THAKKAR POPATLAL VELJI SALES LTD.,PANVEL vs. DCIT, CENTRAL CIRCLE 25, MUMBAI

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ITA 5795/MUM/2013Status: DisposedITAT Mumbai06 September 2016AY 2006-075 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty cannot be levied solely on an addition made on an estimated basis, especially when there is a difference of opinion or two possible views. Mere estimation does not conclusively establish concealment of income.

What were the facts?

During a search, the Assessing Officer estimated suppressed profit and made an addition. This addition was reduced by the CIT(A) and further by the Tribunal. The assessee appealed against the penalty imposed on this reduced estimated turnover.

What were the issues?

Whether penalty under Section 271(1)(c) can be sustained on an addition made on an estimated basis and whether such estimation amounts to concealment of income.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(8)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI

Before: Shri Joginder Singh, & Shri Ashwani Taneja

For Appellant: Shri Manish Sanghvi, Shri B.D. Naik-DR
Hearing: 06/09/2016

Order : आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the by the impugned order dated 20/06/2013 of the Ld. First Appellate Authority, Mumbai. The only ground raised

1.

in this appeal pertains to penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act) on the reduced turnover of Rs.1,07,395/- on estimate basis.

2. During hearing, the ld. Counsel for the assessee, Shri Manish Sanghavi, explained that the addition of Rs.95,53.800/-, on account of suppressed profit was reduced to Rs.6,44,368/- by the ld. Commissioner of Income Tax (Appeals) and further to Rs.1,07,395/- by the Tribunal. Reliance was placed upon the decision in CIT vs Raj Bans Singh 276 ITR 351 and the decision of the Tribunal in for Assessment Year 2008-09 in the case of assessee itself. On the other hand, the ld. DR, Shri B.D. Naik, defended the addition/penalty. 2.1. We have considered the rival submission and perused the material available on record. Before adverting further, we are reproducing hereunder the relevant portion from the order of the Tribunal in the case of assessee (ITA No.5743/Mum/2010, etc.) and ITA No.1875/Mum/2012 order dated 08/05/2013 for Assessment Year 2008-09 (internal page 17 and paper book page 50) for ready reference and analysis:- “23. Now, we will take up the appeal of the assessee listed under ITA No.1875/M/2012, which is in respect to penalty levied under Section 271AAA, relating to assessment year 2008-09.

24. The AO levied penalty of Rs.1,79,860/- under Section 271AAA on the estimated profit of Rs.15,87,500/- as the same was not disclosed by the assessee. In appeal before the CIT(A), the action of the AO was confirmed.

25.

After considering the rival submissions of the parties, we found that on estimation of profit, penalty cannot be levied. We have also disposed of the appeal of the assessee on merit, wherein we have held that the turnover cannot be estimated as only addition can be made on the basis of material found during the course of search. The Tribunal in the case of M/s Shreeji Traders Vs. DCIT, decided in to 285/Mum/2010, vide order dated 13-1-2012 for the assessment years 2002-03 to 2006-07, has held that on estimated turnover the penalty cannot be levied. Copy of the order was also filed. Therefore, following the order of the Tribunal and taking into consideration that we have also disapproved the action of the AO, no turnover can be estimated without any material, we cancel the levy of penalty.” 2.2. Now, we shall analyze the facts of the present appeal. It is noted that a search and seizure action u/s 132 of the Act was carried out on 05/06/2007 at the residential/business premises of Metro Group of cases. The assessee was also covered in the search operation. During the course of search, certain loose papers were discovered. On perusal of documents, it was found that some of the papers were tallying with the books of accounts. The ld. Assessing Officer estimated the turnover of the assessee and the amount of Rs.95,23,800/- was added to the total income. On appeal, before the ld. Commissioner of Income Tax (Appeals), the addition was reduced to Rs.6,44,368/-, being on estimate basis. On further appeal by the assessee the addition was reduced to Rs.1,07,395/- by the Tribunal. Now, question arises, whether penalty will sustain, wherein, the addition was on estimate basis. In our view, mere addition on estimate basis does not conclusively establish the concealment. The ratio laid down in CIT vs Devandas Perumal & Co. 140 ITR 943 (Bom.), CIT vs Aarkay Saree

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