS TOWARDS THE ACQUISITION OF ASSETS, IF THE COST WAS LESS THAN THE AMOUNT PAID. 6. THE ASSESSING OFFICER THEREAFTER IMPOSED PENALTY U/S 271(1)(C) OF THE ACT AS PER ORDER DATED 30 TH MARCH, 2005 CONSIDERING THE QUANTUM OF DEPRECIATIO N DISALLOWED AND ADDITION MADE BY CONSIDERING LIABILI TY AS UNEXPLAINED AMOUNTING TO RS.1,80,730 AS CONCEALED INCOME RESULTING TO FURNIS HING OF INACCURATE PARTICULARS. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A AND PL EADED AS UNDER:- 2.1 APPELLANT SUBMITTED THAT THE ASSESSING OFF ICER FAILED TO APPRECIATE APPELLANTS REPLY DATED 21.3.2005, AS THERE WAS NEITHER ANY CONCEALMENT NOR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. IT WAS SUBMITTED THAT ALL THE MATERIAL PAR TICULARS WERE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS AND THE LEARNED ASSESSING OFFICER ERRONEOUSLY REJECTED BONA FIDE CLAIM OF DEPRECIATION ON ACTUAL COST INCURRED BY THE APPELLA NT. IN RESPECT OF ADDITION OF RS.1,88,000/-, RELIANCE WAS PLACED ON D ECISION IN CASE OF CIT VS LOVELY EXPORTS PVT LTD. (2008) 216 CTR (S C) 195. IT WAS FURTHER SUBMITTED THAT THE ORDER WAS BAD-IN-LAW AS THERE WAS NO FIRM CONCLUSION ABOUT CONCEALMENT OF INCOME OR FURN ISHING OF INACCURATE PARTICULARS OF INCOME. APPELLANT RELIED ON DECISION IN THE CASE OF NEW SORATHIA ENGG. WORKS 282 ITR 642 (GUJ) FOLLOWED BY ITAT, AHMEDABAD IN THE CASE OF NARANLAL PVT LTD IN ITA NO.2667/AHD/2008. 7. THE LEARNED CIT(A) CONFIRMED THE PENALTY AFTER O BSERVING AS UNDER: ITA NO.20/AHD/2010 6 2.2 I HAVE CONSIDERED THE MATTER. IN CAB/IV-N-101/ 09-10 DATED 28.10.2009, ADDITION OF RS.1,88,000/-, BEING SHARE APPLICATION MONEY U/S 68 HAS BEEN DELETED BY ME, WHILE OTHER TW O ADDITIONS HAVE BEEN CONFIRMED. IN VIEW OF THIS, THERE IS NO CASE FOR LEVY OF PENALTY IN RESPECT OF ADDITION OF RS.1,88,000/- U/S 68. REGARDING OTHER ADDITIONS, APPELLANTS CONTENTION IS THAT IT HAD FURNISHED ALL THE MATERIAL PARTICULARS IN RESPECT OF CLAIM OF DEPRECI ATION. AS DISCUSSED IN THE AFORESAID APPEAL ORDER IN RESPECT OF QUANTUM ADDITION PROCEEDINGS, APPELLANT HAS NOT BEEN ABLE T O SUBSTANTIATE ITS CLAIM THAT DEPRECIATION WAS CLAIMED CORRECTLY O N THE COST OF ASSETS. APPELLANT HAS NOT BEEN ABLE TO REBUT AOS CONTENTION THAT THE COST OF ASSETS WAS AS PER MOUS EXECUTED ON STAM P PAPER AND THE COST SHOWN BY THE APPELLANT WAS INFLATED WITH A VIEW TO REDUCE TAX LIABILITY. AOS FINDING WAS BASED ON INDEPENDE NT ENQUIRIES FROM PARTIES, WHO SOLD THE ASSETS TO THE APPELLANT. IN THIS SITUATION, AS PER EXPLANATION.1 BELOW SECTION 271(1)(C), THE DISA LLOWANCE OF DEPRECIATION OF RS.4,97,980/- IS TO BE DEEME3D TO R EPRESENT INCOME IN RESPECT OF WHICH PARTICULARS WERE CONCEALED. IN RESPECT OF ADDITION OF RS.1,18,730/-, AS DISCUSSED IN THE APPE AL ORDER IN RESPECT OF QUANTUM ADDITION PROCEEDINGS, APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE ITS EXPLANATION AND THE SAME W OULD ALSO BE DEEMED TO REPRESENT INCOME, IN RESPECT OF WHICH PAR TICULARS WERE CONCEALED. IT IS HELD IN THIS ORDER THAT THE APPEL LANT HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGG. WORKS (2006 ) 282 ITR 642 (GUJ) WOULD THEREFORE, NOT BE APPLICABLE. THE ASSE SSING OFFICER IS DIRECTED TO RECOMPUTED PENALTY U/S 271(1)(C) TO BE 100% OF TAX SOUGHT TO BE EVADED BY TAKING THE CONCEALED INCOME TO BE RS.6,16,710/-. 8. IT WAS IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE LEARNED AR APPEARING FOR AND ON BEHALF OF THE ASSES SEE PLEADED BY REFERRING TO FINDINGS OF THE CIT(A) IN QUANTUM APPEAL (PARAGRAPH 2.2) AND SUBMITTED THAT SO FAR AS TOTAL PAYMENT OF RS.23.56 LAKHS WAS MADE BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE CIT(A). ACCORDING TO HIM, THE ONLY EVIDENCE RELIED UPON BY THE REVENUE FOR DISALLOWING DEPRECIATION WAS THE MEMORA NDUM OF UNDERSTANDING WHICH WAS FOR AN AMOUNT LESSER THAN THE AMOUNT PAID BY THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE HAVING PAID THE AMOU NT TOWARDS COST OF PLANT AND MACHINERY AS CONSIDERED FOR COMPUTING DEPRECIATION AND THE PAYMENTS HAVING BEEN MADE THROUGH CHEQUES THE DENIAL OF SELLER THAT PLANT AND MACHINERY WAS NOT SOLD TO THE ASSESSEE FOR A PRICE CLAIMED BY THE ASSESSEE WAS NOT JUSTIFIED. ITA NO.20/AHD/2010 7 ACCORDING TO HIM, WHEN THE ASSESSEE HAD PAID THE PU RCHASE PRICE AMOUNTING TO RS.23.56 LAKHS, THE REVENUE SHOULD HAVE MADE PROPER ENQUIRIES WITH THE SELLER. HE FURTHER SUBMITTED THAT EVEN OTHERWISE, THE ASSES SEE HAVE NOT BEEN ALLOWED CROSS EXAMINATION OF THE SELLER, RELIANCE OF THE RE VENUE ON THE SELLERS VERSION WAS NOT JUSTIFIED AND ATLEAST FOR LEVY OF PENALTY. THE LD AR FURTHER SUBMITTED THAT IF THE BALANCE PAYMENT WAS CONSIDERED TOWARDS STOCK OF RAW MATERIAL, ETC. THEN THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF THE WHOL E AS REVENUE EXPENDITURE AND THEREFORE CLAIM OF DEPRECIATION WAS NOT TO EVADE AN Y TAXABLE INCOME. WITH RESPECT TO LIABILITY, THE LD. AR SUBMITTED THAT THE ASSESSEE HAVING BEEN NOT ALLOWED TO CROSS EXAMINE THE CREDITOR, THE ASSESSIN G OFFICERS CONCLUSION AND SINCE CONFIRMED BY THE CIT(A) THAT LIABILITY WAS UN EXPLAINED WAS NOT JUSTIFIED AND ATLEAST WAS NOT RELEVANT FOR LEVY OF PENALTY U/S 27 1(1)(C) OF THE ACT. RELIANCE WAS PLACED ON THE FOLLOWING THREE DECISIONS: NATIONAL TEXTILES VS CIT 249 ITR 125 (GUJ) NAVJIVAN OIL MILLS VS CIT 252 ITR 417 (GUJ) CIT VS AJAIB SINGH & CO 253 ITR 630 (P&H) 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF PENALTY AS WELL AS ORDER OF CIT(A) BY SUBMITTING THAT ASSESSEE HAVING NOT APPEALED AGAINST THE ORDER OF T HE CIT(A CONFIRMING THE ADDITION (IN SECOND ROUND), THE FACTUM OF FURNISHIN G OF WRONG PARTICULARS AND CONCEALMENT OF INCOME SHOULD BE ACCEPTED BY THE ASS ESSEE HIMSELF AND THEREFORE PENALTY WAS JUSTIFIED. REFERRING TO THE DECISIONS RELIED UPON BY THE ASSESSEE, THE LEARNED DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT THE SAME BEING DISTINGUISHABLE ON FACTS WERE NOT OF ANY HELP TO THE ASSESSEE. 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS, GONE T HROUGH THE FACTS OF THE CASE AND PERUSED THE DECISIONS RELIED UPON BY THE A SSESSEE. ITA NO.20/AHD/2010 8 10.1 AFTER GIVING THOUGHTFUL CONSIDERATION TO THE T OTAL FACTS OF THE CASE, I AM OF THE OPINION THAT IF THE ASSESSEE, IN FACT HAD PAID AN AMOUNT OF RS.23.56 LAKHS TOWARDS THE COST OF PLANT AND MACHINERY THROUGH CRO SSED CHEQUES AND BANKING CHANNEL THEN THE STATEMENT OF SELLER THAT PLANT AND MACHINERY WAS SOLD TO THE ASSESSEE ONLY FOR A SUM OF RS.8.5 LAKHS AND CONSEQU ENTLY CONSIDERING THE SAME BY THE ASSESSING OFFICER ONLY AT RS.6.56 LAKHS WAS OF NO RELEVANCE OR JUSTIFIED. IN MY OPINION, THE REVENUE AUTHORITIES SHOULD HAVE INV ESTIGATED AS TO ON WHAT ACCOUNT THE PAYMENT OF RS.23.6 LAKHS WAS MADE BY TH E ASSESSEE BY GIVING THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD AND CR OSS EXAMINATION OF THE SELLER. BY NOT ALLOWING AN OPPORTUNITY TO THE ASSE SSEE FOR CROSS EXAMINATION AND ALSO BY NOT INVESTIGATING THE ASSESSEES CLAIM THAT IT HAD PAID PRICE OF RS.23.6 LAKHS FOR PURCHASE OF PLANT AND MACHINERY, THE REVE NUE AUTHORITIES HAD ACTED IN AN ARBITRARY AND UNJUSTIFIED MANNER BUT SINCE ADDIT ION ON MERITS HAS BEEN ACCEPTED BY THE ASSESSEE, THESE OBSERVATIONS ARE ME ANT FOR JUSTIFICATION FOR LEVY OF PENALTY AND THEREFORE, I AM OF THE OPINION THAT THIS ACTION OF THE ASSESSING OFFICER COULD NOT BE RELEVANT FOR LEVY OF PENALTY. CONSEQUENTLY, I AM OF THE OPINION THAT THIS ISSUE RELATING TO COST OF PLANT A ND MACHINERY AND QUANTUM OF DEPRECIATION REQUIRES RE-CONSIDERATION BY THE ASSES SING OFFICER AND THEREFORE THE ISSUE RELATING TO LEVY OF PENALTY ON THE QUANTUM OF DEPRECIATION DISALLOWED IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS THAT ASSESSEES CLAIM OF HAVING PURCHASED PLANT AND MACH INERY FOR RS.23.6 LAKHS MAY BE INVESTIGATED IN THE LIGHT OF ASSESSEES CLAI M. ISSUE RELATING TO PENALTY U/S 271(1)(C) SHOULD ALSO BE RE-CONSIDERED AS PER LAW A FTER ALLOWING THE ASSESSEE A PROPER OPPORTUNITY OF BEING HEARD. 10.2 SO FAR AS LEVY OF PENALTY ON DISALLOWANCE OF L IABILITY IS CONCERNED, I AM OF THE OPINION THAT THOUGH THE ADDITION HAS BEEN CONFI RMED, THE FACT REMAINS THAT THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE THE THIRD PARTY. EVEN OTHERWISE THE ADDITION, IF ANY, COULD BE MADE IN THE YEAR IN WHIC H THE LIABILITY WAS HELD TO HAVE BEEN PAID BY THE ASSESSEE OR HAD BEEN REMITTED BUT THE REVENUE HAS NOT BROUGHT ANY EVIDENCE IN THIS REGARD ON RECORD. SIMPLY TO T AX THE LIABILITY IN A YEAR WHEN ITA NO.20/AHD/2010 9 THE ASSESSING OFFICER PREFERRED TO MAKE ENQUIRY FRO M THE CREDITOR, IN MY OPINION, WAS NOT A RIGHT APPROACH MEANING THEREBY THAT THE T AXING OF LIABILITY ON THE GROUND THAT IT WAS UNEXPLAINED IN THE YEAR IN WHICH ASSESSING OFFICER PREFERRED TO MAKE ENQUIRIES, THOUGH HAS BEEN TAXED, WAS NOT RELE VANT SO FAR AS LEVY OF PENALTY U/S 271(1)(C) WAS CONCERNED; MEANING THEREB Y THAT PENALTY U/S 271(1)(C) COULD NOT BE IMPOSED ON SUCH ADDITION. PENALTY ON THE ADDITION ON ACCOUNT OF UNEXPLAINED LIABILITY IS THEREFORE, DIRECTED TO BE DELETED. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. 12. ORDER PRONOUNCED ON THIS 09 TH DAY OF FEBRUARY, 2010. SD/- (I.S. VERMA) JUDICIAL MEMBER AHMEDABAD, DT : 09 TH FEBRUARY, 2010 PK/- COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A)-IV, AHMEDABAD 4. THE CIT-II, AHMEDABAD BY ORDER 5. THE DR, SMC BENCH (TRUE COPY) DEPUTY REGISTRAR, ITAT, AHMEDABAD