M/s. Jindal Creation, Surat V. The ACIT.,Circle-5, Surat

ITA 216/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67941 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-10-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 23-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: MEHUL R SHAH
• Keywords: Unexplained investment; Income from undisclosed sources; Retraction
• Section: 133A

Judgement Text

ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS. 215,216 & 217/AHD/2013 (ASSESSMENT YEAR: 2003-04) M/S. JINDAL FASHION 581, ADARSH MARKET-1, RING ROAD, SURAT PAN NO. AACFJ8318A (APPELLANT) VS. THE A.C.I.T CIRCLE (5) SURAT (RESPONDENT) M/S. JINDAL CREATION 581, ADARSH MARKET-1, RING ROAD, SURAT PAN NO. AACF J 0379F (APPELLANT) VS. THE A.C.I.T CIRCLE (5) SURAT (RESPONDENT) MANGATRAI G. GOYAL HUF 576, ADARSH MARKET-1, RING ROAD, SURAT PAN NO. AAFHM2350A (APPELLANT) VS. THE A.C.I.T CIRCLE (5) SURAT (RESPONDENT) APPELLANT BY : SHRI MEHUL R. SHAH RESPONDENT BY : SHRI P.L. KUREEL, SR. D.R. ( )/ ORDER DATE OF HEARING : 10-10-201 3 DATE OF PRONOUNCEMENT : 22 -11- 2013 PER SHRI ANIL CHATURVEDI, A.M. ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 2 1. THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGAIN ST THE ORDER OF CIT(A)-I, SURAT DATED 19.11.2012 & 09.11.2012 FOR A .Y. 2003-04. 2. AT THE OUTSET BEFORE US, THE LD. A.R. SUBMITTED THA T THOUGH THE THREE APPEALS ARE OF DIFFERENT ASSESSEE BUT THE FACTS ARE IDENTICAL AND RELATES TO THE SAME ISSUE EXCEPT FOR THE AMOUNTS AND THEREFORE ALL THE THREE APPEALS CAN BE CONSIDERED TOGETHER. WE THEREFORE DISPOSE OF F ALL THE THREE APPEALS OF THE ASSESSEE BY A CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. WE THEREFORE PROCEED WITH THE FACTS OF CASE IN THE CAS E OF JINDAL FASHION ITA NO. 215/AHD/2013. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF TRADI NG IN SYNTHETIC CLOTH. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OU T AT THE BUSINESS PREMISES OF THE ASSESSEE ON 03.10.2002. DURING THE COURSE OF SURVEY, STATEMENT OF SHRI ASHOK KUMAR JINDAL WAS RECORDED W HEREIN HE ADMITTED UNACCOUNTED INCOME OF RS. 1,41,85,715/- AND THE BRE AK UP OF THE SAME AMONG THE GROUP CONCERNS WAS STATED AS UNDER:- NAME OF THE ASSESSEE CASH STOCK TOTAL M/S JINDAL CREATION 4,00,000/- 30,00,000/- 34,00,0 00/- MS. JINDAL FASHION 4,00,000/- 30,00,000/- 34,00,00 0/- SMT. ANITA ASHOKKUMAR JINDAL PROP. M/S SONIA INTERNATIONAL 3,00,000/- 30,00,000/- 33,00,000/- SHRI MANGATRAI GOYAL HUF PROP. OF SUNITA FASHION 3,05,958/- 37,81,757/- 40,87,715/- TOTAL 14,05,958 1,27,81,757/- 1,41,87,715/- ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 3 5. THUS IN THE CASE OF ASSESSEE, ADDITIONAL INCOME IN RESPECT OF UNACCOUNTED INVESTMENT MADE IN EXCESS STOCK AND EXC ESS CASH WAS QUANTIFIED AT RS. 30 LACS AND RS. 4 LACS RESPECTIVE LY. ON SCRUTINY ON THE RETURN OF INCOME FILED BY THE ASSESSEE ON 30.11.200 9, A.O. NOTICED THAT ASSESSEE HAD NOT CREDITED THE AMOUNT OF EXCESS STOC K OF 30 LACS IN THE PROFIT AND LOSS ACCOUNT, NOR IT WAS INCLUDED IT IN THE COMPUTATION OF TOTAL INCOME. THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE AND ASKED TO SHOW CAUSE AS TO WHY THE EXCESS STOCK FOUND AND DECLARED DURING THE COURSE OF SURVEY NOT BE ADDED TO THE INCOME. ASSESSEE INTERAL IA SUBMITTED THAT AT THE TIME OF SURVEY THE SALE VALUE OF THE STOCK FOUN D WAS COMPARED TO THE COST VALUE OF THE BOOKS STOCK. IT WAS FURTHER SUBMI TTED THAT BOOKS STOCK OF THE GOODS ASCERTAINED ON THE BASIS OF EARLIER YEARS GROSS PROFIT WAS NOT AT ALL CORRECT. IT WAS FURTHER SUBMITTED THAT QUANTITA TIVE RECORDS MAINTAINED BY THE ASSESSEE SHOULD BE CONSIDERED FOR THE PURPOS E OF RECONCILIATION. WITH RESPECT TO THE DISCREPANCY IN THE CASH, SHRI ASHOK KUMAR JINDAL STATED THAT THE AMOUNT HAS BEEN TAKEN BY ALL THE PA RTNERS AND THEREFORE THE EXPLANATION WITH RESPECT DISCREPANCY OF CASH AMOUNT ING TO RS. 14,03,958/- WAS ACCEPTED BY THE A.O. THE EXPLANATI ON WITH RESPECT TO UNEXPLAINED INVESTMENT IN STOCK WAS NOT ACCEPTED BY THE A.O. AND ACCORDINGLY AN ADDITION WAS MADE TO THE TOTAL INCOM E. AGAINST THE QUANTUM ADDITION MADE BY THE A.O., ASSESSEE PREFERR ED APPEAL BEFORE CIT(A). CIT(A) RESTRICTED THE ADDITION MADE BY THE A.O. TO RS. 7,31,800/- AS AGAINST RS. 30 LACS MADE BY A.O. AGA INST THE ORDER OF CIT(A), REVENUE PREFERRED APPEAL BEFORE TRIBUNAL. TRIBUNAL UPHELD THE DECISION OF CIT(A) AND THUS DISMISSED THE APPEAL OF THE REVENUE. ON THE ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 4 AFORESAID ADDITION OF RS. 7,31,800/- WHICH WAS CONF IRMED BY CIT(A), PENALTY UNDER SECTION 271(1)(C) WAS LEVIED AS THE A .O. WAS OF THE VIEW THAT ASSESSEE HAS CONCEALED THE INCOME AND THE DEPA RTMENT DETECTED AND PROVED THAT THE ASSESSEE WAS HAVING UNACCOUNTED EXC ESS STOCK. 6. AGGRIEVED BY THE PENALTY ORDER OF A.O., ASSESSEE CA RRIED THE MATTER BEFORE CIT(A), CIT(A) UPHELD THE ORDER OF A.O. BY H OLDING AS UNDER:- 7. DECISION 7.1 THE CONTENTION OF THE APPELLANT HAS BEEN PERUSED. A S HELD BY THE CIT(APPEALS) AND REPRODUCED BY THE ITAT IN ITS ORDER (SUPRA) THE CIT(APPEALS) FOUND THE RETRACTION OF DISCLOSURE MADE AT THE TIME OF SURVEY ONLY PARTIALLY CORRECT. THE CIT(APPEALS) HAS ALSO MENTIONED CERTAIN DISCREPANCI ES IN APPELLANTS SUBMISSION IN QUANTUM APPEAL, LIKE NAMES OF CERTAIN ITEMS IN BILL S /VOUCHERS DID NOT TALLY WITH THE NAMES MENTIONED IN THE INVENTORY AND IN SOME CASES, THE STOCK COULD NOT BE EXPLAINED. THEREFORE, IT WAS A CASE WHERE FULL MATE RIAL FACTS WERE NOT DISCLOSED BEFORE THE ASSESSING OFFICER OR FILED EVEN BEFORE T HE CIT( APPEALS J WHICH LEAD TO AN ESTIMATION OF UNDISCLOSED STOCK. THE APPELLANT CANN OT CLAIM BENEFIT OF ITS OWN CONDUCT OF NOT DISCLOSING FULL MATERIAL FACTS, WHICH LEADS TO ESTIMATION AND THEN CLAIMING THAT IT DOES NOT AMOUNT TO CONCEALMENT. 7.2 IT IS PERTINENT TO POINT OUT THAT THE EXPLANATION-1 TO SECTION 271(1)(C) OF THE I.T. ACT IN UNAMBIGUOUS TERMS MENTIONS THAT DISCLOSURE O F FULL MATERIAL FACTS BEFORE THE ASSESSING OFFICER IS A PRIMARY CONDITION FOR THE EX PLANATION NOT TO BE INVOKED. THEREFORE, THE APPELLANTS CONTENTION IS REJECTED A ND THE PENALTY LEVIED CONFIRMED. (I.E. GROUND NO. 1 DECIDED AGAINST THE APPELLANT). 7. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US, THE LD. A.R. SUBMITTED THAT AT THE TIME OF SURVEY SHRI ASHOK KUMAR JINDAL GAVE SALE PRICE OF THE STOCK INS TEAD OF PURCHASE PRICE AND THEREFORE THE RATE APPLIED IN THE INVENTO RY WAS SALES RATE AND THEREFORE IT WAS SUBMITTED THAT THE GROSS PROFIT SH OULD BE APPROPRIATELY ADJUSTED TO ARRIVE AT THE COST PRICE. THE LD. A.R. FURTHER SUBMITTED THAT AGAINST THE ADDITION OF RS. 30 LACS MADE BY THE A.O . CIT(A) RESTRICTED THE ADDITION TO RS. 7,31,800/- AGAINST WHICH THE REVENU E PREFERRED APPEAL BEFORE HON. ITAT. ITAT UPHELD THE ORDER OF CIT(A) AND RESTRICTED THE ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 5 ADDITION TO RS. 7,31,800/-. THE LD. A.R. FURTHER SU BMITTED THAT AT THE TIME OF SURVEY OUT OF 123 QUALITIES OF CLOTH FOUND, ASSE SSEE HAD CLAIMED THAT 83 QUALITIES OF CLOTH WERE INVENTORISED AT SALE PRI CE WHILE 40 QUALITIES WERE VALUED AT COST PRICE OR IN SOME OF THE CASES A T LESS THAN COST PRICE. HE FURTHER SUBMITTED THAT NO DIFFERENCE IN QUANTITY WAS FOUND DURING THE COURSE OF SURVEY. THE SURVEY PARTY WORKED OUT ADDIT ION BY VALUING THE STOCK AT A HIGHER PRICE. HE FURTHER SUBMITTED THAT WHEN THE ALLEGED STOCK WAS SOLD, THE PRICE REALIZED WAS ACCOUNTED IN THE B OOKS BY THE ASSESSEE. HE FURTHER POINTED OUT TO THE FINDING OF CIT(A) WHE REIN CIT(A) HAS NOTED THAT THE VALUE OF EXCESS STOCK WAS RESTRICTED TO RS. 7,31,800/- AS AGAINST AT RS. 31,14,800/- IN THE CASE OF JINDAL F ASHION, JINDAL CREATION, & SMT. ANITA JINDAL. IN THE CASE OF SHRI MANGAT RAI GOYAL (HUF) THE ADDITION WAS RESTRICTED TO RS. 9,21,538/- AS AGAINS T RS. 37,81,757/- MADE BY A.O. HE FURTHER SUBMITTED THAT HON. ITAT VIDE O RDER DATED 31.08.2010 HAS UPHELD THE ORDER OF CIT(A). THE LD. A.R. THEREFORE SUBMITTED THAT THE EXPLANATION SUBMITTED BY THE ASS ESSEE IN RESPECT OF STOCK WAS SUBSTANTIATED BY THE ASSESSEE AND WAS NOT FOUND TO THE FALSE. THE DIFFERENCE WAS ON ACCOUNT OF VALUATION OF STOCK AND CONSIDERING THE NUMBER OF ITEMS OF STOCK, THE EXPLANATION OF ASSESS EE CANNOT BE BRUSHED AS NOT BONA FIDE. HE FURTHER PLACED RELIANCE ON TH E DECISION IN THE CASE OF CIT VS. MECON BUILDERS AND ENGINEERS (2001) 248 ITR 159 (DEL.) AND IN THE CASE OF ASHISH B. MODI (HUF) ITA NO. 218/AHD/20 13. HE THEREFORE SUBMITTED THAT THE PENALTY BE DELETED. 8. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT(A) AND FURTHER SUBMITTED THAT THE CASES RELIED BY THE ASSESSEE ARE ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 6 DISTINGUISHABLE ON FACTS AND THEREFORE THE RATIO CA NNOT BE APPLIED TO THE CASE OF ASSESSEE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT, THAT DURING THE COURSE OF SURVEY EXCESS STOCK WAS FOUND AND THE A.O. HAD MADE THE ADDITION AMOUNTING TO RS. 30 LACS. IN THE QUANTUM PROCEEDINGS, CIT(A) AGREED WITH THE SUB MISSIONS MADE BY THE ASSESSEE THAT SOME STOCK WAS VALUED AT SALE PRI CE INSTEAD OF COST PRICE AND ALSO THE AVERAGE PRICE OF STOCK FOUND AT THE TIME OF SURVEY WAS TAKEN AT RS. 45.36 PER MTR AS COMPARED TO RS. 41.18 PER MTR CLAIMED BY ASSESSEE. CONSIDERING ALL THESE FACTS HE ESTIMATED THE VALUE OF STOCK AND THEREAFTER THE ADDITION WAS ESTIMATED AT RS. 7,31,8 00/-. ON THE AFORESAID ADDITION PENALTY U/S 271(1)(C) HAS BEEN LEVIED. 10. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLN. 1 T O SECTION 271(L)(C) ARE THAT : (I) THE PERSON FAILS TO OFFER THE EXPLANATIO N, OR (II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT(A) OR THE CIT TO BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLO SED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGOR IES, THEN ACCORDING TO THE DEEMING PROVISION PROVIDED IN EXPLN. 1 TO SECTI ON 271(L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTIC ULARS HAVE BEEN CONCEALED FOR THE PURPOSES OF CL. (C) OF S. 271(1) AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSES SEE HAS BEEN ABLE TO ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 7 PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM, THEN IN THAT C ASE PENALTY SHALL NOT BE IMPOSED. 11. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED THE MATERIAL FACTS BEFORE THE AO. WHEN THE ASSESSEE HAS MADE A PARTICULAR CLAIM IN THE RETURN OF INCOME AND HAS ALSO FURNISHED ALL THE MATERIAL FACT S RELEVANT THERETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS IN COME BY THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE A ND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE HELD LIABLE FOR CONCEALMENT PENALTY UNDER S. 271(1) (C) OF THE ACT. IT IS ALSO WELL SE TTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D DISTINCT AND THE FINDING IN THE ASSESSMENT PROCEEDINGS CANNOT BE REG ARDED AS CONCLUSIVE FOR THE PURPOSES OF THE PENALTY PROCEEDINGS. CONSI DERING THE TOTALITY OF FACTS WE ARE OF THE VIEW THAT IN THE PRESENT CASE W HEN THE ADDITION MADE BY THE A.O. HAS BEEN RESTRICTED TO A LOWER FIGURE A ND THAT TOO ON AS ESTIMATE BASIS AND THE MATTER HAS ATTAINED FINALITY , THE ADDITION DOES NOT CALL FOR LEVY OF PENALTY U/S 271(1)(C). WE THUS CAN CEL THE PENALTY LEVIED BY THE ASSESSING OFFICER AND THUS THIS GROUND OF AS SESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NOS. 216 & 217/AHD/2013 (FOR A.Y. 2003-04) ITA NOS. 215, 216 & 217/AHD/2013 . A.Y. 2003-0 4 8 13. BEFORE US, BOTH THE PARTIES HAVE SUBMITTED THAT TH E FACTS IN THE CASE OF JINDAL CREATION AND SHRI MANGAT RAI GOYAL HUF ARE I DENTICAL TO THAT OF JINDAL FASHIONS EXCEPT FOR THE AMOUNT. WHILE DECIDI NG THE APPEAL IN THE CASE OF JINDAL FASHIONS HEREINABOVE, WE HAVE DELETE D THE PENALTY LEVIED U/S. 271(1)(C). SINCE THE FACTS IN THE PRESENT TWO APPEALS ARE SIMILAR TO THE CASE OF JINDAL FASHIONS, WE FOR THE REASONS GIVEN W HILE DELETING THE PENALTY IN ITA NO. 215/AHD/2013 (IN CASE OF JINDAL FASHION) ALSO DELETE THE PENALTY IN BOTH THE PRESENT APPEALS NAMELY ITA NO. 216 AND 217/AHD/2013 ( IN THE CASE OF JINDAL CREATION AND M ANGATRAI GOYAL HUF). 14. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22-11 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,A HMEDABADS