The ACIT,Anand Circle,, Anand v. M/s. M.M. Patel & Sons Pvt.Ltd., Tal.Anand

ITA 1168/AHD/2008 | 2002-2003
Pronouncement Date: 11-03-2011 | Result: Dismissed

Appeal Details

RSA Number 116820514 RSA 2008
Assessee PAN AAACM2723G
Bench Ahmedabad
Appeal Number ITA 1168/AHD/2008
Duration Of Justice 2 year(s) 11 month(s) 7 day(s)
Appellant The ACIT,Anand Circle,, Anand
Respondent M/s. M.M. Patel & Sons Pvt.Ltd., Tal.Anand
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 11-03-2011
Date Of Final Hearing 03-03-2011
Next Hearing Date 03-03-2011
Assessment Year 2002-2003
Appeal Filed On 03-04-2008
Judgment Text
ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL D BENCH A HMEDABAD BEFORE SHRI MUKUL MUKAR SHRAWAT AND SHRI A.N. PAHUJ A ITA NO. 1168/AHD/2008 (ASSESSMENT YEAR: 2002-03) ASSISTANT COMMISSIONER OF INCOME TAX ANAND CIRCLE 3 RD FLOOR S.P. COMPLEX MAY FAIR ROAD NR. OLD C.K. HALL ANAND. (APPELLANT) VS. M/S. M. M. PATEL & SONS PRIVATE LTD. POST BOX NO.10 CHIKHODRA. TALUKA ANAND (RESPONDENT) ITA NO. 1220/AHD/2008 (ASSESSMENT YEAR: 2002-03) M/S. M. M. PATEL & SONS PRIVATE LTD. POST BOX NO.10 CHIKHODRA. TALUKA ANAND (APPELLANT) VS. ASSISTANT COMMISSIONER OF INCOME TAX ANAND CIRCLE 3 RD FLOOR S.P. COMPLEX MAY FAIR ROAD NR. OLD C.K. HALL ANAND. (RESPONDENT) PAN: AAACM 2723 G APPELLANT BY : SHRI ANILKUMAR SR. D.R. RESPONDENT BY : SHRI MUKUND BAKSHI. ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKUL KUMAR SHRAWAT J.M. THESE ARE CROSS APPEALS ARISING FROM THE ORDER OF L D. CIT (A)-IV BARODA DATED 5-12-2007. ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 2 2. BOTH THE APPEALS HAVE COMMON FACTS THEREFORE CO NSOLIDATED AND HEREBY DECIDED BY THIS SINGLE ORDER. A. REVENUES APPEAL. GROUND NO. 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CANCELING THE PENALTY LEVIED U/S. 271(1)(C ) OF THE ACT ON CONFIR MED ADDITION OF RS. 18 59 236/- ON ACCOUNT OF BEEDI BATWARA EXPENSES AN D ON FACTS IN HOLDING THAT THE ASSESSEE HAS DISCLOSED ALL MATERIA L FACTS NECESSARY THOUGH THE SAID ADDITION WAS CONFIRMED BY THE HONB LE ITAT. 3. THE FACTS IN BRIEF AS EMERGED FROM THE PENALTY O RDER PASSED UNDER SECTION 271(1)( C) DATED 29-3-2007 AND THE CORRESP ONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 23-3-2005 W ERE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE A ND SALE OF BEEDIES. IT WAS MENTIONED BY THE ASSESSING OFFICER THAT THE BEE DIES WERE MANUFACTURED IN ANDHRA PRADESH THROUGH ITS AGENTS BATWARAS ON WAGE- BASIS. THE BEEDIES WERE PACKED THROUGH AGENTS ON CO NTRACT BASIS. THE ASSESSING OFFICER HAS MENTIONED THE BIFURCATION OF THE TWO I.E. BEEDIES MANUFACTURED BY ASSESSEE ITSELF ON WAGE BASIS AND T HE BEDIES MANUFACTURED AND PACKED ON CONTRACT BASIS. AN ANOTH ER FACT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE CO MPANY HAD TAKEN OVER THE ONGOING BUSINESS OF A SISTER-CONCERN VIZ. M/S. MATHURBHAI MULJIBHAI & SONS. THE PARTNERS OF THE SAID CONCERN HAVE BECOME THE DIRECTOR OF THE ASSESSEE-COMPANY. IT HAS ALSO BEEN NOTED THAT GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WAS SHOWN AT 22.8% AS AGAI NST THE GROSS PROFIT OF THE PAST YEAR SHOWN AT 21.15%.IT WAS ALSO AN ADMITT ED FACT THAT SALES HAVE INCREASED FOR THE YEAR UNDER CONSIDERATION. ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 3 4 . THE PENALTY IN QUESTION AS CHALLENGED BY THE REVENUE DEPARTMENT WAS IN RESPECT OF BIDDIES BATWARA EXPENSES. THE TO TAL EXPENSES CLAIMED BY THE ASSESSEE WERE AT RS.1 22 11 682/- AND AN ADD ITION OF RS.37 18 472/- WAS MADE BY THE ASSESSING OFFICER. IN SECOND APPEAL THE RESPECTED COORDINATE BENCH HAS PARTLY SUSTAINED THE ADDITION OF RS.18 59 236/-.WHILE LEVYING THE PENALTY THE ASSESSING OFFICER HAS MENTI ONED THAT THE ADDITION IN PART WAS SUSTAINED BY LD. C.I.T.(A) AND THE ASS ESSEE HAS NOT FURNISHED THE CORRECT PARTICULARS ABOUT THE BEEDIES BATWARA E XPENSES; THEREFORE SUBJECTED TO CONCEALMENT OF PENALTY. AT THAT TIME B EFORE A.O. ONLY THE ORDER OF THE FIRST APPELLATE AUTHORITY WAS AVAILABLE ACC ORDINGLY THE IMPUGNED PENALTY WAS IMPOSED. 5 . HOWEVER WHEN THE SAID ACTION OF THE ASSESSING OFFI CER WAS CHALLENGED BEFORE THE LD. CIT (A) IT WAS HELD THAT SINCE AN EXPLANATION WAS OFFERED BY THE ASSESSEE AND NO MATERIAL HAD BEEN BR OUGHT ON RECORD TO CONTRAVENE THE SAID EXPLANATION THEREFORE THE PEN ALTY ON BEEDIES BATWARA PACKAGES WAS NOT WARRANTED. THE RELEVANT PORTION I S REPRODUCED BELOW:- 6.1 . THE HONBLE ITAT UPHELD THE ADDITION ON THE GROUND THAT THE EXPENSES HAVE INCREASED ON THIS ACCOUNT BY 247% WHI CH IS HIGHLY EXCESSIVE. A FURTHER RELIEF OF RS.9 29 618/- WAS GI VEN BY THE HONBLE ITAT. THE AMOUNT OF RS.18 59 286/- STOOD CONFIRMED. 6.2. IN APPEAL THE APPELLANT HAS SUBMITTED THAT TH E COST OF BEEDI BATWARA EXPENSES WAS RS.87.22 PER THOUSAND BIDIES I N COMPARISON TO BEEDI BATWARA WITH PUTTA OUT SOURCED WHICH COME TO RS.75.70 PER THOUSAND BEEDIES. CONSIDERING THIS ADVANTAGE THE A PPELLANT CHOSE TO OUTSOURCE THE MANUFACTURE OF BEEDI PUTTA SINCE I T WAS COST EFFICIENT. THIS IS REFLECTED IN THE INCREASE IN GRO SS PROFIT FROM 21.15% TO 22.88% IN A.Y. 2001-02 TO A.Y. 2002-03. THE APPE LLANT FURTHER SUBMITTED THAT BEEDI MANUFACTURERS WHO SUPPLIED THE BEEDI PUTTA ARE IDENTIFIABLE AND THE REASON FOR LOWER RATE IN KARNA TAKA AND ANDHRA PRADESH IS LARGELY DUE TO CHEAPER LABOUR COST. THE APPELLANT FURTHER SUBMITTED THAT PENALTY ON THIS GROUND IS NOT EXIGIB LE SINCE THE EXPLANATION OFFERED IS NOT FOUND TO BE FALSE. ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 4 6.3. THERE IS MERIT IN THE SUBMISSIONS MADE BY THE APPELLANT. THE CIT (A) IN HIS ORDER HAS CLEARLY STATED THAT THERE IS NO MATERIAL ON RECORD TO SHOW THAT SUCH EXPENSES HAVE NOT BEEN INC URRED BY THE APPELLANT. NO EFFORTS WERE MADE TO CROSS CHECK FROM THE BEEDI CONTRACTORS ABOUT THE VOLUME MANUFACTURED OR ITS CO ST. THE MERE FACT THAT THERE HAS BEEN AN INCREASE IN THE COST REASON S FOR WHICH HAS BEEN CLEARLY PUT FORTH BY THE APPELLANT SHOULD NOT BE S UFFICIENT GROUNDS FOR LEVY OF PENALTY. THE APPELLANT HAS GIVEN A FEASIBLE EXPLANATION WHIC H HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER AND NE ITHER HAS HE MADE AN EFFORT TO CONTRADICT THE APPELLANTS EXPLAN ATION. IT IS A WELL SETTLED PROPOSITION THAT PENALTY PROCEEDINGS AND JU DICIAL PROCEEDINGS ARE DISTINCT. JUDICIAL OPINION IS UNANI MOUS THAT WHERE ALL THE FACTS RELATING TO THE ADDITION HAVE BEEN; D ISCLOSED BY THE ASSESSEE IT WOULD NOT BE A FIT CASE FOR LEVY OF PEN ALTY U/S. 271(1)(C ) OF THE INCOME TAX ACT. THE CIT (A) IN HIS ORDER HA S STATED THAT THE SUBMISSIONS MADE BY THE APPELLANT APPEAR TO BE LOGI CAL. THE ADDITION HAS BEEN CONFIRMED BY HIM ON THE GROUND TH AT PRUDENT SEASONED BUSINESS HOUSE WOULD NOT INCREASE ITS EXPE NDITURE BY 247%. HOWEVER THE FACT THAT THERE IS AN INCREASE I N THE G.P. IN THE CURRENT YEAR A FACT BROUGHT OUT IN PARA-3 OF THE O RDER OF THE ASSESSING OFFICER HAS NOT BEEN CONSIDERED AT ANY L EVEL. IN VIEW OF THE ABOVE I AM OF THE VIEW THAT THE APPELLANT HAS OFFERED AN EXPLANATION WHICH APPEARS TO BE LOGICAL. NO MATERIA L HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO CONTR AVENE THE EXPLANATION OF THE APPELLANT. I THEREFORE HOLD THA T THE PENALTY ON BEEDI BATWARA PACKAGING EXPENSES IS NOT WARRANTED A ND THE SAME IS THEREFORE DELETED. 6 . FROM THE SIDE OF THE REVENUE SHRI ANIL KUMAR SR. D .R. APPEARED AND SUPPORTED THE ACTION OF THE ASSESSING OFFICER. 7 . ON THE OTHER HAND FROM THE SIDE OF THE LD. AUTHORI ZED REPRESENTATIVE SHRI MUKUND BAKSHI APPEARED AND PLAC ED RELIANCE ON THE FINDING OF THE LD. C.I.T.(A) AS WELL AS CITED THE FOLLOWING DECISIONS :- (I) NAVJIVAN OIL MILLS VS. CIT 252 ITR 417 (GUJ.) (II) NATIONAL TEXTILES MILLS VS. CIT 249 I TR 125 (GUJ.) (III) SHIVLAL TAK VS. CIT 251 ITR 373 (G UJ.) (IV) ACIT VS. PRECISION DRILLING 34 SOT 432 (AHD.) ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 5 8. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES AT SOME LENGTH AND ALSO ON CAREFUL EXAMINATION OF THE FACTS OF THE CAS E WE HAVE NOTICED THAT THERE WAS A CHANGE IN THE SET UP OF THE ASSESSEE-CO MPANY BECAUSE THE BUSINESS OF A SISTER-CONCERN WAS TAKEN OVER DURING THE YEAR UNDER CONSIDERATION. THE LD. A.R. HAS ALSO INFORMED THAT THOUGH THERE WAS INCREASE IN THE MANUFACTURING EXPENSES BUT EVEN THE N THE PROFITS WERE HIGHER DURING THE YEAR. DUE TO THE CHANGE IN THE SY STEM SOME OF THE MANUFACTURING ACTIVITY WAS OUT-SOURCED BY THE ASSES SEE WITH MATERIAL COST. HOWEVER THE ASSESSEE HAD PROCURED RAW MATERIAL AT L OWER COST AS IT WAS ADMITTED BY LD. C.I.T.(A) ; WHILE GRANTING RELIEF. UNDISPUTEDLY THEREFORE THE ASSESSEE HAS DISCLOSED BETTER PROFIT. FROM THE FAC TS OF THE CASE IT HAS ALSO BEEN NOTED THAT WHILE DECIDING THE APPEAL OF THE AS SESSEE FOR A.Y. 2002-03 RESPECTED COORDINATE BENCH A AHMEDABAD IN APPEAL NO. ITA. 202/AHD/2006 ORDER DATED 30-3-2007 HAS GRANTED RELI EF BY REDUCING UP TO 25% EXCESS EXPENDITURE OF BEEDIES BATWARA EXPENSES. IT WAS SPECIFICALLY NOTED THAT NO EFFORTS HAVE BEEN MADE BY THE REVENUE TO CROSS CHECK FROM THE BIDI CONTRACTORS THROUGH WHOM THE ASSESSEE GOT ITS BIDIES - PUTTA. SINCE THE EXPENDITURE HAD INCREASED DURING THE YEAR UNDER CONSIDERATION THEREFORE ON ADHOC BASIS PART RELIEF WAS GRANTED W ITH THE OBSERVATION THAT SUCH RELIEF WOULD MEET THE ENDS OF JUSTICE. OVERA LL CIRCUMSTANCES THUS DEMANDS THAT WHEN THE FIRST APPELLATE AUTHORITY HER SELF HAS NARRATED THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT FOU ND FALSE AND THAT MERELY ON AN ESTIMATION THE ADDITION WAS SUSTAINED. THEREFORE WE ARE ALSO OF THE VIEW THAT THE IMPUGNED ADDITION DID NOT CALL FOR ANY LEVY OF CONCEALMENT PENALTY. FOLLOWING THE CASE-LAWS CITED HEREINABOVE WE HEREBY CONFIRM THE FINDING OF THE LD. C.I.T. (A) A ND DISMISS THIS GROUND OF THE REVENUE. 9. REVENUES APPEAL IS DISMISSED. B. ASSESSEES APPEAL :--- . ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 6 10. FROM THE SIDE OF THE ASSESSEE FOLLOWING GROUNDS HAVE BEEN RAISED:- THE LD. CIT (A) IV BARODA HAS ERRED IN FACTS AN D IN LAW IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C ) OF T HE ACT IN RESPECT OF DISALLOWANCES MADE BY THE LD. A.O. ON ESTIMATE BASI S IN THE ASSESSMENT PROCEEDINGS OUT OF THE FOLLOWING EXPENSE S. I) CARRAIGE OUTWARD EXPENSES. RS. 1 50 00 0/- II) TOBACCO TRANSPORT EXPENSES. RS. 1 35 400/- III) TRAVELLING EXPENSES. RS. 2 18 000/- IV) CASH TRADE DISCOUNT. RS. 1 00 000/- . 11. RELEVANT FACTS HAVE ALREADY BEEN DISCUSSED HERE INABOVE WHILE DECIDING THE REVENUES APPEAL HOWEVER IT IS WORTH TO MENTION THAT WHILE DECIDING THE APPEAL OF THE ASSESSEE RESPECTED COORD INATE BENCH VIDE ORDER CITED SUPRA HAS NOT GIVEN A FINDING THAT THE EXPENDITURE IN QUESTION WERE BOGUS OR FALSELY CLAIMED BY THE ASSESSEE. IN RESPECT OF THE CARRIAGE OUTWARD EXPENSES THE CLAIM WAS OF RS. 6 07 564/- AN D THE ASSESSING OFFICER HAD MADE AN ESTIMATED DISALLOWANCE OF RS.3 LACS WHI CH WAS CONFIRMED BY THE LD. C.I.T.(A) . WHEN IT WAS CHALLENGED BEFORE T HE TRIBUNAL IT WAS NOTED THAT THERE WAS SUBSTANTIAL INCREASE IN THE EXPENDIT URE HOWEVER LOOKING TO THE FACTS OF THE CASE THE DISALLOWANCE TO THE EXTEN T OF 25% WAS UPHELD THAT TOO WITH THE OBSERVATIONS THAT SUCH PERCENTAGE WOUL D MEET THE ENDS OF JUSTICE. ACCORDINGLY THE DISALLOWANCE WAS REDUCED TO RS.1 50 000/-. AS WE HAVE ALREADY DISCUSSED IN ABOVE PARAGRAPH WHILE DEC IDING THE APPEAL OF THE REVENUE THE LD. C.I.T. (A) HAS GRANTED RELIEF BY ASSIGNING THE REASON THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NO T FOUND FALSE OR THE CLAIM WAS NOT BOGUS BUT IT WAS MERELY DISALLOWED ON THE GROUND OF UNREASONABLENESS OR EXCESSIVE IN NATURE. THEREFORE SUCH NATURE OF DISALLOWANCE DO NOT CALL FOR LEVY OF CONCEALMENT PE NALTY. LIKEWISE IN RESPECT OF TOBACCO TRANSPORT EXPENSES AND TRAVEL ING EXPENSES THERE WAS NO INDICATION OF ANY INCRIMINATING MATERIAL FOR THE LEVY OF CONCEALMENT PENALTY BUT DISALLOWANCE OF TRAVELING EXPENSE WAS P ARTIALLY SUSTAINED BY ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 7 APPLYING A REASONABLE PERCENTAGE OF CLAIM. LIKEWISE WHILE DISCUSSING THE DISALLOWANCE OF TRADE DISCOUNT A CLEAR-CUT FINDI NG WAS RECORDED THAT MERELY THE NAMES OF THE CUSTOMERS IN THE ACCOUNT WA S NOT MENTIONED TO WHOM THE GOODS HAVE BEEN SOLD DID NOT MAKE MUCH OF THE DIFFERENCE. RATHER IT WAS MENTIONED THAT BY TAKING PRACTICAL SI DE OF THE BUSINESS THE ASSESSEE DESERVES SOME CONCESSION. IT WAS ALSO NOTE D THAT THE DISALLOWANCE WAS TOWARDS HIGHER SIDE AND THE SAME W AS REDUCED TO RS.1 LAC TO MEET THE ENDS OF JUSTICE. IN OUR CONSIDERED OPINION THE CIRCUMSTANCES UNDER WHICH THE PART DISALLOWANCES WE RE UPHELD SHOULD NOT BE THE SOUND BASIS FOR LEVY OF PENALTY. WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT NOT TO LEVY THE PE NALTY IN RESPECT OF THE ABOVE REFERRED 4 DISALLOWANCES. THIS GROUND OF THE ASSESSEE IS THEREFORE UPHELD. 12. IN THE RESULT REVENUES APPEAL IS DISMISSED WH EREAS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11 / 3/2011. SD/- SD/- (A.N. PAHUJA) (MUKUL KUMAR SHRAWAT) ACCOUNTANT MEMBER. JUDICIAL MEMBE R. AHMEDABAD. DATED:-11/03/2011. S.A.PATKI. ITA.NO.1168/AHD/2008 ITA NO.1220/AHD/2 008 A.Y. 2002-03. 8 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV BARODA. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD.