The ITO,S.K. Ward-3, Himatnagar V. M/s. Shree Ganesh Enterprise, Himatnagar

ITA 3561/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5817 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 24-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Question of law; Wrong claim
• Section: 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A.N. PAHUJA, AM) ITA NO.3561/AHD/2007 A. Y.: 2003-04 THE INCOME TAX OFFICER, S. K. WARD-3, HIMANAGAR, 3 RD FLOOR AMBALAL COMPLEX, B/H MEHTA PETROL PUMP, HIMANAGAR, AHMEDABAD VS M/S. SHREE GANESH ENTERPRISE, 13, MOTIBAUGH SOCIEY, B/H A-ONE SOCIETY, MOTIPURA HIMATNAGAR, AHMEDABAD PA NO. AAWFS 7153 A (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K.M. MAHESH, DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IX, AHMEDABAD DATED 19-06-200 FOR ASSESSMENT YEAR 2003-04, CHALLENGING THE ORDER OF T HE LEARNED CIT(A) IN CANCELING THE PENALTY LEVIED U/S 271 (1) ( C ) OF T HE IT ACT. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF THE NOTICE THROUGH REGISTERED PO ST. A/D. CARD IS AVAILABLE ON RECORD. THE ASSESSEE IS, THEREFORE, PR OCEEDED EX-PARTE. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO W HILE RECORDING HIS FINDING ON PAGE 4 OF THE ORDER UNDER APPEAL HAS MEN TIONED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS HE NOTICED THAT SI GNATURES IN THE WAGE REGISTER DID NOT BEAR REVENUE STAMPS AS REQUIRED UN DER THE RULES. HE HAS FURTHER MENTIONED THAT SIGNATURES OF THE SAME L ABOURERS ON THE VOUCHERS DIFFERED FROM MONTH TO MONTH. IT IS ALSO M ENTIONED THAT THE IDENTITY OF 283 LABOURERS OF SABAR DAIRY AND 106 LA BOURERS OF MOTHER DAIRY, AGGREGATING TO 389 LABOURERS COULD NOT BE PR OVED AT THE RESPECTIVE ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 2 DAIRY SITES. ON THE BASIS OF THESE DETAILS THE AO E STIMATED THE INFLATED EXPENDITURE APPLYING ESTIMATED PERIOD OF WORKING OF THESE LABOURERS FOR 30 DAYS FOR SABAR DAIRY AND 60 DAYS FOR MOTHER DAIR Y AND DISALLOWANCE SO WORKED OUT AT RS.10,81,114/- WAS TREATED AS CONC EALMENT OF INCOME AND PENALTY PROCEEDINGS U/S 271 (1) ( C ) OF THE IT ACT WAS INITIATED AND IMPOSED PENALTY OF RS.3,40,550/-. 4. THE PENALTY WAS CHALLENGED BEFORE THE LEARNED CI T(A) AND IT WAS SUBMITTED THAT THE ASSESSEE IS A LABOUR CONTRACTOR ENGAGED IN THE BUSINESS OF SUPPLYING LABOURERS. THE ASSESSEE SUPPL IED LABOURERS AT BOTH THE DAIRIES TO WORK IN DIFFERENT SECTIONS OF THE PL ANTS. WAGES ARE DISTRIBUTED TO ALL THE PERSONS WORKING IN A SECTION . SINCE THE WORKERS CANNOT LEAVE THE WORK, THEREFORE, THEY DEPUTED ONE OF THEIR COLLEAGUES TO COLLECT WAGES ON BEHALF OF THE REST OF THE LABOURER S. SOMETIMES THERE MAY BE DIFFERENCE IN THEIR SIGNATURE. THE ASSESSEE IS A LICENSED LABOUR CONTRACTOR AND MAINTAINED THE TIME KEEPING RECORD A ND WAGES ARE PAID IN PRESENCE OF THE TIME KEEPER. EVEN THE CONCERN PARTI ES HAVE CONFIRMED THAT PAYMENTS TO LABOURERS HAVE BEEN MADE. IT WAS S UBMITTED THAT THE ASSESSEE DEPLOYED LARGE NUMBER OF LABOURERS, THEREF ORE, VERIFICATION OF THEIR IDENTITY IN EACH AND EVERY CASE WAS NOT POSSI BLE. THE ASSESSEE SUBMITTED DETAILS OF THE LABOURERS DEPLOYED AT BOTH THE DAIRIES WHICH WERE LARGE IN NUMBER. IT WAS SUBMITTED THAT MAXIMUM VERIFICATION OF THE LABOURERS WAS DONE AND NOTHING WAS FOUND THAT THE A SSESSEE INFLATED LABOUR PAYMENT. IT WAS THEREFORE, SUBMITTED THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTI CULARS OF INCOME ON ACCOUNT OF DISALLOWANCE OF THE LABOUR EXPENSES. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CANCELL ED THE PENALTY. HIS FINDINGS IN PARA 6 OF THE APPELLATE ORDER ARE REPRO DUCED AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT AND HAVE ALSO GONE THROU GH THE PENALTY ORDER. HAVING GONE THROUGH THE RELEVANT FAC TS OF THE ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 3 CASE I FIND CONSIDERABLE FORCE IN THE SUBMISSIONS M ADE BY THE APPELLANTS COUNSEL. THE A.O. HAS SOUGHT O SUPPORT IMPOSITION OF PENALTY BY CITING JUSTIFICATIONS OF THE DISALLOW ANCE. HOWEVER, IT IS A FACT THAT THE VERIFICATION OF LABO URERS WAS LEFT INCOMPLETE THOUGH THERE WAS ENOUGH TIME TO COMPLETE IT AND THEN DISALLOWANCE OUT OF LABOUR EXPENSES WERE MADE. THIS CANNOT BE SAID TO BE WILLFUL CONCEALMENT BECAUSE IN CASE OF LABOUR CONTRACTS IT MAY BE POSSIBLE THAT AFTER LAPS E OF TIME THE LABOURERS MAY NOT BE AVAILABLE FOR PRODUCTION BEFOR E A. O. SUCH DISALLOWANCE MADE IN ASSESSMENT WOULD NOT AUTOMATICALLY ATTRACT PENALTY FOR CONCEALMENT OF IN COME. WHILE CONFIRMING THE ASSESSMENT ORDER, THE CIT(A) HAS HEL D THAT IN VIEW OF THE FACT THAT ALL THE LABOURERS COULD NOT B E VERIFIED AND SINCE EVEN AFTER DISALLOWANCE THE PROFIT WOULD BE A ROUND 8% RECEIPTS, WHICH IS THE NORMAL RATE IN CASE OF CONTR ACTS. THUS, BASICALLY THIS IS A CASE WHICH FINALLY RESULTS IN E STIMATED INCOME. THEREFORE VARIOUS DECISIONS RELIED UPON BY THE APPELLANT HELP THE CASE OF THE APPELLANT. CONSIDERI NG THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS, I AM OF THE VIEW THAT IMPO SITION OF PENALTY IS NOT JUSTIFIED ON THE FACTS OF THE CASE O R IN LAW. THE ORDER IMPOSING PENALTY U/S. 271 (1) ( C) IS THEREFO RE CANCELLED. 5. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT ON DISALLOWANCE OF THE LABOUR EXPENSES WHICH HAS BE EN CONFIRMED, THE ASSESSEE CONCEALED PARTICULARS OF INCOME AND FILED INACCURATE PARTICULARS OF INCOME. THEREFORE, PENALTY WAS RIGHTLY IMPOSED B Y THE AO. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO NO TED IN THE ASSESSMENT ORDER THAT THE ASSESSEE PAID WAGES TO LA RGE NUMBER OF LABOURERS. THE AO CONSIDERING THE FACT THAT WAGE RE GISTERS DID NOT BEAR THE REVENUE STAMPS AND THAT SOME SIGNATURES OF THE LABOURERS ARE DIFFERENT NOTED THAT IDENTITY OF THE LABOURERS HAVE NOT BEEN PROVED. THE AO ACCORDINGLY DISALLOWED 8% OF THE TOTAL EXPENDITU RE OF RS.1,35,25,640/- AND MADE ADDITION OF RS.10,81,114 /- . IT IS THEREFORE, CLEAR THAT THE AO MADE THE DISALLOWANCE OUT OF THE LABOUR EXPENSES IN ABOUT 8% OF THE TOTAL CLAIM MADE BY THE ASSESSEE. N ON-BEARING OF REVENUE STAMPS IN THE WAGE REGISTER MAY BE A GROUND FOR REJECTION OF THE ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 4 CLAIM OF THE ASSESSEE BUT IT CANNOT BE TREATED AS C ONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME BY TH E ASSESSEE. SIMILARLY, IT IS CLEAR THAT THE ASSESSEE DEPLOYED LARGE NUMBER OF LABOURERS AT TWO DIFFERENT DAIRIES. THEREFORE, PRESENCE OF LABOURERS IN LARGE NUMBER BY ITSELF IS DIFFICULT TASK TO PROVE THE IDENTITY OF E ACH AND EVERY LABOURER DEPLOYED AT THE DIFFERENT ORGANIZATIONS. THE DISALL OWANCE OF THE EXPENDITURE PER-SE CANNOT MEAN THAT THE ASSESSEE FU RNISHED INACCURATE PARTICULARS OF INCOME. THE DISALLOWANCE MADE BY THE AO OF 8% OUT OF THE TOTAL CLAIM MADE BY THE ASSESSEE WOULD SHOW THAT TH E AO MADE PART DISALLOWANCE ON ASSUMPTION BASIS WITHOUT POINTING O UT WHICH OF THE LABOUR EXPENSES WAS INADMISSIBLE. THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS AT THE STAGE OF ASSESSMENT AND FILED CO MPLETE INFORMATION AND DETAILS BEFORE THE AO. PART OF THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO DUE TO THE REASON THAT SIGNATURE S OF THE LABOURERS ARE DIFFERENT AND NO REVENUE STAMPS ARE THERE. THE AO FAILED TO NOTE THAT THE LABOURERS ARE FROM UNORGANIZED SECTOR AND THERE MAY BE MANY REASONS FOR NO AFFIXING REVENUE STAMPS OR HAVING DI FFERENT SIGNATURES IN THE WAGE REGISTER. THE EXPLANATION OF THE ASSESSEE IS THUS ACCEPTABLE THAT IT WAS THEIR MISTAKE IN NOT PUTTING REVENUE STAMPS ON THE WAGE REGISTER, OTHERWISE THE ASSESSEE DISCLOSED ALL THE PARTICULAR S AND FACTS AT THE STAGE OF ASSESSMENT AS WELL AS IN THE PROFIT & LOSS ACCO UNT AND IN THE RETURN OF INCOME. 6.1 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CA SE OF CIT VS AJAIB SINGH AND CO. 253 ITR 630 HELD AS UNDER: DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULA RS OF ITS INCOME. CONCEALMENT INVOLVES PENAL ACTION. IT H AS TO BE PROVED AS A CONSCIOUS ACT. THE ESSENTIAL PRE- CONDITION FOR INVOKING EXPLANATION 1 TO SECTION 271 (1) ( C ) OF THE INCOME-TAX ACT, 1961, IS THAT THE ASSE SSEE FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANA TION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) TO BE FALSE. IT IS ONLY IN SUCH A ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 5 SITUATION THAT THE ASSESSING OFFICER CAN INVOKE THE EXPLANATION TO SECTION 271(1) ( C ) AND IMPOSE PENA LTY. HELD, DISMISSING THE APPEAL, THAT, IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND THAT THE ADDITION OF RS.40,000 HAD BEEN SUSTAINED ON ESTIMATE BASIS. SIMILARLY, IT WAS FOUND THAT EVEN THE ADDITION OF RS.4,200 ON ACCOUNT OF SALES TAX LIABILITY INVOLVED A MATTER OF DEBATE. IT HELD THAT THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF THE SALES TAX MAY HAVE BEEN UNDER ERRONEOUS UNDERSTANDING OF LAW BUT IT CANNOT LEAD TO THE CONCLUSION OF CONCEALMENT ON THE PART O F THE ASSESSEE. THUS, IT WAS HELD THAT PENALTY WAS NOT LEVIABLE. THE TRIBUNALS DECISION WAS CORRECT AND N O SUBSTANTIAL QUESTION OF LAW AROSE FROM IT. 6.2 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS NEPANI BIRI COMPANY TRUST 190 ITR 402 HELD AS UNDER: HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL HAD FOUND THAT CERTAIN EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED BY THE INCOME-TAX OFFICER WHICH LED TO T HE DIFFERENCE BETWEEN THE INCOME RETURNED AND THE INCO ME ASSESSED. THE TRIBUNAL WAS JUSTIFIED IN CANCELING T HE PENALTY. 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 ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 6 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 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 CASE OF CIT VS SAHABAD CO-OP. SUGAR MI LLS LTD. 322 ITR 73 (P&H) HELD THAT MAKING OF WRONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING OF INACCURATE INFORMATION, WHICH MAY CALL FO R LEVY OF PENALTY U/S 271 (1) ( C ) OF THE ACT. THE HONBLE PUNJAB & HARY ANA HIGH COURT AGAIN IN THE CASE OF CIT VS SIDHARTHA ENTERPRISES 322 ITR 80 (P & H) HELD THAT LOSS SUFFERED ON SALE OF MACHINERY WRONGLY TAKEN AG AINST PROFIT OF BUSINESS. ASSESSEE ON REALIZATION MISTAKE COMMITTED BY THE COUNSEL ACCEPTED THE DECISION OF THE AO. NO DELIBERATE DEFA ULT. APPELLATE AUTHORITIES JUSTIFIED IN DELETING THE PENALTY U/S 2 71 (1) ( C ) OF THE IT ACT. 9. CONSIDERING THE FACTS OF THE CASE AS NOTED ABOVE , IN THE LIGHT OF THE ABOVE DECISIONS AND IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT(A), WE ITA NO.3561/AHD/2007 ITO VS M/S. SHREE GANESH ENTERPRISE 7 ARE OF THE VIEW THAT IT IS NOT A FIT CASE FOR IMPOS ITION OF PENALTY. THE LEARNED CIT(A) HAS ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY CANCELLED THE PENALTY U/S 271 (1) ( C ) OF THE IT ACT. WE ACCORDINGLY CONFIRM HIS FINDINGS AND DISMISS THE AP PEAL OF THE REVENUE. 10. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISS ED. ORDER PRONOUNCED ON 30-06-2010 SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 30-06-2010 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