SHRI RAJESH TIWARI vs. ITO, WD-51(3), KOLKATA, KOLKATA

The brief facts of this issue are that the asssessee is engaged in the business of general order supplies and mainly derived income from job works and have disclosed income from business as well income from other sources in the return of income. The ld. AO during the course of assessment proceedings observed that the assessee had declared net profit of 0.55% which the ld. AO considered it to be too low and estimated the net profit at 2% of the total receipts and made an addition of Rs.5,85,558/- thereon. The ld. AO further observed that the assesee had furnished the details of payments received from the principal M/s. Brijson’s Hotels Pvt. Ltd and based on the certified payments by the principal the ld. AO observed that the assessee had received Rs.6,76,08,802/- whereas he has only disclosed Rs.4,04,45,562/- in his profit and loss account. Accordingly the ld. AO applied the net profit at 2% on the Sri Rajesh Tiwari A.Yr.2009-10 difference in receipts of Rs.2,71,63,204 and made an addition of Rs.5,43,265/- in the assessment. The assessee in order to avoid protracted litigation chose not to prefer any appeal on this quantum addition. The ld. AO having initiated penalty proceedings u/s 271(1)(c) of the Act at the time of completion of assessment later on proceeded to levy penalty on the aforesaid two additions on the ground of concealment of income and levied penalty of Rs.3,97,946/- thereon. This action of the ld. AO was upheld by the ld. CIT(A). Aggrieved, the assessee is in appeal before us.

The ld. AR argued that in respect of the first addition the ld. AO had estimated the net profit at 2% of the gross receipts without rejecting the books of accounts of the assessee and argued that the penalty was levied on such addition which was made only on estimate basis. He argued that it is well settled that there cannot be any penalty on estimated addition which is done without any basis. In respect of the second addition made in the sum of Rs.5,43,265/- he argued that the same was made based on the details voluntarily submitted by the assessee with regard to the total receipts from M/s. Brijson’s Hotels Pvt. Ltd.. He pleaded that the mistake in not accounting the said receipts were due to the error committed by the accountant of the assessee. He argued that the very fact that the said details were voluntarily submitted by the assessee before any detection by the department goes to prove the bona fide conduct of the assessee on which no penalty for concealment could be levied. Apart from this he also placed a copy of the show cause notice issued u/s 274 r.w.s.271(1)(c) of the Act wherein he argued that the ld. AO had not specified the specific charge (i.e. whether the assessee has concealed particulars of income or furnished inaccurate particulars of income). Hence he argued that the show cause notice issued is defective and he placed reliance on the decision of the Co-ordinate Bench of this tribunal in the case of Suvaprasanna Bhattacharya vs ACIT in dated 06.11.2015 in support of his argument. In response to this the ld. DR had not advanced any argument on the penalty levied in respect of the first addition and relied on the orders of the lower authorities. In respect of the second addition he argued that no person would miss such a substantial amount of Rs.2.71 crores which was admittedly received by the assessee and it is highly unbelievable on the part of the assessee to put the Sri Rajesh Tiwari A.Yr.2009-10 complete blame on the accountant of the assessee in this regard in not recording the said receipt. Hence he argued that the penalty is exigible in that regard.

We have heard the rival submissions and perused the materials available on record. We find that penalty has been levied in respect of the first addition on an estimate basis by increasing the net profit from 0.55% to 2% of the total receipts without rejecting the books of accounts of the assessee. It is well settled that the penalty cannot be levied on estimated addition made in the facts and circumstances of the case. Hence we have no hesitation in directing the ld. AO to delete the penalty thereon. 4.1. In respect of the second addition we find that the assessee from a perusal of the assessment order that the ld. AO had categorically mentioned that the assessee had furnished the details of receipts from M/s. Brijsons Hotels Pvt. Ltd, from which the ld. AO found that there is a difference in the total receipts by Rs.2.71 crores which had not been accounted by the assessee. We find and appreciate the bona fide conduct of the assessee in this regard to come out clean before the ld. AO without understanding the intricacies thereon and before any detection by the department in that regard. In such case the bona fide conduct of the assessee cannot be doubted with and no penalty would become exigible on the same. Hence we direct the ld. AO to delete the penalty thereon. With regard to the alternative argument advanced by the ld. DR that the show cause notice issued by the ld. AO for initiating penalty proceedings is defective, we find that the ld. AO had not struck out the irrelevant portion in the show cause notice for penalty and accordingly it can be safely concluded that he had not specified the specific charge leveled against the assessee i.e. whether he had concealed the particulars of income or furnished inaccurate particulars of income. We find that the reliance placed by the ld. AR on the decision of the Co-ordinate Bench of this Tribunal (supra) clearly supports the arguments advanced by the assessee. Hence in any case we hold that the penalty is not exigible in the facts and circumstances of the case and we hereby cancel the levy of the same.