Ganesh Roller Flour Mills, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 4081/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87125 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 07-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: VENKTESH CHAURASIA; VED JAIN ADV SMT RANO JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 4081/DEL/2011 ASSTT. YR: 2005-06 GANESH ROLLER FLOUR MILLS, VS. ITO, WARD-2(1), 148, DWARKAPURI, MUZAFFARNAGAR. MUZAFFARNAGAR. PAN: AABFH 7319 P ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI VED JAIN ADV. SMT. RANO JAIN CA & SHRI VENKTESH CHAURASIA CA RESPONDENT BY : SHRI T.VASANTHAN SR. DR DATE OF HEARING: 11/03/2015. DATE OF ORDER : 23/03/2015. O R D E R PER S.V. MEHROTRA, A.M:- THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST CIT(A)S ORDER DATED 27-05-2011 RELATING TO A.Y. 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE DERIVE D INCOME FROM FLOUR MILL. IT FILED ITS RETURN OF INCOME DECLARING NIL INCOME. IN COURSE OF ASSESSMENT IT TRANSPIRED THAT DURING THE YEAR UNDER CONSIDERATION NO MANUFACTURING WAS DONE. THE BUSINESS WAS CLOSED DURING THE YEAR AND ONLY TH E SALE AND PURCHASE OF RAW- MATERIAL AND PLANT & MACHINERY AND OTHER ASSETS WE RE MADE. AS PER P&L A/C, ASSESSEE FIRM HAD WORKED OUT LOSS OF RS. 4,67,831/- . HOWEVER, THE RETURN WAS FILED DECLARING NIL INCOME. THE AO REQUIRED THE ASSESSEE TO FILE COPY OF TRADE TAX 2 ITA 4081/DEL/2011 ORDER, FROM WHICH IT WAS REVEALED THAT A SURVEY WAS CONDUCTED BY THE TRADE TAX DEPARTMENT ON 8-12-2004 AND SOME UNDISCLOSED SALES WERE NOTICED BY THE TRADE TAX DEPARTMENT ON THE BASIS OF DOCUMENTS FOUND AT THE TIME OF SURVEY. THE AO OBSERVED THAT AS PER TRADE TAX ORDER, THE ASSESSEE FIRM HAD MADE SALE OF MOTORS, COAL, BRICKS, RODI, GAS CYLINDERS AND TOOLS ETC. TH E SALE CONSIDERATION HAD NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. THE ASSESSEE GAVE EXPLANATION, WHICH IS REPRODUCED HEREUNDER: AS PER TRADE TAX ORDER THE ASSESSEE FIRM HAS MADE SALE OF MOTORS, COAL, BRICKS, RODI, GAS CYLINDERS AND TOOTS ETC. THE SALE CONSIDERATION HAS NOT BEEN ACCOUNTED FOR IN THE BOO KS OF ACCOUNT. THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSEE FIRM VIDE ORDER SHEET ENTRY DATED 26-09-07 AND THE ASSES SEE FIRM WAS ASKED TO GIVE EXPLANATION WHY THE DIFFERENCE IN SAL E VALUE SHOULD NOT BE ADDED IN ITS INCOME. THE ASSESSEE FIRM FURNISHED WRITTEN EXPLANATION ON 28-09-07, WHICH IS AS UNDER: - '1. THAT NET PROFIT AS PER PROFIT AND LOSS ACCOUNT WAS LOSS OF RS. 467831/- BUT ASSESSEE FILED RETURN SHOWING NIL INCO ME. REASON FOR DOING SO WAS THAT THERE WERE DIFFERENCES AMONGS T THE PARTNERS AND SO NONE OF THE PARTNERS WAS LOOKING AF TER THE BUSINESS AND A PERSON WAS DEPUTED FOR THE PURPOSE B UT HE SOLD SOME OF THE ELECTRIC MOTOR, BRICK ETC. FOR ABOUT RS . 3 TO 3.5 LACS AND ALSO HE GOT DUMPED SOME COAL FOR HIS INTEREST. THIS FACT CAME TO OUR KNOWLEDGE WHEN WE RECEIVED NOTICE FROM TRADE TAX AUTHORITIES. WE TRIED TO LOCATE THE PERSON BUT FAILED. 2. THAT DUE TO THE FACTS MENTIONED ABOVE WE SUFFERE D HEAVY LOSS AND REASON FOR LOSS WAS CLEAR AND ADMITTEDLY W E HAD NO EVIDENCE REGARDING MISAPPROPRIATION BY THE PERSON S O WE FILED THE RETURN CONSIDERING THE MATERIAL SOLD BY THAT PE RSON AND INVESTMENT IN COAL FOUND AT OUR PREMISES AS UNDER: - I) COST OF MOTORS-RODI AND BRICKS SOLD AND MISAPPROPRIATED RS. 320000 II) ON ACCOUNT OF COAL FOUND BY TRADE 3 ITA 4081/DEL/2011 TAX AUTHORITIES ROUNDED OF RS.147831/- RS.467831/- IN VIEW OF THE ABOVE POSITION IT IS CLEAR THAT ASS ESSEE HAS FILED THE RETURN AFTER SURRENDERING THE DIFFERENCE DETECTED BY THE TRADE TAX AUTHORITIES AND AFTER DOING SO THERE REMA INS NO DIFFERENCE. MOREOVER TRADE TAX AUTHORITIES HAVE MAD E A BEST JUDGMENT ASSESSMENT.' 2.1. THE AO CONCLUDED AS UNDER: 1. THAT THE ASSESSEE FIRM HAS ADMITTED THAT SALE O F MOTORS, BRICKS AND OTHER ITEMS WAS DONE BY SOME PERSON BUT IS UNABLE TO PRODUCE THAT PERSON MEANING. THEREBY THAT THE FI RM HAS NO EVIDENCE REGARDING MISAPPROPRIATION. 2. THAT THE ASSESSEE FIRM HAS ADMITTED THAT COAL WA S ALSO DUMPED. IT HAS BEEN SUBMITTED BY THE ASSESSEE BEFOR E THE TRADE TAX AUTHORITIES AS WELL AS BEFORE THE UNDERSIGNED T HAT THE COAL DOES NOT BELONG TO FIRM BUT IT FAILED ON BOTH THE O CCASIONS 1(' PROVE THE SAME. MOREOVER, THE TRADE TAX AUTHORITIES HAS REPEATEDLY MENTIONED IN THE ORDER THAT THE PROOF OF PURCHASE/UNLOADING OF COAL WAS' FOUND DURING THE CO URSE 01 SURVEY. 3. THAT THE ASSESSEE'S SUBMISSION THAT THE RETURN W AS FILED CONSIDERING THE MATERIAL SOLD BY THE PERSON DEPUTED TO SUPERVISE THE BUSINESS ACTIVITIES IS NOT ACCEPTED BECAUSE: TH E SURVEY WAS CONDUCTED ON 08-12-2004 WHEREAS THE RETURN OF INCOM E WAS FILED ON 31-08-2005 AND BY THAT TIME ASSESSEE FIRM WAS AWARE OF EACH AND EVERYTHING. 4. THAT THE ASSESSEE'S SUBMISSION THAT THE ASSESSEE HAS FILED THE RETURN 'AFTER SURRENDERING THE DIFFERENCE DETEC TED BY THE TRADE TAX AUTHORITIES IS ALSO NOT ACCEPTED BECAUSE THE SALE PRICE OF MOTORS, BRICKS, RODI, GAS CYLINDER ETC. IS RS. 3,80,000/ INSTEAD OF RS. 3,20,000/- AS STATED BY THE ASSESSEE . SIMILARLY, THE SALE PRICE OF COAL RS. 2,00,000/- INSTEAD OF RS . 1,47,831/-. THE ASSESSEE HAS WORKED OUT THE SALE PRICE IN ACCOR DANCE WITH THE LOSS SHOWN BY IT IN THE PROFIT AND LOSS ACCOUNT . THE ASSESSEE. 4 ITA 4081/DEL/2011 FAILED TO FILE THE PROOF OF PURCHASE OF COAL DURING THE YEAR SO NO CREDIT OF PURCHASE PRICE CAN BE GIVEN. AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND FA CTS OF THE CASE, THE PLEA TAKEN BY ASSESSEE FIRM IS NOT ACCEPT ED AS THE SURRENDER CLAIMED BY IT IS NOTHING BUT AFTER THOUGH T THEREFORE, AMOUNT OF RS. 580000/- BEING SALE PRICE OF MOTORS, BRICKS, RODI, GAS CYLINDER ETC. AND COAL IS ADDED IN TILE INCOME OF THE ASSESSEE TREATING THE SAME AS SALES MADE BY THE ASSESSEE FIR M OUT OF BOOKS OF ACCOUNT. (ADDITION RS. 580000/-) 2.2. ACCORDINGLY, HE ASSESSED THE INCOME AT RS. 1,1 2,169/- (RS. 5,80,000 RS. 4,67,831). 2.3. THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1 )(C) AND PASSED THE PENALTY ORDER DATED 30-3-2010, LEVYING A PENALTY OF RS. 2,1 2,500/-. 2.4. IN THE PENALTY PROCEEDINGS THE ASSESSEE CONTEN DED THAT WHILE MAKING THE ASSESSMENT, THE ADDITION HAD BEEN MADE OF THE SAME AMOUNT WHICH WAS ASSESSED BY THE TRADE TAX DEPARTMENT WITHOUT CONSIDERING WHE THER AMOUNTS RELATED TO SALE OR PURCHASE. IT WAS SUBMITTED THAT TRADE TAX AUTHOR ITIES MADE THE ASSESSMENT TO THE BEST OF THEIR JUDGMENT AND THE SAME HAD BEEN FO LLOWED IN MAKING ANOTHER BEST JUDGMENT ASSESSMENT. IT WAS SUBMITTED THAT AO WAS R EQUIRED TO APPLY HIS MIND TO REACH AT HIS OWN CONCLUSION IN MAKING THE BEST JUDG MENT ASSESSMENT. THE AO, HOWEVER, HELD THAT AO HAD COMPLETED THE ASSESSMENT AFTER GIVING PROPER OPPORTUNITIES OF BEING HEARD TO THE ASSESSEE. THE A SSESSEE ITSELF ADMITTED THAT THE SALES HAD BEEN MADE OUT OF BOOKS OF ACCOUNT. THE AO HAD CORRECTLY REFERRED THE SURVEY UNDERTAKEN BY THE TRADE TAX DEPARTMENT AND T HE AO PROPERLY APPLIED HIS MIND IN COMPLETION OF THE ASSESSMENT. HE HELD THAT ASSESSEE INTENTIONALLY FILED INACCURATE PARTICULARS OF ITS INCOME TO THE EXTENT OF RS. 5,80,000/-. 5 ITA 4081/DEL/2011 2.5. BEFORE LD. CIT(A) IT WAS, INTER ALIA, CONTENDE D THAT ASSESSMENT WAS COMPLETED AT RS. 1,12,169/- AGAINST RETURNED INCOME OF NIL WHILE PENALTY HAD BEEN IMPOSED UPON THE ENTIRE AMOUNT OF RS. 5,80,000/-. A T THE MOST THE CONCEALED INCOME COULD BE TAKEN AT RS. 1,12,169/-. 2.6. LD. CIT(A) DID NOT ACCEPT THE ASSESSEES CONTE NTION FOR THE FOLLOWING REASONS: (I) THE ASSESSEE AT THE FIRST OPPORTUNITY FAILED TO DIS CLOSE THE TRUE ACCOUNT BEFORE THE INCOME-TAX DEPARTMENT ON 30-8-2005, THE DAY IT FILED ITS INCOME-TAX RETURN. (II) IT IS IMPORTANT IN PENALTY PROCEEDINGS TO ESTABLISH THAT EITHER THE INCOME HAD BEEN CONCEALED OR INACCURATE PARTICULARS HAD BE EN FILED. (III) THE ASSESSEES ARGUMENT THAT AT THE MOST, THE PENAL TY MAY BE IMPOSED UPON RS. 1,12,169/- I.E. THE DIFFERENCE OF UNDISCLO SED INCOME OF RS. 5,80,000/- MINUS THE AMOUNT ALREADY SHOWN BY THE AS SESSEE COULD ONLY BE ACCEPTED WHEN IT WAS PROVED THAT WHILE FILING TH E RETURN AT THE LOSS OF RS. 4,67,831/-, THE ITEMS, THE SALES OF WHICH WERE POINTED OUT BY THE TRADE TAX DEPARTMENT, WERE DISCLOSED IN THE RETURN. HOWEVER, THE ASSESSEE FAILED TO SHOW THAT IN ITS P&L A/C IT HAD INCORPORATED THE SALE OF THESE ITEMS WHICH WERE POINTED OUT IN TRADE TAX ORD ER. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS P ER SECTION 271(1)(C)(III), THE PENALTY IS TO BE LEVIED WITH REFERENCE TO THE AMOUN T OF TAX SOUGHT TO BE EVADED BY THE REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. HE REITERATE D HIS SUBMISSIONS MADE BEFORE LD. CIT(A) AND SUBMITTED THAT LOSS AS PER P&L A/C W AS RS. 4,67,831/- AND THE ADDITION OF RS. 5,80,000/- WAS MADE AND, THUS, INCO ME WAS ASSESSED AT RS. 6 ITA 4081/DEL/2011 1,12,169/-. THEREFORE, PENALTY COULD NOT BE IMPOSED ON RS. 5,80,000/- BUT ON RS. 1,12,169/-. HE SUBMITTED THAT THE ASSESSEE FIRM HAD BEEN CLOSED ON ACCOUNT OF DIFFERENCE AMONGST PARTNERS. HE SUBMITTED THAT ASSE SSEE HAD SURRENDERED THE LOSS BY FILING NIL INCOME AND THE AO HAS ALSO ADJUSTED T HE SALES AGAINST THE SAID LOSS. 4. LD. DR SUBMITTED THAT AO ASKED FOR TRADE TAX ORD ER AND THERE FROM IT WAS REVEALED THAT ASSESSEE HAD SOLD VARIOUS ASSETS. HE SUBMITTED THAT THE TAX SOUGHT TO BE EVADED IS AT RS. 5,80,000/- BECAUSE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE LOSS WAS IN RESPECT OF SAME ITEMS FOR WHICH ADD ITION WAS MADE ON ACCOUNT OF SALES. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY THE BASIS OF ADDITION MADE BY AO W AS THE TRADE TAX OFFICERS ORDER. IN THE EXPLANATION FILED BEFORE AO, AS REPRO DUCED EARLIER, THE ASSESSEE HAD STATED THAT BECAUSE OF THE DIFFERENCES AMONGST PART NERS, NO ONE WAS LOOKING AFTER THE BUSINESS AND THE FACT OF SALE OF MOTOR AND COAL CAME TO ITS KNOWLEDGE ONLY WHEN NOTICES WERE RECEIVED FROM TRADE TAX AUTHORITI ES. 5.1. SINCE THE AMOUNT HAD BEEN MISAPPROPRIATED BY T HE PERSON WHO SOLD THE COAL AND MOTORS AT THE BACK OF PARTNERS, THE ASSESSEE HA D FILED RETURN OF LOSS. FROM THE TRADE TAX OFFICERS ORDER, WE FIND THAT THE SALE WA S ESTIMATED IN RESPECT OF MOTOR, BRICKS, RODI, GAS CYLINDERS ETC. AT RS. 3,80,000/- AS NOTED BY AO IN PARA 4 OF HIS FINDINGS AND SALE PRICE OF COAL WAS TAKEN AT RS. 2 LACS. FURTHER, WE FIND THAT AO HAS ALSO REDUCED THE LOAN SHOWN BY THE ASSESSEE ON ACCO UNT OF COST OF MOTORS-RODI AND BRICKS SOLD AND MISAPPROPRIATED AT RS. 3,20,000/-; AND ON ACCOUNT OF COAL FOUND BY TRADE TAX AUTHORITIES AT RS. 1,47,831/- TOTALING TO RS. 4,67,831/-. THEREFORE, IT CANNOT BE SAID THAT THE SALE OF RS. 5,80,000/- WAS AFTER CONSIDERING THE COST OF THOSE ASSETS AND, THEREFORE, WE ARE IN AGREEMENT WITH LD. COUNSEL FOR THE ASSESSEE THAT THE 7 ITA 4081/DEL/2011 PENALTY COULD BE LEVIED ON RS.1,12,169/- AND NOT ON THE ENTIRE SALE OF RS. 5,80,000/-. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 23/03/2015. SD/- SD/- (C.M. GARG) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23/03/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.