Dhiraj Sons Mega Store Pvt. Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2604/AHD/2009

• Counselvise Citation: 260420514 RSA 2009
• Duration Of Justice: 2 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 17-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R N VEPARI
• Keywords: Wrong claim; Set aside
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI G. D. AGARWAL, VP AND SHRI BHAVNESH SA INI, JM) ITA NO.2604/AHD/2009 A. Y.: 2004-05 DHIRAJ SONS MEGA STORE PVT. LTD., GAGANVANI, NEXT TO MANSUKHLAL TOWER, CHOWPATI, ATHWALINES, SURAT VS THE D. C. I. T., CIRCLE-1, AAYAKAR BHAVAN, OPP. NEW CIVIL HOSPITAL, MAJURA GATE, SURAT PA NO. AAACW 2104 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI R. N. VEPARI, AR RESPONDENT BY SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 29-09-2011 DATE OF PRONOUNCEMENT: 05-10-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-I, SURAT DATED 14 TH JULY, 2009 FOR THE ASSESSMENT YEAR 2004-05, CHALLE NGING THE LEVY OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT ON ADDITION IN VALUATION OF CLOSING STOCK ON ESTIMATE BASIS. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO L EVIED PENALTY FOR THE FOLLOWING ADDITIONS/DISALLOWANCES: (I) DISALLOWANCE OF INTEREST RS. 1,86,310/- ITA NO. 2604/AHD/2009 DHIRAJ SONS MEGA STORE PVT. LTD. VS DCIT, COIR-1, S URAT 2 (II) UNDERVALUATION OF CLOSING STOCK RS. 5,28,085 /- (III) ENHANCEMENT OF INCOME FOR INTEREST PAID TO BANK RS. 7,20,000/- THE LEARNED CIT(A) CONFIRMED THE PENALTY IN RESPECT OF UNDERVALUATION OF CLOSING STOCK IN A SUM OF RS.5,28 ,085/- AND FOR THE REMAINING ADDITIONS PENALTY WAS DELETED. IT WAS EXP LAINED BEFORE THE LEARNED CIT(A) WITH REGARD TO UNDERVALUATION OF THE CLOSING STOCK THAT THE AO DID NOT GIVE ANY REASONS FOR MAKING THE ADDI TION. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE WOULD PRO VE THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO HOWEVER, STATED THAT THE ASSESSEE HAD DEDUCTED RS.5,28,085/- AS 1% OF CASH DISCOUNT FROM THE TOTAL CLOSING STOCK FOR WORKING OUT CLOSING STOCK TO BE SHOWN IN THE PROFIT & LOSS ACCOUNTS. THE AO ASKED THE EXPLANATION OF THE ASSES SEE AS TO WHY 1% CASH DISCOUNT BE NOT DEDUCTED. THE ASSESSEE EXPL AINED THAT IT WAS A PRACTICE TO GET CASH DISCOUNT BUT SOME PEOPLE MAY NOT GIVE DISCOUNT. THE EXPLANATION OF THE ASSESSEE WAS NOT A CCEPTED BY THE AO AND ADDITION OF RS.10,00,000/- WAS MADE WHICH WA S REDUCED BY THE LEARNED CIT(A) TO RS.5,28,085/-. IT WAS, THEREF ORE, SUBMITTED BEFORE THE LEARNED CIT(A) THAT SINCE ALL THE PARTIC ULARS WERE DISCLOSED TO THE AO AT THE STAGE OF ASSESSMENT AS WELL AS IN THE RECORDS, THEREFORE, NO PARTICULARS OF INCOME WAS CONCEALED AND NO PENALTY IS LEVIABLE. THE LEARNED CIT(A) HOWEVER, NOTED THAT TH E ASSESSEE HAS DELIBERATELY REDUCED ITS INCOME BY REDUCING 1% CASH DISCOUNT ON ESTIMATE BASIS. THE ASSESSEE HAS CLAIMED DISCOUNT I N RESPECT OF ITA NO. 2604/AHD/2009 DHIRAJ SONS MEGA STORE PVT. LTD. VS DCIT, COIR-1, S URAT 3 EACH AND EVERY ITEMS EVEN THOUGH SUCH CASH DISCOUNT MIGHT NOT BE GIVEN. PENALTY WAS ACCORDINGLY CONFIRMED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE ASSESSEE DISCLOSED ALL THE PARTICULARS OF INCOME IN THE RETU RN OF INCOME AND STOCK WAS REDUCED BY 1% DISCOUNT ON ACCOUNT OF CASH DISCOUNT WHICH IS THE PRACTICE OF THE BUSINESS. THE AO MADE ESTIMA TED ADDITION OF RS.10,00,000/- WHICH IS REDUCED BY THE LEARNED CIT( A). THEREFORE, ON ESTIMATE BASIS PENALTY IS NOT JUSTIFIED. HE HAS SUB MITTED THAT THOUGH THE LEARNED CIT(A) PARTLY CONFIRMED BUT NO FINDING HAVE BEEN GIVEN THAT THE CLAIM OF THE ASSESSEE WAS INCORRECT OR FAL SE FOR INVITING PENALTY. EVEN, THE TRIBUNAL WHILE DISMISSING THE AP PEAL OF THE ASSESSEE ON QUANTUM IN ITA NO.3551/AHD/2007 VIDE OR DER DATED 18- 09-2009 DID NOT GIVE ANY ADVERSE FINDINGS AGAINST T HE ASSESSEE. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE M ADE A WRONG CLAIM OF DEDUCTION ON ACCOUNT OF CASH DISCOUNT; THE REFORE, PENALTY WAS RIGHTLY IMPOSED IN THE MATTER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND T HE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE DIS CLOSED ALL THE FACTS BEFORE THE AO AT THE ASSESSMENT STAGE. THE AO EXAMI NED THE VALUATION OF THE CLOSING STOCK AND FOUND THAT THE A SSESSEE CLAIMED CASH DISCOUNT WHICH WAS DEDUCTED FROM THE GRAND TOT AL OF INVENTORY OF THE CLOSING STOCK. THE AO MADE THE ADDITION ON E STIMATE BASIS WHICH IS REDUCED SUBSTANTIALLY BY THE LEARNED CIT(A ). THE ASSESSEE ITA NO. 2604/AHD/2009 DHIRAJ SONS MEGA STORE PVT. LTD. VS DCIT, COIR-1, S URAT 4 MADE A CLAIM OF CASH DISCOUNT FROM THE CLOSING STOC K ON THE BASIS OF THE PRACTICE OF THE BUSINESS. IT IS ADMITTED FACT T HAT IN THE ASSESSMENT YEAR UNDER APPEAL THE TURNOVER AND GROSS PROFIT RAT E OF THE ASSESSEE WAS SUBSTANTIALLY HIGHER AS COMPARED TO THE PRECEDI NG ASSESSMENT YEAR. THEREFORE, THERE WAS NO REASON FOR THE ASSESS EE TO CONCEAL THE PARTICULARS OF INCOME. THE LEARNED CIT(A) EVEN WHIL E DECIDING THE APPEAL OF THE ASSESSEE DID NOT FIND THAT THE CLAIM OF THE ASSESSEE WAS INCORRECT OR FALSE. SINCE ALL THE PARTICULARS O F INCOME WERE DISCLOSED IN THE RETURN OF INCOME AND ADDITION IS M ADE ON ESTIMATE BASIS, THEREFORE, IN OUR VIEW IT MAY NOT BE A CASE OF CONCEALMENT OF INCOME. MOREOVER, ON CONFIRMING THE ADDITION ON ACC OUNT OF UNDERVALUATION OF THE STOCK, THE AO SHALL HAVE TO E NHANCE THE OPENING STOCK OF THE NEXT ASSESSMENT YEAR 2005-06 R ESULTING THEREBY THERE WOULD BE NO LOSS TO THE REVENUE AUTHORITY WIT H REGARD TO TAXATION WITH REGARD TO UNDERVALUATION OF THE CLOSI NG STOCK. 5. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. , 322 ITR 158 (SC) HELD THA T A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HA S TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASS ESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) (C) WOULD EMBRACE THE DETAIL S OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS F OUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HEL D GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ITA NO. 2604/AHD/2009 DHIRAJ SONS MEGA STORE PVT. LTD. VS DCIT, COIR-1, S URAT 5 ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M 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 T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILI TY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RET URN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAI LS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORREC T OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENAL TY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACC URATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INAC CURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFF IRMED. 6. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RA JASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SAHABAD CO -OP. SUGAR MILLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRO NG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORM ATION, WHICH MAY CALL FOR LEVY OF PENALTY U/S 271 (1) ( C ) OF THE A CT. THE HONBLE PUNJAB & HARYANA HIGH COURT AGAIN IN THE CASE OF CIT VS SI DHARTHA ITA NO. 2604/AHD/2009 DHIRAJ SONS MEGA STORE PVT. LTD. VS DCIT, COIR-1, S URAT 6 ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFE RED ON SALE OF MACHINERY WRONGLY TAKEN AGAINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPT ED THE DECISION OF THE AO. NO DELIBERATE DEFAULT. APPELLATE AUTHORI TIES JUSTIFIED IN DELETING THE PENALTY U/S 271 (1) (C) OF THE IT ACT. 7. IN VIEW OF THE ABOVE DISCUSSIONS, WE DO NOT FIND ANY JUSTIFICATION IN CONFIRMING THE ORDERS OF HT4E AUTH ORITIES BELOW IN LEVYING AND CONFIRMING THE PENALTY U/S 271 (1) (C) OF THE IT ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD