M/s R.K. Rice & General Mills, Kaithal V. ACIT, Kurukshetra

ITA 609/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90243 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Assessee Lawyers: PERMIL GOEL; PARIKSHET AGGARWAL
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 609/CHD/2014 ASSESSMENT YEAR: 2008-09 M/S R.K. RICE & GENERAL MILLS, VS THE ACIT, CHEEKA, KURUKSHETRA. DISTT. KAITHAL PAN: AAGFR5144L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PERMIL GOEL & SHRI PARIKSHET AGGARWAL RESPONDENT BY : DR. AMAR VEER SINGH DATE OF HEARING : 14.07.2015 DATE OF PRONOUNCEMENT : 21.07.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS) KARNAL DATED 21.11.2013 FOR ASSESS MENT YEAR 2008-09, CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS AS NOTED IN THE PENALTY ORDER ARE THAT ASSESSEE DERIVES INCOME FROM RICE MILLING, DOMESTIC AND EXPORT, SALE OF RICE. SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF T HE ASSESSEE ON 07.02.2008. RS. 64,40,000/- WAS SURREN DERED AT THE TIME OF SURVEY WHICH INCLUDED IN THE TAXABLE RETURN OF INCOME OF RS. 64,97,980/- FILED ON 17.09.2008. AS SESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT 2 DATED 02.11.2010 AT AN INCOME OF RS. 72,41,810/- AG AINST RETURNED INCOME OF RS. 64,97,980/-. PERUSAL OF THE RECORD REVEALED THAT ASSESSEE HAS SURRENDERED RS. 64,40,00 0/- IN THE FOLLOWING HEADS : I) ON ACCOUNT OF UNEXPLAINED RS. 4,20,000/- EXCESS CASH II) ON ACCOUNT OF EXCESS STOCK RS. 55,20,000/- FOUND III) ON ACCOUNT OF MISC. INCOME RS. 5,00,00 0/- FOR FINANCIAL YEAR 2007-08 TOTAL : RS.64,40,000/- 3. THE ASSESSING OFFICER HAS MADE ADDITION IN THE I NCOME DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AS UNDER : I) ADDITION ON ACCOUNT OF DIS- RS.1,95,846/- CREPANCIES IN VALUE OF STOCK VALUE IN EXCESS AT THE TIME OF SURVEY OF TAX EXCLUDING THE STOCK FOUND SHORT UNDER PADDY SUPERFINE AND PHAK II) ADDITION ON ACCOUNT OF GROSS RS. 17,711/- PROFIT IN RESPECT OF STOCK OF PADDY SUPERFINE AND PHAK SOLD OUT OF BOOKS III) ADDITION ON ACCOUNT OF GROSS RS. 5,29, 920/- PROFIT ON STOCK FOUND EXCESS AND CLAIMED TO HAVE BEEN SOLD AFTER THE DATE OF SURVEY IV) DIFFERENCE IN THAT BALANCE RS. 351/- 4. DURING THE ASSESSMENT PROCEEDINGS, IT WAS OBSERV ED BY THE ASSESSING OFFICER THAT EXCESS STOCK FOUND AT TH E TIME OF SURVEY IS NEITHER ACCOUNTED FOR IN THE STOCK AS ON 31.03.2008 NOR ACCOUNTED FOR SALE DURING THE PERIOD 07.02.2008 TO 31.03.2008. IT WAS ALSO OBSERVED THA T THE STOCK WAS SOLD OUT FROM THE OUT OF BOOKS AND BY APP LYING 3 THE GROSS PROFIT AT THE AVERAGE RATE FOR 9.06 AN AD DITION OF RS. 5,29,920/- WAS MADE. THE PENALTY PROCEEDINGS U NDER SECTION 271(1)(C) OF THE ACT WERE INITIATED ON THIS ACCOUNT FOR FILING INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME. 5. THE ASSESSEE AGGRIEVED, FILED THE APPEAL BEFORE LD. CIT(APPEALS). 6. THE LD. CIT(APPEALS) PARTLY ALLOWED THE APPEAL O F ASSESSEE. THE NET TAXABLE INCOME WAS ARRIVED AT RS . 68,59,320/-. IT WAS FURTHER OBSERVED THAT ADDITION WORKED OUT ON ACCOUNT OF SALE OF EXCESS TOCK FOUND HAS BEE N CONFIRMED TO THE TUNE OF RS. 3,42,212/- AS AGAINST OF RS. 5,29,920/-. THE ASSESSING OFFICER ISSUED NOTICE FO R LEVY OF PENALTY AND THE ASSESSEE FILED THE REPLY TO THE SAM E, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT ADDITION WAS MADE MERELY ON ESTIMATE AND THAT MISCELLANEOUS INCOME OF RS. 5 LACS HAS ALREADY BEEN DECLARED BY ASSESSEE FIRM IN THE RETURN OF INCOME AND THIS MISCELLANEOUS INCOME OF R S. 5 LACS HAS NOT BEEN ADJUSTED ANYWHERE IN THE ASSESSME NT ORDER. IT WAS, THEREFORE, PRAYED THAT PENALTY PROC EEDINGS MAY BE DROPPED. 7. THE ASSESSING OFFICER EXAMINED THE ISSUE AND FOU ND THAT ASSESSEE DECLARED ADDITIONAL INCOME OF RS. 55. 20 LACS ON ACCOUNT OF EXCESS STOCK FOUND WHICH INCLUDES STO CK OF PADDY BASMATI AND RICE BASMATI. DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT SAME WAS NOT 4 REFLECTED IN THE TRADING ACCOUNT AS ON THE DATE OF SURVEY OR AT THE END OF THE YEAR. IT WAS SUBMITTED BY THE AS SESSEE THAT ENTIRE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WAS SOLD IMMEDIATELY AFTER SURVEY AND CASH REALIZED THERE FROM WAS INTRODUCED IN THE PARTNERS CAPITAL ACCOUN T IN PROPORTION TO THEIR SHARE RATIO. IT WAS NOTED THAT EXCESS STOCK SOLD OUT WOULD HAVE INCLUDE THE GROSS PROFIT, THEREFORE, ADDITION OF RS. 5,29,920/- WAS MADE AND PENALTY WAS INITIATED ON THIS ADDITION. THE ASSESSEE AGAIN SUBMITTED BEFORE ASSESSING OFFICER THAT MISCELLANEO US INCOME DECLARED BY ASSESSEE HAS NOT BEEN ADJUSTED ANYWHERE AND THAT IT WAS ON ESTIMATED BASIS. THERE FORE, NO PENALTY IS LEVIABLE. THE ASSESSING OFFICER, HOWEVE R, FOUND THAT SINCE ASSESSEE HAS NOT FILED APPEAL AGAINST TH E ORDER OF THE LD. CIT(APPEALS) CONFIRMING THE ADDITION OF RS. 3,42,212/-, THEREFORE, ASSESSEE HAS CONCEALED THE I NCOME TO THAT EXTENT AND LEVIED MINIMUM PENALTY OF RS. 1,16, 300/-. 8. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE LD. CIT(APPEALS) AND SIMILAR SUBMISSIONS WERE REITERATE D. IT WAS ALSO SUBMITTED THAT PENALTY HAS BEEN IMPOSED ON THE ADDITION OF RS. 3,42,212/- MADE BY ASSESSING OFFICE R ON ACCOUNT OF PROFIT ON EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. 9. THE LD. CIT(APPEALS), ON THE SAME REASONING THAT ASSESSEE HAS NOT FILED ANY APPEAL BEFORE ITAT AGAIN ST THE QUANTUM ORDER OF LD. CIT(APPEALS), CONFIRMED LEVY O F PENALTY AND DISMISSED APPEAL OF THE ASSESSEE. 5 10. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT PENALTY HAS BEEN LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF GROSS PROFIT ON STOCK FOUN D EXCESS AND CLAIMED TO HAVE BEEN SOLD AFTER THE DATE OF SUR VEY IN A SUM OF RS. 3,42,212/-. IT IS ALSO NOT IN DISPUTE T HAT SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 07.02.2008 I.E. BEFORE END OF THE FINANCIAL YEAR IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS MADE SURRENDER O F RS. 64,40,000/- DURING THE COURSE OF SURVEY ITSELF. CO PY OF THE SURRENDER LETTER DATED 07.02.2008 IS FILED AT PAGE 8 OF THE PAPER BOOK WHICH REVEALED THAT ASSESSEE HAS SURREND ERED RS. 4,20,000/- ON ACCOUNT OF EXCESS CASH AND ALSO M ADE FURTHER SURRENDER OF RS. 55.20 LACS ON ACCOUNT OF E XCESS STOCK FOUND. IN THE SAME SURRENDER LETTER, ASSESSE E HAS ALSO SURRENDERED RS. 5 LACS ON ACCOUNT OF MISCELLAN EOUS INCOME FOR FINANCIAL YEAR 2007-08 I.E. ASSESSMENT Y EAR UNDER APPEAL. THE ASSESSING OFFICER, AS PER SUBMIS SION OF THE ASSESSEE DRAWN THE PRESUMPTION AGAINST THE ASSE SSEE THAT SINCE EXCESS STOCK FOUND AT THE TIME OF SURVEY WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, THEREFORE, A SSESSEE WOULD HAVE SOLD THE SAME OUTSIDE THE BOOKS OF ACCOU NT AND BY APPLYING AVERAGE RATE OF GROSS PROFIT, MADE ADDI TION OF RS. 5,29,920/- WHICH IS ULTIMATELY REDUCED BY THE L D. CIT(APPEALS) TO RS. 3,42,212/-. THESE FACTS, THERE FORE, CLEARLY REVEALED THAT IT WAS AN ESTIMATED ADDITION AGAINST THE ASSESSEE ON ACCOUNT OF APPLYING GROSS PROFIT RA TE WITHOUT BRINGING ANY MATERIAL ON RECORD TO PROVE TH AT 6 ASSESSEE HAS CONCEALED THE INCOME OR CONCEALED THE PARTICULARS OF INCOME. THE ASSESSING OFFICER, MERE LY ASSUMED AT ASSESSMENT STAGE THAT SINCE EXCESS STOCK FOUND BEFORE THE CLOSE OF THE FINANCIAL YEAR WAS NOT SHOW N IN ULTIMATE ACCOUNTS PREPARED BY ASSESSEE, THEREFORE, EXCESS STOCK WAS SOLD OUTSIDE BOOKS OF ACCOUNT. THIS MAY BE A SUFFICIENT REASON FOR MAKING ADDITION AGAINST THE A SSESSEE BUT IT IS SETTLED LAW THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT PROCEEDINGS AND THE ASSESS EE COULD EXPLAIN THE MATTER EVEN AT THE PENALTY STAGE TO EXP LAIN THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING INACCURATE PARTICULARS OF INCOME. THESE FACTS, THEREFORE, CLE ARLY REVEALED THAT ASSESSEE HAS NOT CONCEALED THE INCOME OR PARTICULARS OF INCOME, PARTICULARLY WHEN EXCESS STO CK WAS ALREADY DECLARED IN THE SURRENDER LETTER AT THE TIM E OF SURVEY ITSELF. FURTHER, WHEN EXCESS STOCK WAS NOT FOUND ACCOUNTED IN THE BOOKS OF ACCOUNT, AUTHORITIES BELO W MADE THE ADDITION OF RS. 3,42,212/- ON ACCOUNT OF GROSS PROFIT. THE ASSESSEE HAS ALREADY SURRENDERED RS. 5 LACS AS MISCELLANEOUS INCOME IN FINANCIAL YEAR 2007-08. TH IS FACT IS IGNORED BY THE AUTHORITIES BELOW WITHOUT ANY JUS T REASONS. WHEN ASSESSEE HAS ALREADY SURRENDERED RS. 5 LACS MORE DURING THE COURSE OF SURVEY, THE AUTHORITIES B ELOW SHOULD HAVE GIVEN ADJUSTMENT AND EFFECT OF THE SAME WHILE MAKING ADDITION OR WHILE LEVYING PENALTY IN THE MAT TER. THE GROSS PROFIT ON EXCESS STOCK AS WORKED OUT BY THE L D.CIT(A) WAS FOUND IN A SUM OF RS. 3,42,212/-, THE SAME IS L ESSER BY THE MISCELLANEOUS INCOME OF RS. 5 LACS DECLARED AND 7 SURRENDERED BY ASSESSEE. THEREFORE, THERE WERE NO REASONS TO BELIEVE THAT ASSESSEE HAS NOT MADE ANY SURRENDER OF THAT AMOUNT. MAY BE, ASSESSEE HAS NOT CHALLENGED THE FI NDINGS OF LD. CIT(APPEALS) IN MAKING ADDITION OF RS. 3,42, 212/- BUT THE FACTS ON RECORD CLEARLY REVEALED THAT THE AUTHO RITIES BELOW SHOULD HAVE GIVEN BENEFIT OF ADJUSTMENT OF RS . 5 LACS IN FAVOUR OF THE ASSESSEE AGAINST THE ADDITION SO M ADE BY THE AUTHORITIES BELOW. THE AUTHORITIES BELOW LEVIE D THE PENALTY AGAINST THE ASSESSEE MERELY BECAUSE ASSESSE E HAS NOT FILED ANY APPEAL AGAINST THE ORDER OF LD. CIT(A PPEALS) IN MAINTAINING ADDITION OF RS. 3,42,212/-. HOWEVER, T HE FACTS AS NOTED ABOVE, CLEARLY REVEALED THAT ASSESSEE DECL ARED COMPLETE FACTS OF EXCESS STOCK FOUND DURING THE COU RSE OF SURVEY IN THE RETURN OF INCOME AND ADDITION WAS MAD E MERELY ON PRESUMPTION AGAINST THE ASSESSEE AND NO B ENEFIT OF MISCELLANEOUS INCOME DECLARED BY ASSESSEE HAS BE EN GIVEN BY THE AUTHORITIES BELOW, THEREFORE WOULD REV EAL THAT IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FILING IN ACCURATE PARTICULARS OF INCOME. 10(I) IT IS WELL SETTLED LAW THAT PENALTY NEED N OT TO BE IMPOSED IN EACH AND EVERY CASE BECAUSE FACTS AND CIRCUMSTANCES SHALL HAVE TO BE SEEN AND CONSIDERED BEFORE LEVY OF PENALTY. CONSIDERING THE TOTALITY OF THE F ACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS NOT A FIT CASE OF LEVY OF PENALTY ON ADDITION OF RS. 3,42,212/-. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BE LOW AND DELETE THE PENALTY. WE MAY ALSO NOTE HERE THAT FIN DINGS GIVEN IN THIS ORDER ARE RELEVANT TO THE PENALTY MAT TER ONLY 8 AND SHALL NOT PREJUDICE THE FINDING OF FACT ALREADY RECORDED ON QUANTUM. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JULY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST JULY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH