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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, AM & SHRI G. MANJUNATHA, JM
O R D E R
PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 09.02.2015 passed by the Commissioner of Income Tax (Appeals)-52 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the AY. 2010- 11 in which the penalty levied by the AO has been confirmed.
The assessee has raised the following grounds: -
1. The Commissioner (Appeals) erred in confirming penalty under section 27I(l)(c) of Rs.20,78,458/- invoking Explanation-5 A to section 271(1) (c) of the IT. Act 1961,
2. The Commissioner (Appeals) failed to appreciate that the income of Rs,71,53f28Q/- is added to the income of (he assessee on estimation of gross profile at 26.40% of the goods sold,
ITA. No.2711/M/15 A.Y.2010-11
3. The Commissioner (Appeals) failed to appreciate that Explanation-5A to section 271(1) (c) of the Act provides that income offered in the return of income subsequent to the search would also amount to concealment or furnishing of inaccurate particulars of such income and thus it prevents the assessee from contending that income is already offered in the return of income and hence there is no concealment or furnishing of inaccurate particulars of income.
The Commissioner (Appeals) failed to appreciate that Explanation-5A to section 27I(l)(c) of the Ac: does not prohibit the assessee from contending that the income offered in the return of income filed subsequent to the search is based on estimate of gross profit allegedly earned on the goods sold and therefore, there is no concealment of income or furnishing of inaccurate particulars of income. 5. The Commissioner (Appeals) erred in observing that further addition of Rs. 4,09,0007- has been made by the A.O. on the basis of documents only. 6. The Commissioner (Appeals) failed to appreciate that the addition of Rs. 4,09,0007/- was made by the A.O. by estimating the gross profit at 26.40% of the goods sold as against 25 20% adopted by the assessee while offering the income. 7. The Commissioner (Appeals) failed to appreciate that in The course of the search the alleged stock register was found for the months of January to March 2010 and no material was found for the earlier period of nine months and therefore, income voluntarily offered for the said period of nine months cannot be said lo have been concealed as there was no material found in the course of the search for the said income. 8- The order of (he Commissioner (Appeals) confirming the penalty is bad in law and without jurisdiction 9. Your appellant craves leave to add it to, alter, amend or delete any of the foregoing grounds of appeal.”
The brief facts of the case are that the search seizure action was taken on the Zamkudi Group on 09.10.2010. The assessee was the proprietor of M/s. Zamkudi Fashions. The assessment order u/s 143(3) r.w. 153A of the I.T. Act, 1961 was passed on 20.03.2013 assessing the total
ITA. No.2711/M/15 A.Y.2010-11 income to the tune of Rs.71,53,280/-. During the course of search and seizure, the assessee undisclosed an amount of Rs.63,54,000/- as his undisclosed income from business. The residential premise of the assessee was covered u/s 132 of the Act and the business premise was also covered u/s 133A of the Act. The undisclosed income was declared by the assessee on account of estimated gross profit on the unaccounted sales. These sales were made by the assessee out of his regular books. During the course of the search and survey action, certain documents were found and based upon the said documents, the assessee estimated the gross profit on such unaccounted sales which was declared in the return of income filed u/s 153A of the I.T. Act, 1961. The penalty proceeding u/s 271(1)(c) of the Act was initiated and the penalty to the tune of Rs.20,78,458/- was levied. The assessee filed an appeal before the CIT(A) who confirmed the said penalty, therefore, the assessee has filed the present appeal before us.
ISSUE NOS 1 TO 6:- 4. We have heard the arguments advanced by the Ld. Representative of the parties and perused the record. All the issues are in connection with confirmation of the order of the AO to levy the penalty. The Ld. Representative of the assessee has argued that the penalty has wrongly been levied by the AO and confirmed by the CIT(A). Before going further, we deemed it necessary to advert the facts of the case on record. The assessee is proprietor of Zamkudi Fashions and filed his return of income on 24.09.2010 declaring total income to the tune of Rs.11,81,599/-. Subsequently, a search and seizure action was carried out in the business premise of M/s. Zamkudi Fashions P. Ltd. A-2, Shree Vallab Shopping
ITA. No.2711/M/15 A.Y.2010-11 Centre, Borivali (W) as well as the residential premises of the assessee on 09.10.2010. A diary was taken into possession from the premises of Zamkudi Fashions P. Ltd in which entries recorded for the period w.e.f. January to March, 2010. Thereafter, a notice u/s 153A of the Act was issued and served upon the assessee and the assessee filed the return of income on 08.11.2011 declared total income to the tune of Rs.67,44,280/-. The assessee declared the estimate gross profit of Rs.63,54,000/- which was unaccounted while assessing the income and filing the return. The assessee took the average cost of per shirt @ 235 and the gross profit was assessed to the tune of Rs.63,53,741/- which was @ 25.20% of the gross profit. The Assessing Officer accepted the return filed by the assessee but gross profit was assessed @ 26.40% rejecting the claim of the assessee. A total income of the assessee was assessed to the tune of Rs.71,53,280/-. The assessee did not prefer the appeal. Thereafter the penalty proceeding was initiated. The contention of the assessee is that in the return of income u/s 143(3) r.w. 153A of the Act, the assessee disclosed the income to the tune of Rs.63,54,000/- and did not conceal the income and the return filed earlier u/s 139(1) of the Act become non-ets, therefore, in the said circumstances, the penalty is not leviable in view of the decision in the case of CIT Vs. B.G Shirke Construction (ITA. No. 1392 & 1531 of 2014, dated 06.03.2017) (Bombay High Court) and Pr. CIT Vs. Neeraj Jindal (2017) 79 taxmann.com 96) Delhi High Court. It is also argued that the addition on account of estimation of gross profit @26.40% instead of 25.20% doesn’t amount to concealment of income. Therefore, in the said circumstances, the penalty is not leviable in view of law settled in Smt. Usha Ashokkumar Shah Vs. DCIT in & CIT Vs.
ITA. No.2711/M/15 A.Y.2010-11 Aarkay Saree Museum (187 ITR 147). On the other hand, the Ld. Representative of the Department has refuted the said contention. The factual position is not in dispute which has been discussed above. The assessee filed original return of income on 24.09.2010 u/s 139(1) of the Act. A search and seizure action was carried out on 09.10.2010. The original return of income filed u/s 139(1) of the Act became abate. Subsequently, the assessee filed the return of income in pursuance of notice u/s 153A of the Act on 08.11.2011 declaring total income to the tune of Rs.67,44,280/-. Thereafter, the assessment order was passed u/s 143(3) r.w.s 153A of the Act on 20.03.2013 raising the addition of Rs.4,09,000/- against the income declared by assessee of Rs.63,54,000/- by estimating the gross profit @ 26.40% (whereas the assessee adopted 25.20%). The return of income filed on 24.09.2010 u/s 139(1) of the Act was nowhere in existence as abated and in the new return of income filed u/s 143(3) r.w.s. 153A of the Act on 20.03.2013. In the said circumstances it is apparent that it is not a case of furnishing of inaccurate particulars of income and concealment of any income. The slight change in income on account of adopting the profit ratio on gross profit @ 27.60% nowhere invoke the right to levy the penalty. When the inaccurate particulars in the return of income has not been furnished nor concealed any income specific in the circumstances when the earlier return has been abated therefore no penalty is leviable in view of the law settled in the case of CIT Vs. B.G Shirke Construction (ITA. No. 1392 & 1531 of 2014, dated 06.03.2017) (Bombay High Court). It is held that: -
ITA. No.2711/M/15 A.Y.2010-11
1.1. In the present facts for the subject assessment years it is an undisputed position that the pending assessment before the AO consequent to return filed u/s 139(1) of the Act for the subject assessment years had abated. This is on account of the search and as provided in second proviso to section 153A(1) of the Act. The consequence of notice u/s 153A(1) of the Act is that assessee is required to furnish fresh return of income for each of the sic assessment years in regard to which a notice has been issued. It is this return which is filed consequent to the notice which would be subject of assessment by the Revenue for the first time in the case of abated assessment proceedings. Consequent to notice u/s 153A of the Act the earlier return filed for the purpose of assessment which is pending would be treated as non est in law…..
The Hon’ble Tribunal in the case of Parag M. Sanghvi Vs. DCIT (ITA. No. 1232 to 1235/M/2012, dated 23.11.2015 has also held that: - “2.2 If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, conclusion drawn in the aforesaid order of the Tribunal and the assertions made by the Ld. respective counsels, if kept in juxtaposition and analysed, we note that the returned income filed u/s 153A of the Act was accepted by the AO and there was no variation in the assessed income vis a vis returned income, therefore, following the aforesaid case of the Tribunal dated 01.09.2015, who is the relative of the assessee, as claimed by Ld. AR and considering the decision of the Jodhpur Bench in Devidas Sukhani Vs. DCIT 158 TTJ 42 and Nagpur Bench in DCIT Vs. Purti Sakhani Vs. DCIT 158 TTJ 12, Punen Bench in Smt. Pramila D. Asthekar Vs. ITO (154 TTJ 46) (Pune Trib.) 61 SOT 113 Pune, we find merit in the argument of the assessee and allow the appeal of the assessee on the ground that no addition was made in order u/s 143(3) r.w.s. 153A of the Act for A.Y. 2003-04,
ITA. No.2711/M/15 A.Y.2010-11 2005-06 and 2006-07. The Ld. AO is directed to delete the penalty.”
In the case of Pr. CIT Vs. Neeraj Jindal (2017) 79 taxmann.com 96 ( Delhi High Court has also held that:- “2.1 Thus, it is clear that when the AO has accepted the revised return filed by the assessee u/s 153A, no occasion arises to refer to previous return filed u/s 139 of the Act. For all the purposes, including for the purpose of levying penalty u/s 271(1)(c) of the Act, the return that has to be looked at is the one filed u/s 15 3A…. What is clear from this is that Section 153A is in the nature of a second chance givien to the assessee, which incidentally gives him an opportunity to make good omission if any, in the original return. Once the AO accepts the revised return filed u/s 153A, the original return u/s 139 abates and becomes non-est. Now, it is trite to say that the “concealment” has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty u/s 271(1)(c) what has to be seen is whether there is any concealment in the return filed by the assessee u/s 153A, and not vis a vis the original return u/s 139.”
Taking into account of above facts and circumstances and in view of the law relied by the Ld. Representative of the assessee, we are of the view that the penalty is not liable to be sustainable in the eyes of law. Moreover, upon the disclosure of the income of the assessee, the Assessing Officer assessed the income on estimation basis which nowhere leads to levy the penalty in view of the law settled in Smt. Usha Ashokkumar Shah Vs. DCIT in & CIT Vs. Aarkay Saree Museum (187 ITR 147) & Anant Shelters Pvt. Ltd. Vs. ITO in ITA. No. 7473/M/2011 & CIT Vs. Aarkay Saree Museum (187 ITR 147). In the said circumstances, we are of the view that the finding of the CIT(A) is wrong
ITA. No.2711/M/15 A.Y.2010-11 against the law and facts, therefore, we set aside the same and delete the penalty. Accordingly, we allowed the appeal of the assessee.