TMI Blog2012 (8) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O - partly in favour of assessee. Mistake in amount of expenditure allowed - Held that:- As the tribunal in the first round noted that chart submitted by the assessee as per which it was claimed by the assessee that the A.O. has not allowed in full the deduction being the difference of expenditure claimed in the receipt and payment account and in the P & L account. The tribunal has restored back the matter to the file of the A.O. for examination of this contention of the assessee and to decide the matter afresh. The A.O. has allowed deduction of Rs.47,87,106/- without giving any basis for working out of this amount as against claim of the assessee - as in the interest of justice, this matter should go back to the file of the A.O. for a fresh decision - in favour of assessee for statistical purposes Mistake in not granting deduction of sales tax - Held that:- As per the computation of income filed by the assessee for the AY. 1997-98, and as per the assessment order for this year u/s 43B it is seen that there was unpaid sales tax as on 31.03.1997 as per books of account out of which an amount of Rs.10,11,681/- was for the period up to 31.03.1996 and the sales tax outstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIA, AND SHRI KUL BHARAT, JJ. Appellant by: Shri G C Pipara, AR Respondent by: Shri D P Gupta, CIT DR O R D E R PER SHRI A. K. GARODIA, AM:- Both these appeals are filed by the assessee which are directed against two separate orders of Ld. CIT(A) III, Ahmedabad dated 22.02.2007 in respect of penalty proceedings and of CIT(A) I, Ahmedabad dated 30.03.2007 in respect of quantum proceedings against the order passed by the A.O. u/s 154 on 6.12.2006 for the same block period (01.04.1990 to 09.01.2001). Both these appeals were heard together and are being disposed off by way of this common order for the sake of convenience. 2. First, we take up the quantum appeal in IT(SS)A No.92/Ahd/2007. 2.1 Ground No.1 is general. 2.2 Ground No.2 is as under: 2. The learned CIT(A) has erred in law and on facts in rejecting application for rectification of mistake apparent from record amounting to Rs.25,11,325/- on account of difference between Rs.68,80,250/- and Rs.43,68,925/- being the mistake in sales for 2 months. In view of the facts and submissions filed, the learned CIT(A) ought to have directed the A.O. to rectify the order giving effect to the ITAT's order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition, the same was rejected by the A.O. 2.2.3 In the course of hearing before us, it was submitted by the Ld. A.R. that it is noted by the A.O. on page 6 of the original assessment order dated 31.01.2003 that the total sales as per collection book A-1 for the period Dec, 1999 to 26.02.2000 was Rs.1,22,15,322/-. He also submitted that as per page 11 of the paper book, the sale for the month of Dec. 1999 was found by the A.O. at Rs.51,07,557/- which is part of sale of 6 months form 01.07.1999 to 31.12.1999 of Rs.2,62,13,554/- and this sale figure of 6 months was taken as the basis by the A.O. He submitted that when actual sale figure for the period 01.01.2000 to 26.02.2000 are available as per page 6 of the assessment order, there is no requirement of estimating sales for the period up to 26.02.2000 and only the sale of three days of Feb 2000 i.e. 27.02.2000 to 29.02.2000 is required to be estimated and from these figures of sale from Dec.1999 to 26.02.2000, the sale of Dec 1999 should be reduced and it will give the figure of sale from 01.01.2000 to 26.02.2000 and on the basis of such sales, the sale for last three days of Feb. 2000 can be estimated. 2.2.4 Ld. D.R. supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in this manner, assessee gets relief of Rs.12,55,994/- over and above the relief allowed by the A.O. in the appeal effect order passed by him as against relief claimed by the assessee in ground No.2 for Rs.25,11,325/-. This ground of the assessee is partly allowed. 2.3 Ground No.3 is as under: 3. The learned CIT(A) has erred in law and on facts in rejecting application for rectification of mistake apparent from record amounting to Rs.73,64,574/- being mistake in amount of expenditure allowed-at Rs.47,87,106/- as against Rs.1,21,51,680/-. In view of the facts and submissions filed, the learned CIT(A) ought to have directed the A.O. to rectify the order giving effect to the ITAT's order to the extent of Rs.73,64,574/- as claimed by the appellant and reduced the revised total income by the said amount. 2.3.1 Brief facts of the case are that in the original tribunal order, it was contended before the Tribunal by the assessee that the deduction allowed by the A.O. with regard to excess expenditure debited in the receipt and payment account as compared to the expenses debited in the P L account was short allowed by the A.O. to the extent of Rs.1,21,51,680/-. On this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the original books of account. Similarly, in respect of the factory expenses, the assessee has worked out difference of Rs.14,56,206/- as per the chart available on page 54 of the paper book but the A.O. has allowed deduction of Rs.4,63,927/- and no basis is given by him as to how, he has worked out this amount. The A.O. rejected the assessee s contention in Section 154 order passed by him and against the same, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us. 2.3.2 It is submitted by the Ld. A.R. that since no basis is given by the A.O. in the appeal effect order passed by him in respect of rejection of claim of the assessee about expenses claimed by the assessee of Rs.1,21,51,680/-, against which the A.O. allowed only Rs.47,87,106/-, the matter may be restored back to the file of the A.O. for deciding this aspect afresh and to pass speaking order. 2.3.3 Ld. D.R. of the revenue supported the orders of authorities below. 2.3.4 We have considered the rival submissions, perused the material on record and have gone through the order of authorities below. We find that the tribunal in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account. In the application moved by the assessee before the A.O. u/s 154, it was claimed by the assessee that s there is collection of sales tax as per books of Rs.57,55,817/- and, therefore, to this extent, there is mistake in the appeal effect order passed by the A.O.. It was held by the A.O. in the order passed by him u/s 154 that the assessee has not furnished proof of sales tax paid to the sales tax authorities before filling the return of income which is necessary as per Section 43B of the Income tax Act, 1961 and, therefore, there is no merit in the claim of the assessee and hence, rejected. The assessee carried the mater in appeal before Ld. CIT(A) on this issue also but without success and now, the assessee is in further appeal before us. 2.4.2 It was submitted by the Ld. A.R. before us that as per the copy of audited accounts submitted in the paper book for financial year 1993-94 to the financial year 1999-2000, there is outstanding sales tax as on 31.03.1996 of Rs.10,11,306/- as per the details of unpaid copy of balance sheet available on page 131 of the paper book. He further submitted that the loss as per P L account for this year was Rs.24,96,906/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submissions. We find that as per the computation of income filed by the assessee for the assessment year 1997-98, and as per the assessment order passed by the A.O. for this year u/s 43B and other details, it is seen that there was unpaid sales tax as on 31.03.1997 as per books of account of Rs.17,36,202/- out of which an amount of Rs.10,11,681/- was for the period up to 31.03.1996 and the sales tax outstanding for the financial year 1996-97 was Rs.7,24,521/-. In the computation of income for the assessment year 1997-98, addition was made by the asessee of this amount on the basis of unpaid sales tax but in the order passed by the A.O. u/s 143(3), he has allowed deduction to the assessee of this amount of Rs.7,24,521/- on this basis that sales tax deferment was allowed to the assessee. This proves both the points that assessee is having collection of sales tax as per books and the same is not credited to the sales account but credited to liability account. It is also coming out from the assessment order for the assessment year 1997-98 that the assessee has been found eligible for sales tax deferment and, therefore, no addition is called for in respect of unpaid sales tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. are noted by Ld. CIT(A) in para 3 4 of his impugned order dated 22.02.2007 and for the sake of ready reference, para 3 4 of the order of Ld. CIT(A) are reproduced below. 3. The appellant was searched ii/s. 132 on 9/1/2001. The consequent assessment was framed u/s. 158BC on 31/1/2003 at the undisclosed income of Rs. 5,1 1,40, 380/-. The break-up of undisclosed income, is from suppression of production and sales up to 31/3/2000, at Rs.4.5 crore and from estimated production and sales considered suppressed for the period 1/4/2000 to 9/1/2001. This ^estimated suppression was computed at Rs.60,54,951/- on a proportionate basis (as per para 2.6 of the assessment order). The A.O. also held mat stock was unexplained to the extent of Rs.20. 37 lakhs and so also, the investment in shares to the extent of Rs.75.05 lakhs. No separate addition was however, made for the stock/shares to the total undisclosed income, as these were considered to be investment out of the computed undisclosed income of Rs.5.11 crores. The appeal against the assessment order was decided by the then CIT(A)-I, in his order dtd. 26/5/2003 in which addition(s) of Rs.3.21 crores were deleted and the revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts: (a) Dr. Hakeem S.A. Syed Sathar Vs ACIT 120 ITD 01/123 TTJ 573 (Chennai). (b) ACIT Vs Shanti Kumar Chabara 121 TTJ 985 / 32 SOT 21 (Jp.)(URO). (c) Saluja Hire Purchase Ltd. Vs ACIT 305 ITR (AT) 39 (Luck.) (d) ITO Vs Janta Bazar Stors (P) Ltd. 109 TTJ (Mum.) 535 (e) Enfield Industries Ltd. VS DCIT 107 ITD 01 (Kol) (f) DCIT Vs Suresh Kumar 97 ITD 527 (Kol.) (g) Nemichand Vs ACIT 93 TTJ 564 (BaNG.) 3.2.2 He also submitted that the appeal of the assessee in quantum proceedings has been admitted by Hon ble Gujarat High Court and he submitted a copy of this judgment of Hon ble Gujarat High Court dated 26.12.2006 as per which, the appeal of the assessee was admitted by Hon ble Gujarat High Court. He further submitted that since appeal of the assessee was admitted by the Hon ble Gujarat High Court, penalty is not justified because admittedly, the addition made by the A.O. and confirmed by the tribunal leads to substantial question of law as per Hon ble Gujarat High Court and it is a debatable issue and hence, penalty is not justified. 3.2.3 As against this, Ld. D.R. supported the order of Ld. CIT(A). He also submitted that now, this issue is covered against the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,80,22,714/- and penalty confirmed by Ld. CIT(A) is only to this extent of undisclosed income computed by the A.O. Against this order of the A.O. u/s 154 also, there is quantum appeal filed by the assessee, which is already decided by us as per para 2 to 2.5 above granting some relief to the assessee and restoring back two matters to the file of the A.O. Whatever ultimate relief is allowed to the assessee, penalty will get automatically reduced to that extent as the same is consequential but the issue before us is, whether penalty is justified on the estimated assessed income. Ld. D.R. has placed reliance on two judgements of Hon ble Gujarat High Court rendered in the case of Becharbhai P Parmar and Kanodi Bhogilal Mulchand (supra). In these judgements, it was held by Hon ble Gujarat High Court that they are unable to hold that penalty u/s 158BFA(2) is mandatory in nature. Hon ble Gujarat High Court also referred to Section 273B of the Income tax Act, 1961 and it is observed that although there is no mention of Section 158BFA(2) in the section 273B but still it does not mean that the penalty u/s 158BFA(2) is mandatory. Hence, as per these two judgements of Hon ble Gujarat High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare application money received etc. Similarly, at the payment side, there is a payment for liabilities, expenses etc. In the paper itself on the receipt side, it is mentioned as receipt while on the payment side, it is mentioned as payment . Therefore, we agree with the contention of the Ld. Counsel for the assessee hat the amount debited under the head debtors at the payment side is payment to the debtors and not the closing balance of debtors. However, every outgoing is not expenditure. Therefore, it has to be further examined whether the payment was for an expenditure incurred for the purpose of business it was claimed by the assessee before the lower authorities as well as before us that the debit under the head debtors in Annexure A-15 is for discount and commission allowed to the debtors and also for bad debts. So far as the assessee s contention for bad debt is concerned, it has to be rejected outright because in the case of bad debt, no payment is made to the debtors but the outstanding amount against the sale proceeds becomes irrecoverable. Therefore, the question of bad debt being debited in the payment side of receipt and payment account does not arise. Coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40,87,963 October, 1999 23887 35,57,248 November, 1999 27372 34,48,872 December, 1999 26009 35,89,242 1,75,817 2,33,50,266 At pave 11 of the assessee s paper book which is page 107 of the bunch of loose papers, the details of sale of Rs.2,62,13,554/- is there. The same reads as under: Boxes Amount (Rs.) 33125 44,70,513 July,99 31783 41,46,428 August, 99 33641 40,87,963 September, 99 33887 42,97,248 October, 99 32272 41,03,845 November, 99 37009 51,07,557 December, 99 2,01,817 2,62,13,554 From the comparison of above, it is evident that the less sales at page 8 is because of less number of boxes having been sold and not because of any discount or commission being reduced from the gross sales. The learned counsel has not brought on record any evidence to support the contention that there is general trade practice in this line of business of allowing cash discount to trades and which is separately paid to them. On the other hand, the assessee has own reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed material is not available with the assessee, he cannot properly calculate/compute the undisclosed income belonging to him for the block period as per the seized material. Second situation as per our considered opinion can be that although copy of seized material is available with the assessee but whether on the basis of such seized material, there is an undisclosed income of the assessee or not, is a debatable issue and a person of reasonable prudence can have this possible view that the undisclosed income on the basis of the seized material is not there or is computed at a lower amount but finally the A.O. has made addition which is sustained by the Tribunal also but still it can be said that there was a genuine and bona fide reason on the part of the assessee for not including such income in the undisclosed income declared by him in the block return. In such a situation also, in our considered opinion, penalty u/s 158BFA(2) can be said to be not justified in a given case. 3.2.8 In the light of our above discussion, now we examine the facts of the present case. In the present case, the undisclosed income has been assessed by the A.O. on the basis of receipt payment account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but still the very fact that the appeal of the assessee was admitted by Hon ble Gujarat High Court holding that two substantial question of law arises out of this Tribunal order, it has to be accepted that there can be a possible view of a person of reasonable prudence that the assessee is eligible for deduction in respect of the amount debited in the seized receipt payment account under the head debtors and, therefore, penalty u/s 158BFA(2) not being mandatory as per these two judgments of Hon ble Gujarat High Court can be said to be unjustified in the facts of the present case although the addition is already confirmed by the tribunal. - In the case of Becharbhai P Parmar (supra), the penalty was deleted by the tribunal on this basis that the addition was made on the basis of mere presumption or on estimate basis and, therefore, the revenue failed to prove that the assessee is guilty of concealment. Under these facts, it was held by Hon ble Gujarat High Court in that case that the requirement to prove concealment of income can nowhere but traced in Section 158BFA(2) and, therefore, it was held that the tribunal order is not sustainable. In the present case, the argument be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt. Ltd. (supra), penalty was confirmed by the Tribunal on this basis that the assessee has not furnished particulars of undisclosed income on the basis of seized material and only nil income was returned and, therefore, penalty could be levied on increased undisclosed income even if it was on account of estimation made by the revenue authorities. In the present case, the facts are different. In the present case, we have noted as per above discussion that in the facts of the present case, a person of reasonable prudence can have this possible view that no undisclosed income is arising out of seized material and although the claim of the assessee was rejected by the authorities below and the Tribunal in the quantum proceedings but Hon ble Gujarat High Court has admitted the appeal of the assessee by holding that two substantial question of law arose out of the dispute regarding allowability of deduction in respect of the amount debited in the seized material under the head debtors. The facts being different, this tribunal decision is not applicable in the present case. - Similarly, in the case of Smt. Madhuben R Barot (supra), it is noted by the tribunal in para 6 that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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