Tyco Valves & Controls (India) Pvt. Ltd., Baroda V. The ACIT, Circle- 4, Baroda

ITA 3131/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9561 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-05-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 09-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Section: 143(3); 27; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) I.T. A. NO.31 30 & 3131 /AHD/2011 (ASSESSMENT YEAR : 1996-97 & 1997-98) TYCO VALVES & CONTROLS INDIA PVT. LIMITED 302, A, IVORY TERRACE R. C. DUTT ROAD, ALKAPURI, BARODA 390007 V/S THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, BARODA (APPELLANT) (RESPONDENT) PAN: AAACK 8890L APPELLANT BY : SHRI J.P.SHAH RESPONDENT BY : SHRI NIMESH YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 14-05-2015 DATE OF PRONOUNCEMENT : 29 -05-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER. 1. THESE 2 APPEALS FILED BY THE ASSESSEE ARE AGAINST T HE ORDER OF CIT(A)-III, BARODA DATED 08.09.2011 FOR A.YS. 1995-97 & 1997-98 . 2. AT THE OUTSET, BEFORE US, BOTH THE PARTIES SUBMITTE D THAT THOUGH THE APPEAL OF THE ASSESSEE RELATES TO 2 DIFFERENT ASSESSMENT YEAR S BUT THE FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE SIMILAR EXCEPT FOR THE ASSESSMENT YEARS AND AMOUNTS AND THE SUBMISSIONS ARE ALSO COMMON FOR BOTH THE APPEALS AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. W E THEREFORE PROCEED TO ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 2 DISPOSE OF BOTH THE APPEALS TOGETHER FOR THE SAKE O F CONVENIENCE AND THUS PROCEED WITH THE FACTS FOR A.Y. 1996-97. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND TRADING OF VARIOUS TYPES OF INDUSTRIAL VALVES. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 1996-97 ON 30.11.1996 DECLARING TOT AL TAXABLE INCOME OF RS. 14,05,370/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 26.02.1999 AND THE TOTAL INCOME WAS DETERMINED AT RS. 97,68,54 0/- INTERALIA BY ESTIMATING THE GROSS PROFIT AT 43.95% WHICH RESULTE D INTO ADDITION OF RS. 83,00,000/-. AGGRIEVED BY THE ORDER OF A.O., ASSES SEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 24.11.1999 E STIMATED THE GROSS PROFIT AT 39% AS AGAINST 49.35% MADE BY A.O. AND T HUS THE ADDITION WAS SUSTAINED AT RS. 42,85,000/-. AGAINST THE ORDER OF LD. CIT(A), ASSESSEE AS WELL AS REVENUE PREFERRED APPEAL BEFORE HONBLE ITA T. HONBLE ITAT VIDE ORDER DATED 29.06.2006 SET ASIDE THE ISSUE TO THE F ILE OF A.O FOR FRESH ADJUDICATION. PURSUANT TO THE AFORESAID DIRECTION O F HONBLE TRIBUNAL, ORDER WAS PASSED U/S. 143(3) R.W.S. 254 BY THE A.O BY ORD ER DATED 31.12.2007 AND THE GROSS PROFIT WAS ESTIMATED AT 39.5% WHICH RESUL TED INTO FINAL ADDITION ON ACCOUNT OF GROSS PROFIT AT RS. 38,73,874/-. ON THE AFORESAID ADDITION ON ACCOUNT OF ESTIMATION OF GROSS PROFIT, PENALTY OF R S. 17,81,981/- U/S. 271(1)(C) ON ACCOUNT OF FURNISHING OF INACCURATE PA RTICULARS OF INCOME WAS LEVIED BY ORDER DATED 31.03.2010. AGGRIEVED BY TH E AFORESAID ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO V IDE ORDER DATED 08.09.2011 UPHELD THE PENALTY LEVIED BY A.O BY HOLD ING AS UNDER:- ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 3 15.2 IN THE PRESENT CASE, AS CAN BE SEEN FROM THE F ACTS NARRATED ABOVE, DESPITE BEING GIVEN AMPLE OPPORTUNITIES DURING THE COURSE OF ORIG INAL ASSESSMENT PROCEEDINGS AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS DONE IN PURSUANCE TO SETTING ASIDE OF THE ORIGINAL ASSESSMENT BY ITAT, AS PER THE DIRECTIONS GIVEN BY ITAT, THE APPELLANT FAILED TO PROVIDE COMPLETE DETAILS FOR THE PURPOSES OF VERIFI CATION OF THE INPUT/OUTPUT RATIO AND ALSO FAILED TO DISCHARGE THE ONUS LYING ON IT IN RELATIO N TO VERIFICATION OF THE CORRECTNESS OF ITS ACCOUNTS. THIS IS DESPITE THE FACT THAT A SPECIFIC DIRECTION IN THIS REGARD HAD BEEN ISSUED BY ITAT WHILE SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER. THUS THE CORRECTNESS OF THE BOOKS OF ACCOUNTS COULD NOT BE VERIFIED. ITAT IN IT S ORDER FOR THE AY 96-97 SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER HAS ALSO OBSERVED THA T THE STATUTORY AUDITORS OF THE COMPANY HAVE OBSERVED THAT THE APPELLANT'S INTERNAL AUDIT IN RESPECT OF QUANTITATIVE AND QUALITATIVE CHECKS OF MATERIALS NEED TO BE FURTHER STRENGTHENED. MOREOVER, THE REJECTION OF BOOKS RESULT HAD BEEN UPHELD BY ITAT. THE APPELL ANT HAS NOT FILED ANY APPEAL TO HIGH COURT ON THIS POINT. THUS THIS HAS BEEN ACCEPTED BY IT. EVEN NO APPEAL HAS BEEN FILED AGAINST THE ORDER OF CIT(A) PASSED FOR DECIDING THE APPEAL AGAINST THE SET ASIDE ASSESSMENT ORDER. 5.3 THE ABOVE MENTIONED DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE CHANDRA VILAS HOTEL, WAS FOR A.Y. 1967-68. THE LAW RELATING TO PENALTY WAS AMENDED W.E.F. 01.04,1976 AND ORIGINAL EXPLANATION WAS REPLACED BY THE PRESENT ONE. AFTER THIS AMENDMENT, THE REVENUE IS NOT REQUIRED TO PROVE THA T THE ASSESSES IS GUILTY OF ANY FRAUD OR HAS COMMITTED A WILLFUL NEGLECT I.E. MENS REA IS NOT TO BE PROVED BY THE REVENUE. AS PER THE PRESENT EXPLANATION 1, IF THE ASSESSEE OFFERS A N EXPLANATION IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME, WH ICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AN D THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL I NCOME OF SUCH PERSON AS A RESULT THEREOF, SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 15.4 IN THE PRESENT CASE, THE APPELLANT HAS NOT BEE N ABLE TO SUBSTANTIATE ITS EXPLANATION REGARDING STEEP FALL IN GP RATE AS COMPARED TO THE GP RATE FOR AY 1995-96. ALSO ITS INABILITY TO GET ITS INPUT/OUTPUT RATIO VERIFIED AT THE ASSESSMENT AND APPELLATE STAGE AND EVEN AFTER SPECIFIC DIRECTION GIVEN BY ITAT MAKES I T EVIDENT THAT IT HAS FAILED TO PROVE THAT THE EXPLANATION OFFERED BY IT IS BONAFIDE AND THAT ALL FACTS RELATING TO THE SAME HAS BEEN DISCLOSED BY IT. IN SUCH CIRCUMSTANCES, THE ABOVE M ENTIONED DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CHANDRA VILAS HOTEL (SUPR A) IS FULLY APPLICABLE IN FACTS AS WELL AS IN LAW. THUS, THE ADDITION MADE ON ACCOUNT OF LO W GP RATE IN THIS CASE CLEARLY FALLS WITHIN THE MISCHIEF OF THE PROVISIONS OF SECTION 27 1(1) (C). 15,5 FOR LEVY OF PENALTY IN CASES WHERE ADDITION IS MADE ON ESTIMATE BASIS, BESIDES THE DECISION OF HON'BLE HIGH COURT IN THE CASE OF CHAND RA VILAS HOTEL CITED ABOVE, RELIANCE IS ALSO BASED ON FOLLOWING DECISIONS: I) 269 ITR 492(KER) IN THE CASE OF T,J. MATHAI. II) 152 ITR 529 (MAD) AFFIRMED IN 236 ITR 977 (SC) IN T HE CASE OF B.A.BALASUBAMANIAM III) 208 ITR 202 (BOM) IN THE CASE OF YUSUF ABDULLA PATE L. 16. ON THE BASIS OF THESE FACTS, IT IS HELD THAT PE NALTY U/S 27L(L)(C) HAS BEEN RIGHTLY IMPOSED IN THIS CASE, ACCORDINGLY, THE APPEAL IS DI SMISSED. ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 4 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND:- 1. THE HONBLE CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER [HEREINAFTER REFERRED TO AS THE A.O] IN LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. 6. BEFORE US, LD. A.R. REITERATED THE SUBMISSION MADE BEFORE A.O AND LD. CIT(A) AND FURTHER SUBMITTED THAT THE FALL IN GROSS PROFIT WAS NOT ACCEPTED BY THE A.O AND THEREFORE HE REJECTED THE BOOKS OF ACCO UNTS AND THEREAFTER ESTIMATED THE GROSS PROFIT. AGAINST THE ORDER OF A. O, THE MATTER WAS CARRIED BEFORE LD. CIT(A) WHO GRANTED PARTIAL RELIEF. AGAIN ST THE ORDER OF LD. CIT(A) APPEAL WAS PREFERRED BY ASSESSEE AND REVENUE BEFORE HONBLE ITAT AND PURSUANT TO THE DIRECTIONS OF ITAT, THE GROSS PROFI T WAS FINALLY ESTIMATED AT THE LOWER FIGURE THAN THAT WAS ESTIMATED AT THE INI TIAL STATE AND ADDITIONS WERE MADE. THE LD. A.R. FURTHER SUBMITTED THAT THE G.P RATE WHICH WAS ADOPTED BY VARIOUS AUTHORITIES CLEARLY PROVE THAT M ORE THAN 2 VIEWS HAVE BEEN TAKEN IN THE MATTER AND THAT ESTIMATION OF G.P WAS BEING MADE ON AN ADHOC BASIS AND IN SUCH CIRCUMSTANCES ON THE ADDITI ONS MADE ON ESTIMATED BASIS, PENALTY U/S. 271(1)(C) ON ACCOUNT OF CONCEAL MENT COULD NOT BE LEVIED. HE FURTHER SUBMITTED THAT A.O NOWHERE IN THE ASSESS MENT ORDER HAS POINTED OUT ANY DISCREPANCY IN THE MAINTENANCE OF BOOKS OF ACCOUNTS NOR HAS PROVED WITH ANY EXAMPLE THAT THE PURCHASES, TRADING OR MAN UFACTURING EXPENSES HAVE BEEN FOUND TO BE EXCESSIVE AND HAS ALSO NOT DI SPUTED THE VALUATION OF STOCK. IT WAS FURTHER SUBMITTED THAT THE ACCOUNTS O F THE ASSESSEE ARE AUDITED AND NO ADVERSE COMMENTS HAVE BEEN MADE BY THE AUDIT ORS IN THEIR AUDIT REPORT. HE THEREFORE SUBMITTED THAT THE ADDITION MA DE ON ACCOUNT OF VARIATION ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 5 IN G.P RATES CANNOT FORM THE BASIS FOR LEVYING PENA LTY U/S. 271(1)(C). HE FURTHER SUBMITTED THAT ASSESSEE HAS NOT FURNISHED I NACCURATE PARTICULARS OF INCOME OR CONCEALED THE INCOME. HE FURTHER PLACED R ELIANCE ON THE DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 AND OTHER DECISION. HE FURTHER SUBMITTED THAT THE P ENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE FROM THE ASSESSMENT PROCEEDIN GS. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A ) AND FURTHER SUBMITTED THAT THE ESTIMATION OF GROSS PROFIT WAS BASED ON AC COUNT OF INABILITY OF THE ASSESSEE TO DISCHARGE THE ONUS ON IT RELATING TO VE RIFICATION OF INPUT/OUTPUT RATIO IN PHYSICAL TERMS AS DIRECTED BY HONBLE ITAT . HE THUS SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE AT THE INITIAL STAGE WHILE FRAMING ASSESSMENT U/S. 143(3) THE ADDITION ON ACCOUNT OF GROSS PROFIT WAS ESTIMATED BY THE A.O AT 43.95% WHICH WAS REDUCED TO 39% BY LD. CIT(A) AND F INALLY PURSUANT TO THE ORDER OF THE HONBLE TRIBUNAL THE GROSS PROFIT WAS ESTIMATED AT 39.5% WHICH RESULTED INTO FINAL ADDITION ON ACCOUNT OF GROSS PR OFIT AT RS. 38,73,874/- AND ON THE AFORESAID ADDITION, PENALTY U/S. 271(1)(C) H AS BEEN LEVIED BY THE A.O. IT IS ALSO A FACT THAT THE ADDITION ON ACCOUNT OF G ROSS PROFIT WAS ESTIMATED BY 3 AUTHORITIES AT THREE DIFFERENT FIGURES AND THE FI NAL ADDITION HAS BEEN MADE ON ESTIMATED BASIS. IT IS ALSO A FACT THAT THE ASSE SSEE HAD FURNISHED THE EXPLANATION WITH RESPECT TO THE FALL IN GROSS PROFI T BEFORE THE A.O BUT HOWEVER THE EXPLANATION OF THE ASSESSEE WAS NOT ACC EPTED. IT IS NOT A CASE WHERE THE EXPLANATION FURNISHED BY THE ASSESSEE HAS BEEN FOUND TO BE FALSE OR INCORRECT. IT IS A SETTLED LAW THAT WHEN THE AD DITION IS MADE ON THE ESTIMATE BASIS, NO PENALTY ON ACCOUNT OF CONCEALMEN T OF INCOME ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 6 U/S.271(1)(C) IS SUSTAINABLE. FURTHER, IT IS ALSO A N ADMITTED PROPOSITION IN LAW THAT THE FINDING IN THE QUANTUM PROCEEDING IS NOT A FACTOR FOR DETERMINING THE QUESTION FOR THE PURPOSE OF IMPOSING PENALTY. QUEST ION OF PENALTY HAS TO BE DECIDED INDEPENDENT OF SUCH FINDING. IT IS WELL SET TLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSESSEE IS DIFFERENT FROM THE PENALTY IMPOSED ON A CCOUNT OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME A ND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDING ON THE PREPONDERANCE OF PROBABILITIES, BUT NO PENAL TY COULD BE IMPOSED U/S 271(L)(C) OF THE ACT ON THE PREPONDERANCE OF PROBAB ILITIES. WE FURTHER FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SUBHASH TRADING COMPANY (1996) 221 ITR 110 (GUJ) HAD CONCLUDED THA T WHERE INCOME IS ASSESSED ON ESTIMATE BASIS AFTER REJECTING BOOK RES ULTS, PENALTY U/S. 271(1)(C) CANNOT BE IMPOSED BY MERE APPLICATION OF EXPLANATIO N THEREOF IN THE ABSENCE OF ANY EVIDENCE TO CONCLUDE A POSITIVE FINDING THAT THERE WAS CONCEALMENT OF INCOME. IN VIEW OF THE AFORESAID FACTS AND FOLLOWI NG THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SUBHASH T RADING (SUPRA) WE ARE OF THE VIEW THAT NO PENALTY IS LEVIABLE IN THE PRESENT CASE AND THEREFORE DIRECT ITS DELETION. IN THE RESULT THIS GROUND OF ASSESSEE IS ALLOWED. 8. FURTHER AS ADMITTED BY BOTH THE PARTIES, THAT THE F ACTS OF THE CASE FOR A.Y. 97- 98 IS SIMILAR TO THAT OF A.Y. 96-97, WE THEREFORE F OR THE REASONS GIVEN HEREINABOVE, WHILE DECIDING THE APPEAL FOR A.Y. 96- 97 AND FOR SIMILAR REASONS, DIRECT THE DELETION OF PENALTY FOR A.Y. 97 -98 IN ITA NO. 3130/AHD/2011. THUS THIS GROUND OF ASSESSEE IS ALLO WED. ITA NOS. 313 0 & 3131/AHD/2011 . A.YS. 1996-9 7 & 1997-98 7 9. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 29 - 05 - 2015 . SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD