M/S SHIV KUMAR BAIGARA AND COMPANY , UDHAMPUR V. INCOME TAX OFFICER UDHAMPUR, UDHAMPUR

ITA 357/ASR/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0042 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-03-2019
• Assessment Year: 2001-2002
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Gross profit estimation; Rejection of books of accounts; Business income
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO.357/ASR/2017 AS SESSMENT YEAR: 2001-02 M/S. SHIV KUMAR BAIGRA & CO., WINE SHOP, BUS STAND, UDHAMPUR, J&K. [PAN:ABAFS 2011E] VS. INCOME TAX OFFICER, UDHAMPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P.N.ARORA (AD V.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 11.03.2019 DATE OF PRONOUNCEMENT: 29.03.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), JAMMU ('CIT(A )' FOR SHORT) DATED 10.01.2017, DISMISSING THE ASSESSEES APPEAL CONTES TING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT' HE REINAFTER) BY THE ASSESSING OFFICER VIDE ORDER DATED 26.03.2015 FOR ASSESSMENT YEAR (AY) 2001-02. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-FIRM, IN WINE BUSINESS, RETURNED ITS INCOME FOR THE YEAR ON 30.10.2001 AT AN INCOME OF RS.77,760/- AS BUSINESS INCOME THEREOF. THE SAME WAS SUBJECT TO TH E VERIFICATION TO PROCEDURE UNDER THE ACT, WHEREAT ITS ACCOUNTS, AS MAINTAINED , WERE NOT FOUND RELIABLE AND, ACCORDINGLY, NOT ACCEPTED BY THE ASSESSING OFFICER (AO). INVOKING SECTION 145(3), HE MADE AN ADDITION FOR RS.2,19,111/- ON ACCOUNT OF LOW PROFIT. THIS WAS MADE BY ITA NO. 357/ASR/2017 (AY 2001-02) SHIV K UMAR BAIGRA & CO. V. ITO 2 HIM BY COMPARING THE ASSESSEES DISCLOSED PROFIT RA TE OF 12.78% (ON THE TURNOVER OF RS.67.21 LACS), WITH THAT OF ANOTHER WINE SHOP A T UDHAMPUR (M/S. MAHINDER PAL WINE SHOP), WHICH HAD DISCLOSED A PROFIT RATE OF 16 .004%, AND HAD A COMPARABLE TURNOVER OF RS.61.96 LACS, VIDE ORDER U/S. 143(3) D ATED 26/3/2004. THE PENALTY PROCEEDINGS U/S. 271(1)(C) WERE ALSO INITIATED ALON G WITH. THE ASSESSEE CARRIED THE MATTER IN APPEAL, AND ON BEING UNSUCCESSFUL, BEFORE THE TRIBUNAL, WHICH VIDE ITS ORDER DATED 23.08.2005 (ITA NO.96/ASR/2005) SET ASI DE THE MATTER BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY. HOWEVER, AS THE A SSESSEE FAILED TO MAKE ANY REPRESENTATION BEFORE THE SAID AUTHORITY, HE DISMIS SED THE ASSESSEES APPEAL VIDE ORDER DATED 14.03.2014. ON BEING SHOW-CAUSED IN THE MATTER IN THE PENALTY PROCEEDINGS, THE ASSESSEE AGAIN RELIED ON ITS ACCO UNTS FOR THE YEAR, CLAIMING THE SAME TO BE DULY VOUCHED AND AUDITED, WITH IT ALSO M AINTAINING STOCK RECORD, WHICH WAS IN FACT SUBJECT TO VERIFICATION BY THE EXCISE A ND SALES TAX DEPARTMENTS ON A REGULAR BASIS. THE ASSESSING AUTHORITY, NOT ACCEPTI NG THE ASSESSEES PLEA, IMPOSED PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED, I.E ., AT RS.85,890/-, WHICH WAS CONFIRMED BY THE LD. CIT(A) BY HOLDING AS UNDER: 5. DETERMINATION: I HAVE CONSIDERED THE FACTS OF T HE CASE AS MENTIONED IN THE PENALTY ORDER AND I AM OF THE VIEW THAT THE AO HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE ACT AND IMPOSED PENA LTY OF RS.85,890/- U/S. 271(1) (C) OF THE INCOME TAX ACT FOR FURNISHING INACCURATE PARTICULARS OF HIS INCOME AS HIS COMPETITORS OPERATING IN THE SAME BRAND OF LIQU OR & WINE AND FROM THE SAME LOCALITY HAVE SHOWN BETTER GP AND NP. THUS, TH E BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS MUST BE FABRICATED. THE PENALTY IMPOSED BY THE AO IS, THEREFORE, CONFIRMED AND THE APPEAL IS DISMISSE D. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEES CASE RESTS ON ITS RELIANCE ON ITS BOOKS OF ACCOUNT, I.E., AS DISCLOSING THE TRUE OR CORRECT OPERATING RESULTS OF ITS BUSINESS. FURTHER, THE INCOME AS FINALLY ASSESSED IS BASED ON ESTIMATION, WHICH B Y ITSELF CANNOT RESULT IN FURNISHING INACCURATE PARTICULARS OF INCOME, FOR WH ICH DEFAULT THE PENALTY STANDS IMPOSED IN THE PRESENT CASE. THE ASSESSEE, TOWARD T HIS, RELIES ON A SERIES OF ITA NO. 357/ASR/2017 (AY 2001-02) SHIV K UMAR BAIGRA & CO. V. ITO 3 DECISIONS BY THE HONBLE JURISDICTIONAL HIGH COURT WHICH, AS STATED, ARE REGULARLY FOLLOWED BY THE TRIBUNAL, AS IN THE CASE OF LAKHWINDER SINGH VS. ASST. CIT (ITA NO. 249/ASR/2017, DATED 22.02.2018)(AT PB PAGES 17 20 ). THE ASSESSEES ACCOUNTS HAVE BEEN REGARDED AS NOT R ELIABLE BY THE REVENUE, WHICH FINDING HAS NOT BEEN CONTESTED BY THE ASSESSE E. THE SAID PLEA WOULD THEREFORE BE OF NO MOMENT. FURTHER, THAT ESTIMATIO N PER SE CANNOT BE A GROUND FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IS WELL-S ETTLED. ESTIMATION IS ITSELF A MATTER OF FACT. WHERE, THEREFORE, THE SAME IS BASED ON EVI DENCE, IT CANNOT BE SAID THAT THERE IS NO SUBSTANTIVE BASIS FOR MAKING THE ASSESSMENT; ESTIMATION BEING OTHERWISE INTEGRAL TO AN ASSESSMENT, AS EXPLAINED BY THE HON BLE APEX COURT PER SEVERAL DECISIONS, AS IN THE CASE OF CST VS. H.M. ESUFALI H.M. ABDULALI [1973] 90 ITR 271 ITR (SC); KACHWALA GEMS VS. JT. CIT [2007] 288 ITR 10 (SC), CITING TWO. IN THE PRESENT CASE, THE ASSESSING AUTHORITY REJECT ED THE ASSESSEES ACCOUNTS AS THE ASSESSEE WAS UNABLE TO EXPLAIN THE LOW GROSS PROFIT RATE, I.E., IN COMPARISON TO ANOTHER WINE SHOP, SELLING THE SAME LIQUOR BRAND S, OPERATING IN THE AREA. THAT, HOWEVER, WOULD NOT, BY ITSELF, IMPLY THAT THE ASSES SEE HAD EARNED A HIGHER PROFIT. IT WOULD BE A HIGHER DIFFERENT MATTER IF THERE IS EVID ENCE IMPUGNING THE ASSESSEES ACCOUNTS, AS, FOR EXAMPLE, EXHIBITING THE ASSESSEE TO HAVE CLAIMED HIGHER EXPENDITURE (I.E., THAN THAT ACTUALLY INCURRED) OR SUPPRESSED SALES IN QUANTITY OR IN VALUE, OR THE LIKE. THE ASSESSEE HAS MAINTAINED COM PLETE BOOKS OF ACCOUNT, INCLUDING THE QUANTITATIVE RECORDS, WHICH STAND AUD ITED, WITH NO MATERIAL DEFECTS HAVING BEEN POINTED OUT THEREIN. TRUE, OPERATING IN THE SAME AREA, SELLING THE SAME LIQUOR BRANDS, SHOULD ORDINARILY RESULT IN APPROXIM ATELY THE SAME RATE OF PROFIT, WHILE THE DIFFERENCE IN PRESENT CASE IS AS HIGH AS 25%. FURTHER, THE DIFFERENCE IN PROFIT BY ITSELF CANNOT BE A GROUND FOR MAKING A HI GHER ESTIMATE, I.E., UNLESS ACCOMPANIED BY SOME DEFECTS IN ACCOUNTS BEING POINT ED OUT. THE ASSESSEE EXPLAINS THE PROFIT RATE OF THE COMPARABLE CASE FOR THE RELE VANT YEAR TO BE IN FACT AT 11.62% ITA NO. 357/ASR/2017 (AY 2001-02) SHIV K UMAR BAIGRA & CO. V. ITO 4 (REFER PG. 4 OF THE IMPUGNED ORDER), WHICH IS NOT O NLY LOWER THAN THAT OF THE ASSESSEE, BUT ALSO SHOWS THAT SOME VARIATION ON CAS E TO CASE BASIS, WOULD ARISE, MARGIN FOR WHICH, THEREFORE, IN MAKING THE ESTIMATI ON, OUGHT TO BE MADE. THE SECOND ASPECTS HAVE NOT BEEN CONSIDERED BY THE LD. CIT(A) IN ADJUDICATING THE ASSESSEES PLEA. UNDER THE CIRCUMSTANCES, THEREFORE, IT CANNOT BE SA ID THAT THE ASSESSEE HAD CONCEALED, OR OTHERWISE FURNISHED INACCURATE, PARTI CULARS OF ITS INCOME. THE DECISIONS BY THE JURISDICTIONAL HIGH COURT, AS IN T HE CASE OF HARIGOPAL SINGH VS. CIT [2002] 258 ITR 85 (P&H) AND CIT VS. DHILLON RICE MILLS [2002] 256 ITR 447 (P&H), WOULD APPLY IN THE FACTS AND CIRCUMSTANCES O F THE CASE. I, ACCORDINGLY DIRECT THE DELETION OF THE IMPUGNED PENALTY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON MARCH 29, 2019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 29.03.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: M/S. SHIV KUMAR BAIGRA & CO. , WINE SHOP, BUS STAND, UDHAMPUR, J&K. (2) THE RESPONDENT: INCOME TAX OFFICER, UDHAMPU R (3) THE CIT(APPEALS)-JAMMU, J&K (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER