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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-I’ NEW DELHI
Before: SMT DIVA SINGH
Assessee by Sh. Rajesh Kr. Goel, Adv. Revenue by Sh.F.R.Meena, Sr.DR Date of Hearing 07.11.2016 Date of Pronouncement 04.01.2017 ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 28/01/2016 of CIT(A)-2, Gurgaon pertaining to 2008 – 09 assessment year wherein the penalty imposed u/s 271(1)(c) by the Assessing Officer of Rs.2,90,725/- was upheld in appeal by the CIT(Appeals).
The Ld.AR, Sh.Rajesh Kr. Goel inviting attention to the order passed by the ITAT in the quantum proceedings dated 21/09/2012 submitted that the addition of Rs.8,45,443/- made by the Assessing Officer was confirmed by the CIT(A) and it has been upheld by the ITAT rejecting the GP rate disclosed by the assessee at Rs.3.12 % and applying the GP rate of 10%. Inviting attention to the order passed in the quantum proceedings, it was submitted that reliance was placed upon the order in the case of Mahesh & Co. wherein a GP rate of 4.26% was disclosed which claim had been rejected. It was submitted that the reasoning taken for estimating the GP rate at 10% was that the purchases from M/s Millennium Beer Industries Limited could not be re-conciled by the assessee. Inviting attention to para 6 of the order passed by the ITAT, it was submitted that the assessee had argued that this was the first and the last year of business in this trade and thus due to his inexperience, a lower GP rate may have been earned. However, it was submitted that this submission was not accepted by the ITAT and while upholding the order of the CIT(A), it was noted the fact that “the assessee had not seriously submitted any explanation regarding difference in the account of M/s Millennium Beer Industries Ltd. and therefore there is every possibility that assessee might have inflated the purchases. Before Ld.CIT(A), the AR of the assessee did not appear to clarify anything.” Accordingly, relying upon CIT(A) vs Reliance Petro Products Private Limited (2010) 322 ITR 158 Supreme Court and CIT(A) vs Movie Industries Corporation (2010) 195 taxman 68 (P & H High Court), it was submitted that since admittedly the assessee being inexperienced and evidently ill advised failed to address the reconciliation but this ignorance and lack of awareness cannot be the basis for confirming the penalty.
2.1. The Ld. Sr.DR relied upon the impugned order.
The submissions of the parties have been heard. A perusal of the penalty order shows that in the absence of any explanation on behalf of the assessee as the assessee remains unrepresented, penalty was imposed as the additions made in the quantum proceedings were sustained in appeal by the CIT(A). In appeal, the decision was confirmed rejecting the sole submission of the assessee that penalty in an estimated addition cannot be levied. Reliance was placed upon CIT(A) vs Kalindi Rail Nirmaan Engineering Ltd (Delhi)
[2014] 365 ITR 304. On a consideration of the submissions of the parties before the Bench, I am of the view that the penalty imposed upon the assessee in the peculiar facts and circumstances of the case, cannot be sustained. A perusal of the order passed by the Co- ordinate Bench in the quantum proceedings evidences that the assessee accepting its ignorance and inexperience gave up the specific business in the year under consideration treating it as the first and the last year of its business. It is also seen that in the quantum proceedings, the Co-ordinate Bench found that the assessee though had offered some explanation but was found to have failed to offer “any serious explanation”. In these peculiar facts and circumstances, the benefit of availability of proper advise can be said to operate in favour of the assessee as looking at the quantum of penalty involved the assessee’s capability of seeking proper advise and consultation is self-evident. The fact that penalty and quantum proceedings are separated and distinct is a well-accepted settled legal position. Similarly, the fact that the addition is an estimated addition where reliance palced on Mahesh & Co. was not accepted makes out a reasonable claim that it is not a case either of filing inaccurate particulars nor of concealment income. Considering the explanation of the assessee, the case law relied upon and the overall facts and circumstances as recorded by the Co-ordinate Bench in the quantum proceedings, I am of the view that the penalty deserves to be quashed. The said order was pronounced in the open Court at the time of hearing itself in the presence of the parties.