Virendra Kumar Jain Prop. Jinendra Motors, JODHPUR V. ITO, BALMER

ITA 560/JODH/2008

• Counselvise Citation: 56023314 RSA 2008
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 06-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R KOKANI
• Assessee Lawyers: U C JAIN
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (JODH[PUR BENCH: JODHPUR) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 560/JDP/2008 ASSESSMENT YEAR: 2003-04 VIRENDRA KUMAR JAIN, PROP. VS. INCOME-TAX OFFICER, JINENDRA MOTORS, BARMER SUBHASH CHOWK, BARMER (PAN: AAPPC2465C) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI UC JA IN, ADV. RESPONDENT BY: SHRI R. KOKANI, DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 16.07.2008 PASSED FOR ASSESSMENT YEAR 2003-04. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,30,000 IMPOSED UNDER SEC. 271(1)(C) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE WA S RUNNING A PROPRIETARYSHIP CONCERN IN THE NAME AND STYLE OF M/ S. JITENDRA MOTORS, SUBHASH CHOWK, BARMER (RAJASTHAN). HE IS ENGAGED IN TRADING OF ALUMINUM, IRON, BRASS AND BATTERY SCRAP AND ALSO DEALING IN M OTOR PARTS. A SURVEY UNDER SEC. 133A WAS CONDUCTED AT THE HEAD OFFICE AT BARME R ONLY ON 12 TH SEPTEMBER 2002. THE ASSESSEE HAS FILED HIS RETURN O F INCOME ON 20.11.2003 2 DECLARING AN INCOME OF RS.1,47,750. AN ASSESSMENT O RDER UNDER SEC. 143(3) WAS PASSED ON 28.3.2006. ASSESSING OFFICER HAS COMP UTED THE TOTAL INCOME OF THE ASSESSEE AT RS.8,44,691. HE HAS MADE THE FOL LOWING ADDITIONS: A) ADDITION ON A/C OF EXCESS STOCK 3,88,405 B) TRADING ADDITION:- (I) IN RESPECT OF HEAD OFFICE 94,322/- (II) IN RESPECT OF GANDHIDHAM BR. 35,445/- (III)IN RESPECT OF AJMER BRANCH 1,63,815/- 2, 93,582 C) DISALLOWANCE OF INDIRECT EXPENSES 10,45 4 D) DISALLOWANCE OF TURNOVER TAX 4,500 6,96,941 3. THE DISPUTE TRAVELED UP TO THE ITAT AND THE ITAT HAS DELETED THE FOLLOWING ADDITIONS: A) ADDITION IN RESPECT OF STOCK 3,88,405 B) ADDITION IN RESPECT OF GANDHIDHAM BRANCH 35, 445 C) ADDITION IN RESPECT OF AJMER BRANCH 1 ,63,815 D) ADDITION ON INDIRECT EXPENSES 10,454 5,98,119 4. AFTER THE ORDER OF THE ITAT, THE INCOME ASSESSAB LE HAS BEEN WORKED OUT AT RS.2,69,090 AS AGAINST RS.1,47,750. THE ADDI TION MAINLY RESULTED ON ACCOUNT OF TRADING ADDITION BY ESTIMATION OF G.P. THE ITAT HAS DIRECTED THE ASSESSING OFFICER TO APPLY A G.P. RATE OF 9.5% ON T HE TOTAL TURNOVER OF RS.1,26,00,779. ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS ON 3 THE BASIS OF THE ORIGINAL ASSESSMENT ORDER. HE HAS LEVIED THE PENALTY ON THE GROUND THAT BECAUSE OF THE SURVEY DISCREPANCIES COU LD SURFACED OUT IN THE TRADING ACCOUNT OF THE ASSESSEE WHICH LED TO DECLAR ATION OF EXCESS STOCK ETC. 5. DISSATISFIED WITH THE PENALTY ORDER, ASSESSEE CO NTENDED BEFORE THE LEARNED CIT(APPEALS) THAT HIS APPEAL IS PENDING BEF ORE THE ITAT IN RESPECT OF QUANTUM ADDITION. KINDLY TAKE UP THE HEARING IN THE PENALTY APPEAL AFTER THE DECISION ON THE QUANTUM APPEAL BY THE ITAT. HOW EVER, LEARNED CIT(APPEALS) DID NOT ACCEDE TO THE CONTENTION OF AS SESSEE AND PROCEED TO DECIDE THE APPEAL. LEARNED CIT(APPEALS) HAS CONFIRM ED THE PENALTY. 6. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. REVENUE AUTHORITIES BELOW HA VE CONSIDERED THE IMPOSITION OF PENALTY QUA THE INCOME DETERMINED BY THE ASSESSING OFFICER AT RS.5,98,119 WHILE GIVING EFFECT TO THE LEARNED CIT( APPEALS)S ORDER. THEY HAVE NOT THE BENEFIT OF THE ORDER OF THE ITAT IN IT A NO.236/JOD/07 WHICH HAS BEEN RENDERED ON 30 TH SEPTEMBER 2010. AFTER THAT ORDER, THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS.2,69,090 WHICH INCL UDES RETURNED INCOME OF RS.1,47,750. BEFORE ADVERTING TO THE ISSUE WHETHER PENALTY IS IMPOSEABLE UPON THE ASSESSEE OR NOT. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY AND, THEREFORE, IT IS SALUTARY U PON US TO TAKE NOTE OF THE 4 RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHICH READ AS UNDER: 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1). IF THE ASSESSING OFFICER OR THE COMMISSIONER ( APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED THAT ANY PERSON (A) AND (B)******** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I) AND (INCOME-TAX OFFICER,)******** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1.- WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER(APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION 5 OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHI CH PARTICULARS HAVE BEEN CONCEALED. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION C AN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INT O PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)( C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FAC TS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISION S OF THE ACT, THE ASSESSEE 6 FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OF FERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARN ED CIT(APPEALS); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPU TATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NO T ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT SU CH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS R ELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UN DER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAYA IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO TH E COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEE MING FICTION WOULD COME TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL IN COME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANA TION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. T HESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1 )(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN T HE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUT ING THE TOTAL INCOME OF 7 THE ASSESSEE, FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCUR ATE PARTICULARS HAVE BEEN FURNISHED. 8. ON PERUSAL OF THE RECORD, IT REVEALS THAT ADDITI ON HAS BEEN CONFIRMED ONLY BY ESTIMATING THE G.P. ASSESSING OFFICER HAS N OT POINTED OUT WHICH PARTICULAR FURNISHED BY THE ASSESSEE IS INACCURATE AND HOW HE HAS CONCEALED THE INCOME. THE ADDITIONS WHICH ACCORDING TO THE AS SESSING OFFICER WERE FALLING WITHIN THE AMBIT OF EXPLANATION (I) APPENDE D TO SEC. 271(1)(C) AND COULD GOAD HIM TO VISIT THE ASSESSEE WITH THE PENAL TY, HAVE ALREADY BEEN DELETED BY THE ITAT. AGAINST AN ESTIMATED ADDITION ON ACCOUNT OF G.P., TO OUR MIND IN THE FACTS OF THE PRESENT CASE, NO PENALTY I S IMPOSEABLE. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 29.08.201 1 SD/- SD/- ( K.D. RANJAN ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/08/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR