Income Tax Appellate Tribunal - Jodhpur
Income Tax Officer vs Smt. Purnima Devi Gupta on 30 January, 2004
Equivalent citations: (2004)83TTJ(JODH)586
ORDER
N.K. Saini, A.M.
1. This is an appeal by the Department against the order of the CIT(A) dt. 20th Sept., 1999. The only issue raised in this appeal relates to the cancellation of penalty of Rs. 86,401 imposed under Section 271(1)(c) of the IT Act, by the AO.
2. The facts of the case in brief are that the assessee filed return of income showing an income of Rs. 41,620 which was revised to Rs. 71,330 and the assessment was completed on an income of Rs. 5,44,310 by making an addition of Rs. 4,72,280 on 14th March, 1996. The AO had taken the receipts from bus plying business at Rs. 16,95,506 as against the receipts shown by assessee at Rs. 10,96,370 and applied the net profit rate of 33 per cent. The matter travelled upto the Tribunal level and the Tribunal directed the AO to compute the income by applying a net profit rate of 20 per cent subject to depreciation and interest to third parties. The AO had imposed the penalty holding the difference of income as computed on the basis of the decision of the Tribunal in case of the assessee and income as shown by the assessee as concealed income. The difference of income was computed at Rs. 1,94,900 and the same was considered as the concealed income of the assessee. Consequently the penalty of Rs. 86,401 was imposed.
3. The assessee carried the matter to the CIT(A) and stated that the AO was not legally justified in imposing the penalty because the assessee had not concealed its income in any manner. It was stated that the original return was revised with a view to include the income of the minor children. It was stated that the assessee had kept detailed accounts in respect of plying of buses, income being received therefrom and expenditure relatable to such buses. However, the AO estimated the income by applying a net profit rate of 33 per cent subject to depreciation. Thereafter the learned CIT(A) confirmed the action of the AO. However, the Tribunal, Jaipur Bench, directed the AO to compute the income from bus plying by applying net profit rate of 20 per cent subject to depreciation and interest to third parties. It was vehemently argued that when the assessee had not concealed its income in any manner, the AO was not justified in imposing the penalty. Simply because the higher rate had been applied than shown by the assessee, for working out the income it did not become a case of concealment of income by the assessee. The reliance was placed on the judgment of Tribunal, Jaipur Bench in the case of Asstt. CIT v. Milap Textile Mills in ITA No. 1271/Jp/1989 reported in (1994) 48 TTJ (Jp) 55 and the judgment of Hon'ble Allahabad High Court in case of CIT v. K.L. Mangal Sain (1977) 107 ITR 598 (All).
4. The learned CIT(A) after considering the submissions of the assessee observed that simply because books of accounts were rejected and provisions of Section 145(2) were applied and thereby a particular net profit rate is applied for computing the income while passing the assessment order, it did not become a case of concealment. He further observed that the difference of income was only on account of application of a particular flat rate and it did not amount to concealment of income. He, therefore, following the decision of tribunal, Jaipur Bench in case of Asstt. CIT v. Milap Textile Mills (supra) and the judgment of Hon'ble Allahabad High Court in case of CIT v. K.L. Mangal Sain (supra) held that the AO was not justified in imposing the penalty. Accordingly the penalty was cancelled.
5. Now the Department is in appeal. The learned Departmental Representative stated that the addition in the income of the assessee had been confirmed up to the Tribunal level, therefore, it was the clear case of concealment by the assessee and the penalty was rightly levied by the AO and the CIT(A) was not justified in deleting the same. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the learned CIT(A) and stated that the addition in this case was only on estimate basis and no material had been brought on record that the assessee had concealed any particular of income or furnished inaccurate particulars of income. He vehemently argued that the mere addition made on the basis of higher estimate of net profit rate would not tantamount to concealment of income. The reliance was placed on the judgment of Hon'ble Jurisdictional High Court in the case of Shiv Lal Tak v. CIT (2001) 251 ITR 373 (Raj).
6. We have heard both the parties at length and also gone through the material available, on the record. In the instant case it is noticed that 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 of 33 per cent. The action of the AO was confirmed by the CIT(A), however, the Tribunal estimated the gross receipts at Rs. 15,00,000 and directed the AO to apply a net profit rate of 20 per cent subject to depreciation and interest to third parties. From the above facts it would be clear that there was an estimate at the level of the AO as well as at the level of Tribunal in respect of receipts as well as net profit rate. The above facts clearly show that the income of the assessee was estimated and nothing has been brought on record by the AO that the assessee concealed any particulars of income or furnished inaccurate particulars of income. Their Lordships in the case of Shiv Lal Tak v. CIT (supra) at p. 381 observed that :
"In making computation of total income where the income returned has been rejected by rejecting the trading results, finding some discrepancy in the books of account and substituting the same by an estimated figure, in the strict sense, can neither be said to be addition of any amount in the returned income nor disallowance of any amount as deductions claimed. The word "amount" of which additions made or deductions disallowed also denotes reference to specific item of amount added or disallowed as deduction in contrast to substitution of altogether a new estimated sum in place of the income returned. It is a case neither of addition or disallowance but a case of substitution".
7. In view of the above observation, it cannot be said that the addition made in the hands of the assessee was on account of any concealment by the assessee. Therefore, the provisions of Section 271(1)(c) were not applicable to the facts of the present case. The Hon'ble Punjab & Haryana High Court in the case of CIT v. Metal Products of India (1984) 150 ITR 714 (P&H) held that :
"Merely because the addition had been made on estimate under the proviso to Section 145(1) by adopting the view that the gross profit shown in the books of accounts was too low as there were defects in the method of accounting employed, did not automatically lead to the conclusion that there was failure to return the correct income by means of fraud or gross or wilful neglect."
8. In view of the ratio laid down by the Hon'ble Punjab & Haryana High Court, it cannot be said that in the case of assessee there was any fraud or gross or wilful neglect to return the correct income. In that view of the matter also the penalty was not leviable under Section 271(1)(c) of the IT Act. Similarly the Hon'ble Punjab & Haryana High Court in the case of Harigopal Singh v. CIT (2002) 258 ITR 85 (P&H), held that "there was a difference of opinion as regards the estimate of income of the assessee. Since the AO and the Tribunal adopted different estimates in assessing the income of the assessee, it could not be said that the assessee had concealed the particulars of income so as to attract Clause (c) of Section 271(1)". The ratio of above decision laid down by the Punjab & Haryana High Court is squarely applicable to the facts of the present case, therefore, the learned CIT(A) was justified in deleting the penalty. A similar view has been taken by the Madras High Court in the case of CIT v. Smt K. Meenakshi Kutty (2002) 258 ITR 494 (Mad) by holding that the Tribunal had clearly held that the estimate given by the assessee was not the result of any gross or wilful negligence and that penalty was not called for. The cancellation of penalty was valid.
9. In view of the aforesaid discussion, we are of the confirmed - view that no penalty under Section 271(1)(c) of the IT Act 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. We, therefore, do not see any merit in the Departmental appeal.
10. In the result, the appeal is dismissed.