Shri Shyam Sunder, New Delhi V. DCIT, New Delhi

ITA 3937/DEL/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1764 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 23-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUJIT KUMAR SENIOR
• Assessee Lawyers: SUBHAM RASTOGI S
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.3937/DEL./2010 (ASSESSMENT YEAR : 2005-06) SHRI SHYAM SUNDER, VS. DCIT, CIRCLE 39(1), 4194, GALI ASHARAM, 1 ST FLOOR, NEW DELHI. PAHARI DHIRAJ, SADAR BAZAR, NEW DELHI (PAN : AOTPS9308E) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SALIL KAPOOR, SHRI SANAT KAPOO R & SHRI SUBHAM RASTOGI, ADVOCATES REVENUE BY : SHRI SUJIT KUMAR, SENIOR DR DATE OF HEARING : 17.11.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS FI LED AGAINST THE ORDER OF CIT (APPEALS)-XXVIII, NEW DELHI DATED 26.10.2009 F OR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY SOLITARY GROUND TAKEN BY THE ASSESSEE I S AGAINST THE CONFIRMATION OF PENALTY OF RS.2,08,364/- IMPOSED UN DER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT). ITA NOS.3937/DEL./2010 2 3. THE ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF M/ S. RAHUL TEXTILES AND TRADING OF CLOTH AND RELATED ITEMS. A SURVEY WAS CO NDUCTED U/S 133A OF THE ACT ON 11.02.2005. AS A RESULT OF SURVEY, EXCESS S TOCK WAS FOUND AND THE ASSESSEE SURRENDERED THE EXCESS STOCK AMOUNTING TO RS.30,00,000/- FOR TAXATION. THE AO RECORDED THE STATEMENT OF THE ASS ESSEE TO THIS EFFECT DURING THE COURSE OF SURVEY. BUT, WHILE FILING HIS RETURN OF INCOME, THE ASSESSEE OFFERED AND SURRENDERED INCOME OF RS.23,80,978/- WI TH A NOTE BELOW THE TRADING AND PROFIT & LOSS ACCOUNT AS UNDER :- THIS SURRENDER OF RS.30,00,000/- WAS MADE ON THE BA SIS OF TRADING A/C DRAWN ON THAT DATE FROM THE FIGURES TAKEN FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, LATER ON, THE ASS ESSEE NOTICED THAT THEIR ACCOUNTANT MISSED TO ENTER 5 PURCHASES BILLS OF RS.6,19,022/- WHICH MATERIAL HAD ALREADY BEEN RECEIVED BY THE ASS ESSEE TILL 10.02.2005. ACCORDINGLY EXCESS STOCK SURRENDER AMOU NT BECOMES AT RS.23,80,978/- (3000000-619022) AND THE SAME HAS BE EN DULY ACCOUNTED FOR IN THE FINAL ACCOUNTS OF THE ASSESSEE .' THE AO MADE INQUIRIES FROM THE TWO PARTIES IN RESPE CT OF WHICH THE ASSESSEE HAD CLAIMED THE PURCHASES OF RS.6,19,022/ - WHICH WERE FOUND NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AT THE TIME O F SURVEY. THE AO OBSERVED THAT IN ONE OF THE CASES, INTERPOLATION / CORRECTIO N WERE FOUND IN THE BILL PRODUCED FOR VERIFICATION. HOWEVER, BOTH THE PARTIE S SUBMITTED THAT THE PAYMENT IN RESPECT OF SALES MADE WERE RECEIVED SUBS EQUENTLY THROUGH CHEQUES. THE AO CONFRONTED THE ASSESSEE WITH THE A BOVE INTERPOLATION IN THE ITA NOS.3937/DEL./2010 3 BILLS AND THE ASSESSEE VIDE LETTER DATED 13.11.2007 SURRENDERED THE AMOUNT OF RS.6,19,022/- I.E. THE VALUE OF PURCHASE BILLS AS I NCOME WHICH WAS DEDUCTED FROM THE SURRENDERED INCOME OF RS.30,00,000/- AT TH E TIME OF FILING THE RETURN OF INCOME. ACCORDINGLY, THE AO MADE THE ADDITION O N ACCOUNT OF SURRENDERED INCOME OF RS.6,19,022/-. AGAINST THIS ADDITION, TH E ASSESSEE DID NOT FILE ANY APPEAL. THE AO ALSO DIRECTED TO INITIATE PENALTY P ROCEEDINGS U/S 271(1)(C) OF THE ACT. 3.1 IN THE PENALTY PROCEEDINGS, THE AO REQUIRED THE ASSESSEE TO FILE HIS JUSTIFICATION FOR NON LEVY OF PENALTY U/ S 271(1)(C ) OF THE ACT. THE ASSESSEE FILED REPLY VIDE LETTER DATED 23-04-2008 . THE AO, AFTER CONSIDERING THE FACTS, WAS OF THE OPINION THAT IT WAS APPARENT THAT ASSESS EE HAD CONCEALED THE PARTICULARS OF HIS INCOME AND FURNISHED INACCURATE PARTICULARS THEREOF AND IT WAS ONLY AFTER THE INTERPOLATION / INQUIRING IN ONE OF THE BILLS POINTED OUT TO HIM, THE ASSESSEE SURRENDERED THE INCOME AND NOT ON HIS OWN. HE ACCORDINGLY LEVIED THE MINIMUM PENALTY @ 100% OF RS.2,08,364/- U/S 271(1)(C) OF THE ACT. 3.2 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LD. CIT (A) CONFIRMED THE PENALTY B Y OBSERVING AS UNDER:- 7. CONSIDERING THE ABOVE, IT IS CLEAR THAT IN RESP ECT OF THE AMOUNT ON WHICH PENALTY HAS BEEN IMPOSED, THERE WAS NO VOLUNT ARY ADMISSION OF INCOME PRIOR TO DETECTION BY THE A.O. INCOME ON AC COUNT OF EXCESS STOCK FOUND DURING SURVEY WAS ADMITTED DURING SURVE Y BUT PARTLY ITA NOS.3937/DEL./2010 4 RETRACTED SUBSEQUENTLY BY MANIPULATING CERTAIN PURC HASES. WHEN THE MANIPULATION WAS DETECTED AND THE ASSESSEE WAS CONF RONTED, HE ADMITTED TO THE ADDITIONAL INCOME. THE CLAIM THAT ' SURRENDER' DURING SURVEY WAS ON THE ASSURANCE OF THE SURVEY TEAM THAT NO PENALTY WOULD BE IMPOSED, HAS NOT BEEN SUBSTANTIATED AT ALL AND T HE MATTER HAS TO BE DECIDED ON MERITS AS PER LAW. IN ANY CASE, THE PENA LTY HAS BEEN IMPOSED ONLY ON THE AMOUNT OF RS.6,19,022/- WHICH THE ASSE SSEE IN HIS RETURN HAS REDUCED FROM THE INCOME ADMITTED DURING SURVEY. 8. IN VIEW OF THE ABOVE, THE PROVISIONS OF EXPLANAT ION 1 TO SECTION 271(1)(C) ARE CLEARLY APPLICABLE IN THIS CASE. THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH WAS FOUND BY THE ASSESSING OFF ICER TO BE FALSE. MOREOVER, THE EXPLANATION WAS NOT BONA FIDE AND THE INCOME ADMITTED TOWARDS EXCESS STOCK DURING SURVEY WAS FOUND TO BE REDUCED BY INDULGING IN MANIPULATION, WHICH THE ASSESSING OFFI CER DETECTED. IT WAS ONLY THEREAFTER, THAT THE ASSESSEE ADMITTED THE UND ISCLOSED INCOME. THEREFORE, THE PENALTY IMPOSED U/S 271(1)(C) DESERV ES TO BE UPHELD. IN THE RESULT, THE APPEAL IS DISMISSED. 4. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 5. LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A REPLY DATED 23.04 .2008 STATING THAT THE ASSESSEE HAS NOT CONCEALED ANY PARTICULARS OF INCOM E. LD. AR SUBMITTED THAT THE ASSESSEE HAS SURRENDERED THE INCOME OF RS30,00, 000/- AT THE TIME OF SURVEY BASED ON THE WORKING OF THE STOCK ; AND LATE R WHEN HE REALIZED THAT FEW PURCHASES BILLS REMAINED UNENTERED BY THE ACCOUNTAN T OF THE ASSESSEE, THEN THE SURRENDERED INCOME WAS GENUINELY CORRECTED BY THE A SSESSEE AND SO, NO FAULT CAN BE ATTRIBUTED TO THE ASSESSEE FOR THE NEGLIGENC E ON THE PART OF ACCOUNTANT. ITA NOS.3937/DEL./2010 5 HE FURTHER SUBMITTED THAT THOUGH THE LEFT OUT BILLS OF RS,6,19,022/- WERE GENUINE, THE ASSESSEE SURRENDERED THEM JUST TO BUY MENTAL PEACE AND TO AVOID LITIGATION AND FURTHER ON THE BASIS OF COMMITMENT O F THE DEPARTMENT NOT TO IMPOSE PENALTY AT THE TIME OF SURVEY AND THE CLAIM WAS A BONAFIDE CLAIM SUPPORTED BY EVIDENCE WHICH WAS CORROBORATED BY THE PARTIES AND THE SAID AMOUNT HAS BEEN TRANSACTED THROUGH THE BANKING CHAN NELS. SO THE CLAIM MADE BY THE ASSESSEE WAS GENUINE AND SO THE ASSESSEE MAD E A BONAFIDE CLAIM BEFORE THE AO DURING ASSESSMENT PROCEEDINGS, SO THE PENALT Y WAS NOT WARRANTED. ACCORDINGLY, THE LD. AR PLEADED THAT THE ORDER OF T HE AUTHORITIES BELOW BE SET ASIDE AND THE PENALTY LEVIED BE DELETED. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF THE INCOME AND AGAINST THE QUANTUM PROCEEDINGS ALSO, TH E ASSESSEE HAD NOT FILED ANY APPEAL AGAINST THE ADDITION BEFORE THE CIT (A). HE WANTS US NOT TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE ASSESSEE IS AN INDIVIDUAL AND PROPRIE TOR OF M/ S. RAHUL TEXTILES AND TRADING OF CLOTH AND RELATED ITEMS. A SURVEY WA S CONDUCTED U/S 133A OF THE ACT ON 11.02.2005. AS A RESULT OF SURVEY, EXCE SS STOCK WAS FOUND AND THE ASSESSEE SURRENDERED THE EXCESS STOCK AMOUNTING TO RS.30,00,000/- FOR ITA NOS.3937/DEL./2010 6 TAXATION. THE AO RECORDED THE STATEMENT OF THE ASS ESSEE TO THIS EFFECT DURING. THE COURSE OF SURVEY. BUT, WHILE FILING HIS RETURN OF INCOME, THE ASSESSEE OFFERED SURRENDERED INCOME OF RS.23,80,978/- WITH A NOTE BELOW THE TRADING AND PROFIT & LOSS ACCOUNT AS UNDER :- THIS SURRENDER OF RS.30,00,000/- WAS MADE ON THE BA SIS OF TRADING A/C DRAWN ON THAT DATE FROM THE FIGURES TAKEN FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE. HOWEVER, LATER ON, THE ASSESSEE NOTICED THAT THEIR ACCOUNTANT MISSED TO ENTER 5 PURCHASES BILLS OF RS.6,19,022/- WHICH MATERIAL HAD ALREADY BEEN RECEIVED BY THE ASSESSEE TILL 10.02.2005. ACCORDINGLY EXCESS STOCK SURRENDER AMOUNT BECOMES AT RS.23,80,978/- (3000000-619022) AND THE SAME HAS BE EN DULY ACCOUNTED FOR IN THE FINAL ACCOUNTS OF THE ASSESSEE.' THE AO MADE INQUIRIES FROM THE TWO PARTIES IN RESPE CT OF WHICH THE ASSESSEE HAD CLAIMED THE PURCHASES OF RS.6,19,022/ - WHICH WERE FOUND NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AT THE TIME O F SURVEY. THE AO OBSERVED THAT IN ONE OF THE CASES, INTERPOLATION / CORRECTIO N WERE FOUND IN THE BILL PRODUCED FOR VERIFICATION. HOWEVER, BOTH THE PARTIE S SUBMITTED THAT THE PAYMENT IN RESPECT OF SALES MADE WERE RECEIVED SUBS EQUENTLY THROUGH CHEQUES. THE AO CONFRONTED THE ASSESSEE WITH THE A BOVE INTERPOLATION IN THE BILLS AND THE ASSESSEE VIDE LETTER DATED 13.11.2007 SURRENDERED THE AMOUNT OF RS.6,19,022/- I.E. THE VALUE OF PURCHASE BILLS AS I NCOME WHICH WAS DEDUCTED FROM THE SURRENDERED INCOME OF RS.30,00,000/- AT TH E TIME OF FILING THE RETURN OF INCOME. ACCORDINGLY, THE AO MADE THE ADDITION O N ACCOUNT OF SURRENDERED INCOME OF RS.6,19,022/-. AGAINST THIS ADDITION, TH E ASSESSEE DID NOT FILE ANY APPEAL. ITA NOS.3937/DEL./2010 7 7.1 AS AFORE-STATED, WE FIND THAT THE INQUIRIES WER E MADE FROM THE TWO PARTIES (GEETHA DYEING & FINISHING MILLS AND NAVKAR KNIT FABS) IN RESPECT OF WHICH THE ASSESSEE HAD CLAIMED THE PURCHASES OF RS. 6,19,022/- WHICH WERE FOUND NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE AS SESSEE AT THE TIME OF SURVEY. THE BILLS OF THESE TWO PARTIES ARE FOUND P LACED IN THE PAPER BOOK FROM PAGES 38 TO 42 IS DATED 19.01.2009, 04.02.2005, 05. 02.2005, 07.02.2005 AND 08.02.2005. ACCORDING TO AO, IN ONE OF THE BILLS A MONG THE FIVE BILLS PRODUCED FOR VERIFICATION, HE FOUND INTERPOLATION/C ORRECTION. WE FURTHER FIND THAT HOWEVER, BOTH THE PARTIES SUBMITTED THAT THE P AYMENTS IN RESPECT OF SALES MADE WERE RECEIVED SUBSEQUENTLY THROUGH CHEQUES AND THIS FACT IN THE WORDS OF THE AO IS REPRODUCED AS UNDER :- INQUIRIES WERE MADE FROM THE TWO PARTIES IN RESPEC T OF WHICH THE ASSESSEE HAD CLAIMED THE PURCHASES OF RS.6,19,022/ - WHICH WERE FOUND NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSE E AT THE TIME OF SURVEY. IN ONE OF THE CASE, INTERPOLATION / CORRECTION WERE FOUND IN THE BILL PRODUCED FOR VERIFICATION. HOWEVER, BOTH THE PARTIE S SUBMITTED THAT THE PAYMENT IN RESPECT OF SALES MADE WERE RECEIVED SUBS EQUENTLY THROUGH CHEQUES. WHEN CONFRONTED WITH ABOVE INTERPOLATION IN THE BI LLS, THE ASSESSEE VIDE LETTER DATED 13.11.2007 SURRENDERED T HE AMOUNT OF RS.6,19,022/- I.E. THE VALUE OF PURCHASE BILLS AS I NCOME WHICH WAS DEDUCTED FROM THE SURRENDERED INCOME OF RS.30,00,00 0/- AT THE TIME OF FILING THE RETURN OF INCOME AS MENTIONED ABOVE. PEN ALTY PROCEEDINGS U/S 271(1)(C) WERE ALSO INITIATED FOR FURNISHING INACCU RATE PARTICULARS OF INCOME. THUS, WE FIND THAT AFTER TAKING CONFIRMATION FROM B OTH THE PARTIES, THE AO CONFRONTED THE ASSESSEE WITH THE PURPORTED INTERPOL ATION IN THE BILLS AND THE ASSESSEE VIDE ITS LETTER DATED 13.11.2007 SURRENDER ED THE AMOUNT OF ITA NOS.3937/DEL./2010 8 RS.6,19.022/- I.E. THE VALUE OF PURCHASE BILLS AS INCOME WHICH WAS DEDUCTED FROM THE SURRENDERED INCOME OF RS.30,00,000/- AT TH E TIME OF FILING THE RETURN OF INCOME AS MENTIONED ABOVE; AND ACCORDINGLY THE A O INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 7.2 WE HAVE PERUSED THE FIVE BILLS WHICH ARE PLACED AT PAGES 38 TO 42 AND THEY ARE DATED 19.01.2009, 04.02.2005, 05.02.2005, 07.02.2005 AND 08.02.2005. HOWEVER, THE AO HAS NOTED THAT OUT OF THE FIVE BILLS SUBMITTED, ONE BILL HAD INTERPOLATION WHICH WE COULD NOT SEE F ROM A PERUSAL OF THE SAID BILLS. MOREOVER, THE FACT THAT THE AO HAS CALLED FO R CONFIRMATION FROM BOTH THE PARTIES WHO HAD ISSUED THE BILLS AND THEY HAVE CONF IRMED THE GENUINENESS OF THE BILLS AND SAID THAT THEY GOT THE PAYMENTS LATER THROUGH CHEQUES. WE FIND THAT THOUGH THE AO HAS SAID THAT THERE WAS INTERPOL ATION IN ONE OF THE BILLS, HE HAS NOT STATED WHICH BILL WAS IT. HE COULD HAVE CLE ARLY STATED THAT OUT OF THE FIVE BILLS, WHICH BILL HAS INTERPOLATION, GIVEN ITS INVOICE NUMBER, DATE, NAME OF THE FIRM ETC, AND WHICH COULD HAVE BEEN CONFRONTED WITH THE PARTY WHOM HE CONFRONTED TO KNOW THE GENUINENESS OF THE TRANSACTI ON, WHICH HE DID NOT BOTHER TO DO SO IN THE FIRST PLACE, WHICH EXERCISE WE FEEL, HE SHOULD HAVE DONE BEFORE PENALIZING THE ASSESSEE. WE FIND THAT THE C IT(A) ALSO DID NOT APPRECIATE THE AFORESAID FACTS WHICH VITIATE THE FA CTUAL FINDING OF THE AO THAT THERE WAS INTERPOLATION IN ONE OF THE BILLS. EVEN IF WE TAKE IT FOR CORRECT, THE ITA NOS.3937/DEL./2010 9 STATEMENT OF THE AO THAT ONE OF THE BILLS HAD INTER POLATION, THEN ALSO THE AMOUNT IN THE SAID BILL OUGHT TO HAVE BEEN THE AMOU NT WHICH COULD HAVE ATTRACTED THE PENALTY BECAUSE IT IS ONLY ONE AMONG THE FIVE BILLS WHICH IS UNDER DISPUTE. BEFORE US ALSO, LD. AR VEHEMENTLY SUBMITTE D THAT THERE WAS NO INTERPOLATION, WHICH COULD NOT BE CONTRADICTED BY T HE LD. DR AND WHEN THE FACT REMAINS THAT BOTH THE PARTIES WHO ISSUED THE B ILLS HAVE CONFIRMED THE GENUINENESS OF ALL THE FIVE BILLS AND THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES, SIMPLY BECAUSE THE ASSESSEE SURRENDERED TH E AMOUNT DOES NOT WARRANT PENALTY. IN THIS FACTUAL BACKGROUND, THE FO UNDATION ON WHICH THE PENALTY IS LEVIED FALLS AND FOR THE AFORESAID REASO NS AND SINCE WE COULD NOT SEE ANY INTERPOLATION ALSO IN THE SAID FIVE BILLS AMOUN TING TO RS.6,19,022/-, WE ARE INCLINED TO DELETE THE PENALTY LEVIED AGAINST THE A SSESSEE. WE ORDER ACCORDINGLY 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. -SD- -SD- (N.K. SAINI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER, 2015 TS ITA NOS.3937/DEL./2010 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) -XXVIII, NEW DELHI . 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.