SHEETAL DIAMONDS LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 5289/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93235 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-07-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 12-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: B V JHAVED

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI K BENCH . . , , , BEFORE S/SH. A D JAIN ,JUDICIAL MEMBER & RAJ ENDRA,ACCOUNTANT MEMBER /. ITA NO. 5289 /MUM/ 2011 , / ASSESSMENT YEAR - 200 1 - 02 M/S. SHEETAL DIAMONDS LTD. OFF NO.8, 1 ST FLOOR, SITARAM NIWAS , 1 ST BHATWADI, JSS ROAD, OPERA HOUSE, MUMBAI - 400 004. PAN: AABCS 3005 P VS DCIT - RANGE - 8(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI B.V. JHAVED / REVENUE BY : SHRI S. S. RANA / DATE OF HEARING : 2 8 - 07 - 2015 / DATE OF PRONOUNCEMENT : 28 - 07 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER S OF THE CIT(A ) - XXIX , MUMBAI ,A SSESS EE HAS RAISED FOLLOWING GROUNDS OF APPEAL : 1. THE CIT(A) ERRED IN CONFIRMING THE PENALTY O F RS.13,69,656/ - LEVIED BY DY. CIT. 2. THE CIT(A) ERRED IN DIRECTING THE DCIT TO LEVY PENALTY OF RS.4,04,27,000/ - 3. THE ORDER OF CIT(A) CONFIRMING PENALTY AND DIRECTING THE ASSESSING OFFICER TO LEVY PENALTY ON THE ENHANCED AMOUNT OF RS.4,04,27,000/ - IS BA D IN LAW AND WITHOUT JURISDICTION 4. YOUR APPELLANT CRAVES LEAVE TO ADD TO, ALTER, AMEND OR DELETE ANY OF THE FOREGOING GROUNDS OF APPEAL. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT LEVY OF PENALTY U/S.271(1)(C)OF THE ACT. ASSESSEE - COMP A N Y ENGAGED IN THE BUSIN ESS OF EXPORTING OF CUT AND POLISHED DIAMONDS AND DIAMOND STUDDED GOLD JEWELLERY.IT FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.3.69 CRORES.THE ASSESSING OFFICER (AO ) COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT O N 19.3.2004 DETERMINING THE TOTAL INCOME THE ASSESSEE AT RS.34.63 LACS. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY ( FAA ) , WHO CONFIRMED THE ORDER OF THE AO. THE ASSESSEE AGITATED THE MATTER BEFORE THE TRIBUNAL. THE TRIBUNAL, VIDE IT S ORDER 22.8.2008 , HELD AS UNDER : '3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED A.R. HAS VEHEMENTLY ARGUED BEFORE US THAT IT HAD FURNISHED COMPLETE DETAILS OF PURCHASE AND SALE BEFORE THE ASSESSING OFFICER AND HENCE THE ACTION OF THE A. O. IN REJECTING THE BOOKS OF ACCOUNT WAS NOT AS PER LAW. IT WAS FURTHER STATED THAT DUE TO ILLNESS OF THE MA NAGING DIRECTOR OF THE COMPANY, THE BUSINESS OPERATIONS WERE CLOSED IN THIS YEAR AND THE STOCK WAS SOLD AT THROWAWAY PRICE. HE STILL FURTHER SUBMITTED THAT THE COMPANY HAS BEEN DECLARED AS DEFUNCT THEREAFTER. IN THE OPPOSITION THE LD. DR RELIED ON THE IMPUGNED ORDER. WE ARE NOT CONVINCED WITH ITA/ 5289 /MUM/ 11 , SHEETAL 2 THE SUBMISSION ADVANCED ON BEHALF OF THE ASSESSEE FOR THE OBVIOUS R EASON THAT THE PARTY - WISE DETAILS OF PURCHASE REQUIRED BY THE ASSESSING OFFICER WAS NOT FURNISHED AS HAS BEEN NOTED IN THE ASSESSMENT YEAR. NOW THE LEARNED A.R. HAS RELIED ON PAGE 115 OF THE PAPER BOOK TO CONTEND THAT THE DETAIL OF PURCHASE WAS GIVEN T O THE ASSESSING OFFICER. WE OBSERVE FROM SUCH DETAIL OF PURCHASE THAT THE TOTAL HAS BEEN SHOWN AT RS.2,92,41,677 WHEREAS IN THE TRADING ACCOUNT, THE FIGURE OF PURCHASE HAS BEEN REFLECTED AT RS.2, 77 ,06,042. ON A POINTED QUERY THE LEARNED A.R. HAS FAILE D TO RECONCILE THESE TWO FIGURES. THESE FACTS INDICATE THAT THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED BY THE ASSESSEE FROM WHICH CORRECT TOTAL INCOME COULD BE DEDUCTED. AT THE SAME LIME, WE FURTHER OBSERVE THAT THE ASSESSING OFFICER, TOO, HAS NO B ASIS FOR APPLYING NET PROFIT RATE OF 10% ON THE SALES VALUE. THOUGH HE HAS MENTIONED IN THE ASSESSMENT ORDER THAT HE WAS APPLYING THIS NET PROFIT RATE AFTER CONSIDERING THE COMPARABLE CASES, BUT THERE IS NO WHISPER ABOUT ANY SUCH COMPARABLE CASE WHATSO EVER. IT IS A SETTLED LEGAL POSITION WHEN THE BOOKS OF ACCOUNT ARE REJECTED THE ASSESSING OFFICER SHOULD BE GUIDED BY THE PROFIT RATE OF THE ASSESSEE IN THE PRECEDING YEAR, UNLESS THE FACTS JUSTIFY DEPARTURE THERE FROM. COMING BACK TO - THE FACTS OF THE INST ANT CASE, WE NOTE FROM THE WRITTEN SUBMISSIONS FILED - BEFORE THE LEARNED CIT(A) THAT IN THE IMMEDIATELY PRECEDING YEAR THERE WAS A GROSS LOSS OF RS.354 LAKHS. THE LEARNED A.R. HAS STATED THAT THE COMPANY WAS CONSISTENTLY SUFFERING LOSSES FROM YEAR TO YE AR BASIS AND WAS EVENTUALLY CLOSED. UNDER THE PRESENT CIRCUMSTANCES, NO USEFUL PURPOSE WOULD BE SERVED BY SENDING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION, AS WAS INITIALLY SUGGESTED BY THE LEARNED A.R. TAKING INTO CONSI DERATION THE TOTALITY OF THE FACTS AND CIRCUMSTANCES PREVAILING IN THIS CASE, WE ARE OF THE CONSIDERED OPINION THAT IT WOULD BE JUST AND FAIR IF THE NET INCOME FROM TRADING OPERATIONS IS TAKEN AT RS. NIL. BOTH THE SIDES HAVE AGREED TO THIS PROPOSAL FRO M THE BENCH DURING TH E COURSE OF HEARING. WE ORDER ACCORDINGLY.' MEANWHILE,THE AO INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED A PENALTY OF RS. 13.69 LACS.PENALTY ORDER WAS PASSED AFTER THE AO RECEIV ED THE ORDER OF THE FAA WHEREIN THE QUANTUM APPEAL FILED BY THE ASSESSEE WAS DECIDED AGAINST THE ASSESSEE .CHALLENGING THE PENALTY ORDER,THE ASSESSEE FILED AN APPEAL BEFORE THE FAA ,WHO ENHANCED THE PENALTY TO RS. 4.04 CRORES . 3. BEFORE US, AUTHORISED REPRESENTATIVE(AR)SUBMITTED THAT THE A O AND THE FAA HAD LEVIED THE PENALTY/CONFIRMED THE PENALTY ORDER BEFORE THE ORDER OF THE TRIBUNAL WAS PRONOUNCED,THAT THE TRIBUNAL HAD DETERMINED THE INCOME OF THE ASSESSEE AT RS.NIL,THAT THERE WAS NO JUSTIFICATION FOR ENHANCING THE PENALTY,THAT THE ASSESS EE - COMPANY WAS DEFUNCT. DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE AO HAD COMPLETED THE ASSESSMENT DETERMINING THE INCOME OF THE ASSESSEE AT RS.3 4.63 LACS,THAT THE TRIBUNAL HAD REDUCED THE INCOME FOR THE YEAR UNDER APPEAL AT RS.NIL,THAT THE COMPANY IS NOW DEFUNCT AND HAD SUFFERED A LOSS OF RS.3.54 CRORES IN THE IMMEDIATE PRECEDING AY.,THAT THE AO OR THE FAA DID NOT HAVE THE BENEFIT OF THE ORDER OF THE TRIBUNAL.AS ADDITION MADE BY THE AO HAVE BEEN DELETED BY THE TRIBUNAL IN THE QUANTUM APPEAL,SO,IN OUR OPINION THE PENALTY IMPOSED BY THE AO/ENHANCED BY THE FAA WOULD NOT SURVIVE. ITA/ 5289 /MUM/ 11 , SHEETAL 3 AS A RESULT,APPEAL FILED BY THE ASSESSE E STANDS ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 TH ,JULY,2015. 2 8 , 2015 SD/ - SD/ - ( . . /A.D. JAIN) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE:2 8 .07.2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CON CERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE C OPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.