M/s Repro Resins Pvt. Ltd., RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2, GANDHIDHAM

ITA 69/RJT/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1297 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 29-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M J CHARANIA
• Keywords: Gross profit estimation

Judgement Text

ITA NO. 69 / RJ T/201 6 ASSESSMENT YEAR: 20 07 - 08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E - COURT AT AHMEDABAD) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO. 69 /RJT/201 6 ASSESSMENT YEAR: 20 07 - 08 M/S. REPRO RESINS PVT. LTD., VS. INCOME TAX OFFICER, GAGLANI RACH MAKADIA & CO., WARD - 2, GANDHIDHAM. KEVAL DHAM , 4, AFRICA COLONY, 150 FT. RING ROAD, RAJKOT 360 007. [PAN: AA BCR 7762 C ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KALPESH DOSHI, C. A. RESPONDENT BY : SHRI M.J. CHARANIA, D.R. DATE OF HEARING : 0 5 .04.2016 DATE OF PRONOUNCEMENT : 22 .04.2016 O R D E R PER S.S. GODARA, J.M. TH IS ASSESSEE S APPEAL FOR A SSESSMENT Y EAR 20 07 - 08 , ARISE S FROM ORDER OF THE CIT(A) - 3 , RAJKOT DATED 0 4.01 .2016 , PASSED IN CASE NO.CIT(A) - 3 / A 3/ 153/13 - 14 , IN PROCEEDINGS UNDER SECTION 274 R.W.S. 271(1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE S SOLE SUBSTANTIVE GRIEVANCE IS AGAINST BOTH THE LOWER APPELLATE AUTHORITY S ORDER IMPOSING SECTION 271(1)(C) PENALTY OF RS.1, 4 5,000/ - . ITA NO. 69 / RJ T/201 6 ASSESSMENT YEAR: 20 07 - 08 PAGE 2 OF 4 3. THE ASSESSEE IS ENGAGED IN TRADING OF PLASTIC SCRAPS , AGGLOMERATES AND PROCESSING SCRAP. HE FIELD RETURN ON 31.10.2007 DECLARING TOTAL INCOME OF RS.2,06,160/ - . THE ASSESSING OFFICER TOOK UP SCRUTINY THERE BY FRAMING REGULAR ASSESSMENT. THIS WOULD RESULT IN RE - ESTIMATION OF GROSS PROFIT AND DISALLOWANCE UNDER SECTION 36(1)(3) OF THE ACT ENHANCING ASSESSEE S INCOME TO RS.7,08,410/ - . THE CIT(A) IN LOWER APPELLATE QUANTUM ORDER PARTLY REVERSED THE ASSESSING OF FICER S ACTION. THE SAME RESULTED IN ASSESSEE S INCOME ASSESSED TO BE RS.4,86,067/ - ARISING FROM RE - ESTIMATION OF GROSS PROFITS. A CO - ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.590/RJT/2012 DECIDED ON 18.01.2013 CONFIRMED THE CIT(A) S ORDER WITH A DIRECTIO N TO THE ASSESSING OFFICER TO DEAL WITH ASSESSEE S DOCUMENTARY EVIDENCE IN SUPPORT OF HIS QUALITY CLAIM AMOUNTING TO RS.3,57,000/ - . THE ASSESSING OFFICER FINALISED THE CONSEQUENT PROCEEDING ON 25.10.2013 DETERMINING TOTAL INCOME AT RS.6,01,800/ - AFTER MAK ING LOW GROSS PROFITS ADDITION OF RS.4,24,924/ - . HE ALSO INITIATED THE IMPUGNED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ALLEGING CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AT ASSESSEE S BEHEST. QUANTUM PROCEEDINGS ATTAI NED FINALITY AT THIS STAGE. 4 . WE COME TO THE IMPUGNED PENALTY PROCEEDINGS. THE ASSESSEE FILED HIS REPLY DATED 22.01.2014 HIGHLIGHTING THE FACT THAT THIS CASE INVOLVES ESTIMATED GROSS PROFIT ADDITION SUBSTITUTING ONE ESTIMATION BY ANOTHER NOT INVOLVIN G EITHER OF THE TWO COMPONENT CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER DID NOT AGREE TO THE SAME. HE REVERTS BACK TO THE QUANTUM PROCEEDINGS ASKING THE ASSESSEE TO SUBMIT CLO SING STOCK AND ITS VALUATION DETAILS. THE ASSESSEE SUBMITTED THEREIN TO HAVE VALUED CLOSING STOCK ON NET REALISATION VALUE AFTER REDUCING GROSS PROFIT ELEMENT. THIS MADE THE ASSESSING OFFICER TO AGAIN SEEK COMPLETE DETAILS OF VALUATION OF THE CLOSING STO CK. HE WOULD TREAT ASSESSEE S GENERAL ITA NO. 69 / RJ T/201 6 ASSESSMENT YEAR: 20 07 - 08 PAGE 3 OF 4 VALUATION APPLICABLE IN CASE OF NON - AVAILAB ILITY OF BOOKS AND TREATED THE SAME TO BE DEFECTIVE. THE ASSESSEE HAD DISCLOSED GROSS PROFIT RATIO OF 1.08% REDUCING THE GROSS PROFIT ELEMENT FROM NET REALISATION VALUE OF C LOSING STOCK BY ADOPTING GROSS PROFIT RATIO OF 1.75%. THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE S BOOKS STOOD REJECTED IN PENALTY PROCEEDING RESULTING IN GROSS PROFIT ESTIMATION @ 2.5% AS AGAINST 2.32 % IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR. HE ACCORDINGLY HELD IN THE PENALTY ORDER DATED 11.03.2014 THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF HIS INCOME LIABLE TO BE PENALISED UNDER SECTION 271(1)(C) OF THE ACT. THIS RESULTED IN IMPOSITION OF IMPUGNED PENALTY OF RS.1,45,000/ - AS UPHELD IN THE LOWER APPELLATE ORDER. 5 . WE HAVE HEARD BOTH THE SIDES WHO REITERATED THEIR RESPECTIVE PLEADING S . THERE IS NO DISPUTE THAT THE IMPUGNED PENALTY HAS BEEN IMPOSED BY TREATING QUANTUM ADDITION OF RE - ESTIMATION OF GROSS PROFITS AFTER REJE CTING BOOKS AND VALUATION OF CLOSING STOCK AS AN INSTANCE OF FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS EVIDENT FROM THE CASE FILE THAT THE ASSESSEE FILED ALL DETAILS AND RELEVANT BOOKS IN SUPPORT OF ITS CLOSING STOCK VALUATION ON NET REALISATION VALUE AFTER REDUCING GROSS PROFIT ELEMENT INVOLVED THROUGHOUT IN SCRUTINY PROCEEDINGS. THE ASSESSING OFFICER HAS REJECTED THIS METHOD AND RE - ESTIMATED ITS GROSS PROFITS. BOTH THE AUTHORITIES BELOW TREAT THE SAME TO BE A CASE OF FURNISHING OF INACCURATE P ARTICULARS OF INCOME. WE TEND TO DISAGREE WITH THIS VIEW. THERE IS HARDLY ANY DISPUTE ABOUT THE SETTLED PROPOSITION OF LAW THAT QUANTUM AND PENALTY PROCEEDINGS ARE SEPARATE AND THE MERE FACT THAT AN ADDITION HAS BEEN MADE DOES NOT IPSO FACTO INVITE IMPOS ITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AS HELD BY H ON BLE APEX C OURT IN CIT VS. RELIANCE PETROPRODUCTS, 322 ITR 158. THE FACT ALSO REMAINS THAT THE ASSESSEE VALUED ITS CLOSING STOCK AND THE ASSESSING AUTHORITY FOUND FAULT WITH THE SAME. IT W OULD REJECT THE RELEVANT BOOKS UNDER 145(3) OF THE ACT AND AGAIN ESTIMATED ASSESSEE S GROSS PROFITS. ITA NO. 69 / RJ T/201 6 ASSESSMENT YEAR: 20 07 - 08 PAGE 4 OF 4 THE SAME IS HIGHER THAN THAT DECLARED IN THE PRECEDING ASSESSMENT YEAR. WE TAKE INTO ACCOUNT ALL THESE FACTS AND CIRCUMSTANCES TO HOLD THAT IT IS NOT A C ASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. BEING AN INSTANCE OF MERE ESTIMATION OF GROSS PROFITS AS HELD BY THE LEARNED CO - ORDINATE BENCH IN ITA NO. 1713/AHD/2010 ITO VS. RASRANJAN FOOD PRODUCTS PVT. LTD. DEC IDED ON 05.10.201 2 , THE IMPUGNED PENALTY OF RS.1,45,000 / - IS ACCORDINGLY DELETED. 6 . THIS ASSESSEE S APPEAL IS ALLOWED. P RONOUNCED IN THE OPEN C OURT TODAY ON TH E 22 ND DAY OF APRIL, 2016. SD/ - SD/ - ANIL CHATURVEDI S.S. GODARA (ACCOUNTANT ME MBER) (JUDICIAL MEMBER) AHMEDABAD, THE 22 ND DAY OF APRIL , 2016 PBN/ * COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT