A,C.I T ,CHANDRAPUR CIRCLE, Chandrapur V. M/S SONY DISTRBUTORS PVT. LTD, Chandrapur

ITA 397/NAG/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5045 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 16-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGNES THOMAS; DR MILIND BHOSARI
• Keywords: Unexplained investment; Principle of natural justice
• Section: 271(1)(c); 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, NAGPUR (AT E - COURT, PUNE) BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO S . 396 & 397 /NAG /20 16 / ASSESSMENT YEAR : 2008 - 09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CHANDRAPUR CIRCLE, CHANDRAPUR. ....... / APPELLANT / V/S. SONY DISTRIBUTORS PVT. LTD. C/O. RATHOD & CO., 2 ND FLOOR, RAGHUVANSHI COMPLEX, NEAR AZAD GARDEN, CHANDRAPUR - 442 402. PAN: AAICS0980Q / RESPONDENT REVENUE BY : DR. MILIND BHOSARI, CIT & SMT. AGNES THOMAS, JCIT A SSESSEE BY : SHRI ABHAY AGRAWAL / DATE OF HEARING : 1 8 .0 2 .2020 / DATE OF PRONOUNCEMENT : 19 .02 .2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THESE TWO APPEALS PREFERRED BY THE REVENUE EMA NATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 4, NAGPUR DATED 21.03.2016 FOR THE ASSESSMENT YEAR 2008 - 09 AS PER THE GROUNDS OF APPEAL ON RECORD. 2 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 FIRST, WE WOULD TAKE UP ITA NO.396/NAG/2016 FOR ASSESSMENT YEAR 2008 - 09 FOR ADJUDICATION. ITA NO. 396/NAG/2016 A.Y.2008 - 09 2. IN ITA NO.396/NAG/2016 FOR ASSESSMENT YEAR 2008 - 09, THE REVENUE HAS FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN DELETING THE ADDITION ON A/C OF UNEXPLAINED INVESTMENT OF RS.60,77,044/ - WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF THE ASSESSEE. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS RIGHT IN HOLDING THAT SINCE AN ADDITION OF RS.6,51,107/ - HAS ALREADY BEEN MADE IN THE ORIGINAL ASSESSMENT ORDER, NO FURTHER ADDITION IS REQUIRED TO BE MADE WITH RESPECT TO THE SHORTAGE OF STOCK. 3. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT HAS BEEN COMPL ETED U/S.144 R.W.S.147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). SURVEY U/S.133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 09.01. 2008. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS FOUND THAT THE STOCK OF THE ASSESSEE WAS SHORT BY AN AMOUNT OF RS.54,25,897/ - . IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SOLD THIS SHORT STOCK OUT OF HIS BOOKS OF ACCOUNTS. ACCORDINGLY, THE PROFIT OF SUCH UNACCOUNTED SALE WAS ESTIMATED AT 12% AND AN AMOUNT OF RS.6 ,51,107/ - WAS ADDED TO THE ASSESSEES TOTAL INCOME. THE ASSESSING OFFICER SUBSEQUENTLY REOPENED THE CASE BY ISSUING NOTICE U/S.148 OF THE ACT ON 07.01.2013 AND CONCLUDED THAT THE ASSESSEE SHOULD HAVE RECEIVED SALE CONSIDERATION OF RS.60,77,004/ - ( RS.54,24 ,897/ - BEING THE BOOK VALUE OF SHORT STOCK AND RS.651107/ - BEING THE PROFIT EARNED ON UNACCOUNTED SALE). THE ASSESSING OFFICER FURTHER CONCLUDED THAT THE ASSESSEE HAD MADE 3 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 UNACCOUNTED INVESTMENT BY UTILIZING THIS AMOUNT AND ACCORDINGLY, HE ADDED RS.60,77,0 44/ - AS UNEXPLAINED INVESTMENT U/S.69 OF THE ACT. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S.271 (1)(C) OF THE ACT SEPARATELY AND ALSO IMPOSED PENALTY OF RS.18,50,000/ - U/S.271(1)(C) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(APPEALS) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ASSESSMENT ORDER AND FACTS OF THE CASE, HAS GRANTED PARTIAL RELIEF TO THE ASSESSEE. NOW, THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF THE LD . CIT(APPEALS) AS PER THE GROUNDS MENTIONED IN THE PRECEDING PARAGRAPHS. 5. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE HAVE ALSO GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE LD. CIT(APPEALS). FOR THE SAKE OF COMPLETENESS, PARA 4.3 AND 4.4 OF THE LD. CIT(APPEALS)S ORDER ARE RELEVANT FOR EXTRACTION AND THE SAME ARE AS FOLLOWS: 4.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER, GROUNDS OF APPEAL, SUBMISSIONS OF THE APPELLANT AND THE REMAND REPORT OF THE AO. I FIND THAT DETAILED INVENTORY OF STOCK WAS PREPARED DURING THE COURSE OF SURVEY PROCEEDINGS. THERE W AS A SHORTAGE IN THE STOCK FOUND AT THE PREMISES TO THE TUNE OF RS.54,25,897/ - . THE APPELLANT WAS NOT ABLE TO EXPLAIN THE SHORTAGE IN STOCK AND ACCORDINGLY, THE AO CAME TO THE CONCLUSION THAT THE APPELLANT MUST HAVE SOLD THIS STOCK OUT OF REGULAR BOOKS OF ACCOUNTS. THE AO ACCORDINGLY, ADDED 12% OF THE SHORTAGE OF STOCK AS PROFIT EARNED OUTSIDE THE BOOKS OF ACCOUNT DURING THE COURSE OF ORIGINAL ASSESSMENT. I FIND THAT WHERE PHYSICAL STOCK FOUND IS LESS THAN WHAT IS REFLECTED IN THE BOOKS OF ACCOUNT, THAN THE RE CANNOT ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT. IN THE CASE OF SHORTAGE OF STOCK A VALID PRESUMPTIONS WOULD BE THAT THE STOCK HAS BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNTS. HENCE, UNDER SUCH CIRCUMSTANCES, THE ONLY ADDITION THAT CAN BE MADE IS T HAT OF GROSS PROFIT ON ESTIMATE BASIS. SINCE THE STOCK WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT ACCORDINGLY THERE CAN BE NO ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENTS. 4.4. THE ABOVE VIEW IS FURTHER SUPPORTED BY THE FOLLOWING LEGAL PRONOUNCEMENTS RELIED ON BY THE APPELLANT: (I) ROOPNIKETAN VS. ACIT (2004) 90 TTJ ( MUMBAI) 1097 (II) JANTA TILES VS. ACIT (2000) 66TTJ (PUNE) 695 (III) BIMALKUMAR SINGHANIA VS. DCIT (2006) 100TTJ (KAL.) (790 ) 4 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 IN THE CASE OF ROOPNIKETAN VS. ACIT (2004) 90 TTJ ( MUMBAI) 1097, IT HAS BEEN HELD AS UNDER: 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IT IS UNDISPUTED THAT THE DISCREPANCY FOUND AT THE TIME OF SURVEY WAS IN RESPECT OF STOCK WHICH WAS FOUN D LESS BY AN AMOUNT OF RS.2,97,050 / - AS COMPARED WITH THE STOCK CALCULATED AS PER BOOKS OF ACCOUNTS. THUS, IT IS CLEAR THAT THE LESS FOUND STOCK REPRESENTED SUPPRESSED SALES. KEEPING IN VIEW THE DECISION OF PUNE BENCH CITED BY THE LEARNED COUNSEL WHERE STO CK WAS FOUND LESS ON PHYSICAL VERIFICATION AS COMPARED TO THE STOCK AS PER BOOKS, THE POSSIBLE ADDITION COULD BE ONLY IN RESPECT OF GROSS PROFIT ARISING OUT OF SUPPRESSED SALE. 4.5 . CONSIDERING THE FACT THAT DURING THE COURSE OF ORIGINAL ASSESSMENT ADDIT ION OF RS.6,61,107/ - HAS ALREADY BEEN MADE ON ACCOUNT OF GROSS PROFIT EARNED ON ACCOUNT OF SHORTAGE OF STOCK. THERE FORE, NO FURTHER ADDITION IS REQUIRED TO BE MADE BY THE AO WITH RESPECT TO THIS SHORTAGE OF STOCK. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S.69 AMOUNTING TO RS.60,77,044/ - . AS A RESULT THIS GROUND OF APPEAL IS ALLOWED. ON PERUSAL OF THE FINDINGS OF TH E LD. CIT(APPEALS), IT IS FOUND, THE LD. CIT(APPEALS) OBSERVED THAT WHERE PHYSICAL ST OCK FOUND IS LESS THAN WHAT IS REFLECTED IN THE BOOKS OF ACCOUNT, THAN THERE CANNOT ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT. IN THE CASE OF SHORTAGE OF STOCK A VALID PRESUMPTIONS WOULD BE THAT THE STOCK HAS BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNTS AND THEREFORE, THE LD. CIT(APPEALS) WAS OF THE VIEW, THE ONLY ADDITION THAT CAN BE MADE IS THAT OF GROSS PROFIT ON ESTIMATE BASIS. SINCE THE STOCK WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT ACCORDINGLY THERE CAN BE NO ADDITION ON ACCOUNT OF UNEXPLAINED INVE STMENTS. FURTHER, THE LD. CIT(APPEALS) WHILE GRANTING RELIEF TO THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF ROOPNIKETAN VS. ACIT (2004) 90 TTJ ( MUMBAI) 1097 . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE O RDER PASSED BY THE LD. CIT(APPEALS) ON THE ISSUE IS FAIR AND REASONABLE AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. THUS, GROUNDS RAISED BY THE REVENUE ARE DISMISSED BEING DEVOID OF ANY MERITS. 5 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 6. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.396/NAG/2016 IS DISMISSED. ITA NO.397 /NAG/2016 A.Y.2008 - 09 7 . IN ITA NO.397/NAG/2016 FOR ASSESSMENT YEAR 2008 - 09, THE REVENUE HAS FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN DELETING THE PENALTY U/S.271(1) (C) OF THE I.T. ACT AT RS.18,50,000/ - . 2. WHETHER THE LD. CIT(A) IS RIGHT IN HOLDING THAT SINCE THE ORIGINAL ADDITION ON THE BASIS OF WHICH PENALTY WAS INITIATED HAS BEEN DEALT THE PENALTY ALSO NEEDS TO BE DELETED WITHOUT APPRECIATING THAT ASSESSMENT PROCEEDINGS ARE DIFFERENT FROM PENALTY PROCEEDINGS AND THE FACT THAT THE LD. CIT(A) ORDER DELETING THE ORIGINAL ADDITION HAS NOT BEEN ACCEPTED BY THE REVENUE AND THEREFORE, IT IS NECESSARY TO FILE APPEAL TO KEE P THE ISSUE ALIVE. 3. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. 8. THE CRUX OF THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS AGAINST THE DELETION OF PENALTY LEVIED U/S.271(1)(C) OF THE ACT BY THE LD. CIT(APPEALS). 9. THE LD. AR OF T HE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT ORDER AT PARA 3 WHILE INITIATING PENALTY PROCEEDINGS, NO LIMB WAS SPECIFIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF THE ACT AND THEREFORE, THERE WAS AMBIGUITY IN THE MIND OF ASSESSING OFFICER WITH REGARD TO TH E SPECIFIC CHARGE FOR WHICH PENALTY HAS TO BE LEVIED U/S.271(1)(C) OF THE ACT I.E. C ONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME . SIMILARLY IN THE PENALTY ORDER DATED 29.09.2014, AGAIN NO LIMB HAS BEEN SPECIFIED BY THE ASSESSING OFFICER FOR IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT THIS IS A CASE WHERE THE A SSESSING O FFICER FAILED TO RECORD VALID SATISFACTION IN THE AS SESSMENT ORDER DURING WHICH THE PENALTY PROCEEDINGS WERE INITIATED. HIGHLIGHTING THE LEGAL REQUIREMENT OF 6 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 MAKING A SPECIFIC REFERENCE TO THE SPECIFIC LIMB OF CLAUSE (C) OF SECTION 271(1) OF THE ACT AND RELYING ON VARIOUS BINDING JUDGMENTS IN THE CASE CIT VS. SHRI SAMSON PERINCHERY (2017) 392 ITR 4 (BOM.) AS WELL AS THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 LD. AR OF THE ASSESSEE DEMONSTRATED THAT THE PENALTY LEVIED BY THE A SSESSING O FFICER IS UNSUSTAINABLE IN LAW. 10. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS RELIED ON THE ORDER OF THE A SSESSING O FFICER. 11. W E HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS . WE HAVE ALSO PERUSED THE ORDER OF THE ASSESSING OFFICER WHERE AT PARA 3, THE ASSESSING OFFICER HAS NOT MENTIONED ANY SPECIFIC LIMB U/S.271(1)(C) OF THE ACT AND THE SAME READS AS UNDER: 3. IN VIEW OF THE ABOVE, THE AMOUNT OF RS.60,77,044/ - IS HELD TO BE UNEXPLAINED INVESTMENT OF THE ASSESSEE AND IS ADDED TO THE TOTAL INCOME U/S.69 OF THE I.T. ACT, 1961. PENALTY PROCEEDINGS U/S.271(1)(C) INITIATED SEPARATELY. WE HAVE ALSO PERUSED THE PENALTY ORDER DATED 29.09.2014 WHEREIN THE ASSESSING O FFICER IMPOSED PENALTY U/S.271(1)(C) OF THE ACT BY MENTIONING THAT ..THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES, THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT, 1961.. THE ASSESSING OFFICER HAS NOT MENTIONED ANY SPECI FIC LIMB/CHARGE FOR WHICH HE WISHES TO LEVY THE PENALTY U/S.271(1)(C) OF THE ACT. 11.1 FROM THE ABOVE, IT IS EVIDENT THAT SO FAR AS ASSESSMENT ORDER AS WELL AS PENALTY ORDER ARE CONCERNED, NO SPECIFIC LIMB/CHARGE HAS BEEN MENTIONED BY THE ASSESSING OFF ICER U/S.271(1)(C) OF THE ACT I.E. C ONCEALMENT OF INCOME OR 7 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 FURNISHING OF INACCURATE PARTICULARS OF INCOME. THIS MANNER OF RECORDING OF SATISFACTION SUGGESTS THE EXISTENCE OF AMBIGUITY WITH REFERENCE TO APPLICABILITY OF SPECIFIC LIMB. THEREFORE, WE ARE OF THE OPINION THAT CONSIDERING THE ABOVE REFERRED BINDING JUDGMENTS SUCH PENALTY ORDE R IS UNSUSTAINABLE IN LAW . THE ASSESSING OFFICER IS UNDER OBLIGATION TO SPECIFY THE CORRECT LIMB AT THE TIME OF INITIATION AS WELL AS AT THE TIME OF LEVY OF PENALTY. THAT TAKING GUIDANCE FROM THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCH ERY (SUPRA.) WHEREIN THE HON'BLE BOMBAY HIGH COURT HAS CONSIDERED THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA.), THE LEGAL PROPOSITION THAT COMES OUT AND WHICH IS BINDING IN NATURE IS THAT THE ASSESSING OFFICER SHOULD BE CLEAR AS TO WHICH OF THE TWO LIMBS UNDER WHICH PENALTY IS IMPOSABLE, HAS BEEN CONTRAVENED OR INDICATE THAT BOTH HAVE BEEN CONTRAVENED WHILE INITIATING PENALTY PROCEEDINGS. IT CANNOT BE THAT THE INITIATION OF PENALTY PROCEE DINGS WOULD BE ON BOTH THE LIMBS I.E. FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME OR WITHOUT ANY LIMBS OF SECTION 271(1)(C) OF THE ACT . THE ASSESSING OFFICER HAS TO MENTION SPECIFIC LIMBS WHILE IMPOSING PENALTY U/S.271(1)( C) OF THE ACT. 12 . THE SANCTITY IN TERMS OF NATURAL JUSTICE WITH REGARD TO THIS PROPOSITION IS THAT THE ASSESSEE UNDER THE SCHEME OF WELFARE LEGISLATION WHICH IS EMBEDDED IN THE INCOME TAX ACT, 1961 SHOULD GET AN OPPORTUNITY TO PREPARE HIMSELF FOR THE DE FENSE AS REGARDS TO THE EXACT CHARGE ON WHICH PENALTY IS IMPOSED UPON HIM U/S. 271(1)(C) OF THE ACT. IN THE INSTANT CASE, NO LIMB/CHARGE HAS BEEN MENTIONED BY THE ASSESSING OFFICER AND THEREFORE, LEVY OF PENALTY IS NOT WARRANTED. 8 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 TAKING TOTALITY OF FACTS AND LEGAL SCENARIO INTO CONSIDERATION, WE UPHOLD THE ORDER OF THE LD. CIT(APPEALS) AND THE RELIEF GRANTED TO THE ASSESSEE IS SUSTAINED. 13. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.397/NAG/2016 IS DISMISSED. 14. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRO NOUNCED ON 19 TH DAY OF FEBRUARY , 2020 . SD/ - SD/ - D. KARUNAKARA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 19 TH F EBRUARY , 20 20 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 4, NAGPUR. 4. THE PR. CIT - 3, NAGPUR. 5 . , , / DR, ITAT, NAGPUR. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 9 ITA NO S . 396 & 397 /NAG /20 16 A.Y. 2008 - 09 DATE 1 DRAFT DICTATED ON 18 .0 2 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 1 9 .02 .2020 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER