M/s Hari Om Rice Mill, Patran V. ITO, Patiala

ITA 626/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90257 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 13-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: RISHABH KAPOOR
• Keywords: Reasonable cause; Condonation of delay
• Section: 143(3); 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON,BLE VICE PRESIDENT ITA NO. 626/CHD/2014 (ASSESSMENT YEAR: 2004-05) M/S HARI OM RICE MILL, NARWANA ROAD PATRAN, PUNJAB. PAN: AACHF8141B VS. INCOME TAX OFFICER, WARD-III PATIALA. (APPELLANT) (R ESPONDENT) APPELLANT BY : SH. RISHABH KAPOOR RESPONDENT BY : SH. S.K.MITTAL, DR DATE OF HEARING : 27.07.2015 DATE OF PRONOUNCEMENT : 30.07.2015 O R D E R PER SHRI H.L.KARWA, (VP) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A), PATIALA DATED 31 ST MARCH,2014 WHEREBY HE HAS CONFIRMED THE PENALTY AMOUNTING TO RS.3,05,500/ - LEVIED BY AO U/S. 271(1)(C). 2. IT IS OBSERVED THAT THERE IS A DELAY OF FOUR DAYS IN FILING THE APPEAL BEFORE ITAT. 3. IN THIS CASE, THE ASSESSEE HAS SUBMITTED AN APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL, WHEREIN IT HAS BEEN STATED THAT THE DEALY OF FOUR D AYS HAS OCCURRED DUE TO ILL HEALTH AND FAMILY PROBLEMS OF T HE 2 PARTNER BECAUSE OF WHICH THE SIGNED COPIES OF THE A PPEAL COULD NOT BE SENT TO THE COUNSEL CONCERNED IN TIME. 4. AN AFFIDAVIT OF SH. SHIV KUMAR, PARTNER OF THE ASSESSEE FIRM, TO THIS EFFECT WAS ALSO FILED. 5. I AM FULLY SATISFIED THAT THE ASSESSEE HAS A REASONABLE CAUSE FOR FILING THE APPEAL LATE BY FOUR DAYS AND HENCE THE DELAY OF FOUR DAYS IS HEREBY CONDONED . 6. THE ASSESSEE HAS RAISED AS MANY AS TEN GROUNDS I N APPEAL. HOWEVER, THE ONLY GRIEVANCE IS AGAINST THE CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271(1) (C) OF THE ACT, AMOUNTING TO RS.3,05,500/- 7. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN DECLARING AN INCOME OF RS.4,55,010/- WAS FILED BY T HE ASSESSEE ON 15 TH SEPTEMBER, 2004. THE ASSESSMENT WAS COMPLETED ON 2 ND JUNE, 2005 UNDER SECTION 143(3) ACCEPTING THE RETURNED INCOME. SUBSEQUENTLY, THE CI T, PATIALA SET ASIDE THE SAID ORDER UNDER SECTION 263 AND RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR MAKING ASSESSMENT DE NOVO. A SURVEY UNDER SECTION 133A WAS CARRIED OUT IN THIS CASE ON 15 TH JANUARY, 2004 AND DURING THE COURSE OF SURVEY THE ASSESSEE SURRENDERED A SUM OF THE RS.8,50,000/- AS ITS INCOME. LATER ON, THE ASSE SSEE FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSM ENT YEAR SHOWING INCOME AT RS.4,55,010/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE ASS ESSEE HAS SHOWN GROSS PROFIT RATE OF 6.55% DURING THE YEA R AS AGAINST 21.13% AND 11.92% SHOWN DURING THE PRECEDIN G YEARS 2002-03 AND 2003-04 RESPECTIVELY. FURTHER THE AO 3 OBSERVED THAT IN A PARALLEL CASE OF M/S SINGLA RICE MILL, THE GROSS PROFIT RATE IN ASSESSMENT YEAR 2004-05 WA S 14.65% WHICH IS MUCH ABOVE THE ASSESSEES DECLARATI ON OF GROSS PROFIT. KEEPING IN VIEW THESE FACTS THE AO AP PLIED THE GROSS PROFIT RATE OF 16.52% BEING THE AVERAGE O F GROSS PROFIT RATE DECLARED BY ASSESSEE IN ASSESSMENT YEAR 2002- 03 AND 2003-04. APPLYING THIS RATE ON THE TOTAL TUR N OVER OF RS.85,41,314/- THE AO MADE AN ADDITION AMOUNTING TO RS.8,51,569/- 8. THE ASSESSEE WENT INTO APPEAL BEFORE THE CIT(A), AGAINST THE SAID ORDER OF THE A.O. HOWEVER, CIT(A), PATIALA VIDE HIS ORDER DATED 23 RD MARCH, 2009 CONFIRMED THE SAID ACTION OF THE AO. 9. THEREAFTER, PENALTY PROCEEDINGS U/S 271(1)(C) WE RE INITIATED BY THE AO. DURING THE PENALTY PROCEEDINGS THE ASSESSEE MADE SUBMISSIONS THAT IT HAS NOT CONCEALED ANY INCOME NOR HAS IT FURNISHED INACCURATE PARTICULARS, THEREFORE, PENALTY SHOULD NOT BE LEVIED. FURTHER IT WAS ARGUED THAT THE ASSESSMENT HAS BEEN FINALIZED ONLY AN ESTIMATE BASIS AND ASSESSMENT PROCEEDINGS AND PENAL TY PROCEEDINGS BEING INDEPENDENT OF EACH OTHER, NO PEN ALTY SHOULD BE LEVIED MERELY ON THE BASIS OF THE ADDITIO N SO MADE. HOWEVER, THE AO REJECTED THE CONTENTION OF TH E ASSESSEE AND LEVIED THE PENALTY AMOUNTING TO RS.3,05,500/- BEING 100% OF THE TAX SOUGHT TO BE EV ADED. THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AGA INST THE SAID PENALTY ORDER. DURING THE APPELLATE PROCEE DINGS IT WAS AGAIN ARGUED THAT THE ASSESSEE HAS NOT CONCEALE D ANY INCOME AND NOT FURNISHED ANY INACCURATE PARTICULARS , 4 THEREFORE, PENALTY CANNOT BE LEVIED. IT WAS ALSO EMPHASIZED THAT THE ADDITION HAS BEEN MADE APPLYING THE ARBITRARY GROSS PROFIT RATE, THAT TOO WITHOUT REJEC TING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSEE ALS O RELIED ON A NUMBER OF JUDGEMENTS AND CONTENDED THAT THE PENALTY LEVIED BY THE AO MAY BE DELETED. HOWEVER, T HE CIT(A) DID NOT AGREE WITH THE SUBMISSIONS OF THE AS SESSEE, HE NOTED THAT THE APPELLANT SURRENDERED RS.8,50,000 DURING THE SURVEY OPERATION, YET THE INCOME SHOWN I S ONLY RS.4,55,012/-. HE WAS OF THE OPINION THAT IT IS CLE AR THAT THE ASSESSEE HAS BOOKED LOSSES IN THE BUSINESS OPER ATION WHICH WAS SET OFF AGAINST THE SURRENDER SO MADE. I N VIEW OF THE SAME HE CONFIRMED THE PENALTY LEVIED BY THE AO. 10. BEFORE ME, THE LEARNED COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AS WE LL AS CIT(A), HIS SUBMISSIONS WAS THAT THE ASSESSEE HAS N OT CONCEALED ANY INCOME. IT HAS NOT FURNISHED ANY INAC CURATE PARTICULARS. IT HAS DULY DECLARED THE INCOME SURREN DERED BY IT DURING THE SURVEY OPERATION AND THE AO HAS AP PLIED ONLY AN ARBITRARY GROSS PROFIT RATE, THAT TOO WITHO UT REJECTING THE BOOKS OF ACCOUNT. IT WAS EMPHASIZED B Y THE AR THAT NO PENALTY ON AN ADDITION MADE ON ESTIMATED BASIS CAN BE LEVIED. HE ALSO RELIED ON A JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MODI INDUSTRIAL CONSTRUCTION(2010) 195 TAXMAN68(P&H) 11. THE LEARNED DR, ON THE OTHER HAND, RELIED ON TH E ORDER OF THE AO AND CIT(A). 12. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACT OF THE CASE IS THAT 5 THE ASSESSEE HAD SURRENDERED AN AMOUNT OF RS.8,50,0 00/- DURING THE COURSE OF SURVEY. IT IS ALSO NOT IS DISP UTE THAT THE SAID SURRENDER HAS BEEN DISCLOSED IN THE PROFIT & LOSS OF THE RELEVANT YEAR BY THE ASSESSEE. THIS IS ALSO AN ADMITTED FACT THAT THE GROSS PROFIT RATE SHOWN BY T HE ASSESSEE HAS FALLEN DURING THE YEAR AS COMPARED TO THE PRECEDING YEAR. HOWEVER, ON THE PERUSAL OF THE ASSE SSMENT ORDER IT CAN BE SEEN THAT THOUGH THE A.O HAS MENTIO NED THE FACT RELATING TO SURRENDER BY THE ASSESSEE. HOW EVER, HE HAS TAKEN ADVERSE VIEW ON THE BASIS OF FALL IN G ROSS PROFIT RATE DECLARED BY THE ASSESSEE DURING THE YEA R AS COMPARED TO THE EARLIER YEARS. IT IS A MATTER OF CO MMON KNOWLEDGE THAT RATE OF PROFIT CAN NOT BE UNIFORM IN ALL THE YEARS. IN FACT, PROFIT IS NOT A CONSTANT FACTOR AND IT DEPENDS ON THE TRADING CONDITIONS AND MANY OTHERS. THE A.O HAS ESTIMATED THE GROSS PROFIT, HOWEVER, IT IS TO BE NOTED THAT THE A.O. HAS PREFERRED NOT TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IT IS WELL ESTABLISHED THAT THE FALL IN GROSS PROFIT RATE MAY BE A TRIGGER FOR A.O. TO MAKE FURTHER ENQUIRY, IT CANNOT BE THE SOLE BASIS FOR MA KING ADDITION. IT IS ALSO A MATTER OF RECORD THAT THE A. O. EVEN IN PENALTY ORDER HAS NOT BEEN ABLE TO RECORD ANY FINDI NG AS TO THE CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. THE ADDITION ON ESTIMA TION MAY BE MADE DEPENDING ON THE SPECIFIC FACTS OF A PARTICULAR CASE. HOWEVER IT CANNOT BE A CASE OF CONCEALMENT OF INCOME ON FURNISHING OF INACCURATE PARTICULARS, AS ENVISAGED BY THE PROVISIONS OF S.27 1(1)(C) OF THE ACT. MY VIEW GETS STRENGTHENED BY THE JUDGEM ENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MODI 6 INDUSTRIAL CORPORATION (SUPRA) RELIED ON BY THE LEA RNED AR. IN THIS CASE, THE ADDITION WAS MADE ESTIMATING THE GROSS PROFIT RATE, ON AN APPEAL BY THE REVENUE AGAI NST THE ORDER OF ITAT, DELETING THE PENALTY, THE HONBLE HI GH COURT HELD, CONFIRMING THE ORDER OF THE ITAT, AS UNDER: 5.AFTER HEARING THE LEARNED COUNSEL FOR THE APPELL ANT- REVENUE AND GOING THROUGH THE IMPUGNED ORDER, WE AR E OF THE OPINION THAT THE LEARNED ITAT HAS RECORDED A FI NDING OF FACT WITH REGARD TO THE ADDITION OF INCOME BEING MADE ON THE BASIS OF ESTIMATE, WHICH IN OUR OPINION DOES NOT REQUIRE ANY INTERFERENCE. A PERUSAL OF THE ORDER DA TED 30.03.2007, PASSED BY THE ITAT IN THE ASSESSMENT PROCEEDINGS WHICH HAS BEEN QUOTED IN EXTENSO IN THE IMPUGNED ORDER, MAKES IT CLEAR THAT ADDITION OF THE INCOME WAS MADE ONLY ON THE BASIS OF ESTIMATE. THEREFORE, WE DO NOT FIND THAT THE LEARNED ITAT HAS RECORDED A WRONG FINDING IN THIS REGARD. AS FAR AS THE FINDING WITH REGARD TO CONCEALMENT OF INCOME IS CONCERNED, IT IS CLEAR THAT IN THE ORIGINAL ASSESSM ENT ORDER, THERE WAS NO FINDING THAT ASSESSEE HAS CONCE ALED ITS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME, BUT SUBSEQUENTLY AFTER THE CANCELLATION OF THE ASSESSMENT, THE ASSESSING OFFICER HAS PROCEEDED ON THE BASIS THAT THE ASSESSEE, WHILE INFLATING THE ELECTR ICITY CHARGES AND UNDER-VALUING THE CLOSING STOCK OR RICE BRAN, HAS SUPPRESSED THE INCOME. THEREFORE, THE ADDITIONS ON ACCOUNT OF PROCESSING OF UNACCOUNTED RICE BRAN AND UNDER-VALUATION OF CLOSING STOCK OF RICE BRAN WERE MADE AND INCOME WAS ASSESSED ON THE ESTIMATE BASE. THEREFORE, IN OUR OPINION, THE ITAT IS RIGHT WHILE COMING TO THE CONCLUSION THAT WHEN THE ASSESSMENT IS MADE ON ESTIMATE BASIS, THE PENALTY SHOULD NOT BE IMPOSED. IN THIS REGARD, REFERENCE CAN BE MADE TO A DECISION OF THIS COURT IN HARIGOPAL SINGH V. CIT[2002]258ITR85. THE FACTS IN THE PRESENT CASE ARE NOT DIFFERENT AND THE ONLY CONCLUSION POSSIBLE IN THE PRESENT CIRCUMS TANCES IS THAT THE PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE BECAUSE OF ADDITION MADE ON ESTIMATE BASIS. IN VIEW OF THE 7 ABOVE PENALTY U/S 271(1) (C) LEVIED BY THE A.O. IS HEREBY DELETED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY, 2015. SD/- (H.L. KARWA) VICE PRESIDENT DATED: 30.07.2015. PRAMOD, P.S. COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH