Surat Fashions Ltd., Surat V. The ACIT., Circle-1, Surat

ITA 3368/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6489 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-05-2011
• Assessment Year: 1992-1993
• Appeal Filed On: 10-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S A BOHRAD R
• Assessee Lawyers: R N VEPARI
• Section: 143(3)

Judgement Text

ITA NO.3368/AHD /2008 ASSESSMENT YEAR 1992-93. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH,AH MEDABAD. ( BEFORE SHRI D.K. TYAGI AND SHRI A.K. GARODIA) I.T .A. NO.3368/AHD/2008 (ASSESSMENT YEAR: 1992-93 ) SURAT FASHIONS LTD., (NOW AMALGAMATED WITH OVERSEAS SYNTHETICS LTD.), NUTAN ESTATE, VASTA DEVDI ROAD, SURAT. (APPELLANT) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE-1, AAYAKAR BHAVAN, OPP. NEW CIVIL HOSPITAL, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAACO 2755 P APPELLANT BY : SHRI R.N.VEPARI. RESPONDENT BY : SHRI S.A. BOHRA,D.R. ( (( ( )/ )/)/ )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LD. C.I.T.-I, SURAT DATED 8-9-2008 FOR THE ASSESSMENT YEAR 1992-9 3. 2. IN THIS APPEAL, THE ONLY GRIEVANCE OF THE ASSESS EE IS REGARDING CONFIRMING OF PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)( C) OF RS. 11,85,229/-. 3. BRIEFLY STATED, THE FACTS ARE THAT IN THIS CASE, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31-12-1992 SHOWING TOTAL INCOME OF RS.15,61,120/- THE ASSESSMENT U/S.143(3) OF THE I.T. ACT WAS FINALIZED ON 24-3-1995 DETERMINING THE TOTAL INCOME AT RS.79,79,050/-.ON APPEAL, THE LD. C IT (A) DELETED THE ADDITIONS OF RS.32,500/- AND RS.20,28,769/- MADE ON ACCOUNT OF D ISALLOWANCE OF CONSULTANCY FEE OF RS.32,500/- AND ON ACCOUNT OF LOW G.P. RESPE CTIVELY. BEING AGGRIEVED, REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 26-10-2004 SET ASIDE THESE TWO ISSUES REGARDI NG THE DISALLOWANCE OF CONSULTANCY FEES AND ADDITION ON ACCOUNT OF LOW G.P . AND RESTORED BACK THESE ITA NO.3368/AHD /2008 ASSESSMENT YEAR 1992-93. 2 TWO MATTERS TO THE FILE OF THE ASSESSING OFFICER FO R FRESH DECISION. THE ASSESSMENT U/S. 143(3) R .W. S. 254 OF THE ACT WAS FINALIZED ON 28-2-2006 DETERMINING THE TOTAL INCOME AT RS.38,74,650/- AND IN DOING SO, THOSE TWO ADDITIONS OF RS.32,500/- AND RS.20,28,769/- WERE MA DE ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY FEES AND ON ACCOUNT OF LOW G.P. RESPECTIVELY AND PENALTY PROCEEDINGS U/S. 271(1)(C ) OF THE ACT WERE INITIATED. IN THE COURSE OF PENALTY PROCEEDINGS, VARIOUS SUBMISSIONS WERE MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER BUT HE WAS NOT SATISFIED AND HE IMPOSED A PENALTY OF RS. 20,61,269/- AS PER ORDER DATED 26-3-2008 PASSED BY HIM U/S. 271(1)(C) OF THE ACT. AGAINST THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. C.I.T.(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURT HER APPEAL BEFORE US. 4. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSEE BEFORE US THAT IN THE QUANTUM APPEAL BEFORE THE TRIBUNAL, THE TRIBUNAL HA D CONFIRMED THE ADDITION OF RS.32,500/- ON ACCOUNT OF DISALLOWANCE OF CONSULTAN CY FEES BUT THE ADDITION MADE BY THE A.O. ON ACCOUNT OF LOW G.P. HAD BEEN PA RTLY DELETED AND ONLY PART WAS CONFIRMED BY THE TRIBUNAL. IT IS SUBMITTED THAT AS PER THE ASSESSMENT ORDER, THE A.O. HAS ESTIMATED AND APPLIED THE G.P. RATE OF 6% FOR THE PURPOSE OF MAKING ADDITION OF RS.20,28,769/- BUT THE TRIBUNAL HAS HELD THAT G.P. RATE OF 2.5% SHOULD BE APPLIED INSTEAD OF 6% APPLIED BY THE A.O. FOR THE PURPOSE OF CALCULATING THE PROFIT OF THE ASSESSEE IN RESPECT O F GREY CLOTH. IT IS SUBMITTED THAT ALTHOUGH ONLY PART ADDITION WAS DELETED BY THE TRIB UNAL ON ACCOUNT OF ADDITION FOR LOW G.P. BUT THE PENALTY IS NOT JUSTIFIED EVEN ON S UCH PART ADDITION CONFIRMED BY THE TRIBUNAL BECAUSE EVEN THE PART ADDITION IS CONF IRMED ON ESTIMATE BASIS ONLY AND THEREFORE, PENALTY IS NOT JUSTIFIED. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED BY HIM ON VARIOUS TRIBUNAL/HIGH COURT DECISI ONS, CITATION OF WHICH ARE GIVEN BY HIM ON PAGE-26 OF THE PAPER BOOK WHICH IS AS UNDER:- SR. NO. CITATION NAME. 1. 140 TAXMAN 524 (KER.) HOTEL CLASSIC 2. 94 TTJ 156 (JD.) NARENDRA KUMAR ITA NO.3368/AHD /2008 ASSESSMENT YEAR 1992-93. 3 3. 311 ITR 454 (PUNE)(TM) RAJAN H.SHINDE. 4. 106 TTJ 616 (DEL) ALIED CONSTRUCTION. 5. 111 TTJ 540 (LUCKNOW A) SAHYOG SAHKARI SHRA M SAMVIDA SAMITI LTD. 6. 114 TTJ 561 (DELHI F) RAVI KHURANA 7. 214 CTR 355 (ALL) ARJUN PRASAD AJIT KUMAR. 8. 322 ITR 316 (DELHI) AERO TRADERS PVT.LTD. 9. 38 DTR 434 (CHD.) DABWALI TRANSPORT CO. 5. AS AGAINST THIS LD. D. R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE HAVE ALSO GONE THROUGH THE TRIBUNAL ORDER IN QUANTUM PROCEEDINGS I N ASSESSEES OWN CASE IN ITA NO.147/AHD/2007 DATED 20-11-2009, A COPY OF WHI CH IS AVAILABLE ON PAGES 17 TO 25 OF THE PAPER BOOK. AS PER PARAGRAPH 12 OF THE TRIBUNAL ORDER IN QUANTUM PROCEEDINGS, IT HAS BEEN HELD BY THE TRIBUNAL THAT CONSIDERING THE PROFIT RATES IN EARLIER YEARS WHICH ARE IN THE RANGE OF 1.18% TO 1. 64%, G.P. RATE OF 2.5% SHOULD BE APPLIED TO CALCULATE THE PROFIT IN GREY CLOTH IN STEAD OF 6% APPLIED BY THE ASSESSING OFFICER WHICH IS ON THE HIGHER SIDE. THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO APPLY G.P. RATE OF 2.5% AND CA LCULATE THE PROFIT OF THE ASSESSEE IN RESPECT OF GREY CLOTH. IN THE LIGHT OF THIS FINDING OF THE TRIBUNAL IN QUANTUM APPEAL OF THE ASSESSEE, NOW WE EXAMINE THE VARIOUS DECISIONS CITED BY THE LD. A.R. OF THE ASSESSEE. IN THE CASE OF SAHYOG SAHKARI SHRAM SAMVIDA SAMITI LTD. (SUPRA), IT WAS HELD BY LUCKNOW BENCH O F THE TRIBUNAL THAT WHEN THERE IS ESTIMATION OF INCOME BY APPLYING PROFIT RATE, IT CANNOT BE SAID THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME OR IS GUILT Y OF FRAUD OR GROSS OR WILLFUL NEGLECT MERELY BECAUSE BOOKS OF ACCOUNT OF THE ASSE SSEE HAD BEEN REJECTED AND ASSESSING OFFICER AND CIT (A) HAVING APPLIED DIFFER ENT NET PROFIT RATES TO ESTIMATE ASSESSEES INCOME FROM THE BUSINESS OF THE CIVIL CO NSTRUCTION THAN THE PROFIT RATE SHOWN BY THE ASSESSEE. ON THIS BASIS, THE PENALTY IMPOSED BY THE ASSESSING ITA NO.3368/AHD /2008 ASSESSMENT YEAR 1992-93. 4 OFFICER IN THAT CASE U/S. 271(1) (C) HAD BEEN DELET ED. SIMILARLY, IN THE CASE OF AERO TRADERS PVT. LTD., (SUPRA) THE FACTS ARE THAT THE ASSESSMENT WAS BASED ON ESTIMATED PROFITS. ESTIMATE WAS REDUCED BY CIT (A) AS NO CONCLUSIVE PROOF WAS AVAILABLE. UNDER THESE FACTS, IT WAS HELD BY HONBL E DELHI HIGH COURT THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME AND PENALTY CANNOT BE LEVIED. IN THE PRESENT CASE ALSO WE FIND THAT THE TRIBUNAL HAS HELD IN QUA NTUM APPEAL THAT CONSIDERING THE PROFIT RATES IN EARLIER YEARS, G.P. RATE OF 2.5 % SHOULD BE APPLIED TO CALCULATE PROFIT IN GREY CLOTH INSTEAD OF 6% APPLIED BY THE A SSESSING OFFICER WHICH IS ON THE HIGHER SIDE. HENCE WE FIND THAT WHILE CONFIRMING TH E PART ADDITION MADE BY THE ASSESSING OFFICER ON THE ALLEGATION OF LOW G.P., TH ERE IS NO CONCRETE FINDING THAT THERE IS ANY DEFINITE CONCEALMENT OF INCOME AND PAR T ADDITION WAS CONFIRMED BY THE TRIBUNAL ON ESTIMATE BASIS ONLY AND IT WAS HELD BY THE TRIBUNAL IN QUANTUM APPEAL THAT AS AGAINST 6% G.P. RATE APPLIED BY THE ASSESSING OFFICER, G.P. OF 2.5% SHOULD BE APPLIED TO CALCULATE THE PROFIT IN G REY CLOTH. THERE IS NO CONCRETE FINDING REGARDING CONCEALMENT OF INCOME BY THE ASSE SSING OFFICER OR BY CIT (A) IN QUANTUM PROCEEDINGS OR IN PENALTY PROCEEDINGS. U NDER THESE FACTS OF THE PRESENT CASE, VARIOUS JUDGMENTS CITED BY THE LD. A. R. OF THE ASSESSEE AS NOTED ABOVE ARE SQUARELY APPLICABLE AND BY RESPECTFULLY F OLLOWING THESE JUDGMENTS, WE HOLD THAT THE REVENUE COULD NOT ESTABLISH THE FACTU M OF CONCEALMENT OF INCOME AND HENCE PENALTY U/S.271(1) (C ) IS NOT JUSTIFIED. WE THEREFORE, DELETE THE PENALTY. ORDER PRONOUNCED IN OPEN COURT ON 27 - 05 - 2011. SD/- SD/- (D.K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER. AC COUNTANT MEMBER. AHMEDABAD. DATED: 27 -05 - 2011. ITA NO.3368/AHD /2008 ASSESSMENT YEAR 1992-93. 5 S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 5 -5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 5 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 - 5 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 27 - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 27 - 5 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 7 - 05 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..