MR. PRATAP SINGH BHANDARI,DEHRADUN vs. ITO, DEHRADUN

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ITA 5197/DEL/2015Status: DisposedITAT Delhi09 October 2017AY 2010-115 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a mere estimation of income at 8% does not automatically empower the AO to invoke Section 271(1)(c) in the absence of specific findings of concealment or inaccurate particulars with reference to the books of account. Therefore, the penalty cannot be sustained.

What were the facts?

The assessee, engaged in trading of fire detection/protection equipment and civil contracts, filed a return of income. During assessment, discrepancies were found, and the assessee agreed to have income assessed at 8% of total receipts to avoid disputes. The AO accepted this, rejected the books, and levied penalty under Section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) can be levied solely based on an estimated addition when there is no specific finding of concealment or furnishing of inaccurate particulars with reference to the assessee's books of account.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI K.N. CHARY

Hearing: 18.09.2017Pronounced: 09.10.2017

PER SHRI K.N. CHARY, JUDICIAL MEMBER

1.

This is an appeal by the assessee challenging the order dated 06.07.2015 in appeal no. 340/CIT (A)/DDN/2013-14 passed by the Ld. Commissioner of Income Tax (Appeals)- Dehradun (hereinafter for short called as the “Ld. CIT (A)”) on the following grounds:

1. “On the facts and circumstances of the case and in law, the Ld. CIT (A) has grossly erred in not appreciating the fact that the Assessing Officer itself mentioned in its assessment order that “I estimate the receipts of the assessee & apply a net profit rate of 8% of total turnover.

2. On the facts and circumstances of the case and in law, the Ld. CIT (A) has grossly erred in not appreciating the fact that the Assessing Officer did the assessment on the basis on its estimate not on surrender made by assessee.

3. On the facts and circumstances of the case and in law, the Ld.CIT (A) has grossly erred in upholding that surrender/voluntary disclosure did not prevent levy of penalty. The assessee never asked in appeal before the Ld.CIT (A) that penalty should not be levied on basis of surrender of income. The appellant craves leave to add, alter, amend, or delete any grounds as and when advised.” 2. Briefly stated facts are that the assessee is an individual dealing in the business of trading of fire detection/protection/suppression equipments and accessories and other contracts of civil nature with the Government to derive income. For the AY 2010-11 he filed his return of income on 15.10.2010 declaring a total income of Rs. 9,20,515/- but during the assessment proceedings the assessee was confronted with certain discrepancies in the books of account. By letter dated 21.12.2012 while offering an explanation in respect of the books of account the assessee came forward with a proposal that to avoid disputes and litigation it was agreeable for him to get the income assessed at 8% of the total receipts the rate which is applicable to civil works. He further stated that there was a sale of 87.50 lakhs during the year and the profit rate was already above the prevailing rate on retail trading. AO accepted the same, and while rejecting the books of account in view of the discrepancies and proceeded to estimate the income of the assessee at 8% of the total receipts and reached the income at Rs. 18 lacs. AO initiated proceedings u/s 271(1)(c) of the Act and concluded them by way of order dated 31.03.2010 by levying a penalty of Rs. 2,75,000/-.

Appeal preferred by the assessee on the ground that the penalty cannot be sustained when the addition was made by estimation of income by application of flat rate, was dismissed by the Ld. CIT (A), hence, this appeal.

3.

Ld. AR reiterated before us the same stand taken before the Ld. CIT (A). It is the argument of the Ld. DR that the books of account of the assessee were rejected because of the discrepancies and the income had to be estimated at 8% i.e. applicable to the civil contracts, as such, the penalty proceedings are sustainable.

4.

We have carefully gone through the record. In this matter on identifying the certain discrepancies in respect of the books of account, AO sought the explanation of the assesse and estimated the income at 8%. Here in this matter, there is no adjudication in the books of account in the light of the explanation of the assessee and the additions are not based on the entries in the books of account so as to reach a conclusion that the assessee suppressed any transaction amounting to concealment of income or furnishing of inaccurate particulars. In the absence of any specific finding pointing out the amount that was actually concealed or inaccurate particulars furnished, with reference to the books of account of the assessee, mere estimate of income of the assessee at 8% does not automatically empower the Assessing Officer to invoke the provisions u/s 271 (1)(c) of the Act. With this view of the matter, on facts, we are convinced that there is neither concealment of income nor is there furnishing of inaccurate particulars. In this case, as such, we find it difficult to sustain the orders of the authorities below, and accordingly we quash the same.

5.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 09.10.2017

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