The ITO, Ward-1(3), RAJKOT-GUJARAT V. M/s. Kranti Extrustion Craft Pvt. Ltd., RAJKOT-GUJARAT

ITA 427/RJT/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8912 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: USHA N SHROTE
• Assessee Lawyers: R M MANEK HEARING CONCLUDED O
• Keywords: Business income
• Section: 133A; 69

Judgement Text

ITA NO.427/RJT/2013 ASSESSMENT YEAR: 2007-08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO.427/RJT/2013 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER, WARD 1(3), RAJKOT. .....................APPELLANT VS. KRANTI EXTRUSION CRAFT PVT. LTD., ..... ............ RESPONDENT PLOT NO.2220, ROAD-12, LODHIKA, GIDC, METODA, RAJKOT. [PAN: AABCK 9525 A] APPEARANCES BY USHA N. SHROTE FOR THE APPELLANT R.M. MANEK FOR THE RESPONDENT HEARING CONCLUDED ON: 04.01.2018 ORDER PRONOUNCED ON : 05.01.2018 O R D E R PER PRAMOD KUMAR, AM: BY WAY OF THIS APPEAL THE ASSESSING OFFICER HAS CHA LLENGED CORRECTNESS OF THE ORDER DATED 23.08.2013 PASSED BY THE LD. CIT(A) IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HER EINAFTER) FOR THE ASSESSMENT YEAR 2007-08. 2. GRIEVANCE RAISED BY THE ASSESSING OFFICER IS AS FOLLOWS :- 1. THE LD. CIT(A)-1, RAJKOT HAS ERRED IN LAW AND O N FACT OF THE CASE IN CANCELLING PENALTY OF RS.17,88,079/- LEVIED U/S.271 (1)(C) OF THE ACT RELYING UPON THE DECISION THAT HONBLE ITAT, RAJKOT HAS DEL ETED THE ADDITION ON WHICH PENALTY IS LEVIED. IN FACT HONBLE ITAT HAS CONFIRMED ADDITIONS BUT HAS DIRECTED TO ALLOW THE SET OFF OF THE BROUGHT FO RWARD LOSS TREATING THE ABOVE ADDITION AS BUSINESS INCOME. 2. ON THE FACTS OF THE CASE THE CIT(A) OUGHT TO HAV E UPHELD THE ORDER OF THE AO ITA NO.427/RJT/2013 ASSESSMENT YEAR: 2007-08 PAGE 2 OF 4 3. IT IS FURTHER PRAYED HT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABOVE EXTENT. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ALUMINIUM EXTRU SION AND WAS SUBJECTED TO SURVEY UNDER SECTION 133A OF THE ACT ON 13.03.2007. DURIN G THE COURSE OF SURVEY, THE ASSESSEE COMPANY DECLARED INCOME OF RS.50,01,608/- AS UNDISCLOSED INCOME ON ACCOUNT OF (1) EXCESS STOCK VALUATION RS.25,21,608/ -, (2) EXPENSES DOUBTED RS.15,00,000/- & (3) MACHINERY RS.9,80,000/-. IN T HE INCOME TAX RETURN FILED BY THE ASSESSEE, THE ASSESSEE DECLARED THE AFORESAID INCOM E AS BUSINESS INCOME UNDER THE HEAD INCOME DECLARED UNDER INCOME TAX SURVEY. HO WEVER, EVENTUALLY THERE WAS LOSS UNDER THE HEAD BUSINESS INCOME. THIS DECLARATION DID NOT HAVE TAX IMPLICATION IN THE CURRENT YEAR. WHEN THE RETURN SO FILED CAME UNDER SCRUTINY OF THE ASSESSING OFFICER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID INC OME WAS TAXABLE UNDER SECTION 69 OF THE ACT. IN APPEAL, THE LEARNED CIT(A) WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 69 DID NOT COME INTO PLAY AS NO INVESTMENT WAS FOUND R ECORDED IN THE BOOKS OF ACCOUNT. ACCORDINGLY, THE LEARNED CIT(A) DIRECTED THE ASSESS ING OFFICER TO TREAT THE INCOME AS DISCLOSED AT THE TIME OF SURVEY AS BUSINESS INCOME ELIGIBLE FOR SET OFF AGAINST CARRIED FORWARD LOSS AS WELL AS CURRENT YEAR LOSS. THE DIR ECTIONS OF THE CIT(A) WAS CHALLENGED IN APPEAL BEFORE THE CO-ORDINATE BENCH AND THE TRIB UNAL WAS OF THE VIEW THAT SO FAR AS EXCESS STOCK VALUATION OF RS.25,21,608/- AND EXPENS ES DOUBTED OF RS.15,00,000/- ARE CONCERNED, THESE ADDITIONS CAN ONLY BE MADE UNDER T HE HEAD BUSINESS INCOME AGAINST WHICH CURRENT YEARS LOSS AND BROUGHT FORWA RD LOSS CAN BE SET OUT. HOWEVER, AS REGARDS INVESTMENT IN MACHINERY OF RS.9,80,000/- IS CONCERNED, THE RELIEF GRANTED BY THE LEARNED CIT(A) WAS REVERSED. 4. THE MATTER DID NOT REST THERE. IN THE MEANTIME, THE ASSESSING OFFICER ALSO IMPOSED PENALTY BY OBSERVING THAT THE VIEWS TAKEN B Y THE LEARNED CIT(A) IN TREATING THE DISPUTED ADDITIONS AS ADDITIONS UNDER THE HEAD BUSI NESS INCOME, WHICH WAS CHALLENGED BEFORE THE TRIBUNAL AND THE DECISION OF ITAT, RAJK OT IS AWAITED. HE FURTHER NOTED THAT IRRESPECTIVE OF WHETHER OR NOT BROUGHT FORWARD LOSS OF EARLIER YEARS IS TO BE SET OFF AGAINST THE INCOME CONCEALMENT PART AS DISCUSSED IN THE ASSESSMENT ORDER REMAINS INTACT. THE ASSESSING OFFICER ACCORDINGLY PROCEEDE D TO CONCLUDE AS FOLLOWS :- AS DISCUSSED IN THE FOREGOING PARAGRAPHS, IT IS CL EAR THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND HAS CONCEALED THE INCOME TO ITA NO.427/RJT/2013 ASSESSMENT YEAR: 2007-08 PAGE 3 OF 4 THE EXTENT OF RS.53,12,175/- AND I AM SATISFIED THA T THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. ACCORDINGLY , I ORDER TO LEVY PENALTY ON THE TOTAL CONCEALED INCOME OF RS.53,12,175/- AS STATED ABOVE AT A MINIMUM @ 100% OF TAX SOUGHT TO BE EVADED WHICH COMES TO RS.17,88, 079/- AS AGAINST RS.53,64,237/- @ 300% OF TAX SOUGHT TO BE EVADED. THEREFORE, I IMPOSE A PENALTY OF RS.17,88,079/- U/S. 271(1)(C) OF THE I.T . ACT AT A MINIMUM @ 100% OF TAX SOUGHT TO BE EVADED. 5. ONCE AGAIN ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE LD. CIT(A) AND IN HIS BRIEF ORDER THE LD. CIT(A) DELETED THE IMPUGNED PEN ALTY BY STATING AS FOLLOWS :- 5. I HAVE DULY CONSIDERED THE SUBMISSION MADE BY T HE APPELLANT AND ALSO GONE THROUGH THE DISCUSSION MADE IN THE PENALTY ORD ER. 5.1 I FIND THAT THE QUANTUM APPEAL WAS DECIDED IN F AVOUR OF THE APPELLANT BY THE CIT(A) AND THE HONBLE ITAT, RAJKOT BENCH BOTH VIDE THEIR ORDERS IN APPEAL NO.9271/09-10 DATED 18.11.2010 AND IN ITA NO.38/RJT /2011 DATED 11.04.2013 RESPECTIVELY. SINCE THE ADDITION ON WHICH PENALTY U/S.271(1)(C) WAS LEVIED HAS BEEN DELETED BY BOTH CIT(A) AND THE HONBLE ITAT, T HE PENALTY OF RS.17,88,079/- LEVIED U/.S.271(1)(C) BY THE ASSESSING OFFICER IS A LSO CANCELLED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. 6. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 8. WE FIND THAT SO FAR AS THE ADDITION RELATABLE TO EXCESS STOCK VALUATION AND DOUBTFUL EXPENSES ARE CONCERNED, THE CASE OF THE AS SESSING OFFICER HINGED ON WHETHER OR NOT THESE AMOUNTS ARE TAXABLE UNDER THE HEAD INC OME FROM OTHER SOURCES. AS A MATTER OF FACT, THE ASSESSING OFFICER, IN THE IMPUG NED PENALTY ORDER, HAS HIMSELF OBSERVED THAT THE PENALTY IS BEING IMPOSED AS VIEWS OF THE CIT(A) ARE NOT ACCEPTED AND THE MATTER IS IN APPEAL BEFORE THE TRIBUNAL. HAVIN G NOTED THUS, WE FIND THAT THE CO- ORDINATE BENCH OF THIS TRIBUNAL HAS DISAPPROVED THE ACTION OF THE CIT(A). IN THIS REGARD, THE PENALTY MUST STAND DELETED. WE HAVE ALSO NOTED THAT EVEN THOUGH THE ASSESSEE AGREED TO INCLUDE THIS AMOUNT IN THE PROFIT SHOWN B Y HIM, THERE WAS NO MATERIAL WHATSOEVER TO JUSTIFY THESE ADDITIONS ON MERITS. U NDER THESE CIRCUMSTANCES AND CONSIDERING THE FACT THAT THE ADDITION WAS TAX NEUT RAL EVEN AT THE POINT OF TIME WHEN THE ADDITION WAS MADE, WE ARE OF THE CONSIDERED VIEW TH AT THE PENALTY IN RESPECT OF THESE ADDITIONS WAS CERTAINLY NOT JUSTIFIED. LD. CIT(A) WAS THUS CORRECT IN HIS CONCLUSION TO THE ITA NO.427/RJT/2013 ASSESSMENT YEAR: 2007-08 PAGE 4 OF 4 EXTENT PENALTY IN RESPECT OF THESE TWO ITEMS ARE CO NCERNED. WE HAVE NOTED THAT SO FAR AS ADDITION OF RS.9,80,000/- IN RESPECT OF MACHINER Y IS CONCERNED, RELIEF GRANTED BY THE LD. CIT(A) HAS BEEN REVERSED BY THE ITAT AND YET TH E LD. CIT(A), WHILE ADJUDICATING ON THE CORRECTNESS OF THE PENALTY, HAS NOT DEALT WITH THE SAME ON MERIT. THE ACTION OF THE LD. CIT(A) IN DELETING PENALTY RELATABLE TO MACHINE RY OF RS.9,80,000/- CANNOT, THEREFORE, BE APPROVED OR CONDONED BY US. THE LD. CIT(A) WAS CLEARLY INCORRECT IN HIS APPROACH. HOWEVER, SINCE HE HAS NOT ADJUDICATED ON THE MERIT OF THE ISSUE, WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE TO THE FILE OF THE LD. C IT(A) FOR FRESH ADJUDICATION ON MERITS. 9. SIMILARLY, IT APPEARS ON A PERUSAL OF THE MATERI AL ON RECORD, THAT THERE IS NO DISCUSSION BY THE LD. CIT(A) WITH RESPECT TO PENALT Y RELATABLE TO SHORTAGE OF CASH AMOUNTING TO RS.3,10,567/-, EVEN THOUGH THIS AMOUNT IS INCLUDED BY THE ASSESSING OFFICER IN THE ADDITIONS IN RESPECT OF WHICH IMPUGN ED PENALTY IS LEVIED. WE, THEREFORE, ALSO DIRECT THE LD. CIT(A) TO EXAMINE THIS ASPECT O F THE MATTER AND, IF NECESSARY, DEAL WITH THE SAME BY WAY OF A SPEAKING ORDER IN ACCORDA NCE WITH LAW AND BY GIVING FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. TO SUM UP, WHILE ACTION OF THE LD. CIT(A) IS AP PROVED TO THE EXTENT OF DELETING PENALTY RELATABLE TO (A) EXCESS STOCK VALUATION OF RS.25,21,608/-, (B) DOUBTFUL EXPENSES OF RS.15,00,000/-, WE REMIT THE MATTER TO THE FILE OF LEARNED CIT(A) FOR FRESH ADJUDICATION OF PENALTY RELATABLE TO (A) MACHINERY OF RS.9,80,00 0/- & (B) SHORTAGE OF CASH OF RS.3,10,567/-. ORDERED ACCORDINGLY. 11. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON T HIS 5 TH DAY OF JANUARY, 2018. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEM BER) DATED: 5 TH JANUARY, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPO NDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT