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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER
PER ANIL CHATURVEDI, AM :
This appeal filed by the assessee is emanating out of the order 1. of Commissioner of Income Tax (A) – 3, Pune dt.20.10.2015 for the assessment year 2010-11.
The relevant facts as culled out from the material on record are as under :-
2.1 Assessee is an individual and Proprietor of M/s. Modern Jewellers engaged in trading on Gold and Silver on retail basis. A
survey action u/s 133A of the Act was conducted in assessee’s case
on 09.10.2009. The assessee disclosed unaccounted income of
Rs.90,00,000/- on account of excess stock of gold and silver.
Assessee filed his return of income for A.Y. 2010-11 on 26.09.2011
declaring total income of Rs.98,55,990/- including the income
disclosed during the course of survey. The case was taken up for
scrutiny and thereafter assessment was framed u/s 143(3) of the Act
vide order dt.28.12.2012 and the total income was determined at
Rs.1,76,73,902/- wherein addition on account of under valuation of
excess stock of gold (of Rs.66,88,392/-) silver (Rs.7,72,178/-),
unaccounted debtors (Rs.3,49,480/-) and disallowance u/s 14A of the
Act (Rs.7,861/-). Thus, disallowance aggregating to Rs.1,77,52,357/-
was made. On the addition of Rs.74,60,570/- made on account of
under valuation of excess stock of gold and silver and disallowance of
Rs.3,49,480/- made on account of unaccounted debtors, AO vide
order dt.27.06.2013 levied penalty of Rs.24,13,305/- u/s 271(1)(c) of
the Act. Aggrieved by the penalty order of AO, assessee carried the
matter before Ld.CIT(A), who vide order dt.20.10.2015 (in appeal
No.PN/CIT(A)-3/DCIT Cir-8,Pn/788/2014-15) dismissed the appeal of
the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in
appeal before us, and has raised the following effective ground :
“The learned CIT-A erred on facts and in law in making penalty of Rs.24,13,305/- u/s 271(1)(c) of the Income Tax Act, 1961.”
Before us, Ld.A.R. reiterated the submissions made before AO
and Ld.CIT(A) and further submitted that the addition made by the
AO is basically on account of the valuation of stock. Assessee had
valued the stock on the basis of average basis which was the method
being regularly followed by him since many years but the Department
valued it on the basis of the market value. She submitted that to the
extent the amount of undisclosed income on account of stock that has
been accepted by the assessee in the return of income, no penalty has
been levied but has only been levied on the difference of valuation.
Ld.A.R. therefore submitted that the difference in valuation is on
account of difference of opinion and in such cases, no penalty is
leviable. She also placed reliance on the decision in the case of ACIT
Vs. Ritesh Agrawal reported in [2014] 50 taxmann.com 93 (Indore
Trib.). As far as the addition on account of unaccounted debtors is
concerned she submitted that the amount was due from debtors but
since assessee could not produce the debtors before AO, the assessee
offered the balance of debtors as income. She further submitted that
there is no furnishing of inaccurate particulars of income or
concealment of income and therefore the penalty levied by the AO be
deleted. She further submitted that while recording satisfaction in
the assessment order AO has recorded that assessee has filed
inaccurate particulars of income but in the penalty order passed u/s
271(1)(c) of the Act, AO has levied penalty on both the limbs namely
filing of inaccurate particulars of income and concealment of income.
She therefore relying on the decision of Hon’ble Bombay High Court in
the case of CIT Vs. Samson Perinchery (ITA No.1154 of 2014 order
dt.05.01.2017), submitted that no penalty is leviable. Ld.D.R. on the
other hand, supported the order of lower authorities.
We have heard the rival submissions and perused the material
on record. The issue in the present case is with respect to levy of
penalty for inaccurate particulars of income and concealing the
income.
In the present case, penalty has been levied for concealing the
particulars of income and furnishing of inaccurate particulars of
income. The perusal of assessment order passed u/s 143(3) of the Act
reveals that AO had initiated penalty for furnishing of inaccurate
particulars of income. Thereafter in the penalty order passed u/s
271(1)(c) of the Act, AO held that assessee had furnished inaccurate
particulars of income and had concealed the income u/s 271(1)(c) of
the Act. It is a settled law that while levying penalty for
concealment, the AO has to record satisfaction and thereafter come to
a finding in respect of one of the limbs, which is specified under
section 271(1)(c) of the Act. The first step is to record satisfaction
while completing the assessment as to whether the assessee had
concealed its income or furnished inaccurate particulars of income.
Thereafter, notice u/s 274 read with Section 271(1)(c) of the Act is to
be issued to the assessee. The Assessing Officer thereafter has to levy
penalty under Section 271(1)(c) of the Act for non-satisfaction of either
of the limbs. While completing the assessment, the Assessing Officer
has to come to a finding as to whether the assessee has concealed its
income or furnished inaccurate particulars of income. The Hon’ble
Bombay High Court in CIT Vs. Shri Samson Perinchery in ITA
No.1154 of 2014 with other ITA Nos.953 of 2014, 1097 of 2014 and
1226 of 2014, vide judgment dated 05.01.2017 held that where
initiation of penalty is one limb and the levy of penalty is on other
limb, then in the absence of proper show cause notice to the assessee,
there is no merit in levy of penalty.
On the issue of levy of penalty of account of valuation of stock of
gold and silver, the assessee’s submission that the difference has
arisen on account of methodology of valuation of stock and not on
account of quantity difference has not been controverted by Revenue.
More so, Revenue has not levied penalty on the amount of income
offered by the assessee. In such a situation, we are of the view that
the addition of account of difference of method of valuation, cannot be
a ground for levy of penalty u/s 271(1)(c) of the Act and therefore we
direct the deletion of penalty.
As far as the issue of penalty on addition on account of debtors
is concerned, it is the submission of the assessee that since the
assessee could not produce the debtors before AO, it had offered the
amount representing the debtors as its income. The aforesaid
submission of the assessee has not been found to be untrue / false.
Further no material has been brought on record by Revenue that the
debtors are bogus and further the Revenue has accepted the
corresponding sales as income. Merely because the assessee has
offered the debtors as income cannot be ground for levy of penalty u/s
271(1)(c) of the Act more so when it is a settled law that penalty
proceedings and assessment proceedings are distinct and separate
and that for levy of penalty, Revenue has to convincingly prove that
there is concealment of income or furnishing of inaccurate particulars
of income. In the present case, the aforesaid requirement for levy of penalty is missing. In view of the aforesaid facts we are of the view that no penalty is leviable in the amount of debtors added as income. Thus, the grounds of the assessee are allowed.
In the result, the appeal of assessee is allowed.
Order pronounced on 7th day of February, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे Pune; �दनांक Dated : 7th February, 2018. Yamini
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :
अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-3, Pune. 4. Pr. CIT-2, Pune. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER
// True Copy // // True Copy // व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.