Goyal Industries Ltd., Surat V. The Dy.CIT, Circle-1, Surat

ITA 3666/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1758 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-03-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 07-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSI
• Keywords: Loose papers; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.3666/AHD/2008 [ASSTT. YEAR : 2002-2003] GOYAL INDUSTRIES LTD. 701, TRIVIDH CHAMBERS RING ROAD, SURAT PAN : AAACG 8627 L. VS. DCIT, CIR.1 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE (WRITTEN SUBMISSIONS) REVENUE BY : SHRI G.S. SOURYAWANSI O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX(APPEALS)-I, SURAT DATED 08.09.2008 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 . 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE LEVY OF PENALTY OF RS.53,90,888/- UNDER SECTION 271(1)(C ) OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, NONE APPEARED ON BEHALF OF THE ASSESSEE, BUT WE FIND THAT THE ASSESSEE HAS FURNISH ED WRITTEN SUBMISSIONS. ACCORDINGLY, WE HAVE CONSIDERED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND HEARD THE LEARNED DR. 4. IN THE WRITTEN SUBMISSIONS, IT IS POINTED OUT BY THE ASSESSEE THAT THE AO HAS LEVIED PENALTY IN RESPECT OF THREE ADDITIONS/DI SALLOWANCES MADE IN THE ASSESSMENT ORDER WHICH WERE PARTLY UPHELD BY THE CI T(A) AS UNDER: ADDITION OF ESTIMATED PROFIT ON TURNOVER : RS.40,99,642/- ADDITION ON ACCOUNT OF PRESUMPTIVE INITIAL INVESTME NT : RS.1,00,00,000/- ADDITION ON ACCOUNT OF LOW OIL GAIN : R S.10,00,889/- ITA NO.3666/AHD/2008 -2- HE POINTED OUT THAT OUT OF THE ABOVE ADDITIONS, FIR ST TWO ADDITIONS WERE DELETED BY THE ITAT IN THE QUANTUM APPEAL VIDE ORDER DATED 5-6-2009 IN ITA NO.1683/AHD/2006 AND 998/AHD/2006. WITH REGARD TO THIRD ADDITION, IT IS STATED THAT IT WAS ONLY ESTIMATED ADDITION ON THE B ASIS OF PERCENTAGE OF OIL GAIN ESTIMATED Y THE ITAT IN SOME OTHER CASE. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE ITA T IN QUANTUM APPEAL. FROM THE PERUSAL OF THE ORDER OF THE ITAT, WE FIND THAT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDER ATION, THERE WAS SURVEY AT THE ASSESSEES BUSINESS PREMISES. DURING THE COURS E OF SURVEY, CERTAIN LOOSE PAPERS WERE FOUND ON THE BASIS OF WHICH IT WAS GATH ERED THAT THERE WAS HUGE TURNOVER BY THE ASSESSEE OUTSIDE THE BOOKS. THE AO WORKED OUT THE UNDISCLOSED TURNOVER OF RS.93,47,96,85/-. HE APPLI ED GP RATE OF 2.66% THEREON. ACCORDINGLY, INCOME OF RS.2,48,65,600/- W AS DETERMINED. ON APPEAL, THE CIT(A) HELD THE GP RATE TO BE 2% AND ACCORDINGL Y, THE INCOME WAS DETERMINED AT RS.1,86,95,940/-. ON FURTHER APPEAL, THE ITAT DIRECTED THAT GP RATE OF 1.25% BE APPLIED. THE RELEVANT FINDINGS OF THE ITAT READ AS UNDER: 8 ..... ... IN OUR OPINION, THE SPECIAL AUDITOR SHOULD HAVE WORKED OUT THE ACTUAL PROFIT RATIO EARNED BY THE ASSESSEE. UNDER THESE F ACTS AND CIRCUMSTANCES, IN OUR OPINION, THE GP AT THE RATE O F 1.25% BEING THE AVERAGE OF 1% AND 1.5% WILL BE JUST AND FAIR IN THE ABSENCE OF DATA BEING AVAILABLE FOR COMPUTING THE WEIGHTED AVERAGE. WE ACCORDINGLY DIRECT THE AO TO COMPUTE THE PROFIT AT THE RATE OF 1.25% ON THE UNRECORDED TURNOVER OF RS.93,47,96,985/-. THE AO I S ACCORDINGLY DIRECTED TO RE-COMPUTE THE FIGURE AS GIVEN BY HIM U NDER PARA 2.14 OF THE ASSESSMENT ORDER AND THE ADDITION TO THAT EXTENT IS SUSTAINED. THUS, GROUND NO.1 IN REVENUES APPEAL STANDS DISMISSED WH ILE GROUND NOS.1 AND 2 IN ASSESSEES APPEAL ARE PARTLY ALLOWED. 5. FROM THE ABOVE, IT IS EVIDENT THAT THE ITAT HAS DIRECTED THE AO TO COMPUTE PROFIT AT THE RATE OF 1.25% ON UNRECORDED T URNOVER OF RS.93,47,96,985/-. ACCORDINGLY, THE ITAT PARTLY SU STAINED THE ADDITION MADE BY THE AO. IN THE WRITTEN SUBMISSIONS, THE ASSESSE E HAS MENTIONED THAT THE ADDITION ON THE ESTIMATED PROFIT ON THE TURNOVER IS FULLY DELETED BY THE ITAT. ITA NO.3666/AHD/2008 -3- ON PERUSAL OF THE ORDER OF THE ITAT, WE DO NOT FIND THIS CONTENTION TO BE FACTUALLY CORRECT. AS PER THE ORDER OF THE ITAT AS QUOTED ABOVE, THE ADDITION APPEARS TO BE PARTLY SUSTAINED. IT IS NOT DISPUTED THAT THE ASSESSEE WAS CARRYING ON HUGE ACTIVITY OUTSIDE THE BOOK AND THE UNRECORDE D TURNOVER WAS AS HIGH AS RS.93.47 CRORES. THE CIT(A) WHILE UPHOLDING THE PE NALTY HAS ALSO TAKEN NOTE OF THIS FACT. THEREFORE, IN OUR OPINION, PENALTY U NDER SECTION 271(1)(C) IS RIGHTLY LEVIED IN RESPECT OF THE INCOME FROM UNDISC LOSED TURNOVER. HOWEVER, AS PER THE CONTENTION OF THE ASSESSEE, NO ADDITION IS SUSTAINED IN THIS REGARD BY THE ITAT WHICH REQUIRES VERIFICATION BECAUSE NEITHER PA RTY HAS PRODUCED BEFORE US THE ORDER OF THE APPEAL EFFECT GIVEN BY THE AO TO T HE ORDER OF THE ITAT. WE THEREFORE SET ASIDE THE ISSUE OF PENALTY ON THIS PO INT BACK TO THE FILE OF AO. WE DIRECT HIM TO VERIFY WHETHER ANY ADDITION IS SUSTAI NED IN RESPECT OF INCOME FROM UNDISCLOSED TURNOVER. IF ANY ADDITION IS SUSTAINED , HE WILL LEVY MINIMUM PENALTY ON THE ADDITION SUSTAINED ON THE UNRECORDED TURNOVER. 6. NEXT ADDITION IN RESPECT OF WHICH THE PENALTY UN DER SECTION 271(1)(C) WAS LEVIED WAS THE ADDITION OF RS.1 CRORE WHICH IS DELETED BY THE ITAT IN THE QUANTUM APPEAL. THE RELEVANT FINDINGS OF THE ITAT READ ARE AS UNDER: 10 .... WE COULD NOT FIND ANY MATERIAL BEING BROUGHT ON REC ORD WHICH MAY PROVE THAT DURING THE COURSE OF SURVEY ANY MATERIAL WAS FOUND WHICH SUPPORT THE CONTENTION OF THE REVENUE THAT THE ASSE SSEE HAS INVESTED IN THE UNACCOUNTED SALES. THE ADDITION FOR THE INVEST MENT IN UNACCOUNTED SALES IS MERELY MADE ON PRESUMPTION AND ASSUMPTION. NO ADDITION CAN BE MADE MERELY ON THE BASIS OF SUSPICION HOWEVER ST RONG IT MAY BE, IT CANNOT TAKE PLACE OF ACTUALITY. EVEN THE CASE OF T HE ASSESSEE IS DULY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT AND WE ACCORDINGLY DELETE THE ADDITION OF RS.1 CRORE ON AC COUNT OF INVESTMENT IN UNACCOUNTED SALES. THUS, THIS GROUND IS ALLOWED. SINCE THE ADDITION OF RS.1 CRORE FOR INITIAL INVEST MENT IS DELETED BY THE ITAT, THE PENALTY BASED UPON SUCH ADDITION CANNOT SURVIVE , WE THEREFORE HOLD THAT NO PENALTY CAN BE LEVIED WITH REGARD TO THE ADDITION O F RS.1 CRORE MADE BY THE AO FOR UNEXPLAINED INITIAL INVESTMENT. ITA NO.3666/AHD/2008 -4- 7. THE NEXT ADDITION WAS ON ACCOUNT OF OIL GAIN. I N THIS REGARD, THE ASSESSEE IN THE WRITTEN SUBMISSIONS STATED AS UNDER : 4. NOW AS FAR AS THE ACCOUNT ON ACCOUNT OF OIL GAIN IS CONCERNED, THE APPELLANT SUBMITS THAT THIS ADDITION IS PURELY BASED ON ESTIMATION. ORIGINALLY, LD. AO HAS MADE ESTIMATED ADDITION OF R S.35,22,816/- WHICH WAS REDUCED BY THE CIT9A) TO RS.10,00,889/-. THE A DDITION SUSTAINED BY CIT(A) HAS BEEN SUSTAINED BY THE ITAT ALSO. HOWEVE R, THIS DOES NOT MEAN THAT PENALTY CAN BE LEVIED ON THE SAME U/S.271 (1)(C) OF THE ACT. THE ADDITION MADE BY THE LD. AO IS PURELY ON ESTIMA TED BASIS RELYING ON ITAT, AHMEDABAD JUDGMENT IN THE CASE OF MARMO TEXTU RISING PVT. LTD., (ITA NO.338/AHD/1994). THIS ADDITION IS PURELY BAS ED ON ESTIMATION AND THERE IS NO FINDING AT ALL THAT THE APPELLANT H AD IN FACT ACHIEVED HIGHER OIL GAIN. THE ADDITION WAS MADE BY LD.AO PU RELY ON ESTIMATED BASIS. EVEN IN THE CASE OF MARMO TEXTURISING ITSEL F THE PENALTY WAS DELETED BY THE ITAT. 8. FROM THE ABOVE, IT IS EVIDENT THAT IN THIS CASE, THE ADDITION WAS MADE FOR OIL GAIN IN THE PROCESS OF TEXTURISING. THIS ADDIT ION WAS SUSTAINED BY THE CIT(A) AS WELL AS ITAT FOLLOWING THE DECISION OF TH E ITAT, AHMEDABAD BENCHES IN THE CASE OF MARMO TEXTURISING PVT. LTD. VIDE ITA NO.338/AHD/1994. THE ASSESSEE IN THE WRITTEN SUBMI SSIONS HAS MENTIONED THAT PENALTY LEVIED UNDER SECTION 271(1)(C) WAS DELETED BY THE ITAT IN THE CASE OF MARMO TEXTURISING P. LTD. HOWEVER, HE HAD NEITHER SUBMITTED THE COPY OF THE ORDER OF THE ITAT IN THE CASE OF MARMO TEXTURISING PVT. LTD., CANCELLING THE PENALTY LEVIED UNDER SECTION 271(1)(C) NOR GIVEN TH E DATE OF ORDER AND ITA NUMBER. AS WE HAVE ALREADY MENTIONED THAT THE ASSE SSEE DID NOT APPEAR ON THE DATE OF HEARING. IN THE ABOVE CIRCUMSTANCES, WE SE T ASIDE THE ORDER OF THE AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MAT TER BACK TO THE FILE OF THE AO. WE DIRECT AO TO ALLOW OPPORTUNITY TO THE ASSESSEE T O PRODUCE THE DECISION OF THE ITAT IN THE CASE OF MARMO TEXTURISING PVT. LTD. (SUPRA) AND THEREAFTER RE- ADJUDICATE THE ISSUE IN THE LIGHT OF THE ABOVE DECI SION OF THE ITAT. WE MAY SUMMARIZE OUR FINDING AS UNDER: ITA NO.3666/AHD/2008 -5- I) PENALTY ON THE ADDITION ON ACCOUNT OF INITIAL INVES TMENT OF RS.1 CRORE IS DELETED; II) PENALTY ON ADDITION, IF ANY, SUSTAINED FOR UNEXPLAI NED TURNOVER IS CONFIRMED. HOWEVER, THE AO WILL VERIFY WHETHER ANY ADDITION IS SUSTAINED AFTER THE ORDER OF ITAT IN RESPECT OF TUR NOVER OUTSIDE BOOKS. IF ANY ADDITION IS SUSTAINED, THE AO WILL L EVY MINIMUM PENALTY THEREON. III) PENALTY ON ADDITION SUSTAINED IN RESPECT OF OIL GAI N IS TO BE RE- ADJUDICATED AS PER THE DECISION OF THE ITAT IN THE CASE OF MARMO TEXTURISING PVT. LTD., 9. IN RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH MARCH, 2011 SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 18-03-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD