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Income Tax Appellate Tribunal, ‘A’ BENCH,
Before: Shri P.M.Jagtap & Shri S.S.Viswanethra Ravi
This appeal by the assessee is directed against the order dated 21st August, 2013 passed by the Commissioner of Income Tax(Appeals),Central-1, Kolkata, wherein he confirmed the penalty imposed U/Sec 271(1)(c) of the Act by the AO for the assessment year 1997-98.
In this appeal, the assessee has raised the following effective grounds:-
1. The order passed by the learned Assessing Officer and the Commissioner of Income Tax (Appeals) are arbitrary without proper reasons, invalid and bad in Law.
2. On the facts and in the Circumstances of the case, the learned Commissioner of IncomeTax (Appeals) erred in upholding penalty order on basis of estimated additions of marriage gifts received by the appellant from different relations and guests to the extent Of Rs. 131663.00 and estimated addition of Rs. 150000.00 as marriage expenses.
3. On the facts and in the Circumstances of the case, the learned Commissioner of Income Tax(Appeals) failed to appreciate that the additions are in the ultimate analysis nothing but estimated additions and not based on any documentary evidences.
4. That the Commissioner of IncomeTax(Appeals) failed to appreciate that the judgment in the case of CIT Vs. Warsat Hussain (ITR 171 405) is not applicable in the instant case on the basis of which learned A/a has imposed penalty and as such the penalty should be deleted.
5. Without any prejudice to the above grounds, even the computation of the penalty amount levied by the A.O. and confirmed by the CIT(A) is excessive and unreasonable.
6. The appellant craves leave to amend, alter modify, abridge, add to and for rescind any or all of the above grounds.
The assessee is an individual and filed his return for the assessment year 1997-98 showing total Income of Rs. 3,42,280/- The assessment was completed determining the total Income at Rs.8,18,940/- to that effect an assessment order was passed on 28-03-2000 U/S 143(3) of the Act at after making the following additions.
1. Estimated addition for marriage gifts Rs. 2,81,663 2. Estimated marriage expenses Rs. 1,95,000/
In first appeal, C.I.T(A) gave relief of Rs. 45,000/- on Account of estimated marriage expenses vide his order dt: 20-07-2010. The “C” Bench of ITAT, Kolkata gave further relief of Rs. 1,50,000/- on Account of estimated marriage gifts vide its order dt:31.03.2011 in ITA 1672/kol/20l0 and in pursuance of which the additions stands as under:-
Estimated marriage gifts Rs. 131663.00 2. Estimated marriage Expenses Rs. 150000.00 281663.00
Thereafter, the AO initiated penalty proceeding U/Sec 271(1)(c) of the Act, wherein the Assessee contended that no penalty is imposable where additions were made on estimated basis and further contended that fiction created under sections 68 & 69C of the Act cannot be extended to penalty proceedings through his written submissions. Considering the same the AO observed as under:
5. The contention of the A/R of the assessee is not acceptable. There is no denial that a sum of Rs.4,81,663/ was deposited in the Bank account of the assessee in cash. The assessee's explanation of the deposit have been considered but found not substantial and therefore he has failed to prove that his explanation is bona fide. Again there is no denial that there was a grand party on oaccasion of his marriage, where as per his own submission more than 800 persons had come as guests. His explanation that the entire expenditure was borne by his father and other relatives were also not fully substantiated. As a result, the Department had estimated certain amount of undisclosed income, which have been sustained by the order of Hon'ble ITAT, kolkata.
6. In a reported decision, the Patna High Court (171 ITR 405, CIT vs. Warasat Hussain held that where the assessee fails to explain certain income/expenditure having relevance to computation of income, the revenue has no option but to make as assessment by estimate. In this case, an honest and fair estimate was made which has a reasonable nexus with the materials and circumstances of the case. On the other hand, the explanation offered by the assssee could not substantiate his claim on both the issues. Therefore, as per explanation 1(B) below section 271(1)( c), it is deemed that, the confirmed amount of addition of Rs.2,81,663/ (Rs.1,50,000/ as estimated expenses and Rs.1,31,663/ as receipt which was not marriage gift), Rajesh Mundhra 3
represent income in respect of which particulars have been concealed.
The finding of the AO was that the Assessee has furnished in accurate particulars of his total income for assessment year 1997-98 and imposed penalty of Rs. 1,15,000/- u/s. 271(1) ( c) of the Act.
7. In first appeal, the Assessee reiterated the arguments as made before the AO and further submitted that no material brought on record by the AO to support the additions. Considering the same, the CIT(A) confirmed the penalty as imposed by the AO and has held as under:-
“..... .... ... I have considered the rival submissions and perused the material on record. I do not find merit in the argument that there is no material on record to support the additions as made by the AO in his assessment order and finally confirmed by the Hon’ble ITAT. For, the AO has rightly pointed out that cash of Rs.4,81,663/ was deposited in the bank account of the assessee and the cash deposits so made remained unexplained to the extent of Rs.1,31,663/. Secondly, it is an admitted fact that a grand party attended by more than 800 persons was organised and no expenditure was booked in the accounts of the assessee. The AO made a reasonable and fair estimate which was finally confirmed to the extent of Rs.1,50,000/ by the Hon’ble ITAT. In this factual background, I agree with the findings of the AO that explanation 1(B) was applicable in this case. The penalty order of the AO is upheld. The grounds raised in this appeal are dismissed. In the result, the appeal is dismissed.
In second appeal before us, the learned AR submits that there was no mention of initiation of penalty proceedings nor was there any whisper about the same in the assessment order completed under section 143(3) of the act. The learned AR submits that all the additions were made on the basis of estimation to which penalty cannot be imposed and relied on the case laws. The learned DR relied on the Orders of the lower authorities.
Heard rival submissions and perused the material evidence available on record. We are not in agreement with the learned AR that in the respect of argument that there was no mention or whisper about the initiation of the proceedings in the assessment order, but, we find such finding by the AO at pages 4 and 5 of assessment order. As rightly pointed by the learned AR regarding additions made on the basis of estimation, We find the same at page no’s- 2 & 4, that the AO made addition keeping in mind the status of the family on possible estimation in the respect of expenditure incurred and marriage gifts received by the assessee on the occasion of marriage. Before us the learned AR vehemently argued that the penalty cannot be imposed on the additions which were made on the basis of estimation to that effect the learned AR relied on the case laws. The Honourable High Court of Karnataka in the case of CIT vs Manjunatha Cotton and Ginning factory reported in (2013) 35 taxmann.com250(Karnataka) held that the penalty proceedings are distinct from the assessment proceedings and the findings recorded in the assessment proceedings insofar as concealment of income and furnishing of inaccurate particulars would not operate as res judicata in the penalty proceedings.
Now, we may refer to the decisions relied on by the learned AR. Let us examine the decision rendered by the Honourable High Court of Delhi in the case of CIT vs Aero Traders(P) Ltd reported in 322 ITR 316, wherein the Rajesh Mundhra 5 Honourable High Court upheld the finding arrived by the Tribunal in deleting the penalty imposed under section 271(1)(c) on the ground that the addition was made by the AO on the basis of estimated profit, the relevant finding of the Honourable High Court is reproduced herein below:
6. Aggrieved by this order, the Revenue filed an appeal before the Tribunal. The Tribunal, after hearing the submissions made on behalf of the Revenue, came to the conclusion that the CIT(A) had taken the correct decision in deleting the penalty. The operative portion of the impugned order dt. 4th Dec., 2008 is as follows :
"As the facts emerge the substantial quantum relief was given by the CIT(A) which has been confirmed by the Tribunal, the balance pertains to estimated rate of profit applied on the turnover of the assessee which in our view does not amount to concealment or furnishing inaccurate particulars. In our view, the CIT(A) has taken right decision in deleting the penalty which is upheld."
The appeal is filed against the abovementioned order of the Tribunal dt. 4th Dec., 2008. The finding arrived at by the Tribunal does not warrant interference from this Court as it is purely a finding of fact. No perversity has been pointed in such a finding. Consequently, no substantial question of law arises for consideration. As a result, the appeal is dismissed.
In the case of CIT vs Vijay Kumar Jain of Honourable High Court of Chhattisgarh reported in the 325 ITR 378 (Chattisgarh) wherein the Honourable High Court did not find fault with the finding of the Tribunal in cancelling the penalty on the ground that the net profit was estimated at 10%. The relevant portion of finding is reproduced herein below:
13. If we examine facts of the present case in the light of the principles of law laid down by the Supreme Court in the aforesaid judgments, we find that the assessee furnished accurate particulars of entire receipt of Rs. 21,76,274. After deduction towards expenditure and addition of net profit through other sources, taxable net income was shown at Rs. 70,818. However, since the assessee did not produce any evidence and books of account including the balance sheet for the assessment year, net profit was estimated @ 10 per cent of the receipt from all sources and on difference of profit so estimated, additional tax was imposed and it was further directed that proceeding under s. 271(1)(c) of the Act for Rajesh Mundhra 6 imposition of penalty be separately drawn against the assessee for concealment of income by not producing proper evidence of expenditure. To impose penalty under s. 271(1)(c), conditions stated therein must exist meaning thereby the assessee must have concealed particulars of his income or furnished inaccurate particulars of such income.
In the instant case, it is not the case of the Revenue that the assessee concealed particulars of his income or any particulars of income furnished by him were found to be inaccurate by the AO. The assessee declared net profit by estimating it @ 6.36 per cent of his gross receipt as the AO in similarly situated cases had accepted lower net profit than 6.36 per cent declared by the assessee. Considering the aforesaid facts, the Tribunal held that the order of CIT(A) in cancelling penalty cannot be faulted with and accordingly upheld the order.
In our considered opinion, in view of the undisputed facts that particulars furnished by the assessee regarding receipt in the relevant financial year have not been found inaccurate; it is also not the case of the Revenue that the assessee concealed any income in his return, the order of the Tribunal confirming the order of the CIT(A) cancelling penalty imposed by the AO under s. 271(1)(c) of the Act cannot be faulted with.
In the present case, as discussed above the AO made two impugned additions on the basis of estimation. We also noticed that the substantial relief has been granted by the CIT-A and the Tribunal on the additions made by the AO. It is pertinent to note that the assessee has offered names of the donors from whom the cash gifts were received by the assessee during marriage, the AO while accepting at page no-2 that there is a custom to receive the cash gifts during the marriage and estimated Rs.2 laks as genuine cash gift out of Rs.4,81,683/-and added remaining amount of Rs.2,81,663/-under section 69C of the act. Regarding the addition on marriage expenses the AO categorically observed that he proceeded to estimate the possible expenditure to an extent of Rs.1,95,000/- that would have incurred by the assessee for marriage and made addition thereon. Therefore, it is clear from the assessment order that both the additions were made on the basis of Rajesh Mundhra 7 estimation. The Honourable High Courts in the decisions supra upheld the findings of the Tribunal in cancelling the penalties imposed on the ground of additions made on the basis of estimation. We are of the opinion the facts and circumstances in the decisions supra are similar to the facts of the case in hand and therefore, the principle laid down by the Honourable High Courts supra are applicable to the case on hand. Respectably following the law laid down above, we cancel the penalty of Rs.1,50,000/- imposed by the AO and as confirmed by the CIT-A. Thus, the effective grounds 2 to 5 raised by the assessee are allowed.
In the result, the appeal of the Assessee is allowed Order Pronounced in the Open Court on 16th September, 2016