Mahavir Electronics, Bhubaneswar V. ITO, Bhubaneswar

ITA 55/CTK/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4280 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2010
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SETHM SETH ARS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE HONBLE SHRI D.K.TYAGI, JUDICIAL MEMBER. /AND HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER . / I.TA.NO . 55/CTK/2010 / ASSESSMENT YEAR 2006 - 07 MAHAVIR ELECTRONICS, 458, CUTTACK ROAD,(BAJORIA COMPLEX),BHUBANESWAR 751 006 - - - VERSUS - . INCOME - TAX OFFICER, WARD 1(1), BHUBANESWAR. / A PPELLANT RESPONDENT FOR THE APPELLANT : SHRI D.K.SETH/M.SETH, ARS FOR THE RESPONDENT : SHRI S.C.MOHANTY, DR / ORDER SHRI K.K.GUPTA, ACCOUN TANT MEMBER . THE ASSESSEE IS IN APPEAL AGITATING THE ACTION OF THE LEARNED CIT(A) CONFIRMING THE PENALTY LEVIED U/S.271(1)(C) OF THE INCOME - TAX ACT,1961. 2. WE HAVE HEARD THE RIVAL CONTENTION S AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT HAS BEEN SU BMITTED THAT THE ADDITION TO THE INCOME RETURNED BY THE ASSESSEE WAS ON THE BASIS OF APPLYING THE PROVISIONS OF SECTION 44AF WHICH WAS NOT SUBJECTED TO ANY A GITATION BEFORE THE APPELLATE AUTHORITIES VIS - - VIS THE ASSESSEE HAD RETURNED INCOME OF RS.4,256. T HE ASSESSING OFFICER PROCEEDED TO INVOKE THE PROVISIONS OF SECTION 44AF COMPUTING NET INCOME AT 5% OF SALES BELOW RS.40 LAKHS. HAVING ACCEPTED THE INCREASE IN SALES AND NET MARGIN, THE ASSESSING OFFICER SOUGHT TO INVOKE THE PROVISIONS U/S.271(1)(C) AND LEV IED PENALTY OF RS.41,410 HOLDING THAT THE ASSESSEE HAD CONCEALED THE INCOME OR HAD FURNISHED INACCURATE PARTICULARS. 3. ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSING OFFICER HAD REJECTED THE INCOME RETURNED WAS BASED UPON NON - ACCEPTANCE OF ACCOUNTS AND THEREFORE, THE / I.TA.NO .55/CTK/2010 2 ASSESSING OFFICER HAD DETERMINED THE CORRECT INCOME U/S.44AF COULD NOT BE TERMED AS CONTRARY IN SO FAR AS THE STATUTE DEEMED IT TO BE THE INCOME OF THE AS SESSEE AS PROVIDED IN LAW. THE ASSESSEE HAD SHOWN 0.12% OF INCOME ON SALES WHICH THE LEARNED ASSESSING OFFICER HAD RIGHTLY RECOMPUTED THE INCOME WAS THEREFORE APPROPRIATELY CONSIDERED FOR LEVY OF PENALTY U/S.271(1)(C). 4. THE LEARNED COUNSEL FOR THE ASSES SEE HAD SUBMITTED THAT ON IDENTICAL FACTS AS WERE CONSIDERED BY ALLAHABAD HIGH COURT IN THE CASE OF CIT V. ARJUN PRASAD AJIT KUMAR (2008) 214 /CTR 355 WHERE IT HAS BEEN HELD THAT ADDITION ON ACCOUNT OF APPLYING THE NET PROFIT ON ESTIMATED SALES PENALTY U/S .271(1)(C) COULD NOT BE IMPOSED IN SO FAR AS THE EXPLANATION TO PROVISO TO SECTION 271(1)(C) INDICATED THAT NOTHING CONTAINED IN THE EXPLANATION SHALL APPLY TO A CASE REFERRED TO IN CLAUSE (B) IN RESPECT OF ANY AMOUNT ADDED OR DISALLOWED AS A RESULT OF TH E REJECTION OF ANY EXPLANATION OFFERED BY SUCH PERSON, IF SUCH EXPLANATION IS BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THEREFORE, WE ARE INCLINED TO HOLD THAT THE LEARN ED ASSESSING OFFICER HAD PR OPERLY SHOWN SAID PROFIT ON THE ESTIMATED SALES DOES NOT APPEAR TO BE JUSTIFIED IN SO FAR AS THE LAW PROVIDES ITSELF THAT IN CASE BOOKS OF ACCOUNT ARE NOT MAINTAINED , WHEN THE SALES ARE BELOW RS.40 LAKHS FOR INVOKING THE PROVISIO NS OF SECTION 44AF AND NOT BECAUSE THE ASSESSEE HAD CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS. WE ALSO HAVE CONSIDERED THE DECISIONS OF THE ITAT, JODHPUR IN THE CASE OF ITO V. MADANLAL (78 TTJ 573), AND ALSO THE DECISION IN THE CASE OF ITO V . RAVI KUMAR (171 TAXMAN 26). WE ARE INCLINED TO HOLD THAT IN ORDER TO COMPLY WITH THE LAW, THE ASSESSING OFFICER WAS WITHIN HIS JURISDICTION TO APPLY THE PROVISIONS OF SECTION 44AF WHEN THE LAW ALLOWED THE ASSESSEE TO RETURN INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE SAID SECTION BECOMES CONTRARY TO THE FACT THAT IT IS NECESSARY TO MAINTAIN BOOKS OF ACCOUNT TO ESTABLISH A LOW PROFIT, THEREFORE CLINCHES THE ISSUE IN FAVOUR OF ASSESSEE THAT HE NEITHER CONCEALED THE INCOME NOR FURNISHED INACCURATE PARTI CULARS TO BE VISITED WITH THE PENALTY U/S.271(1)(C) IN THE LIGHT OF THE ASSESSEE ACCEPTING THE LEARNED ASSESSING OFFICERS COMPUTATION. / I.TA.NO .55/CTK/2010 3 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AND THE PENALTY OF RS.41,140 LEVIED U/S.271(1)(C) IS DIRECTED TO BE DELETED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 30.07.2010 S D/ - S D/ - ( ), D.K.TYAGI JUDICIAL MEMBER (K.K.GUPTA), ACCOUNTANT MEMBER. DA TE: 30.07.2010 - COPY OF THE ORDER FORWARDED TO : / THE APPELLANT : MAHAVIR ELECTRONICS, 458, CUTTACK ROAD,(BAJORIA COMPLEX),BHU BANESWAR 751 006 / THE RESPONDENT : INCOME - TAX OFFICER, WARD 1(1), BHUBANESWAR. THE CIT, THE CIT(A), DR, CUTTACK BENCH GUARD FILE TRUE COPY , BY ORDER , [ ] SENIOR PRIVATE SECRETARY ( /) H.K.PADHEE SENIOR.PRIVATE SECRETARY.