ITO, New Delhi V. M/s Ocean Metals (P) ltd., New Delhi

ITA 5778/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81490 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 04-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHAILESH GUPTA SHRI SUNIL SH
• Keywords: Difference of opinion
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI ABY T. VARKEY, JUDICIAL MEMBER ITA NO.5778/DEL./2012 (ASSESSMENT YEAR : 2005-06) ITO, WARD 13 (4), VS. M/S. OCEAN METALS (P) LTD. , NEW DELHI. G 55, MASJID MOTH, GREATER KAILASH PART II, NEW DELHI 110 048. (PAN : AAACO0922A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHAILESH GUPTA, ADVOCATE REVENUE BY : SHRI SUNIL SHARMA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF CIT (APPEALS)-XVI, NEW DELHI DATED 23.07.2012 FOR THE A SSESSMENT YEAR 2005- 06. 2. IN THIS CASE, THE REVENUE HAS CHALLENGED THE DEL ETION OF PENALTY LEVIED OF RS.13,00,326/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 3. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AT T HE TIME OF THE HEARING, THE LD. AR SUBMITTED THAT THIS PENALTY HAS BEEN LEV IED ON THE ADDITION SUSTAINED BY THE CIT (A) IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF LOW ITA NO.5778/DEL./2012 2 GROSS PROFIT TO THE EXTENT OF RS.35,02,280/-. THE ORIGINAL ADDITION ON THIS ISSUE WAS OF RS.53,77,921/-. THE CIT (A) DELETED T HE PENALTY ON THE BASIS THAT THERE IS A DIFFERENCE OF OPINION REGARDING THE QUANTUM OF ADDITION AND DIRECTED TO DELETE THE PENALTY. LD. AR ALSO SUBMIT TED THAT THIS ADDITION SUSTAINED BY THE CIT (A) HAS BEEN DELETED BY THE IT AT IN THE QUANTUM APPEAL FILED BY THE ASSESSEE WHILE DECIDING THE ITA NO.217 2/DEL/2009 IN ITS ORDER DATED 14.03.2014. HE DRAW OUR ATTENTION TO PARAS 1 8 & 19 OF THE AFORESAID ITAT ORDER. THE RELEVANT PARA OF THE ORDER IS REPR ODUCED BELOW :- 18. THE LD. CIT (A) HAS UPHELD THE ACTION OF THE A SSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE AC T, ON THE BASIS THAT THERE WAS DRASTIC DECLINE IN THE GROSS PROFIT OF THE ASSE SSEE AS COMPARED TO THE PRECEDING YEARS, THE PAYMENT OF EXCISE DUTY OF RS.3 9 LAC INCLUDED IN THE SALE PRICE, WILL ONLY HAVE MARGINAL IMPACT ON THE O PERATIONAL RESULTS OF THE ASSESSEE AND THAT THE ASSESSEE HAS NOT EXPLAINED TH E MISMATCH IN THE MONTHLY PRODUCTION FIGURE AND CORRESPONDING PRODUCT ION EXPENSES. HE HAS ALSO NOTED THAT THE ASSESSEE HAS NOT ADDED THE EXCI SE DUTY COMPONENT WHILE VALUING ITS CLOSING STOCK, THOUGH IT IS SPECIFICALL Y PROVIDED IN SECTION 145A OF THE I. T. ACT. HE HAS ALSO NOTED THAT THE ASSESS EE HAS MADE CERTAIN SALES TO ITS SISTER CONCERN, AT A VALUE LOWER THAN ITS PU RCHASE PRICE OF RAW MATERIAL. WE FIND THAT LD. CIT (A) WHILE NOTING ABO VE OBSERVATION HAS NOT CONSIDERED THE EXPLANATION OF THE ASSESSEE ON THOSE OBSERVATIONS MADE BY THE ASSESSING OFFICER. STILL THERE IS NO DISPUTE TH AT PAYMENT OF EXCISE DUTY OF RS. 39LAC INCLUDED IN THE SALES PRICE WILL ONLY FOR MARGINAL IMPACT ON THE OPERATIONAL RESULTS OF THE ASSESSEE, WHICH WILL NOT BRING DOWN THE GROSS PROFIT TO SUCH AN EXTENT AND THAT THERE WERE MISMAT CH IN THE ASSESSEES MONTHLY PRODUCTION FIGURE AND CORRESPONDING PRODUCT ION EXPENSES. 19. WE ARE OF THE VIEW THAT THE LD. CIT (A) RIGHTLY UPHELD THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACC OUNT U/S 145(3). BUT MERELY BECAUSE BOOKS OF ACCOUNT WERE REJECTED THE A CTION OF THE AUTHORITIES BELOW IN ESTIMATING THE PROFIT BY ADOPTING A PARTIC ULAR GP RATE WITHOUT ASSIGNING ANY REASON IN SUPPORT RESULTING INTO THE TRADING ADDITION CANNOT BE JUSTIFIED. THE ADDITION MADE BY THE ASSESSING OFFIC ER AT RS.53,77,921/- AND SUSTAINED BY THE LD. CIT (A) AT RS. 35,02,280/- ON ACCOUNT OF TRADING ADDITION APPLYING AN ESTIMATED GROSS PROFIT RATE WI THOUT ASSIGNING THE VERY BASIS, THUS CANNOT BE JUSTIFIED. IN THIS REGARD, WE FIND SUPPORT FROM THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN ITA NO.5778/DEL./2012 3 LIME KHANIJ UDHYOG (SUPRA, WHEREIN THE HONBLE HIGH COURT HAS BEEN PLEASED TO HOLD THAT SECTION 145 OF THE I.T. ACT, 1 961, ONLY PROVIDES THE BASIS ON WHICH COMPUTATION OF INCOME IS TO BE MADE FOR THE PURPOSE OF DETERMINING THE AMOUNT OF TAX. THE PROVISION BY ITS ELF DOES NOT DEAL WITH ADDITION OR DELETION TO THE INCOME. THEREFORE, MERE REJECTION OF, OR SOME DEFICIENCY IN, THE BOOKS OF ACCOUNT WOULD NOT MEAN THAT IT MUST NECESSARILY LEAD TO ADDITIONS TO THE SUSTAINED INCOME. 20. WE THUS WHILE SETTING ASIDE THE ADDITION MADE A ND SUSTAINED BY THE AUTHORITIES BELOW DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS THUS RE JECTED AND GROUND NO.1,1.1TO 1.4 OF THE APPEAL PREFERRED BY THE ASSES SEE ARE PARTLY ALLOWED. 21. IN THE RESULT, THE APPEAL PREFERRED BY THE REVE NUE IS DISMISSED AND THAT PREFERRED BY THE ASSESSEE IS PARTLY ALLOWED. THUS, THE BASIS ON WHICH THE PENALTY WAS LEVIED ITS ELF HAS BEEN GOT DELETED IN THE QUANTUM APPEAL, THEREFORE, THERE IS NO QUESTION OF SUSTAINING ANY PENALTY FOR CONCEALMENT OF INCOME. WE SUSTAIN THE ORDER OF CIT (A) FOR DELETING THE SAME. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 4 TH DAY OF AUGUST, 2014. SD/- SD/- (ABY T. VARKEY) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 4 TH DAY OF AUGUST , 2014. TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.