The DCIT, Circle-9,, Surat v. Shri Rajeshbhai Bhupatbhai Patel, Surat

ITA 2868/AHD/2011 | 2006-2007
Pronouncement Date: 24-04-2015 | Result: Dismissed

Appeal Details

RSA Number 286820514 RSA 2011
Assessee PAN AGQPP9625A
Bench Ahmedabad
Appeal Number ITA 2868/AHD/2011
Duration Of Justice 3 year(s) 5 month(s) 6 day(s)
Appellant The DCIT, Circle-9,, Surat
Respondent Shri Rajeshbhai Bhupatbhai Patel, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 24-04-2015
Date Of Final Hearing 30-03-2015
Next Hearing Date 30-03-2015
Assessment Year 2006-2007
Appeal Filed On 18-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCO UNTANT MEMBER THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-9 SURAT (APPELLANT) VS SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SHYAM TEXTILES 81-B HANS SOCIETY VARACHHA ROAD SURAT- 3955006 PAN: AGQPP9625A (RESPONDENT) REVENUE BY: SHRI DINESH SINGH SR. D.R. ASSESSEE BY: NONE DATE OF HEARING : 30-03-2015 DATE OF PRONOUNCEMENT : 24-04- 2015 / ORDER PER : RAJPAL YADAV JUDICIAL MEMBER:- REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER O F LD. CIT(A)-V SURAT DATED 29 TH JULY 2011 PASSED FOR ASSESSMENT YEAR 2006-07. ITA NO. 2868/AHD/2011 ASSESSMENT YEAR 2006-07 I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD . CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS. 7 71 275/- IMPOSED BY A O U/S. 271(1)(C) OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS THE ACT ). 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL. HE HAS FILED HIS RETURN OF INCOME ON 16-10-2006 DECLAR ING TOTAL INCOME AT RS. 6 42 125/-. THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MANUFACTURING OF GREY CLOTH. DURING THE YEAR ASSESSEE HAD SHOWN YI ELD OF GREY CLOTH MANUFACTURED FROM DENIER QUALITY 30/40 YARN AT 14.6 5 METER PER KG. AO HAS OBSERVED THAT ASSESSEE DID NOT MAINTAIN DAILY C ONSUMPTION REGISTER PRODUCTION REGISTER AND DAY TO DAY STOCK REGISTER AND THEREFORE HIS BOOKS OF ACCOUNT ARE NOT RELIABLE. HE FURTHER OBSERVED T HAT OTHER ASSESSEES IN THIS LINE OF BUSINESS WERE SHOWING THE YIELD AT 22 TO 24 METERS PER KG OF YARN CONSUMED. HE ACCORDINGLY REJECTED BOOK RESULT OF ASSESSEE AND ESTIMATED THE PRODUCTION. ACCORDING TO THE AO ASS ESSEE OUGHT TO HAVE PRODUCED AT LEAST 18 METERS PER KG CONSUMPTION OF Y ARN. THE ASSESSEE HAS SHOWN TOTAL PRODUCTION AT 20 35 740 METERS. AO HAS ESTIMATED IT AT 22 22 192 METERS. THE VALUE OF ALLEGED EXCESS ESTI MATED PRODUCTION AT 1 86 452/- METERS HAS BEEN WORKED OUT AT RS. 24 23 876/- AO HAS MADE ADDITION OF THIS AMOUNT. HE ISSUED A SHOW CAUSE NO TICE U/S. 271(1)(C) R.W.S. 274 AND ARRIVED AT A CONCLUSION THAT ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME ON THE ISSUE O F ACTUAL PRODUCTION. ACCORDINGLY PENALTY U/S. 271(1)(C) HAS BEEN IMPOSE D AT RS. 7 71 275/-. 4. ON APPEAL LD. CIT(A) HAS DELETED THE PENALTY ON THE GROUND THAT AO HAS MADE ADDITION ON ESTIMATION. HE HAS RELIED UPON THE DETAILS OF ASSESSEE AND WORKED OUT THE ADDITION REQUIRED TO BE MADE IN THE BOOK I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 3 RESULT OF THE ASSESSEE. ACCORDING TO THE CIT(A) T HERE CANNOT BE ANY PENALTY ON AN ESTIMATED ADDITION. 5. IN RESPONSE TO THE NOTICE OF HEARING NO-ONE HA S COME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF LD. DR WE HAVE GONE THROUGH THE RECORD AND PROCEEDED TO DECIDE THIS APP EAL EX-PARTE QUA ASSESSEE. 6. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARIN G ON THE CONTROVERSY AND THEREFORE IT IS SALUTARY UPON US TO TAKE NOTE OF THE RELEVANT PROVISIONS OF SECTION 271(1)(C) ALONG WITH EXPLANATION 1 WHIC H READ AS UNDER: '271. FAILURE TO FURNISH RETURNS COMPLY WITH NOTIC ES CONCEALMENT OF INCOME ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE OF COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER )** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D) IN ADDITION TO TAX IF ANY PAYABLE BY HIM A SUM WHICH SHALL NOT BE LESS THAN BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 4 EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM THE N THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED THE PENALTY IMPOSED UNDER THIS SECTIO N CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCUR ATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF THIS SECTION IS DE EMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ON LY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE I NCOME OR FURNISHED INACCURATE PARTICULARS IN CERTAIN SITUATION EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION BY WA Y OF EXPLANATION I TO I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 5 SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT( APPEAL); AND (B) WHERE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER T HE PROVISIONS OF THE ACT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLAN ATION AND THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UNDER FIRST SITUATION THE DEE MING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY A CTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CAT EGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FA LSE. IN THE SECOND SITUATION THE DEEMING FICTION WOULD COME TO PLAY B Y THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITU ATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 27 1(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE T WO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE T OTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOUL D BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCUR ATE PARTICULARS HAVE BEEN FURNISHED. I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 6 8. IN THE LIGHT OF THE ABOVE WE EXAMINE THE FACTS ON RECORD THEN IT WILL REVEAL THAT CONTENTION OF THE ASSESSEE BEFORE THE A O WAS THAT THE WEIGHT OF GREY CLOTH MANUFACTURED BY HIM IS 6.822 KG FOR P ER 100 METERS WHEREAS THE WEIGHT OF MANUFACTURED CLOTH BY SIMILARLY SITUA TED ASSESSEE WHO HAVE SHOWN PRODUCTION AT 22.14 METERS PER KG OF CONSUMPT ION OF YARN IS 4.51 KG PER 100 METER. THUS THERE IS SIGNIFICANT DIFFEREN CE BETWEEN THE OUTPUT AND THE RESULT OF BOTH THESE ASSESSEES CANNOT BE CO MPARED. THE ASSESSEE ALSO PLEADED THAT IF THE WEIGHT OF THE CLO TH PRODUCED AT 22.14 METERS OF 1 KG CONSUMPTION OF YARN IS MULTIPLIED WI TH 22.14 AND THEN DIVIDED BY THE WEIGHT OF ASSESSEES CLOTH THEN OUTP UT WILL COME AT 14.65 METERS PER KG OF YARN. IN OTHER WORDS THE EXPLANA TION OF THE ASSESSEE IS 4.514 KGSX22.14 METERS / 6.822 KG = 14.65 MTS. 9. THE AO HAS OBSERVED THAT ASSESSEE DID NOT MAINTA IN DAY TO DAY STOCK REGISTER OF GREY CLOTH; PRODUCTION REGISTER A ND CONSUMPTION OF RAW MATERIAL REGISTER THEREFORE BOOK RESULT IS TO BE DISBELIEVED. IN OUR OPINION WHEN ASSESSEE HAS SUBMITTED THE DETAILS OF RAW MATE RIAL CONSUMED DURING THE YEAR THE DETAILS OF TOTAL PRODUCTION AND DETAI LS OF POWER-LOOM USED BY HIM THEN AO WOULD HAVE EASILY WORKED OUT THE PRODUC TION RESULT. THE BOOKS IS TO THE REJECTED U/S. 145(3) WHEN IT IS NOT POSSIBLE FOR THE AO TO DEDUCE TRUE INCOME FROM THE BOOK RESULT. LD. AO HA S NOT GIVEN ANY REASON AS TO HOW HE COULD NOT DEDUCE THE TRUE RESUL T. THOUGH IT IS NOT AN ISSUE AGITATED BY THE ASSESSEE BEFORE THE TRIBUNAL IN THE PRESENT APPEAL. WE ARE JUST APPRECIATING THIS ASPECT WHETHER IN TH IS FACTS AND CIRCUMSTANCES PENALTY CAN BE IMPOSED UPON THE ASSE SSEE. WE FIND THAT AO HAS MADE ADDITION SIMPLY ON ACCOUNT OF HIS DIFFE RENCE OF OPINION QUA THE PRODUCTION RATIO FROM CONSUMPTION OF RAM MATERI AL. LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY OBSERVED THAT ASSESSEE HAS NO T FURNISHED INACCURATE I.T.A NO. 2868/AHD/2011 A.Y. 2006-07 PAGE NO DCIT VS. SHRI RAJESHBHAI BHUPATBHAI PATEL PROP. SH YAM TEXTILES 7 PARTICULARS. THE AO HAS MADE ADDITION ON AN ESTIMA TE BASIS AND THE EXPLANATION OF THE ASSESSEE IN SUPPORT OF HIS CLAIM OF THE PRODUCTION IS NOT FALSE. IT WAS NOT ACCEPTED BY THE AO ON A DIFFEREN CE OF OPINION. THEREFORE NO PENALTY CAN BE IMPOSED UPON THE ASSESSEE. WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24-04-2015 SD/- SD/- (ANIL CHATURVEDI) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 24/04/2015 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER/ /