Sh Surinder Singh. Prop. M/s. Surinder Exports, Amritsar. V. The Dy. Commissioner of Income Tax, Amritsar.

ITA 59/ASR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9521 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 18-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P BHATIA
• Section: 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.59(ASR)/2016 ASSESSMENT YEAR: 2007-08 SURINDER SINGH PROP. M/S. SURINDER EXPORTS, 206, KOT MAHANA SINGH, TARN TARAN ROAD, AMRITSR. PAN:ABTPS3344K VS. THE DY. CIT, CIRCLE-III, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. J.P. BHATIA, ADV. RESPONDENT BY: SH. RAHUL DHAWAN, DR DATE OF HEARING: 22/11/2016 DATE OF PRONOUNCEMENT: 23/11/2016 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A), AMRITSAR, DATED13.10.2015 FOR ASST. YEAR 2007-08. 2. THE ASSESSEE HAS TAKEN VARIOUS GROUNDS OF APPEAL , HOWEVER, THE CRUX OF THE GRIEVANCE OF ASSESSEE IS THE ACTION OF LD. CIT(A), BY WHICH HE HAS CONFIRMED THE PENALTY OF RS.33,660/- IMPOSED BY ASSESSING OFFICER U/S.271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3 ) OF THE ACT AND AN ADDITION OF RS.2,25,704 WAS MADE BY ASSESSING OFFIC ER AFTER INVOKING THE ITA NO.59/ASR/2016 A.Y. 2007-08 2 PROVISIONS OF SEC.145(3) OF THE ACT. THE ADDITION W AS MADE ON ACCOUNT OF DIFFERENCE IN G.P RATE FOR THE PERIOD PRIOR TO THE DATE OF SURVEY AND AFTER THE DATE OF SURVEY. ON APPEAL BEFORE LD. CIT(A), HE REDUCED THE ADDITION OF RS.2,25,704/- TO RS.1,00,000/-. THEREFORE, THE ASSE SSING OFFICER IMPOSED A PENALTY OF RS.33,660/- ON ACCOUNT OF SUSTAINED AD DITION OF RS.1,00,000/-. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD. C IT(A), WHO DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. AR SUBMITTED THAT THERE W AS A SURVEY U/S 133A ON 24.08.2006 AND ASSESSEE HAD MADE A SURRENDE R OF RS.25,31,276/- FOR VARIOUS DISCREPANCIES IN STOCK. IT WAS SUBMITTE D THAT THE SAID SURRENDER WAS DULY REFLECTED IN THE TRADIN G ACCOUNT. HE FURTHER SUBMITTED THAT ASSESSING OFFICER ON THE BASIS OF TR ADING ACCOUNT PREPARED FROM 1.4.2006 TO 24.08.2006 AND FOR THE PE RIOD FROM 25.08.2006 TO 31.3.2007 OBSERVED THAT G.P RATE DECL ARED BEFORE THE SURVEY WAS LOWER THAN G.P RATE DECLARED AFTER THE S URVEY PERIOD AND THEREFORE, HE HAD IMPOSED THE PENALTY, WHICH THE LD . CIT(A) HAD ALLOWED PARTLY. HE SUBMITTED THAT THE PENALTY IMPOSED BY AS SESSING OFFICER IS NOT BASED ON ANY CONCEALMENT OF INCOME AND NO CONCEALME NT HAS BEEN POINTED OUT BY THE DEPARTMENT AND THEY HAVE SIMPLY IMPOSED THE PENALTY ON THE BASIS OF DIFFERENCE IN G.P RATIO OF THE TWO PERIODS, WHICH CANNOT BE UPHELD IN VIEW OF THE VARIOUS DECISIONS O F VARIOUS COURTS ITA NO.59/ASR/2016 A.Y. 2007-08 3 WHERE THE COURTS HAS HELD THAT PENALTY ON THE BASIS OF ESTIMATION CANNOT BE IMPOSED. 7. THE LD. DR, ON THE OTHER HAND, HEAVILY PLACED HI S RELIANCE ON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ONLY BA SIS ON WHICH THE PENALTY HAS BEEN IMPOSED IS THAT THE G.P RATE DECLA RED BY ASSESSEE IN THE PRE SURVEY PERIOD WAS LOWER THAN THE POST SURVEY PE RIOD AND NOWHERE IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS POI NTED OUT ANY CONCEALMENT OF INCOME OR FURNISHING OF WRONG PARTIC ULARS OF INCOME. SIMPLY ON THE BASIS OF LOWER G.P RATIO IN A PRE SUR VEY PERIOD PENALTY CANNOT BE IMPOSED U/S 271(1)(C) OF THE ACT. THE PER CENTAGE OF G.P EARNED BY AN ASSESSEE DEPENDS UPON VARIOUS FACTORS IN A YE AR AND GROSS PROFIT EARNED VARY FROM QUARTER TO QUARTER IN THE CASE OF ASSESSEE DEPENDING UPON THE SEASONALITY OF BUSINESS AND VARIOUS OTHER FACTORS. THEREFORE, BY SIMPLY COMPARING THE GROSS PROFIT IN TWO PERIODS TH E IMPOSITION OF PENALTY IS NOT VALID AS THERE HAS TO BE SPECIFIC FI NDING REGARDING CONCEALMENT OF INCOME OR FURNISHING OF WRONG PARTIC ULARS OF INCOME. THE IMPOSITION OF PENALTY ON THE BASIS OF ESTIMATION IS NOT PERMITTED IN THE EYES OF LAW AS HELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT, PATIALA VS. METAL PRODUCTS OF INDIA (1 50 ITR 715 P&H) AND FURTHER BY HONBLE PUNJAB & HARYANA HIGH COURT IN T HE CASE OF CIT VS. SANGRUR VANASPATI MILLS LTD.(303 ITR 53 P&H). SIMILAR FINDINGS HAS BEEN ITA NO.59/ASR/2016 A.Y. 2007-08 4 MADE BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL VS. CIT REPORTED IN (258 ITR 85 P&H). THE CRUX OF F INDINGS OF THE HONBLE PUNJAB & HARYAN HIGH COURT IN THE ABOVE NOTED CASES ARE REPRODUCED BELOW. B) (258 ITR85 (P&H): HARIGOPAL SINGH VS. CIT IN ORDER TO ATTRACT CLAUSE (C) OF SEC.271(1) OF THE I.T. ACT,1961. IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASS ESSEE OF THE PARTICULARS OF HIS INCOME OF FURNISHING OF INACCURA TE PARTICULARS OF SUCH INCOME. THE PROVISIONS OF SECTION 271(1) (C) O F THE ACT ARE NOT ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN. D) (150 ITR 715 (P&H),CIT, PATIALA VS. METAL PRODUC TS OF INDIA. HELD: THAT MERELY BECAUSE THE ADDITION HAD BEEN MAD E ON ESTIMATE UNDER THE PROVISO TO SEC.145(1) BY ADOPTING THE VIE W THAT THE GROSS PROFIT SHOWN IN THE BOOKS OF ACCOUNT WAS TOO LOW AS THERE WERE DEFECTS IN THE METHOD OF ACCOUNTING EMPLOYED DID NO T AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS FAILURE TO RE TURN THE CORRECT INCOME BY MEANS OF FRAUD OR GROSS OF WILLFUL NEGLEC T. E) (303 ITR 53 (P&H): CIT VS. SANGRUR VANASPATI M ILLS LTD. PENALTY- CONCEALMENT OF INCOME- ADDITIONS TO INCOME BASED ON ESTIMATE- NO EVIDENCE OF CONCEALMENT OF INCOME- PEN ALTY COULD NOT BE IMPOSED- I.T. ACT, 1961, S.271(1)( C) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND JU DICIAL PRECEDENTS, WE ALLOW THE APPEAL OF THE ASSESSEE. 9. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/11/2016. SD/- SD/- (SANJAY GARG) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:23/11/2016 /PK/PS COPY OF THE ORDER FORWARDED TO: ITA NO.59/ASR/2016 A.Y. 2007-08 5 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.