ITO 14(3)(4), MUMBAI vs. RIALTO EXIM, MUMBAI

ORDER PER AMARJIT SINGH, A.M. The solitary ground of appeal of the Revenue is directed against the order of Ld. CIT(A)-25, Mumbai in deleting the penalty of ₹65,21,765/- levied u/s 271(1)(c) of the Act.

2. The fact in brief is that assessment u/s 143(3) of the Act was completed on 28th December 2010 and total taxable income was determined at ₹10,13,80,420/-. During the course of assessment, the AO stated that the assessee-firm was engaged in the business of manufacturing and export of gold coins/medallions and claimed deduction u/s 10AA of the Act. The Assessing Officer has restricted the net profit @ 2% as against 10.89% declared by the M/s Rialto Exim 2 assessee and also initiated penalty proceedings u/s 271(1)(c) of the Act, on reasoning that net profit claimed by the assessee appeared to be on higher side. In the appeal, the Ld. CIT(A) has restricted the net profit @ 8% instead of 10.89% shown by the assessee. The Assessing Officer was of the view that by showing higher net profit, the assessee has claimed higher deduction u/s 10AA of the Act. Therefore, the AO held that the assessee has concealed the particulars of income and imposed minimum penalty of ₹65,21,765/- u/s 271(1)(c) of the Act.

3. Aggrieved, the assessee has filed appeal before the Ld. CIT(A), the Ld. CIT(A) has deleted the penalty holding that assessee has substantiated his explanation which was bona fide and assessee has disclosed full detail before the Assessing Officer.

4. Heard both the sides and perused the material on record. During the course of assessment, the assessee has claimed exemption u/s 10AA of the Act amounting to ₹10,13,80,420/-. The Assessing Officer was of the view that it appeared that assessee had shown higher percentage of net profit to claim higher deduction u/s 10AA of the Act, therefore, he had restricted the net profit @ 8%, however, the Ld. CIT(A) has restricted the disallowance to the extent net profit @ 2% instead of 10.89% shown by the assessee. The Assessing Officer levied penalty for concealment of particulars of income of ₹65,21,765/- u/s 271(1)(c) of the Act. The Ld. CIT(A) has deleted the penalty levied by the Assessing Officer holding that assessee had submitted full detail and particulars of income before the Assessing Officer during the course of assessment proceedings. After perusal of the material on record, it is observed that Assessing Officer has not found any M/s Rialto Exim 3 defect in the books of account and the assessee has disclosed full particulars of its claim in the return of income and the AO has merely imposed penalty on the basis of estimation of net profit without controverting the explanation of the assessee, which demonstrate that it was merely a case that the AO had not agreed with the claim made by the assessee-company. In the light of the above facts and circumstances. We consider that the AO has levied penalty merely on the basis of estimation without establishing that the assessee has furnished inaccurate particulars of income, therefore, we do not find any infirmity in the decision of the Ld. CIT(A). Accordingly, the ground raised by the Revenue is dismissed.