M/s. Gujarat Smelting And Refining Co. Ltd, Ahmedabad V. The ITO, Ward-2(1)(1), Ahmedabad

ITA 258/AHD/2020

AI Insights

The case involves Gujarat Smelting & Refining Co. Ltd., which appealed against the penalty imposed by the Income Tax Officer (ITO) for concealing income by inflating purchases. The ITO had rejected the assessee's books and estimated profits due to the booking of bogus purchases amounting to Rs.8,03,84,097. The Commissioner of Income-tax (Appeals) upheld the penalty, which was contested in the Tribunal. The Tribunal found no merit in the appeal, affirming the penalty on the grounds that the assessee had concealed true particulars of income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133577 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-08-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 271(1)(c)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.258/Ahd/2020 Assessment Year :2012-13 Gujarat Smelting & Refining Co. Ltd. 2706/2, Mahavir Nagar Naroda Road Ahmedabad 380 060. PAN : AAACG 7566 L ITO, Ward-2(1)(1) Ahmedabad. (Applicant) (Responent) Assessee by : None Revenue by : Shri Ashok Kumar Suthar, Sr.DR स ु नवाई क तार ख/Date of Hearing : 22/08/2023 घोषणा क तार ख /Date of Pronouncement: 29/08/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the assessee against the order of ld.Commissioner of Income-tax (Appeals)-2, Ahmedabad [hereinafter referred to as “ld.CIT(A)”] dated 24.1.2020 passed under section 250(6)of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the assessment year 2012-13 confirming the levy of penalty under section 271(1)(c) of the Act by the AO. ITA No.258/Ahd/2020 2 2. None appeared on behalf of the assessee at the time of hearing. From the perusal of the order sheets, it reveals that the appeal of the assessee was listed for hearing on as many as seven occasions i.e.from 21.6.2022 till today i.e. 22.8.2023, but assessee or its authorized representative remained non-present. Therefore, due to continuous absence of the assessee in the hearing before the Tribunal, we proceed to dispose of the case by hearing the ld.DR and considering the material available on record. 3. Brief facts emerging from order of the Revenue authorities are that during assessment proceedings on verification of the details furnished by the assessee, the AO noted that the assessee had shown inflated purchases at Rs.8,03,84,097/-, and some of the purchases allegedly made from Shanti Smelting and Laxmiraj Metal & Alloys P.Ltd., to the tune of Rs.,77,01,535/- and Rs.4,77,18,955/- were found to be bogus. In view of irregularities found in the books of accounts, the AO show caused as to why the books of accounts of the assessee be not rejected, for which the assessee agreed thereto, and accordingly, the AO re-computed the business profit of the assessee at Rs.6,99,941/-as against net business loss returned by the assessee of Rs.(-)2,17,93,121/-. The AO treated the difference of these two amounts, being Rs.2,25,42,873/-, as concealed income andlevied penalty under section 271(1)(c) of the Act on the same. 4. Before the ld.CIT(A), the assessee challenged the levy of penalty contending that it was made on estimated addition, and therefore, there was no concealment of income. Theld.CIT(A), however, noted that it was not a simple case of estimation of income; that the AO had specifically arrived at a finding that the assessee had booked bogus purchases to the tune of Rs.8.03 crores and ITA No.258/Ahd/2020 3 therefore had rejected the books results of the assessee and estimated its profits. He, therefore, held that the assessee had failed to show true and correct income, and the penalty therefore was rightly levied. His findings inthis regard at para 4.4 to 4.8 of the order are as under: ITA No.258/Ahd/2020 4 ITA No.258/Ahd/2020 5 ITA No.258/Ahd/2020 6 6. Aggrieved by the same, the assessee has come up in appeal before us raising the following grounds: “The Ld. AO has erred in law by levying penalty u/s 2711 c of Rs. 69,97,590 on estimated net profit without identifying the facts of the case and real nature of transactions involved, that estimation resulted into taxable profit of only Rs 6,99,941 due to set off of loss and tax effect was negligible. The Ld CIT A has erred by confirming the same.” 7. As is evident from the grounds raised before us, the assessee has challenged levy of penalty on merits and on the ground that the addition made by the AO resulted only in taxable profits of Rs.6,99,941/- and tax effect there was negligible. 8. As far as themerits of the case are concerned, we have gone through the order of theld.CIT(A) and we do not find any reason to interfere inthe same. It is not disputed that the assessee was found to have booked bogus purchases to the tune of Rs.8,03,84,097/- and for this reason his books had been rejected and profits estimated thereon. Therefore, we agree with the finding of the ld.CIT(A) that the assessee had concealed true particulars of his income, and it is, therefore, a fit case forlevy of penalty under section 271(1)(c) of the Act. 9. As regards grounds raised by the assessee regarding quantum of income assessed by the AO at Rs.6,99,941/- penalty if any could have been levied only on the tax evaded vis a vis the income assessed, we find that, facts as noted by the ld.CIT(A) in para 4.3 of his order is that the assessee had returned net business loss of Rs.(- )2,17,93,121/- which the AO in turn had assessed at a positive income of Rs.6,99,941/-. The resultant difference of amount of ITA No.258/Ahd/2020 7 Rs.2,25,42,873/- was accordingly treated as concealment of income on account of furnishing inaccurate particulars and subjected to tax. The facts not being disputed before us, and beingsubstantiated by the assessment order also, the huge loss converted into profits were liable for levy of penalty as per the provisions of law. Explanation 4 to Section 271(1)(c) of the Act takes care of the situation where the loss returned by the assessee are converted into profits , explaining that the tax sought to be evaded in such a situation ,for quantifying the amount of penalty leviable , would include the losses so reduced /converted into profits. For clarity, the provisions of section 271(1)(c), Explanation 4 is reproduced as under: 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person— (a) ....... (b) ........ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income (d) ........ he may direct that such person shall pay by way of penalty,— (i)...... (ii)....... (iii) in the cases referred to in clause© in addition to tax ,ifany,payable by him, a sum which shall not be less than,but which shall not exceed three times ,the amount of tax sought to be evaded by reason of concealment of particulars of income or the furnishing of inaccurate particulars of income ..... . . . . Explanation 4.—For the purposes of clause (iii) of this sub-section,— (a) ....... (b) where in any case the amount of income in respect of which particulars have been concealed or inaccurate particulars have been furnished has the effect of reducing the loss declared in the return or converting that loss into income, the amount of tax sought to be evaded shall be determined in accordance with the ITA No.258/Ahd/2020 8 formula specified in clause (a) with the modification that the amount to be determined for item (A - B) in that formula shall be the amount of tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income; 10. In view of the above provision of law, requiring levy of penalty even on the loss, which is either reduced on account of assessment or converted into profits, there is no error, we hold, in the order of the ld.CIT(A) confirming the levy of penalty on the portion of theloss converted into profits in the present case amounting to Rs.(-) 2,17,93,121/-. In view of the above, the grounds raised by the assessee are rejected and the appeal of the assessee is dismissed. 11. In the result, the appeal of the assessee is dismissed. Order pronounced in the Court on 29 th August, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 29/08/2023