Rakhi Anand Verma, Aurangabad V. Income-tax Officer, Ward - 1(3), Aurangabad

ITA 1017/PUN/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8758 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 06-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 271(1)(c); 143(3); 274

Judgement Text

आयकर अपीलीय अधधकरण “बी ” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI R.S.SYAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 1017/PUN/2018 धनधाारण वषा / Assessment Year : 2010-11 Mrs. Rakhi Anand Verma Plot No.L-13, MIDC, Waluj, Aurangabad PAN : ADFPV8905P .......अपीलाथी / Appellant बनाम / V/s. The Income Tax Officer, Ward-1(3), Aurangabad ......प्रत्यथी / Respondent Assessee by : Shri Nikhil S. Pathak Revenue by : Shri Piyush Kumar Singh Yadav सुनवाई की तारीख / Date of Hearing : 10.11.2021 घोषणा की तारीख / Date of Pronouncement : 11.11.2021 आदेश / ORDER PER CHANDRA MOHAN GARG JM: This appeal filed by the assessee is directed against the order of the Ld.CIT(Appeals)-1, Aurangabad dated 20.03.2018 for the assessment year 2010-11 as per the following grounds of appeal on record: “1. The assessee submits that the penalty order passed u/s.271(1)(c) be declared null and void since there is no proper satisfaction recorded by the AO in the asst. order. 2. The assessee further submits that the notice issued u/s.274 r.w.s. 271(1)(c) is also bad in law and accordingly, the penalty levied may kindly be deleted. 2 ITA No. 1017/PUN/2018 A.Y.2010-11 3. The learned CIT(A) erred in confirming the levy of penalty u/s.271(1)(c) of Rs.3,93,190/- without appreciating that the addition was made on an estimated basis and hence, no penalty was leviable. 4. The learned CIT(A) failed to appreciate that no penalty was leviable on the estimated addition in respect of hawala purchases since there was no concrete evidence with the dept. that the purchases made were non genuine and accordingly, the levy of penalty was not justified. 5. The appellant craves to add, alter, amend or delete any of the above grounds of appeal.” 2. The brief facts in this case are that the assessee is engaged in the business of manufacturing, trading and repairing & maintenance of paper machine and equipment, purchase and sale of land including hiring of tractor. The Assessing Officer disallowed purchases to the tune of Rs.50,89,760/-. The Ld. CIT(Appeals) has restricted the addition to 25% and accordingly, an amount of Rs.12,72,440/- was added in the total income of the assessee for the year under consideration. The Assessing Officer also initiated penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961 (in short „the Act‟) and levied penalty of Rs.3,93,190/- u/s.271(1)(c) of the Act. Ground No.1 & 2 3. The Ld. Counsel for the assessee with regard to Ground Nos.1 & 2 submitted that penalty order passed u/s.271(1)(c) of the Act be declared as null and void since there is no proper satisfaction recorded by the Assessing Officer in the assessment order. He further submitted that notice issued u/s.274 r.w.s. 271(1)(c) of the Act is bad in law and accordingly, penalty levied u/s.271(1)(c) of the Act may kindly be deleted. In support of his contentions, the Ld. Counsel by placing reliance on the order of the Pune Bench of the Tribunal in the case of Shrivallabh V. Shete Vs. DCIT, ITA No.538 & 539/PUN/2018 dated 18.05.2021 submitted that this issue is covered one in favour of the assessee. 3 ITA No. 1017/PUN/2018 A.Y.2010-11 4. The Ld. CIT-DR conceded to the submissions put forth by the Ld. Counsel for the assessee. 5. On careful consideration of the above submissions, we are of the considered view that the similar and identical issue has been decided by the Pune Bench of the Tribunal in favour of the assessee in the case of Shrivallabh V. Shete Vs. DCIT (supra.) wherein the Tribunal on the issue has held as follows: “6. The case of the assessee is that the AO did not strike off the irrelevant limb in the notice issued u/s.274 r.w.s. 271(1)(c) of the Act. We have examined the notice u/s.274 for the assessment year 2009-10, whose copy has been placed at page 1 of the paper book in which both the limbs are present, namely, “have concealed the particulars of your income” or “furnished inaccurate particulars of your income”. None of them was struck off by the AO. As against that, the penalty has actually been imposed on account of claiming loss on sale of asset, which falls only under the second limb, namely, “furnishing of inaccurate particulars of income”. 7. Similar is the position for the assessment year 2011-12. A copy of notice u/s.274 has been placed on record. The first notice u/s.274 of the Act is dated 25-03-2014 and the second is dated 23-07-2014 – both for the year under consideration. In both the notices, the AO has not struck off either of the limbs and both the limbs are present. As against that, again the point is that the addition is because of the denial of status of agricultural income claimed by the assessee. The penalty, if any, on this score could have been imposed under the second limb, namely, “furnishing of inaccurate particulars of income”. It is evident that for both the years under consideration that the AO did not mention correct charge in the notices u/s 274 of the Act. He allowed to remain present both the charges envisaged u/s 271(1)(c) in his notices u/s 274 of the Act. Recently, the full Bench of Hon’ble Bombay High Court in Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking the relevant words vitiates the penalty even though the AO had properly recorded the satisfaction for imposition of penalty in the order u/s 143(3) of the Act. In another judgment, the Hon’ble Bombay High Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 248 (Bom) also took similar view that where inapplicable portions were not struck off in the penalty notice, the penalty was vitiated. The SLP of the Department against this judgment has recently been dismissed by the Hon'ble Supreme Court in Pr.CIT Vs. Golden Peace Hotels and Resorts (P.) Ltd. (2021) 124 taxmann.com 249 (SC). 8. In view of this overwhelming position, it is clear that where the charge is not properly set out in the notice u/s 274 viz., both the limbs stand therein without striking off of the inapplicable limb, but the penalty has, in fact, been levied for one of the two, such a penalty order gets vitiated. Turning to the facts of the extant cases, we find from the notices u/s 274 of the Act that the AO did not strike out the irrelevant limb there from. Respectfully following the Full Bench judgment of the Hon’ble 4 ITA No. 1017/PUN/2018 A.Y.2010-11 jurisdictional High Court, we overturn the impugned orders on this legal issue and direct to delete the penalty for both the years.” Respectfully, following the decision of the Pune Bench of the Tribunal referred herein above, we allow Ground Nos. 1 & 2 raised in this appeal by the assessee. Ground Nos. 3 & 4 6. With regard to Ground Nos. 3 & 4, the Ld. Counsel for the assessee submitted that in this case, the addition was made on an estimated basis in respect of hawala purchases since there was no concrete evidence with the Department and hence, no penalty was leviable. He further submitted that there were plethora of decisions of the Hon‟ble High Courts wherein it has been held that where addition has been made on an estimated basis, there is no reason to impose penalty u/s.271(1)(c) of the Act. 7. The Ld. CIT-DR conceded with the submissions of the Ld. Counsel for the assessee. 8. On careful consideration of the above submissions, we find that the disallowance upheld by the Ld. CIT(Appeals) is merely on estimate basis without any categorical statement of facts whether there is „concealment of income‟ or „furnishing of inaccurate particulars of income‟. More so, when the disallowances have been enforced by the Ld. CIT(Appeals) on estimation basis, in such scenario, the settled legal position is that no penalty u/s.271(1)(c) of the Act cannot be imposed. We find strength from the following decisions of the Hon‟ble High Courts: i) CIT vs. Aero Traders Pvt. Ltd., 322 ITR 316 (Del) ii) CIT Vs. Subhash Trading Co., 221 ITR 110 (Guj.) iii) Harigopal Singh Vs. CIT, 258 ITR 85 (P & H) 5 ITA No. 1017/PUN/2018 A.Y.2010-11 9. We find that the Hon‟ble Delhi High Court in CIT vs. Aero Traders Pvt. Ltd.(supra.) has held that no penalty u/s.271(1)(c) of the Act can be imposed when income is determined on estimate basis. The relevant portion of the judgment reads as follows: “5. Against this order, the assessee filed an appeal before the CIT(A), who deleted the penalty imposed vide order dt. 7th Sept., 2007, holding that the addition made by the AO on the basis of estimated profit cannot be a subject-matter of penalty for concealment of income. The CIT(A) further found that penalty was not imposable in view of the substantial deduction given by the Tribunal and observed as under : "I have considered the submissions of the assessee and perused the facts that are ruling in the instant case. There is no doubt that there are certain discrepancies noticed in the course of special audit as brought out in their report. However, such discrepancies by itself ipso facto lead to the conclusion that the assessee has concealed the income. Ultimately the AO has to resort to estimated addition only. He could not point out any specific item of any addition with any conclusive evidence. Even the addition made by the AO on estimated basis is substantially reduced by the CIT(A) after considering the various facts and figures and circumstances of the case. The said action of the CIT(A) has become final consequent to the decision of the Hon’ble Tribunal in dismissing the Departmental appeal. Resultantly the income of Rs. 1,02,980 is on the basis of estimated profit rate only. It is not on account of any specific item of addition or disallowance. Such an addition made on the basis of guess work cannot be subjected matter of penalty for concealment of income. Penalty being a quasi criminal proceeding there is a duty cast on the AO to establish the guilt of the assessee in concealing the income or furnishing of inaccurate particulars of such income. As stated the seizure of the books of the police is not an act of the assessee. No motives can be attributed to the non-availability of books of accounts to examine and verify the various claims made by the appellant." 6. Aggrieved by this order, the Revenue filed an appeal before the Tribunal. The Tribunal, after hearing the submissions made on behalf of the Revenue, came to the conclusion that the CIT(A) had taken the correct decision in deleting the penalty. The operative portion of the impugned order dt. 4th Dec., 2008 is as follows : "As the facts emerge the substantial quantum relief was given by the CIT(A) which has been confirmed by the Tribunal, the balance pertains to estimated rate of profit applied on the turnover of the assessee which in our view does not amount to concealment or furnishing inaccurate particulars. In our view, the CIT(A) has taken right decision in deleting the penalty which is upheld. 6 ITA No. 1017/PUN/2018 A.Y.2010-11 7. The appeal is filed against the above-mentioned order of the Tribunal dt. 4th Dec., 2008. The finding arrived at by the Tribunal does not warrant interference from this Court as it is purely a finding of fact. No perversity has been pointed in such a finding. Consequently, no substantial question of law arises for consideration. As a result, the appeal is dismissed." 9.1. The Hon‟ble Gujarat High Court in the case of CIT vs. Subhash Trading Company (Guj) on the same issue has held as follows: “Where income is assessed on estimate basis after rejecting book results, penalty under s. 271(1)(c) cannot be imposed by mere application of Explanation thereof in the absence of any evidence to conclude a positive finding that there was concealment of income.” 9.2 Similar view has been taken by the Hon‟ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT (supra) by observing as follows: “Provisions of s. 271(1)(c) are not attracted to cases where income of an assessee is assessed on estimate basis and additions are made therein on that basis.” In view of the foregoing precedents of the Hon‟ble Courts, it is apparent that when the bedrock of instant penalty is on the estimated addition, the same cannot be sustained. 10. Therefore, keeping in view the totality of the facts and circumstances of the case, we are of the considered view that in this case, the additions were made on the basis of estimation and as discussed in the cases referred above, the penalty cannot be levied on the basis of estimated additions and thus, it is not a fit case for levying penalty. Accordingly, we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the penalty from the hands of the assessee. Thus, Ground Nos. 3 and 4 raised in appeal by the assessee are allowed. 7 ITA No. 1017/PUN/2018 A.Y.2010-11 11. Ground No. 5 is general in nature and hence, no adjudication is required. 12. In the result, appeal of the assessee is allowed. Order pronounced on 11 th day of November, 2021. Sd/- Sd/- R.S.SYAL CHANDRA MOHAN GARG VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 11 th November, 2021. SB आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(Appeals)-1, Aurangabad 4. The Pr. CIT-1, Aurangabad. 5. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गार्ा फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune. 8 ITA No. 1017/PUN/2018 A.Y.2010-11 Date 1 Draft dictated on 10.11.2021 Sr.PS/PS 2 Draft placed before author 11.11.2021 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order