KAMAL SINGH BAID, HUF, Jaipur V. ITO, Jaipur

ITA 63/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5381 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Non compliance
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH EQDQY DS-JKOR] U;KF;D LNL; DS LE{K BEFORE: SHRI MUKUL K. SHRAWAT, JUDICIAL M EMBER VK;DJ VIHY LA-@ ITA NO. 63/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07. M/S. KAMAL SINGH BAID HUF A-19, AMBA BARI, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 4(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAHK 7638 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : ADJOURNMENT APPLICATION REJECTED. JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 04/03/2016. VKNS'K@ ORDER PER MUKUL K. SHRAWAT, JM : THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM THE ORDER OF LD. CIT (A)- II, JAIPUR DATED 08.11.2013 AND THE ONLY GROUND IS IN RESPECT OF CONFIRMATION OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF RS. 41,589/-. 2. ON THE DATE OF HEARING, AN ADJOURNMENT APPLICATI ON WAS MOVED. HOWEVER, CONSIDERING THE ISSUE IS TRIFLE IN NATURE, HENCE RE JECTED. 3. THE LD. D/R SHRI RAJ MEHRA, JCIT IS PRESENT WHO HAS PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 2 ITA NO. 63/JP/2014 M/S. KAMAL SINGH BAID HUF VS. ITO 4. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 22.12.2008 AND THE PENAL TY ORDER PASSED UNDER SECTION 271(1)(C) DATED 26.11.2010 WERE THAT THE ASSESSEE I N HUF CAPACITY IS STATED TO BE IN THE BUSINESS OF ASSEMBLING OF SMALL MACHINE PARTS A ND THEN EXPORTED THE ASSEMBLED MACHINES TO USA. THE OBJECTION OF THE AO WAS THAT D URING THE YEAR UNDER CONSIDERATION THERE WAS FALL IN GROSS PROFIT AS WELL AS LOWER GP RATE WAS DISCLOSED BY THE ASSESSEE. IT HAS ALSO BEEN MENTIONED BY THE AO THAT THE SALES HA VE ALSO GONE DOWN FROM THE PAST YEARS AND ANOTHER OBJECTION OF THE AO WAS THAT NO S TOCK REGISTER WAS MAINTAINED BY THE ASSESSEE. THE AO HAD ALSO ENQUIRED FROM THE PARTY W HO HAD SUPPLIED THE SMALL MACHINE PARTS BUT ON ACCOUNT OF NON COMPLIANCE, THE AO HAS DOUBTED THE VERSION OF THE ASSESSEE. FINALLY, HE HAS APPLIED THE GP RATE A T 40% AS AGAINST THE GP RATE DECLARED BY THE ASSESSEE AT 22% AND ESTIMATED THE G ROSS PROFIT AT RS. 14,42,500/-. SINCE THE ASSESSEE HAD DISCLOSED THE GP AT RS. 7,93 ,653/-, THEREFORE, THE DIFFERENCE OF RS. 6,48,848/- WAS TAXED IN THE HANDS OF THE ASSESS EE. 4.1. DURING PENALTY PROCEEDINGS, THE EXPLANATION OF THE ASSESSEE WAS THAT THE ENTIRE TURNOVER WAS EXPORT TURNOVER. DURING THE YEAR EXCHA NGE CONVERSION RATE OF DOLLAR VIS-- VIS RUPEE WAS 43.97, WHEREAS IN THE PRECEDING YEAR THE EXCHANGE CONVERSION RATE WAS 46.42. DUE TO THE DECREASE IN THE EXCHANGE RATE, T HE CONSEQUENCE WAS THAT THE PROFIT RATIO HAD GONE DOWN WHICH RESULTED INTO DECREASE IN GROSS PROFIT RATE. THE OTHER REASON FOR DECREASE IN TURNOVER WAS THAT RATES OF BRASS P IGTAILS WAS HIGHER AND THE MARGIN IN THE BUSINESS HAD GONE DOWN. IT HAS ALSO BEEN PLEAD ED THAT THE ASSESSEE WAS HAVING NUMBER OF SMALL MACHINE PARTS SUCH AS BRASS NUTS, P LATES, COUPLERS, CLIPS, PIGTOUTS, 3 ITA NO. 63/JP/2014 M/S. KAMAL SINGH BAID HUF VS. ITO PLUGS, SCREWS, SPRINGS, WRENCH, THERMOWELL ETC. TH EREFORE, IT WAS NOT PRACTICALLY POSSIBLE TO MAINTAIN STOCK REGISTER. HOWEVER, THE AO WAS NOT CONVINCED AND HELD THAT THE ASSESSEE HAD CONCEALED THE INCOME, HENCE LIABLE TO BE PENALIZED UNDER SECTION 271(1)(C) OF THE IT ACT. FINALLY, PENALTY OF RS. 4 1,589/- WAS IMPOSED. 5. IN THE LIGHT OF ABOVE BRIEF FACTS, I HAVE EXAMIN ED THE ORDERS OF THE REVENUE AUTHORITIES. AT THE OUTSET, IT IS WORTH TO MENTION THAT THIS IS A CASE WHERE THE IMPUGNED ADDITION WAS MADE MERELY BY ESTIMATING THE PROFIT. THE ADMITTED FACTUAL POSITION WAS THAT THE AO HAD APPLIED 40% GP RATE WHICH HAS RESUL TED INTO THE IMPUGNED ADDITION. THOUGH IT WAS AN ADMITTED FACTUAL POSITION THAT THE RE WAS DECLINE IN THE PROFIT RATIO DURING THE YEAR BUT THE EXPLANATION OF THE ASSESSEE APPEARS TO BE CONVINCING THAT DUE TO LOWER RATE OF EXCHANGE CONVERSION RATE OF RUPEE IN COMPARISON TO THE PRECEDING YEARS WHEN THE EXCHANGE CONVERSION RATE OF DOLLAR W AS HIGHER THE ASSESSEE HAD SUFFERED LOWER MARGIN OF PROFIT. I AM OF THE CONSI DERED OPINION THAT IN A SITUATION WHEN THE ASSESSEE HAS OFFERED AN EXPLANATION ABOUT THE D ECLINE IN THE PROFIT AND THAT EXPLANATION WAS NOT FOUND TO BE FALSE OR UNTRUE, TH EN IT WAS NOT JUSTIFIABLE TO IMPOSE THE PENALTY U/S 271(1)(C). IN THIS REGARD EXPLANTIO N-1 TO SECTION 271(1)(C) IS APPLICABLE WHICH PRESCRIBES THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON AND SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO TO BE FALSE TH EN THE AMOUNT SO ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL FOR THE PURPOSE OF CLAUSE (C) TO SECTION 271(1) BE DEEMED TO REPRESENT THE CONCEALED PARTICU LARS OF INCOME. THEREFORE, AN EXCEPTION HAS BEEN CARVED OUT UNDER THE STATUTE THA T IN A SITUATION WHEN AN 4 ITA NO. 63/JP/2014 M/S. KAMAL SINGH BAID HUF VS. ITO EXPLANATION IS OFFERED AND THAT EXPLANATION IS TRUE OR BONAFIDE, THEN OUT OF THE AMBITS OF CONCEALMENT PROCEEDINGS. THERE IS NOTHING ON RECOR D TO DEMONSTRATE THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS MALAFIDE OR UNTRUE. AS A RESULT, THE VIEW TAKEN BY THE REVENUE AUTHORITIES IS HEREBY REVERSED AND G ROUND OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/201 6. SD/- EQDQY DS-JKOR (MUKUL K. SHRAWAT) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/03/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KAMAL SINGH BAID HUF, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 4(2), JAIPUR. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.63/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 5 ITA NO. 63/JP/2014 M/S. KAMAL SINGH BAID HUF VS. ITO SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER 6 ITA NO. 63/JP/2014 M/S. KAMAL SINGH BAID HUF VS. ITO