The Income Tax Officer, Ward 1(7) V. Associated Engineering Corporation

TAXAP/1673/2007

AI Insights

The case involves multiple tax appeals by the Income Tax Officer against the Associated Engineering Corporation, concerning the penalties imposed for alleged concealment of income and claiming bogus expenditures. The core issue was whether the penalties under Section 271(1)(c) of the Income Tax Act were justifiably imposed when the income was assessed on an estimated basis. The Income Tax Appellate Tribunal had earlier deleted these penalties, a decision which the Revenue challenged in the High Court. The High Court, referencing previous judgments and the specifics of the case, upheld the Tribunal's decision, emphasizing that the assessments were based on estimates and not on concrete findings of concealment or incorrect claims.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 798690 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 23-12-2014
• Assessment Year: misc
• Other Referred Cases: 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
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S N DIVATIA
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Bogus Expenditure; Concealment of income; Estimate basis; Income Tax; Penalty
• Section: 271(1)(c)

Judgement Text

"O/TAXAP/1663/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1663 of 2007 With TAX APPEAL NO. 1672 of 2007 TO TAX APPEAL NO. 1673 of 2007 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 ? ================================================================ THE INCOME TAX OFFICER, WARD 1(7)....Appellant(s) Versus ASSOCIATED ENGINEERING CORPORATION....Opponent(s) ================================================================ Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 MR SN DIVATIA, ADVOCATE for the Opponent(s) No. 1 ================================================================ Page 1 of 6 O/TAXAP/1663/2007 JUDGMENT CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 23/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of these appeals, the appellant has challenged the judgment and order dated 28.2.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’ in ITA No. 425/Ahd/2001, in ITA No. 429/Ahd/2001 and ITA No. 427/Ahd/2001. 2. While admitting these appeals on 14.12.2007, this Court has framed the following substantial question of law: “Whether, on the facts and in the circumstances of the case and in law, the Income Tax Appellate Tribunal is right in deleting penalty imposed under Section 271(1)(c) of the Income Tax Act on the ground that income is determined on estimate basis ? 3. The facts of Tax Appeal No. 1663/2007 are are that the return of income was filed on 30.9.1986 for assessment year 1983-1984 on 16.10.1982 declaring total income of Rs. 7,36,941/-. In Tax Appeal No. 1672/2007, the Page 2 of 6 O/TAXAP/1663/2007 JUDGMENT return of income was filed on 16.10.1982 for assessment year 1982-83 showing total income of Rs. 78,254/-, and in Tax Appeal No. 1673/2007, the return of income was filed on 30.9.1986 for assessment year 1984-85 showing total income of Rs. 35,091/-. Thereafter considering the material on record, the assessment orders came to be passed in all the matters. Against the said assessment orders, the assessee has preferred appeals before the CIT(A) which came to be dismissed. Against the order of CIT(A), the assessee preferred appeals before the ITAT which came to be allowed. Being aggrieved by the order of ITAT, the Revenue has preferred present Tax Appeals before this Court. 4. We have heard the learned advocates appearing for the respective parties and considered the submissions. The identical issue came up for consideration before this Court in Tax Appeal No. 461/2000 which came to be decided by this Court on 5.11.2014. This court has observed in para 4.1, 6 and 6.1, as under: 4.1 Learned advocate for the appellant also submitted that the Tribunal has erred in upholding the penalty levied u/s 271(1)(c ) of the Act by the Page 3 of 6 O/TAXAP/1663/2007 JUDGMENT 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. Heard both the parties and gone through the material available on record. In the instant case, we are of the opinion that assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. Therefore, the issues raised in appeals no. 461 to 464 of 2000 are required to be answered in the affirmative and against the assessee. 6.1 So far as the issue involved in appeals no. 833 to 836 of 2005 is concerned, in view of the decisions Page 4 of 6 O/TAXAP/1663/2007 JUDGMENT cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly 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. 5. The Tribunal in para-16 has observed as under: “16. In our opinion, it is a simple case of estimating the income of the assessee at 30% without going into the individual claim of expenditure made by the assessee. It may be that there is no evidence with the assesee to substantiate its claim but since that has not been the basis of assessment as finally made,it would not be proper to hold the assessee as guilty of concealment of income and was of claiming bogus expenditure,which has not been the basis of the assessment. Page 5 of 6 O/TAXAP/1663/2007 JUDGMENT It is a bare simple case of estimate of income of the assessee at 30% and has been so understood by the Revenue Authorities, viz. When the CIT(A) states “it is futile to deal individually whether payments made to Mr. Pathan are genuine or what should be overhead expenses and secret commission.” The levy of penalty, in these circumstances, in our opinion, is not justified, they are accordingly deleted.” 6. In that view of the matter, the question is answered in favour of the Revenue and against the assessee. It is held that the Income Tax Appellate Tribunal is right in deleting penalty imposed under Section 271(1) (c) of the Income Tax Act on the ground that income is determined on estimate basis. All these Tax Appeals are dismissed. (K.S.JHAVERI, J.) (K.J.THAKER, J) mandora Page 6 of 6 "