Honest Enterprises Ltd., Baroda V. The ACIT., Circle-1(2), Baroda

ITA 3445/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5685 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-06-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 09-08-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Income from undisclosed sources; Revised return
• Section: 271(1)(c); 143(3); 133A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE S HRI A.N. PAHUJA, A.M.) I.T.A. NO. 3445/AHD./2007 ASSESSMENT YEAR : 2001-2002 M/S. HONEST ENTERPRISES LTD., BARODA -VS.- AS SISTANT COMMISSIONER OF INCOME TAX, (PAN : AAACH 7237 D) CIRCLE-1(2), BARODA (APPELLANT) (RESPONDENT) APPELLANT BY : MS. URVASHI SHODHAN RESPONDENT BY : SHRI K.M. MAHESH, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 06.06.2007 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA CONFI RMING THE PENALTY OF RS.3,50,000/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS APPEAL ARE THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS AN D NON-FERROUS METAL AND ELECTRODES. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN O F INCOME ON 27.09.2001 DECLARING TOTAL INCOME OF RS.2,91,330/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 27.02.2004 WHEREIN HE MADE THE ADDITION OF RS.8,31, 315/- ON ACCOUNT OF UNACCOUNTED SALES. IN THIS CASE, A SURVEY UNDER SECTION 133 OF THE INCOME TAX ACT WAS CARRIED OUT ON 11.09.2002, WHEREIN THE ASSESSEE MADE A DISCLOSURE OF RS.8,31,3 15/- FOR THE ASSESSMENT YEAR 2001-02 ON ACCOUNT OF VARIOUS DISCREPANCY IN THE DOCUMENTS FOU ND AND IMPOUNDED DURING THE COURSE OF SURVEY PROCEEDINGS. AFTER THE SURVEY, THE ASSESSEE FILED A REVISED RETURN OF INCOME, WHEREIN HE DECLARED TOTAL INCOME OF RS.3,57,600/-. IN THE REVI SED RETURN, THE ASSESSEE HAS DECLARED AN AMOUNT OF RS.44,200/- ONLY BEING GROSS PROFIT AT THE RATE OF 7% OF THE SALES AMOUNT DISCLOSED BY THE DIRECTOR OF THE ASSESSEE-COMPANY DURING THE COURSE OF SURVEY AMOUNTING TO RS.8,31,315/-. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT IN REPLY TO QUESTION NO. 12 (STATEMENT RECORDED AT THE TIME OF SURVEY), SHRI LAXMICHAND VA GHELA, DIRECTOR STATED THAT SALES AND PURCHASES PERTAINING TO THE TRANSACTIONS NOTED IN SHANKAR NOTE BOOK WERE NOT RECORDED IN THE 2 ITA NO. 3445/AHD/2007 REGULAR BOOKS. THE QUESTION AND ANSWER NO. 12 OF HI S STATEMENT ARE REPRODUCED BELOW VERBATIM :- Q. 12. AS YOU HAVE ADMITTED IN YOUR ANSWER TO Q.11 OF THIS STATEMENT THAT THE ENTRIES OF THIS DIARY REPRESENT UNACCOUNTED BUS INESS TRANSACTIONS AND SECRET COMMISSIONS PAID ON PURCHASES, YOU ARE REQUESTED TO EXPLAIN THE SOURCE OF INVESTMENT AND NAMES AND ADDRESSES OF SUPPLIES AS W ELL AS THE BUYERS OF GOODS AND ALSO PERSONS TO WHOM SECRET COMMISSION PAID ON PURCHASES, LABOUR CHARGES PAID, ETC. ALSO PLEASE QUANTIFY THE QUANTUM OF UNAC COUNTED SALES MADE TO THESE PARTIES AS MENTIONED ON PAGE NO. 12,19, 24 AND 26 O F THE ABOVE MENTIONED DIARY. ANS. I HUMBLY REQUEST YOU THAT IT IS NOT IN THE INT EREST OF MY BUSINESS TO DISCLOSE THE FULL PARTICULARS OF THE SUPPLIERS, THE BUYERS O F GOODS, THE RECIPIENT OF SECRET COMMISSION AND THE PAYMENT OF LABOUR CHARGES. HOWEV ER, I AGAIN CATEGORICALLY ADMIT THAT, AS MENTIONED ABOVE, THESE PURCHASES AND SALES TRANSACTIONS WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS BY THE CO MPANY. 3. ON THE BASIS OF ABOVE, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER TREATED THE ENTIRE UNRECORDED SALES AND INTEREST AMOUNTING TO RS.8,46, 115/- AS INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2001-02 AND ALSO INITIATED THE PENA LTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. SUBSEQUENTLY, IN QUANTUM APPEAL, THE LEARN ED COMMISSIONER OF INCOME TAX(APPEALS)- II, BARODA CONFIRMED THE ADDITION MADE BY THE ASSES SING OFFICER IN RESPECT OF UNACCOUNTED SALES. THEREAFTER VIDE ORDER DATED 19.01.2006, THE ASSESSI NG OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS.3,50,000/- BEING 100% OF TAX SOUGHT TO BE EVADED ON UNDISCLOSED SALES OF RS.8,31,315/-, WHICH IS CONFIRMED BY THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) IN IMPUGNED ORDER. THIS PENALTY IS LEV IED @ 100% OF TAX SOUGHT TO BE EVADED ON UNACCOUNTED SALES OF RS.8,31,315/-. 4. AGAINST THE QUANTUM ORDER, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE TRIBUNAL, AND ITAT IN APPEAL NO. 3574/AHD/2004 VIDE ORDER DATED 1 5.05.2009 DIRECTED THE ASSESSING OFFICER TO ADOPT GROSS PROFIT AT 10% ON UNACCOUNTED SALES F OLLOWING THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- PRESIDENCE INDU STRIES (2002) 258 ITR 654 (GUJ.). THEREAFTER, THE ASSESSING OFFICER ALLOWED THE APPEAL EFFECT TO THE ORDER OF TRIBUNAL VIDE ORDER DATED 08.07.2009 WHEREIN ASSESSING OFFICER RESTRICTED THE ADDITION TO RS.81,651/- I.E. 10% OF ENTIRE UNACCOUNTED SALES OF RS.8,16,515/- DISCLOSED BY THE ASSESSEE-COMPANY AT THE TIME OF SURVEY 3 ITA NO. 3445/AHD/2007 OPERATION. THE PRESENT APPEAL OF THE ASSESSEE IS AG AINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DATED 6.6.2007 CONFIRMING THE P ENALTY OF RS.3,50,000/-. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SMT. URVASHI SODHAN, LD. COUNSEL APPEARED AND CONTENDED THAT ENTIRE ADDITION OF RS.8 ,31,315/- WAS MADE ON ESTIMATE BASIS. SHE EXPLAINED THAT IN THE REVISED RETURN FILED AFTER TH E SURVEY, THE ASSESSEE HAS DISCLOSED GROSS PROFIT AT THE RATE OF 7% ON ENTIRE UNDISCLOSED SALES OF RS .6,31,315/-. SHE POINTED OUT THAT THE ASSESSING OFFICER ADDED THE AMOUNT OF ENTIRE SALES TO THE TOT AL INCOME AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER IN QUANTUM APPEAL. HOWEVER, THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO TAKE ONL Y GP @ 10%. THIS ADDITION HAS BEEN MADE ON ESTIMATE BASIS I.E. GP @ 7% DECLARED BY THE ASSESSE E AND FINALLY ASSESSED AT THE RATE OF 10%. THEREFORE PENALTY UNDER SECTION 271(1)(C) IS NOT LE VIABLE. IN SUPPORT OF THIS, RELIANCE IS PLACED ON THE DECISION OF ITAT, C BENCH, AHMEDABAD IN ITA N OS. 3807 & 3808/AHD/2007 IN THE CASE OF M/S. MAYUR ROADWAYS VS.- ACIT, CIRCLE 2(1), BAR ODA FOR THE ASSESSMENT YEAR 2002-03 & 2003-04. THEREFORE, SHE PLEADED THAT THE PENALTY OF RS.3,50,000/- LEVIED BY THE ASSESSING OFFICER BE CANCELLED. ALTERNATIVELY, SHE ARGUED THAT THE AS SESSING OFFICER BE DIRECTED TO RE-WORK OUT THE PENALTY OF RS.81,651/- AT THE RATE OF 100% OF TAX S OUGHT TO BE EVADED BECAUSE FINALLY ITAT, C BENCH, AHMEDABAD HELD THAT ONLY GP @ 10% IS TAXABLE AND NOT THE ENTIRE UNACCOUNTED SALES. 6. ON THE OTHER HAND, SHRI K.M. MAHESH, SR. D.R. AP PEARING ON BEHALF OF THE REVENUE CONTENDED THAT ORIGINAL AS WELL AS REVISED RETURN W AS FILED BY THE ASSESSEE AFTER THE SURVEY OPERATION. IT IS WELL SETTLED LAW THAT THE PENALTY IS LEVIABLE WITH REFERENCE TO THE ORIGINAL RETURN. IN THIS CASE, ORIGINAL RETURN WAS FILED AFTER THE SURV EY AND THE ASSESSEE NEITHER DISCLOSED UNRECORDED SALES AMOUNTING TO RS.8,31,315/- WHICH WAS ADMITTED BY THE DIRECTOR OF THE ASSESSEE-COMPANY AT THE TIME OF SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT AS INCOME FROM UNDISCLOSED SOURCES NOR PROFIT THEREON AT THE RATE OF 7%. THIS PROFIT @ 7% WAS DECLARED IN THE REVISED RETURN. FOR THE PURPOSE OF LEVYING PENALTY UNDER SECTION 27 1(1)(C), REVISED RETURN AFTER DETECTION OF CONCEALMENT BY THE DEPARTMENT IS OF NO CONSEQUENCE. THEREFORE, IT MAY BE HELD THAT PENALTY IN THIS CASE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT IS LEVIABLE. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT SURVEY IN THIS CASE TOOK PLACE ON 11.9.92. THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 29.09.2001, I.E. AFTER THE DATE OF SURVEY, WHEREIN IT DECLARED INCOME 4 ITA NO. 3445/AHD/2007 AT RS.2,91,330/-. IN THIS RETURN, THE ASSESSEE NEIT HER DISCLOSED UNDISCLOSED SALES AMOUNTING TO RS.8,31,315/- WHICH WAS ADMITTED AS ITS UNDISCLOSED INCOME IN REPLY TO QUESTION NO. 12 (SUPRA) NOR GP @ 7%. WE, THEREFORE, HAVE NO HESITATION IN H OLDING THAT THE ASSESSEE HAS CONCEALED INCOME, WHICH IS FINALLY DETERMINED BY ITAT (SUPRA) I.E. RS.81,651/-. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RE-WORK OUT THE PENALTY ON INC OME CONCEALED TO THE EXTENT OF RS.81,651/- UNDER SECTION 271(1)(C) @ 100% OF TAX SOUGHT TO BE EVADED. TO SUM UP, THE PENALTY TO THIS EXTENT IS CONFIRMED AND REMAINING AMOUNT OF PENALTY IS DELETED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 02.07.201 0 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 02 / 07 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.