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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘SMC’
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
PER RAJPAL YADAV, JUDICIAL MEMBER : Present two appeals are directed at the instance of the assessee against orders of the ld.CIT(A)-5, Ahmedabad dated 1.2.2017 and 2.2.2017 passed in the Asstt.Year 2008- 09.
Order dated 1.2.2017 impugned in ITA No.961/Ahd/2017 is in quantum appeal of the assessee against addition of Rs.7,24,159/- out of disallowance of labour expenses, whereas the order dated 2.2.2017 impugned in ITA No.962/Ahd/2017 is with respect to penalty under
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section 271(1)(c) of the Act. First we take quantum appeal i.e. ITA No.961/Ahd/2017.
Brief facts of the case are that the assessee is an individual. He was running two proprietorship concerns viz. Raj Enterprise and Power Plan Engineering Co. He has filed his return of income on 27.9.2008 showing total income at Rs.32,63,340/-. On scrutiny of the accounts it revealed to the AO that the assessee has debited labour expenses of Rs.11,68,775/- to the profit & loss account of Power Plan Engg. Co. These expenditures were debited under three heads viz. Sagar Chauhan, Usha Chauhan and Utkarsh Enterprise. As far as Utkarsh Enterprise is concerned, the ld.AO has allowed those expenditure. However, he disallowed labour expenditure debited qua Shri Harish Chauhan and Usha Chauhan. He recorded that Harish Chauhan is the son of the assessee. He has been helping in the business of his father, but was not aware much about bills raised qua his name and other details. With regard to Usha Chauhan he observed that she is house-wife and has no source of income and she has no knowledge of bills being issued as referred above in her name. This inference has been drawn on the basis of the statement of these two persons. Appeal to the CIT(A) did not bring any relief to the assessee.
With the assistance of the ld.representatives, we have gone through the record carefully. We find that this is the second round of litigation upto the Tribunal. In the first round, the Tribunal has remitted this issue to the file of the ld.CIT(A) for fresh adjudication. The assessee has filed fresh material before the ld.CIT(A) which have been considered by the ld.CIT(A), but concurred with the AO. A perusal of the record
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would indicate that payments have been made through account payee cheques. Identity of both the persons is not in dispute. The AO was satisfied to some extent that son was helping his father. But on the basis of their statement, he harboured a belief that father of the family members of the assessee might have inflated the expenditure by debiting the same in their names. After considering details, we are of the view that possibility of helping her husband by Usha Chauhan and Shri Harish Chauhan helping his father in his business cannot be ruled out. They may not be well aware about the bills issued in their names, but they have confirmed that they are attending to the business needs and helping the assessee in his proprietorship concerns. The AO ought to have appreciated this aspect keeping in mind smallness of the business, which is not in an organized sector. It is not new that family members helping each other in doing business in their proprietor-ship concerns. If some salary is attributable to them on their working, then it should not be doubted simply for the reason that those family members are not aware about the raising of bills in their names. To our mind, the AO is too theoretical instead of appreciating the reality of the business of such family proprietorship concerns. We allow the appeal of the assessee and the delete impugned addition.
Now we take penalty appeal.
As far as penalty imposed under section 271(1)(c) of the Act is concerned, we have already deleted the quantum addition for the reasons stated hereinabove. We find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in
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addition to taxes, if any, payable him, which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. Since we have already deleted the additions, penalty under section 271(1)(c) does not survive, and the same is accordingly deleted.
In the result, both quantum as well as penalty appeals of the assessee are allowed.
Pronounced in the Open Court on 25th March, 2019.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER