The ITO, Ward-6(3), Surat V. M/s. Priyanka Gems, Surat

ITA 717/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80303 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: R B SHAH
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.717/AHD/2011 A.Y.2005-06 ITO, WARD-6(3), SURAT. VS M/S. PRIYANKA GEMS, ROOM NO.6, 3 RD FLOOR, ARIHANT DARSHAN BUILDING, MAHIDHARPURA, SURAT. PAN: AADFP 8898C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.L. YADAV, SR.D.R., ASSESSEE(S) BY : SHRI R.B. SHAH, AR / // / DATE OF HEARING : 14/08/2014 / DATE OF PRONOUNCEMENT: 28/08/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM AN ORDER OF THE LD. CIT(APPEALS)-IV, SURAT, DATED 22/11/2010 AND TH E ONLY GROUND OF THE REVENUE IS AGAINST THE DELETION OF PENALTY LEVIED U /S.271(1)(C) OF IT ACT, REPRODUCED BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A), SURAT HAS ERRED IN DELETING THE PENALTY U/S .271(1)(C) OF RS.24,34,865/- LEVIED ON ACCOUNT OF UNDISCLOSED SOURCE OF INCOME. 2. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE IM PUGNED ADDITION ON WHICH THE PENALTY IN QUESTION WAS LEVIED HAD ALR EADY BEEN DELETED BY ITAT A BENCH AHMEDABAD IN ASSESSEES OWN CASE TIT LED AS M/S. PRIYANKA GEMS (ITA NO.1958/AHD/2008) A.Y. 2005-06, ORDER DATED 31 ST ITA NO.717/AHD/2011 THE ITO WARD-6(3), SURAT VS. M/S. PRIYANKA GEMS, SU RAT FOR A.Y. 2005-06 - 2 - MAY, 2010. THIS FACT WAS DULY MENTIONED BY LEARNED CIT(A) WHILE DELETING THE PENALTY AS UNDER: 2. THIS IS AN APPEAL AGAINST PENALTY OF RS.2434865/ - IMPOSED BY THE A.O. U/S. 271(1)(C) OF THE IT. ACT. THE FACTS ARE THAT THE TO TAL INCOME OF THE APPELLANT WAS DETERMINED AT RS.71,21,483/- AFTER MAKING AN AD DITION OF RS.67,93,643/- BEING VALUE OF 485.26 CARATS OF DIAMONDS FOUND AND SEIZED DURING THE COURSE OF SEARCH ON THE MINI-BUS BELONGING TO M/S. PATEL A MBALAL HARGOVANDAS & CO., ANGADIA'S IN MUMBAI. THE CIT (APPEAL) CONFIRME D THE ADDITION IN APPEAL. AGGRIEVED WITH THE APPELLANT FILED APPEAL T O THE HON'BLE ITAT. SINCE THE PENALTY PROCEEDINGS INITIATED BY THE A.O. WERE GETTING BARRED BY LIMITATION, THE A.O. AFTER CONSIDERING THE SUBMISSI ONS MADE DURING ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS, LEVIED PENALT Y U/S. 271(1)(C) OF THE I.T. ACT. THE QUANTUM APPEAL HAS SINCE BEEN DECIDED BY T HE HON'BLE TRIBUNAL AND THE ADDITIONS MADE HAVE BEEN DELETED. DURING THE AP PEAL PROCEEDINGS, IT WAS SUBMITTED THAT THE PENALTY LEVIED DOES NOT SURVIVE AS QUANTUM ADDITION HAS BEEN DELETED BY THE HON'BLE TRIBUNAL. I FIND MYSELF IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT. ONCE, QUANTUM APPEAL HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY THE HON'BLE TRIBUNAL, NO PENALTY CAN BE SUSTAINED. THE PENALTY LEVIED IS THEREFORE CANCELLED. 3. IT IS WORTH TO REPRODUCE THE RELEVANT PORTION FR OM THE ORDER OF HONBLE ITAT AS UNDER: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AND THE ORDER OF LEARNED CIT(A) AS WELL AS ASSESSEES PAPER BOOK. WE HAVE FIND THAT THE OWNERSHIP OF DIAMOND AS BELONGING TO ASSESSEE WAS ACCEPTED BY THE DEPARTMENT AS THE SUBSTANTIVE A DDITION MADE IN THE CASE OF M/S. PATEL SOMABHAI KANCHANLAL & CO. WAS DELETED BY C1T(A) AND THE REVENUE DID NOT PREFER SECOND APPEAL. WE FIND THAT THE JANGAD I.E. THE CERTIFICATE OF ENTRUSTMENT WAS LEFT TO BE ATTACHED WITH THE PACKET OF DIAMONDS, HOWEVER, IN THE PACKET, THE NAME OF THE SENDER AND THE NAME OF THE RECEIVER WERE MENTIONED AS MR. DAKSHESH AND MR. PRAKASH RESP ECTIVELY AND THE ADDRESS OF THE RECEIVER WAS ALSO MENTIONED IN THE P ACKET. WE FURTHER FIND FROM THE ID. COUNSEL THAT THE GOODS WERE BEING SENT FROM MUMBAI OFFICE TO SURAT OFFICE, WHICH WAS CONFIRMED IMMEDIATELY AFTER THE S EARCH BY ASSESSEE'S PARTNER SHRI PRAKASH BEFORE AUTHORIZED OFFICER ON 2 9-07-2004 AND IN HIS STATEMENT RECORDED, HE CONFIRMED THE MOVEMENT OF TH E GOODS FROM MUMBAI TO SURAT BY ASSESSEE. ACCORDING TO ASSESSEE MR. DAKSHE SH IS THE EMPLOYEE AT MUMBAI OFFICE WAS BEING PAID REGULAR SALARY AND POW ER OF ATTORNEY WAS ISSUED IN HIS FAVOUR AND ALSO PRODUCED PROOF OF IDE NTITY OF MR. DAKSHESH AND HIMSELF TOGETHER WITH PAN CARD OF PRIYANKA GEMS AND POWER OF ATTORNEY EXECUTED BY FIRM IN FAVOUR OF MR. DAKSHESH MUCH BEF ORE ON 08-09-2001. WE FURTHER FIND THAT MR. DAKSHESH WAS PAID REGULAR SAL ARY BY ASSESSEE-FIRM AND HE WAS AUTHORIZED FOR ALL ACTIVITIES OF THE FIRM AN D THE IDENTITY CARD OF BHARAT DIAMOND BOURSE AS REPRESENTATIVE OF ASSESSEE-FIRM W AS ISSUED 03-03-2000 ITA NO.717/AHD/2011 THE ITO WARD-6(3), SURAT VS. M/S. PRIYANKA GEMS, SU RAT FOR A.Y. 2005-06 - 3 - MUCH BEFORE THE SEARCH. ACCORDING TO ASSESSEE THE N AME OF THE FIRM WAS NOT MENTIONED BUT THE GOODS WERE SENT BY EMPLOYEE OF TH E ASSESSEE FIRM TO THE PARTNER OF THE ASSESSEE-FIRM IN THE CAPACITY OF EMP LOYEE AND PARTNER OF M/S. PRIYANKA GEMS. THE ID. COUNSEL STATED THE FACT THA T THERE ARE ONLY TWO PARTNERS BEING HUSBAND AND WIFE AND ONLY SHRI PRAKA SHBHAI IS WORKING PARTNER AND DRAWING REMUNERATION FROM THE ASSESSEE- FIRM. WE FIND THAT AFTER RECORDING THE STATEMENT ON 29-07-2004, THE PARTNER WAS NOT ASKED TO PRODUCE THE INVOICE OF THE PURCHASE OF THE BALANCE-SHEET OF M/S PRIYANKA GEMS, BUT IN THE ASSESSMENT PROCEEDING BEFORE ASSESSING OFFICER, ASSESSEE PRODUCED DOCUMENTARY EVIDENCE IN THE FORM OF BILLS OF PURCHA SE EVIDENCING SOURCE OF THE STOCK OF GOODS SEIZED AND EVEN THE STOCK REGIST ER WAS ALSO PRODUCED. WE FIND THAT THE AO OBSERVED THAT PIECES OF DIAMOND SE IZED ARE OF 1 TO 1.25 CENTS BUT THE ASSESSEE ARGUED THAT IT HAD NEVER PURCHASED THE DIAMONDS OF 1 CENT AS IS EVIDENT FROM THE EXPORT BILLS. ACCORDING TO ASSE SSEE, IT HAD EXPORTED SMALL DIAMONDS AS IS EVIDENT FROM THE EXPORT INVOICE NO.3 DATED 17-08-2004 WHERE IT WAS MENTIONED THAT 203.32 CARATS WERE EXPORTED H AVING 895 PIECES PER CARAT AND THIS MEANS THAT THERE ARE 85 PIECES IN 1 CARAT OF DIAMOND AND SO ONE PIECE OF DIAMOND IS HAVING AVERAGE 1.17 CENTS O F WEIGHT. ACCORDING TO ASSESSEE THERE IS NO PRACTICE OF MENTIONING THE PIE CES IN THE LOCAL PURCHASE BILLS AND ONLY WEIGHTS OF CARATS/CENTS ARE MENTIONE D. WE FIND THAT BOTH THE SELLERS I.E. SOMEYA INTERNATIONAL AND HARSONA DIAMO ND ARE ASSESSED TO TAX HAVING GST AND CST NUMBERS AND ASSESSEE'S AVERAGE S ALE PRICE IS RS.14,527/- PER CARAT WHICH SHOWS THAT ASSESSEE EXP ORTED SMALL DIAMONDS. IN THE CASE OF BIG DIAMONDS HAVING WEIGHT EXCEEDING 50 CENTS, THE SALES VALUE WOULD HAVE BEEN AT LEAST RS.50,000/- PER CARAT. ACC ORDING TO ASSESSEE, PARTS OF THE DIAMONDS WERE SENT FOR ASSORTMENT, AS ASSESS EE WAS HAVING ORDER OF 485.26 CARATS ONLY AND THIS WAS CLARIFIED BY ASSESS EE'S PARTNER IN REPLY TO QUESTION NO.16 WHERE THE PARTNER STATED THAT BALANC E GOODS WERE LYING AT MUMBAI OFFICE AS IT WAS NOT POSSIBLE TO SELL IT AS THESE GOODS WERE BEING SENT FROM MUMBAI OFFICE TO SURAT OFFICE FOR ASSORTMENT A S THE PARTNER SHRI PRAKASHBHAI WAS AT SURAT AT THAT TIME AND SO HE INS ISTED TO SEND THE DIAMOND AT SURAT FOR ASSORTMENT PURPOSE UNDER HIS SUPERVISI ON. WE FIND THAT THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS EXPORT ED 203.32 CARATS WHEN IN FACT, ASSESSEE WAS LEFT WITH THE STOCK OF 202.93 CA RATS AFTER THE SEIZURE BUT WE FIND THAT THERE IS ONLY DIFFERENCE OF 39 CENTS (0.3 9 CARATS) WHICH MAY BE OWING TO THE VARIATION IN THE WEIGHT. ATHOUGH, THERE IS A SEIZURE OF DIAMOND OF 485.26 CARATS, ASSESSEE HAS SHOWN CLOSING STOCK AS ON 31-03-2005 OF 484.87 CARATS SHOWING DIFFERENCE OF 39 CENTS WHICH PROVES THAT THERE MAY BE DIFFERENCE IN WEIGHTING AT THE TIME OF THE SEIZURE OR WHILE EXPORTING THE GOODS OF 203.32 CARATS. WE FURTHER FIND THAT THE ASSESSEE HAS EXPORTED 203.32 CARATS OF DIAMONDS VIDE INVOICE NO.3 DATED 17-08-2004 AND THE ASSESSEE WAS HAVING SUFFICIENT STOCK IN THE BOOKS OF ACCOUNTS TO EXPLAI N THE SEIZED DIAMONDS. THE ASSESSEE PRODUCED COMPLETE STOCK REGISTER AND SUPPO RTING DOCUMENTS IN THIS REGARD AND NOT ONLY THIS, ASSESSEE WAS ABLE TO ES TABLISH THE CORRELATION OF DIAMONDS SEIZED IN THE COURSE OF SEARCH WITH THE PU RCHASES MADE IN THE YEAR RELEVANT TO ASSESSMENT YEAR 2003-04 AND THE RETURN OF INCOME FOR ASSESSMENT YEAR 2003-04 WAS FILED MUCH BEFORE THE DATE OF SEAR CH AND IN THE AUDITED FINANCIAL STATEMENTS OF THE YEARS ENDED ON 31-03-20 03, 31-03-2004, 31-03- ITA NO.717/AHD/2011 THE ITO WARD-6(3), SURAT VS. M/S. PRIYANKA GEMS, SU RAT FOR A.Y. 2005-06 - 4 - 2005 AND CLOSING STOCK SHOWN BY ASSESSEE INCLUDES T HE STOCK SEIZED. WE FURTHER FIND THAT THE VALUATION SHOWN BY ASSESSEE I N ACCOUNTS IN RESPECT OF SEIZED DIAMONDS IS RS.67,66,360/- WHICH IS ALMOST A T PAR WITH THE VALUATION MADE BY DEPARTMENT AT RS.67,93,643/-. THE OPENING S TOCK AND CLOSING STOCK FOR THE YEAR 2003-04 WAS THE SAME AS THERE WAS NO P URCHASE AND SALE DURING THE YEAR AT MUMBAI OFFICE. THERE WAS ONLY PURCHASE AND SALE AT SURAT OFFICE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE ARE AMPLE EVIDENCES WHICH PROVE THAT THE DIAMOND SEIZED ARE EXPLAINED AND PURCHASED FROM DISCLOSED SOURCES AS THESE ARE FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS. ACCORDINGLY, WE ACCEPT THE EXPLANATION OF THE ASSESSEE AND THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE R EVERSED. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED ON MERITS. 4. FURTHER, WE HAVE ALSO BEEN INFORMED THAT THE REV ENUE HAS CHALLENGED THE SAID DELETION BEFORE HONBLE HIGH CO URT IN TAX APPEAL NO.2343 OF 2010, ORDER DATED 9 TH MAY, 2011, THE REVENUE HAS RAISED THE FOLLOWING QUESTION, REPRODUCED BELOW: WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE INCOME TAX APPELLATE TRIBUNAL IS RIGHT IN LAW IN DELETING ADDI TION ON ACCOUNT OF DIAMONDS PURCHASED OUT OF UNDISCLOSED SOURCE OF INCOME IN TH E SUM OF RS.67,93,643/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE APPELLATE COMMISSIONER? 5. THE AFORESAID QUESTION OF THE REVENUE DEPARTMENT WAS NOT ACCEPTABLE TO THE HONBLE HIGH COURT AND THE SAME W AS REJECTED AS UNDER: HAVING PERUSED THE ORDER OF THE ASSESSING OFFICER; CIT(A) AND THE TRIBUNAL WITH THE ASSISTANCE OF THE LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE OPINION THAT THE ENTIRE ISSUE IS BASED ON APPRECIAT ION OF EVIDENCE ON RECORD. THE TRIBUNAL HAS GIVEN COGENT REASONS TO COME TO TH E CONCLUSION THAT SEVERAL FACTS POINTED TO THE SEIZED DIAMONDS BEING THOSE SH OWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. THE DECLARATION BY THE ASSESSEE, EVEN BEFORE THE SEARCH IN THE COURSE OF RETURN PREVIOUSLY FILED AND THE VALUA TION OF THE CLOSING STOCK AND THE VALUATION OF THE SEIZED DIAMONDS AS PER THE DEP ARTMENT WERE SAME. ALL THESE FACTORS PERSUADED THE TRIBUNAL TO COME TO THE CONCLUSION THAT THE SEIZED DIAMONDS DID NOT FORM PART OF UNDISCLOSED SOURCE OF THE ASSESSEE. WE ARE OF THE VIEW THAT THE TRIBUNALS FINDING CANN OT BE SAID TO BE PERVERSE. AT BEST, THE VIEW TAKEN BY THE ASSESSING OFFICER, A S CONFIRMED BY THE CIT(A) COULD ALSO BE ONE OF THE PLAUSIBLE VIEWS. NEVERTHEL ESS, WHEN THE TRIBUNAL, ON THE BASIS OF EVIDENCE ON RECORD, HAS COME TO A CERT AIN FACTUAL FINDINGS, SIMPLY ITA NO.717/AHD/2011 THE ITO WARD-6(3), SURAT VS. M/S. PRIYANKA GEMS, SU RAT FOR A.Y. 2005-06 - 5 - BECAUSE THE TRIBUNALS VIEW WAS DIFFERENT FROM THE ONE HELD BY THE ASSESSING OFFICER, IN OUR VIEW, WOULD NOT PERMIT US TO INTERF ERE WITH THE ORDER UNDER CHALLENGE. NO SUBSTANTIAL QUESTION OF LAW ARISES. TAX APPEAL IS, THEREFORE, DISMISSED. 6. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN TH E DELETION OF PENALTY BY LEARNED CIT(A) AND THE SAME IS HEREBY CO NFIRMED. WE FIND NO FORCE IN THIS GROUND OF THE REVENUE. HENCE HEREBY D ISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 28/08/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. 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