TaxTMI 
TaxTMI 
2015 (1) TMI 521
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....he sales amounting to Rs. 38,91,422/-. 2. First, we shall take up appeals of the Revenue. Shri Sachidanand Dubey, ld. DR, contended that declaration was made by the assessee, pursuant to search action u/s 132 of the Act, carried out at the business premises of Etco Group as well as the residential premises of the Directors. It was pleaded that the amount of Rs. 7,08,69,757/- was surrendered in the hands of the different concerns/persons of the group and M/s Etco telecom Ltd. is one of the concerns of Etco Group which has made disclosure of Rs. 2,52,08,546/- for Assessment Years 2002-03 to 2007-08. The penalty was argued to be rightly levied by the Assessing Officer and wrongly deleted by the ld. First Appellate Authority. 2.1. On the other hand, the ld. Counsel for the assessee, Shri Anuj Kisnadwala, defended the conclusion drawn by the ld. Commissioner of Income tax (Appeals), wherein the penalty was deleted (in six appeals) and challenged sustenance of penalty in ITA No.5243/Mum/2012. The crux of argument is that the penalty was imposed merely on the basis of statement recorded from a third party, which as per the assessee is quite unjustified. It was also pleaded that no i....
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....ncome, admitted during search action, the break-up of the same is also summarized hereunder: Sl. No. Nature of undisclosed income Assessment Years Amount(Rs.) 1. Gross profit @1% of sales 2002-03 77,09,505/- Disallowance of Interest 2002-03 6,43,738/- Withdrawal of claim u/s35D 2002-03 2,09,430/- 2. Gross profit @1% of sales 2003-04 46,29,878/- Disallowance of Interest 2003-04 22,33,128/- Withdrawal of claim u/s35D 2003-04 2,09,430/- 3. Gross profit @1% of sales 2004-05 57,18,060/- Disallowance of Interest 2004-05 8,30,821/- Disallowance u/s 14A 2004-05 4,000/- Withdrawal of claim u/s35D 2004-05 2,09,430/- 4. Gross profit @1% of sales 2005-06 16,95,239/- Disallowance of Interest 2005-06 1,85,597/- Disallowance u/s 14A 2005-06 2,000/- Withdrawal of claim u/s35D 2005-06 2,09,430/- 5. Withdrawal of claim u/s 35-D 2006-07 2,09,430/- Withdrawal of foreign Travel exp. 2006-07 3,00,000/- 6. Withdrawal of claim u/s 35-D 2007-08 2,09,430/- Total 2,52,08,546/- 2.4. Pursuant to the ab....
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....he parties have confirmed the purchase made from assessee company. The payment was made by cheque to Triton Infotech Pvt. Ltd. And payment was received by cheque from sales parties which proves the genuineness of the purchases made by the assessee company from MIs Triton Infotech Pvt. Ltd. i) The assessee company was not given any opportunity to cross examine Shri Krishna Kumar Gupta, Director of M/s Triton Infotech Pvt. Ltd. To prove the falsity of his statement that he had only issued accommodation bills. j) The Hon'ble CIT(A) has upheld the addition to the extent of only Rs. 11,20,0001- in place of Rs. 55,72,000/- vide order dated 19.11.2010. k) Even the addition of Rs. 11,20,0001- sustained by the CIT(A) is also on estimate basis. l) The assessee has filed appeal before the ITAT against the addition of Rs. 11,20,0001- sustained by the CIT(A). In these circumstances no penalty is leviable as held in the following cases:- i. CIT Vs Reliance petro Products Pvt. Ltd. 230 CTR 320 (SC) ii. National Textile V. CIT [2001] 249 ITR 125 (114 Taxman 203) (Guj.) iii. CIT Vs. Inden Bislers [1999] 240 ITR 943 (Mad) iv. CIT v. Mata Prasad [2005] 278 ITR 354 (All) ....
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.... Vs CIT Delhi-168 ITR 705 (SC) c) CIT Vs. S.D. V. Chandru 260 ITR 175 (Mad.) d) Gebilal Kanhaialal (HUF) Vs ACIT-270 ITR 523 (Guj.) e) CIT Vs Chhabre Emorium -264 ITR 249 (Del.)" Disallowance u/s 14A of Rs. 66,000/- The assessee begs to submit that it had voluntarily made a disallowance of Rs. 2,000/- u/s 14A of the I. T. Act. Even if there is some further disallowance on re- compute as directed by CIT(A), it would not amount of concealment of income or' furnishing of inaccurate particulars. On the question of levy of penalty u/s 271(1)(c), it has been held by the Hon'ble Supreme Court that merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty u/s 271 (1)(c). In the light of the above submission and the various judicial decisions cited above, we humbly request your honour to kindly drop the penalty proceedings u/s 271(1)(c) of the I. T. Act." 2.5. Unsatisfied with the above reply of the assessee, the ld. Assessing Officer held that the assessee has committed default, therefore, the penalty is imposable and he levied the penalty as detailed in t....
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....giving credit of Rs. 2,80,000/- declared during the course of search and initiated penalty proceedings. During the penalty proceedings, the AO has again given show cause notice to the assessee to explain why penalty may not be levied. After considering the reply of the appellant, the penalty was levied on this amount. 6.1 Before me, the appellant submitted as under: "The appellant's purchases included purchase of Rs. 2,78,60,000/- from M/s. Triton lnfotech Pvt. Ltd. It has been observed in the assessment order that during the course of search and seizure operation the statement of Shri Krishna Kumar Gupta, Director of M/s. Triton Infotech Pvt. Ltd., was recorded in which he stated that actual sales has not been made to the assessee company by M/s. Triton Infotech Pvt. Ltd., but only they had issued accommodation bills. However, it was submitted by the appellant in course of assessment proceedings that payments were made to the said party through banking channels by cheque. It was further submitted that AO himself has confirmed that sales made by the assessee company were genuine as all the parties have confirmed the purchases from the assessee company. It was concluded by....
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....d that in the case of assessee there were any fraud or gross or willful neglect to return the correct income. In that view of the matter also the penalty was not leviable under section 271(1)(c). No penalty under section 271(1)(c) was leviable in the facts of the present case because in this case the income had been estimated and there was no concrete evidence that the assessee furnished inaccurate particulars of income or concealed particulars of its income." d) In the case of assessee the addition is estimated by AO at Rs. 55,72,000/-. The Hon'ble CIT(A) has reduced the estimated addition to Rs. 11,20,0001- by giving substantial relief of Rs. 44,52,000/-. Applying the ratio of decision of the ITAT to the facts of the assessee, no penalty is leviable on estimation. e) Apart from this, the facts of the addition and the amount in question were not the income of the appellant. The addition was made on account of explanation given by the appellant having not been accepted on account of estimation. Therefore, the penalty is not leviable on such addition. f) Reliance is placed on the decision of CIT Vs Dhillon Rice Mills (2002) 256 ITR 447 (P&H) wherein it has been held tha....
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....ddition of Rs. 11,20,000/- on the basis of actual rate of taxes such as sales-tax and VAT and deleted the balance addition of Rs,44,52,000/-. During the penalty proceedings, the AO has levied penalty on the amount of Rs. 11,20,000/- by treating it as concealed income and submission of inaccurate particulars of income. Now the question arises whether it was a case of concealment of income. To answer this question, it is clear from the facts of the present case that during the course of search and seizure operation, documents were found and seized and it was noticed that the assessee company had made purchases from M/s. Triton Infotech Pvt. Ltd. Thestatement of Shri Krishna Kumar Gupta, Director of this company was recorded who has stated that no actual sales were made to the assessee company and only accommodation bills were issued. In the assessment order, the AO has held that the assessee has made purchases not from M/s. Triton Infotech Pvt. Ltd. but from the grey market to avoid payment of local taxes and to this extent the assessee had concealed income. The AO had made disallowance @ 20% but the CIT(A) has reduced this amount to Rs. 11,20,000/- on the basis of actual rate of loc....
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....spect of further disallowance of Rs. 38,72,000/- made by him on account of bogus purchase, which was deleted by CIT(A). a)' The above comments of the AO regarding the disclosed income of Rs. 3,00,000/- clearly prove that he was satisfied with the appellant's explanation and had come to a finding that there was no concealment of income or furnishing of inaccurate particulars of income in respect of these disclosure amounts. Although the AO has mentioned at the end of the assessment order that penalty u/s 271 (1)(c) r.w.s 274 of the I.T. Act is initiated separately, yet the said penalty notice cannot cover issues on which the AO has not recorded any specific satisfaction regarding concealment of income or furnishing of inaccurate particulars of income. Therefore, without any such satisfaction in course of assessment proceedings specifically on this surrendered income, the AO cannot levy penalty u/s 271 (1)(c) of I.T. Act in respect of these surrendered incomes". 7.2 I have considered the submissions and facts of the case. It is noticed that during the search and seizure operation, the assessee has declared an amount of Rs. 3,00,000/- on account of foreign travelling exp....
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....sales were actually affected. Thus, there are conflicting facts/presumption. The Assessing Officer made the disallowance on estimated basis as is evident that the addition was substantially reduced by the ld. Commissioner of Income tax (Appeals). Penalty u/s 271(1)(c) of the Act is leviable in a case where either there is concealment of income or furnishing of inaccurate particulars of such income. Even otherwise, under the facts available on record, penalty is not imposable when the quantum addition is on estimated basis. It is well established position of judicial precedence, where quantum addition is deleted, penalty cannot survive, because the basis on which penalty was imposed, after its deletion the base itself does not remain in existence. Our view is fortified, and the ratio laid down therein, by the following decisions, 1) K.C. Builders vs ACIT 265 ITR 562 (SC) 2) CIT vs S.P. Viz Construction Company 176 ITR 47 (Pat.) 3) Barkey Chacko vs CIT 203 ITR 885 (SC) 4) Addl. CIT vs. Chandrakanta & Others (205 ITR 602), 5) CIT vs. Krishnaswamy & Sons (219 ITR 157), 6) CIT vs. Chandra Silas Hotel (291 ITR 202) 7) A.M. Shah & Co. vs. CIT (238 ITR 415). 2.8. We....
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.... Weaving Mills 2009-TIOL- 63 held that for every default penalty is not automatic. Hon'ble Madras High Court in Commissioner Of Income Tax vs K.R. Chinni Krishna Chetty (246 ITR 121 Mad), on a question "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs. 40,000/- levied under section 271(1)(c) of the Act for the reason that the addition had only been sustained on the basis of some estimation ?" wherein, the Tribunal has found that the assessee had reported an expenditure of Rs. 70,000/- as the cost of construction of a factory building. That amount came to be debited in the assessee's books of account on 2-1-1971. The Income Tax Officer being of the opinion that the amount so shown, as a expenditure on the construction was on the lower side, obtained a report of the valuer and estimated the cost of construction. The Hon'ble High Court held that mere revision of income to a higher figure does not automatically warrant inference of concealment of income, consequently, it was held that penalty imposed u/s 271(1)(c) of the Act was not valid and thus deleting the penalty by the Tribunal was held to be ....
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....h led to the addition of Rs. 52,92,001/- after allowing telescoping of the 1 % of addition surrendered on total sales (Rs. 55,72,000/- minus Rs. 2,80,000/-). a) The Hon'ble CIT(A) has restricted the disallowance to Rs. 11,20,000/- thereby allowing substantial relief to the extent of Rs. 44,52,000/- (55,72,000 - 11,20,000). b) No penalty is leviable on the addition of Rs. 11,20,000/- sustained by the CIT(A), as the addition/disallowance is entirely on estimated disallowance, which is not supported by any concrete material on record that the appellant had shown bogus purchases in the name of Triton Infotech Pvt. Ltd. The Hon'ble CIT(A) reduced the estimated disallowance to Rs. 11,20,000/- in place of disallowance of Rs. 55J2,000/- made by the AO. Such estimated addition is not subject to penalty u/s 271(1)(c) of the Act. . c) Reliance is placed on the decision of Purnima Devi Gupta (2004) 83 TTJ (Jodh), 586, 589, 590 wherein facts of the cases are as under:- "The assessee had shown gross receipts of Rs. 10,96,370/- from bus plying business which were estimated by the AO at Rs. 16,95,506/- and the AO determined the income of the assessee by applying net profit rate....
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....fotech Pvt. Ltd., who was not allowed to be cross examined. This statement of Shri Krishna Kumar Gupta has been accepted as gospel truth without any corroborative material to support the said claim of Shri Krishna Kumar Gupta. Rather the AO has assumed that sales made by assessee were genuine as all the parties have confirmed the purchases made from assessee company. The payment was made by cheque to Triton Infotech Pvt. Ltd and payment was received by cheque from sales parties which proves the genuineness of the purchases made by the assessee company from M/s. Triton Infotech Pvt. Ltd. h) The assessee company was not given any opportunity to cross examine Shri Krishna Kumar Gupta, Director of M/s. Triton Infotech Pvt. Ltd., to prove the falsity of his statement that he had only issued accommodation bills. i) The Hon'ble CIT (A) has upheld the addition to the extent of only Rs. 11,20,000/- in place of Rs. 55,72,000/- vide his order dated 19-11-2010. j) Even the addition of Rs. 11,20,000/- sustained by the CIT(A) is also on estimate basis. k) The appellant has also filed appeal before ITAT against the CIT(A)'s order sustaining this addition of Rs. 11,20,000/-. Th....
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....s restricted the addition on the basis of actual rate of taxes. Therefore, it is a clear case of concealment of income and penalty u/s. 271(1)(c) is leviable. The argument of the appellant that the AO has made disallowance on estimated basis, penalty is not leviable is not acceptable because in the appellate proceedings the CIT(A) has adopted the actual rate of local taxes and confirmed the addition not on estimated basis but on actual basis. There are a number of decisions on this issue that on addition made on estimated basis penalty is leviable - Addl. CIT vs. Chandrakanta & Others (205 ITR 602), CIT vs. Krishnaswamy & Sons (219 ITR 157), CIT vs. Chandra Silas Hotel (291 ITR 202) and A.M. Shah & Co. vs. CIT (238 ITR 415). In view of these facts and circumstances and the decisions of Hon'ble Courts, it is held that the assessee has concealed income to the extent of Rs. 11,20,000/- and therefore, submitted inaccurate particulars of income and 'penalty levied by the AO is upheld." 4. We have considered the material available on record, reasons of imposing penalty, conclusion drawn in the impugned order and the assertions made by the ld. respective counsel. The crux of ar....
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....y is not imposable. It may be a good case for quantum addition but not for imposing penalty. So far as, addition based on estimation is concerned, we have already dealt with the issue after placing reliance upon various judicial pronouncements in preceding para of this order, while dealing with the appeals of the Revenue, therefore, we refrain from repeating the same. Even otherwise, the assessee has already made a huge surrender to buy peace with the Department and also to save itself from litigation. 4.2. So far as, the contention of the ld. DR that surrender was made by the assessee, consequent upon a search, is concerned we observed that sometimes there are cases where there is no pressure from the Department to make a huge surrender and in some cases, there is a pressure for making a surrender, thus totality of circumstances needs to be considered. As discussed earlier, this is a case of pure estimation as the addition was substantially reduced by the ld. Commissioner of Income tax (Appeals) itself and there is a contradiction in the assessment order itself, therefore, it may be a good case of part quantum addition but not for imposing/sustaining penalty. At the same time, ....