Giriraj Enterprises Vs DCIT (ITAT Pune)
Summary: M/s. Giriraj Enterprises and the Revenue filed cross appeals against the CIT(A), Pune-11 order dated 27.12.2024 for Assessment Year 2021-22. The assessee, a partnership firm engaged in FMCG dealership and other businesses, was covered in a search under section 132 on 17.02.2021 in the Malpani group. It admitted unaccounted sales of Gai Chhap tobacco and other products of Rs.1,26,59,41,430 and offered gross profit of Rs.81,51,03,640. The Assessing Officer initiated penalty under section 271AAB(1A) and levied penalty of Rs.24,45,31,092. The CIT(A) rejected the assessee’s challenge to the validity of the penalty notice but accepted that GST of Rs.59,51,19,109 directly related to the unaccounted cash sales had to be reduced, thereby restricting the undisclosed income for penalty purposes to Rs.21,99,84,531. Before the Tribunal, the assessee argued that the notice under section 274 read with section 271AAB did not specify whether penalty was proposed under clause (a) or clause (b) of section 271AAB(1A), although the two clauses carried different conditions and penalty rates of 30% and 60%. The Tribunal examined the notice dated 22.04.2022 and found that the Assessing Officer had not mentioned the specific applicable limb. Relying principally on PCIT Vs Shri R. Elangovan and following the reasoning in Shri Krishnappa Gowder Kalyanasundaram and Shri Naveen Goswami, it held that failure to specify the applicable limb vitiated the entire penalty proceedings. It also held that the CIT(A) was not justified in distinguishing Mohd. Farhan A. Sheikh merely because that judgment concerned section 271(1)(c). The Tribunal additionally noted that no penalty had been levied for Assessment Year 2020-21 on the same set of facts and referred to Orient Press Ltd. and Arvind Gupta on consistency. On merits, it accepted that the unaccounted sale figures were inclusive of GST and held that GST paid for the relevant year, as well as GST pertaining to the preceding year but paid during the year under consideration, had to be deducted from gross profit. On that computation, no undisclosed income remained for levy of penalty. The Tribunal therefore held that the CIT(A) should have deleted the entire penalty. The assessee’s appeal in ITA No.427/PUN/2025 was allowed and the Revenue’s appeal in ITA No.553/PUN/2025 was dismissed.
