Universal Wood and Steel Industries, Mohali V. ITO, Mohali

ITA 437/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5345 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 27-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Business income; Loose papers
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.437 /CHD/2011 (ASSESSMENT YEAR : 2004-05) UNIVERSAL WOOD & STEEL INDUSTRIES VS. THE INCOME- TAX OFFICER, VILL. BHAGO MAJRA WARD 6(2) MOHALI. MOHALI. PAN: AABFU2051J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT DHIMAN RESPONDENT BY: SHRI N.K.SAINI, DR O R D E R THE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 21.1.2011 RELATING TO ASSE SSMENT YEAR 2004-05 AGAINST THE ORDER PASSED U/S 271(1)(C) OF THE INCOM E-TAX ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND OF APPEAL : 1. PENALTY U/S 271(1)(C) ON ADDITION OF RS.2,82,61 8/- MADE ON ADHOC BASIS 1.1 THE LD. CIT(A) HAS ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) OF RS.1,14,800/- MERELY WHEN THE QUANTUM ADDITION WAS MADE ON ESTIMATED BASIS. 1.2 THE LEARNED CIT(A) HAS FAILED TO UNDERSTAND THAT THE QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE ALTOGETHER DIFFERENT AND THE LATTER BEING STRINGENT, ESTIMATION IS NOT A GOOD GROUND FOR IMPOSING PENALTY. 1.3 THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT DURING THE ASSESSMENT PROCEEDINGS, THE 2 AO HAS NOT BEEN ABLE TO BRING ANY INCRIMINATING MATERIAL ON RECORD WHICH CORROBORATED THE GP RATE ADOPTED BY HIM ARBITRARILY. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AMOUNTING TO RS.1,1 4,800/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT SURVEY UNDE R SECTION 133 OF THE INCOME TAX ACT WAS CARRIED OUT IN THE BUSINESS PREM ISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, PHYSICAL VERIFICATION OF CASH/STOCK WAS MADE AND CERTAIN DOCUMENTS WERE IMPOUNDED. WHEN CO NFRONTED, THE ASSESSEE ADMITTED THAT THESE REPRESENTED THE SALES OUTSIDE THE BOOKS OF ACCOUNT. FURTHER, THE STOCK WAS FOUND SHORT BY RS. 11,28,542/- ON THE DATE OF SURVEY. HOWEVER, NO SURRENDER WAS MADE DUR ING THE COURSE OF SURVEY. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT NOTED THE ABOVE SAID DISCREPANCIES AND ALSO NOTED THE ASS ESSEE TO HAVE SHOWN A GP RATE OF 18.24% AS COMPARED TO THE GP RATE OF 21. 29% SHOWN IN ASSESSMENT YEAR 2003-04 AND 23.27% SHOWN IN THE ASS ESSMENT YEAR 2002- 03. THE ASSESSING OFFICER WHILE COMPLETING THE ASS ESSMENT MADE AN ADDITION OF RS.10 LACS ON ACCOUNT OF SALES MADE OUT SIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER FURTHER APPLIED GP RATE OF 20% ON THE SALES DECLARED BY THE ASSESSEE TO DETERMINE THE INC OME OF THE ASSESSEE AND ADDITION OF RS.2,82,618/- WAS MADE. THE CIT(A) UPHELD THE ADDITION OF RS.2,82,618/- AND FURTHER ADDITION OF RS.37,520/ - ON ACCOUNT OF DISALLOWANCE OUT OF EXPENSES WAS UPHELD BY THE CIT( A). PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED BY THE ASSESSING OF FICER FOR FILING INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF R S.2,82,618/- AND PENALTY OF RS.1,14,800/- WAS IMPOSED, WHICH WAS UPH ELD BY THE CIT(A). 3 5. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID UPHOLDING OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 6. THE LEARNED A.R. FOR THE ASSESSEE AFTER TAKING M E THROUGH THE FACTS OF THE CASE POINTED OUT THAT DURING THE COURSE OF SURVEY NO SURRENDER WAS MADE BY THE ASSESSEE, THOUGH DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTED TO THE SALES MAD E OUTSIDE THE BOOKS. THE LEARNED A.R. FOR THE ASSESSEE STRESSED THAT THE INCOME WAS ESTIMATED IN THE HANDS OF THE ASSESSEE AFTER APPLYING GP RATE OF 20% AND IN SUCH CIRCUMSTANCES NO PENALTY IS LEVIABLE. THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. SANGRUR VANASPATI MILLS LTD., 303 ITR 53 (P&H) AND CIT VS. MODI INDUSTRIAL CORPORATION, 195 TAXMAN 68(P&H). 7. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ADDITION WAS MADE ON THREE COUNTS I.E. ON ACCOUNT OF SHORTAGE OF STOCK, SALES OUTSIDE THE BOOKS AND ESTIMATION OF GP RATE. THE LEARNED D .R. FURTHER STATED THAT THE CASE LAWS CITED BY THE LEARNED A.R. WERE N OT APPLICABLE AS THE ADDITIONS WERE NOT MERELY ON ESTIMATE BASIS. 8. THE LEARNED A.R. FOR THE ASSESSEE IN REJOINDER P OINTED OUT THAT THE ASSESSEE HAD EXPLAINED REASONS FOR FALL IN GP RATE BEFORE THE ASSESSING OFFICER WHICH WERE BRUSHED ASIDE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SURVEY UNDER SECTION 133A OF INCOME TAX ACT WAS CON DUCTED AT THE PREMISES OF THE ASSESSEE AND FOLLOWING DISCREPANCIE S WERE FOUND : I) INVENTORY OF STOCK ON PHYSICAL INSPECTION VALUED AT COST PRICE WAS VALUED AT RS.10,11,193/- AS AGAINST BOOK VERSIO N ON THE 4 DATE OF SURVEY AT RS.21,39,735/-. STOCK WAS FOUND SHORT BY RS.11,28,542/-, WHICH COMPRISED OF STOCK OF FINISHE D GOODS OF RS.5,38,655/- AND STOCK OF RAW MATERIAL OF RS.7, 46,063/-. APPLYING GP ON STOCK OF FINISHED GOODOS, SHORT STOC K WAS VALUED AT RS.9,62,749/-/. II) LOOSE PAPERS SHOWING UNRECORDED SALES WERE FOUN D, WHICH WERE CONFRONTED TO PARTNER DURING SURVEY PROCEEDING S AND HE ADMITTED THAT THE LOOSE PAPERS FOUND DURING SURVEY WERE OF SALES, WHICH WERE NOT ACCOUNTED FOR. III) SHORT CASH OF RS.84,703/- WAS DETECTED. 10. THE ASSESSING OFFICER AT PAGES 5 & 6 OF THE ASS ESSMENT ORDER HAS DETAILED SALES MADE OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN LOWER GP RATE, AGAINST WHICH THE ASSESSEE CLAIMED THAT THE SHORT FALL WAS DUE TO RIS E IN SALES AND FURTHER THERE WAS DECLINE IN JOB WORK INCOME. THE ASSESSEE ADMITTED THAT THERE WERE SALES AGAINST LOOSE PAPERS TOTALING RS.2,57,92 2/-, WHICH WAS NOT ENTERED IN THE BOOKS OF ACCOUNT. THE DIFFERENCE IN STOCK WAS EXPLAINED TO BE ARRIVED ON ESTIMATE BASIS. THE ASSESSEE STAT ED THAT THE DIFFERENCE IN CASH WAS BECAUSE OF ENTRIES NOT MADE IN THE BOOK S OF ACCOUNT AS THE ACCOUNTANT WAS NOT AVAILABLE. IN VIEW OF THE ABOVE SAID, THE ASSESSING OFFICER HELD ASSESSEE HAD MADE SALES OUTSIDE THE BO OKS OF ACCOUNT AND ADDITION OF RS.2,37,061/- WAS MADE ON ACCOUNT OF UN RECORDED SALES ON THE ADMISSION OF THE ASSESSEE. FURTHER THE ASSESSI NG OFFICER ESTIMATED THE SALES OUTSIDE THE BOOKS OF ACCOUNT AT RS.10 LAC S AND APPLYING GP RATE OF 20% ON TOTAL SALES AND JOB CHARGES, MADE ADDITIO N OF RS.2,82,618/-. THE CIT(A) UPHELD THE SAME. PENALTY U/S 271(1)(C) OF THE ACT HAS BEEN LEVIED ON THE AFORESAID ADDITION OF RS.2,82,618/-. 5 11. PENALTY FOR CONCEALMENT U/S 271(1)(C) OF THE AC T IS ATTRACTED WHERE THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE ADMITTED TO SALES OUTSIDE THE BOOKS OF ACCOUNT TOTALING RS.2,37 ,061/-, ON WHICH GP RATE OF 20% WAS APPLIED. FURTHER THE ASSESSING OFF ICER ESTIMATED THE SALES OUTSIDE THE BOOKS FOR THE PERIOD PRIOR TO SUR VEY AT RS.10 LACS, ON WHICH GP RATE OF 20% WAS APPLIED. THE ADDITION NO DOUBT WAS MADE BY ESTIMATING THE SALES AND APPLYING GP RATE ON THE TO TAL SALES, BUT THE BASIS FOR ADOPTION OF SUCH ESTIMATE WERE THE DISCREPANCIE S DETECTED DURING THE COURSE OF SURVEY OPERATIONS. THE ASSESSEE ADMITT ED TO HAVE NOT RECORDED CERTAIN SALES IN ITS BOOKS OF ACCOUNT. FU RTHER THERE WAS DISCREPANCY IN BOTH STOCK AND CASH FOUND AT THE TIM E OF SURVEY AND AS PER BOOKS. IN THE ABOVE SAID CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ADDITIONS WERE PURELY ON ESTIMATE. IT IS A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHERE THE ASSESSEE HAD ADMITTED TO SALES OUTSIDE THE BOOKS OF ACCOUNT. IN THE CIRCUMSTANCE S, THE ASSESSEE IS EXIGIBLE TO LEVY OF PENALTY U/S 271(1)(C) OF THE AC T. THE RELIANCE PLACED BY THE LEARNED A.R. FOR THE ASSESSEE IN CIT VS. SAN GRUR VANASPATI MILLS LTD. (SUPRA) IS MISPLACED AS FACTUAL ASPECTS ARE NO T IDENTICAL. IN THE CASE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT THE MATERIAL WAS FOUND I.E. ONE INVOICE BOOK CONTAINING FIVE SALE INVOICES AND THE ASSESSING OFFICER IN ORDER TO ARRIVE AT THE QUANTUM OF UNACCO UNTED SALES EXTRAPOLATED AVERAGE SALE PRICE OF FOUR INVOICES TO 53 INVOICES. HOWEVER, IN THE FACTS OF THE CASE BEFORE US THE ASS ESSEE ITSELF HAD ADMITTED HAVING MADE THE SALES OUTSIDE THE BOOKS OF ACCOUNT, THE EVIDENCE OF WHICH WAS FOUND DURING THE COURSE OF S URVEY PROCEEDINGS AND THEREAFTER THE ESTIMATION OF THE INCOME WAS MAD E BY THE ASSESSING 6 OFFICER. IN VIEW OF THE SAME THE ASSESSEE IS LIABL E TO THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. I CONFIRM THE ORDER OF CIT(A) IN LEVYING PENALTY OF RS.1,14,800/-. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF JUNE, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 30 TH JUNE, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7