M/s. Zamindara Timber Traders, Karnal V. ITO, Karnal

ITA 2964/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7344 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 16-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N J SINGH
• Assessee Lawyers: RAKESH JAIN S
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-II : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.2964/DEL/2014 ASSESSMENT YEAR : 2007-08 ZAMINDARA TIMBER TRADERS, IMAMBARA, SADAR BAZAR, KARNAL. PAN: AAAFZ1740N VS. ITO, WARD-I, KARNAL. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPANSHU JAIN & SHRI RAKESH JAIN, ADVOCATES DEPARTMENT BY : SHRI N.J. SINGH, SR. DR DATE OF HEARING : 16.06.2016 DATE OF PRONOUNCEMENT : 16.06.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 22.10.2013 UPHOLDING THE PE NALTY OF RS.10,62,120/- IMPOSED BY THE AO U/S 271(1)(C) OF T HE INCOME-TAX ACT, ITA NO.2964/DEL/2014 2 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATIO N TO THE ASSESSMENT YEAR 2007-08 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PURCHASED TIMBER FROM ABROAD, THE PRICE OF WHICH DEPENDED UPO N THE QUALITY OF THE TIMBER PURCHASED. THE SALE BILLS DID NOT SPECIFY TH E QUALITY OF TIMBER SOLD, THOUGH THE SALE PRICE VARIED FROM RS.950/- PE R CBM TO RS.10,887/- PER CBM. SINCE PROPER STOCK REGISTER WAS NOT MAINT AINED, THE AO REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVI SIONS OF SECTION 145(3) OF THE ACT. HE APPLIED GP RATE OF 4.9% AND MADE AN ADDITION OF RS.35,40,410/-. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL IN QUANTUM PROCEEDINGS. THEREAFTER, THE AO IMPOSED PENALTY U/ S 271(1)(C) OF THE ACT ON THE INCOME ESTIMATED BY HIM. SUCH PENALTY W AS DETERMINED AT RS.10,62,120/-. THE LD. CIT(A) UPHELD THE PENALTY B Y HOLDING THAT THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED AND T HE INCOME WAS RIGHTLY ESTIMATED. 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE AO HAS SIMPLY REJECTED THE ITA NO.2964/DEL/2014 3 BOOKS OF ACCOUNT AND MADE AN ESTIMATE OF PROFIT RAT E OF 4.9% TO WORK OUT AN ADDITION OF RS.35.40 LAC ON WHICH THE INSTAN T PENALTY HAS BEEN IMPOSED. THE TRIBUNAL, VIDE ITS ORDER DATED JANUARY , 2015, REDUCED THE RATE OF PROFIT FROM 4.90% TO 3.53%. APART FROM THI S ESTIMATE MADE BY THE AO, THERE IS NOTHING TO SHOW THAT THE ASSESSEE SUPPRESSED THE INCOME IN ANY MANNER. THIS DIVULGES THAT THE ADDITION HAS BEEN MADE ONLY ON THE BASIS OF ESTIMATE MADE BY THE AO, WHICH AGAIN S TOOD REDUCED BY THE TRIBUNAL. IT IS A SETTLED LEGAL POSITION THAT WHEN INCOME IS ESTIMATED, THEN, THERE CAN BE NO QUESTION OF IMPOSING PENALTY U/S 27 1(1)(C) OF THE ACT. THE HONBLE DELHI HIGH COURT IN CIT VS. AERO TRADERS PVT. LTD., (2010) 322 ITR 316 (DEL), HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE IMPOSED WHEN INCOME IS DETERMINED ON ESTIMATE BASIS . SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE P&H HIGH COURT IN HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P&H) AND THE HONBLE GUJARAT HIGH COURT IN CIT VS. SUBHASH TRADING COMPANY, 221 ITR 110 (GUJ) . IN VIEW OF THE FOREGOING PRECEDENTS INCLUDING THE ONE FROM THE HON BLE JURISDICTIONAL HIGH COURT, IT IS APPARENT THAT WHEN THE BEDROCK OF INSTANT PENALTY IS THE ESTIMATE OF INCOME, THE SAME CANNOT BE SUSTAINED. O VERTURNING THE ITA NO.2964/DEL/2014 4 IMPUGNED ORDER, I ORDER FOR THE DELETION OF PENALTY AMOUNTING TO RS.10,62,120/-. 4. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.06.201 6. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 16 TH JUNE, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.