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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) dated 5.1.2018 and 8.1.2018 passed in the Asstt.Year 2014-15.
ITA No.360/Ahd/2018 arose from quantum proceedings, whereas, ITA No.1740/Ahd/2018 arose from penalty proceedings initiated under section 271(1)(c) of the Income Tax Act.
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First we take quantum appeal i.e. ITA No.360/Ahd/2018.
Sole grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.32,00,791/- in the total income of the assessee.
Brief facts of the case are that the assessee is an individual. He is running a proprietorship concern viz. Shree Sai Creation where he had carried out business activity of embroidery on job work basis. He has filed his return of income on 25.2.2015 declaring total income at Rs.2,20,000/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that as per form no.26AS disclosing TDS receipt, the assessee has received gross receipt of Rs.36,49,230/- from two parties viz. Vivek Kishanchand Pherwani and Pankaj Parshotamlal Koarani. TDS was deducted at Rs.36,504/-. However, in the return of income the assessee has shown gross receipt at Rs.8,77,907/-. The ld.AO has confronted the assessee qua this mismatch. In response to this query, the assessee has contended that his tax consultant has uploaded the details of third party by mistake. He has not disputed gross receipts from these two concerns at Rs.36,49,230/-. He has not disputed TDS amounting to Rs.36,504/-, but has explained the expenditure and other details in the balance sheet etc. The ld.AO was not satisfied with the explanation of the assessee, and he has passed the order under section 143(3) determining total taxable income at Rs.31,08,120/-. The discussion made by the AO reads as under:
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“3.5 It has been ascertained that, all the sub-heads and their respective figures in balance Sheet as well as Profit & Loss account furnished in the original return of income fled on 25.02.2015 differ from the revised balance sheets and Profit & Loss account figures. The contention of the assessee that, the consultant had filed all the figures in the return of income pertaining to a third party, is not tenable. The concrete evidence is the claim of TDS of Rs.36,504/- which was rightly claimed pertained to the assessee. If the consultant had made mistake in the columns of Balance Sheet / Profit & Loss account, he should have inserted wrong TDS credits, which is not the case here. The assessee had a plea to consider his revised figures of balance sheets as well as Profit & Loss account. The said plea cannot be acceded to because there was only one alternate for the assessee to revise his income by filing revised return of income through e-filing mode. The time for filing revised return has already been barred by limitation, the same cannot be considered at the stage of assessment proceedings. There were not more than 9 heads of expenses |n the P & L account columns in the R/lncome, whereas there are approx. 19 types of expenses are shown in the revised P & L produced now.
3.6 Moreover, the assessee has claimed Interest paid on housing loan for Self-occupied property for an amount of Rs.50,276/- in the original return of income and to the surprise, the said claim was not changed by the I.T. return filer at the time of original return. Thus, all the facts and circumstances prove that the assessee has malafide intention of providing fake business figures and to claim all the refund amount from the Government department. To the last argument, it can be added here that the assessee had sufficient official time to file his revised return of income, since he has not availed the said chance, thore is no other alternate but to accept the original receipts by the assessee and allow the expenses claimed in the original return of income filed by him.
In view of the above remarks, the total income of the assessee is computed as under: -
INCOME FROM HOUSE PROPERTY As per return (-)50,276 INCOME FROM BUSINESS Receipts as per 37,58,422
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revised working Less: Expenses 5,57,631 32,00,791 claimed in the original return OTHER SOURCES: a) Bank Interest 143 b) Misc. Income 7,457 7,600 Gross Total Income 31,58,115 Less: Deduction under chapter VI-A 50,000 Total income 31,08,115 ROUNDED OFF i.e. 31,08,120
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. A perusal of the assessment order would indicate that the ld.AO failed to apply his mind and appreciate the contention of the assessee. He simply disbelieved the contentions and rejected them. The assessee has pleaded that; I have received gross- receipts of Rs.36,49,230/- from these two concerns, on which TDS was Rs.36,504/-, but I have explained, such as raw material purchases for carrying out embroidery work. It was a mistake in the balance sheet and other details uploaded by the tax consultant. The AO should have verified these documents and should have arrived at a conclusion whether there could be a profit of Rs.32,00,791/- out of gross receipts. To our mind, it is totally illogical at the end of the Revenue authorities to draw such inference, without examining the case of the assessee and his prayer. We have extracted the finding of the AO. No reasons are discernible in para 3.5. AO did not want to go through the details. He simply observed that the assessee should have revised the return. It is to be seen that he is not taking the figure of Rs.36,49,230/- from the return;
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he is taking figure from external sources. If he takes cognizance of such figures, then why not take other details. In view of the above discussion, we are of the view that orders of the Revenue authorities on this aspect are not sustainable. We set aside both the orders and remit this issue to the file of the AO for investigation and re-adjudication. The ld.AO shall take into consideration revised balance sheet, profit & loss account and any other details submitted by the assessee for explaining the expenditure incurred by him qua the gross receipts received from those two concerns. The ld.AO shall re-determine income of the assessee after providing due opportunity of hearing to the assessee, and take into consideration all the details.
It is needless to mention that observation made by us will not impair or injure the case of the AO or will not cause any prejudice to the defence/explanation of the assessee. The assessee will be at liberty to submit any explanation or evidence in support of his case.
Now we take penalty appeal.
As far as penalty imposed under section 271(1)(c) of the Act is concerned, we have already set aside the quantum addition. 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 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 and furnishing of inaccurate particulars of income. In other words, the quantification of the penalty is depended upon the addition made to the
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income of the assessee. Since we have already set aside the issue regarding determination of taxable income, therefore, we deem it appropriate that the ld.AO will consider the issue regarding impact of penalty after determination of income. It is discretion of the AO to impose qua penalty or not, after the assessment order, because in case no addition is being made, then it will not require to initiate penalty proceedings against the assessee. Therefore, we leave this issue to the AO. As of now, no penalty is sustainable under section 271(1)(c) of the Act.
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