M/s. Ashish Plastics Industries, Ahmedabad V. The Income tax Officer, Ward-3(4), Ahmedabad

ITA 987/AHD/2004

• Counselvise Citation: 98720514 RSA 2004
• Duration Of Justice: 8 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-02-2012
• Assessment Year: 1992-1993
• Appeal Filed On: 30-03-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR K SHYAM PRASAD
• Assessee Lawyers: A C SHAH
• Keywords: Business income; Loose papers; Bonafide belief; Wrong claim; Difference of opinion; Corroborative evidences
• Section: 133A; 131; 2

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY AM ITA NOS.987 & 988/AHD/2004 (ASSESSMENT YEARS:-1992-93 & 1993-94) ASHISH PLASTIC INDUSTRIES, F-1/131/1, GIDC ESTATE, NARODA, AHMEDABAD V/S THE INCOME-TAX OFFICER, WARD-3(4), AHMEDABAD PAN: [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI A C SHAH, AR REVENUE BY:- DR. K SHYAM PRASAD, SR. DR DATE OF HEARING:- 16-02-2012 DATE OF PRONOUNCEMENT:- O R D E R PER D K TYAGI (JM) :- THESE TWO APPEALS HAVE BEEN FILED BY AN ASSESSEE AGAINST THREE SEPARATE ORDERS DATED 26- 02-2004 AND 27-02-2004 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-VII, AHMEDABAD [HEREINAFTER REFERRED TO A S THE LEARNED CIT(A)] FOR ASSESSMENT YEARS 1992-93 AND 1993-94, THE EFFECTIVE COMMON GROUND RAISED BY THE ASSESSEE IN THESE TWO THREE APPEALS EXCEPT THE CHANGE IN FIGURE, READS AS UNDER:- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,74,574/- U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTIC ULARS OF INCOME IN AS MUCH AS THE ASSESSEE HAS NOT COMMITTED THE DEFAU LT AS CONTEMPLATED U/S 271(1)(C). 2 2 THE FACTS OF THE CASE FOR ASSESSMENT YEAR 1992-93 ARE THAT THE RETURN IN THIS CASE WAS FILED ON 30-09-92 SHOWI NG TOTAL INCOME OF RS.6,10,530/-. THE ASSESSEE CLAIMED DEDUC TION U/S 80I AT 25% OF THE PROFIT. IN THE COURSE OF ASSESSMENT P ROCEEDINGS, IT WAS POINTED OUT THAT THE ASSESSEE FIRM BEGAN TO MAN UFACTURE OR PRODUCE THE ARTICLES OR THINGS OR TO OPERATE ITS CO LD STORAGE PLANT ON OR BEFORE THE 1 ST DAY OF APRIL, 1990 AND THEREFORE WILL GET DEDUCTION AT THE RATE OF 20% OF PROFITS AND GAINS A ND NOT THE RATE OF 25%. THE ASSESSEE IN ITS LETTER DATED 13-9-93 AG REED TO ALLOW THE DEDUCTION AT 20% AND CONSEQUENTLY EXCESSIVE CLA IM OF RS.33,022/- WAS TO BE DISALLOWED. THEREAFTER, THERE WAS A SURVEY U/S 133A AT THE OFFICE AND BUSINESS PREMISES OF THE ASSESSEE DURING THE COURSE OF WHICH, INVENTORIES OF STOCK AS WELL AS BOOKS OF ACCOUNTS AND DOCUMENTS WERE CALLED FOR AND IMPOU NDED. THE AO NOTED THAT THE SAID BOOKS OF ACCOUNT ALSO INCLUD ED REGISTER OF WAGES FOR THE PERIOD 1-4-90 TO 31-3-91. AS PER THE REGISTER, THERE WERE 4 EMPLOYEES ONLY WHO WERE ENGAGED IN THE MANUF ACTURING PROCESS FROM THE MONTH OF APRIL 1990 TO OCTOBER, 19 90 AND 6 EMPLOYEES FROM THE MONTH OF NOVEMBER, 1990 TO MARCH , 1991. AS PER SUB-SECTION (2) OF SECTION 80I, THE DEDUCTIO N IS ALLOWABLE TO AN UNDERTAKING WHICH EMPLOYS 10 OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER. THE FACT THAT THE ASSESSEE FIRM EMPLOYED LESS THAN 10 WORKER S IN THE MANUFACTURING PROCESS WAS BROUGHT TO THE NOTICE OF THE PARTNER OF THE ASSESSEE FIRM SHRI DAHYABHAI R PANCHAL. THE AO ALSO NOTED THAT THE ASSESSEE HAD FILED A LETTER DATED 24-9-93 WHEREIN IT WAS CONFIRMED THAT SINCE ONLY 6 TO 7 PERSONS WERE EMPLO YED AS WORKERS IN THE FACTORY, CONDITIONS FOR CLAIMING DED UCTION U/S 80I 3 WERE NOT FULFILLED. IT WAS ALSO STATED THAT THE CLA IM WAS MADE UNDER A BONAFIDE BELIEF AND THROUGH OVERSIGHT REGAR DING THE NUMBER OF WORKERS. HOWEVER, THE AO HELD THAT THE AS SESSEE WAS NOT ENTITLED FOR THE DEDUCTION U/S 80I BUT, OBVIOUS LY MADE A FALSE CLAIM TO WHICH THE ASSESSEE ITSELF AGREED TO. THE A O ACCORDINGLY DISALLOWED DEDUCTION U/S 80I OF RS.1,65,160/-. ON A PPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE AO. 3 THE ASSESSEE DISCLOSED CONSUMPTION OF RAW MATERIA L OF 185705 KGS. AFTER CONSIDERING THE OPENING STOCK AVA ILABLE IN THE BOOKS OF ACCOUNT AND VARIOUS DOCUMENTS FOUND DURING THE COURSE OF SURVEY, THE AO OBSERVED THAT 20285 KGS. OF RAW M ATERIAL WAS NEITHER DECLARED IN PRODUCTION OR AS PART OF CLOSIN G STOCK. THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT ALL THE FACTUAL DATA HAD BEEN FOUND RECORDED IN THE IMPOUNDED BOOKS AND PAPERS AND THEREFORE THERE IS NO REASON TO DISBELIEVE OR I GNORE THE SAME. THE AO ALSO NOTED THAT SHORTAGE / WASTAGE OF 4891 K GS. AS RECORDED IN THE REGISTER, HAD BEEN ALLOWED, WHICH W AS MORE THAN THE WASTAGE CLAIMED IN THE AUDIT REPORT. THE AO CON CLUDED THAT THE ASSESSEE HAD PRODUCED PIPES USING RAW MATERIAL OF 20285 KGS. AND SOLD THE SAME WITHOUT RECORDING THE SALE PROCEE DS IN THE BOOKS OF ACCOUNT. THE AVERAGE SALE PRICE WAS ADOPTE D AT RS.59 PER KG. AND THE SUPPRESSED SALES WERE WORKED OUT AT RS.11,96,815/-. THE AO ACCORDINGLY MADE THE IMPUGNE D ADDITION OF RS.11,96,815/-. ON APPEAL BEFORE, THE LEARNED CI T(A) HELD THAT THE ADDITION OF RS.11,96,815/- SHOULD BE ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK AND NOT SUPPRESSION OF SALES. ON FURTHER APPEAL, THE ITAT AHMEDABAD BENCH VIDE ITS O RDER DATED 4 22-6-02 IN ITA NOS.2002 AND 2003/AHD/97, APPROVED T HE VIEWS OF THE LEARNED CIT(A) THAT THE ADDITION OF RS.11,96 ,815/- SHOULD BE ON ACCOUNT OF CLOSING STOCK AND NOT AS SUPPRESSI ON OF SALES. 4 ON THE BASIS OF ABOVE FACTS, THE AO INITIATED PEN ALTY PROCEEDINGS AND ISSUED A NOTICE DATED 26-2-2003. IN RESPONSE, THE ASSESSEE FILED A WRITTEN SUBMISSION DATED 4-3-2003, AS UNDER:- 'SUB: REPLY TO NOTICE U/S 271(L)(C) FOR A.Y. 1992-9 3 WITH REFERENCE TO THE ABOVE, WE BEG TO STATE AS UNDER: THE PENALTY NOTICE U/S 271(1)(C) IS ISSUED ON THE G ROUND THAT THE CLAIM U/S 801 WAS WRONG AND THAT THERE WAS ADDITION OF RS .1,65,160/-. THERE IS ALSO ADDITION OF RS.11,96,815/- MADE ON ACCOUNT OF SUPPRESSION OF SALES BUT CONFIRMED BY CIT(A) AS CLOSING STOCK. AS REGARDS THE CLAIM U/S 801 IT MAY PLEASE BE NOTED THAT THE ASSESSEE HAS NOT CONCEALED THE INCOME OR FURNISHED INACCURAT E PARTICULARS OF INCOME, HI THE OPINION OF THE ASSESSES THE CONDITIO N LAID DOWN U/'S 801 ARE FULFILLED AND THEREFORE, THE CLAIM WAS MADE. THE LEARNED ACIT HAS NOT CONSIDERED THE CLAIM OF SE CTION 801 OF THE ASSESSEE FIRM ON THE GROUND THAT THE NUMBER OF WORK ERS ARE LESS THAN 10. THE STATEMENT SHOWING THAT THE NUMBER OF WORKER S ARE 10 OR MORE WAS ALREADY GIVEN TO THE ACIT AT THE TIME OF ASSESS MENT. THE SAID COPY IS ENCLOSED. DURING APRIL. MAY, JUNE THE NUMBE R OF WORKERS ARE LESS THAN 10 BUT THEREAFTER THE NUMBER OF WORKERS A RE 10 OR MORE. SINCE THE REQUISITE NUMBER OF WORKERS ARE SUBSTANTI ALLY EMPLOYED DURING THE YEAR THE ASSESSEE IS ENTITLED TO THE REL IEF. THIS VIEW IS ACCEPTED IN THE FOLLOWING CASES: 1 CIT V/S SAWYER'S ASIA LTD. 122 1TR 259 (BOMBAY) 2 CIT V/S HARIT SYNTHETICS FABRICS PVT. LTD. 162 IT R 640 (BOMBAY) 3 CIT V/S ORMERODES (I) (P) LTD. 176 ITR 470 (BOMB AY) FROM THE ABOVE, IT MAY PLEASE BE SEEN THAT THE ASSE SSEE ENGAGED 10 WORKERS AS PER THE LIST ENCLOSED. SUBSTANTIALLY, TH ROUGH OUT THE YEAR AND 5 THE VIEW IS ALSO SUPPORTED BY THE ABOVE REFERRED CA SES. HOWEVER, THE CIT APPEAL HAS NOT ACCEPTED THE VIEW. THE VIEW IS D EBATABLE AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS C ONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THER E IS NO MENSREA. THERE IS NO INTENTION TO REDUCE THE TAX LIABILITY. THERE IS A DIFFERENCE OF OPINION REGARDING EMPLOYMENT OF 10 WORKERS. THEREFO RE, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. UNDER THE CIRCUMSTANCES, THE NOTICE UNDER SECTION 271(1)(C) ON THIS ACCOUNT IS ILL CONCEIVED. THERE WAS ADDITION OF RS.11,96,815 AS SUPPRESSION O F SALES FOR A. Y.I 992- 1993. THERE WAS A SURVEY ON 23.9.93. AT THE TI ME OF SURVEY, THE ASSESSEE DECLARED VOLUNTARILY EXCESS STOCK OF RS.13 ,92,420 FOUND. THE DECLARATION WAS MADE VOLUNTARILY WITH A VIEW TO AVO ID LITIGATION AND TO BUY MENTAL PEACE. FOR A.Y.1992-93, THE ADDITION WAS OF RS.11,96,815/- AS SUPPRESSION OF SALES BUT CONFIRMED BY CIT(A) AS CLOSING STOCK. THE REVENUE APPEAL IS DISMISSED BY THE TRIBUNAL. FOR A.Y.1993-94, THE ADDITION OF RS.11,14,080/- AS CLOSING STOCK AND RS.1,73,850 AS SUPPRESSION OF SALES. THE CREDIT FOR THE ADDITION OF CLOSING STOCK OF RS. 11.96.815 FOR A.Y.I992-93 AS CLOSING STOCK WAS GIVEN AS OPENING S TOCK FOR A.Y. 1993-94 RESULTING INTO THE NET ADDITION OF RS.1,01, 082/-. THE CIT(A) CONFIRMED THE ADDITION OF RS.L73.850/- AS CLOSING S TOCK. THE REVENUE APPEAL IS DISMISSED BY THE TRIBUNAL. FOR A.Y.I994-95. THE ASSESSEE SUBMITTED REVISED RET URN VOLUNTARILY DECLARING THE BALANCE STOCK FOUND ON THE DATE OF SU RVEY TO THE EXTENT OF RS.94,523/- AFTER EXCLUDING THE CLOSING STOCK FOR A .Y. 1992-93 AND A.Y. 1993-94. IN OTHER WORDS, THE ASSESSEE OFFERED FOR TAXATION THE STOCK OF RS.13,95.850/- FOUND DURING SURVEY FOR AY. 1992-93, 1993- 94 AND 1994-95. THE AO ACCEPTED THE BALANCE AMOUNT OF RS.94,523/- AS DECLARED. IT MAY PLEASE BE NOTED THAT THE DECLARATION WAS MAD E WITH A VIEW TO AVOID LITIGATION AND TO BUY MENTAL PEACE AND THAT T HE AMOUNT DECLARED IS ACCEPTED BY TRIBUNAL AND BY AO FOR A. Y. 1994-95 . THEREFORE, THE 6 QUESTION OF ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS DOES NOT ARISE. YOU ARE THEREFORE REQUESTED TO DROP THE PROCEEDINGS .' 5 AS REGARDS DEDUCTION U/S 80I, THE AO HAS DISCUSSE D THE FACTS IN DETAIL AS UNDER:- DEDUCTION U/S 80I: THE ASSESSEE HAD CLAIMED DEDUCTION U/S 801 AT 25% O F THE PROFIT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS POINTE D OUT THAT THE ASSESSEE FIRM BEGAN TO MANUFACTURE OR PRODUCE THE A RTICLES OR THINS OR TO OPERATE ITS COLD STORAGE PLANT ON OR BEFORE THE 1A DAY OF APRIL, 1990 AND THEREFORE WIN GET DEDUCTION AT THE RATE OF 20% OF PROFITS AND GAINS AND NOT THE RATE OF 25%. THE ASSESSEE IN ITS LETTER DATED 13.9.93 AGREED TO ALLOW THE DEDUCTION AT 20% AND CONSEQUENTLY EXCE SSIVE CLAIM OF RS.33,022/- WAS TO BE DISALLOWED. THERE WAS SURVEY U/S 133 A AT THE OFFICE AND BUSINE SS PREMISES OF THE ASSESSEE AND DURING THE COURSE OF SURVEY INVENTORIE S OF STOCK AS WELL AS BOOKS OF ACCOUNTS AND DOCUMENTS WERE TAKEN. IN T HE COURSE OF ASSESSMENT PROCEEDINGS THE BOOKS OF ACCOUNTS WERE C ALLED SAR AOD IMPOUNDED. THESE BOOKS OF ACCOUNTS INCLUDED REGISTE R OF WAGES FOR THE PERIOD IS: 1.4.90 TO 31.3.91 (C-24 OF THE INVEN TORY). THE REGISTER SHOWS NO. OF EMPLOYEES IN MANUFACTURING PROCESS 4 O NLY FROM THE MONTH OF APRIL, 1990 TO OCTOBER 1990 AND 6 FROM THE MONTH OF NOVEMBER, 1990 TO MARCH, 1991. THESE FACTS WERE BRO UGHT TO THE NOTICE OF THE THEN LEGAL COUNSEL, SHRI R.S.MEHTA, A DVOCATE AND THE MAIN PARTNER SHRI DAHYABHAI R. PANCHAL THE ASSESSEE FIRM, THEREFORE, FILED A LETTER DATED 24.9.93 WHICH WAS ISSUED BY SH RI DAHYABHAI R. PANCHAL, STATING THAT - 'THE INCOME-TAX RETURNS ARE FILED BY US WITHIN DUE DATES. IN ASST. YEAR 1991-92 THE RETURN IS ACCE PTED U/S 143(L)(A) BY ITO WARD-2(6). WE HAVE CLAIMED IN THE SAID RETURN U /S 801 RS.1,16,065/- AS INDUSTRIAL UNDERTAKING AND AUDIT R EPORT IS SUBMITTED ALONG WITH CERTIFICATES, BUT ALL THE CONDITIONS ARE NOT FULFILLED AS ONLY 6 TO 7 PERSONS ARE EMPLOYED LABOUR WORKERS IN OUR FAC TORY BUT THROUGH OVERSIGHT AND UNDER BONAFIDE BELIEF ON OUR PART WE ASKED FOR DEDUCTION AT RS.1,16,065/- AND IN ASST. YEAR 1992-9 3 AT RS.1,65,160/- WHICH IS WRONGLY CLAIMED AS NOT CLAIMABLE. THERE WA S THUS NO INTENTION TO EVADE TAX BUT DUE BONAFIDE BELIEF WE C LAIMED IT UNDER GENUINE MISTAKE SO WE HEREBY REQUEST YOU TO TAKE TH E LENIENT VIEW OF ACCEPTING THE FACTS AND NOT LEVY OR INITIATE PENALT IES OF ANY KIND'. 7 THUS, THE ASSESSEE WAS NOT ENTITLED FOR THE DEDUCTI ON U/S 80I BUT, OBVIOUSLY MADE A FALSE CLAIM TO WHICH THE ASSESSEE ITSELF AGREED TO. THEREAFTER, SHRI G.C. PIPARA, CA AND AUTHORIZED REP RESENTATIVE ATTENDED ON 20.12.93 AND FILED A WRITTEN SUBMISSION DATED 16.12.93 TO THE EFFECT THAT DURING THE RELEVANT ASSESSMENT YEAR IN ALL ON AN AVERAGE 10 WORKERS AS DEFINED U/S 2(1) OF THE FACTORY ACT 1 948 HAD BEEN EMPLOYED BY THEM, WHICH INCLUDED PERSONS WORKING IN PLANT & MACHINERY DIRECTLY, PERSONS LOOKING AFTER STORES IN FACTORY, PERSONS HANDLING THE MATERIALS FOR DESPATCH ETC. AT FACTORY AND SECURITY GUARDS KEPT AT FACTORY. THE REQUIREMENT OF EMPLOYING 10 OR MORE WORKERS HAD BEEN COMPLIED AND OTHER CONDITIONS BEING FULFIL LED ACCORDING TO THEIR UNDERSTANDING. AS THE ASSESSEE BACKED OUT TO ITS COMMITMENT ABOUT THE FALSE CLAIM U/S SOL A SUMMONS U/S 131 WAS ISSUED TO THE MAIN PARTNER SHRI DAHYABHAI ON 16.6.94 CALLING FOR SUPPORTING EVIDENCE ON THE EMPLOYMENT OF 10 OR MORE WORKERS IN THE MANUFACTURING PROCESS. THE DATE OF HEARING WAS FIXE D ON 1.7.1994. IN A REQUEST TO ADJOURN THE PROCEEDINGS, THE HEARING W AS FINALLY FIXED ON 13.7.94. NOBODY ATTENDED ON THAT DATE. A SHOW CAUSE WAS THEREFORE ISSUED ON 28.11.94 ASKING THE ASSESSEE TO SUBMIT TH E REASONS AS TO WHY THE CLAIM U/S 80-1 SHOULD NOT BE DISALLOWED IN ABSE NCE OF ANY EVIDENCE PRODUCED BY HIM TILL DATE. IN RESPONSE TO THIS, SHRI G.C.PIPARA, C.A. ATTENDED ON 1.12.94 AND FILED A WR ITTEN SUBMISSION DATED 3.12.94 IN WHICH THE CONTENTIONS OF HIS EARLI ER DATED 16.12.93 WERE REPEATED. NO EVIDENCE OF THE ENGAGEMENT OF EMP LOYEES OTHER THAN AVAILABLE ON REGISTER OF WAGES, WAS PRODUCED. IT MAY NOT BE OUT OF PLACE THAT THE PROVISIONS OF FACTORY ACT, 1948 A RE NOT APPLICABLE TO THE ASSESSEE FIRM BECAUSE THE NUMBER OF EMPLOYEES A RE LESS THAN 10. AGAIN IN LETTER DATED 31.1.95 WHEN MR. R.G.PATHAK, A C.A. & A.R. ATTENDED REPEATED THE SAME CONTENTIONS BUT NO SUPPO RTING EVIDENCE WAS FILED IN RESPECT OF EMPLOYEES OTHER THAN IN WAG ES REGISTER. THE ASSESSEE APPENDED A STATEMENT TO ITS DATED 31.1.95 SHOWING THE NUMBERS OF EMPLOYEES FROM 6 TO 11 IN DIFFERENT MONT HS. THE VERIFICATION SHOWS THAT THE NO. OF PERSONS SHOWN AS WORKING, ON MACHINERY ARE 5 IN ALL THE MONTHS. IT HAS BEEN SUBM ITTED BY THE ASSESSEE IN HIS LETTER DATED 3.12.94 THAT THE NAMES CONTAINED IN THE WAGES REGISTER ARE ONLY PERTAINING TO THE WORKERS E MPLOYED IN THE FIRM, WHO ARC WORKING DIRECTLY ON PLANT & MACHINERY . AS STATED HEREIN ABOVE, THE NOS. OF EMPLOYEES AS PER REGISTER IN THE MONTHS OF APRIL TO OCTOBER'90 ARE 4 AND FROM NOVEMBER TO MARCH '91 ARE 6. THUS, IN THE 8 STATEMENT, THE NOS. OF EMPLOYEES SHOWN AS WORKING O N PLANT & MACHINERY AT 5 ARE FALSE AND WITHOUT HAVING ANY BAS E OR EVIDENCE. THE ASSESSEE HAS CONTENDED THAT THE PARTNERS SHOULD ALS O BE CONSIDERED AS WORKERS ENGAGED IN MANUFACTURING PROCESS. THE CONTE NTION WAS QUITE IRRELEVANT AND COULD BE ACCEPTED. THE DECISION CITE D BY THE ASSESSEE IN THE CASE OF CIT VS. STRAW BOARD MFG. CO. 177 ER.T 4 31-434 (SC) WAS NOT APPLICABLE TO THE FACTS OF THIS CASE. THE SAID DECISION IS WITH REFERENCE LO ELIGIBILITY OF THE ASSESSEE EARNING ON A PRIORITY INDUSTRY AS SPECIFIED IN THE SIXTH SCHEDULE, ITEM '16 PAPER AND PULP' UNDER THE PROVISIONS OF SECTION 80-1 THE ASSESSEE H AD BEEN GIVEN SPECIAL CONCESSION AND IF THE ASSESSEE WANTED TO AV AIL THE BENEFIT OF THE SAID CONCESSION IT HAD TO COMPLY ALL THE REQUIR EMENTS AND CONDITIONS STRICTLY AS LAID DOWN IN THE SAID SECTIO N. AS THE ASSESSES FAILED TO COMPLY ALL THE REQUIREMEN TS AND CONDITIONS FOR AVAILING OF DEDUCTION U/S 801 THE CLAIM OF THE ASSESSEE WAS DISALLOWED.' THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE ORDER NO. CIT(A)-II/CIR.2(1)/114/95-96 DATED 27.4.9 5 HELD AS UNDER: 'AFTER GOING THROUGH THE FACTS OF THE CASE I AM OF THE VIEW THAT THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED FOR NOT A LLOWING THE CLAIM OF DEDUCTION U/S 801 OF THE ACT. THE DECISIONS RELIED UPON BY THE APPELLANT'S REPRESENTATIVE DO NOT SUPPORT THE CASE OF THE APPELLANT. IT HAS BEEN CLEARLY HELD, IN THESE DECISIONS, THAT THE PERSONS EMPLOYED IN THE MANUFACTURING PROCESS ALONE SHOULD BETAKEN FOR THE PURPOSE OF GRANTING THE DEDUCTION U/S 80I OF THE ACT. IN VIEW OF THIS FACT THE PERSONS EMPLOYED AS SECURITY GUARD AND THE PERSONS LOOKING AFTER STORES IN FACTORY, PERSON HANDLING THE MATERIALS FO R DESPATCH ETC. WILL NOT BE TAKEN AS PERSONS EMPLOYED FOR MANUFACTURING PROCESS. SINCE THE APPELLANT FIRM HAD EMPLOYED LESS THAN TEN WORKE RS DURING THE YEARS RELEVANT FOR THE ASSESSMENT YEARS 1991-92. 1992-93 AND 1993-94, THEREFORE, THE ASSESSING OFFICER WAS PERFECTLY JUST IFIED FOR NOT ALLOWING THE CLAIM FOR DEDUCTION US 801 OF THE IT A CT. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED' THE ASSESSES HAS NOT FILED ANY FURTHER APPEAL ON TH IS GROUND. 9 AS REGARDS SUPPRESSION SALES OF RS.11,96,815/-, THE AO HAS DISCUSSED THE FACTS IN DETAIL AS UNDER:- SUPPRESSION OF SALES RS.11.96,815/-: IN THE RETURN OF INCOME, THE ASSESSEE DISCLOSED CON SUMPTION OF RAW MATERIALS 185705 KGS. AFTER CONSIDERING THE OPENING STOCK OF 1438 KGS. AND CLOSING STOCK 1775 KGS. ON THE SEIZED PAPER NO. 48 OF FILE NO. A- 18, THE FOLLOWING NOTINGS HAVE BEEN RECORDED: PURCHASE APRIL'91 TO MARCH'92 1,76.225 KGS. CHEMICALS & OTHERS 45,979 KGS. ---------------- TOTAL PURCHASES 2,22,204 KGS. ADD: OPENING STOCK 1,438 KGS. ----------------- 123,642 KGS. LESS: CLOSING STOCK 1775 WASTAGE (AS PER PAGE 135 OF REGISTER C.18) 4891 6,666 KGS. ----------- -------------- BALANCE (CONSUMPTION) 2,16,976 KGS. LESS: CONSUMPTION SHOWN IN RETURN 1 ,85,705 KGS. OF INCOME ----------------- CONSUMPTION NOT SHOWN IN THE RETURN OF INCOME 31,271 KGS. AS THE ASSESSEE DID NOT RECORD THE FULL CONSUMPTION OF THE RAW MATERIALS IN THE REGULAR BOOKS OF ACCOUNTS, CONSEQU ENTLY IN THE RETURN OF INCOME, A SHOW CAUSE NOTICE DATED 28.11.94 WAS I SSUED AND SERVED ON THE ASSESSEE ASKING TO EXPLAIN THE REASONS FOR S HORT RECORDING OF CONSUMPTION OF 31271 KGS. OF RAW MATERIALS. THE ASS ESSEE SIMPLY REPLIED UNDER ITS LETTER HEAD 3.12.94 (PARA-3) THAT ALL THE PURCHASES ARE AS PER BILLS AND THE SAME IS ACTUAL, WHEREAS THE CO NSUMPTION HAS BEEN WORKED OUT ON THE ESTIMATED BASIS, AS NO RECORDS OF PRODUCTION AND CONSUMPTION HAS BEEN MAINTAINED BY THE COMPANY. AT THE SAME TIME, THE ASSESSEE FURNISHED DETAILS OF PRODUCTION ETC. 10 AS PER RETURN AS PER AS PER LOOSE AS PER BOOK (KGS) RETURN (KGS) PAPERS (KGS) LETTER DATED 28.11.94 205377 181991 - 216976 IT WAS NOTICED THAT WHILE FURNISHING THE ABOVE DETA ILS THE ASSESSEE DID NOT GIVE ANY BASE FAR ARRIVING AT THE ABOVE FIGURES . IT MAY ALSO BE NOTED THAT ALL THE FIGURES ARE DIFFERENT AND THERE IS NO EXPLANATION FOR SUCH DIFFERENT FIGURES IN DIFFERENT RECORDS. A FURT HER SHOW CAUSE NOTICE WAS THEREFORE ISSUED AND SERVED ON THE ASSESSEE ON 19.1.95. IT WAS INFORMED TO THE ASSESSEE THAT THE FIGURES INTIMATED IN THIS OFFICE SHOW CAUSE ARE BASED ON THE IMPOUNDED PAPERS FOUND DURIN G THE SURVEY OPERATION AND ALSO EXTRACTED FROM THE REGISTER (C-1 8) MAINTAINED IN COURSE OF MANUFACTURING PROCESS ON DAY-TO-DAY BASIS WITH COMPLETE NARRATION OF VARIOUS SIZES OF PRODUCTIONS AND SALES THEREOF WITH CLOSING DETAILS. THE ASSESSEE REPLIED VIDE LETTER DATED 31. 1.95 THAT AS PER THEIR ACTUAL FIGURES THE TOTAL CONSUMPTION COMES TO 1,85, 705 KGS. THE FIGURES FURNISHED BY THE ASSESSEE ARE NOT SUPPORTED WITH ANY EVIDENCE. UNDER THE CIRCUMSTANCES, THE BASE FOR ADOPTING THE CORRECT FIGURES OF PURCHASE AND CONSUMPTION ETC. WAS TAKEN FROM THE IM POUNDED LOOSE PAPERS AND THE REGISTERS. AS PER LOOSE PAPER NO.48 IN THE FILE NO.A-8. THE TOTAL PURCHASES OF RAW MATERIALS (PVC RESIN) 16 1525 KGS. AND CHEMICALS AND OTHER ADDITION 45,979 KGS. THE ABOVE FIGURES WERE SUPPORTED WITH THE DETAILS ON PAGE NO. 50 & 51 RESP ECTIVELY. THUS, THE TOTAL PURCHASES OF RAW MATERIALS WERE RECORDED AT 2 ,07,504 BUT THE ASSESSEE TOOK THE PURCHASES AT 1,86,042.89 KGS. AND THE ASSESSEE TOOK THE PURCHASES AT 1,86,042.89 KGS. AND THE SAME FIGU RES REPORTED IN THE FORM NO.3CD. THUS, THE ASSESSEE EXCLUDED 21462 KGS. OF PURCHASES FOR THE WORKING OF PRODUCTION. AGAIN, ON REVERSE OF PAGE 48. THE FIGURES OF OPENING STOCK 1438 KGS. PURCHASES 186042 .89 AND ME CONSUMPTION 185704 HAD BEEN NOTED. THE TOTAL PRODUC TION AND SALES HAVE BEEN NOTED ON PAGE 49. FROM THE ABOVE FIGURES THE UNACCOUNTED PRODUCTION DERIVED FROM THE RAW MATERIAL WAS WORKED OUT AS UNDER: OPENING STOCK 1438 KGS. ADD: PURCHASES PVC 161525 CHEMICALS ETC. 45979 207504 KGS. -------- -------------- 11 208942 KGS. LESS: CLOSING STOCK SHOWN 1775 ' --------------- 207167 ' LESS: SHORTAGE AS NOTED IN REGISTER C-18 PG. 135 4891 --------------- 202276 LESS: SHORTAGE ALREADY CLAIMED IN THE ABOVE FIGURES 181991 ------------ 20285 AS SEEN FROM THE ABOVE FACTS THE ASSESSES TOOK OUT THE RAW MATERIALS FROM THE TOTAL PURCHASES AND NEITHER SHOWED IT/CLOS ING STOCK NOR SHOWED IT USED IN PRODUCTION. THE CONTENTION OF THE ASSESSEE THAT THE DIFFERENCE WAS DUE TO PROCESS LOSS, THEFT ETC. IS N OT ACCEPTABLE IN ABSENCE OF ANY EVIDENCE. ALL THE FACTUAL DATA ARE F OUND RECORDED IN THE IMPOUNDED BOOKS AND PAPERS AND THEREFORE THERE IS N O REASONS TO DISBELIEVE OR IGNORE THESE FACTUAL MATTER AND RELY ON THE BARE STATEMENT OF ASSESSEE. IT MAY BE MENTIONED THAT THE SHORTAGE/ WASTAGE OF 4891 KGS. AS RECORDED IN THE REGISTER HAD BEEN ALLOWED, WHICH WAS. MORE THAN CLAIMED IN THE AUDIT REPORT FORM NO.3CD (3714 KGS.) UNDER THE CIRCUMSTANCES, THE NATURAL AND LOGICAL CONCLUSION I S THAT THE ASSESSEE OBTAINED PRODUCTION OF VARIOUS PIPES USING THE RAW MATERIALS AND SOLD THEM OUT WITHOUT RECORDING THE SALES IN THE BOOKS O F ACCOUNTS AND THEREBY SUPPRESSED THE SALES. THE AVERAGE SALE PRIC E OF A PIPE OF 1 KG. WORKED OUT TO RS.59/-. THE QUANTUM OF SUPPRESSED SA LES OF 20285 KGS. WORKED OUT TO RS.11,96,8215/-, WHICH WAS ADDED TO T HE TOTAL INCOME OF THE ASSESSEE. IN SUPPORT OF THE ABOVE FINDING, THE FOLLOWING CORR OBORATIVE EVIDENCES HAD BEEN FOUND ON GOING THROUGH THE IMPOUNDED MATER IALS:- I) THE PRODUCTION REGISTER NO.C.18 PAGE-135 AND THE INFORMATION FURNISHED ABOUT THE MONTH-WISE PRODUCTION IN THE RE TURN OF INCOME REVEALED THAT THESE ARE EXCESS SALES THAN THE PRODU CTION IN THE MONTH OF APRIL JULY, OCTOBER, DECEMBER 1991 AND JANUARY AND MARCH 1992 IN AGGREGATE OF 18729 KGS. THOUGH IN THE SALES, SUCH S ITUATION CAN ONLY ARISE IF THE ASSESSEE HAS GOT UNACCOUNTED STOCK OF FINISHED GOODS. 12 II) SIMILARLY, AS PER REGISTER C-18 PAGE-135, THE M ONTH-WISE SALES WHEN COMPARED WITH THE MONTH-WISE SALES FURNISHED I N THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT IN THE MONTHS OF APRIL, JULY, AUGUST AND OCTOBER 1991, THE SALES WERE SHOWN LESS THAN THE SALES SHOWN IN THE REGISTER TO THE EXTENT OF 11.594 KGS. IN THE REMAINING MONTHS, THE SALES HAVE BEEN SHOWN MORE. T HIS MANIPULATION HAS BEEN MADE TO TALLY THE PRODUCTION IN THE RESPECTIVE MONTHS. THIS SORT OF MANIPULATION CAN BE POSSIBLE O NLY IN CASE OF HAVING UNACCOUNTED STOCK OF FINISHED GOODS WITH THE ASSESSEE. III) THERE IS ALSO DIFFERENCE IN TOTAL SALES AS PER REGISTER C.18 AND THE SALES SHOWN IN THE RETURN OF INCOME BY 216 KGS. THE ASSESSEE COULD NOT EXPLAIN THE DIFFERENCE. THIS ALSO SHOWS T HAT THE ASSESSEE HAS NOT DISCLOSED CORRECT FIGURES OF PRODUCTION, SALES, ETC. IN THE RETURN OF INCOME. IV) THE REGISTER C.I2 AND C.17 SHOWS THE STOCK OF F INISHED GOODS BROUGHT FORWARD TO THE EXTENT OF 5982 KGS. AND SALE S HAVE BEEN SHOWN. IN THE RETURN OF INCOME AS WELL AS IN THE AUDIT REP ORT, NO OPENING STOCK OF FINISHED GOODS HAVE BEEN SHOWN. THE ASSESS EE ALSO STATED THAT (LETTER DATED 31.1.95) THE SALES OUT OF B/F OR C/F WAS NOT ACTUALLY OUT OF B/F & OF STOCK, BUT THESE SALES HAD BEEN OUT OF PRODUCTION AND PURCHASES MADE IN THAT YEAR ONLY. THESE FACTS WERE SUFFICIENT TO SHOW THAT THE ASSESSEE DERIVED UNACCOUNTED PRODUCTION DU RING THE YEAR ITSELF FROM THE CONCEALED RAW MATERIAL AS DISCUSSED IN THE EARLIER PARAGRAPH. V) SIMILARLY, THE REGISTER C.16 GIVES THE DETAILS O F SIZE-WISE PRODUCTION AND DESPATCH OF UNIFLEX PVC PIPES. IT WA S NOTICED THAT THESE SALES WERE BEFORE THE PRODUCTION. MOREOVER, T HE FIGURES RECORDED IN C.I6-REGISTER TALLIES WITH C.I2 REGISTER. THUS, THERE IS NO DOUBT THAT THE ASSESSEE WAS IN POSSESSION OF THE UNACCOUNTED S TOCK OF THE FINISHED GOODS. VI) FURTHER SUPPORT ON HAVING UNACCOUNTED STOCK AND SALES THEREOF IS ALSO AVAILABLE FROM THE IMPOUNDED REGISTERS NO.C .12, C.16, C.17 AND C.I8. IT WAS SEEN THAT IN THESE REGISTERS THE S TOCKS OF FINISHED GOODS OF 18911 KGS. HAVE BEEN SHOWN AS CARRIED FORW ARD. THE RETURN OF INCOME AND THE AUDIT REPORTS DO NOT SHOW ANY CLO SING STOCK. IT WAS THEREFORE, CRYSTAL CLEAR THAT THE ASSESSEE HAD UNAC COUNTED STOCK WHICH SOLD OUT BEFORE THE END OF THE ACCOUNTING YEAR AND THE SALES WERE NOT 13 RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAD ALSO CONFIRMED IN HIS LETTER DATED 31.1.95 THAT THERE WAS NO OPENING STOCK OR CLOSING STOCK. ALL THE FOREGOING FACTS SHOWED THAT THE ASSESSEE OB TAINED UNACCOUNTED STOCK OF FINISHED FROM THE CONCEALED RAW MATERIALS AND SOLD OUT THE SAME OUT OF THE REGULAR BOOKS OF ACCOUNTS. IT MAY B E MENTIONED THAT FULL COST OF THE PURCHASES OF RAW MATERIALS HAD BEE N IN THE BOOKS OF ACCOUNTS AND THERE IS NO TRUTH IN THE CONTENTION OF THE ASSESSEE THAT THE RAW MATERIALS WERE BORROWED FROM SOME OTHER PERSONS . THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE IN SUPPORT OF HIS CON TENTION.' IN VIEW OF THE ABOVE THE AO ADDED RS.11,96,815/- AS CONCEALED SALE PROCEEDS. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) VIDE ITS ORDER NO. CIT(A)-II/CIR.2(1)/L14/95-96 DATED 19 .3.97 HELD AS UNDER: 'I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS MADE BY THE APPELLANT'S REPRESENTATIVE. I FIND THAT THE CLA IM OF THE APPELLANT THAT THE ADDITIONS OF RS.11,96,815/- SHOULD HAVE BEEN MA DE AS CLOSING STOCK AND NOT AS UNACCOUNTED SALE IS JUSTIFIED IN P ARA 4(VI) OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS STATED A S UNDER: 'FURTHER SUPPORT ON HAVING UNACCOUNTED STOCK AND SA LES THEREOF IS ALSO AVAILABLE FROM THE IMPOUNDED REGISTERS NO.C.12, C.1 6, C.17 AND C.18. IT WAS SEEN THAT IN THESE REGISTERS THE STOCK S OF FINISHED GOODS OF 18911 KGS. HAVE BEEN SHOWN AS CARRIED FORWARD...... ' THE ASSESSING OFFICER HAS THUS HIMSELF ACCEPTED THA T AS PER THE STOCK REGISTER FOUND DURING THE COURSE OF SURVEY, THE STO CK OF FINISHED GOODS OF 18911 KGS. HAS BEEN CARRIED FORWARD. ON GOING TH ROUGH THE STOCK REGISTERS FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY, I FIND THAT THE STOCK OF GOODS OF 20285 KGS. HAVE BEEN SHOWN AS CARRIED FORWARD AND THIS STOCK HAS BEEN SOLD DURING THE YEAR RELEVA NT TO THE ASSESSMENT YEAR 1993-94 AND THE SAME IS REFLECTED IN THE STOCK REGISTER FOR THE ASSESSMENT YEAR 1993-94. THE APPELLANT HAS FILED SU MMARY OF THE DETAILS OF STOCK AS ON 31.3.02 AS REFLECTED IN THE STOCK REGISTER. THIS SUMMARY HAS BEEN TEST CHECKED AND HAS BEEN FOUND IN ORDER. I FIND THAT THE BOOKS OF ACCOUNT AND LOOSE PAPERS FOUND DU RING THE COURSE OF SURVEY NOWHERE INDICATE THAT THE APPELLANT HAD SOLD GOODS WORTH 14 RS.11,96,815/-OUTSIDE THE BOOKS OF ACCOUNT. THE DIF FERENCE IN THE TOTAL SALES, AS PER STOCK REGISTER AND AS SHOWN IN THE RE TURN, IS ONLY OF 216 KGS. WHICH IS A NOMINAL FIGURE LOOKING TO THE BUSIN ESS TURNOVER OF THE APPELLANT FIRM. THIS FACT IS STATED BY THE ASSESSIN G OFFICER IN PARA (III) OF THE ASSESSMENT ORDER. DURING THE COURSE OF ASSES SMENT PROCEEDINGS TO SAVE ITSELF FROM THE ADDITION ON ACCOUNT OF EXCE SS STOCK FOUND DURING THE COURSE OF SURVEY THE APPELLANT HAD SLATE D THAT THE SALES BROUGHT FORWARD OR CARRIED FORWARD WAS NOT ACTUALLY BROUGHT FORWARD OR CARRIED FORWARD STOCK, BUT THE SALES HAD BEEN OU T OF PURCHASES MADE IN THAT YEAR ONLY. THIS STATEMENT OF THE APPELLANT, GIVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, IS NOT BASED ON AN Y EVIDENCE FOUND DURING THE COURSE OF SURVEY OPERATION. THE EVIDENCE FOUND DURING THE COURSE OF SURVEY OPERATION IN THE FORM OF STOCK REG ISTER, LOOSE PAPERS ETC. CLEARLY SHOW THAT THE APPELLANT FIRM WAS HAVIN G UNACCOUNTED STOCK AS ON 31.3.92 OF 20285 KGS. IN VIEW OF THIS FACT, T HE ASSESSING OFFICER WAS ALTHOUGH JUSTIFIED IN MAKING THE ADDITION OF RS .11,96,815/-, BUT HE WAS NOT JUSTIFIED IN MAKING THIS ADDITION AS SUPPRE SSION OF SALES. THE ASSESSING OFFICER SHOULD HAVE ADDED THIS AMOUNT AS UNACCOUNTED STOCK AS ON 31.3.92.' THE ASSESSEE DID NOT FILE ANY APPEAL BEFORE THE ITA T. HOWEVER, THE DEPARTMENT HAD PREFERRED AN APPEAL BEFORE THE ITAT. THE ITAT VIDE ITS ORDER NO. ITA NO.2002 & 2003/AHD/97 DATED 22.6. 02 UPHELD THE VIEW OF THE CIT(A) THAT THE ADDITION SHOULD NAVEL B EEN MADE ON ACCOUNT OF CLOSING STOCK AND NOT ON ACCOUNT OF SUPP RESSION OF SALES. HOWEVER, THE FACTS REMAINS THAT BOTH THE AUTHORITIE S I.E. THE CIT(A) AS WELL AS THE ITAT HAVE CONFIRMED THE ADDITION OF RS. 11,96,815/-, ALSO THE ADDITION OF RS.1,73,850/- ON ACCOUNT OF DISALLO WANCE OF CLAIM U/S 80I HAS BEEN CONFIRMED BY CIT(A) AND NO FURTHER APP EAL HAS BEEN MADE BY THE ASSESSEE. FROM THE ABOVE FACTO IT CAN BE SEEN THAT THE A.O. H AS ESTABLISHED THE CONCEALMENT INCOME WITH PROPER EVIDENCE, INQUIRIES AND FACTS. FURTHER, THE ADDITION MADE BY THE A.O. HAVE BEEN SU STAINED BY THE CIT(A) AS WELL AS THE HON'BLE ITAT. FURTHER, THE /A SSESSEE HAS NOT BEEN ABLE TO REBUT THE CONTENTION OF THE A.O. AT AN Y STAGE. 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES. I AM SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME AND FURNISHED INA CCURATE PARTICULARS OF INCOME AND THEREBY THE S ASSESSEE HAS COMMITTED DEFAULT U/S 271(1)(C) OF THE IT ACT. THE MINIMUM PENALTY AT 100 % COMES TO 15 RS.2,74,574/- AND MAXIMUM PENALTY COMES TO RS.8,23, 722 AT 300%. HOWEVER, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I LEVY MINIMUM PENALTY RS.2,74,574/-. 6 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LE ARNED CIT(A) CONFIRMED THE LEVY OF PENALTY WITH THE FOLLOWING OB SERVATIONS:- 4.3 THE LD. COUNSEL FOR THE APPELLANT EXPLAINED T HAT AT THE TIME OF SURVEY, THE APPELLANT HAD DECLARED VOLUNTARILY EXCE SS STOCK RS.13,92,420 WITH A VIEW TO AVOID LITIGATION AND TO BUY MENTAL PEACE. HE STATED THAT THE RETURN FOR AY 94-95 WAS REVISED BY INCLUDING THE INCOME DECLARED LESS THE ADDITION MADE ON CLOSING S TOCK FOR A.Y. 92- 93 AND 93-84. IT WAS EXPLAINED THAT THE DECLARATION OF STOCK MADE BY THE APPELLANT FIRM COULD HAVE BEEN ASSESSED ONLY DU RING THE A.Y. 94- 95. HOWEVER, SINCE THE ASSESSMENT FOR A.Y. 92-93 AN D 93-94 WERE OPEN, THE A.O. MADE ADDITION NOT AS STOCK BUT AS SU PPRESSION OF SATES. IT WAS CONTENDED THAT IN VIEW OF THESE FACTS, PENAL TY CANNOT BE LEVIED AS HELD BY THE HON'BLE S.C. IN THE CASE OF CIT VS. SURESH CHAHDRA MITTAL (251 ITR 9.) 4.4 THE CONTENTIONS RAISED HAVE BEEN CONSIDERED. ON READING THE ASSESSMENT ORDER, I FIND THAT THERE IS NO MENTION O F THE VOLUNTARY DISCLOSURE OF STOCK MADE BY THE APPELLANT FIRM. THI S MEANS THAT THE SAID DISCLOSURE DOES NOT HAVE ANY EFFECT ON THE DIS CREPANCY POINTED OUT BY THE A.O. MOREOVER, AS STATED BY THE ID. COUN SEL, THE DISCLOSURE WAS APPLICABLE ONLY FOR A.Y. 94-95 AND THEREFORE, T HERE IS NO QUESTION OF CONSIDERING THE SAME FOR A.Y. 92-93. I ALSO FIND THAT THE SAID DISCLOSURE CANNOT BE SAID TO BE A VOLUNTARY DISCLOS URE AS THE SAME WAS MADE ONLY AFTER THE CONCEALMENT OF STOCK WAS DETECT ED AS A RESULT OF SURVEY. THE FACT THAT THE CLOSING STOCK WAS DECLARE D LESS BY THE APPELLANT FIRM HAS BEEN CONFIRMED ON THE BASIS OF T HE BOOKS OF ACCOUNT OF THE APPELLANT AND THE VARIOUS MATERIALS FOUND DU RING THE COURSE OF SURVEY. THE CONCEALMENT OF INCOME WITH REFERENCE TO THE NONDISCLOSURE OF STOCK 20285 KGS. OF RAW MATERIAL S TANDS ESTABLISHED IN THE CASE OF THE APPELLANT FIRM AND THE A.O. WAS JUSTIFIED IN MAKING THE ADDITION AS WELL AS IMPOSING PENALTY U/S 271(1) (C). IN THIS CASE, NO BONAFIDE EXPLANATION WAS GIVEN BY THE APPELLANT FOR THE SHORTFALL IN THE STOCK. I, THEREFORE, HOLD THAT THE A.0. WAS JUSTIFI ED IN IMPOSING PENALTY WITH REFERENCE TO THE ADDITION OF RS.11,96,815/-. 16 4.5 THE ID. COUNSEL HAS RELIED UPON THE DECISION OF THE HON'BLE S.C. IN THE CASE OF CIT VS. SURESHCHANDRA MITTAL (251 IT R 9). IN THE REPORTED CASE, AFTER ISSUE OF NOTICE U/S 148, A RET URN WAS RILED SHOWING HIGHER INCOME. IT WAS CLAIMED IN THE PENALTY PROCEE DINGS THAT ASSESSEE HAD OFFERED ADDITIONAL INCOME TO BUY PEACE OF MIND AND TO AVOID LITIGATION. THE PENALTY WAS LEVIED ONLY ON THE ACT OF VOLUNTARY SURRENDER DONE BY THE ASSESSEE. THE HON'BLE COURT H ELD THAT THE A.O. HAD NOT PROVED CONCEALMENT OF INCOME. HOWEVER, THE FACTS OF THE REPORTED CASE ARE DIFFERENT FROM THE FACTS OF THE A PPELLANT, IN THE CASE OF THE APPELLANT, THE ADDITIONAL INCOME SO OFFERED IS FOR A.Y. 94-95 AND NOT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . APART FROM THIS, THE A.O. HAS BROUGHT ON RECORD AMPLE MATERIAL WHICH PROVES THAT THE APPELLANT HAD CONCEALED HIS INCOME. THE A.O. IS, TH EREFORE, DISCHARGED THE BURDEN WHICH LAY UPON HIM FOR LEVYING PENALTY U /S 271(1)(C) AND HAD NOT VESTED HIS CONE I US ION ONLY ON THE ACT OF VOLUNTARY DISCLOSURE MADE BY THE APPELLANT AND AS SUCH THE APPELLANT DOE S NOT GET ANY ASSISTANCE FROM THE DECISION OF THE HON'BLE S.C. 4.6 THE LEGAL OBJECTIONS RAISED WITH REFERENCE TO T HE FIRST ADDITION HAVE ALSO BEEN RAISED HERE. THE SAME ARE BEING TREA TED AS DISPOSED OF AS DISCUSSED EARLIER. 4.7 THE ID. COUNSEL HAS STATED THAT THE PENALTY PRO CEEDINGS WERE INITIATED FOR SUPPRESSION OF SALES AS CAN BE SEEN F ROM THE ASSESSMENT ORDER WHEREAS THE PENALTY HAS BEEN IMPOSED ON THE B ASIS OF CLOSING STOCK. IT WAS, THEREFORE, CONTENDED THAT THE PENALT Y WAS BAD IN LAW AS HELD BY THE HON'BLE RAJASTHAN B.C. IN THE CASE OF C IT VS. SHISHPAL (255 ITR 187). 4.8 THE CONTENTIONS RAISED HAVE BEEN CONSIDERED. I DO NOT AGREE WITH THE COUNSEL THAT THE BASIS FOR INITIATING PENA LTY DURING THE ASSESSMENT PROCEEDINGS WAS DIFFERENT FRONT THE BASI S ON WHICH THE PENALTY WAS ULTIMATELY IMPOSED. THE BASIC ISSUE INV OLVED ON BOTH THE PLACES WAS THE UNACCOUNTED STOCK OF RAW/MATERIAL OF 20285/- KG. THE CONCEALMENT OF INCOME ALSO REPRESENTED THE UNACCOUN TED STOCK OF 20285 KGS. THE PENALTY PROCEEDINGS WERE INITIATED O N THE BASIS OF THIS FACT AND THE IMPOSITION HAS ALSO BEEN MADE WITH REF ERENCE TO THIS UNACCOUNTED STOCK. THEREFORE, THERE WAS NO SHIFTING IN THE BASIS AS FAR AS IMPOSITION OF PENALTY WAS CONCERNED. THE DECISIO N OF THE HON'BLE RAJASTHAN H.C. WAS, THEREFORE, NOT APPLICABLE IN TH E CASE OF THE APPELLANT. MOREOVER, I FIND THAT IN THE CASE DECIDE D BY THE RAJAS THAN H.C., THE ADDITION MADE BY THE A.O. WAS DELETED BY THE CIT(A). IT 17 WAS, THEREFORE, FIELD BY THE HON'BLE H.C. THAT THER E WAS NO BASIS FOR IMPOSING THE PENALTY U/S 271(1)(C). APPARENTLY, THE CASE DECIDED BY THE HON'BLE H.C. HAS NO APPLICABILITY TO THE FACTS OF THE APPELLANT'S CASE. THIS CONTENTION THEREFORE, REJECTED. 5 IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE A.O. WAS JUSTIFIED IN IMPOSING PENALTY U/S 271(1)(C) WITH RE FERENCE TO THE ADDITION OF RS.1,65,160/- AND RS.11,98,815/-. THE P ENALTY OF RS.2,74,574/- IS, THEREFORE, CONFIRMED. IN THE RESU LT, THE APPEAL IS DISMISSED. 7 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 8 AT THE TIME OF HEARING, AS REGARDS THE DISALLOWAN CE OF CLAIM U/S 80IA ON THE BASIS OF WHICH PENALTY HAS BEEN LEV IED, THE LEARNED COUNSEL OF THE ASSESSEE REFERRED TO PAGE-6 OF THE PAPER BOOK WHEREIN THE DETAILS OF WORKERS FOR AY 1992-93 HAVE BEEN FILED AND SUBMITTED THAT THE CLAIM IS NEGATIVED SIN CE NUMBER OF WORKERS IS ALLEGED TO BE LESS THAN 10. BUT, IN FACT , THE TOTAL WORKERS DURING THE RELEVANT PERIOD WAS MORE THAN 10 I.E. 11. IT IS A SUBSTANTIAL COMPLIANCE OF SECTION 80IA(2)(IV) OF THE ACT. IN SUPPORT, THE LEARNED COUNSEL RELIED UPON THE DECISI ON OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SULTAN & SONS RICE MILL (272 ITR 181 (ALL). IT WAS FURTHER A RGUED BY THE LEARNED COUNSEL OF THE ASSESSEE THAT THE EXPLANATIO N OFFERED BY THE ASSESSEE WAS BONA FIDE WHICH WAS ALSO SUBSTANTI ATED, THEREFORE, NO PENALTY FOR CONCEALMENT CAN BE LEVIED . FOR MAKING THIS SUBMISSION, THE ASSESSEE PLACED RELIANCE ON TH E DECISION IN THE CASE OF BHAGYODAY GROUP CO-OP. COTTON SALES GNG . & PSG. FACTORY VS. ACIT 127 TTJ 1 (AHD) AND KANBAY SOFTWAR E INDIA (P) LTD. VS. DCIT 122 TTJ 721 (PUNE). THE LEARNED C OUNSEL 18 FURTHER SUBMITTED THAT NON-ACCEPTANCE OF THE CLAIM U/S 80IA DOES NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC). TH E LEARNED COUNSEL FURTHER SUBMITTED THAT THE CLAIM U/S 80IA W AS MADE ON THE BASIS OF AUDIT REPORT AND IT WAS BONAFIDE AND I N SUPPORT HE RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIG H COURT IN THE CASE OF BTX CHEMICALS P. LTD. VS. CIT 288 ITR 1 96 (GUJ). THE LEARNED COUNSEL ALSO RELIED UPON THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD. 88 ITR 192 (SC) AND THE DECISION OF THE HONBLE GUJARA T HIGH COURT IN THE CASE OF CIT VS. KOHINOOR FLOUR MILLS 99 ITR 54 (GUJ) FOR THE PROPOSITION THAT IF THERE ARE TWO VIEWS, PENALT Y CANNOT BE LEVIED. 9 AS REGARDS THE SUPPRESSION OF SALES ON THE BASIS OF WHICH ALSO PENALTY IS LEVIED, THE LEARNED AR SUBMITTED TH AT THE ADDITION WAS MADE ON THE BASIS OF SUPPRESSION OF SALES BUT C ONFIRMED BY LEARNED CIT(A) BY HOLDING THAT THERE WAS SHORTFALL IN CLOSING STOCK. THEREFORE, THE BASIS OF ADDITION WAS CHANGED . HE SUBMITTED THAT NO PENALTY CAN BE LEVIED IF THE BASI S IS CHANGED AND FOR MAKING THIS SUBMISSION, HE RELIED UPON THE DECISION OF THE THIRD MEMBER ITAT AHMEDABAD BENCH IN THE CASE O F LAXMI PLATORS VS. ACIT 73 TTJ 171 (AHD) (TM) AND THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL 251 ITR 9 (SC). THE LEARNED COUNSEL ALSO SUB MITTED THAT THERE IS NO SATISFACTION OF AO OF LEVYING PENALTY A ND IN THIS 19 CONNECTION HE RELIED UPON THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF DILIP N SHROFF VS. CIT 291 ITR 519 (SC). 10 THE LEARNED DR, ON THE OTHER HAND, VEHEMENTLY SU PPORTED THE ORDERS OF THE LOWER AUTHORITIES. 11 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE HAVE ALSO GONE THROUGH VARIOUS DECISIONS CITED BY T HE LEARNED COUNSEL OF THE ASSESSEE. WE FIND THAT THE CLAIM OF THE ASSESSEE U/S 80IA WAS NEGATIVED BY THE REVENUE AUTHORITIES O N THE GROUND THAT NUMBER OF WORKERS WERE LESS THAN 10 AND THEREF ORE THE ASSESSEE WAS NOT ENTITLED FOR THIS CLAIM AND THE PE NALTY FOR CONCEALMENT OF INCOME WAS LEVIED. THE ASSESSEES CA SE HAS BEEN THAT THERE WAS DUE COMPLIANCE ON THE PART OF THE AS SESSEE OF THE CONDITIONS AS REQUIRED U/S 80IA(2)(4) OF THE ACT AS THE NUMBER OF WORKERS EMPLOYED BY THE ASSESSEE WAS MORE THAN 10, CHOWKIDAR AND STORE-KEEPER WERE ALSO EMPLOYEES OF THE ASSESSE E WHICH WERE NOT TAKEN INTO CONSIDERATION BY THE AO WHILE CONSID ERING THE CLAIM OF THE ASSESSEE U/S 80IA OF THE ACT. WE FURTH ER FIND THAT THIS EXPLANATION OFFERED BY THE ASSESSEE BEING BONA FIDE AND BASED ON THE BASIS OF AUDITORS REPORT, EXPLANATION 1 TO SECTION 271(1)(C) IS NOT ATTRACTED TO THE FACTS OF THE CASE AND THEREFORE, PENALTY IMPOSED BY THE AO AND SUSTAINED BY THE LEAR NED CIT(A) DESERVES TO BE DELETED IN VIEW OF THE DECISIONS IN THE CASE OF BHAGYODAY GROUP CO-OP. COTTON SALES GNG. & PSG. FAC TORY VS. ACIT 127 TTJ 1 (AHD) AND KANBAY SOFTWARE INDIA (P) LTD. VS. DCIT 122 TTJ 721 (PUNE). IN OUR CONSIDERED OPINION, NON- ACCEPTANCE OF THE CLAIM U/S 80IA DOES NOT AMOUNT TO FURNISHING 20 OF INACCURATE PARTICULARS OF INCOME IN VIEW OF THE HONBLE APEX COURT DECISION IN THE CASE OF RELIANCE PETROPRODUCT S PVT. LTD. (2010) 322 ITR 158 (SC), WHEREIN IT HAS BEEN HELD T HAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW OR NOT ACCEPTED BY THE REVENUE AUTHORITIES, WILL NOT AMOUN T TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE. WE, THEREFORE, DELETE THE PENALTY LEVIED IN RESPECT OF THE FIRST ADDITION. 12 COMING TO THE SECOND ADDITION ON ACCOUNT OF SUPP RESSION OF SALES WHICH IS ALSO THE BASIS FOR PENALTY U/S 271(1 )(C), WE FIND THAT THERE IS NO DISPUTE THAT THE ADDITION WAS MADE BY AO ON THE BASIS OF SUPPRESSION OF SALES BUT WHEN THE ASSESSEE WENT IN APPEAL, THE LEARNED CIT(A) THOUGH CONFIRMED THE ADD ITION, HAD CHANGED THE BASIS OF THE ADDITION BY HOLDING THAT T HERE WAS SHORTFALL IN CLOSING STOCK. ON THESE FACTS, THE RAT IO OF THE DECISION IN THE CASE OF LAXMI PLATORS VS. ACIT 73 TTJ 171 (A HD) (TM) RELIED UPON BY THE LEARNED COUNSEL IS APPLICABLE AN D FOLLOWING THE SAME WE DEEM IT PROPER TO RESTORE THE MATTER BA CK TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW . 13 SINCE THE ASSESSEE HAS GOT RELIEF ON MERITS, THE TECHNICAL OBJECTIONS RAISED BY THE ASSESSEE DO NOT REQUIRE AN Y ADJUDICATION. 21 14 IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 16-04-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 16-04-2012 COPY OF THE ORDER FORWARDED TO: 1. ASHISH PLASTIC INDUSTRIES, F-1/131/1, GIDC ESTAT E, NARODA, AHMEDABAD 2. THE INCOME-TAX OFFICER, WARD-3(4), AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VII, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD