Shri Jitendra Bhikhabhai Sonani, Surat v. The Income tax Officer,Ward-9(2),, Surat

ITA 634/AHD/2007 | 2002-2003
Pronouncement Date: 22-01-2010 | Result: Allowed

Appeal Details

RSA Number 63420514 RSA 2007
Assessee PAN ABNPS6970P
Bench Ahmedabad
Appeal Number ITA 634/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 9 day(s)
Appellant Shri Jitendra Bhikhabhai Sonani, Surat
Respondent The Income tax Officer,Ward-9(2),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 22-01-2010
Date Of Final Hearing 21-01-2010
Next Hearing Date 21-01-2010
Assessment Year 2002-2003
Appeal Filed On 12-02-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 634/AHD./2007 ASSESSMENT YEAR : 2002-2003 SHRI JITENDRA BHIKHABHAI SONANI SURAT - VS.- INCOME TAX OFFICER WARD-9(2) SURAT (PAN : ABNPS 6970 P) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI HARDIK VO RA RESPONDENT BY : SHRI M.C. PANDIT SR . D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER :- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 07.12.2006 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V SURAT FOR THE ASSESSMENT YEAR 2002-03 CONFIRMING THE PENALTY OF RS.7 85 043/ - LEVIED BY THE A.O. UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL ENGAGED IN THE WORK OF EARNING INCOME FROM LABOUR CHARGES ON DIAMOND CUTTI NG AND POLISHING. IN THE ASSESSMENT ORDER THE A.O. DISALLOWED RS.35 37 000/- BEING PAYMENT MA DE TO SUB-CONTRACTORS ON THE GROUND THAT THIS AMOUNT WAS NOT CREDITED IN THE BANK A/C. OF VA RIOUS SUB-CONTRACTORS THEREFORE NOT VERIFIABLE. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) CONFIRMED THE DISALLOWANCE. THEREAFTER THE A.O. LEVIED THE PENALTY UNDER SECTIO N 271(1)(C) IN RESPECT OF THIS DISALLOWANCE WHICH IS CONFIRMED BY THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS). ON RECEIPT OF ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN QUANTUM APPEAL THE A.O. ISSUED A SHOW- CAUSE NOTICE UNDER SECTION 271(1)(C) ASKING THE ASS ESSEE TO SHOW-CAUSE WHY PENALTY SHOULD NOT BE LEVIED FOR CONCEALMENT OF INCOME IN RESPECT OF T HE AFORESAID ADDITION OF RS.35 37 000/- WHICH IS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IN REPLY THE ASSESSEE SUBMITTED A DETAILED REPLY AND IN THE PENALTY ORDER THE A.O. HAS SUMMARIZED THE ASSESSEES MAJOR ARGUMENTS AS UNDER :- (1) IT WAS FURTHER OBSERVED THAT AMOUNT IN QUESTION WAS WITHDRAWN THROUGH BEARER CHEQUE AND THAT THE SAME WAS WITHDRAWN BY ON E SHRI GOPAL P. PATEL. MAINL Y ON THE BASIS OF THESE OBSERVATIONS IT WAS CONCLU DED THAT ASSESSEE HAS NOT MADE PAYMENT OF LABOUR CHARGES. 2 (2) IT IS PERTINENT TO POINT OUT AT THE OUTSET THA T NO CONCRETE EVIDENCE HAVE BEEN BROUGHT ON RECORD THAT THE AMOUNT WITHDRAWN TH ROUGH BEARER CHEQUES WERE NOT PAID TO THE SUB-CONTRACTORS BUT WAS REMITTED BA CK TO M/S. I. P. PATEL & CO. (3) THUS ADDITION HAS BEEN PARTLY CONFIRMED BY HIM (THE ID. CIT(A)) ON THE BASIS OF PREPONDERANCE OF PROBABILITY ONLY. MATTER HAS TO BE CONSIDERED AFRESH AND CONCEALMENT SHOULD BE INDEPENDENTLY ESTABLISHED IN THE PENALTY PROCEEDING. (4) THE PENALTY CAN BE JUSTIFIED ONLY IF ASSESSES FAILS TO OFFER AND EXPLANATION OR HIS EXPLANATION IS FOUND TO BE RAISE. IF THESE C IRCUMSTANCES ARE NOT PRESENT THE PENALTY CAN BE AVOIDED IF ASSESSEE IS ABLE TO SUBST ANTIATE HIS EXPLANATION. IT IS TO BE NOTED THAT IN THE CASE OF PENALTY THE ASSESSEE NEE D NOT SUBSTANTIATE THE EXPLANATION TO THE SATISFACTION OF ASSESSING OFFICER. 3. AFTER CONSIDERING THE AFORESAID REPLY THE A.O. TOOK THE VIEW THAT THE ENTIRE AMOUNT OF RS.35 37 000/- CLAIMED BY THE ASSESSEE IS BOGUS BU T THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION OF RS.11 01 059/- . IN VIEW OF THESE FACTS THE A.O. OBSERVED THAT THE ASSESSEE HAS CONCEALED INCOME OF RS.26 32 323/- AND HE LEVIED THE PENALTY OF RS.7 85 043/- BEING THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASONS OF FURNISHING INACCURATE PARTICULARS OF INCOME. ON FURTHER APPEAL IN THE IM PUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTION OF A.O. LEVYI NG THE PENALTY OF RS.7 85 043/- UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. AGGR IEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE I S IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE SHR I HARDIK VORA APPEARED AND PRODUCED A COPY OF THE DECISION DATED 28.10.2009 OF ITAT RAJK OT BENCH RAJKOT IN I.T.A. NO. 831/A/2005 WHEREIN IN QUANTUM APPEAL FOR THE ASSESSMENT YEAR 2 002-03 THE HON'BLE TRIBUNAL HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE LABOUR CHAR GES ARE GENUINE BUT DISALLOWANCE @ 20% UNDER SECTION 40A(3) IS REQUIRED TO BE MADE IN RESPECT OF TOTAL LABOUR CHARGES OF RS.35 37 000/-. LD. COUNSEL OF THE ASSESSEE FURTHER RELIED ON THE FOLLO WING DECISIONS WHEREIN IT IS HELD THAT IN RESPECT OF DISALLOWANCE UNDER SECTION 40A(3) NO PENALTY UN DER SECTION 271(1)(C) IS LEVIABLE :- 1. ACIT VS.- KEJRIWAL IRON STORES (1987) 168 ITR 715 (RAJ.) 2. HARGOVIND BHIKARAM VS.- ITO (1979) 7 TTJ (JP) 627 3. GHISA RAM TARA CHAND VS.- ITO (1998) 60 TTJ 30 (DE L.) 3 LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE IS NOT COVERED BY EXPLANATION (1) TO SECTION 271(1)(C) OF THE INCOME TAX ACT 1961. HE ALSO SUBMITTED THAT DEEMING FICTION OF EXPLANATION 1 TO SECTION 271(1)( C) APPLIES ONLY WITH RESPECT TO FACTS MATERIAL TO THE COMPUTATION OF INCOME AND NOT WITH THE COMPUTATION PER SE. THE FICTION DOES NOT APPLY WHERE THE CONTROVERSY IS REGARDING THE LE GALITY OF THE CLAIM MADE BY THE ASSESSEE . WHEN AN ASSESSEE OFFERS AN EXPLANATION IN DISCHARGE OF THE ONUS CAST UPON HIM BY EXPLANATION 1 TO SECTION 271(1)(C) THE A.O. MUST CONSIDER THE EX PLANATION OBJECTIVELY AND UNLESS HE FINDS THE SAME AGAINST THE HUMAN PROBABILITIES OR UNLESS THERE ARE ANY REAL INCONSISTENCIES OR FA CTUAL ERRORS IN SUCH AN EXPLANATION THE A.O. OUGHT TO AC CEPT THE SAME. THE EXPRESSION CONCEALMENT OF INCOME IMPLIES THAT AN INCOME IS BEING HIDDEN CAMOUFLAGED OR COVERED UP SO AS IT CANNOT BE SEEN FOUND OBSERVED OR DISCOVERED. IN THIS CASE THE A.O. DISALLOWED LABOUR CHARGES AMOUNTING TO RS.35 37 400/- AS BOGUS CLAIM. THIS WAS NOT FOUN D BOGUS BY HIGHEST FACT FINDING APPELLATE AUTHORITY I.E. TRIBUNAL. HOWEVER THE TRIBUNAL RES TRICTED THE DISALLOWANCE TO RS.7 07 400/- BY INVOKING THE PROVISIONS CONTAINED IN SECTION 40A(3) . IN THESE CIRCUMSTANCES EVEN IN RESPECT OF THE DISALLOWANCE TO THE EXTENT OF RS.7 07 400/- CON FIRMED BY THE TRIBUNAL IS NOT LEVIABLE. 5. ON THE OTHER HAND SHRI M.C. PANDIT SR. D.R. AP PEARING ON BEHALF OF THE REVENUE CONTENDED THAT IN THE ASSESSMENT ORDER THE A.O. HA S GIVEN A FINDING THAT THE ASSESSEE HAS CLAIMED RS.35 37 400/- AS BOGUS EXPENSES. OUT OF TH IS BOGUS EXPENSES THE TRIBUNAL HAS CONFIRMED THE ADDITION TO THE EXTENT OF RS.7 07 400 /- BY APPLYING THE PROVISIONS CONTAINED IN SECTION 40A(3) THEREFORE IT MAY BE HELD THAT PENA LTY UNDER SECTION 271(1)(C) IS LEVIABLE FOR CONCEALMENT OF INCOME TO THE EXTENT OF RS.7 07 400/ -. 6. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE ASSESSME NT ORDER THE A.O. DISALLOWED THE LABOUR CHARGES TO THE EXTENT OF RS.35 37 000/-. THESE WERE PARTLY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). ON FURTHER APPEAL THE HON'BLE TRIBUNAL IN I.T.A. NO. 831/A/2005 VIDE ORDER DATED 28.10.2009 (SUPRA) RESTRICTED THE DISAL LOWANCE TO THE EXTENT OF RS.7 07 400/-. THE REASONING GIVEN BY THE HON'BLE TRIBUNAL IS CONTAINE D IN PAGE 7 AT PARA 10 AS UNDER :- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND M ATERIALS PLACED ON RECORD. THE JOB WORKERS HAVE CONFIRMED THE PAYMENTS SUPPORTED BY THEIR BILLS AND CONFIRMATION THE QUA NTITY DETAILS IN CARATS HAVE 4 BEEN MAINTAINED ON THE BASIS OF WHICH JOB CHARGES A RE PAID. AGAINST THE JOB CHARGES THERE IS CORRESPONDING QUANTITY OF DI AMOND CUT & POLISHED RECEIVED FROM THE JOB WORKERS AND GIVEN TO M/S. I.P. PATEL & CO. FOR WHOM JOB WORK IS UNDERTAKEN. THE RATES O( JOB CHARGES AR E NOT EXCESSIVE AND UNREASONABLE AND ALL THE TWELVE PARTIES ARE NOT REL ATED TO ASSESSEE. THE GROSS PROFIT RATE OF ASSESSEE IS 3.83% WHIC H IS MORE THEN THE GROSS PROFIT RATE OF 3% DIRECTED BE ADOPTED BY THE TRIBUN AL IN CASE OF ATUL M JHAVERI HUF. IN FACT IN SUCH CASES WHERE JOB CHARGE S ARE NOT CONFIRMED ASSESSING OFFICER MADE 10% DISALLOWANCE WHICH WERE ALSO DELETED BY THE TRIBUNAL AS PER THE CASE OF BHARATKUMAR RAMNJKLAL M EHTA THE CASE OF ASSESSEE IS BETTER AS ALL THE TWELVE PARTIES HAVE CONFIRMED THE RECEIPT OF JOB CHARGES. HOWEVER THE DISALLOWANCE @ 20% OUT OF TOTAL ADDITION OF RS. 35 37 000/- IS CONFIRMED U/S. 40A(3). SO THE GROUND NO. 1 OF ASSESSEE'S APPEAL IS PARTLY ALLOWED AND GROUND NO 1 OF REVENUE 'S APPEAL IS DISMISSED. 7. FROM THE PERUSAL OF ABOVE IT CAN BE SEEN THAT T RIBUNAL HAS CONFIRMED THE DISALLOWANCE UNDER SECTION 40A(3) BEING 20% OF TOTAL ADDITION OF RS.35 37 000/-. THIS WORKS OUT TO RS.7 07 400/-. UNDER EXPLANATION (1) TO SECTION 271 (1)(C) REFERS BURDEN OF PROOF WHICH CAN BE DISCHARGED BY PREPONDERANCE OF PROBABILITIES. IN TH IS CASE COMPLETE FACTS OF LABOUR CHARGES WERE DISCLOSED. ULTIMATELY THESE WERE NOT FOUND FALSE. T HE HON'BLE TRIBUNAL IN I.T.A. NO. 831/A/2005 (SUPRA) RESTRICTED THE DISALLOWANCE TO THE EXTENT O F RS.7 07 400/- BY APPLYING THE PROVISIONS CONTAINED IN SECTION 40A(3). IN THESE FACTS IN OUR OPINION THE PENALTY UNDER SECTION 271(1)(C) IS NOT LEVIABLE. WE THEREFORE CANCEL THE PENALTY LEV IED BY THE A.O. UNDER SECTION 271(1)(C) OF THE I.T. ACT. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE COURT ON 22.01.2010 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 / 01 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE RESPONDENT 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.