The ITO, Ward-2(3)(5), Surat V. M/s. Global Syntax, Surat

ITA 2936/AHD/2016

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1933 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Difference of opinion
• Section: 271(1)(c); 205; 251

Judgement Text

M/S.GLOBAL SYNTAX IN ITA NO.2936/AHD/2016 FOR A.Y. 2010-11 PAGE 1 OF 5 , , INCOM TAX APPELLATE TRIBUNAL SURAT-BENCH-SURAT . . [ , . . , BEFORE SHRI C .M. GARG,JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER ITA NO.2936/AHD/2016/SRT : ASSESSMENT YEAR: 2010-11 INCOME TAX OFFICER, WARD-2(3)(5), SURAT. V S . M/S.GLOBAL SYNTAX, 208, GIDC, PANDESARA, SURAT. PAN: AACFG 9622Q APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI BHARAT JHAVERI, ADV. /REVENUE BY MRS. R.KAVITHA, SR.DR / DATE OF HEARING: 16 .0 3 .2018 /PRONOUNCEMENT DATE 23 . 03 .2018 ORDER PER O. P. MEENA, AM THIS APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF LD.COMMSSIONER OF INCOME TAX(APPEALS)-1, SURAT DATED 03.08.2016 FOR THE ASSESSMENT YEAR 2010-11 UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. GROUND NO.1 TO 3 STATES THAT CIT(A) ERRED IN DELETING THE PENALTY OF RS.14,58,400/- LEVIED UNDER SECTION 271(1)(C) OF THE ACT, BY OBSERVING THAT THE GP ADDITION IS ON ESTIMATED BASIS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 25.09.2010 DECLARING TOTAL LOSS AT RS.88,57,420/- WHICH WAS ASSESSED AT RS.41,21,602/- BY MAKING GP ADDITION OF RS.46,45,955/-, ADDITION U/S.41(1) OF THE ACT OF RS.16,194/- AND ADDITION ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION M/S.GLOBAL SYNTAX IN ITA NO.2936/AHD/2016 FOR A.Y. 2010-11 PAGE 2 OF 5 TO EPF ACCOUNT OF RS.73,669/-. IN VIEW OF THE ABOVE FACTS CIRCUMSTANCES, THE ASSESSING OFFICER LEVIED PENALTY OF RS.14,58,400/- BEING 100% TAX SOUGHT TO BE EVADED. 4. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO NOTED THAT THE ASSESSING OFFICER MADE ADDITIONS ON GP ADDITION OF RS.46,45,955/-, ADDITION U/S.41(1) OF THE ACT OF RS.16,194/- AND ADDITION ON ACCOUNT OF DELAYED PAYMENT OF EPF OF RS.73,669/-. THE LD.CIT(A), AFTER PERUSAL OF THE RECORD VIEWED THAT G.P. ADDITION BEING TRADING ADDITION DUE TO APPLICATION OF HIGHER PROFIT RATE WRONGLY ESTIMATED BY THE ASSESSING OFFICER THAN THAT OF DECLARED BY THE ASSESSEE, THE SAME BEING THE RESULT OF ESTIMATION AND CANNOT BE TREATED TO BE CONCEALED INCOME BY ANY STANDARD. NOTWITHSTANDING, THE ASSESSING OFFICER HAS NOT BROUGHT ANY POSITIVE EVIDENCE ON RECORD TO SHOW THAT ACTUALLY ASSESSEE HAS EARNED MORE PROFIT/INCOME THAN WHAT HAS BEEN SHOWN IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE ENJOYED THE BENEFIT OF SUCH EXCESS INCOME BY MAKING INVESTMENT/EXPENSES ETC. IN NUTSHELL, THIS IS A SIMPLE CASE OF REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF HIGHER GP RATE WITHOUT HAVING ANY POSITIVE FINDING ABOUT THE CONCEALMENT OF INCOME. THE CIT(A) FURTHER OBSERVED THAT THE AO HAS NOT BROUGHT ON RECORD ANYTHING TO ESTABLISH THAT THE ASSESSEE HAS EARNED MORE PROFIT THAN AND SHOWN IN THE BOOKS OF ACCOUNTS. LIKEWISE, DISALLOWANCE MADE FOR DELAYED PAYMENT OF EMPLOYEES EPF CONTRIBUTION OF RS.73,669/- TOWARDS LATE DEPOSIT OF PF AMOUNT IS CONCERNED THE CIT(A) RELIED ON THE DECISION IN THE CASE OF CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. [1985] 155 ITR 711(SC) WHEREIN IT WAS HELD THAT LEGAL FICTION IS CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. THEREFORE, THE CIT(A) OBSERVED THAT THE LD.AO WAS THOROUGHLY UNJUSTIFIED IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE CIT(A) FURTHER SUPPORTED HIS VIEW BY PLACING RELIANCE IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD [2010] 322 ITR 158 (SC); [2010] 189 TAXMANN 322 M/S.GLOBAL SYNTAX IN ITA NO.2936/AHD/2016 FOR A.Y. 2010-11 PAGE 3 OF 5 (SC) WHEREIN IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE HAS CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE BY THE REVENUE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE ATTRACTED. FOLLOWING THE ABOVE DECISIONS OF HONBLE SUPREME COURT AND OTHER HIGH COURTS, THE CIT(A) HAD DELETED THE PENALTY OF RS.14,58,363/- LEVIED ON THIS ACCOUNT. 5. BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD.SR.DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. THE LD.SR.DR ARGUED THAT THIS IS NOT ISSUE OF REJECTION OF BOOKS OF ACCOUNTS BUT THE ASSESSING OFFICER HAS GIVEN REASON IN FALL OF GROSS PROFIT RATE AS COMPARED TO LAST TWO YEARS AND ONLY APPLIED AVERAGE GROSS PROFIT RATE TO MAKE ADDITION. WITH REGARD TO DISALLOWANCE ON ACCOUNT OF EMPLOYEES EPF PAYMENTS. THE LD.SR.DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 6. PER CONTRA, THE LD.AUTHORISED REPRESENTATIVE SUBMITTED THAT SIMILAR PENALTY IMPOSED FOR THE ASSESSMENT YEAR 2009-10 WAS DELETED BY THE CIT(A) AGAINST WHICH THE DEPARTMENT HAS FILED APPEAL BEFORE THE TRIBUNAL ITA NO.3146/AHD/2015. THE TRIBUNAL HAS ALSO HEARD THE SAME ON 23.11.2017 WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. THEREFORE, THE ASSESSEE RELIES ON THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09 AND ASSESSMENT YEAR 2009-10 IN THIS REGARD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THE ASSESSMENT ORDER, THE AO HAS RELIED ON THE DECISION OF DHARMENDRA TEXTILE PROCESSORS & ORS. (2008) 306 ITR 277 (SC). ADDL. CIT VS. JEEVANLAL SHAH 205 ITR 244 (SC) AND K P MADHUSUDAN VS. CIT 251 ITR 99 (SC) AND LEVIED PENALTY OF RS.14,58,400/- WHICH DELETED BY THE CIT(A). THE AO HAS ESTIMATED THE INCOME ON PURE GUESS WORK. THE SIMILAR ISSUE HAD COME BEFORE THE HONBLE M.P.HIGH COURT IN THE CASE OF CIT VS. SHIVNARAYAN JAMNALAL, (1998) 232 ITR M/S.GLOBAL SYNTAX IN ITA NO.2936/AHD/2016 FOR A.Y. 2010-11 PAGE 4 OF 5 311(MP)/1996 89 TAXMAN 420 (MKP), WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT PROPERLY MAINTAINED AND IF ASSESSEE HAS NOT CONCEALED ANY MATERIAL AND NOT TRIED TO DEFRAUD THE AUTHORITIES, THE PENALTY CANNOT BE LEVIED, BECAUSE THE INCOME WAS ASSESSED ON ESTIMATE BASIS. WE FIND THAT SIMILAR CASE HAS COME UP BEFORE THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH VS. CIT, 258 ITR 85 (P &H), WHEREIN IT IS HELD THAT IT WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME SO AS TO ATTRACT THE PROVISION OF SECTION 271(1)(C). 8. IN THE INSTANT CASE, IN ORDER TO PROTECT THE CLAUSE (C) OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF PARTICULARS OF HIS INCOME OR IF HE FURNISHED THE INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND HE HAS FILED THE RETURN OF INCOME AND DURING THE COURSE OF ASSESSMENT, THE AO HAS ESTIMATED PROFIT PURELY ON THE GUESS WORK THAT GROSS PROFIT RATE DECLARED BY THE ASSESSEE WAS LESS THAN OF PRECEDING ASSESSMENT YEARS. THEREFORE, THE ADDITION WAS MADE ESTIMATED BASIS. SIMILARLY, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SUBHASH TRADING CO. [1996] 131 CTR 121 (GUJ) HELD THAT WHERE PENALTY UNDER EXPLANATION TO SECTION 271(1)(C) OF IS SOUGHT TO BE IMPOSED ON THE BASIS OF ESTIMATED INCOME AFTER REJECTING BOOKS RESULTS, THE PREPONDERANCE OF PROBABILITY IS THAT FAILURE TO RETURN THE ASSESSED INCOME WAS NOT ON ACCOUNT OF ANY FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. IT HAS BEEN HELD THAT ONUS ON THE ASSESSEE STANDS DISCHARGED AND THE PRESUMPTION UNDER EXPLANATION TO SECTION 271(1)(C) STANDS REBUTTED. HENCE, PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED IN SUCH A CASE. IN THE CASE OF DILIP N SHROFF V. JCIT [2007] 291 ITR 519 (SC), THE HONBLE SUPREME COURT HELD THAT FINDING IN ASSESSMENT PROCEEDINGS CAN NOT BE M/S.GLOBAL SYNTAX IN ITA NO.2936/AHD/2016 FOR A.Y. 2010-11 PAGE 5 OF 5 AUTOMATICALLY ADOPTED IN PENALTY PROCEEDINGS AND THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLES. IN CIT V. MAHENDRA SINGH KHEDIA [2012] 252 CTR 453 (RAJ) THE HONBLE RAJASTHAN HIGH COURT HAS HELD THAT A FACT OR ALLEGATION BASED ON ESTIMATION ON GP ADDITION BE CORRECT OR INCORRECT, THEREFORE, PENALTY UNDER SECTION 271(1)(C) WAS NOT JUSTIFIED. IN RESPECT OF DISALLOWANCE ON ACCOUNT OF EMPLOYEES EPF LATE PAYMENT, WE FIND THAT THIS IS ONLY DISALLOWANCE OF LATE PAYMENT OF SAME GOVERNMENT ACCOUNT, BUT EXPENSES INCURRED IS NOT DISPUTED. THIS BEING TECHNICAL DISALLOWANCE, HENCE, THERE IS NO CONCEALMENT OF INCOME. HENCE, PENALTY ON THIS AMOUNT DELETED BY THE CIT(A) IS SUSTAINED. HENCE, NO INTERFERENCE IS REQUIRED IN THE ORDER OF THE CIT(A). THEREFORE, WE ARE OF THE VIEW THAT THE PENALTY CANNOT BE LEVIED. IN THE LIGHT OF THE ABOVE DISCUSSION AND JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD.CIT(A), HENCE, APPEAL OF THE REVENUE ON ALL GROUNDS OF APPEAL IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.03.2018 SD/- SD/- ( . . [ /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED: 23 RD MARCH, 2018 S.GANGADHARA RAO COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT