POWER SECURITY CORP PRIVATE LIMITED,CHENNAI V. ITO, CORP WARD 5(2), CHENNAI

ITA 1864/CHNY/2024

AI Insights

The case involves Power Security Corp Pvt Ltd, which faced penalties for non-filing of tax returns and for estimated income additions made by the Income Tax Officer (ITO) under sections 147 and 148 of the Income Tax Act. The company argued that it had ceased operations and lacked records to file returns, and that the penalties were unjust as the additions were estimated. The Tribunal considered the legal precedents that penalties for estimated additions are not applicable, leading to the decision to set aside the penalties for all four assessment years involved.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36956 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Other Referred Cases: Ganesh Das Khanna, Lakshmi IT Multipurpose Cooperative, CIT vs Perumalsamy, TVH Energy Resources P Ltd vs ACIT, Padam J Challani vs ACIT, Jatin Enterprises vs ACIT, S Gopal vs ITO, Super Tech Construction Company vs ACIT, Saurashtra Chemicals
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.ANITA
• Assessee Lawyers: Y. SRIDHAR; F
• Keywords: Set aside
• Section: 147; 148; 144; 250; 271(1)(c)

Judgement Text

"Page - 1 - of 8 आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री मनु क ुमार गिरर ,न्याययक सदस्य एवं माननीय श्री अममताभ शुक्ला, लेखा सदस्य क े समक्ष BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1863/Chny/2024, Assessment Year: 2013-14 आयकर अपील सं./ITA No.1851/Chny/2024, Assessment Year: 2014-15 आयकर अपील सं./ITA No.1864/Chny/2024, Assessment Year: 2015-16 आयकर अपील सं./ITA No.1865/Chny/2024, Assessment Year: 2016-17 Power Security Corp Pvt Ltd, New No.18, Old No.22, Lake Area, 1st Cross Street, Nungambakkam, Chennai – 600 034. Vs. Income Tax Officer, Corp Ward-5(2), Chennai. [PAN: AAGCP2703C] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr.Y.Sridhar, F.C.A. प्रत्यर्थी की ओर से / Revenue by : Ms.R.Anita, Addl. CIT सुनवाई की तारीख/Date of Hearing : 17.02.2025 घोषणा की तारीख /Date of Pronouncement : 26.03.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : S. No. Appeal Nos. AYs Appellant CIT(A) Order Details Respondent A B C D E F 1 ITA-1863 / Chny / 2024 2013-14 Power Security Corp Pvt Ltd, New No.18, Old No.22, Lake Area, 1st Cross Street, Nungambakkam, Chennai–34. [PAN: AAGCP2703C] DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 /1064270562(1) dated 22.04.2025 Income Tax Officer, Corp Ward-5(2), Chennai. 2 ITA-1851 / Chny / 2024 2014-15 DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 /1064270777(1) dated 22.04.2025 ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 2 - of 8 3 ITA-1864 / Chny / 2024 2015-16 DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 /1064271009(1) dated 22.04.2025 4 ITA-1865 / Chny / 2024 2016-17 DIN & Order No.ITBA / NFAC / S / 250 / 2024- 25 / 1064271181(1) dated 22.04.2025 2.0 It has been noted that there is a delay of 14 days in all the four appeals, in filing before the tribunal. In its affidavit the assesse has pleaded that the assesse is small organization providing security services and has no qualified accounting professionals to handle its tax matters as also that it has to travel frequently outstations for business needs. All these activities contributed to the delay which was neither willful nor wanton. The assesse submitted that there will not be case of any non- compliance now. We have considered the justification put forth by the assesse and we are satisfied with their adequacy. We are also conscious of the fact that no litigant gains by intentionally delaying its own matters. The Ld. DR did not pose any serious objections to the delay. Accordingly, we hereby condone the delay and proceed to adjudicate this appeal. 3.0 We have noted that imposition of penalty u/s 271(1)(c) is seminal to all the above four appeals and hence they are adjudicated by this common order for the purposes of convenience. The facts and figures for AY-2013-14 are being taken as lead year for adjudication. As ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 3 - of 8 admittedly facts are identical for all the years, and hence the decision for AY-2013-14 shall apply to AY-2014-15 to AY-2016-17 mutatis mutandis. 4.0 The Ld. Counsel for the assessee informed that the company under consideration is now liquidated and formaly closed. The Ld. AO was in receipt of information that the assessee had transacted amounts of money aggregating to Rs. 5,00,39,970/- on account of contractor payments, professional technical fees and rent. No return of income was filed and hence action u/s 147 r.w.s. 148 was taken. In response to notice of the Ld.AO the assessee had submitted that it has discontinued its operations and was not in the possession of adequate records to file return of income or any further information. Reference was also made to assessee’s contemporaneous adverse health issues. The Ld. AO recorded that department has initiated action for restoration of company’s name in the registrar of companies. The Ld. Counsel for the assessee submitted that the Ld.AO proceeded to draw his assumptions and presumptions and completed assessment u/s 144 r.w.s 147 estimating total income of the assessee at Rs. 35, 69, 538/-. The Ld. Counsel submitted that for want of adequate resources at its disposal, the impugned order was not agitated before Ld. First Appellate Authority. ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 4 - of 8 4.1 The Ld. Counsel submitted that the Ld. AO then proceeded to impose penalty u/s. 271(1)(c ) upon the assessee amounting to Rs. 11,02,988/- through his order dated 22.08.2023. In the impugned penalty order, the Ld. AO referred to assessee’s act of non-filing of return and the estimates made in the assessment order. While doing so, he rejected the arguments and submissions made by the assessee contesting imposition of penalty. The assessee contested the impugned penalty order before the Ld.CIT(A) who vide his order 22.04.2024, dismissed the appeal while observing non-compliance of the assessee to his statutory notices. 4.2 The Ld. Counsel for the assessee submitted that the action of the Ld. AO in imposing penalty u/s. 271(1)(c ) upon the assessee and of the Ld. CIT(A) in confirming the same is patently wrong and deserves to be set aside. The Ld. Counsel submitted that the addition made in the assessment which has attracted penalty is less than Rs.50 lakhs and hence no addition was liable in view of decision of Hon’ble Delhi High Court in the case of Ganesh Das Khanna. In the impugned case, it was held that notice u/s. 148 can be issued only if estimated undisclosed income surpasses Rs. 50 lakhs. Reliance was also placed upon the decision of Hon’ble Bangalore tribunal in the case of Lakshmi ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 5 - of 8 Multipurpose Cooperative in ITA 935 BANG 2024 holding that unless escaped income exceeds Rs. 50 Lakhs, no action is permissible beyond three years. Thus, the quantum addition per se was challenged by the assessee. It was argued that once the foundation being assessment order looses ground, the super structure of penalty automatically fails. The Ld. Counsel further argued that it is an undisputed fact on records that, in the present case the addition has been made by the Ld. AO on estimate basis. It was argued that it has been held in a catena of judgements that no penalty for any concealment u/s 271(1)(c ) is leviable in cases where estimated additions have been made. In support of its contentions, the Ld. Counsel placed reliance upon following judgements:- “….i) Super Tech Construction Company vs ACIT ITAT Mumbai in ITA no. 910/Mum/2023 dated 05/12/23 ii) Jurisdictional decision: In the case of CIT vs Perumalsamy reported in 150 ITR 600, Madras High Court; iii) M/s TVH Energy Resources P Ltd vs. ACIT ITAT Chennai in ITA No.2497/Chny/2017 dated 02/04/2018 iv) Padam J Challani vs ACIT ITAT in ITA no 602/ Chny/2023 dated 16/01/24 v) Jatin Enterprises vs. ACIT 19(2) in ITAT Mumbai Bench F' in ITA no.3885/2023 dated21/03/2024 vi) S Gopal vs. ITO ‘C' Bench, Chennai in ITA no.417 & 1818/2016 dated 13/1/2019….” ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 6 - of 8 The Ld. Counsel also placed reliance upon decision in the case of Saurashtra Chemicals holding that no penalty is leviable where additions were made on estimate basis. 4.3 The Ld. DR vehemently argued against grant of any relief to the assessee stating that assesssee is a non-filer and has willfully attempted to conceal its income. 5.0 We have heard rival submissions in the light of material available on records. It is an undisputed facts on records that the additions have been made by the Ld. AO on the basis of his estimates. The Ld. CIT(A) has also proceeded to confirm the addition on the basis of estimated conclusions, drawn by the Ld. AO. At the root of the matter the fact remains that the quantum addition is resting upon estimates drawn by the Ld. AO. It is settled principle of law that no concealment penalty can be imposed in in respect of cases where additions have been made on estimate basis. Concealment is an act involving willful mens rea to conceal an income. In the instant case the income deemed to have been concealed has been determined on the basis of guess or estimate of the Ld. AO. Irrespective as to the justification or reasonableness to ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 7 - of 8 draw such estimates, the assessee cannot be subjected to any concealment penalty for such estimates. Accordingly, we are of the considered view that the penalty u/s 271(1)(c ) imposed by the Ld. AO for AY-2013-14 vide order dated 22.08.2023 and confirmed by the Ld. CIT(A) cannot be sustained. We therefore set aside the order of the lower authorities and direct the Ld.AO to delete the impugned penalty u/s. 271(1)(c ) of Rs. 11,02,988/-. All the grounds of appeal raised by the assessee are therefore allowed. 6.0 Both the parties have admitted that the facts of the case as available in ITA No.1863/Chny/2024 for AY-2013-14 are identical to facts of the case in ITA Nos.1851, 1864 & 1865 supra. Accordingly, the decision in ITA No.1863 supra shall apply mutatis mutandis in ITA Nos ITA No.1851, 1864 & 1865 supra. Accordingly, all the grounds of appeal raised by the assessee in ITA Nos ITA No.1851, 1864 & 1865 supra.are therefore allowed. 7.0 In the result the appeal of the assessee vide ITA No.1863 for AY-2013-14, ITA No.1851/Chny/2024 for AY-2014-15, ITA No.1864/Chny/2024 for AY-2015-16 and ITA No.1865/Chny/2024 for AY- 2016-17 are allowed. ITA No.1851, 1863, 1864 & 1865/Chny/2024 Page - 8 - of 8 8.0 In the result, the appeals of the assessee are decided as under:- ITA Nos Assessment Year Result ITA No.1863/Chny/2024 2013-14 Allowed ITA No.1851/Chny/2024 2014-15 Allowed ITA No.1864/Chny/2024 2015-16 Allowed ITA No.1865/Chny/2024 2016-17 Allowed Order pronounced on 26th , March-2025 at Chennai Sd/- Sd/- (मनु क ुमार गिरि) (MANU KUMAR GIRI) न्याधयक सदस्य / Judicial Member (अगमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 26th , March-2025 KB/- आदेश की प्रधतधलधप अग्रेधषत/Copy to: 1. अपीलार्थी/Assessee: 2. प्रत्यर्थी/Revenue 3. आयकर आयुक्त/CIT - Madurai 4. धवभागीय प्रधतधनधि/DR 5. गार्ड फाईल/GF "