M/s. Monika Telecom Pipes Pvt. Ltd., New Delhi V. ACIT, Muzaffarnagar

ITA 314/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6246 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 314/DEL/2014 AY: 20 09-10 MONIKA TELECOM PIPES PVT. LTD., VS ACIT , 9 TH KM STONE, CIRCLE-2, BHOPA ROAD, MUZZARFARNAGAR. MUZZARFARNAGAR, U.P. (APPELLANT) (RESPONDEN T) APPELLANT BY : SHRI ANIL JAIN, ADV. RESPONDENT BY : SHRI P. DAMKANUNJNA, SR. DR DATE OF HEARING: 07.01.2016 DATE OF PRONOUNCEMENT: 30.03.2016 ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 23.09.2013 OF LD. CIT(A)-I, MUZAFFARNAGAR WHE REIN HE HAS CONFIRMED THE LEVY OF PENALTY OF RS. 1,62,656/- IMP OSED U/S 271(1)( C) OF THE ACT FOR ASSESSMENT YEAR 2009-10. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN SALE AND MANUFACTURE OF HDPE PIP ES. RETURN DECLARING INCOME OF RS. 31,26,512/- WAS FILE D ON 29-09-2009. ASSESSMENT IN THIS CASE WAS COMPLETED U /S 143(3) OF THE ACT ON 15-12-2011 WHEREIN FOLLOWING ADDITION S WERE MADE:- I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 2 (I) ON ACCOUNT OF DIFFERENCE IN STOCK (II) ON ACCOUNT OF VAT DIFFERENCE (III) ON ACCOUNT OF ESI & PF NOT PAID BY DUE DATE (IV) ON ACCOUNT OF CHARITY & DONATION THUS, TOTAL ADDITION OF RS. 5,43,340/- WAS MADE TO THE RETURNED INCOME AND INCOME OF THE ASSESSEE WAS ASSESS ED AT RS. 36,69,852/-. A SURVEY U/S 133 A OF THE ACT W AS CONDUCTED ON 16-01-2009, THE VALUE OF SCRAP IN THE BOOKS OF T HE ASSESSEE WAS 4.155 TONNES WHEREAS THE SURVEY TEAM ON PHYSICA L VERIFICATION FOUND IT TO BE 15000 KGS. HENCE, THERE WAS DIFFERENCE IN STOCK OF SCRAP AT 10845 KGS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE ASSESSEE TO JUSTIF Y THE REASON FOR DIFFERENCE IN STOCK. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE WEIGHT TAKEN BY SURVEY TEAM WAS ON ESTIMATE BAS IS AND ACTUAL WEIGHT OF SCRAP WAS ABOUT 1500 KGS. HOWEVER, THE AO REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE ON TH E GROUND THAT AS PER STOCK REGISTER, THE WEIGHT OF SCRAP WAS SHOWN AT 4155 KGS. THE ASSESSING OFFICER, AFTER CONSIDERING THE R EPLY OF THE ASSESSEE, ADOPTED THE WEIGHT OF SCRAP AT 10,000 KGS . WHICH RESULTED IN AN ADDITION OF RS.4,21,972/- ON ACCOUNT OF DIFFERENCE IN THE VALUE OF STOCK AT 5116 KGS. @ 82 PER KG. THU S, IT WAS HELD BY THE AO THAT THE ASSESSEE HAD UNDERESTIMATED THE STOCK OF RS.4,21,972/- RS.1,01,922/- RS. 16,946/- RS. 2,500/- I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 3 SCRAP IN ITS BOOKS TO SUPPRESS THE PROFIT. ACCORDIN G TO THE ASSESSING OFFICER, THE ASSESSEE WAS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING AND THE SCRAP GENERATED DURING THE RE LEVANT FINANCIAL YEAR SHOULD HAVE BEEN REFLECTED IN THE BO OKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. HOWEVER, ON PHYSICAL VE RIFICATION IT WAS GATHERED THAT THE ASSESSEE HAD UNDERVALUED THE SCRAP AND AS SUCH HAD CONCEALED ITS INCOME. 3. IN THE PROFIT & LOSS ACCOUNT UNDER THE HEAD A DMINISTRATIVE & SELLING AND GENERAL EXPENSES, IT WAS GATHERED BY THE AO THAT AN AMOUNT OF RS.6,23,216/- WAS DEBITED UNDER REBATE & DISCOUNT. FURTHER, THE AMOUNT OF RS. 1,01,922/- WAS DEBITED TO SDE MS (TXP) STORE, O/O DET MS(TXP), LUCKNOW. ON VERIFICATION OF THE JOURNAL VOUCHER, IT WAS GATHERE D BY THE AO THAT THE AMOUNT WAS REFLECTED DUE TO VAT DISCOUNT I N RESPECT OF WHICH THE ASSESSEE SUBMITTED THAT VAT HAD BEEN PAID ON ACCOUNT OF BSNL, LUCKNOW WHICH HAD NOT BEEN RECEIVE D BACK AND HENCE, THE IMPUGNED SUM WAS DEBITED UNDER THE H EAD VAT DISCOUNT. HOWEVER, THE AO REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING AND AS SUCH THE IMP UGNED SUM SHOULD NOT HAVE BEEN DEBITED TO THE PROFIT & LOSS A CCOUNT. IT I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 4 WAS HELD BY THE AO THAT THE ASSESSEE DELIBERATELY D EBITED THE AMOUNT OF RS. 1,01,922/- TO INFLATE ITS EXPENSES AN D TO REDUCE THE PROFIT. 4. ON THE PERUSAL OF AUDIT REPORT, IT WAS GATHE RED BY THE AO THAT THE ASSESSEE HAD MADE PAYMENTS OF EMPLOYEES CONTRIBUTION TOWARDS PF AT RS. 14,773/- & ESI AT RS .2,173/- TOTALING TO RS. 16,746/- WHICH WERE PAID BEYOND THE DUE DATE (INCLUDING GRACE PERIOD). THE AO DISALLOWED THE IMP UGNED SUM WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 3 6(1)(VA) OF THE ACT. 5. AN AMOUNT OF RS. 2,500/- WAS DEBITED UNDER THE H EAD CHARITY & DONATION BUT IN THE ABSENCE OF ANY EVIDEN CE THE SAME COULD NOT BE VERIFIED BY THE AO. THUS, IT WAS HEL D BY THE AO THAT THE ASSESSEE HAD DELIBERATELY INFLATED EXPENSE S TO SUCH EXTENT TO REDUCE PROFIT. 6. THE ASSESSING OFFICER, ON THE BASIS OF FACTS M ENTIONED IN THE ASSESSMENT ORDER, HELD THAT THE ASSESSEE HAD DELIBE RATELY FURNISHED INACCURATE PARTICULARS TO AVOID INCIDENCE OF TAX. BASED ON SUCH INFERENCE, THE AO IMPOSED PENALTY U/S 271(L )(C) OF THE ACT AMOUNTING TO RS.1,62,656/-. I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 5 7. AGGRIEVED, THE ASSESSEE APPROACHED THE FIRST APP ELLATE AUTHORITY WHO CONFIRMED THE IMPOSITION OF PENALTY. NOW THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PEN ALTY ORDER PASSED BY THE ASSESSING OFFICER U/S 271(1)(C) IMPOSING PENALTY OF RS. 1,62,656/-. 2. THE ORDER OF THE LD. CIT(A) IS AGAINST LAW AND FACTS OF THE CASE. 8. THE LD. AR SUBMITTED THAT AS REGARD ADDITION O F RS. 4,21,972/- ON ACCOUNT OF DIFFERENCE IN THE STOCK, T HE SURVEY TEAM HAD FOUND A SMALL HEAP OF SCRAP WHICH WAS ONLY ABOU T 1500KG BUT THE SURVEY TEAM WRONGLY ESTIMATED THE WEIGHT OF SCRAP AT 15000 KGS. IT WAS FURTHER SUBMITTED THAT THE HDPE PIPE IS AN EXCISABLE ITEM AND THE ASSESSEE HAD DULY MAINTAINED STOCK REGISTER OF SCRAP IN FORM NO.-4 AND RG-1 AS PRESCRI BED BY THE CENTRAL EXCISE DEPARTMENT. THE STOCK AS PER STOCK R EGISTER WAS 4.155MT WHICH INCLUDED THE STOCK OF SCRAP IN HEAP A ND SCRAP LYING IN THE BAGS. THE LD. AO ESTIMATED THE SCRAP AT L0000 KG AND MADE THE ADDITION OF RS. 4,21,972/-. THE ABOVE ADDITION WAS MADE ONLY ON ACCOUNT OF EXCESS ESTIMATION OF ST OCK OF SCRAP, OTHERWISE THE ASSESSEE HAS NEITHER CONCEALED THE PA RTICULAR OF HIS INCOME NOR FILED THE INACCURATE PARTICULAR OF S UCH INCOME. AS I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 6 SUCH, THE ASSESSEE WAS NOT GUILTY OF FRAUD OR GROSS OR WILFUL NEGLECT. IT WAS SUBMITTED THAT THE ADDITION MADE BY THE LD. AO WAS ARBITRARY AND WITHOUT ANY BASIS. THE LD. AO HAS NOT POINTED OUT ANY SALE AND PURCHASE MADE BY THE ASSESSEE OUT OF BOOKS. THE ASSESSEE HAD AGREED TO PAY TAX JUST TO PURCHASE PEACE OF MIND, TO COOPERATE WITH THE DEPARTMENT AND TO AVOID LITIGATION. THE SUBMISSIONS AND EXPLANATIONS GIVEN BY THE ASSES SEE WERE BONA FIDE, AND THEREFORE, KEEPING IN VIEW THE PROVI SION OF SEC.271(L(C), NO PENALTY WAS EXIGIBLE. AS REGARDS ADDITION ON ACCOUNT OF DIFFERENCE IN VAT ACCOUNT, IT IS SUBMIT TED THAT DURING THE YEAR, THE ASSESSEE HAS SUPPLIED GOODS TO THE BS NL DELHI AGAINST 2% CST. THE BSNL DEPARTMENT HAS DIRECTED TO GIVE SUPPLY OF SOME GOODS IN UP. THE VAT RATE IN UP WAS 4%. THE DIFFERENCE OF VAT PAID BY THE ASSESSEE AMOUNTING TO RS. 1,01,922/- WAS NOT REFUNDED BY THE BSNL DEPARTMENT, AS SUCH THE DIFFERENCE OF VAT WAS DEBITED TO P & L ACCOUNT UNDER THE HEAD REBATE AND DISCOUNT. THE ABOVE EXPENSES ARE WH OLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND ARE ALL OWABLE AS PER LAW. THE OTHER ADDITION OF RS. 16946/- IS ON ACCOU NT OF PF & ESI NOT PAID BY DUE DATE AND RS. 2,500/- ON ACCOUNT OF NON- PRODUCTION OF PROOF OF PAYMENT OF CHARITY AND DONAT ION. THE I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 7 PENALTY U/S 271(L)(C) IS NOT LEVIABLE ON ACCOUNT OF DISALLOWANCE OF EXPENSES 9. LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTH ORITIES AND SUBMITTED THAT THE PENALTY HAS BEEN RIGHTLY LEVIED AND DESERVES TO BE UPHELD. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS SEEN T HAT PENALTY HAS BEEN IMPOSED MAINLY ON THE BASIS OF DIFFERENCE IN T HE WEIGHT OF SCRAP SHOWN BY THE ASSESSEE AND AS ESTIMATED BY THE ASSESSING OFFICER. APART FROM THAT, THERE IS NOTHING TO PROVE THAT THE ASSESSEE HAS, IN FACT, CONCEALED ITS INCOME OR FURN ISHED INACCURATE PARTICULARS OF INCOME. 11. IT IS AN ADMITTED POSITION THAT THE ASSESSEE ACCEPTED THE ADDITION AND DID NOT CHALLENGE IT FURTHER. BUT THE MERE FACT THAT AN ADDITION HAS BEEN ACCEPTED OR IS CONFIRMED IN QU ANTUM PROCEEDINGS CANNOT BE CONCLUSIVE FOR THE IMPOSITION OF PENALTY. FURTHER, THE ONLY BASIS OF ADDITION IS THE ESTIMATE OF WEIGHT MADE BY THE ASSESSING OFFICER IN VALUING THE SCRAP. APA RT FROM THE ESTIMATION MADE BY THE ASSESSING OFFICER, THERE IS NOTHING TO SHOW THAT THE ASSESSEE HAD VALUED THE SCRAP INCORRE CTLY. IT IS A SETTLED LEGAL POSITION THAT WHEN INCOME IS ESTIMATE D, THERE CAN BE I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 8 NO QUESTION OF IMPOSING PENALTY U/S 271(1)(C) OF TH E ACT. THE HON'BLE DELHI HIGH COURT IN CIT VS AERO TRADERS (P) LTD. 322 ITR 316 (DEL) HAS HELD THAT NO PENALTY U/S 271(1)(C) CA N BE IMPOSED WHEN INCOME IS DETERMINED ON AN ESTIMATE. IT IS AP PARENT THAT IN THE INSTANT CASE, THE BEDROCK OF PENALTY IS ESTI MATION OF SCRAP, HENCE, THE PENALTY ON THIS ISSUE CANNOT BE SUSTAINE D. 12. AS FAR AS THE PENALTY ON DIFFERENCE IN VAT AC COUNT IS CONCERNED, IT IS SEEN THAT THE AMOUNT OF RS. 1,01,9 22/- DISALLOWED AS EXPENDITURE PERTAINS TO DIFFERENCE IN VAT RATES IN DELHI AND U.P. IT IS NOT THE CASE OF THE DEPARTMEN T THAT THE ASSESSEE HAD MADE A BOGUS CLAIM OF THE EXPENSE. TH E DISALLOWANCE WAS MADE ON THE BASIS THAT SINCE THE A SSESSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING, THE AMOUN T REMAINING OUTSTANDING COULD NOT BE WRITTEN OFF AS AN EXPENSE. THE ASSESSEES ACT OF DEBITING THE OUTSTANDING AMOUNT A S DISCOUNT/REBATE AT WORST CAN BE TERMED AS A CLAIM NOT ACCEPTED BUT THE INFERENCE OF CONCEALMENT OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME DOES NOT HOLD GOOD . 13. THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF NARENDRA KUMAR RAJENDRA KUMAR JAIN VS CIT 174 ITR 4 79 (MP) HAS HELD ON SIMILAR FACTS, THAT, BEFORE AN ASSESSEE COULD BE HELD I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 9 LIABLE FOR PENALTY U/S 271(1)(C), IT MUST BE FOUND THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS IN COME. THE TRIBUNAL HAD NOT FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS NOT INCURRED AT ALL OR THAT IT WAS CLA IMED IN EARLIER YEARS OR THAT THE ASSESSEE DELIBERATELY MADE A FALS E CLAIM OF DEDUCTION IN THE ASSESSMENT YEAR IN QUESTION. THER EFORE, THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE ASSE SSEE WAS LIABLE TO PAY PENALTY UNDER SECTION 271(1)(C). HENCE, IN OUR CONSIDERED OPINION, THE LEVY OF PENALTY ON THIS ISSUE ALSO CAN NOT BE SUSTAINED. 14. THE OTHER TWO ITEMS ON WHICH THE PENALTY HA S BEEN IMPOSED ARE RS. 16,946/- ON ACCOUNT OF LATE DEPOSIT OF PF & ESI DUES AND RS. 2,500/- ON ACCOUNT OF CHARITY AND DONA TION REMAINING UNVERIFIABLE. IN OUR OPINION, ADDITIONS ON THESE TWO ACCOUNTS ALSO DO NOT JUSTIFY IMPOSITION OF PENALTY AS NO CASE OF FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT IS MADE OUT. HENCE, IMPOSITION OF PENALTY ON THESE TWO ISSUES AL SO CANNOT BE SUSTAINED. 15. WE ACCORDINGLY DIRECT THE DELETION OF THE ENT IRE PENALTY OF RS. 1,62,656/-. 16. IN RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. I.T.A. 314/D/2014 ASSESSMENT YEAR 2009-10 10 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OF MARCH, 2016. SD/- SD/- (J.S. REDDY) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: THE 30TH OF MARCH, 2016 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR