Income Tax Appellate Tribunal - Ahmedabad
Mamta Silk Mills Pvt.Ltd.,, Surat vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C" AHMEDABAD
Before Shri D.K.Tyagi, Hon'ble Judicial Member, and
Shri A. Mohan. Alankamony, Hon'ble Accountant Member
ITA No.2820/Ahd/2009
Assessment Year:2004-05
Date of hearing:14.7.11 Drafted:14.7.11
Income Tax Officer, V/s. M/s. Mamta Silk Mills
Ward-1(3), Room Pvt., Ltd., K-1286, Surat
No.113, Aayakar Textile Market, Ring
Bhavan, Majura Gate, Road, Surat
Surat PAN No.AABCM5904D
(Appellant) .. (Respondent)
Appellant by :- Shri Jasbir S Chouhan, SR-DR
Respondent by:- Shri Rasesh Shah, AR
ORDER
PER D.K.Tyagi, Judicial Member:-
This is Revenue's appeal against the order of Commissioner of Income-tax(Appeals)-I, Surat dated 28-07-2009 for the assessment order 2004-05. The Revenue has taken the following ground:-
"1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied by the A.O. of Rs.4,16,283/- u/s. 271(1)(c)of the Act."
2. The brief facts of the case are that assessee has field return of income for assessment order 2004-05 declaring total income at nil. The assessment was completed u/s.143(3), whereby following two additions were made which were confirmed by Ld. CIT(Appeals) also:-
ITA No. 2820/Ahd/2009 A.Y. 2004-05ITO Wd-1(3), SRT v. M/s. Mamta Silk Mills Pvt. Ltd. Page 2
i) Addition of Rs.9,00,374/- on account of low GP.
ii) Addition of Rs.2,60,000/- being bogus expenses.
3. The penalty proceedings u/s. 271(1)(c) were initiated. In his penalty order the Assessing Officer has stated that books of account of the assessee was rejected for the following discrepancies:-
a) that the GP ratio of the assessee-company had lowered to 3.91% during the year as compared to 6.00% in the immediately preceding year.
b) that there were inconsistencies in month-wise production vis-à- vis expenses on power, fuel and labour
c) that the assessee has not maintained any quantitative records of day-to-day consumption of raw materials and that consumption of raw materials was unverifiable Since the assessee's explanation was not satisfactory the Assessing Officer after rejection of books of account adopted GP rate of 5% leading to addition of Rs.9,00,374/-. In respect of other disallowance of Rs.2.60 lakh, the AO had stated that assessee had claimed remuneration to the directors of a sum of Rs.7.40 lakh, whereas in the immediately preceding year, it was Rs.4.80 lakh. It was found that the additional remuneration was paid to two new directors, namely, Ms. Kanpana Singhvi and Ms. Menka Singhvi. Since the assessee could not justify the reasonability of the above expenses it was treated that remuneration paid to the new directors was bogus and disallowance was made. Both these additions were confirmed by Ld. CIT(Appeals).
4. During the penalty proceedings the assessee was asked as to why penalty be not levied in respect of these two additions. The assessee ITA No. 2820/Ahd/2009 A.Y. 2004-05 ITO Wd-1(3), SRT v. M/s. Mamta Silk Mills Pvt. Ltd. Page 3 simply stated that it had filed appeal before ITAT, therefore it should be kept in abeyance. This explanation of the assessee was not found satisfactory by the Assessing Officer and he imposed penalty of Rs.4,16,283/- u/s. 271(1)(c) of the Income-tax Act, 1961. This penalty was deleted by Ld. CIT(Appeals) by observing as under:-
"I agree with the appellant that the GP addition is an issue of estimation and hence no penalty can be levied on this issue. With respect to the disallowance of remuneration paid to two new Directors, this is also being a debatable issue. The disallowance made by the A.O is technical u/s.40A(2)(b)/37. There is no material on record to show that inaccurate particulars were furnished. All the particulars were on record and hence no penalty can be made on this issue."
5. Aggrieved by this order of Ld. CIT(Appeals) now Revenue is in appeal before us.
6. At the time of hearing, at the outset, Learned Counsel for the assessee submitted that in quantum appeal the assessee has got relief by the ITAT in respect of both the additions and therefore there is no need to interfere with the order passed by Ld. CIT(Appeals).
7. Ld. DR did not object to the submission of the assessee.
8. After hearing both the parties and perusing the record we find that in view of Hon'ble ITAT's order in ITA No.1669/Ahd/2008 dated 11-02- 2011 the revised total income was computed by the Assessing Officer as under:-
Total income as per order giving effect to CIT(A)'s order dated 10.3.2008 before allowing business loss of 1996- Rs.23,14,444 97 & unabsorbed depreciation of 1996-97 Less: Relief granted by ITAT
1.G.P. addition Rs.9,00,374
2.Remuneration to directors Rs.2,60,000 ITA No. 2820/Ahd/2009 A.Y. 2004-05 ITO Wd-1(3), SRT v. M/s. Mamta Silk Mills Pvt. Ltd. Page 4 Rs.11,60,374 Rs.11,54,070 Less: Set off of unabsorbed depreciation of Earlier years to the extent of profit available Rs.11,54,070 Revised total income Rs. N I L It is clear from the above that the ground on which this penalty was imposed no longer exist therefore we feel no need to interfere with the order passed by Ld. CIT(Appeals) and same is hereby upheld.
9. In the result, Revenue's appeal is dismissed Order pronounced in Open Court on 14/07/2011 Sd/- Sd/-
(A.Mohan.Alankamony) (D.K. Tyagi)
(Accountant Member) (Judicial Member)
Ahmedabad,
Dated : 14/07/2011
*Dkp
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-I, Surat
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad