Gujarat Farm Seeds Pvt.Ltd., Anand V. The Dy.CIT.,Anand Circle, Anand

ITA 797/AHD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9692 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-10-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Income from undisclosed sources; Principle of natural justice
• Section: 133A

Judgement Text

I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND MAHAVIR PRASAD , JM ] I.T.A. NO. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 GUJARAT FARM SEEDS PVT. LTD., ........ ... .. APPELLANT 101, JEMSONS HOUSE, NEAR LAXMI CINEMA, ANAND 388 001. [P AN: AAACG 7271 J] VS. DY. COMMISSIONER OF INCOME TAX, ANAND CIRCLE, ANAND. . . RESPONDENT APPEARANCES BY: S.N. DIVATIA FOR THE APPELLANT PRASOON KABRA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 20.10 .2016 DATE OF PRONOUNC ING THE ORDER : 23. 12. 2016 O R D E R PER PRAMOD KUMAR , AM : 1 . THIS APPEAL FILED BY THE ASSESS EE, IS DIRECTED AGAINST T HE ORDER DATED 31 ST DECEMBER 2013, PASSED BY TH E LEARNED C IT(A ) IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT Y EAR 2004 - 05 2. GRIEVANCES RAISED BY THE ASSESSEE APPELLANT ARE AS FOLLOWS : - 1.1 THE ORDER PASSED U/S.250 ON 31.12.2013 FOR A.Y.2004 - 05 BY CIT(A) - IV, BARODA NOT ONLY UPHOLDING BUT ENHANCING THE PENALTY LEVIED U/S. 271(L)(C) OF THE ACT BY AO IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 2 OF 7 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE SUBMISSIONS MADE AND EVIDENCE PRODUCED BY THE APPELLANT WITH REGARD TO THE IMPUGNED ADDITIONS. 2.1 THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THAT THE PROVISIONS OF SECTION 271(L)(C) WERE ATTRACTED IN RESPECT OF GP ADDITION OF RS.13,48,592/ - SUSTAINED IN APPEAL AND THEREBY CONFIRMING THE PENALTY OF RS.4,83,810/~ IMPOSED BY A . O. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) OUGHT NOT TO HAVE UPHELD THAT THE PROVISIONS OF SECTION 271(L)(C ) WERE ATTRACTED IN RESPECT OF GP ADDITION OF RS.13,48,592/ - SUSTAINED IN APPEAL AND THEREB Y CONFIRMING THE PENALTY OF RS. 4,83,810/ - IMPOSED BY A . O. 3.1 THE LD.CIT(A) HAS ERRED IN ENHANCING PENALTY U/S. 271(L)(C) IN RESPECT OF THE AD DITION WORKED OUT BY HIM AT RS. 45,18,352/ - THE NOTICE OF ENHANCEMENT DATED 13.12.2013 AS WELL AS THE EXERCISE OF POWERS OF ENHANCEMENT U/S. 251 OF THE ACT BY CIT(A) WAS WHOLLY ILLEGAL AND UNLAWFUL SO THAT THE IMPUGNED ORDER TO THE EXTENT OF LEVYING PENALTY OF RS . 10,20,277/ - WAS BAD IN LAW. 3.2 WITHOUT PREJUDICE TO THE ABOVE AND IN ALTERNATIVE, THE ID . CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN IMPOSING PENALTY OF RS.10,20,577/ - IN RESPECT OF THE PAYMENTS MADE IN CASH TO THE CREDITORS. 3.3 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT NOT HAVE IMPOSED PENALTY OF RS.10,20,577/ - . IT IS, THEREFORE, PRAYED THAT THE PENALTY OF RS.4,83,810/ - UPHELD AND RS.10,20,577/ - IMPOSED BY THE CIT(A) MAY KINDLY BE DELETED. 3. IN SUBSTANCE THUS, THE GRIEVANCE OF THE ASSESSEE IS (A) THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS. 4,83,810/ - IMPOSED BY THE ASSESSING O FFICER UNDER SECTION 271(1) (C); AND (B) THAT THE LEARNED CI T (A) ERRED IN ENHANCING THE PENALTY BY RS.10,20, 5 77/ - BY IMPOSI NG PENALTY IN RESPECT OF QUANTUM ADDITIONS WHICH WAS NOT IMPOSED BY THE ASSESSING O FFICER. 4. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING RAW SEEDS FOR VEGETABLES . ON 30 TH JANUARY 2004, A SURVEY UNDER SECTION 133A WAS CARRIED OUT AT ASSESSEE S BUSINESS PREMISES . DURING THE I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 3 OF 7 COURSE OF THIS SURVEY, A DIARY, CONTAINING RECORD OF PAYMENTS AGGREGATING TO RS.75,99,192/ - , WAS FOUND. THE ASSESSEE S EXPLANATION WAS THAT THE PAYMENT OF RS.75,99,192/ - WERE MADE TO THE CREDITORS AND THESE PAYMENTS WERE MADE OUT OF UNACCOUNTED EARNINGS. HOWEVER, IN T HE RETURN OF INCOME ONLY AN ADDITIONAL INCOME OF RS.51,44,583/ - WAS SHOWN ON THIS ACCOUNT. IT WAS EXPLAINED THAT OUT OF AVAILABLE CASH, AS PER BOOKS OF ACCOUNT, OF RS .29,39, 815/ - , RS.28,44,815/ - WAS USED FOR MAKING THESE PAYMENTS. THIS EXPLANATION WAS REJECTED BY THE ASSESSING O FFICER, THE LEARNED C IT ( A ) AND FINALLY A CO - ORDINATE BENCH OF THIS TRIBUNAL. ACCORDINGLY, IN ADDITION TO RS.51,44,583/ - OFFERED BY THE ASSESS EE , AN ADDITION OF RS.28,44,815/ - WAS CONFIRMED. DURING THIS SURVEY , IT WAS FOUND THAT PHYSICAL STOCK WAS RS.81,48,226/ - WHEREAS, AS PER BOOKS OF ACCOUNTS, IT SHOULD HAVE BEEN RS.67,47,040/ - . ON THIS BASIS, AN ADDITION OF RS.14,01 , 186/ - WAS MADE IN THE H ANDS OF THE ASSESSEE. THIS ADDITION ALSO STANDS CONFIRMED IN FIRST AS WELL AS SECOND APPEAL. 5. THE TROUBLE FOR THE ASSESSEE , HOWEVER, DID NOT END THERE. THE PROCEEDINGS FOR PENALTY UNDER SECTION 271(1)(C) WERE ALSO INITIATED. THE EXPLANATIONS GIVEN BY THE ASSESSEE WERE CONSIDERED AND REJECTED. WHILE DOING SO, THE ASSESSING OFFICER CONCLUDED AS FOLLOWS : - THE ASSESSEE WAS ALLOWED FRESH OPPORTUNITY VIDE THIS OFFICE LETTER NO. DC IT/AND/GFSPL/271(1)( C)/2009 - 10 DATED 16/02/2010 TO EXPLAIN WHY PENALTY U / 'S. 271(1)( C) SHOU L D NOT BE LEVIED. THE ASSESSEE'S REPRESENTATIVE AS PER HIS LETTER DATED 27/02/2010 AS UNDER: (1) THE CIT(A) - IV, BARODA HAD CONFIRMED ADDITION MADE BY ASSESSING OFFICER PARTLY AND TAXABLE INCOME IS REDUCED TO RS.66,8 0 ,930/ - VIDE ORDER DAT ED 26/10/2009, ALL THE NECESSARY DETAILS/WORKING OF CHITTY WAS SUBMITTED DURING ASSESSMENT PROCEEDINGS AND EVEN FULL PARTICULARS WERE AVAILABLE FOR ASSESSMENT WITH THE ASSESSING OFFICER. FURTHER NECESSARY EVIDENCE PERTAINING TO LOWER G.P. WERE ALSO PROVIDE D DURING THE ASSESSMENT PROCEEDINGS. I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 4 OF 7 (2) FURTHER ADDITION OF ACCOUNT OF STOCK OUR CLIENT HAS SUBMITTED THE RELEVANT DETAILS AND INCOME RS.51,44,583/ - WAS OFFERED IN THE RETURN OF INCOME VOLUNTARILY DECLARED. FURTHER WITH REGARD TO STOCK DIFFERENCE WORTH R S.9,98,400/ - WAS RECEIVED FROM FARMERS ON APPROVAL BASIS AND THE SAME WAS NOT PURCHASED AND EVEN THE SAME IS ADDED. (3) IT IS, THEREFORE, SUBMITTED THAT OUR CLIENT HAD NOT CONCEALED ANY INCOME. A [ HAS FOR FACTS STATED ABOVE AND THIS IS PENALTY SHOULD NOT BE LEVIED'.] THE CONTENTION OF THE ASSESSEE IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE ARE NOT ACCEPTABLE. (I) AT THE TIME OF SURVEY AS PER DIARY IMPOUNDED FROM THE BUSINESS PREMISES, IT CONTAINED NOTINGS OF AMOUNT RETURNED IN CASH TO VARIOUS DEPOSIT S AMOUNTING TO RS.75.99,192 / - . THE SAID AMOUNT WAS NOT DEDUCTED FROM THE DEPOSITORS ACCOUNT IN THE REGULAR BOOKS OF ACCOUNTS. THE PARTNER HAD ACCEPTED THAT THIS IS THE UNACCOUNTED INCOME OF THE ASSESSEE AND DISCLOSED ITS INCOME FOR THE ASSESSMENT YEAR UNDE R CONSIDERATION. (II) THE DISCREPANCY IN STOCK OF RS. 14,01 ,186/ - WAS ALSO BROUGHT OUT ON ACCOUNT OF SURVEY CARRIED CUT. (III) THE RATE OF G.P. FOR THE YEAR UNDER CONSIDERATION WAS WRITTEN AT THE RATE OF 6.21% AS AGAINST 12.89% WRITTEN IN THE IMMEDIA TE PRECEDING YEAR. THE ASSESSING OFFICER REJECTED THE BOOK RESULT AS ASSESSEE HAD NOT PROPERLY MAINTAINED BOOKS OF ACCOUNT AS UNACCOUNTED INCOME I.E. OWN MONEY AS WELL AS STOCK WAS FOUND. THE ASSESSEE HAD WRITTEN LOWER G.P. TO REDUCE ITS TAX LIABILITY. (I V) THE ASSESSEE HAS ALREADY ACCEPTED UNACCOUNTED INCOME AS PER ITS DAIRY AS WELL AS DIFFERENCE IN STOCK. THE ASSESSEE HAD KNOWLEDGE OF ITS REAL INCOME AND CORRECT VALUE OF ITS STOCK BUT HOWEVER THE UNACCOUNTED INCOME WAS NOT TAKEN TO ITS REGULAR BOOKS OF ACCOUNTS AS WELL AS CORRECT VALUE OF THE STOCK ON HAND WAS ALSO NOT TAKEN TO ITS REGULAR BOOKS OF ACCOUNTS. BY THIS IT CONCEALED ITS INCOME AS WELL AS FURNISH INACCURATE PARTICULARS OF ITS STOCK VALUE. 7. FOR THE REASONS STATED ABOVE IT IS CLEAR THA T THE ASSESSEE CONCEALED ITS INCOME LIABLE TO TAX FOR THE YEAR UNDER CONSIDERATION AND MADE ITSELF LIABLE EXCESSIVELY U/S. 271(1)(C ) OF THE ACT. 8. THE MINIMUM PENALTY LEVIABLE WORKS OUT TO RS.4,83,807/ - MAXIMUM OF RS . 14,51,421/ - . HOWEVER CONSIDE RING THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROCEED TO IMPOSE PENALTY OF RS. 4.83,810 / - I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 5 OF 7 6. THE ASSESSEE CHALLENGED THE AFORESAID LEVY OF PENALTY BEFORE THE LEARNED CIT ( A ) . WHILE LEARNED CIT (A) CONFIRMED THE PE NALTY, HE ALSO NOTED THAT THE QUANTIFICA TION OF PENALTY OF RS.4,83,810/ - ONLY COVERS THE ADDITION FOR EXCESS STOCK FOUND DURING SURVEY, AND HAS MISSED OUT THE ADDITION OF RS.28,44,815/ - IN RESPECT OF WHICH EXPLANATION OF THE ASSESSEE HAS BEEN FOUND TO BE FALSE. ACCORDINGLY , A FURTHER PENALTY O F RS.10,20,477/ - WAS HELD TO BE LEVIABLE. THE PENALTY WAS THUS ENHANCED. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 8. LEARNED COUNSEL HAS RAISED A PRELIMINARY OBJECTION TO THE EFFECT THAT IT IS NOT OPEN TO THE LEARNED CI T ( A ) TO IMPOSE PENALTY IN RESPECT OF QUANTUM ADDITION ON WHICH THE ASSESSING O FFICER HAS NOT IMPOSED THE PENALTY. AN ELA BORATE WEB OF ARGUMENTS IS THEN BUILT IN SUPPORT OF THE PROPOSITION AS TO HOW SUCH AN ACTION IS NOT PERMISSIBLE. THIS PROPOSITION DOES SEEM ATTRACTIVE AT THE FIRST SIGHT, BUT THEN , AS A PLAIN LOOK AT THE IMPUGNED PENALTY ORDER, RELEVANT EXTRACTS FROM WHIC H ARE REPRODUCED IN PARAGRAPH 5 ABOVE, WOULD SHOW THAT THE ASSESSING OFFICER DID NOT AT ANY STAGE DROP THE PENALTY PROCEEDING IN RESPECT OF QUANTUM ADDITION OF RS.28,44,815/ - . AS A MATTER OF FACT, THE ASSESSING O FFICER DID DISCUSS THE JUSTIFICATION FOR IM POSING PENALTY IN RESPECT OF THIS QUANTUM ADDITION AS WELL. AS A MATTER OF FACT, IT WAS ONLY IN THE LAST PARAGRAPH THE PENALTY WAS QUANTIFIED IN TERMS OF ADDITION OF RS.14,01 , 186/ - WHICH, ON THE FACE OF IT, WAS AN ERROR IN QUANTIFICATION ONLY. IT WAS SPE CIFICALLY STATED BY THE ASSESSING O FFICER, AFTER NOTING THE EXPLANATION OF THE ASSESSEE IN RESPECT OF BOTH THE QUANTUM ADDITIONS , THAT THE CONTENTION OF THE ASSESSEE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE ARE NOT ACCEPTABLE AND THEN WENT ON T O A D D THAT A T THE TIME OF SURVEY AS PER DIARY I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 6 OF 7 IMPOUNDED FROM THE BUSINESS PREMISES, IT CONTAINED NOTINGS OF AMOUNT RETURNED IN CASH TO VARIOUS DEPOSITS AMOUNTING TO RS.75.99,192/ - . THE SAID AMOUNT WAS NOT DEDUCTED FROM THE DEPOSITORS ACCOUNT IN THE REGULA R BOOKS OF ACCOUNTS. THE PARTNER HAD ACCEPTED THAT THIS IS THE UNACCOUNTED INCOME OF THE ASSESSEE AND DISCLOSED ITS INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT CANNOT, THEREFORE, BE SAID THAT THE ASSESSING O FFICER HAD DROPPED PENALTY PROCEEDIN GS IN RESPECT OF THE ADDITION RELATING TO PAYMENTS OF RS. 75,99,192/ - - WHICH WAS RS.28,44,815/ - IN THIS CASE. THERE ARE MERITS IN THIS INTERESTING LEGAL ARGUMENTS ADVANCED BY THE LEARNED COUNSEL , AND IT MAY INDEED APPEAR THAT LEARNED CIT(A ) MAY NOT HAVE P OWERS TO IMPOSE PENALTY IN RESPECT OF A QUANTUM ADDITION WHEN SUCH PENALTY IS DROPPED BY THE ASSESSING O FFICER, BUT THEN, THIS PLEA IS NOT RELEVANT ON THE FACTS OF THIS CASE. 9. C OMING TO THE MERITS OF THE IMPUGNED PENALTY, WE FIND TH AT SO FAR AS PENALTY IN RESPECT OF DISCREPANCY IN STOCK (RS.14,01,186/ - ) IS CONCERNED, THE MATTER WAS REMITTED TO THE FILE OF THE ASSESSING O FFICE WITH CERTAIN DIRECTIONS. IN THE REMANDED PROCEEDINGS, THE ASSESSING OFFICE HAS AGAIN REITERATED THE ADDITION. ON MERITS, HOWEVE R, WE FIND THAT THE ASSESSEE HAS GIVEN AN EXPLANATION, ABOUT ERRONEOUS INCLUSION OF GOODS RECEIVED ON APPROVAL BASIS, WHICH HAS NOT BEEN FOUND TO BE FALSE. THIS EXPLANATION MAY NOT HAVE BEEN PROVEN TO T HE HILT, BUT THAT IS NOT NECESSARY SO FAR AS PENALTY IS CONCERNED. THE MERE FACT THAT THIS RECEIPT OF GOODS ON APPROV AL BASIS HAS NOT BEEN STATED IN THE STATEMENT RECORDED DURING SURVEY DOES NOT RENDER THE EXPLANATION TO BE INCORRECT. IN VIEW OF THE S E DISCUSSIONS , ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DIRECT THE ASSESSING O FFICER TO DELETE THE RELATED PENALTY, I.E. RS.4,83,810/ - , IN RESPECT OF THIS ADDITION. AS REGARDS THE QUANTUM ADDITION OF RS.28,44,815/ - FOR ALLEGED PAYMENT TO CREDITORS OUT OF AVAILABLE CASH BALANCE, WE FIND THAT THE EXPLANATION OF THE ASSESSEE HAS BEEN REJECTED ON MERITS AND, IN FACT, FOUND TO BE FALSE AS EVEN THE DATES OF PAYMENTS AS I.T.A. N O. 797 /AHD/201 4 ASSESSMENT YEAR: 2004 - 05 PAGE 7 OF 7 FOR SEIZED DIARY AND DATE OF PAYMENTS AS PER BOOKS OF ACCOUNT DO NOT MATCH AT ALL. IN THIS REGARD, IN VIEW OF THE CATEGORICAL FINDINGS OF THE TRI BUNAL IN PARAGRAPH NO.10 OF THE ORDER DATED 25.05.2012 AND IN THE ABSENCE OF ANY OTHER EXPLANATION, THE IMPUGNED PENALTY TO THE EXTENT OF RS.10,20, 577/ - DOES INDEED DESERVE TO BE CONFIRMED. WE CONFIRM THE SAME. 10. IN VIEW O THE ABOVE DISCUSSION, THE IMPU GNED PENALTY TO THE EXTENT OF RS.4,83,810/ - IS DELETED AND PENALTY TO THE EXTENT OF RS.10,20,577/ - IS CONFIRMED. 11 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 23 RD DAY OF DECEMBER , 2016. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 23 RD DAY OF DECEMBER , 2016. COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) D EPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD