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Income Tax Appellate Tribunal, DELHI BENCHES: ‘A’, NEW DELHI
Before: SHRI G.D.AGRAWAL, HON’BLE & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
This appeal is preferred by the assessee against the order dated 01.10.2014 passed by the Ld. Commissioner of Income Tax (Appeals)-28, New Delhi for the Assessment Year (A.Y.) 2008-09,
ITA 96/Del/2015 A.Y.:2008-09 Sh. Ajit Singh Bagga vs. ACIT wherein, vide the impugned order, the Ld.CIT(A) has upheld the imposition of penalty of Rs.4,33,386/- u/s 271(1)(c) of the Income Tax Act, 1961 (‘the Act', for short).
The brief facts of the case are that the assessee filed the return of income declaring income of Rs.20,17,980/- and the assessment was completed u/s 143(3) of the Act at an income of Rs.36,70,920/- after making an addition of Rs.12,75,042/- by rejecting books of accounts and applying Net Profit rate of 8% as against the declared Net Profit rate of 4.96% and making a further addition of Rs.3,77,895/- by invoking provisions of Section 68 of the Act. The quantum addition was confirmed by the Ld. CIT (A) and the penalty was also imposed on the addition pertaining to estimated increase in the Net Profit rate. The assessee’s appeal against the penalty was dismissed by the Ld. CIT (A) against which the assessee is now before the ITAT.
None was present on behalf of the assessee when the appeal was called out for hearing, nor was any application for adjournment received on behalf of the assessee. However, looking
ITA 96/Del/2015 A.Y.:2008-09 Sh. Ajit Singh Bagga vs. ACIT into the facts and circumstances of the case, we are proceedings to decide this appeal on merits ex parte qua the assessee.
The Ld. Sr. D.R. submitted that the A.O. had noticed the defects in the books of accounts as there was non-production of the muster roll, non-maintenance of purchase register and non- maintenance of stock register and in such a situation the A.O. had no option but to reject the books of accounts and estimate the Net Profit at the rate which is prescribed by the Act under the presumptive method of taxation for the Civil Contractors. Reliance was placed on the judgement of Hon’ble Madras High Court in the case of CIT vs. Balasubramaniam and Bros reported in 152 ITR 529 (Mad.), wherein the Hon’ble Madras High Court had upheld the imposition of penalty which was based on estimated additions.
We have heard the Ld. Sr. DR and have also perused the material placed on record. It is seen that the assessee had submitted before the Ld. CIT (A) that the accounts were audited under the provisions of Section 44 AB of the Act, but since the Chartered Accountant of the assessee had passed away just
ITA 96/Del/2015 A.Y.:2008-09 Sh. Ajit Singh Bagga vs. ACIT before the assessment proceedings had started, complete books of accounts could not be produced before the A.O. It was also submitted before the Ld. CIT (A) that no adverse comment had been given by the auditor in the Tax Audit Report filed by the assessee. It is seen from the perusal of the impugned order that the Ld. CIT (A) has not given due consideration to these submissions of the assessee and has simply agreed to the findings of the A.O. while passing the penalty order. We find that there is no independent examination of the issue by the Ld. CIT (A). It is settled law that penalty is not imposable in each and every case where the quantum addition has been upheld. The Ld. Sr. D.R. has placed reliance on the judgement of Hon’ble Madras High Court in the case of CIT vs. Balasubramaniam and Bros. (supra) but we find that this case is distinguishable on facts as in that case the assessee had failed to disclose the sales of import licences and an estimate had to be made regarding suppressed sales. Here, in the present appeal, addition was in respect of profit estimation. We have perused the orders of the authorities below and there is nothing to show that the assessee has concealed its income or furnished inaccurate particulars of income. There can be several reasons for variation in the Net
ITA 96/Del/2015 A.Y.:2008-09 Sh. Ajit Singh Bagga vs. ACIT Profit Ratio and it is undisputed that the books of the assessee were duly audited. Further, the mere fact that the addition has been accepted or is confirmed in quantum proceedings cannot be a conclusive finding for imposition of penalty. The Hon’ble Calcutta High Court in case of Durga Kamal Rice Mills vs. CIT reported in (2004) 265 ITR 25 (Cal.) has held that quantum proceedings are different from penal proceedings. The Hon’ble Kerala High Court in CIT Vs. P.K. Narayanan reported in (1999) 238 ITR 905 (Ker.) has held that despite the addition being confirmed by Tribunal in the quantum proceedings, the penalty can still be deleted by the Tribunal, if the facts justify. In the instant case, the addition has been made only on the basis of estimate made by the A.O. It is settled legal position that when income is estimated, then there can be no question of imposing penalty u/s 271(1)(c) of the Act. The Hon’ble Delhi High Court in CIT Vs. Aero Traders Pvt. Ltd. reported in (2010) 322 ITR 316 (Del.) has held that no penalty u/s 271(1)(c) can be imposed when income is determined on estimate basis. A similar view has been taken by the Hon’ble Punjab and Haryana High Court in Harigopal Singh vs. CIT reported in (2002) 258 ITR 85 (P&H) and the Hon’ble Gujarat High Court in CIT Vs. Subhash Trading Co.
ITA 96/Del/2015 A.Y.:2008-09 Sh. Ajit Singh Bagga vs. ACIT reported in 221 ITR 110 (Guj.). It is apparent that the bedrock of instant penalty is the estimate of profit and the same cannot be sustained. The penalty is, thus, ordered to be deleted.
In the result appeal filed by the Assessee stands allowed. Order pronounced in the Open Court on 28th June, 2018. Sd/- Sd/- (G.D.AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER Dt. 28th June, 2018 *manga