Income Tax Appellate Tribunal - Ahmedabad
Priya Blue Industries Pvt..Ltd.,, ... vs The Acit.,Cent.Circle-2(1),, ... on 14 October, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'B' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER आयकर अपील (एसएस) सं./I.T(SS).A. Nos. 376 & 377/Ahd/2012 & 255/Ahd/2015 ( नधा रण वष / Assessment Years : 2009-10, 2010-11 & 2009-10) Priya Blue Industries बनाम/ ACIT Pvt. Ltd. Vs. Central Circle- 2(1), 3 r d 1563/A, Ashirwad, Opp: Floor, Aaykar Bhavan, Panna Tower, Rupani Ashram Road, Ahmedabad Sardarnagar Road, Bhavnagar & ACIT Circle-1, Aaykar Bhavan, Nakubaug, Jashonath Chowk, Bhavnagar -
364001 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABCP2808B (अपीलाथ /Appellant) .. ( यथ / Respondent) & आयकर अपील सं./I.T.A. No. 1870/Ahd/2012 ( नधा रण वष / Assessment Year : 2010-11) Asst. Commissioner of बनाम/ Priya Blue Industries Income-tax Vs. Pvt. Ltd.
Central Circle-2(1), 3 r d 1563/A, Ashirwad, Opp:
Floor, Room No.306, Panna Tower, Rupani
Annexie to Aayakar Sardarnagar Road,
Bhavan, Ashram Road, Bhavnagar
Ahmedabad
(अपीलाथ /Appellant) .. ( यथ / Respondent)
I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -2 -
अपीलाथ ओर से /Assessee by : Shri S. N. Soparkar & Smt.
Urvashi Shodhan, A.Rs.
राज व क ओर से/Revenue by : Shri Alok Singh, CIT.D.R.
सन
ु वाई क तार"ख / Date of
27/08/2019
Hearing
घोषणा क तार"ख /Date of
14/10/2019
Pronouncement
आदे श/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeals and cross appeal at the instance of assessee & Revenue arise from the respective orders of the Commissioner of Income Tax (Appeals) ('CIT(A)') against respective assessment orders for different assessment years as tabulated below:
I T ( SS) A Na me o f AY CI T ( A) ' s AO ' s AO ' s o r d e r u nd er No s. as se s see o r d er o r d er Sec tio n d ated d ated 3 7 6 / Ahd /1 2 P r i ya B l ue 2 0 0 9 -1 0 0 8 .0 6 .2 0 1 2 3 0 .1 2 .2 0 1 1 153A r . w. s.
I nd u str ie s 143(3) of the
P vt. Ltd . I nco me T ax Ac t,
1 9 6 1 ( ' t he Ac t ')
3 7 7 / Ahd /1 2 - Do - 2 0 1 0 -1 1 - Do - - Do - 1 4 3 ( 3 ) o f t he Ac t
&
1 8 7 0 / Ahd /1 2
2 5 5 / Ahd /1 5 - Do - 2 0 0 9 -1 0 3 0 -0 9 -1 5 2 5 .0 3 .2 0 1 4 2 7 1 ( 1 ) ( c) o f t he
Act
2. The grievances raised being common, all the cases were heard together and disposed of by the common order.
3. We shall first take up assessee's appeal in IT(SS)A No. 376/Ahd/2012 concerning AY 2009-10.
I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -3 -
IT(SS)A No. 376/Ahd/2012-AY-2009-10 (Assessee's appeal)
4. Ground of appeal raised b y the assessee read as under:
" 1) In law and in the facts and circumstances of the appellant's case, the ld. CIT(A) has erred in omitting to deal with the ground raised by the appellant in relation to the validity of the impugned order passed u/s 153A r.w.s. 143(3) of the act. Since the disallowances /additions made by the AO already forms part of the regular assessment framed u/s. 143(3) and further no incriminating document/material was found during the course of search, the Id. CIT(A) should have appreciated that the disallowances/additions made are ultra virus to the scope of section 153A of the act. Hence the assessment order is bad in law and required to be quashed.
2) In law and in the facts and circumstances of the appellant's case the ld. CTT(A) has erred in confirming the addition u/s.14A read with Rule 8D of Rs. 19,20,041/- without appreciating the factual aspect and hence, CIT(A) should have deleted the same.
2.2) In law and in the facts and circumstances of the appellant's case, the ld. CIT(A) has also failed to appreciate that since no new investments were made in the year under consideration even as per the finding of AO, upholding the disallowance of Interest u/s.14A of the act is erroneous and uncalled for. The ld. CIT(A) should have Accordingly directed that such disallowance of Interest can be made in the year of acquisition only and not in the subsequent years.
3) In law and in facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in confirming the addition in respect of unaccounted sales of Rs.7,16,365/-.
4) In law and on the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in rejecting Ground No.7 of the appellant's appeal before him challenging the initiation of penalty proceedings u/s. 271(1)(c) on the ground that it was not appealable. He ought to have appreciated, inter alia, that since, in the peculiar facts and circumstances of the appellant's case, there was no basis, warrant or justification for initiating the penalty proceedings u/s. 271(1)(c), he ought to have directed the learned Assessing Officer to drop the same."
5. Learned Senior Counsel has not pressed the Ground No.1 of appeal of the assessee. Thus, Ground No.1 is dismissed as not pressed. I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -4 -
6. Ground No.2 concerns disallowance under s.14A r.w. Rule 8D of the Income Tax Rules.
6.1 With the assistance of the learned AR for the assessee, we find that no disallowance under s.14A of the Act is permissible in the absence of an y exempt income claimed b y the assessee having regard to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Corrtech Energy P. Ltd. 372 ITR 97 (Guj.).
6.2 In the result, Ground No.2 of the assessee's appeal is allowed.
7. Ground No.3 concerns disallowance of Rs.7,16,365/- in respect of unaccounted sales.
7.1. It is alleged b y the Revenue that assessee compan y is engaged in large scale suppression of sales and a very large part of the total sales goes unaccounted. The AO has referred to certain loose papers as well as the statement recorded. It was noted b y the AO that Shri Sanjay P. Mehta admitted in his statement towards unaccounted removal of goods without preparing invoices. The AO accordingl y quantified escapement of income of Rs.7,16,365/- based on such loose paper supported by confession thereon.
7.2 The CIT(A) in first appeal confirmed the aforesaid addition. The relevant para of the order of the C IT(A) is reproduced hereunder:
"6.2. I have considered the submissions of the appellant. The case of the appellant is that though the sales of Rs.716,835/- appearing on the loose papers is not recorded in the books of accounts, there are many cash sales recorded in the books of accounts which are more than Rs.716,835/-. It was therefore contended that since in the books of accounts many cash sales have been shown by the appellant, the sales to the extent of Rs.716,835/- as is appearing on the loose papers may be treated as accounted. Further, it was contended that only the gross profit on the above mentioned sales may be taxed and not the total sale consideration. For this purpose, the AR was asked to produce the details of cash sales as recorded in the books of accounts and also the cash sales as found noted in the loose papers. The AO was also asked I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -5 -
to substantiate its claim that the sates as appearing in the loose papers are also shown in the cash sales as appearing in the books of accounts. However, the AR failed to prove before me that the sales as appearing in the loose papers are also shown in the cash sales as per the books of accounts of the appellant. It is correct that what can be taxed is the income and not the gross sales. For this purpose, the AR was asked to furnish the details of the purchases and other expenses incurred towards the sales of Rs.716,835/-. He was also asked to clarify whether the corresponding expenses included that purchases had been recorded in the books of accounts or not. In case the expenses and the purchases have been duly accounted for in the books of accounts, then the unaccounted sales to be considered as the total income o£ the appellant. However, if the purchases then the expenses have not been debited by the appellant in his books of accounts, then in that case, only the GP can be added as the income of the appellant. But in that case, the applicability of the provisions of section 40A (3) are required to be examined. In the present case, the AR admitted that only the details of unaccounted sales and not purchases have been found in the loose papers. In other words, no details of purchases and other expenses corresponding to such sales were found noted in the loose papers. Therefore, it is likely that such expenses and purchases are duly accounted for by the appellant in its books of accounts. In that case, the addition of total sales of Rs.716,835/- would be justified. Therefore, in the absence of the entries in the loose papers of the corresponding expenses and purchases, the addition of Rs.716,835/- made by the AO is confirmed."
7.3 We have considered the rival submissions on the issue as well as perused the order of the lower authorities. It is contended on behalf of th e assessee that entire sales cannot be added and onl y some estimation is possible in the light of the decision of the Hon'ble Gujarat High Court in President Industries 258 ITR 654(Guj). We do not see an y merit in the plea of the assessee for such concession. The ratio of decision would come into play where both sales and expenses are outside books. Th e demonstrable evidences in the form of loose paper were found at the premises of the assessee wherein instances of unaccounted sales were found. The statement recorded of the persons connected to the assessee also affirms the clandestine sales. The statement so given was not shown to be successfull y retracted. Thus, in the absence of an y unaccounted expenses shown to be incurred, the entire proceeds from unaccounted sales requires to be added as done b y the AO and confirmed b y the CIT(A). As a corollary, while the expenses have been accounted for, the sales made remained outside book. Thus, the decision of the Hon'ble Gujarat High I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -6 - Court does not help the case of the assessee for suitable estimation. We thus decline to interfere. Ground No.3 of the assessee's appeal is dismissed.
8. In the result, appeal of the assessee is partl y allowed.
IT(SS)A No. 255/Ahd/2015-AY-2009-10 (Assessee's appeal)
9. The captioned appeal has been filed seeking to challenge the imposition of penalty of Rs.2,42,490/- on account of alleged undisclosed sales of Rs.7,16,365/- representing goods sold during the year without recording the same in the books of accounts.
9.1 The AO imposed penalt y on the additions of Rs.7,16,365/- made on account of unaccounted sales made b y the AO. It was observed b y the AO in para 5.4 of the assessment order that the assessee has accepted that th e aforesaid amount is not accounted in the books and has agreed to pay tax on it.
9.2 On perusal of the penalt y order passed b y the AO, we observe that statement of the Manager of the assessee was recorded under s.132(4) of the Act where the under-reporting of sales surfaced. Certain loose papers were recovered which reflected the clandestine act. The AO has anal yzed the fact in proper perspective and rightfull y imposed the penalt y on such deliberate act of the assessee. The CIT(A), in our view, has rightl y confirmed the action of the AO. No good reason has been brought to our notice at the time of hearing at all to enable us to look at the action of the lower authorities differentl y. We thus decline to interfere with the order of the CIT(A).
10. In the result, appeal filed b y the assessee is dismissed. I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -7 -
IT(SS)A No. 377/Ahd/2012-AY-2010-11 (Assessee's appeal)
11. Ground of appeal raised b y the assessee read as under:
" 1) In law and in the facts and circumstances of the appellant's case, the ld. CIT(A) has erred in omitting to deal with the ground raised by the appellant in relation to the validity of the impugned order passed u/s 153A r.w.s. 143(3) of the act. Since the disallowances /additions made by the AO already forms part of the regular assessment framed u/s. 143(3) and further no incriminating document/material was found during the course of search, the ld. CIT(A) should have appreciated that the disallowances/additions made are ultra virus to the scope of section 153A of the act. Hence the assessment order is bad in law and required to be quashed.
2) In law and in the facts and circumstances of the appellant's case the ld. CTT(A) has erred in confirming the addition u/s.14A read with Rule 8D of Rs. 21,32,194/- without appreciating the factual aspect and hence, CIT(A) should have deleted the same.
2.2) In law and in the facts and circumstances of the appellant's case, the ld. CIT(A) has also failed to appreciate that since no new investments were made in the year under consideration even as per the finding of AO, upholding the disallowance of Interest u/s.14A of the act is erroneous and uncalled for. The ld. CIT(A) should have Accordingly directed that such disallowance of Interest can be made in the year of acquisition only and not in the subsequent years.
4) In law and on the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in rejecting Ground No.7 of the appellant's appeal before him challenging the initiation of penalty proceedings u/s. 271(1)(c) on the ground that it was not appealable. He ought to have appreciated, inter alia, that since, in the peculiar facts and circumstances of the appellant's case, there was no basis, warrant or justification for initiating the penalty proceedings u/s. 271(1)(c), he ought to have directed the learned Assessing Officer to drop the same."
12. Learned Senior Counsel has not pressed the Ground No.1 of appeal of the assessee. Thus, Ground No.1 is dismissed as not pressed.
13. Ground No.2 concerns disallowance under s.14A r.w. Rule 8D of the Income Tax Rules.
I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -8 - 13.1 With the assistance of the learned AR for the assessee, we find that
no disallowance under s.14A of the Act is permissible in the absence of an y exempt income claimed b y the assessee having regard to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Corrtech Energy P. Ltd. 372 ITR 97 (Guj.).
13.2 In the result, Ground No.2 of the assessee's appeal is allowed.
14. In the result, appeal of the assessee is partl y allowed.
ITA No. 1870/Ahd/2012-AY-2010-11 (Revenue's appeal)15. Ground of appeal raised b y the Revenue read as under:
"1. The Ld. CIT(A) has erred in law and on facts in deleting the addition made u/s. 68 of the I.T. Act of Rs.75,00,000/-.
2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of interest expenses of Rs.3,33,667/- without appreciating the facts mentioned in the assessment order.
16. At the time of hearing, it was submitted b y the Ld.AR for the assessee that the appeal filed b y the Revenue is hit b y recentl y issued CBDT Circular No.17 of 2019 dated 08/08/2019 revising the previous thresholds pertaining to tax effects. It is inter alia noticed that the CBDT vide Instruction No. F. No. 279/Misc/M-93/2018-ITJ dt. 20/08/2019 has observed that Circular No.17/2019 dated 08/08/2019 relating to enhancement of monetary limits is also applicable to all pending appeals. As per aforesaid Circular read with instruction, all pending appeals filed b y Revenue are liable to be dismissed as a measure for reducing litigation where the tax effect does not ex ceed the prescribed monetary limit which is now revised at Rs.50 Lakhs. In the instant case, the tax effect on the disputed issues raised b y the Revenue is stated to be not exceeding Rs.50 lakhs and therefore appeal of the Revenue is required to be dismissed in limine.
I T ( S S ) A N o s . 3 7 6 / Ah d / 1 2 & 3 O r s .
[ P r i ya B l u e In d u s t r i e s P . L t d . ] -9 -
17. The Learned DR for the Revenue fairl y admitted the applicabilit y of the CBDT Circular No. 17 of 2019. Accordingl y, appeal of the Revenue is dismissed as not maintainable. However, it will be open to the Revenue to seek restoration of its appeal on showing inapplicabilit y of the aforesaid CBDT Circular in any manner.
18. In the result, the appeal of the Revenue is dismissed.
19. In the result, the appeal of the assessee in IT(SS)A No. 376 & 377/Ahd/12 are allowed whereas assessee's appeal in IT(SS)A No. 255/Ahd/2015 and Revenue's appeal in ITA No.1870/Ahd/2012 are dismissed.
This Order pronounced in Open Court on 14/10/2019
Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 14/10/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं-धत आयकर आयु/त / Concerned CIT
4. आयकर आय/
ु त- अपील / CIT (A)
5. 3वभागीय 6त6न-ध, आयकर अपील"य अ-धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड< फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील"य अ-धकरण, अहमदाबाद ।