M/S Aggarwal Oil & General Mills Ltd v. The Commissioner Of Income Tax

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.170 of 2007 Date of decision: 7.12.2010 M/s Aggarwal Oil & General Mills Ltd. Vs. The Commissioner of Income Tax -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTALHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Radhika Suri, Advocatefor the appellant. for the appellant. Ms. Urvashi Dhugga, Standing Counselfor the respondent. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the assesseeunder Section 260-A of the Income Tax Act, 1961 (for short, “theAct”) against the order of the Income Tax Appellate Tribunal,Chandigarh dated 21.7.2006, Annexure A-6 and was admitted forconsideration of following questions of law:- “i)Whether in the facts and circumstances of thecase, the ITAT was justified in sustaining thepenalty of Rs.1,70,753/- under Section 271(1)(c), even though the assessing Officer had notrecorded any satisfaction about concealment ofcase, the ITAT was justified in sustaining thepenalty of Rs.1,70,753/- under Section 271(1)(c), even though the assessing Officer had notrecorded any satisfaction about concealment of income in the assessment order or in the noticeunder Section 274 of the Income Tax Act?under Section 274 of the Income Tax Act? ii)Whether in the facts and circumstances of thecase, the ITAT was justified in sustaining thepenalty of Rs.1,70,753/- merely on the groundthat the additions had been sustained in thequantum of appeal without appreciating that thepenalty proceedings stands on a differentfooting than the initial assessment and theAssessing Officer must be satisfied that therehas been concealment of income prior toinitiation of penalty proceedings?case, the ITAT was justified in sustaining thepenalty of Rs.1,70,753/- merely on the groundthat the additions had been sustained in thequantum of appeal without appreciating that thepenalty proceedings stands on a differentfooting than the initial assessment and theAssessing Officer must be satisfied that therehas been concealment of income prior toinitiation of penalty proceedings? 2. As regards question no.(i), it is not disputed that thesame is covered against the assessee by judgment of this Courtof today in I.T.A. No.1 of 2007M/s Tej Bhan Cotton Ginnng &Press FAC v. CIT. Accordingly, the said question is decidedagainst the assessee. 3. We now proceed to consider question No.(ii).While considering the claim of the assessee for deduction onaccount of loss of bardana, the Assessing Officer held that theclaim was unfounded and in fact the assessee appeared to havesold the bags and suppressed the income so derived. Thefinding recorded is as under:- “5. The scrutiny of the Bardana Account for theperiod ending 31.3.92 revealed that the assessee hasclaimed loss of Rs.1,81,949/- on the sales thereof.The assessee was asked to file reasons of this loss ofRs.1,81,949/- vide this office letter dated 7.3.94. Videperiod ending 31.3.92 revealed that the assessee hasclaimed loss of Rs.1,81,949/- on the sales thereof.The assessee was asked to file reasons of this loss ofRs.1,81,949/- vide this office letter dated 7.3.94. Vide “5. The scrutiny of the Bardana Account for theperiod ending 31.3.92 revealed that the assessee hasclaimed loss of Rs.1,81,949/- on the sales thereof.The assessee was asked to file reasons of this loss ofRs.1,81,949/- vide this office letter dated 7.3.94. Videperiod ending 31.3.92 revealed that the assessee hasclaimed loss of Rs.1,81,949/- on the sales thereof.The assessee was asked to file reasons of this loss ofRs.1,81,949/- vide this office letter dated 7.3.94. Vide his letter dated 29.3.94 the counsel of the assesseestated that the assessee purchases the bardana forstoring its rice and paddy and involves the process of‘barti’. This process of barti repeated many times withthe result that there is a wear and tear and loss ofweight, also in the process the bardana is cut andtorn. Thus the price of bardana is lesser than the costprice and the value of closing stock has been taken atrealisable value resulted to a loss under the account.The reasons given by the counsel of the assessee areuntenable and have no force as bardana is soldimmediately after with the filling of rice and it has along life more than a year. Thus, the loss ofRs.1,81,949/- claimed by the assessee in the bardanaaccount and debited to P&L Account is disallowed. 6. Again the scrutiny of very bardana accountrevealed that the assessee has claimed shortage of15475 bags. Vide this office letter dated 7.3.94 theassessee was asked to give reasons for this shortageof 15475 bags. Vide its letter dated 29.3.94 thecounsel of the assessee stated that the shortage of15475 bags is due to wear and tear of the bags inreposted barti resulting into shortage of 15475 bags.The reasons for shortage of 15475 bags given by theassessee are untenable and have no force. A bag isgenerally purchased @ Rs.10/- each and the usedbag generally fetch Rs.5 to 7/-. This fact is evidentfrom the Bardana account. The assessee haspurchased 56709 bags for Rs.5,38,582/- therebygives cost price per bag at Rs.9.49/-. Similarly, salesprice of 32874 bags has been shown at Rs.417983/-in the bardana account. This gives a sale price ofRs.12.71 per bag. Since the cost price per bag as per bardana account given by the assessee firm is 9.49/-per bag the value of 15475 bags @ Rs.10/- is workedout at Rs.154750/-. Thus, the assessee hassuppressed sales of 15475 bags amounting toRs.1,54,750/- and the same is treated as income ofthe assessee and charged to tax for the year underconsideration.....” 4. The CIT(A) affirmed the above finding and sustainedthe addition made except for partial relief as under:- “5.3. ............There cannot be shortage of bardana inone year to the extent of Rs.1,54,75/- bags becausewhere there was no such shortage in the earlier years,no exceptional circumstances have been brought tomy notice to justify this shortage of bardana. It is nextobserved that bardana handled in the year underconsideration is not old. Out of opening stock of32900 bags, 28000 bags had been purchased afterDecember, 1990. The other purchases of 56709 bagswere in the year under consideration. As against this,there is sale of 32874 bags and shortage of 15475bags has been claimed. In other words, almost 1/3[rd]of the remaining bags after taking into account saleshas been claimed as shortage. This claim is notsupported either by the past history of the case or anyother exceptional circumstance. Therefore, theconclusion of the AO that there was no shortage andthere was suppression of sales of bardana is held tobe justified......” The Tribunal also upheld the above finding as The Tribunal also upheld the above finding as “15). ........The addition has made on account ofsuppressed sales of bardana. The purchase price forthe bardana for the assessment year under referencewas to the tune of Rs.9.90 per bag and the sale priceshown by the assessee for the AY under referencewas Rs.12.71 per bag. Considering the cost priceand the sale price, the estimate made by the lowerauthorities by taking the value at Rs.10 per bagappears to be fair and reasonable. Therefore, thesame does not merit any interference from our side.Accordingly, the order of the CIT(A) is confirmed andthis ground of appeal is dismissed.” 6. As a result of the finding on the above issue, theAssessing Officer also levied penalty equal to the amount of tax,alleged to have been evaded, which has been upheld by the CIT(A) and the Tribunal. 7. We have heard learned counsel for the parties. 8. Learned counsel for the assessee submitted thatmere fact that addition was sustained by rejecting the plea of theassessee about loss of bardana, was not enough to uphold thepenalty. Reliance has been placed on judgment of this Court inCITv. Ajaib Singh & co.[2002] 253 ITR 630. 9. Learned counsel for the revenue supported theimpugned finding. 10. Penalty can be levied under Section 271(1)(c) of theAct if there is concealment of particulars of income or if theparticulars of the income furnished are inaccurate. During the course of assessment, the Assessing Officer may make additionsto the declared income for various reasons, even if bonafides ofthe assessee are not in doubt. Mere fact that the plea of theassessee is not allowed for a particular deduction, is not alwaysenough to infer that the assessee had furnished inaccurateparticulars or concealed the particulars, but where addition isreferable to inaccuracy in particulars of income furnished orconcealment thereof, the penalty may be called for. TheAssessing Officer has to decide the questions on its satisfactionbased on reasons. 11. In the present case, there is concurrent finding of factrecorded by the CIT(A) and the Tribunal that the assesseeconcealed the particulars of income. The said finding hasattained finality. If this is so, the reason for addition beingfurnishing of inaccurate particulars, the levy of penalty could notbe held to be erroneous. The judgment relied upon isdistinguishable on facts. Therein, additions were made not onaccount of concealment of particulars of income but on account ofclaim of the assessee being found to be debatable. In thequestion formulated it has been assumed that the penalty hasbeen levied merely on account of addition without concealment ofthe particulars. This is not correct. We have noticed that levy ofpenalty is not based on mere addition but on satisfaction thatthere was concealment of particulars of income. Finding concurrently recorded by the Assessing Officer, the CIT(A) and the Tribunal is not shown to be perverse. 12. Accordingly, the question (ii) has to be answered against the assessee. 13. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE December 07, 2010ashwani (AJAY KUMAR MITTAL) JUDGE