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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI H. S. SIDHU & SHRI ANADEE NATH MISSHRA
per mtr instead of Rs.191.57 per mtr estimated by the survey team.
Thereafter, the CIT(A) estimated the value of three items at Rs.37.96 per mtr instead of Rs.59.48 per mtr estimated by the AO.
5.6 The Ld. Counsel of the assessee has also placed reliance on the judgment of the Hon'ble Allahabad High Court, Lucknow Bench in the case of Naresh Chand Agarwal vs. CIT 357 ITR 514, in which their Lordship after referring to the Supreme Court judgment of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158, and following the judgment in the case of CIT vs. Arjun Prasad Ajit Kumar 214 CTR 355 (Allahabad H.C.) has observed that no penalty u/s 271(1)(c) can be imposed with reference to the addition made on estimation basis. On the strength of these judgments, the counsel argued that the penalty of Rs.4,68,870/- under appeal is illegal and therefore deserves to be cancelled.
On the other hand, the Ld. DR, Sh. N.K. Bansal, did not controvert the arguments of the Ld. AR of the assessee that addition was made only on account estimation of value of three items in the stock inventory and not on account of any discrepancy in the quantity. However, the Ld. DR vehemently argued that the Assessee had failed to prove the value of the 8 three items of stock and therefore, penalty levied on estimate made on such three items was justified and relied upon the orders of the revenue authorities.
In response, Ld. AR has placed reliance on written submissions filed before CIT(A) in quantum appeal copy placed at pages 40-43 and purchase invoices placed at pages 79-81 of the paper book filed to substantiate value of three items of stock shown by the Assessee and argued for cancellation of penalty under appeal.
We have heard both the parties and perused the records, especially the orders of the authorities below and the Chart filed by the Ld. Counsel of the assessee, we find that the Chart filed by the Ld. Counsel of the assessee shows that addition of Rs.54,47,326/- had been made by the AO by estimating the value of three items of stock. In this behalf, the inventory of stock prepared during the course of survey conducted on 07/09/2006, copy placed at pages 82-90 of the paper book particularly inventory at Sr. No. 26, 47 and 154 at pages 86 and 88 proves that the AO and Ld. CIT(A) had only estimated the value of such three items as under:
Quantity of Rate per Rate estimated Rate estimated three items sq.mtr. shown by the AO by CIT(A) found during by the the course of assessee survey on 07/09/2006 43 x 2000 = Rs. 33.56 (refer Rs. 59.48 Rs. 37.96 86,000 (mtrs.) to page 86) (refer to page 86) 100 x 1000 = Rs. 27.97 Rs. 59.48 Rs. 37.96 9 1,00,000 (mtrs.) (refer to page (refer to page 86) 86) 12 x 200 = Rs. 3.32 Rs. 59.48 Rs. 37.96 2,400 (mtrs.) (refer to page (refer to page 88) 88)
8.1 We further find that the assessment order passed u/s 143(3) of the I.T. Act making the addition of Rs.54,47,326/- passed by the AO on account of alleged difference in the valuation of three items of stock.
8.2 We further note that in Ld. CIT(A)’s order in quantum appeal vide para 1 at page 6 Ld. CIT(A) observed that there was discrepancy quantity-wise in the inventory and the said matter had not been refuted by the Assessee either before the AO or before the Ld. CIT(A) are factually incorrect. According to AR, the Ld. CIT(A) did not dispute the stock quantity and vide para 2.8 at page 6, the Ld. CIT(A) only estimated the value of three items @Rs.33.56 per mtr. instead Rs.59.48 per mtr. as estimated by the AO.
8.3 We further note that against the Ld. CIT(A)’s order, both the Assessee and Revenue went in appeal and ITAT vide order dated 31/03/2011, upheld the order of CIT(A) by dismissing appeals of both the Assessee and the Revenue. The Revenue filed appeal before the Hon'ble Delhi High Court against ITAT order dated 31/03/2011, which was dismissed by Hon'ble High Court vide order dated 04/11/2011. The following are the observations of the Hon'ble High Court order dated 04/11/2011 :-
"We are not inclined to entertain the present appeal under Section 260A of the Income Tax Act, 1961 as the question raised is purely factual.
The Assessing Officer noticed that the during the survey
proceedings, the assessee had surrendered an amount of Rs.35.10 lacs for taxation as additional income for financial year 2006-07. There is no dispute about the same. The dispute pertains to value of zip fastener mentioned at serial
No.26 and 47 and 154. The Assessing Officer had taken the value of the zip fasteners of Rs.59.48 per meter The assessee's contention was that this figure was on the higher side and not substantiated by any material or evidence. After examining the factual and aspects and evidence the CIT(A) valued the zip fasteners at Rs.37.96 per meter. The said order has been upheld by ITAT. The reasons and grounds mentioned by the two appellate authorities are not perverse.
It is a reasonable view on the facts, material and evidence.
The reasoning does not require interference in an appeal u/s 260A of the Income Tax Act, 1961".
8.4 We note that the Hon’ble High Court’s vide its order dated 04/11/2011 was also considered by the AO while levying penalty. In our view the addition had been made only on account of dispute pertaining to value of zip fasteners mentioned at serial No.26 and 47 and 154 as observed by the Hon'ble High Court.
8.5 The findings of the AO for levying penalty that the Assessee failed to offer an explanation and hence, Explanation 1 to section 271(1)(c) was squarely attracted and the addition made in the assessment order in computing the income of the assessee shall be deemed to represent the income in respect of which particulars have been concealed is factually incorrect and legally untenable as explanation alongwith documentary evidence had been filed to substantiate the value of the three items because of which the AO estimated the value of three items at Rs.59.48
per mtr instead of Rs.191.57 per mtr estimated by the survey team.
Thereafter, the Ld. CIT(A) estimated the value of three items at Rs.37.96
per mtr instead of Rs.59.48 per mtr estimated by the AO.
8.6 Keeping in view of the facts and circumstances of the case, we are of the view that penalty on estimation of valuation of the said items are not leviable and deserve to be cancelled.
8.7 Our aforesaid view is fortified by the judgment of the Hon'ble Allahabad High Court, Lucknow Bench in the case of Naresh Chand Agarwal vs. CIT 357 ITR 514, wherein their Lordship after referring to the Supreme Court judgment of CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158, and following the judgment in the case of CIT vs. Arjun Prasad Ajit Kumar 214 CTR 355 (Allahabad H.C.) has observed that no penalty u/s 271(1)(c) can be imposed with reference to the addition made on estimation basis. On the anvil of these judgments, the penalty of Rs.4,68,870/- in dispute is illegal and therefore deserves to be deleted.
In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we are of the considered view that the assessee has not furnished inaccurate particulars of income and there are no findings of the Assessing Officer and the Ld. CIT (Appeals) that the details furnished by the assessee in his return are found to be inaccurate or erroneous or false. Accordingly, we delete the penalty in dispute made u/s. 271(1)(c) of the I.T. Act and quashed the orders of the authorities below and accordingly allow the appeal filed by the assessee.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 24/04/2017.