Arya Hybrids Seeds Ltd, Aurangabad V. DCIT, Central Circle, Aurangabad

ITA 291/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7198 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Gross profit estimation; Unexplained investment
• Section: 143(3); 153A; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 291/PUN/2013 $& ' !(' / ASSESSMENT YEAR : 2008-09 ARYA HYBRIDS SEEDS LTD., 2 ND FLOOR, TAPADIYA TERRACES, ADALAT ROAD, AURANGABAD-431001 PAN : AABCA9241M ....... / APPELLANT )& /VS. DEPUTY COMMISSIONER OF INCOME TAX, (CENTRAL), AURANGABAD / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 28-12-2016 / DATE OF PRONOUNCEMENT : 18-01-2017 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DATED 03- 12-2012 FOR THE ASSESSMENT YEAR 2008-09, CONFIRMING THE LEVY OF PE NALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTU RING, 2 ITA NO. 291/PUN/2013, A.Y. 2008-09 PROCESSING AND MARKETING OF SEEDS USE FOR AGRICULTURAL, A S WELL AS NON- AGRICULTURAL PURPOSES. A SEARCH ACTION U/S. 132 OF THE AC T WAS CARRIED OUT IN THE CASE OF MULAY GROUP ON 10-10-2007. THE ASSE SSEE IS PART OF MULAY GROUP. DURING THE COURSE OF SEARCH ACTION PHYSICA L INVENTORY OF STOCK AT FACTORY PREMISES WAS CARRIED OUT. DURING SEARC H AND POST SEARCH PROCEEDINGS SHORTAGE OF STOCK TO THE TUNE OF ` 8,75,509/- WAS FOUND. PART OF SHORTAGE OF STOCK WAS SET OFF AGAINST THE EXCESS STOCK FOUND IN THE CASE OF M/S. AJEET SEEDS LTD., A SISTER CONCE RN OF THE ASSESSEE. FURTHER, DURING SEARCH AT OFFICE PREMISES OF A JEET SEEDS LTD. NOTING REGARDING INVESTMENT IN THE FORM OF ADVANCE TO TH E TUNE OF ` 5,11,000/- WERE FOUND. THE SAID INVESTMENTS WERE ALLEGEDLY ADMITTED BY THE ASSESSEE. AT THE TIME OF ASSESSMENT PROCEEDINGS , THE ASSESSEE PURPORTEDLY AGREED FOR GP ADDITION ON ACCOUNT OF SHORT AGE OF STOCK AND UNRECORDED INVESTMENT, THUS, AD HOC ADDITION OF ` 5,11,000/- WAS MADE ON BOTH THE COUNTS. DURING THE COURSE OF PENALTY PROCE EDINGS THE ASSESSEE INTER ALIA TOOK OBJECTION THAT NO PENALTY CAN B E LEVIED IN RESPECT OF GP ADDITION. THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF ASSESSEE AND LEVIED PENALTY OF ` 1,73,229/- U/S. 271(1)(C) OF THE ACT, IN RESPECT OF SAID ADDITION. AGGRIEVED BY THE ORDER DATED 28-06-2010 LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF I NCOME TAX (APPEALS) CONFIRMED THE LEVY OF PENALTY AND REJECTED TH E APPEAL OF ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE T HE TRIBUNAL ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) C ONFIRMING THE LEVY OF PENALTY. 3 ITA NO. 291/PUN/2013, A.Y. 2008-09 3. SHRI SUNIL GANOO APPEARING ON BEHALF OF THE ASSESSEE SU BMITTED THAT THE ADDITION OF ` 5,11,000/- MADE ON ACCOUNT OF SHORTAGE OF STOCK AND UNEXPLAINED INVESTMENT DOES NOT WARRANT LEVY OF PENA LTY. THE LD. AR POINTED THAT A PERUSAL OF ASSESSMENT ORDER WOULD SHO W THAT THE PENALTY HAS BEEN LEVIED ON THE GP PERCENTAGE OF 40.18% OF STOCK SHORTAGE, WHICH WORKS OUT TO ` 4,81,725/- AND UNEXPLAINED INVESTMENT ` 29,275/-. THE LD. AR SUBMITTED THAT PENALTY CANNOT BE LEV IED WHERE THE ADDITION IN ASSESSMENT PROCEEDINGS HAVE BEEN MADE O N ESTIMATIONS. PENALTY AND ASSESSMENT PROCEEDINGS ARE TW O DISTINCT AND INDEPENDENT PROCEEDINGS. EVERY ADDITION IN ASSESSMENT D OES NOT NECESSARILY RESULT IN LEVY OF PENALTY. THE LD. AR FURTHER STATED THAT HE WOULD NOT BE PRESSING ADDITIONAL GROUND RAISED IN THE APPEAL ALTHOUGH IN THE PRE SENT CASE ASSESSMENT HAS BEEN WRONGLY MADE UNDER THE PROVISIONS OF SECTION 143(3) R.W.S. 153A OF THE ACT. 4. ON THE OTHER HAND SHRI ANIL CHAWARE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE ORDER OF COMMISS IONER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY U/S. 27 1(1)(C) OF THE ACT. THE LD. DR POINTED THAT DURING ASSESSMENT PROC EEDINGS THE ASSESSEE HAD ADMITTED THAT ADVANCE AS NOTED IN THE SE IZED DOCUMENT IS UNRECORDED AND AGREED FOR THE ADDITION. THE LD. DR PRAY ED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT CONTESTE D THE ADDITIONS MADE DURING THE ASSESSMENT PROCEEDINGS. IT IS A TRITE LA W THAT LEVY OF 4 ITA NO. 291/PUN/2013, A.Y. 2008-09 PENALTY IS NOT AUTOMATIC AND EVERY ADDITION MADE DURING T HE ASSESSMENT PROCEEDINGS NEED NOT NECESSARILY RESULT IN LE VY OF PENALTY. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMIS SIONER OF INCOME TAX VS. KHODAY ESWARSA AND SONS REPORTED AS 8 3 ITR 369 HAS HELD THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCE EDINGS ARE TWO INDEPENDENT AND SEPARATE PROCEEDINGS. THE HONBLE BOM BAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DHAR AMCHAND L. SHAH REPORTED AS 204 ITR 462 HAS HELD : IT IS BY NOW TRITE LAW THAT THE ASSESSMENT PROCEED INGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT PROCEEDIN GS. THE FACT THAT CERTAIN ADDITIONS WERE MADE IN THE ASSESSMENT PROCE EDINGS WOULD NOT AUTOMATICALLY JUSTIFY THE REVENUE TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, ANY ADDITION MADE DURING ASSESSMENT IPSO FACTO WOULD NOT RESULT IN LEVY OF PENALTY. 6. IN THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICE R DURING ASSESSMENT PROCEEDINGS HAS MADE ADDITION IN RESPECT OF SHORTAGE IN STOCK AND UNRECORDED INVESTMENT ON ESTIMATION. IT WAS POINTED BY THE LD. DR THAT THE ASSESSEE HAD AGREED FOR ADDITION. ADDITION ON THE BASIS OF ESTIMATION MAY BE SUSTAINABLE IN ASSESSMENT PROCEEDINGS BUT CRITERION AND YARDSTICK FOR IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT ARE DIFFERENT FROM THESE APPLIED FOR MAKING THE ADDITIONS. IT IS A WELL SETTLED LAW THAT NO PENALTY U/S. 271(1)(C) SHOULD BE LEVIED W HERE ADDITIONS ARE MADE ON ESTIMATIONS. FURTHER, NO PENALTY U/ S. 271(1)(C) CAN BE LEVIED MERELY ON THE GROUND THAT THE ASSESSEE HAS AGREED FOR THE ADDITION. 5 ITA NO. 291/PUN/2013, A.Y. 2008-09 7. WE FIND THAT SIMILAR VIEW WAS TAKEN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. C. CHHOTOLAL TEXTILES (P.) LTD. R EPORTED AS 95 TTJ 436. IN THE SAID CASE, DURING SURVEY DISCREPA NCY IN STOCK WAS FOUND ON PHYSICAL VERIFICATION. THE ASSESSEE AGREED FOR THE ADDITION. THE ASSESSING OFFICER ASSESSED THE INCOME BY MA KING ADDITION ON ACCOUNT OF LOW GP AND ON ACCOUNT OF CERTAIN P URCHASES NOT ACCOUNTED IN STOCK REGISTER. THE ASSESSING OFFICER ALSO LEV IED PENALTY U/S. 271(1)(C) OF THE ACT ON SAID ADDITION. ON APPEAL COMMISSIO NER OF INCOME TAX (APPEALS) CANCELLED THE PENALTY. THE DEPARTME NT CARRIED THE MATTER IN SECOND APPEAL BEFORE THE TRIBUNAL. THE TRIB UNAL UPHELD THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) BY OBSE RVING AS UNDER : THE CASE OF THE ASSESSEE IS THAT IT HAS AGREED TO THE ADDITION MADE ONLY TO BUY PEACE WITH THE DEPARTMENT AND THAT TOO ON A CONDITION THAT PENALTY UNDER SECTION 271(L)(C) OF THE ACT SHALL NO T BE LEVIED ON THE ASSESSEE. THE PENALTY HAS ALSO BEEN LEVIED FOR TRAD ING ADDITION ON ACCOUNT OF LOW GP WHICH IS BASED ON ESTIMATION ONLY AND HENCE NOT SUSTAINABLE. WE FIND THAT SIMILAR ADDITIONS MADE IN THE OTHER GROUP CASES OF THE ASSESSEE WERE DELETED BY THE CIT(A) AN D THE REVENUE HAS NOT FILED AN APPEAL TO THE TRIBUNAL. WE FIND THAT T HE ASSESSEE HAS FILED CONFIRMATION REGARDING THE PURCHASE OF CLOTH FROM M /S ROYAL FABRICS, MUMBAI, WHEREIN THEIR INCOME-TAX FILE NUMBER, IS AL SO MENTIONED. IN THE FACTS OF THE CASE, WE FIND THAT MATERIAL POINTED OU T BY THE REVENUE MAY BE SUFFICIENT TO SUSTAIN THE ADDITION IN THE QUANTU M CASE BUT IS NOT SUFFICIENT TO PENALISE THE ASSESSEE UNDER SECTION 2 71(L)(C) OF THE ACT FOR CONCEALMENT OF INCOME. WE ARE UNABLE TO AGREE WITH THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE DECISION OF TH E HON'BLE APEX COURT IN [2001] 251 ITR 9 9 (SC) (SUPRA) SHALL BE APPLIED BEING LATER IN TIME THAN THE DECISION OF HON'BLE APEX COURT IN [2001] 2 51 ITR 9 (SC) (SUPRA) FOR THE REASON THAT BOTH THE DECISIONS OF THE HON'B LE APEX COURT WERE DECLARED ON DIFFERENT GROUNDS. WE ARE ALSO NOT IMPR ESSED WITH THE ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE DECISION OF THE HON'BLE APEX COURT IN [2001] 251 ITR 9 (SC) (SUPRA) DOES NOT LAY DOWN ANY LAW. THE HON'BLE APEX COURT HAS DELIVERED THIS JUDGMENT IN CIVIL APPEALS AFTER CONSIDERING ALL THE FACTS AND C IRCUMSTANCES OF THE CASE AND AFTER READING THE HIGH COURT ORDER AND THE STAT EMENT OF THE CASE. WE HOLD THAT THE DECISION OF HON'BLE APEX COURT IN SUR ESH CHANDRA MITTAL CASE (SUPRA) LAYS DOWN THE LAW ON THE ISSUE BEFORE THE HON'BLE COURT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN ACCO RDANCE WITH LAW APPLICABLE THERETO, WE HOLD THAT THE CIT(A) HAS RIG HTLY CANCELLED THE PENALTY IMPOSED UNDER SECTION 271(L)(C) AND ACCORDI NGLY WE DISMISS THE GROUND OF APPEAL OF THE REVENUE. 6 ITA NO. 291/PUN/2013, A.Y. 2008-09 8. THUS, IN VIEW OF THE FACTS OF THE CASE AND THE CASE LA WS DISCUSSED ABOVE, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE A SSESSING OFFICER TO CANCEL THE PENALTY. 9. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 18 TH DAY OF JANUARY, 2017. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 18 TH JANUARY, 2017 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A), AURANGABAD 4. ' / THE CIT, CENTRAL, NAGPUR 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, 6 7 / ASSISTANT REGISTRAR, ,- , / ITAT, PUNE