THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. SHITALBEN SAURABH VORA

This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot dated 20.09.2020 in ITA No. 652/RJT/2014 for A.Y. 2003-04. 2. The Revenue has proposed the following question for the consideration of this Court:- “Whether on facts and in the circumstances of the case, the Appellate Tribunal was justified in reducing the penalty of Rs. 2,44,90,900 levied under section 271(1)(c) of the Act to the extent of Rs. 4,89,818/- by holding the unexplained credits as turnover of the assessee and accordingly proportionately reducing the income and penalty? “

We have heard Mr. M.R. Bhatt, the learned Senior Counsel assisted by Ms. Mauna M. Bhatt, the learned Senior Standing Counsel appearing for the Revenue.

It appears that huge amount of cash credits was found in the bank account of the assessee. In such circumstances, the notice under Section 148 of the Act, 1961 was issued with a request to furnish the return of income for the A.Y. 2003-04. Thereafter, the notice under Section 143(1) of the Act, 1961 was issued. However, the assessee neither filed any return of income nor complied with the notice. In such circumstances, a show cause notice dated 04.12.2009 came to be issued, whereby the assessee was asked to explain the source of cash deposits of Rs.2,72,89,000/- in his current bank account No. 3575 of Riddhi Impex maintained with Nawanagar Co-operative Bank Ltd, Udyognagar, Jamnagar.

Ultimately, the Assessing Officer framed the assessment under Section 143(3) read with Section 147 of the Act, 1961 on 15.12.2009 determining the total income of Rs.7,78,35,500/- under Sections 68 and 69A respectively of the Act, 1961 for the huge cash deposits in the saving bank accounts. Subsequently, penalty proceedings came to be initiated on the ground of concealment of income and the Assessing Officer levied penalty of Rs.2,44,90,900/-.

The assessee being dissatisfied with the assessment order preferred appeal before the Commissioner of Income Tax (A) (for short “CIT(A)”). The CIT (A) restricted the penalty to the extent of the tax on income determined at the income computed at 8% of the turnover.

The Revenue being dissatisfied with the order passed by the CIT(A) preferred appeal before the Appellate Tribunal. The assessee preferred cross objections before the Appellate Tribunal. The Appellate Tribunal dismissed the appeal of the Revenue and allowed the cross objectionS preferred by the assessee. The Appellate Tribunal held that the assessee had concealed THE particulars of income. The Tribunal further held that once the income is reduced, the penalty would also reduce proportionately. Accordingly, the Appellate Tribunal restricted the penalty to Rs.4,89,818/-.

The Tribunal recorded the following findings in its order: “15.1 We also note that the income in the case on hand was worked out on estimated basis as discussed in detail in the quantum proceedings. Thus the next question arises whether there can be penalty in the event the income is determined based on estimation. In this regard, we note that the assessee has not maintained her books of accounts, filed her return of income. Thus there was no option available to the learned CIT(A) except to estimate the income based on the materials available on record. Therefore, per se it cannot be concluded that the income has been determined on estimated basis after finding out the defect in the books of accounts, expenses/income claimed/shown in the return of incomer, lower gross profit etc. But the income escaped from the assessment has been computed in different manner. Thus, in our considered view the assessee is guilty of concealing the particular of income. Therefore, the assessee is liable to be visited with the penalty for 100% of the amount of tax sought to be evaded. Regarding the Revenue appeal restricting the penalty to the extent of the tax to be computed @ of 8% of the turnover, we note that the penalty has to be computed with reference to the income. Once the income has reduced then the penalty will also reduce proportionately. Hence the ground of appeal of the Revenue is dismissed and CO filed by the assessee partly allowed.”

Thus, the Tribunal held that once the income is reduced, the penalty would also get reduced proportionately and thereby the Tribunal restricted the penalty to Rs. 4,89,818/-. If such is the view of the Tribunal, then, in our opinion, we should not disturb the same.

The question as proposed by the Revenue in the aforesaid set of circumstances cannot be termed as a substantial question of law.

In the result, this appeal fails and is hereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J) A. B. VAGHELA/A.M.PIRZADA