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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: MS. SUSHMA CHOWLA & SHRI N.K.BILLAIYA
आदेश / ORDER आदेश आदेश आदेश PER SUSHMA CHOWLA, JM: The appeal filed by assessee is against order of CIT(A), Ghaziabad, dated 24.05.2018 relating to assessment year 2012-13 against the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’).
ITA No:- 5379/Del/2018 (Assessment Year: 2012-13)
The only issue raised in the present appeal is against the penalty levied u/s 271(1)(c) of the Act.
The Ld.AR for the assessee at the outset, pointed out that while initiating the penalty proceedings u/s 271(1)(c) of the Act, the AO has failed to record any satisfaction whatsoever. Further the penalty has been levied both for concealment of income and for furnishing of inaccurate particulars of income. The Ld.AR for the assessee further pointed out that in any case on merits also, the addition has been made in the hands of the assessee on estimation of net profit rate where the AO had applied the net profit rate @ 8% and the Tribunal vide its order dated 13.02.2019 has directed the application of net profit rate @ 6%. In such circumstances, he pointed out that no penalty is leviable for concealment u/s 271(1)(c) of the Act. In this regard, he placed reliance on the decision of Delhi Bench of the Tribunal in the case of Shri Vivek Jairath vs DCIT in & 4104/Del/2015 vide order dated 27.12.2018.
3. The Ld.DR for the Revenue on the other hand strongly placed reliance on the orders of the authorities below and also pointed out that the penalty proceedings have been initiated in the case and there is merit in the aforesaid levy of penalty. It was also pointed out that on merits, the books of accounts of the assessee had been rejected
ITA No:- 5379/Del/2018 (Assessment Year: 2012-13) and net profit has been estimated, hence, the levy of penalty for concealment needs to be upheld.
We have heard the rival contentions and perused the record.
Briefly in the facts of the case the assessee had furnished return of income on 29.09.2012 declaring total income of Rs.78,22,670/-. The case of the assessee was taken up for scrutiny. The assessee had not maintained any stock register; hence, show cause was issued to the assessee as to why the books of accounts be not rejected and profit be not estimated @ 8% of gross receipts. The plea of the assessee that it was maintaining the books of accounts which were audited, was not accepted and the AO completed the assessment by applying net profit rate @ 8% to work out the income in the hands of the assessee.
The CIT(A) upheld the aforesaid estimation of income. The Tribunal in in the case of P.K. Builders vs DCIT vide order dated 13.02.2019 directed the application of net profit rate @ 6% on the contract receipts.
The AO while completing the assessment had directed to issue notice u/s 274 r.w.s. 271(1)(c) of the Act. The perusal of the assessment order reflects the AO not to have recorded any satisfaction for initiating the penalty proceedings for concealment u/s 271(1)(c) of the Act. The issue which arises whether non-recording of such ITA No:- 5379/Del/2018 (Assessment Year: 2012-13)
satisfaction is fatal to the levy of penalty proceedings u/s 271(1)(c) of the Act.
Penalty for concealment is leviable where the assessee had either concealed its income or furnished inaccurate particulars of income. The AO while completing the assessment has to record a satisfaction in this regard, in order to show cause the assessee as to which limb to section 271(1)(c) of the Act has not been satisfied by it.
This is the basic condition of the aforesaid section. On perusal of the assessment order passed for the instant assessment year reflects no such satisfaction has been recorded. In the absence of the same, the assessee was not in a position to meet the requirements of the section. Merely, an order issuing notice u/s 274 r.w.s 271(1)(c) of the Act do not meet the conditions of the said initiation of penalty proceedings. In the absence of the same, there is no merit in the penalty order passed in the case. In this regard, we find support from the ratio laid down by the Hon’ble Bombay High Court in the case of CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom).
Another aspect which needs to be kept in mind is the order of penalty u/s 271(1)(c) of the Act. The AO had levied the penalty both for concealment of the particulars of income and furnished inaccurate particulars of income. The AO thus failed to come to any conclusion as to which limb of the said section has not been fulfilled by the ITA No:- 5379/Del/2018 (Assessment Year: 2012-13)
assessee. In the absence of the same, we find no merit in the order passed by the AO in this regard. For this, we place reliance on the decision of Pune Bench of the Tribunal in the case of Kanhaiyalal D. Jain Vs. ACIT (2016) 185 TTJ 553 (Pune) /(2017) 88 taxmann.com 830 (Pune-Trib.).
Even on merits where the income has been estimated in the hands of the assessee by applying net profit rate, there is no merit in the levy of the aforesaid penalty for concealment. Where there is only an estimation of income in the hands of the assessee, there is no merit in the aforesaid levy of penalty for concealment. We find support from the ratio laid down in CIT vs Aero Traders P.Ltd. [2010] 322 ITR 316 (Delhi). Accordingly, we direct the AO to delete penalty levied u/s 271(1)(c) of the Act.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 30th day of August, 2019.