2023 (5) TMI 1277 - AT - Income Tax

Penalty under Section 271(1)(c) set aside as excess stock differences neutralized across related entities

ITAT Ahmedabad allowed the appeal, condoning a delay of 1976 days in filing. The assessee learned of the prosecution case only in May/June 2021 upon ... Condonation of delay - delay of 1976 days - Department launched prosecution case against the assessee on 14.05.2018 by filing a criminal case against the assessee and the Hon’ble Additional Chief Metropolitan Magistrate, Ahmedabad passed an order on the assessee u/s 279(1) - HELD THAT:- The fact of Department having launched prosecution against the assessee came to the notice of the assessee only on the month of May / June 2021 on receipt of order of Hon’ble Additional Chief Metropolitan Magistrate, Ahmedabad. The assessee was advised by his consultant to file compounding application, which was filed before Principal CCIT on 03.12.2021. However, the Principal CCIT rejected the compounding application vide order dated 12.01.2022. It was owing to the aforesaid circumstances that there was a delay of 1976 days in filing of the present appeal before ITAT. This is a fit case for condonation of delay. Accordingly, we are hereby condoning the delay of 1976 days in filing of the present appeal, in the interest of justice. Penalty u/s 271(1)(c) - Additional income on account of excess stock u/s 69B - HELD THAT:- As we are of the view that this is not a case of concealment of income and the excess stock found the case of M/s. Pankaj Textile was more or less neutralized on account of excess stock in the case of M/s. Sonal Fabrics and M/s. Mahek Impex. Further, at the time such excess stock was found by the Department, it is observed that since books of accounts were not written up to date of search, proper books stock could not be arrived at and as the physical stocks of various firms operating from the same premises were mixed, there arose a difference in the physical stocks as compared to the books stock. Accordingly, looking into the facts of the instant case we are of the considered view that at this is not a fit case for levy of penalty under Section 271(1)(c) of the Act. Accordingly, we are hereby directing that the levy of penalty under Section 271(1)(c) of the Act be set-aside. Appeal of the assessee is allowed. Issues involved:The case involves the condonation of delay in filing the appeal, and the levy of penalty under Section 271(1)(c) of the Income Tax Act.Condonation of Delay:The appeal was filed 1976 days late, and the assessee sought condonation of the delay. The Supreme Court emphasized that the expression 'sufficient cause' in the Limitation Act allows for a liberal approach to serve the ends of justice. It was noted that refusing to condone delay could result in a meritorious matter being dismissed at the outset. Considering the circumstances, the delay was condoned in the interest of justice.Merits of the Case - Penalty under Section 271(1)(c):During assessment, a difference in stock was observed, leading to additional income under Section 69B. The assessee agreed to pay taxes on the excess stock, but contested the penalty under Section 271(1)(c), claiming there was no actual excess stock. The CIT(A) dismissed the appeal based on the delay in filing, without discussing the case's merits. The ITAT found that the excess stock in one firm was offset by shortages in others due to mixed physical stocks. Since it was not a case of concealment and all facts were on record, the penalty was set aside.Conclusion:The delay in filing the appeal was condoned, and the penalty under Section 271(1)(c) was set aside. The appeal of the assessee was allowed.