M/s. Baroda Prints, Baroda V. The ACIT.,Circle-5, Baroda

ITA 538/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94533 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-10-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Corroborative evidences
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI S. S. GODARA, JM, & MANISH BORAD, AM. ITA NO.538/AHD/2012 ASST. YEAR: 2004-05 .M/S BARODA PRINTS, OPP> A. S. MOTORS, SALATWADA MAIN ROAD, VADODARA VS ASSTT. CIT, CIR-5, BARODA. (APPELLANT) (RESPONDENT) PA NO. AABFB 9676Q APPELLANT BY NONE (WRITTEN SUBMISSION) RESPONDENT BY SHRI RAJDEEP SINGH, SR. DR DATE OF HEARING: 9/10/2015 DATE OF PRONOUNCEMENT: 14/10/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CI T(A) V, BARODA, DATED 5.12.2011. PENALTY ORDER UNDER SECTIO N 271(1)(C) OF THE I.T. ACT, 1961 (IN SHORT THE ACT) FOR THE ASST. YEAR 2004-05 WAS FRAMED BY ACIT, CIR-5, BARODA ON 31.3.2010. ASSESSE E HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A)-V, ERRED IN LAW AND ON FACT IN UP HOLDING THE ORDER PASSED BY THE LD. AO FOR LEVYING PENALTY OF RS.1,59 ,580/- U/S 271(1)(C) OF THE INCOME-TAX ACT TREATING THE CREDIT ORS AS BOGUS CREDITORS AND ADDITIONS MADE ON ACCOUNT OF DISALLOW ANCE OF ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 2 VARIOUS EXPENDITURE LIKE EMBROIDERIES, PRINTING & L ABOUR, IRON & POLISHING EXPENSES ETC. 2. YOUR APPELLANT MOST HUMBLY RESERVES THE RIGHT TO ADD, ALTER OR SUBSTITUTE THE GROUND IN THIS APPEAL ON OR BEFORE T HE TIME OF HEARING. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF TRADING OF DRESSES AND DRESS MATERIALS. FOR ASST. YEAR UNDER APPEAL IT FILED ITS RETURN OF INCOME ON 26.10.2004 DECLARING TOTAL INCOME OF RS.10,51,310/- . ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER ON TOTAL INCOME OF RS.34,55,040/-. IN THE ASSESSMENT ORDER ASSESSING O FFICER MADE TOTAL ADDITION OF RS.24,03,705/-. OUT OF THIS ADDITION MA DE BY ASSESSING OFFICER AT RS.24,03,725/-, LD. CIT(A) V, BARODA, G AVE RELIEF OF RS.19,58,900/- AND THE REMAINING ADDITION OF RS.4,4 4,825/- WAS CONFIRMED WHICH CONSISTED OF RS.3,44,825/- BEING AD DITION ON ACCOUNT OF PURCHASES FROM BOGUS CREDITORS CALCULATED @ 25% OF BOGUS PURCHASE OF RS.10,34,472/- AND RS.1,00,000/- BEING LUMP SUM ADDITION ON ACCOUNT OF DISALLOWANCE ON EMBROIDERIES , PRINTING, LABOUR, IRON & POLISHING ETC. EXPENSES. 3. A.O. INITIATED PENALTY PROCEEDINGS ON THE CONFIR MED ADDITION OF RS.4,44,825/- AND ACCORDINGLY IMPOSED PENALTY OF RS .1,59,580/- U/S 271(1)(C) HOWEVER, ASSESSEE COULD NOT SUCCEED BEFOR E CIT(A), WHO ALSO UPHELD THE ACTION OF AO IN LEVYING PENALTY OF RS.1,59,580/- UNDER SECTION 271(1)(C) OF THE ACT. ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 3 4. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER, W RITTEN SUBMISSION HAS BEEN SUBMITTED BY THE AR OF THE ASSE SSEE ON 6.10.2015 AND THE SAME HAS BEEN ACCEPTED AND COPY P LACED ON RECORD FOR THE PURPOSE OF DECIDING THE ISSUE ON MER IT. 5. THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES B ELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE PERUSAL OF THE RECORD IT CAN BE CONSTRUED THAT PENALTY OF RS.1,59,580/- IMPOSED UNDER SECTION 271( 1)(C) OF THE ACT BY THE ASSESSING OFFICER PERTAINS TO TWO ADDITIONS CONFIRMED BY CIT(A) OUT OF WHICH ONE OF RS.3,44,825/- IS IN RELA TION TO ADDITION ON ACCOUNT OF BOGUS CREDITORS HAS CALCULATED @25% OF R S.10,34,472/- FOR THE REASON THAT THE PURCHASES WERE NOT SUPPORTE D BY CORROBORATIVE EVIDENCES INCLUDING CONFIRMATIONS FRO M SUNDRY CREDITORS AND SECONDLY ON ACCOUNT OF DISALLOWANCE OF EXPENSES OF RS.1,00,000/- INCURRED BY ASSESSEE ON EMBROIDERIES, PRINTING, LABOUR, IRON AND POLISHING. 7. AS DISCUSSED ABOVE, THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF CLOTH PRINTING, AND SELLING OF DRESS MATERIALS A ND HAS SHOWN OUTSTANDING SUNDRY CREDITORS IN ITS REGULAR BOOKS O F ACCOUNTS WHICH HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. IN THE REGULAR COURSE OF BUSINESS ASSESSEE HAS PURCHASED CLOTHES FROM VAR IOUS SUPPLIERS WHICH ARE HAVING BUSINESS OF BIG AND SMALL MAGNITUD E AND IT HAPPENS MANY TIMES THAT SUCH SUPPLIERS CHANGE THEIR BUSINES S ADDRESSES OR ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 4 CLOSE-DOWN BUSINESS OPERATIONS OR DO NOT REPLY TO T HE NOTICES OF INCOME-TAX DEPARTMENT. ASSESSMENT PROCEEDINGS NORMA LLY COMES INTO OPERATION AFTER TWO YEARS OF THE CLOSE OF THE F.Y. IN WHICH TRANSACTIONS HAVE ACTUALLY TAKEN PLACE LIKE IN THIS YEAR UNDER APPEAL WHICH IS FOR F.Y. 2003-04, THE ASSESSEE WAS ASKED V IDE NOTICE UNDER SECTION 142(1) DATED 12.12.2006 TO FURNISH COMPLETE AND LATEST POSTAL ADDRESS, PAN, CONFIRMATION LETTERS AND CERTIFIED CO PIES OF ITS ACCOUNT AND THE BOOKS OF THE ABOVE NAMED PARTIES, WHICH MEA NS THAT ALMOST AFTER THE COMPLETION OF THREE YEARS, ASSESSEE NEEDE D TO PROVIDE THE ABOVE REFERRED DETAILS. IN SUCH A SITUATION, ASSESS EE HAS COPIES OF PURCHASE BILLS IN ITS RECORD WHICH ARE THE ONLY SOU RCE FOR GIVING THE RELEVANT INFORMATION TO THE ASSESSING OFFICER AND I N CASE WHEN THERE ARE NO TRANSACTIONS BEING CARRIED OUT BY ASSESSEE W ITH SUCH CREDITORS DURING THE PERIOD WHEN THE NOTICE IS SERVED AND THE BUSINESS RELATION WITH SUCH SUPPLIERS HAVE EITHER COME TO AN END OR T HE SUPPLIER HAS CLOSED THE BUSINESS THEN IT PRACTICALLY BECOMES VER Y DIFFICULT FOR THE ASSESSEE TO COLLECT THE REQUIRED INFORMATION WITHOU T HAVING ANY POWER TO FORCEFULLY CALL FOR THE INFORMATION FROM THE SUP PLIERS. IN SUCH SITUATION, WHEN THE ASSESSEE IS UNABLE TO BRING ON RECORD THE REQUIRED INFORMATION OR SATISFY THE ASSESSING OFFICER THEN S UCH CREDITORS ARE TERMED AS BOGUS CREDITORS AND ADDITIONS AND PENALTY ARE IMPOSED ACCORDINGLY. 8. THUS WHEN ASSESSEE HAS DULY DISCLOSED THE RELEVA NT INFORMATION IN ITS RETURN OF INCOME I.E. AMOUNT OF PURCHASES, SUNDRY CREDITORS AT THE END OF THE YEAR, REGULAR BOOKS OF ACCOUNT WHICH HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER DURING THE A SSESSMENT ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 5 PROCEEDINGS, THEN THE APPLICATION OF SECTION 271(1) (C) WILL NOT BE JUSTIFIABLE. IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 HONBLE SUPREME COURT HAVE HELD THAT SECTION 271(1) (C) WILL APPLY TO AN ASSESSEE WHO HAS CONCEALED THE PARTICULARS OF HI S INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE WORDS IN ACCURATE PARTICULARS MEAN THAT THE DETAILS SUPPLIED IN THE R ETURN ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TH E TRUTH OR ERRONEOUS. IN THE ABSENCE OF FINDING GIVEN BY THE ASSESSING OF FICER THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE SHOULD BE NO QUESTION OF INVITING PENALTY U/S 271(1)(C) OF THE ACT. HONBLE APEX COUR T HAVE ALREADY HELD IN THE VERY SAME CASE CITED ABOVE THAT THE ARG UMENTS OF THE REVENUE THAT SUBMITTING INCORRECT CLAIM FOR EXPEND ITURE WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME IS NOT CORRECT. BY NO STRETCH OF IMAGINATION CAN MAKE THE INCORRECT CLAIM IN LAW TENTAMOUNT TO FURNISH INACCURATE PARTICULARS. MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WIL L NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEP TED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY THE ASSESSING OFFICER FOR ANY REASON, ASSESSEE WILL INV ITE PENALTY UNDER SECTION 271(1)(C) I.E. CLEARLY NOT THE INTENTMENT O F THE LEGISLATURE. 9. APPLYING THE ABOVE PRINCIPLES LAID DOWN BY HONB LE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA ) TO THE FACTS OF THE CASE OF ASSESSEE WHEREIN ORIGINALLY MADE ADDITI ONS BY ASSESSING OFFICER HAVING BEEN SCALED DOWN FROM RS.24,03,725/- TO ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 6 RS.4,44,825/- BY CIT(A), THEREAFTER REVENUE LOST TH E CASE (APPEAL) BEFORE THE TRIBUNAL ON THE QUANTUM ISSUE FOR AY 200 4-05 IN ITA NO.448/AHD/2009, IN SUCH A SITUATION IT CANNOT BE J USTIFIABLE TO MAINTAIN THE ACTION OF THE ASSESSING OFFICER OF IMP OSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 10. ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE IN REGARD TO THE PURCHASES. WHATEVER INFOR MATION WHICH WERE BEST AVAILABLE WITH THE ASSESSEE HAVE BEEN SUB MITTED TO THE ASSESSING OFFICER. REGARDING DISALLOWANCES OF VARIO US EXPENSES LIKE EMBROIDERY, PRINTING, IRON AND POLISHING, WHERE THE INITIAL ADDITION OF RS.3,86,978/- WAS MADE BY ASSESSING OFFICER MAINLY FOR THE REASON THAT MOST OF THE PAYMENTS WERE IN CASH OR SUPPORTED BY SELF-MADE VOUCHERS AND THEREAFTER CIT(A) RESTRICTED IT TO RS .1,00,000/-. AS FROM THE PERUSAL OF THE ASSESSMENT ORDER AND CIT(A)S OR DER IT IS CRYSTAL CLEAR THAT ASSESSEES G.P. RATES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, NO MAJOR SPECIFIC DEFICIENCIES I N THE BOOKS OF ACCOUNT HAVE BEEN CULLED OUT BY THE ASSESSING OFFIC ER AND ONLY FOR LACK OF PROPER SUPPORTING IN CASE OF PURCHASES AN E STIMATED DISALLOWANCE FROM THE TOTAL CLAIM OF EXPENSES MADE BY THE ASSESSEE HAVE BEEN MADE WHICH HAS LED TO THE IMPOSITION OF P ENALTY WHICH IS NOT JUSTIFIABLE EVEN TO THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, IT WAS NOT CORRECT ON THE PART OF ASSE SSING OFFICER FOR LEVYING PENALTY OF RS.1,59,580/- UNDER SECTION 271( 1)(C) OF THE ACT AND THE SAME IS DELETED. ACCORDINGLY THIS GROUND OF ASSESSEE IS ALLOWED. ITA NO. 538/AHD/2012 ASST. YEAR 2004-05 7 11. OTHER GROUND IS GENERAL IN NATURE WHICH NEEDS N O ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2015 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 14/10/2015 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASSTT. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 12/10/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 12/10/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 14/10/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: