Nirmal Kumar Jain, Delhi V. ITO, New Delhi

ITA 6696/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2957 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 02-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: B : NEW DELHI BEFORE SHRI R.S. SYAL, AM & SHRI A.T. VARKEY, JM ITA NOS.6696 & 6645/DEL/2014 ASSESSMENT YEAR : 2010-11 NIRMAL KUMAR JAIN, 195/2, PUNJA SHARIF PREM GALI, KASHMERE GATE, DELHI. PAN: AAEPJ6164C VS. ITO, WARD-35(5), NEW DELHI. ASSESSEE BY : SHRI REPUDAMAN THAKUR, CA DEPTT. BY : SHRI SAMEER SHARMA, SR. DR DATE OF HEARING : 02.03.2016 DATE OF PRONOUNCEMENT : 02.03.2016 ORDER PER R.S. SYAL, AM: THESE TWO APPEALS BY ASSESSEE ARISING OUT OF THE OR DERS CONFIRMING PENALTIES U/S 271B AND SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) RELATE TO THE ASSESSMENT YEAR 2010-11. SINCE BOTH THE APP EALS ARE ITA NOS.6696 & 6645/DEL/2014 2 BASED ON COMMON FACTS, WE ARE, THEREFORE, PROCEEDIN G TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED RETURN DECLARING TOTAL INCOME OF RS.2,05,267/ - INCLUSIVE OF SALARY AND INTEREST FROM TWO PARTNERSHIP FIRMS. THE AO GOT AIR INFORMATION THAT THE ASSESSEE HAD DEPOSITED A S UM OF RS.1,23,71,885/- IN TWO SAVINGS BANK ACCOUNTS MAINT AINED WITH THE ICICI BANK. DURING THE COURSE OF INVESTIGATION , IT WAS FOUND THAT THE ASSESSEE WAS HAVING SUCH FOUR BANK A CCOUNTS IN WHICH DEPOSITS WERE MADE. INFORMATION WAS CALLED FO R U/S 133(6) FROM THESE FOUR BANKS, WHICH DIVULGED THAT T HERE WERE CASH DEPOSITS TO THE TUNE OF RS.1.26 CRORE AND OTHE R CREDITS AMOUNTING TO RS.16.90 LAC, TOTALING TO RS.1.43 CROR E. ON BEING CALLED UPON TO PRODUCE THE BOOKS OF ACCOUNT, THE AS SESSEE STATED THAT NO SUCH BOOKS WERE MAINTAINED. IN THIS BACKDROP OF THE FACTS, THE AO ESTIMATED THE ASSESSEES SALES OU TSIDE BOOKS ITA NOS.6696 & 6645/DEL/2014 3 OF ACCOUNT AT RS.1.50 CRORE. BY APPLYING ESTIMATED PROFIT RATE OF 5% ON SUCH SALES, HE MADE AN ADDITION OF RS.7.50 LAC. THAT IS HOW THIS SOLITARY ADDITION OF RS.7.50 LAC WAS MA DE. THEREAFTER, THE AO IMPOSED PENALTY U/S 271B AND ALS O U/S 271(1)(C) OF THE ACT, WHICH CAME TO BE COUNTENANCED IN THE FIRST APPEAL. BOTH THE PENALTIES ARE UNDER CHALLEN GE BEFORE US. 3. IN SO FAR AS THE PENALTY U/S 271B IS CONCERNED, IT IS NOTICED THAT THE AO HAS RECORDED A CATEGORICAL FIND ING ON PAGE 2 OF THE ASSESSMENT ORDER THAT NO BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE. UNDER SUCH CIRCUMSTANCE S, A QUESTION ARISES AS TO WHETHER ANY PENALTY CAN BE IM POSED U/S 271B FOR NOT GETTING THE BOOKS OF ACCOUNT AUDITED. THE HONBLE GAUHATI HIGH COURT IN SURAJ MAL PARASURAM TODI VS. CIT (1996) 222 ITR 691 (GAU.) , HAS HELD THAT WHERE NO BOOKS OF ACCOUNT ARE MAINTAINED, PENALTY SHOULD BE IMPOSE D FOR NON- MAINTENANCE OF BOOKS OF ACCOUNT U/S 271A AND NO PEN ALTY CAN BE IMPOSED U/S 271B FOR VIOLATION OF SECTION 44AB R EQUIRING ITA NOS.6696 & 6645/DEL/2014 4 AUDIT OF ACCOUNTS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN CIT VS. BISAULI TRACTORS (2008) 299 ITR 219 (ALL ). THE HONBLE ALLAHABAD HIGH COURT REITERATED THE SIMILAR VIEW IN CIT AND ANR. VS. S.K. GUPTA AND CO. (2010) 322 ITR 86 (ALL) BY HOLDING THAT REQUIREMENT OF GETTING THE BOOKS OF ACCOUNT AUDITED CAN ARISE ONLY WHERE T HE BOOKS OF ACCOUNT ARE MAINTAINED. IN THE ABSENCE OF THE MAIN TENANCE OF BOOKS OF ACCOUNT, THERE CAN BE NO PENALTY U/S 271B OF THE ACT. IN VIEW OF THE FOREGOING LEGAL POSITION EMANATING F ROM THE JUDGMENTS OF THE TWO HONBLE HIGH COURTS, WE ARE CO NVINCED THAT PENALTY U/S 271B OUGHT NOT TO HAVE BEEN LEVIED BECAUSE THE ASSESSEE ADMITTEDLY DID NOT MAINTAIN ANY BOOKS OF ACCOUNT AS HAS BEEN RECORDED IN THE ASSESSMENT ORDER ITSELF . WE, THEREFORE, ORDER FOR THE DELETION OF PENALTY. 4. AS REGARDS THE IMPOSITION OF PENALTY U/S 271(1)( C) OF THE ACT ON THE ADDITION OF RS.7.50 LAC, WE FIND THAT TH IS ADDITION HAS RESULTED ON ESTIMATION OF INCOME AT 5% ON ESTIM ATED SALES ITA NOS.6696 & 6645/DEL/2014 5 OF RS.1.50 CRORE. EXCEPT THAT THERE IS NO OTHER BAS IS FOR IMPOSITION OF PENALTY. THE HONBLE DELHI HIGH COUR T IN CIT VS. AERO TRADERS P. LTD. (2010) 322 ITR 316 (DEL) HAS UPHELD THE VIEW TAKEN BY THE TRIBUNAL IN DELETING PENALTY U/S 271(1)(C) WHICH WAS IMPOSED ON THE BASIS OF ADDITIO N MADE BY THE AO ON ESTIMATED PROFIT. SIMILAR VIEW HAS BEEN TAKEN IN A SERIES OF JUDGMENTS INCLUDING THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS. DHILLON RICE MILLS (2002) 256 ITR 447 (P&H). IN THIS CASE ALSO, THE HONBLE PUNJAB & HARYANA HI GH COURT APPROVED THE VIEW TAKEN BY THE TRIBUNAL IN DE LETING THE PENALTY U/S 271(1)(C) WHICH WAS BASED ON AN ESTIMAT E OF INCOME MADE BY THE AO. IN VIEW OF THE FOREGOING DE CISIONS, IT IS CLEAR THAT THE PENALTY SO CONFIRMED IN THE INSTA NT CASE CANNOT BE SUSTAINED BECAUSE IT WAS IMPOSED BY THE AO ON TH E ESTIMATE OF INCOME MADE BY HIM. WE, THEREFORE, ORDER FOR TH E DELETION OF PENALTY. ITA NOS.6696 & 6645/DEL/2014 6 5. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.03.2016. SD/- SD/- [A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 02 ND MARCH, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.