The ITO, Ward-6(5), Ahmedabad V. Shri Kiran J.Mistry, Ahmedabad

ITA 271/AHD/2011

• Counselvise Citation: 27120514 RSA 2011
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 02-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: TUSHAR SHAH
• Keywords: Business income; Opportunity of being heard; TDS; Set aside
• Section: 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO. 271/AHD/2011 A. Y.: 2002-03 THE INCOME TAX OFFICER, WARD 6 (5), C. U. SHAH BUILDING, ASHRAM ROAD, AHMEDABAD VS KIRAN J. MISTRY, E/204, SAUNDRYA NIHAR PLATS, VIBHAG -2, B/D. GYANJYOT FLATS, OPP. RIDDHI SOCIETY, GHATLODIA, AHMEDABAD PA NO. AFRPM 1937 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. L. YADAV, DR RESPONDENT BY SHRI TUSHAR SHAH, AR DATE OF HEARING: 16-12-2011 DATE OF PRONOUNCEMENT: 23-12-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XI , AHMEDABAD DATED 25-11-2010 FOR ASSESSMENT YEAR 2002-03, CHALL ENGING THE DELETION OF PENALTY U/S 271 (1) ( C ) OF THE IT ACT . 2. THE LEARNED CIT(A) NOTED IN THE IMPUGNED ORDER T HAT THE ASSESSEE HAS NOT RESPONDED TO THE NOTICES OF HEARIN G OF THE APPEAL. NO WRITTEN SUBMISSION IS FILED. THE APPEAL WAS DECI DED IN ABSENCE OF THE ASSESSEE. THE LEARNED CIT(A) ALSO NOTED THAT IN THIS CASE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE IT ACT O N 01-03-2005 ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 2 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.20,4 2,580/- AFTER MAKING ADDITION OF OUTSTANDING CLOSING BALANCE OF R S.13,83,703/- FROM CIPL MORA SITE AND RS.4,94,341/- FROM GSTG MOR A SITE RESPECTIVELY. PENALTY PROCEEDINGS WERE ACCORDINGLY INITIATED IN WHICH THE AO OBSERVED THAT THE LEARNED CIT(A) ON QUANTUM REDUCED THE ADDITION FROM RS.18,78,043/- TO RS.1,80,740/- VIDE SEPARATE ORDER DATED 15-01-2007 AFTER ADOPTING PROFIT RATE OF 3.02 % ON THE TOTAL RECEIPTS OF RS.59,84,813/-. THE LEARNED CIT(A) ALSO OBSERVED THAT THE ASSESSEE HAS SHOWN LESSER PROFIT RATE WHICH IS AT 2 .50% FROM THE CURRENT YEAR AGAINST TOTAL PROFIT RATIO OF 5.52% FO R THE ENTIRE INCOME OF RS.87,56,000/- FOR 3 YEARS. THE LEARNED CIT(A), THE REFORE ADOPTED PROFIT RATIO @ 3.02% . IT IS FURTHER STATED THAT TH E DEPARTMENT HAS PREFERRED APPEAL BEFORE THE TRIBUNAL IN ITA NO.1677 /AHD/2007 AND THE TRIBUNAL VIDE ORDER DATED 31-01-2008 CONFIRMED THE ADDITION OF RS.7,47,522/- INSTEAD OF ADDITION MADE BY THE AO OF RS.18,78,043/- AFTER COMPUTING THE TOTAL INCOME FOR THE TWO CONTRA CTS AT RS.8,97,722/-. THE TRIBUNAL HAS CONSIDERED THE TOT AL INCOME EARNED BY THE ASSESSEE FROM TWO CONTRACTS EXECUTED OVER TH E 3 YEAR PERIOD I.E. RELEVANT TO ASSESSMENT YEAR 2002-03 TO 2004-05 AT RS.4,84,000/- ON TOTAL TURNOVER OF RS.87,56,000/- I.E. @ 5.52%. T HE LEARNED CIT(A) FOUND THAT THE ASSESSEE DID NOT FILE ANY WRITTEN SU BMISSION AT THE APPELLATE STAGE AND ONLY STATEMENT OF FACTS IS THER E WHICH IS TAKEN INTO CONSIDERATION IN WHICH THE ASSESSEE BRIEFLY EX PLAINED THAT A ACCOUNTS ARE AUDITED AND ADDITION IS MADE ONLY ON E STIMATION, THEREFORE THERE IS NO CASE MADE OUT FOR CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. THE LEA RNED CIT(A) IN VIEW ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 3 OF THE ABOVE CANCELLED THE PENALTY. HIS FINDINGS IN PARA 3.3.1 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER: 3.3.1 THE PENALTY WAS LEVIED BY THE ASSESSING OFF ICER ON THE BASIS OF ADDITION ESTIMATION BY WAY OF PROFIT R ATIO. A. O. MADE ADDITION OF RS.18,78,043/-. THE C. I. T. (A)-X II, AHMEDABAD UPHELD ADDITION OF RS.1,80,740/- ADOPTING TH4E PROFIT RATIO @ 3.02%. THE HONBLE ITAT CONFIRMED TH E ADDITION OF RS.7,47,522/- @ 5.52%. THUS THE ADDITION IS MADE ON ESTIMATION. THE A. O. HAS NOT MADE OUT ANY CASE THA T THE APPELLANT HAD ACTUALLY CONCEALED CERTAIN AND SPECIF IC SUM OF INCOME IN THE YEAR UNDER CONSIDERATION OR FURNISHED INACCURATE PARTICULARS THEREOF. THEREFORE, I HOLD THAT PENALTY U/S. 271 (1) (C) IS NOT EXIGIBLE IN THIS CASE. RELIANCE IS PLACED IN THIS REGARD ON TH4E HONBLE GUJARAT HIGH COURT DECISION IN THE CAS E OF CIT VS. LALUBHAI JOGIBHAI PATEL (139 ITR 1028). 3. THE LEARNED DR REFERRED TO THE ASSESSMENT ORDER AND SUBMITTED THAT THE LEARNED CIT(A) HAS FAILED TO CON SIDER THE OBSERVATION AND FINDINGS OF THE AO IN THE ASSESSMEN T ORDER. THE LEARNED D SUBMITTED THAT THOUGH THE ASSESSEE FILED TAX AUDIT REPORT BUT METHOD OF ACCOUNTING WAS CLAIMED TO BE CASH MET HOD BUT NO DETAILS WERE FURNISHED IN SUPPORT OF THE SAME BEFOR E THE AO. IT WAS FOUND THAT TDS CERTIFICATES WITH DETAIL RECEIPTS AR E IN A SUM OF RS.59,84,813/- AS AGAINST RECEIPTS OFFERED FOR TAXA TION AT RS.1,50,200/- CLAIMED ON CASH BASIS. THE ASSESSEE WAS REQUESTED TO PRODUCE BOOKS OF ACCOUNTS AND OTHER EVIDENCES. I T WAS FOUND THAT THE ASSESSEE HAS NOT DISCLOSED COMPLETE DETAILS OF RECEIPTS IN THE BOOKS OF ACCOUNTS. IN FACT, THE ASSESSEE NEITHER FI LED COPY OF THE CONTRACT RECEIPTS NOR EVEN PRODUCED BOOKS OF ACCOUN TS BEFORE THE AO, THEREFORE, SUMMONS U/S 131 OF THE IT ACT WAS IS SUED REQUIRING TO PRODUCE THE BOOKS OF ACCOUNTS AND STATEMENT OF THE ASSESSEE WAS ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 4 RECORDED ON OATH. THE LEARNED DR SUBMITTED THAT THE ASSESSEE ADMITTED IN HIS STATEMENT THAT BOOKS OF ACCOUNTS AR E MAINTAINED ON MERCANTILE SYSTEM AND HE WAS NOT ABLE TO SAY HOW TH E INCOME OF RS.1,50,200/- WAS SHOWN IN THE RETURN OF INCOME. TH E ASSESSEE ADMITTED IN HIS REPLY THAT IN FACT HIS RECEIPTS EXC EED RS.40 LACS. THE ASSESSEE ALSO ADMITTED THAT THOUGH HE HAS CLAIMED T HAT BOOKS ARE MAINTAINED IN CASH SYSTEM OF ACCOUNTING BUT IN FACT BOOKS HAVE BEEN MAINTAINED ON MERCANTILE SYSTEM. THE LEARNED DR, TH EREFORE, SUBMITTED THAT THERE WAS SUPPRESSION IN RECEIPTS IN A SUM OF RS.18,78,043/- AND THE ASSESSEE WAS NOT ABLE TO EXP LAIN THE SAID DISCREPANCY. THE LEARNED DR SUBMITTED THAT SINCE TH E ASSESSEE CONCEALED ACTUAL RECEIPTS AND FILED INACCURATE PART ICULARS OF INCOME IN THE RETURN OF INCOME, THEREFORE, IT IS A FIT CASE F OR LEVY OF PENALTY. THE LEARNED DR FURTHER SUBMITTED THAT THE FACTS HAVE NO T BEEN PROPERLY CONSIDERED AND APPRECIATED BY THE LEARNED CIT(A). T HE ASSESSEE REMAINED UNCOOPERATIVE AT THE PENALTY STAGE BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A) AND NO NOTICES HAVE BE EN COMPLIED WITH AND NO EXPLANATION WAS FILED, THEREFORE, THE LEARNE D CIT(A) SHOULD NOT HAVE DELETED THE PENALTY. HE HAS SUBMITTED THAT THE LEARNED CIT(A) WAS, THEREFORE, UNJUSTIFIED IN HOLDING THAT PENALTY IS MADE ONLY ON ESTIMATION. 4. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT PENALTY IS LEVIED ONLY ON ESTIMATE B ASIS WHICH WAS RIGHTLY CANCELLED BY THE LEARNED CIT(A). THE LEARNE D COUNSEL FOR THE ASSESSEE COULD NOT PRODUCE THE ORDER OF THE TRIBUNA L ON QUANTUM AND STATED THAT HE IS NOT HAVING POSSESSION OF THE SAME. ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE FINDINGS OF THE AUTHORITIES BELOW. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES NOTED ABOVE, WE ARE OF THE VIEW T HAT THE LEARNED CIT(A) HAS NOT APPRECIATED AND CONSIDERED THE FACTS AND MATERIAL BROUGHT ON RECORD BY THE AO. THE AO NOTED IN THE A SSESSMENT ORDER THAT INCOME WAS DECLARED IN A SUM OF RS.1,45,536/- AND AUDIT REPORT IS ALSO FILED. THE ASSESSEE CLAIMED IN THE AUDIT RE PORT METHOD OF ACCOUNTING TO BE CASH SYSTEM. BUSINESS INCOME IS SH OWN AT RS.1,07,211/- AND CONSULTANCY FEES OF RS.46,500/-. THE ASSESSEE COULD NOT FURNISH COMPLETE DETAILS AS TO HOW CASH M ETHOD WAS ADOPTED. THE AO FOUND THAT TOTAL CONTRACT RECEIPT AS PER THE TDS CERTIFICATES WORKED OUT TO RS.59,84,813/- AS AGAINS T BUSINESS RECEIPTS OFFERED FOR TAXATION AT RS.1,50,200/- CLAIMED ON CA SH METHOD BASIS. THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS BEFO RE THE AO, THEREFORE, SUMMONS U/S 131 OF THE IT ACT WAS ISSUED AND STATEMENT OF THE ASSESSEE WAS RECORDED. THE ASSESSEE IN HIS S TATEMENT ADMITTED THAT BOOKS OF ACCOUNTS ARE MAINTAINED ON M ERCANTILE SYSTEM. THEREFORE, THERE WAS NO BASIS FOR THE ASSE SSEE TO SHOW THE RECEIPTS AND OFFER THE INCOME FOR TAXATION IN THE R ETURN OF INCOME ON CASH SYSTEM. ON INVESTIGATION MADE BY THE AO REVEAL ED THAT THE ASSESSEE CONCEALED AND SUPPRESSED TOTAL BALANCE REC EIPTS IN A SUM OF RS.18,78,044/-. THE ASSESSEE WHEN CORNERED BY TH E AO AGREED TO OFFER INCOME ON MERCANTILE SYSTEM. WHEN THE MATTER WAS TAKEN UP FOR PENALTY, THE ASSESSEE DID NOT FILE ANY REPLY BEFORE THE AO AND NO EXPLANATION WAS OFFERED. SIMILARLY, NO EXPLANATION WAS OFFERED BEFORE THE LEARNED CIT(A). THE HONBLE M. P. HIGH COURT IN THE CASE OF RUKMINI BAI, 276 ITR 650 AND IN THE CASE OF VIMAL G INNING AND ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 6 PRESSING FACTORY, 279 ITR 100 HELD THAT WHEN NO SATISFACTORY EXPLANATION IS FILED AT PENALTY STAGE IMPOSITION OF PENALTY U/S 271 (1) (C) WOULD BE JUSTIFIED. THE FINDINGS OF THE LEARNED CIT(A) NOTED ABOVE DO NOT STATE CORRECT FACTS OF THE CASE AND TH E LEARNED CIT(A) MERELY CONSIDERED THAT INCOME IS ESTIMATED. EVEN, T HERE IS NO REFERENCE OF THE FINDINGS OF THE TRIBUNAL IN THE IM PUGNED ORDER. EVEN IF, INCOME IS ULTIMATELY ESTIMATED BUT THE FINDING OF FACT RECORDED BY THE AUTHORITIES BELOW AT THE QUANTUM STAGE HAVE REL EVANCE ON THE ISSUE BECAUSE THE SAME HAVE PROBATIVE VALUE. CONSID ERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND THE FAC TS BROUGHT ON RECORD BY THE AO PROVING CONCEALMENT AND SUPPRESSION OF TH E ACTUAL RECEIPTS ON CHANGE OF SYSTEM OF ACCOUNTING, THE LEA RNED CIT(A) BEFORE CANCELING THE PENALTY SHOULD HAVE ADDRESSED THIS ISSUES IN THE APPELLATE ORDER. THE ORDER OF THE LEARNED CIT(A) IS NON-SPEAKING, SILENT AND IRRELEVANT TO THE MATTER IN ISSUE. THE O RDER OF THE LEARNED CIT(A) THUS CANNOT BE SUSTAINED IN LAW AND IN OUR O PINION THE SAME REQUIRES RECONSIDERATION. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE MATTER IN ISSUE TO H IS FILE WITH DIRECTION TO RE-DECIDE THE ISSUE CONSIDERING THE FINDINGS BRO UGHT ON RECORD BY THE AO IN THE LIGHT OF THE ORDER OF THE TRIBUNAL ON QUANTUM. THE LEARNED CIT(A) SHALL GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE AO. ITA NO.271/AHD/2011 ITO, WARD 6(5), AHMEDABAD VS KIRAN J. MISTRY 7 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (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 D Y. REGISTRAR, ITAT, AHMEDABAD