M/s. Karnataka Steels, Hubli V. Income-Tax Officer, Hubli

ITA 2159/BANG/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7894 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1998-1999
• Appeal Filed On: 08-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Agreed addition

Judgement Text

ITA.2159/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NO.2159/BANG/2016) (ASSESSMENT YEAR : 1998-99) M/S. KARNATAKA STEELS, NAGASHETTY KOPPA, HUBLI 580 023 .. APPELLANT PAN : AAEFK7988D V. INCOME-TAX OFFICER, WARD 1(3), HUBLI .. RESPONDENT ASSESSEE BY : SHRI. BALRAM R RAO, ADVOCATE REVENUE BY : SHRI. B. R. RAMESH, JCIT HEARD ON : 01.08.2018 PRONOUNCED ON : 18.09.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE CIT (A), HUBBALLI, DT.25.07.2016, FOR THE ASSESSMEN T YEAR 1998-99, ON THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN UPHOLDING THE LEVY OF PENAL TY AMOUNTING TO RS.1,00,000/- WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA.2159/BANG/2016 PAGE - 2 2. THE LD CIT(A) FAILED TO APPRECIATE THE FACT THAT PE NALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT EXIGIBLE UNDER AGREED ADDITIONS AND FAILED TO CONSIDER THE VARIOUS DECISIONS RELIED UPON BY THE APPELLANT IN THIS REGA RD. 3. THE LD. CIT (A) AND AUTHORITIES BELOW FAILED TO APP RECIATE THE FACT THAT THE APPELLANT OFFERED THE G.P @ 4% ON THE SALES OF EACH MONTH (ESTIMATION) AND THEREFORE THER E WAS NEGATIVE FIGURE IN THE CLOSING STOCK FOR THE MONTHS OF APRIL, JUNE AND JULY '97, BUT THERE WAS NO SHORTAGE WITH R EGARD TO ACTUAL PHYSICAL STOCK AND OUGHT TO HAVE REFRAINED F ROM UPHOLDING THE LEVY OF PENALTY U/S 271(1)(C). 4. THE ASSESSING OFFICER HAVING ISSUED THE NOTICE UNDE R SECTION 274 R.W.S 271(1)(C) OF THE ACT IN A MECHANICAL MANN ER, THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT IS NO T SUSTAINABLE IN THE EYE OF LAW. 5. THE APPELLANT BEGS TO SUBMIT THAT THE DECISION OF T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) IS SQUARELY APPLICABLE AND, THEREFORE TH E IMPUGNED ORDER OF THE AUTHORITIES BELOW IS REQUIRED TO BE SET ASIDE. 02. BRIEF FACTS ARE, THE CASE OF THE ASSESSEE WAS S ELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT ORDER WAS PASSED . FEELING AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESS EE FILED APPEAL BEFORE THE CIT (A). 03. THE CIT (A) IN APPEAL BEFORE HIM, GRANTED RELIE F TO THE ASSESSEE AND THEREAFTER THE REVENUE WAS AGGRIEVED A ND FILED APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DT.23 .02.2006, REMANDED THE ISSUES PERTAINING TO ADDITION OF RS.2, 64,050/- ON ACCOUNT OF UNEXPLAINED INVESTMENT, RS.2,52,043/- ON ACCOUNT OF ITA.2159/BANG/2016 PAGE - 3 EXCESS STOCK AND RS.18,092/- ON ACCOUNT OF EXCESS O F ASSETS OVER LIABILITIES TO THE FILE OF THE AO. 04. IN THE SECOND ROUND BEFORE THE AO, THE ASSESSEE HAD AGREED FOR ADDITION OF RS.2,63,870/- ON ACCOUNT OF UNEXPLA INED INVESTMENT IN STOCK AS ON 31.07.2007. IN THE ASSESSMENT ORDER THE AO HAD ALSO PROPOSED INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT. PURSUANT THERETO, NOTICE WAS ISSUED TO THE ASSESSEE BY THE A O FOR IMPOSITION OF PENALTY. ACCORDINGLY THE AO HAD IMPOSED A PENAL TY OF RS.1 LAKH FOR CONCEALMENT OF PARTICULARS OF INCOME. FEELING A GGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESSEE PREFERRED APPE AL BEFORE THE CIT (A). 05. THE CIT (A) HAS NOT INTERFERED WITH THE FINDING RECORDED BY THE AO AND CONFIRMED THE PENALTY ORDER. IN PARA 13 , THE CIT (A) RECORDED AS UNDER : 13. IN THE INSTANT CASE, THE ASSESSEE HAS CONSCIOUS LY FURNISHED INACCURATE PARTICULARS OF INCOME IN SO FA R AS THE SALE OF GOODS WITHOUT HAVING STOCK IN BOOKS IS CONCERNED . MOREOVER, THE ASSESSEE HAS NOT CONTROVERTED THE FINDING OF TH E AO THAT, THE ASSESSEE SOLD GOODS WITHOUT HAVING STOCK IN BOOKS. IN FACT THE AO HAS WORKED OUT THE NEGATIVE STOCK ONLY ON THE BA SIS OF DETAILS FURNISHED. ACCORDINGLY, I HOLD THAT THERE IS NO CA SE FOR ME TO INTERFERE IN THE ORDER OF THE AO. FEELING AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 06. IT WAS THE CASE OF THE ASSESSEE BEFORE US THAT : A) THE PENALTY OF RS.1 LAKH CANNOT BE IMPOSED AS TH E ASSESSEE HAS OFFERED GP AT THE RATE OF 4% ON SALES, ON ESTIMATIO N BASIS AND THERE ITA.2159/BANG/2016 PAGE - 4 CANNOT BE ANY LEVY OF PENALTY ON THE ESTIMATION OF GP AND AGREED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS; B) SECONDLY, THE AO HAS IMPOSED THE PENALTY ON THE PREMISE OF CONCEALMENT OF PARTICULARS OF INCOME AS MENTIONED I N PARA 5 OF THE ORDER, WHEREAS THE CIT (A) IN PARA 13 HAS MENTIONED ABOUT THE INACCURATE PARTICULARS OF INCOME. IT WAS THE CONTE NTION OF THE ASSESSEE BEFORE US THAT THERE IS CONTRADICTION IN T HE ORDER PASSED BY THE AO AS WELL AS THE CIT (A) AS THE LAW HAS PROVID ED SEPARATE TREATMENT FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND FOR CONCEALMENT OF PARTICULARS OF INCOME ; AND C) LASTLY, IT WAS CONTENDED BY THE LD. AR THAT THE ASSESSEES CASE IS COVERED BY THE JUDGMENT OF THE HONBLE JURISDICT IONAL HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY [(201 3) 359 ITR565]. 07. ON THE OTHER HAND THE LD. DR RELIES UPON THE OR DERS OF THE LOWER AUTHORITIES AND MORE PARTICULARS PARA 3 AND 1 1 OF THE ORDER OF THE CIT (A), WHERE THE CIT (A) HAS DEALT THE ARGUME NT OF THE ASSESSEE ON MERIT. 08. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. SECTION 271(1)(C) POSTULATE TO SCENARIO : I) CONCEALMENT OF PARTICULARS OF HIS INCOME ; II) FURNISHING INACCURATE PARTICULARS OF SUCH INCOM E IN THE PRESENT CASE, THE ASSESSEE HAS DERIVED THE CLOSING STOCK, MONTHWISE, ON THE BASIS OF THE GP RATE ADOPTED AT 4 %. THUS THE ITA.2159/BANG/2016 PAGE - 5 FIGURE OF CLOSING STOCK AND DIFFERENCE IN CLOSING S TOCK WAS DERIVED BASED ON THE ESTIMATION BASIS. THEREFORE IT IS IMP ORTANT FOR THE AO TO CONCLUDE WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE ASSESSEE HAS DERIVED THE GP RATE AT 4%. BASED ON THAT THE R EVERSE CALCULATION ARRIVED AT THE CLOSING STOCK WAS MADE. ON ACCOUNT OF THAT, THERE WAS AN ERROR IN VALUATION OF THE CLOSING STOCK. 08. IN OUR CONSIDERED VIEW, THE EXPLANATION GIVEN B Y THE ASSESSEE TO ARRIVE AT THE FIGURE OF CLOSING STOCK IS A PLAUS IBLE EXPLANATION AND THEREFORE THE ASSESSEE IS ENTITLED TO THE BENEFIT O F LAW AS IT IS ABLE TO EXPLAIN ITS POSITION. NONETHELESS, MERE ADMISSION OF THE ADDITION BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS WILL NOT DEBAR IT FROM RAISE THIS ISSUE AT THE TIME OF PENALTY PROCEE DINGS AND THEREFORE THE ACTION OF THE AO TO LEVY THE PENALTY ON THE BASIS OF ESTIMATION IS NOT CORRECT. 09. WE HAVE ONE MORE REASON TO DECIDE THE APPEAL IN FAVOUR OF THE ASSESSEE AS BOTH THE LOWER AUTHORITIES HAVE GIV EN THEIR REASONING BASED ON TWO DIFFERENT ASPECTS I.E., THE AO HAS REC ORDED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME, W HEREAS THE CIT (A) HAS COME TO THE CONCLUSION THAT THE ASSESSEE HA S FURNISHED INACCURATE PARTICULARS OF INCOME. IN OUR VIEW, ONC E THE CLOSING STOCK FIGURE WAS DERIVED BASED ON THE GROSS PROFIT DECLARED BY THE ASSESSEE, IT CANNOT BE SAID TO BE INACCURATE PARTIC ULARS OF INCOME AS IT IS BASED ON THE WORK SHEET GIVEN BY THE ASSESSEE FOR WORKING OUT THE GP BY THE AO. HENCE, THE ORDER PASSED BY THE C IT (A) TREATING THE CLOSING STOCK DERIVED ON THE BASIS OF GP, CANNO T SUSTAIN AND IS ITA.2159/BANG/2016 PAGE - 6 THEREFORE LIABLE TO BE REVERSED. ACCORDINGLY THE P ENALTY IMPOSED BY THE AO AND CONFIRMED BY THE CIT (A) IS DELETED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF SEPTEMBER, 2018. SD/- SD/- (INTURI RAMA RAO) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 18.09.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.