SURENDER SINGH,HARYANA vs. ITO, NARNAUL

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.

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)