The DCIT, Central Circle-4, Surat V. M/s. Bhavin Industries, Surat

ITSSA 63/AHD/2013

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9064 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-05-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Keywords: Difference of opinion

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD , , BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER (SS)' ./ I.T(SS).A. NO.63/AHD/2013 ( / ASSESSMENT YEAR : 2004-05 ) THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-4 SURAT / VS. M/S.BHAVIN INDUSTRIES SURVEY NO.91, OPP.NAVIN FLOURINE UDHNA-NAVSARI ROAD SURAT % ./&' ./ PAN/GIR NO. : AADFB 7416 Q ( '%( / APPELLANT ) .. ( )*%( / RESPONDENT ) '%( + / APPELLANT BY : SHRI SUMIT KUMAR, D.R. )*%( , + / RESPONDENT BY : SHRI ANKUR SHAH - , / DATE OF HEARING : 15/05/2013 ./01 , / DATE OF PRONOUNCEMENT : 17/5/13 2 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF LD.CIT(A)-II, AHMEDABAD DATED 15/11/2012 PASS ED FOR A.Y.2004-05 AND THE ONLY GROUND IS IN RESPECT O F DELETION OF PENALTY OF RS.7 LACS IMPOSED U/S.271(1)(C) OF IT AC T. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R.W.S.153C DATED 31.12.2008 AND THE PENALTY IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 2 - ORDER U/S.271(1)(C) DATED 18.3.2011 WERE THAT THE A SSESSEE-FIRM IS IN THE BUSINESS OF MANUFACTURING OF INDUSTRIAL-GUM. T HE ASSESSEE IS A GROUP OF CONCERN OF COLOUR TEX GROUP, WHICH WAS SUB JECTED TO THE SEARCH U/S.132 OF IT ACT ON 26.07.2006. IN CONS EQUENCE THEREUPON, THE ASSESSEES CASE WAS SCRUTINIZED AND IT WAS FOUND THAT THE VALUATION OF GUAR DAL IN N CLOSING STOCK WAS DO NE @ RS.23.95 PER KG., WHEREAS THE OPENING STOCK WAS VALUED AT RS .42.5 PER KG. THE ASSESSEES EXPLANATION WAS THAT THE PURCHASE PR ICE OF GUAR DAL, THE BASIC RAW-MATERIAL, HAD GONE DOWN CONSIDERABLY DURING THE YEAR, THEREFORE THE VALUE OF THE OPENING STOCK FROM RS.42 .5 PER KG., WHEREAS THE VALUE OF THE CLOSING STOCK WAS REMAINED ONLY AT RS.25.09 PER KG. THE ASSESSEE IS ALWAYS VALUING T HE CLOSING STOCK ON THE BASIS OF THE LAST PURCHASE PRICE. THIS METH OD OF VALUATION WAS STATED TO BE CONSISTENTLY FOLLOWED YEAR-AFTER-Y EAR. HOWEVER, THE AO WAS NOT CONVINCED AND ADDED THE IMPUGNED AMOUNT OF RS.22,08,970/- BEING UNDERVALUATION OF THE CLOSING STOCK. DURING PENALTY PROCEEDINGS, THE MAIN ARGUMENT OF THE ASSES SEE WAS THAT ALL THE FIGURES OF THE STOCK WAS IN THE NOTICE OF THE A O, HOWEVER THERE WAS DIFFERENCE OF OPINION IN RESPECT OF THE VALUATI ON OF THE CLOSING STOCK, HENCE IT WAS NOT A CASE OF NON-FURNISHING OF MATERIAL FACTS. BUT THE AO WAS NOT CONVINCED AND HELD THAT THE EXPL ANATION OFFERED BY THE ASSESSEE WAS NOT SATISFACTORY AND THE FACT I N RESPECT OF INCORRECT CLOSING STOCK WAS CAME TO THE NOTICE OF T HE AO AT THE TIME IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 3 - OF ASSESSMENT, HENCE CONCEALED THE PARTICULARS OF I NCOME. FINALLY, A PENALTY OF RS.7 LACS WAS IMPOSED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS DELETED THE PENALTY IN THE FOLLOWING MANNER:- 6. I HAVE CONSIDERED THE PENALTY ORDER, THE SUBMI SSIONS MADE BY THE APPELLANT AND ALSO PERUSED THE ASSESSME NT ORDER AND APPELLATE ORDER, CASE LAWS RELIED UPON BY THE A PPELLANT ALONG WITH THE WORKING OF CLOSING STOCK OF ALL FOUR ASSESSMENT YEARS AND LAST PURCHASE BILLS OF THE RESPECTIVE YEA R. ON THE BASIS OF EVIDENCE AND WORKING OF CLOSING STOCK, IT IS ESTABLISHED THAT CLOSING STOCK INCLUDING GUAR DAL I S VALUED AT COST PRICE WHICH IS BASED ON LAST PURCHASE PRICE OF THE RAW MATERIAL. THE METHOD OF VALUATION OF CLOSING STOCK HAS BEEN CONSISTENTLY FOLLOWED BY THE APPELLANT FROM YEAR TO YEAR WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. DURING THE YE AR UNDER CONSIDERATION ALSO THE APPELLANT HAS FOLLOWED THE S AME METHOD OF VALUATION OF CLOSING STOCK I.E. ON COST PRICE BASED ON LAST PURCHASE BILL AND HAS NOT CHANGED THE MET HOD OF VALUATION OF CLOSING STOCK AT MARKET PRICE AS ALLEG ED BY THE ASSESSING OFFICER IN THE PENALTY ORDER. IN ASSESSM ENT YEAR 2001-02, TO OPENING STOCK OF GUAR DAL WAS VALUED AT RS.53.50 PER KG WHEREAS THE CLOSING STOCK WAS VALUED AT LAST PURCHASE RATE WHICH IS RS.29.45 PER KG., WHEREAS IN ASSESSME NT YEAR 2003-04 THE OPENING STOCK OF GUAR DAL WAS VALUED AT RS.19.93 PER KG BUT THE CLOSING STOCK WAS VALUED AT RS.42.50 PER KG BASED ON LAST PURCHASE BILL. FOLLOWING THE SAME ME THOD OF VALUATION, THE CLOSING STOCK IN THE YEAR UNDER CONS IDERATION WAS VALUED AT RS.23.95 BASED ON LAST PURCHASE BILL WHEREAS THE OPENING STOCK WAS CARRIED FORWARD FROM EARLIER YEAR AND VALUED AT THE RATE OF RS.42.5 PER KG. I AGREE WITH THE IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 4 - APPELLANTS ARGUMENTS THAT IT HAS SATISFACTORILY EX PLAINED THE REASONS OF VALUATION OF CLOSING STOCK AT LOWER PRIC E THAN THE VALUE OF OPENING STOCK I ALSO AGREE WITH THE ARGUM ENTS OF APPELLANT THAT THE REASON FOR VALUATION OF CLOSING STOCK AT LAST PURCHASE PRICE CONSISTENTLY FOLLOWED BY THE APPELLA NT IS BONA FIDE AND NOT PROVED FALSE ON THE BASIS OF FACTS ON RECORD. IT IS, THEREFORE HELD THAT THE APPELLANT CANNOT BE CONSIDE RED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR FILED INACCU RATE PARTICULARS OF INCOME. THE ARGUMENTS OF THE APPELL ANT ARE SUPPORTED BY THE DECISION IN THE CASE OF CIT V/S.SO UTHERN FISHERIES CORPORATION (1973) 89 ITR 126 (KER) AND I N THE CASE OF LAXMI JEWELLERY V/S. CIT 73 CTR (AP) 131. THE APPELLANT HAS FURNISHED ALL PARTICULARS OF VALUATIO N OF CLOSING STOCK IN THE RETURN OF INCOME AND HAS NOT CONCEALED ANY PARTICULARS IN THIS REGARD. 7. IN VIEW OF THE ABOVE FINDINGS THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN LEVYING PENALTY UNDER SECTION 271( 1) OF THE ACT FOR RS.7,00,000. SO, IN VIEW OF THE ABOVE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE DECISION IN THE CASE REFERRED SUPRA, THE PENALTY OR DER PASSED BY THE ASSESSING OFFICER IS HEREBY CANCELLED. 4. FROM THE SIDE OF THE REVENUE, LD.SR.DR MR.SUMIT KUMAR HAS SUPPORTED THE ACTION OF THE AO AND ARGUED THAT THIS IS A CASE WHERE A SEARCH WAS CONDUCTED AND THEREUPON THE DISCREPANCY IN RESPECT OF VALUATION OF THE CLOSING STOCK WAS NOTICED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, HENCE THE ASSESSEE HAS DELI BERATELY CONCEALED THE PARTICULARS AS ALSO INCOME, THEREFORE RIGHTLY PENALISED U/S.271(1)(C) OF IT ACT. IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 5 - 5. FROM THE SIDE OF THE RESPONDENT-ASSESSEE, LD.AR MR.ANKUR SHAH APPEARED AND SUPPORTED THE VIEW TAKEN BY LD. CIT(A). HE HAS PLEADED THAT THE SAME METHOD WAS FOLLOWED BY THE AS SESSEE YEAR- AFTER-YEAR, HENCE THE ALLEGATION OF FURNISHING OF I NACCURATE PARTICULARS WAS BASELESS. HE HAS ALSO ARGUED THAT THE ASSESSEE HAS FURNISHED THE EVIDENCE IN THE SHAPE OF THE LAST PUR CHASE PRICE AT THE CLOSE OF THE ACCOUNTING PERIOD IN SUPPORT OF THE BA SIS ON WHICH THE CLOSING STOCK WAS VALUED @ OF RS.23.95 PER KG. THE ASSESSEE HAS VALUED THE CLOSING STOCK IN A BONA FIDE MANNER, HEN CE THE PENALTY WAS RIGHTLY DELETED BY LD.CIT(A). 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A S ALSO AFTER CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE CO NSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF CONCEALMENT PENALTY. ALTHOUGH, THIS IS A CASE WHERE A SEARCH WAS CONDUCTED BUT THE IMPUGNED ADDITION CANNOT BE SAID TO BE MADE CONSEQUENT UPON A DETECTION MADE AT THE TIME OF SEARCH, IN RESPECT OF UNDER VAL UATION OF CLOSING STOCK. RATHER, WE HAVE NOTICED THAT ONLY DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD MADE AN OBSERVAT ION THAT THE VALUE ADOPTED FOR THE VALUATION OF CLOSING STOCK WA S LOWER THAN THE VALUE OF THE OPENING STOCK. WE HAVE BEEN INFORMED THAT AS FAR AS THE QUANTITY OF THE STOCK WAS CONCERNED, THERE WAS NO DISCREPANCY FOUND BY THE REVENUE DEPARTMENT. THEREFORE, THE VE HEMENT ARGUMENT WAS THAT EVEN AFTER THE SEARCH OPERATION N O DISCREPANCY AS IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 6 - FAR AS THE QUANTITY OF THE CLOSING STOCK IS CONCERN ED WAS FOUND, BUT IT IS MERELY A CASE WHERE THE EXPLANATION OFFERED IN R ESPECT OF THE VALUATION OF THE CLOSING STOCK WAS REJECTED BY THE AO. FURTHER, THE ARGUMENT IS THAT THE SAME METHOD WAS CONSISTENTLY F OLLOWED BY THE ASSESSEE IN THE PAST AND THE VALUATION OF THE CLOSI NG STOCK WAS MADE ON THE BASIS OF THE LAST PURCHASE PRICE OF THE SAID COMMODITY. IN SUPPORT OF THIS LEGAL ARGUMENT THAT IN A SITUATION WHERE THE VALUATION HAS BEEN DONE ON THE BASIS OF A CONSISTENT METHOD, THEN THE PENALTY SHOULD NOT BE LEVIED, A RELIANCE HAS BEEN PLACED ON (I) ITO VS. CHOKSI HIRACHAND & BROS (1990) 37 TTJ (AHD) 415 [IT AT AHMEDABAD] & (II) CIT VS. SANT RAM MANGAT RAM (20 05) 195 CTR 345(P&H). SINCE THE REVENUE DEPARTMENT HAS N OT ALLEGED THAT THERE WAS A DEPARTURE IN THE METHOD OF VALUATI ON OF THE CLOSING STOCK FROM THE PAST YEAR OR THAT THE BEHAVIOUR OF T HE ASSESSEE WAS IN CONSISTENT, WE HEREBY HOLD THAT IN THE LIGHT OF THE ABOVE DECISIONS, THE LD.CIT(A) HAS RIGHTLY DELETED THE PENALTY. REV ENUES GROUND IS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( M UKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD; DATED 17 / 5 /2013 6.., .../ T.C. NAIR, SR. PS IT(SS)A NO.63/A HD/2013 THE DY.CIT VS. M/S.BHAVIN INDUSTRIES ASST.YEAR - 2004-05 - 7 - !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. '%( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : (') / THE CIT(A)-II, AHMEDABAD 5. ;<= )89, ' 891, >7 / DR, ITAT, AHMEDABAD 6. =?@ A- / GUARD FILE. & / BY ORDER, *;' ) //TRUE COPY// '/ () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER DATED 15.5.13 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16.5.13 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 17.5.13 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.5.13 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER