VIREN DIAMOND EXPORTS LTD,MUMBAI vs. ITO 5(3)3, MUMBAI

Without prejudice to above the learned Commissioner of Income Tax has erred in estimating the rate of profit @4% of the turnover for the trading Business without making any allowance for legitimate expenses incurred wholly and exclusively for the purpose of trading business of your appellant and resultantly levying heavy penalty of the hypothetical basis and disregarding the facts and records.

The appellant craves to add, amend or alter the grounds of appeal at the time of or before the hearing of appeal.” 2.1 At the outset, the learned A.R. for the assessee submitted that the addition of `37,10,901/- made by the AO and confirmed by the learned CIT(A) on account of unexplained bank deposits was the basis for levy of penalty of `12,49,040/- under section 271(1)(c) of the Act vide order dated 19.03.2012. It was submitted that in the quantum appeal before the co- ordinate Bench of ITAT, Mumbai, in its order in and others dated 27.02.2013 for A.Y. 2005-06 to 2007-08, the Bench has restored the issue of undisclosed deposits made in the bank account of the assessee to the file of the AO for the limited purpose of working out the peak credit of the transactions of deposits and withdrawals therein and to restrict the addition to the extent of peak credit so worked out. The learned A.R. for the assessee contends that since the addition of `37,10,901/- made by the AO in this regarding being set aside by the coordinate Bench for de novo consideration, the penalty of `12,49,040/- levied in this regard would also not now survive and is therefore to be cancelled. 2.2 We have heard both the learned A.R. for the assessee and the learned D.R. for Revenue in the matter of penalty of `12,49,040/- levied under section 271(1)(c) of the Act for A.Y. 2007-08. As submitted by the learned A.R. for the assessee, we find that in the quantum appeals of the assessee before the Coordinate Bench of the Tribunal in ITA Nos. 5567 & 5568/ Mum/2009 and 5628/Mum/2010 dated 27.02.2008 the Coordinate Bench has set aside the addition of `37,90,091/-, on account of deposits found to be made in the assessee’s bank account treated as assessee’s undisclosed income, to the file of the AO for the limited purpose of working out peak credit of transactions of deposits and withdrawals reflected therein and to restrict the addition to the extent of peak credit so worked out. In respect of A.Y. 2007-08, the finding of the Coordinate Bench at para 12 of its order is extracted hereunder: - M/s. Viren Diamond Exports Ltd. “12. Now we shall take up the appeal of the assessee for assessment year 2007-08, ground No. 1 of which involves the similar issue as involved in the appeals of the assessee for assessment years 2005-06 and 2006-07 relating to the addition of Rs.37,10,901/- made by the AO and confirmed by the learned CIT (Appeals) on account of deposits found to be made in the bank account of the assessee treating the same as its undisclosed income. Following our decision rendered in assessment years 2005-06 and 2006-07 on the similar issue, we restore this matter to the file of the AO with the same directions as given bin assessment years 2005-06 and 2006-07. Ground No. 1 of the assessee’s appeal for assessment year 2007-08 is accordingly treated as partly allowed for statistical purposes.” 2.3 In view of the aforesaid finding of the Coordinate Bench (supra), since the addition of `37,10,901/- as undisclosed income on account of unexplained deposits in the assessee’s bank account in the period relevant to A.Y. 2007-08 has been set aside, the consequential levy of penalty of `12,49,040/- under section 271(1)(c) of the Act on the count would not now survive for consideration. In this view of the matter, this appeal by the assessee is rendered infructuous and is accordingly dismissed.

In the result, the assessee’s appeal for A.Y. 2007-08 is dismissed as indicated above. Order pronounced in the open court on 5th February, 2016. Sd/- Sd/- (Sandeep Gosain) (Jason P. Boaz) Judicial Member Accountant Member