The ACIT, Circle-1, Bhavnagar V. Inducto Ispat Alloys Ltd., Bhavnagar

ITA 3937/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5925 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion
• Section: 271(1)(c); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : A HMEDABAD (BEFORE HON'BLE SHRI G.D. AGRAWAL, V.P. (AZ) & HON BLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 3937/AHD./2008 ASSESSMENT YEAR : 2003-2004 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- INDUCT O ISPAT ALLOYS LTD., BHAVNAGAR CIRCLE-1, BHAVNAGAR (PAN : AAACI 4860 P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR, D.R. RESPONDENT BY : SHRI TUSHAR P. HEMANI O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 29.08.2008 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XX, AHMEDABAD C ANCELLING THE PENALTY OF RS.58,38,720/- LEVIED BY THE ASSESSING OFFICER UNDE R SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2003-04. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL INGOTS. FOR THE ASSESSMENT Y EAR UNDER APPEAL, IT FILED THE RETURN OF INCOME DECLARING NIL INCOME. IN THE STATEMENT OF INCOME, T HE ASSESSEE HAD SHOWN BUSINESS LOSS OF RS.5,29,14,911/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 29.03.2006, WHEREIN HE MADE THE FOLLOWING TWO ADDIT IONS :- (A) ADDITION ON ACCOUNT OF UNACCOUNTED SALES RS.3 ,05,32,388/- (B) DISALLOWANCE OF POWER EXPENSES RS.1,52,92,30 2/- 3. IN QUANTUM APPEAL, THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) TOOK THE VIEW THAT ENTIRE UNACCOUNTED SALES CANNOT BE MADE. THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFICER TO ADOP T THE AVERAGE G.P. RATE OF LAST THREE YEARS FOR APPLYING GP RATE ON SAID UNACCOUNTED SALES AND ADDI TION TO THAT EXTENT WAS CONFIRMED, WHEREAS DISALLOWANCE OF POWER EXPENSES (GEB) OF RS.1,52,92, 302/- WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN TOTO. THUS A FTER GIVING APPEAL EFFECT TO THE ORDER OF THE FIRST APPELLATE AUTHORITY, THE FOLLOWING ADDITIONS/ DISALLOWANCES WERE CONFIRMED :- 2 ITA NO. 3937/AHD/2008 (I) ADDITION ON ACCOUNT OF UNACCOUNTED SALES (AVERAGE RATE OF GP @ 1.95% OF 3,05,32,388/-) - R S. 5,95,382/- (II) DISALLOWANCE OF POWER EXPENSES (GEB) - RS.1 ,52,92,302/- 4. SUBSEQUENTLY, IN RESPECT OF BOTH THE AFORESAID A DDITIONS, THE ASSESSING OFFICER LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT AMOUNTING TO RS.58,38,720/-. ON APPEAL IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLED THE PENALTY IN RESPECT OF ESTIMATED ADDITION OF RS.5,95,382/- [ ADDITION ON ACCOUNT OF UNACCOUNTED SALES (MINUS) AVERAGE RATE OF GP] FOLLOWING THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILLS VS.- CIT [252 ITR 417]. IN THIS JUDGMENT, THE HON'BLE HIGH COURT HAD HELD THAT ITO HAVING MADE THE ESTIMATES TO MAKE ADDITION OF E STIMATED PROFIT ON SALES MADE OUTSIDE BOOKS OF ACCOUNT, THE EXPLANATION TO SECTIO N 271(1)(C) CANNOT BE EVOKED AND EVEN IF EVOKED, THE ASSESSEE CAN BE SAID TO HAVE DISCHARGED THE BURDEN . FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALSO CANCELLED THE PENALTY IN RESPECT OF DISALLOWANCE OF POWER EXPENSES (GEB) AMOUNTING TO RS.1,52,92,302/- OBSERVING THAT THERE IS NO LACK OF BONA FIDE BELIEF OR FAILURE TO DISCLOSE NECESSARY MATERI AL. ALL THE MATERIAL FACTS WERE ON RECORD AND, THEREFORE, THE CASE OF THE ASSESSEE DOES NOT FALL W ITHIN THE PURVIEW OF PROVISIONS OF SECTION 271(1)(C) OF THE I.T. ACT. AGGRIEVED BY THE ORDER O F LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE SHRI ANIL KUMAR, D.R. APPEARED AND CONTENDED THAT IN THE ASSESSMENT ORDER, THE ASS ESSING OFFICER DISALLOWED ENTIRE UNACCOUNTED SALES OF RS.3,05,32,388/-. IN QUANTUM APPEAL, THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) DIRECTED TO APPLY THE AVERAGE G.P. RAT E. ON THAT BASIS, ADDITION WAS WORKED OUT AT RS.5,95,382/-. THE PARTICULARS OF THIS INCOME WERE CONCEALED BY THE ASSESSEE, THEREFORE, PENALTY IN RESPECT OF THIS ITEM OF ADDITION IS LEVIABLE. TH E LD. D.R. POINTED OUT THAT IN RESPECT OF ESTIMATED ADDITION ALSO, PENALTY CAN BE LEVIED AS HELD BY THE HON'BLE ALLAHABAD HIGH COURT IN THE FOLLOWING TWO CASES :- (I) ADDITIONAL CIT, KANPUR VS.- SWATANTRA CONFECTI ONERY WORKS [104 ITR 291] (ALL.); (II) CIT, U.P. VS.- KEDAR NATH RAM NATH [106 ITR 172 ](ALL.). 3 ITA NO. 3937/AHD/2008 5.1. THE LD. D.R. FURTHER SUBMITTED THAT THOUGH THE ASSESSEE HAS DISCLOSED ALL THE FACTS IN THE RETURN OF INCOME AND THE ACCOMPANYING TAX AUDIT REP ORT, IT IS A FACT THAT ASSESSEE HAD NOT DISCLOSED PROFIT ON THE UNACCOUNTED SALES DETECTED BY CENTRAL EXCISE DEPARTMENT AND FURTHER CLAIMED DEDUCTIONS OF POWER EXPENSES (DETECTED AS W RONG/ ILLEGAL CLAIM BY GEB) OF RS.1.52 CRORES, WHICH THE ASSESSEE KNOWS TO BE NOT ALLOWABL E AS DEDUCTION UNDER SECTION 37. HE ACCORDINGLY CONTENDED THAT IN RESPECT OF BOTH THE A DDITIONS/ DISALLOWANCES, PENALTY IS RIGHTLY LEVIED AND LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) IS NOT JUSTIFIED IN DELETING THE SAME. 6. ON THE OTHER HAND, SHRI TUSHAR P. HIMANI, LD. CO UNSEL APPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). THE LD. COUNSEL OF THE ASSESSEE TOOK US THROUGH THE REPLY T O SHOW-CAUSE NOTICE FURNISHED BEFORE THE ASSESSING OFFICER. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT CENTRAL EXCISE OFFICIALS MERELY ESTIMATED THE PRODUCTION, WHICH IS NOT RECORDED IN THE BOOKS AND TOOK THE VIEW THAT THE ASSESSEE MIGHT HAVE SOLD THE SAID PRODUCTION OUTSIDE THE BOO KS OF ACCOUNTS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DIRECTED THE ASSESSING OFFIC ER TO ADOPT AVERAGE G.P. AFTER GIVING THE APPEAL EFFECT TO THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), ADDITION OF RS.3,05,32,388/- WAS RESTRICTED TO RS.5,95,382/-. T HE ENTIRE ADDITION HAS BEEN MADE ON ESTIMATE BASIS AND THE FACTS OF ASSESEES CASE ARE IDENTICAL WITH THAT OF THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NAVJIVAN OIL MILLS VS.- CIT [252 ITR 417], THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CANCELLING THE PENALTY ON THIS ADDITION BE UPHELD. 6.1. WITH REGARD TO DISALLOWANCE OF POWER EXPENSES OF RS.1,52,92,302/-, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ORDER OF GEB WAS QUITE SPECIFIC THAT YOU HAVE OPTED HTP-VI TARIFF BUT YOU HAVE VIOLATED THE CONDITION OF TARIFF PROVI SION, YOU COULD NOT RESTRICT YOUR DAY TIME CONSUMPTION AND M.D. UPTO 5%. THEREFORE, AS PER TAR IFF PROVISIONS YOUR BILL IS PREPARED AS PER HTP-I TARIFF INSTEAD OF HTP-IV. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THIS ALONE INDICATES THAT THE ASSESSEE HAS NOT COMMITTED ANY O FFENCE AND POWER EXPENSES CLAIMED AMOUNTING TO RS.1,52,92,302/- IS NOTHING BUT POWER EXPENSE. IT IS NOT IN THE NATURE OF PENALTY. THOUGH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN RESPECT OF BOTH THE ADDITIONS WERE ACCEPTED AS THE ASSESSEE HAS INCURRE D HUGE LOSSES, NO PENALTY IN RESPECT OF BOTH THE ADDITIONS/ DISALLOWANCES CAN BE LEVIABLE. IN SU PPORT OF THIS, RELIANCE WAS ALSO PLACED ON THE 4 ITA NO. 3937/AHD/2008 LATEST DECISION OF THE RELIANCE PETRO PRODUCTS PVT. LTD. [2010]322 ITR 158 (SC). HE ACCORDINGLY POINTED OUT THAT THE VIEW TAKEN BY THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSING O FFICER MADE THE ADDITION ON ACCOUNT OF UNACCOUNTED SALES OF RS.3,05,32,388/-. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RESTRICTED THE SAID ADDITION TO RS.5,95,382/- (BY A PPLYING AVERAGE GP RATE @ 1.95% OF RS.3,05,32,388/-). THUS THE ENTIRE ADDITION WAS MAD E ON ESTIMATE BASIS, I.E. BY ESTIMATING THE PRODUCTION OUTSIDE THE BOOKS OF ACCOUNTS AND ITS SA LE. ON THESE FACTS, PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE AS HELD BY THE HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF NAVJIVAN OIL MILLS VS.- CIT [252 ITR 417], WHICH IS RELIED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IN RESPECT OF OTHER ADDITION ALSO, KE EPING IN VIEW THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. REPORTED IN [2010] 322 ITR 158 (SC), PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIAB LE. ON PERUSAL OF REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) IN QUANTUM APPEAL, WE ARE CONVINCED THAT BOTH THE A DDITIONS WERE MADE BY ASSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME TAX(APP EALS) ON ACCOUNT OF DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AND ASSESSING OFFICER. ALL THE MATERIAL FACTS WERE DISCLOSED IN THE RETURN AND, THEREFORE, IT CANNOT BE SAID THAT ASSES SEE HAD FURNISHED INACCURATE PARTICULARS OR CONCEALED INCOME. IN SUPPORT OF THIS, RELIANCE CAN BE PLACED ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT S PVT. LTD. (SUPRA). WE ARE, THEREFORE, OF THE VIEW THAT LEARNED COMMISSIONER OF INCOME TAX(APPEAL S) IS LEGALLY AND FACTUALLY CORRECT IN CANCELLING THE PENALTY ON BOTH THE DISALLOWANCES. W E, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 18.06.201 0 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 18 / 06 / 2010 5 ITA NO. 3937/AHD/2008 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.