M/s. Kumar Textile Industries, Ahmedabad V. The Income tax Officer, Ward-12(2), Ahmedabad

ITA 614/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9133 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 24-02-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D B R V PRASAD
• Assessee Lawyers: G S PATEL
• Keywords: Deemed to accrue or arise in india
• Section: 271(1)(c); 133A; 69B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE SHRI P K BANSAL AND MAHAVIR SINGH) ITA NO.614/AHD/2005 (ASSESSMENT YEAR: 2001-02) A N D ITA NO.825/AHD/2005 (ASSESSMENT YEAR: 2001-02) M/S KUMAR TEXTILE INDUSTRIES, 235/2, CHHIPA KUI, DANI LIMDA, AHMEDABAD PAN: AAAFK 7615 B V/S THE INCOME-TAX OFFICER, WARD-12(2), AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY :- SHRI G S PATEL RESPONDENT BY:- SHRI D B R V PRASAD, CIT-DR O R D E R PER P K BANSAL (ACCOUNTANT MEMBER) : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORD ERS OF THE CIT(A) BOTH DATED 05-10-2004. ITA NO.614/AHD/2005 : 2 IN THE QUANTUM APPEAL, I.E., IN ITA NO.614/AHD/2 005, THE ASSESSEE HAS TAKEN TWO GROUNDS OF APPEAL BUT SI NCE GROUND NO.2 WAS NOT PRESSED, THE SAME STANDS DISMISSED, AS NOT PRESSED. THE ONLY GROUND REMAINS FOR OUR ADJUDICATION READS AS UNDER:- 2 THE LEARNED CIT(A)-XVIII HAS ERRED IN LAW AND FACT S IN MAKING THE ADDITION OF RS.3,12,479/- (RUPEES THREE LACS, TWELV E THOUSANDS FOUR HUNDREDS& TWENTY NINE ONLY) IN APPEAL ORDER. 3 THE BRIEF FACTS RELATING TO THIS GROUND ARE THAT IN THE CASE OF ASSESSEE, A PARTNERSHIP FIRM, A SURVEY WAS CARRIED OUT U/S 133A OF THE INCOME-TAX ACT, 1961 [THE ACT FOR SHO RT], IN WHICH EXCESS STOCK VALUED AT RS.3,12,479/- WAS FOUND. ONE OF THE PARTNERS AGREED TO PAY THE ADVANCE TAX ON THE EXCES S STOCK. THE ASSESSEE PREPARED P&L ACCOUNT FOR THE YEAR ENDED 31 -03-2001 AND IN THIS P&L ACCOUNT, THE ASSESSEE CREDITED A SU M OF RS.3,12,479/- AS EXCESS STOCK AND ACCORDINGLY WORKE D OUT THE NET PROFIT AND PAID THE TAXES. THE AO MADE AN ADDITION OF THIS EXCESS STOCK SEPARATELY. THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(A), WHO TREATED IT AS DEEMED INCOME U/S 69B OF THE ACT AND DID NOT ALLOW SET OFF OF THE CURRENT YEARS BUSINESS LOSS. THE ASSESSEE, BEING AGGRIEVED, HAS COME IN APPEAL BEFORE US. 4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME AND PERUSED THE MATERIAL ON REC ORD. THIS IS AN ADMITTED FACT THAT THE EXCESS STOCK WAS FOUND IN THE CASE OF THE ASSESSEE DURING THE COURSE OF SEARCH WHICH WAS CREDITED BY THE ASSESSEE IN ITS P&L ACCOUNT. THE STOCK RELATES TO THE BUSINESS CARRIED ON BY THE ASSESSEE, THEREFORE, THE INCOME SO DECLARED BY THE ASSESSEE CAN BE ASSESSED ONLY UNDER THE HEAD INCOME FROM BUSINESS. WE ALSO NOTED THAT THE ASSE SSEE SUBMITTED THE RETURN SHOWING TOTAL INCOME AT RS.1,0 7,690/-. THE INCOME-TAX AUTHORITIES VALUED THE STOCK AS ON 01-11 -2000 AT THE TIME OF SURVEY AT RS.6,92,950/- WHILE AS PER THEIR BOOKS IT WAS RS.3,80,471/-. THE AO ASSESSED THE TOTAL INCOME AT RS.3,03,320/- WHICH INCLUDED AN ADDITION OF RS.1,59,080/- AS ACCR UED INTEREST 3 WHICH WAS DELETED IN FIRST ROUND OF APPEAL. THE ASS ESSED INCOME REDUCED TO RS.1,44,240/-. WE FIND SUBSTANCE IN THE SUBMISSION OF THE LEARNED DR THAT THE ASSESSEE HAS CREDITED THE E XCESS STOCK SO FOUND TO THE P&L ACCOUNT TO REDUCE ITS CURRENT GROS S PROFIT SO THAT TO THE EXTENT THE STOCK WAS SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY WHICH GET SET OFF AGAIN ST THE CURRENT INCOME. WE ALSO FIND FORCE IN THE SUBMISSION OF THE LEARNED AR THAT VALUATION CARRIED OUT BY THE REVENUE IN RESPEC T OF EXCESS STOCK WAS AT A HIGHER SIDE AND THE AO WAS NOT CORRE CT IN MAKING THE ADDITION TO THE EXTENT OF RS.3,12,479/- IN THE INCOME OF THE ASSESSEE. KEEPING IN VIEW THE PECULIAR FACTS OF THE CASE, ESPECIALLY THE FACT IF THE CREDIT OF THE EXCESS STO CK IS CARVED OUT OF THE P&L ACCOUNT, THE ASSESSEE WOULD HAVE INCURRE D LOSS INSTEAD OF ANY PROFIT IN THE P&L ACCOUNT, ON THE CO NSENT OF BOTH THE PARTIES, WE SUSTAIN THE ADDITION TO THE EXTENT OF RS.1,56,000/- SO THAT THERE MAY NOT BE ANY LOSS INCURRED BY THE A SSESSEE DURING THE CURRENT YEAR. WE SET-ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE AO TO REDUCE THE ADDITION OF RS.3,12,479/- TO R S.1,56,000/- AND ASSESS IT UNDER THE HEAD INCOME FROM BUSINESS OF THE ASSESSEE. THIS APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ITA NO.825/AHD/2005 : 5 THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDER OF THE CIT(A) WHO IMPOSED THE PENALTY ON THE ASSESSEE U/S 271(1)(C) AMOUNTING TO RS.1,00,000/-. THE FACTS REL ATING TO THIS CASE ARE THAT DURING THE COURSE OF SURVEY U/S 133A, THE REVENUE NOTED EXCESS STOCK TO THE EXTENT OF RS.3,12,479/- W HICH WAS DULY CREDITED BY THE ASSESSEE IN ITS P&L ACCOUNT WHILE S UBMITTING THE RETURN OF INCOME. THE AO MADE CERTAIN ADDITIONS IN THE INCOME OF THE ASSESSEE BUT NO SEPARATE ADDITION HAS BEEN M ADE FOR THE 4 EXCESS STOCK SO FOUND. THE ASSESSEE WENT IN APPEAL AGAINST OTHER ADDITION. THE CIT(A) WHEN NOTED ABOUT THE EXCESS ST OCK BEING CREDITED TO THE P&L ACCOUNT, DIRECTED THE AO TO TAX THIS INCOME U/S 69B AND NOT TO ALLOW SET OFF OF BUSINESS LOSS F OR THE CURRENT YEAR AGAINST THIS INCOME. THE CIT(A) EVEN INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE U/S 271(1)(C) AND ULTIMATELY LEVIED THE PENALTY AMOUNTING TO RS.1,00,000/- ON TH E ASSESSEE BY HOLDING AS UNDER:- 8 FROM CAREFUL PERUSAL OF THE FACTS IT WOULD BE EV IDENT THAT THE ASSESSEE DID NOT MAKE DISCLOSURE OF TRUE AND FULL I NCOME IN ITS RETURN. THE ADMITTED VALUE OF UNRECORDED STOCK WHICH WAS CH ARGEABLE TO TAX AS DEEMED INCOME WAS SET OFF AGAINST BUSINESS LOSS AGAINST THE PROVISIONS OF LAW. THE ASSESSEE HAS FURNISHED INACC URATE PARTICULARS OF INCOME AND IS LIABLE TO PENALTY U/S 271(1)(C). ON C ONSIDERATION OF THE ENTIRE FACTS AND CIRCUMSTANCES AND THE TWO DECISION S OF THE GUJARAT HIGH COURT REFERRED TO ABOVE, I AM SATISFIED THAT T HIS IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C). AS AGAINST THE CORRE CT TOTAL INCOME OF RS.3,12,479/- ASSESSEE DISCLOSED TOTAL INCOME OF RS .1,07,690/- ONLY. TAX SOUGHT TO BE EVADED WAS THE TAX ON RS.2,04,789/ - BEING DIFFERENCE BETWEEN RS.3,12,479/- AND RS.1,07,690/-. THE AMOUNT OF PENALTY HAS TO BE EQUIVALENT TO THE AMOUNT OF TAX ON THIS AMOUN T AND CAN EXTENT UPTO THREE TIMES THIS AMOUNT. UNDER THE GIVEN FACTS AND CIRCUMSTANCES, LEVY OF PENALTY OF RS.1,00,000/- WOU LD BE FAIR AND REASONABLE. A PENALTY OF RS.1,00,000/- IS ACCORDING LY LEVIED U/S 271(1)(C) OF THE I.T. ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. IN OUR VIEW THIS IS NOT A FIT CASE WHERE PENALTY CAN BE IMPOSED ON THE ASSESSEE. THE ASSESSE E HAS DULY CREDITED THE EXCESS STOCK FOUND DURING THE COURSE O F SURVEY AMOUNTING TO RS.3,12,479/- IN ITS P&L ACCOUNT WHICH IS ONE OF THE METHODS OF DISCLOSING SUCH INCOME BEFORE THE IN COME-TAX AUTHORITIES. THIS FACT IS APPARENT FROM THE P&L ACC OUNT. AFTER CONSIDERING THIS CREDIT, THE ASSESSEE HAS WORKED OU T THE NET PROFIT 5 DURING THE YEAR. P&L ACCOUNT HAS DULY BEEN SUBMITT ED BEFORE THE AO WHICH CONTAINS ALL THESE PARTICULARS. IF THE AO OR THE CIT(A) HAS TAKEN A PARTICULAR VIEW, THAT ITSELF WIL L NOT CONVERT FILING OF THE PARTICULARS BY THE ASSESSEE TO BE THE INCORRECT PARTICULARS OF INCOME. THIS IS A FACT ON RECORD THA T THE AO WAS SATISFIED ABOUT CREDITING OF THE EXCESS STOCK IN TH E P&L ACCOUNT AND, THEREFORE, HE DID NOT MAKE ANY SEPARATE ADDITI ON IN THE INCOME OF THE ASSESSEE. IF THERE CAN BE TWO VIEWS O F SHOWING THE PARTICULARS OF INCOME, THE INCOME CAN NOT BE REGARD ED TO HAVE BEEN FURNISHED INCORRECTLY / INACCURATELY. WE, THER EFORE, DELETE THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT. THE A PPEAL FILED BY THE ASSESSEE IS ALLOWED. 7 IN THE RESULT, ITA NO.614/AHD/2005 IS PARTLY ALL OWED AND ITA NO.825/AHD/2005 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17-09-2009 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (P K BANSAL) ACCOUNTANT MEMBER DATE : 17-09-2009 COPY OF THE ORDER FORWARDED TO : 1. M/S KUMAR TEXTILE INDUSTRIES, 235/2, CHHIPA KUI, DANI LIMDA, AHMEDABAD 2. THE ITO, WARD-12(2), AHMEDABAD 3. THE CIT CONCERNED 4. THE CIT(A)-XVIII, AHMEDABAD 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE 6 BY ORDER DY.R/AR, ITAT, AHMEDABAD