M/s. SWASTIK ELECTRICALS, Indore V. THE ACIT 4(1), Indore

ITSSA 177/IND/2014

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1128 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2015
• Assessment Year: misc
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: TRIBHOVAN SACHDEVA
• Keywords: Unexplained investment
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.(SS)A.NO. 177/IND/2014 BLOCK PERIOD : 01.04.1996 TO 17.11.2002 M/S.SWASTIK ELETRICALS, INDORE. ACIT, CIRCLE 4(1), VS INDORE. APPELLANT RESPONDENT PAN NO.AAEFS1004L APPELLANT BY : SHRI TRIBHOVAN SACHDEVA, ADV. RESPONDENT BY : SHRI R. A. VERMA, DR DATE OF HEARING : 23 . 09 .2015 . DATE OF PRONOUNCEMENT : 03.11. 2015 M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 2 2 O R D E R PER GARASIA, J.M. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 27.02.2014. 2. THE ONLY GROUND IN THIS APPEAL IS LEVYING THE PENAL TY OF RS. 2,80,000/- U/S 158-BFA(2) OF THE INCOME-TAX ACT , 1961. 3. THE SHORT FACTS OF THE CASE ARE THAT IT IS A SEARCH CASE AND ASSESSMENT WAS INVOLVED FOR THE BLOCK PERIOD 01 .04.1996 TO 17.11.2002. THE ASSESSMENT WAS COMPLETED ON 30 TH NOVEMBER, 2004, DETERMINING THE TOTAL INCOME OF RS. 62,71,028/-. THE ADDITION WAS MADE ON VARIOUS HEADS LIKE UNDISCLOSED SALES, UNEXPLAINED INVESTMENT IN PURCHA SES, UNEXPLAINED CASH, UNEXPLAINED STOCK. THE ASSESSEE H AS GOT RELIEF IN ALL ADDITIONS EXCEPT UNEXPLAINED INVESTME NT IN PURCHASE. THE ADDITION UNDER THIS HEAD WAS RS. 7,00 ,000/- AND LD. CIT(A) HAS RESTRICTED THE SAME AT RS. 3,08, 270/-. IT WAS ALSO OBSERVED THAT A LOT OF PAIN HAS BEEN TAKEN BY THE M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 3 3 DEPARTMENT IN WORKING OUT THE MONTHLY SALES AND THE ASSESSEE HAS ACCEPTED. THEREFORE, THE AO HAS LEVIED THE PENALTY ON CONFIRMED PART OF ADDITION TO RS. 3,08,2 70/-. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS RESTRICTED THIS ADDITION TO RS. 3,08,270/- AND DEPARTMENT HAS GONE TO I.T.A.T. AND REVENUES APPEAL WAS DISMI SSED. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AO HAS MADE THE ADDITION ON ESTIMATED PROFIT ON UNDISCLOSED SALES, UNEXPLAINED INVESTMENT IN PURCHA SE, UNEXPLAINED CASH AND UNEXPLAINED STOCK. THEREFORE, WHEN ADDITION WAS SUSTAINED ON ESTIMATED BASIS, NO PENAL TY CAN BE IMPOSED. HE RELIED UPON THE DECISION OF HON'BLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. DODSAL LIMITED, (2009) 312 ITR 0112. SIMILARLY, HE ALSO RELIED UPON THE CASE OF CI T VS. DR.GIRIRAJ AGARWAL GIRI, (2012) 346 ITR 0152. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN THIS CASE, WE FOUND FROM THE PENALT Y ORDER THAT THE AO HAS MADE ADDITION OF RS. 62,71,028/- ON ACCO UNT OF M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 4 4 ESTIMATED PROFIT ON UNDISCLOSED SALES, UNEXPLAINED INVESTMENT IN PURCHASE, UNEXPLAINED CASH AND UNEXPLAINED STOCK AND INCOME DECLARED ON ESTIMATED RETURN. 7. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS RESTRICTED THIS ADDITION ON ACCOUNT OF ESTIMATE D PROFIT ON UNDISCLOSED SALES, UNEXPLAINED INVESTMENT IN PURCHA SE AND UNEXPLAINED CASH AND UNEXPLAINED STOCK. IT WAS REST RICTED AND ESTIMATED BY THE LD. CIT(A). WE FIND THAT THE AO HA S ALSO ESTIMATED THE SALES AND THAT SALES HAS BEEN ACCEPTE D BY THE ASSESSEE. THEREFORE, THE ADDITION WAS RESTRICTED TO RS. 3,08,270/-. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. DR.GIRIRAJ AGARWAL GIRI, (2012) 346 ITR 0152, WHEREIN THE HON' BLE RAJASTHAN HIGH COURT HAS HELD AS UNDER :- IMPOSITION OF PENALTY DEPENDS ON FACTS AND CIRCUMSTANCES OF EACH CASE. THE AO IMPOSED THE PENALTY ON SO CALLED THREE ITEMS OF SO CALLED CONCEALED INCOME. EACH ITEM WAS EXAMINED, THOROUGHLY AND IN DETAIL, BY THE CIT(A) AS WELL AS THE I.T.A.T. M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 5 5 AND BY A REASONED ORDER, BOTH CAME TO A CONCLUSION THAT ADDITIONS ARE BASED ON ESTIMATION ONLY. A FACT OR ALLEGATION BASED ON ESTIMATION, CANNOT BE SAID TO BE CORRECT ONLY, IT CAN BE INCORRECT ALSO. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY WAS WRONGLY IMPOSED BY THE ASSESSING OFFICER. THEREFORE APPEAL FILED BY APPELLANT REJECTED. 8. WE ALSO GET SUPPORT FROM THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DODSAL LIM ITED, (2009) 312 ITR 0112, AND ESTIMATED DELETED THIS APP EAL BY OBSERVING AS UNDER :- THE TERMINOLOGY OF SECTION 158BFA(2) MAKES IT CLEAR THAT THERE IS A DISCRETION IN THE AO TO DIRECT PAYMENT OF PENALTY. THE PROVISO SUPPORTS THIS INTERPRETATION. ONLY IF THE AUTHORITY DECIDES TO IMPOSE PENALTY THEN, IT WILL NOT BE LESS THAN THE TAX LEVIABLE BUT SHALL NOT EXCEED THREE TIMES M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 6 6 THE TAX SO LEVIABLE. IT IS, THEREFORE, NOT POSSIBLE TO ACCEPT THE SUBMISSION ON BEHALF OF THE REVENUE THAT ONCE THE AO COMES TO THE CONCLUSION THAT THERE IS A BREACH OF THE MANDATE OF SECTION 158BFA(1), THEN THE PENALTY SHOULD BE IMPOSED. MERELY BECAUSE THE EXPRESSION USED IS SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE OR NOT EXCEEDING THREE TIMES THE TAX, DOES NOT RESULT IN READING THE FIRST PART OF THE SECTION AS MANDATORY. THE PROVISO TO THE SUB-SECTION MAKES IT CLEAR THAT THERE IS DISCRETION CONFERRED ON THE CIT(A) FOR THE REASONS WHICH ARE SET OUT THEREIN. IN THE INSTANT CASE, BOTH CIT(A) AND TRIBUNAL HAVE RECORDED REASONS FOR EXERCISE OF THEIR DISCRETION. M/S.SWASTIK ELECTRICALS VS. ACIT, CIRCLE 4(1),INDOR E, I.T.(SS).A.NO.177/IND/2014 PERIOD 1.4.19965 TO 17.11.2002 7 7 9. WE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, DEL ETE THE PENALTY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 3 RD NOVEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 3 RD NOVEMBER, 2015. CPU* 1416