M/s. Patel Chimanlal Vrajlal, Baroda v. The ACIT.,Cent.Circle-1,, Baroda

ITA 2246/AHD/2009 | 1998-1999
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 224620514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 2246/AHD/2009
Duration Of Justice 2 year(s) 8 day(s)
Appellant M/s. Patel Chimanlal Vrajlal, Baroda
Respondent The ACIT.,Cent.Circle-1,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 30-06-2011
Next Hearing Date 30-06-2011
Assessment Year 1998-1999
Appeal Filed On 21-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI D.K. TYAGI HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA HONBLE ACCOUNTANT MEMBER ITA NO.2246/AHD/2009 ASSESSMENT YEAR:1998-99 DATE OF HEARING:30.6.11 DRAFTED:22.7.11 M/S PATEL CHIMANLAL VRAJLAL M.G. ROAD BARODA PAN NO.AADFP1221D V/S. ACIT CENTRAL CIRCLE- 1 BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. URVASHI SHODHAN AR RESPONDENT BY:- SHRI M.R. CHOUDHRY DR O R D E R PER D.K. TYAGI JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME- TAX(APPEALS)-IV AHMEDABAD DATED 20-01-2009 FOR THE ASSESSMENT YEAR 1998-99. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS:- 1] THE LD. CIT(A) HAS SERIOUSLY ERRED ON FACTS AND IN LAW IN CONFIRMING THE PENALTY U/S 271(1)(C) OF RS.2 34 635/-. 2] IT IS SUBMITTED THAT IN VIEW OF FACTS AND CIRCUM STANCES OF THE CASE AND IN LAW THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE CONCEALMENT PENALTY LEVIED BUT OUGHT TO HAVE DIRECTED TO DELETE THE PEN ALTY CONSIDERING FACTS AND SUBMISSIONS MADE BEFORE HIM. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING ASSE SSMENT PROCEEDINGS FOLLOWING TWO ADDITIONS WERE MADE I TA NO2246/AHD/2009 A.Y. 1 998-99 M/S PATEL C VRAJLAL V. ACIT CC-1 BRD PAGE 2 (A) AN ADDITION OF RS.4 32 832/- WAS MADE TO THE IN COME OF THE ASSESSEE ON THE GROUND THAT ASSESSEE HAD NOT INCLUDED FREIGHT OCTROI AND LOADING & UNLOADING CHARGES INCURRED IN THE PURCHASE OF STOCK TO THE VALUE OF CLOSING STOCK. THE ADDITION WAS MADE FOLLOWING DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44 (SC). THE ASSESSEES PLEA BEFORE THE ASSESSING OFFICER WAS TH AT IN CASE THE ADDITION IS MADE TO THE CLOSING STOCK OF THE ASSESSEE CORRESPO NDING ADDITION OF FREIGHT OCTROI SHOULD ALSO BE MADE TO THE OPENING STOCK OF THE ASSESSEE FOR THE SAME YEAR WHICH WAS REJECTED BY THE AO. THIS ADDITION W AS UPHELD BY THE LD CIT(APPEALS). HOWEVER BEFORE HONBLE ITAT THE ASSE SSEE CONTENDED THAT ITS GRIEVANCE WOULD BE SET AT REST IF CORRESPONDING ADJ USTMENT TO THE OPENING STOCK OF THE NEXT YEAR IS MADE. THE HONBLE ITAT AC CEPTED THIS PLEA OF THE ASSESSEE. (B) DURING THE ASSESSMENT PROCEEDINGS IT WAS FOUND THAT ASSESSEE HAD DEBITED SALES TAX PENALTY OF RS.2 37 554/- TO THE P ROFIT AND LOSS ACCOUNT WHICH WAS ADDED BACK BY THE ASSESSING OFFICER. THE LD CIT (APPEALS) CONFIRMED THE ORDER OF THE AO AND ASSESSEE DID NOT FILE ANY APPEA L BEFORE HONBLE ITAT. 3. ON BOTH THE ABOVEMENTIONED ADDITIONS THE ASSESS ING OFFICER INITIATED PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT 1961 AND A NOT ICE WAS SERVED UPON THE ASSESSEE U/S 271(1)(C) AS TO WHY PENALTY FOR CONCEA LMENT SHOULD NOT BE IMPOSED. IN REPLY ASSESSEE GAVE FOLLOWING REASONS FOR NOT LEVY ING PENALTY U/S 271(1)(C):- I) ALL THE DETAILS WITH RESPECT TO FREIGHT OCTROI CHARGES ETC. AS WELL AS SALES TAX PENALTY WERE DISCLOSED BY THE ASSESSEE IN RETURN. H ENCE NO CONCEALMENT COULD BE ALLEGED; II) NO SATISFACTION ON CONCEALMENT/FILING INACCURAT E PARTICULARS OF INCOME WAS RECORDED BY THE ASSESSING OFFICER; III) AFTER THE ORDER OF THE HONBLE ITAT NET ADDITI ON WAS REDUCED TO RS.1 25 669/- INSTEAD OF RS.4 32 832/- FROM WHICH I TSELF IT WAS APPARENT THAT ISSUE WAS A DEBATABLE ONE; IV) THE DISALLOWANCE OF SALES TAX PENALTY WAS A PAR T OF ASSESSMENT AND NOT OF ANY CONCEALMENT/FURNISHING INACCURATE PARTICULARS O F INCOME; I TA NO2246/AHD/2009 A.Y. 1 998-99 M/S PATEL C VRAJLAL V. ACIT CC-1 BRD PAGE 3 4. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTAB LE TO THE ASSESSING OFFICER FOR THE FOLLOWING REASONS:- A) THE ADDITION WAS MADE FOLLOWING THE DECISION OF HONBLE SUPREME COURT WHICH HAD SET TO REST THE DEBATE WITH RESPECT TO VA LUATION OF CLOSING STOCK. HENCE THE ASSESSEE COULD NOT ASSUME IGNORANCE OR T AKE THE PLEA THE ISSUE WAS DEBATABLE; B) INCORRECT VALUATION OF CLOSING STOCK AMOUNTS TO FILING OF INACCURATE PARTICULARS OF INCOME THAT HAS BEEN BROUGHT OUT VER Y CLEAR IN THE ASSESSMENT YEAR. HENCE PENALTY CORRECTLY INITIATED; C) THE ASSESSEE ITSELF HAD NOT PRESSED THE GROUND T HAT THE CLOSING STOCK HAS BEEN RE-VALUED RATHER IT WAS THE PLEA OF THE ASSESS EE BEFORE HONBLE ITAT THAT IF ADJUSTMENT IN OPENING STOCK IS DONE THE GRI EVANCE OF THE ASSESSEE WOULD BE ASSUAGED. HENCE IT WAS APPARENT THAT THE ASSESSEE HAS ACCEPTED THAT CLOSING STOCK HAD BEEN VALUED INCORRECTLY BY H IM; D) WITH RESPECT TO DEBITING THE SALES TAX PENALTY T HE SAME WAS NOT ALLOWABLE EXPENDITURE U/S.37 OF THE ACT. FURTHER HONBLE SUP REME COURT IN THE CASE OF STANDARD BATTERIES LTD. V. CIT (1995) 211 ITR 444 (SC) HAS ALSO HELD THAT SALES TAX PENALTY WAS NOT A ALLOWABLE EXPENDITURE. THEREFORE DESPITE VERY CLEAR PROVISION OF THE ACT AND ALSO THE DECISION OF THE HONBLE APEX COURT THE ASSESSEE DEBITED THE SAME TO THE PROFIT AND LOSS AC COUNT UNDER THE HEAD SALES TAX. NO DETAILS WITH RESPECT TO PART OF EXP ENDITURE BEING PENALTY WERE GIVEN BY THE ASSESSEE UNTIL THE ASSESSING OFFICER S PECIFICALLY ASKED FOR THE SAME HENCE THESE AMOUNTS TO WILLFULL CONCEALMENT ON THE PART OF THE ASSESSEE. 5. IN VIEW OF THE ABOVE THE ASSESSING OFFICER CONC LUDED THAT THE ASSESSEE WILLFULLY CONCEALED/FILED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT. THEREFORE PENALTY OF 100% TAX SOUGHT TO BE EVADED WAS LEVIED U/S 271(1)(C) OF THE ACT. LD. CIT(APPEALS) C ONFIRMED THE ACTION OF ASSESSING OFFICER. 6. FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE U S. I TA NO2246/AHD/2009 A.Y. 1 998-99 M/S PATEL C VRAJLAL V. ACIT CC-1 BRD PAGE 4 7. AT THE TIME OF HEARING THE CONTENTION OF THE ASS ESSEE IN RESPECT OF PENALTY LEVIED ON ADDITION MADE ON ACCOUNT OF UNDERVALUATIO N OF CLOSING STOCK INVOKING THE PROVISION OF SECTION 145A BY APPLYING RATIO OF JUDG MENT OF THE HONBLE APEX COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUPRA) WAS AS UNDER;- I) CLOSING STOCK WAS VALUED AT MARKET RATE OR COST WHICHEVER WAS LOWER METHOD REGULARLY ADOPTED AND ACCEPTED BY THE DEPART MENT. II) AUDIT REPORT FILED WITH THE RETURN OF INCOME GI VING FULL PARTICULARS OF INVENTORY OF CLOSING STOCK AND METHOD OF VALUATION. III) PROVISIONS OF SECTION 145A BROUGHT IN STATUTE FROM 1-4-1999 I.E. APPLICABLE FROM ASSESSMENT ORDER 1999-00 AND NOT APPLICABLE TO YEAR UNDER CONSIDERATION. IV) ALTERNATE SUBMISSION WAS FOR SIMILAR ADDITION B E MADE TO THE OPENING STOCK FOR THE YEAR UNDER CONSIDERATION FOR COMPUTATION OF TRUE AND CORRECT PROFITS. IT WAS ALSO SUBMITTED THAT NO PENALTY WAS EXIGIBLE WHEN FULL AND COMPLETE DETAILS WERE DISCLOSED IN AUDITED ACCOUNTS NARRATING METHOD OF VALUATION OF CLOSING STOCK AND RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROCHEMICALS PVT. LTD. (2010) 322 ITR 158 (SC). 8. IN RESPECT TO PENALTY LEVIED ON ADDITION MADE ON ACCOUNT OF SALES TAX PENALTY THE SUBMISSION OF THE ASSESSEE WAS:- A) PAYMENT OF SALES TAX OF RS.21 42 974/- FOR EARLI ER YEAR CLAIMED IN PROFIT AND LOSS ACCOUNT COMPRISED OF SALES TAX/INTEREST AND PE NALTY. THIS PENALTY AMOUNT OF RS.2 37 554/- WAS NOT DIRECTLY DEBITED TO PROFIT AND LOSS ACCOUNT AS ALLOWABLE EXPENSES. B) AUDIT REPORT FILED WITH RETURN OF INCOME GAVE TO TAL AMOUNT WITHOUT SPECIFIC MENTION OF PENALTY COMPONENT BY CHARTERED ACCOUNTAN T. C) IN SALES TAX APPELLATE PROCEEDINGS APPEAL WAS AL LOWED AND IN SECOND APPEAL PENALTY WAS SCALED DOWN FROM 60% TO 20% SIN CE IT WAS LEVIED ON DISPUTE ABOUT TAX ON DECLARED GOODS AND NOT ON ANY CONCEALMENT OR INFRINGEMENT OF LAW. I TA NO2246/AHD/2009 A.Y. 1 998-99 M/S PATEL C VRAJLAL V. ACIT CC-1 BRD PAGE 5 D) AMOUNT LEIVED WAS COMPENSATORY IN NATURE AND NOT PENAL THAT WAS UDNE THE NOMENCLATURE AS PENALTY. 9. RELIANCE WAS PLACED ON A DECISION IN THE CASE OF CIT V.SHAHABAD CO-OP SUGAR MILLS LTD. (2010) 322 ITR 73 (P & H) TO SUBMIT THAT MAKING WR ONG CLAIM IS NOT AT PAR WITH CONCEALMENT OR GIVING INACCURATE PARTIC ULARS. PLACING RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. SIDHARTHA ENTERPRISES (2010) 322 ITR 80 (P &H) AND HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF BTX CHEMICAL PVT. LTD. V. CIT (2007) 288 ITR 196 (GUJ) IT WAS SUBMITTED THAT REALIZATION OF MISTAKE OF COUNSEL AND ACCEPTAN CE OF DECISION OF ASSESSING OFFICER DID NOT ENTAIL PENALTY FOR CONCEALMENT OR I NACCURATE PARTICULARS OR PURCHASE. THERE IS NO QUESTION OF INVITING PENALTY U/S 271(1) (C) OF THE ACT. THE COPY OF ORDER OF SALES TAX AUTHORITIES ALONG WITH APPELLATE ORDER WA S ALSO FILED. CONCLUDING HER ARGUMENT LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT PENALTY IMPOSED BY ASSESSING OFFICER AND SUSTAINED BY LD. CIT(APPEALS) MAY KINDLY BE DELETED. 10. LD. DR ON THE OTHER HAND RELIED ON THE ORDERS O F LOWER AUTHORITIES. 11. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT THE ADDITION ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK INVOK ING THE PROVISION OF SECTION 145A BY APPLYING THE RATIO OF THE JUDGMENT OF THE HONBL E APEX COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUPRA) WAS NOT MADE AS A RESULT OF DETECTION OF C ONCEALMENT OF THAT PORTION BY THE ASSESSEE. ALL THE MATERIAL FACT IN S UPPORT OF VALUATION OF CLOSING STOCK WAS DISCLOSED IN THE AUDIT REPORT WHICH WAS FILED A LONG WITH RETURN OF INCOME. THE METHOD OF VALUATION ADOPTED WAS ALSO CLEARLY MENTIO NED IN AUDIT REPORT. THEREFORE IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE C ASE OF RELIANCE PETROCHEMICAL PVT. LTD. (SUPRA) WHEREIN IT WAS OBSERVED THAT WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND T O BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INITIATING THE PENALT Y U/S. 271(1)(C) OF THE ACT. IN THIS CASE THERE IS NO SUCH FINDING BY THE ASSESSING OFF ICER THAT ASSESSEE CONCEALED ANY INFORMATION OR DETAILS IN RESPECT OF VALUATION OF C LOSING STOCK MADE BY HIM. SIMPLY BECAUSE THE ADDITION HAS BEEN MADE FOLLOWING THE RA TIO OF THE HONBLE APEX COURTS DECISION IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUPRA) PENALTY FOR CONCEALMENT U/S. I TA NO2246/AHD/2009 A.Y. 1 998-99 M/S PATEL C VRAJLAL V. ACIT CC-1 BRD PAGE 6 271(1)(C) CANNOT BE LEVIED AND THEREFORE THE PENALT Y SO IMPOSED AND SUSTAINED BY LD. CIT(APPEALS) IS HEREBY DELETED. 12. NOW COMING TO THE PENALTY ON ACCOUNT OF ADDITIO N OF SALES TAX PENALTY AFTER GOING THROUGH THE RECORD AND ORDERS OF SALES TAX AU THORITIES WE FIND THAT PENALTY OF RS.2 37 554/- IMPOSED BY THE SALES TAX AUTHORITY WA S NOT COMPENSATORY IN NATURE AND THUS WAS NOT ALLOWABLE EXPENDITURE U/S 37 OF TH E ACT. WE FURTHER FIND THAT THE ASSESSEE CLAIMED THIS EXPENDITURE UNDER THE HEAD S ALES-TAX AND DID NOT DISCLOSE THAT PART OF THE EXPENDITURE WAS PENALTY UNTIL AO S PECIFICALLY ASKED FOR THE SAME. THIS CONDUCT OF THE ASSESSEE AMOUNTS TO WILLFUL CON CEALMENT OF INCOME AND/OR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREF ORE PENALTY IMPOSED ON THIS ADDITION DESERVES TO BE UPHELD AND THE SAME IS HERE BY UPHELD. 13. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29/07/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYA GI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 29/07/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD