Krishnakant N. Bhavsar, Ahmedabad V. The Income tax Officer, Ward-6(4), Ahmedabad

ITA 2538/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0867 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-08-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 12-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 2538/AHD/2011 / ASSESSMENT YEAR : 2003-04 KRISHNAKANT N. BHAVSAR, C/O. AMBICA TEXTILE PRINT, 239, SAIJPUR, GOPALPUR ROAD, NAROL, AHMEDABAD-382405 PAN: ABXPB 1325 P VS THE ITO, WARD-6(4), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI SATISH SOLANKI, SR DR / DATE OF HEARING : 16/08/2016 / DATE OF PRONOUNCEMENT: 17/08/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD DATED 10.08.2011 FOR AY 2003-04, CONFIRMING LEVY OF PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT IN RESPECT OF ADDI TION OF SUPPRESSED SALES OF RS.4,29,116/-. 2. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME ON 13.08.2003 DECLARING TOTAL INCOME OF RS.5,32,330/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND O RDER U/S 143(3) PASSED ON 27.03.2006 ASSESSING TOTAL INCOME OF RS.15,60,22 0/-. W HILE FINALIZING THE ASSESSMENT, THE LD. AO HAS MADE VARIOUS ADDITIONS/D ISALLOWANCES, WHICH INCLUDES THE ADDITION ON ACCOUNT OF SUPPRESSED SALE S AMOUNTING TO RS.4,29,116/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE AO IMPOSED PENALTY U/S. 274 R.W.S. 271(1)(C) ON THE TO TAL ADDITION OF SMC-ITA NO. 2538/AHD/2011 KRISHNAKANT N. BHAVSAR VS. ITO AY : 2003-04 2 RS.12,07,890/-. ON APPEAL, THE LD. CIT(A) HAS DELET ED THE FOLLOWING ADDITIONS:- I) DISALLOWANCES FROM SUPPRESSED SALES - RS.4,29,116 /- II) DISALLOWANCES FROM EXPENSES IN THE NAME - RS. 52,898/- OF SHRI HANUMAN R. PRASAD III) DISALLOWANCES FROM COMMISSION EXPENSES - RS. 5,0 1,000/- IV) DISALLOWANCES FROM BUILDING REPAIR EXP. - RS. 1, 70,072/- V) ADDITION ON ACCOUNT OF INCOME FROM HOUSE - RS. 9,000/- PROPERTY 2.1 AGAINST THE AFORESAID ORDER OF THE LD. CIT(A), REVENUE FILED APPEAL BEFORE THE ITAT WHICH ALLOWED DEDUCTION IN RESPECT OF BUILDING REPAIRING EXPENSES OF RS.1,70,072/- AND INCOME FROM HOUSE PRO PERTY AMOUNTING TO RS.9000/- AND CONFIRMED THE ADDITION OF RS.10,28,81 4/-. ACCORDINGLY, THE ASSESSING OFFICER IMPOSED A PENALTY OF RS.3,10,498/ - VIDE ORDER DATED 31.01.2011 ON THE CONFIRMED ADDITION OF RS.10,28,81 4/- TOWARDS THE PENALTY EQUIVALENT TO 100% OF THE TAX SOUGHT TO BE EVADED. AGAINST THE IMPOSITION OF ABOVE PENALTY, THE ASSESSEE WENT FURTHER IN APPE AL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE, SUSTAINED THE PENALTY IN RESPECT OF ADDITION ON ACCOUNT OF SUPPRE SSED SALES OF RS.4,29,116/- AND DELETED PENALTY IN RESPECT OF OTH ER ADDITIONS. 2.2 AGGRIEVED BY THE ORDER OF THE LD. CIT(A) IN CON FIRMING THE LEVY OF PENALTY IN RESPECT OF ADDITION ON ACCOUNT OF SUPPRE SSED SALES OF RS.4,29,116/-, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE A DDITION OF RS.4,29,116/- BEING SUPPRESSED SALES/JOB WORK WAS M ADE BY THE ASSESSING OFFICER ONLY ON MATHEMATICAL CALCULATIONS AND HYPO THETICAL ASSUMPTIONS. SMC-ITA NO. 2538/AHD/2011 KRISHNAKANT N. BHAVSAR VS. ITO AY : 2003-04 3 LD COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE WORKING OF THE THEORETICAL PRODUCTION BY USING THE AVERAGE PRODUCT ION ACHIEVED PER UNIT OF ELECTRICITY FOR THOSE MONTHS WHEN ACTUAL PRODUCTION ACHIEVED WAS LESS THAN AVERAGE. THIS AVERAGE WAS WORKED OUT BY CONSIDERI NG THE ACTUAL PRODUCTION FIGURES OF THESE VERY MONTHS ONLY. IT W AS ALSO CONTENDED THAT THE ASSESSEE IS ONLY THE PROCESSOR OF CLOTH AND NOT ORIGINAL MANUFACTURER OF CLOTH AND THEREFORE THE ASSESSEE COULD NOT HAVE SUP PRESSED PRODUCTION AND THE AO HAD WRONGLY PRESUMED THAT THE ADDITION OF RO TARY PRINTING MACHINE WAS A SEPARATE MACHINE AND THAT ALSO EFFECTED THE P RODUCTION OF THE ASSESSEE. IN FACT, THE ROTARY PRINTING MACHINE PURC HASED BY THE ASSESSEE IS THE ATTACHMENT TO THE FLATBED PRINTING MACHINE. FU RTHER, IT WAS CONTENDED THAT NO IRREGULARITIES WERE POINTED OUT BY THE EXCI SE DEPARTMENT WITH RESPECT TO EXCISE RECORDS WHICH WAS DULY AUDITED BY THE EXCISE DEPARTMENT AND NO EVASION OF EXCISE DUTY WAS DETECTED. LD. CO UNSEL FOR THE ASSESSEE THUS PLEADED THAT THE PENALTY IMPOSED BY THE ASSESS ING OFFICER ON THE ADDITION, WHICH WAS MADE ON THE BASIS OF ASSUMPTION WORK, MAY BE DELETED. 4. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. I FIND THAT THE ADDITION ON ACCOUNT OF SUPPRESSED SALES OF RS.4,29, 116/- WAS BASICALLY MADE ON FOLLOWING COUNTS:- (I) NOT MAINTAINING COMPLETE RECORDS OF MANUFACTURING E XPENSES; (II) ASSESSEE DEBITED EXPENSES WITHOUT JUSTIFICATION; SMC-ITA NO. 2538/AHD/2011 KRISHNAKANT N. BHAVSAR VS. ITO AY : 2003-04 4 (III) SHORTAGE OF MANUFACTURED CLOTH AS REFLECTED IN THE TAX AUDIT REPORT DID NOT MATCH WITH THE RECORDS MAINTAINED BY THE ASSESSEE. (IV) VARIATION WAS NOTICED IN ELECTRICITY EXPENSES PER M ETER PRODUCTION OF CLOTH; (V) THERE WAS A SHARP DROP IN THE GP DECLARED DURING TH E YEAR UNDER CONSIDERATION COMPARED TO GP DECLARED IN THE IMMEDIATELY PRECEDING YEAR. IT IS UNDISPUTED FACTS THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED AND ALL THE INCOME AND EXPENDITURES WERE DU LY SUPPORTED BY EVIDENCES AND NO DEFECTS HAVE BEEN POINTED OUT BY T HE AUDITORS. IT WAS ALSO THE SUBMISSION OF THE ASSESSEE THAT AN EXCISE AUDIT WAS DONE ON 23.02.2005 BY THE EXCISE DEPARTMENT AND NO IRREGULARITIES WERE FOUND THEREIN. THUS, I AM OF THE VIEW THAT THE ADDITION WAS MADE BY THE AS SESSING OFFICER BASED ON SOME HYPOTHETICAL ASSUMPTIONS, ON THE BASIS OF T HE UNITS OF ELECTRICITY CONSUMED AND TAKING AVERAGE OF THE PRODUCTION PER U NIT @ 7.71 MTR PER UNIT OF ELECTRICITY CONSUMED AND WITHOUT ANY CONCRETE EV IDENCE ON RECORD. IN THIS REGARD, WE FIND FORCE IN THE SUBMISSION OF LD. COUN SEL FOR THE ASSESSEE THAT THE PRODUCTION FOR THE MONTHS OF APRIL TO SEPTEMBER 2002 WAS LESS THAN THE AVERAGE OUTPUT; THUS THE PRODUCTION CANNOT BE EXTRA POLATED ON THE BASIS OF UNITS OF ELECTRICITY CONSUMED AS IT WAS NOT DEPENDE NT ON ONLY ONE FACTOR. BESIDES, THE ADDITION WAS MADE PURELY ON ESTIMATE B ASIS, BASED ON LOW YIELD & EXCESS EXPENDITURE ON ELECTRICITY AND COMPARING G P PERCENTAGE WITH PRECEDING YEAR. LOOKING TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, THE ADDITION MADE BY ASSESSING OFFICER IN THIS BEHALF M AY BE JUSTIFIED; BUT THAT IS NOT SUFFICIENT TO LEVY THE PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AER O TRADERS PVT. LTD., (2010) 322 ITR 316 (DEL), HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE SMC-ITA NO. 2538/AHD/2011 KRISHNAKANT N. BHAVSAR VS. ITO AY : 2003-04 5 IMPOSED WHEN INCOME IS DETERMINED ON ESTIMATE BASIS . SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE P&H HIGH COURT IN HARIGOP AL SINGH VS. CIT (2002) 258 ITR 85 (P&H) AND THE HONBLE GUJARAT HIG H COURT IN CIT VS. SUBHASH TRADING COMPANY, 221 ITR 110 (GUJ). IN VIEW OF ABOVE, I DELETE THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 17 TH AUGUST, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 17/08/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD