Case Law Details

Case Name : M/s. Chaurasia & Sons. Vs I.T.O. (ITAT Kolkata)
Appeal Number :  I.T.A No. 66/Kol/2013
Date of Judgement/Order : 01/09/2015
Related Assessment Year : 2003-2004
Courts : All ITAT (4625) ITAT Kolkata (330)

Brief of the Case

In the case of Ms. Chaurasia & Sons. Vs. I.T.O the Hon’ble Kolkata ITAT held that mere confirmation of addition will not lead to conclusion that penalty is leviable, unless it is established that assessee has concealed its income. The assessee’s representative conceding the evasion of tax is of no consequence because assessee cannot be made to suffer for the wrong advice of counsel.

Facts of the Case

The assessee had filed its return of income showing total income of Rs.29,660/-. The assessment was completed under section 143(3) at Rs.40,70,677/-, which was revised to Rs.7,28,100/- after ld. CIT(A) order. Tribunal had set aside the order of ld. CIT(A) and directed to verify the claim of assessee in regard to the difference of stock found during the course of survey by personally examining Shri Kailash Nath Chaurasia, who was proprietor of Kailash Trading Co. dealing in the same products and also of the assessee M/s. Chaurasia & Sons, claimed as owner of the stock found in the factory of the assessee-firm. The Tribunal also directed to collect the affidavit of the claimant in this regard. Consequently summons under section 131 was served upon Shri Kailash Nath Chaurasia for personal examination.

After personal examination and verification of accounts and other documents produced it emerged that the assessee firm and Shri Kailash Nath Chaurasia run their business from two different places and their stocks were also kept in two different premises. Further, Shri Kailash Nath Chaurasia was just a petty businessman delivering good from door to door on his bicycle and that he does not have the financial capabilities to maintain such huge amount of stock. They also failed to submit any affidavit in connection to the claim of stock which totally violated the direction given by Hon’ble ITAT.

Therefore, the AO initiated penalty proceeding under section 271(1)(c). He has observed that in response to the notice Shri Manoj Agarwal, Advocate, ld. A.R. of the assessee appeared and stated that he agreed that there has been evasion of taxes but it was all due to assessee’s ignorance and it was the first time such an offence had come to light. He, therefore, prayed for minimum penalty. The Assessing Officer levied penalty at Rs.3,28,230/- which was reduced by the ld. CIT(Appeals) to Rs.1,85,161/-.

Contention of the Assessee

The ld. Counsel of the assesse referred to the decision of the Hon’ble ITAT in assessee’s own case passed on 29-07-2011 in ITA Nos. 1924 & 1925/KOL/2009 wherein the Hon’ble ITAT observed that during the course of stock taking goods belonging to Kailash Trading Co. and Chaurasia & Sons are mistakenly included in each other’s and this is complicated but in any case there is discrepancy in stock and that is not proved beyond doubt. The Hon’ble ITAT confirmed the following additions :-

                        Beetle Nut                                Rs. 81,603/-

                        Khaini                                      Rs. 1,06,825/-

                        Kimam                                     Rs. 36,400/-

                        Menthol                                   Rs. 1,26,075/-

Ld. Counsel of the Assessee further submitted that there is no charge of concealment of Income or furnishing of inaccurate particulars of income. He relied on the decision of the ITAT coordinate Bench in the case of M/s. Unipack Air Express (P) Limited Vs. ITO (ITA No. 421/KOL/2012) and the Hon’ble Supreme Court in the case of CIT –vs.- Atul Mohan Bindal (317 ITR 1 (SC)) wherein it was held that before imposing the penalty by the AO, the revenue must comply with the conditions specified u/s 271(1)(c) of the Act. He also relied on the decisions of the Hon’ble Supreme Court in the case of Dilip N. Shroff  Vs. JCIT (291 ITR 519 (SC)) and the Hon’ble Gujarat High Court in the case of New Srathia Engg. Co. Vs. CIT (282 ITR 642) wherein similar views were taken.

Contention of the Revenue

The Ld. DR of Department relied on the order of the Ld. CIT(A).

Held by CIT(A)

Ld. CIT(A) reduced the penalty from Rs.3,28,230/- as levied by the AO to Rs.1,85,161/-

Held by ITAT

The Hon’ble ITAT held that penalty cannot be cancelled merely because concealment of Income is not mentioned since before the AO the AR of the assessee himself agreed that there had been evasion of Tax.

However, the Hon’ble ITAT decided that it has to be examined whether the assessee had concealed the particulars of income or furnished inaccurate particulars of income. From bare perusal of the order of Tribunal dated 29.07.2011 in ITA Nos. 1924 & 1925/KOL/2009 in assessee’s own case in quantum appeal, it is evident that the addition has been sustained because it was not possible to find out exact stock whether belonged to Shri Kailash Nath Chaurasia, who was proprietor of M/s. Kailash Trading Co. and father of partners of assessee Chaurasia & Sons. Hon’ble Tribunal has observed that during the course of stock taking goods belonging to Kailash Trading Co. and Chaurasia & Sons mistakenly included in each other’s and since there was discrepancy in stock found which had not been fully explained, therefore, Tribunal confirmed the additions as mentioned above.

Thus, the Hon’ble ITAT held that it is clear that no specific concealment of income has been found on the part of assessee. Mere confirmation of addition would not lead to the conclusion that penalty is leveable, unless it is established that the assessee had concealed its income. The assessee’s representative’s conceding to evasion of tax is of no consequence because assessee cannot be made to suffer for the wrong advice of counsel. Therefore, the Hon’ble ITAT set aside the order of ld. CIT(A).

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