M/S PARV SALES AND SERVICE,RANCHI vs. ITO,WARD-2(2), RANCHI

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ITA 171/RAN/2019Status: DisposedITAT Ranchi14 July 2020AY 2015-163 pages
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What did the Tribunal hold?

The Tribunal reduced the estimated gross profit rate from 25% to 9% for the quantum appeal, stating it was not guided by comparable cases. For the penalty appeal, the Tribunal held that since the quantum addition was an estimation, it did not automatically imply furnishing of inaccurate particulars.

What were the facts?

The assessee, a wholesaler of soft drinks, declared a gross profit rate of 6.38%. The Assessing Officer increased this to 50%, which was restricted to 25% in lower appellate proceedings. The assessee appealed both the quantum addition and a penalty.

What were the issues?

Whether the estimation of gross profit rate was justified and whether penalty for furnishing inaccurate particulars is leviable when the addition is based on estimation.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 271(1)(c)

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Income Tax Appellate Tribunal, RANCHI ‘E-COURT’AT KOLKATA

Before: Shri S.S, Godara, JM & Dr. A.L. Saini, AM

आदेश /O R D E R Per Bench(Oral): These assessee’s two appeals for assessment year 2015-16 arise against the Commissioner of Income-tax (Appeals), Jharkhand’s separate orders dated 17.12.2018 & 20.12.2018 passed in case No.CIT(A),Ranchi/10174/2017-18 & CIT(A),Ranchi/10042/2018-19 involving proceedings u/s 143(3) & 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’); respectively. Heard both the parties. Case files perused.

2.

Coming to the assessee’s quantum appeal learned authorized representative is very fair at the outset in not pressing for all other grounds except that of estimation of gross profit rate. He submits that this assessee is a wholesaler in trading of soft drinks and other allied products. It had declared gross &171/Ran/2019 M/s. Parv Sales and Services Assessment Year:2015-16 Page 2 profits @6.38% which has been increased to 50% during the course of assessment and restricted to 25% in the lower appellate proceedings.

3.

Learned departmental representative fails to dispute the clinching aspect that the impugned estimation has not been guided by any contemporary factors such as similar line of business by quoting relevant comparable cases. The fact also remains that the assessee has not been able to explain its profit rate by way of cogent evidence. We keep in mind all these peculiar facts and deem it appropriate to restrict the impugned gross profit rate from 25% to 9 % with a rider that the same shall not be treated as precedent in any other assessment year. The Assessing Officer shall frame consequential computation including that of interest as per law. This quantum appeal is partly allowed.

4.

Coming to 271(1)(c) of the Act, we are of the view that since the quantum dispute pertains to estimation only, it cannot be held that the taxpayer had furnished inaccurate particulars. We make it clear that hon’ble apex court has settled the law long back in Reliance PetroProducts’s case 322 ITR 158(SC) that quantum and penalty proceedings are parallel wherein each and every disallowance /addition made in the course of former does not ipso facto attract the latter penal provision. We therefore accept the assessee’s instant penalty appeal ITA No.171/Ran/2019.

5.

The assessee former quantum appeal is partly allowed and penalty appeal is allowed. Ordered accordingly.

Order pronounced in open court on 14/07/2020.

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