Shri Shivprakash J.Prajapati, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 2766/AHD/2010

• Counselvise Citation: 276620514 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 28-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Rejection of books of accounts; Unexplained investment; Reasonable cause; Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.2766/AHD/2010 ASSESSMENT YEAR:2004-05 SHRI SHIVPRAKASH J PRAJAPATI, PROP. M/S. S.S. SILK MILLS 3018-19, J.J.A.C. MARKET, RING ROAD, SURAT PAN NO.ABEPP8220E V/S . INCOME TAX OFFICER, WARD-2(1), SURAT (APPELLANT) .. (RESPONDENT) /BY APPELLANT SHRI SAPNESH SHETH, AR /BY RESPONDENT SHRI VINOD TANWANI, SR-DR /DATE OF HEARING 14-03-2012 /DATE OF PRONOUNCEMENT 30-04-2012 O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- PRESENT APPEAL IS FIELD BY THE ASSESSEE AGAINST TH E ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-II, SURAT, FOR ASSESSMENT YEAR 2004- 05, WHEREBY THE LD. CIT(A) HAS CONFIRMED THE PENALT Y OF RS.6,07,700/- LEVIED BY ASSESSING OFFICER. THE ASSESSEE FEELING AGGRIEVE D BY THE ORDER OF LD. CIT(A) HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN LEVYING PENALTY OF RS.6,07,700/- U/S 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS LEADING TO FILING OF THE PRESENT APPEAL AS BORNE OUT OF THE RECORDS ARE STATED HEREINAFTER THE ASSESSEE IS ENGA GED IN THE BUSINESS OF ITA NO.2766/AHD.2010 A.Y. 2004-05 SH SHIVPRAKASH J PRAJAPATI V. ITO WD-2(1) SRT PAGE 2 PURCHASING OF GREY CLOTH FROM LOCAL WEAVERS AND GET TING IT PROCESSED FROM MILLS AND SELLING THE FINISHED GOODS IN THE FORM SAREES I N OPEN MARKET AT SURAT AS WELL AS OUT OF SURAT. A SURVEY ACTION UNDER SECTION 133 A OF THE INCOME TAX ACT, 1962( IN SHORT THE ACT) WAS CONDUCTED BY THE INCOME TAX AUTHORITIES ON 25.11.2003 AT THE BUSINESS PREMISES OF THE ASSESSEE . IN THE COURSE OF THE SURVEY ACTION EXCESS STOCK OF SAREES WAS FOUND THE ASSESSEE DISCLOSED AN AMOUNT OF RS. 28,11, 499/- AS THE UNACCOUNTED INCOM E FOR THE YEAR UNDER CONSIDERATION . THEREAFTER, VIDE LETTER DATED 08.12 .2003 THE ASSESSEE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT DURING OPERATION 7757 PIECES OF SAREE WERE NOT CONSIDERED WHILE CALCULATING THE STO CK AS PER BOOKS SINCE THE BILLS OF PROCESSING HOUSES WERE NOT RECEIVED HENCE SAME WERE NOT ENTERED INTO THE STOCK REGISTER. THE VALUATION OF 18984 PIE CES OF SAREES WAS WORKED OUT AT RS.18,60,432/-. SUBSEQUENTLY, THE ASSESSEE F ILED HIS RETURN ALONGWITH AUDIT REPORT IN PRESCRIBED FORMAT ON 27.10.2004 DEC LARING TOTAL INCOME AT RS. 9,87,070/. THEREAFTER, THE ASSESSMENT PROCEEDINGS W ERE INITIATED AND CONCLUDED ON 20.12.2006 U/S. 143(3) OF THE ACT. THE ASSESSING OFFICER NOTED THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE CHANGED HIS STAND NOW AND THEN QUA THE QUANTITY AND VALUATION OF STOCKS A ND REJECTED THE BOOKS OF ACCOUNTS AS PRODUCED BY THE ASSESSEE. THE ASSESSING OFFICER CONSIDERING THE CHANGE IN STAND OF THE WORKED UN ACCOUNT OF INV ESTMENT OF RS.37,01, 938/- . AND DIFFERENCE OF UNACCOUNTED STOCK FOUND AS ON D ATE OF SURVEY WORKED OUT TO RS.18,41,506/-WHICH WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE I NITIATED SEPARATELY. AGAINST THIS ADDITION THE ASSESSEE CARRIED MATTER UPTO THE HONBLE ITAT BUT OF NO AVAIL. IN PENALTY PROCEEDINGS THE ASSESSING OFFICER LEVIED A PENALTY OF RS.6,37,700/- ON ALLEGED CONCEALED INCOME OF RS.18, 41,056/. THE ASSESSEE FEELING AGGRIEVED BY THE PENALTY ORDER FILED APPEA L BEFORE LD. CIT(A) WHO ALSO CONFIRMED THE PENALTY IN THIS BACK GROUND THE ASSES SEE IS BEFORE THIS TRIBUNAL. ITA NO.2766/AHD.2010 A.Y. 2004-05 SH SHIVPRAKASH J PRAJAPATI V. ITO WD-2(1) SRT PAGE 3 3. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT THE IMPUGNED ORDER CONFIRMING THE PENALTY IS ERRONEOUS IN VIEW OF THE FACT THAT IN THE CASE OF PENALTY THE ASSESSEE NEED NOT SUBSTANTI ATE THE EXPLANATION TO THE SATISFACTION OF THE ASSESSING OFFICER. LD. AR PLACE D RELIANCE OF DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT V. SHRI PAWAN KUMAR DALMIA (1987) 168 ITR 1 (KEL) AND ALSO THE JUDGMENTS OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. CIT (2001) 249 ITR 125 (GUJ) AND IN THE CASE OF CIT V. JALARAM OIL MILLS (2002) 253 ITR 192 (GUJ). LD. AR FURTHER SUBMITTED THAT THE AUTHORITIES BELOW DID NO T ACCEPT THE VALUATION OF SAREES AS DECLARED BY THE ASSESSEE AND ADOPTED THE VALUATION OF THEIR OWN. IT IS ARGUED THAT THE AUTHORITIES BELOW OUGHT TO HAVE ACCEPTED THE VALUATION GIVEN BY THE ASSESSEE AS HE HAS PRODUCED THE SALE B ILLS. HOWEVER, THE AO DID NOT ACCEPT THE SAME AND SO FAR THE DISCREPANCY ASPE CT OF THE QUANTITY OF SAREE IS CONCERNED THAT THE LD. AR SUBMITTED THERE WERE C ERTAIN SAREES RETURNED BY THE CUSTOMERS AS REJECTED SAREES AND SAME WERE SOLD AT A LOWER PRICE THIS ASPECT OF THE MATTER IS NOT CONSIDERED BY THE ASSES SING OFFICER HE SUBMITTED THAT THE ASSESSEE THAT THE ASSESSEE HAS DULY REFLEC TED THE INCOME IN THE TRADING AND PROFIT AND LOSS ACCOUNT FILED ALONG WIT H THE RETURN OF INCOME. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO TAKEN STOCK OF EXCESS SAREES 18984 IN THE QUANTITATIVE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE BALANCING FIGURE AS ON 31.03.20 04 SHOWN AS CLOSING STOCK. HE SUBMITTED THERE IS NO CONCEALMENT AND OR FILING OF IN ACCURATE PARTICULARS. HE FURTHER SUBMITTED UNDER THE PECULIA R FACTS AND CIRCUMSTANCES OF THE CASE A LENIENT VIEW MAY BE TAKEN. THE AO HAS N OT GIVEN ANY FINDING AS TO WHY HE HAS ADOPTED HIGHER VALUE THAN DECLARED BY TH E ASSESSEE. LD. AR SUBMITTED THAT THE SURVEY OPERATION TOOK PLACE SUDD ENLY AND THE ASSESSEE BEING A LAYMAN UNDER THE PRESSURE OF THE REVENUE AU THORITY DOES NOT GIVE A FREE-HAND INDEPENDENT STATEMENT IN RESPECT OF STOCK . 4. ON THE CONTRARY, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT IN QUANTUM APP EAL THE ASSESSEE COULD ITA NO.2766/AHD.2010 A.Y. 2004-05 SH SHIVPRAKASH J PRAJAPATI V. ITO WD-2(1) SRT PAGE 4 NOT SUPPORT HIS CLAIM THEREFORE THE AUTHORITIES BEL OW HAVE RIGHTLY TREATED UNEXPLAINED STOCK AS FURNISHING OF INACCURATE PARTI CULARS OF INCOME. 5. WE HAVE PERUSED THE MATERIALS ON RECORD, THE OR DERS OF AUTHORITIES BELOW AND DECISIONS CITED BY THE RESPECTIVE PARTIES . WE FIND THAT THE VALUATION OF SAREES AS ADOPTED BY THE ASSESSING OFFICER IS HI GHER THAN THE VALUE AS CLAIMED BY THE ASSESSEE HAS DECLARED AT RS.50/- PER PIECE. WE FIND THAT THE HONBLE TRIBUNAL IN ITA NO.3702/AHD/2007 IN QUANTUM APPEAL HAS REPRODUCED FINDING OF THE ASSESSING OFFICER AS WELL S AS THAT OF LD. LEARNED CIT(APPEALS) AS UNDER:- PHYSICAL STOCK OF SAREES AND THE SAME WAS INVENTOR IED AND VALUED. THE TOTAL STOCK OF SAREES FOUND AT 56,800 PIECES, W HICH WAS VALUED AT RS.55,66,400/-. AS PER THE BOOKS OF ACCOUNT, THE ST OCK WAS AT 3,059 PIECES OF SAREES. THEREFORE, THE DIFFERENCE IN PIEC E OF SAREE WAS AT 26,741 PIECES OF SAREES. THE VALUE ADOPTED PER SARE E WAS AT RS.98/- AND THE TOTAL VALUE OF UNEXPLAINED STOCK WAS FOUND AT RS.26,20,618/-. THE FINDING OF LD. CIT(A) IS ALSO RECORDED IN THE A FORESAID JUDGMENT:- 5. CONSEQUENT TO THE ABOVE ORDER OF THE ITAT, THE AO PROVIDED FRESH OPPORTUNITY TO THE APPELLANT VIDE NOTICE DT. 2.2.20 09. HOWEVER, THE APPELLANT TOOK THE GROUND THAT THE ISSUE RELATING T O DISCLOSING STOCK HAS BEEN SET ASIDE FOR FRESH ASSESSMENT BY THE ITAT AND REQUESTED FOR DROPPING OF PENALTY PROCEEDINGS. THE AO HAS IN PARA 7 OF THE PENALTY ORDER HAS MENTIONED AND DISCUSSED THAT UNACCOUNTED INVESTMENT MADE IN THE EXCESS STOCK FOUND WORKED OUT HAS BEEN CONFI RMED BY THE ITAT, AND, THE ISSUE, WHICH HAS BEEN SET ASIDE RELATES TO THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN THE CLOSING STOCK, AS S UCH, THE APPELLANT SHOULD HAVE MADE SUBMISSIONS ON THE ISSUE DECIDED A GAINST THE APPELLANT, INSTEAD HE HAS REQUESTED FOR DROPPING OF PENALTY PROCEEDINGS BY MISREPRESENTING THE FACTS, AND WHILE DISMISSING THE APPEAL AGAINST THE QUANTUM ADDITION, CIT(A) HAS ALSO POINTED OUT T HAT THE APPELLANT HAD FAILED TO TAKE OPPORTUNITY DURING THE APPELLATE PROCEEDINGS, SO AS TO RECONCILE THE QUANTITATIVE DETAILS. THE ASSESSING O FFICER HAS THEREFORE, HELD THAT THE APPELLANT HAS WILLFULLY, KNOWINGLY AN D WITHOUT REASONABLE CAUSE FURNISHED INACCURATE PARTICULARS OF HIS INCOM E, WHICH LEADS TO CONCEALMENT OF INCOME, AND FURTHER HELD THAT PENALT Y IS EXIGIBLE IN THE CASE OF APPELLANT AND ACCORDINGLY, LEVIED PENALTY @ 100% ON THE TAX SOUGHT TO BE EVADED ON THE CONCEALMENT OF INCOME OF RS.18,41,056/- AND LEVIED PENALTY OF RS.6,07,700/- ITA NO.2766/AHD.2010 A.Y. 2004-05 SH SHIVPRAKASH J PRAJAPATI V. ITO WD-2(1) SRT PAGE 5 THE HONBLE TRIBUNAL IN QUANTUM APPEAL CONSIDERED T HE RIVAL CONTENTIONS OF THE PARTIES AND DECIDED THE ISSUE AGAINST THE ASSES SEE. IT IS SUBMITTED BEFORE US THAT A LENIENT VIEW MAY BE ADOPTED SINCE IN THE PRESENT CASE THERE IS A DIFFERENCE OF OPINION IN RESPECT OF VALUATION OF SA REES BETWEEN ASSESSING OFFICER AND THE ASSESSEE. LD. AR PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL TEXTILES (SUPRA), WHERE IT HAS BEEN OBSERVED IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED THAT IT IS NOT ACCEPTED BUT CIRCUMSTANCE DO NOT LEAD TO REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. LD AR SUBMITTED THAT IN THE PRESENT CASE ALSO THE EXPLAINED OFFERED BY T HE ASSESSEE IS NOT ACCEPTED BY THE REVENUE AUTHORITY. HOWEVER, THERE IS NOTHING ON RECORD THAT SUCH EXPLANATION AS OFFERED BY THE ASSESSEE IS FALSE AND DISPROVED. UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE, THE ASSESSEE DESERVES FOR A LENIENT VIEW AS THERE IS NOTHING ON RECORD SUGGESTI NG THAT THE ASSESSEE GAVE FALSE EXPLANATION. THE EXPLANATION AS OFFERED BY TH E ASSESSEE IS NOT IMPOSSIBLE KEEPING IN VIEW NATURE OF BUSINESS AS CA RRIED OUT BY THE ASSESSEE. THE JUDGEMENTS AS RELIED BY LD. CIT(APPEALS) ARE DI STINGUISHABLE UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE. WE A RE CONSCIOUS OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCT PVT. LTD. (2010) 322 ITR 174 (SC) THAT IN ORDER TO EXPOSE TH E ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. THEREFORE, R ESPECTFULLY FOLLOWING THE RATIO IN CIT V. RELIANCE PETROPRODUCT PVT. LTD. (SUPRA) WE HEREBY DIRECT THE ASSESSING OFFICER TO DELETE PENALTY AS LEVIED VIDE ORDER DATED 24/03/2009. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) *DKP ITA NO.2766/AHD.2010 A.Y. 2004-05 SH SHIVPRAKASH J PRAJAPATI V. ITO WD-2(1) SRT PAGE 6 - 30/04/2012 ()* + ,- ,- ,- ,- ../ ../ ../ ../ 0/ 0/ 0/ 0/ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. *.2 , ,3 / CONCERNED CIT 4. , ,3- / CIT (A) 5. /56 ...2, , .2 , ()* / DR, ITAT, AHMEDABAD 6. 69: ;< / GUARD FILE. BY ORDER/ ,- , /TRUE COPY/ =/ ( > , .2 , ()* +