Sri.V.I. George Kutty, Kollam V. The iTO, Kollam

ITA 106/COCH/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 9056 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 09-09-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Set aside
• Section: 234B; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Chandra Poojari, AM & Shri George Mathan, JM ITA Nos. 106 & 107/Coch/2021 (Assessment Years: 2003-04 & 2004-05) Shri V.I. Georgekutty Varoor House Edamulakkal, Ayoor Kollam - 691533 Vs. Income Tax Officer Ward - 1 Kollam PAN – AAGPI4999E Appellant Respondent Appellant by: Shri T.M. Sreedharan, Advocate Respondent by: Smt. J.M. Jamuna Devi, Sr. DR Date of Hearing: 09.11.2021 Date of Pronouncement: 09.11.2021 O R D E R Per: George Mathan, JM These are appeals filed by the assessee against the order of the learned CIT(A), Thiruvananthapuram in appeal No. ITA.25 & 24/KLM/CIT(A), TVM/2012-13 dated 18.04.2018 for Assessment Years 2003-04 and 2004-05 against confirmation of levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. There is a delay in filing these appeals of 1152 days. The assessee has filed an affidavit giving reasons for the delay wherein he has mentioned that the assessee was not able to discuss the issue with his counsel at Ernakulam due to the travel restrictions on account of Covid- 19. It was the prayer that the delay may be condoned. We have considered the submissions. The affidavit filed by the assessee has not been found to be false. Also it is an admitted fact that Limitation Act has been suspended by the Hon'ble Supreme Court during this period of Covid pandemic. In these circumstances we accept the reasonable cause for the delay in filing ITA Nos. 106 & 107/Coch/2021 Shri V.I. Georgekutty 2 of the appeals by the assessee and condone the delay and dispose off the appeal on merits. 3. Shri T.M. Sreedharan, Advocate represented assessee and Smt. J.M. Jamuna Devi, Sr. DR appeared on behalf of the assessee. 4. The assessee has filed a written note dated 6 th November, 2021 which is extracted as below: - “The above appeals are posted for hearing before the Hon'ble Bench on Tuesday, the 9th November 2021 at 10.30 a.m. The undersigned is appearing in the above appeals. Brief facts of the case and the grounds urged are stated below:- 1. The appeals relate to the penalties imposed under section 271 (1)(c) of the Income Tax Act 1961. The assessment years involved are 2003-04 and 2004-05. Penalty is imposed for the above years by separate orders dated 28th September 2012 for both the assessments. Following are the penalties imposed. 2003-04 - Rs.4,75,540/- 2004-05 - Rs.2,90,630/- 2. For the corresponding assessment years, assessments were completed u/s 144 of the Income Tax Act 1961 vide order dated 24.12.2007 for 2003- 04 and 2004-05. Copies of the assessment orders are produced at pages 20 to 22 of the Note submitted. A perusal of the assessment orders would show that for the assessment year 2003-04, the assessee filed return of income declaring net loss of Rs.3,61,161/-. For the assessment year 2004-05, the assessee did not file any return of income voluntarily. After the issue of notice u/s 148, on 13.12.2006, the Assessing Officer estimated the income on best judgment by estimating profit at 2% on total turnover which works out to Rs.17,66,723/-. The assessee had 2 lorries, the income from which is also estimated at statutory rate at Rs.42,000/- per lorry. 3. For the assessment year 2003-04, the Assessing Officer levied interest under Sections 234A and 234B aggregating to Rs.1,73,700/-. For the assessment year 2004-05 also interest is levied aggregating to Rs.4,83,143/- under 'Sections 234A and 234B. These assessment orders have acquired finality since no appeal has been filed. 4. The appeals filed by the assessee are belated. The petition for Condonation of delay is also submitted. The reasons for the delay are also stated in the affidavit submitted along with the petition for Condonation of delay. The assessee discontinued the business soon after the end of the previous year relevant to the Assessment Year 2006-07 on account of heavy loss and other unforeseen adverse factors. The business is situated at Valakom, in Kollam District. The appellant was out of touch with the Advocate after discontinuing of the business. The spread of Covid 19 is one of the factors which brought travel restrictions in public ITA Nos. 106 & 107/Coch/2021 Shri V.I. Georgekutty 3 transport,' as a result of which the appellant was unable to meet the Advocate in Ernakulam for seeking professional advice. There was no willful or intentional omission or latches on the part of the assessee. By imposition of penalty, huge and unbearable financial burden is created. There was no income for the above assessment years. What is assessed.is estimated income. In the above circumstances, it is prayed that lenient view may be taken and the delay in filing the appeals may be condoned and the appeals entertained for consideration on merits. 5. So far as the merits of the case are concerned, the assessee has submitted that at the time of survey on 6.12.2007, which is referred in the Assessment Order 2003-04, no incriminating material or unaccounted assets or investments was found with the intention of escapement of income. The assessee has suffered heavy loss and therefore estimated assessment u/s 144 cannot be valid ground for levy of penalty. Secondly, 'the Assessing Officer has made various estimated additions in the Assessment Order which are not based on any evidence or document. These are purely estimated ones. In the absence of any evidence or material pointing out concealment of income, the impugned penalty orders are liable to be set aside : 6. The penalty proceedings are also void and without any jurisdiction and is also barred by limitation. The two penalties are imposed by orders dated 28.09.2012 for both the assessment years, whereas the assessments were completed on 24.12.2007. 7. The assessee is now passing through serious financial crisis and is virtually become unable to discharge his liabilities. In the assessee's own case for the Assessment Year 2003-04 the profit at 2% of the turnover was estimated. For the assessment year 2004-05 also profit was estimated at 2%. These estimates for 2003-04 and 2004-05 were confirmed by this Hon'ble Appellate Tribunal by common orders dated 6th January 2012. Copies of appellate order in ITA Nos.135 & 140/C/2010. for the assessment year 2003-04 and 2004-05 are submitted separately. ITA No.137/C/2010 relates to penalty levied u/s 271B for the Assessment Year 2004-05. 8. Before the CIT(A), the assessee had made written submissions as regards levy of penalty. In the re-assessment proceedings for 2003-04 and 2004- 05 penalties were again imposed on the estimating 1.5% on the profit which had been interfered with by the Hon'ble Appellate Tribunal vide its common order dated 6.1.2012 and a true copy thereof is submitted for kind reference. 9. So much so, in view of the second penalties imposed pursuant to the re- assessment based on the combined turnover, the re-assessment penalty imposed on the first assessment may kindly be deleted and two appeals allowed in favour of the assessee.” 5. The learned A.R. submitted that admittedly the assessee has not been able to participate in the assessment proceedings as the assessee had suffered substantial loss in his business and he had gone abroad to the Gulf ITA Nos. 106 & 107/Coch/2021 Shri V.I. Georgekutty 4 on employment. It was submitted that as a consequence of non- participation in the assessment proceedings the income of the assessee had been estimated by the AO and the loss returned had been converted into profit. It was the submission that though the AO does mentioned that in the course of survey proceedings certain evidence have been found against the assessee, nothing, whatsoever, has been brought out in the assessment order nor in the penalty order and there is no reference to any evidence found in the course survey which has been used for the purpose of assessment. The learned A.R. submitted that the income of the assessee has been estimated at 2% of the total turnover and the income from running two lorries was estimated at Rs. 3500/- per lorry. It was the submission that on the basis of one Inspector’s report of the Sales Tax Authorities wherein the Inspector Squad No. 1 had intercepted a lorry carrying boiled rice and estimated Rs. 7301/- was treated as profit in the name of the assessee. It was the submission that nothing other than this has been referred to in the assessment order. It was the submission that penalty has been levied only on estimation of income and the same was not sustainable. It was the submission that the learned CIT(A) did not consider the submission of assessee and only on the ground that addition has been sustained by the ITAT, confirmed the levy of penalty for both the assessment years. 6. In reply the learned D.R. vehemently supported the orders of the AO and the CIT(A). It was the submission that the penalty had been rightly levied by the AO and confirmed by he learned CIT(A). 7. We have heard the rival submission. A perusal of the assessment order clearly shows that the income of the assessee has been arrived at on estimation basis only. Even the addition made on the basis of Inspector’s report of the Sales Tax Department, the valuation is on estimation basis, the probable cost is on estimation basis and even the profit element is on estimate basis. Other than one Inspector’s report in support of search of lorry, no evidence has been found against the assessee nor recoded in the assessment order. Thus clearly the addition has been made only on the estimation basis and on estimated income assessed no penalty is liable to be levied. Estimation of income cannot be deemed to be concealment of ITA Nos. 106 & 107/Coch/2021 Shri V.I. Georgekutty 5 income on the part of the assessee or furnishing of inaccurate particulars. In these circumstances we are of the view that penalty as levied by the AO and confirmed by the learned CIT(A) is unsustainable on the facts of the case. Consequently the same stands deleted. 8. In the result, the appeals filed by the assessee are allowed. Dictated and pronounced in the open Court on 9 th November, 2021. Sd/- Sd/- Chandra Poojari (George Mathan) Accountant Member Judicial Member Cochin, Dated: 9 th November, 2021 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -Thiruvananthapuram 4. The Pr.CIT - Thiruvananthapuram 5. The DR, ITAT, Cochin 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Cochin n.p.