Condor Footware(India) Ltd., Surat V. The Dy.CIT.,Range-1, Surat

ITA 3073/AHD/2009

• Counselvise Citation: 307320514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, , . .. . . .. . , , , , ! ! ! ! ' '' '# ## # ' ' ' '. .. .$ #$ $ #$ $ #$ $ #$ , %& ' %& ' %& ' %& ' % ! % ! % ! % ! IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD BEFORE HONBLE SHRI G.C.GUPTA, V.P. & HONBLE SHRI A.MOHAN ALANKAMONY, A.M.) # # # #. ITA NO. 3073 / AHD./2009 : ()- 2004-2005 M/S. CONDOR FOOTWEAR (INDIA) PVT. LTD., SURAT -VS- DCIT, CIRCLE-1, SURAT (,- /APPELLANT) ( ./,- /RESPONDENT ) PAN : AAACC 9540N ,- 0 1 % / APPELLANT BY : NONE (WRITTEN SUBMISSION) ./,- 0 1 % / RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. 2 0 34& / DATE OF HEARING : 08/12/2011 5$( 0 34& / DATE OF PRONOUNCEMENT : 16/12/2011 %6 %6 %6 %6 / ORDER PER SHRI A.MOHAN ALANKAMONY, A.M. : THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT IN APP EAL NO. CAS-I/66/09-10 DATED 14.09.2009 FOR THE ASSESSMENT YEAR 2004-2005 PASSED UNDER SECTION 250 R.W.S. 271(1)(C) OF THE I.T. ACT, 1961. 2. AT THE TIME OF HEARING OF THE APPEAL, NONE APPE ARED ON BEHALF OF THE ASSESSEE. THE NOTICE OF HEARING WAS SERVED BY THE ITAT AND TH E ACKNOWLEDGEMENT IS AVAILABLE ON RECORD. IN THESE FACTS, WE PROCEED TO DECIDE THE APPEAL OF THE ASSESSEE, AFTER HEARING THE LD. D.R. 3. THE ASSESSEE HAS RAISED TWO GROUNDS IN ITS APPEA L WHEREIN GROUND NO.2 IS GENERAL IN NATURE AND DOES NOT SURVIVE FOR ADJUDICA TION. THE GROUND NO.1 IS REPRODUCED HEREIN-BELOW: ITA NO. 3073-AHD-09 2 1. THE LEARNED CIT(A) GROSSLY ERRED IN CONFIRMING L EVY OF PENALTY OF RS.2,03,834/- U/S.271(1)(C) OF THE ACT. 4. THE AO HAD MADE AN ADDITION OF RS.1,21,258/- ON ACCOUNT OF ADJUSTMENT UNDER SECTION 145A OF THE ACT , THE DISALLOWANCE OF FOREI GN TRAVEL EXPENSES TO THE TUNE OF RS.3,54,032/- AND ADDITION ON ACCOUNT UNEXPLAINED S UNDRY CREDITORS AMOUNTING TO RS.92,809/-. ON THESE ADDITIONS, PENALTY WAS IMPOSE D AT 100% ON TAX SOUGHT TO BE EVADED WHICH WORKS OUT TO RS.2,03,834/-. 5. ON APPEAL BEFORE THE LD. CIT(A), THIS PENALTY OR DER OF THE LD. A.O. WAS CONFIRMED. THEREAFTER, THE ASSESSEE FILED APPEAL BE FORE US. 6. IMPOSITION OF PENALTY FOR THE ADDITION OF RS.1,21,2 58/- MADE UNDER SECTION 145A OF THE ACT:- THE LD. A.O. NOTICED THAT THERE WAS A DIFFERENCE O F RS.31.38 LAKHS IN EXCISE DUTY IN CLOSING STOCK AND UNUTILIZED MODVAT. SECTION 145A OF THE ACT PROVIDES THAT WHILE DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, FOLLOWING ADJUSTMENTS SHOU LD BE MADE: PURCHASE AND SALE OF GOODS SHOULD BE SHOWN AT GROSS AMOUNT INCLUDING DUTY, TAX, CESS ETC. OPENING AND CLOSING STOCK SHOULD INC LUDE TAX, DUTY, CESS ETC., AS A PART OF ITS COST. ACCORDINGLY, IN CASES WHERE ACCOU NTING FOR PURCHASE, SALES AND INVENTORY ARE DONE ON NET BASIS, THEN FOR ACCOUNTIN G PURPOSES THERE IS NO BAR ON CONTINUING THE SAME. HOWEVER, FOR INCOME-TAX PUR CHASES, THE ASSESSEE WILL HAVE TO RECAST THE ACCOUNTS ON GROSS BASIS AS PROVI DED BY SECTION 145A OF THE ACT. SINCE THE ASSESSEE HAD NOT ABIDE BY THE MANDAT E OF SECTION 145A OF THE ACT AND THEREBY UNDER-VALUED THE STOCK, AN ADDITION OF RS.1,21,258/- WAS MADE . IN THE PENALTY PROCEEDINGS, THE LD. A.O. HELD THAT SECTION 271(1)(C) WILL BE ATTRACTED IN SUCH CASE SINCE THE ASSESSEE HAS NOT DISCLOSED THE CORRECT VALUE OF CLOSING STOCK BY INCLUDING TAX, DUTY, CESS ETC., IN ITS RETURN OF IN COME. THE LD. CIT(A) FURTHER CONFIRMED THE ORDER OF THE LD. A.O. 7. THE LD. A.R. VEHEMENTLY ARGUED BEFORE US THAT TH E ASSESSEE WAS FOLLOWING THE SAME METHOD OF ACCOUNTING YEAR AFTER YEAR AND HAS N OT CONCEALED ANY PARTICULARS OF ITS INCOME FURNISHING INACCURATE PARTICULARS. HE FURTHE R SUBMITTED THAT NO ELEMENT OF ITA NO. 3073-AHD-09 3 PROFIT HAS ESCAPED TAX BECAUSE THE SMALL DISCREPANC Y ARISING DUE TO THE METHOD OF ACCOUNTING FOLLOWED WILL BE TAXED IN THE SUBSEQUENT YEAR. THE LD. A.R. PLACED RELIANCE IN THE FOLLOWING CASES AND ARGUED THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY AND THE SAME MAY BE DELETED. I) CIT-VS- MAHAVIR ALUMINIUM LTD. 297 ITR 77 (DEL. ) I) J.N.PARABIA (TRANSPORT) (P) LTD. VS- DCIT 50 IT D 250 8. THE LD. D.R. STRONGLY ARGUED THAT THE CONTENTION OF THE LD. A.R. IS NOT ACCEPTABLE. HE STATED THAT THE ASSESSEE HAD DELIBER ATELY FAILED TO DISCLOSE THE CORRECT VALUE OF THE CLOSING STOCK AND IT IS A FIT CASE FOR LEVY OF PENALTY AND THEREFORE THE ORDER OF THE LD. CIT(A) MAY BE UPHELD. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS QUITE APPARENT THAT THE ASSESSEE HAS BEEN CONTINUOU SLY FOLLOWING THE SAME METHOD OF VALUING THE CLOSING STOCK. WE HAVE ALSO TAKEN NOTE OF THE CASE LAWS RELIED ON BY THE LD. A.R. WHEREIN IT WAS HELD IN THE CASE OF CIT-VS- MAH AVIR ALUMINIUM LTD. ( SUPRA ) AS UNDER: ACCOUNTSVALUATION OF STOCKADJUSTMENT FOR EXCISE D UTY, MODVAT CREDIT, ETC.TO GIVE EFFECT TO S. 145A, IF THERE IS A CHANG E IN THE CLOSING STOCK AS ON 31ST MARCH, 1999, THERE MUST NECESSARILY BE A CORRE SPONDING ADJUSTMENT IN THE OPENING STOCK AS ON 1ST APRIL, 1998, AND SINCE NO A DJUSTMENT WAS MADE BY THE ASSESSEE IN THE P&L A/C FOR THE YEAR ENDING 31ST MA RCH, 1998, NO QUESTION OF DOUBLE DEDUCTION ARISESTRIBUNAL WAS CORRECT IN LAW IN ALLOWING THE ADJUSTMENT OF RS. 54,83,272 TO THE ASSESSEE IN THE OPENING STOCK FOR THE PREVIOUS ASST. YR. 1998-99 (BEING A TRANSITIONAL YE AR) UNDER S. 145A. IN THE CASE OF J.N.PARABIA (TRANSPORT) (P) LTD. ( SUPRA ) IT WAS HELD AS UNDER: PENALTY UNDER SC. 271(1)(C) CONCEALMENT- WORK-IN- PROGRESS NOT DISCLOSED SAME SYSTEM FOLLOWING BY ASSESSEE-COMPANY SINCE ITS INCEPTION AND HAS BEEN ACCEPTED BY DEPARTMENT IN THE PAST NOT A FIT CASE FOR LEVY OF PENALTY . 9.1 FURTHER, WE HAVE TAKEN NOTE TO THE RECENT DECIS ION OF THE HONBLE APEX COURT CITED BY THE LD.AR IN THE CASE OF RELIANCE PETRO PR ODUCTS PVT. LTD. REPORTED IN 322 ITR 158 (S.C.), WHEREIN IT WAS HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE I.T. ACT 1961, SUGGESTS THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS ITA NO. 3073-AHD-09 4 OF THE INCOME OF THE ASSESSEE. SECONDLY THE ASSESSE E MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING O F THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRANCE THE DETAIL S OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE I NCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCU RATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION THE PENALTY PROVISIONS CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS TO ATTRACT PENALTY, THE DETAILS SUPPL IED IN THE RETURN MUST NOT BE ACCURATE, NOR EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE I N LAW, BE ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AM OUNT TO FURNISHING INACCURATE PARTICULARS. 9.2 FROM THE FACTS AND CIRCUMSTANCE OF THE CASE IT IS APPARENT THAT THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS. IT IS ONLY AN INADVERTENT MISTAKE COMMITTED BY THE APPELLANT I N NOT ADOPTING THE CORRECT METHOD OF ACCOUNTING. FURTHER NO ELEMENT OF PROFIT HAD ESC APED TAX THOUGH IT MAY HAVE SPILLED OVER TO THE SUBSEQUENT YEAR AND THAT TOO MARGINALLY . FURTHER CONSIDERING THE ABOVE CASE LAWS, WE ARE OF THE CONSIDERED VIEW THAT IT IS NOT A FIT CASE TO LEVY PENALTY ON THIS ISSUE. ACCORDINGLY, WE DELETE THE LEVY OF PENALTY M ADE UNDER THIS ISSUE. 10. IMPOSITION OF PENALTY FOR DISALLOWANCE ON FOREIGN T RAVEL EXPENSES OF RS.3,54,032/-:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD . A.O. DISALLOWED AN EXPENSES OF RS.3,54,032/- INCURRED BY THE ASSESS EE TOWARDS FOREIGN TOUR EXPENSES OF MR. MURLI ADNANI, WHO WAS NEITHER A DIRECTOR NOR AN EMPLOYEE OF THE COMPANY. THE ASSESSEE HAD CLARIFIED THAT MR. MURLI ADNANI WAS A PROMOTER/SHAREHOLDER OF THE COMPANY AND HAD SOURCED MANY BUYERS/SUPPLIERS FOR T HE COMPANY. HE WAS HELPING THE COMPANY IN ITS BUSINESS AND THE COMPANY HAD INCURRE D THESE TRAVEL EXPENSES OF MR. MURLI ADNANI FOR THE PURPOSE OF BUSINESS OF THE ASS ESSEE COMPANY. HOWEVER, LD. A.O. DISBELIEVED THE CONTENTION OF THE ASSESSEE AND MADE THE DISALLOWANCE. THIS DISALLOWANCE OF EXPENSES WAS CONFIRMED BY THE LD. C IT(A) AND THE ITAT. LD. A.O. THEREAFTER LEVIED PENALTY ON THIS ADDITION INVOKING SECTION 271(1)(C) OF THE ACT WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD. CIT(A). ITA NO. 3073-AHD-09 5 11. THE LD. A.R. FORCEFULLY ARGUED THAT THE EXPENSE S INCURRED BY THE ASSESSEE WERE GENUINE AND THE DISALLOWANCE WAS MADE BY THE LD. AO DISBELIEVING THE ASSERTION OF THE ASSESSEE. HE PRAYED THAT IN SUCH CIRCUMSTANCES, PEN ALTY MAY NOT BE LEVIED BECAUSE THE ASSESSEE HAS NOT CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS. 12. THE LD. D.R. SUPPORTED THE ORDERS OF THE REVENU E AND PRAYED THAT THE ASSESSEE HAS INCORRECTLY CLAIMED EXPENSES WHICH WERE NOT PER MISSIBLE UNDER THE ACT AND THEREFORE PENALTY LEVIED ON THIS ADDITION MAY BE SU STAINED. 13. AFTER HEARING BOTH THE SIDES AND CAREFULLY GOIN G THROUGH THE RECORDS AVAILABLE WITH US, IT IS EVIDENT THAT THE ASSESSEE HAS DISCLO SED ALL THE DETAILS OF ITS EXPENDITURE EXPLICITLY IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE H AS ALSO EXPLAINED THE PURPOSE OF SUCH EXPENDITURE. THE DISALLOWANCE WAS MADE BY THE REVEN UE AUTHORITIES ON THE ASSUMPTION THAT THE EXPENSES CLAIMED TO BE NOT GENUINE BECAUSE SUFFICIENT EVIDENCE TO THAT EXTENT WAS NOT PRODUCED. HOWEVER, CONSIDERING THE FACTS AN D CIRCUMSTANCES OF THE CASE AND PLACING RELIANCE ON THE DECISION OF THE HONBLE APE X COURT RENDERED IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. ( SUPRA ), WE ARE OF THE CONSIDERED VIEW THAT PENALTY LEVIED ON THE ABOVE ADDITION IS NOT SUSTAINABLE. TH EREFORE, WE HEREBY DELETE THE PENALTY MADE ON THE DISALLOWANCE OF RS. 3,54,032/- UNDER TH E HEAD FOREIGN TRAVEL EXPENSES. 14. IMPOSITION OF PENALTY ON ACCOUNT OF UNEXPLAINED SUN DRY CREDITORS AMOUNTING TO RS.92,809/-:- THESE SUNDRY CREDITORS ARE OUTSTANDING BALANCE A ND ARE PENDING FOR MORE THAN LAST 3 YEARS. THE ASSESSEE WA S NOT ABLE TO ESTABLISH THE GENUINENESS OF THESE SUNDRY CREDITORS. ADDITION WAS MADE ON ACCOUNT OF THE SAME WHICH WERE CONFIRMED BY BOTH THE APPELLATE AUTHORIT IES AND PENALTY WAS IMPOSED BY THE LD. AO, WHICH WAS SUSTAINED BY THE LD. CIT(A). 15. LD. A.R. EXPLAINED THAT THESE SUNDRY CREDITORS WERE BEYOND THREE YEARS AND SUBSTANTIAL INFORMATION REGARDING THE IDENTITY OF T HESE CREDITORS WAS DIFFICULT TO BE ESTABLISHED AT THIS STAGE. THEREFORE, IT WAS PRAYED THAT THOUGH THE ADDITION MADE ON THIS ISSUE HAD MERITS, IT IS NOT A FIT CASE FOR LEVY OF PENALTY AND THE SAME MAY BE DELETED. ITA NO. 3073-AHD-09 6 16. THE LD. D.R. VEHEMENTLY OPPOSED TO THE SUBMISSI ONS OF THE LD. A.R. AND PRAYED THAT THE ORDERS OF THE REVENUE MAY BE SUSTAINED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THESE SUNDRY CREDITORS ARE UNDISPUTEDLY QUITE OLD AND OBV IOUSLY DIFFICULT FOR PROPER VERIFICATION. THE REVENUE HAS NOT BROUGHT ANY MATER IALS ON RECORD TO SHOW THAT THESE SUNDRY CREDITORS ARE BOGUS. THOUGH THIS MAY BE A FI T CASE FOR MAKING ADDITION, WE ARE OF THE CONSIDERED VIEW THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, CONSIDERING THE RECENT JUDGME NT OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PVT. LTD. ( SUPRA ). FURTHER IT SHOULD BE KEPT IN MIND THAT THE ASSESSEE HAS NOT CONCEALED THE DETAILS OF THE SUNDRY CREDITORS AND HAS BEEN SHOWING THE SAME YEAR AFTER YEAR IN ITS BOOKS OF AC COUNTS. THEREFORE, WE HEREBY DELETE THE PENALTY LEVIED BY THE LD. A.O. WHICH WAS FURTHE R CONFIRMED BY THE LD. CIT(A) ON THIS GROUND. THUS THE PENALTY IMPOSED BY THE LD.AO ON ALL THE ISSUES MENTIONED SUPRA STANDS DELETED. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7 %6 0 5$( 8#) 16 / 12 /2011 $ 9 0 2 : SD/- SD/- (G.C.GUPTA) (A.MOHAN ALANKAMONY) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 16/12/2011 %6 %6 %6 %6 0 00 0 .3; .3; .3; .3; <%;(3) <%;(3) <%;(3) <%;(3)- -- - 1. ,- 2. ./,- 3. ## 3 @ 4. @- - 5. ;C .3 , , : 6. E F7 %6 %, / # , : TALUKDAR/ SR. P.S. ITA NO. 3073-AHD-09 7