The DCIT, Circle-9, Surat V. M/s. Pankaj Diamonds, Surat

ITA 676/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9323 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-01-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: P M MEHTA
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 676/AHD/2012 (ASSESSM ENT YEAR: 2005-06) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 9, SURAT VS. M/S. PANKAJ DIAMONDS 47, KRISHAN DIAMOND PARK, NR. G.E.B. VARACHHA ROAD, SURAT - 395006 PAN NO. AADFP5145L (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI P. M. MEHTA, A.R. DATE OF HEARING : 21 -01-201 6 DATE OF PRONOUNCEMENT : 16 -02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)-V, SURAT, DATED 08.11.2011 FOR THE ASSESSMENT YEAR 2005-06 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF IMPORT, EXPORT AND MANUFACTURING OF DIAMONDS IN THE NAME AND STYLE OF M/S. PANKAJ DIAMOND. IT FILED ITS RETURN OF INCOME FOR A.Y. 2005-06 ON 24.10.2005 DECLARING TOTAL INCOME AT RS. 4,55,20,380/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, ASSESSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 24.12.2007 AND THE TOTAL INCOME WAS DETERMINED AT R S. 6,78,64,550/- INTER ALIA BY MAKING VARIOUS ADDITIONS AMOUNTING TO RS.2,23,44,17 0/-. AGGRIEVED BY THE ORDER ITA NO.676/AHD/12 A.Y. 2005-06 (DCIT VS. M /S. PANKAJ DIAMONDS) 2 OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER B EFORE THE LD. CIT(A) WHO VIDE ORDER DATED 10.07.2008 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE AND CONFIRMED THE ADDITION ONLY TO THE EXTENT OF RS.52,50,534/- ON AC COUNT OF LOW GROSS PROFIT OF RS.44,57,266/- AND UNACCOUNTED SALE OF DIAMOND POWD ER OF RS.7,93,268/-. ON ADDITIONS, WHICH WERE CONFIRMED BY THE LD. CIT(A), ASSESSING OFFICER VIDE ORDER DATED 31.03.2010 HELD THAT ASSESSEE HAD FILED INACC URATE PARTICULARS OF INCOME TO THE EXTENT OF ADDITIONS THAT WERE CONFIRMED BY THE LD. CIT(A) AND THEREFORE, ASSESSEE WAS LIABLE FOR PENALTY U/S.271(1)(C) OF TH E ACT. HE ACCORDINGLY LEVIED PENALTY OF RS.19,21,300/-. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 08.11.20 11 ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: 6. I HAVE CONSIDERED THE REASONS GIVEN BY ASSESSIN G OFFICER AND ALSO THE SUBMISSIONS OF APPELLANT. AFTER CAREFULLY GOING THROUGH THE FACTS OF THE CASE, IT IS EVIDENT THAT ADDITION ON ACCOUNT OF LOW G.P IS MADE ONLY ON THE BASIS OF EST IMATION & THERE IS NO COGENT EVIDENCE ON RECORD WHICH INDICATES CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. SIMILARLY, THE CIT(A) HAS DISALLOWED 25% OF CONSUMP TION OF POWDER CLAIMED BY THE APPELLANT INSTEAD OF CONFIRMING ADDITION OF RS. 33,31,725 MAD E BY THE A.O. ON ACCOUNT OF UNACCOUNTED SALE, IS ALSO NOT BASED UPON ANY COGENT MATERIAL AVAILABL E EITHER WITH THE A.O. OR WITH THE CIT(A). THIS DISALLOWANCE IS ALSO BASED ON ESTIMATE BASIS. HENCE , THERE IS NO RECORD WITH THE REVENUE TO PROVE ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME ON BOTH ACCOUNT I.E. ADDITION ON ACCOUNT OF LOW G.P. AND DISALLOWANCE OF EXPENSES AS MENTIONED ABOVE. IN MY OPINION THE CONFIRMATION OF AN ADDITION TO IN COME BY ANY HIGHER AUTHORITY OR COURT DOES NOT GIVE ANY LIBERTY TO THE A.O TO LEVY THE PE NALTY AUTOMATICALLY UNLESS THE BASIS OF ADDITION IS SUCH THAT IT CONCLUSIVELY PROVES THAT THE ASSESS EE. HAS EITHER CONCEALED HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE A.O HAS TO PROVE BY WAY OF FURTHER EVIDENCES DURING THE PENALTY PROCEEDINGS THAT THE ASSESSEE HA S EITHER CONCEALED HIS INCOME OR HAS FURNISHED IN ACCURATE PARTICULARS OF INCOME. MANY HON'BLE COU RTS HAVE HELD THAT THE PENALTY BEING HARSHER IN NATURE SHOULD NOT BE LEVIED IN A MECHANICAL MANN ER. HERE WHAT HAS HAPPENED IS THAT THE PENALTY WAS LEVIED BY THE A.O. ONLY BECAUSE THE AMO UNT OF ADDITION HAS BEEN CONFIRMED BY LEARNED CIT(A). IN MY OPINION, THE ESTIMATED ADDITION DOES NOT NECE SSARILY INDICATE THAT EITHER THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. FURTHER ESTIMATION IS ALWAYS ESTIMATION HOWSOEVER; IT MAY B E SCIENTIFIC OR LOGICAL. HENCE, ON THE ADDITION MADE ON ACCOUNT OF ESTIMATION, PENALTY PROCEEDINGS CANNOT BE INVOKED. THE OPINION/OBSERVATION HAS BEEN HELD BY MANY HONBLE COURTS OF THE COUNTRY . ACCORDINGLY, THE PENALTY LEVIED ON THE ABOVE TWO ADDITIONS IS HEREBY DELETED AND THE APPEA L IS ALLOWED. ITA NO.676/AHD/12 A.Y. 2005-06 (DCIT VS. M /S. PANKAJ DIAMONDS) 3 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.19,21,300/- LEVIED U/S.2 71(1)(C) OF THE I.T. ACT, 1961. 5.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF ASSE SSING OFFICER. ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFO RE THE ASSESSING OFFICER AND CIT(A) AND SUPPORTED THE ORDER OF CIT(A). HE FURTH ER SUBMITTED THAT THE MAJOR PORTION OF ADDITION WAS WITH RESPECT TO GP ADDITION , THE ADDITION WHICH HAS BEEN DELETED BY THE CO-ORDINATE BENCH OF TRIBUNAL VIDE O RDER DATED 13.01.2012. AS FAR AS THE ADDITION WITH RESPECT TO DISALLOWANCE OF DIA MOND POWDER EXPENSES CONCERNED, HE SUBMITTED THAT ADDITION IS ON ESTIMAT ED BASIS AND IT IS A SETTLED LAW THAT NO PENALTY IS LEVIABLE ON THE ADDITIONS MADE O N ESTIMATE BASIS. HE, THUS, SUPPORTED THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO LE VY OF PENALTY U/S.271(1)(C) OF THE ACT. WE FIND THAT LD. CIT(A) WHILE DELETING THE PE NALTY HAS GIVEN A FINDING THAT THE ADDITION ON ACCOUNT OF LOW GP WAS MADE ONLY ON THE BASIS OF ESTIMATION AND THERE WAS NO EVIDENCE WHICH INDICATED THE CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. WITH RESPECT TO DISALLOWANCE OF CONSUMPTION OF DIAMOND POWDER, HE HAS GIVEN A FINDI NG THAT THE ADDITION IS NOT BASED UPON ANY COGENT MATERIAL TO PROVE UNACCOUNTED SALE AND THAT THE DISALLOWANCE IS AGAIN BASED ON ESTIMATED BASIS. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE TWO INDE PENDENT PROCEEDINGS AND THE PENALTY ORDER CANNOT BE SOLELY BASED ON THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT. FURTHER APART FROM THE FALSITY OF THE E XPLANATION GIVEN BY THE ASSESSEE, THE DEPARTMENT MUST HAVE BEFORE IT BEFORE LEVYING T HE PENALTY, COGENT MATERIAL OR EVIDENCE FROM WHICH IT COULD BE INFERRED THAT ASSES SEE HAS CONSCIOUSLY CONCEALED ITA NO.676/AHD/12 A.Y. 2005-06 (DCIT VS. M /S. PANKAJ DIAMONDS) 4 THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY F URNISHED INACCURATE PARTICULARS OF INCOME. IT IS WELL SETTLED THAT THE PARAMETERS OF J UDGING THE JUSTIFICATION FOR ADDITION MADE IN THE ASSESSMENT CASE OF THE ASSSESS EE IS DIFFERENT FROM THE PENALTY IMPOSED ON ACCOUNT OF CONCEALMENT OF INCOME OR FILI NG INACCURATE PARTICULARS OF INCOME AND THAT CERTAIN DISALLOWANCE/ADDITION COULD LEGALLY BE MADE IN THE ASSESSMENT PROCEEDINGS ON THE PREPONDERANCE OF PROB ABILITIES BUT NO PENALTY COULD BE IMPOSED U/S. 271(1)(C) OF THE ACT ON THE PREPOND ERANCE OF PROBABILITIES AND REVENUE HAS TO PROVE THAT THE CLAIM OF EXPENSES BY THE ASSESSEE WAS NOT GENUINE OR WAS INFLATED TO REDUCE ITS TAX LIABILITY. FURTHER M ERELY BECAUSE ADDITIONS HAVE CONFIRMED IN APPEAL OR NO APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ADDITIONS MADE, IT CANNOT BE THE SOLE GROUND FOR COMING TO TH E CONCLUSION THAT ASSESSEE HAS CONCEALED ANY INCOME. IN VIEW OF THE AFORESAID FACT S, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS, THE GROUND OF RE VENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 02 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 16/02/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD