The ITO, Ward-1(4), Surat V. M/s Navpad Textile Industries Ltd., Surat

ITA 983/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76842 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-04-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 04-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Gross profit estimation; Unexplained cash credit; Unexplained investment
• Section: 143(3); 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 983/AHD/2011 (ASSESSMENT Y EAR: 2003-04) THE ITO, WARD-1(4), SURAT V/S M/S. NAVPAD TEXTILE INDUSTRIES LTD. 2 ND FLOOR, AMAR SHILP APARTMENT, NANPURA, SURAT (APPELLANT) (RESPONDENT) PAN: AAACN 7695P APPELLANT BY : SHRI P.L. KUREEL, SR. D.R RESPONDENT BY : SHRI TUSHAR HEMANI ( )/ ORDER DATE OF HEARING : 11-04-201 4 DATE OF PRONOUNCEMENT : 18 -06-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-I, SURAT DATED 20.01.2011 FOR A.Y. 2003-04. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN TH E BUSINESS OF TEXTURISING PROCESS IN TEXTILES. IT FILED ITS RETURN OF INCOME ON 30.11.2003 DECLARING TOTAL INCOME OF RS NIL. IN THIS CASE INFORMATION WAS RECE IVED BY AO FROM THE INVESTIGATION WING THAT DURING THE YEAR UNDER CONSI DERATION, ASSESSEE HAD DEPOSITED HUGE SUM OF CASH IN THE BANK ACCOUNT MAIN TAINED WITH VITRAG CO- ITA NO 983/AHD/2011 . A.Y. 2003- 04 2 OP BANK LTD AND LATER DURING THE INVESTIGATION THE DIRECTOR OF THE ASSESSEE HAD ADMITTED THAT THE SOURCE OF INITIAL CASH DEPOSI TS OF RS 69,37,812/- CANNOT BE EXPLAINED BY HIM AND OFFERED THE SAME FOR TAX. A CCORDINGLY THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT AND T HEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 VIDE ORDER DATED 18.12 .2009 AND ADDITIONS WERE MADE ON ACCOUNT OF LOW GROSS PROFIT (RS 1,01,36,860 /-), ON ACCOUNT OF UNEXPLAINED INVESTMENT (RS 69,37,812/-), ON ACCOUNT OF INCOME FROM UNEXPLAINED CASH CREDITS (RS 80,000/-) AND DISALLOW ANCE 20% OF EXPENSES (RS 3,15,595/-). AFTER MAKING THE AFORESAID ADDITIO NS THE INCOME WAS ASSESSED AT RS NIL AFTER SET OFF OF BROUGHT FORWARD LOSSES. ON THE AFORESAID ADDITIONS MADE, PENALTY PROCEEDINGS WERE INITIATED AND THEREAFTER PENALTY OF RS 63,04,341 U/S 271(L)(C) WAS LEVIED BY THE AO VID E PENALTY ORDER DATED 29.6.2010. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 20.1.2011 GRANTED S UBSTANTIAL RELIEF TO THE ASSESSEE AND THEREFORE AGGRIEVED BY THE ORDER, REVE NUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY LEVIED ON ADDITION MADE ON ACCOUNT OF LOW G .P.(AS THE TURNOVER OF THE ASSESSEE HAD INCREASED BY 6.36% TO THE IMMEDIATE PRECEDING YEAR AND G.P. WAS ABNORMALLY DROPPED FROM 8.50% TO 1.91% ) INSPITE OF THE ASSESSEE'S FAILURE TO PRODUCE BOOKS OF ACCOUNTS AND ANY OTHER DOCUMENTARY EVIDENCE DURING ASSESSMENT AND PENALTY PROCEEDINGS. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY LEVIED ON ADDITION OF RS.69,37,812/- MADE O N ACCOUNT OF UNEXPLAINED INVESTMENT THOUGH THE ASSESSEE IN HIS STATEMENT RECORDED U/S 131 OF T HE IT. ACT ON OATH HAD ADMITTED THAT SUM DEPOSITED IN CASH IN BANK WAS MADE OUT OF UNDISCLOS ED INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) MAY BE SET-SIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 4. BEFORE US, LD DR WITH RESPECT TO PENALTY ON GP A DDITION, SUBMITTED THAT EVEN DURING THE DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND AT THE TIME OF PENALTY PROCEEDINGS THE ASSESSEE DID NOT PRODUCE TH E BOOKS OF ACCOUNTS AND OTHER DETAILS AND MERELY SUBMITTED THAT THE COM PUTER HARD DISK HAD CRASHED AND THE HARD COPY OF THE BOOKS OF ACCOUNTS WERE DESTROYED BY THE TERMITES. IN THE ABSENCE OF BOOKS OF ACCOUNTS AO RE JECTED THE BOOKS RESULTS U/S 145(3) AND WORKED OUT THE GP AFTER CONSIDERING THE AVERAGE GP OF EARLIER ITA NO 983/AHD/2011 . A.Y. 2003- 04 3 YEARS AND AFTER GIVING THE CREDIT OF THE GP SHOWN B Y THE ASSESSEE MADE ADDITION OF RS 1,01,36,860/-. HE FURTHER SUBMITTED THAT THE TURNOVER OF THE ASSESSEE ABNORMALLY INCREASED BY 6.36% AS COMPARED TO THE IMMEDIATE PRECEEDING YEAR AND THE GROSS PROFIT ABNORMALLY DRO PPED FROM 8.50% TO 1.91%. THE LD DR FURTHER SUBMITTED THAT AGAINST THE ADDITION MADE, ASSESSEE DID NOT PREFER APPEAL AND HAD THUS ACCEPTE D THE FINDINGS OF AO. HE SUBMITTED THAT IN THE ABSENCE OF BOOKS OF ACCOUN TS, THE AO RIGHTLY MADE ESTIMATION OF GROSS PROFITS AND THE ESTIMATION WAS BASED ON THE ASSESSEES OWN HISTORY OF GROSS PROFITS AND THE ADDITION WAS N OT AN ADHOC ESTIMATION. HE FURTHER SUBMITTED THAT LD CIT(A) HAD NOT APPRECIATE D THE FACT THAT ASSESSEE HAD DELIBERATELY NOT PRODUCED THE BOOKS OF ACCOUNTS DURING ENQUIRY STAGE AT INVESTIGATION WING, ASSESSMENT PROCEEDINGS AND PENA LTY PROCEEDINGS AND FURTHER IT WAS NOT PROVED BY ASSESSEE BEFORE CIT(A) THAT THE GP DISCLOSED BY THE ASSESSEE WAS ACTUAL AND CORRECT. WITH RESPECT T O ADDITION OF RS 69,37,812/- MADE ON ACCOUNT OF UNEXPLAINED INVESTME NTS, IT WAS SUBMITTED THAT ASSESSEE HAD DEPOSITED HUGE SUM OF CASH IN VIT RAG CO-OP BANK. IN THE STATEMENT OF SHRI KETAN SHAH, DIRECTOR OF THE ASSES SEE, RECORDED U/S 131 BY DDIT (INV), IT WAS STATED THAT THE CASH DEPOSITS WE RE OUT OF UNDISCLOSED INCOME. ASSESSEE HAD FAILED TO GIVE THE DETAILS OF CASH SALES LIKE NAME OF THE CUSTOMERS, DETAILS OF QUANTITY SOLD ETC. FURTHE R THE ADDITION WAS NOT CONTESTED IN APPEAL BY THE ASSESSEE. THE LD DR THUS SUBMITTED THAT IN THE PRESENT FACTS, THE AO WAS FULLY JUSTIFIED IN LEVYIN G PENALTY AND THEREFORE HIS ORDER BE UPHELD. LD DR ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS S. KRISHNASWAMY & SONS (1996) 219 ITR 157(MAD) AND OTH ER DECISIONS IN ITS SUPPORT. 5. ON THE OTHER HAND LD AR REITERATED THE SUBMISSIO NS MADE BEFORE AO AND CIT(A) AND SUPPORTED THE ORDER OF CIT(A). HE ALSO P LACED RELIANCE ON THE DECISION IN THE CASE OF NAVJIVAN OIL MILLS VS CIT ( 2001) 252 ITR 417 (GUJ) AND THE DECISION IN THE CASE OF ACIT VS INDUCTO ISP AT ALLOYS LTD (ITA NO 3937/AHD/2008). ITA NO 983/AHD/2011 . A.Y. 2003- 04 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE PENALTY U/S 271(L)(C) WAS INITIALL Y LEVIED ON 3 ADDITIONS VIZ UNDERSTATEMENT OF GROSS PROFIT (RS 1,0136,860/-), U NEXPLAINED INVESTMENTS (RS 69,37,812/-) AND INCOME FROM UNEXPLAINED SOURCE S (RS 80,000/-) BUT BEFORE US, THE ISSUE IS WITH RESPECT TO PENALTY ON GROSS PROFIT AND UNEXPLAINED INVESTMENTS. WITH RESPECT TO ADDITION ON ACCOUNT OF UNDERSTATEMENT OF GROSS PROFIT, IN THE ABSENCE OF BOOKS OF ACCOUNTS AND OTH ER RECORDS, A.O ESTIMATED THE GROSS PROFIT ON THE BASIS OF PAST RESULTS OF TH E ASSESSEE AND BASED ON SUCH ESTIMATION, ADDITION WAS MADE AND PENALTY WAS ALSO LEVIED. THUS IT IS SEEN THAT ADDITION WAS MADE ON ESTIMATE BASIS. WE A RE OF THE VIEW THAT IN THE ABSENCE OF BOOKS OF ACCOUNTS, THE REVENUE WAS F ULLY JUSTIFIED IN MAKING ADDITIONS BUT THE QUANTUM ADDITION IS NOT SUFFICIEN T FOR LEVYING OF PENALTY U/S. 271(1)(C) OF THE ACT FOR THE REASON THAT IT IS WELL SETTLED THAT THE PARAMETERS OF JUDGING THE JUSTIFICATION FOR ADDITION MADE IN ASSE SSMENT CASE OF ASSESSEE IS DIFFERENT FROM THE PENALTY IMPOSED ON ACCOUNT OF CO NCEALMENT OF INCOME. WE ALSO FIND THAT THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF INDUCTO ISPAT ALLOYS (SUPRA) AND RELYING ON THE DECISION IN THE CASE OF NAVJIVAN OIL MILLS LTD 252 ITR 417 HELD THAT WHEN THE ADDITION W AS MADE ON ESTIMATE BASIS, PENALTY U/S 271(L)(C) WAS NOT LEVIABLE. RESP ECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO-ORDINATE BENCH OF TRIB UNAL, WE DIRECT THE DELETION ON PENALTY ON THE AFORESAID ADDITION. WITH RESPECT TO THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENTS (RS 69,37,812/-) , IT IS NOTED BY THE AO THAT ASSESSEE HAD DEPOSITED THE CASH AGGREGATING TO RS 69,37,812/- IN THE BANK ACCOUNT AND WHICH WAS ALSO ADMITTED BY THE DIR ECTOR OF THE ASSESSEE AS UNDISCLOSED INCOME. IT IS ALSO A FACT THAT ON TH E AFORESAID ADDITION, ASSESSEE HAD NOT PREFERRED APPEAL. IT IS ASSESSEES SUBMISSION THAT THE AFORESAID BANK ACCOUNT WAS DISCLOSED IN THE BALANCE SHEET. IT IS ALSO THE ASSESSEES SUBMISSIONS THAT ASSESSEE WAS FACING SEV ERE FINANCIAL CRUNCH AND THE LOANS FROM KARNATAKA BANK WERE OUTSTANDING DUE TO WHICH KARNATAKA BANK WAS NOT ALLOWING TO OPERATE THE ACCO UNT SMOOTHLY AND THEREFORE THE ACCOUNT WITH VITRAG CO-OP. BANK WAS O PENED. IT IS ALSO THE ITA NO 983/AHD/2011 . A.Y. 2003- 04 5 SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE IS A B IFR COMPANY AND BECAUSE OF HUGE LOSSES THE ASSESSEE DID NOT PREFER AGAINST THE ADDITION BECAUSE, THERE WOULD NOT BE ANY TAX IMPACT EVEN AFT ER THE ADDITION ARE MADE AND THEREFORE IT WAS SUBMITTED THAT IT CANNOT BE SA ID THAT ASSESSEE HAD CONCEALED THE FACTS TO AVOID THE TAX LIABILITY. WE FIND THERE IS NO FINDING OF THE A.O THAT THE BANK ACCOUNT IN WHICH THE CASH SALES W ERE DEPOSITED WERE DISCLOSED IN THE BALANCE SHEET. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O TO VERIFY THE SUBMISSIONS OF THE ASSESSEE AND VERIF Y AS TO WHETHER THE BANK ACCOUNT IN WHICH THE CASH SALES ARE DEPOSITED WAS D ISCLOSED IN BALANCE SHEET AND THEREAFTER DECIDE THE ISSUE. IN VIEW OF T HE AFORESAID FACTS THIS GROUND OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 18 - 06 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD