Income Tax Appellate Tribunal - Mumbai
Income Tax Officer vs C. Chhotalal Textiles (P) Ltd. on 22 March, 2004
Equivalent citations: (2005)95TTJ(MUM)436
ORDER
G.C. Gupta, J.M.
1. This appeal by the Revenue for the asst. yr. 1993-94 is directed against the order of the CIT(A). The only issue in this appeal is regarding validity of penalty of Rs. 3,05,998 under Section 271(1)(c) of the Act.
2. The learned Departmental Representative stated that it is a survey case and survey was conducted on 20th Nov., 1992, and the Department found the stock discrepancy as a matter of fact and thereafter the assessee has made the surrender of the discrepancy and, therefore, is liable to penalty. He stated that physical verification of stock was undertaken by the survey party and various discrepancies such as blank bills, bills not numbered and even two printouts of the same period were found. He relied on the series of decisions in support of his arguments that in such a case the penalty for concealment of income under Section 271(1)(c) is leviable on the assessee. He relied on the decisions in Western Automobiles (India) v. CIT (1978) 112 ITR 1048 (Bom), CIT v. S. Krishnaswamy & Sons (1996) 219 ITR 157 (Mad), Indira Chemical Agency v. CIT (1979) 119 ITR 569 (Mad), CIT v. R. Sadayappan (Decd.) (By LRs) (2002) 253 ITR 203 (Mad), CIT v. Sudharshan Silks & Sarees (2002) 253 ITR 145 (Kar), CIT v. K.P. Sampath Reddy (1992) 197 ITR 232 (Kar) and CIT v. K.R. Sadayappan (1990) 185 ITR 49 (SC).
3. The learned counsel for the assessee stated that none of these factors being canvassed by the learned Departmental Representative was referred to in the assessment order while making the addition and hence has no relevance to the case of the assessee. He submitted that the ADI has admitted that during the course of post-survey investigations conducted by the ADI, certain errors and omissions were found to have been made by the survey party as the audited accounts of the preceding year were not available at the time of the survey and after taking into consideration the audited accounts of the year 1992-93, the ADI considered it fit to reduce the additional income surrendered at Rs. 15 lacs to Rs. 10 lacs. He argued that the assessee has filed the return of income declaring an income of Rs. 63,440, meaning thereby that no additional income was declared in the return of income. However, the income was determined by the AO at Rs. 6,53,660 which was later on reduced to 5,95,610. This amount of Rs. 5,95,610 consists of two additions, namely, pertaining to the lower GP and the closing stock of clothes for which there was no corresponding entry in the stock register as per the Revenue and for which the assessee has agreed to the addition on the condition that no penalty would be levied under Section 271(1)(c) of the Act. The learned counsel argued that the addition has been a matter of estimation only due to which the figure of addition has changed several times and for which penalty under Section 271(1)(c) cannot be levied. He argued that the penalty for concealment of income cannot be levied on the GP addition made by the Revenue. The learned counsel referred to the order of the AO passed under Section 154 of the Act wherein the contention of the assessee that the stock should have been valued @ Rs. 28 per mtr., instead of Rs. 35 per mtr, was accepted by the AO. He argued that the conditional surrender was made by the assessee in order to buy peace with Department and the condition was that penalty under Section 271(1)(c) shall not be levied on the assessee. He stated that the facts may be sufficient to make addition in the quantum case but are not sufficient to impose the penalty on the assessee. He relied on decisions in Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457 (SC), CIT v. Suresh Chandra Mittal (2001) 251 ITR 9 (SC), Kumar Agencies (India) v. Asstt. CIT (2003) 80 TTJ (Mumbai)(TM) 868 : (2003) 87 ITD 69 (Mumbai)(TM), CIT v. Kiran & Co. (1996) 217 ITR 326 (Bom) and CIT v. Devandas Perumal & Co. (1983) 140 ITR 943 (Bom), 251 ITR 371 (Guj) (sic). He argued that similar additions made in the case of sister-concern belonging to the same group of the assessee, were deleted by the CIT(A) and no appeal was filed to the Tribunal by the Revenue. He relied on decisions in Union of India v. Kaumudini Narayan Dalai & Anr. (2001) 249 ITR 219 (SC), Union of India v. Satish Panalal Shah (2001) 249 ITR 221 (SC) and Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC).
4. The learned Departmental Representative, in rejoinder, argued that although the quantum of addition varies but the fact remains that there was a discrepancy in the stock of the assessee. He relied on decision in (1992) 197 ITR 232 (Kar) (supra). He argued that there is no question of agreement between the assessee and the Department on the question of levy of penalty and in fact the Revenue is not authorised to enter into agreement with the assessee. He relied on decision in CIT v. D.K.B. & Co. (2000) 243 ITR 618 (SC), AIR 1998 (SC) 591 on doctrine of promissory estoppel and also decisions in Dr. Mrs. Renuka Datla & Ors. v. CIT (2003) 259 ITR 258 (Del) and Union of India & Anr. v. Banwan Lal Agarwal (1999) 238 ITR 461 (SC). He argued that the decision of Hon'ble Supreme Court in K.P. Madhusudhanan v. CIT (2001) 251 ITR 99 (SC) being later in date than the decision in (2001) 251 ITR 9 (SC) (supra), the decision in (2001) 251 ITR 99 (SC) (supra) shall be applied. He argued that in (2001) 251 ITR 9 (SC) (supra), the Hon'ble apex Court has not laid down any law.
5. We have considered the rival submissions carefully. We find that the figure of stock discrepancy went on changing from time to time in this case. The assessee has filed the return declaring income of Rs. 63,440, meaning thereby that no additional income was declared in the return of income filed by it. However, income was assessed at Rs. 6,53,660 on account of two additions made, i.e., on account of low GP and secondly, on account of certain purchases held not accounted for in the stock register. This assessed income was later on reduced to Rs. 5,95,610 on account of rectification order under Section 154 passed by the AO, wherein the plea of the assessee that the stock should be valued at Rs. 28 per mtr. instead of Rs. 35 applied by the Department, was accepted by the AO. The case of the assessee is that it has agreed to the addition made only to buy peace with the Department and that too on a condition that penalty under Section 271(1)(c) of the Act shall not be levied on the assessee. The penalty has also been levied for trading addition on account of low GP which is based on estimation only and hence not sustainable. We find that similar additions made in the other group cases of the assessee were deleted by the CIT(A) and the Revenue has not filed an appeal to the Tribunal. We find that the assessee has filed confirmation regarding the purchase of cloth from M/s Royal Fabrics, Mumbai, wherein their income-tax file number, is also mentioned. In the facts of the case, we find that material pointed out by the Revenue may be sufficient to sustain the addition in the quantum case but is not sufficient to penalise the assessee under Section 271(1)(c) of the Act for concealment of income. We are unable to agree with the learned Departmental Representative that the decision of the Hon'ble apex Court in (2001) 251 ITR 99 (SC) (supra) shall be applied being later in time than the decision of Hon'ble apex Court in (2001) 251 ITR 9 (SC) (supra) for the reason that both the decisions of the Hon'ble apex Court were declared on different grounds. We are also not impressed with the argument of the learned Departmental Representative that the decision of the Hon'ble apex Court in (2001) 251 ITR 9 (SC) (supra) does not lay down any law. The Hon'ble apex Court has delivered this judgment in civil appeals after considering all the facts and circumstances of the case and after reading the High Court order and the statement of the case. We hold that the decision of Hon'ble apex Court in Suresh Chandra Mittal case (supra) lays down the law on the issue before the Hon'ble Court. In the facts and circumstances of the case and in accordance with law applicable thereto, we hold that the CIT(A) has rightly cancelled the penalty imposed under Section 271(1)(c) and accordingly we dismiss the ground of appeal of the Revenue.
6. In the result, the appeal of the Revenue is dismissed.