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2016 (7) TMI 98 - ITAT MUMBAI

2016 (7) TMI 98 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - Quantum addition, @0.1% of turnover on account of low G.P. in the year under consideration vis-a-vis the immediately preceding year, upheld by Tribunal - Further, assessee failed to bring on record material evidence to controvert the findings of the learned CIT(A) in upholding the levy of penalty - Held that:- In these circumstances, we uphold the CIT(A)ís action in confirming the levy of penalty u/s 271(1)(c) - Decided against assess .....

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der: - 2.1 The assessee is engaged in retail trading of diamonds. In the case on hand the assessment for A.Y. 2009-10 was completed under section 143(3) of the Act vide order dated 23.12.2011 wherein the income of the assessee was determined at ₹ 30,63,850/- as against the returned income of ₹ 5,05,851/- in view of the addition of ₹ 25,58,000/- @0.5% of turnover on account of low G.P. shown in the year under consideration vis-a-vis the immediately preceding year and also taking .....

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T(A)-25, Mumbai dated 12.07.2012 in the quantum proceedings, the Assessing Officer (AO) took up the penalty proceedings under section 271(1)(c) of the Act in respect of the addition of ₹ 5,11,785/- by issue of letter dated 19.12.2012 to the assessee affording him opportunity to show cause why penalty under section 271(1)(c) of the Act should not be levied in his case. In reply thereto, the learned A.R. for the assessee vide letter dated 21.12.2012 stated that the assessee s reply in the ma .....

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he CIT(A)-25, Mumbai, who dismissed the assessee s appeal vide the impugned order dated 31.07.2013. 3. The assessee, being aggrieved by the impugned order of the CIT(A)- 25, Mumbai dated 31.07.2013 for A.Y. 2009-10 upholding the levy of penalty of ₹ 1,73,954/- under section 271(1)(c) of the Act by the AO, has preferred this appeal raising the following grounds: - 1. The learned CIT(A) erred in confirming the penalty u/s. 271(1)(c) of ₹ 1,73,954/- levied by ITO 14(2)-4 without appreci .....

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f hearing were informed through the notice board. On other dates the case was adjourned on the request of the learned A.R. for the assessee. When the case was called for hearing on 02.06.2016, none was present for the assessee but the learned D.R. for Revenue was present and ready to present the case. In the circumstances, as discussed above, it appears to us that the assessee is not serious about pursuing this appeal and we therefore proceed to dispose this appeal with the assistance of the lea .....

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taken the estimation of G.P. as concealment of income or filing of inaccurate particulars of income. 5.2 The learned D.R. emphatically supported the impugned order of the learned CIT(A) in confirming the levy of penalty of ₹ 1,73,954/- under section 271(1)(c) of the Act for A.Y. 2009-10. It was brought to the notice of the Bench that in quantum proceedings, a Coordinate Bench of this Tribunal had, in its order dated 05.11.2015, upheld the G.P. addition to the extent of 0.1% thereby confir .....

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the finding of the authorities below from the order of assessment for A.Y. 2009-10 dated 23.12.2011 upto the order of the AO levying penalty of ₹ 1,73,954/- under section 271(1)(c) of the Act. It is contended that since the assessee had failed to bring on record any material evidence to contravene the findings of the learned CIT(A) in the impugned order in respect of the sustaining of penalty of ₹ 1,73,954/- levied under section 271(1)(c) of the Act, the assessee s appeal ought to b .....

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ppellate proceedings. the appellant contended that he had neither concealed the income nor filed inaccurate particulars of income and thus was not liable to penalty u/s 271(1)(c). He pointed out that the penalty was levied on the basis of assessment wherein the income was arbitrarily estimated by adding 0.5% (later revised to 0.1%) in G.P. on sales and when the income is estimated by enhancing G.P., the question of levy of penalty does not arise. The appellant relied upon the following judgments .....

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0. Reliance Petroproducts Pvt. Ltd. vs. Sirpurkar J. (arising out of SLP(C) No. 27161 of 2008) 11. Harigopal Singh vs. CIT (125 Taxman 242) Punj. & Har. 12. Sadhu Ram Goyal vs. DCIT (128 lTD 436) Jp 13. Shiv Lal Tak vs. CIT (121 Taxman 99) Raj. 5. In contrast, the following relevant observations are made from the assessment order. 5.1 It appears that the AO was not satisfied with the stock register maintained by the assessee for the reason that it does not contain the details about the quali .....

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ase of 3 given parties namely Crown Gallant Ltd., Rich Style Ltd. and Star Grace Ltd. He has only submitted that he has filed the copy of stock register and all the transactions are explained there. 5.3 The AO has pointed out in assessment order that the assessee has failed to produce all the jangads maintained. Perusal of some of the jangads produced before him reveals that only the quantity and rate is mentioned. There is no mention of size, colour, clarity, shape etc. 5.4 The AO has made a co .....

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O has pointed out reasons for not accepting the comparative details filed by the assessee in para 5.5 of the assessment order and given reasons for distinguishing the same from the case of assessee. 6. Based on aforesaid facts, the AO has observed that the assessee is not maintaining his books of accounts in proper manner and there is enough scope for manipulation in the books of account maintained by the assessee. Therefore, he rejected the books of accounts of the assessee u/s 145(3) of the I. .....

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evied the penalty accordingly. 7. The AO has further observed that the assessee having a turnover of ₹ 55 crores had annual expenditure of ₹ 30,000/- only. The reasons submitted by the assessee were not acceptable as the drawings shown by him were highly inadequate. This also confirmed the view of AO why addition should be made in the gross profit of the assessee's business. However, he did not make separate addition in this behalf, as the addition on account of low drawings is c .....

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ugh various case laws relied upon by the appellant, it appears that the circumstances are distinguishable on facts of each case. For example: In the case CIT vs. Bombay Hardware Syndicate (supra), it was observed that mere estimate made, however well founded it may be, by itself would not normally constitute material for holding that income that has been added on basis of estimate was income that has been concealed, rather it is also necessary to establish the quantum of the income that had esca .....

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271(1)(c) was not leviable. In the case of CIT vs. Metal Products of India (supra), the penalty for concealment levied was cancelled by tribunal, on grounds that assessee had discharged onus cast on it by producing regular books of account, and that though there was discrepancy in value of stock as per books of account, no addition had specifically been made on this account. In the case of CIT vs. Ajay Hari Dalmia (supra), the penalty was cancelled on ground that as particulars of concealment ha .....

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on a preponderance of probabilities, no other conclusion could be reached but that failure to return total assessed income was not on account of any fraud or gross or willful neglect on part of assessee. In the case of CIT vs. Gordhandas Moolchand (supra), the Tribunal held that what was brought to tax could not be referred to any particular assessment year and there was no evidence to show that said sum added could be related to relevant assessment year, and hence penalty was cancelled. In the .....

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all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. In the case of Harigopal Singh (supra), it was observed that there was not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. In the case of Sadhu Ram Goyal (supra), it was noted that on question of quantum o .....

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lanation 1, same by itself cannot take place of conclusive proof so as to discard evidence and attending circumstances on that basis alone. 10. It can be deduced from aforesaid judgments relied upon by the appellant that mere addition on estimate basis is not sufficient to levy penalty u/s 271(1)(c) of the Act, instead the whole facts and intention of assessee need to be looked into on case to case basis. In the present case, the AO has sufficiently shown that the stock records maintained by the .....

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ssessee has made conscious concealment of the particulars of income by understating the gross profits. This belief was further fortified with the paltry annual drawings shown by the assessee. Hence, the facts and evidences of the case are clearly against the appellant. 11. The Hon'ble Supreme Court in the landmark case of Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) has held as under: "The Explanation appended to section 271(1)(c) entirely indicate the elemen .....

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