Ankit Garg, Dhuri V. Income Tax Officer, Malerkotla

ITA 1076/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8933 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: SSH SUDHIR SEHGAL; KUSHAL CHOPRA
• Keywords: Gross profit estimation; Business income

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1076/CHD/2016 ASSESSMENT YEAR: 2009-10 SH. ANKIT GARG, VS. THE ITO, WARD-1, DHURI MALERKOTLA PAN NO. AKZPG9384N (APPELLANT) (RESPONDENT) APPELLANT BY : S/SH. SUDHIR SEHGAL & KUSHAL CHOPRA RESPONDENT BY : SH. S.K. MITTAL DATE OF HEARING : 17.11.2016 DATE OF PRONOUNCEMENT : 08.12.2016 ORDER THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-2, LUDHIANA DATED 26.08.2016 FOR ASSESSMENT YEAR 2009-10 CHALLENGING THE LEVY OF PENALTY U/S 271(1)(C) OF TH E INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE WAS DOING BUSINESS OF PURCHASE AND SALE OF COMMODITY ON SPECULATION BASIS UNDER THE NAME AND STYLE OF M/S SATYAM COMMODITIES IN WHICH NO ACTUAL DELIVERY IS TAKEN OR GIVEN. THE GP RATE OF THE ASSESSEE IN ASSESSMENT Y EAR UNDER APPEAL IS 0.40% WHICH IS LOW AS COMPARED TO EARLIER YEARS. TH E TOTAL SALES OF THE 2 ASSESSEE ARE AT 14.17 CRORES. THE ASSESSEE STATED I N HIS STATEMENT RECODED AT THE ASSESSMENT STAGE THAT AVERAGE GP FOR THE LAS T THREE YEARS COME TO 0.76%. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY GP RATE OF 1% MAY NOT BE APPLIED. HOWEVER, ASSESSEE AG REED FOR APPLICATION OF GP RATE OF 0.80%. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS. 5,70,000/- TO COVER UP ALL DISCREPANCIES ETC. PENAL TY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED ON THE SAME ADD ITION. THE ASSESSING OFFICER WAS OF THE VIEW THAT ONCE THE ASSESSEE HAS SURRENDERED THE AMOUNT, THE SAME PREVENTED THE ASSESSING OFFICER FROM MAKIN G INVESTIGATION IN THE MATTER OF LOW GP, THEREFORE, THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY LEVIED THE PENALTY. THE L D. CIT(A) CONFIRMED THE LEVY OF PENALTY HOLDING THAT THERE IS A FAILURE TO OFFER AN EXPLANATION AND WHATEVER EXPLANATION WAS OFFERED WAS NOT SUBSTA NTIATED. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS I AM OF THE VIEW THAT PENALTY IS NOT LEVIABLE IN THE MATTER. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON MERE ESTIMATION OF INCOME, PENALTY IS NOT LEVIAB LE. HE HAS RELIED UPON THE ORDER OF THE DIVISION BENCH OF ITAT DELIVERED I N THE CASE OF RAJA RAM CONTRACTOR V ACIT IN ITA NO 308/CHD/2013 DATED 21.4 .2014 AND M/S BOPARAI METALS (P) LTD. VS. ITO IN ITA NO. 1013/CH D/2010 DATED 18.10.2010 IN WHICH IT WAS HELD THAT ON MERE ESTIMA TION OF INCOME, PENALTY SHOULD NOT BE LEVIED. ON THE OTHER HAND , LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS ALSO FILED COPY OF THE STATEMENT OF THE ASSESSEE RECORDED AT THE TIME OF ASSESSMENT. ON GOI NG THROUGH THE ABOVE FACTS AND STATEMENT OF THE ASSESSEE, IT IS CLEAR TH AT ASSESSING OFFICER ASKED SEVERAL QUESTIONS TO THE ASSESSEE REGARDING BUSINES S ACTIVITIES OF THE 3 ASSESSEE AND ITS MODUS OPERANDI. IN RELATION TO THE APPLICATION OF GP RATE OF 1% PROPOSED BY THE ASSESSING OFFICER, THE ASSES SEE SUBMITTED IN HIS STATEMENT THAT ASSESSEE HAS SHOWN GP OF 0.40% FOR A SSESSMENT YEAR UNDER APPEAL AND IN EARLIER YEAR IT WAS 0.62%. IT IS ALS O EXPLAINED THAT THERE WAS NO FIX GP IN SUCH A TRADE. IN ORDER TO AVOID LITIGA TION WITH DEPARTMENTAL ACTION, ASSESSEE VOLUNTARILY OFFERED GP @ 0.80%. TH ESE FACTS CLEARLY SHOW THAT ASSESSEE EXPLAINED THAT IN SUCH TYPE OF TRADE THERE IS NO FIX GP RATE. THEREFORE, THERE IS AN EXPLANATION OF THE ASSESSEE WITH REGARD TO THE LOW GP. THE ASSESSING OFFICER HAS NOT BROUGHT ANY CONCR ETE OR SPECIFIC MATERIAL AGAINST THE ASSESSEE ON RECORD THAT ASSESS EE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. THE ASSESSING OFFICER HAS NOT MENTIONED ANY SPECIFIC FA CT ADVERSE IN NATURE AGAINST THE ASSESSEE IN ORDER TO LEVY OF PENALTY AG AINST THE ASSESSEE. EVEN IN THE STATEMENT OF ASSESSEE, NO DISCREPANCY IN THE SYSTEM OF ACCOUNTING OF THE ASSESSEE WAS FOUND. THEREFORE, MERE FALL IN GP BY ITSELF IS NO GROUND TO LEVY PENALTY AGAINST THE ASSESSEE. IT IS ALSO WELL SETTLED THAT ON MERE ESTIMATION OF INCOME, PENALTY NEED NOT BE LEVIED. I RELY UPON THE DECISIONS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS. DHILLON RICE MILLS (2002) 256 ITR 447 (P&H) AND HAR I GOPAL SINGH VS. ACIT (2002) 258 ITR 85 (P&H). CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE AND IN THE ABSENCE OF ANY SPECIFIC MATE RIAL AGAINST THE ASSESSEE ON RECORD, LEVY OF PENALTY IN THIS CASE IS NOT JUSTIFIED. 4. IN THIS VIEW OF THE MATTER, I SET ASIDE THE ORDE RS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 4 5. ASSESSEE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 8 TH DECEMBER, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR