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Income Tax Appellate Tribunal, DELHI BENCH “SMC” NEW DELHI
Before: SHRI B.P. JAIN
PER B.P. JAIN, ACCOUNTANT MEMBER:
These two appeals of different assessees as mentioned herein above arise from two different orders of ld. CIT(A) dated 31.3.2016 and for the A.Y. 2012-13.
The appeals are in respect of the penalty levied @ 200% in both the appeals. It was brought my notice by the ld. counsel for the assessee Dr. Rakesh Gupta, Advocate that the issue is identical to the issue in the case of Mr. Rajender Singh vs. ITO for the same assessment year in and 4011/D/2016 vide order dated 7.3.2017. Therefore it was prayed that whatever the order has been done by the Tribunal in the case of Rajender Singh, the same is to be followed in the present cases.
The ld. DR conceded to the submissions of Dr. Rakesh Gupta.
I have heard the rival contentions and perused the facts of the case. The issue in the present cases are identical as in the case of Rajender Singh (supra) and for the sake of convenience the order of Rajender Singh (Supra) is reproduced herein below:- “The brief facts of the case are that :-
It has been observed by the A.O. that the Appellant enjoys Page 2 of 7 income from contractual business. During the year Appellate declared total receipts from contractual business at Rs. 22,95,3000/- on which net profit at Rs. 1,83,600/- shown on presumptive basis under section 44AD of the Act and net profit was disclosed @ 8%. The A.O. has observed that the Appellant was specifically asked to justify the low NP rate disclosed from contractual business as compared to other assessee shown as 13% to 15% in that areas by the A.O. the A.O. observed that the Appellant has stated that he runs contractual business on small scale only for different department of Uttarakhand, moreover he does not maintain any book account and vouchers for his business and it was argued by the Appellant that proper books of accounts and vouchers have not been maintained, therefore, he is not in a position to produce bills/vouchers/ receipts in their support of respective expenses. However, to buy peace of mind he agrees for application of Net Profit rate at 12% on contractual receipts. In this view of the facts the A.O. imposed net profit from contractual business of total receipt Rs. 22,95,300/- by applying NP rate of 12% which works out to Rs. 2,75,500/- giving extra profit of Rs. 91,900/- (Rs. 2,75,500/- - Rs. 1,83,600/-) and added the same to the assessee’s income.
4. The ld. CIT (A) sustains the net profit at 8% by giving the following observations:- “The submissions of the Appellant as above have been considered. It is however seen from the Assessment order that the Appellant was having business income and it was a no accounts case. Although income has been disclosed u/s 44AD, however in Assessment proceedings the Appellant agreed to Assessment at an Net Profit of 12%, which is clearly mentioned in the order by the A.O. Section 44AD also provides for showing income at higher amount than 8% on option of the Assessee. Here the Appellant has also not given any satisfactory explanation why after the Page 3 of 7 amount was agreed for addition during assessment proceedings, now the same is not justified. Accordingly its contention cannot be accepted and the addition made by the A.O to the Net profit is confirmed.”
5. As regards the second addition the brief facts in this case are as under:- “It has been observed by the A.O that during the year the Appellant has withdrawn Rs. 60,000/- in all to meet his personal investment and day to day house hold expenses, social function, on children education etc. Further that it was submitted by the Appellant that his family consists of himself, wife, two sons who are studying in local school, he got small family and, therefore, drawing of Rs. 60,000/- is adequate to meet his family’s daily need. The submission put forth by the Appellant was not accepted by the A.O and he held that in the present scenario day to day living cost, social function, children education is very high even for average families. Appellant got four member- family having two sons school going, then Appellant’s house hold expenses are apparently inadequate. The A.O observed that when the Appellant was pointed out high cost of living and low house hold expenses, then the he ultimately agreed for an Rs. 10,000/- per month i.e (1,20,000 - 60,000 = 60,000) addition of Rs. 60,000/- to his total income to cover up possible leakages towards, if any, towards house hold expenses.”
6. The ld. CIT (A) confirmed the action of the Assessing Officer with regard to the addition on account of house hold expenses.
7. I have heard the rival contentions and perused the facts of the case. Even though the assessee has agreed for the addition and to comply the net profit @ 12% but the same was brought down to 8% by the ld. CIT(A) when the same was contested before him. In fact no material has been brought on record by Page 4 of 7 the Assessing Officer or by the ld. CIT (A) to comply such a rate of net profit at 8%. No comparable cases and no past results have been brought on record and therefore the addition is purely surmises and conjectures and no addition is called for on this account and addition so sustained by the ld. CIT (A) is directed to be deleted.
As regards the confirmation of addition on account of house hold expenses, the Assessing Officer has made the addition purely on surmises and conjectures and without bringing any material on record and therefore such confirmation of addition by the ld. CIT (A) is bad in law in the absence of any cogent reasoning and material brought on record. Thus both the additions i.e. trading additions and house hold additions are on estimation basis and therefore the same are directed to be deleted. Accordingly the appeal of the assessee in is allowed.
Now we take the case in with regard to the levy of penalty which is @ 200% which is being contested only on the trading additions. The ld. CIT (A) deleted the penalty for addition on account of house hold expenses.
As regards the issue in the case of penalty, since the addition in the quantum has been deleted, the penalty does not survive and therefore the penalty so confirmed by the ld. CIT(A) is directed to be quashed on the said ground and appeal of the assessee is allowed.
Though it was argued that the penalty has been levied including the returned income and my attention was invited at assessment order page 13 and penalty order page 2, which shows the non application of mind. The ld. counsel relied upon decision in the case of Smt. Srilekha Dhamani vs. DCIT reported 2015 175 TTJ 332, Mumbai.
Respectfully following the same no penalty can be levied in such circumstances and facts of the case. The Assessing Officer has not recorded the satisfaction was brought to our notice and reliance was placed in the case of CIT vs. Triveni Engineering Industries Pvt. LTd. (2014) 369 ITR 360 (Allahabad) in such circumstances and facts of the case i.e. due to non application of mind of the authorities below, not recording the satisfaction and estimated additions as discussed above the penalty on merit or so cannot be levied and penalty so levied is directed to be deleted.
In the result, both the appeals of the assessee in & 4011/Del/2016 are allowed. ”
Following the order in the case of Rajender Singh (supra) this identical issue is applicable in the present cases. Accordingly, the penalty so levied is directed to be deleted in both the appeals.
In the result, both the appeals of the assessee in & 3521/Del/2016 are allowed.
Pronounced in the open court on 09.03.2017.