K. S. VELUSAMY,CHENNAI vs. DCIT, CENTRAL CIRCLE 3(3), CHENNAI

आयकर अपीलीय अिधकरण “सी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय �ी एबी टी. वक�, �ाियक सद" एवं माननीय �ी मनोज कुमार अ'वाल ,लेखा सद" के सम)। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकर अपील सं./ ITA No.123/Chny/2024 (िनधा*रणवष* / Assessment Year: 2010-11) & 2. आयकर अपील सं./ ITA No.124/Chny/2024 (िनधा*रणवष* / Assessment Year: 2011-12) & 3. आयकर अपील सं./ ITA No.125/Chny/2024 (िनधा*रणवष* / Assessment Year: 2012-13) Shri K.S. Velusamy DCIT बनाम/ #41, Ayyasamy Street, Central Circle-3(3), Shanmugam Road,West Tambaram, Vs. Chennai. Chennai-600 045. �थायीलेखासं./जीआइआरसं./PAN/GIR No.AGUPV-1436-G (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri R.Venkat Raman (CA)-Ld.AR � थ�कीओरसे/Respondent by : Shri P. Sajit Kumar(JCIT) -Ld. DR सुनवाईकीतारीख/Date of Hearing : 27-06-2024 घोषणाकीतारीख /Date of Pronouncement : 10-07-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

Centre (NFAC), Delhi [CIT(A)] all dated 21.11.2023 confirming penalty levied by Ld. AO u/s 271(1)(c) in all these years vide separate orders dated 30.03.2022. It is admitted position that facts as well as issues are quite identical in all the years and our adjudication in any one year shall equally apply to the other years also. First, we take up appeal for AY 2010-11 wherein the assessee has challenged the impugned penalty on legal grounds as well as on merits. 2. The Ld. AR advanced arguments and explained the chronology of events. The Ld. AR assailed impugned penalty on legal grounds as well as on merits. During the course of hearing, Ld. AR referred to various decisions to support the argument that in the absences of specific charge in the show-cause notice, the impugned penalty would be bad-in- law. On merits, Ld. AR submitted that finally the additions have been sustained on estimated basis only and therefore, the same do not call for levy of penalty in terms of various judicial decisions. The copies of the same have been placed on record. The Ld. Sr. DR vehemently opposed the legal grounds and pleaded for confirmation of impugned penalty by drawing our attention to the order of Tribunal in quantum addition. It has been submitted that the assessee has already been granted excessive relief on quantum additions and therefore, the penalties have to be sustained. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 The assessee being proprietor of M/s S.V.S.Enterprises is stated to be engaged in real estate. Pursuant to survey action on assessee, an assessment was framed u/s 143(3) r.w.s. 147 of the Act on 28.03.2015 wherein returned income of Rs.12.09 Lacs was assessed at Rs.190.05

Lacs. It transpired that assessee was not maintaining any books of accounts. Based on survey findings, Ld. AO estimated profit of Rs.651.83 Lacs for all the above three years against profit of Rs.361.15 Lacs as admitted by the assessee during survey. In AY 2010-11, Ld. AO estimated business income at Rs.190.05 Lacs. Apparently, the addition was made on estimated basis based on the statements made by the assessee during survey proceedings. Accordingly, penalty proceedings were initiated against quantum addition u/s 271(1)(c) for concealment of income. During penalty proceedings, a show-cause notice was issued to the assessee on 31.03.2015. In the absence of any reply, another notice was issued on 05.05.2015. The assessee again failed to respond to this notice. 3.2 In the meanwhile, the quantum addition were partly deleted by first appellate authority vide order dated 31.10.2017. The partial relief was granted considering the remand report of Ld. AO wherein Ld. AO suggested certain relief to the assessee. Consequently, the assessee got substantial relief to the tune of Rs.140.24 Lacs and his income was re-determined at Rs.49.80 Lacs. 3.3 The assessee preferred further appeal before Tribunal but sought to settle the demand under DTVsVs Scheme, 2020. However, the assessee failed to pay demand as per Form-3 and the settlement could not be made. Considering the same, the appeal of the assessee was adjudicated on merits by Tribunal vide ITA Nos. 2550 to 2552/Chny/2018 order dated 12.05.2023. in para 7.1 of the order, the Tribunal accepted Net Profit Rate of 18.40% which was highest amongst the three years and directed Ld. AO to re-compute the income of the assessee by adopting profit rate of 18.40%.

3.4 The order giving effect to the Tribunal order has been passed by Ld. AO on 20.12.2023. Upon perusal of the same, it could be seen that the income of the assessee has ultimately been revised to Rs.39.67 Lacs as against Rs.49.80 Lacs as determined by Ld. AO in consequent to first appellate order. In other words, finally the quantum addition has been sustained on estimated basis by adopting net profit rate of 18.40% in all the three years. The assessee has not maintained any books of accounts. 3.5 So far as the penalty proceedings are concerned, after passing of first appellate order, fresh opportunity was given to the assessee on 22.03.2022 wherein the assessee again failed to file any response. Another notice was issued on 26.03.2022 wherein the assessee requested to keep the penalty proceedings in abeyance. However, the assessee did not offer any satisfactory explanation as to why the impugned penalty should not be levied. Considering all these facts, Ld. AO held that it was a case of concealment of particulars of income and accordingly, levied penalty of Rs.11.64 Lacs. 3.6 The assessee preferred further appeal before Ld. CIT(A) which was disposed-off on 21.11.2023 i.e., after the order passed by Tribunal in quantum appeal on 12.05.2023. The assessee contended that no penalty could be levied on estimated additions. Reliance was placed on the decision of Hon’ble High Court of Madras in the case of CIT vs. P Rojes (356 ITR 703 / 31 Taxmann.com 253). However, Ld. CIT(A) held that it was a case of suppression of business receipts as found during survey. The additions were on the basis of impounded material. Therefore, Ld. AO rightly levied penalty for concealment of income which resulted out of furnishing of inaccurate particulars of income. However,

suitable directions were given to Ld. AO to reduce the penalty in terms of quantum order of Tribunal. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 4. The material facts are not in dispute. The assessee is engaged in the business of real estate. Consequent to survey findings, the case was reopened and assessments were framed for all the three years in identical fashion. Pertinently, the assessee has not maintained any books of accounts. It could also be seen that finally the Tribunal has estimated income of the assessee and directed Ld. AO to adopt Net profit Rate of 18.40% which is nothing but highest profit rate of three years. In other words, the additions which have ultimately been sustained are purely estimated additions. It could also be seen that substantial quantum addition has already been deleted by Ld. CIT(A) considering the findings given by Ld. AO in the remand reports. Therefore, it could very well be said that the action of Ld. AO in making the quantum additions, at the first instance, was only on estimated basis. In such a scenario, the penalty is not sustainable in law considering the ratio of Hon’ble High Court of Madras in the cited case law of CIT vs. P Rojes (356 ITR 703 / 31 Taxmann.com 253). 5. In the aforesaid decision, the assessee estimated profit of 5% on cash deposits which were spread over a period of twelve months. The assessee agreed for additional estimation of 3% as proposed by Ld. AO. The Ld. AO levied penalty on the addition. However, the penalty was deleted by the Tribunal. The Hon’ble Court observed that no penalty could be levied on estimation of income. It was further held by Hon’ble Court that the Tribunal rightly found that the present case was not a fit

case for levy of penalty u/s 27(1)(c) by finding that the initial impression of the Assessing Officer was incorrect with regard to the deposit. The Hon’ble Court also referred to the decision in Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) in which it was observed that in order to bring the case u/s 271(1)(c) of the Act, there has to be concealment of particulars of the income of the assessee and the assessee must have furnished inaccurate particulars of his income. It was further pointed out by the Hon'ble Supreme Court that in order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. Mere making of an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. 6. In our considered opinion, the ratio of aforesaid decision applies to the facts of present appeals before us. Therefore, respectfully following the same, we delete the impugned penalty on merits, in all the three years. 7. The Ld. AR has filed additional grounds of appeal which are legal grounds. It has been urged that show-cause notices issued to the assessee do not specify exact charge against the assessee i.e., whether the proposed penalty was for concealment of income or for furnishing of inaccurate particulars of income. However, we are not impressed with all these grounds considering the facts that several notices were issued to the assessee after framing of assessment order as well as after first appellate orders in quantum appeals. However, the assessee failed to make any effective representation therein and failed to raise any such objections during those proceedings. Therefore, we are not inclined to concur with the legal grounds at this stage of proceedings.

Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे4ईChennai; िदनांकDated :10-07-2024 DS आदेशकीJितिलिपअ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु=/CIT Chennai. 4. िवभागीय�ितिनिध/DR 5. गाडBफाईल/GF