THE ITO WARD - 1, Amalapuram V. M/s Adilaxmi Enterprises, Amalapuram

ITA 724/VIZ/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6799 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 19-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J P ANAND
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 724 / VIZ /201 3 (ASST. YEAR : 2009 - 10 ) ITO, WARD - 1, AMALAPURAM. V S . M/S. ADILAXMI ENTERPRISES, 4 - 234, KAMANAGARUVU, AMALAPURAM . PAN NO. AANFA 4705 B (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : SHRI D.J.P. ANAND SR. DR DATE OF HEARING : 08 / 0 8 /201 7 . DATE OF PRONOUNCEMENT : 30 / 0 8 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , VISAKHAPATNAM , DATED 27 /0 9 /201 3 FOR THE ASSESSMENT YEAR 2009 - 10 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE - FIRM IS ENGAGED IN TRADING OF SEA PRODUCTS, FILED ITS RETURN OF INCOME BY DECLARING TOTAL INCOME OF 25,540/ - . THE RETU R N FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT') AND AFTER FO LLOWING DUE PROCEDURE, ASSESSMENT IS COMPL E TED UNDER SECTION 143(3) OF THE ACT. IN THE ASSESSMENT ORDER, 2 ITA NO. 724 /VIZ/2013 ( M/S. ADILAXMI ENTERPRISES ) THE ASSESSING OFFICER HAS MADE ADDITION S ON ACCOUNT OF LOW PROFIT SHOWN BY THE ASSESSEE, DIFFEREN CE ON ACCOUNT OF TRADE CREDITORS , DIFFERENCE ON ACCOUNT OF CREDITORS FROM CAPITAL GOODS. THE ASSESSEE IS ACCEPTED THE ADDITIONS MADE BY THE ASSESSING OFFICER AND NO APPEAL IS PREFERRED. SUBSEQUENTLY, THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS BY ISSUING A NOTICE UNDER SECT ION 271(1)(C) OF THE ACT. THE ASSESSEE HAS NOT RESPONDED TO THE NOTICES ISSUED BY THE ASSESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS. ACCORDINGLY, THE ASSESSING OFFICER PASSED PENALTY ORDER UNDER SECTION 271(1)(C) AND LEVIED PENALTY OF 36,52, 374/ - . 3 . ON APPEAL, LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED BY OBSERVING AS UNDER: - 6. I HAVE PERUSED THE ASSESSMENT ORDER AND THE PENALTY ORDER AND ALSO CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. IT IS EVIDENT THAT THE ADDITIONS MADE I N THE ASSESSMENT WERE ON AGR EED BASIS AN D NO APPEAL WAS FILED AGAINST THE ADDITIO NS. THERE IS ALSO MERIT IN THE CONTENTION THAT THE ASSESSING OFFICER HAD NOT RECORDED HIS SATISFACTION FOR INITIATING PENALTY IN THE ASSESSMENT ORDER IN RESPECT OF THE ADDITIONS MADE IN THE ASSESSMENT. THE IMPUGNED PENALTY ORDER ALSO DO NOT INDICATE WHETHER THE CO NDITIONS PRESCRIBED IN SEC. 271(1 )(C) HAVE BEEN SATISFIED. THE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHENNAKESAVA PHARMACEUTICAL S VS. COMMISSIONER OF INCOME - TAX (2012) 349 ITR 196 (AP) HAS CATEGORICALLY OBSERVED: IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RAM COMMERCIAL ENTERPRISES LTD., (2000) 246 ITR 568 (DE L ) IT WAS HELD THAT A BARE READING OF THE PROVISIONS OF SECTION 271AND LAW LAID DOWN BY THE SUPREME COURT MAKES IT CLEAR THAT IT IS THE ASSESSING AUTHORITY WHICH HAS TO FORM ITS OWN PINION AND RECORD ITS SATISFACTION BEFORE INITIATING THE PENALTY 'PROCEEDINGS. MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, IT CA NNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT IN THE ABSENCE OF THE SAME BEING SPELT OUT BY THE ORDER OF THE ASSESSING 3 ITA NO. 724 /VIZ/2013 ( M/S. ADILAXMI ENTERPRISES ) AUTHORITY. APPLYING THE ABOVE PRINCIPLE THAT THE AO SHOULD RECORD IN THE ASST ORDER HIS SATISFACTION THAT THE ASSESSEE HAD EI THER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME IN HIS RETURN BEFORE IMPOSING PENALTY, IT WAS NOTICED THAT IN THE ASST ORDERS PASSED BY THE AO, IN THE PRESENT CASE, NO SUCH SATISFACTION WAS RECORDED. NOWHERE DID THE ASSESSING OFFICE R NOTED IN THE ASST, ORDER HIS SATISFACTION THAT THERE WAS EITHER CONCEALMENT OF INCOME BY THE ASSESSEE OR THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS IN HIS RETURN OF INCOME AND THAT THERE WAS A CASE MADE OUT FOR INITIATING PROCEEDINGS U/S.271(L)(C). THEREFORE, IT WAS HELD THAT INITIATION OF THE PROCEEDINGS U/S.271( 1 )(C) AGAINST THE ASSESSEE WERE NOT VALID IN LAW AND THAT CIT(A) HAD RIGHTLY SET ASIDE THE SAME. 7. IN THE ABOVE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE PRINCIPLE OF LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT, I CONSIDER THAT PENALTY U/S 271(1)(C) IS NOT EXIGIBLE IN THE ASSESSEE'S CASE. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO CANCEL THE PENALTY LEVIED OF RS.36,52,374/ - . 4 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 6 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL A VAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 7 . IN THIS CASE, ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) AND ADDITIONS WERE MADE ON ACCOUNT OF LOW GROSS PROFIT OF 14,95,324/ - , TRADE CREDITORS AND ADVANCE FROM CUSTOMERS OF 74,83,904/ - AND CREDITORS FOR CAPITAL GOODS OF 32,61,532/ - . THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ACCEPTED BY THE 4 ITA NO. 724 /VIZ/2013 ( M/S. ADILAXMI ENTERPRISES ) ASSESSEE AND NO APPEAL IS CARRIED. SUBSEQUENTLY, THE ASSESSING OFFICER INIT I ATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ON ACCOUNT OF TRADE CREDITORS AND ADVANCE FROM CUSTOMERS, CREDITORS FOR CAPITAL GOODS AND ISSUED NOTICE TO THE ASSESSEE. THE ASSESSEE DID NOT APPEAR BEFORE THE ASSESSING OFFICER, THEREFORE, THE ASSESSING OFFICER HAS LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ON APPEAL, LD. CIT(A) BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHENNAKESAVA PHARMACE UTICALS (SUPRA) DIRECTED THE ASSESSING OFFICER TO CANCEL THE PENALTY LEVIED . WE HAVE GONE TH R OUGH THE ASSESSMENT ORDER AS WELL AS PENALTY ORDER AND ALSO THE ORDER OF LD. CIT(A). IN THE PENALTY ORDER, THE ASSESSING OFFICER HAS NOT MENTIONED ANYWHERE THAT WHETHER ASSESSEE HAS FILED INACCURATE PARTICULARS OR CONCEALED THE INCOME. WITHOUT MENTIONING ANYTHING, SIMPLY INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IT IS THE DUTY OF THE ASSESSING OFFICER TO COME TO A CON C LUSION THAT WHETHER ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. WITHOUT SUCH A CONCLUSION, SIMPLY PENALTY CANNOT BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT SINCE ASSESSEE IS NOT ABLE TO FILE CONFIRMATIONS IN RESPECT OF TRADE CREDITORS, ADDITION WAS MADE AND THE SAME IS ACCEPTED BY THE ASSESSEE. SO FAR AS, CREDITORS FOR CAPITAL GOODS, THE ASSESSEE IS NOT ABLE TO FILE CONFIRMATION LETTERS OF SOME OF THE CREDITORS , THE ASSESSING OFFICER HAS MADE ADDITIONS. THE ABOVE ADDITIONS MADE BY THE ASSESSING OFFICER ARE ON ACCOUNT OF INABILITY OF THE ASSESSEE TO FURNISH THE DETAILS 5 ITA NO. 724 /VIZ/2013 ( M/S. ADILAXMI ENTERPRISES ) BEFORE THE ASSESSING OFFICER. WE FIND THAT IN THIS CASE , THE ASSESSEE NEITHER CONCEALED INCOME NOR FILED INACCURATE PARTICULARS, THEREFORE, BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINI O N THAT IT IS NOT A FIT CASE TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF THE LD.CIT(A). THUS, THIS APPEAL FILED BY THE REV E NUE IS DISMISSED. 8 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 3 0 T H DAY OF AUGUST , 201 7 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 0 T H AUGUST , 201 7 . VR/ - COPY TO : 1. THE ASSESSEE - M/S. ADILAXMI ENTERPRISES, 4 - 234, KAMANAGARUVU, AMALAPURAM. 2. THE REVENUE ITO, WARD - 1, AMALAPURAM. 3. THE CIT, RAJAHMUNDRY. 4. THE CIT(A) , VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.