Kusum Silk Mills Pvt.Ltd., Surat V. The Dy.CIT., Circle-1, Surat

ITA 3996/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9699 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-09-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 10-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: RASESH SHAH
• Keywords: Income from undisclosed sources
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL (VICE PRESIDENT) & SHRI T .K. SHARMA (JM) I.T.A. NO.3996/AHD/2008 (ASSESSMENT YEARS 2003-04) KUSUM SILK MILLS PVT LTD VS DY.CIT, CIR.1 V-2144, 1 ST FLOOR SURAT SURAT TEXTILE MARKET RING ROAD, SURAT PAN : AABCK0234G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RASESH SHAH RESPONDENT BY : SHRI CK MISHRA O R D E R PER T.K. SHARMA : THIS APPEAL BY THE ASSESSEE IS DI RECTED AGAINST THE LD.CIT(A)- I, SURAT DATED 17-10-2008 FOR THE ASSESSMENT YEAR 2 003-04, WHEREBY THE LD.CIT(A) CONFIRMED PENALTY OF RS.7,35,000 IMPOSED U/S 271(1)(C) OF THE I.T. ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DYEIN G AND PRINTING OF FRABRICS ON JOB WORK BASIS. THE IMPUGNED PENALTY HAS BEEN I MPOSED AGAINST AN ADDITION OF RS.20 LAKHS ESTIMATED ON THE BASIS OF PRODUCTION CAPACITY. THE BRIEF FACTS ARE THAT THERE WAS A PREVENTIVE CHECK CONDUCTED BY CENT RAL EXCISE AND CUSTOMS DEPARTMENT T THE PREMISES OF THE ASSESSEE. AS A RE SULT OF WHICH THE SHORTAGE OF 104734 MTRS OF GREY CLOTH WAS FOUND. THE DIRECTORS OF THE ASSESSEE COMPANY CONFESSED THAT SAID GOODS WERE SOLD OUTSIDE THE BOO KS OF ACCOUNT IN CASH. THE ASSESSEE NOT ONLY PAID THE EXCISE DUTY BUT ALSO OFF ERED ADDITIONAL INCOME OF RS.17,84,000, THE DETAILS OF WHICH ARE AS BELOW: ON ACCOUNT OF INITIAL INVESTMENT RS. 5,00,000 IN RESPECT OF 107 KACHHA CHALLANS FOUND FROM FROM THE OFFICE INDICATING CASH SALE OF RS.95,65,479 GREY VALUED AT RS.71,01,635@10% RS. 7,10,200 ITA 3996/AHD/2008 2 JOB WORK CHARGES RS. 24,63,840 RS. 4,18,800 IN RESPECT OF GREY FOUND SHORT IN MILL 94,265.775 MTRS X RS.9.67 JOB CHARGES = RS.912001 @17% RS. 1,55,000 TOTAL RS.17,84,000 =========== THE ASSESSING OFFICER, HOWEVER, HELD THAT THE INITI AL INVESTMENT SHOULD BE AROUND RS.8 LAKHS AS AGAINST RS.5 LAKHS OFFERED BY THE ASS ESSEE. SIMILARLY, THE ASSESSING OFFICER ESTIMATED NET PROFIT AT RS.11,12, 082 RESULTING INTO TOTAL UNACCOUNTED INCOME TO THE EXTENT OF RS.19,12,082. DUE TO SUCH ACTIVITY, THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD HAVE UTILIZED ITS PRODUCTION CAPACITY TO THE EXTENT OF 210 LAKHS MTRS. ON THE B ASIS OF STEUTER CAPACITY, PRODUCTION AND SALES WERE ESTIMATED AND PROFIT OF R S.20 LACS WAS ESTIMATED AS INCOME OUTSIDE THE BOOKS OF ACCOUNT. THOUGH THE AS SESSING OFFICER AGREED THAT PART OF THIS SUM OF RS.20 LACS IS INCLUDED IN NET P ROFIT OFFERED FOR TAXATION DYEING INCOME ESTIMATED IN RESPECT OF ACTIVITIES CARRIED O UTSIDE THE BOOKS OF ACCOUNT, INSTEAD OF RESTRICTING THE ADDITION TO THE DIFFEREN CE BETWEEN RS.20 LAKHS AND SUM OF RS.17.85 LACS AS OFFERED BY THE ASSESSEE, WHOLE OF THE AMOUNT OF RS.20 LAKHS WAS FURTHER ADDED TO THE TOTAL INCOME OF THE ASSESS EE. 2.1 WHEN THE ASSESSEE APPEALED AGAINST THE ABOVE ES TIMATED ADDITION OF RS.20 LAKHS, THE LD.CIT(A) CONFIRMED THE SAME. ON FURTHER APPEAL, THE TRIBUNAL DELETED THE ADDITION WITH THE FOLLOWING OBSERVATION S, VIDE PARAGRAPH 7 IN ITA NO.71/AHD/2007 ORDER DATED 08 TH DAY OF JANUARY, 2010: 7. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE PARTIES AT LENGTH. ON THE BASIS OF UNACC OUNTED ACTIVITIES FOUND BY THE EXCISE DEPARTMENT, THE ASSESSEE OFFERE D THE INCOME OF RS.17.85 LAKHS. THIS INCOME WAS INCLUDED SEPARA TELY IN THE BOOKS OF ACCOUNT AND EVEN SO RECORDED BY THE TAX AU DITOR ALSO. AGAINST THE ACTUAL PROFIT OFFERED BY THE ASSESSEE A S ADDITIONAL INCOME, THE ASSESSING OFFICER HAS ESTIMATED THE INC OME TO BE RS.20 LAKHS ON THE BASIS OF PRODUCTION CAPACITY RAT HER THAN GOING BY THE ACTUAL UNACCOUNTED ACTIVITIES CARRIED OUT BY THE ASSESSEE. SINCE THE PROFIT OUT OF UNACCOUNTED TRANSACTIONS HA S BEEN DULY ITA 3996/AHD/2008 3 OFFERED FOR TAX AND IT HAS ALSO BEEN SO ADMITTED BY THE ASSESSING OFFICER, SEPARATE ADDITION OF RS.20 LAKHS IS NOT JU STIFIED. IT IS ALSO BE SEEN THAT THE ADDITIONAL INCOME HAS BEEN TAXED M ERELY ON THE BASIS OF PRODUCTION CAPACITY RATHER THAN GIVING THE FINDING THAT SUCH PRODUCTION CAPACITY WAS ACTUALLY UTILIZED AND THE E XCESS PRODUCTION WERE SOLD OUTSIDE THE BOOKS OF ACCOUNT. AT BEST TH IS COULD HAVE RESULTED INTO ADDITION OF RS.2.16 LAKHS ONLY BUT SI NCE THE ASSESSEE HAS TAKEN INTO ACCOUNT NOT ONLY OFFICIAL INVESTMENT BUT ALL THE FACTORS RELATING TO UNACCOUNTED PRODUCTION, THE ADDITION OF RS.20 LAKHS BEING DUPLICATION IS LIABLE TO BE DELETED. WE, THE REFORE, DELETE THE ADDITION OF RS.20 LAKHS MADE BY THE ASSESSING OFFIC ER. 3. ON THE STRENGTH OF ABOVE FACTUAL BACKGROUND, THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT SINCE THE ADDITION OF RS. 20 LAKHS ON THE BASIS OF WHICH THE IMPUGNED PENALTY OF RS.7,35,000 IS IMPOSED HAS BEEN DELETED BY THE TRIBUNAL VIDE ORDER DATED 08-01-2010, THE PENALTY I N QUESTION HAS NO LEG TO STAND. THE LEARNED COUNSEL FOR THE ASSESSEE CLARIF IED THAT ITAT, AHMEDABAD BENCH (CAMPT AT SURAT) IN ORDER DATED 08-01-2010, T HROUGH TYPOGRAPHICAL ERROR HAS MENTIONED THE ASSESSMENT YEAR AS 2002-03 WHEREA S IT SHOULD BE 2003-04 AND THAT FOR THIS CORRECTION A MISCELLANEOUS APPLIC ATION HAS BEEN FILED BEFORE THE TRIBUNAL. HE PLEADED THAT THE SAME MAY BE CANCELLED . 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FAIRLY A DMITTED THAT THE TRIBUNAL IN ITS ORDER DATED 08-01-2010 THROUGH TYPOGRAPHICAL ERROR HAS MENTIONED THE ASSESSMENT YEAR AS 2002-03 WHEREAS ON CAREFULLY GOI NG THROUGH THE SAID ORDER IT IS CLEAR THAT THE SAID DECISION RELATES TO THE ASSE SSMENT YEAR 2003-04. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL PLACED BEFORE US. IT IS WELL SETTLED LAW THAT WHER E THE ADDITION MADE IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH PENALTY FOR CONCEALMENT IS LEVIED, IS DELETED, THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENALTY FOR CONCEALMENT AND THEREFORE IN SUCH A CASE NO PENALTY CAN SURVIVE. A DMITTEDLY, THE ADDITION OF RS.20 LAKHS WHICH WAS MADE BY THE ASSESSING OFFICER STAND DELETED BY THE TRIBUNAL VIDE ORDER DATED 08-01-2010. THEREFORE, P ENALTY IN QUESTION OF RS. ITA 3996/AHD/2008 4 7,35,000 IMPOSED BY THE ASSESSING OFFICER U/S 271(1 )(C) IS LIABLE TO BE CANCELLED. WE ACCORDINGLY CANCEL THE SAME. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON THIS 19 TH DAY OF OCTOBER, 2010. SD/- SD/- (G.D. AGARWAL) (T.K. SHARMA) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD, DT : 19 TH OCTOBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -I, SURAT 4. THE CIT-I, SURAT 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE B (TRUE COPY) BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD BENCHES