ACIT 24(3), MUMBAI V. RADHESHYAM S. SABOO, MUMBAI

ITA 2434/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93149 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 11-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-04-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Bogus purchase; Rejection of books of accounts; Initiation of penalty proceedings; Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI D. MANMOHAN, VP & SHRI R.C.SHARMA , A M ITA NO. 2434 / MUM/20 1 3 ( ASSESSMENT YEAR : 20 0 5 - 06 ) ACIT - 24(3), MUMBAI VS. SHRI RADHESHYAM S. SABOO, M - 4/14, HIRAMANI RATAN CHS LTD., BANGUR NAGAR, GOREGAON (W), MUMBAI - 400090 PAN NO. : A MTPS 9870 M ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY : SHRI LOVE KUMAR ASSESSEE BY : NONE DATE OF HEARING : 27 TH MAY, 2015 DATE OF PRONOUNCEMENT 8 - 7 - 2015 O R D E R PER R.C.SHARMA ( A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 3 4, MUMBAI , DATED 16 - 1 - 2013 FOR THE ASSESSMENT YEAR 2005 - 06 , IN THE MATTER OF IMPOSITION OF PENALTY U/S.271 (1)(C) OF THE I.T.ACT. 2. NOBODY APPEARED ON BEHALF OF ASSESSEE IN SPITE O F SERVICE OF NOTICE. THE BENCH, THEREFORE, DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING LD. DR. WE HAVE CONSIDERED THE C ONTENTIONS OF LD. DR AND PERUSED THE RECORD. FACTS IN BRIEF ARE THAT THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S. 143(3) ON 31 - 12 - 20 07 BY MAKING ADDITION OF RS. 18,76,442/ - TOWARDS DISALLOWANCE OF 10% OF G.P. ON THE ALLEGED BOGUS PURCHASES IN RESPECT OF FOUR PARTIES AND RS. 3,00,000/ - ON AD HOC BASIS DISALLOWANCE ON THE EXPENDITURE INCURRED. AGGRIEVED BY THE ABOVE ADDITION, THE ASSESSEE WAS BEFORE THE CIT(A). THE CIT(A) VIDE ORDER NO. CIT(A) - 34/IT - 20/2007 - 08 DATED 23/02/2010 BY RELYING ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF M/S VIJAY PROTEINS HAS ENHANCED THE ITA NO. 2434 / 1 3 2 DISALLOWANCE TO 25% AND THEREBY WORKED OUT THE DISALLOWANCE OF RS. 46,91 ,105/ - WITH AN ENHANCEMENT OF RS. 28,14,663/ - . THE CIT(A) HAD DELETED THE AD HOC DISALLOWANCE MADE IN RESPECT OF VARIOUS EXPENSES INCURRED AND THEREBY THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. CONSEQUENT TO THE ORDER OF CIT(A), THE AO HAD LEVIED PENALT Y OF RS. 15,79,026/ - . 3. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE PENALTY AFTER OBSERVING AS UNDER : - 1.4 I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT, THE IMPUGNED PENALTY ORDER AND THE MATERIALS AVAILABLE ON RECORD. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AIR OF THE APPELLANT HAD FURNISHED COPY OF THE HON'BLE ITAT'S ORDER VIDE ITA NO.3311/MUM/2010 DATED 7/12/2007. THE APPELLANT HAD FILED AN APPEAL BEFORE THE HON'BLE ITAT, MUMBAI. AGAINST THE ORDER OF CIT(A), THE HON'BLE IT AT WHILE SETTING ASIDE THE ORDER OF THE LOWER AUTHORITIES HAD GIVEN THE SPECIFIC DIRECTION TO THE AO. TO RECOMPUTE THE INCOME BY SUBSTITUTING GP RATE AT 6% INSTEAD OF 3.06% IN THE APPELLANT'S CASE. THE RELEVANT PORTION OF THE FINDING IS IN PARA - 10 OF TH E ORDER WHICH IS REPRODUCED HEREUNDER: PARA 10 - IN THE INSTANT CASE, HOWEVER, ASSESSEE APPEARS TO HAVE NOT FURNISHED THE BANK STATEMENTS OF THE PARTIES. HOWEVER, THE FACT REMAINS THAT SHRI MOOLCHAND SHAH, THE MAIN PERSON CONCERNING TWO FIRMS OUT OF THE FOUR FIRMS EXPIRED ON 21/05/2005 WHEREAS THE ASSESSMENTS WERE MADE SUBSEQUENT TO THE SAID DATE, WHICH MIGHT HAVE PUT THE ASSESSEE TO A DISADVANTAGEOUS POSITION TO NOT FURNISHING COMPLETE DETAILS. IN SUCH CIRCUMSTANCES, THE' PROPER COURSE OF ACTION IS TO VE RIFY THE STANDARD PERCENTAGE OF PROFIT, AS DECLARED BY THE ASSESSEE AND ASSESSED IN THE IMMEDIATELY PRECEDING YEARS, SO AS TO ARRIVE AT A FAIR ESTIMATE OF INCOME FOR THIS YEAR. IN RESPECT OF AY. 2004 - 05, THE GP RATE ON THE INCOME DECLARED BY THE ASSESSEE W ORKS OUT TO 10.23 AND FOR AY. 2003 - 04 THE GP RATE WORKS OUT TO 3.17 WHEREAS IN THE YEAR UNDER CONSIDERATION THE ASSESSEE'S RETURN AND GP RATE WAS 3.06 ONLY. THE ASSESSEE HAS FILED REVISED WORKING OF LOSS/PROFIT FOR THE THREE YEARS TO SHOW THAT IF AN AVERAG E OF 3 YEARS STATEMENTS IS CONSIDERED THE GP RATE WORKS OUT TO 5.48. ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE INTEREST OF JUSTICE WOULD BE MET IF GP RATE OF 6% IS ADOPTED IN THE YEAR UNDER CONSIDERATION SO AS TO TAKE CARE OF THE INCREASE IN PURCHASE PRICE, IF ANY, WITH RESPECT TO THE PURCHASES FROM THE IMPUGNED FOUR PARTIES INSTEAD OF ESTIMATING 25% OF THE PURCHASES AS BOGUS PURCHASES. ITA NO. 2434 / 1 3 3 WE THEREFORE SET ASIDE THE ORDERS OF THE TAX AUTHORITIES AND DIRECT THE AO TO . RECOMPUTE THE INCOME BY SUBSTITUTING THE GP RATE AT 6% INSTEAD OF 3.06% AS PER THE INCOME RETURNED BY THE ASSESSEE.' 1.5 FROM THE ABOVE FINDING, IT IS CLEAR THAT THE ESTIMATION AT 25% OF DISALLOWANCE TOWARDS BOGUS PURCHASES BY THE CIT(A) HAD BEEN SET - ASIDE BY THE ITA T. THE ES TIMATION BY THE AO. AT 10% OF THE GP RATE WAS ALSO REDUCED TO 6% BY THE ITAT. CONSEQUENT TO THE ADDITION MADE BY THE AO. PENALTY WAS LEVIED ON AN ESTIMATED INCOME. THE AO DID NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE APPELLANT HAD FILED INACCURATE PARTICULARS NOR MATERIAL TOWARDS CONCEALMENT OF INCOME. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. EVERYTHING WOULD DEPEND. UPON THE RETURN FILE D BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS FURNISHED ARE FOUND TO BE INACCURATE, THEN ONLY THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. AS MENTIONED ALREADY THERE IS NO MATERIAL BEFORE THE AO THAT THE RETURN FILED IS INACCURATE. IN THIS REGARD I RELY ON THE DECISION OF T H E HON;BLE APEX COURT I N THE CASE OF COMMISSIONER OF INCOME - TAX V. RELIANCE PETROPRODUCTS PVT. LTD REPORTED IN 322 ITR 158. THE HEAD NOTE IS AS UNDER PENALTY -- CONCEALMENT OF PARTICULARS OF INCOME -- NO INFORMATION GIVEN IN RETURN FOUND TO BE INCORRECT -- MAKING INCORRECT CLAIM -- D OES NOT AMOUNT TO CONCEALMENT OF 'PARTICULARS' -- INCOME - TAX ACT, 1961, S. 271(1)(C). WORDS AND PHRASES -- 'PARTICULARS', MEANING OF. A GLANCE AT THE PROVISIONS OF SECTION 271 (1)(C) OF THE INCOME - TAX ACT, 19 6 1, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, T HERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271 (1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PRO VISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ITA NO. 2434 / 1 3 4 ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271 (1 )(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FUR N ISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS.' . DECISION OF THE GUJARAT HIGH COURT AFFIRMED. DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC) AND SREE KRISHNA ELECTRICALS V. STATE OF TAMIL NADU [2009] 23 VST 249 (SC) RELIED ON. FURTHER PENALTY CANNOT BE LEVIED ON THE ESTIMATED INCOME. FOR THIS PROPOSITIO N. I RELY ON THE FOLLOWING DECISIONS: 1. CIT VS. SMT. K. MEENAKSHI KUTTY (2002) 258FTR 494 (MAD) 2. CIT VS. RAHARNAT KHAN BIRBAF KHAN BADRUDDIN & PARTY (1999) 240 FTR 778 (RAJ) REJECTION OF BOOKS OF ACCOUNTS R ESULTING IN ESTIMATED ADDITION DISALLOWANC E DOES NOT JUSTIFY LEVY OF PENALTY. 3. CIT VS. M.M. RICE MILLS (2002) 253FTR 17 (P & H) ADDITION MADE DUE TO REJECTION OF ACCOUNTS BECAUS E OF NON MAINTENANCE OF STOCK PRODUCTION REGISTER WOULD NOT JUSTIFY LEVY OF PENALTY. 4. C IT VS. B.O. RAMCHANDRA ( 1984) 150 I TR 242 (BORN) 5. HARIGOPAL SINGH V. CIT [2002] 258 ITR 85(P&H) IN THE ABOVE CASE IT WAS HELD THAT THERE WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE I NCOME SO AS TO ATTRACT THE PROVISIONS OF SECTION 271 (1 )( C). 6.CIT V. J. K. A. RAJAPPA CHETTIAR [1985] 1531TR 215 (MAD) HELD, WHERE ON THE BASIS OF A TRUE DISCLOSURE OF THE ASSESSEE'S SOURCE OF INCOME AND WHERE, IN THE ABSENCE OF DIRECT MATERIALS, TH E DETERMINATION OF THE TAXABLE INCOME HAS GOT TO BE TAKEN UP AS A MATTER OF ESTIMATE, THE QUESTION OF CONCEALMENT OF INCOME HARDLY ARISES. 7.CIT V. NADIR ALI & CO. [1977]106 ITR 151(AII) HELD, WHERE INCOME IS ESTIMATED BY ADOPTION OF A HIGHER RATE OF P ROFIT, NO PENALTY COULD BE IMPOSED. ITA NO. 2434 / 1 3 5 8. CIT V. HARNAM SINGH & CO. [1977] 106 ITR 532(AII) HELD, WHERE PROFITS ARE ESTIMATED BY APPLYING FLAT RATE; PENALTY CANNOT BE IMPOSED. 9.CIT V. MUSADDI LAL SINGH [1977] 106 ITR 672(AII) HELD, WHERE .ASSESSINQ OFF ICER REJECTED BOOK RESULTS OF ASSESSEE AND ESTIMATED PROFITS OF THE ASSESSEE BY APPLYING FLAT RATE, LEVY OF PENALTY WOULD NOT BE JUSTIFIED. 10. J. A. TRIVEDI BROS. V. CIT [1986] 1581TR 705 (MP) HELD, PENALTY CANNOT BE IMPOSED MERELY BECAUSE ASSESSMENT I S MADE ON ESTIMATE BASIS. 11. BOMBAY HARDWARE SYNDICATE V. CIT [1978] 1141TR 586 (MAD) HELD, THE ASSESSING OFFICER CANNOT RELY ON HIS ESTIMATE OF THE INCOME OF THE ASSESSEE (ENHANCING THE INCOME DECLARED BY THE ASSESSEE) TO CONTEND THAT THERE WAS CONCEA LMENT OF INCOME. 12.CIT V. METAL PRODUCTS OF INDIA [1984] 150 ITR 714 (P&H) THE ASSESSING OFFICER MADE ADDITION ON ESTIMATE TO THE RETURNED INCOME BY ADOPTING THE VIEW THAT GROSS PROFIT SHOWN IN THE BOOKS OF ACCOUNT WAS TOO LOW. HELD, HE CANNOT AUTOMATI CALLY COME TO A CONCLUSION THAT THERE WAS A FAILURE TO RET URN CORRECT INCOME BY MEANS OF FRAUD OR WILLFUL NEGLECT FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C). 13. APPEAL NO. 666 OF 2009 NOVEMBER 25, 2009 [[2010] 195 TAXMAN 68 (PUNJ. & HAR.) IT WAS HELD THAT THE TRIBUNAL WAS RIGHT IN COMING TO THE CONCLUSION THAT WHEN THE ASSESSMENT WAS MADE ON ESTIMATE BASIS, THE PENALTY SHOULD NOT BE IMPOSED. (COPY ENCLOSED) 14. VIKRAM PLASTICS VS. INCOME - TAX OFFICER, WARD - 2, GODHRA* IT APPEAL NOS. 1444 & 14 45 (AHD. - IT AT) OF 2008 DTD. JANUARY 25,2012 IN THIS CASE IT IS HELD THAT NO PENALTY CAN BE LEVIED FOR THE DIFFERENCE BETWEEN RETURNED INCOME AND ASSESSED INCOME DUE TO ESTIMATE OF INCOME. 1.6 IN VIEW OF THE ABOVE DECISIONS, THE PENALTY LEVIED BY THE ASSESSING OFFICER IS HEREBY CANCELLED. THE APPEAL OF THE APPELLANT IS ALLOWED. 2. IN THE RESULT, THE APPEAL IS 'ALLOWED'. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD CAREFULLY. AGAINST THE ADDITION SO MADE, THE ASSESSEE APPROACHED TO THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 7 - 12 - 2007 SET ASIDE THE ORDER OF BOTH THE LOWER AUTHORITIES AND MATTER WAS RESTORED BACK TO THE FILE ITA NO. 2434 / 1 3 6 OF AO TO RECOMPUTE THE INCOME BY APPLYING GP RATE AT 6% , WHICH WAS THE AVERAGE G.P. RATE OF LAST THREE YEARS . THUS, THE ADDITION MADE BY DISALLOWING 25% OF PURCHASE WAS SET ASIDE BY THE TRIBUNAL AND INCOME WAS DIRECTED TO BE RECOMPUTED BY TAKING GP RATE OF 6 % IN PLACE OF GP RATE OF 3.06 % SHOWN BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES, THE CIT(A) FOUND THA T ASSESSEE HAS FURNISHED ALL THE EVIDENCES AND NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT, THEREFORE, ASSESSEE CANNOT BE HELD TO BE GUILTY OF FURNISHING INACCURATE PARTICULARS. AFTER APPLYING VARIOUS PROPOSITION OF LAW LAID DOWN BY THE HO N BLE SUPREME COURT AND HON BLE HIGH COURTS AS DISCUSSED AT PARA 1.5 OF CIT(A)S ORDER TO THE FACTS OF THE INSTANT CASE, THE PENALTY WAS DELETED. THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) . 5 . I N THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON THIS 08 /07 / 201 5 . SD/ - ( D.MANMOHAN ) SD/ - ( R.C.SHARMA ) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI ; DATED 08 /07 / 201 5 P KM , . / PS COPY OF THE ORDER FORWARDED TO : BY ORDER , ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//