Ashok Nanchahal, New Delhi V. ACIT, Circle- 62(1), New Delhi

ITA 5486/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3031 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 21-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: T R TALWAR
• Keywords: Set aside
• Section: 271(1)(c); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NOS.5486/DEL./2018 ASSESSMENT YEAR 2011-2012 SHRI ASHOK NANCHAHAL, 2474, NALWA STREET, PAHARGANJ, NEW DELHI. PAN ACKPN0993P VS. THE ACIT, CIRCLE 62 (1), NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T.R. TALWAR, ADVOCATE. FOR REVENUE : SHRI S.L. ANURAGI, SR. D.R. DATE OF HEARING : 25.02.2019 DATE OF PRONOUNCEMENT : 05.03.2019 ORDER 1. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(A)-20, NEW DELHI DATED 28 TH JUNE, 2018, FOR THE ASSESSMENT YEAR 2011-2012, CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF INSTALLATIONS OF POTACABIN. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT RATIO 2 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. FOR CURRENT ASSESSMENT YEAR AND FOR THE PRECEDING TWO ASSESSMENT YEARS. THE CHART IS REPRODUCED IN THE ASSESSMENT ORDER, WHICH SHOWS THAT IN ASSESSMENT YEAR UNDER APPEAL, ASSESSEE HAS SHOWN THE NET PROFIT RATE OF 3.37%. HOWEVER, IN PRECEDING ASSESSMENT YEARS 2009-2010 AND 2010-2011, ASSESSEE HAS SHOWN NET PROFIT RATE OF 2.48% AND 1.48% RESPECTIVELY. THE GROSS PROFIT RATE IN ASSESSMENT UNDER APPEAL IS 8.87%. HOWEVER, IN PRECEDING ASSESSMENT YEARS 2009-2010 AND 2010-2011, THE ASSESSEE HAS SHOWN THE GROSS PROFIT RATE OF 12.87% AND 11% RESPECTIVELY. THE ASSESSING OFFICER, THEREAFTER, EXAMINED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE DETAILS FILED BEFORE HIM AND NOTED CERTAIN DISCREPANCIES IN THE ASSESSMENT ORDER LIKE THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER, SOME BILLS/ VOUCHERS RELATED TO PURCHASES DO NOT BEAR ANY EVIDENCE OF TRANSPORTATION OF MATERIAL PURCHASED,, BILLS OF EXPENSE ON ACCOUNT OF CARTAGE COULD NOT BE PRODUCED, DID NOT PROVIDE DETAILS OF PROJECT-WISE MATERIAL UTILIZATION, BILLS AND VOUCHERS RELATED TO LABOUR AND INSTALLATION CHARGES ARE MOSTLY HAND MADE VOUCHERS OR ROUGH BILLS/SELF GENERATED 3 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. AND PAYMENTS WERE MADE IN CASH AND OTHER EXPENSES COULD NOT BE VERIFIED IN THE ABSENCE OF PROPER BILLS AND VOUCHERS. THE ASSESSEE, THUS, SUBMITTED BEFORE THE A.O. THAT HIS INCOME MAY BE ESTIMATED BY APPLYING NET PROFIT @ 5%. THE ASSESSING OFFICER, ACCORDINGLY, MADE ADDITION OF RS.13,75,710/-. 2.1. THE ASSESSING OFFICER ALSO NOTED THAT IN ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS RECEIVED GROSS RECEIPTS FROM M/S. SINDH PROJECTS MASONARY AMOUNTING TO RS.1,00,835/-. HOWEVER, THIS RECEIPT IS NOT REFLECTED IN THE BOOKS OF ACCOUNT AND THE SAME WAS, THEREFORE, ADDED TO THE INCOME OF ASSESSEE. THE A.O. ALSO MADE AN ADDITION OF RS.4,04,348/- ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE I.T. ACT ON RENT. THE A.O. IN THE PENALTY ORDER NOTED THAT THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF ASSESSEE. THE ADDITION OF RS.13,75,710/- WAS NOT CHALLENGED BEFORE THE LD. CIT(A). HOWEVER, DISALLOWANCE UNDER SECTION 40(A)(IA) HAVE BEEN ALLOWED FOR STATISTICAL PURPOSES. THE ADDITION OF RS.1,00,835/- HAVE BEEN ENHANCED TO RS.2,62,923/-. THE 4 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. ASSESSING OFFICER, THEREFORE, NOTED THAT CONCEALED INCOME COMES TO RS.14,76,545/-, ON WHICH, PENALTY UNDER SECTION 271(1)(C) WAS LEVIED. 3. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT PENALTY HAVE BEEN LEVIED FOR ENHANCEMENT OF NET PROFIT RATE, THEREFORE, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A), HOWEVER, DISMISSED THE APPEAL OF ASSESSEE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT PENALTY IS NOT LEVIABLE IN THE MATTER. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ITAT, DELHI BENCH IN THE CASE OF THE SAME ASSESSEE IN ITA.NO.4827/DEL./2015 FOR THE A.Y. 2011-2012 VIDE ORDER DATED 21 ST OCTOBER, 2016 CONSIDERED THE ADDITION OF RS.1,00,835/- AND THE MATTER HAVE BEEN SET ASIDE AND RESTORED BACK TO THE LD. CIT(A). HE HAS, SUBMITTED THAT NO FRESH ORDER HAVE BEEN PASSED ON THE SAME. THIS FACT HAVE NOT BEEN DISPUTED BY THE LD. D.R. SINCE, THIS ADDITION IS 5 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. RESTORED TO THE FILE OF LD. CIT(A), THEREFORE, AT THIS STAGE PENALTY IS NOT LEVIABLE ON THIS AMOUNT. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY ON THIS ADDITION. 5. HOWEVER, AS REGARDS ADDITION OF RS.13,75,710/- IT IS CLEAR THAT ASSESSEE PRODUCED BOOKS OF ACCOUNT AND COMPLETE DETAILS BEFORE ASSESSING OFFICER. THE ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNT AND ALL THE BILLS/ VOUCHERS AND FIND CERTAIN DISCREPANCIES IN THE SAME. THE A.O. ALSO NOTED THAT IN ASSESSMENT ORDER UNDER APPEAL, THE NET PROFIT RATE OF THE ASSESSEE IS HIGHER AS COMPARED TO THE PRECEDING ASSESSMENT YEARS. HOWEVER, THE GROSS PROFIT RATE IS LESSER AS COMPARED TO THE PRECEDING ASSESSMENT YEARS. THE ASSESSEE AGREED FOR ENHANCEMENT OF NET PROFIT RATE TO 5% AS AGAINST NET PROFIT RATE DECLARED AT 3.37% IN ASSESSMENT YEAR UNDER APPEAL. IT IS, THEREFORE, CLEAR THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS.13,75,710/- ON ACCOUNT OF ENHANCING THE NET PROFIT RATE FROM 3.37% TO 5%. THE A.O. FORGOT TO NOTE THAT NET PROFIT RATE OF ASSESSEE IS ALREADY HIGHER AS COMPARED TO PRECEDING ASSESSMENT YEAR 6 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. WHILE CONSIDERING LEVY OF PENALTY AGAINST THE ASSESSEE. THEREFORE, EVEN IF THERE IS DISCREPANCIES NOTED IN THE BOOKS OF ACCOUNT AND OTHER RECORDS PRODUCED BY ASSESSEE, BUT, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. SINCE THE ASSESSEE HAS SHOWN HIGHER INCOME BY SHOWING BETTER NET PROFIT RATE IN ASSESSMENT YEAR UNDER APPEAL AS COMPARED TO PRECEDING ASSESSMENT YEARS, THEREFORE, THERE WAS NO OCCASION FOR THE ASSESSEE TO CONCEAL INCOME OR FILE INACCURATE PARTICULARS OF INCOME. THE ASSESSEE PRODUCED COMPLETE DETAILS AND RECORDS BEFORE ASSESSING OFFICER FOR HIS VERIFICATION. THEREFORE, IT IS A CASE OF ESTIMATED INCOME, IN WHICH, ASSESSEE AGREED FOR HIGHER NET PROFIT RATE BECAUSE OF THE DISCREPANCIES NOTED BY THE A.O. IN THE RECORD PRODUCED BY ASSESSEE. IT IS WELL SETTLED LAW THAT PROVISIONS OF SECTION 271(1)(C) ARE NOT ATTRACTED TO THE CASES WHERE THE INCOME OF ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN ON THAT BASIS. I RELY UPON JUDGMENT OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASES OF HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P&H) AND CIT 7 ITA.NO.5486/DEL./2018 SHRI ASHOK NANCHAHAL, NEW DELHI. VS. SANGRUR VANASPATI MILLS LTD., (2008) 303 ITR 53 (P&H). NO DEFINITE FINDING OF FACT HAVE BEEN GIVEN BY ASSESSING OFFICER THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME IN THIS REGARD. THEREFORE, BY MERE AGREEING TO ADDITIONAL INCOME ON ACCOUNT OF ENHANCED NET PROFIT, BY ITSELF IS NO GROUND TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY ON THIS ADDITION ALSO. 6. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) DELHI, DATED 05 TH MARCH, 2019 JUDICIAL MEMBER VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.