A RM. RAMANATHAN, Chennai V. ASSISTANT COMMISSIONER OF INCOME TAX NON CORPORATE CIRCLE 6 (1), Chennai

ITA 443/CHNY/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0142 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R ANITHA
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.443/CHNY/2018 ' (' / ASSESSMENT YEAR : 2007-08 SHRI A.RM. RAMANATHAN, 17, 1 ST FLOOR, WUTHUCATTEN STREET, PERIAMET, CHENNAI - 600 003. PAN : AAIPR 6628 P V. THE ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 6(1), CHENNAI. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+/ APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE ,-*+/ RESPONDENT BY : MS. R. ANITHA, JCIT . / 0# / DATE OF HEARING : 24.07.2018 12( / 0# / DATE OF PRONOUNCEMENT : 19.09.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -5, CHENNAI, D ATED 17.01.2018, CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFI CER UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'TH E ACT') FOR THE ASSESSMENT YEAR 2007-08. 2. SHRI T. VASUDEVAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MAN UFACTURING AND 2 I.T.A. NO.443/CHNY/18 EXPORT OF LEATHER GOODS. DURING THE YEAR UNDER CON SIDERATION, ACCORDING TO THE LD. COUNSEL, SOME OF THE GOODS SOLD BY THE A SSESSEE WERE REJECTED. IN FACT, THE ASSESSEE PURCHASED WET BLUE GOAT SKIN FOR MANUFACTURING THE LEATHER GOODS. ACCORDING TO THE LD. COUNSEL, NORMALLY, GOAT SKIN WOULD TAKE MINIMUM 20 DAYS FOR PROCESSING INTO SEMI FINISHED LEATHER. ACCORDING TO THE LD. COUNSEL, THE ASSESSE E PURCHASED 17347 PIECES OF WET BLUE GOAT SKIN FROM M/S NIZAM & SONS. OUT OF 17347 PIECES OF WET BLUE GOAT SKIN, THE ASSESSEE REJECTED 1829 PIECES. THESE REJECTED WET BLUE GOAT SKIN PIECES WERE ALSO AVAILA BLE IN THE BUSINESS PREMISES OF THE ASSESSEE. ACCORDING TO THE LD. COU NSEL, THE VENDOR WOULD RAISE THE BILL ONLY IN RESPECT OF WET BLUE GO AT SKIN WHICH WAS ACCEPTED BY THE ASSESSEE AFTER INSPECTION. BY A DE LIVERY NOTE DATED 03.03.2007, ACCORDING TO THE LD. COUNSEL, TWO DIFFE RENT VARIETIES OF WET BLUE GOAT SKIN WERE DELIVERED. SIMILARLY, ON 27.03 .2007 ALSO TWO DIFFERENT VARIETIES OF WET BLUE GOAT SKIN WERE DELIVERED. SI NCE THERE WAS A DIFFERENCE IN VALUATION OF WET BLUE GOAT SKIN, ACCO RDING TO THE LD. COUNSEL, THE ASSESSING OFFICER MADE ADDITION OF 5,43,130/-. ACCORDING TO THE LD. COUNSEL, THE REJECTED GOODS WERE TAKEN INTO CONSIDE RATION BY THE ASSESSING OFFICER FOR THE PURPOSE OF MAKING ADDITIO N ON THE BASIS OF THE CLOSING STOCK VALUATION. THE LD.COUNSEL FURTHER SU BMITTED THAT IF THE REJECTED GOODS WERE NOT TAKEN INTO CONSIDERATION, T HERE CANNOT BE ANY ADDITION. THE CONSEQUENT LEVY OF PENALTY IS NOT JU STIFIED. 3 I.T.A. NO.443/CHNY/18 MOREOVER, ACCORDING TO THE LD. COUNSEL, DUE TO DIFF ERENCE IN VALUATION OF CLOSING STOCK, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME OR CONCEALED A NY PART OF HIS INCOME. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE LEVY O F PENALTY IS NOT JUSTIFIED. 3. ON THE CONTRARY, MS. R. ANITHA, THE LD. DEPARTME NTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE REGISTER FOR CLOSING STOCK. MOREOVER, ACC ORDING TO THE LD. D.R., THE ASSESSEE HAS NOT VALUED THE CLOSING STOCK CORRE CTLY, THEREFORE, THERE WAS UNDER STATEMENT OF INCOME. HENCE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HAS RIGHTLY LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND EXPORT OF LEATHER GOODS. FOR THE PURPOSE OF BUSINESS, THE AS SESSEE IS PURCHASING WET BLUE GOAT SKIN. OUT OF 17347 PIECES OF WET BLU E GOAT SKIN PURCHASED BY THE ASSESSEE FROM M/S NIZAM & SONS, 1829 PIECES WERE REJECTED. THE ASSESSEE CLAIMS THAT THE REJECTED GOODS WERE AL SO AVAILABLE IN THE BUSINESS PREMISES OF THE ASSESSEE. THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE REJECTED 1829 PIECES OF WET SKIN AND 4 I.T.A. NO.443/CHNY/18 PURCHASED ONLY THE BALANCE, THE REJECTED 1829 PIECE S CANNOT BE CONSIDERED FOR VALUATION OF CLOSING STOCK. THEREFO RE, IT CANNOT BE SAID THAT THERE WAS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. HENCE, THIS IS NOT A F IT CASE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, O RDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE PENALTY LEV IED BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT(APPEALS) IS DELETED . 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 19 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- ( !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 19 TH SEPTEMBER, 2018. KRI. / ,056 76(0 /COPY TO: 1. *+/ APPELLANT 2. ,-*+/ RESPONDENT 3. . 80 () /CIT(A)-5, CHENNAI-34 4. PRINCIPAL CIT- 9, CHENNAI 5. 69 ,0 /DR 6. :' ; /GF.