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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 726/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 726/JP/2017 fu/kZkj.k o"kZ@Assessment Year: 2008-09 cuke Suresh Kumar Mittal, I.T.O., Vs. L/H- Shri Devi Sahai Mittal, Ward 1(2), Prop.- M/s Suresh Kumar & Jaipur. Company, Radha Damodar Ki Gali, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACFPM 8506 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Nikhilesh Kataria (CA) jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 08/05/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 14/05/2018 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.:
This is an appeal filed by the assessee against the order of the ld CIT(A)- I, Jaipur dated 26/07/2017 for A.Y. 2008-09, wherein the assessee has challenged the levy of penalty U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) despite the fact that the additions were made purely on estimated basis.
Earlier, this appeal was dismissed for want of prosecution by the Coordinate Bench vide its order dated 07/11/2017, which was subsequently recalled vide M.A. order dated 23/01/2018. Hence, this appeal has come up for hearing before us.
ITA 726/JP/2017_ 2 Suresh Kumar Mittal Vs ITO
Briefly stated, the facts of the case are that the assessee derives his income from contract and job work of iron fabrication. For the year under consideration, he has filed his return of income declaring total income of Rs. 3,46,770/- on 30/09/2008. Subsequently, a survey U/s 133A of the Act was conducted at the business premises of the assessee on 22/4/2009 wherein it was found that the assessee had not kept any books of account in relation to its business and in his statement recorded thereon, the assessee has also confirmed the same. During the course of assessment proceedings, the Assessing Officer after making various observations has accepted the turnover as declared by the assessee amounting to Rs. 89,97,900/-, however has not accepted the NP declared by the assessee and has estimated the N.P. rate @ 20%. Further the Assessing Officer also estimated the income from job work amounting to Rs. 90,000/-. In the quantum proceedings, the N.P. rate was reduced by the ld. CIT(A) from 20% to 12% and the job work charges estimated at Rs. 90,000/- were sustained. Apparently, the assessee has not filed any further appeal against the order of ld. CIT(A),hence, quantum proceedings have seen attained finality.
During the course of penalty proceedings, the Assessing Officer issued fresh show cause notice and held that the assessee has furnished inaccurate particulars of his income by not disclosing true and correct profits of the contract business. He, therefore, levied the penalty amounting to Rs. 2,79,731/- @ 100% of tax sought to be evaded.
Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the said levy of penalty. Now, the assessee is in appeal against the said findings of the ld CIT(A).
During the course of hearing, the ld AR of the assessee has submitted that firstly, the additions made by the Assessing Officer have been substantially reduced in the appellate proceedings, therefore, the very foundation of levying
ITA 726/JP/2017_ 3 Suresh Kumar Mittal Vs ITO of penalty become non-existent and hence, there was no justification for levying the said penalty. It was further submitted that the order of the ld. CIT(A) could not be challenged due to death of assessee, hence, none filing of appeal in the quantum proceedings by the assessee should not be considered adversely. It was further submitted that even the department has not filed any further appeal against the order of the ld. CIT(A). It was further submitted that there is absolutely no positive evidence against the assessee that it has earned more than what has been declared in his return of income despite the fact that the survey proceedings were taken against the assessee on 20/4/2009 and in absence of any positive evidence, no penalty can be imposed. It was further submitted that no incriminating documents were found during the course of survey and the Assessing Officer has not been able to refer to any single slip or loose paper to base his additions, which itself proves that there was no concrete basis for making of addition. It was further submitted that the entire addition made by the Assessing Officer and partly sustained by the ld. CIT(A) are based on estimation only without any positive material against the assessee. Regarding the reasons for non-maintenance of books of account, it was submitted that this fact is not an afterthought rather it was accepted in the survey proceedings as well as during the course of assessment proceedings. It was submitted that the assessee was not aware about the compulsory maintenance of books of account as neither in the past nor in the future the turnover of the assessee exceeded the limit as prescribed U/s 44AB of the Act. It was further submitted that there was complete disclosure made in the return of income and in the balance sheet, P&L account and the other details submitted during the course of assessment proceedings. It was further submitted that the decisions relied upon by the Assessing Officer and the ld. CIT(A) are distinguishable on facts. It was submitted that the decision of Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. 358 ITR 593 (SC) relied upon by the ld. CIT(A) is factually distinguishable as in that case there was a specific surrender based on voluminous documents found during the course of survey and the return was
ITA 726/JP/2017_ 4 Suresh Kumar Mittal Vs ITO filed after the survey proceedings which is not the facts in the present case. The ld AR further relied on the various decisions for the proposition that where the additions have been made on estimate basis, which was substantially reduced in the appellate proceedings, the same do not qualify for levy of penalty U/s 271(1)(c) of the Act. In this regard, the ld AR has relied on the decisions of Hon’ble Rajasthan High Court in the case of CIT Vs. Mahendra Singh Khedla (2012) 252 CTR 0453 (Raj) and CIT Vs. Krishi Tyre Retrading & Rubber Industries (2013) 263 CTR 484 (Raj). Besides, he has relied upon the decision of Hon’ble Delhi High court in the case of Pr.CIT Vs. Fortune Technocomps (P) Ltd. (2016) 96 CCH 0018 (Del) and the decision of Hon’ble Gujarat High Court in the case of ITO Vs. Bombaywala Readymade Stores (2015) 230 Taxman 0313.
Per contra, the ld Sr. DR vehemently argued the matter and relied on the findings of the Assessing Officer as well as the ld. CIT(A) and supported the orders of the lower authorities.
We have heard the rival contentions of both the parties and perused the material available on record. Undisputedly, the turnover declared by the assessee in his return of income filed much prior to survey has been accepted by the Assessing Officer and thereafter the Assessing Officer has estimated the NP rate @ 20%. Subsequently, during the appellate proceedings, the NP rate has been reduced by the ld. CIT(A) to 12%. There is no finding recorded by either of the authorities regarding linkage and estimation of net profit rate with findings, if any during the course of survey proceedings. It is, therefore, a case where the NP rate has been estimated by both the authorities and the additions have been made in the hands of the assessee.
In this factual background, we refer the decision of the Hon’ble Rajasthan High Court in the case of CIT Vs. Krishi Tyre Retrading & Rubber Industries 360 ITR 580 (Raj) wherein the Hon'ble High Court has held as under:
ITA 726/JP/2017_ 5 Suresh Kumar Mittal Vs ITO “8. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) only. Thus, the assessee will get the relief of Rs.44,000 (Rs. forty four thousand) from the orders of the lower authorities on ad hoc basis".
On a perusal of the facts stated hereinbefore, it transpired that the addition has been sustained purely on estimate basis and, in our view, no positive fact or finding has been found so as to even make the said addition. It is, according to us, a pure guess work and, in our view, on such guess work or estimation, no penalty under section 271(1)(c) of the Act can be said to be leviable. For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed.”
We also refer to the decision of Hon’ble Rajasthan High Court in the case of CIT Vs. Mahendra Singh Khedla (supra) wherein the Hon'ble High Court has held as under:
ITA 726/JP/2017_ 6 Suresh Kumar Mittal Vs ITO “8. The above finding of the Tribunal makes it clear that additions made by the Assessing Officer were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly levied by the Assessing Officer. The basis for levying penalty in the present case is only estimation, which is purely a question of fact and there is a concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both.”
In the light of the above, in the entirety of facts and circumstances of the case, respectfully following the decisions of the Hon'ble Rajasthan High Court referred supra, the levy of penalty u/s 271(1)(c) is hereby deleted.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 14/05/2018.
Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 14th May, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Suresh Kumar Mittal, Jaipur. 2. izR;FkhZ@ The Respondent- The ITO, Ward 1(2) Jaipur 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. Jaipur विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण]जयपुर@क्त्ए प्ज्Aज्ए 6. xkMZ QkbZy@ Guard File (ITA No. 726/JP/2017) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत