M/s Rex Sewing Machines Co. (P) Ltd., Ludhiana V. ACIT, C-7, Ludhiana

ITA 98/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1299 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDER KANTA
• Assessee Lawyers: ADITYA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 98/CHD/2018 ASSESSMENT YEAR : 2006-07 M/S REX SEWING MACHINES CO. PVT LTD., VS. THE ACIT , 245, INDUSTRIAL AREA-A, CIRCLE-7, LUDHIANA LUDHIANA PAN NO. AAACR7846Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI KUMAR, CA & SH. ADITYA KUMAR, CA RESPONDENT BY : SMT.CHANDERKANTA, SR.DR DATE OF HEARING : 18.07.2018 DATE OF PRONOUNCEMENT : 07.09. 2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.11.2017 OF THE COMMISSIONER OF I NCOME TAX(A)-3, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)] AGI TATING THE LEVY OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENG AGED IN THE BUSINESS OF MANUFACTURING OF SEWING MACHINES. DURIN G THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED FROM THE QUANTITATIVE ANALYSIS OF THE STOCK THAT THERE WAS M ISMATCH IN RESPECT OF CONSUMPTION OF AN ITEM KHOL. HE FOUND THAT 4 24 KHOLS WERE NOT RECORDED BY THE ASSESSEE IT ITS BOOKS OF ACCOUNT. H E ACCORDINGLY ITA NO. 98/CHD/2018- M/S REX SEWING MACHINES, LUDHIANA 2 ASSESSED THE INCOME OF THE ASSESSEE IN THIS RESPECT AND MADE THE ADDITIONS TO THE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE A LSO INITIATED AND THE IMPUGNED PENALTY OF RS. 1,15,031/- WAS IMP OSED TO THE ASSESSEE. THE ASSESSEE CONTESTED THE MATTER IN RELA TION TO THE QUANTUM ADDITION UP TO THE LEVEL OF THE TRIBUNAL BU T REMAINED UNSUCCESSFUL. IN APPEAL AGAINST THE PENALTY PROCEED INGS, THE LD. CIT(A) NOTED THAT SINCE THE ADDITIONS IN RESPECT O F UNACCOUNTED SALES HAVE BEEN CONFIRMED UP TO THE LEVEL OF THE TR IBUNAL, HENCE, HE CONFIRMED THE IMPUGNED PENALTY LEVIED BY THE ASSES SING OFFICER U/S 271(1)(C) OF THE ACT. 3. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD. COU NSEL FOR THE ASSESSEE HAS REITERATED HIS SUBMISSIONS AS WERE MAD E BEFORE THE LOWER AUTHORITIES AND HAS FURTHER SUBMITTED THAT TH ERE ARE AS MANY AS 80 PARTS WHICH ARE TO BE MOUNTED / FITTED TO MAKE A COMPLETE MACHINE. HOWEVER, WHILE FITTING PARTS, BOTH THE IN SIDE AND OUTSIDE KHOLS BEING MADE OF CAST IRON ARE INCLINED TO BREAK AGE /MIS-FITTING, WHICH EVENTUALLY RESULTS INTO DEFACEMENT OF THAT PA RTICULAR PART OF THE KHOL. THE DEFACED BROKEN KHOLS IN SUCH AN EVENT AR E JUST SCRAP OF NEGLIGIBLE VALUE AND HENCE WAS NOT TAKEN INTO ACCOU NT. THE LD. COUNSEL, THEREFORE, HAS SUBMITTED THAT THOUGH THE Q UANTUM ADDITIONS MADE / CONFIRMED ON THE BASIS OF ASSUMPTION THAT TH E ASSESSEE HAD NOT SHOWN ANY SCRAP, HOWEVER, THERE WAS NO EVIDENCE ON THE FILE THAT THE ASSESSEE WAS INDULGED IN OUT OF ACCOUNT SALES O F THE SEWING MACHINES. ITA NO. 98/CHD/2018- M/S REX SEWING MACHINES, LUDHIANA 3 4. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS HELD TIME AND AGAIN THAT THE PENALTY PROCEEDINGS ARE DIFFERENT FR OM ASSESSMENT PROCEEDINGS. IN THIS CASE THE QUANTUM ADDITIONS HA VE BEEN MADE / CONFIRMED ON THE GROUND THAT THE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION REGARDING 240 KHOLS OF WHI CH WERE NOT FOUND CONSUMED IN THE BOOKS OF ACCOUNT. HOWEVER, THE PLEA OF THE ASSESSEE THAT SUCH 240 KHOLS WERE IN FACT, HAVE BEEN GOT DAM AGED IN THE PROCESS OF FITTING OF THE MACHINES ETC. AND THAT TH E SAME HAVE NEGLIGIBLE VALUE, HENCE, NOT TAKEN INTO ACCOUNT HAS ALSO NOT BEEN REBUTTED BY THE ASSESSEE WITH COGENT AND CONVINCIN G EVIDENCE. THOUGH THE ADDITIONS WERE MADE TO THE INCOME OF THE ASSESSEE ON THE BASIS OF CERTAIN ASSUMPTIONS / PROBABILITIES, HOWEV ER, SO FAR AS THE STRICT PROVISIONS OF PENALTY ARE CONCERNED, IN OUR VIEW, THE REVENUE COULD NOT ESTABLISH THE FACT THE ASSESSEE HAD INDUL GED IN FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF ITS INCOME. 5. KEEPING IN VIEW THE ABOVE ASPECT, IN OUR VIEW, T HE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN THIS CASE IS N OT JUSTIFIED AND THE SAME IS ACCORDINGLY ORDERED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HERE BY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.09.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07.09.2018 RKK ITA NO. 98/CHD/2018- M/S REX SEWING MACHINES, LUDHIANA 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR