SWASTIK UDYOG,JAIPUR vs. ITO, TONK

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 74/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke M/s. Swastik Udyog The ITO Vs. F-72, 73, Industrial Area, Newai Ward - Tonk Distt.Tonk Tonk LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAJFS 8181 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by: Shri Mahendra Gargieya and Shri Devang Gargieya, Advocate jktLo dh vksj ls@ Revenue by :Shri R.A. Verma, Addl CIT-. DR lquokbZ dh rkjh[k@ Date of Hearing : 03/03/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 03/04/2017 vkns'k@ ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT(A) dated 13-10-2016 for the assessment year 2009-10 raising therein following grounds of appeal. ‘’1. The impugned penalty order u/s 271(1)© of the Act dated 27-06-2012 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.

2 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . 2. The ld. CIT(A) erred in law as well as on the facts of the case in confirming the penalty u/s 271(1)(c) of the Act of Rs. 88,269/-. The penalty so imposed by the AO and confirmed by the ld. CIT(A) being totally contrary to the provisions of law and facts may kindly be deleted in full.

2.1 It is further noted that the ld. AR of the assessee filed following

modified grounds of appeal with the prayer to admit the same in place of

present grounds of appeal.

‘’1. The impugned penalty order u/s 271(1)© of the Act dated 27-06-2012 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.

3 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . being contrary to the provisions of law and facts kindly be quashed.’’

2.2 As per ITAT Rule 11, the assessee is not entitled except by leave of

the Tribunal, urge or be heard in support of any ground which is not said

in the memo of appeal. The modified ground as claimed by the assessee is

not a modification of the ground but it appears as a new ground which has

been taken in the form of Ground No. 4. The ITAT rule 11 is mentioned

as under:-

‘’11. The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground net set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule:

Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.’’

2.3 After hearing both the parties and perusing the materials available

on record, the application for modified ground is not entertained. It is

further noted that such ground No. 4 was not taken up by the assessee

before the ld. CIT(A). Hence, it is dismissed.

4 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . 3.1 Now the appeal of the assessee is being decided as taken in original

form No.36 by the assessee as under:-

‘’1. The impugned penalty order u/s 271(1)© of the Act dated 27-06-2012 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be quashed.

4.1 The Ground No. 1 & 3 of the assessee is general in nature which

need no adjudication.

5.1 Apropos Ground No. 2 of the assessee, brief facts of the case are

that the assessee filed the return of income declaring an income of

Rs. 5,02,080/- on 23-09-2009 and assessment u/s 145(3) was completed

on 2-12-2011 at an income of Rs. 7,87,740/- after making various

additions which includes addition on account of low yield from oil seed

at Rs. 2,80,237/-, disallowance of donation of Rs. 5,000/- and

disallowance of sales tax demand of Rs. 420/-. During the course of

5 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . assessment proceedings, the AO noticed that the assessee firm derives

income from manufacturing and trading of edible oils. The AO further

noticed that the assessee has not maintained the books of account

properly and verification of gross profit was not possible on the basis of

books of account produced thus the AO noted several defects in

maintenance of books of account like yield of oil could not be verified

from the stock register / and production register. The AO also noted that

the assessee did not produce the lab reports to justify the lower yield from

oil seeds processed by the assessee. The AO thus rejected the books of

account after considering the reply filed by the assessee and made

additions of Rs. 2,85,657/- . The AO further observed that the assessee

firm has furnished inaccurate particulars of income and thus the AO held

that it is a fit case for initiation of penalty u/s 271(1)© r.w.s. 274 of the

Act.

5.2 In penalty proceedings, the AO vide his order dated 27-06-12

imposed the penalty of Rs. 88,269/- by observing as under:-

‘’It is therefore, held that the assessee has deliberately and willfully furnished inaccurate particulars of its income and has tried to reduce income by Rs. 2,85,657/- . In accordance with Explanation 4 to Section 271, the tax sought to be evaded on this income comes to Rs. 88,269/-. Considering the facts and circumstances of the case, a penalty of Rs. 88,269/- @ 100% of the

6 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . tax sought to be evaded is hereby levied which is calculated as under:- ‘’1. Income sought to be evaded Rs. 2,85,657/- 2. The tax sought to be evaded on this income Rs. 88,269/- 3. Minimum penalty @ 100% of the tax sought to be evaded Rs. 88,269/- 4. Maximum Penalty @ 300% of the tax sought to be evaded Rs. 2,64,807/- 5. Penalty imposed Rs. 88,269/-

5.3 In first appeal, the ld. CIT(A) has confirmed the penalty by

observing as under:-

‘’5.2.12. In the present case, in assessment proceedings, the AO rejected the trading results declared by the AO appellant and estimated the gross profit. Before me, during appellate proceedings, it has been pleaded by the A.R. that no penalty can be levied for mere estimation and on issue which are debatable.

Perusal of penalty order u/s 271(1)© dated 27- 06-2012, reveals that during appellate proceedings, the AO found that the assessee had not maintained proper books of account on the basis of which gross profit could be determined. Moreover, the assessee was not ale to substantiate the low oil yield through substantial evidence. In view of the same, the AO rejected the books of account and proceeded to determine the profits u/s 145 of the Act. I thus, find the action of AO, in determination of correct profit, as justified. The present case is not just of mere estimation, without rational basis which was alleged by the appellant before me. The case therefore, clearly of suppression of material facts resulting in concealment of true profits.

5.2.13 The offence of concealment is a direct attempt to hide an item or a portion thereof from the knowledge of Income Tax Authorities. There is a strict liability on the assessee against concealment of particulars of income or for giving inaccurate particulars of income, while filing the return. The duty is enjoined upon a person to make a correct and complete disclosure of his or her income and it is only

7 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . when he/ she fails in his / her duty by not disclosing his/her income or part thereof, that he/ she conceals the particulars of his/her income. Similarly, therefore, if the disclosure made of particulars of income is incorrect, then also he/ she commits breach of his / her duty. In Ajay Jain vs. ACIT (2012) 34 CCH 006 Del Trib., it has been held that a very heavy onus is placed on the assessee to explain the difference between the assessed income and returned income.

5.4 During the course of hearing, the ld. AR of the assessee prayed for

deletion of penalty of Rs. 88,269/- sustained by the ld. CIT(A) u/s

271(1)(c) of the Act for which the ld. AR of the assessee filed the written

submission and the same has been taken into consideration.

5.5 On the other hand, the ld. DR relied on the orders of the authorities

below.

5.6 I have heard the rival contentions and perused the materials

available on record. It is noted from the assessment order that the assessee

firm derives income from manufacturing and trading of edible oil. During

the course of assessment proceedings, the AO noticed that the assessee

had not maintained books of account of properly and it was not possible

for the AO to verify the gross profit of the assessee from the books of

8 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . account produced by the assessee and thus he observed that there was

several defects in the maintenance of books of account. The AO observed

that yield of oil could not be verified on the basis of details maintained in

stock register / production register and the assessee firm could not

produce the lab reports to justify the lower yield from oil seeds processed

by the assessee firm. Thus the AO rejected the book results of the

assessee taking into consideration the reply filed by the assessee and

made an addition of Rs. 2,80,237/- . The AO further disallowed donation

expenses of Rs. 5,000/- and sales tax demand of Rs. 420/-. Conclusively,

the AO made an addition of Rs. 2,85,657/- with the observation that the

assessee has deliberately and willfully furnished inaccurate particulars of

its income and tried to reduce income by Rs. 2,85,657/-. Thus it is a fit

case for initiation of penalty proceedings u/s 271(1)© of the Act r.w.s.

274 of the Act. In penalty proceedings, the AO vide his order dated 27-

06-2012 imposed the penalty of Rs. 88,269/- taking into consideration the

reply of the assessee as well as the assessment order. In first appeal, the

ld. CIT(A) confirmed the penalty of Rs. 88,269/-. In appellate

proceedings, it is noted that the assessee had not maintained properly

books of account and thus the AO could not determine the exact gross

profit. It is also noted that the assessee could not produce the reason for

9 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . low oil yield. In view of these facts, the AO had no alternative except to

reject the books of account u/s 145 of the Act which also indicate that the

assessee has tried to suppress the material facts from the AO by not

producing the proper books of account as well as the reason for low oil

yield. Hence, in such a situation the lower authorities have confirmed the

imposition of penalty of Rs. 88,269/- u/s 271(1)(c) of the Act. The ld.

CIT(A) in his order has taken reference of decision of ITAT Delhi Bench

in the assessee of Ajay Jain vs. ACIT (2012) 34 CCH 006 wherein it is

held that a very heavy onus is placed on the assessee to explain the

difference between the assessed income and returned income. In this case,

the assessee had not maintained the proper books of account and gross

profit of the assessee firm could not be deduced by the AO and thus he

rejected the books of account u/s 145 of the Act. Further, the assessee has

not been able to justify the reasons for low yield of oil seeds processed by

it. Taking into considerations of the orders of lower authorities as well as

the written submission filed by the assessee, I find no reason to interfere

with the order of the ld. CIT(A) who has rightly sustained the penalty of

Rs. 88,269/- u/s 271(1)(c) rw 274 of the Act. Thus the appeal of the

assessee dismissed.

10 ITA No. 74/JP/2017 M/s. Swastik Udyog, vs. ITO, Ward- Tonk . 6.0 In the result, the appeals of the assessee is dismissed. The order is pronounced in the open Court on 03 -04-2017.

Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03 /04/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s. Swastik Udyog, Tonk izR;FkhZ@ The Respondent- The ITO, Ward- Tonk 2. 3. vk;dj vk;qDr¼vihy½@ CIT(A). vk;dj vk;qDr@ CIT, 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No.74/JP/-2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत