M/s. Atmaram Mody & Co., Ahmedabad V. The Income tax Officer,Ward-11(4), Ahmedabad

ITA 906/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76912 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-07-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Reasonable cause; Difference of opinion
• Section: 273B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NOS.905 & 906/AHD/2011 A.Y.2004-05 M/S. ATMARAM MODY & CO., 21, NEW CLOTH MARKET, AHMEDABAD. PAN: AAGFA 2925C VS ITO, WARD 11(4) AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.L. YADAV, SR.D.R., ASSESSEE(S) BY : MS. URVASHI SHODHAN, A.R. / // / DATE OF HEARING : 15/07/2014 / DATE OF PRONOUNCEMENT: 18/07/2014 / O R D E R SHRI MUKUL KUMAR SHRAWAT (JUDICIAL MEMBER) THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE A RISING FROM THE ORDERS OF LEARNED CIT(A)-XVI AHMEDABAD BOTH DAT ED 25 TH OF JANUARY, 2011, RESPECTIVELY, PASSED U/S. 271(1)(C) AND U/S.271B OF IT ACT CONFIRMING THE PENALTY OF RS.9,62,609/- AND RS.23,2 28/-. AGAINST THE CONFIRMATION OF PENALTY NOW THE APPELLANT IS BEFORE US. A. PENALTY U/S.271B OF IT ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDERS PASSED U/S.143(3) R.W.S. 147 DATED 18.12.200 7 AND THE ORDER PASSED U/S.271B DATED 25.03.2010 WERE THAT THE ASSE SSEE-FIRM IS ENGAGED IN DALALI/COMMISSION/BROKERAGE BUSINESS IN TEXTILE CLOTH. WHILE LEVYING THE PENALTY U/S.271B OF IT ACT, THE AO HAS GIVEN TH E REASON AS FOLLOWS: ITA NOS.905 & 906/AHD/2013 M/S. ATMARAM MODY & CO. VS. ITO, WARD 11 (4) FOR A.Y. 2004-05 - 2 - 2. IN THIS CASE, DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, IT WAS NOTICED THAT ASSESSEE HAS SHOWN TOTAL COMMISSION IN COME OF RS.24,06,124/- DURING THE YEAR UNDER CONSIDERATION. HOWEVER, OUT OF THE TOTAL COMMISSION OF RS.24,06,124/- AN AMOUNT OF RS. 4,56,895/- PERTAINED ON THE PREVIOUS YEAR I.E. A.Y. 2003-04. SINCE THE A SSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, IT SHOULD HAVE ACC OUNTED FOR THE SAID COMMISSION INCOME OF RS.4,56,895/- IN THE A.Y. 2003 -04 ITSELF. THEREFORE, THE COMMISSION INCOME OF RS.4,56,895/- P ERTAINED TO A.Y. 2003-04 IS EXCLUDED FROM THE TOTAL COMMISSION INCOM E SHOWN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND AF TER EXCLUDING THE COMMISSION OF RS.4,56,895/- PERTAINING TO A.Y. 2003 -04, COMMISSION FOR THE A.Y.04-05 IS TAKEN AT RS.19,49,299/-. ACCORDING LY, THE TOTAL COMMISSION INCOME OF THE ASSESSEE FOR THE YEAR UNDE R CONSIDERATION COMES TO RS.46,45,760/- (RS.26,96,531 + RS.19,49,22 9/-). THUS, AS PER SECTION 44AB OF THE IT ACT, ASSESSEE WAS LIABLE TO GET ITS ACCOUNTS AUDITED SINCE THE GROSS RECEIPTS DURING THE YEAR UN DER CONSIDERATION HAVE EXCEEDED RS.40 LAKH. AS THE ASSESSEE FAILED TO GET ITS ACCOUNT AUDITED AND FURNISH A REPORT OF SUCH AUDIT AS REQUI RED UNDER SECTION 44AB, PENAL PROVISION U/S.271B ARE ATTACHED IN THIS CASE. 3. HEARD BOTH THE SIDES. RELEVANT ORDERS HAVE BEEN PERUSED. WE HAVE NOTED THAT FOR A.Y. 2004-05, THE YEAR UNDER CONSIDE RATION IN QUANTUM PROCEEDINGS THE ASSESSEE HAD GONE IN APPEAL BEFORE HONBLE ITAT A BENCH AHMEDABAD AND IN AN APPEAL TITLED AS M/S. ATM ARAM MODY VS. ITO IN ITA NO.66/AHD/2009 ORDER DATED 29 TH JULY, 2011, WHEREIN IT WAS HELD AS UNDER: 7. REGARDING GROUND NO.3 I.E. REGARDING ALTE RNATIVE CONTENTION OF THE ASSESSEE, WE FIND THAT THIS IS VERY MUCH NOTED BY THE A.O. IN THE ASSESSMENT ORDER ITSELF THAT THE ASSESSEE HAS DECLA RED COMMISSION INCOME OF RS.31,29,532/- IN ASSESSMENT YEAR 2005-06 WHICH INCLUDES COMMISSION OF RS.26,96,531/- PERTAINING TO THE PRES ENT YEAR. HENCE, IT IS SEEN THAT ONCE IT IS HELD THAT THIS INCOME IS TAXAB LE IN THE PRESENT YEAR, AS A CONSEQUENCE, THE ASSESSEE BECOMES ELIGIBLE FOR REDUCTION OF SUCH INCOME IN ASSESSMENT YEAR 2005-06. INCOME CANNOT BE TAXED TWICE, ONCE IN THE PRESENT YEAR BY APPLYING THE MERCANTILE SYST EM OF ACCOUNTING AND THEN AGAIN IN THE NEXT YEAR ON THE BASIS OF ASSESSE E'S BOOKS OF ACCOUNT AS PER CASH SYSTEM OF ACCOUNTING IN RESPECT OF ITS COMMISSION INCOME. HENCE, THE ASSESSEE DESERVES RELIEF IN THE NEXT YEA R AS A CONSEQUENCE TO UPHOLDING OF ADDITION MADE BY THE A.O. IN THE PRESE NT YEAR. ADMITTEDLY, THE NEXT YEAR I.E. ASSESSMENT YEAR 2005-06 IS NOT O PEN BEFORE US BUT ITA NOS.905 & 906/AHD/2013 M/S. ATMARAM MODY & CO. VS. ITO, WARD 11 (4) FOR A.Y. 2004-05 - 3 - SINCE THE RELIEF CLAIMED BY THE ASSESSEE AS PER THI S ALTERNATIVE CONTENTION IS A CONSEQUENTIAL RELIEF, WE ARE OF THE CONSIDERED OPINION THAT GIVING DIRECTION FOR SUCH CONSEQUENTIAL RELIEF IN A PRECEDING OR SUCCEEDING YEAR IS WELL WITHIN THE POWERS OF THE TR IBUNAL AND HENCE, WE DIRECT THE A.O. TO ALLOW CONSEQUENTIAL RELIEF TO TH E ASSESSEE IN THE NEXT YEAR IF NOT ALREADY ALLOWED BECAUSE NO INCOME CAN B E TAXED TWICE AND THIS IS ADMITTED POSITION IN THE PRESENT CASE THAT THE INCOME BEING TAXED BY THE A.O. IN THE PRESENT YEAR HAS BEEN DECLARED B Y THE ASSESSEE AND INCLUDED IN THE INCOME IN THE SUCCEEDING YEAR. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NO.3 OF THE ASSESSEE STANDS ALL OWED. 3.1 IN THIS ORDER, WE HAVE ALSO NOTED THAT PART OF THE INCOME WHICH WAS ASSESSED AS COMMISSION INCOME FOR THE YEAR UNDER CO NSIDERATION WAS TAXED BUT THE CLAIM OF THE ASSESSEE WAS THAT IT PER TAINED TO THE NEXT YEAR. ALTHOUGH, CONSIDERING THE ACCOUNTING OF THE ASSESSE E THE CLAIM OF THE ASSESSEE WAS NOT APPROVED, HOWEVER AS FAR AS THE QU ESTION OF LEVY OF PENALTY FOR NON AUDITING OF ACCOUNT BEING GROSS REC EIPTS HAVE EXCEEDED RS.40 LACS, WE HAVE NOTED THAT SOME OF THE COMMISSI ON INCOME PERTAINED TO A.Y.2003-04 AND PART OF THE INCOME PERTAINED TO A.Y. 2004-05 AND LIKEWISE ANOTHER PART OF THE INCOME BELONGED TO A.Y . 2005-06. THIS POSITION OF SEGREGATION OF INCOME FOR RESPECTIVE YE ARS WAS FINALLY SETTLED BY THE RESPECTED CO-ORDINATE BENCH. THEREFORE, THE ARGUMENT BEFORE US WAS THAT THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT THE COMMISSION INCOME FOR THE YEAR UNDER CONSIDERATION WAS LESS TH AN RS.40 LACS; HENCE UNDER THAT IMPRESSION HE HAS NOT OBTAINED THE AUDIT ED ACCOUNTS. ON THE QUESTION OF BONA FIDE OF TAX PAYERS, VIZ-A-VIZ, THE PROVISION OF SECTION 271B OF IT ACT A DECISION OF HONBLE GUJARAT HIGH C OURT HAS BEEN CITED IN THE CASE OF ITO VS. SACHINAM TRUST, 223 CTR 152 (GUJ.). RESPECTFULLY FOLLOWING THIS DECISION, WE HEREBY HOL D THAT IN VIEW OF THE PROVISIONS OF SECTION 273B OF IT ACT THE ASSESSEE W AS PREVENTED BY A ITA NOS.905 & 906/AHD/2013 M/S. ATMARAM MODY & CO. VS. ITO, WARD 11 (4) FOR A.Y. 2004-05 - 4 - REASONABLE CAUSE; HENCE THE PENALTY LEVIED U/S. 271 B DESERVES TO BE DELETED. B. PENALTY U/S. 271(1)(C) 4. FACTS IN BRIEF AS EMERGED FROM THE PENALTY ORDER PASSED U/S.271(1)(C) DATED 25.03.2010 WERE THAT THE PENALT Y WAS LEVIED AS PER THE FOLLOWING OBSERVATIONS: 2. ON VERIFICATION OF THE RETURN OF INCOME FOR THE A. Y. 2005-06, IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED TOTAL COMMISS ION INCOME OF RS. 31,29,252/- IN THE A.Y. 2005-06 OUT OF WHICH, COMM ISSION INCOME AMOUNTING TO RS. 26,96,531./- WAS PERTAINING TO THE PERIOD 01.04.2003 TO 31.03.2004. ACCORDINGLY, THE ASSESSEE SHOULD HAVE DECLARED THE SAME IN THE RETURN OF INCOME FOR THE A .Y.2004-05. THE DETAILS OF COMMISSION INCOME RECEIVED BY THE ASSESS EE ARE AN UNDER.:- SR. NO. NAME OF PAYERS AMOUNT OF COMMISSION DETAILS 1 OMKAR TEXTILES MILLS 8,24,447/- 2 ANJANI SYNTHETICS LTD. 4,24,206/- 3 PRAKASH TEXTILES (G) LTD. 8,15,604/- 4 CTM TEXTILES MILLS 3,45,846/- 5 RATNAK TEX P. LTD. 19,965/- 6 SAMARIA FASHIONS PVT. LTD. 2,66,463/- TOTAL 26,96,531/- 4.1 THE EXPLANATION OF THE ASSESSEE WAS AS UNDER: NATURE OF BUSINESS:- THE FIRM IS ENGAGED IN DALALI COMMISSION (BROKERAG E) BUSINESS PARTICULARLY OF TEXTILE CLOTH. BRIEFLY SPEAKING THE ACTIVITY OF THE FIRM IS TO HELP VARIOUS TEXTILES EXPORTERS IN PROCESSING WORK DONE ON THEIR CLOTH IN 'PROCESS HOUSES' OF AHMEDABAD CITY. ALTERNATIVELY, WE HELP EXPORTERS OF TEXTILES CLOTHS IN PROCURING GREY CLOTH, FINISHED C LOTH AND /OR SUPERVISE THE CLOTH WHILE THE SAME IS PROCESSED IN VARIOUS 'P ROCESS HOUSES' IN THE CITY. FOR THIS PURPOSE, WE MAKE PAYMENTS TO BROKERS / AGENTS/ PARTIES WHO HELP US IN PROCURING GREY CLOTH AND / OR PROCES SING THE CLOTH. METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE F IRM IN GENERAL IS MERCANTILE. HOWEVER, THE COMMISSION INCOME IS TAKEN INTO ACCOUNT ON ITA NOS.905 & 906/AHD/2013 M/S. ATMARAM MODY & CO. VS. ITO, WARD 11 (4) FOR A.Y. 2004-05 - 5 - CASH FOR DOING SO IS THAT FROM MOST OF THE PROCESS HOUSES (GIVER OF COMMISSION ON CLOTH SUPERVISION WORK) AND EXPORTERS (GIVER OF COMMISSION ON GREY CLOTH PURCHASES) ARE CREDITING O UR ACCOUNT IN THEIR BOOKS WITH THE AMOUNT OF COMMISSION IN ONE 1 FINANCIAL YEAR AND ACTUALLY RELEASING THE PAYMENT IN SUBSEQUENT FINANC IAL YEAR / YEARS. SO IT IS NOT BECOME POSSIBLE TO ASCERTAIN CORRECT INCO ME OF COMMISSION WITHOUT TAKING THE INCOME IN THE YEAR IN WHICH IT R ECEIVED.' 5. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS ALSO CONTESTED THAT THE TDS ON THE SAID COMM ISSION HAD ALSO BEEN DEDUCTED; THEREFORE, FROM THE SIDE OF THE ASSESSEE THERE WAS A DISCLOSURE OF THE COMMISSION INCOME HOWEVER DUE TO DIFFERENCE OF OPINION THE COMMISSION INCOME WAS TAXED IN THE YEAR UNDER CONSI DERATION. LEARNED CIT(A) WAS NOT CONVINCED AND HELD THAT WHEN THE ASS ESSEE HAD PAID THE TDS NEXT YEAR BUT THE DISALLOWANCE WAS MADE IN THE CURRENT YEAR THEN AS FAR AS THE QUESTION OF TDS CREDIT IS CONCERNED THE SAME WAS TO BE ALLOWED IN THE NEXT YEAR BUT THE ASSESSEE WAS REQUI RED TO OFFER THE INCOME ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTANCY; H ENCE, HE HAS UPHELD THE LEVY OF PENALTY. 6. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES, W E ARE OF THE CONSIDERED OPINION THAT IN A SITUATION WHEN THE COM MISSION INCOME WAS SUBJECT TO TDS AND THAT COMMISSION INCOME WAS DISCL OSED IN THE RESPECTIVE YEARS FOLLOWING ONE METHOD OF ACCOUNTING WHICH WAS NOT ACCEPTED AND TAXED IN A.Y.2004-05 ON THE BASIS OF A NOTHER SYSTEM OF ACCOUNTING; THEN IT IS NOT FAIR TO HOLD THAT THE AS SESSEE HAS DELIBERATELY CONCEALED THE FACTS OF THE INCOME FOR THE YEAR UNDE R CONSIDERATION. FOR THIS LEGAL PROPOSITION, WE HEREBY PLACE RELIANCE UP ON THE DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF REL IANCE PETRO ITA NOS.905 & 906/AHD/2013 M/S. ATMARAM MODY & CO. VS. ITO, WARD 11 (4) FOR A.Y. 2004-05 - 6 - PRODUCT PVT. LTD., REPORTED IN (2010) 322 ITR 158 A ND REVERSE THE FINDINGS OF LEARNED CIT(A). WE HEREBY DIRECT TO DEL ETE THE PENALTY. 7. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. SD/- SD/- (ANIL CHATURVEDI) (MUK UL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18/07/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD