TMI Blog2012 (5) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee’s claim of absence of any charge of having not disclosed its correct income, and of having a plausible explanation in support of the returned income. The same, though, would not prove its case as regards the claim of expenditure (or income), yet remains a valid claim for the purpose of levy of penalty. No penalty is exigible in the instant case - Decided in favour of assessee. - I.T.A. Nos. 18 & 19/JP/2012 - - - Dated:- 16-5-2012 - R. K. Gupta (Judicial Member) And Sanjay Arora (Accountant Member) For the Assessee : G. G. Mundra, CA-AR For the Revenue : D. K. Meena, Jr DR ORDER Sanjay Arora (Accountant Member) These are the two set of Appeals by the Assessee directed against separate Orders by the Commissioner of Income-tax (Appeals)-I, Jaipur ( CIT(A) for short) of even date, i.e., 05-12-2011, confirming the levy of penalty u/s. 271(1) (c) of the Income Tax Act, 1961 ( the Act hereinafter) by the Asstt. CIT, Circle- 1, Jaipur for the assessment years (A.Y.) 2004-05 and 2005-06 vide separate penalty orders, again of even date, i.e., 29-012010, at the minimum rate of one hundred per cent. of the tax sought to be evaded, being at ₹ 1,74,772/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a g.p. rate of 14% for the immediately preceding assessment year. A trading addition of ₹ 81.12 lacs was made. In appeal there-against, the first appellate authority sustained a g.p. rate at 8%, reducing the addition to ₹ 41.10 lacs vide order dated 28-03-2008 (in ITA No. 684/2006-07). In further appeal before the Tribunal, the assessee secured substantial relief. The tribunal directed for application of a g.p. rate at 4.5% as against declared g.p. rate of 3.83% and 4.10% for the two consecutive years respectively, thereby sustaining a net trading addition, i.e., net of relief u/s. 80HHC, at ₹ 5,29,610/- and ₹ 5,06,686/- for the two consecutive years respectively vide its combined order dated 26-06-2009, deciding the cross appeals by the assessee and the Revenue (in ITA Nos.1018 1212/JP/2008 Assessee and ITA Nos. 1101 1279JP/2008 Revenue - PB pages 10-15), holding as under vide para 13 of its order: 13. So far as reasonableness of GP rate shown by the assessee .. Undisputedly, the declared sales have not been doubted by the lower authorities in the present case of the assessee thus, claimed purchases cannot be denied but the doubt has been ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow, given the mandate of Explanation 1 to the provision. In fact, taking such a view as being urged, the assessee may well not produce the books of account or, rather, even not maintain them or maintain irregular books of account, impelling the Revenue to take recourse to best judgement assessment, and which would stand to be excluded from the levy of penalty. The assessment by way of an estimate, which is a well accepted method known to the world of taxation, would fall outside the ambit of section 271(1)(c) of the Act. The tribunal had in the case of Som Engineering Corporation (infra) confirmed the levy of penalty under such circumstances, and which was upheld by the hon'ble Allahabad High Court (reported at 277 ITR 92). The decision by the hon'ble jurisdictional high court in the case of Shiv Lal Tak vs. CIT, 251 ITR 373, cited by the assessee in advancing its case, was discussed and found distinguishable. The assessee in that case was a building contractor, and being unable to substantiate its books of account, gross profit addition was sustained. The hon'ble court held that since no deliberate false entry had been found to have been made in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, including all the decisions by the apex court cited supra, with the exception of the last, being subsequent, that the onus was on the assessee, which it had failed to discharge as no explanation had been given before the assessing authority. Similar was case in the case of Vidhya Shankar Dixit vs. CIT (2005) 277 ITR 285 (All.), where the penalty was again in respect of confirmed disallowance on account of unverifiable purchases. Clearly, therefore, it cannot be said that merely because the enhancement in income in assessment is sustained on account of applying an estimate, no penalty for that reason could be levied. Wilful concealment is not an essential ingredient for the invocation of sec. 271(1)(c), and neither is Explanation 1 thereto to be specifically pressed; the same being an integral part of the section, of which the assessee is put to notice when show caused in the matter, and the Department at this stage is not obliged to bring some positive evidence. The decision by the hon'ble jurisdictonal High Court in the case of Shiv Lal Tak vs. CIT, 251 ITR 373, also stands rightly distinguished by the Revenue. The same is for assessment year 1978-79, with the law amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timate. If there is none, as we find in the instant case, it is only a matter of one person s estimate against the other. For both the years, the clear finding by the tribunal for sustaining a higher g.p. rate is to plug a possible leakage of revenue on account of unverifiable purchases; the assessee having exhibited the purchase of goods against its unverifiable purchases. The assessee can under the circumstances only be considered as having substantiated it explanation, if not to the hilt, substantially so, with all the facts material to the computation of income being on record. Once it is accepted as a fact that the goods had indeed been purchased, an addition on account of a possibility of having incurred a higher expenditure than claimed, though definitely valid for effecting a disallowance of the claimed expenditure; the assessee having failed to prove their actual cost as incurred, cannot lead to the inference of a wrong claim, justifying the levy of penalty. That is, the very fact of the tribunal sustaining a higher g.p. rate only to plug a possible leakage of revenue on account of unverifiable purchases, proves the assessee s claim of absence of any charge of having not d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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