Sh. Vijay Sood, Sood Agencies,, Kangra v. ITO,, Palampur

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH (SMC) BEFORE SHRI G.S.PANNU ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.239/CHANDI/2010 ASSESSMENT YEAR 2005-06 SHRI VIJAY SOOD V I.T.O. SOOD AGENCIES PALAMPUR(HP). PALAMPUR. PAN : ACEPK-6517G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL KUMAR BATRA DEPARTMENT BY: SMT.INOSHI SHARMA ORDER PER G.S.PANNU AM THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F THE CIT(APPEALS) DATED 05.01.2010 PERTAINING TO THE ASSESSMENT YEAR 2005-06. THE SOLITARY ISSUE IN THI S APPEAL RELATES TO IMPOSITION OF PENALTY U/S 271(1)(C) OF T HE INCOME TAX ACT 1961 ( IN SHORT 'THE ACT') AMOUNTING TO RS .74 136/- 2. IN BRIEF THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF WHOLESALE IN KAR YANA. THE ASSESSEE FILED A RETURN OF INCOME DECLARING INC OME OF RS.1 40 930/- ON 28.10.2005. THE RETURN OF INCOME FILED WAS TAKEN UP FOR SCRUTINY ASSESSMENT AND ASSESSMENT WAS FINALIZED U/S 144 OF THE ACT ON 28.12.2007 WHEREBY THE TOTAL 2 INCOME WAS DETERMINED AT RS.3 85 225/-. CONSEQUENT LY THE ASSESSING OFFICER HELD THE ASSESSEE GUILTY OF HAVIN G FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN T HE MEANING OF SECTION 271(1)(C) OF THE ACT AND IMPOSED A PENALTY EQUIVALENT TO 100% OF THE TAX SOUGHT TO BE EVADED ON THE CONCEALED INCOME. ACCORDINGLY PENALTY U/S 271(1)(C) WAS LEVIED AT RS.74 136/- VIDE ORDER DATE D 26.6.2008. IN APPEAL THE CIT(APPEALS) HAS SUSTAIN ED THE IMPOSITION OF PENALTY AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. BEFORE US THE PRIMARY SUBMISSION RAISED BY THE LEARNED COUNSEL IS THAT THE INCOME HAS BEEN DETERM INED BY THE ASSESSING OFFICER BY APPLYING A NET PROFIT RATE OF 5% ON ESTIMATED SALES AND THEREFORE IN SUCH A CASE PENAL TY U/S 271(1)(C) OF THE ACT IS NOT IMPOSABLE HAVING REGARD TO THE FOLLOWING JUDGEMENTS : I) HARI GOPAL SINGH V CIT 258 ITR 85 (P&H) II) CIT V RAVAIL SINGH & CO. 254 ITR 191 (P&H) III) CIT V SURESH KUMAR BANSAL & ANOTHER 254 ITR 130 (P&H) 4. IT IS FURTHER SUBMITTED BY THE LEARNED COUNSEL T HAT THE ASSESSING OFFICER HAS ELABORATED THE FACTS IN THE P ENALTY ORDER WHICH WERE RELEVANT ONLY FOR THE PURPOSES OF ASSESSMENT AND THE SAME DID NOT FIND PLACE IN THE ASSESSMENT ORDER. THEREFORE REFERENCE TO SUCH FACT S IN THE PENALTY ORDER IS NOT JUSTIFIED. IT IS FURTHER POIN TED OUT THAT THE ASSESSING OFFICER HAS NOT ESTABLISHED AS TO IN WHAT 3 MANNER THE ASSESSEE HAS CONCEALED HIS INCOME OR FUR NISHED INACCURATE PARTICULARS OF INCOME SO AS TO JUSTIFY L EVY OF PENALTY U/S 271(1)(C) OF THE ACT. 5. ON THE OTHER HAND LEARNED DR HAS DEFENDED THE ORDERS OF THE LOWER AUTHORITIES. ACCORDING TO HER IT IS NOT A SIMPLE CASE OF ESTIMATION OF INCOME BUT IS A CASE W HERE THE ESTIMATION HAS BEEN RESORTED TO ONLY AFTER DISCREPA NCIES WERE FOUND IN THE RETURN OF INCOME FILED BY THE ASS ESSEE. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ON THE BASIS OF WHICH THE RETURN OF INCOME WAS FILED WERE FOUND TO BE INCOMPLETE AND DEFECTIVE AND THEREFORE THE SAME WERE REJECTED AND THE INCOME WAS ESTIMATED. IT WAS POIN TED OUT THAT THE ASSESSEE HAS ALSO ACCEPTED THE ADDITIONS M ADE TO THE RETURNED INCOME AND THEREFORE THE DEFECTS IN T HE BOOKS OF ACCOUNT STOOD ESTABLISHED. THUS THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. IT IS WELL SETTLED THAT IF THE ASSESSING OFFICER IN TH E COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT AN Y PERSON HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME HE SHALL BE IMPOS ED WITH PENALTY U/S 271(1)(C) OF THE ACT. THE MAIN INGREDI ENTS FOR IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT ARE THAT ASSESSEE OUGHT TO HAVE EITHER CONCEALED THE PARTICU LARS OF HIS INCOME OR SHOULD HAVE FURNISHED INACCURATE PART ICULARS OF HIS INCOME. IN THIS CONTEXT THE PLEA SET UP BY THE ASSESSEE IS THAT IN THE INSTANT CASE THE ASSESSMEN T HAS 4 BEEN FRAMED ON MERE ESTIMATION AND THEREFORE IT DOE S NOT ENTAIL CONCEALMENT OR FURNISHING OF INACCURATE PART ICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF T HE ACT. IN THIS CONNECTION RELIANCE HAS BEEN PLACED ON THE JUDGEMENTS OF THE HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF RAVAIL SINGH & CO. (SUPRA) SURESH KUMA R BANSAL & OTHERS (SUPRA) AND HARI GOPAL SINGH (SUPRA ). WE HAVE CAREFULLY PERUSED THE JUDGEMENTS RELIED UPON B Y THE LEARNED COUNSEL BEFORE US. 7. BEFORE WE CONSIDER THE APPLICABILITY OF THE AFOR ESAID JUDGEMENTS TO THE INSTANT CASE IT WOULD BE APPROPR IATE TO NOTE THE REASONS FOR THE MANNER IN WHICH THE ADDITI ONS IN THIS CASE HAVE BEEN MADE BY THE ASSESSING OFFICER. AS NOTED EARLIER THE ASSESSEE FILED A RETURN OF INCOM E DECLARING AN INCOME OF RS.1 40 930/- WHICH WAS TAKE N UP FOR SCRUTINY ASSESSMENT. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER EXAMINED THE BOO KS OF ACCOUNT AND OTHER RECORDS PRODUCED BY THE ASSESSEE. IT WAS FOUND THAT THERE WAS A CASH DEFICIT IN THE CASH BOOK I.E. EXPENDITURE EXCEEDED THE RECEIPTS. SIMILARLY IN THE RECORDING OF CASH SALE RECEIPTS DEFICIENCIES WERE NOTICED AS OBSERVED BY THE ASSESSING OFFICER IN PARA 2 OF T HE PENALTY ORDER. INFORMATION WAS CALLED FOR U/S 133( 6) OF THE ACT FROM VARIOUS PARTIES FROM WHOM ASSESSEE HAD MAD E PURCHASES AND IT WAS FOUND THAT ASSESSEE HAD UNREC ORDED PURCHASES. SIMILAR EXERCISE WAS CARRIED OUT FROM CO NCERNS FROM WHOM ASSESSEE HAD RAISED UNSECURED LOANS. AS A RESULT OF SUCH ENQUIRIES DISCREPANCIES WERE FOUND IN THE 5 BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IN FA CT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSEE APPROACHED THE ADDITIONAL COMMISSIONER OF INCOME TA X PALAMPUR WING PALAMPUR U/S 144A OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE ADDL.COMM OF INCOME TAX PALAMPUR OBSERVED THAT THE BOOKS OF ACCOUNT DID NOT REFLECT CORRECT INCOMES AN D VARIOUS DISCREPANCIES WERE NOTICED. HE THEREFORE DIRECTED THE ASSESSING OFFICER TO IGNORE THE RESULTS DECLARED AS PER THE ACCOUNT BOOKS AND COMPUTE THE INCOME BY APPLYING NE T PROFIT RATE OF 5% ON THE SALES DECLARED PLUS ON THE SALES ESTIMATED ON ACCOUNT OF UNACCOUNTED PURCHASES DETEC TED. THUS THE ASSESSING OFFICER DETERMINED TOTAL INCOME BY APPLYING NET PROFIT RATE OF 5% ON THE SALES DECLARE D PLUS THE SALES ESTIMATED IN RELATION TO UNACCOUNTED PURCHASE S DETECTED DURING ASSESSMENT PROCEEDINGS AND ACCORDI NGLY THE TOTAL INCOME WAS DETERMINED AT RS.3 86 245/- AS AGAINST RS.1 40 930/- RETURNED BY THE ASSESSEE. 8. FROM THE AFORESAID IT IS CLEAR THAT THE INCOME WAS RETURNED BY THE ASSESSEE ON THE BASIS OF THE BOOKS OF ACCOUNT WHICH HAVE BEEN HELD TO BE UNRELIABLE. TH E INCOME HAS BEEN ULTIMATELY ESTIMATED BY APPLYING A NET PROFIT RATE ON THE REWORKED AMOUNT OF SALES. IT IS ALSO EVIDENT THAT PRIOR TO ESTIMATION OF INCOME THE REV ENUE AUTHORITIES DETECTED UNACCOUNTED PURCHASES UNRECON CILED AND UNEXPLAINED LOANS INTRODUCTION OF UNACCOUNTED MONEY BY MANIPULATION OF ENTRIES IN THE CASH BOOK ETC. ALL THESE DEFECTS AND DISCREPANCIES DETECTED PROMPTED THE IN COME 6 TAX AUTHORITIES TO RESORT TO ESTIMATION OF INCOME A ND REJECT THE RESULTS DECLARED IN THE RETURN OF INCOME. IT I S ALSO NOTEWORTHY THAT THE ASSESSMENT SO FINALIZED HAS BEC OME FINAL AND THE ASSESSEE HAS NOT CONTESTED THE SAME. BE THAT AS IT MAY IT IS CLEAR THAT PRIOR TO ESTIMATION TH ERE IS A DETECTION OF CONCEALMENT AND/OR FURNISHING OF INACC URATE PARTICULARS OF INCOME BY THE ASSESSEE AND THEREFORE IN OUR CONSIDERED OPINION THE ASSESSING OFFICER WAS JUSTI FIED IN INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND IMPOSING PENALTY AMOUNTING TO RS.74 136/-. 9. THE PLEA OF THE APPELLANT THAT AN ASSESSMENT MAD E ON ESTIMATE BASIS DOES NOT RESULT IN A LEVY OF PENALTY IS WELL FOUNDED BUT THE SAID PROPOSITION IS NOT AN ABSOLUT E PROPOSITION. THIS PROPOSITION HAS TO BE CONSIDERED IN THE LIGHT OF PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT HAD REFERRED TO JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SURESH KUMAR BANS AL AND ANOTHER (SUPRA). IN THAT CASE AFTER THE ORIGINAL ASSESSMENTS THE PREMISES OF THE ASSESSEE WERE SUBJ ECTED TO SEARCH U/S 132 OF THE ACT WHEREBY ASSESSEE SURRE NDERED CERTAIN AMOUNTS FOR ASSESSMENTS AFTER DISCUSSION W ITH THE OFFICERS SUBJECT TO NO PENALTY. THE ASSESSING OFFI CER MADE FRESH ASSESSMENTS AND IMPOSED PENALTY U/S 271(1)(C) OF THE ACT. AS PER THE HON'BLE HIGH COURT NO PENALTY WAS LEVIABLE IN THAT CASE BECAUSE THE ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC ITEMS OF CONCEALMENT AND SIMPLY LE VIED THE PENALTY IN VIEW OF THE DIFFERENCE IN THE ORIGINAL I NCOME AND THE RE-ASSESSED INCOME. THE HON'BLE HIGH COURT ALS O 7 NOTICED THAT THE RE-ASSESSED INCOME WAS HIGHER ON A CCOUNT OF ESTIMATED NATURE OF DISALLOWANCES. EVIDENTLY T HE FACTS IN THE PRESENT CASE STAND ON A DIFFERENT FOOTING. IN THIS CASE IT IS EVIDENT THAT PRIOR TO ESTIMATION OF INC OME FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSE E STOOD ESTABLISHED. THEREFORE THE JUDGEMENT OF HON'BLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF SURESH KUMAR BANS AL (SUPRA) DOES NOT HELP THE CASE OF THE ASSESSEE. 10. TO THE SIMILAR EFFECT IS THE JUDGEMENT OF THE H ON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI GOP AL SINGH (SUPRA). IN THAT CASE THE ASSESSEE FILED HIS RETURN OF INCOME ON ESTIMATE BASIS AS HE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT. THE INCOME WAS ASSESSED AT A HIG HER FIGURE BY THE ASSESSING OFFICER BY ESTIMATING THE A SSESSEE'S SALES AND GROSS PROFIT. UNDER THESE CIRCUMSTANCES IT WAS FOUND THAT THE VARIATION IN THE RETURNED INCOME AND THE ASSESSED INCOME WAS MERELY ON ACCOUNT OF DIFFERENCE OF OPINION AS REGARDS THE ESTIMATE OF INCOME OF THE AS SESSEE AND THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD EARNED INCOME MORE THAN THE INCOME RETURNED BY HIM. HERE TOO THE FACTS IN THE INSTANT CASE ARE ENTIRELY DIS JUNCT. IN THE PRESENT CASE AS NOTED EARLIER FURNISHING OF I NACCURATE PARTICULAR STANDS ESTABLISHED AND IT IS NOT A CASE OF ESTIMATION OF INCOME SIMPLISTER WHICH WAS POSITION IN THE CASE OF HARI GOPAL SINGH (SUPRA). 11. SIMILARLY THE JUDGEMENT IN THE CASE OF RAVAIL SINGH & CO. (SUPRA) ALSO DOES NOT SUPPORT THE PLEA OF THE A SSESSEE. IN THE SAID CASE ALSO PENALTY WAS FOUND UNSUSTAINAB LE ON 8 THE GROUND THAT THERE WAS NO EVIDENCE OF CONCEALMEN T OR FURNISHING OF INACCURATE PARTICULARS OF INCOME THOU GH THE ADDITION WAS MADE ON ESTIMATE BASIS. IT IS EVIDENT FROM PERUSAL OF ALL THE THREE JUDGEMENTS RELIED UPON BY THE LEARNED COUNSEL THAT THERE IS NO ABSOLUTE PROPOSITI ON TO THE EFFECT THAT WHEREVER AN ASSESSMENT IS MADE ON ESTIM ATE BASIS NO PENALTY U/S 271(1)(C) IS LEVIABLE. ON THE CONTRARY SUCH PROPOSITION HAS TO BE CONSIDERED AND APPLIED O NLY HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREBY IT CAN BE SEEN THAT THERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CASE HAVING REGARD TO THE ENTIRE GAMUT OF FACTS AND CIRCUMSTANCES OF THE CASE IN OUR VIEW THE ASSESSIN G OFFICER HAS SUCCESSFULLY ESTABLISHED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME AND THEREFORE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AMOUNTING T O RS.74 136/- IS JUSTIFIED. THE OTHER PLEA OF THE AS SESSEE THAT FACTS HAVE BEEN ENUMERATED IN THE PENALTY ORDER WH ICH HAVE NOT BEEN DISCUSSED IN THE ASSESSMENT AND THERE FORE SUCH FACTS CANNOT BE CONSIDERED WHILE CONSIDERING T HE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THIS CONTE XT THE VERACITY OF FACTS NOTED IN THE PENALTY ORDER IS NOT ASSAILED BY THE APPELLANT. MERELY BECAUSE THE SAME HAVE NOT BEEN STATED SUCCINCTLY IN THE ASSESSMENT DOES NOT RENDER THEM IRRELEVANT AND IN ANY CASE THE PENALTY PROCEEDINGS AND THE ASSESSMENT PROCEEDINGS ARE INDEPENDENT PROCEEDINGS AND THE ASSESSING OFFICER WAS COMPETENT TO REFER TO MAT ERIAL AND EVIDENCE THAT IS RELEVANT TO ESTABLISH CONCEALM ENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE 9 ASSESSEE THE ONLY CAVEAT BEING THAT SUCH MATERIAL AND EVIDENCE BE CONFRONTED TO THE ASSESSEE. WE FIND NO SUBSTANCE IN THE PLEA OF THE APPELLANT. ACCORDINGL Y THE IMPOSITION OF PENALTY IS UPHELD. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL 2010. SD/- SD/- (SUSHMA CHOWLA) ( G.S.PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED :30 TH APRIL 2010. POONAM COPY TO : THE APPELLANT/THE RESPONDENT/THE CIT (A)/ THE CIT/THE DR.