The Dy. Commr. Of Income Tax, Morbi Circle, Morbi V. M/s Italica Floor Tiles Pvt. Ltd., Morbi

ITA 475/RJT/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0938 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 12-10-2015
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NOS. 475 & 476/RJT/2015 ( ASSESSMENT YEARS. : 2006-07 & 2007-08) DEPUTY COMMISSIONER OF INCOME TAX MORBI CIRCLE, MORBI / VS. M/S. ITALICA FLOOR TILES PVT. LTD. BANDHUNAGAR, MORBI ./ ./ PAN/GIR NO. : AABCL2816C ( APPELLANT ) .. ( / RESPONDENT ) & ./ I.T.A. NO. 480/RJT/2015 ( ASSESSMENT YEAR: 2008-09) DEPUTY COMMISSIONER OF INCOME TAX MORBI CIRCLE, MORBI / VS. M/S. VRUNDAVAN CERAMICS PVT. LTD. 8-A, NATIONAL HIGHWAY, SURVEY NO. 143/2, VILLAGE: DHUVA, TAL. WANKANER, DIST. RAJKOT ./ ./ PAN/GIR NO. : AAACV9308B ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ANIL KUMAR DAS, SR. D.R. / RESPONDENT BY : SHRI MEHUL RANPURA, A.R. DATE OF HEARING 19/12/2019 !'# / DATE OF PRONOUNCEMENT 20/12/2019 / O R D E R ITA NO. 475, 476 & 480/RJT/2015 [DCIT VS. M/S. ITAL ICA FLOOR TILES PVT. LTD. & M/S. VRUNDAVAN CERAMICS PVT . LTD.] - 2 - PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS BY THE REVENUE ARE DIRECTED A GAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-1, RAJKOT. TH E RELEVANT DETAILS ARE TABULATED AS UNDER: ITA NOS. NAME OF ASSESSEE AY CIT(A)S ORDER DATED AOS PENALTY ORDER DATED AOS ORDER UNDER SECTION 475/RJT/15 M/S. ITALICA FLOOR TILES PVT. LTD. 2006-07 27.07.15 21.03.14 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) 476/RJT/15 -DO- 2007-08 -DO- -DO- -DO- 480/RJT/15 M/S. VRUNDAVAN CERAMICS PVT. LTD. 2008-09 28.07.15 -DO- -DO- 2. WE SHALL TAKE ITA NO.475/RJT/2015 CONCERNING AY 2006-07 AS A LEAD CASE FOR ADJUDICATION. ITA NO.475/RJT/2015 - AY- 2006-07 (IN CASE OF M/S. ITALICA FLOOR TILES PVT. LTD.) 3. THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT (A) WHEREBY THE PENALTY UNDER S.271(1)(C) OF THE ACT AMOUNTING TO R S.55,94,938/- LEVIED BY THE AO WAS DELETED BY THE CIT(A). 4. THE CIT(A) FOUND THE PENALTY TO BE UNSUSTAINABLE IN LAW FOR THE FOLLOWING REASONINGS: 6. I HAVE PERUSED THE WRITTEN SUBMISSION, ASSESSME NT ORDER, PENALTY ORDER, ORDER OF THE LD. CIT(A) ON THE QUANTUM APPEA L AND THE HON. ITAT ON THE QUANTUM APPEAL. THE LD. AR OF THE APPELLANT HAD TAKEN UP THE CASE OF THE APPELLANT ON FOLLOWING MULTIPLE GROUNDS. A. PENALTY IS NOT LEVIABLE WHERE THE PROFIT ITSELF IS WORKED OUT ON ESTIMATION BASIS. B. PENALTY IS NOT LEVIABLE ON NOTIONAL INCOME. C. PENALTY NOT LEVIABLE WHERE THE CASE HAS NOT REAC HED ITS FINALITY. ITA NO. 475, 476 & 480/RJT/2015 [DCIT VS. M/S. ITAL ICA FLOOR TILES PVT. LTD. & M/S. VRUNDAVAN CERAMICS PVT . LTD.] - 3 - D. THE DECISION OF THE HON. GUJARAT HIGH COURT IN THE CASE COVERED UNDER VAT ON A SIMILAR ISSUE, HAS BEEN DECI DED AGAINST THE REVENUE. E. THE DECISION OF THE HON. ITAT HYDERABAD ON S IMILAR ISSUE HAS BEEN DECIDED AGAINST THE REVENUE. F. PENALTY IS NOT LEVIABLE WHERE TWO OPINIONS EXI STS. G. ADDITION BY ITSELF DOES NOT JUSTIFY PENALTY IN SUPPORT OF ALL THE ABOVE ARGUMENTS, THE ID. AR O F THE APPELLANT HAS MADE EXHAUSTIVE AND DEEP ARGUMENTS IN THE CASE. FUR THER, AS POINTED OUT BY THE LD. AR OF THE APPELLANT, SIMILAR TO THE ACTI ON OF THE INCOME TAX DEPARTMENT, THE SALES TAX DEPARTMENT HAD ALSO INITI ATED PUNITIVE ACTION AGAINST ALL THE MANUFACTURERS IN WHOSE CASE SUPPRES SION OF EVASION OF EXCISE DUTY WAS ALLEGED BY THE EXCISE DEPARTMENT. O NE SUCH CASE WAS THAT OF M/S. FUTURA CERAMICS P. LTD, THE HON'BLE HIGH CO URT OF GUJARAT HAS IN THE CASE OF THE SAID FUTURA CERAMICS PVT. LTD., VS. STATE OF GUJARAT THROUGH THE SECRETARY, IN SPECIAL CIVIL APPLICATION NO. 6500 OF 2012 HELD THAT: 'THE QUESTION, HOWEVER, IS WHETHER ON A MERE SHOW C AUSE ISSUED BY THE EXCISE DEPARTMENT, THE SALES TAX DEPARTMENT CAN MAKE ADDITIONS FOR THE PURPOSE OF COLLECTING TAX UNDER T HE GUJARAT VALUE ADDED TAX ACT WITHOUT ANY FURTHER INQUIRY. IF THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX HAS UTILIZED THE MAT ERIAL COLLECTED BY THE EXCISE DEPARTMENT; INCLUDING THE S TATEMENTS OF THE PETITIONER AND OTHER RELEVANT WITNESSES AND HAD COME TO AN INDEPENDENT OPINION THAT THERE WAS IN FACT EVASION OF EXCISE DUTY BY CLANDESTINE REMOVAL OF GOODS, HE WOULD HAVE BEEN JUSTIFIED IN MAKING ADDITIONS FOR THE PURPOSE OF VAT ACT. IN THE PRESENT CASE, HOWEVER, NO SUCH EXERCISE WAS UNDERTAKEN. ALL THAT THE ASSESSING OFFICER DID WAS TO RELY ON THE SHOW CAUSE NOTICE IS SUED BY THE EXCISE DEPARTMENT. NOWHERE DID HE CONCLUDE THAT THE RE WAS A CASE OF CLANDESTINE REMOVAL OF GOODS WITHOUT PAYMEN T OF TAX UNDER THE VAT ACT. MERELY BECAUSE THE EXCISE DEPART MENT ISSUED A SHOW CAUSE NOTICE, THAT CANNOT BE A GROUND TO PRE SUME AND CONCLUDE THAT THERE WAS EVASION OF EXCISE DUTY IMPL YING THEREBY THAT THERE WAS ALSO EVASION OF TAX UNDER THE VAT AC T. IT IS NOT EVEN THE CASE OF THE DEPARTMENT THAT SUCH SHOW CAUS E NOTICE PROCEEDINGS HAS CULMINATED INTO ANY FINAL ORDER AGA INST THE PETITIONER. WE WONDER WHAT WOULD HAPPEN TO THE ORDE R OF REASSESSMENT, IF ULTIMATELY THE EXCISE DEPARTMENT W ERE TO DROP THE PROCEEDINGS WITHOUT LEVYING ANY DUTY OR PENALTY FRO M THE PETITIONER. ALL IN ALL, THE ASSTT. COMMISSIONER HAS ACTED IN A MECHANICAL MANNER AND PASSED FINAL ORDER OF ASSESSMENT MERELY ON THE PREMISE THAT THE EXCISE DEPARTMENT HAS ISSUED A SHO W CAUSE NOTICE ALLEGING CLANDESTINE REMOVAL OF THE GOODS. S UCH ORDERS THEREFORE, CANNOT BE SUSTAINED AND IS ACCORDINGLY Q UASHED. WHEN THE ORDER IS EX FACIE ILLEGAL AND WHOLLY UNTENABLE IN LAW, MERE AVAILABILITY OF ALTERNATIVE REMEDY WOULD NOT PRECLU DE US FROM INTERFERING AT THIS STAGE IN A WRIT PETITION'. ITA NO. 475, 476 & 480/RJT/2015 [DCIT VS. M/S. ITAL ICA FLOOR TILES PVT. LTD. & M/S. VRUNDAVAN CERAMICS PVT . LTD.] - 4 - BESIDES, THE APPELLANT ALSO RELIED UPON THE DECISIO N OF HON'BLE ITAT, HYDERABAD BENCH 'A' HAS IN THE CASE OF M/S VARALAXM I GRANITES (P) LTD., HYDERABAD VS. DCIT IN ITA NO. 1435 TO 1438/HUD/2010 AS CAN BE SEEN SUPRA. THE ARGUMENT OF THE LD. AR THAT NO PENALTY CAN BE L EVIED WHERE THE ADDITION IS MADE ON ESTIMATION BASIS, ALSO HAS SUBS TANTIAL FORCE. MOREOVER, THE ABOVE DECISION OF THE HON. GUJARAT HI GH COURT ALSO UPHOLDS THE FACT THAT THE VERY ADDITION STANDS ON A SHAKY GROUND. I ALSO FIND THAT THE QUANTUM ORDER ON WHICH PENALTY HAS BE EN LEVIED WAS AN ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF T HE I T ACT. SINCE THE VERY PROCEEDING OF REOPENING HAS BEEN CANCELLED BY THE HON. ITAT, THEREFORE, THE PENALTY NO LONGER SURVIVES. HENCE, T HE IMPUGNED ORDER WHICH IS CONTESTED BY VIRTUE OF THE PRESENT APPEAL, IS ALSO CANCELLED AND ACCORDINGLY THE PENALTY PROCEEDINGS STAND DELETED. HENCE, DULY RESPECTING THE JUDICIAL PRINCIPLES VIZ., THE DECISION OF THE H ON. GUJARAT HIGH COURT AND THE DECISION OF THE HON. ITAT RAJKOT BENCH IN T HE APPELLANT'S OWN CASE WHEREIN THE VERY REOPENING OF PROCEEDINGS HAVE BEEN CANCELLED, THE PRESENT PENALTY ORDER WHICH IS CONTESTED BY VIRTUE OF THE PRESENT APPEAL, IS ALSO CANCELLED AND ACCORDINGLY THE PENALTY PROCE EDINGS STANDS DELETED. THE AO IS THEREFORE DIRECTED TO CANCEL THE PENALTY. 7. IN THE RESULT, THE APPEAL IS ALLOWED. 5. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED AR FOR THE ASSESSEE POINTED OUT, AT THE OUTSET, THAT THE ADDIT IONS MADE IN THE QUANTUM PROCEEDINGS ITSELF STOOD DELETED BY THE ORDER OF TH E CO-ORDINATE BENCH OF THE ITAT IN ITA NOS. 122 TO 124/RJT/2013 & 166 TO 168/RJT/2013 CONCERNING AYS. 2005-06 TO 2007-08 ORDER DATED 16.01.2018 (IN CASE OF M/S. ITALICA FLOOR TILES P. LTD.) AND ITA NOS. 117 & 142/RJT/2013 CONCERNING AY. 2008-09 ORDER DATED 25 .05.2015 (IN CASE OF M/S. VRUNDAVAN CERAMICS PVT. LTD.) . THE APPEAL FILED BY THE REVENUE AGAINST THE ORDE R OF THE ITAT ALSO HAS BEEN DISMISSED BY THE HONBLE GUJ ARAT HIGH COURT IN PR.CIT VS. M/S. ITALICA FLOOR TILES P. LTD. R/TAX A PPEALS NOS. 1135 TO 1140 OF 2018 JUDGMENT DATED 17.09.2018. THE COPY OF THE ORDER WAS PLACED ON RECORD. 6. THE LEARNED DR FOR THE REVENUE DID NOT OFFER ANY COMMENT IN REBUTTAL EXCEPT FOR THE RELIANCE ON THE PENALTY ORD ER PASSED BY THE AO. 7. HAVING REGARD TO THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND ALSO TAKING INTO ACCOUNT THE FACT THAT ADDITIONS/DI SALLOWANCES IN THE QUANTUM ASSESSMENT GIVING RISE TO THE PENALTY CONSE QUENCES IN QUESTION HAS ITA NO. 475, 476 & 480/RJT/2015 [DCIT VS. M/S. ITAL ICA FLOOR TILES PVT. LTD. & M/S. VRUNDAVAN CERAMICS PVT . LTD.] - 5 - BEEN REVERSED BY THE CO-ORDINATE BENCH OF TRIBUNAL, THE VERY BASIS FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) OF THE ACT HAS CEASED TO EXIST AND DOES NOT SURVIVE ANY MORE. HENCE, CONCLUSION DRAWN BY THE CIT(A) TOWARDS DELETION OF PENALTY DOES NOT CALL FOR ANY I NTERFERENCE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 9. FOR THE SIMILAR REASONS, THE APPEAL OF THE REVEN UE IN OTHER CAPTIONED APPEALS AGAINST DELETION OF PENALTY BY CIT(A) UNDER S.271(1)(C) OF THE ACT ARE ALSO DISMISSED. 10. IN THE COMBINED RESULT, ALL THREE APPEALS OF TH E REVENUE ARE DISMISSED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR KE DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 20/12/2019 TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2019