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Income Tax Appellate Tribunal, “SMCC” BENCH, AHMEDABADererererererererererer5
Before: SHRI RAJPAL YADAV, JM, & SHRI MANISH BORAD, AM
आदेश / O R D E R
PER MANISH BORAD, ACCOUNTANT MEMBER This appeal of assessee for Assessment Year 2008-09 is directed against the order of Commissioner of Income Tax (Appeals)-I, Baroda dated 13.11.2013 vide appeal No. CAB/I-163/2013-14 arising out of the order u/s. 271(1)(c) of the Income Tax Act 1961 (hereinafter refer to the Act) framed on 23.04.2012 by ITO Ward-2, Anand.
ITA.No.500/Ahd/2014 Assessment year 2008-09 - 2 – 2. Solitary grievance of the assessee is against the order of learned Commissioner of Income Tax (Appeals) confirming penalty of Rs. 4,64,750/- levied by the Assessing Officer u/s. 271(1)(c) of the Act.
Briefly stated facts has culled out from the records are that the assessee is a partnership firm engaged in the business of manufacturing and selling of ply board, block board. Survey u/s. 133A of the Income Tax Act was conducted at the business premises of the assessee on 29.02.2008 and certain books of accounts and loose papers were impounded. Subsequently the case was selected for scrutiny and notice u/s. 143(2) of the Act followed by notice u/s. 142(1) of the Act was duly served to assessee along with a detailed questionnaire. Necessary information as called for were furnished by the Authorised Representative of the assessee. Return of income was filed on 29.09.2008 declaring loss of Rs. 4,42,514/-. Learned Assessing Officer after making various additions totaling to Rs. 18,61,658/- assessed the income at Rs. 15,19,140/-. Appeal of the assessee before learned Commissioner of Income Tax (Appeals) against the quantum addition could not bring any relief to assessee.
Subsequently penalty proceedings u/s. 271(1)(c) were initiated and after hearing the assessee, learned Assessing Officer held that assessee has deliberately and intentionally concealed the income in respect of the following concealed amount which was confirmed by the learned Commissioner of Income Tax (Appeals)
Particulars Amount (i) Unaccounted stock Rs. 9,19,182/- (ii) Unexplained expenditure
ITA.No.500/Ahd/2014 Assessment year 2008-09 - 3 – on account of negative cash balance Rs. 5,57,031/- (iii) Unexplained investment in Construction of shade Rs. 27,750/- Total Rs.15,03,963/-.
Learned Assessing Officer imposed penalty of Rs. 4,64,750/- u/s. 271(1)(c) of the Act on the concealed income of Rs. 15,03,963/-. Against this order u/s. 271(1)(c) of the Act, assessee filed appeal before learned Commissioner of Income Tax(Appeals), but could not succeed.
Aggrieved assessee is now in appeal before the Tribunal.
None appeared in person on behalf of the assessee however written submission filed on 05.05.2017 are placed on record wherein learned Authorised Representative has submitted that against the quantum addition of Rs. 15,03,963/- confirmed by learned Commissioner of Income Tax (Appeals), assessee preferred appeal before the Hon’ble Tribunal, Ahmedabad. Coordinate bench has deleted additions of Rs. 14,76,213/- out of the total additions of Rs. 15,03,963/- vide ITA No. 336/Ahd/2012 dated 11.11.2016 thereby giving major relief to the assessee. Learned Authorised Representative has further mentioned that as the quantum addition of Rs. 14,76,213/- has been deleted, assessee should not be penalised u/s. 271(1)(c) of the Act on this deleted addition and deserves appropriate relief.
On the other hand learned Departmental Representative relied on the order of lower authorities.
ITA.No.500/Ahd/2014 Assessment year 2008-09 - 4 – 9. We have heard the learned Departmental Representative and gone through the written submission filed by the learned Authorised Representative and perused the material placed on record. Sole grievance of the assessee in this appeal is against the order of learned Commissioner of Income Tax (Appeals) confirming penalty of Rs. 4,64,750/- levied by the learned Assessing Officer u/s. 271(1)(c) of the Act.
We notice that the impugned penalty of Rs. 4,64,750/- has been levied by the learned Assessing Officer on following additions confirmed by learned Commissioner of Income Tax (Appeals).
(i) Unaccounted stock Rs. 9,19,182/- (ii) Unexplained expenditure on account of negative cash balance Rs. 5,57,031/- (iii) Unexplained investment in Construction of shade Rs. 27,750/- Total Rs. 15,03,963/-. 11. We further observe that assessee preferred appeal against the above said quantum addition of Rs. 15,03,963/- and coordinate bench vide ITA No. 336/Ahd/2012 dated 11.11.2016 deleted the addition of Rs. 9,19,182/- towards unaccounted stock and also deleted addition of Rs. 5,57,031/- made towards unexplained expenditure on account of negative cash balance by observing as follows in para 6 and para 9 of the Tribunal order dated 11.11.2016.
Next aspect of the controversy is that even this statement is not admissible in evidence as used by the AO, then also stock of Rs.9,19,182/-was found, whether the assessee has explained that stock or not. The case of the assessee is that the Id.AO has not pointed out any defect in the details or purchases or sales made by the assessee. If overall record including opening stock and closing stock along with purchases and sales is being
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verified, then it would reveal that there was no excess stock. This has been worked out mainly for reasons that stock register was not maintained, but non-maintenance of the stock register would not automatically generate excess stock. This can be explained with total purchases and sales made by the assessee, and in the present case, the assessee has explained this position. The assessee has worked out total value of the stock including opening stock and purchases by making addition of GP element and this rate of GP has taken on the basis of overall GP disclosed by the assessee between present year as well as immediately preceding year. Therefore, we are of the view that the Id.CIT(A) has erred in confirming the addition solely on the basis of statement given by the partner. We allow this ground of appeal and delete addition of Rs.9,19,182/-.
----*---------*----------*----*------*-------*-------*-------*-----*------*-------*-----*---------*** 9. Before us, the Id. counsel for the assessee contended that the Id.CIT(A) has deleted addition of Rs.3,07,000/-- by following the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Pankaj Dye Stuff Industries, ITR No.241 of 1993 dated 6.7.2005. He contended that capital contributed by the partners cannot be added because identity of the partners is not dispute. They have confirmed the contribution, and at the most Id.AO could verify their cases. As far as sources of expenditure is concerned that has been explained by the assessee from this capital. The AO has treated these two issues, as if that expenditure is automatically be added and it is being given set off against the capital contribution of four persons. One due consideration of these facts and circumstances, we are of the view that capital contributed by all nine partners is to be treated at par and it cannot be considered as unexplained cash credit. In view of the Hon'ble Gujarat High Court decision in the case of Pankaj Dye Stuff Industries (supra), there cannot be any adjustment of unexplained expenditure vis-a-vis alleged capital contribution. Both these aspects are required to be adjudicated independently. Since the AO has made addition qua the capital contributed by four partners under the impression that, addition of equivalent amount is be made on account of unexplained ™ expenditure. In our opinion, this addition under section 68 cannot be made, and therefore, where addition on account of unexplained expenditure can be made is to be examined independently. We find that there is no unexplained expenditure, because assessee has source of such expenditure in - the shape of money received from the partners. Thus, the Id. Revenue authorities have failed to appreciate these two issues in right perspective. We allow the grounds of appeal raised by the assessee and delete Rs.5,57,031/-.
We further notice from the perusal of section 271(1)(c) of the Act that penalty is to be calculated on the concealed income of the assessee. In this appeal out of the concealed income of Rs. 15,03,963/- coordinate bench has already deleted the addition of Rs. 14,76,213/- and therefore when the addition itself has been deleted then there remains no basis of calculating the penalty u/s. 271(1)(c) of the Act.
ITA.No.500/Ahd/2014 Assessment year 2008-09 - 6 – 13. We are therefore of the view that in the given facts and circumstance of the case and in view of the order of the coordinate bench in quantum addition in ITA No. 336/Ahd/2012 dated 11.11.2016, we hold that penalty imposed on the assessee u/s. 271(1) of the Act of Rs. 14,76,213/- needs to be deleted. We accordingly direct the learned Assessing Officer to do so and sustain the penalty u/s 271(1)(c) of the Act only on the confirmed addition of Rs. 27,750/-.
Accordingly assessee’s appeal is partly allowed.
Order pronounced in the Court on 9th May, 2017 at Ahmedabad.
Sd/- Sd/- (SHRI RAJPAL YADAV) (SHRI MANISH BOARD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated, 09/05/2017 Mukul Kumar, P.S. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद /DR,ITAT, Ahmedabad. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, सहायक पंजीकार (Asstt.Registrar) आयकर अपील�य अ�धकरण ITAT, Ahmedabad