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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No. 12/SRT/2020 (�नधा�रणवष� / Assessment Years: (2013-14) (Physical Court Hearing) M/s. Rajvi Corporation, Vs. The DCIT, Circle-3(2)(2), D-3, Om Final Plot No. 108, Bombay Surat. Food Compound Kasanagar Road, Nr. IDBI Bank Katargam, Surat-395004. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAOFR0631E (Appellant) (Respondent) Assessee by : Shri Ronak Parekh, AR Revenue by : Shri Deependra Kumar, Sr. DR सुनवाईक�तार�ख/ Date of Hearing : 28/04/2022 घोषणाक�तार�ख/Date of Pronouncement : 24/06/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2013-14, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short “the ld. CIT(A)”] in Appeal No. CIT(A),-3/10473/2016-17 dated 19.07.2019, which in turn arises out of penalty order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”].
The grounds of appeal raised by the assessees are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the penalty of Rs.2,66,821/- u/s. Sec. 271(1)(c) of the Income Tax Act, 1961 on account of Disallowance of Electricity Exp. Of Rs.6,44,700/-, Office of Rs.1,76,000/- & Late Payment of PF & ESIC of Rs.42,805/-. 2. The learned assessing officer has erred in passing the penalty order without giving reasonable opportunity of being heard which is against the law of natural justice and equity. 3. It is therefore prayed that above addition confirmed by CIT(A) may please be deleted.
12/SRT/2020/AY.2013-14 M/s. Rajvi Corporation 4. Appellant craves leave to alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. Succinct facts are that assessing officer has made the addition u/s 143(3) in the assessment order on account of disallowance of electricity expense of Rs.6,47,760/- office rent expense of Rs.1,76,000/- and late payment to EPF/ESIC of Rs.42,805/-. The assessing officer observed that the additions were made on account of electricity expense as part of the expenses was disallowed as the business premises were shared by other concerns who had claimed electricity expense separately. Similarly, the rental expenses were also disallowed as the business premises were shared by other concerns. Based on these facts the assessing officer levied the penalty u/s 271(1)(c) of the Rs.2,66,821/-.
On appeal, the ld CIT(A) has confirmed the penalty imposed by the assessing officer under section 271(1) (c ) of the Act. Aggrieved, the assessee is in appeal before us.
Learned Counsel for the assessee, submits before us that assessing officer has made the disallowance on ad hoc or estimate basis without bringing any facts on record. That is, the assessing officer during the assessment proceedings made ad hoc estimate by disallowing rental expense and other expenses. About, late payment of PF and ESIC, the ld Counsel submits that no doubt, the assessee made late payment of PF and ESIC to the government account but that does not mean that he has concealed any particulars of income. The PF and ESIC has been disclosed by the assessee in the return of income as well as in the books of accounts, therefore assessee has not concealed any income, hence penalty should be deleted.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
12/SRT/2020/AY.2013-14 M/s. Rajvi Corporation 7. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that during the assessment proceedings, the Assessing Officer made ad hoc disallowance and in penalty proceedings the assessing officer has levied the penalty under section 271(1)(c) of the Act on ad hoc disallowances. It is settled principle of law that on ad hoc disallowances the penalty should be levied. For that, reliance can be placed on the judgment of the Co-ordinate Bench in ITA No. 293 & 294/AHD/2005 in the case of Gipilon Texturising Pvt. Ltd, order dated 13.04.2021, wherein it was held as follows: “11.We have noted that the assessee while filing return of income for assessment year 1988-89 on 20.06.1988 declared loss in the form unabsorbed depreciation of Rs.22,48,941/-. The assessment was completed under section 143(3) on 29.05.1992. The assessing officer while passing the assessment order assessed total income of the assessee at Rs. Nil and also allowed carry forward of unabsorbed depreciation. It is an admitted fact that the assessing officer while passing the assessment order rejected the books of accounts and estimated the gross profit @10% turnover by passing the flowing order: “The assessee failed to produce books of accounts from which the g.p. position can be verified. The assessee does not maintain quantitative tally stock as is evident from the report of the auditors in form No.3CD. Therefore, provisions of section 145(1) are applicable and the g.p. is required to be estimated. I, therefore, worked out at Rs.29,16,850/- as against this g.p. shown was Rs.10,29,291/-. The difference of Rs.18,87,559/- is therefore, added in the total income of the assessee for low g.p.” 12. On second appeal before the Tribunal in ITA No.186/Ahd/1998 dated 08.03.2004 the additions restricted the addition @ 5% of Gross Profit. Considering the fact that addition in the assessment order, on the basis of which the penalty was levied, is purely an estimated addition. It is settled position in law that no penalty under section 271(1)(c) can be levied on additions made on estimation. The similar view was taken by the Hon'ble Jurisdictional High Court in Manish Dhirajlal Mehta Vs. ACIT, Vijay Proteins Ltd., Vs. CIT (supra), in Vijay Proteins Vs CIT (supra) and other case laws relied by ld. AR for the assessee. No contrary facts or law is brought to our notice. In the result, Ground No.1 of appeal is allowed. 13. In the result, appeal of the assessee is allowed on ground No.1 itself. ITA No.294/Ahd/2005 for A.Y. 1989-90: 14. As noted by the assessee has raised identical grounds of appeal in 293/Ahd/2005 for A.Y. 1988-89, which we have allowed, therefore, following the
12/SRT/2020/AY.2013-14 M/s. Rajvi Corporation principle of consistency, the appeal for A.Y.1989-90 is also allowed with similar observation. ITA’s No.2141/Ahd/2013 & 2142/Ahd/2013 for A.Y. 1988-89 and 1989-90: 15. Considering the fact that while adjudicating the appeal in ITA No. 293 & 294/AHD/2005, deleted the penalty levied by the assessing officer under section 271(1)(c) of the Act, granting full relief to the assessee. Therefore, the appeals in ITA’s No.2141/ Ahd/2013 for A.Y. 1988-89 & 2142/Ahd/2013 for A.Y.1989-90 have become infructuous and accordingly dismissed. 16. In the result ITA(s) No. 293 & 294/AHD/2005 are allowed and ITA (s) No. 2141 & 2142/Ahd/2013 are dismissed.”
Therefore respectfully following the judgment of the Coordinate Bench in the case of Gipilon Texturising Pvt. Ltd (supra), we delete the penalty.
In the result, appeal filed by the assessee is allowed.
Order is pronounced in the open court on 24/06/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / �दनांक/ Date: 24/06/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File
By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat