M/s. Dhirubhai Girdharbhai & Sons, Anand V. The ACIT, Anand Cicle, Anand

ITA 2298/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0512 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2298/AHD/2013 / ASSTT. YEAR: 2003-2004 M/S.DHIRUBHAI GIRDHARBHAI & SONS AT P.O. SARSA ANAND. PAN : AABFD 6892 Q VS ACIT, ANAND CIRCLE ANAND. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : ARTI N. SHAH REVENUE BY : SHRI SUMIT KUMAR VERMA, DR / DATE OF HEARING : 30/08/2016 / DATE OF PRONOUNCEMENT: 23/09/2016 $%/ O R D E R ASSESSEE IS IN APPEAL AGAINST ORDER OF THE LD.CIT(A )-IV, BARODA DATED 29.7.2013 PASSED FOR THE ASTT.YEAR 2003-04. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS.1,43,300/- IMPOSED UNDER S ECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN BUSINESS OF SALE AND PURCHASE OF TOBACCO AND BIDI PATTI. IT HAS FILED RETURN OF INCOME ON 24.10.2003 DECLARING TOTAL INCOME AT RS.8 ,31,233/-. A SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT ON TH E BUSINESS PREMISES OF THE ASSESSEE ON 3.9.2002. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT FIRM HAS SHOWN SUBSTANTIAL PURCHASES OF TOBACCO FROM PARTNER S. ONE OF THE BUSINESS ITA NO.2298/AHD/2013 2 PREMISES OF THE ASSESSEE WAS SITUATED AT SARSA AND SURVEY ON THE PREMISES WAS CONDUCTED ON 3.9.2002. DURING THE COURSE OF SURVEY , A DIARY CONTAINING 14 PAGES WAS FOUND. IN THIS DIARY, DETAILS EXHIBITING PURCHASE OF TOBACCO WAS NOTICED. THE AO HAS REPRODUCED LIST OF 30 PARTIES FOUND IN THIS DIARY. HE WORKED OUT THE DIFFERENCE BETWEEN QUANTITIES OF TOB ACCO RECORDED IN THE STOCK REGISTER AS WELL IN THIS DIARY. FOR EXAMPLE, FIRST NAME IS SHRI JASHBHAI MAVHASBHAI. AS PER STOCK REGISTER, TOBACCO OF 15,9 06 KGS. WAS PURCHASED. IN THIS DIARY 16,000 KGS. WAS RECORDED. THE DIFFERENC E WAS WORKED OUT AT 94 KGS AND AT THE RATE OF RS.17.75 PER KG. AN AMOUNT OF RS .1,668/- WAS WORKED OUT. THE AO HAS WORKED OUT TOTAL ALLEGED UNACCOUNTED PUR CHASES AT RS.29,89,699/-. THE TOTAL TOBACCO IN TERMS OF QUAN TITY WAS WORKED AT 2,22,954 KG. THE AO HAS APPLIED A RATE OF RS.13.40 PER KG. WHEN THIS DISPUTE TRAVELLED TO THE TRIBUNAL, THE TRIBUNAL HAS CONSIDE RED THE ADDITION TO THE EXTENT OF 10% OF THE QUANTITY, I.E. THE TRIBUNAL HA S CONFIRMED THE ADDITION TO THE EXTENT OF 28936 KGS. OF TOBACCO. IN THIS WAY, AN ADDITION OF RS.3,89,871/- WAS CONFIRMED. THE AO HAS INITIATED PENALTY PROCEE DINGS UNDER SECTION 271(1)(C) OF THE ACT. AND HE IMPOSED PENALTY OF RS. 1,43,300/-. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV E, WE GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTI NENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** ITA NO.2298/AHD/2013 3 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT ITA NO.2298/AHD/2013 4 THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. ITA NO.2298/AHD/2013 5 6. IN THE LIGHT OF THE ABOVE BACKGROUND, IF I EXAMI NE THE FACTS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT THE ADDITIO N HAS BEEN MADE ON THE BASIS OF INFERENCE DRAWN FROM THE DIARY AT THE PREMISES O F THE ASSESSEE. THE LD.CIT(A) HAS, WHILE REJECTING THE APPEAL OF THE AS SESSEE, OBSERVED THAT THE ADDITION WAS NOT MADE ON ESTIMATION BASIS BY REJECT ING THE BOOKS RESULT OF THE ASSESSEE, RATHER, IT IS BASED ON INCRIMINATING MATE RIAL FOUND DURING THE COURSE OF SURVEY. TO MY MIND, THIS FINDING IS NOT IN ACCO RDANCE WITH FACTS ON RECORD. THE CASE OF THE ASSESSEE THAT SAUDA DIARY FOUND AT THE PREMISES WAS A ROUGH BOOK AND ENTRIES FROM THESE ARE BEING POSTED IN THE REGULAR STOCK REGISTER. IT CONTAINED DETAILS OF CERTAIN TRANSACTIONS WHICH HAS BEEN CANCELLED OR WHICH NEVER MATERIALIZED. IN THIS SAUDA DIARY, THE TOTAL TRANSACTION WAS OF 2,22,954 KGS. OF TOBACCO. OUT OF THIS, ON AN ESTIMATE BASIS , THE TRIBUNAL HAS CONFIRMED THE ADDITION TO THE EXTENT OF 28,936 KGS. THIS IS NOT BASED ON SOME INCRIMINATING MATERIAL. THIS ADDITION HAS BEEN MAD E BECAUSE, THE ASSESSEE FAILED TO ESTABLISH COMPLETE RECONCILIATION BETWEEN TRANSACTIONS RECORDED IN THE SAUDA DIARY VIS--VIS STOCK REGISTER, OR ANY OTHER BOOKS . ON ACCOUNT OF THIS FAILURE, THE ADDITION STANDS CONFIRMED. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION OR ITS EXPLA NATION WAS FOUND TO BE FALSE. IN THIS SITUATION, THE ASSESSEE SHOULD NOT BE EXPOSED TO THE PENALTY PROCEEDINGS. I ALLOW THE APPEAL OF THE ASSESSEE AN D DELETE PENALTY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 23 RD SEPTEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 23/09/2016