M/s SEL Manufacturing Co. Ltd., Ludhiana V. DCIT, C-III, Ludhiana

ITA 698/CHANDI/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9211 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 15-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income
• Section: 143(3); 142(1); 132

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 698/CHD/2018 / ASSESSMENT YEAR : 2014-15 M/S SEL MANUFACTURING CO. LIMITED, 274, G.T. ROAD, DHANDARI KHURD, LUDHIANA THE DCIT, CENTRAL CIRCLE_III, LUDHIANA ./PAN NO. AAHCS9189E / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI ASHWANI KUMAR, CA ' ! / REVENUE BY : SH. MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 01.07.2019 &'() % / DATE OF PRONOUNCEMENT : 03.07.2019 (*/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 02.03.2018 OF THE COMMISSIONER OF INCOM E TAX-2, JALANDHAR [HEREINAFTER REFERRED TO AS CIT(A) ] 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A)-2, JALANDHAR UPHOLDING THE LEVY OF PENALTY U/S 271AAB AT RS. ITA NO. 698-C-2018 M//S SEL MANUFACTURING CO LTD., LUDHIANA 2 19,14,042/- IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS NO SUCH PENALTY WAS EXIGIBLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO UPHOLD THE PENALTY U/S 271AAB DESPITE THE FACT THAT PENALTY WAS INITIATED BY THE LD. ASSESSING OFFICER U/S 271AAB (1)(A) WHEREAS WHILE LEVYING PENALTY, IT WAS LEVIED U/S 271AAB(1)(C). 3. THE FACTS OF THE CASE IN BRIEF ARE THAT A SEARCH ACTION U/S 132 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') WAS C ONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 11.9.2013. ACC ORDINGLY, A NOTICE U/S 142(1) DATED 6.1.2015 WAS ISSUED TO THE ASSESS EE. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME THROUGH E-FILING ON 15.1.2015 DECLARING LOSS OF RS. 353,89,24,961/-. SU BSEQUENTLY, THE RETURN WAS REVISED ON 28.2.2015 DECLARING LOSS OF R S. 352,64,97,299/- BY INCLUDING RS. 63,80,140/- AS ADDITIONAL INCOME D ECLARED DURING THE COURSE OF SEARCH PROCEEDINGS U/S 132(4) OF THE I.T . ACT. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT, 1961 VIDE ORDER DATED 16.1.2015 AT A TOTAL LOSS OF RS. 333,69,57,050/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT AT THE TI ME OF SEARCH PROCEEDINGS, THE ASSESSEE HAD ADMITTED THE UNDISCLO SED INCOME AMOUNTING TO RS. 63,80,140/- U/S 132(4) OF THE ACT. PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WERE INITIATED ON 23.6.2016 O N UNDISCLOSED INCOME OF RS. 63,80,140/-. ITA NO. 698-C-2018 M//S SEL MANUFACTURING CO LTD., LUDHIANA 3 4. IN THE PENALTY PROCEEDINGS, THE ASSESSING OFFICE R HELD THAT THE ASSESSEE HAD ADMITTED UNDISCLOSED INCOME OF RS. 63, 80,180/- DURING THE SEARCH. THE ASSESSEE HAD ITSELF OFFERED THIS AMOUN T OF RS. 63,80,180/- AS BUSINESS INCOME ON ACCOUNT OF STOCK FOUND SHORT. THUS, THE CASE OF THE ASSESSEE WOULD FALL UNDER THE PROVISIONS OF SEC TION 271AAB OF THE ACT. HE FURTHER HELD THAT NEITHER THE ASSESSEE SPE CIFIED THE MANNER IN WHICH SUCH INCOME HAD BEEN DERIVED IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT NOR ASSESSEE HAD SUBSTANTIATED TH E MANNER OF EARNING OF THE UNDISCLOSED INCOME, HENCE, THE CASE OF THE ASSESSEE DID NOT FALL U/S 271AAB(1)(A) AND 271AAB(1)(B) OF THE ACT. HE, A CCORDINGLY HELD THAT THE DISCLOSURE OF RS. 63,80,140/- WOULD BE WIT HIN THE MEANING OF UNDISCLOSED INCOME AS PER THE PROVISION OF SECTIO N 271AAB(1)(C) OF THE ACT. THEREFORE, THE PENALTY WAS LEVIABLE AT 30 % OF THE UNDISCLOSED INCOME. ACCORDING, HE LEVIED PENALTY OF RS. 19,14,0 42/- U/S 271AAB(1)(C) OF THE INCOME TAX ACT, 1961. 5. IN APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY SO LEVIED BY THE ASSESSING OFFICER. 6. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE DECISION DATED 18.4.2019 OF THE CO-ORDINATE CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF GROUP COMPANY OF THE ASSESS EE NAMELY M/S SEL TEXTILES LTD. LUDHIANA VS DCIT IN ITA NO. 695/CLHD /2018 FOR ASSESSMENT YEAR 2014-15, WHEREIN, ON IDENTICAL ISSU E IN RESPECT OF ITA NO. 698-C-2018 M//S SEL MANUFACTURING CO LTD., LUDHIANA 4 SURRENDERED INCOME ON ACCOUNT OF SHORTAGE OF STOCK, THE TRIBUNAL HELD THAT SINCE THE MANNER OF EARNING OF SUCH INCOME HAD BEEN EXPLAINED BY THE ASSESSEE, HENCE, THE PENALTY WAS LEVIABLE @ 1 0% UNDER SECTION 271 AAB(1)(A) OF THE ACT. THE RELEVANT PART OF THE ORDER IN THE CASE OF GROUP COMPANY OF THE ASSESSEE IS REPRODUCED AS UNDE R;-- 14. HOWEVER, SO FAR AS THE SURRENDERED AMOUNT OF RS. 39.99 LACS IS CONCERNED, SAME WAS OFFERED ON ACCOUNT OF PROFITS ON STOCK FOUND SHORT DURING THE SEARCH ACTION. ADMITTEDLY, THE STOCK WAS FOUND SHORT DURING THE SEARCH ACTION. IN FACT, THE ASSESSING OFFICER APART FROM THE ABOVE SURRENDER OF RS. 39.99 LACS HAS MADE FURTHER ADDITION OF RS . 2.58 CORES ON THIS ISSUE. IT IS APPARENT THAT THE AFORESAID PROFIT ON SHORT STOCK WERE NOT ACCOUNTED FOR BY THE ASSESSEE BUT WAS ONLY DETECTED DURING THE SEARCH ACTION. HOWEVER, THE ASSESSEE HAS SUBSTANTIATED THE MANNER OF EARNING OF THE SAID INCOME WHICH INCLUDE THE SURRENDER INCOME OF RS. 39.99 LACS, HENCE, PENALTY @ 10% IS LEVIABLE ON THE AFORESAID AMOUNT AS PER THE PROVISIONS OF SECTION 271AAB (1)(A) OF THE I.T. ACT. 14. IN VIEW OF THIS, THE PENALTY IN THIS CASE IS RESTRICTED TO 10% OF THE SURRENDERED INCOME OF RS. 39,99,158/- ON ACCOUNT OF STOCK FOUND SHORT AS PER THE PROVISIONS OF SECTION 271AAB (1)(A) OF THE ACT. HOWEVER, THE REMAINING PART OF THE PENALTY IS ORDERED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. 7. IT IS PERTINENT TO MENTION HERE THAT THE AFORESA ID GROUP CONCERN OF ASSESSEE WAS ALSO COVERED IN THE SAME SEARCH ACTI ON, HENCE, THE FACTS ITA NO. 698-C-2018 M//S SEL MANUFACTURING CO LTD., LUDHIANA 5 AND ISSUE INVOLVED IN THIS CASE ARE IDENTICAL. THE ADDITIONAL INCOME HAS BEEN SURRENDERED ON ACCOUNT OF PROFITS ON THE STOC K FOUND SHORT, HENCE, THE SOURCE AS WELL AS THE MANNER OF SUCH INCOME ST OOD SUBSTANTIATED. THE ISSUE IS SQUARELY COVERED BY THE AFORESAID DECI SION OF THE TRIBUNAL, ACCORDINGLY, THE PENALTY IN THIS CASE IS RESTRICTE D TO 10% OF THE AMOUNT SURRENDERED ON ACCOUNT OF SHORTAGE OF STOCK U/S 271 AAB(1)(A) OF THE I.T.ACT. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY TREATED A S PARTLY ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 03.07.2019. SD/- SD/- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR ITA NO. 698-C-2018 M//S SEL MANUFACTURING CO LTD., LUDHIANA 6