Valarmathi Silks, Kancheepuram V. ACIT, CHENNAI

ITA 564/CHNY/1993

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64352 (ITAT-CHENNAI)
• Duration Of Justice: 19 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-09-2012
• Assessment Year: 1988-1989
• Appeal Filed On: 25-02-1993
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: S SRIDHAR
• Section: 133A; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NOS.564, 565 & 566/MDS/1993 ASSESSMENT YEARS : 1988-89, 1988-89 & 1989-90 M/S VALARMATHI SILKS 12, METTU STREET KANCHEEPURAM VS THE ACIT CITY CIRCLE VI(1) CHENNAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : DR.S. MOHARANA, CIT/DR DATE OF HEARING : 25-09-2012 DATE OF PRONOUNCEMENT : 27-09-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF THE CIT(A)-VI,MADRAS, DATED 30.1 2.1992. 2. THE APPEALS IN I.T.A.NOS.564 AND 566/MDS/1993 ARE AGAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN ASSESSMENT YEARS 1988-89 AND 1989-90. THE ASSESSEE HAS CHALL ENGED THE LEVY OF PENALTY BY RAISING THE COMMON GROUND OF APPEAL WHI CH READS AS UNDER: I.T.A.NO.564,565 & 566/93 :- 2 -: THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY OF ` 3,87,668/- LEVIED U/S 271(1)(C) OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT IN THE ASSESS MENTS MADE BY THE ASSESSING OFFICER, ADDITION OF ` 2,84,771/- WAS MADE IN ASSESSMENT YEAR 1988-89 AND ` 3,79,350/- WAS MADE IN ASSESSMENT YEAR 1989-90 ON ACCOUNT OF DIFFERENCE BETWEEN WEAVI NG CHARGES OF ` 6,27,045/- AS PER GENERAL LEDGER WHICH WAS DEBITED IN THE PROFIT & LOSS ACCOUNT OF ASSESSMENT YEAR 1988-89 AND THE WEAVING CHARGES PAID OF ` 3,42,274/- AS PER PORAI PERADU FOR THE YEAR ENDING ON 31.3.1988. SIMILARLY, ADDITION OF ` 3,75,082/- WAS MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE WEAVING CHARGES OF ` 7,66,146/- AS PER GENERAL LEDGER WHICH WAS DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR 1989-90 AND THE WEAVING CHARGES PAID OF ` 3,91,064/- AS PER THE PORAI PERADU FOR THE YEAR ENDING 31.3.1989. THE AD DITION WAS CONFIRMED IN APPEAL BY THE CIT(A). THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 271(1)(C) OF THE ACT AND THE A SSESSEE DID NOT FILE ANY REPLY TO THE SAID NOTICE. HENCE, THE ASSESSING OFFICER FINALIZED THE PENALTY PROCEEDINGS EX-PARTE AND HELD THAT THE ASS ESSEE DID NOT HAVE A VALID EXPLANATION TO OFFER AND LEVIED PENALTY OF ` 2,61,245/- IN I.T.A.NO.564,565 & 566/93 :- 3 -: ASSESSMENT YEAR 1988-89 AND ` 3,87,668/- IN ASSESSMENT YEAR 1989-90 U/S 271(1)(C) OF THE ACT. 4. BEFORE THE CIT(A), THE ASSESSEE OBJECTED TO THE L EVY OF PENALTY AS BEING UNWARRANTED AND EXCESSIVE. THE CI T(A) CONFIRMED THE LEVY OF PENALTY BY MAKING SIMILAR OBSERVATIONS IN BOTH THE YEARS IN APPEAL EXCEPT FOR CHANGE IN FIGURES, AS UNDER: 4. I REJECT HIS ARGUMENT, AS THE INCOME RETURNED AND ASSESSED WERE ` 60,400 AND ` 3,44,770 RESPECTIVELY AND THE DISALLOWANCE OF ` 2,84,771, BEING THE DIFFERENCE BETWEEN THE WEAVING CHARGES OF ` 6,27,045 DEBITED TO THE PROFIT & LOSS ACCOUNT AND THE WEAVING CHARGES PAID OF ` 3,42,274, AS PER THE PORAI PERADU, FOR THE YEAR ENDING ON 31.3.88 WA S CONFIRMED BY THE CIT (APPEALS) III, MADRAS, IN THE ORDER CITED IN PARA 2 ABOVE. FURTHER, AS THE APPELLANT DID NOT FILE A PENALTY REPLY, THOUGH THE A.C. GAVE IT ADEQUATE OPPORTUNITIES OF BEING HE ARD ON 18.4.91, 13.7.91, 19.3.92 AND 30.3.92, I CONCUR WIT H THE A.C. THAT THE APPELLANT DID NOT HAVE A VALID EXPLANATION TO OFFER AND THAT PENALTY UNDER SECTION 271(1)(C) WAS EXIGIBLE. FURTHER, THE QUANTUM OF PENALTY LEVIED WAS REASON ABLE AND NOT EXCESSIVE, AS THE A.C OF INCOME-TAX, VELLORE, I N HIS LETTER DATED 16.12.92 REPORTED THE MAXIMUM PENALTY LEVIABL E AT ` 4,35,408. HENCE, FOLLOWING THE DECISIONS OF THE A. P. HIGH COURT IN YELAVARTI GOPALAKRISHNAIAH AND OTHERS VS C IT 967 ITR PAGE 184) AND THE MADRAS HIGH COURT IN L.K.SHAI K MOHAMED BROTHERS VS CIT (110 ITR PAGE 808), I CONFI RM HE LEVY OF PENALTY OF ` 2,61,245 UNDER SECTION 271(1)(C) FOR 88- 89 ASSESSMENT YEAR AND I DISMISS THIS APPEAL. 5. THE A.R OF THE ASSESSEE ARGUED AND SUBMITTED THAT THE TRIBUNAL IN THE QUANTUM APPEAL OF THE ASSESSEE FILED IN I.T .A.NOS.2541 & 2542/MDS/1992, VIE ITS ORDER DATED 18.8.1993, HAS O BSERVED THAT ON I.T.A.NO.564,565 & 566/93 :- 4 -: 16.2.1989 SURVEY OPERATIONS WERE CONDUCTED BY THE D EPARTMENT U/S 133A OF THE ACT. THE SAID OPERATIONS REVEALED THAT THE DAY BOOK HAD BEEN WRITTEN ONLY UPTO 17.1.1989 AND THAT THE DETAI LS OF THE TRANSACTIONS THAT TOOK PLACE DURING THE PERIOD FROM 18.1.1989 TO 15.2.1989 WERE NOT AVAILABLE FOR VERIFICATION. THE TRIBUNAL FURTHER NOTED IN ITS ORDER AT PARA 3 THAT COMPARISON OF THE ENTRIES IN PORAI PERADU AND THE GENERAL LEDGER DISCLOSED THAT ACCORD ING TO THE ENTRIES IN THE PORAI PERADU WAGES PAID BY THE ASSESSEE TO THE WEAVERS FOR GETTING SILK SAREES MANUFACTURED AGGREGATED TO ` 3,42,274/-, THE CORRESPONDING FIGURE ACCORDING TO THE GENERAL LEDGE R WAS ` 6,27,045/-. IN OTHER WORDS, IN THE GENERAL LEDGER RELATING TO T HE YEAR OF ACCOUNT ENDING ON 31.3.1988 THE WAGES HAD BEEN OVER STATED BY A SUM OF ` 2,84,774/-. SIMILARLY, IN RELATION TO THE YEAR OF ACCOUNT ENDING ON 31.3.1989, THE OVER-STATEMENT IN THE GENERAL LEDGER WAS OF THE ORDER OF ` 3,75,082/-. THE A.R FURTHER SUBMITTED THAT BEFORE THE TRIBUNAL THE ASSESSEE EXPLAINED THAT DISCREPANCIES WERE BECA USE THE WAGES PAYABLE TO THE WEAVERS IN ACCORDANCE WITH THE AGREE MENT ENTERED INTO BETWEEN THE WEAVERS ASSOCIATION ON THE ONE HAND A ND THE MANUFACTURERS ASSOCIATION ON THE OTHER HAND HAD BE EN NOTED IN THE PORAI PERADU. IN THE GENERAL LEDGER, HOWEVER, THE WAGES ACTUALLY PAID WAS ENTERED. ONLY IF THE EXTRA WAGES WERE GIVEN, T HE WEAVERS WOULD I.T.A.NO.564,565 & 566/93 :- 5 -: AGREE TO WORK FOR THE ASSESSEE AND DO THE WORK QUI CKLY. THERE WAS NO BASIS FOR FIXING THE EXTRA WAGES. DEPENDING ON THE CIRCUMSTANCES AND NECESSITY SUCH WAGES WERE DECIDED FROM DAY TODA Y AND PAID. ON OCCASIONS LIKE DIWALI, PONGAL AND MARRIAGE SEASON E XTRA WAGES ARE PAID. HE FURTHER SUBMITTED THAT THE TRIBUNAL, AFTE R CONSIDERING THE SUBMISSIONS, HELD IN PARA 20 OF THE ORDER THAT IN PRINCIPLE, THE LOWER AUTHORITIES WERE JUSTIFIED IN MAKING ADDITION TOWAR DS INFLATION OF WAGES. THE TRIBUNAL ALSO OBSERVED THAT IT CANNOT R ULE OUT THE POSSIBILITY OF THE ASSESSEE HAVING PAID ON SOME OC CASIONS ATLEAST, SOME EXTRA WAGES AS AN INCENTIVE AND PURELY AS A MA TTER OF BUSINESS EXPEDIENCY. TAKING A GLOBAL VIEW OF THE MATTER, TH E TRIBUNAL HELD THAT IT WOULD BE FAIR TO GIVE THE ASSESSEE THE BENEFIT OF DOUBT TO SOME EXTENT AND HELD THAT THE EXTRA WAGES PAID COULD REA SONABLY BE ESTIMATED AT 10% OF THE WAGES RECORDED IN THE PORAI PERADU. THUS, IT WAS HIS SUBMISSION THAT THE TRIBUNAL HAD NOT COME T O A CONCRETE FINDING THAT THE ASSESSEE HAD INFLATED THE WAGES P AID TO THE WEAVERS IN ITS BOOKS OF ACCOUNT IN ORDER TO EVADE PAYMENT O F TAX. HE SUBMITTED THAT FIRSTLY, THE ADDITION WAS CONFIRMED ONLY ON THE BASIS OF AN ESTIMATE. SECONDLY, HE SUBMITTED THAT PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED ONLY IN A CASE WHERE THE ASS ESSEE CONCEALED ITS PARTICULARS OF INCOME OR FILED INACCURATE PARTICULA RS OF ITS INCOME. HE I.T.A.NO.564,565 & 566/93 :- 6 -: SUBMITTED THAT BOTH THE CONDITIONS ARE NOT SATISFIE D IN THE CASE OF THE ASSESSEE AND THEREFORE, THE PENALTY LEVIED U/S 27 1(1)(C) OF THE ACT BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) S HOULD BE DELETED. 6. ON THE OTHER HAND, THE CIT/DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. IN I.T.A.NO.565/MDS/1993, FOR ASSESSMENT YEAR 1988 -89, THE ASSESSEE IS IN APPEAL AGAINST THE LEVY OF PENA LTY U/S 273(2)(B) OF THE ACT BY RAISING THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN GIVING ONLY PART RELIEF AS THE APPEAL FILE D AGAINST LEVY OF PENALTY U/S 273(2)(B) ON THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 273(2)(B) OF THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE ASSESSEE-FIRM WAS CONSTITUTED BY A PARTNERSHIP DEED DATED 21.4.1987 AND WAS A NEW ASSESSEE AND WAS NOT ASSESSED TO TAX. IT FAILED TO COMPLY WITH THE PROVISIONS OF SE CTION 209A(1)(B) OF THE ACT. THE ASSESSEE HAD FILED RETURN SHOWING IN COME OF ` 60,000/- WHICH WAS ASSESSED AT ` 3,44,770/-. AN ADDITION OF ` 2,84,771/- WAS MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE WEAVING C HARGES OF ` 6,27,045/- DEBITED IN THE PROFIT & LOSS ACCOUNT AND THE WEAVING I.T.A.NO.564,565 & 566/93 :- 7 -: CHARGES PAID OF ` 3,42,774/- AS PER THE PORAI PERADU FOR THE YEAR ENDING 31.3.1988. 9. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED TH E ADDITION BUT SET ASIDE THE ORDER OF THE ITO REFUSI NG REGISTRATION TO THE FIRM. THE ASSESSING OFFICER GRANTED REGISTRATION T O THE ASSESSEE-FIRM AFTER LEVY OF PENALTY U/S 273(2)(B) OF THE ACT OF ` 1,19,410/- BEING 100% OF 75% OF THE ASSESSED TAX FOR ASSESSMENT YEAR 1988-89. 10. THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF TH E ASSESSING OFFICER AND ARGUED THAT THE LEVY OF PENAL TY IS UNWARRANTED. THE CIT(A) HELD AS UNDER: 4. I REJECT HIS ARGUMENT, AS I CONCUR WITH THE A. C. THAT AS THE APPELLANT FAILED TO COMPLY WITH THE PROVISIO NS OF SECTION 209A(1)(B) AND TO FILE A PENALTY REPLY, THO UGH, ADEQUATE OPPORTUNITIES OF BEING HEARD WERE GIVEN TO IT, PENALTY UNDER SECTION 273(2)(B) WAS EXIGIBLE. THE CIT (APEPALS)-III, MADRAS, IN THE ORDER CITED IN PARA 2 ABOVE, SET ASIDE THE ITOS ORDER REFUSING REGISTRAT ION TO THE APPELLANT FIRM FOR 88-89 ASSESSMENT YEAR AND TH E A.C. VELLORE, IN THE ORDER UNDER SECTION 185(1)(A) READ WITH SECTION 251 DAATED 15.12.92 GRANTED REGISTRATION TO THE APPELLANT FIRM FOR THAT ASSESSMENT YEAR. ON THE BA SIS OF THE REVISED ASSESSED TAX FOR 88-89 ASSESSMENT YEAR THE A.C. REPORTED THE MINIMUM AND THE MAXIMUM PENALTIES LEVIABLE UNDER SECTION 273(2)(B) AS ` 5,413 AND ` 81,203 RESPECTIVELY. AS THE A.C. LEVIED PENALTY OF 100% OF 75% OF THE ASSESSED TAX FOR 88-89 ASSESSMENT YEAR, WHICH WAS 2 /3 OF THE MAXIMUM PENALTY LEVIABLE, ON SIMILAR BASIS, I C ONFIRM THE LEVY OF PENALTY OF ` 54,135/- INSTEAD OF ` 1,19,410 I.T.A.NO.564,565 & 566/93 :- 8 -: LEVIED BY THE A.C., I REDUCE THE PENALTY LEVIED UND ER SECTION 273(2)(B) FOR 88-89 ASSESSMENT YEAR BY ` 65,275 AND I PARTLY ALLOW THIS APPEAL, WITH THE DIRECTION TO THE A.C. TO MODIFY THAT ORDER ACCORDINGLY. 11. THE A.R OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE HAS CLOSED DOWN ITS BUSINESS AND IS VIRTUALLY WITHOUT A NY FUNDS. HE, THEREFORE, PRAYED THAT MERCY SHOULD BE SHOWN TO THE ASSESSEE AND THE LEVY OF PENALTY SHOULD BE DELETED. 12. ON THE OTHER HAND, THE CIT/DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT IN THE INSTANT CASE, THE ORIGINAL ASSESSMENT F OR ASSESSMENT YEAR 1988-89 WAS COMPLETED ON 22.3.1991 AT AN INCOME OF ` 3,44,770/- AND FOR ASSESSMENT YEAR 1989-90 WAS COMPLETED ON 22 .3.1991 ASSESSING TOTAL INCOME AT ` 4,45,732/-. THEREAFTER THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C) OF THE ACT F OR THE ASSESSMENT YEAR 1988-89 VIDE ORDER DATED 22.5.1992 OF ` 2,61,245/- AND FOR ASSESSMENT YEAR 1989-90 VIDE ORDER DATED 22.5.1992 OF ` 3,87,668/-. THE ASSESSING OFFICER ALSO LEVIED PENALTY U/S 273( 2)(B) OF THE ACT OF ` 1,19,410/- VIDE ORDER DATED 22.5.1992 FOR ASSESSME NT YEAR 1988-89. I.T.A.NO.564,565 & 566/93 :- 9 -: 14. ON APPEAL, THE CIT(A) VIDE SEPARATE ORDERS DATED 30.12.1992 HAS CONFIRMED THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT FOR BOTH THE ASSESSMENT YEARS AND VIDE HIS ORDER DA TED 30.12.1992 REDUCED PENALTY U/S 273(2)(B) TO ` 54,135/- AS THE ASSESSEE-FIRM WAS GRANTED REGISTRATION U/S 185 OF THE ACT. 15. WE FIND THAT ALL THE ABOVE PENALTIES WERE BASED ON ADDITION OF ` 2,84,771/- IN ASSESSMENT YEAR 1988-89 AND ` 3,79,350/- IN ASSESSMENT YEAR 1989-90. WE FIND THAT IN THE QUANT UM APPEAL, THIS TRIBUNAL VIDE ITS CONSOLIDATED ORDER DATED 18.8.199 3 PASSED IN I.T.A.NOS.2541 AND 2542/MDS/1992 FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ALLOWED PARTLY THE APPEALS OF THE AS SESSEE. WE FIND THAT THE PENALTY WAS IMPOSED BY THE ASSESSING OFFIC ER BEFORE THE DECISION IN THE QUANTUM APPEAL BY THE TRIBUNAL AND WAS ALSO CONFIRMED BY THE CIT(A) BEFORE THE DECISION OF THE TRIBUNAL IN THE QUANTUM APPEAL. THUS, WE FIND THAT THE FINDINGS AN D RELIEFS ALLOWED BY THE TRIBUNAL WERE NOT CONSIDERED BY THE LOWER AU THORITIES IN THE INSTANT CASE BEFORE IMPOSING AND CONFIRMING THE LEV Y OF PENALTY U/S 271(1)(C) AND U/S 273(2)(B) OF THE ACT. WE FURTH ER OBSERVE THAT IN ALL THE THREE CASES UNDER CONSIDERATION, THE PENALT Y ORDER WAS PASSED BY THE ASSESSING OFFICER WITHOUT THE SUBMISSIONS OF THE ASSESSEE AND THE CIT(A)S ORDER IS INFLUENCED BY THE FACT THAT T HE ASSESSEE DID NOT I.T.A.NO.564,565 & 566/93 :- 10 -: MAKE SUBMISSIONS BEFORE THE ASSESSING OFFICER IN RE SPECT OF SHOW CAUSE NOTICE FOR PENALTIES. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW, IT SHALL BE FAIR AND IN THE INTEREST OF JUSTICE TO SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSES SING OFFICER FOR DECIDING THE SAME AFRESH AFTER TAKING INTO CONSIDER ATION THE FINDINGS OF THE TRIBUNAL IN THE QUANTUM APPEAL. THE ASSESSING OFFICER SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE PASSING THE ORDER AFRESH. WE ORDER ACCORDINGLY AND ALL THE APP EALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, ALL THE APPEALS OF THE ASSES SEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 27 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 27 TH SEPTEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR