Income Tax Appellate Tribunal - Jaipur
Shri Jaideep Dhadda, Jaipur vs Income Tax Officer, Ward-1-1, Jaipur on 7 January, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "A", JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 733/JP/2017
fu/kZkj.k o"kZ@Assessment Year: 2008-09
Jaideep Dhadda, cuke I.T.O.,
3934, Dhadda Market, Vs. Ward 1(1),
Johari Bazaar, Jaipur. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABXPD 5619 E
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Rohan Sogani &
Shri Rajiv Sogani (CA)
jktLo dh vksj ls@ Revenue by : Shri P.P. Meena (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 02/01/2019
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 07/01/2019
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 21/07/2017 of ld. CIT(A)-I, Jaipur arising from the penalty order passed U/s 271(1)(c) of the Income Tax Act, 1961 (in short the Act) for the A.Y. 2008-09. The assessee has raised following grounds of appeal:
"1(a) In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. A.O. in imposing the penalty of Rs. 43,122/- U/s 271(1)(c) of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the said penalty of Rs. 43,122/- imposed under section 271(1)(c).
2 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO
(b) In the facts and circumstances of the case and in law the ld. A.O. has erred in imposing penalty U/s 271(1)(c) without specifically pointing out whether the penalty was proposed on concealment of particulars of income or for furnishing inaccurate particulars of income. The action of the ld. A.O. is illegal, unjustified arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty imposed U/s 271(1)(c)."
2. Ground No. 1(a) of the appeal is regarding confirming of penalty of Rs. 43,122/-. The assessment in the case of assessee was completed U/s 143(3) of the Act on 14/12/2010. While completing the scrutiny assessment, the Assessing Officer rejected the books of account of the assessee U/s 145(3) of the Act and made the addition on account of unverifiable purchases @ 25% of such purchases. Hence, the Assessing Officer made the addition of Rs. 4,95,423/- being 25% of bogus/unverifiable purchases of Rs. 19,81,691/-.
3. The said addition was challenged by the assessee before the ld. CIT(A) in the quantum proceedings and it was restricted to 7% of such purchases as against 25% made by the Assessing Officer. Thus, the ld. CIT(A) has restricted the addition to Rs. 1,39,555/-. The Assessing Officer while passing the order U/s 271(1)(c) of the Act on 25/3/2015 levied the penalty of Rs. 43,122/- being 100% of tax sought to be evaded by the assessee.
4. The assessee challenged the levy of penalty U/s 271(1)(c) of the Act before the ld. CIT(A) but could not succeed.
3 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO
5. Before us, the ld AR of the assessee has submitted that the penalty has been levied by the Assessing Officer against the addition which was based on estimation and further the ld. CIT(A) has again estimated the addition by restricting the said addition from 25% to 7%, therefore, it is not a case of concealment of income or furnishing inaccurate particulars of income. In support of his contention, he has relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs. Mahendra Singh Khedla (2012) 252 CTR 453 (Raj) as well as the decision in the case of Shiv Lal Tax Vs CIT (2001) 251 ITR 373 (Raj). The ld AR has also relied upon the decisions of the Coordinate Benches of this Tribunal dated 16/1/2017 in the case of Shri Vikram Singh Vs DCIT in ITA No. 143/JP/2016 as well as decision dated 22/12/2016 in the case of Deepak Dalela Vs ITO in ITA No. 1027/JP/2013. The ld AR has also relied on the following decisions of this Tribunal:
(i) ITA No. 668/JP/2016, Shri Hemant Srivastava Vs ITO order dated 08/01/2018.
(ii) ITA No. 237/JP/2016, Smt. Sharmila Jain Vs ITO orde dated 08/01/2018
6. On the other hand, the ld DR has submitted that the addition was made by the Assessing Officer on the basis of the enquiry and also following the precedents on the issue and therefore, it is not the addition 4 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO merely based on estimation. He has relied upon the orders of the authorities below.
7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that while completing the assessment U/s 143(3) of the Act, the Assessing Officer rejected the books of account of the assessee U/s 145(3) of the Act and consequently the income in respect of unverifiable/bogus purchases was estimated @ 25% of such purchases. The said addition made by the Assessing Officer was restricted by the ld. CIT(A) to 7% to those purchases as against 25% addition made by the Assessing Officer. Thus, it is clear that the addition sustained by the ld. CIT(A) is nothing but is based on the estimation of income by taking 7% of such unverifiable purchases. The order of the ld. CIT(A) in quantum appeal is relevant on this aspect in para 4.3 as under:
"4.3 I have carefully perused the order of the AO and the submissions of the AR alongwith the order of the Hon'ble ITAT, Jaipur in the case of the assessee for assessment year 2006-07. The Hon'ble ITAT, Jaipur Bench has consistently held that the provisions of section 145(3) can be invoked for rejection of books of accounts in such cases where the purchases remain unverifiable. Once the summons issued were not complied with the onus shifted on the assessee to produce the sellers alongwith the stock registers for verification of the transactions. This was not done and so the onus was not discharged by the assessee. Further it is not understood as to how the appellant was able to produce confirmations from these alleged sellers but was not able to produce them. In view of 5 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO the consistent view taken by the Hon'ble ITAT, Jaipur in the case of jewelers and the facts of the case, the rejection of books of accounts by invoking the provisions of section 145(3) is upheld.
Regarding estimation of income it is clear that the facts of the assessee are different from the case laws relied on by the AO namely Sanjay Oil Cake Industries vs. CIT. Moreover, the facts of the case are covered by the finding of the Hon'ble ITAT, Jaipur in its own case for assessment year 2006-07, ITA No.16/JP/2011 dated 31.3.2011 wherein the Hon'ble ITAT, Jaipur had sustained the addition of Rs.20,000/- on total unverifiable purchases of Rs.2.84 lacs. The Hon'ble ITAT, Jaipur thus disallowed 0.07% of the unverified purchases in the case of the appellant. During this assessment year the unverified purchases are Rs. 19,81,691/-. A disallowance of 0.07% of these is required to be made which is Rs. 1,39,555/- since the matter is covered by the order of the Hon'ble ITAT, Jaipur, This results in confirmation of trading addition of Rs.1,39,555/-."
We further note that the Coordinate Bench of this Tribunal have taken a consistent view on this issue of levy of penalty against the addition made by the Assessing Officer by taking the income @ 25% of the unverifiable purchases holding that the penalty levied against the addition based on estimation of income is not sustainable. In the case of Shri Hemant Srivastava Vs ITO (supra), the Coordinate Bench has considered this issue in para 7 and 8 as under:
"7. We have considered the rival submissions as well as relevant material on record. There is no dispute that the addition in question was made by the AO @ 25% of unverifiable purchases while completing the assessment 6 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO u/s 143(3). There is no definite finding by the AO that the assessee has inflated the purchase to the extent of 25% but it was only estimation of the AO to make addition which was subsequently restricted by this Tribunal to 15% of unverifiable purchase. Thus even the addition in quantum proceedings attained the finality it is not based on the finding that the assessee has inflated the purchases and suppressed the income or claim of the assessee was absolutely bogus. The AO has only doubted the purchases from certain parties and made the addition only to the extent of 25% of purchases made from such parties instead of disallowing entire purchases from those parties. When the AO has not given any finding of bogus purchases then the disallowance made by the AO is only based on estimation which was restricted by this Tribunal as reasonable estimated. Accordingly, the issue of levy of penalty u/s 271(l)(c) of such addition is now covered by the decision of Hon'ble Jurisdiction High Court in case of CIT vs. Mahendra Singh Khedla(supra). The Hon'ble High Court while considering the issue of levy of penalty arising from the addition based on estimation in para 6 to 8 as under:-
6. We have considered the submissions of learned counsel for appellant and examined the reasons assigned by Appellate Authority as well as Appellate Tribunal for setting aside the penalty order.
7. The appellate authority as well as the appellate Tribunal both considered the matter in detail and by speaking order set aside the penalty levied by Assessing Officer, in the facts and circumstances of the present case. The relevant portion of Para 7 of order of the Tribunal is reproduced as under:-
"Para 7. .....The enquiry conducted by the AO may lead to arrive at the findings as to whether the particulars disclosed are truthful or false or not proved to be satisfactory. In the first case it would be a positive case of no concealment, in second case it would be a positive case of concealment and in third case benefit of doubt will go in favour of the assessee. The case of the assessee falls within third category where the alleged fact of introduction of capital is found to be not proved satisfactorily. Therefore, it is not a case of positive concealment and benefit of doubt goes in favour of the assessee. There is no dispute that trading addition was made on the basis of estimation because the results shown by the assessee was not 7 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO found satisfactory by the AO. Where an estimated addition was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee to the extent of amount in difference shown by the assessee and estimated by the department depends upon the facts and circumstances of the case. .............. Under these circumstances when in the present case there was no positive evidence beyond doubt regarding estimated trading addition that the amount in difference between the result shown by the assessee and that estimated by the AO was resultant of concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee, penalty under section 271 (1) (c) of the Act cannot be levied. The AO had rejected the books of account and estimated the trading addition on the basis that the assessee had not maintained site- wise account, no head-wise details of claimed purchases were furnished, no separate head of expenses was maintained, work in progress was not declared, some wages were shown outstanding without complete details of creditors, stock register was not maintained and misc. expenses on water transportation etc. were not verifiable and purchase vouchers of sand, steel, bajri etc. were self made etc. Assessee explained reasons for the above defects which were not accepted by the AO as not found satisfactory. The AO accordingly made estimation. The circumstances suggest that it may be just and proper case of making estimated trading addition but an inference therefrom cannot be drawn beyond doubt especially keeping in mind the nature of work in not maintaining those books and details supported with proper vouchers etc. that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee to attract the penal provisions. In view of above discussion and keeping in mind the fact and circumstances of the present case, we are of the view that the ld. CIT (A) was justified in deleting the penalty in absence of positive evidence with the department that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the addition in question. The first appellate order on the issue is thus upheld."
8. The above finding of the Tribunal makes it clear that additions made by the Assessing Officer were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly levied by the Assessing Officer. The basis for levying penalty in the present case is only estimation, which is purely a question of fact and there is a concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both.
8. In the facts and circumstances as discussed above as well as respectfully following the decision of Hon'ble Jurisdiction High Court in case of CIT vs. 8 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO Mahendra Singh Khedla (supra) we delete the penalty levied u/s 271(1)(c). The appeal of the assessee is allowed." Therefore, in view of the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs Mahendra Singh Khedla (supra), the levy of penalty against the addition made on the basis of estimation of income by taking 25% of the unverifiable purchases which was reduced in the said case to 15% was found to be not sustainable. This view has been consistently taken even in other decisions as referred by the ld AR of the assessee. Accordingly, to maintain the rule of consistency and in absence of any contrary precedent brought to our notice, we delete the levy of penalty U/s 271(1)(c) of the Act.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 07th January, 2019.
Sd/- Sd/-
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(VIKRAM SINGH YADAV) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 07th January, 2019
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Jaideep Dhadda, Jaipur.
2. izR;FkhZ@ The Respondent- The I.T.O., Ward 1(1), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
9 ITA 733/JP/2017_ Jaideep Dhadda Vs ITO
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 733/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar