Puran Chand , Delhi vs Assessee

PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on several grounds

whereby the Learned CIT(Appeals) has upheld the penalty of Rs.1,68,643

levied by the Assessing Officer under sec. 271(1)(c) of the Income-tax Act,

1961.

2. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

2

3. The Assessing Officer has noted the facts and reply of the assessee in

the penalty proceedings as under :

"In this case the assessee filed return showing an income of Rs.5,73,570. A survey u/s. 133A of the Income-tax Act, 1961 was carried out at the business premises of the assessee on 13.01.2006 at A-3, Sarai Pipal Thala Extn., Adarsh Nagar, Delhi in the cases of M/s. Sanjay Salt Suppliers and M/s. Hotel Seven Seas, both of which are the proprietary concern of the assessee. During the course of the assessment proceedings, the Assessing Officer, on the basis of the result of the survey operation, found that as against the stock of salt claimed at Rs.92,48,540, the actual stock on the date of survey was Rs.93,61,797. Hence excess stock amounting to Rs.1,13,257 was available with the assessee as on that day for which the assessee could not furnish any satisfactory explanation. Consequently, the same was added on account of unexplained investment u/s.69 of the Act. Besides this, excess cash amounting to Rs.456 was also found for which the assessee could not furnish satisfactory explanation, and hence the same was added to the total income of the assessee. The third discrepancy was in respect of the suppression of room charges receipts. Since the assessee could not furnish satisfactory explanation, 20% of these receipts of Rs.19,36,535 amounting to Rs.3,87,807 was disallowed and added to the total income of the assessee. On this addition of Rs.5,01,020, penalty proceedings u/s. 271(1)(c) were initiated. Show- cause notice in respect of these proceedings were issued to the assessee on 24.06.2010. In reply thereto, the assessee submitted as follows:

3 1. In respect of excess stock, the difference is very minor and there may be mistake at the time of physical stock taking, no responsible persons was present from the side of the assessee and stock taking was done in a very haphazard manner.

2. In respect of excess stock, the discrepancy is very small.

3. In respect of rent receipt, the disallowances were made on assumption basis.

4. In respect of rent receipt, the disallowances were made on assumption basis."

4. The Assessing Officer did not find the reply of the assessee

satisfactory and levied penalty of Rs.1,68,643 under sec. 271(1)(c) of the

Act with this finding the assessee has deliberately and fraudulently furnished

inaccurate particulars of income in terms of Explanation the section. The

Learned CIT(Appeals) has also upheld the penalty rejecting the contention

of the assessee that the Assessing Officer in the assessment order has not

recorded his satisfaction for initiation of penalty under sec. 271(1)(c) against

the addition made by him.

5. In support of the ground, the Learned AR reiterated the submissions

made before the authorities below and contended further that addition made

on account of suppression of room charges receipts has been made on 4

estimation basis and hence penalty cannot be levied on this addition. He

placed reliance on the following decisions:

i) CIT vs. Aero Traders (P) Ltd. - 322 ITR 316 (Del.);

ii) Harigopal Singh vs. CIT - 358 ITR 85 ( P & H);

iii) Juma Bhai Prem Chand (HUF) vs. CIT - 243 ITR 812 (Guj.);

iv) Global Green Co. Ltd. Vs. DCIT - ITA No. 1390/Del/2011 (A.Y. 2001-02) - order dated 13.07.2012; &

v) Madhushree Gupta & British Airways Plc. Vs. Union of India-

317 ITR 107 (Del.).

6. The Learned DR on the other hand placed reliance on the order of the

authorities below.

7. We have noticed some undisputed facts about the addition that is

subject matter of the penalty proceedings that the assessee was not able to

explain, the excess stock amounting to Rs.1,13,257 found during the course

of survey. He also failed to explain excess cash amounting to Rs.456 found

during the course of survey. However, there is no dispute that an addition of

Rs.3,87,807 on account of room charges has been made on estimate basis.

We thus restrict the penalty levied under sec. 271(1)(c) of the Act on the

addition of Rs.1,13,257 and Rs456 which the assessee failed to explain. So

far levy of penalty on estimated income is concerned, it is well established

position of law that penalty cannot be levied since in a case of estimated 5

income, it cannot be held beyond doubt that there was concealment of

income or furnishing inaccurate particulars thereof on the part of the

assessee to attract the penal provisions. The penalty levied on the addition of

Rs.3,87,807 is thus directed to be deleted.

8. So far as the plea of the Learned AR that the Assessing Officer while

initiating the penal proceedings has not recorded his satisfaction in this

regard is concerned, we do not find substance therein since the satisfaction

of the Assessing Officer that there was concealment of income or furnishing

inaccurate particulars of such income was very much discernible from the

assessment order which is required to justify the initiation of penal

provisions under sec. 271(1)(c) of the Income-tax Act, 1961.

9. In result, the appeal is partly allowed.

Decision pronounced in the open court on .02.2015

( N.K. SAINI ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: /02/2015 Mohan Lal 6

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR