SMT. BITOLI DEVI v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2007-LL-0427-12]

Citation 2007-LL-0427-12
Appellant Name SMT. BITOLI DEVI
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 27/04/2007
Assessment Year BLOCK PERIOD ENDING ON 4TH JUNE, 2002
Judgment View Judgment
Keyword Tags valuation of property • concealment of income • undisclosed income • undisclosed sales • levy of interest • returned income • income returned • net profit rate • estimate basis • block period • cold storage
Bot Summary: The assessee filed a return of undisclosed income on 10th Jan., 2003 showing undisclosed income at Rs. 12,50,000. Shri Rakesh Garg, learned counsel for the assessee submitted that the penalty under s. 158BFA(2) is almost in pari materia to s. 271(1)(c) of the IT Act, 1961 which relates to concealment of income. In view of the above decisions, Shri Rakesh Garg, learned counsel for the assessee submitted that the addition of Rs. 1,43,353 has been made on estimate basis by applying higher net profit rate as against that declared by the assessee. Shri Anil Kumar, Senior Departmental Representative submitted that the addition in the income of the assessee has been confirmed upto the Tribunal level therefore, the AO was fully justified in levying the penalty under s. 158BFA(2) of the IT Act, 1961. From the entire facts of the present case, it would be clear that the income of the assessee was estimated and nothing has been brought on record by the AO that the assessee concealed any particulars of income. Since the AO and the Tribunal adopted different estimates in assessing the income of the assessee, it could not be said that the assessee had concealed the particulars of his income so as to attract cl. In the instant case, the assessee applied a different net profit rate and the AO and CIT(A) adopted different estimates and it could not be said that the assessee had concealed the particulars of his income so as to attract penalty under s. 158BFA(2) of the IT Act, 1961.


This appeal, filed by assessee, is directed against order of CIT(A)-I, Kanpur dt. 4th Jan., 2006 relating to block period ending on 4th June, 2002 in confirming penalty of Rs. 1,00,000 imposed under s. 158BFA(2) of IT Act, 1961. Briefly stated, facts of case are that assessee is individual and enjoys income from trading of sweet supari on wholesale basis. search was conducted on 4th June, 2002 at business and residential premises of family members and proprietors of M/s Mohini & Co. and M/s Richa Chemicals and M/s B.S. Sales Agency. During course of search, certain assets and records were seized. assessee filed return of undisclosed income on 10th Jan., 2003 showing undisclosed income at Rs. 12,50,000. profit on sales covered by seized records was estimated by applying net profit rate of 3.3 per cent approximately. However, AO applied net profit rate of 4.5 per cent. AO has not disputed total figures of sales as found undisclosed. On appeal, CIT(A) reduced net profit rate applied by AO to 4 per cent. CIT(A) was of view that certain expenses must have been incurred by assessee to make sales. learned CIT(A) held that net profit rate of 4 per cent would be reasonable. In second appeal, Tribunal confirmed order of CIT(A), hence rate of 4 per cent became final. final assessed income worked out by AO came to Rs. 13,93,353 as against Rs. 12,50,000 declared by assessee. Thus addition came to Rs. 1,43,353. AO, vide its order dt. 30th March, 2005, levied penalty on difference between income returned and income assessed. AO took view that provisions to s. 158BFA(2) are applicable. On appeal, learned CIT(A) confirmed levy of penalty holding that provisions of s. 158BFA(2) are mandatory. Now assessee is in appeal against order of CIT(A) before this Bench of Tribunal. Shri Rakesh Garg, learned counsel for assessee submitted that AO has not disputed total figures of sales as found undisclosed. At same time he has not brought any material on record either from seized papers or otherwise suggesting higher estimate of net profit rate to be applied. According to learned counsel for assessee, as matter of fact, no paper was found at time of search suggesting any profit earned or likely to be earned on undisclosed sales or in respect of net profit rate. He also submitted that no paper relating to expenses incurred was found at time of search Shri Rakesh Garg, learned counsel for assessee also submitted that AO has levied penalty on difference between income returned and income assessed. It was also stated by learned counsel for assessee that CIT(A) has confirmed levy of penalty holding that provisions of s. 158BFA(2) are mandatory. Shri Rakesh Garg, learned counsel for assessee submitted that provisions of s. 158BFA(2) are not mandatory and automatic since word "may" has been used in s. 158BFA(2) in contrast to word "shall" used for levy of interest under s. 158BFA(1) of IT Act, 1961. Reliance was placed on following cases: (i) Smt. Mala Dayanithi vs. Dy. CIT (2005) 92 TTJ (Bang) 270. In above case it has been held that penalty under s. 158BFA(2) is not mandatory. Tribunal further held that if assessee offers convincing reason or if reasonable cause is demonstrated for non-inclusion of such income, penalty is not attracted. (ii) Nemichand vs. Asstt. CIT (2005) 93 TTJ (Bang) 564; (iii) Dy. CIT vs. Suresh Kumar (2005) 95 TTJ (Kol) 926: (2005) 97 ITD 527 (Kol). In case of Suresh Kumar (supra), Tribunal has held as under: "Since provisions of s. 271(1)(c) are similar to provisions of s. 158BFA(2) same will apply mutatis mutandis and ratio as laid down by t h e various Courts while dealing with penalty relating to concealment of income will also apply. Therefore, there was no merit in plea of Revenue that penalty under s. 158BFA(2) is mandatory and not discretionary." In view of above, Shri Rakesh Garg, learned counsel for assessee submitted that learned CIT(A) was not justified in stating that provisions of s. 158BFA(2) of IT Act, 1961 are mandatory. Shri Rakesh Garg, learned counsel for assessee also submitted that AO has estimated net profit rate @ 4.5 per cent of undisclosed sales. According to learned counsel for assessee, there was no positive concealment and no assets/investment/expenditure were found in excess of income disclosed in block return. Shri Rakesh Garg, learned counsel for assessee submitted that penalty under s. 158BFA(2) is almost in pari materia to s. 271(1)(c) of IT Act, 1961 which relates to concealment of income. According to learned counsel for assessee, various Courts and Benches of Tribunal have held that if positive concealment is not found, no penalty is leviable on addition made on estimate basis. Reliance was also placed on following decisions: (i) CIT vs. Prem Das (2001) 167 CTR (P&H) 158: (2001) 248 ITR 234 (P&H); (ii) ITO vs. Smt. Purnima Devi Gupta (2004) 83 TTJ (Jd) 586: (2004) 3 SOT 753 (Jd); (iii) Rajan H. Shinde vs. Dy. CIT (2006) 104 TTJ (Pune)(TM) 445: (2006) 103 ITD 360 (Pune)(TM). In view of above decisions, Shri Rakesh Garg, learned counsel for assessee submitted that addition of Rs. 1,43,353 has been made on estimate basis by applying higher net profit rate as against that declared by assessee. He further submitted that there is no positive evidence or finding regarding concealment, penalty imposed be deleted. Shri Anil Kumar, Senior Departmental Representative submitted that addition in income of assessee has been confirmed upto Tribunal level therefore, AO was fully justified in levying penalty under s. 158BFA(2) of IT Act, 1961. He also relied on following decisions: (i) Addl. CIT vs. Swatantra Confectionary Works (1976) 104 ITR 291 (All); (ii) CIT vs. Kedar Nath Ram Nath 1975 CTR (All) 13: (1977) 106 ITR 172 (All); (iii) Addl. CIT vs. Lakshmi Industries & Cold Storage Co. Ltd. (1983) 32 CTR (All) 195: (1984) 146 ITR 492 (All). In view of above, learned senior Departmental Representative submitted that levy of penalty may be upheld. In rejoinder, learned counsel for assessee submitted that decision relied upon by learned Departmental Representative are distinguishable on facts and, therefore, not applicable to facts of present case. He further submitted that recently Hon ble Allahabad High Court, in case of CIT vs. Raj Bans Singh (2005) 276 ITR 351 (All) held that from findings recorded by Tribunal that assessee had not deliberately concealed income, no penalty under s. 271(1)(c) of Act was imposable. In said case, Tribunal held that it was case of estimate against estimate and there was no concealment and accordingly it was held that no penalty was imposable. He, therefore, submitted that in view of recent judgment of Hon ble Allahabad High Court, unless any positive concealment is found, no penalty is leviable on addition made on estimate basis. We have carefully considered rival submissions and have also perused orders of authorities below. decisions relied upon by both parties were also considered. In instant case, assessee had submitted block return showing income of Rs. 12,50,000 which covered all aspects of search. profit on sales was estimated by applying net profit rate of 3.3 per cent approximately. However, AO applied net profit rate of 4.5 per cent. He has not disputed total figures of sales as found undisclosed. At same time, AO has not brought any material either from seized papers or otherwise suggesting higher estimate of net profit rate to be applied. It is relevant to state that no paper was found at time of search suggesting any profit earned or likely to be earned on undisclosed sales or in respect of net profit rate. It is seen that learned CIT(A) reduced net profit rate to 4 per cent as against 4.5 per cent applied by AO. learned CIT(A) took view that certain expenses must have been incurred by assessee to make sales. learned CIT(A) observed that net profit rate applied by AO was on higher side. He, therefore, held that net profit rate of 4 per cent would be reasonable. Tribunal confirmed order of CIT(A). In instant case, AO estimated net profit @ 4.5 per cent of undisclosed sales. However, there was no positive concealment and no asset/investment/expenditure was found in excess of income disclosed in block return. In our opinion, penalty under s. 158BFA(2) is not mandatory. If assessee offers convincing reason or if any reasonable cause is demonstrated for non-inclusion of such income, penalty is not attracted. In case of Smt. Mala Dayanithi (supra), Bangalore Bench of Tribunal held that addition not based on material found during search or material in possession of AO, but based on difference in valuation of property, as disclosed by assessee and as estimated by DVO, there was no concealment attracting penalty under s. 158BFA(2) of IT Act, 1961. In instant case there was estimate at level of AO as well as at level of CIT(A) in respect of net profit rate. From entire facts of present case, it would be clear that income of assessee was estimated and nothing has been brought on record by AO that assessee concealed any particulars of income. In our view, unless any positive concealment is found, no penalty is leviable on addition made on estimate basis. While taking such view, we are fortified by decision of Hon ble Punjab & Haryana High Court in case of CIT vs. Prem Das (supra). relevant observations of Hon ble High Court (at p. 236) are as under: "We have heard learned counsel for Revenue and assessee. It appears that assessee had claimed deduction of expenses from gross freight receipts in respect of his own trucks on estimate basis and had shown income from commission at 7 per cent of gross receipts in respect of trucks owned by others. AO had allowed expenditure at 80 per cent. CIT(A) allowed expenditure at 84 per cent. Similarly, whereas AO had estimated income from commission at 10 per cent, CIT(A) allowed it at 8 per cent. Tribunal found that difference between returned and assessed income was due to difference of opinion about estimated rates of income and expenditure. Income had been enhanced by AO by adopting lower estimate in respect of expenditure and higher estimate with regard to income from commission. AO determined income of assessee on estimate basis. Tribunal noticed that since difference in estimates was based on difference of opinion, there was no positive proof regarding concealment of income by assessee. assessee had shown expenditure as also income from commission on estimate basis. rates of estimate were varied by AO. These were further varied by CIT(A). Tribunal, therefore, cancelled penalty on ground that there was no positive evidence to prove suppression of income. On consideration of matter, it is noticed that assessee had returned income on estimate basis. AO and CIT(A) adopted different estimates. It was, thus, case of difference of opinion." From above judgment it is clear that AO and CIT(A) adopted different estimates, and it was case of difference of opinion. Hon ble Punjab & Haryana High Court held that Tribunal was justified in law in cancelling penalty imposed under s. 271(1)(c) of Act. In our opinion, penalty under s. 158BFA(2) is almost in pari materia to s. 271(1)(c) of IT Act, 1961, which relates to concealment of income. various Benches of Tribunal have held that unless any positive concealment is found, no penalty is leviable on addition made on estimate basis. In case of Hari Gopal Singh vs. CIT (2002) 177 CTR (P&H) 580: (2002) 258 ITR 85 (P&H), Hon ble Punjab & Haryana High Court held that where assessment is made on estimate basis, no penalty under s. 271(1)(c) can be imposed. Hon ble High Court observed that there was difference of opinion as regards estimate of income of assessee. Since AO and Tribunal adopted different estimates in assessing income of assessee, it could not be said that assessee had concealed particulars of his income so as to attract cl. (c) of s. 271(1) of IT Act, 1961. In instant case, assessee applied different net profit rate and AO and CIT(A) adopted different estimates and, therefore, it could not be said that assessee had concealed particulars of his income so as to attract penalty under s. 158BFA(2) of IT Act, 1961. decisions relied upon by learned Departmental Representative are distinguishable on facts and, therefore, are of no help so far as Revenue s case is concerned. In case of Raj Bans Singh (supra), Tribunal came to is concerned. In case of Raj Bans Singh (supra), Tribunal came to conclusion that it was case of estimate against estimate and there was no concealment and accordingly it was held that no penalty was imposable. On reference, Hon ble Allahabad High Court held that no penalty under s. 271(1)(c) of Act was imposable. In view of above discussion, we are of considered view that on facts and in circumstances of present case, no penalty under s. 158BFA(2) of IT Act, 1961 can be levied in this case. Accordingly we cancel penalty levied by AO and confirmed by CIT(A). In result, appeal is allowed. *** SMT. BITOLI DEVI v. ASSISTANT COMMISSIONER OF INCOME TAX
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