KAMLESH GUPTA,NEW DELHI vs. DCIT,CC-1, NEW DELHI

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ITA 1078/DEL/2022Status: DisposedITAT Delhi07 June 2023AY 2014-155 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions made on an estimated basis do not amount to concealment of income. Therefore, penalty under Section 271(1)(c) cannot be sustained when income is estimated.

What were the facts?

The Assessing Officer made additions to the assessee's income based on estimated profits from alleged undisclosed sales. The assessee appealed against the penalty imposed under Section 271(1)(c) of the Income Tax Act.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when additions are made on an estimated basis. Whether failure to appeal against an addition automatically leads to a conclusion of concealment for penalty purposes.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, DELHIBENCH ‘D’, NEW DELHI

Before: Sh. Kul BharatDr. B. R. R. Kumar

For Appellant: CA Sh. P. K. Mishra, CA
Hearing: 09.03.2023Pronounced: 07.06.2023

Heard together (7 matters)

ITA No. 1074/Del/2022
ITA No. 1073/Del/2022
ITA No. 1075/Del/2022
ITA No. 1076/Del/2022
ITA No. 1077/Del/2022
ITA No. 1078/Del/2022
ITA No. 1079/Del/2022

Read from the judgment's own cause title. This page is filed under one of them.

These appeals have been filed by the assessee against the order of ld. CIT(A)-24, New Delhi dated 21.03.2022 for Assessment Years 2009-10 to 2015-16.

2.

The assessee has raised the following grounds of appeal:

“1. That the order of learned Commissioner of Income Tax (Appeals) is bad in law as well as on the facts and in the circumstances of the case.

2. That the Id. CIT(Appeals) has erred in summarily dismissing the ground of appeal

that appellant was not provided a fair and proper opportunity of being heard.

3. That the Id. CIT(Appeals) has erred in giving a finding that the appellant has chosen not to represent his case on merits and ignoring the written submissions and evidences filed by the appellant in the appellate proceedings

4. That the Id. CIT(Appeals) has erred in not dealing with ground no. 4 raised before him contending that the Id. AO had exceeded his jurisdiction in initiating and imposing penalty u/s 271(1)(c) and in sustaining the penalty imposed by the assessing officer on account of estimated profits amounting to Rs. 1,85,924/- from alleged undisclosed sales by ignoring the written submissions and evidences filed by the appellant in the appellate proceedings.

5. That the Id. CIT(Appeals) has erred in sustaining the penalty amounting to Rs. 55,777/- u/s 271(1)(c) of the Act as imposed by the assessing officer.”

3.

The issues involving Section 271(1)(c) and Section 271AAB in all the appeals are common in nature and hence being adjudicated by a common order.

4.

In the case of M/s German Homoeopathic Distributors Pvt. Ltd., a company in which the appellant is a Director, the AO made the following estimated additions in the assessment order on account of local medicine sales.

Asst. Year Local Addition Medicines estimated @ sales 18.23%

(1) (2) (3) 2009-10 21,95,180 4,00,181 2010-11 88,97,660 16,22,043 2011-12 1,41,72,765 25,83,695 2012-13 2,26,86,064 41,35,669 2013-14 2,83,98,538 51,77,053 2014-15 3,55,66,486 64,83,774 2015-16 1,10,35,754 20,11,818 12,29,52,4 47

5.

The above additions were deleted by the ld. CIT(A) in the case of M/s German Homoeopathic Distributors Pvt. Ltd. vide his common order dated 09.05.2017 for A.Y. 2009-10 to 2014-15 and a separate order dated 09.05.2017 for A.Y. 2015-16.

6.

The ld. CIT(A) in the case of M/s. German Homoepathic Distributors Pvt. Ltd. while deleting the additions made on account of sales of local medicines directed the AO to make the following additions in the hands of the assessee, Sh. Kamlesh Gupta, by applying GP Rate of 9.11% on net sales after discount instead of the GP Rate of 18.23% on gross sales:

Local Discount Net sales of G.P. Addition Asst. Medicines local Rate directed to be Year sales medicine made by CIT(A) after in the hands of reducing Sh. Kamlesh discount Gupta vide orders dated 09.05.2017 (1) (2) (3) (4) = (2)-(3) (5) (6) 2009-10 21,95,180 1,54,297 20,40,883 9.11% 1,85,924 2010-11 88,97,660 3,89,412 85,08,248 9.11% 7,75,101 2011-12 1,41,72,765 9,48,797 1,32,23,968 9.11% 12,04,703 2012-13 2,26,86,064 20,00,481 2,06,85,583 9.11% 18,84,457 2013-14 2,83,98,538 45,11,593 2,38,86,945 9.11% 21,76,101 2014-15 3,55,66,486 41,05,141 3,14,61,345 9.11% 28,66,129 1,10,35,754 3,37,708 1,06,98,046 9.11% 9,74,592 2015-16 12,29,52,447 1,24,47,429 11,05,05,018 1,00,67,007

7.

The addition on account of transaction of sale of local medicines has been made on estimate basis by applying G.P rate of 9.11% on the sales appearing the bank account.

8.

Heard the arguments of both the parties and perused the material available on record.

9.

It is a trite law that any addition made on account of estimated rate of profit applied to the turnover does not amount to concealment.

10.

In the judgment of ITAT, Delhi Bench in the case of Rajiv Kumar Garg vs. ITO in the Bench following the judgment in the case of CIT vs. Aero Traders (P) Ltd and the decision of Hon'ble P & H High Court in the case of Harigopal Singh vs. CIT (2002) 258 ITR 85 (P&H) and the decision of Gujrat High Court in CIT vs. Subhash Trading Company 221 ITR 110 (Guj) has followed the settled legal position that when income is estimated, then, there can be no question of imposing penalty u/s 271(1)(c) of the Act and has deleted the penalty imposed u/s 271(1)(c). Similar view is upheld in the judgment of ITAT, Jaipur in the case of Vishnu Tambi v. DCIT, ITA no. 965 to 969/JP/2018.

11.

Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Aero Traders (P) Ltd (2010) 322 ITR 316 (Delhi).

12.

The AO has also stated that since the appellant has not filed any appeal in this matter it shows that the appellant has no plea to offer and concluded that the above transaction is concealed. Merely because the appellant has not filed any appeal against the addition cannot be a ground for imposing penalty. We find that this cannot at all lead to a conclusion that the levy of penalty is automatic when addition is not appealed against or for that matter it is sustained. There can be many reasons due to which an assessee may choose not to file an appeal, for example, for want of proper legal advice. It is settled law that the assessment proceedings and penalty proceedings are different.

13.

Hence, keeping in view, the entire facts and circumstances peculiar to the instant case, we hold that the penalty levied by the Assessing Officer cannot be sustained.

14.

In the results, the appeals of the assessee are allowed. Order Pronounced in the Open Court on 07/06/2023.

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