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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-5, Ahmedabad, dated 27/02/2019 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-2014.
The assessee has raised the following grounds of appeal:
1. The order passed by the Ld.CIT(A) is against the law, equity and justice.
2. The Ld.CIT has erred in law and/or on facts in upholding order of Ld.AO for levy of penalty for concealment of income, while Ld.AO had initiated penalty proceedings for furnishing of inaccurate particulars of income during assessment proceedings.
3. The Ldd.CIT(A) has erred in law and/or facts in upholding order of Ld.AO of levy penalty of Rs.15,79,620/- u/s. 271(1)(c) of the Act.
4. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.
3. The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the penalty levied u/s 271(1)(c) of the Act for Rs. 15,79,620/- on account of furnishing of inaccurate particulars of income.
The facts in brief are that the assessee in the present case is an individual and declared his income under the head salary, capital gain and other sources. The assessee in his return of income has declared income of Rs. 20,07,255/- under the head short term capital gain. The Assessee has worked out the impugned amount of short term in capital gain after claiming the expenses incurred on the purchase of sand, bricks and matipuran expenses aggregating to Rs.51,12,040/- 4.1 However, the AO during the assessment proceedings found that these expenses claimed by the assessee are bogus in nature and therefore the same was disallowed and added to the total income of the assessee in assessment framed u/s 143(3) of the Act vide order dated 28/03/2016 . The AO also initiated the penalty proceedings u/s. 271(1)(c) of the Act, on the account of furnishing inaccurate particulars of income. The AO subsequently levied the penalty u/s 271(1)(c) of the Act on the charges that the assessee has furnished inaccurate particulars of income by claiming the bogus expenses as discussed above. The penalty was levied for Rs.15,79,620/- being 100% of amount of tax sought to be evaded.
Aggrieved assessee preferred an appeal to the Ld. CIT(A), who confirmed the order of the AO.
Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
The Ld. AR before us filed a paper book running from pages 1 to 63 and submitted that the ITAT in the quantum proceedings restricted the addition to the tune of 15% of the expenses disallowed by the authorities below. In other words the disallowance was made on adhoc and estimated basis for Rs. 766806/- being 15% of Rs. 51,12,040/- only. Thus it was contended by the Ld. AR that the addition was made on estimated basis, therefore the penalty cannot be levied under the provision of section 271(1)(c) of the Act. The Ld. AR in support of his contention relied on the judgment of Hon’ble Gujarat High Court in case of Ramesh chandra Vs ACIT in tax appeal no. 800 of 2008 vide order dated 10/08/2016. The relevant extract of the order is reproduced below: 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 imposed under Section 271(l)(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(l)(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."
7.1 The Ld. AR also relied on the order of this Tribunal in case of DCIT Vs Maradia Copper Extrusion (P) Ltd. reported in 88 taxmann.com 748. The relevant extract of the order is reproduced as under:
In the light of the above, if we examine the facts of the present case, then it would reveal that as far as addition with respect to the suppressed profit is concerned, it is an estimated addition which was significantly reduced by the Tribunal. This issue is a debatable issue as the addition made by the Assessing Officer was deleted by the learned Commissioner oflncome-tax (Appeals) and when the Tribunal restored these additions partly then the appeal of the assessee has been admitted by the hon'blc High Court suggesting the question of law is involved. In such type of issue it cannot be said that the explanation submitted by the assessee in support of its addition as false, proving the fact that the assessee has concealed its income. Similarly, the assessee has given explanation with regard to the issue of bogus purchases. Us explanation was accepted by the learned Commissioner of Income-tax (Appeals) in the quantum appeal but such conclusions of the learned Commissioner of Income-lax (Appeals) did not meet the approval of the Tribunal. But again
the hon'ble High Court has admitted the question on this aspect also. Therefore, it is also debatable issue. The learned Commissioner of Income-tax (Appeals) has considered both these aspects in the impugned order and deleted the penalty. After going through the order of the learned Commissioner of Income-tax (Appeals), we do not see any reason to interfere in it. According!), the appeal of the Revenue is dismissed.
In the result the appeal of the Revenue is dismissed.
On the other hand the Ld. DR contended that the authorities below have not made any disallowance on estimated basis. As such all the expenses were disallowed by the authorities below treating them as bogus in nature. Thus Ld. DR was of the view that the penalty has not been levied merely on the addition which were made on estimated basis. The Ld. DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was no addition made by the authorities below on estimated basis. In fact all the expenses claimed by the assessee against impugned short term capital gain were treated as bogus and therefore 100% expenses were disallowed. However, the ITAT in the own case of the assessee in quantum proceedings in has restricted the disallowance to the tune of 15% amounting to Rs. 7,66,806/- only. The relevant extract of the order is reproduced below:
We therefore, in the given facts of the case, and being fair to both the parties, are of the considered view that sustaining of disallowance @ 15% of the alleged amount of Rs.51,12,040/-will meet the end of justice. We accordingly, order so and confirm the disallowance of expenses at Rs.7,66,806/- partly allow assessee's appeal.
9.1 From the above findings of the Tribunal there remains no ambiguity that addition were reduced by the ITAT to extent of 15% which is purely on estimated basis and balance amount to the tune of 85% has been treated as genuine. . Thus it can be inferred that there was no deliberate act on the part of the assessee to furnish inaccurate particulars of income.
9.2 Therefore, in our considered view there cannot be any penalty in the hands of the assessee. For this preposition we draw strength from the judgment of Hon’ble Gujarat High Court in the case of Ramesh Chandra A Shah (Supra). We also draw support and guidance from the order of this Tribunal in the case of Maradia Copper Extrusion(P) Ltd.(Supra).
9.3 In view of above, and after considering the fact in totality we are of the view that the assessee cannot be visited with the penalty u/s 271(1)(c) of the Act as the penalty was levied on the income determined on estimated basis. Hence the ground of appeal of the assessee is allowed.
In the result, the appeal of the assesse is allowed.
Order pronounced in the Court on 17/08/2021 at Ahmedabad.