Khandelwal Chemicals, Kolkata V. THE ITO, WD-35(3), KOLKATA, Kolkata

ITA 777/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9377 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2016
• Court: TRIBUNAL
• Department Lawyers: S K Z H TANVEER JCITSR
• Assessee Lawyers: JITENDRA KAUSHIK
• Keywords: Rule of consistency; Revised return
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM ./ ITA NO.777/KOL/2016 ( / ASSESSMENT YEAR:2008-2009) KHANDELWAL CHEMICALS, ROOM NO.702, 7 TH FLOOR, 32, EZRA STREET, KOLKATA- 700001 VS. THE ITO, WARD-25(3), KOLKATA ./ ./PAN/GIR NO.: AAHFK 9060 B ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI JITENDRA KAUSHIK, ADVOCATE REVENUE BY : SH.S.K.Z.H.TANVEER, JCIT,SR.DR / DATE OF HEARING : 27/12/2016 /DATE OF PRONOUNCEMENT 22/02/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2008-09, IS DIRECTED AGAINST THE OR DER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA, I N APPEAL NO.248/CIT(A)-10/WD-.5(3)/13-14/KOL, DATED 01.02.20 16, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFI CER (AO) UNDER SECTION 143(3)/147 OF THE INCOME TAX ACT 1961, (IN SHORT THE ACT), DATED 27.01.2014. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS RETURN OF INCOME ON 19.08.2008 DECLARING TOTAL INCOME OF RS.10,92,034/-. ASSESSEES CASE WAS SELECTED FOR S CRUTINY U/S.143(3) AND THE AO HAS COMPLETED THE ASSESSMENT BY MAKING VARI OUS ADDITIONS. ITA NO.777/16 KHANDELWAL CHEMCIALS 2 3. AGGRIEVED FROM THE ORDER OF THE AO, ASSESSEE FIL ED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ADDITIONS MADE BY THE AO OBSERVING THE FOLLOWINGS :- OBSERVATIONS OF CIT(A) FOR GROUND NO.2 DECISION: 1. I HAVE EXAMINED THE ACTION OF THE AO IN DISALLOW ING THE INTEREST PAYMENTS OF RS.35,344/- BY INVOKING THE PROVISIONS OF SEC 40A(2) OF THE INCOME TAX ACT, 1961.THE AO HAS VERY CLEARLY BROUGHT FORTH THE RELATIONSHIP BETWEEN THE PERSONS AND THE APPELL ANT-FIRM. I FIND MERIT IN THE FINDING OF THE AO THAT WHEN THE PARTNE R IDS PAID INTEREST AT 7%, THERE IS NO LOGIC IN PAYING INTEREST AT 12% TO CLOSE FAMILY PEOPLE. A DIFFERENCE OF 5 % OF INTEREST IS CERTAINL Y TO BE CONSIDERED EXCESSIVE AND CANNOT BE A SOUND BUSINESS PRINCIPLE. 2. I DO NOT FIND ANY MERIT IN THE CONTENTION OF THE APPELLANT THAT SIMILAR ACTION HAD NOT BEEN DONE IN A PREVIOUS YEAR ON COMPLETION OF ASSESSMENT, AS EACH ASSESSMENT IS A SEPARATE AND DISTINCT LEGAL PROCEEDING. IT MAY NOT BE CORRECT TO COMPARE THE BA NK LENDING RATE TO ARRIVE AT THE PRINCIPLE OF RATES BEING EXCESSIVE OR NOT, AS CONTENDED BY THE LD.A.R, AS THE AO HAS CONSIDERED T HE RATES ON INTEREST BEING PAID / BEING GIVEN WITHIN THE INFORM ATION AVAILABLE IN THE RETURN OF THE FIRM ITSELF. THAT TO ME APPEARS T O BE THE CORRECT BASE FOR COMPARISON. IN THE CIRCUMSTANCES EMERGING, I AM OF THE CONSIDER ED OPINION THAT THE ACTION OF THE AO IN THIS MATTER DOES NOT CALL F OR ANY INTERFERENCE AND THE ADDITION OF RS.35,344/- IS SUSTAINED. THIS GROUND OF APPEAL IS ACCORDINGLY ADJUDICATED AG AINST THE APPELLANT. OBSERVATIONS OF CIT(A) FOR GROUND NO.3 DECISION: AFTER HAVING PERUSED THE SUBMISSIONS AND THE DOCUME NTS SUBMITTED BY THE LD.A.R, I FIND THAT THE IMPUGNED AMOUNTS HAV E BEEN IMPOSED BY WAY OF A PENALTY BY THE SALES TAX AUTHOR ITIES, THOUGH IT IS NOT VERY CLEAR AS TO THE CIRCUMSTANCES OF THE IM POSITION OF THE PENALTY. IN MY CONSIDERED VIEW, THERE IS NOT MUCH D OUBT THAT THE AMOUNTS OF RS.2,000/- AND RS.220/- HAVE BEEN IMPOSE D FOR VIOLATIONS / INFARCTIONS OF THE LAW, FOR WHATEVER R EASON. I AM THEREFORE NOT CONVINCED BY THE SUBMISSIONS OF THE APPELLANT/ LD A.R AND FIND THAT THERE IS NO REASON TO INTERFER E WITH THE FINDINGS OF THE A.O. ITA NO.777/16 KHANDELWAL CHEMCIALS 3 THE ACTION OF THE AO IS DISALLOWING RS.2,220/- AS P ENALTY AMOUNTS DEBITED IN THE PROFIT AND LOSS ACCOUNT, IS THEREFOR E SUSTAINED. THIS GROUND IS DECIDED AGAINST THE APPELLANT. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUND S OF APPEAL :- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT QU ASHING THE PROCEEDINGS INITIATED U/S.147 OF THE IT ACT 196 1, BY THE LD. INCOME-TAX OFFICER WHO HAVING BEEN SATISFIED THAT T HERE WAS NO ESCAPEMENT OF INCOME ON THE BASIS OF RECORDED REASO NS. 2. FOR THAT WITHOUT PREJUDICE TO THE GROUND NO.1, T HE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIR MING DISALLOWANCE OF A SUM OF RS.35,344/- MADE BY THE LD . INCOME- TAX OFFICER ON THE ALLEGED GROUND OF INTEREST PAID AT EXCESSIVE RATE TO RELATIVES OF THE PARTNERS. 3. FOR THAT WITHOUT PREJUDICE TO THE GROUND NO.1, T HE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIR MING DISALLOWING OF A SUM OF RS.2,000/- BEING FEE FOR LA TE FILING OF A VAT RETURN. 5. ALTHOUGH IN THIS APPEAL, THE ASSESSE HAS RAISED THREE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING THE MAIN GRIEVANC E OF THE ASSESSE HAS BEEN CONFINED TO GROUND NO.1 AND 2. GROUND NO. 3 HA S NOT BEEN PRESSED THE ASSESSE. 6. GROUND NO. 1: IN THIS GROUND THE ASSESSE HAS CHA LLENGED THE VALIDITY OF PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S 147 STATING THAT THERE WAS NO ESCAPEMENT OF INCOME ON THE BASIS OF RECORDE D REASONS. 6.1 LD AR FOR THE ASSESSE HAS SUBMITTED BEFORE US T HAT ASSESSE HAD FILED THE REVISED RETURN OF INCOME AND ACCEPTED THE DIFFE RENCE OF RS.64,634/. AND AS SUCH THE REASONS FOR REOPENING THE CASE HAD BEEN COMPLIED WITH BY THE ASSESSE. ITA NO.777/16 KHANDELWAL CHEMCIALS 4 6.2 ON THE OTHER HAND LD DR FOR THE REVENUE HAS STA TED THAT RETURN OF INCOME WAS FILED BY THE ASSESSE ONLY IN RESPONSE TO NOTICE U/S 148 ISSUED BY THE ASSESSING OFFICER. AS THE RETURN OF INCOME H AD BEEN REVISED BY THE ASSESSEE TO COVER THE POINT OF ADDITION U/S 147/148 OF RS. 64,634/-, AND THE AO HAS ACCEPTED IT. THE LD AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MAKING FURTHER ADDIT IONS, MERELY BECAUSE THE ITEM OF ESCAPEMENT OF INCOME HAD BEEN COVERED B Y THE RETURN OF INCOME FILED BY THE ASSESSEE. THAT IS, DURING THE R EASSESSMENT PROCEEDINGS IF THE AO FINDS THAT OTHER ITEMS HAS ES CAPED ASSESSMENT, HE MAY ASSESS THE SAME ALSO. 6.3 HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN T HE SUBMISSIONS OF THE LD DR FOR THE REVENUE. AS THE LD DR FOR THE REVENUE PO INTED OUT THAT THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MAKING FUR THER ADDITIONS, MERELY BECAUSE THE ITEM OF ESCAPEMENT OF INCOME HAD BEEN C OVERED BY THE RETURN OF INCOME FILED BY THE ASSESSEE. THE ASSESSI NG OFFICER MAY MAKE ADDITION ON THOSE ITEMS WHICH WERE NOT COVERED BY H IM IN REASONS RECORDED BY HIM, IF HE FINDS THAT INCOME HAS ESCAPE D ASSESSMENT. IN THE PRESENT CASE, THE ADDITION HAS BEEN MADE AND REASON S FOR REOPENING HAS SUSTAINED, AND THEREFORE THE ASSESSING OFFICER IS F REE TO INVESTIGATE OTHER AREAS, AND MAKE ADDITIONS WHERE NECESSARY. ACCORDIN GLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER PASSED BY THE LD CIT(A). WE CONFIRM THE ORDER PASSED BY THE CIT(A). ITA NO.777/16 KHANDELWAL CHEMCIALS 5 6.4 IN THE RESULT, THE APPEAL FILED BY THE ASSESSE ON THIS GROUND IS DISMISSED. 7. GROUND NO.2 RAISED BY THE ASSESSE IS WITHOUT PREJUDICE TO THE GROUND NO.1, AND STATES THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF A SUM OF RS.35,344/- MAD E BY THE LD. INCOME-TAX OFFICER ON THE ALLEGED GROUND OF INTEREST PAID AT E XCESSIVE RATE TO RELATIVES OF THE PARTNERS. 7.1 LD AR FOR THE ASSESSE HAS SUBMITTED, BEFORE US, THAT IN PREVIOUS YEARS NO ANY SIMILAR ADDITIONS WERE DONE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS DEVIATED FROM THE PRINCIPLE O F CONSISTENCY. THE LD AR FOR THE ASSESSE HAS SUBMITTED BEFORE US THE ASSE SSMENT ORDER FOR A.Y. 2007-08 (PB 8 TO 14) WHERE SIMILAR ADDITION WE RE NOT DONE BY THE ASSESSING OFFICER. 7.2 ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS R EITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSE, AS THE PROPOSITION CANVASSED BY LD. AR FOR THE ASSE SSEE ARE SUPPORTED BY THE FACTS NARRATED BY HIM ABOVE. AS LD. AR SUBMITT ED BEFORE US THAT SIMILAR ADDITIONS WERE NOT MADE BY ASSESSING OFFICE R IN PREVIOUS YEARS. THE ASSESSING OFFICER SHOULD FOLLOW THE PRINCIPLE O F CONSISTENCY. KEEPING IN MIND THE PRINCIPLE OF CONSISTENCY, AND SMALLNESS OF THE AMOUNT, WE ARE ITA NO.777/16 KHANDELWAL CHEMCIALS 6 OF THE VIEW THAT ADDITION MADE BY THE AO AND CONFIR MED BY THE CIT(A), NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADD ITION. 7.4. IN THE RESULT, APPEAL FILED BY THE ASSESSE ON GROUND NO.2 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22/0 2/2017. SD/ - ( A.T.VARKEY ) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 22/02/2017 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-KHANDELWAL CHEMICALS 2. / THE RESPONDENT.-ITO, WARD-35(3), KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//