The ITO, Ward-2(4),, Surat v. M/s. Kalakin Traders, Surat

ITA 2850/AHD/2008 | 2004-2005
Pronouncement Date: 17-09-2010 | Result: Dismissed

Appeal Details

RSA Number 285020514 RSA 2008
Assessee PAN AADFK0027A
Bench Ahmedabad
Appeal Number ITA 2850/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 8 day(s)
Appellant The ITO, Ward-2(4),, Surat
Respondent M/s. Kalakin Traders, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 17-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 17-09-2010
Date Of Final Hearing 31-08-2010
Next Hearing Date 31-08-2010
Assessment Year 2004-2005
Appeal Filed On 08-08-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.2850/AHD/2008 & C.O. NO.240/AHD/2008 (ARISING OUT ITA NO.2850/AHD/2007) ASSESSMENT YEAR:2004-05 DATE OF HEARING:31..8.10 DRAFTED:1.9.10 INCOME TAX OFFICER WARD-2(4) ROOM NO.119 1 ST FLOOR AAYAKAR BHAVAN MAJUA GATE SURAT KALAKIN TRADERS ICHHADOSHI NI WADI SIDHI SHERI SALABATPURA SURAT 395 002 PAN NO.AADFK0027A V/S . V/S . M/S. KALAKIN TRADERS 3/1917-B ICHHAL DOSHINI WADI SIDDHI SHERI SALABATPURA SURAT INCOME TAX OFFICER WARD-2(4) SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- NONE REVENUE BY:- SHRI VIMALENDU VERMA DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION (CO ) BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME- TAX (APPEALS)-II SURAT IN APPEAL NO. CAS/II/54/07-08 DATED 16-05-2008. THE PE NALTY UNDER DISPUTE WAS LEVIED BY ASSESSING OFFICER U/S.271(1) OF THE INCO ME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 28-06-2007 FOR ASSESSMENT YEAR 2004-05. ITA NO.2850/AHD/2008 & CO NO.240/AHD/2008 A.Y.2004-05 ITO WD-2(4) SRT V. M/S. KALAKIIN TRADERS. PAGE 2 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING PENALTY LEVIED U/S.271(1)(C) OF THE ACT. F OR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED CIT(A)-II SURAT HAS ERRED IN DELETING PENA LTY OF RS.2 15 067/-. 3. WE HAVE HEARD THE LD.DR AND GONE THROUGH THE FA CTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS AS WELL AS ORDER OF CIT(A) AND PENALTY ORDER. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOM E ON 01-11-2004 DECLARING TOTAL LOSS OF RS.12 69 400/- AND ASSESSMENT WAS FIN ALIZED U/S 143(3) OF THE ACT ON 20-12-2006 DETERMINING TOTAL LOSS AT RS.3 31 961/- AFTER MAKING VARIOUS ADDITIONS TO THE EXTENT OF RS.9 37 439/-. THE MAIN ADDITION OF RS.5 99 490/- WAS MADE ON ACCOUNT OF LOW GROSS PROFIT AND ASSESS ING OFFICER HAD INITIATED AND LEVIED PENALTY U/S.271(1)(C) OF THE ACT AMOUNTI NG TO RS.2 15 067/-. WE FIND THAT THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DISCLOSED GRO SS PROFIT RATE OF 4.30% ON TOTAL TURNOVER OF RS.1 39 41 627/- AS AGAINST THE G ROSS PROFIT RATE OF 8.09% ON TURNOVER OF RS.4 08 93 489/- IN THE IMMEDIATELY PRE CEDING YEAR. THERE WAS THUS FALL IN THE GROSS PROFIT RATE BY 4.30% ALONG W ITH AS FALL IN THE NET PROFIT RATE AS WELL. THE AO ASKED THE ASSESSEE TO EXPLAIN THE R EASON FOR ALL IN THE GROSS PROFIT RATE VIDE SHOW CAUSE NOTICE DATED 12-12-2006 IN PURSUANCE TO WHICH NO EXPLANATION WAS FURNISHED BY THE ASSESSEE REGARDING SUCH NOR DID ANY ONE APPEARED BEFORE THE HEARING ON THE DATE OF HEARING FIXED. MOREOVER THERE WAS MUCH VARIATION IN THE EXPENDITURE INCURRED IN ELECT RICITY POWER AND FUEL IN THE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEA R AS WELLS THERE WAS ALSO SUPPRESSION OF PRODUCTION. THE AO HAD THEREFORE REJ ECTED THE BOOK RESULTS U/S145(3) OF THE ACT AND ADOPTED THE GROSS PROFIT @ 8.09% AS SHOWN BY THE ASSESSEE ITSELF IN THE IMMEDIATELY PRECEDING YEAR A ND WORKED OUT THE DIFFERENCE @ 4.30% AMOUNTING TO RS.5 99 490/- AND A DDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO LEVIED THE PENALTY U/S.271( 1) OF THE ACT ON THE ADDITION MADE. THE AO HELD THAT THE ONUS IS ON THE PART OF THE ASSESSEE TO ITA NO.2850/AHD/2008 & CO NO.240/AHD/2008 A.Y.2004-05 ITO WD-2(4) SRT V. M/S. KALAKIIN TRADERS. PAGE 3 PROVE THAT THERE WAS NO CONCEALMENT OF INCOME OR NO INACCURATE PARTICULARS OF INCOME FURNISHED AND THE ASSESSEE HAS FAILED TO DO SO. AGGRIEVED AGAINST LEVY OF PENALTY THE ASSESSEE PREFERRED APPEAL BEFO RE CIT(A). 4. THE CIT(A) DELETED THE PENALTY VIDE PARA-7 OF HIS APPELLATE ORDER AS UNDER:- 7. I FIND THAT THE ADDITION ON ACCOUNT OF LOW GROS S PROFIT AND SUBSEQUENTLY THE LEVY OF PENALTY CAME TO BE MADE ON LY BECAUSE THERE WAS NO COMPLIANCE ON THE PART OF THE ASSESSEE TO TH E NOTICES ETC AND CONSEQUENTLY IN THE ABSENCE OF ANY CREDIBLE EXPLAN ATION REGARDING THE FALL IN GP RATIO. HOWEVER THE AO FAILED TO COUNTER THE ASSESSEES ASSERTION THAT ITS BOOKS OF ACCOUNT AND OTHER RECOR DS HAD BEEN DESTROYED IN THE FLOOD. WHAT EMERGED THEREFORE WAS AN ONE-SIDED ADDITION ON ACCOUNT OF LOW GROSS PROFIT WHICH WAS THE RESULT OF A COMPARISON OF THE GP RATIOS OF THE YEAR UNDER CONSI DERATION AND THE IMMEDIATELY PRECEDING YEAR. THE GP RATIO DISCLOSED BY THE ASSESSEE WAS SUPPORTED BY THE AUDIT REPORT EVEN THOUGH THE ASSESSEE HAD BEEN UNABLE TO REPRODUCE THE BOOKS OF ACCOUNT. IT W AS THEREFORE SIMPLY A CASE OF TWO DIVERGENT CLAIMS ONE MADE BY THE ASS ESSEE AND THE ONE MADE BY THE AO. IT WAS ESSENTIALLY A CASE OF TWO DI FFERING VIEW POINTS. CONSEQUENTLY IT COULD NOT BE SAID THAT THERE WAS A NY MENS REA ON THE PART OF ASSESSEE WHICH NECESSARILY HAD TO BE ESTAB LISHED BY THE AO BEFORE LEVYING PENALTY FOR CONCEALMENT OR FOR FURN ISHING INACCURATE PARTICULARS OF INCOME. ON HIS PART THE AO DID NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE CLAIM OF THE ASSESSEE WAS N OT BONAFIDE. HE ONLY RELIED UPON THE GP RATIO DISCLOSED IN THE IMME DIATELY PRECEDING YEAR. WHAT RESULTED THEREFORE WAS AN ADDITION MADE PURELY ON ESTIMATE WITHOUT THE ESTABLISHMENT OF ANY CONCEALMENT ON THE PART OF THE AO. GIVEN SUCH FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE FIRM VIEW THAT NEITHER PROCEDURES U/S.271(1) COULD BE INITIA TED NOR COULD ANY PENALTY BE LEVIED EITHER FOR CONCEALMENT OR FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. THE AO IS DIRECTED TO DELETE THE PENALTY OF RS.2 15 067 LEVIED U/S.271(1) OF THE IT ACT 5. WE FIND THAT DUE TO HEAVY FLOOD IN SURAT ON 06-0 8-2006 ALL THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ALL SUPPORTING VOUCHERS AND OTHER RECORDS HAD BEEN TOTALLY DESTROYED. THE NOTICES HAD BEEN ISSUED IN VERNACULAR NEWSPAPERS REGARDING THE LOSS OF BOOKS OF ACCOUNT STOCK-IN-TRADE AND COMPUTER SYSTEMS ETC. IT HAS THEREFORE BEEN ARGUED THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS SINCE THE ASSESSEE WAS PREVENTED BY ITA NO.2850/AHD/2008 & CO NO.240/AHD/2008 A.Y.2004-05 ITO WD-2(4) SRT V. M/S. KALAKIIN TRADERS. PAGE 4 JUST AND SUFFICIENT CAUSE FROM PRODUCING THE BOOKS AND THE ORDER RECORDS. IN REGARD TO THE FALL IN THE GP RATIO IT HAS BEEN ARG UED THAT THE AO WAS NOT JUSTIFIED IN COMPARING THE CONSUMPTION OF RAW MATER IALS WITH THE TOTAL TURNOVER. COMPARISONS COULD BE JUSTIFIED ONLY WHEN THE SALES OF THE ASSESSEE IS COMPRISED OF CRIMPED YARN AND GREY CLOTH BUT NO SUC H COMPARISON COULD BE MADE WHEN THERE IS A WIDE DIFFERENCE IN THE AMOUNTS AS ALSO IN THE QUANTITIES. DURING THE YEAR THE CRIMPED YARN SALES REDUCED BY 39% WHEREAS THE SALE OF GREY CLOTH INCREASED BY 2% AS COMPARED TO THE PRECE DING YEAR. WHILE GREY CLOTH IN MEASURED IN METERS YARN IS MEASURED IN KI LOGRAMS. THEREFORE THE COMPARISON MADE BY THE AO WAS DEFECTIVE. WITH REGAR D TO THE CONSUMPTION OF ELECTRICITY IT HAS BEEN ARGUED THAT THE SAME COULD NOT BE COMPARED WITH THE SALES. CONSUMPTION OF ELECTRICITY COULD BE COMPARED ONLY WITH THE TOTAL COST OF PRODUCTION. THE AO WAS ALSO NOT JUSTIFIED IN COMPAR ING THE WEAVING WAGES WITH THE TOTAL SALES AND WEAVING WAGES IS ALWAYS PA ID ON THE PRODUCTION OF THE GREY CLOTH PER METER AND NOT ON THE BASIS OF THE TO TAL TURNOVER; IT DOES NOT HAVE ANY CO-RELATION WITH THE PRODUCTION OF YARN. IT HAS BEEN FURTHER STATED THAT THE BOOKS OF ACCOUNT WERE AUDITED AND THE RETURN OF INC OME WAS FILED ON THE BASIS OF THE AUDITED BOOKS OF ACCOUNT. COPY OF THE AUDIT REPORT WAS FILED BEFORE THE AO WHERE NO ADVERSE COMMENT HAD BEEN MADE BY THE A UDITORS. THE AR HAD PLACED RELIANCE ON VARIOUS CASE LAWS TO ARGUE WHY T HE BOOKS OF ACCOUNT COULD NOT BE REJECTED AND NO PENALTY COULD BE LEVIED FOR CONCEALMENT IN SUCH CASES. 6. BEFORE US IN VIEW OF THE ABOVE FACTS THE LD. C OUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE O F CIT V. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 174 (SC) WHEREIN THE HONBLE APEX COURT HAS HELD :- WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE AS A M ATTER OF FACT THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTERS DICTIONARY THE WORD INACCURATE HAS BEEN DEFINED AS: NOT ACCURATE NOT EXACT OR CORRECT ; NOT ACCORDING TO TRUTH ERRONEOUS AS AN INACCURATE STATEMENT COPY OR TRANSCRIPT. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTI CULARS IN THE EARLIER PART OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCUR ATE NOT EXACT OR CORRECT NOT ITA NO.2850/AHD/2008 & CO NO.240/AHD/2008 A.Y.2004-05 ITO WD-2(4) SRT V. M/S. KALAKIIN TRADERS. PAGE 5 ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY TH E ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH N OT BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABL E IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. IN VIEW OF THE ABOVE FACTS WE FIND THAT THE ASSESS EE HAS FILED COMPLETE DETAILS IN RESPECT OF COMPUTATION OF GP AND ADDITION MADE I S ON ESTIMATE BASIS WHICH CANNOT BE SUBJECT-MATTER OF PENALTY U/S.271(1) OF THE ACT. ACCORDINGLY WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE PENALTY AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISS ED. 7. THE CO OF THE ASSESSEE IS SUPPORTIVE HENCE DOE S NOT REQUIRE ANY ADJUDICATION. 8. IN THE RESULT REVENUES APPEAL AND ASSESSEES CO A RE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 17/09/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 17/09/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-II SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD