Mohamadali Ahmadhussain Mukhi, Palanpur V. The Income tax Officer,Ward-1, Palanpur

ITA 352/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6127 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 31-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Keywords: Set aside
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A.N. PAHUJA, AM) ITA NO.352/AHD/2008 A. Y.: 1997-98 MOHAMADALI AHMADHUSAIN MUKHI, PROP. MUKHI APPARELS, DISHA HIGHWAY, PALANPUR, PA NO. ABWPM 7974- N VS THE INCOME TAX OFFICER, WARD 1, PALANPUR (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VARTIK CHOKSI, AR RESPONDENT BY DR. JAYANT JHAVERI, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XV, AHMEDABAD DATED 13-11-2007 FOR ASSESSMENT YEAR 1997-98 CHALLENGING THE ORDER OF TH E LEARNED CIT(A) IN CONFIRMING THE PENALTY LEVIED U/S 271 (1) ( C ) OF THE IT ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF READYMADE SHIRTS IN THE NAME AND STYLE OF M/S. MUKHI APPARELS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSEE WAS NOT ABLE TO FURNISH DAY TO DAY DETAILS OF PRODUCTIO N OF SHIRT STITCHED, DAY TO DAY DETAILS OF FABRICS IN METERS PURCHASED, FABR ICS USED FOR PREPARING GOODS EACH DAY, DETAILS OF KARIGARWISE PRODUCTION N EITHER COULD HE PRODUCE DETAILS OF DAY TO DAY LABOUR PAYMENT AS PER PRODUCTION EACH DAY, NEITHER MACHINEWISE PRODUCTION DETAILS WERE PR ODUCED. THE AO AFTER GIVING OPPORTUNITY TO THE ASSESSEE BY ISSUING SHOW CAUSE NOTICE TO THE ITA NO.352/AHD/2008 MOHAMADALI AHMADHUSAIN MUKHI VS ITO 2 ASSESSEE AND PROVING THAT HE WAS MAINTAINING STOCK IN THE FORM OF PRODUCTION REPORTS, GATE PASS BOOKS, ETC. AND AFTER MAKING ENQUIRIES FROM LEADING TAILORS, WORKED OUT CONSUMPTION OF 2.2 5 METER FABRICS PER SHIRT. THE AO NOTED THAT THE ASSESSEE HAS NOT GIVEN PROPER EXPLANATION OR DETAILS ABOUT OPENING AND CLOSING STOCK FIGURES DISCLOSED BY HIM. BOOKS OF ACCOUNT WERE ACCORDINGLY REJECTED. ADDITIO N OF RS.7,23,126/- WAS MADE ON ACCOUNT OF UNACCOUNTED SALES AND RS.60, 239/- ON ACCOUNT OF UNDER VALUATION OF STOCK. THE TRIBUNAL VIDE ORDE R DATED 23-06-2006 CONFIRMED THE ADDITIONS ON MERITS AS WELL AS REJECT ION OF THE BOOKS OF ACCOUNT. HOWEVER, CONSUMPTION OF FABRICS AT 2.4 MET ERS PER SHIRT WAS TAKEN AND ADDITION OF RS.7,23,126/- WAS REDUCED TO RS.4,07,594/-. THE TRIBUNAL THEREFORE, SUBSTITUTED THE FIGURE OF 2.4 M ETERS FABRICS CONSUMPTION PER SHIRT INSTEAD OF 2.25 METERS TAKEN BY THE AO. THE AO VIDE SEPARATE ORDER IMPOSED THE PENALTY ON BOTH THE ABOVE ADDITIONS. THE LEARNED CIT(A) CONFIRMED THE PENALTY AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T ULTIMATELY INCOME OF THE ASSESSEE IS ESTIMATED BY THE AO AS AGAINST T HE CLAIM OF THE ASSESSEE AND ADDITION MADE BY THE AO HAS BEEN SUBST ANTIALLY REDUCED BY THE TRIBUNAL. HE HAS SUBMITTED THAT THERE IS NO EXP ERTISE TO TAKE THE AVERAGE MATERIAL REQUIRED FOR ONE SHIRT AND THE ASS ESSEE IS DEPENDANT UPON THE WORKERS. THE AVERAGE PRICE IS ULTIMATELY T AKEN FOR THE PURPOSE OF MAKING THE ADDITIONS. HE HAS SUBMITTED THAT THE AO MADE ENQUIRIES FROM SOME OF THE TAILORS AT THE BACK OF THE ASSESSE E WHICH WERE NEVER CONFRONTED TO THE ASSESSEE AND REFERRED TO PAGE 5 O F THE ASSESSMENT ORDER. HE HAS SUBMITTED THAT THE TRIBUNAL ON THE IS SUE OF VALUATION OF THE CLOSING STOCK DIRECTED THE AO TO CONSIDER THE V ALUATION OF CLOSING STOCK AS OPENING STOCK IN THE NEXT YEAR. THE ABOVE FACTS WOULD PROVE THAT THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF I NCOME BEFORE THE ITA NO.352/AHD/2008 MOHAMADALI AHMADHUSAIN MUKHI VS ITO 3 AUTHORITIES BELOW. IT WAS ONLY ESTIMATED INCOME MAD E BY REJECTING THE BOOK RESULTS AND THAT THE ADDITION MADE ON ACCOUNT OF UNDER VALUATION OF THE CLOSING STOCK WOULD REMAIN OPENING STOCK NEX T YEAR, THEREFORE, IT WOULD NOT MAKE OUT A CASE OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. HE HAS SUBMITTED THAT THE AO HAS NOT GIVEN ANY CLEAR FINDING WHETHER IT IS A CASE OF FUR NISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BY T HE ASSESSEE, THEREFORE, PENALTY SHOULD NOT BE LEVIED IN THE MATT ER. 5. LEARNED DR RELIED ON THE ORDER OF THE AUTHORITIE S BELOW AND RELIED UPON THE DECISION OF THE HONBLE ALLAHABAD HIGH COU RT IN THE CASE OF NAINU MAL HET CHAND VS CIT 294 ITR 185 IN WHICH IT WAS HELD THAT WHEN SUFFICIENT FINDINGS HAD BEEN GIVEN THAT EXPLA NATION REGARDING CASH CREDITS WAS FALSE, IMPOSITION OF PEN ALTY WAS VALID . THE LEARNED DR SUBMITTED THAT IT IS NOT A CASE OF M ERE ESTIMATION OF INCOME; THEREFORE, PENALTY WAS RIGHTLY IMPOSED BY T HE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE AO HAS IMPOSED TH E PENALTY ON ACCOUNT OF ADDITION OF RS.4,07,594/- ON WHICH THE ASSESSEE CLAIMED CONSUMPTION OF FABRICS FOR MANUFACTURE OF SHIRT AT 2.6 METERS T O 2.7 METERS. THE AO HOWEVER, CONSIDERED IT TO BE A CASE OF CONSUMPTION OF 2.25 METERS FABRICS PER SHIRT. THE TRIBUNAL ULTIMATELY CONSIDERING THE MATERIAL ON RECORD DIRECTED THE AO TO APPLY CONSUMPTION OF FABRICS AT 2.4 METERS PER SHIRT TAKING INTO CONSIDERATION THE WORKING GIVEN BY THE ASSESSEE AND REDUCED THE ADDITION OF RS.7,23,126/- TO RS.4,07,594/-. TH E TRIBUNAL AS REGARDS ADDITION OF RS.239/- IN RESPECT OF VALUATION OF CLOSING STOCK DIRECTED THE AO TO TAKE THE VALUATION OF CLOSING STOCK AS OP ENING STOCK IN THE SUBSEQUENT YEAR. THE ABOVE FACTS WOULD SHOW THAT TH E ASSESSEE DISCLOSED ALL PRIMARY FACTS IN THE RETURN OF INCOME AS WELL A S DISCLOSED THE DETAILS BEFORE THE AO AT THE ASSESSMENT STAGE. THE DISPUTE WAS WITH REGARD TO ITA NO.352/AHD/2008 MOHAMADALI AHMADHUSAIN MUKHI VS ITO 4 CONSUMPTION OF MATERIAL PER SHIRT BY THE ASSESSEE A ND THE RESULTANT UNDER VALUATION OF STOCK WHICH WAS BASED UPON THE S AME MATTER. THE EXPLANATION OF THE ASSESSEE WAS PARTLY ACCEPTED BY THE TRIBUNAL. ULTIMATELY, THE MAIN ISSUE OF CONSUMPTION OF MATERI AL FOR MAKING SHIRT WAS ESTIMATED AND THE ESTIMATED ADDITION WAS MADE I N THE CASE OF THE ASSESSEE BY REDUCING THE ADDITION MADE BY THE AO. 7. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) HELD THAT A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C ) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 2 71(1) ( C ) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INF ORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURAT E, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PART ICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CAN NOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORREC T CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. TH ERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETUR N FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE T HE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARI SE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NO T BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FA LSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271( 1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL ITA NO.352/AHD/2008 MOHAMADALI AHMADHUSAIN MUKHI VS ITO 5 NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REG ARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RE TURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISI ON OF THE GUJARAT HIGH COURT AFFIRMED. 8. THE HONBLE SUPREME COURT IN THE CASE OF M/S. RA JASTHAN SPINNING & WEAVING MILLS 2009 PIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASES OF CIT VS DHILLON RICE MILLS [ 2002] 256 ITR 447 (P & H) AND IN THE CASE OF HARIGOPAL SINGH VS CIT [2002] 258 ITR 85 (P & H) HELD THAT NO PENALTY FOR CONCEALMENT LEVIABLE WHERE INCOME ASSESSED IS A MATER OF ESTIMATE. 9. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE , IN THE LIGHT OF THE ABOVE DECISIONS IT IS CLEAR THAT THE ASSESSEE HAS D ISCLOSED ALL THE FACTS AT THE ASSESSMENT STAGE AND THERE WAS A VERY THIN MARG IN IN THE CLAIM OF THE ASSESSEE FOR CONSUMPTION OF FABRICS FOR MAKING SHIRT AND ULTIMATELY ADDITION IS SUBSTANTIALLY REDUCED BY THE TRIBUNAL. THE PARTICULARS AND INFORMATION GIVEN BY THE ASSESSEE WERE NOT FOUND TO BE INCORRECT OR INACCURATE. THE AO IN THE PENALTY ORDER ALSO HAS NO T GIVEN ANY SPECIFIC FINDING WHETHER THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME OR HAS CONCEALED PARTICULAR OF INCOME. AS RE GARDS, THE UNDER VALUATION OF CLOSING STOCK, THE SAID ADDITION WAS B ASED UPON THE MAIN ISSUE OF CONSUMPTION OF RAW MATERIALS WHICH WAS ULT IMATELY ESTIMATED AND THE TRIBUNAL DIRECTED THE AO TO CONSIDER THE VA LUATION OF CLOSING STOCK AS OPENING STOCK IN THE SUBSEQUENT YEAR. IT W OULD RESULT INTO THE FACT THAT THE ADDITION MADE IN THE PRESENT ASSESSME NT YEAR WOULD BE REDUCED FROM THE PROFIT OF THE ASSESSEE FROM SUBSEQ UENT YEAR. THEREFORE, THE ADDITION MADE ON ACCOUNT OF VALUATION OF CLOSIN G STOCK WOULD HAVE EFFECT ON THE PROFIT TO BE CALCULATED IN THE SUBSEQ UENT YEAR. THEREFORE, MERE ENHANCEMENT TO THE VALUATION STOCK IN THE ASSE SSMENT YEAR UNDER ITA NO.352/AHD/2008 MOHAMADALI AHMADHUSAIN MUKHI VS ITO 6 APPEAL AND REDUCTION GIVEN IN THE SUBSEQUENT YEAR W OULD NOT LEAD TO AN INFERENCE THAT THE ASSESSEE CONCEALED PARTICULARS O F INCOME OR FILED INACCURATE PARTICULARS OF INCOME. CONSIDERING THE T OTALITY OF THE FACTS AND CIRCUMSTANCES AND THE FACT THAT EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE FALSE, WOULD PROVE THAT THE ASSESSEE MA DE A BONA FIDE CLAIM BEFORE THE AUTHORITIES BELOW WHICH HAS NOT BEEN PAR TLY ACCEPTED. THEREFORE, IN OUR VIEW IT IS NOT A CASE OF CONCEALM ENT OF PARTICULARS OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOM E. THE DECISION CITED BY THE LEARNED DR WOULD NOT SUPPORT THE CASE OF THE RE VENUE. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 10. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED ON 04-06-2010 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 04-06-2010 LAKSHMIKANT/- 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 D Y. REGISTRAR, ITAT, AHMEDABAD