Raagam Syndicate, Tirunelveli V. ITO, Tirunelveli

ITA 524/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7884 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL IRS
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NO. 524/MDS/2015. / ASSESSMENT YEAR : 2007-2008 M/S. RAAGAM SYNDICATE 52-C/57, RAJA BUILDING, TIRUNELVELI. VS. THE INCOME TAX OFFICER, WARD I(3) TIRUNELVELI. [PAN AAGFR 6514C] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. G. BASKAR, ADVOCATE $% ! ' # /RESPONDENT BY : DR. B. NISCHAL, IRS, JCIT & ' ' ( /DATE OF HEARING : 28-01-2016 ) ' ' ( /DATE OF PRONOUNCEMENT : 02-03-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, MADURAI , IN ITA NO.22/2010-11, DT. 14.01.2015 FOR THE ASSESSMENT YE AR 2007-2008 PASSED U/S.271(1) (C) AND 250 OF THE INCOME TAX ACT , 1961. ITA NO.524/MDS/2015 :- 2 -: 2. THE ASSESSEE HAS RAISED SUBSTANTIVE GROUND AGAINST ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE PENALTY U/S.271(1) (C) OF THE ACT WHERE THE ASSESSEE HAS VO LUNTARILY ACCEPTED AND AGREED FOR ADDITION AND PAID TAXES. 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS A RETAILER IN TEXTILES BUSINESS. THE ASSESSEE FILED RETURN OF INCOME ELECTRONICALLY ON 06.11.2007 WITH TOTAL INCOME OF =25,740/-. SUBS EQUENTLY THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND AS P ER SCRUTINY NORMS NOTICE U/S. 143(2) WAS ISSUED FOR HEARING. THERE WAS SURVEY OPERATIONS U/S.133A OF THE ACT AT BUSINESS PREMIS ES ON 10.10.2006 AND INCOME TAX AUTHORITIES FOUND CERTAIN DISCREPANC IES IN BOOK STOCK AND PHYSICAL STOCKS AND RECORDED A STATEMENT AND T HE ASSESSEE HAS VOLUNTARILY ACCEPTED TO OFFER AN ADDITIONAL INCOME OF =1,50,000/- OF EXCESS STOCK IN ADDITION TO THE NORMAL PROFITS AS P ER BOOKS OF ACCOUNTS. IN ASSESSMENT PROCEEDINGS, THE LD. ASSE SSING OFFICER FOUND CASH PAYMENTS IN EXCESS OF =21,000/- TO ONE OF THE SUPPLIER AND PROVISIONS OF SEC.40A(3) OF THE ACT ARE ATTRACTED A ND DISALLOWED 20% OF THE CASH PAYMENT =4,200/-. THE LD. AUTHORISED R EPRESENTATIVE APPEARED FROM TIME TO TIME AND SUBMITTED EXPLANATIO NS. THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S.143(3) OF THE ACT DATED 11.12.2009 WITH ABOVE ADDITIONS AND ASSESSED INCOME OF =1,79,940/-. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U /S.271(1) (C) OF THE ITA NO.524/MDS/2015 :- 3 -: ACT FOR INITIATING LEVY OF PENALTY AND CALLING FOR THE EXPLANATIONS. THE ASSESSEE COMPLIED WITH THE NOTICE AND SUBMITTED THA T IN TEXTILE BUSINESS, IT IS A REGULAR PRACTICE FOR THE SELLER O F THE TEXTILE INDUSTRY TO SEND THE GOODS FIRST AND INVOICE LATER IN WEEKS TIM E AND SURVEY U/S.133A OF THE ACT WAS CONDUCTED DURING THE DIWALI SEASON IN 2006 AND STOCK WERE ORDERED IN LARGE QUANTITY AND RECEIV ED ONE DAY PRIOR TO THE DATE OF SURVEY, BECAUSE OF SHORT TIME THE AS SESSEE COULD NOT TALLY PHYSICAL STOCK ON THE DATE OF SURVEY AND AGRE ED VOLUNTARY FOR ADDITION OF =1,50,000/- TO BUY PEACE WITH THE DEPAR TMENT AND TO AVOID VEXTIOUS LITIGATIONS. THE LD. ASSESSING OFFICER OV ERLOOKED THE SUBMISSIONS AND ALLEGED THAT BECAUSE OF SURVEY OPER ATIONS THE ASSESSEE HAS COME FORWARD FOR SURRENDER OF INCOME A ND FILED CONSENT LETTER OFFERING ADDITIONAL INCOME BUT PRIME FACIE, THE ASSESSEE IN ORDER TO BUY PEACE AND COOPERATED IN THE ASSESSMENT PROCE EDINGS BUT THE ASSESSING OFFICER IN PENALTY PROCEEDINGS PRESUMED T HAT THE ASSESSEE HAS NOT EXPLAINED ANY INVESTMENT OF EXCESS STOCK AN D FAILED TO RECONCILE THE DEPOSITS IN BANK ACCOUNT AND UNILATE RALLY CONCLUDED THAT THE ASSESSEE HAS CONCEALED INCOME AND FILED INACCU RATE PARTICULARS AND LEVIED PENALTY U/S.271(1) (C) OF THE ACT OF =60 ,000/- PASSED ORDER DATED 25.06.2010. AGGRIEVED BY THE ORDER OF THE AS SESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISS IONER OF INCOME TAX (APPEALS). ITA NO.524/MDS/2015 :- 4 -: 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS IN TH E TEXTILE BUSINESS AND ON THE DATE OF SURVEY ON 10.10.2006, THE DEPAR TMENT HAS NOT FOUND ANY EXCESS PHYSICAL STOCK. SINCE THE SURVEY TOOK PLACE IN DIWALI SESSION AND THE STOCKS HAVE JUST ARRIVED ONE DAY B EFORE DATE OF SURVEY THE ASSESSEE INORDER TO BUY PEACE HAS COOPE RATED AND AGREED TO OFFER ADDITIONAL INCOME OF =1,50,000/-. THE REV ENUE MADE ADHOC ADDITION WITHOUT ANY SUBSTANTIVE FACTS ON RECORDS. ASSESSEE HAS ESTABLISHED THE BONAFIDES BY PAYMENT OF THE TAXES INSPITE OF FINANCIAL CRISIS AND GENUINE DIFFICULTLY. THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE APEX COURT DECISION DILIP & SHEROFF VS. DCIT (2007) 291 ITR 590 WERE HELD THAT THE PENALTY IS NOT LEVYABLE ON T HE BASIS OF ASSESSEES CONDUCT AND BONAFIDES AND EXPLANATIONS ARE SATISFACTORY AND THERE IS NO CONTUMACIOUS CONDUCT TO EVADE TAX. IN THE PRESENT CASE THE ASSESSEE HAS FURNISHED ALL THE DETAILS IN ASSESSMENT PROCEEDINGS AND PAID TAXES AS AGREED. THE LD. AUTH ORISED REPRESENTATIVE FURTHER VEHEMENTLY ARGUED THAT THE D EPARTMENT HAS NOT FOUND ANY INCRIMINATING MATERIAL DURING THE S URVEY U/S.133A OF THE ACT EXCEPT RECORDING OF STATEMENT AND ADDITION OF INCOME IN THE ASSESSMENT PROCEEDINGS. THE LD. COMMISSIONER OF IN COME TAX (APPEALS) ON THE FINDINGS OF THE ASSESSING OFFICER AND ALSO FACTUAL MATRIX OF THE CASE RELIED ON THE DECISION OF APEX COURT MAK DATA ITA NO.524/MDS/2015 :- 5 -: (P) LTD VS. CIT, 38 TAXMANN.COM 448 AND DECISION OF JURISDICTIONAL HIGH COURT CIT VS. M/S. MEKALA FINANCE & INVESTMENT CO IN T.C. NO.495 TO 497 OF 2009, DATED 26.11.2003 AND ELABORATELY EXAMINED THE PROVISIONS AND CONCURRED WITH THE FINDINGS OF T HE ASSESSING OFFICER THAT THE INCOME WAS NOT OFFERED AND INCLUDED IN TH E RETURN OF INCOME BUT ONLY DURING SURVEY OPERATIONS. IT WAS ACCEPTED AND THERE IS A CONSCIOUS AND DELIBERATE ATTEMPT BY THE ASSESSEE TO SUPPRESS THE INCOME. WITH THESE FINDINGS, THE LD. COMMISSIONER O F INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFI CER. AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S), THE ASSESSEE HAS ASSAILED AN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE REITER ATED HIS SUBMISSIONS MADE BEFORE THE ASSESSMENT PROCEEDINGS, PENALTY PROCEEDINGS AND COMMISSIONER OF INCOME TAX (APPEAL S). THE ONLY CONTENTION THE REVENUE EMPHASIZING BUT FOR SURVEY, ASSESSEE COULD NOT HAVE OFFERED TO INCOME TAX. THE ASSESSEE IN THE SURVEY OPERATIONS WITHOUT ANY BASIS OR ANY MATHEMATICAL CALCULATIONS OR INCREMENTING MATERIAL UNEARTHERED BY THE DEPARTMENT CAME FORWAR D TO OFFER ADDITIONAL INCOME OF =1,50,000/- TO BUY PEACE WITH THE REVENUE. PRIME FACIE THE DEPARTMENT HAS NOT FOUND ANY INCRIM INATING MATERIAL IN SURVEY. FURTHER, THE LD. COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN GIVING A FINDING THAT THE ASSESSEE COULD NOT TAL LY THE STOCK AND ITA NO.524/MDS/2015 :- 6 -: EXCESS STOCK WAS FOUND. IT IS AN UNDISPUTED FACT T HAT SURVEY TEAM HAS NOT MADE ANY INVENTORY OF STOCK EXCEPT THE STATEMEN T RECORDED. FURTHER, LD. AUTHORISED REPRESENTATIVE RELIED ON TH E CBDT BOARD LETTER F.NO.286/2/2003-IT (INV), DT. 3.10.2003 ON CONFESSI ON AND ANOTHER LETTER OF CBDT DATED 18 TH DECEMBER, 2014 ON THE ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/PRESSURE DURING S EARCH/SURVEY AND RELIED ON THE JURISDICTIONAL HIGH COURT DECISION AN D PLEADED FOR DELETION OF PENALTY. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE LOWER AUTHORITIES ORDER AND VEHEMENTLY ARGUED ON TH E FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT DISCL OSURE HAS COME ONLY DUE TO SURVEY OPERATIONS AND SUPPORTED THE DEC ISIONS OF LD. COMMISSIONER OF INCOME TAX (APPEALS) 7. WE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND ALSO JUDICIAL DE CISIONS CITED. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AS SESSEES ONLY PLEA WAS TO BUY PEACE WITH THE DEPARTMENT AND CAME FORWA RD TO OFFER INCOME IN SURVEY OPERATIONS AND HAS NOT FILED AN APPEAL AGAINST ORDER OF 143 (3) OF THE ACT. THE ASSESSEE FIRM IS A SMAL L TIME BUSINESS FIRM WITH GREAT DIFFICULTY PAID ADMITTED TAX TO SUBSTAN TIATE THE BONAFIDES AND THERE IS NO CONSCIOUS AND WILLFUL ATTEMPT TO EV ADE TAXES. THE CONTENTION OF THE DEPARTMENT THAT DUE TO SURVEY OPE RATIONS ONLY THE ITA NO.524/MDS/2015 :- 7 -: ASSESSEE HAS COME FORWARD TO OFFER THE INCOME, BUT EITHER BEFORE LOWER AUTHORITIES OR BEFORE US, THE DEPARTMENT COUL D NOT SUBSTANTIATE THEIR CLAIM OF FINDING INCRIMINATING DOCUMENTS OF INVENTORY OF STOCKS EXCEPT RELYING ON THE CONSENT/CONFESSION LETTER OF THE ASSESSEE CONSIDERED BY THE ASSESSING OFFICER FOR ADDITIONS I N ASSESSMENT PROCEEDINGS. THE LD. AUTHORISED REPRESENTATIVE RELI ED ON THE CBDT LETTER DT. 03.10.2013 AS UNDER:- INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WH ERE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED T O CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH & SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETR ACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURNS OF INC OME. IN THESE CIRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPART MENTS. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COU RSE OF SEARCH IT SEIZURES AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSEL Y. ADDITIONS ARE MADE ON THE SUBMISSIONS RECORDED DURI NG THE SURVEY OPERATIONS U/S.133A OF THE ACT AND DOES NOT HAVE E VIDENTIAL VALUE WITHOUT ANY INCRIMINATING DOCUMENTS SUPPORTING THE STATEMENTS AND WE RELY ON THE JURISDICTIONAL HIGH COURT DECISION O F CIT VS. S. KHADER KHAN SON 300 ITR 0157 AND THE ASSESSEE IN PENALTY PROCEEDINGS SUBMITTED THAT IT A REGULAR PRACTICE AS THE TEXTILE BUSINESS FOR THE SELLER TO SEND THE GOODS FIRST AND INVOICE WOULD BE RECEIV ED IN WEEKS TIME. THE SURVEY WAS CONDUCTED DURING THE DIWALI SEASON A ND THE FIRM HAS ITA NO.524/MDS/2015 :- 8 -: ORDERED LARGE QUANTITY OF STOCKS AND SUCH STOCK OF GOODS WERE RECEIVED ONLY ONE DAY PRIOR TO THE DATE OF SURVEY A ND DUE TO WHICH THE ASSESSEE COULD NOT TALLY THE STOCK ON DATE OF SURVE Y AND ALSO ASSESSEE VOLUNTARILY OFFERED ADDITIONAL INCOME OF 1,50,000/- . IN ORDER TO BUY PEACE WITH THE DEPARTMENT AND AVOID PROTRACTED LITI GATION THE ASSESSEE HAS PAID TAXES AND NOT FILED APPEAL AGAINST THE ORD ER U/SEC.143(3) OF THE ACT, THE PENALTY PROCEEDINGS ARE NOT AUTOMATIC AND THEY ARE SEPARATE AND DISTINCT. WE DRAW SUPPORT FROM THE PRI NCIPLES LAID DOWN IN CASE OF CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 , (KARNATAKA) AND ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.524/MDS/2015 IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 2ND DAY OF MARC H, 2016, AT CHENNAI. SD/- SD/- ( . ! ' ) (A. MOHAN ALANKAMONY) $ %& / ACCOUNTANT MEMBER ( ' . ( ) ) (G. PAVAN KUMAR) * %& / JUDICIAL MEMBER *& / CHENNAI + / DATED: 2ND MARCH, 2016 KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT , 2. $% ! / RESPONDENT 3. 1' () / CIT(A) 4. 1' / CIT 5. /4 5 $'6 / DR 6. 5 7 8 & / GF