ITO 9(2)(3), MUMBAI V. MARSHAL MULTITRADE P. LTD, MUMBAI

ITA 2995/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3095 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SANTOSH MANKOSKAR
• Keywords: Rejection of books of accounts

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY ,JUDICIAL MEMBER /. ITA NO. 2885 /MUM/201 1 , / ASSESSMENT YEAR - 2004 - 05 INCOME TAX OFFIER - 9(3)(2) ROOM NO.225, AAYAKAR BHAVAN MUMBAI - 400 020. VS M/S. MARSHAL MULTITRADE PVT. LTD. OFFICE NO.33, S HREE NAMAN PLAZA, S .V. ROAD, BEHIND SHOPPERS STOP KANDIVALI (W)MUMBAI - 400 067. PAN: AADCM 0756 F ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : NONE / REVENUE BY : DR. SANTOSH MANKOSKAR / DATE OF HEARING : 28 - 09 - 2015 / DATE OF PRONOUNCEMENT : 28 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.11.02.2011OF CIT(A) - 20, MUMBAI THE ASSESSING OFFICER(AO), HAS FILED FOLLOWING GROUNDS OF APPEAL : 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF ;THE CASE AND IN LAW, THE LD. CITE ) ERRED IN CANCELING THE PENALTY OF RS. 6,96,006/ - IMPOSED BY THE ASSESSING OFFICER S. 271(1)(C) OF THE I.T. ACT, 1961, WITHOUT APPRECIATING THAT THE ASSESSEE HAS ACCEPTED THE ADDITION MADE IN THE QUANTUM ASSESSMENT TOWARDS SUPPRESSED PROFIT AFTER COGENTLY REJECTING THE BOOK RESULT, AND THAT THE CONCEALMENT OF INCOME BY THE ASSESSEE STANDS ADEQUATELY ESTABLISHED AS PER MATERIAL ON RECORD. 2. THE A PPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE HAD FILED RETURN OF INCOME ON 30.10.2004,DECLARING INCOME OF RS.67,946/ - .THE AO COMPLETED THE ASSESSMENT ON 29.12.2006,U/S.144 OF THE ACT,DETERMINING ITS INCOME AT 40.16 LACS. DURING THE ASSESSMENT PROCEEDINGS,THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMAT ED THE INCOME @2% OF THE TOTAL TURNOVER.HE ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1) (C)OF THE ACT FOR CONCEALING THE PARTICULARS OF INCOME , VIDE HIS NOTICE ISSUE ON 29.12.2006. IN THE MEANWHILE,T HE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY (FAA) AGAINST THE ADDITION MADE.THE FAA DIREC TED THE AO TO RECOMPUTED THE INCOME OF THE ASSESSEE @1% OF THE TOTAL TURNOVER.CONSEQUENTLY, HE PASSED AN ORDER U/S.250 OF THE ACT AND INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 20.08 LAKHS. 2.1. IN RESPONS E TO THE PENALTY NOTICE,THE ASSESSEE CONTENDED THAT THERE WAS NOTHING ON RECORD THAT DISPUTED AMOUNT REPRESENTED ITS INCOME,THAT IT HAD NOT CONCEALED PARTICULARS OF INCOME,THAT THE AO HAD MADE ADDITION ON AN ESTIMATE BASIS. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE AO HELD THAT IT WAS GIVEN AMPLE OPPORTU NITY TO SUBSTANTIATE ITS CLAIM, THAT THE ASSESSEE DID NOT DISCHARG E THE ONUS CAST UPON IT, THAT THE BOOKS OF ACCOUNTS WERE REJECTED AS PER PROVISIONS OF SECTION 145(3) OF THE ACT , THAT ASSESSEE HAD F AILED TO ITA/ 2 88 5 /M/11 MARSHAL ,AY. 0 4 - 05 2 SUBSTANTIATE VARIOUS CLAIM S MADE IN THE RETURN OF INCOME.HE REFERRED TO THE CASE OF DHARMENDRA TEXTILE PROCESSES AND HELD THAT AA HAD FURNISHED INACCURATE PARTICULARS OF INCOME .FINALLY, HE IMPOSED PENALTY OF RS.6.96 LACS, BEING 100% OF THE TAX TO BE EVADED U/S. 271(1)(C) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA.BEFORE HIM, IT WAS ARGUED THAT IT HAD NOT C ONCEALED PARTICULARS OF INCOME,THAT THE ADDITION W AS MADE PURELY ON ESTIMATE BASIS WITHOUT S HOWING THAT THE ENTRIES IN THE BOOKS OF ACCOUNT WERE INCORRECT OR INCO - M PLETE.AFTER CO NSIDERING THE ASSESSMENT ORDER, PENALTY ORDER AND THE SUBMISSIONS OF THE ASSESSEE , THE FAA REFERRED TO THE CASE O F ATUL MOHAN BINDAL(317 ITR 1) AND HELD THAT FOR APPLICA - B ILITY OF S.271(1)(C)CONDITIONS STIPULATED IN THE SECTION MUST EXIST.HE ALSO RELIED UPON THE CASE OF RELIANCE PETROPRODUCTS LTD. (328 ITR 158) AND HELD THAT THE AO HAD REJECTED THE BOOKS OF ACCOUNTS, THAT HE HAD ESTIMATED THE INCOME ON THE BASIS OF TURNOVER D ISCLOSED IN THE ACCOUNTS,THAT IT WAS NOT THE CASE OF THE AO THAT THE INCOME ESTIMATED INCLUDED SUPPRESSED TURNOVER, THAT NO PENALTY COULD BE LEVIED IN CASE WHERE INCOME WAS ESTIMATED.FINALLY HE DELETED THE PENALTY LEVIED BY THE AO. 4 .BEFORE US,THE DEPART MENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO.NONE APPEARED ON BEHALF OF THE ASSESSEE , AS STATED EARLIER.WE HAVE PERUSED THE MATERIAL ON RECORD.WE FIND THAT WHILE COMPLETING THE EX - PARTE ORDER, THE AO HAD ESTIMATED THE INCOME OF THE ASSESSEE , THAT H E HAD ADDED 2% OF THE TOTAL TURNOVER AS TAXABLE INCOME OF THE ASSESSEE , THAT B OOKS OF ACCOUNTS WERE REJECTED, THAT THE FAA DELETED THE PENALTY LEVIED BY THE AO, THAT THE FAA HELD THAT IN CASE OF ESTIMATED INCOMES PENALTY U/S. 271(1)(C) OF THE ACT COULD NOT B E LEVIED.WE FIND THAT THE FAA HAD REDUCED THE ESTIMATED INCOME FROM 2% TO 1% OF THE TOTAL TURNOVER. IN OUR OPINION, ONCE THE AO REJECTS THE BOOKS OF ACCOUNT HE CANNOT LEVY PENALTY FOR CONCEALMENT OF INCOME ON THE BASIS OF SAME BOOKS.THE ASSESSEE HAD FILED E XPLANATION BEFORE THE AO AND SAME FELL IN THE CAT EGORY OF PLAUSIBLE EXPLANATION. COURTS ARE OF THE VIEW THAT P ENALTY PROCEEDINGS ARE ENTIRELY DISTINCT F ROM ASSESSMENT PROCEEDINGS AND, HOWSOEVER RELEVANT AND GOOD, THE FINDINGS IN ASSESSMENT PROCEEDINGS MAY BE , THEY ARE NOT CONCLUSIVE SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED , THAT CONFIRMATION OF ADDITION BY HIGHER JUDICIAL FORUMS OF QUANTUM,IN APPELLATE PROCEEDINGS, SHOULD NOT RESULT IN AUTOMATIC LEVY OF CONCEALMENT PENALTY. HERE WE WOULD LIKE TO REFER TO THE CASE OF KRISHI TYRE RETREADING AND RUBBER I NDUSTRIES (360ITR580), DECIDED BY THE HONBLE R AJASTHAN HIGH COURT.FACTS OF THE CASE WERE THAT T HE ASSESSEE WAS ENGAGED IN RETREADING OF OLD (WORN OUT) TYRES OF ALL VEHICLES. BESIDES THE JOB WORK, THE ASSESSEE ALSO SOLD SUCH RAW MATERIAL TO LOCAL PARTIES. A SURVEY OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 16 .11. 1995,WHERE SOME DOCUMENTS WERE FOUND, WHICH WERE NOT SATISFACTORILY EXPLAINED AND ACCORDINGLY, O N ACCOUNT OF THE DISCREPANC IES, AN ESTIMATED ADDITION WAS MADE OF RS. 1,44,000. THE FAA SUSTAINED THE ADDITION. THE TRIBUNAL RESTRICTED THE ADDITION TO RS. 1 LAKH, INTER ALIA, REFERRING TO THE FACT THAT ADDIT ION WAS MADE ON ESTIMATE BASIS. PENALTY WAS IMPOSED BY THE A O AND WAS CONFIRME D BY THE FAA. HOWEVER, THE TRIBUNAL DELETED THE PENALTY. ON APPEAL TO THE HIGH COURT HELD AS UNDER : IF THERE IS NO EVIDENCE OR MATERIAL TO SHOW THAT THE ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS AND THERE WAS ANY MALA FIDE INTENTION ON H IS PART PENALTY CANNOT BE LEVIED UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 . PENALTY PROCEEDINGS ARE ENTIRELY DISTINCT FROM ASSESSMENT PROCEEDINGS AND, HOWSOEVER RELEVANT AND GOOD, THE FINDINGS IN ASSESSMENT PROCEEDINGS MAY BE, THEY ARE NOT CONCL USIVE SO FAR AS THE PENALTY PROCEEDINGS ARE ITA/ 2 88 5 /M/11 MARSHAL ,AY. 0 4 - 05 3 CONCERNED . THAT THE ADDITION HAD BEEN SUSTAINED PURELY ON ESTIMATE BASIS AND NO POSITIVE FACT OR FINDING HAD BEEN FOUND SO AS TO EVEN MAKE THE ADDITION. IT WAS A PURE GUESS WORK AND ON SUCH GUESS WORK OR ESTIMATI ON, NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT COULD BE SAID TO BE LEVIABLE. WE FIND THAT IN THE CASE UNDER CONSIDERATION THE ADDITION WAS MADE ON AD HOC BASIS AND SAME WAS FURTHER REDUCED BY 50% BY THE FAA. IN THESE CIRCUMSTANCES, FOLLOWING THE ABOVE DE CISIONS OF THE HONBLE RAJASTHAN HIGH COURT, WE ARE OF THE OPINION THAT ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. EFFECTIVE GROUND OF APPEAL FILED BY THE AO IS DECIDED AGAINST HIM AS A RESULT, APPEAL F ILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 28 ,SEPTEMBER,2015. 28 , 2015 SD/ - SD/ - ( / SAKTIJIT DEY ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT M EMBER / MUMBAI, /DATE: 28 .09. 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A) / , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.