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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-3’ NEW DELHI
Before: SHRI H. S. SIDHU
ORDER
PER H.S. SIDHU, JM
1. This appeal is filed by the Assessee against the Order dated 25.5.2016 passed by the Ld. CIT(A)-13, New Delhi relating to Assessment Year 2011-12 on the following grounds:-
That the assessment order passed by learned CIT (A) is illegal, d in law and not maintainable on the facts and circumstances of the case.
That the Ld. Assessing officer has assessed tax @ 10% gross receipts of Rs.1,02,11,753/- on estimated basis assessment U/s 143(3) of the Income Tax Act, 1961. The assessee has not challenged the order of assessment levying tax and interest thereon and paid tax and interest amounting to Rs. 3,05,000/- as on 30/04/2015 that by itself would not be sufficient for the authorities either to initiate penalty proceeding or impose penalty three times of normal Tax of Rs. 1,60,015/- amounting to Rs. 4,80,045/- which is without any basis and without bringing any fresh material or records.
3. That the imposition of penalty even if the tax liability is admitted is not automatic. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law.
That the Ld. A.O. has issued notice u/s 274 of the Act, does not specifically mentioned whether it is for concealment of income or for furnished of incorrect particulars of income. 5. That the applicant may be permitted to add more points at the time of hearing. 2. The brief facts of the case are that the return of income was filed on 07.12.2011 disclosing a total income of Rs.2,10,OOO/-. The declared source of income was Other Sources. During scrutiny assessment proceedings, the AO enquired into the sources of cash deposited in the bank a/c mounting to Rs.1,02,11,753/- during the relevant previous year. The assessee filed a "revised" return before the AO on 19.11.2013, claiming that the cash deposits were out of turnover of Rs.1,08,18,106/- from her proprietary business of trading in cloth/grey fabric. An audited balance sheet was submitted alongwith it. The AO held that the "revised" return could only have been filed before the expiry of one year from the end of the relevant assessment year, or before the completion of the assessment, whichever is earlier, i.e. before 31.03.2013. Hence, the so-called revised return was treated as non est. The assessee was directed to produce the books of account from which the audited financial statements had supposedly been prepared. The AR submitted a letter on 31.03.2015 to claim that the books of account were lost on the way to the Income Tax Office. After considering all these facts, the AO held that the cash deposits in the bank account was the undisclosed business turnover of the assessee. He applied a net profit rate of 10% to the total deposits of Rs.1,02,ll,753/- o arrive at a profit from business of Rs.10,21,175/-. He set off the income of Rs.2,10,OOO/- already declared, and made an addition of Rs.8,ll,175/-. The AO initiated penalty proceedings u/s 271(1)(c) for furnishing of 2 inaccurate particulars of income. The appellant did not contest this assessment order in appeal. Thereafter, in response to the show cause notice of penalty u/s 271{1)(c) the assessee submitted that penalty could not be initiated on a protective assessment. As the assessment in question had not been framed on a protective basis, the AO found no merit in this argument. It was held in the order of penalty that the return was filed disclosing only income from Other Sources of Rs.2,lO,OOO/- whereas there were cash deposits of Rs.l,02,ll,753/- in her bank account. It was only after detection by the department that the asseessee admitted to carrying on a proprietary business of trading in cloth. It was held that the assessee had concealed income to the tune of Rs.8,ll,175/-. After considering the gravity of the concealment, the maximum penalty was levied at 300% of the tax sought to be evaded, which worked out to Rs.4,80,045/- vide his order dated 30.9.2015.
Against the above Penalty Order dated 30.9.2015 passed by the Assessing Officer, assessee appealed before the Ld. First Appellate Authority, who vide impugned order dated 26.10.2016 dismissed the appeal of the assessee.
4. Against the above order of the Ld. CIT(A) dated 26.10.2016, assessee is in appeal before the Tribunal.
Ld. Counsel of the assessee in order to support his contention reiterated the grounds of appeal. He submitted that it is well settled law that the assessment proceedings and penalty proceedings are separate and distinct as held by the Hon’ble Supreme Court in the case of Anatharam Veerasinghaiah & Co. vs. CIT 123 ITR 457. Ld. Counsel of the assessee submitted that the present case is not case of concealment of Income. He further stated that merely because an addition has not been contested, it cannot be presumed that the addition represents concealed income and placed the reliance of the decision fo the Hon’ble Supreme Court of India in the case of Sir Shadilal Sugar & General Mills Ltd. Reported at 168 ITR 705 that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. There may be a hundred and one reasons for such admission. He further stated that addition in this case was made on protected assessment/addition on estimated basis which is against the law laid down by the Hon’ble Gujarat High Court in the case of M/s Bahilal Manilal Patel vs. CIT (2015) 232 Taxmann. 483 (2014). In view of above, he prayed that the appeal of the assessee may kindly be allowed in the interest of justice.
Ld. Departmental Representative controverted the arguments advanced by the Ld. Counsel of the assessee and he relied upon the orders of the revenue authorities.
I have heard both the counsel and perused the orders passed by the Revenue authorities. I find that it is well settled law that the assessment proceedings and penalty proceedings are separate and distinct as held by the Hon’ble Supreme Court in the case of Anatharam Veerasinghaiah & Co. vs. CIT 123 ITR 457. I agree with the contention of the assessee’s counsel that merely because an addition has not been contested, it cannot be presumed that the addition represents concealed income and placed the reliance of the decision of the Hon’ble Supreme Court of India in the case of Sir Shadilal Sugar & General Mills Ltd. Reported at 168 ITR 705 that from the assessee agreeing to additions to his income, it does not follow that the amount agreed to be added was concealed income. I further find that addition in this case was made on protected assessment/addition on estimated basis which is against the law laid down by the Hon’ble Gujarat High Court in the case of M/s Bahilal Manilal Patel vs. CIT (2015) 232 Taxmann. 483 (2014). I further find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty.
7.1 In this regard, I find that Hon’ble Apex Court decision in the case of CIT CIT CIT CIT vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010 vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010 is squarely vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010 vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010 applicable in the present case of the assessee wherein it was held as under:-
"A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271
(1)(c). That is clearly not the intendment of the legislature."
In the background of the aforesaid discussions and respectfully following the aforesaid precedents, I find that the levy of penalty in this case is not justified. Accordingly, I quash the orders of the authorities below and delete the levy of penalty in dispute.
In the result, the appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 26/12/2016.