Greenfield Timber & Plywoods Pvt. Ltd., CHENNAI V. ACIT Central Circle II(1) i/c, CHENNAI

ITA 2964/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5194 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRINIRANJANI
• Keywords: Income from undisclosed sources

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! .#$#%, ' !( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NO.2964/CHNY/2017 % *% / ASSESSMENT YEAR : 2003-04 M/S GREENFIELD TIMBER & PLYWOODS PVT. LTD., NO.154, RANGARAJAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI - 600 034. PAN : AAACG 1187 F V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(1), CHENNAI - 600 034. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : MS. S. SRINIRANJANI, ADVOCATE ./,- 0 1 / RESPONDENT BY : SHRI AR.V. SREENIVASAN, JCIT 2 0 3' / DATE OF HEARING : 07.06.2018 45* 0 3' / DATE OF PRONOUNCEMENT : 14.06.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -13, CHENN AI, DATED 08.11.2017, FOR THE ASSESSMENT YEAR 2003-04, CONFIR MING THE PENALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTI ON 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2 I.T.A. NO.2964/CHNY/17 2. MS. S. SRINIRANJANI, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MENTIO NED IN THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE FOR LEVYING PEN ALTY, WHETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, ACCOR DING TO THE LD. COUNSEL, THE PENALTY PROCEEDING INITIATED BY THE AS SESSING OFFICER IS NOT JUSTIFIED. 3. COMING TO THE MERIT OF THE APPEAL, MS. S. SRINIR ANJANI, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THERE A RE TWO ADDITIONS MADE BY THE ASSESSING OFFICER WITH REGARD TO UNDERV ALUATION OF STOCK AND UNSECURED LOAN. IN RESPECT OF UNDERVALUA TION OF STOCK, THE ASSESSING OFFICER MADE ADDITION OF 2,90,000/-. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE CLOSING STOCK FOR ASSESSMENT YEAR 2003-04 WAS TAKEN AS OPENING STOCK FOR THE ASSESSMENT YEAR 2004 -05, THEREFORE, THERE IS A TAX NEUTRAL. MOREOVER, OUT OF TOTAL STO CKS, ACCORDING TO THE LD. COUNSEL, SOME OF THE STOCKS WERE NOT MARKETABLE AND NO ALLOWANCE WAS GIVEN WHILE PREPARING THE STATEMENT O F VALUATION BY THE ACCOUNTANT. THE VALUE OF THE STOCK DISCLOSED B EFORE THE DEPARTMENT WAS AFTER GIVING DISALLOWANCE TO THE UNM ARKETABLE 3 I.T.A. NO.2964/CHNY/17 STOCKS. THEREFORE, ACCORDING TO THE LD. COUNSEL, T HE DIFFERENCE HAS OCCURRED AND HENCE THERE WAS NO CONCEALMENT. 4. COMING TO THE UNSECURED LOAN ON CREDITORS, THE L D.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ENTIRE TRANSACT ION WAS RECORDED IN THE BOOKS. ACCORDING TO THE LD. COUNSEL, THE BA LANCE AMOUNT OUTSTANDING IN THE BOOKS ON THE DATE COULD NOT BE P ROPERLY ENTERED BY THE ACCOUNTANT. THE AMOUNTS REPAID WERE ENTERED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE ITSELF OFFERED TO MAKE ADDITION. THEREFORE, ACCORDING TO THE LD. COUNSEL, THERE CANN OT BE ANY LEVY OF PENALTY. 5. ON THE CONTRARY, SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE COULD NOT PRODUCE ANY MATERIAL BEFORE THE ASSESSING OFFIC ER WITH REGARD TO UNDERVALUATION OF STOCK. IN THE ABSENCE OF ANY PRO PER EXPLANATION, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER MA DE ADDITION OF 2,90,000/-. IN RESPECT OF SUNDRY CREDITORS AND UNS ECURED LOAN, ACCORDING TO THE LD. D.R., THE ASSESSEE ITSELF OFFE RED DURING THE COURSE OF ASSESSMENT PROCEEDING, THEREFORE, THE CIT (APPEALS) HAS RIGHTLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSI NG OFFICER. 4 I.T.A. NO.2964/CHNY/17 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE PENALTY WAS LEVIED ON TWO COUNTS. ONE FOR UNDERVAL UATION OF STOCKS AND ANOTHER IS FOR SUNDRY CREDITORS AND LOAN CREDIT ORS. IN RESPECT OF UNDERVALUATION OF STOCKS, THE ASSESSEE CLAIMS THAT THERE WERE SOME UNMARKETABLE STOCKS WHICH WERE NOT REDUCED WHILE PR EPARING THE STATEMENT. HOWEVER, WHILE DISCLOSING THE STATEMENT , IT WAS REDUCED. THIS EXPLANATION OF THE ASSESSEE WAS APPA RENTLY MADE BEFORE THE ASSESSING OFFICER WHICH WAS REJECTED BY BOTH THE AUTHORITIES BELOW. THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT WHEN THERE WERE SOME UNMARKETABLE STOCKS, WHICH WER E REQUIRED TO BE REDUCED OR THE MARKET RATE OF THOSE PRODUCTS HAD TO BE TAKEN INTO CONSIDERATION WHILE VALUING THE STOCKS, THIS CANNOT BE CONSTRUED AS CONCEALING THE INCOME OF THE ASSESSEE OR FURNISHING INACCURATE PARTICULARS FOR THE PURPOSE OF LEVYING PENALTY UNDE R SECTION 271(1)(C) OF THE ACT. 7. NOW COMING TO SUNDRY CREDITORS, THE ASSESSEE ADM ITTED BEFORE THE ASSESSING OFFICER THAT THERE WERE UNSECU RED CREDITORS AND LOANS. BOTH WERE TAKEN BY CASH AND BY CHEQUE. THE TRANSACTIONS WERE ENTERED INTO THE BOOKS. FROM THE MATERIAL 5 I.T.A. NO.2964/CHNY/17 AVAILABLE ON RECORD, IT APPEARS THAT SOME OF THE LO ANS OR CREDITORS WERE REPAID FROM UNACCOUNTED INCOME OF THE ASSESSEE . SOME OF THE LOANS WERE STILL OUTSTANDING. DURING THE COURS E OF EXAMINATION, THE ASSESSEE OFFERED THE SAME FOR TAXATION. THEREF ORE, THE ASSESSING OFFICER MADE ADDITION IN THE ASSESSMENT P ROCEEDING. 8. IT IS A SETTLED PRINCIPLE OF LAW THAT ASSESSMENT PROCEEDING IS INDEPENDENT AND DISTINCT FROM PENALTY PROCEEDING. DURING THE COURSE OF PENALTY PROCEEDING, THE ASSESSING OFFICER WAS EXPECTED TO RE-EXAMINE THE MATERIAL AVAILABLE ON RECORD. EV ERY ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER SHALL NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. WHEN THE ASSESSEE EXPLAINED THAT THE SUNDRY C REDITORS TO THE EXTENT OF 1,96,357/- WERE OUTSTANDING AND THE SAME WERE OFFER ED FOR THE NEXT ASSESSMENT YEAR, THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF BOTH THE LOWER AUTHORITIES. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE PENALTY LEV IED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE AC T AS CONFIRMED BY THE CIT(APPEALS) IS DELETED. 6 I.T.A. NO.2964/CHNY/17 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 14 TH JUNE, 2018 AT CHENNAI. SD/- SD/- ( ! .#$#% ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 14 TH JUNE, 2018. KRI. 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-13, CHENNAI-34 4. PRINCIPAL CIT-2, CHENNAI-34. 5. 9< .3 /DR 6. =% > /GF.