M/S SHIV KUMAR BAIGARA AND COMPANY ,UDHAMPUR vs. INCOME TAX OFFICER UDHAMPUR, UDHAMPUR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No.357/Asr/2017 Assessment Year: 2001-02

M/s. Shiv Kumar Baigra & Co., vs. Income Tax Officer, Wine Shop, Bus Stand, Udhampur Udhampur, J&K. [PAN:ABAFS 2011E] (Appellant) (Respondent) Appellant by : Sh. P.N.Arora (Adv.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 11.03.2019 Date of Pronouncement: 29.03.2019 ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)' for short) dated 10.01.2017, dismissing the assessee’s appeal contesting the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 ('the Act' hereinafter) by the Assessing Officer vide order dated 26.03.2015 for Assessment Year (AY) 2001-02.

2 ITA No. 357/Asr/2017 (AY 2001-02) Shiv Kumar Baigra & Co. v. ITO him by comparing the assessee’s disclosed profit rate of 12.78% (on the turnover of Rs.67.21 lacs), with that of another wine shop at Udhampur (M/s. Mahinder Pal Wine Shop), which had disclosed a profit rate of 16.004%, and had a comparable turnover of Rs.61.96 lacs, vide order u/s. 143(3) dated 26/3/2004. The penalty proceedings u/s. 271(1)(c) were also initiated along with. The assessee carried the matter in appeal, and on being unsuccessful, before the Tribunal, which vide its’ order dated 23.08.2005 (ITA No.96/Asr/2005) set aside the matter back to the file of the first appellate authority. However, as the assessee failed to make any representation before the said authority, he dismissed the assessee’s appeal vide order dated 14.03.2014. On being show-caused in the matter in the penalty proceedings, the assessee again relied on its’ accounts for the year, claiming the same to be duly vouched and audited, with it also maintaining stock record, which was in fact subject to verification by the Excise and Sales Tax Departments on a regular basis. The assessing authority, not accepting the assessee’s plea, imposed penalty at 100% of the tax sought to be evaded, i.e., at Rs.85,890/-, which was confirmed by the ld. CIT(A) by holding as under: “5. Determination: I have considered the facts of the case as mentioned in the penalty order and I am of the view that the AO has rightly rejected the books of accounts u/s. 145(3) of the Act and imposed penalty of Rs.85,890/- u/s. 271(1) (c) of the Income Tax Act for furnishing inaccurate particulars of his income as his competitors operating in the same brand of liquor & wine and from the same locality have shown better GP and NP. Thus, the books of account and other supporting documents must be fabricated. The penalty imposed by the AO is, therefore, confirmed and the appeal is dismissed.” 3. I have heard the parties, and perused the material on record. The assessee’s case rests on it’s reliance on its’ books of account, i.e., as disclosing the true or correct operating results of its business. Further, the income as finally assessed is based on estimation, which by itself cannot result in furnishing inaccurate particulars of income, for which default the penalty stands imposed in the present case. The assessee, toward this, relies on a series of

3 ITA No. 357/Asr/2017 (AY 2001-02) Shiv Kumar Baigra & Co. v. ITO decisions by the Hon’ble jurisdictional High Court which, as stated, are regularly followed by the tribunal, as in the case of Lakhwinder Singh vs. Asst. CIT (ITA No. 249/Asr/2017, dated 22.02.2018)(at PB pages 17 – 20). The assessee’s accounts have been regarded as not reliable by the Revenue, which finding has not been contested by the assessee. The said plea would therefore be of no moment. Further, that ‘estimation’ per se cannot be a ground for levy of penalty u/s. 271(1)(c) of the Act is well-settled. Estimation is itself a matter of fact. Where, therefore, the same is based on evidence, it cannot be said that there is no substantive basis for making the assessment; estimation being otherwise integral to an assessment, as explained by the Hon’ble Apex Court per several decisions, as in the case of CST vs. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 ITR (SC); Kachwala Gems vs. Jt. CIT [2007] 288 ITR 10 (SC), citing two. In the present case, the assessing authority rejected the assessee’s accounts as the assessee was unable to explain the low gross profit rate, i.e., in comparison to another wine shop, selling the same liquor brands, operating in the area. That, however, would not, by itself, imply that the assessee had earned a higher profit. It would be a higher different matter if there is evidence impugning the assessee’s accounts, as, for example, exhibiting the assessee to have claimed higher expenditure (i.e., than that actually incurred) or suppressed sales – in quantity or in value, or the like. The assessee has maintained complete books of account, including the quantitative records, which stand audited, with no material defects having been pointed out therein. True, operating in the same area, selling the same liquor brands, should ordinarily result in approximately the same rate of profit, while the difference in present case is as high as 25%. Further, the difference in profit by itself cannot be a ground for making a higher estimate, i.e., unless accompanied by some defects in accounts being pointed out. The assessee explains the profit rate of the comparable case for the relevant year to be in fact at 11.62%

4 ITA No. 357/Asr/2017 (AY 2001-02) Shiv Kumar Baigra & Co. v. ITO (refer pg. 4 of the impugned order), which is not only lower than that of the assessee, but also shows that some variation on case to case basis, would arise, margin for which, therefore, in making the estimation, ought to be made. The second aspects have not been considered by the ld. CIT(A) in adjudicating the assessee’s plea. Under the circumstances, therefore, it cannot be said that the assessee had concealed, or otherwise furnished inaccurate, particulars of its’ income. The decisions by the jurisdictional High Court, as in the case of Harigopal Singh vs. CIT [2002] 258 ITR 85 (P&H) and CIT vs. Dhillon Rice Mills [2002] 256 ITR 447 (P&H), would apply in the facts and circumstances of the case. I, accordingly direct the deletion of the impugned penalty.