SRI.NATESH SUBRAMANYA JAYARAM ,MADIKERI vs. INCOME TAX OFFICER WARD-1, MADIKERI

O R D E R

Per Shri Laliet Kumar, Judicial Member

by the assessee are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.

2. That the notice issued u/s 274 of the Act is bad in law.

3. That the notice issued u/s 274 of the Act does not satisfy the requirements of section 274, as notice is vague and no details regarding concealment of income or furnishing of inaccurate particulars of income were furnished in the notice.

4. That the learned Commissioner of Income Tax (Appeals) erred in Page 2 of 5 law and on facts in upholding the penalty u/s 271(1)(c) of the Act even though the appellant had offered a bonafide explanation.

5. That the learned Commissioner of Income Tax (Appeals) ought to have considered the judgment of the Hon'ble Tribunal in the quantum appeal where the Hon'ble Tribunal has held only the gross profits on the omitted receipts have to be treated as income.

6. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in confirming the penalty even though the addition made by the Hon'ble Tribunal is purely on an estimate basis and penalty cannot be levied on such addition. Each of the above ground is without prejudice to one another and the appellant craves the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise any of the ground either before the hearing or at the time of hearing this appeal.”

Page 3 of 5 addition is justified only to the extent of GP @ 15%. He submitted that for such estimated addition, penalty is not justified. In support of this contention, he placed reliance on Tribunal order rendered in the case of Vijaykumar Mavjibhai Dodiya vs. ITO in dated 04.12.2017. He submitted a copy of this Tribunal order. He drawn our attention to para 8 of this Tribunal order and pointed out that in that case also, the Tribunal in quantum proceedings confirmed the addition to the extent of 10%. Under these facts, the Tribunal cancelled the penalty. As against this, the ld. DR of revenue supported the orders of authorities below. He also placed reliance on a judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Sri Durga Enterprises as reported in [2014] 44 taxmann.com 442 (Karnataka) and submitted that any mistake in the notice is taken care of by section 292B of IT Act. At this juncture, the bench pointed out to the ld. DR of revenue that in that case, the issue involved was regarding reopening u/s. 148 and not penalty u/s. 271 (1)(c) of IT Act. But in reply, ld. DR of revenue could not point out as to how this judgement is applicable in the present case.

Page 4 of 5 has been placed by ld. AR of assessee is also supporting this view. For ready reference, we reproduce Para 8 of this Tribunal order. “8. In the light of the above, let us examine the facts of the assessee's case. Assessee is a small trader engaged in manufacturing and trading of mechanical iron scale. He filed return of income declaring total income at Rs.1,47,690/-. This was assessed at Rs.27,40,320/- after taking into account a deposit of Rs.25,79,207/- found in the bank statement. Challenge to the addition on which penalty was imposed travelled up to the Tribunal, and the Tribunal considering facts of the case, made addition on the basis of estimated net profit at the rate of 10% of deposit receipts. Before the AO, in the penalty proceedings assessee explained that the above deposit did not belong to the assessee, but belonged to the HUF, and since HUF did not have assessable income and not required to maintain books of accounts, the same was not reflected in the return. Though the explanation of the assessee may not be convincing, it would not lead to the conclusion that the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. There must be a positive and cogent act of concealment on the part of the assessee, which is missing in this case. The provisions of section 271(1)(c) are not attracted in cases where income of the assessee is assessed on an estimate basis and addition is made on that basis. Even if the assessee is not able to substantiate the explanation, but his explanation is not lacking bona fide, and, therefore, we are of the view that it is not a fit where vigour of provisions of section 271(1) is attracted. Accordingly, we allow the appeal of the assessee and cancel the impugned penalty.”