UNICORN TEXTILES P.LTD, MUMBAI V. ITO WD 4(3)(3), MUMBAI

ITA 7155/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83607 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 30-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Document seized; Question of law; Difference of opinion; Documents seized
• Section: 133A; 27; 148; 144

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/SHRI H.L. KARWA, HONBLE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ./ I.T.A. NO.7155 /MUM/2012 ( / ASSESSMENT YEAR : 2007-2008 M/S UNICORN TEXTILES PRIVATE LTD., 51, AGARWAL SADAN, DADI SHETH AGAIRY LANE, KALBADEVI, MUMBAI 400 002. / VS. INCOME TAX OFFICER, WARD 4(3)(3), MUMBAI. ./ PAN : AAACU4180G ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY MS. VINITA SHAH R E SPONDENT BY : SHRI P.K. SINGH / DATE OF HEARING : 26-8-2014 / DATE OF PRONOUNCEMENT : 27-8-2014 [ !' / O R D E R PER B.R. BASKARAN, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) -8, MUMBAI DATED 02-11-2012 RELATING TO A.Y. 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE PENALTY OF RS. 4,66,885/- LEVIED BY THE A.O. U/S 27 1(1)(C) OF THE INCOME TAX ACT, 1961(THE ACT). 3. THE FACTS THAT LED TO LEVY OF PENALTY ARE DISCUS SED HEREUNDER. THE DEPARTMENT CARRIED OUT A SURVEY OPERATION U/S 133A OF THE ACT ON 22-3-2007. DURING THE COURSE OF SURVEY OPERATION, IT WAS NOTIC ED THAT THE ASSESSEE ITA 7155/M/12 2 COMPANY DID NOT MAINTAIN THE STOCK REGISTER AND FUR THER IT COULD NOT PRODUCE ITS BOOKS OF ACCOUNT FOR VERIFICATION. LATER, THE A .O. COMPLETED THE ASSESSMENT TO THE BEST OF HIS JUDGMENT U/S 144 OF THE ACT. THE AO INCLUDED THE UN- ACCOUNTED SALES IN THE TOTAL TURNOVER REPORTED BY T HE ASSESSEE. THE A.O. ALSO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GRO SS PROFIT AT 20% OF THE SALES (BOTH ACCOUNTED AND UNACCOUNTED). THE A.O. A LSO DISALLOWED 40% OF THE ADMINISTRATIVE EXPENSES CLAIMED BY THE ASSESSEE. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) REDUCED THE RATE OF GRO SS PROFIT TO 8% AS AGAINST 20% ADOPTED BY THE A.O. SIMILARLY, THE LD. CIT(A) RESTRICTED THE DISALLOWANCE MADE FROM SELLING AND ADMINISTRATIVE EXPENSES FROM 40% TO 10%. THE OTHER DISALLOWANCES MADE BY THE A.O. WERE DELETED BY THE LD. CIT(A). IN THE RESULT, THE ADDITIONS TO THE EXTENT OF RS. 13,87,062/- RELA TING TO GROSS PROFIT AND SELLING AND ADMINISTRATIVE EXPENSES CAME TO BE CONF IRMED BY THE LD. CIT(A). THE A.O. LEVIED PENALTY EQUIVALENT TO 100% OF TAX S OUGHT TO BE EVADED ON THE ABOVE SAID ADDITIONS. THE ASSESSEE CHALLENGED THE P ENALTY ORDER PASSED BY THE A.O. BY FILING AN APPEAL BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. AGGRIEVED, THE ASSESSEE HAS PREFERRED THIS APPEAL B EFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PER USED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARI NG BEFORE US, THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSES SEES SISTER CONCERN NAMELY M/S P. KISHANCHAND TEXTILES LTD. WAS ALSO SU BJECTED TO SURVEY OPERATION AND IDENTICAL ADDITIONS IN RESPECT OF GRO SS PROFIT AND SELLING AND ADMINISTRATIVE EXPENSES WERE MADE. THE A.O. ALSO LE VIED PENALTY U/S 271(1)(C) OF THE ACT ON THE ADDITIONS CONFIRMED BY THE LD. CI T(A). THE ASSESSEE CARRIED THE MATTER IN APPEAL AGAINST THE PENALTY ORDER BEFO RE THE TRIBUNAL IN ITA NO. 7156/MUM/2012. THE TRIBUNAL BY FOLLOWING THE DECIS IONS RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AER O TRADERS P. LTD. (2010) 322 ITR 316 (DEL.), DELETED THE PENALTY SO IMPOSED BY THE A.O. ACCORDINGLY, ITA 7155/M/12 3 THE LD. COUNSEL FOR THE ASSESSEE PRAYED FOR DELETIO N OF PENALTY IN THE PRESENT CASE ALSO. 6. THE LD. D.R., ON THE OTHER HAND, PLACED STRONG R ELIANCE ON THE ORDER PASSED BY THE LD. CIT(A). 7. THE LD. COUNSEL FOR THE ASSESSEE ALSO FURNISHED A COPY OF THE ORDER DATED 12-2-2014 PASSED BY THE TRIBUNAL IN THE CASE OF M/S P. KISHANCHAND TEXTILES LIMITED IN ITA 7156/MUM/2012 REFERRED SUPR A. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE SAID ORDER: 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE IT IS AN ADMITTED FACT THAT THE AO ESTIMATED THE INCOME OF T HE ASSESSEE ON ESTIMATE BASIS. HE WORKED OUT THE GROSS PROFIT BY APPLYING T HE GROSS PROFIT RATE OF 15% ON THE TOTAL SALES. HE ALSO MADE THE ADDITION ON AC COUNT OF DISALLOWANCE OF EXPENSES AT THE RATE OF 40%, AND THE LEARNED CIT(A) ALSO RESTRICTED THE ADDITION BY APPLYING GROSS PROFIT RATE OF 7% AND DI SALLOWING THE EXPENSES AT THE RATE OF 10%. THEREFORE, IT IS CLEAR THAT THE IN COME OF THE ASSESSEE WAS ESTIMATED. SO IT CANNOT BE SAID THAT THE ADDITION M ADE BY THE AO OR SUSTAINED BY THE LEARNED CIT(A) WAS ON ACCOUNT OF THE CONCEAL MENT MADE BY THE ASSESSEE. IT IS ALSO NOT THE CASE THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. IN A SIMILAR ISSUE, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. B.D.RAMACHANDRA (SUPRA) HAS HELD THAT WHERE THE ASSESSEE HAD DISCLOSED ALL MATERIALS, THE PRESUMPTI ON STOOD REBUTTED AND IT COULD NOT BE HELD THAT BECAUSE THE ASSESSEE HAD FAI LED TO MAINTAIN A STOCK REGISTER THERE WAS GROSS OR WILLFUL NEGLECT ON HIS PART . IN THE PRESENT CASE ALSO THE NON-MAINTENANCE OF STOCK REGISTER, WHEN ALL INF ORMATION WERE DISCLOSED BY THE ASSESSEE RELATING TO ITS SALES AND PURCHASES, I T CANNOT BE HELD THAT THERE WAS GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASS ESSEE. 10. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. AERO TRADERS (P) LTD. (SUPRA) HELD AS UNDER (HEAD NOTE) : PENALTY UNDER S. 271(1)(C) CONCEALMENT ADDITIO N OF ESTIMATED PROFIT AO REJECTED THE BOOK RESULTS DEC LARED BY THE ASSESSEE AND ESTIMATED THE INCOME AT RS.61,00,000 A S AGAINST RETURNED LOSS OF RS.83,64,468 CIT(A) DELETED THE LEVY OF PENALTY UNDER S.271(1)(C) ON THE GROUND THAT THE ADDITION W AS MADE BY THE AO ON THE BASIS OF ESTIMATED PROFIT AND THE SAM E HAS BEEN SUBSTANTIALLY REDUCED BY THE TRIBUNAL FINDING ARR IVED AT BY THE ITA 7155/M/12 4 TRIBUNAL DOES NOT WARRANT INTERFERENCE AS IT IS PUR ELY A FINDING OF FACT NO PERVERSITY HAS BEEN POINTED OUT IN SUCH A FINDING CONSEQUENTLY, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. 11. WHILE DISMISSING THE APPEAL OF THE DEPARTMENT O N THE BASIS OF THE AFORESAID FACTS, THE HONBLE DELHI HIGH COURT HELD AS UNDER:- THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME FO R THE YEAR 1997-98 ON A NOTICE UNDER SECTION 148 OF THE INCOME -TAX ACT, 1961 DECLARING A LOSS OF RS.83,64,468. THE ASSESSEE HAD, IN THE INCOME-TAX RETURN FILED BY IT, ATTACHED A NOTE STAT ING THAT IT WAS IMPOSSIBLE FOR IT TO SUBSTANTIATE ITS CLAIM OF LOSS BY WAY OF ANY EVIDENCE AS THE RELEVANT RECORDS WERE SEIZED AND WE RE WITH THE POLICE AUTHORITIES. THE ASSESSING OFFICER AFTER BEI NG UNABLE TO OBTAIN COPIES OF THE SEIZED DOCUMENTS, BASED HIS AS SESSMENT ORDER ON THE LIMITED DOCUMENTS PROVIDED AND REJECTE D THE BOOK RESULTS DECLARED BY THE ASSESSEE. HE ESTIMATED THE INCOME OF THE ASSESSEE AT RS.61,00,000. HE ALSO INITIATED PENALTY PROCEEDINGS SEPARATELY. THE COMMISSIONER (APPEALS) ESTIMATED TH E TOTAL INCOME OF THE ASSESSEE AT RS.1,02,980. THE TRIBUNAL CONFIRMED THIS ORDER. THE ASSESSING OFFICER OBSERVED THAT THE PROFIT WAS ESTIMATED AFTER REJECTION OF BOOKS OF ACCOUNT DUE T O CERTAIN DISCREPANCIES AND IMPOSED A PENALTY ON THE ASSESSEE OF RS.36,41,003, ON THE GROUND THAT IT WAS A CLEAR CAS E OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE CO MMISSIONER (APPEALS) DELETED THE PENALTY HOLDING THAT THE ADDI TION MADE BY THE ASSESSING OFFICER ON THE BASIS OF ESTIMATED PRO FIT COULD NOT BE A SUBJECT-MATTER OF PENALTY FOR CONCEALMENT OF I NCOME. THE TRIBUNAL CONFIRMED THIS ORDER. HELD, DISMISSING THE APPEAL, THAT THE FINDING ARRIV ED AT BY THE TRIBUNAL DID NOT WARRANT INTERFERENCE AS IT WAS PUR ELY A FINDING OF FACT. 12. IN THE PRESENT CASE ALSO THE INCOME OF THE ASSE SSEE WAS DETERMINED BY APPLYING THE GROSS PROFIT RATE AND BY MAKING THE DI SALLOWANCE OUT OF THE EXPENSES ON ESTIMATE BASIS. THE LEARNED CIT(A) ALSO SUSTAINED THE ADDITION ON ESTIMATE BASIS, SO IT CANNOT BE SAID THAT THE ASSES SEE CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. 13. ON A SIMILAR ISSUE, THE HONBLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF HARIGOPAL SINGH V. CIT [(2002) 258 ITR 85 (P&H)] HELD AS UNDER:- THAT THERE WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF THE INCOME OF THE ASSESSEE. SINCE THE ASSESSING OFF ICER AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSING T HE INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSE E HAD ITA 7155/M/12 5 CONCEALED THE PARTICULARS OF HIS INCOME SO AS TO AT TRACT CLAUSE OF SECTION 271(1). 14. WE, THEREFORE, KEEPING IN VIEW THE PECULIAR FAC TS OF THIS CASE AND THE RATIO LAID DOWN BY THE HONBLE HIGH COURTS IN THE A FORESAID CASES, ARE OF THE VIEW THAT THE PENALTY U/S 271(1)(C) OF THE ACT WAS NOT LEVIABLE TO THE FACTS OF THE PRESENT CASE. IN THAT VIEW OF THE MATTER, THE P ENALTY LEVIED BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) U/S 271(1)(C) OF TH E ACT IS DELETED. 8. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE ABOVE SAID CASE, WE ALSO SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE IMPUGNED PENALTY LEVIED BY T HE A.O. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2014. !' # $% &! ' 27-08-2014 ( ) SD/- SD/- (H.L. KARWA) (B.R. BASKARAN) PRESIDENT ACCOUNTANT MEMBER $ 2 MUMBAI ; &! DATED 27-8-2014. [ .:../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ; () / THE CIT-8, MUMBAI 4. ; / CIT -4,MUMBAI 5. >?( ::@A , @A , $ 2 / DR, ITAT, MUMBAI F BENCH 6. (CD E / GUARD FILE. ' / BY ORDER, > : //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 2 / ITAT, MUMBAI