Elefur Indutries India Pvt.Ltd., ... vs Assessee

Elefur Industries India The Asstt. Commissioner Pvt. Ltd, 312-313, Camps of Income Tax, Circle- Corner, Nr. Narhari Vs 1(2), Baroda, Baroda Hospital, Fatehgunj, Baroda PAN: AAACE4999B (Appellant)

Assessee by: Shri Anil R. Shah, A.R. Revenue by: Shri Dinesh Singh, Sr. D.R.

Date of hearing : 05-02-2015 Date of pronouncement : 20-02-2015

आदे श/ORDER

PER : MUKUL KR. SHRAWAT, JUDICIAL MEMBER:-

Both these appeals are in respect of the same assessee, one filed against the quantum addition and the other against the penalty levied u/s. 271(1)(c) arising from two separate order CIT-I, Baroda both identically dated 20th April, 2011.

I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 2 Elefur Industries Pvt Ltd vs. ACIT

2. First we shall take up the main appeal in respect of quantum addition and the grounds raised are as under:-

A. ITA 1704/Ahd/2011 "1 The Ld. AO had erred in law and on facts in making the addition of Rs. 8,01,196/- in ex-parte assessment order u/s r.w.s. 147 of the I.T. Act. The Hon'ble CIT(A) has also erred in confirming the action of the Ld. A.O. and dismissing the appeal.

2. The Ld. AO had also erred in law and on facts in arriving profit at Rs.

8,01,961/- being profit charges @ 8% on deemed turnover of Rs. 1,00,24,523/-. The Ld. AO had adopted average of the turnover for A.Y. 2001-02 and A.Y. 2002-03. The appellant had closed down the business since mid 2002 with no place of office, no employee and it has gone to GBIFR as sick unit. The hon'ble CIT(A) has also erred in confirming the addition.

3. The Ld. A.O. and the Hon'ble CIT(A) both have not the set off of past years losses through the losses were determined by the Ld. A.O. to carried forward in subsequent years."

3. Apropos to Ground No. 1, no specific argument has been raised and stated that the ground being general in nature hence needs no legal adjudication. This ground is therefore dismissed being not pressed.

4. Apropos to Ground No. 2, facts in brief as emerged from the corresponding assessment order passed u/s. 144 r.w.s. 147 of IT Act dated 28-11-2006 were that the assessee company was stated to be in the business of manufacturing and trading of steel furniture. The admitted factual position was that no return of income was furnished by the assessee for the year under consideration. It is also evidenced from the assessment order that a notice u/s. 148 was issued but even then no return was filed. The AO has also given opportunities of hearing due to I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 3 Elefur Industries Pvt Ltd vs. ACIT non-compliance. AO has noticed that there was no option but to proceed ex-parte u/s. 144 of I.T. Act. Thereafter it was found by the AO as per the assessment record that for A.Y. 2002-03 the sales were of Rs. 87,28,458/- and for A.Y. 20001-02 it was Rs. 1,13,20,587/-. On that basis, the AO has worked about an average turn over at Rs. 1,00,24,523/-. The AO has further noted that he had no option but to assess net profit ratio at 8% on the said turnover and thereupon worked out the net profit at Rs. 8,01,961/-. It has also been noted by the AO that since the assessee has not furnished the income tax return, therefore, not entitled for set off of carry forward losses.

5. Being aggrieved the matter was carried before the first appellate authority.

6. Before Ld. CIT(A), a written submission was filed in which it was stated that the assessee-company was closed for over 8 years and in the past suffered losses. Even the books of accounts were impounded by the Sales Tax department, Bharuch. It was also informed that due to riots in the year 2002, the factory was closed down. However, Ld. CIT(A) was of the view that the assessee has not furnished any information about its turn-over etc. The AO had made an allegation that the asessee was a beneficiary of bogus purchase bills, therefore, Ld. CIT(A) has affirmed the action of the AO.

7. With this brief factual background, Ld. AR. Shri Anil R. Shah, has stated that as per the comparative chart, the assessee has earned gross profit for A.Y. 2000-01 @ 40.07% and in 2001-02 it was 25.17%. However there was net loss suffered by the assessee. Ld. AR has also furnished certain accounts for A.Y. 2001-02 to demonstrate that the assessee was I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 4 Elefur Industries Pvt Ltd vs. ACIT facing financial difficulty and suffered losses in the past few years. The main plank of argument before us is that due to financial problems the assessee-company was not having any income to offer to the revenue department rather closed down its business. There was no one to look after financial matters. The available record was with the Sales tax department. In such circumstances, a reasonable view may be taken to arrive at the percentage of net profit because the net profit @ 8%, as adopted by the AO, was towards higher side.

8. On the other hand from the side of the Revenue, Ld. DR, Shri Dinesh Singh, has vehemently supported the view taken by the revenue authorities. He has pleaded that the non-cooperative conduct of the assessee deserves no sympathy. The assessee has not furnished any detail to the AO, therefore, he had no option but to estimate the income. The main contention was that the percentage of profit as adopted by the AO should be upheld.

9. Having heard the submissions of both the sides and after considering the totality of the facts and circumstances as vehemently stated by Ld. AR before us; we are of the view that the past history of the profit/loss should not be ignored so as to arrive at a logical assessment of profit. Although this assessee has not cooperated with the revenue department but still the natural justice demands to assess a taxpayer on an income which is legitimately correct/acceptable. Due to this reason, we have considered the comparative chart and other details as furnished in the paper book filed by the assessee and thereupon consider it reasonable to estimate the profit at 4% on the 'turn-over' as determined by the AO. We may like to add that although there is no sound basis for this estimation but to put an end to a litigation some times it is desirable to I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 5 Elefur Industries Pvt Ltd vs. ACIT work out a middle path solely with the purpose to resolve an unfruitful controversy. As we have found in this case that the company had already been closed down. Therefore, we direct the AO to re-compute the assessable income by adopting net profit ratio at 4% on the turn over of Rs. 1,00,24,523/-. Resultantly, this ground of the assessee is partly allowed.

10. Apropos to Ground No. 3 the question of granting set off of past year losses has already been decided correctly by Ld. CIT(A) hence the legal view as taken by him need not to be disturbed. This ground of assesse is dismissed.

11. In the result, this quantum appeal of the assessee is partly allowed.

B. ITA No. 1705/Ahd/2011

12. Grounds raised are reproduced below:-

"1. The AO had erred in law and on facts in levying penalty of Rs. 2,88,000/- u/s 271(1)(c) of the I.T. Act and the Hon'ble CIT(A) has erred in confirming the action of the Ld. A.O.

2. The Ld AO had also erred in law and on facts in levy of penalty though the appellant has neither concealed the income nor furnished the inaccurate particulars of income and the Hon'ble CIT(A) has erred in law and on facts in confirming the penalty.

3. The Ld. A.O. had also erred in law and on facts in levying penalty because the appellant has closed down the business during the year. There was no income. The Ld. A.O. had taken the income of Rs. 8,01,961/- on estimate basis @ 8% on deemed turnover of Rs. 1,00,24,523/- (The Ld. A.O. adopted average of turnover for A.Y. 2001-02 & A.Y. 2002-03). The Hon'ble CIT(A) CIT(A) has erred in confirming the penalty though the same is based on estimate. Where the addition is made solely on the basis of estimate without any proof of concealment, by way of best judgment assessment, I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 6 Elefur Industries Pvt Ltd vs. ACIT there could hardly be any case for penalty as per Hon'ble ITAT Chennai Bench (2009) 314 ITR (AT) 290."

13. We have heard both the sides in the background of the facts as stated hereinabove. Although the admitted factual position was that the assessee has not furnished the return of income and because of that reason an ex-parte order was passed by the AO; still we have noted that there was no specific information about specific concealment of income by the assessee. This is not the case where the revenue department had detected some information leading to assess the concealed income. Although it is correct that an estimated figure of sales and estimate of profit was adopted by the AO, but simultaneously it is also correct that the AO had no option but to adopt an estimation to assess the taxable income. Considering both the aspects, we can arrive at a reasonable conclusion that in such circumstances when one estimation is pitted against another estimation then in general not a fit case for levy of concealment penalty. However, we are also aware of this fact in this case that the estimation was the only option available to the revenue authorities because of non- filing of the return and non-production of records. Therefore, we again draw a middle path reducing the penalty to an estimated figure of Rs. 25,000/- and rest of the penalty is hereby deleted. The penalty levied u/s. 271(1)(c) is therefore restricted to Rs. 25,000/-. We order accordingly. The grounds raised by the assessee are therefore partly allowed.

14. Both the appeals are partly allowed.

Order pronounced in open court on the date mentioned hereinabove at caption page

Sd/- Sd/-

(N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER I.T.A No. 1704 & 1705/Ahd/2011 A.Y. 2003-04 Page No 7 Elefur Industries Pvt Ltd vs. ACIT Ahmedabad : Dated 20/02/2015 ak

आदे श क ूितिल प अमे षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद