M/s. Bansidhar Rice Mills, Kheda v. The Income tax Officer, Ward-3,, Nadiad

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.2591/AHD/2010 ASSESSMENT YEAR:2003-04 DATE OF HEARING:18.2.11 DRAFTED:21.2.11 M/S. BANSIDHAR RICE MILLS MALAWADA ROAD LIMBASI DIST. KHEDA PAN NO.AABFB87397N V/S. INCOME TAX OFFICER WARD-3 NADIAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE RESPONDENT BY:- SHRI G.S.SURYAVANSHI SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-IV BARODA IN APPEAL NO.CAB/ IV-N-102/09-10 DATED 17-06-2010. THE ASSESSMENT WAS FRAMED BY THE ITO W ARD-3 NADIA U/S.143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 20-12-2004 FOR THE ASSESSMENT YEAR 2003-04. THE PENALTY UNDER DISPUTE WAS LEVIED BY ITO WARD-3 NAD IA U/S 271(1) OF THE ACT VIDE HIS ORDER DATED 23-09-2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY MADE BY ASSESSING OF FICER U/S.271(1)(C) OF THE ACT. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING EF FECTIVE TWO GROUNDS :- 1. THE PENALTY ORDER PASSED BY THE ASSESSING OFFIC ER U/S.271(1) OF IT ACT AND CONFIRMED BY THE FIRST APPEAL AUTHORITY IS BAD IN LAW AND DESERVES TO BE UNCALLED FOR. ITA 2591/AHD/2010 A.Y. 2 003-04 M/S BANSIDHAR RICE MILLS V. ITO WD-3 NADIAD PAGE 2 2. THE ASSESSING OFFICER AS WELL AS FIRST APPELLANT AUTHORITY HAS ERRED IN LAW & ON FACTS IN LEVYING AND CONFIRMING RESPECTIVE LY PENALTY OF RS.2 88 516/- ON ADDITION TOWARDS G.P. ESTIMATION I NCOME. THE SAID PENALTY DESERVES TO BE DELETED. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF TRADING AND MILLING OF P ADDY RICE AND BY-PRODUCT. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30-0 7-2003 DECLARING TOTAL LOSS AT RS.1 18 572/-. A SURVEY OPERATION U/S.133A WAS C ARRIED OUT ON 30-01-2002 AND ASSESSING OFFICER FOUND EXCESS STOCK WORTH RS.4 86 908/- IN DIFFERENT ITEMS I.E. GUJRAT-17 KUSHKI & BARDAN AND A STATEME NT RECORDED U/S.133A OF SHRI NARENDRABHAI PUNJABHAAI PANCHAL WHO IS ACTIVE PARTNER OF THE ASSESSEE- FIRM ON 30-01-2003 WHEREIN HE STATED THAT EXCESS S TOCK OF DIFFERENT ITEMS OF TOTAL RS.4 86 908/- FOUND IN THE BUSINESS PREMISES STATED THAT IT IS NOTHING BUT THE ASSESSEE-FIRMS UNACCOUNTED BUSINESS INCOME NOT RECORDED IN THE BOOKS OF ACCOUNT FOR WHICH HE AGREED TO ACCOUNT FOR IN TH E BOOKS OF ACCOUNT AND PAY THE TAXES THEREON. FURTHER WITH REGARD TO SOME OF T HE ITEMS I.E. MASURI DANGER VATLA KANAKI THERE WAS A DEFICIT IN THE BUS INESS STOCK RECORDED IN THE BOOKS OF ACCOUNT ON THAT DAY AND THE PARTNER OF ASS ESSEE-FIRM COMMITTED THAT THE DIFFERENCE SO ARRIVES IS HIS UNRECORDED SALES I N THE BOOKS OF ACCOUNT FOR WHICH IT WILL PAY THE TAXES UPON THE BUSINESS INCOM E DURING THE ASSESSMENT YEAR AND THE EXPENSES OF RS.6.30 LAKH MADE DURING T HE YEAR ARE FROM THE PARTNERSHIP FIRMS CONCEALED INCOME AND NOT RECORDE D IN THE BOOKS OF ACCOUNT FOR WHICH HE ALSO AGREED TO PAY THE TAXES AS THE IN COME FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER MADE ADDITION OF GROSS PROFIT AFTER AVERAGING THE SAME AT 7.63% AND ADDITION WAS MADE A T RS.9 94 207/- BY GIVING FOLLOWING FINDINGS:- UNDER THE CIRCUMSTANCES IT WOULD BE COMPLETE GENUI NE TO TAKE GP AT AVERAGE RATE OF PRECEDING TWO ASSESSMENT YEARS FROM THE YEAR UNDER CONSIDERATION. THE AVERAGE SO COMES TO 7.63% (8.20% FOR A.Y. 02-03 + 7.05% FOR A.Y. 01-02). NOW THE ASSESSEE HAS SHOWN G.P. OF LAST TWO YEARS. ON ACCOUNT OF DIFFERENCE IN GP AT 5.113% AN AMOUNT OF RS.9 94 207/- IS ADDED TO THE TOTAL INCOME OF THE A SSESSEE. PENALTY PROCEEDINGS U/S.271(1) OF THE ACT ARE INITIATED FO R FURNISHING AND CONCEALING THE PARTICULARS OF INCOME. ITA 2591/AHD/2010 A.Y. 2 003-04 M/S BANSIDHAR RICE MILLS V. ITO WD-3 NADIAD PAGE 3 4. BUT THE ASSESSING OFFICER LEVIED THE PENALTY ON THE INCOME SURRENDERED AT RS.7 85 083/- ON THE FOLLOWING ITEMS:- I) DECLARED ESTIMATED PROFIT ON UNACCOUNTED SALES RS. 80 183/- II) UNACCOUNTED INVESTMENT EXPENSES IN FACTORY BUI LDING RS.6 30 000 III) AMOUNT DECLARED IN BARDAN STOCK RS. 68 900/- RS.7 85 083/- FOR THIS ASSESSING OFFICER RECORDED HIS FINDINGS IN PARA-7 OF PENALTY ORDER AS UNDER:- 7. IN VIEW OF THE FOREGOING DISCUSSION I SATISFIE D THAT THIS IS A FIT CASE TO LEVY PENALTY U/S.271(1) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME T THE TUNE OF RS.7 85 083/-. THE MAXI MUM PENALTY LEVIABLE @ 300/- COMES TO RS.8 65 548/- AND MINIMUM PENALTY @ 100% COMES TO RS.2 88 516/-. HOWEVER LOOKING TO THE FACTS OF THE CASE I AM SATISFIED TO LEVY MINIMUM PENALTY OF RS.2 88 516/- U/S.271(1) OF THE I.T. ACT. 5. THE LD. SR-DR STATED THAT THE TRIBUNAL IN QUANTU M APPEAL IN ITA NO.2560/AHD/2005 VIDE ORDER DATED 23-01-2009 VIDE PARA-5 SUSTAINED THE ADDITION AND HELD AS UNDER:- 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS CREDITED THE FOLLOWING A DDITIONAL INCOME INTO THE TRADING ACCOUNT: ESTIMATED PROFIT ON UNACCOUNTED SALES RS. 86 183/- UNACCOUNTED EXPENSES IN FACTORY BUILDING RS.6 30 0 00/- AMOUNT DECLARED IN BARDAN STOCK RS. 68 900/- RS.7 85 083/- THE GROSS PROFIT OF THE ASSESSEE WHEN THERE WAS NO ADDITIONAL INCOME CREDITED IN THE EARLIER YEAR WAS 8.2% AND 7.05% WH ILE DURING THE YEAR IT HAS FALLEN TO 2.5%. NO PLAUSIBLE EXPLANATION HAS BE EN OFFERED BY THE ASSESSEE NEITHER BEFORE THE AUTHORITIES BELOW NOR B EFORE US FOR THE FALL IN THE GP RATHER THE LEARNED AR CONTENDED THAT THE EXTRAORDINARY INCOME CREDITED BY THE ASSESSEE SHOULD HAVE BEEN CO NSIDERED FOR ESTIMATING THE GROSS PROFIT RATE OF. THE REJECTION OF BOOKS OF ACCOUNT HAS DULY BEEN ACCEPTED BY THE ASSESSEE AND ONCE THE BOO KS OF ACCOUNT HAVE BEEN REJECTED THE INCOME HAS TO BE COMPUTED I N THE MANNER STATED U/S.144 ON THE BASIS OF MATERIAL AVAILABLE W ITH THE AO. IN OUR OPINION THE BEST EVIDENCE AVAILABLE WITH THE AO WA S THE COMPARATIVE GP IN THE EARLIER YEAR EARNED BY THE ASSESSEE. THE AVERAGE GP FOR THE LAST TWO YEARS IS 7.63% WHICH IS NOT DENIED. THE AS SESSEE HAS DECLARED ITA 2591/AHD/2010 A.Y. 2 003-04 M/S BANSIDHAR RICE MILLS V. ITO WD-3 NADIAD PAGE 4 THE GROSS PROFIT IN ITS BOOKS OF ACCOUNT FOUND AT T HE TIME OF SURVEY AT THE RATE OF 5.485. THUS WE DO NOT FIND ANY PLAUSIBLE R EASON FOR THE FALL IN THE GP TO 2.5% DURING THE YEAR WHILE IN THE PERIOD AFTER THE SURVEY THE GP SHOWN BY THE ASSESSEE WOULD HAVE DRASTICALLY FAL LEN. IN VIEW OF THESE FACTS AND CIRCUMSTANCES IN OUR OPINION THE CIT(A) WAS MUCH FAIR AND REASONABLE IN ESTIMATING THE GP AT THE RATE OF 6.5% WHICH IS EVEN BELOW THE AVERAGE OF THE LAST TWO ASSESSMENT YEARS. WE THEREFORE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER O F THE CIT(A) SO FAR AS THE ESTIMATION OF THE ADDITION ON ACCOUNT OF ESTIMATE O F GP IS CONCERNED WHICH IN OUR OPINION IS IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 145 READ WITH SECTION 144 OF THE ACT. 6. AFTER HEARING LD. SR-DR WE ARE OF THE VIEW THAT THE CIT(A) HAS NOT GONE INTO THE ORDER OF THE TRIBUNAL REGARDING ESTIM ATION OF GROSS PROFIT AND THERE IS NO FINDING HOW THE INCOME OF THE ASSESSEE IS LIABLE TO PENALTY U/S.271(1)(C) OF THE ACT. EVEN OTHERWISE THE LOWER AUTHORITIES HAVE NO BENEFIT OF TRIBUNALS ORDER LET THE AUTHORITIES CONSIDER T RIBUNALS ORDER IN QUANTUM AND DECIDE THE PENALTY ACCORDINGLY. ACCORDINGLY THIS P ENALTY IS SET ASIDE TO THE FILE OF ASSESSING OFFICER FOR RE-ADJUDICATION. THIS ISS UE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 22/02/2011 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 22/02/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV BARODA 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD