Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 2576 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-10-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2012-2013
Appeal Filed On
15-11-2019
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1714/AHD/2019 / ASSTT. YEAR: 2012-2013 SHRI JIGARKUMAR NAVINCHANDRA SONI, 9, KAMLA COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD-380009. PAN: ANKPS9216K VS. A.C.I.T, CIRCLE-5(2), AHMEDABAD. (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI P.F. JAIN, A.R REVENUE BY : DR. SHYAM PRASAD, SR.D.R /DATE OF HEARING : 24/08/2021 /DATE OF PRONOUNCEMENT: 13/10/2021 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-5, AHMEDABAD, DATED 22/10/2019 ARISING IN THE MATTER OF PENALTY ORDER PASSED UNDER S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2012-2013. ITA NO.1714/AHD/2019 ASSTT. YEAR 2012-13 2 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE PENALTY LEVIED BY THE AO IN PART UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF MANUFACTURING & TRADING IN GOLD ORNAMENTS. IN THE PRESENT CASE THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AFTER MAKING THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE OF THE FOLLOWING ITEMS: I. ADDITION OF GROSS PROFIT AT THE RATE OF 12.5% RS. 2,48,927.00 II. UNACCOUNTED STOCK RS. 1,66,47,490.00 3.1 SUBSEQUENTLY, THE AO INITIATED THE PENALTY PROCEEDINGS UNDER THE PROVISIONS OF SECTION 271(1) OF THE ACT ON ACCOUNT OF CONCEALMENT OF INCOME WHICH CAME TO BE CONFIRMED BY THE AO VIDE ORDER DATED 22 MARCH 2018 BY IMPOSING THE PENALTY OF 52,18,737.00 BEING 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. 3.2 ON APPEAL, THE LEARNED CIT (A) FOUND THAT THE ADDITION MADE BY THE AO FOR 2,48,927.00 WAS DELETED BY THE ITAT IN ITA NO. 511/AHD/2017 VIDE ORDER DATED 3-10-2018. THUS, THE LD. CIT-A CONCLUDED THAT THERE CANNOT BE ANY PENALTY ON SUCH AMOUNT OF ADDITION. 3.3 LIKEWISE, THE LEARNED CIT (A) FOUND THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF UNACCOUNTED STOCK OF 1,66,47,490 WAS REDUCED TO 16,67,895.00 ONLY. THUS, THE LEARNED CIT (A) DIRECTED THE AO TO RECALCULATE THE AMOUNT OF PENALTY WITH RESPECT TO THE ADDITION CONFIRMED BY THE ITAT FOR 16,67,895.00 ONLY. HENCE THE GROUND OF APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. 4. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1714/AHD/2019 ASSTT. YEAR 2012-13 3 5. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 53 AND CONTENDED THAT THE ADDITION WAS MADE BY THE AUTHORITIES BELOW FOR 1,66,47,490.00 ON ACCOUNT OF UNACCOUNTED STOCK OF THE JEWELRIES. HOWEVER, THE ITAT HAS CHANGED THE BASIS OF ADDITION BY ESTIMATING THE PROFIT EMBEDDED IN SUCH AMOUNT OF UNACCOUNTED STOCK. THE PROFIT WAS ESTIMATED AT THE RATE 10% ONLY. THUS, THE ADDITION WAS REDUCED FROM 1,66,47,490.00 TO 16,67,895.00 ONLY. THUS THE LEARNED AR FURTHER SUBMITTED THAT THERE CANNOT BE ANY PENALTY ON THE ADDITION WHICH WAS MADE ON ESTIMATED BASIS. 6. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE AMOUNT OF QUANTUM ADDITION WAS REDUCED SUBSTANTIALLY BY THE ITAT IN ITA NO. 511/AHD/2017 VIDE ORDER DATED 3-10- 2018. AS SUCH THE ITAT WAS PLEASED TO MAKE THE ADDITION ON ESTIMATED BASIS ON ACCOUNT OF THE UNACCOUNTED STOCK FOUND DURING THE COURSE OF SURVEY. THUS, THERE REMAINS NO AMBIGUITY TO THE FACT THAT THE BASIS OF MAKING THE ADDITION WAS CHANGED BY THE ITAT. NOW THE QUESTION ARISES, WHETHER THE ADDITION BASED ON ESTIMATED BASIS CAN ATTRACT THE PENALTY PROVISIONS UNDER SECTION 271(1) OF THE ACT ON ACCOUNT OF CONCEALMENT OF INCOME. IN THIS REGARD WE FIND THAT THE ITAT IN THE CASE OF M/S SATYA SANKLAP DEVELOPERS VERSUS ACIT IN ITA NO. 1606/AHD/2018 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 6-7-2021 HAS DELETED THE PENALTY, INVOLVING IDENTICAL FACTS AND CIRCUMSTANCES, BY OBSERVING AS UNDER: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE CONTROVERSY INVOLVES IMPOSITION OF PENALTY UNDER 271(1)(C) OF THE ACT ON DISALLOWANCES CARRIED OUT TOWARDS BOGUS PURCHASES IN THE REALM OF ESTIMATIONS. WE STRAIGHTAWAY NOTE THAT IN ORDER TO ATTRACT PENALTY UNDER S.271(L)(C) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF PARTICULARS OF ITS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME PER SE. NEEDLESS TO SAY, BEFORE PENALTY CAN BE IMPOSED, THE ENTIRETY OF CIRCUMSTANCES MUST REASONABLY POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT REPRESENTS INCOME AND THE ASSESSEE HAS CONCEALED THE PARTICULARS THEREOF OR ITA NO.1714/AHD/2019 ASSTT. YEAR 2012-13 4 FURNISHED INACCURATE PARTICULARS. THE DISALLOWANCE IN THE INSTANT CASE IS ON ESTIMATED BASIS ON THE PRESUMPTION THAT EXPENDITURE INCURRED IS EXCESSIVE HAVING REGARD TO NATURE AND BUSINESS ACTIVITIES OF ASSESSEE AND ALSO HAVING REGARD TO THE NON- AVAILABILITY OF COGENT EVIDENCES TO SUPPORT PURCHASES. THE TRIBUNAL IN QUANTUM PROCEEDINGS HAS TAKEN GUIDANCE FROM THE DECISION RENDERED IN VIJAY PROTEINS LTD. (SUPRA) FOR THE PURPOSES OF QUANTIFICATION OF ESTIMATED DISALLOWANCE. THE QUANTUM ADDITIONS ARE SUSTAINED PURELY ON ESTIMATED BASIS INVOLVING CERTAIN AMOUNT OF GUESS WORK. A CONSPECTUS OFEXPLANATION (1) TO SECTION 27 1(1 )(C) OF THE ACT MAKES IT CLEAR THAT THE STATUTE VISUALIZES THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS TO BE WHOLLY DISTINCT AND INDEPENDENT TO EACH OTHER. WHILE THE REVENUE MAY BE JUSTIFIED IN MAKING ESTIMATED DISALLOWANCE IN QUANTUM PROCEEDINGS, SUCH DISALLOWANCE OF EXPENSES, THAT TOO ON ESTIMATED BASIS, COULD NOT AUTOMATICALLY FALL WITHIN MISCHIEF OF SECTION 271(L)(C) OF THE ACT. WHILE A CLAIM TOWARDS EXPENDITURE MAY NOT BE FOUND ACCEPTABLE IN QUANTUM PROCEEDINGS, SUCH DISALLOWANCE CANNOT AUTOMATICALLY INVITE RIGOROUS ACTION BY WAY OF PENALTY. THE HON'BLE GUJARAT HIGH COURT HAS AFFIRMED THE VIEW THAT PENALTY CANNOT BE IMPOSED ON SUCH ESTIMATED ADDITIONS IN SOMEWHAT SIMILAR CIRCUMSTANCES IN VIJAY PROTEINS LTD. VS. CIT (2015) 58 TAXMANN.COM 44 (GUJ). 8. NOTICEABLY, THE ASSESSMENT ORDER IN THE QUANTUM PROCEEDINGS HAS BEEN ALTERED BY THE FIRST APPELLATE AUTHORITY IN A SIGNIFICANT WAY. DRASTIC REDUCTION IN QUANTIFICATION OF DISALLOWANCE TOWARDS BOGUS PURCHASES FROM 100% TO 20% WAS CARRIED ON. THUS, THE EFFICACY OF THE VERY BASIS OF INITIATION OF PENALTY PROCEEDINGS HAS PALED INTO INSIGNIFICANCE, WHEREAS THE AO HAS CONTINUED THE PENALTY PROCEEDINGS ON THE BASIS OF SAME NOTICE. AS NOTED, 'SATISFACTION' OF THE AO FORMING THE BASIS FOR ISSUANCE OF NOTICE STOOD SIGNIFICANTLY MODIFIED IN THE COURSE OF QUANTUM APPELLATE PROCEEDINGS AND THUS COULD NOT BE ACTED UPON. NEEDLESS TO SAY, THE LEVY OF PENALTY UNDER S.271(L)(C) OF THE ACT IS NOT AUTOMATIC AND SIGNIFICANCE OF EXPRESSION 'MAY' IN SECTION 271(L)(C) OF THE ACT GIVING STATUTORY DISCRETION TO AO CANNOT BE UNDERMINED. THUS, KEEPING IN MIND STARKLY DIFFERENT PARAMETERS WHICH OPERATE FOR THE PURPOSES OF WEIGHING ON IMPOSITION OF PENALTY UNDER S.271(L)(C) OF THE ACT, WE FIND CONSIDERABLE MERIT IN THE PLEA OF THE ASSESSEE FOR INAPPLICABILITY OF SECTION 271(L)(C) OF THE ACT IN THE FACTS OF THE CASE. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE PENALTY SO IMPOSED. 7.1 THE FACTS OF THE CASE ON HAND ARE IDENTICAL TO THE CASE AS DISCUSSED ABOVE. IN THE ABOVE CASE THE ADDITION WAS MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES TO THE TUNE OF 100% WHICH WAS REDUCED BY THE LEARNED CIT (A) TO 20% OF SUCH BOGUS PURCHASES. THUS THE ITAT IN THE ABOVE CASE DELETED THE PENALTY LEVIED BY THE AO FOR THE REASONS AS DISCUSSED. THE FACTS OF THE CASE ON HAND ARE IDENTICAL TO THE FACTS OF THE CASE AS DISCUSSED ABOVE. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE SET ASIDE THE FINDING OF THE LEARNED CIT (A) AND DIRECT THE AO TO DELETE THE PENALTY ITA NO.1714/AHD/2019 ASSTT. YEAR 2012-13 5 LEVIED BY HIM UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13/10/2021 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY) AHMEDABAD; DATED 13/10/2021 MANISH
