Ramesh Chander Gupta v. Income Tax Appellate Tribunal, Amritsarand Others

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income Tax Appeal No. 261 of 2005Date of decision: 8.11.2010 Ramesh Chander Gupta --- Appellant Versus Income Tax Appellate Tribunal, Amritsarand others --- Respondents CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL. --- PRESENT:Mr. Akshay Bhan, Advocatefor the appellant. Ms. Savita Saxena, Govt. Standing Counselfor the respondents. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 31.8.2004, passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar, (SMC) (in short “the Tribunal”) in ITA No.332/ASR/1999 relating to the assessment year 1995-96. The point for consideration in this appeal is, whether theTribunal was justified in sustaining penalty under Section 271(1)(c) ofthe Act on the ground that there had been concealment of income bythe assessee? Briefly stated the facts of the case as narrated in the appealare that on 5.8.1994, a survey was carried out under Section 133-A ofthe Act at the business premises of the assessee-appellant. Thesurveying authority found the stock of Ist and 2[nd] Class bricks in excessto the tune of 28750 and 45280 respectively whereas the 3[rd] class tileswere found short to the extent of 63400. The Income Tax Officer, on thebasis of the above, vide order dated 24.11.1997, made addition of Rs.44,380/- on account of shortage in stock of 3[rd] class tiles andRs.44,383/- were added on account of excess stock of bricks of Ist and2[nd] Classes. Appeal of the assessee against the order of the Income TaxOfficer was dismissed by the Commissioner of Income-tax (Appeals) {inshort “the CIT(A)”}, vide order dated 1.7.1998. Even the applicationmoved by the assessee for rectification of the order dated 1.7.1998 wasalso dismissed. The assessee preferred appeal before the Tribunal. TheTribunal partly accepted the appeal by holding that in the case of shortstock of 63400 tiles of 3[rd] Class, G.P. rate was to be applied but theaddition having been made on the entire amount was wrong to thatextent. The Tribunal, thus, directed to adopt the profit rate with respectto short stock of 3[rd] class tiles found at the time of survey and restrictedthe addition to Rs. 7163/- instead of Rs. 44,380/- made by theassessing officer. While passing assessment, the assessing officer also ordered for initiation of proceedings under Section 271(1)(c) of the Actand in pursuance of the said proceedings, a penalty of Rs. 23,740/- wasimposed on the appellant, vide order dated 23.12.1998, Annexure A-1.The CIT(A) on appeal by the assessee deleted the penalty vide orderdated 18.3.1999, Annexure A-2, against which the Revenue went inappeal before the Tribunal. The Tribunal, vide order dated 31.8.2004,reversed the order passed by the CIT(A) and held that the deletion ofpenalty was not justified. It was ordered that the penalty be calculatedon the basis of the amount of addition finally sustained by the Tribunal. It is how the assessee is in appeal before us. We have heard learned counsel for the parties and haveperused the record. The Tribunal had set aside the order of the CIT(A) anddirected the assessing officer to re-compute the amount of penalty onthe basis of the amount which was finally sustained by it. The Tribunalwhile reversing the order of the CIT(A) cancelling the penalty hadcategorically held that the addition had not been made on the basis ofestimate as recorded by the CIT(A) but on actual physical verification ofstock by the assessing officer during survey on 5.8.1994. The findingsrecorded by the Tribunal in para 5 of its order read thus: It is how the assessee is in appeal before us. We have heard learned counsel for the parties and haveperused the record. The Tribunal had set aside the order of the CIT(A) anddirected the assessing officer to re-compute the amount of penalty onthe basis of the amount which was finally sustained by it. The Tribunalwhile reversing the order of the CIT(A) cancelling the penalty hadcategorically held that the addition had not been made on the basis ofestimate as recorded by the CIT(A) but on actual physical verification ofstock by the assessing officer during survey on 5.8.1994. The findingsrecorded by the Tribunal in para 5 of its order read thus: “We have considered the rival submissions in the light ofmaterial placed before us and precedents relied upon. In sofar as the question of recording satisfaction by the AO isconcerned, we find that the same has been duly recorded inthe assessment order in last para of page 2 by observing“the assessee has either sold bricks outside the books ofaccount or manufactured bricks outside the books of account. Hence, the value of this difference is added back inthe income of the assessee as concealed income.” Theseobservations of the AO in addition to the initiation of penaltyat the end of the assessment order clearly demonstrate thatthe satisfaction was duly recorded at the assessment stage.Coming to the merits of the case, we note that the assesseewas found to be having excess stock of first and secondclass bricks at the time of survey. Inventory was preparedand duly signed by the assessee. This is not the casewhere some stock was found in excess by the Survey partyand the assessee settled the dispute by agreeing for certainadditions subject to no penalty. On the contrary, the tribunalbeing the final fact finding authority, vide para 6 of its orderin quantum has recorded a categorical finding as under: “Since stock with respect to first class and secondclass bricks has been found in excess and inventoryprepared at the time of survey had duly been signedby the assessee, therefore, the addition in this regardis called for and the same has rightly been made bythe AO at Rs. 43,483/- by adopting the sale rate of Rs.725/- and 500/- per thousand bricks with respect tofirst and second class bricks respectively.” In view of the foregoing finding, it becomes crystal clear thatthe assessee was having excess stock of first and secondclass bricks which was not accounted for in the books ofaccount. It is true, as contended by the ld. AR that penaltyproceedings are different from assessment proceedings and the confirmation of addition in question does not lead toautomatic conformation of penalty. In such circumstances,the onus is on the assessee to prove that the mischief ofSection 271(1)(c) is not attracted. In view of the findinggiven by the Tribunal, in the present case, the inescapableconclusion that follows is that there was actual difference instocks and the assessee has not succeeded in bringing outits case from the ambit of the penal provision. In so far asthe contention of the learned A.R. regarding the additionmade on estimate is concerned, we are satisfied that thesame is not correct because a specific quantity of bricks wasfound to be available outside the books of account and bysimply applying the sale rate of such specific quantity, itcannot be said that the very basis of the addition is makingof the estimate. Similar is the case regarding the shortagein stock of third class tiles where the addition was made atRs. 44380/- on the basis of the value of the stock but thetribunal restricted the addition to Rs. 7,163/- by holding thatonly the GP rate of such sales be applied. In suchcircumstances, we hold that the deletion of penalty by thefirst appellate authority was not justified. We orderaccordingly and direct the AO to recompute the quantum ofpenalty on the basis of the amount of addition finallysustained by the Tribunal.” Further, in Income Tax Appeal No. 102 of 2006, filed by the Further, in Income Tax Appeal No. 102 of 2006, filed by the present assessee, addition made by the assessing officer has beenupheld and the appeal dismissed. No error could be pointed out by the counsel for theassessee in the findings recorded by the Tribunal as noticed above. Anattempt was made by the counsel for the appellant for re-appreciationof material on record, but the same does not fall within the domain ofSection 260A of the Act. In view of the above, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE November 08, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE