SMT. MAMTA SOGANI, Jaipur V. ACIT, Jaipur

ITA 691/JPR/2011

• Counselvise Citation: 69123114 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 18-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MUKESH GOYAL
• Keywords: Opportunity of being heard; Initiation of penalty proceedings; Onus to prove
• Section: 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 691/JP/2011 ASSESSMENT YEAR : 2004-05 PAN : AGWPS 9210 Q SMT. MAMTA SOGANI VS. THE ACIT 99, DHULESHWAR GARDEN CIRCLE- 1 AJMER ROAD, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MUKESH GOYAL DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 14-08-2014 DATE OF PRONOUNCEMENT: 28-08-2014 ORDER PER T.R. MEENA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT (A)-I, JAIPUR DATED 02-05-2011 FOR THE ASSES SMENT YEAR 2004-05 WHEREIN THE ASSESSEE HAS RAISED THE SOLITARY GROUN D AS UNDER:- THE LD. CIT(A) HAS GROSSLY ERRED IN FACT AND IN LAW IN CONFIRMING THE PENALTY OF RS. 1,76,323/- IMP OSED BY THE AO U/S 271(1)(C) OF THE I.T. ACT, 1961 IN RE SPECT OF ADDITION SUSTAINED ON ACCOUNT ESTIMATED G.P. 2 2.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN MANUFACTURING AND TRADING OF GEMS, STONES AND ORNAM ENTS. THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 10.86% AS AGAINST GROSS PROFIT RATE OF 15.30% DECLARED BY THE ASSESSEE IN IMMEDIATELY PRECEDING Y EAR. THE STOCK VALUATION OF THE ASSESSEE FIRM WAS FOUND ON ESTIMATE BASIS. O N EXAMINATION OF BOOKS OF ACCOUNT AT THE TIME OF SCRUTINY ASSESSMENT, IT W AS NOTICED BY THE AO THAT PURCHASES WERE MADE FROM 28 CONCERNS AMONG OTHERS. THE ASSESSEE WAS REQUIRED TO PRODUCE ALL THESE PARTIES FOR VERIFICAT ION OF THE PURCHASES SHOWN. THE ASSESSEE STATED THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS ON 17-11-2006, SHE WAS UNABLE TO PRODUCE SUCH PARTIES. THE NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO ALL THESE CONCERNS BUT MO ST OF THE NOTICES RECEIVED BACK FROM THE POSTAL AUTHORITIES AND THEY COULD NOT BE SERVED ON THE GIVEN ADDRESSES. THE INSPECTOR WAS ALSO DEPUTED TO LOCATE SUCH PARTIES BUT AS PER HIS REPORT THE SAID PARTIES WERE NOT FOUND EXISTED AT THE GIVEN ADDRESSES. THIS FACT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE A ND A SHOW CAUSE NOTICE WAS ISSUED VIDE LETTER DATED 17-11-2006 TO THE ASSE SSEE TO AFFORD OPPORTUNITY TO PRODUCE THESE PARTIES. HOWEVER, THE ASSESSEE FAI LED TO PRODUCE SUCH PARTIES. THUS THE BOOKS OF ACCOUNT OF THE ASSESSEE U/S 145(3) WERE REJECTED BY THE AO AND HIGHER GROSS PROFIT RATE OF 25% WAS A PPLIED AFTER CONSIDERING THE BOOK RESULTS OF SOME OTHER COMPARABLE CASES IND ULGED IN SIMILAR TYPE OF 3 BUSINESS WHICH RESULTED INTO TRADING ADDITION OF RS . 26,07,390/-. THE PENALTY PROCEEDINGS U/S 271(1) ( C )OF THE ACT WAS INITIATE D FOR CONCEALMENT OF INACCURATE PARTICULARS OF INCOME FOR THESE ADDITION S. 2.2 THE LD. CIT(A) VIDE ORDER DATED 17-12-2007 IN A PPEAL NO.553/2006- 2007 DELETED THE ENTIRE ADDITIONS. 2.3 IN SECOND APPEAL, THE ITAT JAIPUR BENCH UPHELD THE FINDING OF THE AO NOT ONLY OF REJECTING THE BOOKS OF ACCOUNT BUT ALSO APPLIED THE GROSS PROFIT RATE OF 15% ON DECLARED TURNOVER WHICH RESU LTED INTO RESTORATION OF ADDITION OF RS. 5,34,317/-. BEFORE IMPOSING PENALTY , THE AO GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHICH WA S AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSION OF THE A SSESSEE , IT HAS BEEN HELD THAT W.E.F. 01-04-1989 SUB-SECTION (1B) OF SECTION 271 HAS BEEN AMENDED AND IT HAS BEEN STATED WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE I N ANY ORDER OF ASSESSMENT, REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTIO N FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE OF SUB-SECTION 1, SUCH A N ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFAC TION OF THE AO FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAI D CLAUSE . THOUGH THE ADDITION WAS MADE BY ESTIMATING THE INCOME YET SUCH ESTIMATION WAS NECESSITATED DUE TO INCOMPLETENESS OF BOOKS OF ACCO UNT OF THE ASSESSEE. THUS 4 IT DID NOT SHOW CORRECT INCOME OF THE ASSESSEE. THE INCORRECTNESS OF PARTICULARS OF INCOME IN THE FORM OF LESSER BUSINES S PROFIT WAS DETECTED WHICH HAD ALSO BEEN CONFIRMED BY THE ITAT. WHEN THE BOOKS OF ACCOUNT WERE REJECTED, THE LAW REQUIRES THE AO TO ESTIMATE THE INCOME OF THE ASSESSEE AND SUCH ESTIMATION OF INCOME HAS LEGAL SANCTITY. T HE AO RELIED ON THE FOLLOWING DECISIONS. 1. CIT VS. SWAROOP COLD STORAGE, 136 ITR 435 (ALL.) 2. A.K. BASHU SAHIB VS. CIT, 108 ITR 736 (MAD.) 3. CIT VS. K.D. ARORA, 162 ITR 481 (PATNA) 4. CIT VS. WARDE & COMPANY INDIA (P) LTD., 171 ITR 405 (PATNA) 5. CIT VS. BALKRISHNA TEXTILES, 193 ITR 361 (MAD.) FINALLY, THE AO IMPOSED 100% PENALTY AT RS. 1,76,32 3/- ON CONCEALED INCOME OF RS. 5,34,317/- OF TAX SOUGHT TO BE EVADED . 2.4 BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE PENALTY IMPOSED BY THE AO VIDE PARA 8.3 ,8.4, 8.5 AND 9 OF HIS ORDER AS UN DER:- 8.3 IN A CASE WHERE ASSESSEE'S BOOKS ARE REJECTED AND ASSESSMENT IS MADE ON BEST JUDGEMENT AFTER ESTIMATI NG THE TURNOVER AND RATE OF GROSS PROFIT , IT CANNOT BE S AID THAT PENALTY CANNOT BE IMPOSED. IT HAS TO BE EXAMINED WHETHER TH ERE WAS MATERIAL TO IMPLICATE THE ASSESSEE FOR HAVING CONCE ALED OR FURNISHED INACCURATE PARTICULARS OF INCOME, ALSO IN THE LIGHT OF THE FORMULA OF THE EXPLANATION DURING THE PERIOD IT WAS 5 EFFECTIVE (ADDL. CITVS SWATANTRA CONFECTIONARY WORK S (1976) 104 ITR 291 (ALL.); CIT VS. KEDAR NATH RAM NATH (19 77) 106 ITR 172 (ALL.); ADDL. CIT VS. LAKSHMI INDUSTRIES AN D COLD STORAGE CO. LTD. (1984) 146 ITR 492 (ALL); ADDL. CI T VS. BRIJ NANDAN PRASAD DIN DAYAL (1979) 119 ITR 959 (ALL.); CIT VS. SWARUP COLD STORAGE & GENERAL MILLS (1982) 136 ITR 435 (ALL.). IN THIS CASE ENOUGH MATERIAL WAS BROUGHT ON RECORD TO IMPLICATE THE ASSESSEE FOR CONCEALING HER CORRECT I NCOME. 8.4 ASSESSMENT BY ESTIMATING IS ONE OF THE KNOWN PROCESSES IN THE TAXATION WORLD. WHERE THE ASSESSEE CONCEALS RELEVANT MATERIAL/ EVIDENCE BY THE REVENUE HAS NO O PTION BUT TO MAKE A BEST JUDGEMENT BY ESTIMATE. AN ASSESSMENT BY ESTIMATE IS AS MUCH LEGAL AS ANY OTHER ASSESSMENT. ONCE AN A SSESSMENT HAS BEEN DONE, WHETHER IT IS A BEST JUDGMENT ASSESS MENT OR OTHERWISE, THE FIGURE ASSESSED MUST BE HELD TO BE T HE INCOME OF THE ASSESSEE [CIT VS. WARASAT HUSSAIN (1988) 171 IT R 405, 412 (PAT)]. THE CASE LAW IS APPLICABLE TO THE ASSES SEE'S CASE AS ONCE THE BOOKS OF ACCOUNT WERE HELD TO BE INCORRECT AND INCOMPLETE THE ASSESSEE REPEATEDLY FAILED TO DISCHA RGE HER ONUS, THE AO WAS LEFT WITH NO OPTION BUT TO ESTIMATE THE CORRECT INCOME. 8.5 IN A RECENT ORDER IN THE CASE OF SOM ENGINERING CORP. VS. CIT HON'BLE H.C. OF ALLAHABAD (2005) 277 ITR 92 (A LL.) HAS HELD THAT WHERE THE ASSESSEE FAILS TO DISCHARGE THE ONUS AND NO EXPLANATION WAS GIVEN BY IT BEFORE THE ASSESSING OF FICER TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE LEV OF PENA LTY. THE FINDING IN THIS CASE IS APPLICABLE TO THE ASSESSEE' S CASE AS SHE HAS REPEATEDLY FAILED TO DISCHARGE HER ONUS. 9. IN VIEW OF THE ABOVE FACTS AND POSITION OF LAW, I CONFIRM THE PENALTY U/S 271(1) (C ) IMPOSED BY THE ASSESSIN G OFFICER OF RS. 1,76,323/- ON THE ASSESSEE. 2.5 NOW THE ASSESSEE IS BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). THE LD. AR ARGUED THAT THE LD. CIT(A) HAS NOT APPRECIAT ED THE FACTS OF THE CASE AS 6 THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE AUDITED. THERE WAS DECLINE IN GROSS PROFIT RATE BUT IT DEPENDS UPON VARIOUS FACTO RS OF THE MARKET. THE ADDITION WAS MADE ON ESTIMATE BASIS AFTER REJECTING THE BOOKS OF ACCOUNTS BY THE AO. THE ASSESSEE HAD FURNISHED THE SALES TAX R EGISTRATION NUMBERS OF THESE PARTIES AND HAD DISCHARGED THE ONUS OF BURDEN OF PROOF. THE ASSESSEE HAD PRODUCED SALES AND PURCHASE VOUCHERS BEFORE THE AO FOR VERIFICATION. THUS THESE PURCHASES WERE NOT BOGUS. THE LD. AR OF THE ASSESSEE HAS FURTHER DRAWN OUR ATTENTION TO ITAT DECISION IN ASSESSEE'S OWN CASE AT PAGE NO. 11 TO 14 OF THE PAPER BOOK WHEREIN ITAT HAD OBSERVED THAT THERE IS NO DOUBT THAT IN SUCH TYPE OF CASES, JAIPUR BENCH OF THE TRI BUNAL HAS TAKEN CONSISTENT VIEW THAT WHERE THE ASSESSEE HAS FURNISHED NECESSA RY INFORMATION OF THE TRANSACTIONS WITH DETAILS THEREOF AND THE PARTIES S UPPORTED WITH DOCUMENTS AS EXPECTED FROM A PRUDENT PURCHASER, THE PRIMARY ONUS HAS BEEN DISCHARGED BY THE ASSESSEE AND IN ABSENCE OF ANY POSITIVE EVIDENC E THAT THE GOODS WERE PURCHASED FROM SOMEONE ELSE THAN THE NAMED PARTIES ESPECIALLY WHEN THE SALES MADE BY THE ASSESSEE HAVE NOT BEEN DENIED BY THE DEPARTMENT AND IN ABSENCE OF POSITIVE EVIDENCE THAT THE AMOUNT IN CON SIDERATION OF THE GOODS SUPPLIED TO THE ASSESSEE AFTER WITHDRAWAL BY THE PA RTIES HAS BEEN RETURNED TO THE ASSESSEE BY THEM. THEREFORE, THE LD. AR REQUEST ED TO DELETE THE PENALTY. 2.6 AT THE OUTSET, THE LD. DR SUPPORTED THE ORDER O F THE LD. CIT(A). 7 2.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE COORDINATE BE NCH IN QUANTUM ADDITION OBSERVED THAT IN PRESENT CASE AN EXCEPTIONAL CIRCUM STANCES IS THERE THAT OUT OF 28 SUPPLIERS NONE WAS FOUND AT THE GIVEN ADDRESS ES NOR THE ASSESSEE WAS ABLE TO PRODUCE EVEN ONE OF THEM, BEFORE THE AO TO ENABLE THE AO TO VERIFY THE GENUINENESS OF THE CLAIMED PURCHASES MADE BY IT FROM THE NAMED PARTIES. IT IS VERY DIFFICULT FOR US TO ACCEPT SUCH A HIGHLY IMPROBABLY FACT AND CIRCUMSTANCES OF THE PRESENT CASE TO ACCEPT THE CON TENTION OF THE ASSESSEE THAT BY FURNISHING ALL THE NECESSARY INFORMATION AB OUT THE TRANSACTIONS AND PARTIES SUPPORTED WITH DOCUMENTS, THE ASSESSEE AS E XPECTED FROM PRUDENT PURCHASER HAD DISCHARGED HER PRIMARY ONUS TO ESTABL ISH GENUINENESS OF THE CLAIMED PURCHASES STATED TO HAVE BEEN MADE FROM THE ABOVE NAMED PARTIES ESPECIALLY WHEN SALE HAVE NOT BEEN DENIED AND TRANS ACTIONS HAVE BEEN MADE THROUGH BANKING CHANNELS. IN THIS CASE, THE RE JECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT WAS UPHELD BY THE C OORDINATE BENCH IN QUANTUM ADDITION BUT THE GROSS PROFIT RATE WAS REDU CED FROM 25% TO 15%. THE AO GAVE THE REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE AT THE TIME OF PENALTY PROCEEDINGS BUT THE ASSESSEE WAS NO T ABLE TO PRODUCE THESE PARTIES AT THE TIME OF IMPOSING PENALTY U/S 271(1)( C) OF THE ACT. THE CASE LAWS RELIED ON BY THE ASSESSEE IS NOT SQUARELY APPL ICABLE IN THIS CASE. THUS IN 8 VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CA SE, WE CONFIRM THE ORDER OF THE ORDER OF THE LD. CIT(A). HENCE, THE SOLITARY GROUND OF THE ASSESSEE IS DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED . THE ORDER PRONOUNCED IN OPEN COURT ON 28 -08-201 4 SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED: 28 TH AUG, 2014 *MISHRA COPY FORWARDED TO:- 1. SMT. MAMTA SOGANI, JAIPUR 2. THE ACIT, CIRCLE- 1, JAIPUR BY ORDER 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR 5..THE LD. DR 6.THE GUARD FILE (IT NO. 691/JP/2011) A.R. , ITAT JAIPUR 9