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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the assessee against the order dated 28.01.2019 passed by the CIT(A)-3, Rajkot for the Assessment Year 2009-10.
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT (A) has erred in law and facts in confirming penalty u/s. 271(1)(c) of Rs.24,420/-. The penalty needs deletion.
2. The Ld. CIT (A) has erred in law and facts in not deciding legal ground no.7 although submissions were made before him and mentioned by him in the appeal order at Para 2.1 to para 4 at page no.9 & 10 of the appeal order and has thus not followed the order of higher corum. The penalty needs cancellation.
3. The Ld. CIT (A) has erred in law and facts in confirming penalty u/s. 271(1)(c) of Rs.24,420/- in respect of addition made on without proper verification and settled law. The penalty needs deletion.
Assessment Year: 2009-10 Page 2 of 5 4. The Ld. CIT (A) has erred in law and facts in confirming penalty u/s. 271(1)(c) of Rs.24,420/- in respect of addition sustained on estimated basis. The penalty needs deletion.
5. The Ld. CIT (A) has erred in law and facts in confirming penalty u/s. 271(1)(c) of Rs.24,420/- giving inadequate time and opportunity. The penalty needs deletion.
6. The Ld. CIT (A) has erred in not bringing any cogent material justifying levy of penalty. The penalty needs deletion.
7. The Ld. CIT (A) has erred in not giving proper and adequate opportunity. The penalty order being bad in law needs cancellation.
8 Without prejudice, no reasonable opportunity has been given by the Ld. CIT(A) at appellate stage. The same needs annulment.
The penalty order being bad in law needs cancellation.
Taking into considering the legal position, statutory aspects and facts of the case no penalty ought to have been levied. The same deserves cancellation.”
The assessee is engaged in the business of manufacturing and trading of mechanical iron scale. The assessee filed its return of income on 23.09.2009 declaring total income of Rs.1,99,450/-. The assessment order was passed on 26.12.2011 determining total income of Rs.16,54,080/- after making various additions/disallowances. Subsequently, the Assessing Officer has issued penalty notice and after taking on record the submissions of the assessee imposed penalty of Rs.24,420/- for concealment of income.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. At the time of hearing, none appeared on behalf of the assessee despite giving notice. But the Ld. AR Shri D.R. Adhia has filed a Written Submission before us which are reproduced as below :- “Written Submissions:
1.1 The Ld. A.O. has levied penalty of Rs.24,420/- in respect of addition of Rs.1.40,841/- sustained by the Hon. 1TAT at 10% on deposit of Rs.14,08,814/- Thus the addition is sustained on estimated basis.
Assessment Year: 2009-10 Page 3 of 5 1.2 It is settled law that when addition is sustained on estimated basis penalty U/s. 271(1) (c) is not leviable. The assessee humbly rely on the order passed by the Hon. ITAT in the case of Varia Navneet Muljibhai (copy enclosed with submissions filed on 5/1/2017) wherein the Hon. ITAT has been please to deleted the penalty levied.
1.3 It may also be submitted that the Ld. A.O. has made addition of profit- elements oh estimate basis therefore penalty cannot be levied assessee also placed reliance on decision given by Hon. High Court Of Punjab & Haryana 258 ITR 85 it was held that provision of Sec.271(1)(c) are not attracted to cases where income of an assessee is assessed on estimate basis and addition arc made therein on that basis thus penalty levied may kindly be delete.
1.4 It is also submitted that the amount retain at 10% is also purely on estimated basis and no solid proof / evidence for determining income as mentioned above are established.
1.5 Over and above amount of addition of Rs.1,40,841/- is totally on presumption and estimated basis. It is settled law no penalty in respect of addition made on estimated basis can be levied. The assessee relies on the following:
106 ITR 672 (All.) - Mussadilal Singh 2. 150 ITR 714 (P & H) - Metal Products of India 3. 258 ITR 85 (P & H) - HarigopaJ Singh 4. 140 !TR 943 (Bom.) - Devendas Eprumal Co. 5. 360 ITR 580 (Raj.) - Krushi Tire Rt. & Rubber Ind.
2.1.1 It may also be submitted that at Para 4.3 page no. 4 of the assessment order the Ld. A.O. has mentioned that ............... A penalty proceeding U/s. 271(1) (c) of the Act is separately initiated for this default..............
2.1.2 Thus no specific charge is mention as to whether it is concealment of income or for furnishing inaccurate particulars of income.
2.2.1 At Para 6 page no. 5 of the assessment order the Ld. A.O. has mentions that issued penalty show cause notice for furnishing inaccurate particulars of income and concealment of income thus assessment order contains no specific charge is established.
2.2.2 The Hon. Gujarat High Court in the case of New Sorathiya Engineering Works 282 ITR 642 (Guj) and Jyoti Ltd. 34 TAXMAN.com 65(GUJ). Hon. Karnataka High Court in the case of CIT vs. Maganur Builders and in the case of Manjunatha Cotton & Ginning Factory 359 ITR 565 (Karn) has been placed to hold that no penalty can be levied without specifying proper charge, 3.1 Reliance is also placed on the decision of Hon. ITAT Rajkot in the case of Paraskumar V. Kataria ITA No. 542/RJT/2012 it was held that it is requisite
Assessment Year: 2009-10 Page 4 of 5 of law that the notice to the assessee should be specific it therefore must follow that the notice issued proposing penalty were illusory and the assessee was incapacitated to defend its case.
3.2 At Para 3 page no. 7 of the penalty order the Ld. A.O. has mentions that I levy penalty U/s. 271(1)(c) of the Act for concealment of income.
3.3 Whereas the notice issued dated 26/12/2011 through which the penalty proceedings are initiated describes as under.
That you have concealed the particulars of your income or furnished inaccurate particulars of such income.
3.4 From the above its clear that the notice issued by the Ld. A.O. is not specifying proper charges and thus it is bad in law it also submitted that the without issuing proper notice penalty cannot be levied. Kindly delete the penalty levied.
3.5 It is settled law that when charges are not specified as to whether it is levied for concealment or for furnishing inaccurate particulars, the levy of penalty is illegal bad in law and not sustainable in the eye of law. The Hon. ITAT Rajkot, Ahmedabad, Kalkata, Delhi, Bombay and others has also been kind enough to delete penalty levied when it is not specifically for a particular charge.
4 Assessee also rely on the decision of Hon. ITAT Rajkot in the case of Sureshbhai Makanshi Gadesha 1TA No. 203 & 204/RJT/201J it was held that penalty proceeding for one offence and finding the assessee guilty of another offence or finding him guilty of either one-or other cannot be sustained in law thus kindly quashed the penalty proceeding.
It is therefore requested that the penalty levied may kindly be cancelled considering the merits of the case and being levied on non-specific charge.”
Ld. DR relied upon the assessment order, penalty order and the order of the CIT(A).
We have heard the Ld. DR and perused all the relevant material available on record. The assessee has furnished the details before the Assessing Officer during the assessment proceedings. The addition was made on account of unaccounted income under Section 69A of the Income Tax Act, 1961 for non-verifiable nature of expenditure in respect of vouchers, Bills and 20% of expenditure for probable personal use. The Assessing Officer while making addition in respect of personal expenses has estimated the expenditure and the same cannot be treated as concealment of income. As regards unaccounted income of the assessee under Section 69A of the Assessment Year: 2009-10 Page 5 of 5 Act, the same cannot be treated as concealment of income as the assessee has retained the said amount at 10% which is purely on estimate basis. This cannot be the criteria for imposing penalty and thus concealment of income does not sustain in the present assessee’s case. In fact, the notice issued under Section 271(1)(c) of the Act has also not satisfied the particular limb of Section 271(1)(c) upon which the penalty has been imposed but only the order passed under Section 271(1)(c) highlights concealment of income. Thus, the issue is squarely covered by the Hon’ble Apex Court in the case of CIT vs. SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (SC) and hence penalty under Section 271(1)(c) of the Act will not sustain.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on this 14th day of September, 2022.