SUNRISE OPTICS,MUMBAI vs. A.O WD 13(1)(2), MUMBAI

Brief facts of the case are that the assessee is engaged in the business of trading in optical goods, filed its return of income on 31/10/2012 declaring income of Rs. 14,244/-. The assessment was completed under section 143(3) on 27/12/2004 accepting the income returned. This assessment was later set aside under section 263 of the Act for making fresh assessment. Consequent to the 263 proceedings, the assessment was completed under section 143(3) read with section 263 on 06/12/2006 determining the income of the assessee at Rs.9,11,170/-. In this case, a survey under section 133A was conducted on 17/01/2012, and in the course of survey, discrepancies in stock, expenses etc. were found. Excess stock was found in the case of the assessee and its sister concerns. The assessee appears to have disclosed additional income of Rs. 8 lakh & 20 lakh in its goods and its sister concern namely Top Opticals. The assessment was completed by rejecting the books of account and estimating the gross profit at 30.4%. The Assessing Officer noticed that there is drastic fall in gross profit when compared to last year, therefore the assessee has offered additional income in the course of survey. Therefore, the profit & loss account of the assessee was recast by estimating gross profit and determining the income at Rs. 9,10,716/-. This assessment was confirmed by the ld.CIT(A) and the Tribunal and the High Court also refused to admit the appeal/question of law. Penalty proceedings were initiated under section 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars as there was steep fall in gross profit. The Assessing Officer was of the view that the assessee had intentionally furnished inaccurate particulars of income. He passed order under section 271(1)(c) levying penalty of Rs. 3,25,388/- on the income escaped assessment.

The assessee preferred an appeal before the ld.CIT(A) and made elaborate submissions before the ld.CIT(A). However, the ld.CIT(A) without considering the submissions, sustained the order of penalty.

The Authorized Representative of the assessee submitted that gross profit was estimated in assessee’s case in quantum proceedings by rejecting the books of account. There was a search, discrepancies in stock were found at the time of survey, however, the entire stock was valued at one rate by the Assessing Officer. The Authorized Representative of the assessee further submitted that no defects in vouchers, books were found and in fact 17% of stock was sold as scrap

The Departmental Representative relied on the orders of the authorities below and placed reliance on the decision of the Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. ( 358 ITR 593).

We have heard the rivals submissions, perused the orders of the authorities below. We find considerable force in the submissions of the Authorized Representative of the assessee that the ld.CIT(A) has not dealt with the elaborate submissions made by the assessee in the course of the proceedings before him. In fact, the ld.CIT(A) has extracted the submissions of the assessee which are running into almost 17 pages of his order and finally concluded in page No. 18 dismissing the appeal of the assessee and confirmed the penalty observing as under:- “2.4 I have considered the above submissions. However, it would be relevant to point out that in the appeal proceedings relating to the assessment for A.Y. 25002-03 in the appellate order passed on 22/02/2011 the findings of the Assessing Officer have been confirmed and also the protective assessment made by the Assessing Officer as regards unexplained investment in stock has also been held as substantive and Assessing Officer has been directed to add back the same as unexplained of Rs. 8/- lakhs on the date of survey for unexplained investment in stock and unexplained investment/expenditure in renovation of shop has been confirmed in the appellate order passed on 22/02/2011. Further action of the Assessing Officer in rejecting the books of account has been confirmed in the said appellate order and estimation of GP has also been upheld. Thus, as on date when the appeal is being decided relating to penalty the findings of the Assessing Officer in the assessment