Shri Krishanmohan Ramwadh Shingh, Jamnagar V. The Income Tax Officer, ward-2(2), Jamnagar

ITA 379/RJT/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7293 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 15-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Corroborative evidences
• Section: 271(1)(c); 143(3); 195

Judgement Text

आयकरअपील यअ धकरण, राजकोट यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकरअपीलसं./ITA No. 379/Rjt/2018 नधा रणवष /Asstt. Year:2012-13 Krishnamohan Ramawadh Singh, C/o. Mehul Mehta & Associates, 436, Neo Square, P N Marg, Jamnagar-361008 PAN: ASDPS5438B Vs. ITO Ward-2(2), Jamnagar (Applicant) (Respondent) Assessee by : None Revenue by : Shri B. D. Gupta, Sr. DR स ु नवाईक तार ख/Date of Hearing : 01/07/2022 घोषणाक तार ख/Date of Pronouncement: 14/09/2022 आदेश/O R D E R PER BENCH: The captioned appeal has been filed at the instance of the assessee against the order of the Ld. Commissioner of Income Tax-(Appeals), (in short the Ld. CIT(A)), Jamnagar dated 17/05/2018arising in the matter of penalty order passed under Section 271(1)(c)of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal: “1. I am not agreeing with the order of Commissioner of Income Tax (Appeals). 2. Also I have enclosed a copy of Assessment Order for A.Y. 2010-11 U/s. 143(3) of the Income Tax Act whereby the addition of Income was made on the same grounds for lack of providing supporting evidence for the expenses booked. In the said Assessment Order no Penalty U/s. 271(l)(c) has been imposed. 3. Also in citation of Asst Commissioner of Income Tax vs. Dhariwal Industries Ltd, (ITAT Pune) income Tax Appeal no 582/PN/2009, Date of Pronouncement ITA No.379/Rjt/2018 A.Y. 2012-13 2 12.06.2015 it was observed that since No penalty was levied by the A.O, on similar disallowance in the preceeding assessment year, therefore, the penalty cannot be levied in the succeeding assessment year for the same disallowance, he Co- ordinate Bench of the Tribunal in ITA No. 957/PN/2011 in the case of Shri C.P. Mohandas Vs. DCIT decided on 29-05-2015 has deleted the penalty on similar grounds.” 3. The only effective issue raised by the assessee that the Ld. CIT(A) has erred in confirming the penalty levied under the provision of Section 271(1)(c) of the Act for Rs. 1,38,326/-. 4. The facts in brief are that the assessee in the represent case is an individual and claimed to be engaged in the business of providing services in relation to all type of pipe fabrication, laying, coating and erection work. In the present case, the assessment was framed by the AO by estimating the net profit of the assessee @8% of the total turnover, determining the total income at Rs. 10,36,850/- only. According to the AO the assessee has declared gross profit for the year under consideration i.e. 5% which was much less than the prevailing market rate. Thus, the addition was made on estimated basis to the total income of the assessee. In the assessment proceedings, the penalty under Section 271(1)(c) of the Act was also initiated for the concealment of income. Finally the AO vide order dated 17.07.2015 confirmed the penalty at Rs. 1,38,326/- being 100% of the amount of tax sought to be evaded. 5. Aggrieved assessee preferred an appeal before the Ld. CIT(A) who also confirmed the order of the AO by observing as under: “5. The penalty order u/s. 271(l)(c) of the Act of the appellant as well as submission dated 16/05/2018 of the AR of the appellant have been considered. The grounds of appeal of the appellant are reproduced in initial paragraph of this appeal order. With regard to these grounds of appeal, the submission dated 16/05/2018 of the AR of the appellant is not found to be acceptable. The fact involved in the case of appellant is that he had shown the gross profit ratio of 15.64% and net profit ratio of 4% for the year under consideration. However, the appellant could not justify this gross profit of 15.64% and net profit of 4% and during the course of assessment proceedings he admitted before the AO that he had not maintained various supporting evidences like bills and vouchers etc. in respect of transactions carried out by him during the year under consideration. The AO has estimated the net profit of the appellant @ 8% of the contractual ITA No.379/Rjt/2018 A.Y. 2012-13 3 receipt and has accordingly made addition ofdifferentia! amount i.e. the differential amount between the net profit declared by the appellant @ 4% and the net profit estimated by the AO @ 8%. The appellant has admitted his failure regarding non production of bills and vouchers in respect of transactions before the AO and has not filed any appeal against the assessment order u/s. 143(3) of the Act of the AO to the CIT(A). Admittedly, the appellant failed to furnish accurate particulars of income during the course of assessment proceedings in support of his claim of gross profit of 15.64% and net profit of 4%. In view of these facts in my opinion the AO has correctly levied the penalty of Rs. 1,38,326/- u/s. 271(l)(c) of the Act and therefore, the same is confirmed.” 6. When the matter was called out for hearing no body attended on behalf of the assessee despite the fact that the notice intimating the date of hearing was duly served upon the assessee. Accordingly, in the absence of any cooperation from the side of the assessee, we decided to proceed to adjudicate the issue ex- parte to the assessee. 7. At the time of hearing the Ld. DR vehemently supported the order of the authoriteis below. 8. We have heard the Ld. DR and perused the materials available on record. From the preceding discussion we find that assessee in the present case has filed the return of income declaring total income of Rs. 4,68,550/- but the AO was not satisfied with the amount of income declared by the assessee and therefore he estimated the gross total income of the assessee at the rate of 8% of the total turnover. Thus the AO framed the assessment at Rs.10,36,850/- after allowing the deduction available to the assessee under Chapter VI-A of the Act. As such, the addition has been made by the AO to the total income of the assessee vide order dated 30.01.2015. Such addition made by the AO was not challenged before the Ld. CIT-A and thus the addition made by the AO reaches to the finality. However, the AO initiated the penalty proceedings under the assessment proceedings under the provisions of Section 271(1)(c) of the Act on account of concealment of the particulars of income which came to be confirmed at Rs.1,38,326/- being hundred percent of the tax amount sought to be evaded. The amount of penalty was subsequently confirmed by the Ld. CIT-A. ITA No.379/Rjt/2018 A.Y. 2012-13 4 9. Coming to levy of penalty on the addition of income being estimated profit on the amount of sale, in this regard, we find that the quantum proceeding and the penalty proceeding are different. Any addition or disallowances made under quantum proceeding do not ipso facto empower the revenue authority to levy penalty under Section 271(1)(c) of the Act. Further the addition made was based on estimation and it settled position of law by the various Hon’ble High court that no penalty under Section 271(1)(c) can be sustained in the case of estimated addition. At this juncture we feel pertinent to refer the judgment of Hon’ble Allahabad High Court in case of CIT v. Norton Electronics System Pvt. Ltd [2014] 41 taxamm.com280 [Allahabad] where the Hon’ble bench observed as under: “6. Needless to mention that the quantum proceedings and penalty proceedings are the independent proceedings as per the ratio laid down in the case of Durga Kamal Rice Mills v. CIT [2004] 265 ITR 25/[2003] 130 Taxman 553 (Cal.). When the addition is made on the estimatebasis, no penalty is sustainable as per the ratio laid down in the following cases:— 1. CIT v. Raj Bans Singh [2005] 276 ITR 351 (All.) 2. CWT v. Sanghi Brothers (India) Ltd. [2008] 301 ITR 129 (M.P).; 3. CIT v. Adamkhan [1997] 223 ITR 264/95 Taxman 215 (Mad.); and 4. Harigopal Singh v. CIT [2002] 258 ITR 85/125 Taxman 242 (Punj. & Har.) In view of above, by considering the totality of the facts and circumstances of the case, we find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along with the reasons mentioned therein. No substantial question of law is emerging from the impugned order.” 10. Similarly, the Punjab and Haryana High Court in the case of CIT vs. Modi Industrial Corpn. [2010] 195 Taxman 68 has also held that where the assessment of the assessee was completed on estimated basis penalty under Section 271(1)(c) of the Act was not imposable with respect to the additions made on such estimate by the Assessing Officer. 11. Likewise the Patna High Court in case of CIT vs. Kailash Crockery House [1999] 235 ITR 544/107 Taxman 386, also in identical circumstances held as under: “For the assessment year 1979-80, the Assessing Officer enhanced the gross profit rate adopted by the assessee, running crockery business. As a result he made certain trading additions. In view of discrepancy between the income returned and ITA No.379/Rjt/2018 A.Y. 2012-13 5 income assessed, the Assessing Officer imposed penalty under section 271(1)(c). On appeal, the AAC affirmed the order of the Assessing Officer. On second appeal, the Tribunal specifically found that there was no finding of concealment of income by the lower authorities, and held that sustenance of addition by the Tribunal did not imply that the books of account produced contained inaccurate particulars of total income and that the assessee had given no explanation for decline in gross profit rate. As a result, the Tribunal deleted the penalty imposed.” 12. Therefore, in view of the above judicial precedent, we are of the opinion that no penalty under Section 271(1)(c) of the Act can be sustained on account of addition made by the authorities below based on estimation. Accordingly, we hereby set-aside the order of the Ld. CIT(A) and direct the AO to delete the penalty levied by him. Hence, the ground of appeal raised by the assessee is allowed. 13. In the result appeal, of the assessee is allowed. Order pronounced in the Court on 14/09/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 14/09/2022 Tanmay, Sr. PS TRUE COPY आदेशक त ल प े षत/Copy of the Order forwarded to : आदेशान ु सार /BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपील यअ!धकरण, अहमदाबाद / ITAT, Ahmedabad 1. अपीलाथ / The Appellant 2. !यथ / The Respondent. 3. संबं धतआयकरआय ु #त/ Concerned CIT 4. आयकरआय ु #त(अपील) / The CIT(A) 5. $वभागीय 'त'न ध, आयकरअपील यअ धकरण/ DR, ITAT, 6. गाड)फाईल / Guard file.