M/s Oscar Remedies (P) Ltd., Yamunanagar V. DCIT, Yamunanagar

ITA 64/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9916 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.64/CHD/2016 ASSESSMENT YEAR:2006-07 M/S OSCAR REMEDIES (P) LTD. VS. THE DCIT, ROOP NAGAR COLONY, BADDI MAJRA CIRCLE, YAMUNA NA GAR YAMUNA NAGAR PAN NO. AAACO3115H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 11/04/2016 DATE OF PRONOUNCEMENT : 14/06/2016 ORDER PER ANNAPURNA GUPTA A.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF LD. CIT(A), PANCHKULA, DATED 30.11.2015. THE ASS ESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN UPHOLDING THAT ASSESSING OFFICER WAS JUSTIFIED IN IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ADDITION TO TRADING RESULTS TO THE EXTENT CONFIRMED BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL FOR FURNISHIN G THE INACCURATE PARTICULARS OF INCOME. 2. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERIN G THAT PENALTY U/S 271(1)(C ) CANNOT BE LEVIED ON THE ADDITION MADE ON ESTIMATION AND PURELY ON GUESS WORK IN THE TRADING RESULTS, IN WHICH RELIEF WAS GRANTED BY THE INCOME TAX APPELLATE TRIBUNAL. 3. THAT THE LD. ASSESSING OFFICER HAS ERRED IN NOT CON SIDERING THE FACT THAT ALL THE FACTS HAD BEEN DISCLOSED AND NOTHING WAS CONCEALED. 4. THAT THE PENALTY U/S 271 (1)(C) AS ABOVE HAS BEEN L EVIED AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETAILED REPLY FILED DURING THE COURSE OF HEARING HAS NOT BEEN CONSIDERED PROPERLY. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 2. FACTS LEADING TO THE PRESENT APPEAL ARE THAT THE ASSESSMENT IN THIS WAS COMPLETED U/S 143(3) VIDE ORDER DATED 29.12.2008 AT TOTAL INCOME OF RS. 62,06,320/- MAKING, INTER ALIA, ADDITION OF RS. 13, 60,405/- AS TRADING ADDITION AND RS. 3,69,000/- ON ACCOUNT OF SUNDRY CREDITORS. WE H AVE MENTIONED THESE TWO 2 ADDITIONS SPECIFICALLY FOR THE REASON THAT THE PRES ENT PENALTY APPEAL HAS ORIGINATED FROM THE PENALTY ORDER U/S 271(1)(C), DA TED 30.03.2012 WHEREIN THE ASSESSING OFFICER LEVIED PENALTY OF RS. 5,82,117/- IN RESPECT OF THE ABOVE TWO AMOUNTS. HOWEVER, PENALTY QUA THE ADDITION OF SUNDR Y CREDITORS WAS DELETED BY LD. CIT(A) AND THUS WHAT IS LEFT IS THE PENALTY QUA THE TRADING ADDITION. REGARDING THE TRADING ADDITION OF RS. 13,60,405/-, THE A.O NOTED IN THE ASSESSMENT ORDER THAT ASSESEE COMPANY DEALS IN MANU FACTURING AND TRADING OF MEDICINES AND ITS TOTAL SALES WAS RS. 4,64,87,279/- AGAINST WHICH GROSS PROFIT WAS SHOWN AT RS. 25,39,595/- WHICH GAVE A GROSS PROFIT RATE OF RS. 5.46%. ACCORDING TO THE A.O., SUCH GROSS PROFIT RATE WAS L OWER THAN THE GROSS PROFIT RATE OF PRECEDING TWO YEARS I.E. 6.34% IN A.Y. 2004-05 A ND 6.6% IN A.Y. 2005-06. EXPLANATION OF THE ASSESSEE REGARDING THE FALL IN G ROSS PROFIT RATE DID NOT FIND FAVOUR AND A.O. RECORDED THAT BOOKS OF ACCOUNT MAIN TAINED BY THE ASSESEE DID NOT REFLECT TRUE AND COMPLETE AFFAIRS OF THE ASSESE ES BUSINESS. ACCORDINGLY, THE A.O. REJECTED THE BOOKS OF THE ASSESSEE UNDER SECTI ON 145(3) AND ESTIMATED THE SALES AT RS. 6 CRORES AND ESTIMATED/APPLIED GROSS P ROFIT RATE OF 6.5% TO THE TURNOVER AND MADE THE TRADING ADDITION OF RS. 13,60 ,405/-. THE SAID ADDITION WAS HOWEVER CONTESTED BEFORE THE LD. CIT(A) AND HONBLE ITAT BY THE ASSESSEE. THE HONBLE ITAT VIDE ITS ORDER DATED 28.10.2014 UPHELD THE ESTIMATION OF TURNOVER AT RS. 6 CRORES BUT ESTIMATED THE GP RATE AT 5.5% AS A GAINST 6.5% ESTIMATED BY THE A.O. IT IS THIS VERY TRADING ADDITION SO SUSTAINED BY THE ITAT WITH REFERENCE TO WHICH PENALTY WAS IMPOSED BY THE A.O. AND WHICH WAS CONFIRMED BY CIT(A). 3. BEFORE US, LD. AR ARGUED THAT ADDITION MADE WAS ESTIMATED AND THERE WAS THUS NO CONCRETE FINDINGS OF ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, HENCE NO PENALTY UNDER SECTI ON 271(1)(C) WAS LEVIABLE LD. AR RELIED UPON THE FOLLOWING CASE LAWS IN SUPPORT O F ITS ABOVE CONTENTION: A) CIT VS. RELIANCE PETRO PRODUCTS LTD. (2010) 322 ITR 158 (SC) B) CIT VS. SANGRUR VANASPATI MILLS LTD. (303 ITR 53) ( P&H HC) C) CIT VS. RAVAIL SINGH AND CO. 254 ITR 191 (P&H HC) D) CIT VS. AERO TRADERS PVT LTD. (322 ITR 316)(DEL) 3 E) F.A. CHASMAWALA PVT. LTD. VS ACIT IN ITA NO. 1795/A HD/2011 VODE ORDER DATED 13/03/2015 F) M/S OCTAVE EXPORTS VS DCIT IN ITA NO. 117/CHD/2012 VIDE ORDER DATED 19/11/2014 G) SHRI LAXMI NARAYAN SHIVHARE VS. JCIT IN ITA NO. 68/ AGRA/2013 VIDE ORDER DATED 28/06/2013 H) M/S DEEP CONSTRUCTION VS. ACIT IN ITA NO. 178/RJT/2 013 VIDE ORDER DATED 10/01/2014 I) M/S ADITYA GEMS VS ACIT IN ITA NO. 786/JP/2013 VIDE ORDER DATED 30/01/2014. 4. LD. AR ALSO STATED THAT PENALTY PROCEEDINGS ARE SEPARATE FROM ASSESSMENT PROCEEDING AND FURTHER DISTINGUISHED THE CASE LAW RELIED UPON BY THE LD.CIT(A) I.E AGGARWAL OIL & GENERAL MILLS LTD. 78 CCH 970 BY STATING THAT THE FACTS IN THAT CASE DIFFERED FROM THE PRESENT CASE A ND THAT PENALTY IN THAT CASE WAS NOT LEVIED ON ADDITION MADE ON ESTIMATE BASIS. 5. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER O F THE CIT(A) AND FURTHER PLACED RELIANCE ON THE DECISION OF THE DELHI HIGH C OURT IN THE CASE OF ZOOM COMMUNICATION 327 ITR 510. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING PE RUSED THE MATERIAL BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO CASE FOR PENALTY U/S 271(1)(C) QUA SUCH ESTIMATED TRADING ADDITION. SECTION 271(1)(C) BEING A PENAL PROVISION HAS TO BE STRICTLY CONSTRUED. PENALTY U/S 271(1)(C) IS LEVIED FOR CONCEALING OR FURNISHING IN ACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE WE FIND THAT BOOKS OF THE ASSES SEE WERE REJECTED ON ACCOUNT OF DISCREPANCY IN CASH AND INVESTMENT IN BU ILDING AND MACHINE FOUND DURING SURVEY, ON ACCOUNT OF NON-MAINTENANCE OF STO CK DETAILS, ON ACCOUNT OF NOT PROVIDING POST AND PRE SURVEY PERIOD TRADING AC COUNTS AND ON ACCOUNT OF NO PLAUSIBLE EXPLANATION OFFERED FOR FALL IN G.P. R ATE. THEREAFTER THE TURNOVER OF THE ASSESSEE WAS ESTIMATED AT RS. 6 CRORES BASED UP ON PREVIOUS YEAR TURNOVER WHILE G.P. WAS ESTIMATED AT 5.5% AS AGAINST TURNOVE R OF 4.65 CRORES AND G.P. OF 5.46% SHOWN BY THE ASSESSEE. WE FIND THAT THERE WAS GOOD ENOUGH REASON FOR REJECTING THE ASSESSEE BOOKS AS HELD BY THE ITAT AL SO AND THEREAFTER ESTIMATING TURNOVER AND G.P. RATE OF THE ASSESSEE, BUT THIS AT THE SAME TIME DOES NOT CONCLUSIVELY PROVE THAT THE ASSESSEE HAD CONCEALED ANY PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME TO JU STIFY THE LEVY OF 4 PENALTY U/S 271(1)(C). WE FIND THAT EXCEPT FOR THE FINDING THAT THE BOOKS WERE NOT RELIABLE AND THEREFORE ESTIMATING THE TURNOVER AND G.P. RATE ON THE BASIS OF PERVIOUS YEAR SALE, THERE IS NO POSITIVE EVIDENCE B ROUGHT ON RECORD TO PROVE SUPPRESSION OF SALE BY THE ASSESSEE. IN FACT THERE IS NOT EVEN A WHISPER TO THIS EFFECT IN THE ORDERS PASSED BY THE AUTHORITIES BELO W, WHILE LEVYING PENALTY. THEREFORE, WE HOLD THAT WHILE IT MAY BE A GOOD CASE FOR MAKING ADDITION, CONDITIONS FOR LEVY OF PENALTY HAVE NOT BEEN PROVEN TO BE ESTABLISHED IN THIS CASE. THERE IS NOT CONCURRENT FINDING OF CONCEALMEN T OF INCOME IN THIS CASE. IT IS A CASE WHERE BOOKS OF ACCOUNTS WERE REJECTED AND TURNOVER WAS ESTIMATED. GP RATE TOO WAS ESTIMATED AT 6.5% WHICH WAS REDUCED BY THE TRIBUNAL TO 5.5%. THEREFORE, IN SUCH A SITUATION SUCCESSIVE ESTIMATIO NS AND VARIATION IN THE ESTIMATION ITSELF SHOW THAT PENALTY U/S 271(1)(C) C ANNOT BE IMPOSED IN SUCH SITUATION. ASSESSMENT AND PENALTY ARE TWO DIFFERENT AND DISTINCT PROCEEDINGS. FINDINGS OF THE ASSESSMENT PROCEEDING MAY BE RELEVA NT BUT ARE NOT FINAL AND CONCLUSIVE FOR PENALTY PROCEEDING. TURNOVER WAS EST IMATED BY THE ASSESSING OFFICER WHICH ESTIMATION THOUGH UPHELD BY THE TRIBU NAL, YET CANNOT BE THE BASIS OF LEVYING PENALTY U/S 271(1)(C). AFTER ALL THIS WA S AN ESTIMATION ONLY. SIMILARLY, GROSS PROFIT TOO WAS ESTIMATED BY THE ASSESSING OFF ICER WHICH GROSS PROFIT RATE WAS LOWERED BY THE TRIBUNAL BY 1%. THUS, PRESENT CASE I S ONE WHERE THERE WAS AN ELEMENT OF GUESS WORK WHICH IN OUR OPINION CAN NOT BE THE VALID BASIS FOR LEVYING PENALTY U/S 271(1)(C). THEREFORE, IN OUR CONSIDERED VIEW THAT THE PENALTY LEVIED BY A.O. AND CONFIRMED BY CIT(A) QUA TRADING ADDITIO N IS NOT SUSTAINABLE AND THE SAME IS HEREBY CANCELLED. THE APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :14/06/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR