Income Tax Appellate Tribunal - Chandigarh
Akash Enterprises, Samrala vs Acit, Khanna on 21 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.704/Chd/2015
(Assessment Year : 2007-08)
&
ITA No.705/Chd/2015
(Assessment Year : 2008-09)
Akash Enterprises, Vs. The A.C.I.T,
Dhillon Complex, Circle Khanna,
Chandigarh Road, Khanna.
Samrala.
PAN: AAMFA7188F
(Appellant) (Respondent)
Appellant by : Shri Sudhir Sehgal
Respondent by : Shri S.K. Mittal, DR
Date of hearing : 08.08.2016
Date of Pronouncement : 21.11.2016
O R D E R
PER ANNAPURNA GUPTA, A.M. :
These two appeals have been filed by the assessee against the consolidated order of Ld. Commissioner of Income Tax (Appeals)-2, Ludhiana dated 10.6.2015 for assessment years 2007-08 and 2008-09.,confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act,1961.
2. At the outset it may be stated that both the above cases were fixed for hearing on 05.01.2016 when none appeared on behalf of the assessee, nor any application was moved for adjournment. The appeals 2 were, therefore, dismissed vide order dated 05.01.2016. Thereafter, the assessee moved a Miscellaneous Application, in pursuance to which both the appeals were recalled vide order dated 29.4.2016 and fixed for hearing before us.
3. The issue involved in both the appeals is identical and are therefore being dealt with by a common order. For the sake of convenience the facts in the case of appeal filed in ITA. No. 704/Chd/2015, pertaining to A.Y 2007-08, are being dealt with herewith and the same shall apply mutatis mutandis to other appeal of the assessee in ITA No.705/Chd/2015 also.
4. Brief facts relating to the case are that for the impugned year, return declaring total income of Rs.53,55,480/- was filed by the assessee. The assessee is a wine contractor and had opened 122 liquor vends out of which only 41 ahatas had been maintained on which ahata income of Rs.23,96,647/- had been credited to the trading account. During the course of assessment proceedings, the assessee admitted that the ahata income had been shown on estimate basis. The Assessing Officer further noted that the cash memos had not been issued by the salesman of the ahatas. On being asked to explain these discrepancies, the assessee offered an addition of Rs.3 lacs on account of ahata income. Further, the Assessing Officer examined books of account alongwith original vouchers and noted that some vouchers were not properly prepared. When confronted with the same, the 3 assessee voluntarily offered an addition of Rs.1 lac out of miscellaneous expenses and Rs.50,000/- out of general expenses, being unvouched and unverifiable expenses incurred in cash. Accordingly, an addition of Rs.3 lacs on account of ahata income and Rs.1,50,000/- on account of expenses disallowed was made to the income of the assessee. Penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act') were also initiated. During the course of penalty proceedings, the assessee submitted that the additions were made on agreed basis and, therefore, no penalty was leviable on the same. The Assessing Officer rejected the assessee's contention and referring to Explanation-1 to section 271(1)(c) of the Act, as also, the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudan Vs. CIT (2001) 251 ITR 99 (SC) and the decision of Hon'ble Punjab & Haryana High Court in the case of CI T Vs. Mangaram (2005) 276 ITR 362 (P&H), held that the assessee had deliberately furnished inaccurate particulars of income and tried to evade taxes. The Assessing Officer held that had the case not been selected for scrutiny, the assessee would have evaded taxes of Rs.4,50,000/- Accordingly, the Assessing Officer held the assessee liable for penalty under section 271(1)(c) of the Act and accordingly, imposed penalty of Rs.1,51,470/- @ 100% of tax sought to be evaded.
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5. The matter was carried in appeal before the Ld. CIT (Appeals) who upheld the penalty levied by stating that it was an admitted fact that the income shown by the assessee in his return was not correct and the additional income offered was not voluntary but based on specific findings of the Assessing Officer. The Ld. CIT (Appeals) held that evidently the assessee had tried to understate his taxable income to avoid payment of taxes. Further the Ld. CIT (Appeals) held that no justification or explanation was also offered by the assessee and, therefore, Explanation-1 to section 271(1)(c) of the Act was attracted. Thereafter relying on a number of case laws, the Ld. CIT (Appeals) held that it was a fit case for levy of penalty and upheld the order of the AO.
6. Aggrieved by the same, the assessee filed the present appeal before us. During the course of hearing before us, the Ld. counsel for the assessee made multi pronged arguments against the levy of penalty. The Ld. counsel for the assessee pleaded that the additions made in the case of the assessee were agreed additions subject to no penalty when no adverse interference had been drawn by the Department. No specific defect had been pointed out by the Department in any vouchers or any bill, that the books of account were properly audited and all expenses were duly vouched and the assessee himself had offered the amount during the course of assessment 5 proceedings to avoid any litigation and to buy peace of mind. The Ld. counsel for the assessee pleaded that in such circumstances no penalty was leviable. Reliance was placed on a number of case laws in this regard :
a) CIT vs. Agrawal Round Rolling Mills Ltd. (88 CCH 036 ) (SC)
b) CIT vs. Suresh Chandra Mittal (251 ITR 9 )(SC)
c) CIT vs. Subash Kumar Jain (335 ITR 364) (P&HH C)
d) CIT vs Rajnish Nath Aggarwal (219 CTR 590) (P & H HC)
e) CIT vs Rajiv Garg & Ors (313 ITR 256 (P& H HC)
f) Heranba Industries Ltd. vs DOT in ITA no. 2292/Mum/2013 vide order dated 08
7. The second line of argument of the Ld. counsel for the assessee was that the disallowance of expenditure and estimation of income was purely adhoc made on account of doubts and suspicion without pinpointing any defect and, therefore, there was no question of inviting any penalty under section 271(1)(c) of the Act. Reliance was placed on a number of case laws in this regard also. Thereafter Ld. counsel for the assessee pleaded that the additions made in quantum proceedings do not automatically lead to the levy of penalty. The Ld. counsel for the assessee also distinguished each and every case law relied upon by the Ld. CIT (Appeals) while upholding the levy of penalty.
8. The Ld. D.R., on the other hand, relied upon the order of the Ld. CIT (Appeals).
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9. We have heard the rival contentions and perused the orders of the authorities below as also documents placed before us.
10. The undisputed facts of the present case, we find,are that the assessee is a wine contractor and the impugned year is the first year of working of the assessee firm. Admittedly, the assessee had shown ahata income on estimate basis and no cash memos were issued by the salesmen of ahatas run by the assessee. When confronted with the same, the assessee had voluntarily surrendered Rs.3 lacs on account of ahata income. Similarly, the Assessing Officer found some vouchers not properly prepared and when the assessee was confronted with the same, he surrendered Rs.1 lac out of miscellaneous expenses and Rs.50,000/- out of general expenses. It is on these additions made, that the penalty under section 271(1)(c) of the Act has been levied.
11. What emerges from the above is that the penalty has been levied for concealing ahata income to the extent of Rs.3 lacs and wrongly claiming expenses on account of general and miscellaneous expenses amounting in all Rs.50,000/-. Be that as it may, we find that there is no adverse finding either in the assessment order or the penalty order relating to aforesaid two issues except for the admittance by the assessee that he has returned his 7 ahata income on estimate basis since the salesmen had not issued cash vouchers properly, as also the surrender on account of the same which we find, was accepted as such by the Assessing Officer. There is no finding either in the assessment order or the penalty order that the estimation of income by the assessee was on the lower side to the extent of Rs.3 lacs which resulted in concealment of income to this extent. There is no iota of evidence on record to show that the income returned by the assessee was on the lower side. The addition also was made on adhoc basis without any shred of evidence in support of concealment of income to that extent. Clearly, the Assessing Officer accepted the contention of the assessee without making any further investigation either with regard to the income estimated or the income surrendered. Similar is the circumstance in the case of addition made on account of expenses disallowed amounting to Rs.1,50,000/-. No specific defect has been pointed out in the vouchers of the assessee except for a general observation and as in the case of ahata income, the surrender made by the assessee has been accepted without making any effort to determine whether the same reflected the concealed income of the assessee or not. Clearly there is no specific finding of concealment of income in the present case. For levying penalty under section 271(1)(c) of the Act, there has to be a positive act of concealment and the onus to prove the same is on the department. Order imposing penalty being quasi criminal 8 in nature, burden lies on the Department to establish that assessee concealed his income. The Hon'ble Punjab and Haryana High Court in the case of Harigopal Singh vs CIT (2002) 258 ITR 85 has while laying down the above proposition held in its order as follows:
"In order to attract Clause (c) of Section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or if he furnishes inaccurate particulars of such income. What is to be seen is whether the assessee in the present case had concealed his income as held by the Assessing Officer and the Tribunal. He had not maintained any accounts and he filed his return of income on estimate basis. The Assessing Officer did not agree with the estimate of the assessee and brought his income to tax by increasing it to Rs. 2,07,500. This, too, was on estimate basis. The Tribunal agreed that the income of the assessee had to be assessed on an estimate of the turnover but was of the view that the estimate as made by the Assessing Officer was highly excessive and it fixed the total income of the assessee at Rs. 1,50,000 for the year under appeal. It is, thus, clear that there was a difference of opinion as regards the estimate of the income of the assessee. Since the Assessing Officer and the Tribunal adopted different estimates in assessing the income of the assessee, it cannot be said that the assessee had "concealed the particulars of his income" so as to attract Clause (c) of Section 271(1) of the Act. There is not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department."9
12. Moreover the additions made are purely adhoc and mere estimations only which do not tantamount to concealment of particulars of income or furnishing of inaccurate particulars of income. The reliance placed by Ld. Counsel for the assessee on the decisions of the Punjab and Haryana High Court in the case of CIT vs Iqbal Singh & Co.(2009)180 Taxmann 355 and CIT Vs Modi Industrial Corporation (2010) 34 DTR 158,in this regard, we find, is apt.
13. Further the case laws relied upon by the Ld. CIT(A) while upholding the levy of penalty are mainly related to the attraction of the Explanation to section 271(1)(c), which we find is not applicable in the present case, since there is no finding of concealment of income or furnishing of inaccurate particulars of income in the first place for which the assessee was required to give any explanation. The assessee had on the first occasion admitted that it had estimated the income of its ahatas, even before the AO could discover anything adverse to this effect, which in any case ,we find he did not, even after aforesaid admittance by the assessee and surrender of income on this account or for that matter on account of expenses. For this reason also the reliance placed by the CIT on the decision of the apex court in Mak Data Pvt. Ltd. Vs CIT and the decision of the Punjab and Haryana 10 High Court in the case of Prempal Gandhi vs CIT 335 ITR 23 does not apply in the assessees case.
14. In view of the above, we set aside the order of the Ld. CIT (Appeals) and delete the penalty levied.
15. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court.
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 21st November, 2016
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh