M/s. Chemfilt, Anand V. The Dy.CIT, Cent.Circle-I, Baroda

ITA 2818/AHD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68051 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT M EMBER M/S CHEMFILT 1304A, GIDC, VITHAL UDYOGNAGAR, ANAND (APPELLANT) VS DCIT, CENTRAL CIRCLE-1, BARODA (RESPONDENT) REVENUE BY: SRI O.P. BATHEJA , SR.D.R. ASSESSEE BY: SRI URVASHI SHODHAN, A. R. DATE OF HEARING : 04-12-2013 DATE OF PRONOUNCEMENT : 13-12-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-IV AHMEDABAD DATED 26 TH OCTOBER 2012. ITA NO. 2818/AHD/2012 ASSESSMENT YEAR 2006-07 I.T.A NO.2818/AHD/2012 A.Y. 2006-07 PAGE NO M/S CHEMFILT VS. DCIT 2 2. THE ASSESSEE IN THIS APPEAL IS AGGRIEVED BY THE ACTION OF LD. CIT(A) IN CONFIRMING PENALTY LEVIED BY AO U/S. 271(1)(C) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE COUR SE OF SURVEY CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE THE STOCK OF THE APPELLANT FIRM WAS PHYSICALLY VERIFIED AND WAS FOUND TO BE OF RS. 2,44 ,62,147/- WHEREAS THE STOCK AS PER BOOKS WAS RS. 2,61,51,979/-. THE DIFF ERENCE IN STOCK OF RS. 16,89,832/- WAS ACCEPTED BY THE CEO OF THE ASSESSEE FIRM DURING THE COURSE OF SURVEY. HOWEVER, DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THE FOLLOWING RE-CONCILIATION WITH REFERENCE TO THE DIF FERENCE IN STOCK OF RS. 16,89,832/- WAS FURNISHED. 'CLOSING STOCK AS PER BOOKS RS. 2,61,51,959/- ADD: BILLS NOT ENTERED: 1. BILLS NOT ENTERED TILL 19/10/2006 RS. 33,24,966/ - 2. LESS BILLS DECLARED ON 19/01/2006 RS. 16,90,304 /- RS. 16,33,662/- LESS: MATERIAL LYING OUTSIDE CHEMFIT FOR MACHINING RS. 23,65,721/- -------------------- ACTUAL CLOSING STOCK AS PER BOOKS RS. 2,54,19,92 0/- LESS STOCK ROUND IN SURVEY RS. 2,44,62,147/- --------------------- RECONCILED DEFICIT IN STOCK RS. 9,57,773/- --------------------- 4. IN VIEW OF THE ABOVE, THE ACTUAL STOCK DEFICIT WAS WORKED OUT BY THE ASSESSEE TO BE RS. 9,57,773/- INSTEAD OF 16,89,832/ -. POINTING OUT CERTAIN SPECIFIC DEFECTS THE AO REJECTED THE BOOKS OF ACCOU NT OF THE ASSESSEE U/S. I.T.A NO.2818/AHD/2012 A.Y. 2006-07 PAGE NO M/S CHEMFILT VS. DCIT 3 145 OF THE ACT AND CONCLUDED THAT ASSESSEE HAD MADE PURCHASES WHICH WERE NOT RECORDED IN THE BOOKS WORTH RS. 33,24,966/- FOR WHICH NO SOURCE COULD BE EXPLAINED. FURTHER AS THE STOCK WAS NOT FOUND O N THE PREMISES DURING THE SURVEY. AO HELD THAT IT WAS SOLD OUT OF BOOKS OF A CCOUNT. ACCORDINGLY, THE ADDITION OF RS. 33,42,966/- WAS MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNDISCLOSED INVESTMENT IN PURCHASES AND FURTHER ADDITION OF PROFIT ON THE ABOVE STOCK @ 15 % OF GP AMOUNTING TO RS. 4,98,750/- WAS ALSO ADDED TO THE INCOME OF THE ASSESSEE. THUS TOT AL ADDITION OF RS. 38,23,716/- WAS MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES AND PROFIT ELEM ENT ON SALE OF SUCH STOCK. THIS ADDITION MADE BY AO WAS CONFIRMED BY L D. CIT(A) WHEN ASSESSEE WENT IN APPEAL BEFORE HIM. AO INITIATED P ENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND IMPOSED A PENALTY OF RS. 1 2 LAC FOR CONCEALMENT OF PARTICULARS OF INCOME AT AROUND THE MINIMUM RATE OF TAX SOUGHT TO BE EVADED. 5. IN THE MEANWHILE ASSESSEE WENT IN APPEAL BEFORE HONBLE ITAT AGAINST THE ORDER OF LD. CIT(A) WHERE THE ADDITION OF RS. 38,23,716/- WAS RESTRICTED TO RS. 5 LACS. IN THE PENALTY PROCEEDIN GS BEFORE LD. CIT(A) ASSESSEE INTERALIA TOOK THE PLEA THAT SINCE THE ADD ITION OF RS. 5 LACS HAS BEEN CONFIRMED BY HONBLE ITAT ON ESTIMATED BASIS PENALT Y U/S. 271(1)(C) IS NOT LEVIABLE RELYING ON VARIOUS CASE LAWS ON THE ISSUE. LD. CIT(A) HOWEVER CONFIRMED THE PENALTY TO THE EXTENT THE ADDITION WA S CONFIRMED BY HONBLE ITAT. I.T.A NO.2818/AHD/2012 A.Y. 2006-07 PAGE NO M/S CHEMFILT VS. DCIT 4 6. BEFORE US LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT DURING THE ASSESSMENT PROCEEDINGS ASSESSEE FILED COMPLETE RE-C ONCILIATION OF BOOK STOCK AND STOCK FOUND DURING THE SURVEY AND SINCE T HE ADDITION MADE BY THE AO HAS BEEN SUSTAINED ONLY ON ESTIMATED BASIS BY TH E HONBLE TRIBUNAL PENALTY MAY KINDLY BE DELETED. LD. DR RELIED ON TH E ORDER OF LOWER AUTHORITIES. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT ADDITION OF RS. 38,23,716/- MADE BY THE AO AND SUST AINED BY LD. CIT(A) ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASES AND PROFIT ELEMENT ON SALE OF SUCH STOCK WAS RESTRICTED TO RS. 5 LACS BY HONB LE TRIBUNAL BY OBSERVING AS UNDER:- 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT AS A RESULT OF SURVEY, ON PHYSICAL VERIFICATION OF THE STOCK, THERE WAS A SHO RTFALL OF RS. 16.89 , 832/- IN THE STOCK OF THE ASSESSEE AND THE SAME WAS ACCEPTED BY THE CEO, SHRI KEYUR ARNIN. THE ASSESSEE HAS FILED A REC ONCILIATION STATEMENT AND HAS STATED THAT THE ACTUAL DIFFERENCE WAS RS.9,57,773/- AND NOT RS.16,89,832/-. WE FIND THAT THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.38,23,716/- INCLUDING PR OFIT ELEMENT AND UNDISCLOSED INVESTMENT IN PURCHASES WAS NOT JUSTIFI ED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW T HAT ENDS OF JUSTICE SHALL MET IF AN ADDITION OF RS.5,00,000/- IS MADE O N THIS COUNT OF SHORTFALL IN STOCK FOUND AT THE TIME OF SURVEY WHIC H WILL COVER THE PROFIT ELEMENT AND ALSO THE INVESTMENT MADE BY THE ASSESSEE. ACCORDINGLY, WE SUSTAIN THE ADDITION OF RS.5,00,000 /- AND THE BALANCE ADDITION ON THIS COUNT IS DELETED AND THE GROUND NO . 3 OF THE ASSESSEES APPEAL IS PARTLY ALLOWED. IT IS CLEAR FROM THE ABOVE THAT THE ADDITION OF RS. 5 LACS HAS BEEN SUSTAINED BY THE HONBLE TRIBUNAL ON ESTIMATED BASIS ONLY. L AW IS NOW WELL SETTLED I.T.A NO.2818/AHD/2012 A.Y. 2006-07 PAGE NO M/S CHEMFILT VS. DCIT 5 THAT ON ESTIMATED BASIS ADDITIONS PENALTY U/S. 271( 1)(C) FOR CONCEALMENT OF INCOME OR FOR FILING OF INACCURATE PARTICULARS OF I NCOME IS NOT LEVIABLE, THEREFORE PENALTY OF RS. 5 LACS SUSTAINED BY LD .CI T(A) IS HEREBY DELETED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D (HEREINABOVE AT CAPTION PAGE SD/- SD/- (A.K. GARODIA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 13/12/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,