Shri Sanjay Chugh, Indore V. The Dy. CIT., Indore

ITA 83/IND/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5870 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-11-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 17-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MITRA
• Assessee Lawyers: H P VERMA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.87/IND/2010 A.YS. 2004-05 RAJESH CHUGH INDORE PAN ABCPC-1529 APPELLANT VS DY. COMMR. OF INCOME TAX 4(1), INDORE .. RESPONDENT A N D ITA NO.83/IND/2010 A.YS. 2004-05 SANJAY CHUGH INDORE PAN ABXPC-9481D APPELLANT VS DY. COMMR. OF INCOME TAX 4(1), INDORE RESPONDENT APPELLANTS BY : SHRI HP VERMA AND SHRI ASHISH GOYAL RESPONDENT BY : SHRI P.K. MITRA O R D E R 2 PER JOGINDER SINGH, JM THESE APPEALS ARE FILED BY DIFFERENT ASSESSEES AGAI NST THE RESPECTIVE ORDERS OF THE LEARNED CIT(A) DATED 3.11. 2009 ON THE COMMON GROUND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY OF RS. 58,000/- AND RS. 19,500/-, RESPECTIVELY, LEVIED U/S 271(1)(C) OF THE ACT. 2. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE THE ASSESSEE DERIVED INCOME FROM TRADING IN ELECTRO NIC GOODS IN THE STATUS OF INDIVIDUAL. THE FATHER OF THE ASSESSEE W AS ALSO ARGUED TO BE HAVING DEALING IN IDENTICAL GOODS HAVING SHOP IN FR ONT OF HIS SON. TO BUY PEACE WITH THE DEPARTMENT, NO APPEAL WAS FILED BY T HE ASSESSEE ON QUANTUM ADDITION. THE ALLEGED DIFFERENCE OF GOODS WAS CLAIMED TO BE RECONCILED WITH THE GOODS WORTH RS. 1,23,005/- RECE IVED FROM M/S ROYAL RADIOS. RELIANCE WAS PLACED ON THE DECISION IN 189 TAXMAN 322 (SC). IT WAS SUBMITTED THAT THE CASE OF SHRI RAJESH CHUGH IS ALSO ALMOST ON IDENTICAL FACTS. ON THE OTHER HAND, THE LEARNED SE NIOR DEPARTMENTAL REPRESENTATIVE DEFENDED THE IMPUGNED ORDER BY INVIT ING OUR ATTENTION TO PAGE 2 PARA 5 (QUANTUM ORDER) PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 3. IN THE CASE OF SANJAY CHUGH BRIEF FACTS ARE THAT THE ASSESSEE DECLARED INCOME OF RS. 3,03,550/- IN ITS RETURN FIL ED ON 28 TH MARCH, 2005. SURVEY WAS CONDUCTED ON 6.2.2004 AT THE PREMISES OF THE ASSESSEE 3 WHEREIN STOCK OF RS. 4,69,020/- WAS FOUND AGAINST R S. 4,06,515/-, ARRIVED AT IN THE TRADING ACCOUNT BY APPLYING GP AT THE RATE OF 16.65% ON THE SALE OF RS.7,57,245/-. THE DIFFERENCE OF RS.62 ,505/- (RS. 4,69,020/- MINUS RS.4,06,515/-) RESULTED INTO EXCESS STOCK. TH E CLAIM OF THE ASSESSEE IS THAT THE DIFFERENCE OF RS.,62,505/- STO OD RECONCILED WITH THE GOODS WORTH RS.1,23,005/- RECEIVED FROM M/S ROYAL R ADIOS, INDORE, WHICH REMAINED TO BE CONSIDERED AT THE TIME OF SURV EY AS SALES FOR THE WHOLE YEAR WERE ACCEPTED. THIS CLAIM OF THE ASSESSE E WAS NOT CONTROVERTED BY THE REVENUE. 4. IN THE CASE OF SHRI RAJESH CHUGH, DURING SURVEY ON 6.2.2004 THE STOCK WAS FOUND SHORT BY RS. 2,36,435/- WHICH W AS TREATED AS SALES OUTSIDE THE BOOKS OF ACCOUNTS. THE CLAIM OF THE ASS ESSEE IS THAT BESIDES SHORT STOCK, DETERMINED ON THE BASIS OF ACCOUNTED O PENING STOCK, PURCHASES AND SALES, NO OTHER EVIDENCE WAS FOUND FO R SUCH SALES. THE SURRENDER OF RS. 1,85,000/- AS INCOME ON THE BASIS OF TRADING ACCOUNTS WHICH WAS PARTIALLY RETRACTED IN THE RETURN OF INCO ME WAS CLAIMED TO BE SUFFICIENT TO INCLUDE THE ALLEGED SHORT STOCK. IN THIS APPEAL, THE LEARNED ASSESSING OFFICER MADE FURTHER ADDITION OF RS.1,85, 000/- WHICH WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). DURING HEARING IT WAS CLAIMED BY THE ASSESSEE THAT SECOND APPEAL WAS NOT FILED BY THE ASSESSEE TO BUY PEACE WITH THE DEP ARTMENT. 4 5. THE CLAIM OF THE ASSESSEE IS THAT DURING THE ASS ESSMENT PROCEEDINGS FACTS COULD NOT BE PROPERLY EXPLAINED A ND APPRECIATED ESPECIALLY WHEN ALL THE EVIDENCES AND DETAILS WERE AVAILABLE ON RECORD AS THE VALUE OF ALLEGED SHORT STOCK OF RS. 2,36,435 /- WAS INCLUDED IN THE TRADING ACCOUNT. IT IS ALSO SEEN THAT THE LEARNED A SSESSING OFFICER APPLIED GROSS PROFIT AT THE RATE OF 31.5% AGAINST T HE GP OF 14.58% OF THE LAST YEAR AND DECLARED GP AT THE RATE OF 19.34% FOR THE SECOND PERIOD I.E. 7 TH FEBRUARY, 2004 TO 31.3.2004 (ASSESSMENT ORDER PAGE 3 PARA 6). DURING HEARING IT WAS ALSO POINTED OUT THAT THE LEA RNED REVENUE AUTHORITIES DID NOT CONSIDER THE REPAIR RECEIPTS SE PARATELY I.E. RS.73,470/- (AO PAGE 2 PARA 3B) AND NET PROFIT AFTER EXPENSES R S.52,720/- (PROFIT AND LOSS ACCOUNT PAPER BOOK 3). IF THE TOTALITY OF FACTS IS ANALYSED, WE FIND THAT SHORT SALES WERE DETERMINED ON THE BASIS OF ACCEPTED OPENING STOCK, RECORDED PURCHASES AND SALES. THE VARIATION IN THE GP RATE IS ON ESTIMATE BASIS, THEREFORE, IF THE ARGUMENT OF UNACC OUNTED PURCHASES IS ACCEPTED, THE ALLEGED SHORT STOCK SHALL VANISH ESPE CIALLY WHEN THERE IS NO EVIDENCE OF UNACCOUNTED PURCHASES. EVEN OTHERWI SE, THE GP AT THE RATE OF 34.44% IS BASED ON ESTIMATION (DURING SURVE Y) WHEREAS IN THE ASSESSMENT ORDER IT WAS ADOPTED AT 20% WHICH SHOWS CLEAR CASE OF ESTIMATION. THE FIGURES ACCEPTED BY THE AUTHORITIE S ARE AS UNDER :- 5 (I) - RECEIPTS SALES INCLUDING SHORT STOCK 15,83,744/- (TRADING ACCOUNT A/C P.B. 3) ADD REPAIR RECEIPTS --- 73,470/-(AO PAGE 2 PARA 3) TOTAL = 16,57,214/- (II) - PROFIT SHOWN ON SALES NOT ACCEPTED BY THE DEPTT. 2,62,718/-(P.B.3) ADD : REPAIRS 52,720/- (P.B. 3) TOTAL = 3,15,438/- IT COMES TO 17.51% (III) UPTO SURVEY (FROM 1.4.2003 TO 6.2.2004 THE GP SHOWN AT 14.58%. (IV) GP SHOWN FROM 7.2.2004 TO 31.3.2004 (POST SURV EY) THE GP IS 19.99% IF THE TOTALITY OF FACTS IS ANALYSED, IT IS A CLEAR CASE OF NON-APPRECIATION OF FACTS AND THE WHOLE ADDITION IS MADE ON ESTIMATION OF INCOME, THEREFORE, WE ARE OF THE VIEW THAT NO PENALTY IS IMPOSABLE WHE RE INCOME IS ESTIMATED. THE RATIO LAID DOWN IN CIT V. M.M. RICE MILLS; 253 ITR 17 (P&H) AND CIT V. KERLA SPINNERS LIMITED; 247 ITR 54 1 (KER) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. THE HONBLE PUNJ AB AND HARYANAHIGH COURT IN THE CASE OF M.M. RICE MILLS (S UPRA) HELD AS UNDER :- 6 MERELY BECAUSE ADDITIONS HAVE BEEN MADE TO INCOME UNDER THE PROVISO TO SECTION 145(1) OF THE INCOME TAX ACT, 1961, BY ADOPTING THE VIEW THAT THE GROSS PROFIT SHOWN IN THE BOOKS OF ACCOUNTS WAS TOO LOW AS THERE WERE DEFECTS IN THE METHOD OF ACCOUNTI NG EMPLOYED IT WOULD NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS FAILURE TO RETURN THE COR RECT INCOME BY MEANS OF FRAUD OR GROSS OR WILLFUL NEGLEC T. WHILE COMING TO THE AFORESAID CONCLUSION, THE HONB LE COURT FOLLOWED THE DECISION IN CIT V. METAL PRODUCTS OF INDIA; 150 ITR 714 (P&H). AS FAR AS THE ARGUMENT OF THE LEARNED SENIOR DEPARTMENTAL REP RESENTATIVE THAT THE ADDITION ON QUANTUM WAS NOT CHALLENGED BY THE A SSESSEE, WE ARE OF THE VIEW THAT QUANTUM AND PENALTY PROCEEDINGS ARE A LTOGETHER DIFFERENT AND MERE ADDITION ON QUANTUM MAY NOT JUSTIFY IMPOSI TION OF PENALTY UNLESS AND UNLESS IT IS PROVED BEYOND DOUBT THAT EI THER THE ASSESSEE CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS THEREOF. THIS VIEW IS SUPPORTED BY THE DECISION IN JAMNABAI PREMC HAND; 243 ITR 812 (GUJ) AND THE RATIO LAID DOWN IN CIT V. RELIANCE PE TRO PRODUCTS (P) LIMITED; 189 TAXMAN 322 (SC). FOR IMPOSING PENALTY U/S 271(1) OF THE ACT, DEFINITE FINDING ABOUT CONCEALMENT BY THE REVE NUE IS THE BASIC REQUIREMENT. EVEN OTHERWISE, IF THE ASSESSEE, SIMP LY TO BUY WITH THE DEPARTMENT, DID NOT PREFER SECOND APPEAL, AUTOMATIC ALLY DOES NOT TANTAMOUNT TO CONCEALMENT OF INCOME OR FURNISHING I NACCURATE PARTICULARS OF SUCH INCOME. THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT V. SKYLINE AUTO PRODUCTS PRIVATE LIMITE D; 271 ITR 335 EVEN 7 WENT TO THE EXTENT THAT WHEN MISTAKE IS BONAFIDE, N O PENALTY CAN BE IMPOSED AS FOR IMPOSING PENALTY U/S 271(1) A DELIB ERATE MISTAKE ON THE PART OF THE ASSESSEE IS REQUIRED. THE RATIO LAID DO WN BY THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF ANIL KUMAR PATNI (IT A NO. 439/IND/2009) ORDER OF EVEN DATE FURTHER SUPPORTS THE CASE OF THE ASSESSEES. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, THE PEN ALTY SO IMPOSED IN THE RESPECTIVE APPEAL IS DIRECTED TO BE DELETED. FINALLY, BOTH THESE APPEALS OF THE A SSESSEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND NOVEMBER, 2010 (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22.11.2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE