SH. PREM PAL GANDHI,NAWANSHAHR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- II, JALANDHAR

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ITA 456/ASR/2017Status: DisposedITAT Amritsar27 March 2018AY 2008-095 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that while additions can be made on probability, imposing a penalty based solely on extrapolated probable receipts, when only a few entries differed, was not warranted. Therefore, the penalty was deleted.

What were the facts?

During a search, the assessee's marriage hall receipts were found to be lower than actual charges indicated by seized documents. The Assessing Officer made an addition based on probable receipts, which was upheld by the CIT(A).

What were the issues?

Whether penalty for furnishing inaccurate particulars of income is leviable when the addition is based on extrapolated probable receipts from a survey, and not on concrete evidence for all transactions.

Which sections of the Income-tax Act were involved?

Section 132,Section 292C,Section 250(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR

Before: SH. SANJAY ARORA & SH. N.K.CHOUDHRY

Hearing: 28.02.2018Pronounced: 27.03.2018

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA No.456(Asr)/2017 Assessment Year:2008-09

Shri Prem Pal Gandhi Vs. Asst. CIT, K.C.Tower, Chandigarh Road, Central Circle-II Nawanshahar Jalandhar PAN:AAQPG6508D (Appellant) (Respondent) Appellant by: Sh. M.R.Bhagat & CA, Rajinder Kumar Chopra Respondent by: Sh. P.K.Sharma (Ld. DR) Date of hearing: 28.02.2018 Date of pronouncement: 27.03.2018 ORDER PER N.K.CHOUDHRY, JM:

The instant appeal has been preferred by the Assessee/Appellant, on feeling aggrieved against the order dated 21.04.2017 passed by the Ld. CIT(A)-5, Ludhiana, u/s 250(6) of the I.T. Act, 1961 (hereinafter called as ‘the Act’).

2.

The sole ground of appeal raised by the assessee is as under.

ITA No.456/Asr/2017 (A.Y.2008-09) 2 Shri Prem Pal Gandhi, Nawanshahar vs. ACIT

“That the learned CIT(A) erred in confirming penalty of Rs.77,911/- without appreciating the facts that the addition of Rs.2,29,000/- has been made by invoking the provisions of section 292C of the Income Tax Act,1961, which were not applicable in this case being a survey u/s 133A. It is prayed that penalty may please be deleted.”

3.

The brief facts of the case are that a search u/s.132 of the I.T. Act was conduced at the official premises of the assessee at K.C. Tower, Chandigarh Road, Nawanshahar on 18.02.2010. During the search operation, some receipts from the Manager of the assessee was seized, which was noticed by the Assessing Officer. During the assessment proceedings, the assessee has declared income of Rs.6,000/- per function from marriage hall/ banquet whereas as per the seized receipts average rate was Rs.13,500/-, therefore, the Assessing Officer while perusing the booking register, wherein amounts in respect of bookings have been mentioned and receipts dated 14.10.2007, 19.10.2007, 14.02.2008 & 23.02.2008 depicting the amount of Rs.6,000/- have been considered and on the aforesaid basis concluded the probable receipts leading to addition of Rs.2,29,218/-. The aforesaid addition was upheld by the Ld. CIT(A).

The Assessing Officer in penalty order while observing that the assessee had declared income only of Rs.6,000/- per function from the marriage hall /banquet whereas as per the seized annexure receipts averaged at Rs.13,500/- and extrapolation income of Rs.2,29,218/- was added back, which

ITA No.456/Asr/2017 (A.Y.2008-09) 3 Shri Prem Pal Gandhi, Nawanshahar vs. ACIT

clearly points out the suppression of receipts, when compared with regular books of accounts, therefore, it was logical for the Assessing Officer to come to the conclusion that the receipts from function done at K.C. Palace have been suppressed which clearly falls within the purview of undisclosed income. On the aforesaid basis the Assessing Officer found the assessee is guilty for furnishing inaccurate particulars of income and thereby, imposed the penalty of Rs.77,911/- on the addition of Rs.2,29,218/-. The penalty order was upheld by the Ld. CIT(A), therefore, feeling aggrieved against the same, the assessee is before us.

4.

We have heard the rival parties at length and perused the relevant record and from the assessment order, it reflects that on the basis of seized annexure, the amount of various dates i.e., 14th October, 2007, 29th October, 2007, 14th February, 2008 and 23rd Feb., 2008 have been shown as Rs.14,000/-, Rs.14,900/-, Rs.12,500/- & Rs.13,000/- respectively, therefore, the Assessing Officer taken the average amount of Rs.13,500/- and multiplied by 94 functions which alleged to be taken place at K.C. Palace, Nawashahar and while determining the liability of Rs.2,29,218/- for the Asst. Year under consideration. From the Assessment Order as well as from order in appeal against the quantum order passed by the Ld. CIT(A), it clearly reflects that four entries in the register were found to be dissimilar to the receipts of booking amount entered in ledger, but nothing on

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record to show dissimilarities qua remaining entries, however, the Assessing Officer made the addition only on the basis of probable receipts. During the course of argument, it was submitted by Ld. AR that the K.C. Palace (marriage hall) was given to the Manager for a fixed hire rate of Rs.6,000/- per function and the Manager himself after making arrangement for decoration, water etc. charged different amounts from different parties which may vary between 11,000/- to 14,000/- per function and during the survey, only four entries could be found, however, the authorities below estimated the whole income by applying the same principle to the other functions held in the palace, during that year, which is apparent from the record which reflects to be on the basis of probabilities. On the other hand, it was argued by the ld. DR that the entries have duly been proved by the Revenue Department, therefore, no interference is required in the order under challenge.

We realized that although there is a judgment of the Apex Court to the effect that the addition can be made on the basis of probability, however, considering the fact that in the instant case only four entries out of 94 have been shown as different than the booking amount entered in the register and the Assessing Officer while extrapolating determined the amount and added to the income of the assessee on the basis of probable receipts, which

ITA No.456/Asr/2017 (A.Y.2008-09) 5 Shri Prem Pal Gandhi, Nawanshahar vs. ACIT

according to our considered opinion does not entail the penalty, hence, we are inclined to delete the same. Ordered accordingly.

5.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 27 .03.2018.

Sd/- Sd/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:27.03.2018 /PK/ Ps. Copy of the order forwarded to: (1) Shri Prem Pal Gandhi, Nawanshahar (2) The ACIT, Central Circle-II, Jalandhar (3) The CIT(A)-5, Ludhiana (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order

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