M/s Vallabh Fabrics Ltd., Ludhiana V. ACIT, Ludhiana

ITA 684/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73482 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-02-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 684/CHD/2013 ASSESSMENT YEAR : 2000-01 VALLABH FABRICS LTD VS. A.C.I.T, C-II SUNDER NAGAR LUDHIANA LUDHIANA AAACV 5476G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUDHIR SEHGAL RESPONDENT BY: SHRI J.S. NAGAR DATE OF HEARING 19.2.2014 DATE OF PRONOUNCEMENT 26 .2.2014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 4.4 .2013 OF THE LD CIT(A)-II, LUDHIANA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) @ 1 00% OF THE TAX ALLEGEDLY SOUGHT TO BE EVADED. 2. THAT WHILE CONFIRMING LEVY OF PENALTY @ 100%, TH E CIT(A) HAS FAILED TO CONSIDER THAT THE ISSUE OF DEDUCTION U/S 80IA WAS A DEBATABLE ISSUE AND THE SAID DEDUCTION HAD BEEN CLAIMED ON TH E BASIS OF CERTIFICATE FROM THE CHARTERED ACCOUNTANT AND, THUS, NO PENALTY U/S 271 (1)(C) COULD HAVE UPHELD. 3. THAT EVEN OTHERWISE, THE SUSTAINING OF PENALTY O N THE BASIS OF ADHOC OFFER OF RS.7 LACS IS UNJUST SINCE, THERE WAS NO MATERIAL ON RECORD TO JUSTIFY THE LEVY OF PENALTY U/S 271 (1) (C) 4. NOTWITHSTANDING THE ABOVE SAID GROUND OF APPEAL, THE CIT(A) HAS FAILED TO CONSIDER THAT SINCE THE OFFER OF RS. 7 LA CS WAS SUBJECT TO NO PENALTY AND, AS SUCH, NO PENALTY COULD HAVE BEEN SU STAINED ON THE BASIS OF JUDGMENT OF JURISDICTIONAL BENCH IN THE CASE OF SH. RAJESH GARG AS REPORTED IN 313 ITR 256. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOS ED OFF. 2 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSE SSEE HAD CLAIMED DEDUCTION U/S 80IA. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS SELLING CLOTH BY PROCES SING THE SAME. THE PROCESS OF DYING, COMPARING, TABULAR, CAL ENDAR ETC. WERE SAID TO HAVE BEEN PERFORMED. THE ASSESSING OF FICER WAS OF THE OPINION THAT THOUGH THE ASSESSEE FAILED TO P ROVE THESE PROCESSES BUT IN ANY CASE THE DEDUCTION U/S 80IA WA S NOT ALLOWABLE ON THE PROCESSING AND ACCORDINGLY DEDUCTI ON WAS DENIED. FURTHER SOME DISCREPANCIES WERE NOTED IN TH E PURCHASE AND SALE AND THERE WAS ALSO FALL IN THE GROSS PROFI T RATE AGAINST WHICH DURING ASSESSMENT PROCEEDINGS THE ASSESSEE OF FERED ADDITIONAL INCOME OF RS. 7 LAKHS WHICH WAS ACCEPTED AND THE ASSESSED TO TAX. ON THESE TWO ITEMS THE ASSESSING O FFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 4 IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS MAINL Y SUBMITTED THAT THE ASSESSEE HAS MADE ALL THE DISCL OSURE IN THE RETURN, THEREFORE NO PENALTY WAS LEVIABLE. RELIANC E WAS PLACED ON VARIOUS CASE LAWS. HOWEVER, THE ASSESSING OFFI CER DID NOT FIND FORCE IN THE SAME AND LEVIED PENALTY @ 150%. 5 ON APPEAL BEFORE THE LD. CIT(A) IT WAS MAINLY SUB MITTED THAT ADDITIONS HAVE BEEN MADE ON ESTIMATED BASIS, T HEREFORE NO PENALTY IS LEVIABLE. FURTHER MERE DENIAL OF DEDUCT ION WOULD NOT ATTRACT THE PENALTY PROCEEDINGS. 6 BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT DEDUCTION U/S 80IA WAS NO ALLOWED BECAUSE ACCO RDING TO THE ASSESSING OFFICER PROCESSING ITSELF WOULD NOT M AKE DEDUCTION U/S 80IA ALLOWABLE. HE HAS ALSO OBSERVED THAT THE ASSESSEE COULD NOT PROVE THAT THE ASSESSEE HAS CARR IED ANY 3 PROCESSES. HE SUBMITTED THAT THIS IS NOT CORRECT A SSERTION AND IN THIS REGARD HE REFERRED TO PAGE 23 OF THE PAPER BOOK WHICH IS A COPY OF MANUFACTURING. TRADING AND PROFIT AND LOS S ACCOUNT AND WHICH CLEARLY SHOW THAT DURING THE YEAR THE ASS ESSEE HAS INCURRED THE EXPENDITURE TO THE TUNE OF RS. 3,14,65 ,316/- AS MANUFACTURING EXPENSES. HE FURTHER REFERRED TO PA GE 32 WHICH IS A COPY OF SCHEDULE IX WHICH GIVE THE DETAILS OF MANUFACTURING EXPENSES AND WHICH CLEARLY SHOW THAT MAJOR EXPENDITURE WAS ON ACCOUNT OF DYING AND FINISHING A MOUNTING TO RS. 2,19,43,488/-. THEREFORE MERE DISALLOWANCE OF DEDUCTION U/S 80IA WOULD NOT LEAD TO PENAL CONSEQUENCES. OTH ER ADDITION OF RS. 7 LAKHS WAS ON ACCOUNT OF SURRENDERED INCOME MADE DURING ASSESSMENT PROCEEDINGS WHICH RELATED TO CERT AIN DISCREPANCIES IN THE SALE, PURCHASE AND SUPPLIER AC COUNT. THEREFORE MERE ESTIMATION OF INCOME ON THESE ACCOUN TS WOULD NOT ATTRACT PENALTY PROCEEDINGS. HE ALSO STRONGLY RELIED ON THE DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT INCASE OF CIT V. INDER SONS LEATHER PVT LTD, 328 ITR 167 AND DECISION OF HON'BLE SUPREME COURT IN CASE OF RELIANCE PETRO PRODUCT PVT LTD, 322 ITR 158. 7 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND ALSO POINTED OUT THAT RS. 7 LAKHS WAS SURRENDERED BECAUSE OF BOGUS P URCHASES. 8 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREFU LLY. WE FIND THAT AS FAR AS ADDITION OF RS. 7 LAKHS IS C ONCERNED, THE SAME WAS MADE BECAUSE CERTAIN DISCREPANCIES WERE FO UND IN THE ACCOUNTS OF SOME PARTIES. GROSS PROFIT RATE WA S ALSO FOUND ON LOWER SIDE, THEREFORE IN ALL THESE POINTS IT WAS OBSERVED IN THE ASSESSMENT ORDER AS UNDER: 4 THE FACTS AS STATED ABOVE WERE EXAMINED. AS REGAR DS THE PURCHASES AT HIGHER RATES AND SALES AT LOWER RATES IN COMPARISON TO EARLIER YEAR, THE CONTENTION OF THE ASSESSEE MAY BE ACCEPTED. IT MAY ALSO BE ADMITTED THAT THE RECEIPTS ON A HIGH VA LUE ADDITION ITEMS HAVE ALSO DECLINED. BUT, KEEPING IN VIEW THE QUANTUM OF THESE ITEMS, IT MAY BE HELD THAT THESE ITEMS ARE NO T MUCH ACCOUNTABLE FOR DECLINE IN GROSS PROFIT RATE AS REG ISTERED BY THE ASSESSEE. WHEN THESE FACTS ADDITION THE FACTS THAT THE ASSESSEE IS NOT MAINTAINING QUANTITATIVE DETAILS WERE CONFRONTE D TO THE ASSESSEE, AN ADDITION OF RS. 7,00,000/- WAS OFFERED BY THE ASSESSEE BY FILING A LETTER DURING THE COURSE OF HE ARING SUBJECT TO NO PENALTY. THE ABOVE CLEARLY SHOW THAT THE ADDITION WAS MADE O N ACCOUNT NOT ANY PARTICULAR DEFECT BUT COMBINATION OF FACTS AND OFFERE BY THE ASSESSEE FOR SURRENDER OF RS. 7 LAKHS HAS BEEN ACCEPTED. AT BEST THIS CAN BE DESCRIBED TO BE AN ESTIMATED AD DITION AND WOULD NOT CALL FOR PENAL PROCEEDINGS BECAUSE IN OUR OPINION, ALL THE FACTS HAVE ALREADY BEEN DISCLOSED IN THE RETURN OF INCOME. AS FAR AS DENIAL OF DEDUCTION U/S 80IA IS CONCERNED , PERUSAL OF MANUFACTURING AND TRADING ACCOUNT CLEARLY SHOW THAT THE ASSESSEE HAS INCURRED EXPENSES IN MANUFACTURING OF RS. 3,14,65,316/. DETAILS OF THESE EXPENSES ARE GIVEN IN SCHEDULE IX WHICH IS PLACED AT PAGE 32 OF PAPER BOOK. THIS PAGE SHOWS THAT DYE AND FURNISHING EXPENSES OF RS. 2,99,43,488 /-WAS INCURRED BY THE ASSESSEE. THIS EXPENDITURE HAS BEE N ALLOWED BY THE ASSESSING OFFICER WHICH MEAN PROCESSING EXPE NSES HAS BEEN ALLOWED. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE PROCESSING OF DYE AN D FINISHING. THE DEDUCTION HAS BEEN MAINLY HELD NOT TO BE ALLOW ABLE BECAUSE THE DEDUCTION U/S 80IA WAS ALLOWABLE AGAINS T THE PROCESSING OF GOODS. MERELY BECAUSE THE DEDUCTION IS NOT ALLOWABLE BECAUSE OF SOME TECHNICAL REASONS IT CANN OT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARLY O F INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE HO N'BLE 5 SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT LTD (SUPRA) HAS OBSERVED AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, SUGGESTS THAT IN ORDER TO BED COVERED BY IT, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISH ED INACCURATE PARTICULARS IF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRA CE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN T HE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE C ANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN OR DER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAM OUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY TH E ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSE E CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULA RS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRA CT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE , NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT THIS I S NOT A FIT CASE FOR LEVY OF PENALTY AND ACCORDINGLY WE DELETE THE PENALTY. 9 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.2.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26.2.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR