M/s. Allied Cashew Industries, Kollam V. DCIT, Kollam

ITA 567/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64959 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-09-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 10-11-2010
• Court: TRIBUNAL
• Department Lawyers: SRINIVASU KOLLIPAKA
• Assessee Lawyers: T V HARIHARAN

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. 567/COCH/2010 ASSESSMENT YEAR: 2001-02 M/S. ALLIED CASHEW INDUSTRIES, KADAPPAKKADA, KOLLAM. [PAN: AABCF 3802B] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI T.V. HARIHARAN, CA REVENUE BY SHRI SRINIVASU KOLLIPAKA, JR. DR DATE OF HEARING 10/09/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 06-08-2010 PASSED BY LD CIT(A)-1, TRIVANDRUM AND IT RELATES TO THE AS SESSMENT YEAR 2001-02. THE PENALTY OF RS.1,02,334/- LEVIED BY THE AO U/S 271(1)(C) OF THE ACT, 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 PROCESSING AND EXPORT OF CASHEW KER NELS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASS ESSEE HAS PURCHASED IMPORTED RAW NUTS FROM A COMPANY NAMED M/S OUTSPAN (INDIA) LTD., KOLLAM AT HIGH SEAS FOR RS.74,08,051/-. THE AVERAGE COST PER BAG OF THE SA ID PURCHASE WORKED OUT TO RS.2,964/-, WHICH WAS HIGHER WHEN COMPARED WITH OTH ER IMPORTS HAVING AN AVERAGE COST OF RS.2,480/-. HENCE THE AO ASKED THE ASSESSE E TO FURNISH COPIES OF HIGH SEAS PURCHASE INVOICES AND ALSO THE RELEVANT COMMERCIAL INVOICES TO SUBSTANTIATE THE I.T.A. NO.567/COCH/2010 2 PURCHASES MADE AT HIGH SEAS FROM M/S OUTSPAN (INDIA ) LTD. THE ASSESSEE COULD NOT FURNISH RELEVANT COMMERCIAL INVOICE, THOUGH IT COUL D FURNISH COPIES OF HIGH SEAS PURCHASE INVOICE. HENCE THE AO TOOK THE VIEW THAT THERE IS INFLATION IN THE SAID PURCHASES AND DETERMINED THE INFLATION AT RS.100/- PER BAG. ACCORDINGLY, HE DISALLOWED A SUM OF RS.2,49,900/- AS INFLATION IN PURCHASE PRI CE. IN THE APPELLATE PROCEEDINGS, THE SAID ADDITION GOT CONFIRMED BY LD CIT(A). THE AO L EVIED MINIMUM PENALTY OF RS.1,02,334/- U/S 271(1)(C) OF THE ACT AGAINST THE SAID ADDITION AND THE SAID PENALTY WAS ALSO CONFIRMED BY LD CIT(A). AGGRIEVED, THE AS SESSEE IS IN APPEAL BEFORE US. 3. THE MAIN CONTENTION OF THE LD A.R WAS THAT T HE ASSESSEE PURCHASED THE RAW NUTS FROM M/S OUTSPAN (INDIA) PVT. LTD, KOLLAM AND HENCE IT COULD FURNISH THE FOLLOWING DOCUMENTS IN SUPPORT OF SUCH PURCHASE. HE SUBMITTED THAT THE ASSESSEE COULD NOT HAVE COPIES OF COMMERCIAL INVOICE RAISED BY THE FOREIGN SUPPLIER TO M/S OUTSPAN (INDIA) PVT. LTD. (A) BILL OF LADING IN THE ABSENCE OF COMMERCIAL I NVOICE. (B) INVOICE RAISED BY OUTSPAN (INDIA) PVT. LTD. (C) LETTERS ADDRESSED TO THE ASSISTANT COMMISSIONE R (CUSTOMS) AND SHIPPING AGENTS, WHERE REFERENCE TO COMMERCIAL INVOICE HAS B EEN GIVEN. IT WAS FURTHER CONTENDED THAT THE ASSESSEE HAS EFFE CTED PURCHASES TO THE TUNE OF ABOUT RS.5.00 CRORES AND SALES OF RS.9.36 CRORES DURING T HE YEAR UNDER CONSIDERATION AND HENCE ITS FAILURE TO FURNISH A COMMERCIAL INVOICE, WHICH IS NOT AVAILABLE WITH THE ASSESSEE, PERTAINING TO THE PURCHASE OF RS.0.74 CR ORES SHOULD NOT LEAD TO AN ADVERSE INFERENCE IN THE PENALTY PROCEEDINGS. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE COULD NOT SUBSTANTIATE THE REASONS FOR PAYMENT OF HIGHER PRICE FOR THE HIG H SEAS PURCHASE MADE FROM M/S OUTSPAN (INDIA) PVT. LTD. THOUGH THE ASSESSEE CLAI MED THAT IT HAS PURCHASED HIGH QUALITY RAW NUTS, YET THE AO HAS DEMONSTRATED THAT THERE WAS NO SIGNIFICANT INCREASE IN THE OUTPUT OF THE KERNELS IN RESPECT OF SUCH PURCHA SES. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER HAS ESTABLISHE D THE FACT OF INFLATION OF PURCHASE AND ACCORDINGLY CONTENDED THAT THE PENALTY SHOULD BE SU STAINED. I.T.A. NO.567/COCH/2010 3 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IT IS A WELL ESTABLISHED PRINCIPLE THAT THE ADDITION MADE IN THE QUANTUM PRO CEEDING 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 AFRESH AND FOR THAT PURPO SE, THE REASONS FOR MAKING ADDITION IN THE QUANTUM PROCEEDINGS MAY BE TAKEN AS A GOOD A ID. IN THE INSTANT CASE, THE AVERAGE COST OF RAW NUTS PURCHASED AT HIGH SEAS FRO M M/S OUTSPAN (INDIA) PVT LTD WORKED OUT TO RS.2,964/- PER BAG, AS AGAINST THE AV ERAGE IMPORT COST OF RS.2,480/- PER BAG. THUS, THERE WAS A DIFFERENCE OF ABOUT RS.500/ - PER BAG. IT IS PERTINENT TO NOTE THAT THE AO HAS, HOWEVER, DETERMINED THE INFLATION IN PURCHASES AT RS.100/- PER BAG AS AGAINST THE DIFFERENCE OF RS.500/- PER BAG. THE SA ID ACTION OF THE AO CLEARLY SHOWS THAT THE AO WAS ALSO CONVINCED WITH THE CLAIM OF THE ASS ESSEE THAT HIGHER PAYMENT WAS MADE FOR PURCHASE OF HIGH QUALITY MATERIALS. 6. THE AO HAS SOUGHT TO DISPROVE THE SAID CLAIM OF THE ASSESSEE BY COMPARING THE OUTPUT OF FINISHED PRODUCT, I.E., ACCORDING TO THE AO, THE HIGH QUALITY RAW NUTS HAVE NOT RESULTED IN HIGHER OUTPUT. HOWEVER, WE NOTICE THA T THE ASSESSEE HAS, IN TURN, JUSTIFIED ITS CLAIM BY SUBMITTING THAT THE EXPORTS MADE OF PR OCESSING OF THE SAID IMPORTED RAW NUTS WAS ACCEPTED BY THE FOREIGN BUYERS AND THERE W AS NO REJECTION AT ALL. THERE CANNOT BE ANY CARDINAL PRINCIPLE THAT THE HIGH QUAL ITY OF RAW NUTS SHOULD ALWAYS RESULT IN HIGHER OUTPUT, MAINLY FOR THE REASON THAT THE QUALI TY OF KERNELS IS DECIDED ON OTHER CRITERIA. FURTHER, THE ASSESSEE HAS SUBMITTED COPI ES OF PURCHASE INVOICE AS AVAILABLE WITH IT, I.E., THE INVOICE GIVEN BY M/S OUTSPAN (IN DIA) PVT. LTD. UNDER NORMAL CIRCUMSTANCES, IT WOULD BE VERY DIFFICULT FOR AN AS SESSEE TO OBTAIN COPIES OF INVOICES GIVEN BY THE ORIGINAL SUPPLIER TO M/S OUTSPAN (INDI A) PVT LTD (TERMED AS COMMERCIAL INVOICE). YET THE ASSESSEE HAS SHOWN THAT IT HAD M ADE ATTEMPTS TO PROCURE COPIES OF THE SAID COMMERCIAL INVOICE FROM THE GOVERNMENT SOU RCES. IN ANY CASE, THESE DISCUSSIONS WOULD SHOW THAT THE IMPUGNED ADDITION H AS BEEN MADE MERELY ON INFERENCES AND IT IS NOT SUPPORTED BY ANY CONCRETE EVIDENCE. ON THE CONTRARY, THE ASSESSEE HAS OFFERED EXPLANATIONS FOR MAKING HIGHER PAYMENT AND HAS ALSO TAKEN STEPS TO OBTAIN THE COPIES OF COMMERCIAL INVOICES FROM TH E GOVERNMENT AUTHORITIES, ON WHICH I.T.A. NO.567/COCH/2010 4 THE ASSESSEE COULD NOT HAVE CONTROL. UNDER THESE C IRCUMSTANCES, WE ARE OF THE VIEW THAT THE AO HAS NOT BROUGHT ON RECORD SUFFICIENT MA TERIAL TO SUSPECT THE BONA FIDES OF THE CLAIM MADE BY THE ASSESSEE. ACCORDINGLY, WE AR E OF THE VIEW THAT THE IMPUGNED ADDITION OF RS.2,49,900/- CANNOT LEAD TO THE LEVY O F PENALTY U/S 271(1)(C) OF THE ACT. 7. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT (A) AND DIRECT THE AO TO DELETE THE PENALTY OF RS.1,02,334/- LEVIED FOR THIS YEAR U/S 2 71(1)(C) OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 16-11-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16 TH NOVEMBER, 2012 GJ COPY TO: 1. M/S. ALLIED CASHEW INDUSTRIES, KADAPPAKKADA, KOL LAM. 2.THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. 3.THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, TRI VANDRUM. 4.THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN