Income Tax Appellate Tribunal - Chandigarh
Rajiv Kumar S/O Pawan Kumar Goyal, ... vs Ito, Malerkotla on 16 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
'SMC' BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
ITA No. 722/CHD/2016
Assessment Year: 2009-10
Shri Rajiv Kumar, Vs The ITO,
S/o Shri Pawan Kumar Goyal, Ward - 2,
53, Cinema Road, Malerkotla.
Near Janta College,
Ahmedgarh.
PAN: ACJPK6964A
&
ITA No. 723/CHD/2016
Assessment Year: 2010-11
Shri Rajiv Kumar, Vs The ITO,
S/o Shri Pawan Kumar Goyal, Ward - 4(4),
53, Cinema Road, Malerkotla.
Near Janta College,
Ahmedgarh.
PAN: ACJPK6964A
(Appellant) (Respondent)
Appellant by : Shri Sudhir Sehgal
Respondent by : Shri Manjit Singh, DR
Date of Hearing : 15.11.2016
Date of Pronouncement : 16.11.2016
O R D E R
This order shall dispose off both the above appeals filed by assessee for different assessment years.
2. I have heard ld. Representatives of both the parties and perused the material on record. The appeals are decided as under.
2
ITA 722/2016 ( A.Y. 2009-10)
3. This appeal by assessee has been directed against the order of ld. CIT(Appeals)-2 Ludhiana dated 28.03.2016 for assessment year 2009-10 challenging the levy of penalty under section 271(1)(c) of the Income Tax Act.
4. Brief facts of the case are that the assessment was completed on 26.12.2011 at an income of Rs. 12,00,261/- as against returned income of Rs. 3,17,870/-. During the course of assessment proceedings, the main addition of Rs. 8,56,562/- was made on account of low GP rate shown by the assessee by rejecting books of account by pointing out specific defects therein. During the assessment proceedings, the Assessing Officer noted that the assessee had shown a gross turnover of Rs. 4.32 Cr and declared GP rate of 8.09% which was less by 1.03% from the preceding assessment year. The Assessing Officer further noted that assessee had debited all the manufacturing expenses in the Profit & Loss Account. The Assessing Officer, accordingly, computed GP and noted that GP worked out to 2.22% which was less by 0.77% from previous year under the similar circumstances. The Assessing Officer made the addition of Rs. 8,56,562/- by applying GP rate of 4.18% on the total sales of Rs. 4.32Cr. The ld. CIT(Appeals), comparing the case of the assessee with previous year and current year, limited the addition to Rs. 3,33,107/-. The Assessing Officer levied the penalty on the aforesaid addition and ld. CIT(Appeals) confirmed the levy of penalty. 3
5. After considering rival submissions, I am of the view penalty is not leviable in the matter. The ld. counsel for the assessee pointed out that Assessing Officer made the addition by applying higher GP rate of 4.18% and the addition has been further reduced substantially by the ld. CIT(Appeals). He has further pointed out that ITAT 'SMC' Bench, Chandigarh in the case of the assessee in ITA 408/2011 vide order dated 10.08.2016 reduced the addition to Rs. 1 lac against the addition maintained by ld. CIT(Appeals) in a sum of Rs. 3,33,107/-. The findings of the Tribunal in para 4 to 5 are reproduced as under :
"4. I have heard ld. Representatives of both the p a r t i e s a n d p e r u s e d f i n d i n g s o f a u t h o r i t i e s b e l o w. The ld. counsel for the assessee did not challenge t h e r e j e c t i o n o f b o o k s o f a c c o u n t wh i c h i s a l s o n o t challenged in the ground of appeal bef ore Tribunal. Moreover, Assessing Off icer has given various r e a s o n s i n t h e a s s e s s me n t o r d e r f o r r e j e c t i o n o f t h e books of account and v ie w of the Assessing Off icer have been c o n f i r me d by the ld. C IT ( A p p e a l s ) . Theref ore, in the absence of any challenge to these f indings of the authorities b e l o w, I proceed to decide the issue of addition in question. 4(i) The ld. counsel for the assessee submitted that addition is still excessive because GP rate was f ound less only by 0.77%. I, on the examin ation of the orders of the authorities below found that addition is still on excessive side. The authorities belo w despite rejecting the books of account of the a s s e s s e e a l s o m a d e d i s a l l o wa n c e o f 1 / 5 t h o f t h e expenses and made addition of Rs. 25,829/-. The l d . C IT ( A p p e a l s ) c o n f i r me d t h e a d d i t i o n . I t i s we l l 4 settled law wh e n books of account rejected, no f u r t h e r e x p e n s e s s h o u l d b e d i s a l l o we d s e p a r a t e l y . Since the addition of Rs. 25,829/- have been maintained and is not in subject matter, but this addition is available to assessee to prove that the addition on account of GP rate is excessive. It may also be noted here that despite noting various def ects by the authorities b e l o w, ultimately the g r o s s p r o f i t r a t e wa s f o u n d l e s s b y 0 . 7 7 % wh i c h i s very negligible. The ld. counsel f or the assessee a l s o s t a t e d t h a t i n e a r l i e r y e a r , t h e l d . C IT ( A p p e a l s ) d e l e t e d t h e a d d i t i o n a n d I T A T c o n f i r me d t h e o r d e r o f l d . C IT ( A p p e a l s ) v i d e o r d e r d a t e d 2 2 . 0 6 . 2 0 1 2 , copy of the order is f iled in the Paper Book at page 5 3 wh e r e b y d e p a r t me n t a l a p p e a l wa s d i s m i s s e d . Theref ore, considering history of the assessee and earlier order of the Tribunal and that separate a d d i t i o n o n a c c o u n t o f d i s a l l o wa n c e o f e x p e n d i t u r e h a v e b e e n m a d e wi t h o u t a n y j u s t i f i c a t i o n , I r e d u c e the addition of Rs. 3,33,107/- to Rs. 1 lac only. The orders of authorities belo w to that extent are mod if ied and I restric t the addition to Rs. 1 lac as against addition f Rs. 3,33,107/-.
6. He has contended that on mere estimate of income, no penalty is leviable. The ld. DR, however relied upon orders of the authorities below.
6(i) In this view of the matter and considering the case of the assessee in the light of order of the Tribunal on quantum dated 10.08.2016 (supra), it is clear that ultimately small addition is maintained on estimate basis. Hon'ble Punjab & Haryana High Court in the cases of Dhillon Rice Mills 256 ITR 447 and Hari Gopal Singh 258 5 ITR 85 did not approve levy of the penalty on estimated additions. Since in this case, ultimately income is estimated, therefore, no case of concealment of income or filing inaccurate particulars has been made out by the authorities below. The penalty is, therefore not leviable in the matter. I, accordingly, set aside the orders of authorities below and cancel the penalty.
7. In the result, appeal of the assessee is allowed.
ITA 723/2016 ( A.Y. : 2010-11)
8. This appeal by assessee has been directed against the order of ld. CIT(Appeals)-2 Ludhiana dated 01.03.2016 for assessment year 2010-11 challenging the rejection of the books of account and addition of Rs. 17,81,577/- made on account of applying higher GP rate.
9. Brief facts of the case are that assessee filed return of income declaring income of Rs. 2,98,680/-. During the course of assessment proceedings, Assessing Officer noted that assessee had shown gross profit of Rs. 31,79,932/- on the total sales of Rs. 3.78 Cr and declared GP rate of 2.42%. The Assessing Officer noted that assessee had debited all the manufacturing expenditure in the Profit & Loss Account. The Assessing Officer re-computed GP and noted that GP worked out to 2.42%. The Assessing Officer found several discrepancies in the books of account of the assessee therefore, rejected the books of account of the assessee and applied average GP rate of 6.81% and made 6 addition of Rs. 17,81,577/-. The ld. CIT(Appeals) confirmed the addition and dismissed the appeal of the assessee.
10. After considering rival contentions, I am of the view addition is excessive in nature. The ld. counsel for the assessee did not challenge the rejection of the books of account. He has submitted that issue is covered by order of ITAT 'SMC' Bench in the case of the same assessee for assessment year 2009-10 dated 10.08.2016 (supra) which is reproduced above. He has submitted that issue is identical in the assessment year under appeal as well. 10(i) After considering rival submissions, I am of the view issue is covered by order of ITAT 'SMC' Chandigarh Bench for preceding assessment year 2009-10 dated 10.08.2016 in which, after considering the addition of expenses in a sum of Rs. 25,829/-, the addition was restricted to Rs. 1 lac only. In the present year also, the Assessing Officer, apart from making the addition on account of low GP, made addition of Rs. 22,000/- under section 40A(3) of the Income Tax Act which was not challenged before ld. CIT(Appeals). Therefore, this addition could not have been made while rejecting the books of account. Therefore, same would also be available to the assessee to prove that addition is excessive as is held by the Tribunal in assessment year 2009-10 above.
11. Considering the history of the assessee noted above, in the light of addition confirmed by the Tribunal in a sum of 7 Rs. 1 lac in preceding assessment year 2009-10 and following the order of the Tribunal dated 10.08.2016 (supra), I reduce the addition of Rs. 17,81,577/- to Rs.
1.50 lacs in all. The orders of the authorities below to that extent are modified and I restrict the addition to Rs. 1.50 lacs as against addition of Rs. 17,81,577/-.
12. In the result, appeal of the assessee is partly allowed.
13. In the result, appeal of the assessee for assessment year 2009-10 is allowed, however, appeal of the assessee for assessment year 2010-11 is partly allowed.
Order pronounced in the Open Court.
Sd/-
(BHAVNESH SAINI) JUDICIAL MEMBER Dated : 16 t h November,2016.
'Poonam' Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR Assistant Registrar, I TAT Chandigarh