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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-33, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-33/Rg.21/339/2014-15 dated 19-11-2015. The Assessment was framed by the Jt. Commissioner of Income Tax (OSD), Circle-15(1), Mumbai (in short JCIT) for the assessment year 2009-10 order dated 23-12-2011 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty was levied by JCIT under section 271(1)(c) of the Act vide order dated 26-03-2014.
The only issue in this appeal of Revenue is against the order of CIT(A) deleting the penalty levied by AO under section 271(1)(c) of the Act on account of additional cost of material consumed amounting to ₹ 71,38,571/-. For this Revenue has raised the following three grounds: -
“1. Whether on facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied u/s. 271(l)(c) of the Income Tax Act."
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that penalty u/s. 271(l)(c) of the Income Tax Act, 1961 would not be attracted in the present case."
3. Whether on the facts and in the circumstances of the case and in law, the L.d. CIT(A) has erred adopting that additions on account of additional cost of material consumed would not make assessee liable for penalty u/s. 271(1)(c) of the Income Tax Act, 1961."
At the outset, the learned Counsel for the assessee filed copy of Tribunal Orders in quantum appeal in assessee’s own case for this AY 2009-10 in ITA 3939/Mum/2013 order dated 07-03-2016, wherein Tribunal has deleted this addition vide Para 22 and 23. The learned Counsel for the assessee filed copy of Tribunal order which is placed on record. The relevant para 22 and 23 reads as under: -
“22. We have heard rival submissions and also perused the relevant finding in the impugned orders. We find that, Ld. AO has made the addition on account of additional cost of consumption of raw material of Rs.71,38,571/- in the trading account by holding that, the assessee could not justify the rise in the cost of raw materials consumed. Such an action of the AO has been confirmed by the Ld. CIT(A) without considering the fact that, no defect whatsoever have been found either in the purchase bills of the cost of raw materials, or any defect in the regular books of account, excise register, etc. nor there is any other material coming on record to show that assessee has resorted to inflate the cost of consumption of raw material. The assessee’s main contention before us is that, cost of increase in the consumption was mainly on account of foreign exchange fluctuation and other relevant factor like, increase in the per kg. unit. From the perusal of the aforesaid chart, as furnished by the Ld. Counsel, it is seen that, there is a huge difference in per kg. unit, which difference has not been rebutted either by the AO or by the Ld.CIT(A) by any evidence. Not only there has been increase in the rate per unit but also there is an increase in the quantity of consumption which has led to the overall increase in the quantity of consumption. Further GP rate and gross profit has been accepted. Once no discrepancy is found in the opening stock, purchases and direct expenses on the debit side and sales have been accepted on credit side along with the gross profit, then no addition in the trading account can be made merely on the basis surmises and presumption. Analysis based on evidences and entities in the books of account has to be done, and only if books of account or corroborating evidences are not proper, the trading result can be disturbed. The purchase bills of raw material has not been doubted nor there is any discrepancy in excise register of raw material, hence, no addition can be made either on account of cost or on account of consumption.
Before us, the Ld. Counsel pointed out that, if the assessee rate of cost of material purchased as on 31st March, 2008 is applied, then perhaps, there would be negligible difference in the so called increase cost of consumption. Hence, on this premise also no addition is called for. This aspect has been demonstrated before us by way of a separate chart. However, without going into this aspect, we on the threshold hold that addition itself is unsustainable especially when no defect has been pointed out either in purchase bills or purchase rates of raw materials consumed or factor of foreign exchange rates and without there being any adverse material coming on record. Hence such an addition as sustained by the CIT(A) is set aside and ground of appeal of the assessee is allowed.”
4. Once the quantum is deleted, the penalty levied under section 271(1)(c) of the Act on this very item will not survive. Hence, we confirm the order of CIT(A) deleting the penalty, though on different reasoning as stated hereinabove. The appeal of Revenue is dismissed.
In the Result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 23-02-2018.