Income Tax Appellate Tribunal - Delhi
Sentinel Consultants Pvt. Ltd., New ... vs Assessee on 1 June, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'G' : NEW DELHI)
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.3257/Del./2010
(ASSESSMENT YEAR : 2006-07)
M/s. Sentinel Consultants Pvt. Ltd., vs. ACIT, Circle 8 (1),
504, Ashok Bhawan, 93, Nehru Place, New Delhi.
New Delhi.
(PAN : AAACS3096L)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri G.P. Gulati, Advocate
REVENUE by : Shri Neeraj Kumar, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of CIT (Appeals)-XI, New Delhi dated 1.6.2010. The grounds of appeal taken by the assessee read as under :-
"1. The Ld. CIT (A) has grossly erred in law in not bestowing his judicial mind to the Ground Nos.2 to 6, which were independent of each other, but confirmed penalty u/s 271(1)(c) at Rs.80,300/- on the addition/disallowance of Rs.2,24,000/- and 14,516/- by simply saying that the assessee has concealed the particulars of income and/or furnished inaccurate particular thereof, but without deliberating on the detailed written submissions made before him and in brief incorporated in para 2.1 of this order.
2. The Ld. CIT (A) erred on facts and in law in confirming the AO's order of penalty without saying a single word contra the assessee's explanation that it was not found to be false or not substantiated within the meaning of Part (1) or part (B) of the 2 ITA No.3257/Del./2010 Explanation-1 below section 271(1)(c). The various judgments referred by the Ld. CIT (A) are out of the context and entirely distinguishable to the facts of the assessee's case, particularly when there is no iota of evidence if the assessee has concealed any particulars of income.
2. In this case, the Assessing Officer made following additions :-
(i) Addition on account of sale of shop
u/s 40 (A)(2)(b) 2,24,000/-
(ii) Out of Dress Materials 1,84,440/-
(iii) Provision for gratuity 14,516/-
(iv) Belated payment of ESI 66,812/-
(v) Belated payment of PF 6,57,011/-
3. Assessee preferred appeal before the CIT (A). CIT (A) deleted an addition of Rs.1,84,400/- on account of dress material and confirmed the other additions. Assessee went in appeal before the ITAT in respect of the belated payment of ESI and PF in respect of item nos.(iv) & (v) above and ITAT deleted the additions. Assessee has not preferred an appeal against the addition of Rs.2,24,000/- made on account of sale of shop under section 40(a)(2)(b). The Assessing Officer made the penalty on the basis of additions on the following two items :-
(i) Addition on account of sale of shop on the basis of valuation report of Rs.2,24,000/-; and
(ii) Addition on account of provision of gratuity of Rs.14,516/-.
CIT (A) confirmed the penalty as levied by the Assessing Officer.
4. While pleading on behalf of the assessee learned AR submitted that the CIT (A) has wrongly observed while confirming the penalty that the addition to the extent of Rs.2,38,516/- was sustained after giving effect of the order of ITAT. He submitted that assessee has not taken the grounds as these additions of Rs.2,24,000/- on account of sale of shop and Rs.14,516/- on account of provision 3 ITA No.3257/Del./2010 for gratuity before the ITAT. The assessee himself agreed to the addition on account of sale of shop to buy peace which is evident from the letter dated 20.3.2008 of the assessee filed before Assessing Officer. In this letter, assessee had agreed to the addition subject to the condition that no penalty proceedings would be initiated, which reads as under :
"As per your show cause that difference in the value of the commercial property at Noida sold by the assessee company to its erstwhile director of the company Mr. Rajesh Sharma for Rs.11 lacs and valuation made by the approved valuer at Rs.13.24 Lacs should not be added in the total income of the company it is stated that valuation is a subjective assessment and apart from the circle rate fixed by the State Govt. many other factors affects the value of the property. As earlier stated that for security reasons the builder "Ansal" did not permit the occupier to remain in the building after 8.00 P.M. no body was interested to purchase the above property. At that time lift was also not functioning properly. Hence in view of the company the property could not fetch more than 11.00 lacs. However in view to buy peace, the company has no objection if the difference in the value of the property Rs.2.24 lacs (13.24-11) be added in the total income subject to no penalty proceedings be initiated."
He further pleaded that the property, which was sold to the erstwhile Director of the company, Shri Rajesh Sharma for Rs.11 lacs, was on market rate available. Although the registered valuer had estimated the market value of the property at Rs.13,24,000/- but the market value of the property was low due to a security problem in the Noida area and also the building was not allowed to be kept open after 8.00 PM. There was also a dispute among the directors after the search and in such a situation, it was sold at the best price available. There was no other buyer available to buy the shop. For the interest of business, the shop was sold at market rate available to the ex-director of company. He further pleaded that this addition 4 ITA No.3257/Del./2010 was on the basis of valuation report. The valuation is only on estimate of value not the exact amount. In this case, the value has arrived at market value on the basis of rental method and which cannot be a foolproof method to determine the accurate sale price. It was only an estimate and no penalty can be levied on the basis of addition made on the estimate basis. He also relied on the order of Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts (P) Limited 322 ITR 158 (SC) for the proposition that no details supplied by the assessee in its return were found incorrect, erroneous or false, therefore, penalty u/s 271(1)(c) cannot be levied. He also submitted that there is no evidence, which could even whisper that assessee has received more consideration in respect of the shop than shown in the books of account and sale document. For this proposition, he relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Shivakami Co. P. Ltd. 159 ITR 71 (SC). He vehemently pleaded that the CIT (A) was not justified in confirming the penalty particularly after relying on the decision of Hon'ble Supreme Court in the case of Union of India vs. Dharamendra Textile Processors & Ors. 219 CTR (SC) 617 : 306 ITR 277 (SC). He submitted that no case law, as relied upon by the CIT (A), has similar facts as that of the case of the assessee. He also relied on decision of Delhi High Court in the case of CIT vs. Aero Traders (P) Limited 322 ITR 316 where Court held that penalty for concealment could not be levied on the estimated profit.
5. On the other hand, learned DR relied on the order of the authorities below.
6. After hearing both the sides, we find that the assessee has sold a shop to the erstwhile director for Rs.11,00,000/-. Assessee 5 ITA No.3257/Del./2010 itself got prepared a valuation report of the shop from valuer and submitted to the Assessing Officer. There was difference of Rs.2,24,000/- between the sale value as per sale deed and valuation report. This valuation was based on rental method. There was dispute among the directors after the search. Fact regarding the sale of the shop was duly declared in the return of income. The valuation made by the valuer was based on the rental method, which could show only the approximate value but cannot be said to be too accurate. The addition made on such approximate value that too with the consent of the assessee cannot be made a basis for levying penalty u/s 271(1)(c) particularly where the difference is not large. Similarly, the provisions made for gratuity could not be added back to the computation of income due to inadvertent mistake and that also does not invite the provision of section 271(1)(c). Considering the ratio laid down by Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P.) Limited, cited supra, we set aside the order of the authorities below and delete the penalty.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in open court on this 10th day of September, 2010.
Sd/- sd/-
(RAJPAL YADAV) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 10th day of September, 2010/TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT-XI, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.