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Income Tax Appellate Tribunal, MUMBAI BENCH “H” MUMBAI
Before: SHRI RAVISH SOOD & SHRI N.K. PRADHAN
Assessee by : Shri N. M. Porwal, AR Revenue by : Shri K. Bhoopathi, DR Date of Hearing : 13/11/2019 Date of pronouncement : 15/11/2019 ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2005-06. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-3, Mumbai [in short ‘CIT(A)’] and arises out of penalty levied u/s. 271A of the Income Tax Act 1961, (the ‘Act’). There has been a delay of 14 days on the part of the assessee in filing the appeal before the Tribunal. Having gone through the affidavit filed by the assessee stating that her husband was critically ill during the relevant period, we are convinced that the assessee had genuine difficulty in filing this ITA 5817/MUM/2018/A.Y.2005-06 2 HARSHA PRAVIN SHAH appeal. Therefore, we condone the delay of 14 days’ on the part of the assessee in filing the present appeal.
The grounds raised by the assessee read as under:
“1. On the facts and in the circumstances of the case, the Ld. CIT(A)-3 erred in levying penalty u/s. 271A of the Income Tax Act, 1961 @ Rs.25,000/-.
2. The Ld. CIT(A) erred in not appreciating that the penalty order passed by the AO is barred by limitation.”
Briefly stated, the facts of the case are that during the course of assessment proceedings, the Authorized Representative (AR) of the assessee explained before the AO that the cash deposits appearing in the books of account are the turnover. As per the assessee her profit margin is only 1% to 1.5% of the turnover. As the assessee failed to maintain books of accounts, the AO estimated the profit @8% of the turnover of Rs.25,78,000/- which comes to Rs.2,21,440/-.
Further, during the course of assessment proceedings, the AO observed that the assessee had not filed the return of income and also not maintained the books of accounts as per section 44AA of the Act. Thus, inferring that there was a failure on the part of the assessee, the AO issue a show cause notice u/s. 271A dated 20.03.2013 asking the assessee to explain as to why penalty u/s. 271A should not be imposed. In response to it, neither the assessee attended the office of the AO nor furnished any reply. Therefore, the AO levied a penalty of Rs.25,000/- u/s. 271A of the Act.
ITA 5817/MUM/2018/A.Y.2005-06 3 HARSHA PRAVIN SHAH 4. In appeal, the ld. CIT(A) confirmed the penalty of Rs.25,000/- levied by the AO on the ground that (i) the appellant is supposed to maintain the books of accounts, if the turnover is more than Rs.10,00,000/- u/s.44AA, whereas no books of accounts are maintained on the turnover of Rs.27,68,032/-, (ii) by claiming that the net profit income earned in such business is in the range of 1% to 1.5%, the assessee has deliberately not maintained the books of accounts.
Before us, the ld. counsel for the assessee relies on the order of the Tribunal in the case of ACIT v. Aggrawal Construction Co. 291 ITR AT 226, Chandigarh and submits that the ratio laid down in the above case squarely applies to the facts of the present appeal and therefore the penalty of Rs.25,000/- levied by the AO be deleted.
On the other hand, the ld. Departmental Representative (DR) submits that the appellant is supposed to maintain books of accounts as the turnover is Rs.27,68,032/- which is much more than the turnover of Rs.10 lakhs prescribed u/s.44AA of the Act. Thus, it is stated that the CIT(A) has rightly affirmed the penalty of Rs.25,000/- levied by the AO u/s.271A of the Act.
We have heard the rival submissions and perused the relevant materials available on record. In the instant case, the AO during the course of assessment proceedings u/s. 143(3) r.w.s 254 of the Act, issued notice u/s. 143(2) and 142(1) dated 03.12.2012 to the assessee. In response to it, the Authorized Representative (AR) of ITA 5817/MUM/2018/A.Y.2005-06 4 HARSHA PRAVIN SHAH the assessee filed the following documents along with copy of affidavit dated 27.10.2008 filed before the CIT (A).
i. Paper Book Volume-I (A) ii. Paper Book Volume-I (B) iii. Paper Book Volume-I(C) The documents filed as per paper book, Volume I(B) contains the following details; Volume – I.(B): 1) Copies of cash memo for F.Y. 2004-05 2) Copies of few purchases bills along with bank passbook of the suppliers. 3) Showing payments made to them.
6.1 That the appellant has filed the above documents during the course of assessment proceedings u/s. 143(3) r.w.s 254 have been mentioned by the AO at para 4 and para 5 of the assessment order dated 20.03.2013. As per the AIR information, the cash deposits in the saving bank account of the assessee during the financial year 2004-05 were Rs.25,78,000/-. The AO on verification of the bank statement for the same financial year found that the actual cash deposits in her account were Rs.27,68,032/- instead of Rs.25,78,000/- as reported in the AIR. Finally the AO estimated the net profit @8% of Rs.27,68,032/- which works out to Rs.2,21,442/-. 6.2 In view of the facts narrated at para 6 and 6.1 hereinabove, it is not a fit case for levy of penalty of Rs.25,000/- u/s. 271A of the Act. Accordingly, we delete it.
ITA 5817/MUM/2018/A.Y.2005-06 5 HARSHA PRAVIN SHAH 7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 15.11.2019