Income Tax Appellate Tribunal - Jaipur
M/S Sharma East India Hospitals And ... vs Assistant Commissioner Of Income Tax, ... on 18 June, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,"B" JAIPUR
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BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PAL RAO, JM
vk;dj vihy la-@ITA No. 1165 to 1167/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2010-11 to 2012-13
M/s Sharma East India Hospitals cuke The ACIT,
and Medical Research Ltd., Vs. Central Circle-1,
H-1, Chitranjan Marg, Jaipur.
C-Scheme, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCS 9729 A
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by: Shri Manish Agarwal (C.A.)
jktLo dh vksj ls@ Revenue by : Shri P.P. Meena (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 13/06/2019
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/06/2019
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. These three appeals by the assessee are directed against three separate orders of the ld. CIT(A), Jaipur dated 14.08.2018 & 16.08.2018 arising from the penalty orders passed U/s 271(i)(c) and 271AAA of the IT Act for the assessment years 2010-11 to 2012-13 respectively. For the assessment year 2010-11 the assessee has raised following grounds:-
ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT "1. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming penalty levied by ld.AO u/s 271(1)(c) read with explanation 5A at Rs. 1,30,000/-arbitrarily, thus the order so passed deserves to be quashed.
2. On the facts and in the circumstances of the case the Ld. CIT(A) erred in confirming the penalty levied by ld.AO u/s 271(1)(c) the Income Tax Act, 1961 when the notice initiating the penalty was defective where the limb was specified on which penalty proceedings were initiated i.e. whether the assessee has concealed the income or furnished inaccurate particulars of his income, thus the penalty order so passed deserves to be hold bad in law and the consequence penalty levied u/s 271(1)(c) at Rs. 1,30,000/-
deserves to be deleted.
3. On the facts and in the circumstances of the case the Ld. CIT(A) has further in imposing the penalty without appreciating the fact that the additions sustained by Hon'ble ITAT are on estimate basis by directing disallowance at rate of 15% out of the alleged unverifiable purchases which have been duly established by the assessee as verifiable and genuine by submitting complete evidences and there is nothing which has not been disclosed by the assessee or has not been reported and mere making of claim, which is not sustainable in the eyes of law, by itself will not amount to furnishing of inaccurate particular so as to hold the appellant guilty in terms of section 271(1)(c) of the Act. Hence the penalty so levied deserves to be deleted in toto.
4. That, the Ld. CIT(A) has further erred in confirming application of Explanation 5A to Section 271(1)(c) by completely ignoring that the conditions contemplated under explanation 5A are not fulfilled in as much as the addition sustained by the Hon'ble ITAT does not represent the income based on any entry in books of account/documents or transactions. Therefore, the penalty of Rs. 1,30,000/- deserves to be deleted.
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ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT
5. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in ignoring the observations made by Hon'ble High Court while hearing the appeal on quantum additions filed by department where it was observed that the additions were on estimate basis, thus the consequent penalty deserves to be deleted.
6. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal."
2. The assessee is a public limited company and providing medical facilities by running a Hospital under the name and style as "Jaipur Hospital". The assessee filed his return of income U/s 139(1) of the Act on 19.08.2010 declaring total income of Rs. 24,92,280/- subsequently, there was a search and seizure action U/s 132 of the Act on 08.06.2011 at the business premises of the assessee as well as at residence of its director. During the course of search and seizure action some loose papers and documents were found and seized from the possesstion of the directors and the statement of directors of the assessee company and their family members were recorded. During the statement recorded U/s 132(4) of the bogus purchase of cotton and gauge patties (bandage) from one M/s Shri Krishna Surgicals were admitted to the tune of Rs. 27,28,014/- for the assessment year 2010-11, Rs. 3
ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT 30,13,175/- for the assessment year 2011-12 and Rs. 5,56,210/ for the assessment year 2012-13. However, in response to notice U/s 153A of the Act the assessee has not declared income on account of the bogus purchase and declared the same income as declared in the return of income filed U/s 139(1) of the Act. The AO in the assessment frame U/s 143(3) r.w.s. 153A for the assessment year 2010-11 made the addition of Rs. 27,28,014/- on account of bogus purchase. The matter was carried to this Tribunal and this Tribunal vide order dated 05.06.2015 has restricted the addition to 15% of the alleged bogus purchases. On further appeal before the Hon'ble Jurisdictional High Court the order of the Tribunal was confirmed. The AO has initiated the proceeding U/s 271(1)(c) of the act and levied of the penalty against the addition sustained by the Tribunal. The assessee challenged the order of the penalty before the ld. CIT(A) but could not succeed.
3. Before us, the ld. AR of the assessee has submitted that the AO has invoked the explanation 5A by holding that the assessee deemed to have concealed the income to the extent of the bogus purchases shown in the books of accounts. However, the Assessing Officer has completely ignoring the fact that the conditions contemplated under explanation 5A are not fulfilled as much as addition sustained by the 4 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT Tribunal does not represent the income based on any entry in the books of accounts, documents or transactions claimed by the assessee as the income for the previous year relevant to the assessment year under consideration. He has further contended that when the addition was sustained by the Tribunal by estimating the income at 15% alleged bogus/unverifiable purchase then, in view of the decision of the Hon'ble Jurisdictional High Court in case of CIT vs. Krishi Tyre Retreading and Rubber Industries (2014) 360 ITR 580 the penalty U/s 271(1)(c) of the act is not sustainable. The ld. AR has further submitted that even the Hon'ble High Court has also observed while dismissing the appeal of the assessee that the disallowance of 15% which has been restricted by the Tribunal is on the basis of presumption and consequently the case is not beyond a reasonable doubt. He has also relied upon the following decisions:-
• Shiv Laltak vs. CIT 251 ITR 373.
• CIT vs. Gotan Lime Khanij Udyog (2002) 256 ITR 243.
• N.L. Agarwal vs. ACIT in ITA No. 197/JP/2018 dated 10.05.2019.
• Shri Satya Prakash Mundra vs. ITO in ITA No. 754/JP/2016 dated 23.01.2019.
• Shri Naveen Agarwal vs. ITO in ITA No. 295/JP/2014 & 910/JP/2016 dated 08.04.2019.
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ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT
4. On the other hand, the ld. DR has submitted that the addition was made by the AO based on the incriminating material clearly disclosing bogus purchase of the assessee without actual supply of goods. It was also found that the assessee was receiving back the money after the supplier deducting the VAT and other charges and therefore, the assessee has shown bogus purchase only by taking vouchers/bills from the suppliers without actual supply of goods. He has further contended that since bogus purchase were detected during the search and seizure action therefore, explanation 5A to section 271(1)(c) of the Act is applicable in this case. He has relied upon the orders of the authorities below.
5. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made the addition of Rs. 27,28,014/- on account of bogus purchases as detected during the course of search and seizure action in case of the assessee and a survey conducted in case of the supplier M/s Krishan Surgicals. The details of the addition made by the AO for 3 years are as under:-
S.N. F.Y. Only Bills Bills with goods
1. 2009-10 Rs. 27,28,014/- Rs. 61,581/-
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ITA No.1165 to 1167/JP/2018
M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT
2. 2010-11 Rs. 30,13,175/- Rs. 80,195/-
3. 2011-12 Rs. 5,56,210/- --------
Total Rs. 62,97,399/-
In the quantum appeal, this Tribunal vide order dated 05.06.2015 restricted the addition on account of bogus purchases to 15% of such unverifiable purchases in para 3.9 as under:-
"3.9 We have heard the rival contentions and peruse the material available on record. First we shall take up the assessee's appeals which raise the sole issue of addition on account of unverifiable purchase. Authorities below have relied on the statements of MD, Accountant and prop. of SKS Shri Jayant Khandelwal. Statement of Shri Khandelwal was neither supplied nor the cross examination was given to the assessee, consequently the statement of Shri Khandelwal may not be held as reliable evidence against assessee. However the statements of the MD and accountant have neither been retracted nor effectively controverted, consequently they remain valid piece of evidence in this behalf. Assessee has endeavored to demonstrate that the copious consumption of cotton gauge, bandages etc. has not been disputed; Books of accounts are properly maintained and not rejected by lower authorities. As compared to AY 2009-10 assessee's gross receipts, GP and NP % have gone up and at the same time % consumption of cotton has gone down; this data also has not been disputed in any manner by revenue, assessee claims that no 20 cotton was purchased from SKS in 2009-10. In this circumstance an alternate plea is advanced that a suitable estimate of disallowance be adopted instead of total disallowance. Reliance is placed on our consolidated order in the 7 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT case of Anuj Kumar Varshney and ors (supra); in this case the addition qua unverifiable purchases of semi precious stones has been held to be at 15% of such unverifiable purchases. Looking at the entirety of facts and circumstances i.e. the books of accounts being not rejected & consumption of cotton having comparatively decreased, we are inclined to follow our judgment in the case of Anuj Kumar Varshney (supra) and direct to restrict the disallowance to 15% of purchases from SKS. Thus assessee's appeals are partly allowed."
On further appeals filed before the Hon'ble Jurisdictional High Court vide judgment dated 11.10.2017 in D.B. Income Tax Appeal No. 189 & 190/2015 dismissed the appeal by considering the matter in para 7 to 12 are as under:-
"7. However, the Tribunal while considering the matter observed as under:-
3.9 We have heard the rival contentions and peruse the material available on record. First we shall take up the assessee's appeals which raise the sole issue of addition on account of unverifiable purchase. Authorities below have relied on the statements of MD, Accountant and prop. of SKS Shri Jayant Khandelwal. Statement of Shri Khandelwal was neither supplied nor the cross examination was given to the assessee, consequently the statement of Shri Khandelwal may not be held as reliable evidence against assessee. However the statements of the MD and accountant have neither been retracted nor effectively controverted, consequently they remain valid piece of evidence in this behalf. Assessee has endeavored to demonstrate that the copious consumption of cotton gauge, bandages etc. has not been disputed; Books of accounts are properly maintained and not rejected by lower authorities. As compared to AY 2009-10 8 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT assessee's gross receipts, GP and NP % have gone up and at the same time % consumption of cotton has gone down; this data also has not been disputed in any manner by revenue, assessee claims that no 20 cotton was purchased from SKS in 2009-10. In this circumstance an alternate plea is advanced that a suitable estimate of disallowance be adopted instead of total disallowance. Reliance is placed on our consolidated order in the case of Anuj Kumar Varshney and ors (supra); in this case the addition qua unverifiable purchases of semi precious stones has been held to be at 15% of such unverifiable purchases. Looking at the entirety of facts and circumstances i.e. the books of accounts being not rejected & consumption of cotton having comparatively decreased, we are inclined to follow our judgment in the case of Anuj Kumar Varshney (supra) and direct to restrict the disallowance to 15% of purchases from SKS. Thus assessee's appeals are partly allowed."
8. Taking into account, we are of the opinion that the 15% disallowance restricted by the Tribunal is just and proper. No interference is called for.
9. Therefore, the issue is required to be answered in favour of the department against the assessee.
10. We observe that on the basis of this assessment order, no prosecution will be launched and if it is launched, it will be open for the present appellant to take defence that he has succeeded before the Tribunal which has been confirmed by this Court.
11. Om that view of the matter, if discharge application is preferred, the same will be considered in accordance with law. The 15% disallowance which has been restricted by the tribunal is on the basis of presumption, in that view of the matter, the case against the present appellant is not beyond reasonable doubt.
12. The appeals stand dismissed."
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ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT A combined reading of the order of the Tribunal in quantum appeal and further the judgment of the Hon'ble jurisdictional High Court reveals the addition sustained by the Tribunal is on the basis of considering the assess GP & NP for the preceding assessment year as well as assessment years under consideration accordingly, the addition was restricted to 15%. Matter before us is only the penalty appeals and therefore, we cannot go behind the order of this Tribunal in the quantum appeal. The Hon'ble Jurisdictional High Court in case of CIT vs. Krishi Tyre Retreading and Rubber Industries (supra) after considering various decision held in para 7 to 24 as under:-
"7. We have considered the arguments advanced by the learned counsel for the parties and have also perused the impugned order.
8. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) only. Thus, the assessee will get the relief of Rs.44,000 (Rs. forty four thousand) from the orders of the lower authorities on ad hoc basis".10
ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT
9. On a perusal of the facts stated hereinbefore, it transpired that the addition has been sustained purely on estimate basis and, in our view, no positive fact or finding has been found so as to even make the said addition. It is, according to us, a pure guess work and, in our view, on such guess work or estimation, no penalty under section 271(1)(c) of the Act can be said to be leviable. For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed.
10. Penalty proceedings are entirely distinct from assessment proceedings and, howsoever relevant and good, the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned.
11. From the above discussion, it can be seen that the opinion of the Tribunal with respect to the deletion is based on appreciation of evidence on record.
12. The hon'ble apex court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 has held that if there is no evidence on material to show that the assessee had deliberately furnished inaccurate particulars and there was any mala fide intention on his part so as to make him liable for penalty. A mere omission or negligence would not constitute deliberate act of concealing particulars of income or suppressed or furnished inaccurate particulars of income.
13. The Patna High Court in the case of CIT v. Kailash Crockery House [1999] 235 ITR 544/107 Taxman 386, had an occasion to consider the issue of penalty under section 271(1)(c) on the basis of the fact that the gross profit rate shown by the assessee was found 11 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT to be low and trading addition was made on estimate basis though the trading addition was sustained by the Tribunal but in so far as penalty under section 271(1)(c) is concerned, it held that the trading addition had been made on the basis of an estimate and on account of estimated trading addition penalty could not be levied under section 271(1)(c) of the Income-tax Act.
14. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714/18 Taxman 412, has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income.
15. The Gujarat High Court in the case of CIT v. Whitelene Chemicals [2014] 360 ITR 385/[2013] 32 taxmann.com 192/214 Taxman 93 (Mag.) (Guj) has observed that no penalty can be imposed merely because account books of the assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. The assessee filed its explanation which could not be termed as not bona fide and, accordingly, the Gujarat High Court came to a conclusion that mere rejection of books of account and estimation of profit cannot be a ground for imposition of penalty.
16. The Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 221 ITR 110/86 Taxman 30, has held as under
(headnote) :
"Held, that a best judgment assessment had been made. While the assessee in its books of account disclosed the total sales to be Rs. 7,75,000, the Income-tax Officer on rejection of the books of account estimated the sales to be Rs. 8,75,000 which on appeal, the Tribunal reduced to Rs. 8,00,000. So also, while the gross profit disclosed by the books of account of the assessee was 5 per cent., the Income-tax Officer estimated the gross profit rate at 15 per cent which again was reduced by the Tribunal to 12 per cent. In this circumstance, in the absence of any other material which might reflect on the conduct of the assessee about a deliberate attempt to 12 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT maintain false books of account, on a preponderance of probabilities, no other conclusion could be reached than that the failure to return the correct income was not on account of any fraud or gross or willful neglect on the part of the assessee. The Tribunal was right in holding that penalty of Rs. 92,894 imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was not justified."
17. The Punjab and Haryana High court in the case of Harigopal Singh v. CIT [2002] 258 ITR 85/125 Taxman 242, has held as under
(page 86) :
"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 13 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT 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. We are also of the considered view that the Tribunal grossly erred in law in relying on Explanation 1(B) to section 271(1)(c) of the Act to raise a presumption against the assessee. The assessee had justified his estimate of income on the basis of household expenditure and other investments made during the relevant period. It is not the case of the Revenue that he had, in fact, incurred expenditure in excess of what he had stated. In this view of the matter, it cannot be said that the explanation furnished by the assessee had not been substantiated or that he had failed to prove that such explanation was not bona fide."
18. The Madhya Pradesh High Court in the case of CIT v. Shivnarayan Jamnalal & Co. [1998] 232 ITR 311/[1996] 89 Taxman 420 held thus (page 313) :
"We have gone through the orders of the Tribunal and the Commissioner of Income-tax (Appeals). We are satisfied that both the authorities have correctly approached the matter and found that there was no fraudulent attempt on the part of the assessee. The assessee had placed before the authorities whatever books of account it had maintained-whether they were properly maintained or not but it has not withheld or concealed any material or made any deliberate attempt to defraud the authorities. The assessing authority has employed the flat rate for assessing the income of the assessee and on that basis, he has been taxed.
Therefore, we are of the opinion that the view taken by the Tribunal in setting aside the penalty appears to be justified and we answer both these questions against the Revenue and in favour of the assessee."
19. The Allahabad High Court in the case of CIT v. Raj Bans Singh [2005] 276 ITR 351 has held that "On appeal, the Tribunal came to the conclusion that it was a case of an estimate against an 14 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT estimate and there was no concealment and accordingly it was held that no penalty was imposable".
20. This court in the case of CIT v. Chaturbhuj Bhanwarlal [1987] 166 ITR 659/31 Taxman 363 (Raj.) observed as under (page 682) :
"Having given our anxious consideration to the rival contentions advanced before us and to the law cited by both the sides, we are of the view that the Tribunal proceeded to take into account various circumstances referred to above and had reached the finding after considering those circumstances. It cannot be said that the finding reached by the Tribunal was based on no evidence. All material facts and circumstances positive and negative, constitute evidence and on consideration of the positive and negative circumstances, the finding can be arrived at after weighing the probabilities. Such a finding, in our opinion, cannot be said to be a finding which is vitiated on any count, i.e., such a finding cannot be said to be perverse or based on no evidence. It is true that this course was also open to the Tribunal and the Tribunal should have asked the assessee to submit his explanation with respect to capital accretion considered by the authorities below, but failure to do so by the Tribunal would not in any way affect the jurisdiction of the Tribunal to proceed to decide the appeal on the basis of the material on record. The finding of the Tribunal, therefore, cannot be said to be based on no evidence and the finding that there has been no concealment of income is a finding of fact and it does not raise any question of law and the Tribunal was right in cancelling the penalty imposed on the assessee."
21. The Delhi High Court in the case of CIT v. Aero Traders (P.) Ltd. [2010] 322 ITR 316 has held that penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal.
22. The Punjab and Haryana High Court in the case of CIT v. Modi Industrial Corpn. [2010] 195 Taxman 68 has held that where the assessment of the assessee was completed on 15 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT estimated basis penalty under section 271(1)(c) of the Act was not imposable with respect to the additions made on such estimate by the Assessing Officer.
23. The Chhattisgarh High Court in the case of CIT v. Vijay Kumar Jain [2010] 325 ITR 378/[2011] 10 taxmann.com 9/198 Taxman 156 (Mag.)has held that the assessee declared the net profit by estimating it at the rate of 6.36 per cent. of his gross receipt while it was estimated at the rate of 10 per cent of gross receipts by the Assessing Officer and on these facts held that penalty for concealment cannot be levied as the assessee cannot be said to have concealed any particulars of income or furnished any inaccurate particulars of income.
24. In view of the above facts and what we have observed above, the finding reached by the Tribunal is essentially a finding of fact and no substantial question of law is involved in the present appeal. This appeal has no force and accordingly, the same is dismissed.
A similar view has been taken by the Hon'ble Jurisdictional High Court in case of Shiv Laltak vs. CIT (supra) as well as in other decisions relied upon the ld. AR of the assessee. We further note that this Tribunal in case of N.L. Agarwal v. ACIT vide dated 10.05.2019 in ITA No. 197/JP/2018 has also considered this issue in para 6 to 8 as under:-
"6. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that the trading addition has been upheld by the Tribunal by estimating the GP rate at 15% on the alleged unverifiable purchases. It is settled proposition of law that 16 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT merely confirmation of the trading addition made on estimate basis does not lead to the conclusion that assessee has furnished inaccurate particulars of income or concealed any income. Further estimation is always on presumptions and assumptions and without proper and specific linking with any evidence in support of such estimation assessee cannot be fastened with liability of penalty. Accordingly, it is well settled that no penalty is leviable u/s 271(1)(c) on the basis of trading addition due to disturbance in the G.P. rate disclosed by the assessee. Therefore, additions were made in the assessment order not on the basis of any concealment being detected in assessment but only on Ad hoc Basis. Hence it cannot be deemed to concealed income for the purpose of penalty u/s 271(1)(c) as held by Delhi High Court in the case of CIT Vs. Super Metal Re-Rollers Pvt. Ltd. (2004) 265 ITR 082 (Del.).
7. The Hon'ble Jurisdictional High Court has in the case of CIT Vs. Krishi Tyre Retreading and Rubber Industries (supra) has held as under:
"Penalty -- 271 (1) (c) -- Concealment -- Addition on estimate basis
-- Merely because the books of account of the assessee were rejected or estimated addition was made, no penalty is leviable
-- Assessee offered an explanation, which could not be termed as not bona fide -- In the absence of any corroborative evidence to prove the charge of concealment, penalty u/s 271(1)(c) could not be imposed."
8. In view of the above discussion, we do not find any merit in the penalty so imposed with regard to the addition upheld on estimation basis, therefore, we direct to delete the same. We direct accordingly."
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ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT This Tribunal has again considered in case Shri Naveen Agarwal vs. ITO vide dated 08.04.2019 in ITA No. 295/JP/2014 & 910/JP/2016 has held in para 18 as under:-
"18. We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record we found that the A.O. made addition by estimating the profit @ 22.7% on the alleged unrecorded sales. After considering the entire facts and circumstances while disposing the quantum appeal hereinabove we have directed the A.O. to estimate the profit @ 15% and upheld the addition only to that extent. It is clear that the addition to the income is based on estimate of profit rate when the A.O. passed order vis a vis when we dispose the quantum appeal. In such estimated addition, no penalty is to be levied in view of the decision of the Hon'ble Jurisdictional High court as referred by the ld AR during the course of hearing before us. Considering the totality of facts and circumstances of the case we direct the A.O. to delete the penalty so imposed on the estimated addition so made."
Accordingly, in view of the facts and circumstances of the case as well as various decisions on this issue, we delete the penalty levied U/s 271(1)(c) of the Act for the assessment year 2010-11.
6. For the assessment years 2011-12 and 2012-13 the assessee has raised common grounds except the quantum of penalty. The grounds raised for the assessment year 2011-12 are reproduce as under:-
"1. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming penalty u/s 271AAA levied 18 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT by ld. AO at Rs. 45,198/- arbitrarily, thus the order so passed deserves to be quashed.
2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in ignoring the facts that the appellant has duly complied with all the conditions laid down which allows exemption from levy of penalty u/s 271AAA, thus the penalty of Rs. 45,198/-, so levied deserves to be deleted.
3. without prejudice to above, on the facts and in the circumstances the Ld. CIT(A) has grossly erred in confirming the penalty levied by ld. AO u/s 271AAA on the addition of Rs. 4,51,976/- which was sustained by the Hon'ble ITAt by disallowing at an estimated rate of 15% out of the allged unverifiable purchases without holding such expenses to be false and no penalty can be levied merely on account of an addition made/sustained on estimated basis, thus the penalty levied at Rs. 45,198/- deserved to be deleted.
3.1 That the ld. CIT(A) has further erred in ignoring the observations made by Hon'ble High Court while hearing the appeal on quantum additions filed by department where it was observed that the additions were on estimate basis, thus the consequent penalty deserves to be deleted.
4. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal."
7. Since the assessment years 2011-12 and 2012-13 are falling in the category of specified year as prescribed U/s 271AAA of the Act therefore, the penalty was levied U/s 271AAA of the Act on account of bogus purchases detected during the course of search and seizure action. The facts for these two assessment years remain the same as 19 ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT for the assessment year 2010-11. The ld. AR of the assessee has submitted once the Tribunal has restricted the addition to 15% alleged /bogus purchases then the income of the assessee was estimated the addition to the income of the assessee is based on presumption and estimation. Hence, in view of the decisions as relied upon for the assessment year 2010-11 the penalty U/s 271AAA of the Act is not sustainable.
8. On the other hand, the ld. DR has relied upon the orders of the authorities below.
9. We have considered the rival submissions as well as the relevant material on record. We note that the addition made by the AO is identical to the addition for the assessment year 2010-11. We already produced the order of this Tribunal as well as judgment of Hon'ble Jurisdictional High Court in the quantum appeals. Accordingly, in view of our finding for the assessment year 2010-11 the penalty levied U/s 271AAA of the Act against the addition made to the income of the assessee based on estimation/presumption is not sustainable consequently the same is deleted.
20
ITA No.1165 to 1167/JP/2018 M/s Sharma East India Hospitals and Medical Research Ltd. vs. ACIT In the result, the appeals filed by the assessee are allowed. Order pronounced in the open court on 18/06/2019.
Sd/- Sd/-
¼ jes'k lh0 "kekZ ½ ¼fot; iky jko½
(Ramesh. C. Sharma) (Vijay Pal Rao)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 18/06/2019.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Sharma East India Hospitals and Medical Research Ltd., Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Central Circle-1, Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 1165 to 1167/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 21