SHRI SIDDHARTH GOEL,AJMER vs. ACIT, CIRCLE-2, AJMER

The hearing of the matter was scheduled through Video Conferencing in view of ongoing COVID-19 pandemic situation in the country.

During the course of hearing, the ld. AR submitted that the assessee has filed his return of income declaring total income of Rs. 16,48,450/- u/s 139(1) on 27.11.2009. The matter was selected for scrutiny and order u/s 143(3) was passed wherein the AO estimated rental income in respect of Chitrakoot event place at Rs. 3,50,000/-. Being aggrieved, the assessee Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer carried the matter in appeal before the ld. CIT(A) who has sustained the addition to the extent of Rs. 2,00,000/- and in respect of which, the Assessing Officer has levied the penalty u/s 271(1)(c) amounting to Rs. 68,000/-. It was submitted that the levy of penalty u/s 271(1)(c) is not mandatory but the law requires that where the AO in the course of any proceeding is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay penalty u/s 271(1)(c). It was submitted that before the levy of penalty, it is necessary that the assessee offers an explanation as per his bonafide belief and fails to prove such bonafide belief to the Assessing Officer. In the instant case, the estimation of income by AO as well as sustenance thereof by the ld. CIT(A) is direct proof of the facts of bonafide belief and therefore, there is no concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee. It was submitted that the assessee has maintained complete records on day to day basis and no defects therein were found except that complete addresses of persons from whom rent received not mentioned in receipts issued. However, complete facts and reasons were submitted to AO stating that to run the fast food restaurant, the place is used and occasionally given on rentals for small parties. It was merely on past history and as per directions of the Tribunal for A.Y 2010-11, the additions were made with no other positive findings for concealment or furnishing of inaccurate particulars of income. It was submitted that before levying penalty u/s 271(1)(c), the AO has to prove that assessee has consciously made concealment of income or furnished inaccurate particulars of income. It was further submitted that under the similar facts and circumstances, the Tribunal in assessee’s own case for A.Y 2011-12, A.Y 2012-13 and A.Y 2014-15 has deleted the penalty as levied u/s 271(1)(c) and the matter is thus squarely covered by the said decision and the penalty so levied may thus be deleted. Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer 4. Per contra, the ld. DR submitted that the assessment in this case was reopened u/s 148 pursuant to information gathered during the subsequent assessment year i.e. A.Y 2010-11 and enquiries made at that time revealed that said party plot was booked for marriage, birthday parties, engagements, organizing Garba, exhibition for business products, etc for around 6 months in a year and the assessee has not offered any income in his return of income. It was accordingly submitted that looking at the past history of the assessee and the fact that the assessee was habitual of not disclosing his income correctly from the event places and had also had failed to produce details and evidences of income and expenditure of the event places, no alternate was left with the Assessing Officer but to estimate the income of the assessee from the event places. It was accordingly submitted that the rental income has been estimated taken into consideration various factors including gross receipt declared by the assessee before the Commercial Tax Department and the findings of the ld. CIT(A) as well as Tribunal. It was accordingly submitted that it is not correct to say that it is a case of mere estimation of income by the Assessing Officer. It was accordingly submitted that there is no infirmity in the order of Assessing Officer where he has held that the assessee has furnished inaccurate particulars of income to the tune of Rs. 2,00,000/- and it is fit case for levy of penalty u/s 271(1)(c). Regarding other contention advanced by the ld. AR regarding bonafide belief, it was submitted that similar contentions were raised before the ld. CIT(A) and after considering the same, he has held that they cannot be held as bona-fide belief for not disclosing the correct rental income. Further, our reference was drawn to the remand report submitted by the Assessing Officer during the appellate proceedings and content thereof read as under:- “In this context it is submitted that during the course of assessment proceedings the assessee stated that income from chitrakoot place is nil being receipt were Rs. 1,46,500/- and expenditure was of Rs. 3 Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer 1,46,900/- but assessee failed to produce any kind of receipt book for money received from the parties and failed to spell out the address of 14 persons from whom rent received and also failed to furnish the address of the persons to whom payment was made for expenses, leaving no option but to estimate the income. Further, before finalizing the penalty proceedings a show cause notice dated 19.03.2019 was also issued but no compliance was made by the assessee in this regard. Now, regarding remand report the opportunity was again provided to the assessee vide letter dated 03.09.2019 but again no compliance was made by the assessee. Thus, there is no merit in the contention of the assessee that, the fact that the addition was made on estimate basis by the then AO and that a part of estimation was upheld by CIT(A), it is a proof of bonafide belief. The estimation of income was made by AO. Since there was no other choice left with him and confirmation of such addition in appeal proves that there had been concealment of income at least to that extent. Therefore, the penalty was rightly levied on the assessee.”

We have heard the rival submissions and perused the material available on record. The undisputed facts which are emerging from records are that in the original return of income filed u/s 139(1), the assessee has disclosed gross receipts from chitrakoot place at Rs. 1,46,500/- and has claimed expenditure of Rs. 1,46,900/- against the said receipts. Thereafter, the matter was reopened based on subsequent year findings and income from chitrakoot place was estimated at Rs 3,50,000 by the Assessing officer and which has been sustained to the extent of Rs 2,00,000/- by the ld CIT(A). On the income so sustained by the ld CIT(A) and which has attained finality, the Assessing officer has levied penalty u/s 271(1)(c) of the Act. Similar issue of levy of penalty on estimated income has been dealt by the Bench in 4 Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer assessee’s own case (ITA No. 744, 745& 1097/JP/2019 dated 13.01.2020) and the relevant findings read as under: “6. We have heard the rival contentions and purused the material available on record. We find that for A.Y 2011-12, the rental income has been determined by the Assessing officer not basis any material or direct evidence found against the assessee but basis the hypothesis that the plot ought to have been let-out at least for the number of occasions on which the Mahurats are there as per the Panchang i.e. 28 during the respective year. Therefore, for the remaining 11 Mahurats other than 17 mahurats for which assessee has already offered rental income, basis the average rate of booking of Rs 15,000/-, rental income was estimated at Rs.1,65,000/-. Further, rental for small parties, exhibition and garba party were again estimated by the Assessing officer. Similar findings are recorded for other two assessment years. The said determination of income could form the basis of addition in the quantum proceedings, however for the purposes of levy of penalty, mere addition made in the assessment order could not form the basis of levy of penalty. It is a settled legal proposition that assessment and penalty proceedings are separate proceedings and therefore, mere addition made in the assessment order is not sufficient for levy of penalty. Further, we find that against said estimation of income done by the Assessing officer, the ld CIT(A) has reduced the quantum of estimation of rental income. Therefore, where there is no positive evidence or material beyond doubt of assessee having concealed the particulars of income or furnishing inaccurate particulars of income, mere addition in the quantum proceedings is not sufficient to hold assessee liable for levy of penalty. In this regard, useful 5 ITA No. 118/JP/2020 Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer reference can be drawn to the decision of Hon’ble Rajasthan High Court in case of Mahendra Singh Kedla (DB Appeal No. 174/2010 dated 19.03.2012) wherein it was held as under:

The appellate authority as well as the appellate Tribunal both considered the matter in detail and by speaking order set aside the penalty levied by Assessing Officer, in the facts and circumstances of the present case. The relevant portion of Para 7 of order of the Tribunal is reproduced as under:- Para 7. ..... ....... ..... ..... ...... ......The enquiry conducted by the AO may lead to arrive at the findings as to whether the particulars disclosed are truthful or false or not proved to be satisfactory. In the first case it would be a positive case of no concealment, in second case it would be a positive case of concealment and in third case benefit of doubt will go in favour of the assessee. The case of the assessee falls within third category where the alleged fact of introduction of capital is found to be not proved satisfactorily. Therefore, it is not a case of positive concealment and benefit of doubt goes in favour of the assessee. There is no dispute that trading addition was made on the basis of estimation because the results shown by the assessee was not found satisfactory by the AO. Where an estimated addition was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee to the extent of amount in difference shown by the assessee and estimated by the department depends upon the facts and circumstances of the case. ..... ..... ..... .... ..... ..... ..... ....... Under these circumstances when in the present case there was no positive evidence beyond doubt regarding estimated trading addition that the amount in difference between the result shown by the assessee and that estimated by the AO was resultant of concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee, penalty under section 271(1)(c) of the Act cannot be levied. The AO had 6 Shri Siddharth Goel, Ajmer Vs. ACIT, Ajmer rejected the books of account and estimated the trading addition on the basis that the assessee had not maintained site-wise account, no head-wise details of claimed purchases were furnished, no separate head of expenses was maintained, work in progress was not declared, some wages were shown outstanding without complete details of creditors, stock register was not maintained and misc. expenses on water transportation etc. were not verifiable and purchase vouchers of sand, steel, bajri etc. were self made etc. Assessee explained reasons for the above defects which were not accepted by the AO as not found satisfactory. The AO accordingly made estimation. The circumstances suggest that it may be just and proper case of making estimated trading addition but an inference therefrom cannot be drawn beyond doubt especially keeping in mind the nature of work in not maintaining those books and details supported with proper vouchers etc. that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee to attract the penal provisions. In view of above discussion and keeping in mind the fact and circumstances of the present case, we are of the view that the ld. CIT(A) was justified in deleting the penalty in absence of positive evidence with the department that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the addition in question. The first appellate order on the isuse is thus upheld.

The above finding of the Tribunal makes it clear that additions made by the Assessing Officer were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly levied by the Assessing Officer. The basis for levying penalty in the present case is only estimation, which is purely a question of fact and there is a concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both.”