TMI Blog2017 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... is no finding that bogus purchases have been detected during the course of search operations and even the additions of ₹ 15,903/- made by the AO on this account has also been deleted by the Coordinate Bench in the quantum proceedings. Even looking at the quantum of bogus purchases of ₹ 15,703 vis-à-vis trading addition of ₹ 6,96,990 so sustained, there is a fundamental fallacy in the very basis for levy of penalty by the AO where he says that penalty has been levied on account of unverifiable purchases whereby the assessee has failed to prove the genuineness thereof. It is thus a case for levy of penalty purely on trading addition on an estimate basis which cannot be sustained. Appeal of the assessee is allowed. - ITA No. 211/JP/17, ITA No. 210/JP/17, ITA No. 217/JP/17, ITA No. 218/JP/17, ITA No. 220/JP/17, ITA No. 221/JP/17, ITA No. 222/JP/17, ITA No. 648/JP/16, ITA No. 219/JP/17 - - - Dated:- 7-9-2017 - Shri Kul Bharat, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri M.L. Borad (Adv.) Revenue by : Shri S.L. Chandel (Addl.CIT) ORDER Per Shri Vikram Singh Yadav, A. M. These are appeals filed by the respective assesses against the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred particulars of income. 5. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and then before the Tribunal. The Coordinate Bench vide its order dated 19.12.2011 has upheld the rejection of books of accounts. However, it directed to apply G.P. rate of 15% as against G.P. rate of 11.60% offered by the assessee and G.P. rate of 30% applied by the Assessing Officer. Regarding unverifiable purchases, the same was deleted given that the G.P. addition has been confirmed at 15% in the hands of the assessee. The relevant findings of the Coordinate Bench in ITA No. 14/JP/2011 and others dated 19.12.2011 reads as under:- 74 Ground No. 3 is against upholding application of provisions of section 145(3). 75. We have already upheld the action of the CIT(A) while disposing the appeal for assessment year 2008-2009 and 2007-08. Therefore, for the same reasoning, this ground of the assessee is also rejected. 76. Ground No. 4 is against sustaining trading addition of ₹ 35,66,906/- by applying a higher GP rate of 30% against GP rate of 11.60% on the sales of ₹ 1.91 Crore or odd. 77. Similar issue was involved in the appeal for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... has concealed the particulars of his income or furnished inaccurate particulars of [such income, or] It is clear that by making purchase from unregistered dealers and failing to prove the genuineness of transaction the assessee has both concealed his true income and has furnished inaccurate particulars of income. 7. On appeal, the ld. CIT(A) upheld the levy of penalty and relevant findings are contained at para 3.3.4, 3.3.5 and 3.3.6 of his order which are reproduced as under:- 3.3.4 Therefore, the issue of bogus bills has not been controverted by the assessee before the AO and even at appellate stages i.e. before CIT(A) and ITAT, Jaipur. Therefore, in absence of any satisfactory explanation or any explanation in respect of excess stock and trading additions made thereof on proportionate basis (as it was admitted by the assessee that if was not possible to bifurcate stocks among four family members namely Sh. Ravi Haldia, Sh. Dinesh Daldia, Smt. Deepali Haldia, Smt. Mamta Haldia) the first part of clause (A) of explanation 1 is attracted. In quantum appeal, both CIT(A) and ITAT, Jaipur have both dealt in details with the items of excess stock and additions mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the AO that quantitative details kept maintained by the assessee are not subject to verification. Nor is there any allegation of suppression of sale nor any allegation of inflation of purchases against the assessee. The assessment has been framed on the basis of net profit figure declared in profit and loss account submitted by the assessee along with return of income. The assessee deals in gems and stones and in this line of business multiple business are started every year which gives a tough competition in the market and effects GP rate. Otherwise also the additions made are of routine nature and there is no conscious nor positive concealment of income. The assessee s explanation is based on supporting documents. The consensus of judicial opinion is that for routine additions like trading additions and disallowance of deductions and expenses, no penalty for concealment of income or furnishing of inaccurate particulars of income should be levied. It is respectfully submitted that it is not the case of the AO that the assessee had suppressed the sale and/or inflated purchases. That the onus of proving mensrea on the part of the assessee was on the A.O and the AO has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s very case that the statute has clearly drawn a distinction between a deliberate false explanation furnished by the assessee and an explanation, which may not be false but is not accepted because the assessee was not able to substantiate it. 12. The Hon ble Kolkata High Court in the case of Durga Kamal Rice Mills (265 ITR 25) has held that quantum proceedings are not binding in the penalty proceedings as both are independent proceedings. 13. Moreover, mensrea which is a main ingredient for levy of penalty is absent in the present case. In support of this submission the assessee craves leave to refer to and rely on the leading judgment of Hon ble Apex Court in the case of Cement Marketing Company of India Ltd. Vs. Assistant CST, (1980) 124 ITR 15, 18 (SC) 14. The appellant also craves leave to refer to and rely on the judgment of Hon ble Supreme Court in the case of CIT Vs. Anwar Ali (1970) 76 ITR 696 (SC). In this judgment the Hon ble Court held that in penalty proceedings, the onus is on the department to establish that the assessee is guilty of violation. The penalty proceedings are not criminal proceedings rather they are quasi criminal in nature. 15. It is held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) deleted the penalty holding that the addition made by the AO on the basis of estimated profit could not be a subject matter of penalty for concealment of income. The tribunal confirmed this order. The Hon ble Delhi Court, dismissing the appeal, held that the finding arrived at by the tribunal did not warrant interference as it was purely a finding of fact. 20. The assessee craves leave to refer to and rely on the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Mahendra Singh Khedla reported in 252 CTR 453 and judgement in the case of CIT vs. Krishi Tyre Retreading Rubber Industries reported in (2014) 360 ITR 580 (Raj.). The latter judgment is given by the Hon ble Jurisdictional High Court taking into consideration judgment of Hon ble Supreme Court in the case of UOI vs. Dharmendra Textiles Processor reported in 306 ITR at page 277. In this case the Hon ble Jurisdictional High Court inter alia held that penalty proceedings are entirely distinct from assessment proceedings and howsoever relevant and good the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned. 21. The judicial consensus in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed. 10. Penalty proceedings are entirely distinct from assessment proceedings and, howsoever relevant and good, the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned. 24. The Hon ble Rajasthan High Court in the case of CIT vs. Mahendra Singh Khedla reported in 252 CTR 453 has held as under: 7. The appellate authority as well as the appellate Tribunal both considered the matter in detail and by speaking order set aside the penalty levied by Assessing Officer, in the facts and circumstances of the present case. The relevant portion of Para 7 of order of the Tribunal is reproduced as under:- Para 7. .....The enquiry conducted by the AO may lead to arrive at the findings as to whether the particulars disclosed are truthful or false or not proved to be satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to attract the penal provisions. In view of above discussion and keeping in mind the fact and circumstances of the present case, we are of the view that the ld. CIT (A) was justified in deleting the penalty in absence of positive evidence with the department that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the addition in question. The first appellate order on the issue is thus upheld. 8. The above finding of the Tribunal makes it clear that additions made by the Assessing Officer were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly levied by the Assessing Officer. The basis for levying penalty in the present case is only estimation, which is purely a question of fact and there is a concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both. 25. In the instant case, the Coordinate Bench in the quantum proceedings has upheld the rejection of books of accounts on account of certain dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that addition made and sustained on the basis of excess valuation is not justified as there is no difference in items, weight disclosed in the books of account and found during the course of search. Whatever a small difference was there, on this account the assessee himself has surrendered a sum of ₹ 34,00,000/- or odd on account of cash purchases by Shri Ravi Haldia and Shri Dinesh Haldia. Therefore, in our view, no further addition is required. Accordingly, the remaining entire addition is deleted. 27. In light of above discussions and in the entirety of facts and circumstances of the case and respectfully following the decisions of the Hon ble Rajasthan High Court referred supra, we hereby delete the levy of penalty u/s 271(1)(c) on estimated trading additions to the extent so sustained in the quantum proceedings. In the result, ground taken by assessee is allowed. 28. In the result, the appeal of the assessee is allowed. ITA No. 210/JP/2017 29. In its appeal for AY 2004-05, Dinesh Haldia, the assessee has taken the following ground of appeal: That the learned CIT(Appeals) erred in sustaining penalty of ₹ 2,06,287/- levied by the AO u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Undisputedly, both the parties agreed that the facts and circumstances of the case are identical to case of Ravi Haldia in ITA No. 211/JP/2017 where the trading additions have been sustained on estimate basis and penalty has been levied thereon. Similar arguments have been canvassed by both the parties and for the purposes of brevity, we are not reproducing the same. Our findings and directions contained in ITA No. 211/JP/2017 shall apply mutatis mutandis to this appeal as well. The appeal of the assessee is thus allowed. ITA No. 217/JP/2017 33. In its appeal for AY 2005-06, Dinesh Haldia, the assessee has taken the following ground of appeal: That the learned CIT(Appeals) erred in sustaining penalty of ₹ 66,352/- levied by the AO u/s 271(1)(c) of the I.T. Act, which sustaining of levy of penalty of ₹ 66,352/- u/s 271(1)(c) of the I.T. Act is most arbitrary, unjust and untenable in fact and in law and in the alternative excessive w.r.t. facts and circumstances of the case. 34. Briefly the facts of the case that assessment u/s 143(3) r/w sec. 153A/153B was completed on 30.11.2009 wherein trading addition of ₹ 2,03,2002/- by way of applying 30% GP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is most arbitrary, unjust and untenable in fact and in law and in the alternative excessive w.r.t. facts and circumstances of the case. 38. Briefly the facts of the case are that assessment u/s 143(3) r/w sec. 153A/153B was completed on 31.12.2009 wherein certain additions were made which inter-alia included addition of excess stock on protective basis at ₹ 1,91,16,000/-, trading addition of ₹ 1,75,393/- by way of applying 30% G.P. rate against the declared G.P. rate of 12.27%, disallowance of some of the expenses @ 20% at ₹ 1,38,269/-. In first appeal before the learned CIT(A) the addition on account of unexplained stock was deleted to the extent of ₹ 89,86,534/- out of total addition of ₹ 1,91,16,000/- and addition of ₹ 1,01,29,466/- was sustained by the learned CIT(A). In appeal before the Tribunal, the addition of ₹ 1,01,29,466/- sustained by the learned CIT(A) was deleted. As regards trading addition of ₹ 1,75,393/- made by the AO by way of applying 30% GP rate against the declared GP rate of 12.27%, the Tribunal reduced the GP rate to 20% and consequently reduced trading addition from ₹ 1,75,393/- to ₹ 76,489/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,063/-. However the Tribunal sustained on substantive basis the trading addition of ₹ 43,674/- by applying GP rate of 17% as against GP rate of 30% applied by the AO. On the trading additions so sustained, the AO levied the penalty of ₹ 13,757 u/s 271(1)(C) of the Act. ITA No. 220/JP/2017 42. In its appeal for AY 2004-05, Mamta Haldia, the assessee has taken the following ground of appeal: That the learned CIT(Appeals) erred in sustaining penalty of ₹ 64,866/- levied by the AO u/s 271(1)(c) of the I.T. Act, which sustaining of levy of penalty of ₹ 64,866/- u/s 271(1)(c) of the I.T. Act is most arbitrary, unjust and untenable in fact and in law and in the alternative excessive w.r.t. facts and circumstances of the case. 43. Briefly the facts of the case are that the assessment u/s 143(3) r/w sec. 153A/153B was completed on 30.11.2009 wherein trading additions of ₹ 9,11,038/- was made by applying GP rate of 30% which was upheld by the ld CIT(A). The Tribunal reduced the GP rate to 15% and consequently reduced trading addition from ₹ 9,11,038/- to ₹ 2,16,221/-. On the trading additions so sustained, the AO levied the penalty o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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