RUCHI STRIPS AND ALLOYS LTD, MUMBAI v. DCIT CEN CIR-40, MUMBAI

ITA 6940/MUM/2008 | 2003-2004
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 694019914 RSA 2008
Assessee PAN AABCR2086D
Bench Mumbai
Appeal Number ITA 6940/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 16 day(s)
Appellant RUCHI STRIPS AND ALLOYS LTD, MUMBAI
Respondent DCIT CEN CIR-40, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-03-2010
Next Hearing Date 17-03-2010
Assessment Year 2003-2004
Appeal Filed On 05-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI N. V. VASUDEVAN J.M. AND SHRI T.R. SOO D A.M. I.T.A. NO.6940/MUM/2008 ASSESSMENT YEAR : 2003-04 & I.T.A. NO.6941/MUM/2008 ASSESSMENT YEAR : 2005-06 M/S. RUCHI STRIPS & ALLOYS LTD. 611 TULSIANI CHAMBERS NARIMAN POINT MUMBAI PAN NO : AABCR2086D DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 40 MUMBAI (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI BHUPENDRA SHAH RESPONDENT BY : SHRI JITENDRA YADAV ORDER PER N. V. VASUDEVAN (JM) : I.T.A. NO.6940/MUM/2008 A.Y. 2003-04 & I.T.A. NO.6941/MUM/2008 A.Y. 2005-06 BOTH THESE APPEALS AR E RAISED BY THE ASSESSEE AGAINST TWO ORDERS BOTH DATED 11.11.2008 OF COMMISS IONER OF INCOME TAX (APPEALS) CENTRAL-7 MUMBAI RELATING TO THE ASSESS MENT YEAR 2003-04 AND 2005-06. 2. IN BOTH THESE APPEALS THE ASSESSEE HAS CHALLENG ED THE ORDER OF THE LEARNED CIT (APPEALS) WHERE BY THE LEARNED CIT (APP EALS) CONFIRMED THE ORDER OF THE AO IMPOSING PENALTY ON ASSESSEE U/S. 271 (1) (C) OF THE ACT. THE FACTS 2 AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED O N THE ASSESSEE BY THE AO ARE AS FOLLOWS :- 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF COAL ROLLING MANUFACTURING. THERE WAS A SEARCH AND SEIZURE OPERA TION U/S. 132 OF THE INCOME TAX ACT 1961 (THE ACT) CARRIED OUT BY THE DEPARTME NT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17.11.2005. IN THE COURSE OF SEA RCH STATEMENTS OF DIRECTORS WERE RECORDED. BASED ON THE INCRIMINATING DOCUMENTS FOUND IN THE COURSE OF SEARCH THE ASSESSEE HAD THROUGH ITS DIRECTOR OFFE RED AN ADDITIONAL INCOME ON ACCOUNT OF LOOSE PAPERS FOUND IN THE COURSE OF SEAR CH. IN THE RETURN OF INCOME FILED AFTER THE SEARCH FOR ASSESSMENT YEAR 2003-04 AND 2005-06 THE INCOME SURRENDER AT THE TIME OF SEARCH WAS DULY OFFERED FO R TAX. THE ASSESSEE BEING A COMPANY THE PROVISIONS OF SECTION 115 JB OF THE ACT WERE APPLICABLE. SINCE THE TOTAL INCOME COMPUTED AS PER THE NORMAL PROVISION O F THE ACT IN BOTH THE AFORESAID ASSESSMENT YEARS WAS LESS THAN THE BOOK P ROFITS COMPUTED U/S. 115 JB OF THE ACT. THE AO ULTIMATELY LEVIED TAX ON THE TOT AL INCOME COMPUTED UNDER THE PROVISION OF SECTION 115 JB OF THE ACT. THE POS ITION IN THIS REGARD CAN BE SUMMARISED AS FOLLOWS:- ASSESSMENT YEAR : 2003-04 PARTICULARS INCOME AS PER ORIGINAL RETURN INCOME AS PER RETURN AFTER SEARCH AS PER ASSESSMENT ORDER U/S. 153 A BUSINESS INCOME RS.1 52 32 341/- RS.1 52 32 341/- RS.1 52 32 341/- ADD- ADDL. INCOME TOWARDS LOOSE PAPER NO.23 OF ANNEXURE A-15 OFFERED FOR TAX RS.12 00 000/- RS.12 00 000/- LESS: SET OFF OF B/F LOSSES RS.1 52 32 341/- RS.1 64 32 341/- RS.1 64 32 341/- TOTAL INCOME RS. NIL RS.NIL RS. NIL BOOK PROFIT U/S.115JB RS.19 88 912/- RS.19 88 912/- RS.19 88 912/- 3 ASSESSMENT YEAR : 2004-05 PARTICULARS INCOME AS PER ORIGINAL RETURN INCOME AS PER RETURN AFTER SEARCH AS PER ASSESSMENT ORDER U/S. 153 A BUSINESS INCOME RS.4 21 55 790/- RS.4 21 55 790/- RS.4 21 55 790/- ADD- ADDL. INCOME TOWARDS LOOSE PAPER NO.47 48 52 53 & 56 OF ANNEXURE A-15 RS.2 84 00 000/- RS.2 84 00 000/- LESS: SET OFF OF B/F LOSSES RS.4 21 55 790/- RS.6 47 43 644/- RS.6 47 43 644/- TOTAL INCOME RS. NIL RS.58 12 150/- RS.58 12 150/- BOOK PROFIT U/S.115JB RS.2 93 91 564/- RS.2 93 91 564/- RS.2 93 91 564/- 4. IN RESPECT TO THE INCOME DISCLOSED BY THE ASSES SEE IN RETURN OF INCOME FILED AFTER THE SEARCH TOWARDS LOOSE PAPERS FOUND IN THE COURSE OF SEARCH THE AO INITIATED PENALTY PROCEEDINGS U/S. 271 (1) ( C) OF THE ACT AND ALSO IMPOSED PENALTY BY HOLDING THAT THE ASSESSEE CONCEALED PART ICULARS OF INCOME. ON APPEAL BY THE ASSESSEE THE LEARNED CIT (APPEALS) CONFIRME D THE ORDER OF THE AO. AGAINST THE ORDER OF THE LEARNED CIT (APPEALS) ASSE SSEE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READS AS FOLLOWS :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN LAW IN CONFIRMING THE PENALTY OF RS.4 41 0 00/- AT THE REATE OF 100% U/S.271(1)(C) OF THE ACT WITHOUT APPRECIAT ING FOLLOWING FACTS: A. ADDITIONAL INCOME WAS SURRENDERED DURING THE COURSE OF SEARCH PROCEEDINGS ON ADHOC BASIS AND JUST TO COVER UP SUCH AMOUNT WITHOUT GOING FOR RETRACTION INCOME WAS OFF ERED ON EVERY LOOSE PAPER WHICH WAS EVEN SLIGHTLY DOUBLED U PON. B. SUCH SURRENDER WAS MADE TO BUY PEACE OF MIND AND TO AVOID LITIGATION WITHOUT TAKING ANY CREDIT IN THE BOOKS O F ACCOUNTS. C. EVEN AFTER ADDITIONAL INCOME SO SURRENDERED AND ASS ESSED NO TAX WAS PAYABLE BY THE APPELLANT DUE TO CARRY FO RWARD BUSINESS LOSSES AND DEPRECIATION OF EARLIER YEARS A ND ONLY BOOK PROFIT WAS TAXABLE U/S. 115 JB OF THE ACT. 4 D. THE SURRENDER WAS MADE BASED ON NOTING ON LOOSE PAP ERS (ANNEXURE A-15) WHICH CANNOT BE CONSIDERED AS DETEC TION OF CONCEALED INCOME BY THE DEPARTMENT IN THE BACKGROUN D OF TOTAL INCOME SURRENDER BY THE GROUP. E. EXPLANATION 5 TO SECTION 271 (1) (C) OF THE ACT APP LIED TO THE FACTS OF THE CASE BECAUSE SUCH SURRENDER WAS MADE D URING THE COURSE OF SEARCH PROCEEDINGS U/S. 132(4) OF THE ACT AND THE APPELLANT IS ELIGIBLE FOR IMMUNITY PROVIDED THE RE UNDER. CONFIRMING THE PENALTY @ 100% WITHOUT APPRECIATING AFORESAID FACTS AND WITHOUT ANY POSITIVE PROOF OF CONCEALMENT AGAINST THE APPELLANT AT 100% OF THE TAX SOUGHT TO BE EVADED IS VERY EXCESSIVE ARBITRARY UNJUSTIFIED IMPROPER BAD IN LAW AND DE SERVES TO BE QUASHED. 2. THE APPELLANT FURTHER CRAVES LEAVE TO ADD ALTE R AND/OR TO AMEND THE AFORESAID GROUNDS OF APPEAL AS AND WHEN R EQUIRED. 5. THOUGH SUBMISSIONS WERE MADE ON THE APPLICABILI TY OF EXPLANATION-5 TO SEC.271(1)(C) OF THE ACT AND ALSO GENERAL SUBMISSIONS WITH REGARD TO IMPOSING OF PENALTY WE DEEM IT APPROPRIA TE FOR TAKING UP FOR CONSIDERATION GROUND (C). 6. AS ALREADY STATED THE INCOME OF THE ASSESSEE WA S ULTIMATELY DETERMINED AS PER THE PROVISION OF SECTION 115 JB OF THE ACT AND NOT AS PER THE NORMAL PROVISIONS OF THE ACT. IT IS ALSO NOT IN DIS PUTE THAT THE PENALTY WAS ULTIMATELY IMPOSED ON THE ASSESSEE IN RESPECT OF TH E COMPUTATION OF INCOME UNDER THE NORMAL PROVISION OF THE ACT. THE QUESTION AS TO WHETHER PENALTY CAN BE IMPOSED IN RESPECT OF THE ASSESSMENT OF TOTAL IN COME UNDER THE NORMAL PROVISIONS OF THE ACT WHEN ULTIMATELY THE TOTAL INC OME IS DETERMINED U/S. 115 JB OF THE ACT HAD CAME UP FOR CONSIDERATION BEFORE TH E HONBLE DELHI HIGH COURT. THE HONBLE COURT HELD AS FOLLOWS:- THE JUDGMENT OF THE SUPREME COURT IN GOLD COIN HEA LTH FOOD (P) LTDS CASE(SUPRA) CLARIFIES THAT EVEN IF THERE ARE LOSSES IN A 5 PARTICULAR YEAR PENALTY CAN BE IMPOSED AS EVEN IN THAT SITUATION THERE CAN BE A TAX EVASION. AS PER SECTION 271(1)( C) THE PENALTY CAN BE IMPOSED WHEN ANY PERSON HAS CONCEALED THE PA RTICULARS OF HIS INCOME OR HAS FURNISHED INCORRECT PARTICULARS O F THE INCOME. ONCE THIS CONDITION IS SATISFIED QUANTUM OF PENALT Y IS TO BE LEVIED AS PER CLAUSE (III) OF SECTION 271(1) WHICH STIPU LATES THAT THE PENALTY SHALL NOT EXCEED THREE TIMES OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. THE EXPRESSION THE AMOUNT OF TAX S OUGHT TO BE EVADED HAS BEEN CLARIFIED AND EXPLAINED IN THE EXP LANATION 4 THERETO AS PER WHICH IT HAS TO HAVE THE EFFECT OF REDUCING THE LOSS DECLARED IN THE RETURN OR CONVERTING THAT LOSS INTO INCOME. UNDER THE SCHEME OF THE ACT THE TOTAL INCOME OF TH E ASSESSEE IS FIRST COMPUTED UNDER THE NORMAL PROVISIONS OF THE A CT AND TAX PAYABLE ON SUCH INCOME IS COMPARED WITH THE PRESCRI BED PERCENTAGE OF THE BOOK PROFITS COMPUTED UNDER SEC TION 115JB. THE HIGHER OF THE TWO AMOUNTS IS REGARDED AS TOTAL INCOME AND TAX IS PAYABLE WITH REFERENCE TO SUCH INCOME. IF THE TAX PAYABLE UNDER THE NORMAL PROVISIONS IS HIGHER SUCH AMOUNT IS THE TOTAL INCOME OF THE ASSESSEE OTHERWISE BOOK PROFITS AR E DEEMED AS THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION 11 5JB. IN THE INSTANT CASE THE INCOME COMPUTED AS PER THE NORMAL PROCEDURE WAS LESS THAN THE INCOME DETERMINED BY LE GAL FICTION NAMELY BOOK PROFITS UNDER SECTION 115 JB[PARA 22 ] THE INCOME OF THE ASSESSEE WAS THUS ASSESSED UNDER SECTION 115 JB AND NOT UNDER THE NORMAL PROVISIONS. IT WAS IN THAT CONTEXT THAT THE APPLICATION OF EXPLANATION 4 TO SECTION 271(1) (C) HAD TO BE EXAMINED. THE JUDGMENT IN THE CASE OF GOLD COIN HEALTH FOOD ( P) LTD.(SUPRA) OBVIOUSLY DOES NOT DEAL WITH SUCH A SI TUATION. WHAT WAS HELD BY THE SUPREME COURT IN THAT CASE IS THAT EVEN IF IN THE INCOME TAX RETURN FILED BY THE ASSESSEE LOSSES ARE SHOWN PENALTY CAN STILL BE IMPOSED IN A CASE WHERE ON SETTING OFF THE CONCEALED INCOME AGAINST ANY LOSS INCURRED BY THE ASSESSEE UN DER OTHER HEAD OF INCOME OR BROUGHT FORWARD FROM EARLIER YEARS TH E TOTAL INCOME IS REDUCED TO A FIGURE LOWER THAN THE CONCEALED INC OME OR EVEN IS A MINUS FIGURE. THE COURT WAS OF THE OPINION THAT THE TAX SOUGHT TO BE EVADED WILL MEAN THE TAX CHARGEABLE NOT AS IF I T WAS THE TOTAL INCOME. ONCE THIS RATIONALE GIVEN BY THE SUPREME C OURT TO THE EXPLANATION 4 WAS APPLIED TO THE INSTANT CASE IT W OULD BE DIFFICULT 6 TO SUSTAIN THE PENALTY PROCEEDINGS. REASON WAS SIM PLE. NO DOUBT THERE WAS CONCEALMENT BUT THAT HAD ITS REPERCUSSION S ONLY WHEN THE ASSESSMENT WAS DONE UNDER THE NORMAL PROCEDURE. THE ASSESSMENT AS PER THE NORMAL PROCEDURE WAS HOWEVER NOT ACTED UPON IN THE INSTANT CASE. ON THE CONTRARY IT WAS THE DEEMED INCOME ASSESSED UNDER SECTION 115JB WHICH HAD BECOM E THE BASIS OF ASSESSMENT AS IT WAS HIGHER OF THE TWO TAX WAS THUS PAID ON THE INCOME ASSESSED UNDER SECTION 115JB. HENCE WH EN THE COMPUTATION WAS MADE UNDER SECTION 115JB THE AFORE SAID CONCEALMENT HAD NO ROLE TO PLAY AND WAS TOTALLY IRR ELEVANT. THEREFORE THE CONCEALMENT DID NOT LEAD TO TAX EVAS ION AT ALL [PARA 25] THEREFORE THE ORDER OF THE TRIBUNAL WAS TO BE SUST AINED THOUGH ON DIFFERENT GROUNDS. 7. IN OUR VIEW THE AFORESAID RULING OF THE HONB LE DELHI HIGH COURT APPLIES TO THE FACTS OF THE PRESENT CASE. IN THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE NO PENALTY COULD HAVE BEEN IMPOSED ON THE ASSESSEE BECAUSE THERE WAS NO TAX SOUGHT TO BE EVADED BECAUSE THE ADDITION IN RESPECT OF WHICH PENALTY WAS IMPOSED WAS MADE WHILE COMPUTING TOTAL INCOME U NDER THE NORMAL PROVISIONS OF THE ACT AND ULTIMATELY THE TOTAL INCO ME OF THE ASSESSEE WAS DETERMINED ON THE BASIS OF BOOK PROFITS U/S.115JB O F THE ACT . WE THEREFORE CANCEL THE PENALTY IMPOSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 8. IN THE RESULT BOTH THE APPEALS BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 21ST DAY OF JANUARY 2011. SD/- SD/- ( T.R. SOOD ) ( N. V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT: 21/01/2011 7 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T. 4. CIT (A) 5. THE DR D- BENCH ITAT MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ROSHANI