M/s M.J.Mathew & Sons, Chengannur V. ITO, Thiruvalla

ITA 537/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64825 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 27-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 08-10-2010
• Court: TRIBUNAL
• Assessee Lawyers: K NARAYANAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 537 /COCH/2010 ASSESSMENT YEAR : 2006-07 M/S. M.J.MATHEW & SONS, COURT ROAD, CHENGANNUR, KOTTAYAM- 689121. [PAN:AACFMO 0371Q] VS. THE INCOME TAX OFFICER, WARD-II, THIRUVALLA, KOTTAYAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI K.NARAYANAN, REVENUE BY SHRI PRATAP NARAYAN SHARMA, JR. DR DATE OF HEARING 27/08/2012 DATE OF PRONOUNCEMENT 28/09/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 12-07-2010 PASSED BY LD CIT(A)-1, TRIVANDRUM AND IT RELATES TO THE ASSES SMENT YEAR 2006-07. THE PENALTY OF RS.64,381/- LEVIED BY THE AO U/S 271(1)(C) OF THE A CT, HAVING BEEN CONFIRMED BY LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 2. THE FACTS RELATING THERE TO ARE DISCUSSED IN BRIEF. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING IN PROVISIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE FIRM HAD SHOWN OUTSTAN DING SUNDRY CREDITORS BALANCE AT RS.17,66,667/-. THE AO ASKED THE ASSESSEE TO PRODU CE CONFIRMATION LETTERS FROM SOME OF THE MAJOR CREDITORS IN ORDER TO VERIFY THE CORRE CTNESS OF THE BALANCES SHOWN BY THE ASSESSEE. ON COMPARISON OF THE ACCOUNTS, DIFFERENC ES WERE NOTICED IN THE ACCOUNT OF THE FOLLOWING CREDITORS:- I.T.A. NO.537/COCH/2010 2 (A) GENERAL TRADING COMPANY - RS .1,00,116/- (B) NIRAPARA ROLLER FLOUR MILLS (P) LTD - RS. 38,765/- (C) SELVAM STORES - RS. 43,939/- IN THE QUANTUM ASSESSMENT PROCEEDINGS, THE AO ADDED THE ABOVE SAID DIFFERENCES TO THE TOTAL INCOME OF THE ASSESSEE. IN THE PENALTY P ROCEEDINGS, THE AO LEVIED A MINIMUM PENALTY OF RS.64,381/- U/S 271(1)(C) OF THE ACT ON THE ADDITIONS CITED SUPRA. THE LD CIT(A) ALSO CONFIRMED THE SAID PENALTY AND HENCE TH E ASSESSEE IS IN APPEAL BEFORE US. 3. ACCORDING TO THE ASSESSEE, THE ACCOUNTS MAIN TAINED BY IT, IS CORRECT AND THE DIFFERENCES NOTICED BETWEEN THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND ITS SUPPLIERS ONLY REQUIRE RECONCILIATION. IT WAS FURTHER SUBMIT TED THAT THE ASSESSEE HAS AGREED TO THE SAID ADDITIONS IN ORDER TO PURCHASE PEACE, THOU GH IT COULD HAVE SUBSTANTIATED THE BALANCES SHOWN IN ITS ACCOUNTS BY PREPARING RECONCI LIATION STATEMENTS. IT WAS ALSO SUBMITTED THAT IT DID NOT PREFER TO CROSS EXAMINE T HE SUPPLIERS, AS IT MAY STRAIN THE BUSINESS RELATIONSHIP. IT WAS ALSO SUBMITTED THAT IT HAS OFFERED EXPLANATIONS WITH REGARD TO THE DIFFERENCES AND THE AO HAS MADE THE A DDITION BY DISBELIEVING THE SAID EXPLANATIONS WITHOUT MAKING ANY FURTHER ENQUIRIES. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS FAILED TO RECONCILE THE DIFFERENCES AND FURTHER THE EXPLANATIONS OFFERE D BY THE ASSESSEE WERE NOT SATISFACTORY. THE ASSESSEE HAS REFUSED TO CROSS EX AMINE THESE THREE SUPPLIERS, WHICH ONLY SUPPORTED THE CASE OF THE AO. ACCORDINGLY THE LD D.R SUBMITTED THAT THE AO HAS ESTABLISHED THE FACT THAT THE SUNDRY CREDITORS BALA NCE HAS BEEN OVERSTATED AND ACCORDINGLY PRAYED THAT THE PENALTY LEVIED ON SUCH EXCESS BALANCE SHOULD BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THOUGH THE DIFFERENCES IN THE BALANCES BETWEEN THE ACCOUNT S OF THE ASSESSEE AND THAT OF THE SUPPLIER WAS NOTED DOWN BY THE AO, YET IT IS SEEN T HAT NEITHER THE ASSESSEE NOR THE AO MAKE ANY ATTEMPT TO FIND OUT THE REASONS FOR THE DI FFERENCE. FOR EXAMPLE, A MERE CLERICAL ERROR OF POSTING OF PAYMENTS/RECEIPTS IN A WRONG ACCOUNT WOULD CERTAINLY RESULT IN A DIFFERENCE. ACCORDINGLY, IN OUR VIEW, MERE DI FFERENCE IN THE BALANCES OF ANY SUNDRY I.T.A. NO.537/COCH/2010 3 CREDITOR ACCOUNT WOULD NOT AUTOMATICALLY LEAD TO TH E INFERENCE OF CONCEALMENT, UNLESS THE REASONS FOR THE SAID DIFFERENCE WERE PINPOINTED . 6. NOW WE SHALL EXAMINE THE EXPLANATIONS OFFERE D BY THE ASSESSEE. IN RESPECT OF THE ACCOUNTS RELATING TO M/S GENERAL TRADING COMPANY, T HE ASSESSEE HAS EXPLAINED THAT THE PAYMENTS WERE MADE TO THEM BY THE MANAGING PARTNER FROM OUT OF HIS PERSONAL SOURCES, AS THE SAID PARTY WAS CLOSELY RELATED TO H IM, BUT THE SAID PARTY HAS CREDITED THE SAME TO THE ACCOUNTS OF THE ASSESSEE. IT WAS FURTH ER STATED THAT THE ASSESSEE HAS PASSED THE NECESSARY ENTRIES IN APRIL 2006 ITSELF, I.E., PRIOR TO THE COMMENCEMENT OF ASSESSMENT PROCEEDING. HOWEVER, THE AO DID NOT ACC EPT THIS EXPLANATION. IT IS PERTINENT TO NOTE THAT THE AO HAS ALSO FAILED TO MA KE NECESSARY ENQUIRIES ON THIS EXPLANATION EITHER WITH THE MANAGING PARTNER OR WIT H M/S GENERAL TRADING COMPANY IN ORDER TO VERIFY ITS VERACITY. WITH REGARD TO OTHER TWO PARTIES, THE ASSESSEE HAS SHOWN THAT THE OUTSTANDING AMOUNTS WERE PAID SUBSEQUENTLY BY WAY OF CHEQUES. HOWEVER, THE AO REJECTED THE SAID EXPLANATIONS ALSO ON THE R EASON THAT THE CLAIM OF CHEQUE PAYMENTS WAS NOT PROVED. HERE ALSO, THE AO HAS FAI LED TO VERIFY THE CLAIM OF THE ASSESSEE WITH THE CONCERNED CREDITORS. THUS, IT IS SEEN THAT THE AO HAS MADE THE IMPUGNED ADDITIONS BY MERELY REJECTING THE EXPLANAT IONS GIVEN BY THE ASSESSEE WITHOUT DISPROVING THE SAID EXPLANATIONS. 7. IT IS A WELL ESTABLISHED PRINCIPLE THAT THE ADDITION MADE IN THE QUANTUM PROCEEDING WOULD NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE PENALTY PROCEEDINGS, THE ENTIRE FACTS SHOULD BE APPRAISED A FRESH AND FOR THAT PURPOSE, THE REASONS FOR MAKING ADDITION IN THE QUANTUM PROCEEDI NGS MAY BE TAKEN AS A GOOD AID. THE FOREGOING DISCUSSIONS WOULD SHOW THAT THE ASSES SEE HAS OFFERED EXPLANATIONS ON THE ADDITIONS MADE, BUT THE SAID EXPLANATIONS WERE NOT FOUND TO BE FALSE. HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE SAID ADDITIONS WOULD NOT LEAD TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 8. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CI T(A) AND DIRECT THE AO TO DELETE THE PENALTY OF RS.64,381/- LEVIED U/S 271(1)(C) OF THE ACT. I.T.A. NO.537/COCH/2010 4 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 28-09-2012 . SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 28TH SEPTEMBER, 2012 GJ COPY TO: 1. M/S. M.J.MATHEW & SONS, COURT ROAD, CHENGANNUR, KOTTAYAM- 689121. 2.THE INCOME TAX OFFICER, WARD-2, THIRUVALLA. 3.THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, TRIVA NDRUM. 4.THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 3. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 4. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN