Alidhara Textool Engineers Pvt.Ltd., Dist.Vapi V. The Dy.CIT, Range-1, Surat

ITA 3377/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2227 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-02-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C CHAUDHRY
• Assessee Lawyers: RASESH SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3377-3378/AHD/2008 ASSESSMENT YEAR:2003-04 DATE OF HEARING:3.2.11 DRAFTED:4.2.11 ALIDHARA TEXTOOL ENGINEERS PVT. LTD. FLAT NO.2, BUILDING NO.1, S. NO.55, PART NO.2 & 3, DUNGARA, DIST. VAPI, PAN NO.AAACD8469M ALIDHARA TEXPRO ENGINEERS PVT. LTD. FLAT NO.1 S.NO.55, PART NO.1 & 3, DUNGARA, DIST. VAPI PAN NO.AACCAA0256D V/S . V/S . DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, SURAT DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI RASESH SHAH, AR REVENUE BY:- SHRI D.C. CHAUDHRY, DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE TWO APPEALS BY THE ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURAT IN AP PEAL NO.CAS-I/54-55/08-09 OF EVEN DATE 24-07-2008. THE ASSESSMENT WAS FRAMED BY ACIT-CIRCLE-1, SURAT U/S143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 16-03-2006 FOR ASSESSMENT YEAR 2003-04. THE PENALTY UNDER DISPUTE WAS LEVIED BY DCIT, CIRCLE-1, SURAT U/S.271(1) OF THE ACT VIDE HIS ORDER DATED14-03- 2008. 2. THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICA L AND COMMON IN BOTH THE APPEAL AND PENALTY LEVIED ON DISALLOWANCE OF UNDER VALUATION OF SEMI FINISHED GOODS ITA NO.3377-78/AHD/2008 A.Y 2003-04 ALIDHARA TEXPRO ENGINEERS PVT. LTD. V. DCIT, CIR1, SRT PAGE 2 AND STOCK IN TRANSIT IN ASSESSMENT YEAR 2003-04 OF RS.5 LAKH IN ITA NO.3377/AHD/2008, CASE OF ALIDHARA TEXTOOL ENGINEERS PVT. LTD AND DISALLOWANCE OF RS.5 LAKH IN ITA NO.3378/AHD/2008 THE CASE OF ALIDHARA TEXPRO ENGINEERS PVT. LTD. HENCE, WE WILL TAKE UP THE FACTS AND CIRCUMSTANCES IN ITA NO.3377/AHD/2008 AND DECIDED THIS ISSUE. THE ONLY COMMON ISSUE IN THESE APPEALS OF ASSESSEE IS REGARDING THE RESTRICTION BY CIT(A) AT RS.60,423/- OUT OF TOTAL PENALTY LEVIED BY ASSESSING OFFICER RS.1,83,750/- U/S 271(1)(C) OF TH E ACT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1 :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN L EVYING A PENALTY OF RS.60,423/- OUT OF PENALTY OF RS.1,83,750/- U/S.271 (1) OF THE ACT. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS OF THE CASE. WE FIND THAT THE ASSESSING OFFICER DURING THE COURSE OF ASS ESSMENT PROCEEDINGS U/S.143(3) OF THE ACT MADE ADDITION OF RS.5 LAKH ON ACCOUNT OF UNDER VALUATION OF SEMI FINISHED GOODS AND STOCK IN TRANSIT. THE AO LEVIED THE PENAL TY U/S.271(1) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME ON THE ADDITION OF RS.5 LAKH MADE BY ASSESSING OFFICER. THEREFORE HE LEVIED MINIMUM PENA LTY OF RS1,83,750/-. THE CIT(A) RESTRICTED THE PENALTY ON UNDER VALUATION ADMITTED BY ASSESSEE TO THE EXTENT OF RSS.1,64,416/- AND DELETED THE BALANCE PENALTY BY G IVING FOLLOWING FINDINGS IN PARA- 2.31 TO 2.32 OF HIS APPELLATE ORDER:- 2.3.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE APP ELLANT AND OBSERVATION ON MADE BY THE A.O. WHILE CONFIRMING THE ADDITION IN T HE ASSESSMENT ORDER, THE CIT(A) HAS OBSERVED AS UNDER:- 2.4 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATIONS OF THE A.O. THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. [188 ITR 44] IS VERY CLEAR. THE CLOSING STOCK HAS TO BE VALUED BY INCLUDING OVE RHEADS LIKE FREIGHT INWARDS ETC. FROM THE ABOVE IT IS CLEAR THAT THE AP PELLANT HAS ADMITTED THAT THE OVERHEAD MANUFACTURING EXPENSES TO THE EXT ENT OF RS.1,64,416/- WERE NOT INCLUDED IN THE SEMI-FINISHE D STOCK. FURTHER THE APPELLANT HAS NOT GIVEN THE OTHER EXPENSES LIKE FRE IGHT INWARDS IN THE STOCK LYING WITH THE JOB WORKERS. SIMILARLY, THE AP PELLANT HAS NOT GIVEN ANY DETAILS OF OTHER EXPENSES OF STOCK LYING IN TRA NSIT. IN VIEW OF THE REASONS THAT THE APPELLANT ITSELF HAS ADMITTED UNDE RVALUATION OF CLOSING STOCK OF RS.1,64,416/- IN RESPECT OF SEMI-FINISHED STOCK AND THE APPELLANT HAS NOT GIVEN THE OTHER EXPENSES LIKE FRE IGHT INWARDS ETC. FOR BOTH STOCK IN TRANSIT OF RS.98,63,661/- AND STOCK L YING WITH JOB WORKERS OF RS.31,25,350/-, THE ADDITION MADE BY THE AO OF R S.5,00,000/- ITA NO.3377-78/AHD/2008 A.Y 2003-04 ALIDHARA TEXPRO ENGINEERS PVT. LTD. V. DCIT, CIR1, SRT PAGE 3 APPEARS TO BE EXTREMELY REASONABLE. THEREFORE THE A DDITION MADE BY THE AO IS CONFIRMED AND THIS GROUND OF APPEAL IS DI SMISSED. 2.3.2 FROM THE ABOVE, IT IS CLEAR THAT THE APPELLAN T HAS ADMITTED THAT THE OVERHEAD MANUFACTURING EXPENSES TO THE EXTENT OF RS .1,64,416/- WERE NOT INCLUDED IN THE SEMI-FINISHED STOCK. FURTHER THE AP PELLANT HAS NOT GIVEN THE OTHER EXPENSES LIKE FREIGHT INWARDS IN THE STOCK LY ING WITH THE JOB WORKERS. SIMILARLY, THE APPELLANT HAS NOT GIVEN ANY DETAILS OF OTHER EXPENSES OF STOCK LYING IN TRANSIT. IN VIEW OF THE REASONS THAT THE A PPELLANT ITSELF HAS ADMITTED UNDERVALUATION OF CLOSING STOCK OF RS.1,64,416/- IN RESPECT OF SEMI-FINISHED STOCK AND THE APPELLANT HAS NOT GIVEN THE OTHER EXP ENSES LIKE FREIGHT INWARDS ETC. FOR BOTH STOCK IN TRANSIT OF RS.98,63,661/- AN D STOCK LYING WITH JOB WORKERS OF RS.31,25,350/-, THE ADDITION MADE BY THE AO OF R S.5,00,000/- WAS MADE. THEREFORE, THIS IS NOT A CASE OF MERE ESTIMATION OR ADHOC ADDITION. THE APPELLANT ITSELF HAS ADMITTED THAT THERE WAS UNDERV ALUATION TO THE EXTENT OF RS.1,64,416/-. THE APPELLANT HAS NOT GIVEN SEVERAL DETAILS OF INWARD FREIGHT. THEREFORE IT IS CLEAR THAT THE UNDERVALUATION OF CL OSING STOCK WAS DEFINITELY CONSCIOUS AND DELIBERATE. IT IS ELEMENTARY ACCOUNTS THAT WHILE COMPUTING THE CLOSING STOCK, OVERHEADS, INWARD FREIGHT, ETC. HAVE TO BE INCLUDED. BY NOT DOING SO, THE APPELLANT HAS CLEARLY AND CONSCIOUSLY FURNISHED INACCURATE PARTICULARS OF CLOSING STOCK THEREBY CONCEALING THE INCOME. ON THESE FACTS, THE CASE LAWS RELIED UPON BY THE APPELLANT ARE NOT APPL ICABLE SINCE THE CONCEALMENT IS CONSCIOUS AS DISCUSSED ABOVE. IN THE CASE OF LALALUABHAI JOGIBHAI PATEL THE HONBLE HIGH COURT STATED THAT THE ASSESSEE ADMITTED THAT HE HAD PURCHASED THE CAR FOR RS.31,000 AND, THEREFO RE, THAT WAS A VALID BASIS ON WHICH THE TRIBUNAL HELD THAT THERE, ADMITTEDLY, WAS CONCEALMENT OF INCOME TO THE TUNE OF RS.31,000. AS REGARDS THE AMOUNT WHI CH WAS IN EXCESS OF RS.31,000, THE TRIBUNAL HAD FOUND THAT IT WAS A MER E ESTIMATE BY THE INCOME- TAX OFFICER WHILE FIXING THE AMOUNT THAT WENT INTO PURCHASE OF THE CAR. THE FINDING OF THE TRIBUNAL THAT THE AMOUNT WHICH WAS I N EXCESS OF RS.31,000 INVOLVED A FACTOR OF ESTIMATE, ON THE BASIS OF LACK OF EVIDENCE COULD NOT BE SAID TO BE PERVERSE. THE TRIBUNAL WAS RIGHT IN CONF IRMING THE PENALTY IN RESPECT OF AN AMOUNT OF RS.31,000 AND CANCELLING TH E BALANCE PENALTY LEVIED UNDER SECTION 271(1)(C). IN THE PRESENT CASE THE APPELLANT ITSELF HAS ADMITT ED THAT THERE WAS UNDERVALUATION TO THE EXTENT OF RS.1 ,64,416/-. HENCE, FOLLOWING THIS DECISION THE PENALTY LEVIED BY THE A.O IS CONF IRMED IN RESPECT OF THE ADDITION OF RS.1,64,416/- ONLY AND THE PENALTY ON T HE BALANCE ADDITION IS DELETED. AGGRIEVED AGAINST THE RESTRICTION OF PENALTY OF RS. 60,423/- ASSESSEE CAME IN SECOND APPEAL BEFORE US. 4. WE FIND THAT CIT(A) HAS RESTRICTED THE PENALTY O N UNDERVALUATION OF CLOSING STOCK QUA RS.1,64,416/- ON IN RESPECT OF SEMI-FINIS HED STOCK AS THE ASSESSEE HAS NOT GIVEN EXPENSE LIKE FREIGHT ETC. FOR STOCK TRANSFER IN TRANSIT AND AS ADMITTED BY ASSESSEE OF UNDERVALUATION TO THAT EXTENT. WE FIND FROM PART FINDINGS THAT ASSESSEE HAS ADMITTED BUT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS FOUND THAT ITA NO.3377-78/AHD/2008 A.Y 2003-04 ALIDHARA TEXPRO ENGINEERS PVT. LTD. V. DCIT, CIR1, SRT PAGE 4 ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AN D EVEN OTHERWISE THE ASSESSEES EXPLANATION THAT THE ADDITION IS BASED O N ESTIMATE AND DOES NOT SHOW THE STOCK OF FINISHED GOODS AS WHETHER INCLUSIVE OF LAB OUR CHARGES AND OVERHEAD OR NOT. IN CASE THIS FACT IS NOT CLEAR, NO DOUBT, THE ASSES SEE HAS ADMITTED THE INCOME TO AVOID LINGERING LITIGATION BUT PENALTY IS NOT EXIGI BLE ON THE ASSESSEE. ACCORDINGLY, WE DELETE THE PENALTY AND THIS ISSUE OF ASSESSEES APP EAL IS ALLOWED. AS REGARDS TO ITA NO.3378/AHD/2008 THE FACTS AND CIRCUMSTANCES, THE PENALTY RETAINED B Y CIT(A) IN RESPECT OF UNDERVALUATION OF CLOSING QUA RS.1,51,85 5/- AS ADMITTED BY ASSESSEE, THE FACTS AND CIRCUMSTANCES BEING EXACTLY IDENTICAL, TA KING A CONSISTENT VIEW WE DELETE THE PENALTY. 5. IN THE RESULT, BOTH THE APPEAL OF ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 03/02/2011 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 03/02/2011 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-I, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD