Jayantilal D. Kundalia, JAMNAGAR V. The Income Tax Officer, Ward-2(1), JAMNAGAR

ITA 240/RJT/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76394 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J B JHAVERI D R
• Assessee Lawyers: CHETAN AGARWAL
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI B. R. JAIN AM ITA NO. 240/RJT/2013 ASSESSMENT YEAR 2004-05. JAYANTILAL D. KUNDALIA, PROP- M/S KUNDALIA COLOURS, K.P. SHAH HOUSE, K.V. ROAD, JAMNAGAR. PAN- ACYPK3618G ( APPELLANT V/S THE INCOME TAX OFFICER WARD-2(1), JAMNAGAR. RESPONDENT ! ' # / ASSESSEE BY SHRI CHETAN AGARWAL, C.A. % ! ' # / REVENUE BY SHRI J.B. JHAVERI, D.R. # & ' ! ( / DATE OF HEARING 07/01/2014 ) ! ( / DATE OF PRONOUNCEMENT 09/01/2014 / ORDER PER B.R. JAIN, A.M.: THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 08/3/2013 OF SHRI S.K. MOHANTY, LD. COMMISSIONER OF INCOME TAX ( APPEALS)-,JAMNAGAR RAISES THE SOLITARY GROUND AS UNDER:- HON. CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT IN CONFIRMING PENALTY U/S 271(1)(C) OF THE IT ACT. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS A TRA DER OF COLOURS AND PAINTS AND DECLARED LOSS OF RS. 64,570/-. THIS IS T HE FIRST YEAR OF BUSINESS OF THE ASSESSEE. A SURVEY U/S 133A OF THE I.T. ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE ON 10/12/2003. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE IS MAKING SALES ON THE BASIS OF DELIVERY CHALLANS AND HAS NOT MAINTAINED ACCOUNTS OR SALE VOUCHERS THEREOF. HE HAS ALSO NOT MAINTAINED S TOCK REGISTER. SINCE THE SALES WITH REFERENCE TO SUCH DELIVERY CHALLAN WAS N OT RECONCILED, THE ASSESSING OFFICER REJECTED THE ACCOUNTS AND ESTIMAT ED SALES @ 80,000/- ITA 240/RJT/2013 2 PER MONTH AND APPLIED GROSS PROFIT RATE OF 10.25% T HEREON, WHICH WAS EQUAL TO GROSS PROFIT RATE IN THE CASE OF HIS BROTH ER ALSO COVERED IN THE SURVEY ON THE SAME DATE. THE ESTIMATION, THUS HAS R ESULTED INTO AN ADDITION OF RS. 98,040/-. IN QUANTUM APPEAL, THE SA ID ADDITION STOOD REDUCED TO RS. 61,380/- BY THE ORDER OF THE LD. CIT (A). THE ASSESSEE DID NOT PURSUE THE ADDITION, SO SUSTAINED BY THE LD. CI T(A). IN PENALTY PROCEEDINGS IN RESPONSE TO SHOW CAUSE NOTICE, THE A SSESSEE SUBMITTED THAT THE ADDITION MADE IS A RESULT OF ESTIMATION OF SALES AS WELL AS ESTIMATION OF GROSS PROFIT RATE. THE ADDITION BEING PURELY ON AD HOC BASIS, PENALTY CANNOT BE IMPOSED. THIS EXPLANATION, HOWEVE R, WAS NOT ACCEPTED BY THE ASSESSING OFFICER. HE, THEREFORE, PROCEEDED TO IMPOSE PENALTY OF RS. 12,776/- EQUAL TO 100% OF TAX SOUGHT TO BE EVAD ED. 3. THE LD. CIT(A) CONSIDERING THE VARIOUS JUDGMENTS AND THE FACTS OF THE CASE FOUND THAT THE ADDITION OF RS. 98,040/- MA DE BY THE A.O. PERTAINED TO UNACCOUNTED SALES. THE AFORESAID INCOM E COULD NOT HAVE BEEN BROUGHT TO PURVIEW OF TAXATION, HAD THERE BEEN , NO SURVEY CONDUCTED IN ASSESSEES PREMISES. THE ASSESSEE CONCEALED THE INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEES EX PLANATION THAT ADDITION WAS MADE ON ACCOUNT OF ESTIMATION OF SALES AND GROS S PROFIT DOES NOT AMOUNT TO CONCEALMENT OR FURNISHING OF INACCURATE P ARTICULARS, WAS NOT FOUND SUBSTANTIATED WITHIN THE MEANING OF EXPLANATI ON OF SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, PENALTY SO IMPOSED STOOD C ONFIRMED. 4. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIA L ON RECORD. ADMITTEDLY, THIS IS THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE HAD CARRIED OUT SALES ON THE BASIS OF DELI VERY CHALLANS AND NO BOOKS OF ACCOUNT WERE FOUND TO HAVE BEEN MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THE ACCOUNTS PRESENTED WITH THE RETURN OF INCOME WERE FOUND DEFECTIVE AND ACCORDINGLY THE A.O. ESTIM ATED THE SALES @ RS. 80,000/- PER MONTH I.E. EQUAL TO RS. 9,60,000/- AND APPLIED A GROSS PROFIT ITA 240/RJT/2013 3 RATE OF 10.25% IN ESTIMATING THE ASSESSEES INCOME. IT, THUS, IS EVIDENT THAT THE ADDITION HAS NOT BEEN MADE ON THE BASIS OF ANY UNACCOUNTED SALES RELATABLE TO DELIVERY CHALLANS FOUND AS A RESULT OF SURVEY ON THE ASSESSEE. THE LD. CIT(A), THEREFORE, IS NOT JUSTIFIED IN SAYI NG THAT THE INCOME SO ADDED AMOUNTED TO CONCEALED INCOME AS THE SAME WAS DETECTED AS A RESULT OF SURVEY ON THE ASSESSEE. THE EXPLANATION T ENDERED BY THE ASSESSEE DURING THE COURSE OF PENALTY IS THUS FOUND BONAFIDE. THE ESTIMATION OF INCOME IS SUBSTITUTION OF THE INCOME DECLARED BY THE ASSESSEE ON WHICH PENALTY IS NOT EXIGIBLE. ACCORDIN GLY, WE CANCEL THE PENALTY AND ALLOW THE GROUND RAISED IN APPEAL. 5. IN THE RESULT, APPEAL BY ASSESSEE STANDS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2014. SD/- SD/- ( T. K. SHARMA ) ( B. R. JAIN ) #*% /JUDICIAL MEMBER (#*% / ACCOUNTANT MEMBER *+,*- ORDER DATE 09/01/2014 /RAJKOT *RANJAN / COPY OF ORDER FORWARDED TO:- ./ /APPELLANT- JAYANTILAL D. KUNDALIA, JAMNAGAR. 0/ /RESPONDENT- THE INCOME TAX OFFICER, WARD-2(1), JAM NAGAR. 1/#-2- & 3 / CIT-I, RAJKOT. 4/ & 3 5 / CIT (A)-, JAMNAGAR. 6/789 / DR, ITAT, RAJKOT :/9;<= / GUARD FILE. *+# / BY ORDER TRUE COPY PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, RAJKOT.