Case Law Details
ITAT AMRITSAR BENCH
Income-tax Officer
Versus
Sukhamrit Singh
IT Appeal No.451 (Asr) of 2011
[ASSESSMENT YEAR 2005-06]
Date of Pronouncement – 05.09.2012
ORDER
1. The Revenue has filed the present appeal against the impugned order of the Commissioner of Income-tax (Appeals), Amritsar, dated May 31, 2011 for the assessment year 2005-06.
2. The facts relating to the issue in dispute are that the assessee is an individual and filed his return of income on October 31, 2005 declaring income at Rs. 1,57,120 and agricultural income at Rs. 80,000. The Assessing Officer processed the return of income under section 143(1) of the Income-tax Act, 1961 (in short, “the Act”), vide intimation dated February 7, 2006 and subsequently the case of the assessee was selected for scrutiny and the Assessing Officer issued notice under section 143(2) of the Act on October 27, 2006, which was served upon the assessee on the same date. In response to the same, the authorised representative of the assessee appeared and sought adjournment and the case was adjourned for November 24, 2006. None appeared on November 24, 2006 and the Assessing Officer issued fresh statutory notice under sections 142 and 143(2) dated December 19, 2006. Again nobody attended on the appointed date, i.e., December 29, 2006. Similarly, so many times, the Assessing Officer adjourned the matter. But none appeared on behalf of the assessee and lastly the Assessing Officer, vide notice dated June 8, 2007 informed the assessee that in case of non-compliance, the case would be decided ex parte. Notice was duly served upon the assessee on June 12, 2007 along with statutory notice under section 142 and the case was fixed for June 28, 2007 and the Assessing Officer framed the assessment under section 144 of the Act, to the best of his judgment, vide assessment order dated July 2, 2007 by making net estimated income amounting to Rs. 25,57,195 mentioned at pages 5 and 6 of the assessment order. Aggrieved by the assessment order dated July 2, 2007, made under section 144 of the Act, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals), who vide order dated March 19, 2008 has written that during the course of appellate proceedings on March 17, 2008, the appellant filed a letter dated March 17, 2008 requesting for withdrawal of the appeal filed by the appellant. On these facts, the appeal of the assessee is dismissed as withdrawn. As per record, the assessee has also filed a petition under section 264 of the Act dated May 14, 2008 before the learned Commissioner of Income-tax-1, Amritsar, requesting for setting aside the order dated July 2, 2007 passed by the Assessing Officer under section 144 of the Act with the direction to the Assessing Officer to give reasonable opportunity of being heard to the assessee and alternatively various additions and disallowances so made under different heads by the Assessing Officer may be directed to delete the order and the assessee may be granted any other legitimate relief for which the assessee is entitled. The learned Commissioner of Income-tax-1 Amritsar, vide his order dated October 21, 2008 directed the Assessing Officer to modify the assessment order to give relief of Rs. 10,000 on account of telephone expenses out of Rs. 40,420 and finally disposed of the petition filed by the assessee under section 264 of the Act.
3. Keeping in view the facts and circumstances explained above, the Income-tax Officer, Ward 2(4), Batala initiated the proceedings under section 271(1)(c) of the Act, in the case of the assessee for the assessment year in dispute. He elaborated the facts of the case and issued a show-cause notice under section 271(1)(c) of the Act, dated January 21, 2009 to the assessee fixing the case for hearing on January 28, 2009. In response to the same, the assessee furnished a reply dated February 27, 2009 and stated that no proper notice of audit report, trading account, profit and loss account and balance-sheet has been taken thereof while framing ex parte assessment. The assessee further stated that there were genuine depositors and creditors as appearing in the balance sheet which was returned in subsequent year. The assessee further stated in reply dated February 27, 2009 that the income was enhanced by making disallowances of expenditure under the head salary, petrol, telephone and travelling allowances without making proper inquiry and collecting evidence which is merely on the basis of presumption which does not warrant the initiation of penalty proceedings under section 271(1)(c) of the Act. After considering the reply filed by the assessee, the Income-tax Officer, Ward-2(4), Batala stated that the onus is on the assessee to prove the genuineness of credits and justify the expenses claimed in profit and loss account by supplying vouchers. But he failed to discharge his onus in spite of repeated opportunities allowed to him and the Assessing Officer has proposed to pass ex parte assessment under section 144 of the Act. The Income-tax Officer, Ward 2(4), Batala, rejected the contentions raised by the assessee before him and finally held that the assessee has failed to discharge its onus to prove creditworthiness of the depositors and the addition was rightly made under section 68 of the Act and he is fully satisfied that the assessee has furnished inaccurate particulars of his income and liable to penalty under section 271(1)(c) of the Act at 100 per cent. of the concealed income, i.e., amounting to Rs.7,55,308 vide his order dated March 13, 2009 passed under section 271(1)(c) of the Act.
4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the learned Commissioner of Income-tax (Appeals), who vide impugned order dated May 31, 2011 allowed the appeal of the assessee and cancelled the penalty in dispute.
5. Now, the Revenue is aggrieved by the impugned order dated May 31, 2011 passed by the learned Commissioner of Income-tax (Appeals), filed the present appeal before us.
6. The learned Departmental representative relied upon the order passed by the Assessing Officer, Ward 2(4) under section 271(1)(c) of the Act and stated that the learned first appellate authority has wrongly deleted the penalty in dispute merely on the ground that the Assessing Officer has made addition on estimated basis. He further stated that the assessee has withdrawn his appeal which he has filed before the learned Commissioner of Income-tax (Appeals) and resorted to section 264 of the Act, which was dismissed by the learned Commissioner of Income-tax-1 and the Income-tax Officer had levied penalty in dispute in the case of the assessee.
7. On the contrary, learned counsel for the assessee, Sh. Satish Gupta, advocate, relied upon the impugned order passed by the learned Commissioner of Income-tax (Appeals) and stated that the assessee has filed all documentary evidence supporting his claim before the Assessing Officer which includes statement of trading account, profit and loss account and the balance-sheet and audit report in Form No. 3CD duly signed by Sh. Anil Kumar, chartered accountant. This was not properly appreciated by the Assessing Officer and he completed the assessment under section 144 of the Act without giving sufficient opportunity to the assessee and made addition in dispute on estimation basis. No doubt, the assessee has filed appeal before the learned Commissioner of Income-tax (Appeals) against the assessment dated July 2, 2007 but later on the assessee has withdrawn the same by filing petition under section 264 of the Act before the learned Commissioner of Income-tax-1, Amritsar, which was partly allowed by him vide order dated October 21, 2008. He further stated that the Income-tax Officer, Ward-2(4), Batala, has levied the penalty in dispute vide his order dated March 13, 2009, on the addition made by the Assessing Officer on estimation basis which is not permissible under law and liable to be cancelled. He further stated that the assessee has prevented with sufficient causes to appear before the Assessing Officer which the learned Commissioner of Income-tax (Appeals), has mentioned in the impugned order. He further stated that the Assessing Officer has also levied penalty under section 271(1)(b) amounting to Rs. 10,000, which the learned Commissioner of Income-tax (Appeals) has deleted on the appeal filed by the assessee by relying upon various decisions of the courts, mentioned as under :
(i) Sh. Bodh Raj Chopra (HUF) v. ITO [2008] 36 IT Rep 595 (ITAT, Asr.) ;
(ii) Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519;
(iii) CIT v. Metal Products of India [1984] 150 ITR 714; and
(iv) Harigopal Singh v. CIT [2002] 258 ITR 85.
8. In view of the above submissions, Sh. Satish Gupta, learned counsel for the assessee prayed that the appeal filed by the Revenue may be dismissed. He has also filed paper book containing pages 1 to 145.
9. We have heard both parties and perused the relevant records available with us especially the impugned order passed by the learned first appellate authority, along with the appellate order passed under section 264 of the Act, as well as orders of the learned first appellate authority deleting penalty levied in the case of the assessee under section 271(1)(b) of the Act along with various case laws cited by the learned first appellate authority in the impugned order. As per record, the assessee has filed his return of income on October 31, 2005 declaring income at Rs. 1,57,120 and agricultural income at Rs. 80,000. He has also attached various documentary evidences along with return, viz., statement of trading account, profit and loss account, balance-sheet and audit report in Form No.3CD duly signed by the competent person. No doubt, the assessee remained non-cooperative in the assessment proceedings due to the reasons mentioned by the assessee in the impugned order. In paragraph 6.1 at page 30, the reasons mentioned by the assessee for non-appearance before the Assessing Officer are that he remained pre-occupied in seeking allotment of dealership of Hero Honda and dealt with various department to whom a complaint was being pursued by unknown persons out of jealousy and ill-will which led him to remain absconded and underground for quite good time to avoid harassment. Secondly, the assessee has engaged Sh. Anil Gupta, chartered accountant, who failed to apprise the appellant about the day to day developments of the scrutiny case and ultimately, the Assessing Officer completed the assessment ex parte under section 144 of the Act on July 2, 2007. Thirdly, the assessee himself remained confined to bed being a heart patient during the period from May 8, 2007 onwards for which the assessee has produced prescription slips and copies of various clinical tests adduced before the learned first appellate authority. Fourthly, he took care of his two mentally retarded children who were insane by birth and also had to pay medical attendance to his ailing mother suffering from various ailments and in particular from cancer which ultimately led to her sad and sudden demise on October 7, 2006, i.e., during course of appellate proceedings. The learned first appellate authority has also disclosed various other reasons for keeping the assessee absent from assessment as well as appellate proceedings and could not pursue his case before the Revenue authorities properly.
10. After perusing the assessment order in which the Assessing Officer has made all additions, disallowances, treating the cash credits/foreign receipts as well as the assessee’s declared agricultural income merely on estimate and guess work basis without bringing on record any positive and concrete evidence to be applied against the assessee. We also find that the Assessing Officer has not quoted any comparable case in this line of business, which has shown better gross profit than that shown by the assessee in the present assessment year. As stated above, the assessee has filed statement of trading account, profit and loss account, balance-sheet and audit report in Form 3CD duly signed by the authorised person. As regards the cash credits which the assessee has shown in his return, one can establish its genuineness by furnishing necessary documentary evidence but due to lack of communication by his chartered accountant the assessee could not furnish the same. As regards the foreign gift in dispute which the assessee has received from his real brother who is residing in the USA and made the gift to the assessee out of love and affection through banking channel, for that the assessee has produced all necessary evidence in the assessment proceedings. As regards to the agricultural income declared by the assessee on estimation basis, which has been converted into the income of the assessee from other sources without appreciating the Revenue’s record furnished before the Assessing Officer being ancestral land as per Jamabandi available with the assessment record. No doubt, the Assessing Officer completed the assessment under section 144 of the Act and made the addition in dispute on estimation basis without bringing any evidence establishing that the assessee has concealed any income or furnished inaccurate particulars of income in his return intentionally or mala fidely. In our considered view, the Assessing Officer has levied the penalty in dispute on the addition made by the Assessing Officer on estimate basis which is against law and facts on file and contrary to the various decisions rendered by the hon’ble courts. We are of the view that in order to attract clause (c) of section 271(1), it is very much necessary that there must be concealment by the assessee of particulars of income or furnishing inaccurate particulars of such income. The provisions of section 271(1)(c) of the Act are not attracted to the cases where the income of the assessee is assessed on estimate basis. In the present case also, the Assessing Officer has not established any mala fide intention on the part of the assessee in filing the return. In the absence of the same, the penalty in dispute deserves to be cancelled. The assessee is not ipso facto liable for penalty until it is demonstrated that there was a mala fide intent on the part of the assessee or this was his deliberate Act. The Assessing Officer has to establish the assessee’s mala fide intention to evade tax which he has failed to do so, in the present case and therefore, the penalty is not sustainable. This view is supported by the decision of the hon’ble Supreme Court, in the case of Dilip N. Shroff (supra), where the hon’ble Supreme Court, has held that if there is no evidence or 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. In the present case, the Assessing Officer has not established any basis for levying penalty in dispute on the additions made which is purely on the basis of estimation. The hon’ble Punjab and Haryana High Court has also specifically held in the case of Metal Products of India (supra) that merely because the addition has been made on estimation basis, that did not automatically lead to the conclusion that there was failure to return the correct income. Where the income was assessed by estimating the gross profit and there was difference of opinion as regards to the estimation of income of the assessee, concealment of penalty could not be imposed. Their view is also supported by the decision of the hon’ble Punjab and Haryana High Court, in the case of Harigopal Singh (supra).
11. Keeping in view the facts and circumstances of the case discussed above, we are of the considered opinion that the additions on which penalty in dispute has been imposed is purely on estimation basis and the Assessing Officer has not brought any material on record to establish any mala fide intention of the assessee to evade tax in the return filed by the assessee. Therefore, the penalty in dispute deserves to be cancelled. Accordingly, we cancel the penalty in dispute by upholding the impugned order passed by the learned first appellate authority because the learned first appellate authority has passed a well reasoned order on the basis of evidence filed by the assessee as well as on the basis of various decisions rendered by the hon’ble Supreme Court and the High Courts. We, therefore, are of the view that no interference is called for in the well reasoned order passed by the learned first appellate authority. Accordingly, we uphold the impugned order by dismissing the appeal filed by the Revenue.
12. In the result, the appeal of the Revenue is dismissed.
