IT: Where assessee properly explained excess consumption of raw material in relevant year, penalty under section 271(1)(c) could not be imposed on basis of addition of excess consumption of raw materials
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[2013] 40 taxmann.com 27 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -1
v.
Arham Prints (P.) Ltd.*
M.R. SHAH AND MS. SONIA GOKANI, JJ.
TAX APPEAL NO. 480 OF 2012†
JUNE 25, 2013
Section 271(1)(c), read with section 274, of the Income-tax Act, 1961 - Penalty - For concealment of income [Disallowance of claim, effect of] - Assessing Officer made addition on account of excess consumption of raw material - Thereafter penalty under section 271(1)(c) was also imposed on basis of such addition - Assessee's case was that there was extraordinary inflationary trend during year under question in chemical business of assessee as compared to previous year and assessee-company was closed for past two years and directors of assessee had also left city and shifted elsewhere which had resulted into papers and documents not being in place - Tribunal accepted case of assessee and deleted penalty - Whether no question of law arose out of order of Tribunal - Held, yes [Para 4] [In favour of assessee]
Manav A. Mehta for the Appellant.
ORDER
Ms. Sonia Gokani, J. - This Tax Appeal under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] is preferred challenging the order of Income Tax Appellate Tribunal ["ITAT" for short] dated 05.01.2012 proposing following substantial question of law for our consideration.
"A. Whether on the facts and circumstances of the case, the Hon'ble Tribunal has erred in law in cancelling penalty levied at Rs. 11,38,540/- under Section 271(1)(C) by the Assessing Officer and confirmed by the learned CIT(A) on disallowance of consumption of raw materials made at 20% without appreciating the fact that the assessee had failed to produce its books of account in spite of affording several opportunities to the assessee?"
2. The brief facts for the purpose of this petition are as follows:
2.1 The assessee engaged in the business of dying and printing of Art Silk Cloth on the job work basis filed return of income. The Assessing Officer assessed his total income at Rs. 9,06,980/- though the assessee had declared his income to be NIL. This was done after the scrutiny assessment under Section 143(2) of the Act, which had dissatisfied the assessee.
2.2 The assessee preferred appeal before the Commissioner of Income Tax (Appeals) ["CIT(A)" for short], which confirmed the additions made by the Assessing Officer. Pursuant to such confirmation of the order by the CIT(A), the Assessing Officer initiated the proceedings under Section 271 (1)(C) read with Section 274 of the Act against the assessee and levied the penalty to the tune of Rs. 11,98,705/-. The appeal was once again preferred before the CIT(A) challenging such order of the penalty. It partly allowed such appeal and the assessee challenged the same before the ITAT.
2.3 The Tribunal after considering in detail the submissions of both the sides cancelled the penalty order and allowed the appeal of the assessee resulting into the present Appeal challenging such order of cancellation of penalty.
3. We have heard learned counsel Mr. Manav Mehta appearing for the Revenue, who has fervently challenged the order impugned.
3.1 On having considered the submissions and having also examined the material on record with his assistance, we are of the opinion that the Tribunal has committed no error requiring any interference by this Court.
4. It could be noticed from the material that the penalty proceedings were initiated essentially on the ground that the consumption of the material for an year under consideration was 20% more whereas the consumption of the power and fuel was less than the previous year. Such ratio was found unbelievable by the Assessing Officer. It was held to be furnishing of the inaccurate particulars and concealment on the part of the assessee. The CIT(A) also had concur with such findings of the Assessing Officer.
4.1 The Tribunal has rightly noted that these circumstances were aptly explained by the assessee who had reiteratively mentioned that there was extraordinary inflationary trend during the year under question in chemical business of the assessee as compared to the previous year. The Tribunal has also taken into consideration the explanation rendered by the assessee vide communications dated 20.01.2006 and 18.07.2007. The company was closed for past two years and the Directors of the Company had also left the city of Surat and shifted elsewhere. This has resulted into papers and documents not being in place however, this was not the case the Tribunal has rightly found of, either wilfully not submitting the documents or account books before the Revenue. The accounts of the assessee also were found to be audited and the report of the Auditor was also placed along with the return of the income. On cumulative examination of these factual matrix, the Tribunal, in our opinion, has rightly concluded in favour of the assessee. No interference is necessary as neither any question of law much less the substantial question of law arises in this Tax Appeal
Appeal merits no consideration, the same is, therefore, dismissed.
USPRegards
Prarthana Jalan
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