P. BHARATKUMAR & CO., MUMBAI V. DCIT (OSD-I)CENT.RG.-7, MUMBAI

ITA 472/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100880 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 18-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 16-01-2013
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Gross profit estimation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 472 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 6 - 20 0 7 ) M/S P.BHARATKUMAR & CO., C/O MOHANLAL JAIN & CO., CHARTERED ACCOUNTANTS, 10, CHARTERED HOUSE, GR. FLOOR, DR. C.H.STREET, MARINE LINES, MUMBAI - 400002 VS. ACIT (OSD) - I, CR - 7, MUMBAI - 20 ./ ./ PAN/GIR NO. : A A A FP 2301 B ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI VIJAY KOTHARI /REVENUE BY : SHRI SATYA PAL KUMAR / DATE OF HEARING : 19 /0 8 / 2015 / DATE OF PRONOUNCEMENT 26/08 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI , DATED 27 - 11 - 2012 FOR THE ASSESSMENT YEAR 2006 - 07 , IN THE MATTER OF IMPOSITION OF PENALTY U/.S271(1)(C) OF THE I.T.ACT . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS AS TRADER IN DIAMONDS. THE ASSESSEE ALSO CARRIED ON BUSINESS AS ADATIYA AGENT. THERE WAS A SEARCH AT ASSESSEES PREMISES ON 26 - 5 - 2005 . DURING THE COURSE OF SEARCH INVENTORY WAS TAKEN. THE AO OBSERVED THAT THERE ITA NO. 472 /1 3 2 WAS DIFFERENCE OF 4415.23 CTS IN BETWEEN THE STOCK OF DIAMONDS AS PER PAGE NO.25 AND THE DIAMONDS ACTUALLY F OUND (73,753.22 CTS ) AND THE SAME WERE LYING IN THE MARKET WITH THE CUSTOMERS OF ASSESSEE FOR SALE. THEREFORE, THE AO BY APPLYING GP RATE ESTIMATED PROFIT OF RS.21,62,736/ - ON ACCOUNT OF LOW GP RATE. THE AO ALSO MADE AN ADDITION OF RS.15,16,069/ - AND RS.44 ,08,336/ - . THE AO LEVIED PENALTY WITH RESPECT TO ENTIRE ADDITION SO MADE. IN QUANTUM APPEAL, THE MATTER TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUNAL DELETED THE ADDITION OF RS. 15,16,069/ - AND RS.44,08,336/ - . ONCE THE ADDITION ITSELF HAS BEEN DELETED, THE P ENALTY IMPOSED WITH RESPECT TO SUCH ADDITION HAS NO LEGS TO STAND. WE ALSO FOUND THAT THE AO HAS ALSO PASSED ORDER TO GIVE EFFECT TO THE ORDER OF ITAT ON 15 - 10 - 2012 AND DELETED THE ADDITION SO MADE AS PER THE DIRECTION OF THE TRIBUNAL. ACCORDINGLY, WE DO N OT FIND ANY MERIT IN THE PENALTY LEVIED FOR THE ADDITION WHICH HAD BEEN ULTIMATELY DELETED BY THE TRIBUNAL VIDE ORDER DATED 8 - 8 - 2012. 3. NOW, WE ARE LEFT WITH THE ESTIMATED ADDITION OF RS. 21,62,736/ - MADE BY THE AO ESTIMATING GP RATE ON THE DIFFEREN CE OF DIAMONDS ALLEGED TO BE LYING WITH THE CUSTOMERS FOR SALE. WE FOUND THAT ADDITION HAS BEEN MADE ON ESTIMATED BASIS AND HAVE NO COGENT MATERIAL. THERE IS NO DISPUTE TO THE PROPOSITION THAT PENALTY PROCEEDINGS IS DISTINCT AND DIFFERENT FROM THE ASSESSMENT PRO CEEDINGS AND PENALTY IS NOT LEVIABLE M ERELY BECAUSE ANY AMOUNT IS ASSESSED AS 'INCOME' EVEN THOUGH THE SAME DOES NOT REPRESENT 'REAL INCOME' AS HAS BEEN HELD IN VARIOUS CASE LAWS. FURTHERMORE, IT IS NEVER BE THE LEGISLATIVE INTENT TO PENALIZE THE ASSEESEE ON CHARGE OF ITA NO. 472 /1 3 3 CONCEALMENT MERELY BECAUSE CERTAIN ADDITION IS ACCEPTED BY THE ASSESSEE JUST TO AVOID LITIGATION AND TO BUY PEACE AND HAD THAT BEEN SO, ALL THE ASSESSEE WOULD HAVE INDULGED IN LONG LITIGATION AND NO ASSESSEE WOULD EVER TRIED TO AVOID THE LITI GATION TO BUY PEACE OF MIND. IF THERE ARE BONA FIDE VIEWS AND INFERENCE IS TO BE DRAWN ON THE BASIS OF FACTS AS ALSO INTERPRETATION OF LAW IN WHICH THE VIEW CANVASSED BY THE ASSESSEE IS NOT ACCEPTABLE TO THE REVENUE, THE EXISTENCE OF THE OPPOSITE VIEW WOUL D NOT BY ITSELF JUSTIFY THE IMPOSITION OF PENALTY. FOR THIS PROPOSITION, WE RELY ON THE FOLLOWING DECISIONS: - A) CIT VS. CAMLIN POINT LABORATORIES LTD. (2007) 293 ITR 524 (MAD). B) CIT VS. AJAIB SINGH & CO.(2002) 253 ITR 630 (P&H). C) CIT VS. SIVANANDA STEELS LT D. (2002) 256 ITR 683 (MAD). D) DURGA KAMAL RICE MILLS VS. CIT (2004) 265 ITR 25 (CAL). E) CIT VS. SOHAN PAL HUF (2008) 302 ITR 262 (P&H). F) CIT VS. BACARDI MARITINI INDIA LTD. (2007) 288 ITR 285 (DEL). G) NUCHEM LTD. VS. CIT (1994) 49 TTJ 177 (DEL). 4. THE CHE NNAI BENCH IN THE CASE OF SURESH REDDY VS. ACIT (2008) 120 TTJ 523 (CHENNAI) ANALYSED VARIOUS DECISIONS VIZ 83 ITR. 26 (SC), 251 ITR 9 (SC), 83 ITR 369 (SC), 282 ITR 435 (SC), 265 ITR 327 (KER), 254 ITR 45 (KER), 265 ITR 562 (SC), 88 ITR 192 (SC), 203 ITR 792 (BOM), FINALLY DREW SUPPORT FROM THE HONBLE SUPREME COURT DECISION IN CASE OF KARTAR SINGH VS. STATE OF PUNJAB JT 1994 (2) SC 432.P. 466 : 1994 (3) SCC 569 LAYING DOWN THE FOLLOWING PRINCIPLES --- O THE PRINCIPLE APPLIED IN CONSTRUING A PENAL ACT IS THA T IF, IN CONSTRUING THE RELEVANT PROVISIONS, THERE APPEARS ANY REASONABLE DOUBT OR AMBIGUITY, IT WILL BE RESOLVED IN FAVOUR OF THE PERSON WHO WOULD BE LIABLE TO PENALTY; ITA NO. 472 /1 3 4 O IF THERE IS REASONABLE INTERPRETATION, WHICH WILL AVOID THE PENALTY IN ANY PARTICULA R CASE, THAT CONSTRUCTION MUST BE ADOPTED; O IF THERE ARE TWO CONSTRUCTIONS, THE MORE LENIENT ONE MUST BE ADOPTED; O IF THE LANGUAGE OF THE STATUTE IS EQUIVOCAL AND THERE ARE TWO REASONABLE MEANINGS OF THAT LANGUAGE, THE INTERPRETATION THAT WILL AVOID THE PENALTY IS TO BE ADOPTED. 5. THERE IS ALSO NO DISPUTE TO THE PROPOSITION THAT THE LEGALITY OF THE LEVY OF PENALTY MUST BE CONSIDERED INDEPENDENTLY AND UNINFLUENCED BY THE TREATMENT MADE IN THE ASSESSMENT ORDER. THE PROCEEDINGS RELATING TO THE ASSESSMENT A ND APPEAL ON THE QUANTUM OF INCOME ASSESSED/ASSESSABLE CANNOT AND SHOULD NOT BE THE BASIS NOR THE FINDINGS GIVEN THEREIN, TO SUSTAIN PENALTY ON THE ASSESSEE. SO LONG AS THE THE ASSESSEE OFFERS PLAUSIBLE EXPLANATION ALTHOUGH THE SAME IS REJECTED IN ASSESSME NT OR APPEAL, THE SAME MUST NOT BE TAKEN AS THE BASIS FOR LEVYING PENALTY FOR THIS PROPOSITION, RELIANCE CAN BE PLACED ON THE FOLLOWING DECISIONS : - I. CEMENT MARKETING CO. OF INDIA LTD. VS.ACIT 124 ITR 15 (SC) II. M/S VIP INDUSTRIES LTD. VS. ACIT (ITA NO. 4383 /MUML2006)(ITAT - MUM) III. MIMOSA INVESTME NT CO. LTD. VS. ITO (ITA.NO.2983/MU M/2007)(ITAT - MUM) IV. MRS. NAJMA M. KANCHWALA VS. ITO (2009) 24 DTR 369 (ITAT - MUM) 6 . IN THE INSTANT CASE, ADDITION WAS MADE BY THE AO ON ESTIMATION BASIS AND THERE WAS NO COGENT MATER IAL BEFORE THE AO TO CONCLUDE THAT DIFFERENCE OF STOCK WAS ACTUALLY SOLD IN THE MARKET SO AS TO EARN ANY PROFIT. APPLYING THE PROPOSITION OF LAW DISCUSSED ABOVE, WE DO NOT FIND ANY MERIT ITA NO. 472 /1 3 5 FOR IMPOSITION OF PENALTY WITH RESPECT TO THE ESTIMATED GP ADDITION M ADE BY THE AO. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 26/08 / 201 5 . SD/ - SD/ - ( ) ( PAWAN SINGH ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 26/08 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. //TRUE COPY//