ITO, Ward - 1(2), Kolkata, Kolkata V. M/s. The Ganges Mfg. Co. Ltd., Kolkata

ITA 371/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1629 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2013
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 03-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 04-03-2011
• Court: TRIBUNAL
• Department Lawyers: ASOKE KUMAR DEY
• Assessee Lawyers: J M THARD
• Keywords: Search and seizure; Condonation of delay

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () . .. . . .. . , ,, , , ! ''# $ ''# $ ''# $ ''# $ ] ]] ] [BEFORE HONBLE SRI P.K.BANSAL, AM & HONBLE SRI GEORGE MATHAN, JM] !& !& !& !& /ITA NOS.371 & 372/KOL/2011 '( )*/ ASSESSMENT YEARS : 2003-04 & 2004-05 ($, / APPELLANT ) - - ( ./$, /RESPONDENT) I.T.O., WARD-1(2), M/S.THE GANGES MFG.CO.LTD., KOLKATA -VERSUS- KOLKATA (PAN:AAACT 9781 E) $, 0 1 / FOR THE APPELLANT: SHRI ASOKE KUMAR DEY, SR.DR ./$, 0 1 / FOR THE RESPONDENT: SHRI J.M.THARD 2 3 0 4 /DATE OF HEARING : 07.02.2013 5) 0 4 /DATE OF PRONOUNCEMENT : 07.02.2013. 6 / ORDER PER BENCH BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. C.I.T. (A)-CENTRAL-III, KOLKATA DATED 25.09.201 0. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON AS AGREED BY BOTH THE PARTIE S THEREFORE WE DECIDED TO DISPOSE OF BOTH THESE APPEALS BY THIS COMMON ORDER BY TAKIN G THE FACTS RELATING TO ASSESSMENT YEAR 2003-04. 2. THE ONLY ISSUE INVOLVED IN BOTH THE APPEALS IS R ELATING TO THE DELETION OF PENALTY U/S 271(1)(C) OF THE IT ACT BY THE LD. CIT(A). 3. BOTH THE APPEALS HAVE BEEN FILED LATE BY THE REV ENUE ALONG WITH THE APPLICATION FOR THE CONDONATION OF DELAY AS WELL AS THE AFFIDAV IT STATING THAT THE ORDER OF THE LD. CIT(A) WAS RECEIVED IN THE OFFICE OF JURISDICTION O F CIT ONLY ON 01.12.2010 AND APPEAL IN BOTH THE CASES WERE FILED ON 04.03.2011. EVEN THOUGH THE APPROVAL FOR FILING OF THE APPEAL WAS TAKEN ON 17.02.2011 AND DOCUMENTS , PAPERS DETAILS ALONG WITH THE ITA NOS .371 & 372/KOL/2011 2 PETITION FOR CONDITION OF DELAY WAS PREPARED ON 18. 02.2011 TO 03.03.2011. THE LD. AR DID NOT OBJECT TO THE AFFIDAVIT FILED BY THE REVENU E ON THE CONDONATION OF THE DELAY. AFTER HEARING BOTH THE PARTIES WE FIND THAT IT IS A FIT CASE WHERE THE DELAY CAN BE CONDONED AND ACCORDINGLY WE CONDONE THE DELAY AND A DMIT BOTH THE APPEALS FILED BY THE REVENUE. 4. THE BRIEF FACTS RELATING TO THE ASSESSMENT YEAR 2003-04 ARE THAT THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS TOOK A VIE W THAT THE ASSESSEE HAD EVADED TAX BY FILING INACCURATE PARTICULARS OF ITS INCOME CHAR GEABLE TO TAX AND ACCORDINGLY INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE IT ACT WHILE PASSING THE ASSESSMENT ORDER U/S 153A/143(3) OF THE ACT. THE AS SESSEE SUBMITTED THE EXPLANATION TO WHICH THE AO DID NOT AGREE. THE AO LEVIED PENALT Y BY OBSERVING AS UNDER :- THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER O N THE BASIS OF SEIZED MATERIALS AND THE DISCLOSED ACCOUNTING RECORDS. THE DISCREPANCIES POINTED OUT IN THE ASSESSMENT ORDER WERE REAL DISCREPANCIES AND NOT BASED ON ANY SURMIS ES OR CONJECTURES. THE ASSESSEE HAD FAILED TO PROVE ITS CASE BEFO RE THE A.O. AS WELL AS THE CIT(A) AND AS SUCH PENALTY U/S 271(1)(C) OF RS.11,48,720/- IS HEREBY LEVIED WITH THE APPROVAL OF ADDL.CIT, RANGE-V, CENTRAL, KOLKATA. SIMILARLY PENALTY FOR THE ASSESSMENT YEAR 2004-05 W AS ALSO LEVIED. THE ADDITION FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 WERE RS.38, 29,067 AND RS.38,97,844/- RESPECTIVELY. IT WAS ALSO SUBMITTED THAT AFTER THE ADDITIONS SUSTAINED IN THE A.YEAR 2003-04 THE TOTAL INCOME AFTER SETTING OFF THE DEPR ECIATION WAS RS.NIL WHILE FOR THE ASSESSMENT YEAR 2004-05 IT WAS ASSESSED AT A LOSS O F RS.16,53,904/-. THE ADDITION WAS MADE BY THE AO ON THE BASIS OF SOME WRITINGS I N A WORKING PAPER MARKED GM-4 PAGE-34 SEIZED AT THE TIME OF SEARCH ON 15.10.2003 FROM THE PREMISES OF THE ASSESSEE. THE ADDITION WAS MADE BY THE AO BY OBSERVING AS UND ER :- THE A/R OF THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE GOODS SENT TO OTHER COMPANIES AND RECEIVED FROM OTHER COMPANIES AS PER THE ENTRIES RECORDED IN GM/4, PAGE NO.34. THE A/R REPLIED THAT THE SALES ARE ALREADY R ECORDED IN SALES. HE ADDED THAT BOTH GOODS SENT AND GOODS RECEIVED ARE RECORDED IN PURCH ASES AND SALES. THE ASSESSEE STATED THAT A SEPARATE LOAN ACCOUNT IS MAINTAINED WITH OTH ER MILLS AND NO COGNIZANCE WAS GIVEN AT THE TIME OF SEARCH AND SEIZURE OPERATION BY THE INVESTIGATION WING. HOWEVER, THE ASSESSEES ARGUMENTS WAS NOT ACCEPTABLE TO ME AS TH E ASSESSEE DID NOT PUT THE MATTER OF LOAN REGISTER BEFORE THE INVESTIGATION WING. ON THE OTHER HAND, THE ASSESSEE HAD FILED APPLICATION FOR DIRECTION U/S 144A ON THIS ISSUE RE CORDED IN GM/4, PAGE-34. THE ADDL.CIT, R-V , KOLKATA VIDE HIS DIRECTION GIVEN ON 30.03.2006 PLACED IN FILE HAS ITA NOS .371 & 372/KOL/2011 3 DIRECTED TO MAKE ADDITION OF THE VALUE OF UNDISCLOS ED SALES OF 188,004 MT OF GOODS SENT TO RDB TEXTILES LTD., VALUE OF GOODS OF 64.51 MT GI VEN TO ADITYA TRANSLINK LTD. AS MENTIONED IN THE SAID DIRECTOR. THUS TOTAL UNEXPLAI NED GOODS BECOME 252.514 MT. THE VALUE OF THE GOODS @ 26,250/- PER MT AMOUNTS TO RS. 66,28,492/- HAS ALREADY DISCLOSED UNDISCLOSED INCOME FOR RS.27,99,425/-. HENCE THE DI FFERENCE OF RS.38,29,067/- IS ADDED TO THE ASSESSEES TOTAL INCOME. 5. THE ADDITION SO MADE WAS SUSTAINED BY THE LD. CI T(A) ALSO. THE AO SUBSEQUENTLY IMPOSED PENALTY AMOUNTING TO RS.11,48, 720/- FOR A.YR. 2003-04 AND RS.11,69,352/- FOR THE A. YR.2004-05. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE PENALTY WHEN THE ASSESSEE P OINTED OUT THAT THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER WERE BASICAL LY WRONG WITH REFERENCE TO THE REPLY OF THE ASSESSEE THAT THE SALES ARE ALREADY RE CORDED IN THE SALES WHILE THE FACT WAS THAT SEPARATE LOAN ACCOUNT WAS MAINTAINED BY THE A SSESSEE WITH OTHER MATERIALS AND THE AO HAS NOT TAKEN COGNIZANCE TO THAT REGISTER AT THE TIME OF SEARCH AND SEIZURE OPERATION BY THE INVESTIGATION WING. THE LD. CIT(A ) WHILE DELETING THE PENALTY HAS OBSERVED AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLANT AND THE MATERIAL ON RECORD. IN THE PRESENT CASE THE AO HAS NOT BROUGHT ON RECORD ANY CONCEALMENT OR FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME EXCEPTING RELYING ON HIS INTERPRETATION OF THE WRITINGS IN THE SEIZED PAPER MARKED AS GM/4 PAGE-34 AND SUSTAINMENT OF THE ADDITION MADE IN THE ASSESSMENT BY THE LD. CIT(A). THE SUBMISSIONS MADE BY THE APPELLANT WERE NOT CONSIDERED IN THEIR PROPER PERSPECTIVE. THE EXPLANATION OF THE ASSESSEE ABOUT THE WRITINGS IN THE PAPER AND THE RECORDING OF THE GIVING & RECEIVING OF GOODS IN THE LOAN REGISTER IS A PLAUSI BLE EXPLANATION AND CANNOT BE BRUSHED ASIDE LIGHTLY IN THE PENALTY PROCEEDINGS. IT IS TRU E THAT AS PER EXPLANATION 1 TO SEC.271(1)(C) IN SUCH CASES AN ADDITION MADE TO INC OME EFFECTIVELY RAISES A PRESUMPTION AGAINST THE ASSESSEE BUT THAT IS AN ENTIRELY REBUTT ABLE PRESUMPTION AND THE SCHEME OF REBUTTAL IS PROVIDED IN THE EXPLANATION ITSELF. THE ONUS IS ON THE ASSESSEE TO FURNISH AN EXPLANATION WHICH HE IS ABLE TO SUBSTANTIATE AND TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS MATERIAL TO COMPUTATION OF HIS TOTAL INCOME HAS BEEN DISCLOSED BY HIM. ONCE THE ASSESSEE DISCHARGES HIS ONUS THE A O HAS TO ESTABLISH THAT SUCH EXPLANATION IS FALSE AND THERE HAS BEEN CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING PARTICULARS OF INCOME BEFORE PROCEEDING TO LEVY A PENALTY U/S 271(1)(C). 5.1. IN THE INSTANT CASE THE ISSUE ARISES OUT OF A DIFFERENT INTERPRETATION OF A PARTICULAR SEIZED PAPER MARKED GM/4, PAGE-34 WHERE IT WAS MENT IONED THAT GOODS SENT TO RDB 188.004 MT AND GOODS RECEIVED FROM ADITYA 64.510 MT . AS THE ASSESSEE WAS NOT IN A POSITION TO RECONCILE THE DIFFERENCE OF 123,434 MT THE VALUE OF THE SAME BEING RS.27,79,425/- WAS OFFERED FOR TAXATION BY A STATEM ENT U/S 132(4) OF THE I.T.ACT61. HOWEVER, THE AO HAS ADDED BOTH THE FIGURES AND ARRI VED AT TOTAL UNEXPLAINED GOODS OF 252.514 MT. THE AO VALUED THE GOODS AT RS.66,28,492 /- DEDUCTED THE AMOUNT DISCLOSED BY THE ASSESSEE AND ADDED RS.38,29,067/- INTO THE A SSESSEES TOTAL INCOME. THE ASSESSMENT ORDER ITSELF SHOWS THAT THE AO WAS UNDER CERTAIN MISCONCEPTION. HE HAS MENTIONED THAT 64.51 MT WAS GIVEN TO ADITYA TRANSLI NK LTD. WHEREAS THE SEIZED PAPER ITA NOS .371 & 372/KOL/2011 4 CLEARLY STATES THAT IT WAS RECEIVED FROM ADITYA. TH US, MOST PROBABLY, THE AO HAS GIVEN HIS FINDING ON THE BASIS OF A WRONG READING OF THE PAPER. THIS IS STRENGTHENED BY THE FACT THAT IN THE A/Y 04-05 THE AO HAS ADOPTED A NET BASI S (GOODS SENT GOODS RECEIVED) IN ARRIVING AT THE VALUE OF UNEXPLAINED GOODS. EVEN IF FOR A MOMENT IT IS ASSUMED THAT THE AO HAS CONSCIOUSLY ADDED BOTH THE FIGURES AND TREAT ED BOTH GOODS SENT AND GOODS RECEIVED AS UNEXPLAINED GOODS THEN IT CAN AT BEST B E ONE INTERPRETATION OUT OF THREE PROBABLE INTERPRETATIONS AS STATED BELOW : (A) THE NET OF GOODS SENT AND RECEIVED IS THE UNEXP LAINED GOODS; (B) ONLY THE GOODS SENT IS THE UNEXPLAINED GOODS; BOTH GOODS SENT AND RECEIVED ARE UNEXPLAINED GOOD S; TO ME OUT OF THESE THREE(A) APPEARS TO BE THE MOST RATIONAL AND (C) THE LEAST. THEREFORE, IT CAN BE INFERRED THAT THE ASSESSEE HAS BEEN ABLE TO FURNISH A VERY RATIONAL AND PLAUSIBLE EXPLANATION ABOUT THE UNEXPLAINED GOODS UNDER A BON A FIDE BELIEF. THE AO HAS JUST TAKEN A DIFFERENT INTERPRETATION MAY BE UNDER A WRO NG READING OF THE FACT AS STATED EARLIER IN THIS ORDER. THE LD. CIT(A) HAS UPHELD THE ADDITI ON ON THE BASIS OF REASONING GIVEN IN SOME OTHER CASES. THE APPELLANT HAS GIVEN A VERY LO GICAL EXPLANATION WHICH IS BONAFIDE AND ALSO SUBSTANTIATED IT BY EVIDENCE. THE AO NOWHE RE IN HIS PENALTY ORDER BROUGHT ANY MATERIAL TO PROVE THAT SUCH EXPLANATION IS FALSE AN D THERE HAS BEEN CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. UND ER SUCH CIRCUMSTANCES I HOLD THAT THE IMPOSITION OF PENALTY U/S 271(1)(C) IN THIS CASE IS NOT IN ACCORDANCE WITH LAW AND HENCE IS CANCELLED. SIMILARLY PENALTY ORDER IS DELETED FOR A.YR. 2004-0 5 ALSO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. IN THIS CASE THE AO HAS LEVIED U/S 271(1)(C) OF THE IT ACT MERELY BY REJECTING THE EXPLANATION OF THE ASSESSEE AND OBSERVING THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. HE THEN FAIL ED TO OFFER SUITABLE REPLY TO THE QUERIES RAISED BY THE AO AT THE ASSESSMENT STAGE. T HE ADDITIONS WERE MADE BY THE AO ON THE BASIS OF THE SEIZED MATERIALS AND DISCLOSED ACCOUNTING RECORDS.. THE DISCREPANCY POINTED OUT IN THE ASSESSMENT ORDER WER E REAL DISCREPANCIES AND NOT BASED ON ANY SURMISES OR CONJECTURES. AFTER OBSERVING THE SE THE AO FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PROVE ITS CASE BEFORE THE AO AS WELL AS THE CIT(A) AND AS SUCH PENALTY U/S 271(1)(C) OF THE IT ACT OF RS.11,48,270 /- IS HEREBY LEVIED WITH THE APPROVAL OF ADDL.CIT, RANGE-V, CENTRAL, KOLKATA. 6.1. SECTION 271(1)(C) OF THE ACT GIVES THE JURISDI CTION TO THE AO TO IMPOSE PENALTY U/S 271(1)(C) ON THE ASSESSEE IF THE AO IN THE COUR SE OF PROCEEDINGS UNDER THE I.T.ACT IS SATISFIED THAT THE ASSESSEE HAS CONCEALED ANY PA RTICULARS OF HIS INCOME OR FURNISHED ITA NOS .371 & 372/KOL/2011 5 INACCURATE PARTICULARS OF SUCH INCOME. U/S 271(1)(I II) THE PENALTY HAS TO BE LEVIED 100% OF TAX SOUGHT TO BE EVADED AND CANNOT EXCEED 3 00% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. THUS THE PENALTY HAD TO BE LEVIED EIT HER FOR CONCEALMENT OF THE PARTICULARS OF INCOME OR FILING INACCURATE PARTICUL ARS OF THE INCOME. BOTH THE DEFAULTS ARE STIPULATED U/S 271(1)(III) AND ARE DIFFERENT. E XPLANATION 1 IS APPLICABLE IN RESPECT OF THE CONCEALMENT OF THE PARTICULARS OF THE INCOME BU T IS NOT APPLICABLE IN RESPECT OF FILING OF INACCURATE PARTICULARS OF THE INCOME. IF THE CHARGE IS REGARDING THE CONCEALMENT OF THE PARTICULARS OF THE INCOME, DUE T O THE APPLICABILITY OF EXPLANATION 1, THE ONUS IS VESTED ON THE ASSESSEE TO PROVE THAT HE HAS NOT CONCEALED THE PARTICULAR OF HIS INCOME. BUT IN CASE, CHARGE AGAINST THE ASSESSE E IS FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE ONUS IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF THE INCOME. WE HAVE GONE THROUGH THE PENALTY ORDER. WE DO NOT FIND ANY SPECIFIC CHARGE HAS BEEN MADE OUT BY THE AO WHILE IMPOSING THE PENALTY ON THE ASSESSEE. UNTIL AND UNL ESS SPECIFIC CHARGE IS MADE OUT AGAINST THE ASSESSEE, THE ONUS BY WHOM TO ADDUCE EV IDENCES CANNOT BE DECIDED. THE ASSESSEE MUST BE KNOWN FOR WHICH DEFAULT THE PENALT Y IS BEING LEVIED. UNDER THESE FACTS ITSELF, IN OUR OPINION, IN THE ABSENCE OF SPE CIFIC CHARGE, PENALTY ORDER IS VITIATED IN ABSENCE OF SPECIFIC CHARGE ITSELF. WE ACCORDINGL Y QUASH PENALTY ORDER. OUR AFORESAID VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NEWS SORIAHA ENGG. CO. LTD. (282 ITR 642) E VEN WE NOTED THAT ON MERIT, THE LD.CIT(A) DELETED PENALTY THAT THE EXPLANATION OF T HE ASSESSEE IS BONA FIDE ONE. IN OUR OPINION ALSO THE EXPLANATION OF THE ASSESSEE ABOUT THE WRITINGS IN THE PAPER AND RECORDING OF THE GIVING AND RECEIVING OF GOODS IN T HE LOAN REGISTER IS A PLAUSIBLE EXPLANATION AND THIS EXPLANATION CANNOT BE BRUSHED ASIDE. THE ADDITION HAS BEEN MADE BY THE AO ONLY ON THE BASIS OF THE INTERPRETAT ION TAKEN BY HIM IN RESPECT OF THE SEIZED MATERIAL THAT MAY BE ONE OF THE INTERPRETATI ONS. THE LD. DR DID NOT BRING ANY COGENT MATERIAL TO OUR KNOWLEDGE WHICH MAY PROVE T HAT THE INTERPRETATION TAKEN BY THE AO IS THE ONLY INTERPRETATION ON THE BASIS OF T HE SEIZED MATERIAL. ON THIS BASIS ALSO, IN OUR OPINION, THE ORDER THE LD. CIT(A) .DELETING THE PENALTY IMPOSED ON THE ASSESSEE U/S 271(1)(C) OF THE IT ACT IS TO BE CONFIRMED. ACC ORDINGLY, THE PENALTY ORDER DELETING THE PENALTY IS CONFIRMED IN BOTH THE ASSESSMENT YE ARS. ITA NOS .371 & 372/KOL/2011 6 7. IN THE RESULT BOTH THE APPEALS FILED BY THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 07.02.2013. SD/- SD/- [ .''# $ , ] [ .., ,, , ] GEORGE MATHAN ] [P.K.BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 07.02.2013. R.G.(.P.S.) 6 0 .''7 87)9- COPY OF THE ORDER FORWARDED TO: 1. M/S.THE GANGES MFG. CO.LTD., 33, J.L.NEHRU ROAD, KO LKATA-700071. 2 I.T.O., WARD-1(2), KOLKATA 3 . CIT KOLKATA 4 . CIT(A)-CENTRAL-III, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. /7 .'/ TRUE COPY, 62/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES