M/s. Ishwar Arts, Mumbai V. The Income tax Officer,Ward-2(2), Baroda

ITA 3631/AHD/2008

• Counselvise Citation: 363120514 RSA 2008
• Duration Of Justice: 3 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-01-2012
• Assessment Year: 1993-1994
• Appeal Filed On: 04-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Opportunity of being heard; Diversion of income; Onus to prove
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.3631 AND 4037/AHD/2008 A. Y.: 1993-94 AND 1994-95 M/S. ISHWAR ARTS, ASIAN BUILDING, 4TH FLOOR, KAMANI MARG, BELLARD ESTATE, MUMBAI P.A. NO. AAAEFM 1875 B VS THE INCOME TAX OFFICER, CIRCLE- 2(2), BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI VINOD TANWANI, SR. DR DATE OF HEARING: 19-01-2012 DATE OF PRONOUNCEMENT: -03-2012 O R D E R PER A. MOHAN ALANKAMONY: THESE TWO APPEALS BY THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF T HE LEARNED CIT(A)-II, BARODA DATED 20-08-2008 FOR ASSESSMENT YEARS 1993-9 4 IN APPEAL NO.CAB/II-333/06-07 AND DATED 12-09-2008 IN APPEAL NO.CAB/II- 235/05-06 FOR ASSESSMENT YEAR 1994-95 RESPECTIVELY . BOTH THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER AS UNDER . - 2 - ITA NO.3631/AHD/2008:AY 1993-94 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) IN HOLDING THE PARTICULARS OF SALES AFFECTED BY THE ASSESSEE TO M/S. MILTON EXPORTS AS WELL AS CONFIRMI NG THE PENALTY OF RS.2,50,000/- MADE BY THE AO U/S 271 (1) ( C) OF TH E IT ACT. 2.1 THE FACTS IN BRIEF, RELATING TO THIS ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 05-01-1994 DECLARING TOTAL INCOME AT RS.2,25,130/-. THE ASSESSMENT WAS COMPLETED ON 22-0 3-1996 ASSESSING TOTAL INCOME AT RS.26,04,090/-. THE AO MA DE ADDITION ON ACCOUNT OF DIVERSION OF INCOME TO ITS SISTER CONCER N OF THE ASSESSEE VIZ M/S. MILTON EXPORTS OF RS.11,29,052/-. ON APPEAL, T HE LEARNED CIT(A) ALLOWED PARTIAL RELIED TO THE ASSESSEE VIDE HIS ORD ER DATED 28-01-1997 DETERMINING THE INCOME AT RS.1,10,513/- AGAINST WHI CH BOTH THE PARTIES PREFERRED SECOND APPEAL BEFORE ITAT. ITAT VIDE ORDE R DATED 06-03-2006 CONFIRMED DIVERSION OF INCOME TO THE SISTER CONCERN OF THE ASSESSEE, M/S. MILTON EXPORTS. THE AO CONTENDED THAT THE ASSE SSEE WAS ENGAGED IN MANUFACTURING OF HOUSEHOLD THERMO WARE ARTICLES AND SALES OF FINISHED GOODS OF RS.8,26,978/- WAS MADE TO M/S. MILTON EXPO RTS. THE AO NOTED THAT THE ASSESSEE SOLD THE FINISHED PRODUCTS TO ITS SISTER CONCERN AT LOWER RATE OF PRICE COMPARED TO OTHER PARTIES WHICH WERE OF 33% TO 74% OF FAIR MARKET PRICE. IT WAS ALSO NOTED BY THE AO THAT THE ASSESSEE CHARGED SALE RATE FROM M/S. MILTON EXPORTS EVEN AT LOWER TH AN COST PRICE. THE AO ACCORDINGLY MADE ADDITION OF RS.11,29,052/- RELYING UPON VARIOUS DECISIONS AND IMPOSED PENALTY OF RS.2,50,000/- VIDE SEPARATE ORDER. 2.2 THE ASSESSEE CONTENDED THAT THE AO SHOULD NOT H AVE HELD THAT THE ASSESSEE HAD DIVERTED INCOME OF RS.5,49,073/- TO IT S SISTER CONCERN M/S. - 3 - MILTON EXPORTS WITH THE INTENTION OF EVADING TAX AN D SHOULD NOT HAVE IMPOSED PENALTY OF RS.2,50,000/-. 3. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE, SUBMISSIONS OF THE ASSESSEE AND THE FINDINGS OF THE TRIBUNAL IN QUANTUM APPEAL THAT SINCE BOTH THE ENTITIES ARE CONTROLLED BY THE SAME FAMILY, THE TRANSACTIONS BETWEEN THESE CONCERNS WERE COLLUSIVE IN NATURE FOR DIVERSION OF PROFIT OF THE ASSESSEE AND TREATED THE SAME AS CONCEALMENT OF INCOME, CONFIRMED THE PENALTY IMPOSED BY THE AO. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE OR DERS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIALS ON R ECORD ALONG WITH CITATIONS REFERRED TO. SINCE THE QUANTUM APPEAL HAS NOT BEEN CHALLENGED AND THE FINDINGS OF THE TRIBUNAL HAVE BECOME FINAL, WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL OF THE ASSESSEE CHALL ENGING THE IMPOSITION OF PENALTY. WE ALSO DO NOT FIND ANY INFIRMITY IN TH E ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAME. ACCORDINGLY, WE DISMIS S THESE GROUNDS OF APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.3631/AHD/2008 FOR AY 1993-94 IS DISMISSED. ITA NO.4037/AHD/2008 (AY 1994-95 ) 6. IN THE FIRST GROUND OF THIS APPEAL, THE ASSESSE E CHALLENGED THE ORDER OF THE LEARNED CIT(A) CONFIRMING PENALTY ON D ISALLOWANCE OF SALES COMMISSION AMOUNTING TO RS.33,176/- AND DISALLOWANC E OF DEPRECIATION OF RS.15,320/-. IN THE SECOND GROUND OF APPEAL, THE ASSESSEE CHALLENGED CONFIRMATION OF PENALTY BY THE LEARNED CIT(A) IN RE SPECT OF UNEXPLAINED CLOSING STOCK OF RS.5,01,300/- AND UNEXPLAINED PRIN TING EXPENSES OF RS.2,04,131/-. - 4 - 6.1 THE AO IN THE PENALTY ORDER LEVIED PENALTY ON T OTAL NINE ITEMS TOTALLING TO RS.17,50,112/- AFTER REJECTING EXPLANA TIONS OF THE ASSESSEE. REGARDING THE TWO ADDITIONS CONFIRMED BY THE TRIBUN AL IN QUANTUM APPEAL ON THE ISSUE OF DEPRECIATION ON UNEXPLAINED ADDITION TO FACTORY BUILDING OF RS.15,320/- AND SALES COMMISSION OF RS. 33,176/-, NO SUBMISSION HAS BEEN MADE EXCEPT MENTIONING THAT THE AO HAS NOT INITIATED PENALTY SEPARATELY FOR THESE ADDITIONS. I N RESPECT OF THE ADDITION ON ACCOUNT OF UNEXPLAINED PRINTING EXPENSES OF RS.2 ,04,131/- AND UNEXPLAINED SHORTAGE IN CLOSING STOCK OF RS.5,01,30 0/-, THE MATTER IS STATED TO BE PENDING BEFORE THE TRIBUNAL AGAINST TH ESE ADDITIONS, AND NO FURTHER SUBMISSIONS WAS MADE. CONSIDERING THE FACTS OF THE CASE AND SUBMISSIONS OF THE ASSESSEE THE LEARNED CIT(A) FOUN D THAT OUT OF THE AFORESAID NINE ADDITIONS, FOUR ADDITIONS ARE REMAIN ING OUT OF WHICH TWO HAVE BEEN CONFIRMED BY THE TRIBUNAL AND TWO ARE PEN DING. THE ADDITIONS CONFIRMED BY THE TRIBUNAL ARE ON ACCOUNT OF SALES C OMMISSION AND CLAIM OF DEPRECIATION ON UNEXPLAINED ADDITION TO FACTORY BUILDING AND THAT THESE ADDITIONS INVOLVED INCORRECT CLAIMS MADE BY THE ASS ESSEE. IN THE CASE OF UNEXPLAINED ADDITION TO FACTORY BUILDING, THE ENQUI RY MADE BY THE AO REVEALED THAT THE CLAIM IN THE NAME OF PANCHAL BUIL DERS WAS INCORRECT LEADING TO ADDITION ON ACCOUNT OF DEPRECIATION. SAL ES COMMISSION WAS ALSO SHOWN IN THE NAME OF SISTER CONCERN AGAINST WH ICH EVIDENCE OF RENDERING OF SERVICES WAS NOT THERE. SINCE THE CLAI M OF THE ASSESSEE WAS NOT SUSTAINED, THE DISALLOWANCE RESULTED IN CON CEALMENT OF INCOME. IN VIEW OF THIS, THE LEARNED CIT(A) CONFIRMED LEVY OF PENALTY ON THESE TWO ADDITIONS. 6.2 IN RESPECT OF THE TWO ADDITIONS PENDING BEFORE ITAT ON ACCOUNT OF UNEXPLAINED PRINTING EXPENSES OF RS.2,04,131/- AND UNEXPLAINED SHORTAGE IN CLOSING STOCK RS.5,01,300/-, THE ADDITI ONS WERE MADE BY THE - 5 - AO AFTER DETAILED DISCUSSIONS. THE PRINTING EXPENSE S WERE CLAIMED IN THE NAME OF SISTER CONCERN FOR WHICH TRANSPORTATION BILLS AND PURCHASE INVOICES COULD NOT BE PRODUCED BY THE ASSESSEE. IN THE ABSENCE OF ANY DETAILS AND COGENT EVIDENCE TO PROVE THE PURCHASES, THE ADDITION WAS AGAIN MADE BY THE AO IN THE SET ASIDE PROCEEDINGS A LSO. IN THE ABSENCE OF DISCHARGING ONUS TO PROVE THE CLAIM ON THE PART OF THE ASSESSEE, ADDITION WAS HELD TO BE DEEMED CONCEALMENT WITHIN T HE MEANING OF EXPLANATION 1 TO SECTION 271(1) ( C ) OF THE IT ACT . REGARDING UNEXPLAINED SHORTAGE IN CLOSING STOCK OF RS.5,01,30 0/-, ON QUANTITY VERIFICATION, THE AO FOUND THE SHORTAGE IN CLOSING STOCK. ASSESSEES SUBMISSION COULD NOT BE SUBSTANTIATED BY ANY DOCUME NTARY EVIDENCE TO EXPLAIN THE SHORTAGE IN CLOSING STOCK AND DUE TO FA ILURE TO PROVE ITS CLAIM, THE ADDITION BECOME DEEMED CONCEALMENT WITHIN THE E XPLANATION 1 TO SECTION 271 (1) ( C ) OF THE IT ACT. IN VIEW OF THI S, THE LEARNED CIT(A) HELD THAT PENALTY U/S 271 (1) ( C ) OF THE IT ACT IS LEV IABLE AND ACCORDINGLY CONFIRMED THE PENALTY LEVIED BY THE AO ON THESE ISS UES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES AND CONSIDERED THE MATERIALS ON RECORD ALONG WITH PAPER BOOKS AND CITATIONS REFERRED TO. IN RESPECT OF PENA LTY ON DISALLOWANCE OF SALES COMMISSION AMOUNTING TO RS.33,176/- AND ON DE PRECIATION OF DEPRECIATION OF RS.15,320/-, THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACTS ON RECORD AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THROUGH ANY COGENT DOCUMENTARY EVIDENCES AND HELD THAT PENALTY IS LEVIABLE ON THESE ISSUES. ACCORDINGLY HE CONFIRMED THE PENALTY U/S 27 1 (1) (C) OF THE IT ACT LEVIED BY THE AO. BEFORE US ALSO, NO INFIRMITY COUL D BE POINTED OUT BY THE ASSESSEE IN THE ORDER OF THE LEARNED CIT(A). ACCORD INGLY, WE FIND NO JUSTIFICATION TO INTERFERE IN THE ORDER OF THE LEAR NED CIT(A) TO THAT EXTENT - 6 - AND CONFIRM HIS FINDINGS. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 7.1 HOWEVER, IN RESPECT OF CONFIRMING THE PENALTY O N ACCOUNT OF ADDITIONS OF UNEXPLAINED SHORTAGE IN CLOSING STOCK AMOUNTING TO RS.5,01,300/- AND UNEXPLAINED PRINTING EXPENSES OF RS.2,04,131/-, SINCE THE QUANTUM APPEAL IS PENDING BEFORE THE TRIBUNAL, WE DO NOT FIND ANY JUSTIFICATION TO SUSTAIN THE FINDINGS OF THE LEARNE D CIT(A) AND SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH DIRECTION TO D ECIDE THE SAME DEPENDING ON DECISION OF THE TRIBUNAL IN THE QUANTU M APPEAL, IN ACCORDANCE WITH LAW AFTER GIVING SUFFICIENT REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.2 OF THE APP EAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.4037/AHD/2008 FOR AY 1994-95 IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.3631 FOR AY 1993-94 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO.4037/AHD/2008 FOR AY 1994-95 IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2/3/12. SD/- SD/- (D.K.TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - - 7 - 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 DY. REGISTRAR, ITAT, AHMEDABAD