Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, JAIPUR BENCHES “A”, JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 1266/JP/2019
ORDER PER: SANDEEP GOSAIN, J.M. This is an appeal filed by the assessee against the order of ld. CIT(A)- 1, Jaipur dated 02/09/2019 for the A.Y. 2008-09, wherein following grounds have been taken.
1. That on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in not accepting plea of the appellant that the notice issued by the assessing officer u/s 271(1)(c) of the I.T. Act, 1961 is wrong and bad in law inasmuch as it did not specify in which limb of Sec. 271(1)(c) of the Income Tax Act, 1961 the penalty proceedings has been initiated i.e. whether for concealment of income or furnishing of inaccurate particulars of income.
2 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT
2. That without prejudice to the ground No. (1) above on the facts and in the circumstances of the case the ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 1065919 imposed by the ld. Assessing Officer under section 271(1)(c) of the I.T. Act, 1961.
3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal
or to withdraw any of them.”
2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
3. Brief facts of the case are that the assessee is an individual and engaged in business of trading of gem stones. The assessee filed his return of income declaring total income of Rs. 30,51,620/- on 27-09-2008 which was processed u/s 143(1) of the Income Tax Act, 1961 (in short, the Act) on 28-07-2009. The A.O. completed the assessment u/s 147/143 (3) of the Act on 30/09/2015 holding purchases made by assessee recorded in books of accounts amounting to Rs. 2,29,97,192/- as bogus/not verifiable and disallowed 25% which was added in total income of assessee and also initiated penalty proceedings u/s 271 (1) (c) of the Act. On appeal, the ld. CIT(A) reduced the addition by disallowing 15% of the disputed purchases by following his own order in assessee’s case for the A.Y. 2007-08. The assessee filed appeal against appeal order for A.Y. 2008-09 also before ITAT, Jaipur and earlier also appeal against appeal order for A.Y. 2007-08 was filed before the ITAT, Jaipur. However, under some misconception the 3 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT A/R of assessee withdrawn the appeal filed for A.Y. 2008-09 before ITAT while appeal for A.Y. 2007-08 was decided by ITAT, Jaipur Bench, Jaipur wherein the disallowance of 15% of purchases was not upheld and ordered to assess the income of assessee on average gross profit declared and admitted by the A.O. and attained finality. Thus there is no appeal order of ITAT for A.Y. 2008-09 and addition sustained by CIT (A) at Rs. 34,49,579/- (being 15% of alleged disputed purchased) attained finality. The A.O. after receipt of appeal order of CIT (A) took up penalty proceedings u/s 271 (1) (c) by issuing notice on 9-01-2008 to which assessee filed explanation which was not accepted by the A.O. and vide impugned penalty order passed levied a penalty of Rs. 10,65,919/- u/s 271 (1) (c) of Act. The ld. CIT(A) has upheld the penalty order passed by the A.O.
4. Now the assessee is in appeal before the ITAT against imposition and confirmation of the penalty on the grounds mentioned above.
Ground No. 1 raised by the assessee relates to challenging the order of the ld. CIT(A) on the ground that the notice issued by the A.O. U/s 271(1)(c) of the Act was wrong and bad in law as it did not specify in which limb of Section 271(1)(c) of the Act the penalty proceedings were initiated i.e. whether for concealment of income or furnishing of inaccurate particulars of income. In this regard, the ld AR appearing on behalf of the 4 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are reproduced below: “1(a) Submission of the assessee- 1. Initiation of Penalty a) In Assessment Order:- In the assessment order the initiation of penalty is stating -that assessee has concealed the particulars of income and furnished inaccurate particulars of income by introducing non-genuine purchases it is a fit case for initiating penalty proceedings ' u/s 271 (1) (c) of the I. T. Act. 1961 which is being done separately" and b) Notice u/s 274 Further in the penalty notice u/s 274 read with section 271 of the I. Tax Act dated 30.09.2015 (copy enclosed). A.O. mentioned that: - "Concealed the particulars of income or furnished inaccurate particulars of such income." c) Notice dated 09.01.2018 Further in the penalty notice u/s 274 read with section 271 (1) (c) of I. Tax Act dated 09.01.2018 (copy enclosed). A.O. mentioned that: - Penalty proceedings u/s 271 (1) (c) were initiated against you during the course of assessment proceedings for A.Y. 2008-09 and notice was already served on you. It is submitted any notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should specify under which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c).
5 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT It is pertinent to note that in the said assessment order and notice Ld. A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. Ld. A.O. in assessment order or penalty notices did not specified the limb under which the penalty was initiated and simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the Ld. A.O. was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the Ld. A.O. clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind.
The penalty order was passed on 26.03.2018 wherein for penalty imposed on addition of Rs. 34,49,579/- made in the assessment as upheld by CIT (A) by holding that the assessee has furnished inaccurate particulars of income. The relevant findings of Ld. A.O. in para 7 & 8 is as under: - "7. In view of above, it can be concluded that the assessee has furnished inaccurate particulars of his taxable income making claim of major portion of purchases by way of bogus bills to inflate the purchase cost and to reduce the taxable profit. The explanation offered by the assessee during course of assessment substantiate it explanation with regard to correctness of its books of account.
8. I am, therefore, satisfied that the assessee is found guilty of furnishing inaccurate particulars of income to the tune of Rs. 34,49,579/- which was chargeable to tax under the head 'Income from business and profession' as such, penalty u/s 271 (1) (c) r/w Sec. 274 of the 1. T Act is imposable in this case quantum of which is worked out as under." Thus the penalty proceedings were initiated without specifying the limb i.e. whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. Thereafter the penalty was levied by holding that the assessee has furnished inaccurate particulars of income. Therefore the initiation and imposing of penalty proceedings is wrong, bad in law, invalid and void ab initio.
The notice u/s 271 should be specific on imposing of penalty u/s 271 (1) (c) of Income Tax Act, 1961 i.e. concealed particulars of income or furnishing inaccurate particulars of income. Reliance is placed on the decision of 6 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA's EMERALD MEADOWS reported in 2015 (11) TMI 1620. He also relied on the decision in the case of Manjunatha Cotton & Ginning Factory [20131 359 ITR 565 (Karnataka) and Jyoti Ltd. [20131 taxmann.com 65 (High Court-Guj), New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-High Court).
The above ratio laid down in the case of Manjunatha Cotton & Ginning Factory Supra) has been followed by various High Courts in the below mentioned cases: i. Shri Samson Perinchery. ITA 1154, 953, 1097, 1226 of 2014 (Order date — 5.01.2017) (Bombay High Court) ii SSA's Emerald Meadows [20161 73 taxmann.com 241 (Karnataka High Court) iii Mitsu Industries Ltd. of 2004. Gujarat High Court 5. Further attention is drawn towards the following judgement of the Hon'ble ITAT, Jaipur Bench: i. Narayana Heights & Towers, Vs. I.T.O. Ward — 2- 4 Jaipur ITA No. 1033/JP/2016. ii.) Shankar Lal Khandelwal v. DCIT — ITA No. 878/JP/2003. iii) Radha Mohan Maheshwari v. DCIT — ITA No. 773/JP/2013. iv) Murari Lal Mittal ITA No. 334/JP/2015 order dated 09/11/16 v) MrsMradula Agarwal vs I.T.O. ITA No. 176/JP/2016 Attention is drawn towards the recent judgement of the Hon'ble Jurisdictional High Court in the case of Shevata Construction Co. Pvt. Ltd. ITA No. 534/2008 (copy enclosed), 6. The Hon'ble ITAT, Jaipur Bench, Jaipur has also in case of Lal Chand Mittal Vs. DCIT (ITA No. 772/JP/2016 order dated 29-12-2011 and various other cases decided by it held that on the basis of such notice issued by sending printed where only all the ground of section 271 (1) (c) are mentioned or where show cause notice u/s 271 (1) (c) for imposing of penalty without specifying the limb for reasons to impose penalty whether 7 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT for concealment of income or furnish inaccurate particulars of income is not as per law and assessing officer did not have any jurisdiction to impose penalty u/s 271 (1) (c). In the case(s) Radha Mohan Maheshwari Vs. DCIT (ITA No. 773/JP/2013) Mohd. Sharif Khan Vs. DCIT (ITA No. 44I/JP/2014) Shankar Lal Khandelwal Vs. DCIT (ITA No. 878/JP/2013)Murari Lal Mittal (ITA No. 334/JP/2015 order dated 9-11-2016 and Mridula Agarwal (ITA No. 176/JP/20I6) the Hon'ble Bench upheld the same view. The Hon'ble coordinate ITAT, Jaipur Bench, Jaipur has also in a recent case of Ratan Kumar Sharma Vs. ITO Wad-7(1) (ITA No. 176/JP/2018 order dated 08-032019 and Heera Chand Jain Vs ITO W1-(2), Jaipur (ITA No. 964/JP/18) dated 30-042019 upheld the same view.
7. The Hon'ble ITAT, Amritsar Bench (THIRD MEMBER) in the case of HPCL Mittal Energy Ltd. Vs Add. CIT, Circle-1, Bhatinda held that "when Assessing Officer is satisfied at stage of initiation of penalty proceedings of a clear-cut charge against assessee of concealment of particulars of income, but imposes penalty by holding assessee as guilty of other charge (furnishing of inaccurate particulars of income) or an uncertain charge (concealment of particulars of income/furnishing of inaccurate particulars of income), penalty cannot be sustained"
8. Further the Hon'ble Supreme Court of India in case of PCIT (Central) Vs Golden Peace Hotels & Resorts Pvt. Ltd. (2021) 124 Taxmann.Com 249 (SC) held that " SLP dismissed against High Court ruling that recording of satisfaction by Assessing Officer that there was concealment of income or that any inaccurate particulars were furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee"
On the other hand, the ld Sr.DR has vehemently supported the orders of the authorities below.
We have considered the rival contentions and carefully perused the material available on record. From perusal of record, we noticed that the 8 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT penalty in this case was initiated by the A.O. on account of concealment of income or for furnishing inaccurate particulars of income and thus, the ld AR has pointed out before us that notice U/s 274 r.w.s. 271(1)(c) of the Acdt should have specifically indicated in which limb of Sec. 271(1)(c) of the Act, the penalty proceedings were initiated i.e. whether for concealment of income or furnishing of inaccurate particulars of income. Thus, in absence of a particular limb, no penalty should have been levied on the assessee as the determination of such limb is sine qua non for imposition of penalty U/s 271(1)(c) of the Act. Wherein on the contrary, the ld DR while relying on the orders passed by the lower authorities submitted before us that no prejudice has been caused to the assessee and the A.O. has levied the penalty after recording his satisfaction.
After having gone through the meticulous orders passed by the lower authorities and the documents placed on record more particularly the assessment order as well as notice U/s 274 r.w.s. 271(1)(c) of the Act, we noticed that the A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. The A.O. has simply mentioned in his order with regard to initiation of penalty by stating that the assessee has concealed the income or furnishing inaccurate particulars of income by introducing non-genuine purchases thus it is a fit case for initiating the 9 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT penalty proceedings U/s 271(1)(c) of the Act. Later on a pre-printed/cyclostyle performa by way notice U/s 274 r.w.s 271(1)(c) of the Act without striking off the unnecessary portions of the notice was served upon the assessee, we are of the view that, if at all, the A.O. was of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then in that eventuality, he should have deleted or not mentioned the other limb for imposition of penalty. This act of the A.O. clearly indicates that the entire exercise of initiation of penalty proceedings has been done in a casual and cavalier manner. The notice u/s 271 should be specific for imposition of penalty u/s 271 (1) (c) of Act i.e. for concealment of particulars of income or furnishing inaccurate particulars of income as has been held by the Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA's EMERALD MEADOWS reported in 2015 (11) TMI 1620, wherein the Hon'ble Court has held that: - "3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961 (for short 'the Act) to be bad in law as it did not specify which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX — VS — MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
10 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT
4. In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arise in this appeal for determination by this Court. The appeal is accordingly dismissed." The department has filed SLP in Hon'ble Supreme Court which has been dismissed. Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs. SSA's Emerald Meadows and CIT Vs Manjunatha Cotton & Ginning Factory & others [2013] 359 ITR 565. Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [20131 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under: - “……… Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or• is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pal reported in 292 1TR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income cart), different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The Standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind.”
11 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT We draw strength from the decision of Hon’ble Gujarat High Court in the case of Jyoti Ltd. [2013] taxmann.com 65 (High Court-Guj), the A.O. in his penalty order, noted as under: - "In view of the above facts, it is clear that the assessee concealed income/furnished inaccurate particulars of income. I, therefore, consider it a fit case for levy of penalty u/s 271 (I) (c)" Hon’ble Gujarat High Court in the above case held that, where the Assessing officer in order of penalty did not come to a clear finding regarding the penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, the Tribunal was justified in setting aside the impugned penalty order. Hon'ble Gujarat High Court followed the ratio laid down in the case of New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-High Court).
We also draw strength from the decision of Coordinate Bench of this Tribunal in the case of Narayana Heights & Towers, Vs. I.T.O. Ward- 2(4) Jaipur in has cancelled the penalty by holding that: - "3.2 We have heard the rival contention, perused the material available on record and gone through the orders of the authorities below. For the sake of clarity the relevant contents of the Assessment order are reproduced as under: -" ‘"Penalty u/s 271(1)(c) is separately as assessee has concealed the income." Relevant contents of the Penalty Order are reproduced as under: - 12 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT "As the assessee had not filed any appeal against order of the A.O. and it appears that the assessee is satisfied with the order passed by the A.0.. Therefore, it appears that the assessee has nothing to say and has no objection regarding imposing the penalty us/ 271(1) (c) of I. T Act, 1961. Therefore, I impose a penalty of equal to 100% of tax sought to be evaded on account of the above acts of the assessee of Rs. 34,05,436/- i.e. 100% tax evaded. In the light of the above, we need to examine whether assessment order and the penalty order comply with the provisions of section 271 (1) (c) of the Act. We find that on page 3 of the assessment order, the assessing officer, A.O. observed as under: - "As the assessee has concealed/furnished the inaccurate particulars of income therefore, penalty u/s 271 (1) (c) is also initiated." 3.3 As per section 271 (1) (c), the assessing officer is empowered to impose penalty if in the course of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. From the above provision it is clear that there has to be a specific satisfaction by the Assessing officer that the assessee is guilty of concealing the particulars of his income or furnishing inaccurate particulars of such incomes. 3.4 From the above, it is clear that the assessing officer should give a specific finding In the present case, in the assessment order as noted above the assessing officer has stated that the assessee has concealed / furnished the inaccurate particulars of income. Therefore, the penalty under Section 271 (1) (c) was also initiated from this it cannot be inferred whether there is specific charge of concealing the particulars of income or furnished the inaccurate particulars of such income Law is well settled that the assessing officer has to come to a definite satisfaction whether the assessee has concealed the income of particulars or furnished the inaccurate particulars of income. The Hon'ble Karnataka High Court in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Kar.) has held that the notice u/s 274 of the Act should specifically state as to whether penalty is being proposed for concealment of particulars of income or inaccurate particulars of income. In the present case 13 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT notice under section 274 dated 25/3/2015 enclosed at paper book page 16 reads as under: - "Penalty Notice Under Section 274. Read with Section 271 of the IT Act, 1961. Whereas in the course of proceedings before me for the Assessment Year 2012-13. It appears to me that you have: - Read With Section 271(1)(c) concealed particulars of income or furnished inaccurate particulars of income." Therefore, there is no specific charge by the Assessing officer. Further, it is noted that the Assessing officer in penalty order (as noted hereinabove) has proceeded on the basis of the assumption that the assessee is satisfied with the assessment order. Therefore, it appears that the assessee has nothing to say and has no objection regarding the imposing of the penalty under section 271 (1) (c) of the Act. In our considered view, the assessing officer was not justified in imposing the penalty on this basis the action of the assessing officer is contrary to the provision of law." The Hon'ble Jurisdictional High Court in the case of Shevata Construction Co. Pvt. Ltd. in at Para 9 of its order has held as under: - "...... Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observation made in the said judgement, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order ...." (Emphasis Supplied).
14 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT Further the latest view of the Hon'ble Supreme Court in case of PCIT (Central) Vs Golden Peace Hotels & Resorts Pvt. Ltd. (2021) 124 Taxmann.Com 249 (SC) wherein it was held that "SLP dismissed against High Court ruling that recording of satisfaction by Assessing Officer that there was concealment of income or that any inaccurate particulars were furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee" Therefore, considering the totality of the facts and circumstances of the case, we are of the view that concealment of income or furnishing of inaccurate particulars of income are two different forms and they cannot be inter mixed, therefore, we quash the penalty proceedings initiated U/s 271(1)(c) of the Act.
Ground No. 2 of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) on the ground that no penalty U/s 271(1)(c) of the Act should have been imposed by the A.O. under the circumstances of the present case. The ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are reproduced below:
15 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT “2(a) It is clear from facts stated above and from assessment / appeal orders in quantum proceedings that trading addition made by Ld. A.O. and confirmed by CIT (A) at Rs.34,49,579/- is not on account of any ungenuine or bogus purchases but was estimated addition out of purchases wherein Ld. A.O. by estimate disallowed 25% thereof on account of unverifiability of purchases while allowing 75% of said purchases as allowable and CIT (A) by estimate disallowed 15% thereof on account of unverifiability of purchase while allowing 85% of said purchases as allowable. It is therefore cannot be held as bogus purchase but the purchases are held unverifiable as much as 85% of very same purchases has been allowed. It is the case where purchases are not doubted but bills of purchases were held unverifiable because of non-verification thereof from sellers. The addition has been made as trading addition by invoking section 145 (3). Further as stated above the appeal filed by assessee against order of CIT (A) was got wrongly withdrawn under misconception and in case of assessee himself for A.Y. 2007-08 on the same facts the Hon'ble ITAT did not upheld disallowance of 15% of purchases but ordered to assess the income of assessee on average gross profit declared and admitted by the A.O. and attained finality. Thus judgement is now being followed in deciding appeals on the same issue before CIT (A) & ITAT and if that would have applied in the case for this year there would not remain any disallowance out of the purchases held unverifiable in the case for this year. Thus the addition is estimated and unsubstantiated addition which do not fall within the purview of Section 271 (1) (c).
The assessee furnished all particulars correctly and no deficiency or mistake found therein and technically. invoking of provision of section 145 (3) is on account of and lack of verifiability of some purchases made while the G.P. rate declared by assessee was much better than in previous years and no trading addition would have been called for and thus it is not a case of furnishing 16 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT inaccurate particulars as held by Ld. A.O. Thus the additions is purely on estimate. It is settled law that addition based on estimated higher trading profit as against the declared gross profit cannot be considered as concealed income or of furnishing inaccurate particulars within the provisions of section 271 (1) (c) as held in case of CIT Vs. Dhillon Rice Mills (2002) 256 ITR 209 (ALL) and in case of Hari Gopal Singh Vs. CIT (2002) 258 ITR 85. In both these decisions, it was held that the provisions of section 271 (1) (c) are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. In case of CIT Vs. Aero Traders P. Ltd. (2010) 322 ITR 316 it was held thatthe Assessing officer, observing that the profit was estimated after rejection of the books of account due to certain discrepancies, imposed a penalty on the assessee, on the ground that it was clear case of furnishing of inaccurate particulars of income. The Tribunal held that it did not amount to concealment of income or furnishing of inaccurate particulars of income therefore, deleted the penalty and Hon'ble High Court of Delhi confirmed the order of ITAT. The judgement of Rajasthan High Court in case of Shiv Lal Tak Vs. CIT 251 ITR 373 also supports the above contention. The judgement of Rajasthan High Court in case of Shiv Lal Takis fully applicable as even after amendment in clause B of expl — 1 to 271 (1) (c) by redrafting the same it remained similarly worded. The judgement of Rajasthan High Court in case of CIT Vs. Giriraj Agarwal Giri (2012) 346 ITR 152 (Raj.) also clearly supports the case of assessee.
It is further submitted that Ld. CIT(A)-I, Jaipur in the assessee's own case for the A.Y. 2007-08 (having same issue/identical facts) deleted the penalty levied by AO. A copy of appeal order for refence is enclosed herewith. It is pertinent mention here that both appeal orders were passed by the same CIT (A).
17 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT In view of the above the penalty of Rs. 10,65,919/- levied by Ld. A.O. and confirmed by Ld. CIT(A) is wrong and bad in law which deserves to be deleted.” 11. On the other hand, the ld Sr.DR has relied on the orders passed by the authorities below.
We have considered the rival contentions and carefully perused the material placed on record. From the facts of the present case, we noticed that the trading additions were made by the A.O. and confirmed by the ld. CIT (A), however, no additions were made on account of non-genuine or bogus purchases but were estimated additions out of purchases wherein the A.O. by estimating disallowed 25% of the purchases thereof on account of unverifiability of purchases while allowing 75% of said purchases as allowable. Further in appeal, the ld. CIT(A) by estimating disallowed 15% thereof on account of unverifiability of purchases and at the same time, allowed 85% of said purchases. In this way, according to the ld AR, the purchases cannot be held to be bogus as the said purchases were held by both the authorities as unverifiable because 85% of the same purchases have also ready been allowed by the ld. CIT(A). Thus, according to the ld. AR, it is a case where purchases are not doubted but bills of purchases were held unverifiable because of non-verification thereof from sellers.
18 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT
The additions in the present case have been made as trading additions by invoking Section 145(3) of the Act. As per the ld. AR, the appeal filed by the assessee against order of ld. CIT(A) was got wrongly withdrawn under misconception and in assessee’s own case for the preceeding year i.e. A.Y. 2007-08 on the same facts, the ITAT did not uphold disallowance of 15% of purchases but ordered to assess the income of assessee on average gross profit declared and admitted by the A.O.. Thus, in this way, the purchases which was held unverifiable cannot be held to be bogus and the addition on the basis of estimation do not fall within the purview of Section 271 (1) (c) of the Act.
After appreciating the facts of the case, we noticed that the assessee had furnished all particulars before the A.O. and no deficiency or mistake was found therein and technically, the invocation of provision of Section 145 (3) of the Act by the A.O. was on account of and lack of verifiability of some of the purchases. In this way, the additions made in the present case were purely on estimation. It is a settled law that additions based on estimation where higher trading profit as declared against the gross profit has been declared therein, in that cases, no penalty is leviable as it cannot be held that in those cases, the assessee has concealed income or of furnishing inaccurate particulars of income within the provisions of Section 271(1) (c) of the Act. This proposition 19 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT has been upheld in case of CIT Vs. Dhillon Rice Mills (2002) 256 ITR 209 (ALL) and in case of Hari Gopal Singh Vs. CIT (2002) 258 ITR 85. In both these decisions, it has been held by the Hon’ble Courts that the provisions of Section 271(1)(c) are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. As per the facts of the present case, the additions were made on estimation basis whereas the gross profit declared by the assessee was much better than the previous years. Even in the case of CIT Vs. Aero Traders P. Ltd. (2010) 322 ITR 316 it was held by the Hon’ble Court the profit was estimated after rejection of the books of account due to certain discrepancies, imposed a penalty on the assessee on the ground that it was clear case of furnishing of inaccurate particulars of income. However, the Tribunal held that it did not amount to concealment of income or furnishing of inaccurate particulars of income therefore, deleted the penalty and Hon'ble High Court of Delhi confirmed the order of ITAT. Further the Hon’ble Rajasthan High Court in case of Shiv Lal Tak Vs. CIT 251 ITR 373 also upheld the said proposition. Further glaring facts have also been placed on record before us wherein we noticed that the ld. CIT(A) in assessee’s own case for the previous year i.e. A.Y. 2007-08 had deleted the penalty levied by the A.O. on identical facts and circumstances, therefore, taking into consideration the totality of facts and circumstances of the case as mentioned above, we are of the view that since 20 ITA 1266/JP/2019_ M/s Vijay Kedia Vs ACIT the additions in the present case were made purely on the basis of estimation, therefore, no penalty is leviable or attracted in the present case. Accordingly, we direct to delete the penalty levied U/s 271(1)(c) of the Act.
In the result, this appeal of the assessee is allowed. Order pronounced in the open court on 30th July, 2021.