DCIT, Bangalore V. M/s Synthetic Packers Pvt. Ltd., Bangalore

ITA 699/BANG/2011

• Counselvise Citation: 69921114 RSA 2011
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Wrong claim
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 699/BANG/2011 (ASST. YEAR - 2005-06) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-12(3), BANGALORE. . APPELLANT VS. M/S SYNTHETIC PACKERS PVT. LTD., NO.262-263, 4 TH PHASE, PEENYA INDL. AREA, BANGALORE-560 058. . RESPONDENT PAN AABCS7571C. APPELLANT BY : SHRI SARAVANAN B, JCIT RESPONDENT BY : SHRI H.N KHINCHA, C.A DATE OF HEARING : 27-04-2012 DATE OF PRONOUNCEMENT : 27-04-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) III ITA NO. 699/B/11 2 AT BANGALORE DATED 18.02.2011. THE APPEAL ARISES OUT OF THE PENALTY PROCEEDINGS COMPLETED U/S 271(1)(C) OF THE INCOME -TAX ACT, 1961. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE PENALTY OF RS.6,02,144/- LEV IED U/S 271(1)(C) OF THE ACT BY THE AO BASED ON AN ADDITION/MADE BY HIM OF THE ASSESSEES DECLARATION OF DEFLATED PROFITS/INCOME ARISING OUT OF NOT MAKING CORRECT ADJUSTMENTS TO THE OPENING AND CLOSING STOC K AS REQUIRED U/S 145A OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WHICH IS IN THE BUSINESS OF MANUFACTURING AND TRADING IN HDPE, LDPE/ LLDE BAGS FILED ITS RETURN OF INCOME FOR THE ASSESS MENT YEAR 2005-06 ON 29.10.2005 DECLARING A TOTAL INCOME OF RS.25,59, 785/-. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3), THE AO OBSERVED THAT IN THE COMPUTATION OF INCOME STATEMENT FILED ALONG WITH TH E RETURN OF INCOME, THE NET PROFIT AS PER THE PROFIT AND LOSS A CCOUNT AS ADJUSTED U/S 145A WAS RS.29,27,347/-, WHEREAS NET PROFIT AS PER PROFIT AND LOSS ACCOUNT WAS RS.35,51,320/-. IN ORDER TO VERIFY THE CAUSE OF THIS DIFFERENCE IN THE VALUES OF OPENING & CLOSING STOCK S, HE PERUSED THE PROFIT AND LOSS ACCOUNT AND OBSERVED THAT THE VALUE OF THE CLOSING ITA NO. 699/B/11 3 STOCK OF RAW MATERIALS IS MORE THAN THE OPENING STO CK OF THE RAW MATERIALS BECAUSE THE VALUES OF THE OPENING AND CLO SING STOCK WERE TAKEN EXCLUSIVE OF EXCISE DUTY AND THAT IF THEY ARE TAKEN INCLUSIVE OF EXCISE DUTY AS REQUIRED U/S 145A, IT WOULD RESULT I N INCREASE OF NET PROFIT IN THE PROFIT AND LOSS ACCOUNT BECAUSE THE EXCISE DUTY PAID ON CLOSING STOCK IS MORE. HE OBSERVED THAT THE ADJUST MENT MADE BY THE ASSESSEE U/S 145A RESULTED IN DECREASE IN NET PRO FIT. WHEN THIS WAS POINTED OUT TO THE ASSESSEE, THE ASSESSEE AGREED TH AT A MISTAKE HAD CREPT IN WHILE PREPARING THE ADJUSTMENT STATEMENT U /S 145A AND, THEREFORE, THE NET PROFIT SHOWN AT RS.29,27,347/- I S NOT CORRECT. THE ASSESSEE FILED A STATEMENT OF CLOSING AND OPENING S TOCKS INCLUSIVE OF EXCISE DUTY AND ARRIVED AT DIFFERENCE OF RS.10,12,5 69/- AND OFFERED THE SAME TO TAX. THE ASSESSING OFFICER ADDED THIS AMOU NT TO THE TOTAL INCOME AND HAS ALSO OBSERVED THAT THE ASSESSEE HAS MADE WRONG ADJUSTMENTS U/S 145A AND DECREASED THE PROFITS FROM 35,51,320/- TO 29,27,347/- AND, THEREFORE, THE DIFFERENCE OF RS.6, 23,973/- IS ALSO TO BE ADDED TO THE TOTAL INCOME. THE ASSESSEE ACCEPTED T HE ADDITION AND DID NOT FILE ANY APPEAL AGAINST THE ADDITION. 4. MEANWHILE, THE ASSESSING OFFICER INITIATED PENA LTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT BY ISSUANCE OF A SHOW CAUSE ITA NO. 699/B/11 4 NOTICE DATED 28.12.2007. IN RESPONSE TO THE SAID S HOW CAUSE NOTICE, THE ASSESSEE FILED A REPLY ON 30.6.2008 ADMITTING T HAT THERE IS A MISTAKE IN ADOPTING THE EXCLUSIVE METHOD FOR THE PU RPOSE OF PREPARING THE PROFIT AND LOSS ACCOUNT AS REQUIRED U/S 145A A ND THAT THE MISTAKE IS NEITHER INTENTIONAL NOR PURPOSEFUL AND, THEREFOR E, TO DROP THE PENALTY PROCEEDINGS. THE AO WAS HOWEVER NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND HELD THAT ALL THE F IGURES RELATING TO EXCISE DUTY ON OPENING STOCK AND CLOSING STOCK OF R AW MATERIAL ARE AVAILABLE FROM THE BOOKS OF ACCOUNTS AND THOUGH THE AR CLAIMS THAT A CLERICAL MISTAKE HAS CREPT IN, HE HAS NOT DEMONSTRA TED EXACTLY AS TO HOW THE CLERICAL MISTAKE TOOK PLACE. HE HELD THAT THE FACT THAT THE VALUE OF CLOSING STOCK OF RAW MATERIALS IS MORE THA N THAT OF OPENING STOCK ITSELF IS A PRIMA FACIE INDICATION THAT THE A DJUSTMENT U/S 145A WOULD BE UPWARDS WHEREAS, THE ASSESSEE MADE A DOWNW ARD ADJUSTMENT AND SECONDLY THAT THE ADJUSTMENT U/S 145 A IS SIGNED BY A CA, WHICH SHOWS THAT THE ASSESSEE WAS HAVING THE AS SISTANCE OF QUALIFIED PERSONNEL. HE THUS HELD THAT THE ASSESSE E HAS CONCEALED ITS PARTICULARS OF INCOME AND THAT HAD NOT THE ASSESSME NT BEEN TAKEN UP FOR SCRUTINY AND HAD THE BOOKS OF ACCOUNTS HAD NOT BEEN VERIFIED, THE WRONG ADJUSTMENT U/S 145A WOULD NOT HAVE COME TO LI GHT AT ALL. HE, THEREFORE, HELD THAT IT IS A FIT CASE FOR LEVY OF P ENALTY U/S 271(1)(C) OF ITA NO. 699/B/11 5 THE INCOME-TAX ACT. HE ACCORDINGLY LEVIED THE PENA LTY OF RS.6,02,144/-. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) AND REITERATED THE SUBMISSION MADE BEFORE THE AO. THE CIT(A) AFTER TAKING INTO CONSIDERATION, THE ASSESSEES SUBMISSIO NS AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F RELIANCE PETRO PRODUCTS LTD. REPORTED IN 322 ITR 158, HELD THAT TH E AO HAVING ACCEPTED THE FACT THAT THE RETURN OF INCOME FILED B Y THE ASSESSEE HAS CONTAINED THE PROFIT AND LOSS ACCOUNT BOTH AS PER T HE COMPANIES ACT AND AS PER THE SEC. 145A OF THE INCOME-TAX ACT AND ALL THE PARTICULARS BEING AVAILABLE FOR VERIFICATION BY THE AO, MERELY BECAUSE A PARTICULAR ITEM IS FOUND TO BE UNACCEPTABLE AND THE ASSESSEE A DMITS TO THE MISTAKE, THERE COULD BE NO CASE FOR INFERRING OF CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. HE ACCORDINGLY DELETED THE PENALTY. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DR SHRI SARAVANAN B, VEHEMENTLY SUP PORTED THE ORDER OF THE AO AND SUBMITTED THAT THE FACT THAT TH E ASSESSEE ITSELF HAS ITA NO. 699/B/11 6 ACCEPTED THAT THERE IS A MISTAKE IN ADJUSTMENTS MAD E U/S 145A, PROVES THAT THE BOOKS OF ACCOUNTS CERTIFIED BY CA ARE NOT CORRECT. HE SUBMITTED THAT VERY FEW RETURNS OF INCOME ARE SELEC TED FOR SCRUTINY AND THAT IF THE CASE OF THE ASSESSEE WAS NOT SELEC TED FOR SCRUTINY, THE DISCREPANCY IN THE ACCOUNTS WOULD HAVE GONE UNNOTIC ED. HE SUBMITTED THAT INSTEAD OF ADDING THE EXCISE DUTY EL EMENT TO THE OPENING AND CLOSING STOCKS TO THE NET PROFIT DECLAR ED IN THE PROFIT AND LOSS ACCOUNT, ASSESSEE HAS REDUCED THE SAME, THEREB Y REDUCING THE NET PROFIT WHICH GOES TO SHOW THAT THE ASSESSEE HAD INT ENDED TO CONCEAL PARTICULARS OF INCOME AND THEREBY AVOID TAX. IN SU CH CIRCUMSTANCES, ACCORDING TO HIM, THE PENALTY IS LEVIABLE. HE PLACE D RELIANCE UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ZOOM COMMUNICATION REPORTED IN 327 ITR 510, IN WHIC H AFTER TAKING INTO CONSIDERATION OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD., (CITED S UPRA), IT WAS HELD THAT THE PENALTY U/S 271(1)(C) IS LEVIABLE WHERE A CLAIM WAS MADE WHICH WAS UNTENABLE IN LAW AND ABSOLUTELY HAS NO FO UNDATION ON WHICH IT COULD BE MADE. HE HAS FILED A COPY OF TH E SAID ORDER BEFORE US. ITA NO. 699/B/11 7 9. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THA T THE ASSESSEE HAD FILED ALL THE BOOKS OF ACCOUNTS BEFORE THE AO AND A LSO ADMITTED THAT THERE WAS CLERICAL ERROR IN TAKING THE FIGURES OF O PENING STOCK AS ON 1/4/2004. HE SUBMITTED THAT AS FAR AS THE VALUE OF THE OPENING AND CLOSING STOCKS U/S 145A IS CONCERNED, THEY ARE TAKE N AFTER INCLUDING THE VALUE OF EXCISE DUTY. FOR THIS PURPOSE, HE HAS FILED THE COPIES OF THE RELEVANT DOCUMENTS BEFORE US IN THE FORM OF PAP ER BOOK CONTAINING PAGES 1 TO 5. HE DEMONSTRATED BEFORE US THAT IN TH E PROFIT AND LOSS ACCOUNT AS PER SEC. 145A OF THE INCOME-TAX ACT, THE OPENING STOCK HAS BEEN ERRONEOUSLY TAKEN AS RS,180,56,366/- INSTEAD O F VALUATION OF RS.1,60,56,366/-, DUE TO WHICH THE DISCREPANCY HAD ARISEN. HE SUBMITTED THAT THE EXCISE DUTY PAYABLE ON RS.52,05, 21.877/- HAS ALSO NOT BEEN REFLECTED IN THE PROFIT AND LOSS ACCOUNTS AS PER THE COMPANIES ACT. HE SUBMITTED THAT THE ADJUSTMENT OF THE PROFI T AND LOSS ACCOUNT AS PER SEC. 145A HAS BEEN CORRECTLY CARRIED OUT EXC EPT FOR THE ABOVE DISCREPANCY, WHICH IS NEITHER INTENTIONAL NOR WANTO N. THUS, ACCORDING TO HIM, RELIANCE UPON THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT LTD., (CITED SUP RA) BY THE CIT(A) FOR DELETION OF THE PENALTY IS CORRECT AND NEEDS N O INTERFERENCE. ITA NO. 699/B/11 8 10. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ADDITION IS ON ACCOUN T OF THE DIFFERENCE IN THE VALUATION OF OPENING AND CLOSING STOCKS IN T HE PROFIT AND LOSS ACCOUNTS, PREPARED AS PER THE COMPANIES ACT AND AS PER SEC. 145A OF THE INCOME-TAX ACT. EVERY ADDITION WILL NOT AUTOMA TICALLY ATTRACT PENALTY. WHETHER THE DIFFERENCE IN THE VALUATION O F THE OPENING AND CLOSING STOCKS IN THE TWO PROFIT AND LOSS ACCOUNTS HAS BEEN INTENTIONAL OR IS IT A CLERICAL MISTAKE IS TO BE SEEN, AND ALS O WHETHER THE EXPLANATION OF THE ASSESSEE FOR THE MISTAKE IS BONA FIDE OR NOT IS TO BE CONSIDERED. 11. HAVING GONE THROUGH THE MATERIALS FILED BY THE ASSESSEE BEFORE US AND HAVING APPRECIATED THE SAME, WE FIND THAT TH E VALUATION OF THE OPENING STOCK AS ON 1.4.2004 TAKEN BY THE ASSESSEE WAS ONLY A TYPOGRAPHICAL MISTAKE. AS THE VALUATION OF THE OPE NING AND CLOSING STOCKS IN THE PROFIT AND LOSS ACCOUNT AS PER THE CO MPANIES ACT AND AS PER SEC. 145A OF THE INCOME-TAX ACT WERE BOTH PRODU CED BEFORE THE ASSESSING AUTHORITY AND WERE AVAILABLE FOR SCRUTINY , IT CANNOT BE SAID THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. MERELY, BECAUSE IT WOULD HAV E ESCAPED ASSESSMENT HAD IT NOT BEEN CHOSEN FOR SCRUTINY, IT WOULD NOT AMOUNT TO ITA NO. 699/B/11 9 CONCEALMENT OF INCOME. IT IS THE DUTY OF THE REVEN UE AUTHORITIES TO CORRECTLY ASSESS THE INCOME OF AN ASSESSEE IN ACCOR DANCE WITH LAW AND ONLY WHERE THERE IS WILLFUL ATTEMPT BY THE ASSESSEE TO CONCEAL OR FURNISH INACCURATE PARTICULARS OF ITS INCOME, IS TH E PENALTY LEVIABLE. IN THE CASE OF ZOOM COMMUNICATIONS LTD, (CITED SUPRA) ASSESSEE THEREIN HAD MADE WRONG CLAIM FOR DEDUCTION OF INCOME-TAX PA ID WHICH ITSELF NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. IN SUCH CIRCUMSTANCES, THE HONBLE DELHI HIGH COURT HAS HELD THAT THE CLAI M WHICH IS WHOLLY UNTENABLE IN LAW AND HAS ABSOLUTELY NO FOUNDATION O N WHICH IT COULD BE MADE, THE ASSESSEE CANNOT BE SAID TO HAVE PUT A BONAFIDE CLAIM AND IN SUCH CIRCUMSTANCES IT WOULD GIVE A LICENCE TO UN SCRUPULOUS ASSESSEES TO MAKE WHOLLY UNTENABLE AND SUSTAINABLE CLAIMS WITHOUT THERE BEING ANY BASIS FOR MAKING THEM. IN THE CASE OF ASSESSEE BEFORE US, WE FIND THAT ALL THE DETAILS WERE BEFORE THE A SSESSING AUTHORITY AND DISCREPANCY IS ONLY WITH REGARD TO THE FIGURE ADOPT ED BY THE ASSESSEE AND NOT ABOUT THE UN- TENABILITY OF THE CLAIM. IN SUCH CIRCUMSTANCES, AS HELD BY THE CIT(A), IT CANNOT BE SAID THAT THE A SSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AS IS TO BE UNDERS TOOD U/S 271(1)(C) OF THE INCOME-TAX ACT. IN SUCH CIRCUMSTANCES, WE S EE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE REVE NUES APPEAL IS ACCORDINGLY DISMISSED. ITA NO. 699/B/11 10 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH APRIL, 2012. SD/- SD/- (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 27/04/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, I TAT, BANGALORE.