Mahadik Brothers, V. ACIT,Cir.5,

ITA 456/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3327 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Keywords: Ignorance of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER I.T.A. NO. 456/PN/2009 ( ASSTT.YEAR. 2005-06 ) M/S. MAHADIK BROTHERS, APPELLANT SHIROLI (PULACHI) HATKANGALE, KOLHAPUR PAN : AAFFM0892B VS. ACIT ICHALKARANJI CIRCLE RESPONDENT AYAKAR BHAVAN, TARABAI PARK, KOLHAPUR APPELLANT BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI ABHAY DAMLE ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER OF THE CIT(A), KOLHAPUR DT. 27.2.2009 IN CONN ECTION WITH THE CONFIRMING OF PENALTY U/S. 271(1)(C ) OF THE INCOME TAX ACT AMOUNTING TO RS. 68,195/-. THE GROUNDS RAISED READ AS UNDER: WITHOUT PREJUDICE TO EACH OTHER: 1) ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.50,442/- LEVIED BY THE A.O U/S. 271(1)(C ) OF I. T. ACT. 2) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENA LTY U/S. 271(1)(C ) OF THE I.T. ACT ON ADDITION OF MUNI CIPAL TAXES OF RS. 18,625/-, WHEN THE ADDITION ITSELF IS WRONG. THERE WAS NO DOUBLE DEDUCTION OF MUNICIPAL TAXES CLAIMED BY THE ASSESSEE. 3) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE P ENALTY U/S. 271(1)(C ) ON UNRECORDED PURCHASES OF 2 OIL BA RRELS OF RS. 24,462/- WHICH WAS NOT RECEIVED BY THE APPEL LANT BUT BILLED BY THE BHARAT PETROLEUM CORPORATION LTD. AND THE DISPUTE IN THIS RESPECT IS PENDING WITH THE SAI D COMPANY. 2. ASSESSEE HAS ALSO RAISED FOLLOWING ADDITIONAL GROUNDS WITHOUT PREJUDICE TO THE ORIGINAL GROUNDS: PAGE 2 OF 5 ITA NO.456/PN/2009 M/S. MAHADIK BROTHERS, A.Y. 2005-06 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE LE VY OF PENALTY U/S 271(1)(C ) IN RESPECT OF THE ADDITION M ADE ON ACCOUNT OF DISALLOWANCE OF REPAIRS EXPENDITURE O F RS.89,812/- WITHOUT APPRECIATING THAT NO PENALTY WA S LEVIABLE IN RESPECT OF THE SAID ADDITION. 2] THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENA LTY LEVIED IN RESPECT OF EXCESS PURCHASES WHICH WERE DE BITED IN THE BOOKS OF RS.3280/- WITHOUT APPRECIATING THAT NO PENALTY WAS LEVIABLE ON THE SAID AMOUNT. 3. REFERRING TO THE ABOVE GROUNDS, THE COUNSEL MENT IONED THAT THE A.O LEVIED THE PENALTY OF RS.50,442/- U/S. 271( 1)( C) IN RESPECT OF CONCEALED INCOME OF RS. 1,36,172/- WHICH CONSIST S OF (I) RS.89,812/- ON ACCOUNT OF REPAIRS OF BUILDING, (II) RS. 18,625/- ON ACCOUNT OF MUNICIPAL TAXES, (III) RS.3,280/- IN RESPECT OF EXCESS PURCHASES OF OIL; AND (IV) RS.24,462/- IN RESPECT OF UN-RECORDED PURCHASES OF TWO OIL BARRELS FROM THE BPCL AND FINA LLY, (V) RS.1,670/- ON ACCOUNT OF UNACCOUNTED PROFITS RELATED TO UNACCOUNTED PURCHASE. 4. REFERRING THE PENALTY RELATABLE TO THE ADDITION OF RS.18,625-, THE COUNSEL DEMONSTRATED THAT THE SAID AMOUNT CONST ITUTE MUNICIPAL TAXES PAID AND THE SAME WAS ADDED IGNORING THE FACT THAT THE AMOUNT WAS ALREADY ADDED BY THE ASSESSEE WHILE FILI NG THE RETURN OF INCOME AND THEREFORE, THE SAME HAS TO BE DELETED. W E HAVE EXAMINED THE FACTS OF THE CASE AND DETAILS FURNISHE D BEFORE US. WE FIND THAT THE DOUBLE DISALLOWANCE HAS CREPT IN VIEW OF THE FACT THAT PROPERTY WAS PARTLY LET OFF AND THE INCOME WAS CLAI MED UNDER HOUSE PROPERTY BUT BALANCE OF THE PROPERTY WAS CO NSIDERED AS BUSINESS ASSET. CONSIDERING THE FACT THAT THERE IS NO DOUBLE DEDUCTION OF MUNICIPAL TAXES CLAIMED BY THE ASSESSE E, THE LEVY OF PENALTY IN RESPECT OF SUCH ADDITION IS UNWARRANTED . 5. REFERRING TO THE PENALTY RELATABLE TO THE ADDITI ON OF RS.3,280/-, THE COUNSEL MENTIONED THAT THE SAID AMOUNT CONSTITUTES AN UNRECONCILED SUM BETWEEN ASSESSEE RE CORDED IN THE BOOKS IN EXCESS OF THE AMOUNT RECORDED AS PER THE E NTRIES IN THE PAGE 3 OF 5 ITA NO.456/PN/2009 M/S. MAHADIK BROTHERS, A.Y. 2005-06 BPCL RECORDS IN CONNECTION WITH INVOICES NO. 540, 8 00, 4704 AND 540, 800 & 6544. THE COUNSEL MENTIONED THAT THE SA ID MISTAKE IS ATTRIBUTABLE TO THE CLERKS WHO ERRONEOUSLY MADE ENT RIES UNDER BONA FIDE BELIEF. IN THIS REGARD, THE COUNSEL RELIED ON THE DECISION OF THE PUNE BENCH IN THE CASE OF KANBAY SOFTWARE PVT LTD V S DCIT ( 122 TTJ 721) FOR THE PROPOSITION THAT PENALTY IS NOT L EVIABLE WHEN THERE IS A BONA FIDE CLERICAL ERROR. CONSIDERING THE SM ALLNESS OF THE AMOUNT AND THE LIKELY POSSIBILITY OF INVOLVEMENT O F CLERKS IN SUCH MISTAKES, WE ARE OF THE VIEW THAT PENALTY NEED NOT TO BE LEVIED IN RESPECT OF THIS ADDITION OF RS. 3,280/-. THUS, TH E ASSESSEE SUCCEEDS IN THIS REGARD. 6. REFERRING TO THE PENALTY LEVIED IN RESPECT OF TH E UNACCOUNTED PURCHASES OF RS. 24,462/- AND THE RELATED PROFITS OF RS. 1,670/-, THE COUNSEL EXPLAINED THE FACTS OF THE CASE RELYIN G ON PARA 6, 6.1 AND 6.2 OF THE ASSESSMENT ORDER WHICH R EAD AS UNDER :- 6. PURCHASE ACCOUNT OF THE ASSESSEE THE ASSESSEE IS ENGAGED IN RESALE OF PETROL DIESEL AND OTHER PETROLEUM PRODUCTS. DEALER IS BHARAT PETROLE UM CORPORATION LTD. THE COPY OF ACCOUNT OF THE ASSESS EE IN THE BOOKS OF SUPPLIER M/S BHARAT PETROLEUM CORPORATION LTD., WERE CALLED FOR. THE SAID ACCOUNT IS CROSS TALLIED WHIC H THE PURCHASE ACCOUNT MAINTAINED BY THE ASSESSEE IN ITS BOOKS. ON VERIFICATION THE FOLLOWING DISCREPANCIES WERE FOUND . DESCRIPTIONS OF THE RECEIVED BY THE RECORDED BY THE DIFFERENCE INVOICE ASSESSEE BPCL 1 OIL 11-05-04 71,549/- 71,393/- 156/- 5408004704 2 OIL 31-12-04 75,340/- 72,216/- 3,124/- 5408006544 3 OIL 29-01-05 5408003741 (-)48,925/- 73,387/- 24,462/- --------------------------------------------------- ----------------------------- 6.1 FROM THE ABOVE, IT IS SEEN THAT THE ASSESSEE HA S DEBITED EXCESS AMOUNT OF RS. 156/- AND 3,124/- TO THE PURCH ASE ACCOUNT. SIMILARLY, AT SERIAL NO 3 ABOVE THE ASSES SEE HAS NOT SHOWN PURCHASE OF RS. 24,462/-. 6.2 ON THIS DISCREPANCY, THE A.R. OF THE ASSESSEE V IDE ORDER SHEET DATED 20-11-2007 WAS ASKED TO EXPLAIN THE SAM E. IN REPLY TO THE SAID, THE A.R. OF THE ASSESSEE ATTENDE D ON 28-11- 2007 AND HAS GIVEN WRITTEN SUBMISSION AS WELL AS NO TING IN THE PAGE 4 OF 5 ITA NO.456/PN/2009 M/S. MAHADIK BROTHERS, A.Y. 2005-06 ORDER SHEET DATED 28-11-2007 IT WAS ACCEPTED THAT E XCESS AMOUNT WAS DEBITED TO THE PURCHASE ACCOUNT AND NO P URCHASE WAS RECORDED IN THE BOOKS AS POINTED OUT ABOVE. SIMULTANEOUSLY, IT IS ALSO STATED THAT RESPECTIVE SALES OF GOODS, IS ALSO NOT RECORDED IN THE BOOKS. IN VIEW OF ABOVE FOLLOWING ADDITIONS ARE MADE TO THE INCOME OF THE A SSESSEE ON ACCOUNT OF INFLATION OF PURCHASE EXPENSES AT RS. 3, 280/- SIMILARLY RS. 24,462/- ON ACCOUNT OF UNACCOUNTED PU RCHASE OF THE ASSESSEE. FUTURE AS RESPECTIVE SALE IS NOT REC ORDED IN THE BOOKS AND ADDITION ON GROSS PROFIT ON ACCOUNT UNACC OUNTED PURCHASE IS ALSO MADE, WHICH COMES TO RS.1670/-. A S SUCH THERE IS ADDITIONS OF RS. 29,412/- 1. EXCESS PURCHASES DEBITED RS. 3,280/- 2.UNACCOUNTED PURCHASE RS 24,462/- 3.GP ADDITION ON ACCOUNT OF SALES RS. 1,670/- _________ TOTAL - RS 29,412/- 7. THE NEED FOR LEVY OF THIS PENALTY IN RESPECT OF THIS AMOUNT, THE D.R. HIGHLIGHTED THE FACT THAT ASSESSEE DID NOT FILE EXPLANATION IN RESPECT OF NON-RECORDING OF THE SAID AMOUNT IN T HE BOOKS OF ACCOUNT AND HE ALSO MENTIONED THAT THE SAID AMOUNT OF RS. 24,462/- HAS TO BE ADDED AS IT RELATED TO THE INVOICE NO. 54 08003741. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE PENALTY RELYING ON THE SUPREME COURT JUDGMENT IN TH E CASE OF DHARMENDRA TEXTILE PROCESSORS, (2008) 306 ITR 277. AGGRIEVED WITH THE SAME, ASSESSEE FILED THE PRESENT APPEAL. 8. DURING THE PROCEEDINGS, THE LD COUNSEL FAIRLY RE LIED ON THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. ON THE OTHER HAND, D.R. RELIED ON PARA 7 & 8 OF THE IMPUGNED ORD ER. WE HAVE PERUSED THE ORDERS AND FIND THAT THERE IS NOT CREDI BLE EXPLANATION BY THE ASSESSEE AS TO WHY THE INVOICE NO. 5408003741 W AS NOT FULLY ENTERED IN THE BOOKS OF ACCOUNT, WHICH HAS EFFECT O F SUPPRESSION OF THE PURCHASES. CONSIDERING THE ABSENCE OF CREDIBLE EXPLANATION , WE ARE OF THE OPINION THAT THE FINDING GIVEN BY THE CIT(A) IN PARA 7 TO 9 OF THE IMPUGNED ORDER DOES NOT CALL FOR ANY IN TERFERENCE. ACCORDINGLY, THIS PART OF THE PENALTY IS CONFIRMED AND RELEVANT GROUNDS ARE DISMISSED . 9. REGARDING THE LEVY OF PENALTY IN RESPECT OF THE ADDITION OF RS.89,812/-, THE COUNSEL MENTIONED THAT THE SAID AM OUNT WAS PAGE 5 OF 5 ITA NO.456/PN/2009 M/S. MAHADIK BROTHERS, A.Y. 2005-06 CLAIMED IGNORING THE QUESTION THAT THE PROPERTY IN QUESTION WAS LET AND THE ASSESSEE ALREADY CLAIMED 30% ON ACCOUNT OF REPAIRS. AS PER THE COUNSEL, THE SAID CLAIM WAS ATTRIBUTABLE TO THE IGNORANCE OF LAW AND THE CONFUSION CREATED BY THE CLERKS OF THE ASSESSEE. CONSIDERING THE DECIDED NATURE OF THIS ISSUE, IN VI EW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF KANBAY SOFTWARE PVT LTD VS DCIT (SUPRA), WE ARE OF THE OPINION THAT THERE IS NO NEE D FOR LEVY OF PENALTY IN RESPECT OF SUCH INADVERTENCE. ACCORDINGL Y, THIS PART OF THE PENALTY ON THE ABOVE ADDITION OF RS. 89,812/- IS DELETED . 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED ON THE 9TH SEPTEMBER 2010. SD/- SD/- ( I.C. SUDHIR) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE DATED THE 9TH SEPTEMBER 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-KOLHAPUR 4. THE CIT- I/II, KOLHAPUR / CIT (CENTRAL), PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE