The DCIT, Circle-1, Surat V. Ameen Silk Mills Ltd., Surat

ITA 2565/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6924 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSI
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 01/04/2011 DRAFTED ON: 0 4/04/2011 ITA NO.2565/AHD/2010 ASSESSMENT YEAR : 2005-06 THE DY.CIT CIRCLE-I SURAT VS. M/S.AMEEN SILK MILLS LTD. PLOT NO.83/84/85 GIDC PANDESARA, SURAT PAN/GIR NO. : AACCA 3420 H ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.S. SOURYAWANSI, D.R. RESPONDENT BY: SHRI KAMLESH BHATT, A.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I, SURAT DA TED 21/06/2010 PASSED FOR ASSESSMENT YEAR 2005-06. THE ONLY SUBS TANTIVE GROUND READS AS FOLLOWS:- [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CANCELING THE PENALTY OF RS.4,1 8,643/- LEVIED ON THE ADDITION OF RS.11,44,070/- ON ACCOUNT OF CLOSING S TOCK OF WORK IN PROGRESS. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G PENALTY ORDER PASSED U/S.271(1)(C) OF THE I.T. ACT, 1961 DATED 26/03/201 0 AND ASSESSMENT ORDER MADE U/S.143(3) DATED 07/12/2007 WERE THAT T HE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING OF GREY CLOTH AND ITS ITA NO. 2565/AHD/2010 THE DY.CIT VS. M/S. AMEEN SILK MILLS LTD. ASST.YEAR 2005-06 - 2 - DYING AND PRINTING ON JOB-WORK BASIS. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF THE INVENTORY OF THE CLO SING STOCK AS PER THE BALANCE SHEET, IT WAS NOTICED THAT THE ASSESSEE HAD NOT SHOWN ANY CLOSING STOCK IN WORK-IN-PROGRESS. AS PER ASSESSING OFFICE R, EVEN IF THE ASSESSEE WAS CARRYING OUT THE JOB-WORK, THE COMPANY MUST BE USING ITS OWN MATERIAL. THE MATERIAL, THEREFORE, MUST HAVE EXIST ED SINCE THE VALUE OF STOCK AT THE END OF THE ACCOUNTING YEAR WAS NOT SHO WN, THEREFORE, AS PER ASSESSING OFFICER, THE TRADING ACCOUNT HAD REFLECTE D THE DISTORTED FIGURE OF TRADING RESULTS. AN ADDITION OF RS.11,44,070/- WAS MADE DUE TO NON- DISCLOSURE OF CLOSING STOCK. DURING THE PENALTY P ROCEEDINGS, IT HAS HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CONC EALED THE PARTICULARS OF INCOME, THEREFORE, LIABLE TO PENALTY U/S.271(1)(C) OF THE I.T.ACT. WITH THE RESULT, A PENALTY OF RS.4,18,643/- WAS LEVIED U/S.2 71(1)(C) OF THE I.T.ACT WHICH WAS CHALLENGED BEFORE THE LEARNED CIT(APPEALS ). AFTER HEARING THE SUBMISSIONS, THE LEARNED CIT(APPEALS) DELETED T HE PENALTY AS PER THE FOLLOWING PARAGRAPH:- 2.2. DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF J.H. PARABIA (TRANSPORT) PVT.LTD. (284-ITD-316), WHEREI N IT HAS BEEN HELD THAT NO PENALTY CAN BE LEVIED IN THE CASE OF E STIMATION OF WORK-IN-PROGRESS. 2.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. I AGREE WITH THE APPE LLANT THAT THE ISSUE IS FULLY COVERED BY THE DECISION OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF J.H. PARABIA TRANSPORT PVT.LTD . (SUPRA), WHEREIN THE HON'BLE GUJARAT HIGH COURT HAS STATED T HAT NO PENALTY CAN BE LEVIED WHEN THE ASSESSEE HAS CONSISTENTLY AD OPTED THE SAME METHOD OF ACCOUNTING BY NOT SHOWING THE WORK-IN-PRO GRESS, WHICH WAS ACCEPTED BY THE DEPARTMENT. IN VIEW OF THE ABO VE, THE PENALTY ITA NO. 2565/AHD/2010 THE DY.CIT VS. M/S. AMEEN SILK MILLS LTD. ASST.YEAR 2005-06 - 3 - LEVIED BY THE A.O. IS DELETED AND THESE GROUNDS OF APPEAL ARE ALLOWED. 3. ON HEARING BOTH THE SIDES, WE HAVE NOTICED THAT THE QUESTION OF LEVY OF CONCEALMENT PENALTY IN RESPECT OF NON-DISCL OSURE OF CLOSING STOCK HAS ALREADY BEEN CONSIDERED BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. J.H. PARABIA (TRANSPORT) PVT.LTD. R EPORTED AT [2006]284 ITR 361 (GUJ.), WHEREIN FACTS WERE THAT THE ASSESSI NG OFFICER HAD FOUND THAT THE ASSESSEE HAD NOT CONTAINED THE ENTRY BY WA Y OF WORK-IN-PROGRESS. THE ASSESSING OFFICER HAS CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY THE SAME SHOULD NOT BE TREATED AS INCOME. THE ASSE SSEE HAS FILED A REVISED RETURN OF INCOME AND GAVE THE DETAILS OF TH E WORK-IN-PROGRESS. THE HON'BLE COURT HAS ALSO NOTED THAT, AS A MATER O F FACT, THE ASSESSEE HAD BEEN CONSISTENTLY ADOPTING THE SAME METHOD OF ACCOU NTING, I.E. OF NOT INCLUDING THE WORK-IN-PROGRESS FOR THE PURPOSE OF A RRIVING AT THE TEXTILE INCOME SINCE THE INCEPTION OF THE COMPANY. IT WAS ALSO NOTED THAT THE TRIBUNAL HAS GIVEN A FINDING THAT THE SAID METHOD O F ACCOUNTING HAD BEEN ACCEPTED BY THE DEPARTMENT. RESULTANTLY, THE PENAL TY WAS FOUND NOT LEVIABLE AS PER THE FOLLOWING PARAGRAPH:- AS CAN BE SEEN FROM THE QUESTION RAISED AND REFERR ED, THE ENTIRE SUBMISSION OF THE REVENUE AND THE BASIS OF LEVY OF PENALTY GETS SUMMARIZED IN THE FRAME OF THE QUESTION. HOWEVER, IN THE LIGHT OF THE FACTS FOUND BY THE TRIBUNAL, AND IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT SUCH FINDINGS ARE INCORRECT IN ANY MAN NER WHATSOEVER, IT IS NOT POSSIBLE TO ACCEPT THE CONTEN TION RAISED ON BEHALF OF THE APPLICANT REVENUE. IT IS NOT POSSIBL E TO STATE THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE WAS SU CH THAT IT DID NOT REFLECT THE POSITION CORRECTLY CONSIDERING THE FACT THAT FOR THREE YEARS THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT. ONCE THIS WAS THE POSITION, THE BONA FIDES OF THE ASSESSEE CO ULD NOT BE ITA NO. 2565/AHD/2010 THE DY.CIT VS. M/S. AMEEN SILK MILLS LTD. ASST.YEAR 2005-06 - 4 - DOUBTED, AND THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO HOLD A BONA FIDE BELIEF TH AT THE UNCERTIFIED WORK-IN-PROGRESS WAS NOT LIABLE TO BE TREATED AS TA XABLE ITEM SO AS TO BE VISITED WITH PENALTY FOR CONCEALMENT THEREOF. 4. IN OUR OPINION, THE LEARNED CIT(APPEALS) HAS RIG HTLY FOLLOWED THE VERDICT OF THE HON'BLE JURISDICTIONAL HIGH COURT, T HEREFORE, NO INTERFERENCE IS REQUIRED. WE FIND NO FORCE IN THE GROUND OF THE REVENUE AND, THEREFORE, THE SAME IS DISMISSED. 5, IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 8 TH APRIL, 2011. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 8 / 04 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO. 2565/AHD/2010 THE DY.CIT VS. M/S. AMEEN SILK MILLS LTD. ASST.YEAR 2005-06 - 5 - 1. DATE OF DICTATION..01/04/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/04/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S8.4.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8.4.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER