Loading judgment…
No AI summary yet for this case.
Before: Shri Duvvuru RL Reddy & Shri S. Jayaraman
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
Both the appeals filed by the assessee are directed against the orders of the ld. Commissioner of Income Tax (Appeals)-II/3, Coimbatore dated 30.07.2013 & 28.12.2015 relevant to the assessment year 2008-09 passed under section 143(3) as well as under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short]. First we shall take quantum appeal for adjudication.
Both the appeals filed against quantum addition as well as penalty levied under section 271(1)(c) of the Act by the assessee are delayed by 11 days and 111 days respectively, for which, the ld. Counsel for the assessee has filed a petition in support of an affidavit for condonation of the delay, to which; the ld. DR has not raised any serious objection. Consequently, since the assessee was prevented by sufficient cause, the delays in filing of both the appeals are condoned and the appeals are admitted for adjudication.
Brief facts of the case are that the assessee is an individual his filed return of income for the assessment year 2008-09 admitting income of ₹.1,94,760/-. The case of the assessee was selected for scrutiny and after considering the submissions of the assessee against various notices, the assessment under section 143(3) of the Act was completed by assessing total income at ₹.39,89,960/- after making addition of ₹.11,79,120/- under section 68 of the Act as well as disallowance of expenses at ₹.26,16,198/-. On appeal, the ld. CIT(A) dismissed the appeal of the assessee.
On being aggrieved, the assessee is in appeal before the Tribunal and challenged the confirmation of addition of ₹.11,79,120/- being the introduction of capital in the business as well as differences in claiming expenses by estimating the income @ 2% on the turnover being ₹.26,16,198/-. The ld. Counsel for the assessee has submitted that the specific ground raised before the ld. CIT(A) that the Assessing Officer while rejecting the books of account ought to have been considered that the credit of ₹.11,79,000/- credited in the books of account is also a part of the addition of ₹.26,16,198/- has not been adjudicated and prayed that the additions should be deleted. On the other hand, the ld. DR supported the orders of authorities below.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has introduced cash credits of ₹.11,79,120/-. Since the assessee could not produce the source of this credit, the AR of the assessee agreed to the addition of ₹.11,79,120/- during the course of assessment proceedings and accordingly, the Assessing Officer made addition of ₹.11,79,120/- under section 68 of the Act. Further, against the claim of various expenses, since the assessee was not able to substantiate properly, the AR of the assessee agreed for estimating the income @ 2% on the turnover and also agreed to pay the resultant tax demand. The turnover of the assessee during the year was ₹.21,59,18,234/- and 2% thereof works out to ₹.43,18,365/-. Out of this, the assessee has already admitted ₹.17,02,167/- and the balance works out to ₹.26,16,198/- was brought to tax. On appeal, the ld. CIT(A) dismissed the appeal filed by the assessee. Before the Tribunal, the ld. Counsel for the assessee has submitted that the assessee has raised a specific ground before the ld. CIT(A) at ground No.3 that the Assessing Officer while rejecting the books of account ought to have been considered that the credit of ₹.11,79,000/- credited in the books of account is also a part of the addition of ₹.26,16,198/- and the same has not been adjudicated. On perusal of the appellate order, we find that the ld. CIT(A) has not adjudicated the above specific ground. Thus, we remit the matter back to the file of the ld. CIT(A) to adjudicate the above grounds in accordance with law after allowing an opportunity of being heard to the assessee and to pass speaking order.
Against the confirmation of quantum additions, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act by issuing a letter posting the penalty hearing. Since there was no reply to the above letter, considering the facts and circumstances, the Assessing Officer levied penalty of ₹.12,83,815/- under section 271(1)(c) of the Act. On appeal, after considering the submissions of the assessee, the ld. CIT(A) confirmed the penalty levied under section 271(1)(c) of the Act. On being aggrieved, the assessee preferred an appeal against levy of penalty. By relying upon various case law including the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. K. Meenakshi Kutty 258 ITR 494, the ld. Counsel for the assessee has submitted that penalty cannot be levied where additions are made on estimate basis and prayed for deleting the penalty levied under section 271(1)(c) of the Act. On the other hand, the ld. DR relied on the orders of authorities below.
6.1 We have heard rival contentions, perused the materials available on record and gone through the orders of authorities below including various decisions filed by the assessee. Based on the quantum additions, the Assessing Officer levied penalty under section 271(1)(c) of the Act on the ground that had there been no scrutiny in this case, the concealed income would have gone untaxed and moreover the assessee has not paid the tax demanded and no reason was given for the non-payment of the same.
6.2 In this case, since the assessee was not able to substantiate properly the expenses claimed, the AR of the assessee has agreed for estimating the income @ 2% on the turnover. The turnover of the assessee was ₹.21,59,18,234/- and 2% thereof works out to ₹.43,18,365/-. Out of this, the assessee has already admitted ₹.17,02,167/- and balance works out to ₹.26,16,198/- and the same was brought to tax. From the above, it is clear that the addition was made purely based on estimate basis. In the case of CIT v. K. Meenakshi Kutty (supra), the Hon’ble Jurisdictional High Court has categorically held that penalty cannot be levied where additions are made on estimate basis. In view of the direct decision on this issue, the penalty levied under section 271(1)(c) of the Act stands deleted.
In the result, the appeal filed by the assessee in is allowed. Order pronounced on the 13th November, 2019 at Chennai.