M/s Amar Brothers, Kanpur V. Asstt. Commissioner of Income Tax-II, Kanpur

ITA 882/LKW/2014

• Counselvise Citation: 88223714 RSA 2014
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.882/LKW/2014 ASSESSMENT YEAR:2007-08 A.C.I.T.-II, KANPUR. VS M/S AMAR BROTHERS, 87/112, KALPI ROAD, KANPUR. PAN:AACFA6378B (RESPONDENT) (APPELLANT) SHRI R. R. JAIN, C. A. APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY 19/10/2015 DATE OF HEARING 31/12/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE OR DER PASSED BY LEARNED CIT(A)-II, KANPUR DATED 18/09/2014 FOR THE ASSESSMENT YEAR 2007-2008. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: 1. HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL) II KANPUR HAS ERRED IN LAW AS WELL AS IN FACTS BY CONFIRMING PENALTY OF RS.104757.00 IMPOSED U/S. 271 (1) (C) OF THE ACT. 2. HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL) I I HAS FAILED TO APPRECIATE THE FACT THAT CLAIM OF DED UCTION FOR PURCHASE/EXPENDITURE HAS BEEN ALLOWED FOR DEDUCTION IN HIS APPELLANT ORDER. HOWEVER DIRECTED TO SHIFT THE CLAIM TO A.Y. 2006-07 AND NOT IN THE A.Y. 2007-08 AS SAID EXPENDITURE/PURCHASE RELATES TO A.Y . 2006-07. 2 3. HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL) I I HAS ERRED IN LAW AS WELL AS IN FACT BY NOT CONSIDER ING THE FACT THAT CLAIM FOR DEDUCTION OF EXPENDITURE/PURCHA SE WHICH HAS BEEN ALLOWED CONFIRMS RECTIFICATION OF BONAFIDE INADVERTENT MISTAKE OCCURRED IN A.Y. 2006- 07. THEREFORE NO PENALTY IS IMPOSSIBLE ON RECTIFICATION OF BONAFIDE INADVERTENT MISTAKE. 4. HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL) I I HAS FAILED TO APPRECIATE THAT APPELLANT HAD PAID TA XES FIRST I.E. IN A.Y. 2006-07 BUT CLAIMED FOR DEDUCTIO N IN A.Y. 2007-08. HENCE HOW COULD IT BE TREATED CONCEALMENT WITH A VIEW TO EVADE TAXES FOR IMPOSITI ON OF PENALTY. 5. HONOURABLE COMMISSIONER OF INCOME TAX (APPEAL) I I HAS ERRED IN LAW AS WELL AS ON FACT THAT IT IS SIMP LE RECTIFICATION OF BONAFIED INADVERTENT MISTAKE. IDEN TIFYING CORRECT YEAR FOR DEDUCTION DOES NOT FALL WITHIN PRE VIEW OF CONCEALMENT OF INCOME. 6. APPELLANT ORDER CONFIRMING PENALTY IS ARBITRARY ILLEGAL AND BAD IN LAW. 3. LEARNED A. R. OF THE ASSESSEE SUBMITTED SYNOPSIS OF ARGUMENTS IN WRITING IN SUPPORT OF GROUNDS OF APPEAL AND THE SAM E ARE REPRODUCED HEREIN BELOW: 1. THE ABOVE APPEAL HAS BEEN DIRECTED AGAINST PEN ALTY OF AN ORDER OF RS.104757/-LEVIED U/S 271(1)(C) OF THE ACT BY LEARNED A.O. AND SUSTAINED BY LEARNED C.I.T.(A). FACTUAL BACKGROUND 2.1 FACTS GIVING RISE TO THE ABOVE APPEAL LIE WITHI N A VERY NARROW COMPASS AND ARE DEDUCIBLE FROM THE ORDER OF PENALTY AND THE APPELLATE ORDER. HOWEVER, TO RECAPITULATE T HEY ARE AS UNDER:- A) APPELLANT, DURING THE YEAR UNDER APPEAL, WAS CARRYI NG ON THE BUSINESS OF MANUFACTURING AND EXPORT OF LEAT HER AND LEATHER GOODS. 3 B) ACCORDINGLY APPELLANT FILED ITS RETURN OF INCOME WI THIN THE TIME SPECIFIED IN SECTION 139(1) AS IN FORCE AT THE RELEVANT TIME VIDE THE RETURN SO FILED TOTAL INCOME OF RS.3275150/- WAS DECLARED. C) THE SAID RETURN WAS SELECTED FOR SCRUTINY U/S 143(3 ) OF THE I.T.ACT, 1961 AND WITH THE INITIATION OF PROCEE DINGS U/S 143(3) LEARNED A.O. RAISED MANY QUERIES FROM TI ME TO TIME EITHER BY NOTICES ISSUED OR VIDE ORDER SHEE T ENTRIES. D) DURING THE YEAR PRECEDING THE YEAR UNDER APPEAL VID E INVOICE APPEARING AT PAGE 3 OF THE PAPER BOOK APPEL LANT PURCHASED CHEMICAL WHICH WAS RECEIVED ON 23-2-06 AN D THE SAME WAS TAKEN INTO STOCK (SINCE NOT CONSUMED) ON THE SAID DATE A FACT VERIFIABLE FROM PAGE 15 OF THE APPELLATE ORDER APPEARING ON PAGE 14 TO 15 OF THE PAPER BOOK. E) HOWEVER DUE TO INADVERTENT MISTAKE ON PART OF THE ACCOUNTANT THE ENTRY FOR SAID PURCHASE WAS PASSED I N THE ACCOUNTS RELATING TO THE YEAR UNDER APPEAL. F) FROM THE ABOVE SET OF FACTS IT BECOMES CLEAR THAT W ITH NO ENTRY FOR PURCHASE IN PRECEDING YEAR VIZ. FINANC IAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 AN D AS A RESULT OF INCLUSION THEREOF IN THE STOCK THE P ROFITS FOR PRECEDING YEAR GOT OVERSTATED AND TAX WAS PAID UPON SUCH HIGHER PROFITS. G) DURING THE ASSESSMENT YEAR UNDER APPEAL AN ADDITION OF RS.311224/- WAS MADE BY LEARNED A.O. VIDE ORDER ON PAGE 4 AND 5 OF THE PAPER BOOK. H) AGAINST THE SAID ADDITION APPELLANT FILED AN APPEAL AND VIDE ORDER DT. 26.7.2011 (ON PAGE 14 AND 15 OF THE PAPER BOOK) LEARNED C.I.T. APPEAL HELD THAT THE PURCHASES PERTAINED TO PRECEDING YEAR AND DIRECTED LEARNED A.O. TO RECOMPUTE THE INCOME FOR ASSTT.YEAR 2006-07 AFTER ALLOWING DEDUCTION OF SIMILAR AMOUNT. I) ACCORDINGLY, LEARNED A.O. GAVE EFFECT TO THE AFORES AID APPELLATE ORDER BY REVISING ORDER DT. 15.2.2013 APPEARING ON PAGE 16 OF THE PAPER BOOK. J) ON THE BASIS OF ADDITION SO MADE IN THE YEAR UNDER APPEAL LEARNED A.O. INITIATED PENALTY PROCEEDINGS U /S 271(L)(C) VIDE NOTICE DT. 26.10.2009. 2.2 HOWEVER, WITH THE DELIVERY OF APPELLATE ORDER D T. 26.7.2011 LEARNED A.O. ISSUED A SHOW CAUSE NOTICE D T. 15.3.2013 U/S 271(L)(C). 4 2.3. IN REPLY APPELLANT FILED COGENT REPLY A FACT VERIFIABLE FROM THE ORDER IN APPEAL. SAID REPLY APPEARS ON PAG E 19 OF THE PAPER BOOK. IN NUTSHELL VIDE SAID REPLY APPELLA NT DEMONSTRATED THAT THERE WAS NEITHER ANY CONCEALMENT NOR THERE WAS ANY FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE THE ITEM OF PURCHASES WORTH RS.311224/- WAS S HOWN AS CLOSING STOCK IN THE YEAR CORRESPONDING TO ASSTT.YE AR 2006-07 AND ACCOUNTING ENTRY WAS PASSED IN THE YEAR UNDER A PPEAL AND THE MISTAKE WAS AN INADVERTENT ONE. 3.1 WITH THE AFORESAID FACTS IN THE BACK GROUND APP ELLANT'S SUBMISSIONS IN SUPPORT OF THE GROUNDS OF APPEAL APP EAR IN THE FOLLOWING PARAGRAPHS. IN RE: GROUNDS OF APPEAL NO. 1,2,3,5 & 6 4.1 LEARNED C.I.T.(A) WHILE SUSTAINING THE PENALTY HAS HELD THAT APPELLANT DID NOT ESTABLISH THE BONAFIDE OF TH E MISTAKE. 4.2 WHILE RECORDING THE ABOVE FINDING LEARNED C.I. T.(A) HAS NOT APPRECIATED THAT BONAFIDE OF THE .MISTAKE WAS E STABLISHED BY THE FACTUM OF INCLUSION OF THE MATERIAL PURCHASE D IN THE VALUE OF CLOSING STOCK AND AS SUCH THERE WAS NO ATT EMPT TO HIDE THE FACTUM OF PURCHASE OF GOODS. NO MALAFIDE C AN BE ATTRIBUTED IN THE INSTANT CASE SIMPLY BECAUSE THE A CCOUNTING ENTRY WAS MADE IN THE SUCCEEDING YEAR. LINE OF REAS ONING IS SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS. (A) BHARAT RICE MILLS VS CIT 278 ITR 599 (ALL) (B) JAYANT VEGOILS AND CHEMICAL (P)LTD. VS CIT 181 TAXMAN 260(BOM) 4.3 IN ANY CASE AND WITHOUT PREJUDICE, LEARNED C.I. T.(A) HAS FAILED TO APPRECIATE THAT LEARNED A.O, WHILE LEVYIN G THE PENALTY HAS BEEN OVERWHELMINGLY GUIDED BY THE FACTOR OF LEA RNED C.I.T.(A) HAVING HELD VIDE HIS APPELLATE ORDER DT. 26.7.2011 THAT THE PURCHASE PERTAINED TO THE YEAR CORRESPONDI NG TO ASSESSMENT YEAR 20006-07 AND NOT 2007-08 AND WHILE DOING SO HE HAS ALSO FAILED TO APPRECIATE THAT IN PENALTY PROCEEDINGS, WHICH ARE DISTINCT AND SEPARATE FROM ASSESSMENT PRO CEEDINGS, LEARNED A.O. WAS BOUND TO PROVE THAT THE FACTOR OF INCLUSION OF RAW MATERIAL IN THE VALUE OF CLOSING STOCK AND T HE 5 ACCOUNTING ENTRY IN THE SUBSEQUENT YEAR RESULTED IN LOSS TO THE REVENUE. 4.4 LEARNED C.I.T.(A) HAS ALSO FAILED TO APPRECIATE THAT WHILE LEVYING THE IMPUGNED PENALTY LEARNED A.O. HAS BEEN GUIDED BY ANOTHER IRRELEVANT FACTOR (WHICH APPEARS IN PARA 06 OF THE ORDER) WHEREBY IT HAS BEEN OBSERVED THAT ANY OVERSIGHT BY THE PERSON CONCERNED SHOULD HAVE BEEN RECTIFIED BY THE AUDITOR CONCERNED. AS THUS THIS FACTOR ALSO VITIATE S THE PENALTY LEVIED AND AS SUSTAINED BY LEARNED C.I.T.(A) IN RE: GROUND OF APPEAL NO.4 5.1 A CONSPECTUS OF THE ORDERS PASSED BY THE AUTHOR ITIES BELOW CLEARLY ESTABLISH ONE FACTOR THAT INCLUSION O F THE PURCHASE IN THE VALUE OF CLOSING STOCK WITHOUT ACCO UNTING ENTRY FOR PURCHASE AND FOR CORRESPONDING CREDIT TO THE ACCOUNT OF SUPPLIER OF THE MATERIAL RESULTED IN OVER STATEM ENT OF PROFITS FOR THE ASSESSMENT YEAR 2006-07 AND AS SUCH THIS AG AIN IS THE FACTOR WHICH PROVES THE BONAFIDES OF THE APPELLANT IN AS MUCH AS AUTHORITIES BELOW HAVE NOT BEEN ABLE TO PROVE TH AT THERE WAS ANY EVASION OF TAX IN ANY OF THE TWO YEARS INVO LVED- A FACTOR WHICH AGAIN EXPOSES THE INVALIDITY OF THE IM PUGNED PENALTY. PRAYER IN VIEW OF THE ABOVE SUBMISSIONS APPELLANT, HEREBY, PRAYS THAT HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE A PPEAL AND PASS SUCH ORDER AS MAY BE DEEMED JUST AND PROPER FO R VACATION OF THE UNWARRANTED PENALTY U/S 271(L)(C). 4. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN P ARA NO. 3 OF HIS ORDER, IT IS NOTED BY CIT(A) THAT THE DEDUCTION OF RS.3,11,22 4/- UNDER THE HEAD CONSUMABLE STORES WAS CLAIMED BY THE ASSESSEE IN THE PRESENT YEAR BUT THE SAME WAS HELD TO BE ALLOWABLE BY LEARNED CIT(A) IN QUANTUM 6 PROCEEDINGS FOR ASSESSMENT YEAR 2006-07. AS PER TH E FACTS, BORNE OUT FROM THE RECORD, IT IS SEEN THAT THE ASSESSEE PURCH ASED CHEMICAL WHICH WAS RECEIVED ON 23/02/2006 AND THE SAME WAS TAKEN I NTO STOCK IN FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 SINCE THE SAME WAS NOT CONSUMED IN THAT YEAR BUT DUE TO INADV ERTENT MISTAKE ON THE PART OF THE ACCOUNTANT, THE ENTRY FOR THE SAID PURCHASE WAS PASSED IN THE ACCOUNTS RELATING TO THE PRESENT YEAR I.E. ASSE SSMENT YEAR 2007-08. UNDER THESE FACTS, THE CLAIM OF THE ASSESSEE IN THE PRESENT YEAR WAS DISALLOWED BUT THE SAME WAS ALLOWED IN THE PRECEDIN G YEAR. IN THE LIGHT OF THESE FACTS, IN OUR CONSIDERED OPINION, ALTHOUGH TH E DISALLOWANCE IS THERE BUT IT CANNOT BE SAID TO BE A CASE OF CONCEALMENT A ND THEREFORE, PENALTY UNDER THESE FACTS IS NOT JUSTIFIED. HENCE, WE DELE TE THE PENALTY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED:31/12/2015 *SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGIS TRAR