M/s Om Sweets Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4003/DEL/2011

• Counselvise Citation: 400320114 RSA 2011
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: K SAMPATH
• Keywords: Business income; Loose papers; Initiation of penalty proceedings
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH E BENCH E BENCH E BENCH E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D.AGRAWAL BEFORE SHRI G.D.AGRAWAL BEFORE SHRI G.D.AGRAWAL BEFORE SHRI G.D.AGRAWAL, VICE PRESIDENT AND , VICE PRESIDENT AND , VICE PRESIDENT AND , VICE PRESIDENT AND SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER SHRI A.D.JAIN, JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.4003/DEL/2011 4003/DEL/2011 4003/DEL/2011 4003/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2005 2005 2005 2005- -- -06 0606 06 M/S OM SWEETS PVT.LTD., M/S OM SWEETS PVT.LTD., M/S OM SWEETS PVT.LTD., M/S OM SWEETS PVT.LTD., G1 G1G1 G1- -- -23, SHEHEED BHAGAT 23, SHEHEED BHAGAT 23, SHEHEED BHAGAT 23, SHEHEED BHAGAT SINGH MARG, SINGH MARG, SINGH MARG, SINGH MARG, JAIL JAIL JAIL JAIL ROAD, ROAD, ROAD, ROAD, HARI NAGAR, HARI NAGAR, HARI NAGAR, HARI NAGAR, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 058. 110 058. 110 058. 110 058. PAN : AAACO5022H. PAN : AAACO5022H. PAN : AAACO5022H. PAN : AAACO5022H. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -13(4), 13(4), 13(4), 13(4), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.SAMPATH, ADVOCATE. RESPONDENT BY : SHRI R.S.NEGI, SR.DR. ORDER ORDER ORDER ORDER PER A.D.JAIN, JM PER A.D.JAIN, JM PER A.D.JAIN, JM PER A.D.JAIN, JM : : : : THIS APPEAL IS FILED BY THE ASSESSEE FOR THE AY 20 05-06 AGAINST THE ORDER OF LEARNED CIT(A)-XVI, NEW DELHI, CONFIRM ING CONCEALMENT PENALTY OF `6,71,318/- LEVIED BY THE ASSESSING OFFI CER VIDE PENALTY ORDER DATED 30.3.2010. 2. THE FACTS ARE THAT A SURVEY WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 29/30.11.2004. THE DOC UMENTS IMPOUNDED IN THE SURVEY SHOWED TOTAL SALES OF `92,8 0,821/-. THE ASSESSEE CONTENDED THAT SALES OF `41,49,568/- WERE ALREADY RECORDED IN ITS BOOKS; THAT THOSE OF `22,25,602/- PERTAINED TO M/S OMJEE SNACKS PVT.LTD.; AND THAT INCOME TO THE TUNE OF `10,55,000 /- REPRESENTING PROFIT ON THE REMAINING UNACCOUNTED SALES OF `29,05 ,651/- STOOD ACCOUNTED FOR IN THE TOTAL INCOME OF `55,25,790/- D ECLARED IN THE RETURN OF INCOME FILED. ITA-4003/DEL/2011 2 3. THE ASSESSING OFFICER REJECTED THE ASSESSEES BO OKS OF ACCOUNT AND MADE ADDITION OF `13,86,738/- ON ACCOUNT OF EST IMATED UNACCOUNTED SALES AND OF `3,53,175/- ON ACCOUNT OF UNDISCLOSED INVESTMENT FOR MAKING CASH PURCHASES. 4. THE LEARNED CIT(A) CONFIRMED THE REJECTION OF BO OKS. HE, HOWEVER, DIRECTED THE ASSESSING OFFICER TO EXCLUDE AN AMOUNT OF `5 LAKHS FROM THE TOTAL UNACCOUNTED SALES AND TO APPLY THE G.P. RATE ACCORDINGLY. THE ADDITION OF `3,53,175/- WAS ALSO DELETED. 5. THE ITAT DISMISSED THE DEPARTMENTS APPEAL AGAIN ST THE SAID ORDER OF THE CIT(A). 6. IN THE PENALTY ORDER, IT WAS OBSERVED, INTER ALI A, THAT IN THE SURVEY, SALES OF `92,80,821/- WERE FOUND TO BE UNRE CORDED IN THE BOOKS OF ACCOUNT; THAT THE DIRECTOR OF THE ASSESSEE COMPA NY HAD ADMITTED THAT THE SALES RECORDED IN THE DOCUMENTS IMPOUNDED IN THE SURVEY WERE YET TO BE RECORDED IN THE BOOKS OF ACCOUNT; TH AT THE ASSESSEES STAND THAT IT WAS DUE TO A CLERICAL MISTAKE THAT SA LES OF SWEETS OF `7,31,905/- WRONGLY ENTERED IN THE SALES OF M/S OMJ EE SNACKS PVT.LTD., HAD NOT BEEN SUBSTANTIATED WITH DOCUMENTARY EVIDENC E; THAT IT WAS NOT CLEAR AS TO WHETHER THE SALES RECORDED IN THE L OOSE SLIPS FOUND IN THE SURVEY PERTAINED TO THE ASSESSEE COMPANY, OR TO M/S OMJEE SNACKS PVT.LTD.; THAT THE ADDITIONS MADE HAD BEEN PARTLY C ONFIRMED BY THE CIT(A) WHILE UPHOLDING THE REJECTION OF BOOKS OF AC COUNT; AND THAT HAD THE SURVEY NOT BEEN CONDUCTED, THE ASSESSEES ACTIO N OF NOT MAINTAINING THE BOOKS OF ACCOUNT AS PER ACCOUNTANCY PRINCIPLES AND OF NOT RECORDING THE SALES CORRECTLY WOULD NOT HAVE CO ME TO LIGHT. IN THIS MANNER, CONCEALMENT PENALTY OF `6,71,318/- WAS LEVI ED. ITA-4003/DEL/2011 3 7. BY VIRTUE OF THE IMPUGNED ORDER, THE CIT(A) CONF IRMED THE PENALTY IMPOSED, OBSERVING, INTER ALIA, THAT THE SA LES AND THE RESULTANT PROFIT WERE DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME ONLY AS A RESULT OF THE SURVEY OPERATION; THAT THE DISCLOSURE OF THIS INCOME WAS THUS NOT VOLUNTARY; THAT THE ADDITION HAD NOT BEEN MADE MERELY ON ESTIMATE BASIS; THAT THE PROFIT OF `10.55 LAKHS HAD BEEN WORKED OUT ON SALES NOT RECORDED IN ITS BOOKS OF ACCOUNT IMPOUNDE D IN THE SURVEY; AND THAT THE ADDITION HAD THUS BEEN MADE ON THE BAS IS OF MATERIAL FOUND IN THE SURVEY, INDICATING UNRECORDED SALES OF `29.06 LAKHS, AS ALSO ADMITTED BY THE ASSESSEE ITSELF. 8. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT THE LEARNED CIT(A) HAS GONE WRONG IN CONFIRMING THE PEN ALTY WRONGLY LEVIED; THAT WHILE DOING SO, IT HAS WRONGLY BEEN IG NORED THAT THE ADDITION MADE WAS ON ESTIMATE BASIS; THAT IT HAS FU RTHER BEEN ERRONEOUSLY NOT CONSIDERED THAT OUT OF THE ADDITION OF `18,34,578/-, AN AMOUNT OF `10,55,000/- STOOD ALREADY ADDED TO THE R ETURNED INCOME; THAT THE SURVEY WAS CONDUCTED IMMEDIATELY AFTER DIW ALI, WHEN THE ASSESSEE WAS IN THE PROCESS OF COMPLETING ITS ACCOU NTS; THAT EVEN THOUGH THE ASSESSEE HAD SUBMITTED THAT SOME OF THE SLIPS AND LOOSE PAPERS FOUND IN THE SURVEY WERE DUE TO BE ENTERED I N THE BOOKS OF ACCOUNT AND THAT ENTRY OF THE VOUCHERS WAS DELAYED DUE TO DIWALI, THE SLIPS AND LOOSE PAPERS FOUND IN THE SURVEY WERE WRO NGLY RELIED ON; THAT SINCE BOTH THE COMPANIES OF THE GROUP WERE ASSESSED AT THE SAME RATE OF TAX, THE RECORDING OF SALE IN THE OTHER COMPANY DID NOT INDICATE EITHER THE COMMISSION OF ANY WILLFUL DEFAULT, OR CO NCEALMENT OF PARTICULARS OF INCOME TO AVOID TAX; THAT THE FACTUM OF DELETION OF ADDITION OF ALLEGED UNRECORDED SALE OF `5 LAKHS CON FIRMED THAT THERE WAS NO UNRECORDED SALE; THAT IT HAS WRONGLY BEEN IG NORED THAT THE ADDITION WAS ON THE BASIS OF APPLICATION OF HIGHER GP RATE, THE ASSESSING OFFICER HAVING APPLIED A GP RATE OF 37.67 % AS AGAINST THE ITA-4003/DEL/2011 4 ACTUAL GP RATE OF 36.33%, WHEREAS THE GP RATE OF TH E IMMEDIATELY PRECEDING ASSESSMENT YEAR HAD BEEN OF ONLY 33.52%; THAT THE RELIEF GRANTED BY THE CIT(A) WAS UPHELD BY THE ITAT; AND T HAT THE ASSESSEE HAD NOT BEEN PROVED EITHER TO HAVE CONCEALED ITS IN COME, OR TO HAVE FURNISHED INACCURATE PARTICULARS THEREOF. 9. ON THE OTHER HAND, THE LEARNED DR HAS STRONGLY R ELIED ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT AS CORR ECTLY OBSERVED BY THE CIT(A), THE DISCLOSURE OF THE SALES AND THE PRO FIT THEREON WAS MADE BY THE ASSESSEE IN ITS RETURN OF INCOME ONLY PURSUA NT TO THE SURVEY CONDUCTED; THAT IN THE ABSENCE OF THE SURVEY, THE A SSESSEE WOULD CERTAINLY NOT HAVE MADE SUCH DECLARATION; THAT THER EFORE, THE DISCLOSURE MADE BY THE ASSESSEE CANNOT AT ALL BE SA ID TO BE VOLUNTARY OR VOLITIONAL OR WILLFUL; THAT THE ADDITION WAS NOT MADE MERELY ON ESTIMATE BASIS; THAT THE PROFIT OF `10.55 LAKHS WAS WORKED OUT ON SALES NOT RECORDED IN THE BOOKS OF ACCOUNT; THAT THE LEAR NED CIT(A) HAS CORRECTLY CONFIRMED THE PENALTY IMPOSED; AND THAT T HEREFORE, THERE BEING NO MERIT THEREIN, THE APPEAL OF THE ASSESSEE BE DISMISSED. 10. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL BROUGHT ON RECORD. THE SALES ACCORDING TO THE SLIP S AND LOOSE PAPERS FOUND AND IMPOUNDED IN THE SURVEY WERE OF `92,80,82 1/-. OF THESE SALES, THOSE OF `22,25,602/- WERE RELATED TO M/S OM JEE SNACKS PVT.LTD. SALES OF `41,49,568/- WERE FOUND RECORDED IN THE BO OKS OF THE ASSESSEE COMPANY. THUS, SALES OF `29,05,651/- WERE NOT ENTE RED IN THE ASSESSEES BOOKS. APPLYING A GP RATE OF 36.30% THE REON, AN AMOUNT OF `10,55,000/- WAS ADDED BY THE ASSESSEE ITSELF TO IT S INCOME IN THE PROFIT & LOSS ACCOUNT AND INCLUDED IN THE RETURN OF INCOME FILED. 11. THE ASSESSING OFFICER, ON THE OTHER HAND, APPLI ED A GP RATE OF 37.367%, MAKING AN ADDITION OF `13,86,738/-. THIS WAS REDUCED, BY ITA-4003/DEL/2011 5 THE CIT(A), TO `7,79,578/-, GIVING THE ASSESSEE REL IEF OF `6,07,160/-. THE ITAT UPHELD THIS ACTION OF THE CIT(A). THE ADD ITION WAS, THUS, BASED ON ESTIMATION. THE ADDITION WAS REDUCED, TOO , ON ESTIMATION. 12. IN CIT VS. KALICHARAN AGARWALLA & CO., 146 IT R 634 (CAL) [NOTED BY THE CIT(A) AS RELIED ON BY THE ASSESSEE], IT HAS BEEN HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 145 OF THE IT ACT, BY ITSELF, DOES NOT PROV E CONCEALMENT OF INCOME. 13. SIMILAR ARE THE DECISIONS IN CIT VS. DEVANDAS PERUMAL & CO., 140 ITR 943 (BOM) AND CIT VS. K.L. MANGAL SAIN, 1 07 ITR 598 (ALL) [BOTH RELIED ON BY THE ASSESSEE BEFORE THE CIT(A)], WHERE THE ADDITIONS WERE BASED ON ESTIMATION. 14. THE LEARNED CIT(A) HAS ERRED IN DIFFERENTIATING THESE DECISIONS ON THE BASIS THAT THE PROFIT OF `10.55 LAKHS WAS WORKE D OUT ON SALES NOT RECORDED IN THE BOOKS. WHILE DOING SO, IT HAS WRON GLY BEEN IGNORED THAT THE AMOUNT OF `10.55 LAKHS HAD ALREADY BEEN TA KEN TO THE PROFIT & LOSS ACCOUNT AS INCOME OF THE ASSESSEE COMPANY. 15. FURTHER, THE LEARNED CIT(A) HAS ALSO FAILED TO TAKE INTO CONSIDERATION THE FACT THAT IT IS THE RETURN OF INC OME WHICH FORMS THE GENESIS OF THE INITIATION OF PENALTY PROCEEDINGS. THAT BEING SO, WHEN IN THE PRESENT CASE THE RETURN OF INCOME FILED BY THE ASSESSEE DISCLOSED THE INCOME TRULY AND CORRECTLY AS DISCUSSED HEREINA BOVE, THERE WAS NO REASON FOR THE LEARNED CIT(A) TO AFFIRM THE OBSERVA TIONS OF THE ASSESSING OFFICER ON THIS COUNT. ITA-4003/DEL/2011 6 16. IN VIEW OF THE ABOVE, FINDING SUBSTANCE AND JUS TIFICATION IN THE GRIEVANCE RAISED BY THE ASSESSEE, THE SAME IS ACCEP TED. THE ORDER UNDER APPEAL IS CANCELLED AND THE PENALTY IMPOSED I S DELETED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2011. SD/- SD/- (G.D.AGRAWAL (G.D.AGRAWAL (G.D.AGRAWAL (G.D.AGRAWAL) )) ) ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 18.11.2011 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR