Shri Govindbhai Shitaldas Ramanani,HUF, Anand V. The Income tax Officer,Ward-1, Anand

ITA 3292/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0852 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 11-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Onus to prove
• Section: 143(3); 133A

Judgement Text

ITO VS. IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.3292/AHD/2011 ASST. YEAR: 2004-05 GOVINDBHAI SHEETALDAS RAMNANI (HUF), PROP. KALANIKETAN SILK EMPORIUM, C/O KIRAN PATEL & CO., CHARTERED ACCOUNTANTS, 3/4, RANGOLI COMPLEX, ANAND- VV NAGAR ROAD, ANAND. VS. ITO, WARD-1, ANAND. APPELLANT RESPONDENT PAN AAFHR 8903N APPELLANT BY SHRI ASEEM THAKKAR, AR RESPONDENT BY SHRI SANJAY KUMAR, SR.DR DATE OF HEARING: 11/8/2016 DATE OF PRONOUNCEMENT: 12/8/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . ASSESSEES APPEAL IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-IV, BARODA, DATED 21.10.2011, FOR ASST. YEAR 2004-05, I N APPEAL NO.CAB/IV-A-37/2010-11 PASSED AGAINST ORDER U/S 271 (1)(C) OF THE IT ACT, 1961 (IN SHORT THE ACT) FRAMED ON 26.3.2010 BY ITO, WD-1, ANAND. ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - IV, BARODA. ERRED IN LAW AND ON FACTS IN CONFIRMING PENALTY LEVIED BY INCOME TAX OF FICER, WARD -- 1. ANAND OF RS. 85,900/- U/S. 271(1) (C) OF THE IT ACT, 1961. ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 2 THE APPELLANT CRAVES LIBERTY TO ADD, ALTER, D ELETE, AMEND, OR MODIFY ANY OF THE GROUND MENTIONED HEREIN ABOVE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE IS A HUF ENGAGED IN THE BUSINESS OF TRADING IN READYMADE GAR MENTS & DRESS FOR LADIES. A SURVEY U/S 133A OF THE ACT WAS CARRIE D OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 14/10/2003. RE TURN OF INCOME WAS FILED ON 31.10.2004 DECLARING TOTAL INCOME AT R S.2,27,580/-. ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED ON 27.1 2.2006 ASSESSING THE INCOME AT RS.7,32,960/- AFTER MAKING ADDITION U/S 69B AGAINST INVESTMENT ON EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AT RS.5,02,715/-. AGAINST THE QUANTUM ADDITION ASSE SSEE GOT PART RELIEF AS LD. CIT(A) SUSTAINED THE ADDITION OF RS.2 ,86,348/-. 3. PENALTY PROCEEDINGS U/S 271(1) R.W.S. 274 OF TH E ACT WERE INITIATED AND ORDER IMPOSING PENALTY OF RS.85,904/- WAS PASSED ON 26.3.2010. AGAINST THIS PENALTY ORDER ASSESSEE COUL D NOT SUCCEED BEFORE LD. CIT(A) AS PENALTY OF RS.85,900/- IS CONF IRMED. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. LD. AR SUBMITTED THAT ADDITION OF RS. 5,02,715/- WAS WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF DIFFER ENCE BETWEEN THE BOOKS STOCK AT RS.2,72,209/- AND THE VALUE OF STOCK CALCULATED BY THE DEPARTMENT AT RS.7,74,924/- ON THE DATE OF SURVEY O N 14.10.2013. AT THE TIME OF FILING OF RETURN CLOSING STOCK ON THE D ATE OF SURVEY WAS CALCULATED AT RS.4,88,576/- AS AGAINST THE BOOKS ST OCK ACTUALLY STATED AT THE TIME OF SURVEY AT RS.2,72,209/-. LD. AR SUBM ITTED THAT THE ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 3 REASONS OF SHOWING STOCK AT RS.4,88,576/- EMANATED FROM ACTUAL WORKING OF VALUATION OF STOCK ON DATE OF SURVEY ARR IVED AT BY REDUCING THE COST TOWARDS DEFECTIVE STOCK, VALUE OUT OF FASH ION ITEMS AND CORRECTLY APPLYING THE COST PRICE AS AGAINST MARKET PRICE USED BY THE DEPARTMENT ON SOME ITEMS. LD. AR SUBMITTED FURTHER THAT THERE WAS NO MISTAKE DISCOVERED BY THE ASSESSING OFFICER IN T HE BOOKS OF ACCOUNT AND THE SAME WERE NOT REJECTED U/S 145(3) O F THE ACT. AND ADDITION WAS PURELY MADE ON THE BASIS OF DECLARATIO N GIVEN BY KARTA OF HUF DURING THE COURSE OF SURVEY WHICH WAS NOT GI VEN UNDER OATH AND DID NOT HAVE ANY EVIDENTIARY VALUE. LD. AR FURT HER SUBMITTED THAT ADDITION MADE BY ASSESSING OFFICER WAS PURELY ON ES TIMATE BASIS WHICH WAS FURTHER SCALED DOWN BY LD. CIT(A) TO RS.2 ,68,348/- AT THE PLACE OF RS. 5,02,715/- GIVING A SUBSTANTIAL RELIEF TO THE ASSESSEE. IN SUCH CIRCUMSTANCES, LD. ASSESSING OFFICER WAS NOT J USTIFIED IN IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. IN SUPPO RT OF HIS CONTENTION LD. AR REFERRED AND RELIED ON THE JUDGMENT OF PUNJA B & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH VS. CIT258 ITR 85 (P & H) AND DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF IT ) VS. PAMA INDUSTRUES IN ITA NO.274/AHD/2006 FOR ASST. YEAR 19 99-2000 DATED 5 TH FEBRUARY, 2010. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F ASSESSING OFFICER AND LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE GRIEVANCE OF THE ASSESSEE IS AG AINST THE ORDER OF LD. CIT(A) CONFIRMING PENALTY OF RS.85,900/- U/S 27 1(1)(C) OF THE ACT. ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 4 WE OBSERVE THAT DURING THE COURSE OF SURVEY U/S 133 A OF THE ACT ON 14.10.2003 EXCESS STOCK OF RS.5,02,715/- WAS FOUND AND WAS DULY ADMITTED BY THE KARTA OF HUF. THIS EXCESS STOCK WAS WORKED OUT BY REDUCING BOOKS STOCK AT RS.2,72,209/- FROM THE PHYS ICAL VALUE OF STOCK AT RS.7,72,942/- ON THE DATE OF SURVEY. IN T HE BOOKS OF ACCOUNT SUBJECTED TO SCRUTINY U/S 143(3) ASSESSEE HAS DECL ARED BOOKS STOCK AT RS.4,88,576/- BUT DURING ASSESSMENT PROCEEDINGS ASSESSEE WAS UNABLE TO CONVINCE LD. ASSESSING OFFICER ABOUT THE CORRECTNESS OF DECLARATION OF STOCK VALUE AND ADDITION U/S 69B FOR UNEXPLAINED INVESTMENT IN STOCK OF RS. 5,02,715/- MADE BY LD. A SSESSING OFFICER WHICH WAS LATER ON SUSTAINED AT RS. 2,86,348/- BY L D. CIT(A). PENALTY U/S 271(1)(C) OF THE ACT AT RS. 85,900/- HAS BEEN IMPOSED ON THE CONCEALED INCOME OF RS. 2,86,348/-. AGAINST THE SUS TAINED QUANTUM ADDITION ASSESSEE HAS NOT PREFERRED ANY APPEAL BEFO RE THE TRIBUNAL. 8. WE FIND THAT ASSESSEE IS IN THE BUSINESS OF TRAD ING IN READYMADE GARMENTS WHICH IS SUPPOSED TO HAVE DEEP E FFECT OF THE CURRENT FASHION/TREND. IT IS NOT DISPUTED THAT ASSE SSEE IS NOT MAINTAINING REGULAR STOCK DETAILS BUT CARRIES ON PH YSICAL STOCK TAKING AT THE END OF THE YEAR. IN THE CASE OF ASSESSEE NOT MAINTAINING REGULAR STOCK RECORDS THEN VALUATION OF CLOSING STO CK DURING THE COURSE OF INCOME-TAX SURVEY IS NORMALLY CALCULATED BY QUANTIFYING THE PHYSICAL STOCK AVAILABLE AT THE PREMISES AND GROSS PROFIT THE RATE DISCLOSED BY THE ASSESSEE IN PAST IS UNIFORMLY DEDU CTED FROM THE TOTAL VALUE OF STOCK CALCULATED ON THE BASIS OF TAG PRICE I.E. MARKET PRICE. HOWEVER, ONE CANNOT IGNORE THE FACT THAT IN THE COU RSE OF SUCH CALCULATION CERTAIN ELEMENTS ARE NOT TAKEN CARE OF MINUTELY SUCH AS ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 5 CASH DISCOUNT, AGEING OF STOCK, DEFECTIVE AND OBSOL ETE STOCK, VARIATION IN PROFIT PERCENTAGE DEPENDING ON ITEM TO ITEM ETC. CERTAINLY IF ALL THESE ITEMS ARE CONSIDERED THE VALUATION OF PHYSICAL STOCK CAN VARY FROM CASE TO CASE IN OTHER WORDS THERE CANNOT BE A CONCRETE BASIS OF VALUING STOCK IN SUCH TYPE OF SITUATION. W E FURTHER OBSERVE THAT HON. PUNJAB & HARYANA HIGH COURT IN THE CASE O F HARIGOPAL SINGH VS. CIT (SUPRA) HAS DEALT WITH SIMILAR ISSUE OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT, CALCULATED ON EST IMATED BASIS AND DECIDED THE ISSUE BY OBSERVING AS UNDER :- I N ORDER TO ATTRACT CLAUSE (C) OF SECTION 271(1) O F THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICULARS O F HIS INCOME OR IF HE FURNISHES INACCURATE PARTICULARS OF SUCH INCOME. WHAT IS TO B E SEEN IS WHETHER THE ASSESSEE IN THE PRESENT CASE HAD CONCEALED HIS INCOME AS HELD BY TH E ASSESSING OFFICER AND THE TRIBUNAL. HE HAD NOT MAINTAINED ANY ACCOUNTS AND HE FILED HIS RETURN OF INCOME ON ESTIMATE BASIS. THE ASSESSING OFFICER DID NOT AGREE WITH THE ESTIMA TE OF THE ASSESSEE AND BROUGHT HIS INCOME TO TAX BY INCREASING IT TO RS. 2,07,500. THI S, TOO, WAS ON ESTIMATE BASIS. THE TRIBUNAL AGREED THAT THE INCOME OF THE ASSESSEE HAD TO BE ASSESSED ON AN ESTIMATE OF THE TURNOVER BUT WAS OF THE VIEW THAT THE ESTIMATE AS M ADE BY THE ASSESSING OFFICER WAS HIGHLY EXCESSIVE AND IT FIXED THE TOTAL INCOME OF T HE ASSESSEE AT RS. 1,50,000 FOR THE YEAR UNDER APPEAL. IT IS, THUS, CLEAR THAT THERE WAS A D IFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF THE INCOME OF THE ASSESSEE. SINCE THE A SSESSING OFFICER AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSING THE INCOME OF THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE HAD 'CONCEALED THE PARTICULARS OF HIS INCOME' SO AS TO ATTRACT CLAUSE (C) OF SECTION 271 (I) OF THE ACT. THERE IS NOT EVEN AN IO TA OF EVIDENCE ON THE RECORD TO SHOW THAT THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER AP PEAL WAS MORE THAN THE INCOME RETURNED BY HIM. ADDITIONS IN HIS INCOME WERE MADE, AS ALREADY OBSERVED, ON ESTIMATE BASIS AND THAT BY ITSELF DOES NOT LEAD TO THE CONCL USION THAT THE ASSESSEE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. THERE HAS TO BE A POSITIVE ACT OF CONCEALMENT ON HIS PART AND THE ONUS TO PROVE THIS IS ON THE DEPARTMENT. WE ARE ALSO OF THE CONSIDERED VIEW THAT THE TRIBUNAL GROSSLY ERRED IN LAW IN RELYING ON EXPLANATION I(B) TO SECTION 27I(I)(C) OF THE ACT TO RAISE A PRESUMPTION AGAINST THE ASSESSEE. THE ASSESSEE HAD JUSTIFIED HIS ESTIMA TE OF INCOME ON THE BASIS OF HOUSEHOLD EXPENDITURE AND OTHER INVESTMENTS MADE DURING THE R ELEVANT PERIOD. IT IS NOT THE CASE OF THE REVENUE THAT HE HAD, IN FACT, INCURRED EXPENDIT URE IN EXCESS OF WHAT HE HAD STATED. IN THIS VIEW OF THE MATTER, IT CANNOT BE SAID THAT THE EXPLANATION FURNISHED BY THE ASSESSEE HAD NOT BEEN SUBSTANTIATED OR THAT HE HAD FAILED TO PROVE THAT SUCH EXPLANATION WAS NOT BONA FIDE. ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 6 5. IN THE RESULT, THE APPEAL IS ALLOWED AND THE QUE STION POSED IN THE EARLIER PART OF THE ORDER IS ANSWERED IN THE NEGATIVE HOLDING THAT THE PROVISIONS OF SECTION 271(1X0) OF THE ACT ARE NOT ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN ON THAT BASIS. CONSEQUENTLY, THE IMPUGNED ORDER OF THE TRIBUNAL DATED MAY 30, 2001, IS SET ASIDE AND T HAT OF THE COMMISSIONER (APPEALS) DATED APRIL 8, 1993, RESTORED. THE ASSESSEE WILL HA VE HIS COSTS WHICH ARE ASSESSED AT RS. 500. 9. WE ARE, THEREFORE, OF THE VIEW THAT SIMILAR SITU ATION HAS ARISEN IN THE CASE OF ASSESSEE AS A RESULT OF WHICH THERE WAS A VARIATION OF CLOSING STOCK CALCULATED AT THE TIME OF SURVEY V/S. SHOWN BY ASSESSEE IN ITS BOOKS OF ACCOUNT V/S. RECALCULATED VALUE OF STOCK AT THE TIME OF FILING THE RETURN. THERE IS NO SPECIFIC MISTAKE POI NTED OUT BY THE ASSESSING OFFICER FOR CONCEALING INCOME OR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME AND WAS PURELY MADE ON ESTIMA TE BASIS WHICH EVEN COULD NOT STAND COMPLETELY BEFORE LD. CIT(A). THEREFORE, ASSESSEE SHOULD NOT BE VISITED WITH PENALTY U/S 271 (1)(C) OF THE ACT IN SUCH A SITUATION FOR CONCEALING INCOME OR FURNISHIN G INACCURATE PARTICULARS OF INCOME. WE DELETE THE IMPUGNED PENAL TY. THIS GROUND OF THE ASSESSEE IS ALLOWED. 10. OTHER GROUND IS GENERAL IN NATURE, WHICH NEED N O ADJUDICATION. 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 12/8/2016. ITA NO. 3292/AHD/2011 ASST. YEAR 2004-05 7 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 11/08/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 12/08/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 2/8/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: