SMT. NIRMALABEN R. PATEL V. INCOME TAX OFFICER

TAXAP/179/2002

AI Insights

The case revolves around a dispute concerning a penalty imposed on the appellant-assessee, Smt. Nirmalaben R. Patel, by the Income Tax Department. Initially, the Assessing Officer estimated the income of the assessee for the Assessment Year 1987-88 and imposed a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) later deleted this penalty, which was subsequently reinstated by the Tribunal. The High Court, referencing a similar case (Manish Dhirajlal Mehta v. Asstt. CIT), concluded that the penalty was incorrectly imposed as the income addition was based on estimation, not on concrete evidence.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 767583 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 19-12-2014
• Assessment Year: misc
• Other Referred Cases: Manish Dhirajlal Mehta v. Asstt. CIT, Commissioner of Income Tax vs. Krishi Tyre Retreading and Rubber Industries, Naresh Chand Agarwal vs. Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S UDHIR M EHTA
• Assessee Lawyers: SWATI SOPARKAR
• Keywords: Assessment; Estimation; Income Tax; Penalty; Unaccounted income
• Section: 271(1)(c)

Judgement Text

"O/TAXAP/179/2002 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 179 of 2002 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER =========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ SMT. NIRMALABEN R. PATEL....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 19/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) Page 1 of 6 O/TAXAP/179/2002 JUDGMENT 1. By way of this appeal, the appellant- assessee has challenged the order dated 5.12.2001 passed by the Income Tax Appellate Tribunal [ for short “the Tribunal”] in ITA No.1637/Ahd/1996, whereby the appeal preferred by the revenue was allowed by the Tribunal. 2. The short facts of this case are that the appellant-assessee had filed its return for the Assessment Year 1987-88, declared total income of Rs.16,800/-. After scrutiny, the Assessing Officer passed his order and assessed the income of the assessee at Rs.1,75,000/- and thereafter, the penalty order under Section 271(1)(c) came to be passed on 23.05.1995. Against the order of the penalty, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) vide order dated 20.2.1996 allowed the said appeal and deleted the penalty imposed on the assessee. Being aggrieved by the order of the CIT(A), the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 05.12.2001 allowed the appeal. Hence, this appeal is filed at the instance of the assessee. 3. While admitting this appeal on 26.6.2002, the Court had formulated the following Page 2 of 6 O/TAXAP/179/2002 JUDGMENT substantial question of law:- “Whether in the facts and circumstances of the case and in light of the provisions of Section 271(1)(c) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal was right in law in confirming the penalty of Rs.65,000/- made by the Assessing Officer, reversing the order of the Commissioner of Income Tax (Appeals) ? ” 4. Learned advocate for the appellant- assessee has submitted that the question of law involved in this appeal is already concluded by this Court in Tax Appeal No.461 of 2000 and other allied matter in the case of Manish Dhirajlal Mehta v. Asstt. CIT. 5. Learned advocate for the respondent- revenue is not in a position to distinguish the proposition of law laid down in the decision relied upon by learned advocate for the appellant-assessee 6. We have heard learned advocates appearing for both the parties and perused the material on record and find that the Assessing Officer had passed the assessment order on the basis of estimation. We have also perused the Page 3 of 6 O/TAXAP/179/2002 JUDGMENT decision relied upon by learned advocate for the appellant-assessee and find that the question of law involved in this appeal is already concluded by this Court in favour of the assessee and against the revenue. Paragraph Nos. 4.1 and 6.1 of the above decision read as under:- 4.1 Learned advocate for the appellant has submitted that the Tribunal has erred in upholding the penalty levied u/s 271(1)(c) of the Act by the respondent in respect of alleged unaccounted gross profit earned out of alleged unaccounted sale of silver ornaments. In support of his submission, reliance has been placed on a decision reported in the case of Commissioner of Income Tax vs. Krishi Tyre retreading and Rubber Industries reported in [2014] 360 ITR 580 and Naresh Chand Agarwal vs. Commissioner of Income-Tax reported in [2013] 357 ITR 514. 6.1. So far as the issue involved in appeals no. 833 to 836 of 2005 is concerned, in view of the decisions cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly Page 4 of 6 O/TAXAP/179/2002 JUDGMENT imposed under Section 271(1)(c) of the Act. In the case of Krishi Tyre Retreading and Rubber Industries (supra), it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. We therefore answer the issue involved in appeals no. 833 to 836 of 2005 in the negative and in favour of the assessee. 7. Since the issues are already concluded, no elaborate reasons is required to be assigned by this Court. In that view of the matter, we are of the considered opinion that the present appeal deserves to be allowed and the same is accordingly allowed. The question of law raised in this appeal is answered in favour of the assessee and against the revenue. Accordingly, we hold that the Tribunal was not right in law in confirming the penalty of Rs.65,000/- made by the Assessing Officer and in reversing the order of the Commissioner of Income Tax (Appeals). Page 5 of 6 O/TAXAP/179/2002 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) pawan Page 6 of 6 "