RAMABEN H. SHAH,MUMBAI vs. ACIT 16 (1), MUMBAI

Briefly, the facts are, assessee, is an individual, deriving income from retail trade of readymade garments and accessories through her proprietary concern M/s. Roopali. The assessee filed her return of income on 10.09.2011, declaring total income of Rs.3,84,764/-. A survey u/s. 133A was carried out in assessee’s business premises, during which alleged suppression of sales was found and on that basis statement was recorded from Shri Mahesh Patel, stated to be in-charge of assessee’s business. In the statement recorded, when the alleged suppression of sales was confronted, the concerned person agreed to declare additional income of Rs.21,95,767/- and on that basis a revised return was filed on 29.03.2012, declaring income of Rs.25,80,531/-. During the assessment proceedings, the AO on the basis of material available on record, including the survey proceedings, found that the gross profit on sales of Rs.1,10,78,861/- at 35% works out to Rs.38,77,601/-, whereas, in the revised return filed, the assessee has disclosed gross profit of Rs.34,71,671/- only. He therefore, was of the view that the assessee had suppressed gross profit to the tune of Rs.4,35,930/- Accordingly, he called upon the assessee to explain why the suppressed gross profit should not be treated as her income. Though, the assessee objected to the proposed addition, the AO completed the assessment by adding back the amount of Rs.4,35,930/-. As it appears, the assessee accepted the addition made by the AO without preferring any appeal before the CIT(A). On the basis of income determined in the assessment order, the AO initiated proceedings for imposition of penalty u/s. 271(1)(c) of the Act by issuing a show cause to the assessee. In response to the show cause notice, the assessee objecting to the initiation of penalty proceedings submitted that she is an old lady of 79 years and due to her old age and also the fact that there is no family member to look after her business, she had to solely rely upon Shri Mahesh Patel, who was in overall charge of business. It was submitted, on the basis of the statement of Shri Mahesh Patel the addition of income was made. She also submitted that since she was not having control over day to day management of the business affairs, she was not aware of the alleged sale suppression. It was submitted, only after the survey she was informed by Shri Mahesh Patel about the sales suppressions and on his advice, to buy peace with the department, assessee had filed the revised return of income declaring additional income and paid tax. She, therefore, submitted that in the circumstances penalty u/s. 271(1)(c) should not be imposed as there is no deliberate or willful concealment of particulars of income by her. However, the explanation submitted by the assessee was not accepted by the AO and he proceeded to pass an order imposing penalty of Rs.7,71,357/- u/s. 271(1)(c) of the Act.

Though, the assessee challenged the penalty order before the CIT(A), he also confirmed the imposition of penalty.

The learned AR reiterating the stand taken before the departmental authorities submitted that the assessee is an old lady and mostly confined to her home. He submitted, the entire business activity of the assessee was managed by Shri Mahesh Patel and the survey was carried out in his presence. He submitted that since the assessee was not looking after the day to day business activity, she was not aware of the alleged suppression of sales, which was only in the knowledge of Shri Mahesh Patel. He submitted, at the time of survey neither the assessee was there nor was any statement recorded from her. The learned AR submitted, only on the basis of the statement recorded from Shri Mahesh Patel, the assessee filed revised return declaring additional income to buy peace with the department. Even for that reason also, the addition made in the assessment order was also not challenged by preferring any further appeal. The learned AR submitted, in the aforesaid circumstances, it cannot be alleged that the assessee has concealed the particulars of income therefore, penalty imposed should be deleted.

The learned DR justifying the imposition of penalty submitted that it is difficult to believe that the assessee was not aware of her business activities and the entire show was managed by Shri Mahesh Patel. The learned DR submitted that in the statement recorded Shri Mahesh Patel has admitted that he was only maintaining the accounts relating to sales and purchases and the owner can explain which part of the sales are accounted for and which part is unaccounted. The learned DR submitted, from the aforesaid statements of Shri Mahesh Patel, it is clear that the assessee was keeping track of her business activities. He submitted, if the survey would not have taken place, the suppression of sales could have gone undetected. Therefore, there being clear concealment of particulars of income by the assessee, penalty imposed is justified.

We have considered the submissions of the parties and perused the materials on record. Undisputedly, on the basis of additional income offered at the time of survey, the assessee has filed a revised return of income showing additional income of about 21 lacs. However, the fact remains that at the relevant point of time assessee was an old lady of 79 years and it is also evident from the statement recorded from Shri Mahesh Patel at the time of survey that he was in overall charge of the day to day business of the assessee. In fact, Shri Mahesh Patel has stated at the time of survey that the assessee gives signed blank cheques, which were utilized by him for making the payments, since, the assessee is not always available for carrying out the business activities. Thus, to some extent it proves assessee’s claim that day to day business activities were looked after by Shri Mahesh Patel. This is further proved from the fact that at the time of survey carried out by the departmental authorities, it was Shri Mahesh Patel, who was available in the business premises and, in fact, on the basis of material found at the time of survey it was Shri Mahesh Patel, who declared additional income of Rs.21,95,767/-. Admittedly, no statement was recorded from the assessee.

In view of our aforesaid decision, the additional grounds raised by the assessee has become infructuous and is dismissed.

In the result, the assessee’s appeal is allowed.