Shri Kailash Agrawal, Bhopal V. The A.C.I.T., Bhopal

ITSSA 37/IND/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8088 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: SSH H P VERMA
• Keywords: Search and seizure; Valuation report

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI R.C. SHARMA, AM IT (SS) A NO. 37 /IND/2010 B . P . 1.4.96 TO 1.8.2002 KAILASH AGRAWAL PROP. APSARA JEWELLERS, BHOPAL PAN ACZPA 3417 A APPELLANT VS. ACIT - 2(1), BHOPAL RESPONDENT APPELLANT BY : S/SH H.P. VERMA & ASHISH GOYAL RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 07.07.2011 DATE OF PRONOUNCEMENT : 16 .09.2011 O RDER PER R.C. SHARMA, ACCOUNTANT MEMBER THIS IS A N APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) - I, BHOPAL , DATED 12. 1.20 1 0 FOR THE BLOCK 2 PERIOD 1.4.96 TO 1.8.02 IN THE MATTER OF ORDER PASSED U/S 158BFA(2) OF THE I.T. ACT, 1961 , CHALLENGING THE CONFIRMATION OF IMPOSITION OF PENALTY OF RS.2 ,50,000/ - , ON THE FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, 1. THE ORDER PASSED IS BAD - IN - LAW, NOT SUSTAINABLE, BARRED BY LIMITATION, CONTRARY TO MATERIAL AND LAW, WITHOUT JURISDICTION, ILLEGAL AND THEREFORE LIABLE TO BE QUASHED. 2. THE LD. CIT(A) ERRED IN SUSTAINING THE ORDE R WHICH IS BARRED BY LIMITATION, PASSED WITHOUT JURISDICTION, BAD - IN - LAW, CONTRARY TO MATERIAL AND LAW AND WAS ILLEGAL. 3. THE LD. CIT(A) ERRED IN SUSTAINING IN THE PENALTY OF RS.2,50,000/ - U/S 158BFA(2). 4. THE LD. CIT (A) ERRED IN MAINTAINING THE PENALTY AT RS.2,50,000/ - BY NOT CONSIDERING THAT IT WAS A CASE OF ESTIMATE. 5. THE LD. CIT(A) ERRED IN NOT DELETING THE PENALTY LEVIED ON MERELY DISBELIEVING THE EXPLANATION OF ASSESSEE. 6. ALTERNATIVELY AND WITHOUT PREJUDICE, THE LD . CIT(A) SHOULD HAVE DELETED THE PENALTY ON ACCOUNT OF ESTIMATED G.P. INSTEAD OF APPLICATION OF N.P. AS PER M.P. HIGH COURT DECISION IN BALCHAND AJIT KUMAR, 186 CTR 419 (MP). 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. FACTS OF THE CASE ARE THAT THE SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CARRIED OUT SIMULTANEOUSLY AT THE SHOP AS WELL 3 AS RESIDENTIAL PREMISES OF THE ASSESSEE ON 1.8.2002. DURING THE COURSE OF SEARCH, ASSETS, LOOSE PAP ERS/DOCUMENTS ETC. WERE FOUND AND SEIZED AS PER PANCHNAMA PREPARED DURING THE SEARCH PROCEEDINGS. ASSESSMENT U/S 158BC OF THE ACT WAS COMPLETED FOR THE B.P. 1.4.96 TO 1.8.02 VIDE ORDER DATED 31.8.02 DETERMINING TOTAL UNDISCLOSED INCOME AT RS.44,22,249/ - . P ENALTY PROCEEDINGS U/S 158BFA(2) WERE ALSO INITIATED. THE ASSESSEE PREFERRED AN APPEAL AGAINST THE ASSESSMENT ORDER AND THE LD. CIT(A) ALLOWED CERTAIN RELIEF TO THE ASSESSEE. AFTER GIVING APPEAL EFFECT, THE REVISED UNDISCLOSED INCOME WAS DETERMINED AT RS.2 1,22,650/ - . THE ASSESSEE FURTHER FILED SECOND APPEAL BEFORE THE ITAT AGAINST THE ORDER OF THE LD. CIT(A). THE ITAT CONFIRMED THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD AT RS.2,78,208/ - . THE ADDITION OF RS.2,78,208/ - CONFIRMED BY THE ITAT WAS RELATING TO T HE G.P. @13.44% ON THE TOTAL UNDISCLOSED SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS OF RS.20,70,000/ - . THE AO, AFTER ISSUING SHOW CAUSE TO THE APPELLANT AND CONSIDERING THE REPLY, LEVIED THE PENALTY U/S 158BFA(2) OF RS.2,50,000 / - . 4 3. THE A SSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A) AGAINST THE PENALTY LEVIED U/S 158BFA(2) OF RS.2,50,000/ - . THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FACTS & CIRCUMSTANCES OF THE CASE AND REPRODUCING THE SECOND PROVISO TO SEC. 158BFA(2), CONFIRMED T HE PENALTY AT RS.2,50,000/ - . FINDINGS OF THE LD. CIT(A) ARE REPRODUCED AS UNDER : FROM THE SECOND PROVISO, IT IS CLEAR THAT THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF THE UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF THE UNDISCLOS ED INCOME SHOWN IN THE RETURN. IN THE APPELLANT S CASE, UNDISCLOSED INCOME WAS SHOWN IN THE RETURN OF INCOME FOR THE BLOCK PERIOD AT RS.NIL. T HEREFORE, THE PENALTY U/S 158BFA(2) WAS LEVIABLE ON THE UNDISCLOSED INCOME FINALLY CONFIRMED BY THE HON BLE ITAT. AS MENTIONED IN THE PENALTY ORDER, THE MINIMUM PENALTY LEVIABLE @100% WORKED OUT RS.1,75,270/ - AND THE MAXIMUM PENALTY @300% WORKED OUT AT RS.5,25,810/ - . THE ASSESSING OFFICER LEVIED PENALTY U/S 158BFA(2) AT RS.2,50,000/ - , WHICH CONSIDERING THE 5 FACTS AND C IRCUMSTANCES OF THE CASE IS FAIR AND REASONABLE, AND, THEREFORE, THE PENALTY LEVIED U/S 158BFA(2) AT RS.2,50,000/ - IS CONFIRMED. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. WE FOUND THAT PENALTY OF RS. 2.50 LAKHS WAS IMPOSED ON THE SALES ESTIM ATED BY THE ASSESSING OFFICER AND CONSEQUENTLY GROSS PROFIT ESTIMATED ON SUCH SALES. THE AO HAS ESTIMATED SALES AT RS. 2.93 CRORES , WHICH WAS REDUCED BY THE LD. CIT(A) TO RS. 20.70 LAKHS. THE AO HAS WORKED OUT PROFIT ON ESTIMATED SALES AT 39.46 LAKHS, WHIC H WAS REDUCED BY THE LD. CIT(A) TO RS. 20.70 LAKHS. IN A FURTHER APPEAL, THE TRIBUNAL HAS ESTIMATED PROFIT AT RS. 2.78 LAKHS AS AGAINST PROFIT ESTIMATED BY THE LD. CIT(A) AT RS. 20.70 LAKHS AND BY AO AT RS. 39.46 LAKHS WITH RESPECT TO THE ADDITION FINALLY RETAINED BY INCOME - TAX ACT, 1961, T HE AO OBSERVED THAT MINIMUM PENALTY LEVIABLE WAS RS.1,75,270/ - AND MAXIMUM RS. 5,25,810/ - . HOWEVER, HE LEVIED PENALTY U/S 158BFA(2) AT RS. 2.50 LAKHS, WHICH WAS CONFIRMED BY THE LD. CIT(A). AGAINST THIS ORDER, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 6 5. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATIVE THAT DURING THE COURSE OF SEARCH, PHYSICAL STOCK WAS TAKEN, WHICH WAS FOUND SHORT BY THE SEARCH PARTY. A T THE TIME OF TAKING STOCK, IT WAS POINTED OUT THAT MEASUREME NT WAS NOT CORRECT. HE INVITED OUR ATTENTION TO PAGE 8 TO 13 OF THE AO S ORDER, PARA 5, WHEREBY THE DIFFERENCE POINTED OUT BY THE ASSESSEE WAS DISCUSSED, HOWEVER, THE AO CHOSE NOT TO GIVE FINDING ON MERITS FOR REJECTION OF ASSESSEE S SUBMISSION. THE LD. AU THORIZED REPRESENTATIVE FURTHER POINTED OUT THAT STOCK IN BOOKS WAS RECORDED ON GROSS WEIGHT, WHEREAS STOCK WAS TAKEN BY THE DEPARTMENTAL VALUER ON NET WEIGHT. AS PER LD. AUTHORIZED REPRESENTATIVE, DUE TO IMPURITIES AND OTHER FACTORS, THE NET WEIGHT IS ARO UND 85 % 90 % OF THE GROSS WEIGHT. IF THE NET WEIGHT OF 37,490.420 GMS. IN THE PRESENT CASE IS CONVERTED TO GROSS WEIGHT AFTER TAKING INTO IMPUR I TIES AT 10 %, THE GROSS WEIGHT COMES TO 41,656 GMS. WHEREAS STOCK AS PER BOOKS WAS 42,405 GMS. THUS, THERE WAS A VERY MEAGER DIFFERENCE IN THE STOCK. THE SURRENDER OF INCOME WAS FORCED BY THE DEPARTMENT, WHICH WAS RETRACTED BY THE ASSESSEE IMMEDIATELY AFTER SEARCH. AFFIDAVIT WAS ALSO FILED IN SUPPORT 7 OF IMPROPER STOCK VERIFICATION AND DURESS DURING THE COURSE OF SE ARCH. ACCORDINGLY, IT WAS SUBMITTED THAT NO PENALTY WAS LEVIABLE UNDER SUCH CIRCUMSTANCES. 6. ON THE OTHER HAND, THE LD. SENIOR D.R. SUPPORTED THE ORDER OF THE LOWER AUTHORITIES AND CONTENDED THAT PENALTY HAS BEEN LEVIED WITH RESPECT TO THE FINAL ADDITION RET AINED BY THE HIGHER FORUM. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT PENALTY HAS BEEN IMPOSED WITH RESPECT TO THE FINAL PROFIT ESTIMATED. THE AO HAS ESTIMATED PROFIT AT RS. 39.46 LAKHS, WHICH WAS REDUCED BY CIT(A) TO RS. 20.70 LAKH S AND FURTHER REDUCED BY THE TRIBUNAL ONLY TO THE EXTENT OF RS. 2.78 LAKHS. THE ADDITION WAS SUSTAINED ON ESTIMATION. EVEN WITH RESPECT TO THE ADDITION MADE FOR DIFFERENCE IN STOCK, VARIOUS DISCREPANCIES WERE POINTED OUT BY THE ASSESSEE DURING THE COURSE O F SEARCH AND ALSO BY WAY OF AFFIDAVIT. EVEN THE OBJECTION RAISED WITH RESPECT TO THE WRONG WEIGHMENT OF OLD ORNAMENTS WAS BRUSHED ASIDE BY THE LOWER AUTHORITIES. EVEN THE VALUATION REPORT OF THE STOCK OF JEWELLERY FOUND DURING COURSE OF SEARCH AS SUBMITTED BY THE ASSESSEE WAS NOT DOUBTED. EVEN THE DEFECTS POINTED OUT BY 8 THE ASSESSING OFFICER IN THE VOUCHERS TO SUPPORT THE SUPPRESSED SALES, THE SAME WAS ONLY PERTAINED TO IMPROPER DATING AS PER TYPOGRAPHICAL MISTAKE. ALL SALES WERE FOUND RECORDED. FINALLY, TH E AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED PROFIT RATE OF ALLEGED SHORT STOCK. FINALLY, THE TRIBUNAL HAVE ESTIMATED UNDISCLOSED INCOME BY APPLYING ESTIMATED NET PROFIT. THERE IS DIRECT DECISION OF THE I.T.A.T., PUNE BENCH IN THE CASE OF RAJAN H. SHIN DE, 103 ITD 360, WHEREIN IT WAS HELD THAT WHERE BOOKS ARE REJECTED AND PROFIT RATE IS APPLIED, PENALTY CANNOT BE LEVIED ON SUCH ESTIMATED ADDITION. 8. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND THIS CASE FIT FOR LEVY OF PENALTY U/S 158BFA(2) OF THE INCO ME - TAX ACT, 1961. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2011. SD/ - SD/ - (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 TH S EPTEMBER, 2011 C PU* 131 6