SONALI A. SHAH, MUMBAI V. I.T.O 14(3) (3), MUMBAI

ITA 5720/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1980 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJN EESH K ARVIND
• Assessee Lawyers: ADITYA R AJGAONKAR
• Keywords: Gross profit estimation; Rejection of books of accounts; Difference of opinion
• Section: 133A; 133(6); 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.5720/M/2013 ASSESSMENT YEAR: 2007-08 MRS. SONALI A. SHAH, RAJ PARASHAR, 3 RD FLOOR, FLAT NO.301-2-3, 95/F, INDRANARAYAN ROAD, SANTACRUZ (W), MUMBAI 400 054 PAN: AGDPS 6844D VS. I.T.O. 14(3), EARNEST HOUSE, NARIMAN POINT, MUMBAI 21 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ADITYA R. AJGAONKAR, A.R. REVENUE BY : SHRI RAJNEESH K. ARVIND, D.R. DATE OF HEARING : 09.08.2016 DATE OF PRONOUNCEMENT : 07.11.2016 O R D E R PER C.N. PRASAD, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-25, MUMBAI [(H EREINAFTER REFERRED TO AS THE CIT(A)] DATED 31.07.2013 FOR THE ASSESSMENT YEAR 2007-08 IN SUSTAINING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE A CT ON THE ADDITION MADE ESTIMATING THE GROSS PROFIT IN RESPECT OF TEXTILE B USINESS AND IRON AND STEEL BUSINESS OF THE ASSESSEE. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE, ENGAGED IN THE BUSINESS OF DEALERS IN FABRICS, CLOTHS, IRON AND STEEL PRODUCTS , FILED HER RETURN OF INCOME ON 12.10.07 DECLARING THE INCOME AT RS.1,91,917/-. TH E ASSESSMENT WAS COMPLETED UNDER SECTION 144 READ WITH SECTION 145 O F THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS.2,87,58,580/-. THE AS SESSING OFFICER WHILE ITA NO.5720/M/2013 MRS. SONALI A. SHAH 2 COMPLETING THE ASSESSMENT MADE ADDITION OF RS.3,01, 83,302/- ESTIMATING THE GROSS PROFIT ON SALES OF IRON AND STEEL BUSINESS AT 10% AND ON THE SALES OF TEXTILES AT 20%. THE ASSESSING OFFICER REJECTED TH E BOOKS OF ACCOUNTS OF THE ASSESSEE OBSERVING THAT GROSS PROFIT IS VERY LOW, T HE SALES AND PURCHASE MADE BY THE ASSESSEE ARE NOT GENUINE, ASSESSEE HAS NOT M AINTAINED PROPER STOCK RECORDS, ASSESSEE HAS NOT PRODUCED CONFIRMATIONS FR OM THE PURCHASERS, THE NOTICES ISSUED TO THE PURCHASERS WERE RETURNED UNSE RVED, THE ASSESSEE COULD NOT PRODUCE THE PURCHASERS. THEREFORE, THE ASSESSING O FFICER BECAUSE OF ALL THESE DISCREPANCIES REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE GROSS PROFIT AND MADE ADDITION ACCORDINGLY. 3. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) AND THE LD. CIT(A) SUSTAINED THE ADDITION. SUBSEQUENTLY, THE MATTER W AS CARRIED TO THE TRIBUNAL BY THE ASSESSEE AND THE CO-ORDINATE BENCH SUSTAINED TH E ADDITION PARTLY BY REDUCING THE GROSS PROFIT RATE BY 5% FOR BOTH TEXTI LE BUSINESS AND IRON AND STEEL BUSINESS. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C). IN RESPONSE TO THE PENALTY NOTICE, ASSE SSEE FILED REPLY ON 29.03.12. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THAT ADDITION WAS MADE ONLY ON ESTIMATION BASIS AS THE GP WAS ESTIMATED BY REJECTING BOOKS OF ACCOUNTS AND THERE IS NO CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS. IT WAS FURTHER CONTENDED THAT AS FAR AS IRON AND STEEL BUSINESS ARE CONCERNED ALL THE CONFIRMATIONS WERE SUBMITTED AND NONE OF THE NOTICES ISSUED UNDER SECTION 133(6) SENT TO THE PARTIES IN RESPECT OF IRON AND STEEL WERE NOT RETURNED AND ALL THE PARTIES RESPONDED TO THE NOTIC ES. THE NOTICES RETURNED PERTAINED ONLY FOR TEXTILE BUSINESS AND THE ASSESSE E HAS PRODUCED THE CONFIRMATIONS, SALE BILLS AND PURCHASE BILLS. THER EFORE, IT WAS CONTENDED THAT REJECTION OF BOOKS IS NOT JUSTIFIED MERELY BECAUSE SOME PARTIES DID NOT RESPOND TO NOTICES UNDER SECTION 133(6) OF THE ACT. IT WAS FURTHER CONTENDED THAT ALL PURCHASES AND SALES WERE THROUGH ACCOUNT PAYEE CHEQ UES AND ALL INVOICES OF SALES AND PURCHASES IN RESPECT OF THE SAID BUSINESS ES WERE PRODUCED, THEREFORE ITA NO.5720/M/2013 MRS. SONALI A. SHAH 3 PROPER BOOKS OF ACCOUNTS WERE MAINTAINED AND THEY W ERE AUDITED AND THERE IS NO EVIDENCE FOUND TO SHOW THAT THE TRANSACTIONS ENT ERED INTO BY THE ASSESSEE ARE NON GENUINE AND HENCE ESTIMATION OF GP IS NOT JUSTI FIED. HOWEVER, THE ASSESSING OFFICER PASSED PENALTY ORDER ON 30.03.12 HOLDING THAT A SURVEY ACTION UNDER SECTION 133A WAS CONDUCTED AT THE PREM ISES OF THE ASSESSEE AND A LOT OF INCRIMINATING EVIDENCES WERE FOUND AND THEY WERE THOROUGHLY ANALYSED BY THE ASSESSING OFFICER AND ARRIVED AT A CONCLUSIO N THAT THE ASSESSEE HAS CONCEALED/DID NOT PRODUCE/FABRICATED WRONG EVIDENCE S AND DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER CON CLUDED THAT SUCH ACTION OF THE ASSESSING OFFICER IS CONFIRMED BY THE LD. CIT(A ), THEREFORE IT CONCLUSIVELY PROVES THAT THIS IS A RIGHT CASE FOR LEVY OF PENALT Y UNDER SECTION 271(1)(C). 4. ON APPEAL, THE LD. CIT(A) SUSTAINED THE PENALTY ON THE GROSS PROFIT ESTIMATED ON THE TEXTILE BUSINESS AND IRON AND STEE L BUSINESS OF THE ASSESSEE. WHILE SUSTAINING THE PENALTY THE LD. CIT(A) WAS OF THE VIEW THAT ASSESSEE HAS BEEN RESORTING TO UNFAIR MEANS AND SUBMITTING INACC URATE PARTICULARS OF INCOME WHEREBY CONCEALING THE INCOME, THEREFORE THERE IS N O SCOPE FOR ANY RELIEF TO BE GRANTED TO THE ASSESSEE. LD. CIT(A) PLACED RELIANC E ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHA RMENDRA TEXTILE PROCESSORS (306 ITR 277). 5. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT TH E ASSESSEE IS INTO TRADING OF IRON AND STEEL AND FABRICS ON A WHOLESALE BASIS. THE ADDITION WAS MADE IN THE ASSESSMENT ORDER BY ESTIMATING THE GROSS PROFIT AT 20% FROM THESE TWO BUSINESSES I.E. TEXTILE AND IRON AND STEEL BY REJEC TING THE BOOKS OF ACCOUNTS. THE ADDITION WAS MADE ON ESTIMATE BASIS WITHOUT ANY COGENT MATERIALS. THE LD. COUNSEL FOR THE ASSESSEE INVITING OUR ATTENTION TO PARA 6.1 OF THE LD. CIT(A)S ORDER SUBMITS THAT A REMAND WAS CALLED FOR BY THE LD. CIT(A) AND IN RESPONSE TO THE REMAND REPORT ASSESSEE ALSO FILED R EPLY WHICH IS AT PARA 6.2. THE LD. COUNSEL FURTHER INVITED OUR ATTENTION TO PA GE 9 OF THE LD. CIT(A)S ORDER AND THE OBSERVATIONS WHICH WERE RECORDED BY T HE LD. CIT(A). THE LD. ITA NO.5720/M/2013 MRS. SONALI A. SHAH 4 COUNSEL SUBMITS THAT FINALLY THE LD. CIT(A) CONCLUD ED THAT THERE IS CONCEALMENT OF INCOME. THE LD. COUNSEL FURTHER SUB MITS THAT THERE IS NO REAL CONCRETE EVIDENCE TO PROVE THAT THESE TRANSACTIONS OF PURCHASES ARE SHAM. IT IS SUBMITTED THAT NO DISCREPANCIES WERE FOUND ABOUT ST OCKS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER HAS SIMPLY RELIED ON THE FINDINGS IN THE ASSESSMENT ORDER FOR IMPOSITION OF PENALTY. HE SUBMITS THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT AND THE ASSESSM ENT PROCEEDINGS ARE INDEPENDENT. HE CANNOT BLINDLY RELY ON ASSESSMENT ORDER FOR IMPOSING PENALTY. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS FOR THE PROPOSITION WHEN INCOME IS ESTIMATED PENALTY IS NOT ATTRACTED. 1. CIT(A) VS. METAL PRODUCTS OF INDIA 150 ITR 714 ( P & H) 2. CIT VS. S. RAHAMAT KHAN BIRBALKHAN BADRUDDIN AND PARTY 240 ITR 778 (RAJASTHAN) 3. HARIGOPAL SING VS. CIT 258 ITR 85 (P & H) 4. SHRI NARAYANSINGH J. DEORA VS. ACIT (ITA NO.5895 /MUM/2010 DATED 09.12.2011) THE LD. COUNSEL ALSO PLACED RELIANCE ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. (322 ITR 158) AND SUBMITS THAT MAKING INCORRECT CLAIM DOES N OT AMOUNT TO CONCEALMENT OF PARTICULARS, THEREFORE NO PENALTY IS ATTRACTED. THE LD. COUNSEL FURTHER REFERRING TO PARA 7 TO 10 OF THE CO-ORDINATE BENCH IN THE CASE OF SHRI NARAYANSINGH J. DEORA VS. ACIT (SUPRA) SUBMITS THAT ON SIMILAR CIRCUMSTANCES WHERE THE BOOKS OF ACCOUNTS WERE REJECTED AND INCOM E WAS ESTIMATED ON THE CONTRACT RECEIPTS, THE CO-ORDINATE BENCH AFTER CONS IDERING VARIOUS DECISIONS HELD THAT WHEN ASSESSEES INCOME WAS ESTIMATED PENA LTY IS NOT ATTRACTED. 6. THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. THE LD. D.R. FURTHER REFERRING TO PAGE 2 OF THE ASS ESSMENT ORDER SUBMITS THAT THERE WAS A SURVEY ACTION UNDER 133 A OF THE ACT ON 13.03.07 IN THE RESIDENTIAL CUM OFFICE PREMISES OF THE ASSESSEE AND THE SURVEY REPORT SHOWS THAT THE ASSESSEE WAS SHOWING GROSS PROFIT AT 1.30% APPROXIM ATELY FOR BOTH TEXTILE AS WELL AS IRON AND STEEL BUSINESS ON THE TURNOVER OF ABOUT RS.15 CRORES FOR THE ITA NO.5720/M/2013 MRS. SONALI A. SHAH 5 ASSESSMENT YEAR 2006-07. DURING THE COURSE OF SURV EY, ASSESSEE IN SPITE OF REPEATED DIRECTIONS TO FURNISH GODOWNS AND WAREHOUS E ADDRESSES NO DETAILS WERE FURNISHED BY THE ASSESSEE. THE OFFICE PREMISE S OF THE ASSESSEE WAS A SHARING ACCOMMODATION WHERE THE ASSESSEE WAS PAYING A MEAGER RENT OF RS.1000/- PER MONTH AND THERE WAS NO FURNITURE OF T HE ASSESSEE TO CONDUCT THE BUSINESS PROPERLY AND FURTHER IT CAME TO LIGHT THAT ASSESSEE IS NOT MAINTAINING ANY OPENING OR CLOSING STOCK OF BOTH THE BUSINESSES SINCE AS AND WHEN THE ORDERS RECEIVED FROM THE PARTIES EITHER THROUGH BRO KERS DIRECTLY ASSESSEE PLACES THESE ORDERS WITH THEIR MEMBERS WHO SUPPLIED AND DE LIVERED THE MATERIALS DIRECTLY TO THE ASSESSEES CLIENT. THEREAFTER ASSE SSEE HAS RAISED SALE BILLS ON HER CLIENT AND IN THE SIMILAR MANNER HER SUPPLIERS ALSO RAISED THE BILLS ON THE ASSESSEE. IT WAS ALSO STATED IN THE REPORT THAT WH ILE RAISING THE SALE BILLS ON CLIENTS ASSESSEE USED TO KEEP HER MARGIN. THE LD. D.R. FURTHER REFERRING TO PAGE 3 OF THE ASSESSMENT ORDER SUBMITS THAT THE ASS ESSEE HAS SHOWN VERY LOW GP AND IS MAINTAINING GP AT 1% TO 1.5 % ON THE MARG IN OF SALES AND THIS IS VERY LOW MARGIN IN TEXTILE AND IRON AND STEEL BUSIN ESSES. THE LD. D.R. FURTHER SUBMITS THAT IN ORDER TO VERIFY THE GENUINENESS OF SALES AND PURCHASE TRANSACTIONS AS THE ASSESSEE WAS SHOWING VERY LOW G P, NOTICES WERE ISSUED TO VARIOUS PARTIES FROM WHERE THE ASSESSEE HAS STATED TO HAVE MADE PURCHASES. THE LD. D.R. SUBMITS THAT MANY OF THE NOTICES HAVE BEEN RETURNED BACK BY THE POSTAL AUTHORITY WITH ENDORSEMENTS LIKE LEFT, WRONG ADDRESS, INCOMPLETE ADDRESS ETC. THE LD. D.R., HOWEVER, SUBMITS THAT T HE ASSESSEES HUSBAND SUBMITTED THE CONFIRMATIONS OF THE PARTIES WHERE TH E NOTICES COULD NOT BE SERVED BY POSTAL AUTHORITIES. HE SUBMITS THAT ON V ERIFICATION OF THE CONFIRMATIONS THE AO FOUND THAT THEY ARE SELF MADE AND THEY ARE NOT ON LETTER HEAD, THERE IS NO DATE, SEAL, NAME AND DESIGNATION OF THE AUTHORITY WHO HAS SIGNED THE CONFIRMATIONS AND THEREFORE THEY ARE DUB IOUS AND NOT GENUINE. HE FURTHER SUBMITS THAT THE ASSESSING OFFICER HAS FOUN D THAT THERE WAS NO COMPLETE ADDRESS I.E. PLOT NUMBER, ROOM NUMBER, FLO OR NUMBER, ROAD NAME, PIN CODE ETC. ON THE CONFIRMATIONS. THE ASSESSING OFFI CER FURTHER NOTICED THAT THE ITA NO.5720/M/2013 MRS. SONALI A. SHAH 6 PEN AND INK USED FOR SIGNATURES BY THE SIGNATORIES IS ALMOST THE SAME. THEREFORE, BY VIRTUE OF ALL THESE DEFECTS THE BOOKS WERE REJECTED BY THE AO AND ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AS THE B OOKS WERE NOT RELIABLE. THE LD. D.R. THEREFORE SUBMITS THAT SINCE SURROUNDING C IRCUMSTANCES PROVE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME OR THERE IS CONCEALMENT OF INCOME THE ASSESSING OFFICER LEFT WITH NO OPTION AND RIGHTLY IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE CASE LAW RELIED ON. IN T HIS CASE THE ASSESSEE IS INTO THE BUSINESS OF TEXTILES, IRON AND STEEL. THERE WA S A SURVEY IN THE PREMISES OF THE ASSESSEE AND IN THE COURSE OF SURVEY IT WAS NOT ICED THAT THE ASSESSEE WAS SHOWING VERY LOW GROSS PROFIT ON THE TURNOVER FROM THE BUSINESS OF TEXTILES AS WELL AS IRON AND STEEL. THE ASSESSING OFFICER WHEN REQUESTED FOR FURNISHING THE DETAILS OF GODOWNS AND WAREHOUSES ADDRESSES THE ASSESSEE SEEMS TO HAVE GIVEN EVASIVE REPLIES. THE SURVEY PARTY HAS ALSO F OUND THAT THE ASSESSEE IS OPERATING HER BUSINESS IN A SMALL PLACE ON A SHARIN G ACCOMMODATION WITHOUT EVEN ANY FURNITURE/STAFF ETC. THE SURVEY PARTY ALSO RECORDED A STATEMENT FROM ASSESSEES HUSBAND WHO HAS STATED THAT THEY DID NOT HAVE ANY OPENING STOCK OR CLOSING STOCK IN BOTH THE BUSINESS AS THEY RECEIVE ORDERS FROM THE PARTIES THEY PLACE ORDERS WITH THE MEMBERS DIRECTLY AND THE MATE RIAL IS SUPPLIED TO THE PARTIES. THE ASSESSEE RAISES BILLS ON HER CLIENT A ND IN TURN HER SUPPLIERS ALSO RAISE BILLS ON THE ASSESSEE. IN THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER ISSUED NOTICES TO VARIOUS PARTIES WHO HAVE SOLD MATERIALS TO THE ASSESSEE. MANY OF THE NOTICES WERE RETURNED UN SERVED. HOWEVER, ASSESSEE SEEMS TO HAVE PRODUCED THE CONFIRMATIONS BEFORE THE ASSESSING OFFICER WHEREAS NOTICES WERE RETURNED UNSERVED. THE ASSESS ING OFFICER AFTER NOTICING VARIOUS DISCREPANCIES IN THE CONFIRMATIONS HE TREAT ED SUCH CONFIRMATIONS AS DUBIOUS AND NON GENUINE. IN VIEW OF ALL THESE DISC REPANCIES THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSES SEE AND ESTIMATED THE GROSS ITA NO.5720/M/2013 MRS. SONALI A. SHAH 7 PROFIT AT 20% IN RESPECT OF SALES MADE IN THE TEXTI LE BUSINESS AND 10% IN SALES MADE IN IRON AND STEEL BUSINESS. THE LD. CIT(A) SU STAINED THE ACTION OF THE ASSESSING OFFICER IN REJECTING BOOKS OF ACCOUNTS AN D ESTIMATING OF GROSS PROFIT. HOWEVER, THE TRIBUNAL WHILE SUSTAINING THE REJECTIO N OF BOOKS OF ACCOUNTS BY THE LOWER AUTHORITIES AS THEY ARE NOT RELIABLE AND AT THE SAME TIME HELD THAT THE GROSS PROFIT ESTIMATED IN THE IRON AND STEEL BUSINE SS AND TEXTILE BUSINESS IS ON HIGHER SIDE. THE TRIBUNAL REDUCED THE GROSS PROFIT RATE BY 5% IN BOTH THE BUSINESSES OF THE ASSESSEE. 8. THE ASSESSING OFFICER LEVIED PENALTY HOLDING THA T THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS W HICH THE LD. CIT(A) SUSTAINED. ON A READING OF THE ORDERS OF THE LOWER AUTHORITIES I.E. THE ASSESSMENT ORDER AND THE LD. CIT(A)S ORDER, WE FIN D THAT THE BOOKS OF ACCOUNTS WERE REJECTED ON NOTICING VARIOUS DISCREPA NCIES SUCH AS NO PROPER CONFIRMATIONS FROM THE PARTIES, LOW GP RATE, NO PRO PER STOCK RECORDS, NO DETAILS OF WAREHOUSES, GODOWNS ETC. WE NOTICE THAT IT WAS NOT CONCRETELY ESTABLISHED THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING O F INACCURATE PARTICULARS IN THIS CASE. THE BOOKS WERE REJECTED AS THEY ARE NOT RELIABLE AND THE ADDITION WAS MADE BY ESTIMATING THE GROSS PROFIT. THE ACTIVITY OF THE ASSESSEE IN DOING THESE BUSINESSES BY PLACING ORDERS WITH THE DEALERS WHO S UPPLY THE MATERIALS DIRECTLY TO THE CLIENTS OF THE ASSESSEE AND THE ASSESSEE RAI SING INVOICES ON THE CLIENTS AND THE DEALERS ON THE ASSESSEE IS ALSO NOT IN DISP UTE. IN FACT IT IS THE FINDING IN THE SURVEY REPORT THAT ASSESSEE IS KEEPING SOME MAR GIN FROM SUCH SALES. THEREFORE THE LOWER AUTHORITIES COULD NOT CONCRETEL Y PROVE THAT THERE IS FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME IN SHOWING LESS GP IN THE BUSINESSES. MERE ESTIMATION OF GROSS PRO FIT WILL NOT LEAD TO FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME. 9. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M. M. RICE MILLS (2002) 253 ITR 17 (P & H) FOLLOWING THE DECISION OF HONBL E PUNJAB HIGH COURT IN THE CASE OF CIT VS. METAL PRODUCTS OF INDIA (150 IT R 714) HELD AS UNDER: ITA NO.5720/M/2013 MRS. SONALI A. SHAH 8 MERELY BECAUSE THE ADDITION HAD BEEN MADE ON ESTIM ATE UNDER THE PROVISO TO S. 145(1) BY ADOPTING THE VIEW THAT THE GROSS PROFIT S HOWN IN THE BOOKS OF ACCOUNT WAS TOO LOW AS THERE WERE DEFECTS IN THE METHOD OF ACCOUNTING EMPLOYED, DID NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS FAILURE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD OR GROSS OR WILLFUL NEGLEC T. 10. IN THE CASE OF HARIGOPAL SINGH VS. CIT (258 ITR 85) THE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT WHERE THE ASSESSMENT IS MADE ON ESTIMATE BASIS, NO PENALTY UNDER S. 271(1)(C) CAN BE IMPOSED . THE HONBLE HIGH COURT OBSERVED THAT THERE WAS A DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF INCOME OF THE ASSESSEE. SINCE THE ASSESSING OFFICE R AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASSESSING THE INCOME OF THE ASSESSEE, IT COULD NOT BE SAID THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME SO AS TO ATTRACT CL. (C) OF S. 271(1)(C) OF THE IT ACT, 1961. 11. IN THE CASE OF CIT VS. NAWAB AND BROS. (1977) 1 07 ITR. 681 (ALL), THE HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER: 'THAT THE ONLY REASON WHY HIS BOOKS WERE REJECTED W AS THAT THE ASSESSEE WAS NOT MAINTAINING A DAY-TO-DAY STOCK REGISTER. THE CORREC T INCOME WAS DETERMINED BY MERELY APPLYING A FLAT RATE ON THE RETURNED TURNOVE R. IN VIEW OF THESE FACTS, IT COULD NOT BE SAID THAT THE ASSESSEE WAS GUILTY OF EITHER FRAUD OR WILLFUL NEGLECT IN THE MATTER AND THE ASSESSEE HAD DISCHARGED THE BURDEN T HAT LAY ON HIM. THE TRIBUNAL WAS JUSTIFIED IN LAW IN CANCELLING THE PENALTY. ' 12. IN THE CASE OF COMMISSIONER OF INCOME TAX VS. K .L. MANGAL SAIN (107 ITR 598) THE HONBLE ALLAHABAD HIGH COURT HELD AS U NDER: ON APPEAL BEFORE THE TRIBUNAL IT WAS URGED ON BEHAL F OF THE ASSESSEE THAT IT HAS BEEN ESTABLISHED THAT IT WAS NOT GUILTY OF FRAUD OR GROS S OR WILLFUL NEGLECT. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE BOOK V ERSION WAS REJECTED AND PROFIT WAS DETERMINED BY APPLYING A FLAT RATE FOR WANT OF PROP ER VERIFICATION. THE TRIBUNAL HELD THAT THESE FACTS MAY CONSTITUTE SUFFICIENT MATERIAL FOR MAKING CERTAIN ADDITION IN THE ASSESSMENT BUT IT DOES NOT FOLLOW THAT THERE WAS AN Y FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. THE MERE FACT THAT TH E BOOK VERSION HAS NOT BEEN ACCEPTED COULD NOT LEAD TO ANY FINDING TO THE EFFEC T THAT THERE WAS ANY FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. ON THIS VIEW THE PENALTY ORDER WAS CANCELLED. THE ONLY FACT PROVED WAS THAT THE ASSES SEE HAD NOT MAINTAINED THE ACCOUNTS REGULARLY, FOR WHICH REASON THEY WERE REJE CTED. THE CORRECT INCOME WAS ESTIMATED BY APPLYING A FLAT RATE. ON THESE FACTS THE TRIBUNAL HELD THAT IT COULD NOT BE SAID THAT THE ASSESSEE WAS GUILTY OF FRAUD OR GR OSS OR WILLFUL NEGLECT. ITA NO.5720/M/2013 MRS. SONALI A. SHAH 9 13. IN THE CASE OF CIT VS. SANGRUR VANASPATI MILLS LTD. (303 ITR 53) THE FACTS ARE DURING THE ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER CAME TO KNOW THAT THE CENTRAL ENFORCEMENT WING OF THE EXCIS E & TAXATION DEPARTMENT CARRIED OUT INSPECTION OF THE BUSINESS PREMISES OF THE ASSESSEE ON 23-1-1993 AND SEIZED CERTAIN DOCUMENTS. ON SCRUTINY OF THOSE DOCUMENTS, THE ASSESSING OFFICER NOTICED THAT IN ONE INVOICE BOOK CONTAINING FIVE SALE VOUCHERS, ORIGINAL COPIES OF FOUR BILLS WERE FOUND TORN AND THE DUPLIC ATE AND TRIPLICATE COPIES WERE AVAILABLE. BY TAKING INTO CONSIDERATION THE SAID MA TERIAL AND THE STATEMENT OF THE DIRECTOR OF THE COMPANY, THE ASSESSING OFFICER ARRIVED AT A CONCLUSION THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT RELIA BLE AND DID NOT REFLECT ITS TRUE INCOME. ACCORDINGLY, THE ASSESSING OFFICER REJ ECTED THE ACCOUNTS OF THE ASSESSEE AND CONCLUDED THAT THE ASSESSEE HAD MADE U NACCOUNTED SALES. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER, I N ORDER TO ARRIVE AT THE QUANTUM OF SUCH UNACCOUNTED SALES, EXTRAPOLATED THE AVERAGE SALE PRICE IN 4 INVOICES TO 53 INVOICES AND PROCEEDED TO MAKE AN AD DITION OF RS.66,16,865. PENALTY WAS IMPOSED BUT THE TRIBUNAL DELETED THE PE NALTY ON THE GROUND THAT THERE WAS NO CONCLUSIVE EVIDENCE THAT THE SALES EST IMATED BY THE ASSESSING OFFICER TO THE EXTENT OF RS.66,16,865 WERE MADE OUT SIDE THE BOOKS OF ACCOUNT. ON APPEAL TO THE HIGH COURT THE HONBLE HIGH COURT HAS HELD AS UNDER: 6. WE HAVE HEARD COUNSEL FOR THE APPELLANT AND HAVE G ONE THROUGH THE IMPUGNED ORDER. 7. THE ORDER PASSED BY THE ITAT IS BASED UPON TWO DEC ISIONS OF THIS COURT IN CIT V. RAVAIL SINGH & CO. [2002] 254 ITR 191 1 AND HARI GOPAL SINGH V. CIT [2002] 258 ITR 85 2 . IN BOTH THESE DECISIONS, THIS COURT HAS HELD THAT IN ORDER TO ATTRACT CLAUSE ( C ) OF SECTION 271(1) OF THE ACT, IT IS NECESSARY THAT THE RE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICULARS OF HIS INCOME OR FURNIS HING OF INACCURATE PARTICULARS OF SUCH INCOME. THE PROVISIONS OF SECTION 271(1)( C ) OF THE ACT ARE NOT ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED O N ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN. IT WAS HELD THAT WHEN THE ADDITIO N HAD BEEN MADE ON THE BASIS OF ESTIMATE AND NOT ON ACCOUNT OF ANY CONCRETE EVID ENCE OF CONCEALMENT, THEN THE PENALTY WAS NOT LEVIABLE. THE SIMILAR VIEW WAS ALSO TAKEN BY THIS COURT IN CIT V. DHILLON RICE MILLS [2002] 256 ITR 447 3 , WHERE THE ADDITION WAS MADE BY THE ASSESSING OFFICER BY ESTIMATING THE YIELD OF SUPER PHAK AS WELL AS OF CHHILKA AND ALSO THE PRICE OF CHHILKA, THAT ADDITION WAS REDUCED BY THE CIT(A). HOWEVER, THE PENALTY LEVIED BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(A). THE ORDER OF CIT(A) WAS ITA NO.5720/M/2013 MRS. SONALI A. SHAH 10 CONFIRMED BY THE ITAT AND THE APPEAL FILED BY THE R EVENUE AGAINST THE SAID ORDER OF THE ITAT WAS DISMISSED BY THIS COURT, ON THE GROUND THAT THE ASSESSING OFFICER HAD MADE THE ADDITIONS ON THE BASIS OF ESTIMATE OF THE YIELD OF PHAK AND CHHILKA AND AN ESTIMATE OF THE PRICE AND THAT THE ESTIMATE WOULD N OT IPSO FACTO LEAD TO PENALTY. 14. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT I N THE CASE ON HAND BEFORE US THERE IS NO CONCRETE EVIDENCE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND THE ADDITION WAS MADE BASED ON ESTIMATING G ROSS PROFIT BY REJECTING BOOKS OF ACCOUNTS HENCE NO PENALTY IS ATTRACTED. T HUS WE REVERSE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON ESTIMATED ADDITION. 15. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.11.2016. SD/- SD/- (RAMIT KOCHAR) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 07.11.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.