Income Tax Appellate Tribunal - Pune
M/S. Nanchand & Co.,, Pune vs Deputy Commissioner Of Income Tax,, ... on 3 September, 2019
आयकर अऩीऱीय अधधकरण "ए" न्यायऩीठ ऩण
ु े में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, PUNE
श्री डी. करुणाकरा राव, ऱेखा सदस्य, एवं श्री ववकास अवस्थी, न्याययक सदस्य के समक्ष ।
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अऩीऱ सं. / ITA Nos.2207 to 2212/PUN/2016
यनधाारण वषा / Assessment Years : 1998-99 to 2002-03 & 2004-05
M/s. Nanchand & Co.,
Shah Khandelwal Jain & Associates,
Chartered Accountants,
Level 3, Business Bay, Plot No. 84,
Wellesley Road, Near RTO,
Pune - 411001
PAN : AABFN5345A
.......अऩीऱाथी / Appellant
बनाम / V/s.
Assistant Commissioner of Income Tax,
Central Circle - 2(2), Pune
......प्रत्यथी / Respondent
आयकर अऩीऱ सं. / ITA Nos.383 to 385/PUN/2017
यनधाारण वषा / Assessment Years : 1998-99 to 2000-01
M/s. Nanchand & Co.,
Shah Khandelwal Jain & Associates,
Chartered Accountants,
Level 3, Business Bay, Plot No. 84,
Wellesley Road, Near RTO,
Pune - 411001
PAN : AABFN5345A
.......अऩीऱाथी / Appellant
बनाम / V/s.
Deputy Commissioner of Income Tax,
Central Circle - 2(2), Pune
......प्रत्यथी / Respondent
Assessee by : Shri Neelesh Khandelwal
Revenue by : Shri Shivanand H. Kalakari
सन
ु वाई की तारीख / Date of Hearing : 06-06-2019
घोषणा की तारीख / Date of Pronouncement : 03-09-2019
2
ITA Nos.2207 to 2212/PUN/2016 &
383 to 385/PUN/2017
आदे श / ORDER
PER VIKAS AWASTHY, JM :
The assessee in ITA Nos. 2207 to 2212/PUN/2016 has assailed the order of Commissioner of Income Tax (Appeals)-13, Pune dated 24-06-2016 common for the assessment years 1998-99 to 2002-03 and 2004-05.
2. The brief facts of the case common for all the assessment years are :
The assessee firm is engaged in the business of trading in dry fruits on wholesale and retail basis. A search and seizure action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was carried out in the case of Soni-Shah group on 29-07-2003. During the course of search cash Rs.40 lakhs was seized. The statement of Shri Nanchand Bhogilal Shah, partner of the assessee firm was recorded on 04-12-2003 u/s. 131(1)(b) of the Act. He admitted cash seized Rs.40 lakhs as undisclosed income of the group. In his statement he offered the entire cash for tax in the name of three group entities viz. Nanchand & Co., Swati Automobiles and Danendra Kumar & Co. spread over the period of six years starting from assessment year 1998-99. The details of cash disclosed in the name of group entities over the period of six assessment years is as under :
Sr. Name of the concern A.Y. Amount (Rs.)
No.
1 M/s. Nanchand & Co. 1998-99 3,10,000/-
2 -do- 1999-2000 3,10,000/-
3 -do- 2000-01 3,10,000/-
4 -do- 2001-02 3,10,000/-
5 -do- 2002-03 3,10,000/-
6 -do- 2003-04 3,10,000/-
7 -do- 2004-05 40,000/-
8 M/s. Swati Automobiles 1998-99 30,000/-
9 -do- 1999-2000 30,000/-
10 -do- 2000-01 30,000/-
11 -do- 2001-02 30,000/-
12 -do- 2002-03 30,000/-
3
ITA Nos.2207 to 2212/PUN/2016 &
383 to 385/PUN/2017
13 -do- 2003-04 30,000/-
14 -do- 2004-05 20,000/-
15 M/s. Danendrakumar & 1998-99 3,10,000/-
Co.
16 -do- 1999-2000 3,10,000/
17 -do- 2000-01 3,10,000/
18 -do- 2001-02 3,10,000/
19 -do- 2002-03 3,10,000/
20 -do- 2003-04 3,10,000/
21 -do- 2004-05 40,000/-
Total 40,00,000/-
2.1 The assessee disclosed turnover along with gross profit for the impugned assessment years as under :
Assessment Disclosed Gross Profit (GP) GP Percentage Year Turnover 1998-99 23,41,358/- 2,10,611 8.99% 1999-00 33,75,549 2,43,590 7.21% 2000-01 27,13,479 2,44,338 9.00% 2001-02 30,21,608 2,15,022 7.11% 2002-03 21,78,556 2,11,285 9.70% 2004-05 21,72,751 1,96,985 9.06% 2.2 Thereafter, assessments for the impugned assessment years were framed u/s. 153A r.w.s. 143(3) of the Act. The Assessing Officer made additions in the impugned assessment years on account of unexplained expenditure u/s. 69C, unexplained investments u/s. 69B and GP additions on undisclosed sales.
2.3 Aggrieved against the assessment orders for the respective assessment years, the assessee filed appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) enhanced the additions. Hence, the present appeals by the assessee.
3. For the sake of convenience, we will take up the appeals of assessee for adjudication in seriatim of assessment years.4
ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 ITA No. 2207/PUN/2016, (A.Y. 1998-99)
4. The assessee has raised following grounds assailing the findings of Commissioner of Income Tax (Appeals) :
"1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of Rs.4,55,426/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act.
The addition made by the AO and that enhanced by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the profits of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes the profits earned out of the unaccounted business activities. The appellant be granted just and proper relief in this respect.
3. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of Rs.23,221/- on account of unaccounted expenditure is unwarranted, unjust and against the provisions and scheme of the Act. The said addition be deleted and the appellant be granted just and proper relief in this regard.
4. Without prejudice to the above ground, on the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the amount of Rs.23,221/- on account of unaccounted expenditure has already been taxed in the hands of Mr.Nandchand Shah for A.Y.2001-02 and therefore no separate addition should be made in the hands of the appellant. The addition be deleted and the appellant be granted just and proper relief in this respect.
5. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of Rs.3,84,207/- on account of unaccounted initial investment is unwarranted, unjust and against the provisions and scheme of the Act. The addition so made be deleted. The appellant be granted just and proper relief in this regard.
6. Without prejudice to the grounds raised above, on facts and circumstances prevailing in the case and as per provisions of law and scheme of the Act, it be held that the appellant is allowed to claim telescopic effect of the additions made and the appellant be granted consequential relief in accordance with the provisions of law. The appellant be granted just and proper relief in this regard.
7. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing." 5
ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017
5. Shri Neelesh Khandelwal appearing on behalf of the assessee submitted that in the impugned assessment year the Assessing Officer made additions on following counts :
i. GP addition on unrecorded sales Rs.12,940/-.
ii. Unexplained expenditure u/s. 69C Rs.23,221/-.
5.1 The ld. AR submitted that in First Appellate proceedings the Commissioner of Income Tax (Appeals) enhanced GP addition on unaccounted sales by extrapolating sales for the month of October, 1997 to the entire year. The ld. AR submitted that extrapolating the sales for the month of October, 1997 to the entire year is unreasonable and unjustified as the turnover during the month of October was at peak owing to Diwali festival. During the non festival months/seasons the turnover of the firm is considerable low. The ld. AR submitted that maximum three months in the entire year can be considered as the months of festivals when the sale of dry fruits goes up. Therefore, the sale for the month of October, 1997 cannot be extrapolated to the entire year. The ld. AR furnished a table giving working of turnover and the GP calculated on the basis of aforesaid turnover. The same is reproduced here-in-below :
Particulars Turnover Months Total Remarks
Turnover
Festival 4,22,160 3 12,66,480 For the festive
Season season
turnover is
considered
same as found
for the month
of October
1997 in the
seized papers.
Non-festive 1,92,613 9 17,33,520 Balance
season amount
Total 12 30,00,000
GP percentage worked out from return filed by the 8.99%
appellant
GP on the turnover calculated in table as above 2,69,700
(30,00,000 *8.99%)
6
ITA Nos.2207 to 2212/PUN/2016 &
383 to 385/PUN/2017
5.2 The ld. AR contended that in the statement recorded on 14-12-2003 Shri Nanchand Bhogi Lal Shah while replying to Q. No. 7 has categorically stated that unaccounted cash was generated from the transactions of unaccounted purchases and sales. Thus, the cash found in the premises of appellant was out of profits from unaccounted business activities. The ld. AR prayed that the telescopic effect of the cash declared may be given to the assessee against addition on account of gross profits on unaccounted sales. In case the benefit of telescopy is not given it would result in double addition of income in the hands of assessee. The ld. AR further contended that for the assessment year 1998-99 the cash declared by the assessee is Rs.3,10,000/- and GP addition on account of undisclosed purchases as computed above is Rs.2,69,700/-. After giving telescopic effect of cash declared against GP on unaccounted sales, there would be no addition.
5.3 In respect of addition on account of unexplained expenditure u/s.
69C the ld. AR submitted that once GP addition on unaccounted sales is made no further addition on account of unexplained expenditure u/s. 69C should be made.
5.4 The ld. AR further contended that the Commissioner of Income Tax (Appeals) during First Appellate proceedings made addition on account of unexplained investment u/s. 69B Rs.3,84,207/-. The addition has been made on account of initial investment. The basis for calculation of initial investment by the Commissioner of Income Tax (Appeals) is extrapolation of turnover for the month of October, 1997 to the entire year. The ld. AR contended that after considering the earlier table wherein the total turnover of Rs.30 lakhs was worked after extrapolating the sale of October, 1997 to three months. Addition on account of initial investments would 7 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 work out to Rs.2,62,360/-. The ld. AR gave the working of aforesaid calculation which is as under :
1 Turnover for First month i.e. April 1997 ( Non- 1,92,613 festive) 2 GP Percentage 7.99% 3 Gross Profit (1*2) 15,390 4 Initial cost of Investment (1-3) 1,77,223 5 Add: GP for 6 months (3* 6 Months) 92,339 6 Funds available at the beginning of October 2,69,562 1997 (4+5) 7 Turnover for the month of October ( Festive) 4,22,160 8 Gross Profit (7*2) 33,731 9 Cost of Investment for October 1997 (7-8) 3,88,429 10 Difference in the Funds available and 1,18,868 Investment made in October 1997 (9-6) 11 Initial cost of Investment (As per 4) 1,77,223 12 Gross Profit for the month of October 33,731 13 Total Addition ( 10+11) 2,62,360 5.5 The ld. AR thus prayed for deleting the additions made by the Commissioner of Income Tax (Appeals) after giving the benefit of telescopy and restricting the addition u/s. 69B as sated above.
6. On the other hand Shri Shivanand H. Kalakari representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee.
7. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. It is an undisputed fact that during search operation cash Rs.40 lakhs was seized.
Shri Nanchand Bhogi Lal Shah offered seized cash to tax in the name of three group firms including assessee spread over the period of six years. The cash disclosure made by the assessee has been accepted by the Department. However, the authorities below have made addition in respect of GP on unaccounted sales. The contention of the assessee is that the 8 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 cash seized during search is generated from the business activities. A perusal of statement Shri Nanchand Bhogi Lal Shah recorded on 04-12- 2003 u/s. 131 reveal that while replying to Q. No. 7, he has categorically stated that "Whatever profits the generated out of the transactions of purchases and sales are reflected in different pages in these four seized bundles formed also the part of total cash of Rs.40/- lacs seized from my residence." Thus, unaccounted cash offered by the assessee was against undisclosed business transactions.
8. The Commissioner of Income Tax (Appeals) in First Appellate proceedings has enhanced GP addition by extrapolating sales for the month of October, 1997 to the entire year. The contentions of the assessee is that October being the month of Diwali festival the sales are at peak. Hence, sales during festival months/seasons cannot be extrapolated to the entire year. We find merit in the contentions of the assessee. Merely for the reason that there were high volume of sales in the month of October on account of festival, the sales cannot be extrapolated to the other months for computing annual turnover. This would give unrealistic figures of annual turnover and there would be aberration in computation of profits. The sales recorded during festival month at the most can be extrapolated to 3-4 calendar months. In so far as the remaining calendar months regular sales figure have to be adopted. Without going into the merits of calculations furnished by the assessee we deem it appropriate to restore this issue back to the file of Assessing Officer for re-computation of annual turnover in line with our aforesaid observations. Accordingly, ground Nos. 1 and 2 of the appeal by the assessee are allowed for statistical purpose.
9. In ground Nos. 3 and 4, the assessee has assailed addition u/s. 69C of the Act. The Assessing Officer has made addition by invoking the 9 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 provisions of section 69C on account of unexplained expenditure. We are of considered view that once GP addition has been made by estimating unaccounted sales turnover, addition u/s. 69C is not warranted. The unaccounted expenditure could have been made by assessee from income generated from unaccounted sales. Our view is supported the judgment rendered by Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Jawanmal Gemaji Gandhi reported as 15 Taxman 487. Accordingly, ground Nos. 3 and 4 raised in the appeal are allowed.
10. In ground No. 5 of the appeal the assessee has assailed the addition made by Commissioner of Income Tax (Appeals) u/s. 69B on account of unexplained initial investment. The assessee has given calculation on the basis of turnover computed after extrapolating sales of festival month to three calendar months and regular sales for remaining 9 months. Since, we have restored the issue of GP addition and computation of annual turnover back to the file of Assessing Officer, the calculation of initial investment has to be re-worked based on the annual turnover computed as per the directions of Tribunal. We deem it appropriate to restore the issue back to the file of Assessing Officer. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Accordingly, ground No. 5 is allowed for statistical purpose.
11. In ground No. 6 of the appeal, the assessee has prayed for allowing telescopic effect. The unaccounted cash found during the search operation has been offered to tax by the assessee as part of undisclosed business income. The additions made during assessment proceedings are in respect of undisclosed business transactions. The GP addition is made on turnover determined by extrapolation of sales. We are of considered view that the assessee deserves the benefit of telescopic effect on GP additions 10 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 against cash seized and offered to tax. Therefore, we find merit in the contentions of the assessee in seeking the benefit of telescopy of cash seized against addition on account of gross profits on unaccounted sales. In principle, we allow ground No. 6 of the appeal. However, we deem it appropriate to restore this issue back to the file of Assessing Officer for limited purpose of giving telescopic effect to the GP after re-computation. Accordingly, ground No. 6 of the appeal is allowed for statistical purpose.
12. The ground No. 7 is general in nature, hence, require no adjudication.
13. In the result, the appeal of assessee is partly allowed in the terms aforesaid.
ITA No. 2208/PUN/2016, (A.Y. 1999-2000)
14. The assessee has taken following grounds :
"1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of Rs.14,698/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes the profits earned out of the unaccounted business activities. The appellant be granted just and proper relief in this respect.
3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing."
15. In the impugned assessment year only issue raised by the assessee is against GP addition and to allow telescopic effect. The facts being similar to assessment year 1998-99. The findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 on the issues in hand, will apply mutatis mutandis to the assessment year under 11 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose.
ITA No. 2209/PUN/2016, (A.Y. 2000-01)
16. The assessee has taken following grounds :
"1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of Rs.2,12,376/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the AO and that enhanced by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the profits of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes the profits earned out of the unaccounted business activities. The appellant be granted just and proper relief in this respect.
3. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of Rs.1,06,665/- on account of unaccounted expenditure is unwarranted, unjust and against the provisions and scheme of the Act. The said addition be deleted and the appellant be granted just and proper relief in this regard.
4. Without prejudice to the above ground, on the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the amount of Rs.1,06,665/- on account of unaccounted expenditure has already been taxed in the hands of Mr.Nandchand Shah for A.Y.2001-02 and therefore no separate addition should be made in the hands of the appellant. The addition be deleted and the appellant be granted just and proper relief in this respect.
5. On the facts and circumstances prevailing in the case and as per the provisions and scheme of the Act, it be held that the addition on account of unaccounted expenditure amounting to Rs.1,06,665/- be restricted to Rs.23,930/- since the balance amount of Rs.82,735/- has already been taxed in A.Y.2001-02. The appellant be granted just and proper relief in this regard.
6. Without prejudice to the grounds raised above, on facts and circumstances prevailing in the case and as per provisions of law and scheme of the Act, it be held that the appellant is allowed to claim telescopic effect of the additions made and the appellant be granted consequential relief in accordance with the provisions of law. The appellant be granted just and proper relief in this regard.
7. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing."12
ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017
17. The ground Nos. 1 and 2 are in respect of GP addition. The ground Nos. 3 to 5 of the appeal are in respect of additions u/s. 69C and ground No. 6 of the appeal is with respect of telescopic benefit. The facts being similar to assessment year 1998-99, the findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 will apply mutatis mutandis to the assessment year under appeal. Accordingly, the ground Nos. 1, 2 and 6 raised by the assessee are allowed for statistical purpose. The ground Nos. 3 to 5 are allowed for the detailed reasons given while adjudicating the ground Nos. 3 and 4 of the appeal for assessment year 1998-99.
18. In the result, the appeal of assessee is partly allowed. ITA No. 2210/PUN/2016, (A.Y. 2001-02)
19. The assessee has taken following grounds in the appeal :
"1. The delay in filing of appeal be condoned.
2. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of Rs.82,735/- on account of unaccounted expenditure is unwarranted, unjust and against the provisions and scheme of the Act. The said addition be deleted and the appellant be granted just and proper relief in this regard.
3. Without prejudice to the above ground, on the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the amount of Rs.82,735/- on account of unaccounted expenditure has already been taxed in the hands of Mr. Nanchand Shah for A.Y.2001-02 and therefore no separate addition should be made in the hands of the appellant. The addition be deleted and the appellant be granted just and proper relief in this respect.
4. Without prejudice to the above grounds on the facts and circumstances prevailing in the case and as per the provisions and scheme of the Act, it be held that the addition on account of unaccounted expenditure amounting to Rs.82,735/- be deleted as the said amount has already been taxed in A.Y.2000-01. The appellant be granted just and proper relief in this regard.
5. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of Rs.1,91,767/- on account of unaccounted initial investments is unwarranted, unjust and against the provisions and scheme of the Act. The addition be deleted and the appellant be granted 13 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 just and proper relief in this regard.
6. Without prejudice to the grounds raised above, on facts and circumstances prevailing in the case and as per provisions of law and scheme of the Act, it be held that the appellant is allowed to claim telescopic effect of the additions made and the appellant be granted consequential relief in accordance with the provisions of law. The appellant be granted just and proper relief in this regard.
7. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing."
20. The appeal is time barred by 465 days. The assessee has filed an application seeking condonation of delay supported by an affidavit. We have examined the application and the affidavit filed by the assessee. After perusal of the same we are satisfied that delay in filing of appeal is not deliberate or intentional. The delay has occurred for the bonafide reasons stated in the affidavit.
21. The Hon'ble Supreme Court of India in the case of Ram Nath Sao @ Ram Nath Sahu and Others Vs. Gobardhan Sao and Others reported as 2002 AIR 1201 has held that acceptance of explanation furnished seeking condonation of delay should be the rule and refusal an exception, more so when no negligence or inaction or want of bonafide can be imputed to the defaulting parties. Taking a pedantic and hyper technical view of the matter, the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party against whom the lis terminates either by default or inaction. The Hon'ble Apex Court in various other decisions has taken similar view in liberally accepting the explanation furnished by the assessee for condoning the delay in filing of appeal. Thus, in view of the law laid down by the Hon'ble Apex Court and the for reasons stated in the affidavit by the assessee/appellant, the delay 14 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 of 465 days in filing of appeal is condoned. The appeal is admitted to be heard and disposed of on merits.
22. The grounds raised in the appeal and facts being similar to assessment year 1998-99, the findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 will apply mutatis mutandis apply to the assessment year under appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose in the same terms.
ITA No. 2211 /PUN/2016, (A.Y. 2002-03)
23. The assessee has taken following grounds :
"1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of Rs.1,15,352/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes the profits earned out of the unaccounted business activities. The appellant be granted just and proper relief in this respect.
3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing."
24. In the impugned assessment year only issue raised by the assessee is against GP addition and for allowing telescopic effect. The facts being similar to assessment year 1998-99, the findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 will apply mutatis mutandis to the assessment year under appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose. ITA No. 2212 /PUN/2016, (A.Y. 2004-05)
25. The assessee has taken following grounds :
15
ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017
1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of Rs.1,49,234/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect.
2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes the profits earned out of the unaccounted business activities. The appellant be granted just and proper relief in this respect.
3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing."
26. In the impugned assessment year only issue raised by the assessee is against GP addition and for allowing telescopic effect. The facts being similar to assessment year 1998-99, the findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 will apply mutatis mutandis to the assessment year under appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose. Penalty Appeals ITA Nos.383 to 385/PUN/2017, (A.Ys. 1998-99 to 2000-01)
27. These three appeals by the assessee are against the order of Commissioner of Income Tax (Appeals)-13, Pune dated 05-12-2016 common for the assessment years 1998-99 to 2000-01 levying penalty u/s. 271(1)(c) of the Act.
ITA No.383/PUN/2017, (A.Y. 1998-99)
28. The ld. AR submitted at the outset that penalty levied u/s. 271(1)(c) is liable to set aside as the charge while recording satisfaction by the Commissioner of Income Tax (Appeals) for initiating penalty proceedings and the charge mentioned in order levying penalty are not coherent. The Commissioner of Income Tax (Appeals) while initiating penalty has observe that the penalty is levied for concealment of income. However, while 16 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 passing order levying penalty u/s. 271(1)(c), the Commissioner of Income Tax (Appeals) levied penalty for concealment of income and furnishing inaccurate particulars of income. The manner in which penalty has been levied is against the law laid down by the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 ITR 4.
29. On the other hand the ld. DR vehemently defended the impugned order and submitted that the order of Commissioner of Income Tax (Appeals) levying penalty is in accordance with the provisions of the Act.
30. Both sides heard. Orders of the authorities below examined. A perusal of the order dated 24-06-2016 passed by the Commissioner of Income Tax (Appeals) reveal that Commissioner of Income Tax (Appeals) initiated penalty proceedings u/s. 271(1)(c) for concealment of income qua enhancement of GP addition. Similarly, for addition u/s. 69B penalty proceedings u/s. 271(1)(c) are initiated for concealment of income. The Commissioner of Income Tax (Appeals) vide order dated 05-12-2012 levied penalty in respect of aforesaid additions for concealment as well as furnishing inaccurate particulars of income. The relevant extract of the impugned order reads as under :
"I am of the opinion that the Appellant has concealed the particulars of its income and furnished inaccurate particulars within the meaning of the provisions of section 271(1)(c). Therefore, penalty u/s. 271(1)(c) is clearly attracted in the instant case."
31. A perusal of the orders by Commissioner of Income Tax (Appeals) initiating penalty proceedings and the order levying penalty clearly indicate that the charge for levy of penalty are not in coherence. The penalty has been initiated for concealment, whereas it has been levied for both the 17 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 charges of section 271(1)(c) i.e. concealment of income and furnishing inaccurate particulars of income.
32. The Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery (supra) has held that where satisfaction has been recorded for one breach u/s. 271(1)(c) and the penalty has been levied for another, such order levying penalty u/s. 271(1)(c) is not permissible. The relevant extract of the order of Hon'ble High Court reads as under :
"6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice."
33. Thus, in view of the facts of the case and judgment of Hon'ble Bombay High Court, the order levying penalty is liable to be set aside. Accordingly, the impugned order is set aside and the appeal of the assessee is allowed.
ITA No.384/PUN/2017, (A.Y. 1999-2000)
34. The ld. AR submitted that the penalty has been levied by Commissioner of Income Tax (Appeals) for the impugned assessment year in respect of GP addition. The ld. AR submitted that in case the assessee's plea of allowing telescopic effect is accepted, there will not be any addition and hence the penalty would not be survive.
18
ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017
35. On the other hand ld. DR vehemently defended the impugned order and prayed for dismissing the appeal of assessee.
36. Both sides heard. Orders of the authorities below perused. The Commissioner of Income Tax (Appeals) has initiated and levied penalty u/s. 271(1)(c) of the Act for concealment of income with respect to GP addition. While adjudicating quantum appeals of assessee, we have restored this issue back to the file of Assessing Officer for re-quantification of the GP addition and has also in principle allowed the benefit of telescopy. Since, the GP addition would be negated by giving telescopic effect, the addition would not survive. Once the substratum for levy of penalty has eroded there is no question for levy of penalty. Accordingly, the assessee succeeds in this appeal. The impugned order for the assessment year under appeal is set aside and the appeal of assessee is allowed.
ITA No.385/PUN/2017, (A.Y. 2000-01)
37. The ld. AR submitted that the facts in the assessment year under appeal are identical to the facts in assessment year 1999-2000 in ITA No. 384/PUN/2017. Therefore, the submissions made for assessment year 1999-200 would equally apply to the present appeal, as well.
38. On the other hand ld. DR vehemently defended the impugned order and prayed for dismissing the appeal of assessee.
39. Both sides heard. Orders of the authorities below perused. Since, the facts in the assessment year under appeal are identical to the assessment year 1999-200 the findings given by us while adjudicating the appeal in assessment year 1999-200 would mutatis mutandis apply in the 19 ITA Nos.2207 to 2212/PUN/2016 & 383 to 385/PUN/2017 assessment year under appeal. The appeal of assessee is allowed, accordingly.
40. In the result, the appeal of assessee is allowed.
41. To sum up, the appeals of assessee in ITA Nos. 2207 to 2212/PUN/2016 are allowed for statistical purpose and appeals of assessee in ITA Nos. 383 to 385/PUN/2017 are allowed.
Order pronounced on Tuesday, the 03rd day of September, 2019.
Sd/- Sd/-
(डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩण
ु े / Pune; ददनाांक / Dated : 03rd September, 2019 RK आदे श की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant.
2. प्रत्यथी / The Respondent.
3. आयकर आयुक्त (अऩीऱ) / The CIT(A)-13, Pune
4. The Pr. Commissioner of Income Tax (Central), Pune
5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, "ए" बेंच, ऩण ु े / DR, ITAT, "A" Bench, Pune.
6. गाडड फ़ाइऱ / Guard File.
//सत्यावऩत प्रयत // True Copy// आदे शानुसार / BY ORDER, यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune