M/s. Exetera Info-Tech, Surat V. The Income tax Officer,Ward-5(1), Surat

ITA 745/AHD/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0107 (ITAT-SURAT)
• Duration Of Justice: 7 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M JAGASHETH
• Keywords: Difference of opinion
• Section: 271(1)(c)

Judgement Text

EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A.NO.745/AHD/2012 [ [ / ASSESSMENT YEAR : 2005-06 M/S.EXETERA INFO - TECH, 1/1026, CHOWKI STREET, NANPURA, SURAT 395 002. [PAN: AAAFE 7586 R] VS . THE INCOME TAX OFFICER, WARD-5(1), SURAT. APPELLANT /RESPONDENT [ /ASSESSEE BY: SHRI P.M.JAGASHETH CA /REVENUE BY: SHRI PRASOON KABRA - SR. DR / DATE OF HEARING: 1 5 .0 5 .2019 /PRONOUNCEMENT ON: 1 5 .0 5 .2019 /O R D E R PER BHAVNESH SAINI, JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV [LD.CIT(A)], SURAT DATED 24.01.2012 FOR ASSESSMENT YEAR 2005-06 CHALLENGING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. 2. THE ASSESSEE FIRM FILED THE RETURN OF INCOME ON 28.09.2005 DECLARING TOTAL INCOME OF RS.24,740/-. THE RETURN OF INCOME WAS ACCOMPANIED BY AUDIT REPORT IN PRESCRIBED FORM. THE ASSESSING OFFICER CALLED FOR QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK AND SUBSEQUENTLY MONTH WISE PURCHASES AND SALES. THE ASSESSING OFFICER EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 2 OF 6 PREPARED CHART AS PER ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER AND FOUND THAT ASSESSEE HAD SHOWN MORE SALES THAN PURCHASES IN MOST OF THE MONTHS. THE ASSESSING OFFICER FURTHER DEDUCTED GROSS PROFIT FROM EVERY MONTHS SALE TO ARRIVE AT A COST OF THE GOODS SOLD AND FOUND THE PEAK OF CUMULATIVE UNACCOUNTED PURCHASES IN THE MONTH OF NOVEMBER WAS AT RS.7,29,647/- AND HELD THAT CLOSING STOCK FOR THE MONTH OF NOVEMBER WAS ALSO OUT OF UNACCOUNTED PURCHASES. THE ASSESSING OFFICER HAS HELD THAT THESE TWO AMOUNTS WERE UNACCOUNTED PURCHASES TOTALLING TO RS.7,98,520/- AND MADE AN ADDITION TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT. THE ASSESSING OFFICER IN THE PENALTY ORDER HAS MENTIONED IT IS A FIT CASE OF LEVY OF THE PENALTY ON THE AFORESAID ADDITION FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALING THE PARTICULARS OF INCOME. THE ASSESSING OFFICER VIDE SEPARATE ORDER LEVIED THE PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT WHICH HAVE BEEN CONFIRMED BY THE LD.CIT(A). 3. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE ASSESSMENT ORDER AND SUBMITTED THAT ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER SHOWS THAT ASSESSING OFFICER HAS STATICALLY ESTIMATED THE GROSS PROFIT RATE AT 13.85 % FOR CALCULATING PEAK UNACCOUNTED PURCHASES WHICH IS IMPOSSIBLE IN EACH MONTH. HE HAS SUBMITTED THAT ALL THE FACTS WERE DISCLOSED TO THE REVENUE DEPARTMENT. THE BOOKS OF ACCOUNTS ARE EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 3 OF 6 AUDITED, THEREFORE NOTHING HAS BEEN CONCEALED TO THE REVENUE DEPARTMENT. HE HAS SUBMITTED THAT ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEARNED CIT(A) AND IT WAS SUBMITTED THAT ASSESSEE IS IN THE BUSINESS OF COMPUTER STATIONERY AND COMPUTER PERIPHERALS AND WERE DEALING IN LOW VALUE ITEMS WHICH WERE VERY LARGE IN NUMBER. THE ASSESSEE WOULD RECEIVED PURCHASED ITEMS FIRST BUT THE BILLS FOR THE SAME WERE RECEIVED BUT A SUBSEQUENT DATE. THE ITEMS STOCKED BY THE ASSESSEE WERE FAST MOVING ONES AND WOULD GET SOLD BEFORE THE ACTUAL PURCHASE BILL WAS RECEIVED BUT SALE BILL WAS PREPARED AS SOON AS THE SALE WAS EFFECTIVE. THEREFORE, DUE TO MOVEMENT OF THE GOODS AS EXPLAINED ABOVE THERE WERE NO DEFICIT IN THE STOCK. IT IS SUPPORTED BY THE FACT THAT ASSESSEE HAD AN OPENING STOCK OF 23,108/- AGAINST TOTAL TURNOVER OF RS.1.03 CRORES. HE HAS SUBMITTED THAT THOUGH THE LD.CIT(A) DID NOT ACCEPT CONTENTION OF THE ASSESSEE ON QUANTUM APPEAL, BUT THE ADDITION OF UNACCOUNTED PURCHASES HAVE BEEN REDUCED TO MONTH OF MARCH AT RS.6,63,866/-. HE HAS SUBMITTED THAT ADDITION IS MADE MERELY ON ESTIMATE AND THAT SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE FOR LEVY OF PENALTY WAS ALSO DEFECTIVE. HE HAS THEREFORE SUBMITTED THAT IT IS NOT A FIT CASE TO LEVY OF THE PENALTY. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT ASSESSEE FIRM IS IN BUSINESS OF TRADING OF COMMUTER STATIONERY AND EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 4 OF 6 PERIPHERALS LIKE FLOPPY, BLANK CD, PAPER, RIBBON ETC., THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED IN WHICH NO DEFECTS HAVE BEEN POINTED OUT BY THE AUTHORITIES BELOW. THE ASSESSING OFFICER, HOWEVER, WHILE PREPARING ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER FOUND THAT THERE IS AN UNACCOUNTED PURCHASES, PEAK OF THE SAME WAS TAKEN FOR THE MONTH OF NOVEMBER 2004. THE LEARNED CIT(A) HAS HOWEVER TAKEN IT FOR THE END OF THE FINANCIAL YEAR I.E. FOR MARCH 2005. THE ASSESSING OFFICER HAS APPLIED ESTIMATED GROSS PROFIT RATE OF 13.85 % FOR CALCULATING PEAK PURCHASES WHICH IS IMPRACTICAL AND IMPOSSIBLE THAT ASSESSEE WOULD EARN SIMILAR GROSS PROFIT EVERY MONTH ON EVERY ITEM. THE ASSESSEE DISCLOSED ALL THE FACTS TO THE REVENUE DEPARTMENT AND ALL ENTRIES HAVE BEEN MADE IN THE BOOKS OF ACCOUNTS. THE ASSESSEE EXPLAINED BEFORE THE LD.CIT(A) THAT ASSESSEE DEALS IN LARGE NUMBER OF LOW VALUE ITEMS AND PURCHASED ITEMS ARE RECEIVED FIRST AND LATER ON BILLS HAVE BEEN RECEIVED. THE EXPLANATION OF THE ASSESSEE THOUGH NOT ACCEPTED BY THE AUTHORITIES BELOW BUT APPEARS TO BE PROBABLY CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE. THE AUTHORITIES BELOW IN THESE FACTS AND CIRCUMSTANCES SHOULD HAVE BROUGHT CONCRETE MATERIAL ON RECORD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS A CASE OF MAKING CALCULATION OF UNACCOUNTED PURCHASES BASED ON ESTIMATE AND BASED ON ANNEXURE-A ATTACHED WITH THE ASSESSMENT ORDER AS PER ENTRIES IN BOOKS OF ACCOUNTS. THE QUANTUM ADDITION HAVE BEEN REDUCED BY THE LD.CIT(A) TAKING THE PEAK OF THE END EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 5 OF 6 OF THE MONTH OF THE FINANCIAL YEAR. THEREFORE, ENTIRE BASIS OF ASSESSING OFFICER FOR CALCULATING PEAK UNACCOUNTED PURCHASES HAS NOT BEEN ACCEPTED BY THE LD.CIT(A). IT THEREFORE APPEARS THAT IT IS A CASE OF DIFFERENCE OF OPINION BETWEEN ASSESSEE AND THE INCOME TAX AUTHORITIES. THE ASSESSEE EXPLAINED THAT THE NATURE OF BUSINESS SHOWS THAT PETTY ITEMS WERE PURCHASED WITHOUT BILL AND SOLD BECAUSE BILLS RECORDED LATER ON WHICH FACT HAS NOT BEEN ACCEPTED BY THE AUTHORITIES BELOW. THE ASSESSEES EXPLANATION IS SUPPORTED BY THE FACT THAT ASSESSEE HAD SMALL OPENING STOCK AS AGAINST TURNOVER IN CRORES. 6. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW, IT IS NOT A FIT CASE OF LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING THE PARTICULARS OF INCOME. COPY OF THE SHOW CAUSE NOTICE ISSUED PRIOR TO LEVY OF THE PENALTY IS ALSO FILED IN THE PAPER BOOK DATED 24.12.2007 IN WHICH ALSO ASSESSING OFFICER HAS MENTIONED BOTH THE ABOVE LIMBS OF SECTION 271(1)(C) OF THE INCOME TAX ACT FOR LEVY OF THE PENALTY. THEREFORE, AUTHORITIES BELOW WERE NOT DEFINITE IN THEIR CONCLUSION WHETHER IT IS A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. IT IS A CASE OF ESTIMATED ADDITION BASED ON NO EVIDENCE BROUGHT ON RECORD BY THE REVENUE AUTHORITIES AGAINST THE ASSESSEE. IT IS WELL SETTLED LAW THAT LEVY OF PENALTY IS IN AUTOMATIC IN EACH AND EVERY CASE AND IT DEPENDS UPON FACTS AND CIRCUMSTANCES OF THE EACH CASE. EXETERA INFO-TECH VS ITO, WARD-5(1), SURAT /ITA NO.745/AHD/2012 PAGE 6 OF 6 7. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW IT IS NOT A FIT CASE OF LEVY OF THE PENALTY. WE, THEREFORE SET-ASIDE THE ORDERS OF AUTHORITIES BELOW AND CANCEL THE LEVY OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT 15-05-2019. SD/- SD/- (O.P.MEENA) (BHAVNESH SAINI) ( /ACCOUNTANT MEMBER) ( /JUDICIAL MEMBER) / SURAT, DATED : 15 TH MAY , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT