The ITO, Ward-2, Anand V. M/s. Jalaram Textiles, Anand

ITA 695/AHD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9360 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 19-01-2017
• Assessment Year: 2001-2002
• Appeal Filed On: 26-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: AARTI N SHAH
• Keywords: Unexplained investment; Principle of natural justice
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NOS.537 /AHD/2 015 & 2187/AHD/2011 (ASSESSMENT YEARS:2000-01 & 2001-02) M/S. JALARAM TEXTILE STATION ROAD, KARAMSAD, DISTT. ANAND APPELLANT VS. INCOME-TAX OFFICER, WARD-2, ANAND RESPONDENT / CROSS APPELLANT & ITA NO. 695/AHD/2015 (ASSESSMENT YEAR: 2001-02) INCOME-TAX OFFICER, WARD-2, 2 ND FLOOR, S.P. COMPLEX, NR. OLD C. K. HALL, MAYFAIR ROAD, ANAND - 3888001 APPELLANT VS. M/S. JALARAM TEXTILE STATION ROAD, KARAMSAD, DISTT. ANAND RESPOND ENT PAN: AABFJ9348R /BY ASSESSEE : AARTI N. SHAH, A.R. /BY REVENUE : SHRI ROOPCHAND, SR. D.R. /DATE OF HEARING : 19.01.2017 /DATE OF PRONOUNCEMENT : 20.01.2017 ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 2 - ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE THREE CASES COMPRISE OF ASSESSEES TWO APPEAL S FOR ASSESSMENT YEAR 2000-01 & 2001-02 ARISE AGAINST CIT(A)-IV, BAR ODAS SEPARATE ORDERS DATED 03.01.2015 & 18.07.2011, IN APPEAL NOS. CAB/ 4-103/2014-15 & CAB/IV-A-206/2010-11 IN PROCEEDINGS UNDER SECTION 1 43(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT IN FOR MER APPEAL AND U/S. 143(3) R.W.S. 147 OF THE ACT IN LATTER CASE; RESPEC TIVELY. THE REVENUE ON THE OTHER HAND HAS INSTITUTED ITS APPEAL AGAINST THE CI T(A)-IV, BARODAS ORDER DATED 22.12.2014 DELETING PENALTY OF RS.8,84,290/- AS IMPOSED BY THE ASSESSING OFFICER VIDE ORDER DATED 26.03.2013 IN AS SESSMENT YEAR 2001-02 IN PROCEEDINGS U/S.271(1)(C) OF THE ACT. 2. WE FIRST COME TO ASSESSEES PLEADINGS. ITS SOLE SUBSTANTIVE GROUND IN ITA NO.537/AHD/2015 FOR ASSESSMENT YEAR 2000-01 SEE KS TO DELETE SECTION 69 UNEXPLAINED INVESTMENT IN STOCK MADE BY BOTH THE LOWER AUTHORITIES AMOUNTING TO RS.25,32,450/-. ITS APPEAL ITA NO.218 7/AHD/2011 FOR ASSESSMENT YEAR 2001-02 FILED EARLIER THAN THE FORM ER APPEAL RAISES TWO SUBSTANTIVE GROUNDS INTER ALIA CHALLENGING UNACCOUN TED STOCK ADDITION OF RS.16,06,680/- ALONG WITH GP COMPUTED THERE UPON OF RS.7,85,192/- BY THE ASSESSING OFFICER AND RESTRICTED TO THAT TO RS.3,04 ,786/- IN THE LOWER APPELLATE PROCEEDINGS. A COMBINED PERUSAL OF THE INSTANT CASE FILE REVEAL S THAT THIS IS SECOND ROUND OF LITIGATION BETWEEN THE PARTIES BEFORE THIS TRIBUNAL. THE ASSESSING OFFICER HAD FRAMED A REGULAR ASSESSMENT IN ASSESSEE S CASE ON 19.03.2004 ADDING A SUM OF RS.41,39,130/- IN THE NATURE OF UNE XPLAINED EXCESS STOCK. HE ARRIVED AT THE SAID CONCLUSION AFTER NOTICING TH AT THE ASSESSEE FIRM HAD DECLARED YARN AND CLOTH STOCK IN ITS BOOK TOTALING TO RS.5,05,960/- AS AGAINST ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 3 - THE ONE STATED BEFORE ITS CREDITOR BANK NAMELY CHAR OTAR NAGRIK SAHAKARI BANK LTD. HAVING ITS HYPOTHECATION ACCOUNT NO. HP 673 WH EREIN THE STOCK STATEMENT INDICATED DIFFERENCE VIS--VIS THAT DISCL OSED IN BOOK AMOUNTING TO RS.41,39,130/-. HE ADDED THE SAID DIFFERENTIAL SUM FOLLOWED BY YET ANOTHER ADDITION OF RS.7,85,192/- OVER AND ABOVE THE ABOVE STOCK ADDITION. THE ASSESSEE PREFERRED APPEAL. THE CIT(A)S ORDER DATE D 07.03.2005 DELETED THE SAME. THE REVENUE THEN FILED ITA NO.1551/AHD/2005 BEFORE THIS TRIBUNAL. THE CO-ORDINATE BENCH IN ITS ORDER DATED 11.09.2009 RESTORED THE ISSUE BACK TO THE ASSESSING OFFICER AS UNDER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. A PERUSAL OF THE STATEMENT SUBMITTED TO THE BANK BY THE ASSESSEE AND STOCK AS PER BOOKS CLEARLY REVEALED THAT THERE IS A QUANTITATIVE DIFFERENCE WHICH HAS NOT BE EN SATISFACTORILY EXPLAINED EXCEPT SUBMITTING THAT PART OF IT MAY RELATE TO EARLIER YE ARS. THEREFORE, ADDITION MADE BY THE AUTHORITIES BELOW IS JUSTIFIED. HOWEVER, BEFORE CONFIRMING THE ADDITION, IT HAS TO BE EXAMINED WHETHER SUCH DISCREPANCY EXISTED IN SOME EARLIER YEARS, I.E. ASSESSMENT YEARS 1999-2000 & 2000-01 AS SUBMITTED B Y THE LD.AR. NO STOCK STATEMENT SUBMITTED TO THE BANK HAS BEEN FURNISHED TO US FOR EITHER OF THE TWO YEARS, BUT FOR THE SAKE OF NATURAL JUSTICE, WE WOUL D LIKE THE ASSESSING OFFICER TO ASK THE ASSESSEE TO SUBMIT THE STOCK STATEMENT FURNISHE D TO THE BANK AS ON THE END OF THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEARS 19 99-2000 & 2000-01 AND WORK OUT THE ALLEGED DISCREPANCY EXISTING IN THOSE YEARS AND AS CLAIMED BY HIM BEFORE US. IF ANY QUANTITATIVE DIFFERENCE IS DISCOVERED IN THESE TWO EARLIER YEARS, THEN ASSESSMENT FOR THESE TWO ASSESSMENT YEARS WI11 BE R EOPENED BY THE ASSESSING OFFICER FOR TAXING THE DISCREPANCY PERTAINING TO TH ESE YEARS. IF NO SUCH DISCREPANCY IN QUANTITY IS FOUND IN THOSE TWO YEARS, THEN NO DI SCOUNT IS TO BE GIVEN FROM THE DISCREPANCY OF THE PRESENT YEAR AND ADDITIONS AS PR OPOSED BY THE ASSESSING OFFICER FOR RS.41,39,130/- IS CONFIRMED. IN CASE, RE-OPENIN G OF THE TWO YEARS IS WARRANTED ON THE BASIS OF QUANTITATIVE DIFFERENCE FOUND IN TH OSE TWO YEARS, THEN ASSESSING OFFICER WILL BE FREE TO TAKE ACTION AND PROCEED ACC ORDING TO LAW WITHOUT ANY FETTERS ON THE QUANTUM IN THOSE YEARS. THIS WILL BE TREATED AS OUR DIRECTIONS WITHIN THE MEANING OF SECTION 153(3) OF THE IT. ACT, 1961. 3. THE ASSESSING OFFICER ACCORDINGLY TOOK UP CONSEQ UENTIAL PROCEEDINGS. HE NOTICED IN COURSE THEREOF THAT THE ASSESSEES ST OCK STATEMENT FOR IMMEDIATE PRECEDING ASSESSMENT YEAR INDICATED A DIFFERENCE OF RS.25,32,450/- IN THE DISCLOSURES MADE IN THE BOOKS OF ACCOUNTS VIS--VIS THOSE STATED BEFORE THE ABOVE CO-OPERATIVE BANK. HE FRAMED CONSEQUENTIAL A SSESSMENT IN ASSESSEES CASE ON 10.12.2010 IN ASSESSMENT YEAR 2001-02 ADDIN G THE REMAINING SUM OF ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 4 - RS.16,06,680/- ALONG WITH GP THEREUPON @18.79% COMI NG TO RS.7,85,192/-. HE THEN REOPENED ASSESSMENT IN ASSESSEES CASE PERT AINING TO PREVIOUS ASSESSMENT YEAR 2000-01 FOLLOWED BY CONSEQUENTIAL R E-ASSESSMENT BEING FRAMED ON 28.03.2013 ADDING THE REMAINING ALLEGED D ISCREPANCY OF RS.25,32,450/- I.E. RS.41,39,130-16,06,680/- (SUPRA ). 4. THE ASSESSEE PREFERRED TWO SEPARATE APPEALS. TH E CIT(A) CONFIRMS ASSESSING OFFICERS ACTION IN PRINCIPLE IN BOTH ASS ESSMENT YEARS. THE ONLY EXCEPTION IS THAT HE HAS RESTRICTED GROSS PROFIT AD DITION IN ASSESSMENT YEAR 2001-02 MADE @18.97% ON RS.16,06,680/- ONLY INSTEAD OF THE ENTIRE ADDITION SUM IN FIRST ROUND OF RS.41,39,130/-. THIS LEAVES THE ASSESSEE AGGRIEVED IN BOTH THE IMPUGNED ASSESSMENT YEARS. 5. WE HAVE HEARD BOTH THE PARTIES. CASE FILES PERU SED. LEARNED COUNSELS STRONGLY REITERATE THEIR RESPECTIVE PLEADINGS IN TH E COURSE OF HEARING. IT IS EVIDENT THAT THE LOWER AUTHORITIES HAVE SIMPLY GONE BY STOCK STATEMENT DIFFERENCE IN ASSESSEES BOOKS AS COMPARED TO THAT DECLARE TO THE ABOVE STATED CO-OPERATIVE BANK TOTALING TO RS.41,39,130/- IN THE FIRST ROUND AND THE SAME HAS BEEN SPLIT OVER IN THE TWO IMPUGNED ASSESSMENT YEARS IN THE LATTER CONSEQUENTIAL ROUND SUBJECT MATTER OF APPEAL BEFORE US. THEY DONT EVEN REFER TO A SINGLE PIECE OF EVIDENCE APART FROM ASSE SSEES STOCK STATEMENT DISCLOSED TO THE BANK WHICH COULD INDICATE THERE HA S BEEN ANY EXCESS STOCK ITEM IN ITS RELEVANT BOOKS OR OTHER EVIDENCE. IT I S THUS APPARENT THAT THE IMPUGNED ADDITION IS BASED UPON ASSESSEES STOCK ST ATEMENT GIVEN TO THE BANK AS PREPARED ON ESTIMATION BASIS ONLY INSTEAD OF ACT UAL FIGURES. WE NOTICE IN THIS FACTUAL BACKDROP THAT HONBLE JURISDICTIONAL H IGH COURT IN TAX APPEAL NO.2041/2010 CIT VS. M/S. MEICO BOARDS PVT. LTD. D ECIDED ON 05.12.2011 AND CIT VS. ARROW EXIM PVT LTD. (2010) 230 CTR 293 (GUJARAT) DELETES IDENTICAL ADDITIONS IN ABSENCE OF ANY SPECIFIC EVID ENCE WHEREIN THE SAID ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 5 - ASSESSEES HAD SUBMITTED STOCK STATEMENTS TO THEIR C REDITORS BANK ON ESTIMATION BASIS WHEREIN THE BANKS CONCERNED HAD NOT PHYSICALL Y VERIFIED THE RELEVANT STOCK ON THEIR OWN. WE DRAW SUPPORT THEREFROM AND DELETE ALL THE IMPUGNED ADDITIONS IN THE INSTANT APPEAL AS WELL. THE ASSES SEES SOLE GRIEVANCE IN FORMER APPEAL AND TWO SUBSTANTIVE GROUNDS IN THE LA TTER ONE (SUPRA) ARE ACCEPTED. THIS RENDERS ITS ADDITIONAL GROUNDS RAIS ED IN THE APPEAL CHALLENGING THE IMPUGNED ADDITIONS ON THE BASIS OF ABOVE CASE L AW AS RENDERED INFRUCTUOUS. 6. THIS LEAVES US WITH REVENUES APPEAL ITA NO.695/ AHD/2015. THE ASSESSING OFFICER LEVIED THE PENALTY IN QUESTION AM OUNTING TO RS.8,84,290/- AS PERTAINING TO UNACCOUNTED STOCK ADDITION OF RS.1 6,06,680/- AND PROFIT THEREUPON BY TREATING THE SAME AS UNRECORDED SALES OF RS.3,04,787/- FOLLOWED BY YET ANOTHER DISALLOWANCE OF INTEREST. THERE CAN HARDLY BE ANY DISPUTE THAT WE HAVE ALREADY DELETED THE FORMER TWO QUANTUM ADDI TIONS IN PRECEDING PARAGRAPHS. THE IMPUGNED PENALTY THUS HAS NO LEGS TO STAND. THE THIRD DISALLOWANCE IS OF INTEREST EXPENSES. THE ASSESSIN G OFFICER HELD THE ASSESSEE TO HAVE DIVERTED INTEREST BEARING FUNDS TO DISALLOW THE ABOVE INTEREST AMOUNT IN FIRST ROUND OF ASSESSMENT (SUPRA). THIS TRIBUNA LS ORDER DATED 11.09.2009 UPHELD THE SAME AFTER OBSERVING THAT THE ASSESSEES BALANCE SHEET AT PAGE 59 OF THE PAPER BOOK DID NOT DEMONSTRATE ANY CAPITAL, RESERVE OR INTEREST FREE FUNDS. THE ASSESSING OFFICER THUS PENALIZED THE AS SESSEE BY CONCLUDING THAT IT HAD COMMITTED DEFAULT WITHIN THE MEANING OF SECT ION 271(1)(C) OF THE ACT WITHOUT EVEN SPECIFY AS TO WHETHER THE SAME WAS IN THE NATURE OF FURNISHING OF INACCURATE PARTICULARS OR THAT OF CONCEALMENT OF INCOME. HIS ONLY VIEW WAS THAT ANY DISALLOWANCE/ADDITION IS DEEMED TO REP RESENT CONCEALMENT OF PARTICULARS IPSO FACTO U/S.271(1)(C) EXPLANATION 1 OF THE ACT. THE CIT(A) FOLLOWS HONBLE APEX COURTS DECISION IN RELIANCE P ETROPRODUCTS PVT. LTD. CASE 322 ITR 158 (SC) HOLDING THAT EACH AND EVERY D ISALLOWANCE/ADDITION ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 6 - MADE IN QUANTUM PROCEEDINGS DOES NOT NECESSARILY RE SULT IN SECTION 271(1)(C) PENALTY. 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL SUBMISSIONS. WE REITERATE THAT THE IMPUGNED QUANTUM DISALLOWANCE HA S BEEN MADE ONLY ON THE GROUND THAT THE ASSESSEE HAD UTILIZED INTEREST BEAR ING FUND FOR NON BUSINESS PURPOSES U/S.36(1)(III) OF THE ACT. THIS IS NOT THE REVENUES CASE THAT IT HAD NOT DISCLOSED ALL THE RELEVANT PARTICULARS RESULTIN G IN THE IMPUGNED DISALLOWANCE. IT IS THUS EVIDENT THAT THE ASSESSEE SOUGHT TO CONTEST ASSESSING OFFICERS SHOW CAUSE ALLEGING DIVERSION OF INTEREST BEARING FUNDS WHICH ULTIMATELY WENT IN REVENUES FAVOUR. WE ACCORDINGL Y CONCLUDE THAT THE SAME CANNOT BE HELD TO BE A CASE OF FURNISHING OF INACCU RATE PARTICULARS OR CONCEALMENT OF INCOME AS RIGHTLY HELD IN THE LOWER APPELLATE PROCEEDINGS. WE THUS UPHOLD THE CIT(A)S ORDER. REVENUES APPEA L ITA NO.695/AHD/2015 FAILS. 8. THE ASSESSEE SUCCEEDS IN BOTH APPEALS ITA NO.537 /AHD/2015 & 2187/AHD/2011. REVENUES APPEAL ITA NO.695/AHD/201 5 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JANUARY, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 20/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD ITA NOS. 537 & 695/AHD/2015 AND 2187/AHD/2011 (JALA RAM TEXTILES VS. ITO) A.YS. 2000-01 & 2001-02 - 7 - 1 +23 45 / GUARD FILE. BY ORDER / . // . /0