ACIT CEN. CIR. - 35, MUMBAI V. M/s HINDUSTAN POLYMIDES & FIBRES LTD., MUMBAI

ITSSA 748/MUM/2003

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8557 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 30 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 29-02-2012
• Assessment Year: misc
• Appeal Filed On: 30-10-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K GOPALSH SATENDRA PANDEY
• Keywords: Block assessment
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI RAJENDRA SINGH, AM & SHRI VIJAY PAL RAO , JM IT(SS) NO.780/MUM/2003 & IT(SS) NO.748/MUM/2003 (BLOCK ASSESSMENT 1.4.87 TO 23.10.97) M/S HINDUSTAN POLYAMIDES & FIBRES LTD C/O BOMBAY OIL INDUSTRIES LTD LBS MARG, BHANDUP (W) MUMBAI 78 VS THE DY COMMR OF INCOME TAX CEN CIR 35, MUMBAI (APPELLANT/RESPONDENT ) (RESPONDENT/APPELLANT) PAN NO. AAACH 3757J ASSESSEE BY SH K GOPAL/SH SATENDRA PANDEY REVENUE BY SH A B KOLI DT.OF HEARING 29 TH NOV 2012 DT OF PRONOUNCEMENT 29 TH NOV 2012 ORDER PER VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 21.8.2003 OF THE COMMISSIONER OF INCOME TAX(APPEALS) ARISING FROM TH E PENALTY ORDER PASSED U/S 158BFA(2) OF THE I T ACT. 2 BRIEFLY STATED THE FACTS IN THIS CASE ARE THAT TH ERE WAS A SEARCH AT THE BUSINESS PREMISES OF THE ASSESSEE ON 23.10.1997. IN RESPONS E TO NOTICE U/S 158BC(A), THE ASSESSEE FURNISHED BLOCK RETURN SHOWING NIL UNDISCL OSED INCOME. THE BLOCK ASSESSMENT WAS MADE ON 29 TH OCT 1999 DETERMINING THE UNDISCLOSED INCOME OF ` 62,07,542/-. SUBSEQUENTLY, THE PENALTY PROCEEDING S U/S 158BFA(2) WERE INITIATED AND A PENALTY OF ` 1,11,73,572/- LEVIED BEING THE MAXIMUM RATE OF 3 00% OF TAX LEVYABLE ON THE DIFFERENCE IN THE UNDISCLOSED INCOM E DECLARED AND UNDISCLOSED INCOME ASSESSED IN THE BLOCK ASSESSMENT. ITA NO . 780 & 748/M/2003 M/S HINDUSTAN POLYAMIDES & FIBRES LTD . 2 2.1 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEA LS), THOUGH CONFIRMED THE LEVY OF PENALTY; BUT TO THE EXTENT OF 100% OF THE T AX LEVYABLE ON THE UNDISCLOSED INCOME ASSESSED. 3 THEREFORE, BOTH THE ASSESSEE AS WELL AS THE REVEN UE HAVE CHALLENGED THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX(AP PEALS). THE ASSESSEE HAS AGGRIEVED BY THE CONFIRMATION OF THE PENALTY TO THE EXTENT OF 100% OF THE TAX LEVYABLE WHEREAS THE REVENUE HAS AGGRIEVED BY REDUC ING THE PENALTY FROM 300% TO 100%. 4 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD AR OF THE ASSESSEE HAS POINTED OUT THAT OUT OF THREE ADDITIONS, THE TRIBUNAL VIDE ORDER DATED 22.8.2012 IN THE QUANTUM APPEAL IN IT(SS)A NO.255/MUM/2002 HAD COMPLETELY DELETED THE ADDITION TO THE EXTENT OF ` 61,35,842/- WITH RESPECT TO THE STOCK OF FINISHED PRODUCTS AND THE STOCK OF WORK-IN- PROGRESS; WHEREAS IN RESPECT TO STOCK OF RAW MATER IAL, THE TRIBUNAL HAS CONFIRMED THE ADDITION ONLY TO THE EXTENT OF ` 18,000/- AND SOME ODD AMOUNT OUT OF THE ADDITION OF ` . 71,700/-. 4.1 THE LD AR HAS FURTHER SUBMITTED THAT NO PENALTY CAN BE LEVIED EVEN ON THE SAID ADDITION BECAUSE THE TRIBUNAL HAS OBSERVED IN PARA 13 THAT THE REVENUE AUTHORITY HAVE NOT DISPUTED THE OVERALL STOCK POSITIO NS RECORDS, WHICH HAVE BEEN FOUND BY THE SEARCH PARTY, BUT WHAT HAS BEEN DISPUTED , IS THE INTER-SE STOCK POSITION AT VARIOUS STAGES IN THE PRODUCTION LINE. WE, THEREF ORE, CANNOT SUBSCRIBE TO THE OBSERVATIONS OF THE REVENUE AUTHORITIES, THAT THIS IS A CASE OF UNDISCLOSED INCOME AND COULD BE ASSESSED UNDER CHAPTER XIVB. HENCE, THE LD AR HAS SUBMITTED THAT WHEN THE ENTIRE ADDITION HAS BEEN DELETED IN THE QU ANTUM APPEAL, EXCEPT ` ITA NO . 780 & 748/M/2003 M/S HINDUSTAN POLYAMIDES & FIBRES LTD . 3 18,000/-, THEN IN VIEW OF THE OBSERVATIONS IN THE Q UANTUM APPEAL, THE PENALTY DOES NOT SURVIVE. 4.2 ON THE OTHER HAND, THE LD DR HAS NOT DISPUTED T HE FACTS OF DELETING THE ADDITION BY THE TRIBUNAL IN THE QUANTUM APPEAL. HO WEVER, HE HAS SUPPORTED THE LEVY OF PENALTY TO THE EXTENT OF THE ADDITION CONFI RMED BY THE TRIBUNAL. 5 HAVING REGARD TO THE FACTS OF THE CASE AND CONSID ERING THE RIVAL SUBMISSIONS OF THE PARTIES, WE NOTE THAT IN THE BLOCK ASSESSMENT A N ADDITION OF ` 62,07,542/- WAS MADE ON ACCOUNT OF UNDISCLOSED INCOME WHICH CONSIST S OF THE FOLLOWING ITEMS: I)FINISHED GOODS ` 49,60,234/- II) STOCK OF WORK IN PROGRESS ` 11,75,608/- III) RAW MATERIALS ` 71,700/- TOTAL ` `` ` 62,07,542/- 5.1 AS REGARDS THE ADDITION ON ACCOUNT OF THESE THR EE ITEMS, THE TRIBUNAL HAS CONSIDERED AND DECIDED THE ISSUE IN THE QUANTUM APP EAL IN PARAS 15 & 16 AS UNDER: 15. THE SEIZURE PARTY INVENTORISED 57,780 KGS OF PT BCHA VALUED AT ` 39,74,1O8, 7560 KGS OF OTBCHA VALUED AT RS.9,86,126 AND STOCK IN PROCESS OF 1 1,75,608. IN THE COURSE OF SEARCH ITSELF THE PRODUCTION OFFICER EXPLAINED THAT STOCK REGISTER OF FURNISHED GOODS IS KEPT FOR CENTRAL EXCISE PURPOSE WHEREAS MATERIAL IN PROCESSING REGISTER LISTED 2.5 KGS EACH OF THE ABOVE TWO PRODUCTS. FURTHER FOR THE DISCREPANCY IN QUANTITY, IT WAS FURTHE R EXPLAINED THAT THE ABOVE PRODUCTS ARE NOT 100% PURE AND REQUIRE FURTHER P ROCESSING. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE FURTHER EX PLAINED WITH THE EXCISE RECORD DETAILS THAT THE FINISHED PRODUCTS ARE RECORDED O NLY WHEN PRODUCTS ARE READY FOR EXPORT. PRE-SHIPMENT GOODS PENDING APP ROVAL ARE RECORDED FOR MIS PURPOSES BUT NOT FOR CENTRAL EXCISE PURPOSES AS IT MAY REQUIRE FURTHER PROCESSING IN CASE THE SAMPLE WAS NOT APPROVED. IN S UPPORT OF THE ABOVE CONTENTIONS IT SHOWED THE EXCISE RECORDS AS ON 31.3. 97 (BEFORE SEARCH) AND 31.3.98 (AFTER THE SEARCH) WHERE IN EXCISE RECORDS SHOW ED NIL STOCK BUT CLOSING STOCK WAS REFLECTED AT Z27,30,892 AND Z9,58,781/- RE SPECTIVELY (DETAILS IN PAGE 4 OF THIS ORDER). FURTHER EXPLAINED THAT THE FINISHED GOODS ARE EXPORTED TO AN EXTENT OF 60480 KGS OF PTBCHA AND 14860 KGS OF OTBC HA IMMEDIATELY WITHIN THREE WEEKS OF SEARCH ARID FILED THE DETAILS IN SUPP ORT. THESE WERE NOT ACCEPTED BY AO. HIS CONTENTION WAS THAT THE GOODS S HOULD FIGURE IN THE RAW MATERIAL STOCK OR FINISHED GOODS STOCK. WE ARE IN A GREEMENT WITH ASSESSEE ITA NO . 780 & 748/M/2003 M/S HINDUSTAN POLYAMIDES & FIBRES LTD . 4 CONTENTIONS. SINCE THE SALES MADE OUT OF THE STOCK OF FINISHED PRODUCTS HAVE BEEN ONLY RECORDED LATER AND EXPORTED AND HAVE BEEN DU LY ACCOUNTED FOR IN BOOKS/ PROFIT & LOSS A/C, THERE IS NO NEED TO TRE AT THE VALUE AS UNDISCLOSED INCOME AS WAS DONE BY AO. MOREOVER ASSESSEE SUBMISSI ONS BASED ON RECORD HAVE NOT BEEN NEGATIVED BY AO. AS ALREADY STATED EA RLIER THERE IS NO INCRIMINATING MATERIAL AT ALL OF SALES OUTSIDE BOOKS OR INCOME GENERATED OUTSIDE BOOKS. THE ARGUMENT THAT GOODS MUST FIND ITS PLACE I N EITHER IN RAW MATERIAL STOCK REGISTER OR FINISHED GOODS STOCK REGI STER DOES NOT HAVE ANY SUPPORT AS MATERIAL ISSUED AND IN PROCESS CANNOT BE REC ORDED WHEN THEY ARE IN PROCESS AND ONLY WHEN THE VALUATION WAS REQUIRED ON THE CLOSING DATE OF BALANCE SHEET/TRIAL BALANCE DATE THE VALUATION WAS UNDERTAKEN, WHICH ASSESSEE EXPLAINED AS ON THE DATES 31.3.07 AND 31.3 .08. THEREFORE, SINCE SEARCH OCCURRED DURING THE MIDDLE OF YEAR, WE DO NOT C ONSIDER IT NECESSARY TO VALUE STOCK ON THAT DATE SO AS TO DETERMINE THE U NDISCLOSED INCOME. SIMILAR ARGUMENT WAS ALSO PLACED FOR WORK IN PROCESS AD DITION OF ` 11,75,608. SINCE THE EXPLANATION BEING SAME AND AD DITION WAS ALSO MADE ON SIMILAR LINES, WE DO NOT SEE ANY REASON TO SUPPOR T THE ORDER OF ASSESSING OFFICER ON FACTS. THEREFORE, ASSESSEE GROUNDS ON THIS ARE ALLOWED (RELIEF RS 61,35,842/) (B) STOCK OF RAW MATERIALS ` 71,700/- 16. UNDER THIS HEAD QUANTITY OF 50.9 KGS OF CATALYST -A WAS INVENTORISED AND VALUED AT 25,450/-. ASSESSEE SUBMITTED STOCK REGISTE R (APB 75) IN SUPPORT TO STATE THAT CATALYST A WAS IN THE STOCK REGISTER AS IMPORTED CATALYST. THIS WAS NOT ACCEPTED. ANOTHER ITEM WAS HCO AT 1850 KGS VALUE D AT 46,250/. THE STOCK ENTRY OF THIS ITEM AT 1L20 KGS WAS PRODUCED IN SUPPORT (APB 74), WHILE ACCEPTING THAT THERE IS A DISCREPANCY OF 730 KGS IN T HIS ITEM BY ASSESSEE. AO DID NOT ACCEPT AND MADE ADDITION OF ENTIRE AMOUNT. A FTER CONSIDERING THE ARGUMENTS AND EXAMINING THE DOCUMENTS PLACED ON RECO RD, WE ARE SATISFIED THAT THE STOCK OF CATALYST A WAS ACCOUNTED AS IMPOR TED CATALYST AT 50.9 KGS( 25,450) AND STOCK OF HCO AT 1120 KGS.(28,000). THERE FORE, ONLY ADDITION OF 73OKGS VALUE OF HCO WAS REQUIRED TO BE CONFIRMED. EV EN THOUGH ASSESSEE EXPLANATION WAS THAT THE STOCK COULD BE OUT OF EARL IER ISSUED FOR PROCESS, THE SAME CANNOT BE ACCEPTED IN THE ABSENCE OF RECONCILI ATION, SO TO THAT EXTENT THE ADDITION REQUIRED TO BE CONFIRMED. 5.2 AS IT IS CLEAR THAT THE ADDITION ON ACCOUNT OF DISCREPANCY IN STOCK OF FINISHED GOODS AND WORK-IN-PROGRESS HAVE BEEN DELETED IN TOT O. THUS, THE PENALTY LEVIED ON SUCH ADDITION DOES NOT SURVIVE AND LIABLE TO BE DEL ETED. 5.3 FURTHER, THE ADDITION ON ACCOUNT OF RAW MATERI AL HAS BEEN CONFIRMED ONLY TO THE EXTENT OF 730 KGS VALUE OF HCO OUT OF 1850 KG OF HCO VALUED AT ` 46,215/-. ITA NO . 780 & 748/M/2003 M/S HINDUSTAN POLYAMIDES & FIBRES LTD . 5 5.4 THE ADDITION WITH RESPECT TO 50.9 KGS OF CATALY ST-A VALUED AT ` 25,450/- HAS ALSO BEEN DELETED BY THE TRIBUNAL; THEREFORE, THE O NLY ADDITION, WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL IS THE VALUE OF 730 KGS O F HCO WHICH COMES TO ` 18,236/-. HOWEVER, THE TRIBUNAL HAS OBSERVED IN PARA 13 AS UN DER: 13. IT IS ALSO SEEN THAT THE REVENUE AUTHORITY HAVE NOT DISPUTED THE OVERALL STOCK POSITIONS RECORDS, WHICH HAVE BEEN FOUND BY T HE SEARCH PARTY, BUT WHAT HAS BEEN DISPUTED, IS THE INTER-SE STOCK POSITION A T VARIOUS STAGES IN THE PRODUCTION LINE. WE, THEREFORE, CANNOT SUBSCRIBE TO THE OBSERVATIONS OF THE REVENUE AUTHORITIES, THAT THIS IS A CASE OF UNDISCLOS ED INCOME AND COULD BE ASSESSED UNDER CHAPTER XIVB. 5,5 IN VIEW OF THE ABOVE OBSERVATION OF THE TRIBUNA L IN THE QUANTUM APPEAL, THE PENALTY ON THIS ADDITION OF ` . 18,236/- IS ALSO NOT LEVYABLE BECAUSE THERE WAS N O PHYSICAL DISCREPANCY IN THE OVERALL STOCK; BUT THE DISCREPANCY WAS NOTICED ONLY IN THE INTER-SE STOCK POSITION AT VARIOUS STAGES IN TH E PRODUCTION LINE. THEREFORE, IN VIEWS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELE TE THE PENALTY LEVIED U/S 158BFA(2). 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E. 29 TH NOV 2012. SD/ SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 29 TH , NOV 2012 RAJ* ITA NO . 780 & 748/M/2003 M/S HINDUSTAN POLYAMIDES & FIBRES LTD . 6 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI