M/s. Patel Timber Mart, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-1(3), RAJKOT-GUJARAT

ITA 332/RJT/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2309 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 10-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K CHAKRAVARTY
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Wrong claim; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BEN CH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , , ) ITA NO. 332/RJT/2013 (ASSESSM ENT YEAR: 2007-08) M/S. PATEL TIMBER MART, 8-LATI PLOT, KUVADWA ROAD, RAJKOT - 360003 VS. THE INCOME TAX OFFICER, WARD 1 (3), RAJKOT PAN NO. AACFP4411A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. D. LALCHANDANI, ADV. RESPONDENT BY : SHRI V. K. CHAKRAVARTY, D.R. DATE OF HEARING : 30 -12-201 5 DATE OF PRONOUNCEMENT : 16-02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT(A)-I, RAJKOT, DATED 28.06.2013 FOR THE ASSESSMENT YEAR 2007-08 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF TRADING IN TIMBER, KITCHEN WARES AND LAMINATES. A SEARCH ACTION/S.132 OF THE ACT ITA NO.332/RJT/13 A.Y. 2007-08 (M/S. PATEL TIMBER MART VS. ITO) 2 WAS CARRIED OUT AT THE RESIDENCE OF PARTNERS OF THE FIRM AND A SURVEY U/S.133A OF THE ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY U/S.133A, THE STOCK AS PER INVENTORY WAS FOU ND TO BE AT RS.15,05,489/- AND THE STOCK AS PER BOOKS WAS WORKED OUT AT RS.10,11,6 08/- AND THUS, EXCESS STOCK TO THE EXTENT OF RS.4,93,881/- WAS FOUND DURING SURVEY . THE ASSESSEE WAS ASKED TO RECONCILE AND EXPLAIN THE DIFFERENCE OF EXCESS STOC K. IN ABSENCE OF SATISFACTORY EXPLANATION BEFORE THE A.O. , THE EXCESS STOCK FOUN D AT THE TIME OF SURVEY WAS ADDED TO THE INCOME BY THE A.O. IN THE ORDER PASSED U/S.143(3) OF THE ACT. AGGRIEVED BY THE AFORESAID ADDITION, MATTER WAS CAR RIED BEFORE THE CIT(A) WHO VIDE ORDER DATED 23.02.2010 UPHELD THE ACTION OF A. O. AGGRIEVED BY THE ORDER OF CIT(A), MATTER WAS CARRIED BEFORE THE TRIBUNAL BY A SSESSEE WHEREIN THE ADDITION WAS RESTRICTED TO RS.2,34,133/-. ON THE AFORESAID ADDITION THAT WAS CONFIRMED BY THE TRIBUNAL, ASSESSING OFFICER VIDE ORDER DATED 30 .12.2010 LEVIED PENALTY OF RS.79,196/- U/S.271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE PENALTY ORDER OF ASSESSING OFFI CER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 2 8.06.2013 CONFIRMED THE LEVY OF PENALTY BY HOLDING AS UNDER: 5.0 AFTER CONSIDERING THE SUBMISSION MADE BY THE APPELLANT AND PERUSING HE MATERIAL ON RECORD INCLUDING THE IMPUGNED PENALTY ORDER, THE FO LLOWING GROUNDS OF APPEAL ARE BEING DISCUSSED AND DECIDED TOGETHER FOR THE SAKE OF CONV ENIENCES AS UNDER: GROUND OF APPEAL NO.1 : THE ASSESSING OFFICER ERRE D IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT ON THE APPELLANT. THE LEVY OF PENALTY IS NOT JUSTIFIED. GROUND OF APPEAL NO 2 WITHOUT PREJUDICE TO GROUN D NO.1 THE LEVY @ RS.79,200/- IS TOO HEAVY AND ARBITRARY AND NOT WARRANTED BY THE FADS O F THE CASE. 5.1 THE BASIS OF LEVY OF PENALTY U/S.271(1)(C) IN T HIS CASE IS THE ADDITION MADE BY THE A.O. ON ACCOUNT OF EXCESS STOCK WHICH WAS, ULTIMATELY, REST RICTED BY THE HONBLE ITAT TO RS.2,34,133/-. THE HONBLE ITAT HAS GIVEN FOLLOWING FINDING IN THI S REGARD:- ITA NO.332/RJT/13 A.Y. 2007-08 (M/S. PATEL TIMBER MART VS. ITO) 3 '......CONSIDERING THE OVERALL FACTS AND CIRCUMSTAN CES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT ENDS WOULD BE MET IF THE AD DITION IS RESTRICTED TO 50% OF THE ADDITION SUSTAINED BY THE LD. CIT(A). THIS WOULD TA KE CARE OF ANY OMISSION OR SHORTCOMINGS IN THE STOCK REGISTER MAINTAINED BY TH E ASSESSEE. THE ADDITION IS THUS RESTRICTED TO RS.2,34,133/-.' 5.2 IN VIEW OF THE ABOVE, IT CAN BE SAID THAT THE A PPELLANT HAD FURNISHED INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED ITS INC OME TO THE EXTENT OF RS.2,34,133/-. THE IMPORTANT FACT IS THAT NO STOCK REGISTER WAS MAINTA INED BY THE FIRM. LD. CIT(A) HAS HELD THAT THE APPELLANT HAS INCREASED THE VALUE OF BOOK STOCK BY INCREASING THE EXPENSES. THE HON'BLE ITAT IN PARA-3 ON PAGE-3 OF ITS ORDER, HAS STATED THAT FROM THE COMPARATIVE STATEMENT IT REVEALED THAT APART FROM CLAIM OF EXPENDITURE ELEMENT, THERE IS D IFFERENCE BETWEEN THE FIGURES OF QUANTITY AND RATE. THE APPELLANT PLEADED THAT NO QUESTION WAS PU T TO HIM BY THE SURVEY OFFICERS REGARDING SO- CALLED DIFFERENCE IN THE STOCK POSITION. HOWEVER, I T IS A SETTLED PROPOSITION OF LAW THAT IT IS OPEN T O THE ASSESSEE TO CHANGE HIS EARLIER STAND SUBSEQUENT LY (POST-SURVEY/POST-SEARCH) WITH COGENT SUPPORTING EVIDENCES. THUS, THE NON BONA FIDE CONDU CT OF THE APPELLANT IS EVIDENT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT ALSO F AILED TO DISCLOSE FULLY AND TRULY ALL RELEVANT MATERIAL FOR COMPUTATION OF TOTAL INCOME. 5.3 IT IS PERTINENT HERE TO REFER TO THE DECISION I N THE CASE OF CIT VS. ZOOM COMMUNICATION P. LTD. 327 ITR 510, WHEREIN THE HONBLE DELHI HIGH CO URT HAS ELABORATED THE POSITION IN RESPECT OF WRONG CLAIMS AS UNDER:- 18. IN THE CASE OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED(SUPRA), THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THE INTEREST CLAIMED AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT WAS DELETED BY THE COMMISSION ER OF INCOME TAX(APPEALS) THOUGH IT WAS LATER RESTORED, BY THE TRIBUNAL, TO THE ASSESSI NG OFFICER. THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL WAS ADMI TTED BY THE HIGH COURT. IT WAS, IN THESE CIRCUMSTANCES, THAT THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAD NEITHER CONCEALED THE INCOME NOR FILED INACCURATE P ARTICULARS THEREOF. IN RECORDING THIS FINDING, THE TRIBUNAL FELT THAT IF TWO VIEWS OF THE CLAIM OF THE ASSESSEE WERE POSSIBLE, THE EXPLANATION OFFERED BY IT COULD NOT BE SAID TO BE F ALSE. THIS, HOWEVER, IS NOT THE FACTUAL POSITION IN THE CASE BEFORE US. THE FACTS OF THE PR ESENT CASE THUS ARE CLEARLY DISTINGUISHABLE. 19. IT IS TRUE THAT MERE SUBMITTING A CLAIM WHICH I S INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS OF THE INCO ME OF THE ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM MADE BY THE ASSESSEE NEEDS TO BE BONAFIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALAFIDE, EXPLANATION 1 T O SECTION 271(1) WOULD COME INTO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE. 20. THE COURT CANNOT OVERLOOK THE FACT THAT ONLY A SMALL PERCENTAGE OF THE INCOME TAX RETURNS ARE PICKED UP FOR SCRUTINY. IF THE ASSE SSEE MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BAS IS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH A CLAIM IS NOT FOUND TO BE BONA FIDE, IT WOULD BE DIFFICULT TO SAY THAT HE WOULD STILL NOT BE LIABLE TO PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. IF WE TAKE THE VIEW THAT A CLAIM WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION ON WHICH IT COULD BE MADE, THE ASSESSEE WOULD NOT BE L IABLE TO IMPOSITION OF PENALTY, EVEN IF HE WAS NOT ACTING BONAFIDE WHILE MAKING A CLAIM OF THIS NATURE, THAT WOULD GIVE A LICENCE TO UNSCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND UNSUSTAINABLE CLAIMS WITHOUT ITA NO.332/RJT/13 A.Y. 2007-08 (M/S. PATEL TIMBER MART VS. ITO) 4 THERE BEING ANY BASIS FOR MAKING THEM, IN THE HOPE THAT THEIR RETURN WOULD NOT BE PICKED UP FOR SCRUTINY AND THEY WOULD BE ASSESSED ON THE B ASIS OF SELF ASSESSMENT UNDER SECTION 143(1) OF THE ACT AND EVEN IF THEIR CASE IS SELECTE D FOR SCRUTINY, THEY CAN GET AWAY MERELY BY PAYING THE TAX, WHICH IN ANY CASE, WAS PAYABLE B Y THEM. THE CONSEQUENCE WOULD BE THAT THE PERSONS WHO MAKE CLAIMS OF THIS NATURE, AC TUATED BY A MALAFIDE INTENTION TO EVADE TAX OTHERWISE PAYABLE BY THEM WOULD GET AWAY WITHOUT PAYING THE TAX LEGALLY PAYABLE BY THEM, IF THEIR CASES ARE NOT PICKED UP F OR SCRUTINY. THIS WOULD TAKE AWAY THE DETERRENT EFFECT, WHICH THESE PENALTY PROVISIONS IN THE ACT HAVE. 5.4 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE PENALTY LEVIED BY THE A.O. IS HEREBY CONFIRMED. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT ON THE APPELLANT. THE LEV Y OF PENALTY IS NOT JUSTIFIED. 2. WITHOUT PREJUDICE TO GROUND NO.1 THE LEVY @RS.78 200/- IS TOO HEAVY AND ARBITRARY AND NOT WARRANTED BY THE FACTS OF THE CASE. 5.1 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A) AND FURTHER SUBMITTED THAT ASSES SEE HAS NEITHER CONCEALED THE PARTICULARS OF INCOME NOR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. HE FURTHER SUBMITTED THAT THERE IS NO DIFFERENCE IN TH E QUANTITY AS PER THE DEPARTMENT AND AS PER THE BOOKS AND THE DIFFERENCE IS ONLY ON ACCOUNT OF VALUATION. HE FURTHER SUBMITTED THAT SINCE PENALTY PROCEEDINGS ARE DISTIN CT AND SEPARATE FROM ASSESSMENT PROCEEDINGS, THE ADDITION MADE IN QUANTUM PROCEEDIN GS CANNOT AUTOMATICALLY LEAD TO LEVY OF PENALTY. HE PLACED RELIANCE ON THE DECI SION IN CASE OF CIT VS. SANGRUR VANASPATI MILLS LTD. (2008) 303 ITR 53 (P&H), CIT V S. RAJ BANS SINGH (2005) 276 ITR 351 (ALL) AND OTHER DECISIONS. HE, THEREFO RE, SUBMITTED THAT THE PENALTY LEVIED BY THE A.O. BE DELETED. LD. D.R. ON THE OTH ER HAND SUPPORTED THE ORDERS OF A.O. AND LD. CIT(A). ITA NO.332/RJT/13 A.Y. 2007-08 (M/S. PATEL TIMBER MART VS. ITO) 5 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LE VY OF PENALTY U/S.271(1)(C) OF THE ACT. BEFORE US, IT IS ASSESSEES SUBMISSION THAT T HE ADDITION IS ON ACCOUNT OF VALUATION DIFFERENCE AND IS NOT ON ACCOUNT OF QUANT ITY DIFFERENCE BETWEEN THE BOOKS STOCK AND THE PHYSICAL STOCK FOUND AT THE TIME OF S URVEY. FURTHER, IT IS ITS SUBMISSION THAT THE ADDITION HAS BEEN MADE ON ESTIM ATED BASIS. THE AFORESAID SUBMISSIONS OF THE ASSESSEE HAS NOT BEEN CONTROVERT ED BY REVENUE. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE TWO INDEPENDENT PROCEEDINGS AND THE PENALTY ORDER CANNOT BE SOLELY BASED ON THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT. FURTHER APART FR OM THE FALSITY OF THE EXPLANATION GIVEN BY THE ASSESSEE, THE DEPARTMENT MUST HAVE BEF ORE IT BEFORE LEVYING THE PENALTY, COGENT MATERIAL OR EVIDENCE FROM WHICH IT COULD BE INFERRED THAT ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS IN COME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSSESSEE IS DIFFERENT FROM THE PENALTY IMPOSED ON ACCOUNT OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME AND THAT CE RTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDINGS ON TH E PREPONDERANCE OF PROBABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(1)(C) OF THE ACT ON THE PREPONDERANCE OF PROBABILITIES AND REVENUE HAS TO P ROVE THAT THE CLAIM OF EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED TO REDUCE ITS TAX LIABILITY. FURTHER MERELY BECAUSE ADDITIONS HAVE CONFIRMED IN APPEAL O R NO APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ADDITIONS MADE, IT CANNOT BE THE S OLE GROUND FOR COMING TO THE CONCLUSION THAT ASSESSEE HAS CONCEALED ANY INCOME. CONSIDERING THE AFORESAID FACTS AND PECULIAR FACTS OF THE CASE, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT HAS BEEN MADE OUT. WE THUS DIRECT ITA NO.332/RJT/13 A.Y. 2007-08 (M/S. PATEL TIMBER MART VS. ITO) 6 THE DELETION OF PENALTY U/S. 271(1)(C) OF THE ACT. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 02 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 16.02.2016 TRUE COPY S K SINHA 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, RAJKOT