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Income Tax Appellate Tribunal, “ SMC” BENCH MUMBAI
Before: SHRI C.N.PRASAD,JM & SHRI RAJESH KUMAR, AM
आदेश / O R D E R
PER C.N.PRASAD (J.M.) :
This appeal of the assessee Rakesh Kumar M Gupta is filed against the order of the Ld CIT (Appeals)- 29, Mumbai dated 22.01.2015 for the Assessment Year 2002-03 in sustaining the penalty levied under Section 271(1)(c) of the Act.
The Ld. Counsel for the Assessee at the outset submits that penalty under Section 271(1)(c) was levied on the estimated addition of commission income on the business of providing accommodation entries by the Assessee. The Ld. Counsel for the Assessee submits that while completing the assessment, the Assessing Officer estimated the commission at 6% from business of accommodation entries as against income of 1% which was already considered by the Assessee in his total income. The Ld. Counsel submits that in the quantum appeals the Tribunal considering the facts and circumstances of the case and following the decision in the case of Sanjay Kumar Garg and the decision in the case of Goldstar Finvest (P) Ltd. Vs. ITO (2013) 33 taxman.com 129, restricted the commission income to 0.6% as reasonable. While estimating this commission at 0.6%, the Tribunal observed that in this line of business, there cannot be income more than 1%. Therefore, he submits that the addition was made only on the estimated basis, there is no concealment or 3 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15 furnishing of inaccurate particulars by the Assessee and therefore penalty is not attracted in these cases. The Ld. Counsel further submits that in Assessee’s group cases in the case of Mohit Rakesh Kumar Gupta the Tribunal in ITA 2644/Mum/15 dated 29.9.2016 deleted the penalty levied under Section 271(1)(c), where the commission was estimated by the Assessing Officer at 6% which was reduced by the Tribunal to 0.6% of sales turnover following the decision of Sanjay Kumar Garg. Copy of the order is placed on record.
The Ld. DR vehemently supports the orders of the authorities below in imposing the penalty under Section 271(1)(c) of the Act on the Commission income estimated by the Assessing Officer.
We have heard the rival submissions, perused the orders of the authorities below and the Coordinate Bench decision in the case of Mohit Rakesh Kumar Gupta in to 2646 & 2649/Mum/2015, order dated 29.09.2016, wherein on identical circumstances deleted the penalty observing as under : “Now, in the wake of the aforesaid Tribunal decision in the quantum proceedings, the income estimated has been scaled down substantially and the differential in tax amount is in few thousands only as reproduced above. Once it is a matter of estimation and the final income sustained after estimation of net profit is very near to the estimate of commission income shown by the assessee, then under these facts and circumstances, it cannot be held that any penalty can be levied under section 271(1)(c) either for concealment of income or 4 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15
for furnishing of inaccurate particulars. Once it is a case of pure estimation which has been varied by various authorities at different stages, then on such difference of opinion that to be in the matter of estimation, it cannot lead to any inference of levy of penalty. Accordingly, penalty levied by the Assessing Officer and sustained by the CIT(A) is hereby directed to be deleted in all the years. Therefore, the appeals of the assessee for all the years are allowed.” We also find that the Coordinate Bench on identical situation deleted the penalties in the case of Hema R Gupta, and Nilesh RK Gupta 2638/Mum/2015 by order dated 30.09.2016. Since the facts and circumstances in the case before us are identical, following the said order, we delete the penalty levied in this case also as the addition was made only on estimate basis and there is no conclusive proof that the Assessee had concealed income or furnished inaccurate particulars of such income.
Now, we take up the appeals of the Assessee in the case of Hema R Gupta where assessee is challenging the order of the Ld.CIT (A) in sustaining the penalty levied u/s 271(1)(c) of the Act. The facts and circumstances are identical in this case also as the commission income was estimated by the Assessing Officer at 7% from the business of profit accommodation bills which was reduced by the Tribunal to 0.6%.
5 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15
We observe that on identical facts in Assessee’s own case for the Assessment year 2002-03, Tribunal deleted the penalty observing as under : “5. We have heard the rival submission and also carefully perused the material placed on record including the cases relied upon, in the light of the respective contentions of the parties. We notice that in quantum appeal ITA Nos. 5011 and 5018/Mum/2014 sought assessment years 2002–03 to 2009–10, the coordinate bench vide order dated 14/09/2016, following the decision rendered in the case of Sanjay Kumar Garg versus ACIT (2011) 12 taxmann.com 294 (Delhi) and the decision rendered by the coordinate bench in the case of gold star Finvest (P) Ltd versus ITO (2013) 33 taxmann.com 129 (Mumbai tribunal) held that addition of 0.6%. of turnover is reasonable. The relevant portion of the order reads as under:- “6.1 We find that Tribunal in case of Sanjay Kumar Garg vs. ACIT (supra) held that rate of commission cannot be more than 1%, but in present case, the assessee had already offered the same for taxation purpose but with rider of allowability of certain expenses against same. Hence, the rate of 6% adopted by Assessing Officer was highly one. Hence, the commission income was to be taken @ 0.6% of sales turnover. Similar view has also been taken by the jurisdictional Mumbai Tribunal in case of Gold Star Finvest (P.) Ltd. vs ITO (2013) 33 taxmann.com129 (Mumbai – Trib.), wherein Tribunal held as under: “12. Having carefully examined the various Orders in the case of different assessees, it has become amply at that in these type of activities brokers are only concerned with their commission on the value of the transactions. Now the question comes what would be the reasonable percentage of commission on the total turnover?
6 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15
The assessee has also made out a case that the customers do not come directly to him and they come through a sub-broker who also charges a particular share of commission. In all the judgments what has been stated his that an average percentage of commission these between15% to 25%. In the case of Palresha & Co (supra) and Kiran & and Co. (supra), the Tribunal has considered reasonableness of percentage of commission to be earned on turnover was at .1%. The assessee himself has offered the percentage of commission at 0.15%, which is more than the percentage of commission considered to be reasonable by the Tribunal in the cases of Palresha & Co. (supra) and Kiran & Co. (supra), in similar type of projections. The theory of the Assessing Officer to treat the entire deposit as unexplained cash credits, cannot be accepted in the light of assessment orders in the case of beneficiaries and also in the light of the fact that assessee is only concerned with the commission earned on providing accommodation entries. We, therefore, of the view that since the assessee itself has declared the commission on turnover at 0.15% which is more than the percentage considered to be reasonable by the Tribunal in the case of Palresha & Co. (supra) and Kiran & Co. (supra), the same should be accepted. We, accordingly, accept the commission declared by the assessee and set aside the order of the CIT (A) in this regard. 6.2 We find that ITAT in case of Sanjay Kumar Garg (supra) has applied 0.2% commission on turnover and in Gold Star Finvest (P) Ltd. (supra)
7 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15 approved 0.15%. So, taking all factors into consideration, we hold that percentage of commission to be earned on turnover is reasonable at 0.6%. We hold so.”
6. Admittedly, the AO had levied penalty in question under section 271(1)(c) of the Act on the addition made on the basis of estimation and the basis of estimation was further changed substantially by the Tribunal in quantum appeal. As per the settled law penalty proceedings are different from assessment proceedings because the standard of proof required for imposition of penalty is different from that on which an addition could be maintained. Mere addition to the income of the assessee does not mean that the assessee has concealed In Naresh Chand Agarwal vs. CIT(2013)38 taxmann.com 397 Hon’ble Allahabad High Court has held that when addition is made on estimate basis, penalty under section 271(1)(c) cannot be imposed. The Hon'ble Punjab & Haryana High Court in case of Harigopal Singh Vs. Commissioner of Income Tax reported in (2002) 125 Taxman 242, wherein the estimated addition made by the AO was considerably reduced by the Tribunal, has held that in such cases, provisions of section 271 (1 )(c) of the Act are not attracted. The same view have been taken by the ITAT Chandigarh in JCIT v. Bhagwan Dass Garg (2014) 48.taxmann185 (Chandigarh–Trib), Jodhpur Tribunal in ITO v. Gurunanak Oil Agency (2013) 35 taxmann 562(Jodhpur-Trib.) and other Benches of ITAT. So, in view of the decisions of the Hon’ble High Courts and Tribunals, we are of the considered opinion that this is not a fit case where penalty can be imposed under section 271(1)(c) of the Act for concealment of income or for furnishing incorrect particulars of income. We, therefore, set aside the impugned order and allow the grounds of appeal
of the assessee.”
7. Facts and circumstances being similar, following the said order, we delete the penalty levied under Section 271(1)(c) for these assessment years also.
8 Rakesh Kumar M Gupta, Hema R Gupta, ITA Nos. 2640 & 2643/Mum/15
In the result, appeals of the Assessee are allowed.
Order pronounced in the open court on the 30th day of December 2016.
Sd/- Sd/- RAJESH KUMAR C.N.PRASAD लेखा सदस्य / न्याधयक सदस्य / ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई / Mumbai; ददनांक / Dated 30/12/2016 LR, SPS आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. प्रत्यर्थी / The Respondent. 2. आयकर आयुक्त(अपील) / The CIT(A), Mumbai. 3. आयकर आयुक्त / CIT 4. 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai गार्ड फाईल / Guard file. 6. सत्यादपत प्रदत //True Copy// आदेशाि सार/ BY ORDER,