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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI R.S. SYAL & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-2, Pune dated 07-06-2016 for the assessment year 2009-10 confirming levy of penalty on the addition of Rs.5,00,000/- sustained by the Tribunal in quantum appeal of the assessee.
2 ITA No. 2563/PUN/2016, A.Y. 2009-10
Shri Hari Krishan appearing on behalf of the assessee submitted that in scrutiny assessment proceedings the Assessing Officer made addition of Rs.10,40,000/- on account of suppressing of profits. In first appeal the addition was confirmed by the Commissioner of Income Tax (Appeals). The assessee carried the matter in second appeal before the Tribunal in ITA No. 149/PN/2014. The Tribunal after appreciating the facts of the case restricted the addition to Rs.5,00,000/- on ad hoc basis. Consequent to the addition penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) were initiated by the Assessing Officer. The Assessing Officer vide order dated 20-03-2015 levied penalty of Rs.3,72,800/- u/s. 271(1)(c) for concealment of income on the addition of Rs.10,40,000/-.
2.1 Aggrieved by the order levying penalty dated 20-03-2015, the assessee filed appeal before the Commissioner of Income Tax (Appeals). During the pendency of first appeal in penalty proceedings, the Tribunal vide order dated 13-05-2016 restricted the addition to Rs.5,00,000/-. The Commissioner of Income Tax (Appeals) confirmed levy of penalty to the extent of addition sustained by the Tribunal.
2.2 The ld. AR submitted that it is a well settled law that no penalty is sustainable on ad hoc additions.
On the other hand Shri M.K. Verma representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. In appeal, the
3 ITA No. 2563/PUN/2016, A.Y. 2009-10
assessee has assailed levy of penalty u/s. 271(1)(c) on addition of Rs.5,00,000/- in respect of loss of stock due to rain. The assessee is a wholesale trader of cigarettes and food items. During the period relevant to the assessment year under appeal there was decline in GP rate. The assessee explained that due to heavy rains and cyclonic winds the stock of the assessee was damaged hence, it was written off. The assessee filed affidavit before the Assessing Officer to this effect. The Assessing Officer disbelieved the explanation furnished by the assessee resulting in decrease in GP and NP. The ld. AR has pointed that the GP in subsequent period has again increased. The period relevant to assessment year under appeal was an exceptional year when there was fall in GP due to natural calamity. In quantum proceedings, matter travelled to the Tribunal. The Tribunal allowed part relief to the assessee by observing as under : “12. We find some force in the above argument of the Ld. Counsel for the assessee. When the assessee is not maintaining any quantitative details of stock and has valued the stock at the end of the year on physical verification the same takes care of the loss due to rain, if any. Further, the trading result of the subsequent years show that there is no such drastic fall. We therefore find some force in the submission of the Ld. Counsel for the assessee that there is no intension on the part of the assessee to suppress profit by making a false claim. However, it is also a fact that apart from affidavit, the assessee was unable to give any other supporting evidence to substantiate that there was loss of stock due to heavy rains. Considering the totality of the facts of the case and in the interest of justice, disallowance of Rs.5 lakhs on adhoc basis in our opinion will meet the ends of justice. We, therefore, restrict the disallowance on account of such loss of stock to Rs.5 lakhs as against Rs.10,40,000/- made by the AO and upheld by the CIT(A). The ground raised by the assessee is accordingly partly allowed.”
A perusal of the order of Co-ordinate Bench in assessee’s appeal in assessment proceedings show that the addition of Rs.5,00,000/- has been confirmed on ad hoc basis. The Commissioner of Income Tax (Appeals) has upheld levy of penalty u/s. 271(1)(c) to the extent of addition sustained by the Tribunal.
4 ITA No. 2563/PUN/2016, A.Y. 2009-10
It is a well settled law that no penalty u/s. 271(1)(c) is leviable on ad hoc additions. Thus, in view of facts of the case and settled position of law we are of considered view that levy of penalty in the present case deserves to be deleted. We hold and direct accordingly. Resultantly, the impugned order is set aside and the appeal of assessee is allowed.
In the result, the appeal of assessee is allowed.
Order pronounced on Thursday, the 25th day of October, 2018.
Sd/- Sd/- (R.S. Syal) (Vikas Awasthy) VICE PRESIDENT JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 25th October, 2018 RK आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Pune 3. 4. The Pr. C.I.T.-1, Pune ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रतत // True Copy// आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune