The DCIT, Circle-9, Surat V. M/s. Paladiya Brothers, Surat

ITA 2199/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89707 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI RAJPAL YADAV, JUDICIAL MEMBER AND SHR I ANIL CHATURVEDI , ACCOUNTANT MEMBER THE DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 9, SURAT (APPELLANT) VS M/S. PALADIYA BROTHERS, 25 - 26, SARTHI INDL. ESTATE, NANDU DOSHI WADI, VASTA DEVDI ROAD, SURAT PAN: AADFP1969N (RESPONDENT) REVENUE BY : S H RI NIMESH YADAV , SR. DR ASSESSEE BY: WRITTEN SUBMISSION DATE OF HEARING : 18 - 05 - 2 015 DATE OF PRONOUNCEMENT : 24 - 06 - 2 015 / ORDER P ER : R AJPAL YADAV , JUDICIAL MEMBER : - THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 24 TH MAY, 2011. I T A NO . 2199 / A HD/20 11 A SSESSMENT YEAR 200 5 - 06 I.T.A NO. 2199 /AHD/20 11 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. PALADIYA BROTHERS 2 2. THE GRIEVANCE OF THE REVENUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETI NG THE PENALTY OF RS. 6, 0 3,283/ - IMPOSED BY THE ASSESSING OFFICER U/S. 271(1) (C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF DIAMONDS. IT HAS FILED ITS RETURN OF INC OME ON 30 TH AUGUST, 2005 DECLARING TOTAL INCOME AT RS. 77,54,689/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S. 143(2) WAS ISSUED ON 29 TH AUGUST, 2006. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT AS SESSEE HAD DECLARED A GP OF RS. 1,67,36,708/ - @ 10.15% OF THE TOTAL TURNOVER. ACCORDING TO THE ASSESSING OFFICER, THE GP SHOWN IN THE LAST YEAR WAS 15.11% OF THE TURNOVER. THUS, THERE WAS A FALL IN GP. LD. ASSESSING OFFICER HAS POINTED OUT DEFECT S IN THE MAINTENANCE OF ACCOUNTS AND ACCORDINGLY REJECTED THE BOOK RESULT. HE ESTIMATED THE GP AT 11.15% AS AGAINST 10.15% DISCLOSED BY THE ASSESSEE. THUS, LD. ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 16,48,655/ - . THIS ADDITION HAS BEEN CONFIRMED U P TO ITAT. 4. THE LD. ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) AND AFTER HEARING THE ASSESSEE HAS IMPOSED A PENALTY OF R S. 6, 0 3,283/ - WHICH IS EQUIVALENT TO THE TAXES SOUGHT TO BE EVADED ON AN ADDITION OF R S. 16,48,655 / - . 5. ON APPEAL, LD. FIRST APPELLATE AUTHORITY HAS DELETED THE PENALTY BY OBSERVING AS UNDER: - 6. I HAVE CONSIDERED THE PENALTY ORDER AS WELL AS THE SUBMISSION OF APPELLANT. THOUGH THE ASSESSING OFFICER HAD POINTED OUT THAT QUALITY WISE REGISTER OF STOCK, MANUFAC TURING AND SALES OF DIAMONDS WAS NOT I.T.A NO. 2199 /AHD/20 11 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. PALADIYA BROTHERS 3 MAINTAINED, YET, THE ASSESSING OFFICER COULD NOT POINT OUT ANY PARTICULAR PURCHASE, MANUFACTURING OR EXPORT BILL AS NON - GENUINE. NO DISALLOWANCE OF LABOUR EXPENSES CLAIMED WERE MADE BY THE ASSESSING OFFICER. INSTEAD OF MAKING THE ITEM WISE ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK, YIELD OR PRODUCTION THE ASSESSING OFFICER PREFERRED TO ESTIMATE GROSS PROFIT RATE OF 11.15%. APART FROM THE DISCUSSION ON QUALITY WISE STOCK REGISTER AND PIECE WISE RECORDS OF MANUFAC TURING OF DIAMONDS AND BASIS OF VALUATION OF STOCK IN THE ASSESSMENT ORDER THERE IS NO REFERENCE TO DETECTION OF ANY CONCEALMENT OF FACTS OR INCOME. THE VERY QUESTION OF PUNISHMENT OF CONCEALMENT REQUIRES TO BE CONSIDERED. THE CIT(A) HAD DELETED THE ADDITI ON MADE BY ASSESSING OFFICER. THE HON'BLE ITAT HAD ALSO ESTIMATED GROSS PROFIT OF 8% IN A NUMBER OF CASES FOR A.Y. 2005/06 AS AGAINST THE GROSS PROFIT OF 10.15% SHOWN BY THE ASSESSEE. DURING THE PENALTY PROCEEDINGS THE APPELLANT EXPLAINED THAT FOR COMPAR ISON PURPOSES THE GROSS PROFIT HAS TO BE CALCULATED EXCLUDING EXCHANGE DIFFERENCE IN VIEW OF THE DE CISION OF THE ITAT IN THE CASE OF ACIT VS. PANKAJ DIAMONDS IN ITA NO. 2608/A/2009. THIS FACT WAS NOT BROUGHT TO THE NOTICE OF ITAT BY THE AR DURING THE HEARI NG OF QUANTUM APPEAL. SIMILARLY, THE REASON FOR REDUCTION IN GROSS PROFIT DUE TO INCREASE IN COST OF ROUGH DIAMONDS AND LABOUR WAS ALSO EXPLAINED DURING THE PENALTY PROCEEDINGS WITH ALL EVIDENCES. IF THESE TWO FACTORS OF EXCHANGE DIFFERENCE AND INCREASE IN COST OF ROUGH DIAMONDS AND LABOUR COMPARED TO INCREASE IN SALE PRICES ARE CONSIDERED THERE IS NO VARIATION IN GROSS PROFIT. THESE FACTS ITSELF PROVES THAT THERE DOUBTS ABOUT THE CORRECT PROFIT WHICH IPSOFACTO COULD NOT TANTAMOUNT TO CONCEALMENT OF INCOME. IN MY OPINION PENALTY CANNOT BE LEVIED WHERE THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS HOWSOEVER THE METHOD OF ESTIMATION MAY BE QUITE SCIENTIFIC. ACCORDINGLY, THE CONCEALMENT PENALTY OF RS.6,03,283/ - IS HEREBY DELETED . 6. IN RESPONSE TO THE NOTICE OF HEARING, NO - ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE BUT WRITTEN SUBMISSIONS HAVE BEEN FILED. WITH THE ASSISTANCE OF LD. DEPARTMENTAL REPRESENTATIVE, W E HAVE GONE THROUGH THE RECORD AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE. IT EMERGES FROM TH E RECORD THAT THOUGH ASSESSEE MAINTAINED THE BOO K S OF ACCOUNTS BUT I.T.A NO. 2199 /AHD/20 11 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. PALADIYA BROTHERS 4 ACCORDING TO THE ASSESSING OFFICER CERTAIN ANCILLARY DETAILS WHICH ARE SUPPORTING TO THE BOOKS ACCOUNTS ARE NOT COMPLETELY MAINTAINED. FOR EXAMPLE, ASSESSEE FAILED TO PRODUCE QUALITY DATA OF DIAMONDS MANUFACTURED BY IT. IT FAILED TO PRODUCE THE WRITTEN SLIPS VIDE WHICH ROUGH DIAMONDS WERE HANDED OVER TO THE LABOURERS FOR JOB WORK. TO OUR MIND, THESE TYPES OF DOCUMENTS ARE SPECIFICALLY NOT MANDATED BY THE LAW BUT THESE ARE DOCUMENTS FOR IN TERNAL ACCOUNTING PURPOSE. NO - DOUBT, SUCH DOCUMENTS MAY HELP THE ASSESSING OFFICER TO CROSS VERIFY THE STOCK POSITION BY RE - CONCIL IAT ING WITH PURCHASES, SALES, YIELD AND WASTAGE CLAIMED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS REJECTED THE B OOK RESULT BECAUSE OF HIS INABILITY TO DEDUCE T RUE INCOME , BUT IT CANNOT BE ALLEGED THAT ASSESSE HAD MADE A DELIBERATE ATTEMPT OF CONCEALING THE INCOME. THE ADDITION IS A RESULT OF DIFFERENCE OF OPINION ABOUT THE NATURE OF DETAILS REQUIRED TO BE MAINTAINED BY THE ASSESSE AS AGAINST OF THE ASSESSING OFFICER. THE ASSESSEE HA S SHOWN GP OF 15.11 % IN THE LAST YEAR BUT EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS LD. ASSESSING OFFICER HAS MADE THE ADDITION AT 11.15% OF THE TURNOVER. IT SUGGESTS THAT ADDITION WAS O N AN ESTIMATE BASIS AND ON ESTIMATED ADDITION , ASSESSEE NOT DESERVES TO BE VISITED WITH PENALTY. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY DELETED THE PENALTY. WE DO NOT FIND ANY MERIT IN T H IS APPEAL. IT IS DISMISSED. ORDER P R ONOUNCED IN THE OPEN COURT ON 24 - 06 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 24 /06 /2015 AK I.T.A NO. 2199 /AHD/20 11 A.Y. 2005 - 06 PAGE NO DCIT VS. M/S. PALADIYA BROTHERS 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,