M/s Safari Bikes Limited, Ludhiana V. ACIT, Ludhiana

ITA 8/CHANDI/2015

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9842 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 06-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Unexplained expenditure
• Section: 69C; 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 8/CHD/2015 ASSESSMENT YEAR: 2009-10 M/S SAFARI BIKES LIMITED, VS. THE ACIT, CIRCLE-1, LUDHIANA CHANDIGARH PAN NO. AAKCS5909D & ITA NO. 9/CHD/2015 ASSESSMENT YEAR: 2009-10 THE ACIT, CIRCLE-1, VS. M/S SAFARI BIKES LIMITED , LUDHIANA LUDHIANA PAN NO. AAKCS5909D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : DR. AMARVEER SINGH DATE OF HEARING : 02.07.2015 DATE OF PRONOUNCEMENT : 07.07.2015 ORDER PER T.R.SOOD, A.M. THE APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DATED 28.10.2014 OF CIT(A)-1, LUDHIANA 2. THE ISSUE INVOLVED IN THESE CROSS APPEALS ARE CO MMON, THEREFORE, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. IN ITA NO. 8/CHD/2015 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING PENALTY U/S 271(1)(C) AMOUNTING TO RS. 2,71,290/- ON ADDITION OF SALARY AND WAGES RS. 8,00 ,000/- (AS RESTRICTED BY THE INCOME TAX APPELLATE TRIBUNAL IN QUANTUM APPEAL AS PER PARA-8 OF HIS ORDER). 2. THAT THAT WORTHY CIT (A) HAS ERRED IN NOT CONSIDER ING THE FACT THAT ADDITION IN RESPECT OF SO CALLED UNEXPLAINE D EXPENDITURE 2 RELATING TO SALARY AND WAGES MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS. 86,57,239/- WAS RESTRICTED TO RS. 43,69,886/- BY THE CIT AND RS. 8,00,000/- BY THE ITAT. AS SUCH, NO PENALTY CAN BE LEVIED ON ACCOUNT OF ADDITION MADE O N ESTIMATION AND GUESS WORK ITA NO. 9/CHD/2015 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N RESTRICTING THE PENALTY TO THE TUNE OF RS. 2,71,920/- IMPOSED B Y THE AO ON THE ISSUE OF UNEXPLAINED EXPENDITURE RELATING T O SALARY AND WAGES U/S 69C IGNORING THE FACT THAT THE AO HAD IMP OSED THE SAME VIS-A-VIS THE QUANTUM ADDITION MADE ON THE BASIS OF CIRCUMSTANTIAL EVIDENCE GATHERED DURING THE COURSE OF SURVEY U/S 133A MADE ON THE PREMISES OF THE ASSESSEE. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE PENALTY IMPOSED BY THE AO ON THE ISSUE OF UNACC OUNTED SALES IGNORING THE FACT THAT THE AO HAD IMPOSED THE SAME VIS-A VIS THE QUANTUM ADDITION MADE ON THE BASIS OF CIRCU MSTANTIAL EVIDENCE GATHERED DURING THE COURSE OF SURVEY U/S 1 33A MADE ON THE PREMISES OF THE ASSESSEE. 5. AFTER HEARING BOTH THE PARTIES WE FIND THAT ORIG INALLY IN THE ASSESSMENT ORDER, MANY ADDITIONS WERE MADE BY THE ASSESSING OF FICER OUT OF WHICH ARE TWO ADDITIONS ON WHICH PENALTY WAS INITIATED AS UNDER:- I) THE ISSUE OF UNEXPLAINED EXPENDITURE RELEVANT TO SALARY AND WAGES U/S 69C RS. 86,57,239/- II) THE ISSUE OF UNACCOUNTED SALES OF RS. 4,23,09, 315/- ON THESE TWO ITEMS ,THE ASSESSING OFFICER HAS ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE ASSESSEE WENT IN APP EAL BEFORE CIT(A) AND ADDITIONS WERE PARTLY REDUCED VIDE ORDER DATED 12.0 2.2015. THE RESTRICTED ADDITIONS DETERMINED ARE AS UNDER:- I) ISSUE OF UNEXPLAINED EXPENDITURE RELATING TO SALARY AND WAGES - RS. 43,69,886/-. II) ISSUE OF UNACCOUNTED SALES ; RS. 2,13,48,943/- 6. THE ASSESSEE AND REVENUE FILED FURTHER APPEALS B EFORE THE TRIBUNAL WHEREIN THE ADDITIONS ON ACCOUNT OF UNEXPLAINED WAG ES AND SALARY WAS RESTRICTED TO RS. 8 LAKHS AND THE ADDITION ON ACCOUNT OF UNACC OUNTED SALES WAS DELETED BY 3 THE TRIBUNAL. HOWEVER, BY THE TIME PENALTY PROCEED INGS WERE TAKEN, UP THE ORDER OF THE TRIBUNAL PERHAPS WAS NOT AVAILABLE WIT H THE ASSESSING OFFICER. 7. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS MAI NLY SUBMITTED THAT ADDITIONS HAVE BEEN PARTLY DELETED BY CIT(A) AND FI NAL ADDITIONS HAVE BEEN MADE ON ESTIMATED BASIS WHICH WOULD NOT CALL FOR LE VY OF PENALTY. HOWEVER, THE ASSESSING OFFICER DID NOT FIND FORCE IN THESE SUBMI SSIONS AND LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT AT THE MINIMUM RATE OF 100 % AMOUNTING TO RS. 87,41,830/-. 8. ON APPEAL, LD. CIT(A) CONFIRMED THE PENALTY ON T HE ISSUE OF UNEXPLAINED EXPENDITURE RELATING TO SALARY AND WAGES WHICH WAS DETERMINED AT RS. 8 LAKHS BY THE TRIBUNAL VIDE PARA 8, WHICH READS AS UNDER:- 8. I HAVE CONSIDERED THE ISSUE OF IMPOSITION OF PENALTY WITH REFERENCE TO CONFIRMED ADDITION OF RS. 8,00,00 0/- AT THE LEVEL OF HON'BLE ITAT AND IT IS SEEN THAT THE HON'BLE BEN CH WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE WITH REFERENCE TO ATTENDANCE CARDS OF 26 PERSONS WHO HAD LEFT THE JOB IN THE MONTH OF AUGUST-SEPTEMBER, 2008. IT WAS OPINED BY THE HON 'BLE BENCH THAT IN VIEW OF THE EVIDENCE COLLECTED AT THE TIME OF SURVEY THE INFLATION OF SALARY AND WAGES COULD NOT BE RULED OU T. IT WAS IN THIS BACKGROUND THAT THE ADDITION OF RS. 8,00,000/- HAD BEEN CONFIRMED SPECIFICALLY WITH REFERENCE TO THE SUFFIC IENT EXPLANATION PERTAINING TO 26 PERSONS. THER EFORE THE CONTENTION OF THE APPELLANT THAT ADDITION SUSTAINE D BY THE HON'BLE BENCH ON ESTIMATE BASIS IS NOT CORRECT DEP ICTION OF FACTS OF THE CASE AND OBSERVATION OF THE HON'BLE BENCH. T HE ENTIRE ADDITION HAD BEEN INITIATED ON THE BASIS OF SURVEY PROCEEDINGS LEADING TO LOGICAL WORKING OUT OF UNACCOUNTED PAYM ENT OF SALARY AND WAGES WHICH GOT FINALLY RESTRICTED TO RS,8,00,0 00/-. THEREFORE I AM OF THE VIEW THAT ASSESSEE IN ITS RET URN OF INCOME HAD FILED INACCURATE PARTICULARS PERTAINING TO SALA RY AND WAGES TO THE TUNE OF RS.8,00,000/- AND THEREFORE PENALTY UNDER SECTION 271(L)(C) TO THE TUNE OF RS.2,71,920/- IS CONFIRMED . 4 9. THE PENALTY IN RESPECT OF OTHER ISSUE WAS DELETED BECAUSE ADDIT ION HAS BEEN DELETED BY THE TRIBUNAL. 10. BEFORE US, LD. COUNSEL FOR THE ASSESSEE WITH RE FERENCE TO ASSESSEES APPEAL SUBMITTED THAT FINALLY THE TRIBUNAL HAS ESTI MATED THE ADDITION ON ACCOUNT OF EXPENDITURE RELATING TO SALARY, AND WAGES AT RS. 8 LAKHS. IT IS PURE CASE OF ESTIMATION OF DISALLOWANCE AND, THEREFORE, ON THAT ACCOUNT PENALTY CANNOT BE LEVIED. FURTHER, THIS IS A CASE OF MERE DISALLOWANC E OF EXPENDITURE AND, THEREFORE, PENALTY SHOULD NOT HAVE BEEN LEVIED. HE RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ITA NO. 183 CIT VS BAL KISHAN DHAWAN HUF ( COPY OF THE JUDGEMENT FILED). HE ALSO RELIED ON THE DECISION OF CIT V AJAIB SINGH & COMPANY 253 ITR 630 RUBBER UDYOG VIKAS P. LTD 335 ITR 558(P&H). HE ALSO RELIED ON THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD 322 ITR 158 12. WITH REFERENCE TO REVENUES APPEAL, HE POINTED OUT THAT TRIBUNAL HAS ALREADY DELETED THE ADDITION IN ITA NO. 253 & 474/C HD/2013 VIDE PRAS 33 TO 37 AND THEREFORE, THERE IS NO QUESTION OF LEVY OF PENA LTY. 13. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT AS FAR AS ADDITION OF RS. 8 LAKHS FINALLY CONFIRMED BY TRIBUNAL ON ACCOUN T OF UNEXPLAINED EXPENDITURE RESPECT OF WAGES AND SALARY IS CONCERNED, THE SAME IS A CASE OF ESTIMATE AND THEREFORE, PENALTY PROCEEDINGS ARE NOT CALLED FOR. IN ANY CASE PENALTY CANNOT BE LEVIED ON MERE DISALLOWANCE OF EXPENDITURE ON ESTIM ATED BASIS. IN THIS REGARD WE WOULD LIKE TO REPRODUCE THE OBSERVATION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V AJAIB SINGH AND COMPANY (SUPRA), WHICH IS AS UNDER:- DISALLOWANCE OF AN EXPENSE PER SE CANNOT MEAN THAT THE ASSESSEE HAS FURNISHED INCORRECT PARTICULARS OF ITS INCOME. CONC EALMENT INVOLVES PENAL ACTION. IT HAS TO BE PROVED AS A CONSCIOUS ACT. THE ESSENTIAL PRE-CONDITION 5 FOR INVOKING EXPLANATION 1 TO SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961, IS THAT THE ASSESSEE FAILS TO OFFER AN EXP LANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) TO BE FALSE. IT IS ONLY IN SUCH A SITUA TION THAT THE ASSESSING OFFICER CAN INVOKE THE EXPLANATION TO SECTION 271(1 )(C) AND IMPOSE PENALTY . 15. SIMILAR OBSERVATIONS WERE MADE IN THE CSSE OF C IT VS. RUBBER UDYOG VIKAS P. LTD (SUPRA), THEREFORE, IN OUR OPINION, TH IS IS NOT A FIT CASE FOR LEVY OF PENALTY AND ACCORDINGLY WE SET ASIDE THE ORDER OF L D. CIT(A) AND DELETE THE PENALTY . 16. AS FAR AS THE DELETION OF PENALTY BY CIT(A) ON ACCOUNT OF ISSUE OF UNACCOUNTED SALES IS CONCERNED, SINCE THE ADDITION ITSELF HAVE BEEN DELETED BY THE TRIBUNAL, THEREFORE, THERE IS NO QUESTION OF LE VY OF PENALTY. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.07.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 7 TH JULY, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6