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2019 (9) TMI 550

..... year. The contentions of the assessee is that October being the month of Diwali festival the sales are at peak. Hence, sales during festival months/seasons cannot be extrapolated to the entire year. We find merit in the contentions of the assessee. Merely for the reason that there were high volume of sales in the month of October on account of festival, the sales cannot be extrapolated to the other months for computing annual turnover. This would give unrealistic figures of annual turnover and there would be aberration in computation of profits. The sales recorded during festival month at the most can be extrapolated to 3-4 calendar months. In so far as the remaining calendar months regular sales figure have to be adopted. Without going into the merits of calculations furnished by the assessee we deem it appropriate to restore this issue back to the file of Assessing Officer for re-computation of annual turnover in line with our aforesaid observations. Accordingly, ground Nos. 1 and 2 of the appeal by the assessee are allowed for statistical purpose. Unexplained expenditure u/s. 69C on account of unexplained expenditure - HELD THAT:- We are of considered view that once GP addition .....

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..... dantic and hyper technical view of the matter, the explanation furnished should not be rejected when stakes are high and/or arguable points of facts and law are involved in the case, causing enormous loss and irreparable injury to the party against whom the lis terminates either by default or inaction. The Hon’ble Apex Court in various other decisions has taken similar view in liberally accepting the explanation furnished by the assessee for condoning the delay in filing of appeal. Thus delay of 465 days in filing of appeal is condoned. Levying penalty u/s. 271(1)(c) - HELD THAT:- A perusal of the orders by Commissioner of Income Tax (Appeals) initiating penalty proceedings and the order levying penalty clearly indicate that the charge for levy of penalty are not in coherence. The penalty has been initiated for concealment, whereas it has been levied for both the charges of section 271(1)(c) i.e. concealment of income and furnishing inaccurate particulars of income. The Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT] has held that where satisfaction has been recorded for one breach u/s. 27 .....

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..... ,358/- 2,10,611 8.99% 1999-00 33,75,549 2,43,590 7.21% 2000-01 27,13,479 2,44,338 9.00% 2001-02 30,21,608 2,15,022 7.11% 2002-03 21,78,556 2,11,285 9.70% 2004-05 21,72,751 1,96,985 9.06% 2.2 Thereafter, assessments for the impugned assessment years were framed u/s. 153A r.w.s. 143(3) of the Act. The Assessing Officer made additions in the impugned assessment years on account of unexplained expenditure u/s. 69C, unexplained investments u/s. 69B and GP additions on undisclosed sales. 2.3 Aggrieved against the assessment orders for the respective assessment years, the assessee filed appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) enhanced the additions. Hence, the present appeals by the assessee. 3. For the sake of convenience, we will take up the appeals of assessee for adjudication in seriatim of assessment years. ITA No. 2207/PUN/2016, (A.Y. 1998-99) 4. The assessee has raised following grounds assailing the findings of Commissioner of Income Tax (Appeals) : 1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of ₹ 4,55,426/- on account of gross profit .....

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..... at the time of hearing. 5. Shri Neelesh Khandelwal appearing on behalf of the assessee submitted that in the impugned assessment year the Assessing Officer made additions on following counts : i. GP addition on unrecorded sales ₹ 12,940/-. ii. Unexplained expenditure u/s. 69C ₹ 23,221/-. 5.1 The ld. AR submitted that in First Appellate proceedings the Commissioner of Income Tax (Appeals) enhanced GP addition on unaccounted sales by extrapolating sales for the month of October, 1997 to the entire year. The ld. AR submitted that extrapolating the sales for the month of October, 1997 to the entire year is unreasonable and unjustified as the turnover during the month of October was at peak owing to Diwali festival. During the non festival months/seasons the turnover of the firm is considerable low. The ld. AR submitted that maximum three months in the entire year can be considered as the months of festivals when the sale of dry fruits goes up. Therefore, the sale for the month of October, 1997 cannot be extrapolated to the entire year. The ld. AR furnished a table giving working of turnover and the GP calculated on the basis of aforesaid turnover. The same is reproduced her .....

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..... nth i.e. April 1997 ( Nonfestive) 1,92,613 2 GP Percentage 7.99% 3 Gross Profit (1*2) 15,390 4 Initial cost of Investment (1-3) 1,77,223 5 Add: GP for 6 months (3* 6 Months) 92,339 6 Funds available at the beginning of October 1997 (4+5) 2,69,562 7 Turnover for the month of October ( Festive) 4,22,160 8 Gross Profit (7*2) 33,731 9 Cost of Investment for October 1997 (7-8) 3,88,429 10 Difference in the Funds available and Investment made in October 1997 (9-6) 1,18,868 11 Initial cost of Investment (As per 4) 1,77,223 12 Gross Profit for the month of October 33,731 13 Total Addition ( 10+11) 2,62,360 5.5 The ld. AR thus prayed for deleting the additions made by the Commissioner of Income Tax (Appeals) after giving the benefit of telescopy and restricting the addition u/s. 69B as sated above. 6. On the other hand Shri Shivanand H. Kalakari representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. 7. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. It is an undisputed fact that during search operation cash ₹ 40 lakhs was seized. Shri Nanchand Bhogi Lal .....

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..... sales turnover, addition u/s. 69C is not warranted. The unaccounted expenditure could have been made by assessee from income generated from unaccounted sales. Our view is supported the judgment rendered by Hon ble Bombay High Court in the case of Commissioner of Income Tax Vs. Jawanmal Gemaji Gandhi reported as 15 Taxman 487. Accordingly, ground Nos. 3 and 4 raised in the appeal are allowed. 10. In ground No. 5 of the appeal the assessee has assailed the addition made by Commissioner of Income Tax (Appeals) u/s. 69B on account of unexplained initial investment. The assessee has given calculation on the basis of turnover computed after extrapolating sales of festival month to three calendar months and regular sales for remaining 9 months. Since, we have restored the issue of GP addition and computation of annual turnover back to the file of Assessing Officer, the calculation of initial investment has to be re-worked based on the annual turnover computed as per the directions of Tribunal. We deem it appropriate to restore the issue back to the file of Assessing Officer. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Accor .....

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..... to allow telescopic effect. The facts being similar to assessment year 1998-99. The findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 on the issues in hand, will apply mutatis mutandis to the assessment year under appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose. ITA No. 2209/PUN/2016, (A.Y. 2000-01) 16. The assessee has taken following grounds : 1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of ₹ 2,12,376/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the AO and that enhanced by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect. 2. Without prejudice to above ground, on facts and circumstances prevailing in the case and as per provisions & Scheme of the Act, it be held that the cash found at the premises of the appellant was out of the profits of the unaccounted business activities of the appellant firm and the amount declared out of the cash found includes t .....

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..... are allowed for the detailed reasons given while adjudicating the ground Nos. 3 and 4 of the appeal for assessment year 1998-99. 18. In the result, the appeal of assessee is partly allowed. ITA No. 2210/PUN/2016, (A.Y. 2001-02) 19. The assessee has taken following grounds in the appeal : 1. The delay in filing of appeal be condoned. 2. On the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the addition of ₹ 82,735/- on account of unaccounted expenditure is unwarranted, unjust and against the provisions and scheme of the Act. The said addition be deleted and the appellant be granted just and proper relief in this regard. 3. Without prejudice to the above ground, on the facts and circumstances prevailing in the case and as per the provisions of the Act, it be held that the amount of ₹ 82,735/- on account of unaccounted expenditure has already been taxed in the hands of Mr. Nanchand Shah for A.Y.2001-02 and therefore no separate addition should be made in the hands of the appellant. The addition be deleted and the appellant be granted just and proper relief in this respect. 4. Without prejudice to the above grounds on th .....

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..... tion furnished by the assessee for condoning the delay in filing of appeal. Thus, in view of the law laid down by the Hon ble Apex Court and the for reasons stated in the affidavit by the assessee/appellant, the delay of 465 days in filing of appeal is condoned. The appeal is admitted to be heard and disposed of on merits. 22. The grounds raised in the appeal and facts being similar to assessment year 1998-99, the findings given by us while adjudicating the appeal of assessee in assessment year 1998-99 will apply mutatis mutandis apply to the assessment year under appeal. Accordingly, the grounds raised by the assessee are allowed for statistical purpose in the same terms. ITA No. 2211 /PUN/2016, (A.Y. 2002-03) 23. The assessee has taken following grounds : 1. On facts and circumstances prevailing in the case and as per provisions & Scheme of the Act it be held that, the addition of ₹ 1,15,352/- on account of gross profit on unrecorded sales is not in accordance with the provisions of the law and scheme of the Act. The addition made by the first appellate authority be deleted. The appellant be granted just and proper relief in this respect. 2. Without prejudice to above g .....

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..... ounds raised by the assessee are allowed for statistical purpose. Penalty Appeals ITA Nos.383 to 385/PUN/2017, (A.Ys. 1998-99 to 2000-01) 27. These three appeals by the assessee are against the order of Commissioner of Income Tax (Appeals)-13, Pune dated 05-12-2016 common for the assessment years 1998-99 to 2000-01 levying penalty u/s. 271(1)(c) of the Act. ITA No.383/PUN/2017, (A.Y. 1998-99) 28. The ld. AR submitted at the outset that penalty levied u/s. 271(1)(c) is liable to set aside as the charge while recording satisfaction by the Commissioner of Income Tax (Appeals) for initiating penalty proceedings and the charge mentioned in order levying penalty are not coherent. The Commissioner of Income Tax (Appeals) while initiating penalty has observe that the penalty is levied for concealment of income. However, while passing order levying penalty u/s. 271(1)(c), the Commissioner of Income Tax (Appeals) levied penalty for concealment of income and furnishing inaccurate particulars of income. The manner in which penalty has been levied is against the law laid down by the Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Samson Perinchery reported as 392 .....

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..... 1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. 33. Thus, in view of the facts of the case and judgment of Hon ble Bombay High Court, the order levying penalty is liable to be set aside. Accordingly, the impugned order is set aside and the appeal of the assessee is allowed. ITA No.384/PUN/2017, (A.Y. 1999-2000) 34. The ld. AR submitted that the penalty has been levied by Commissioner of Income Tax (Appeals) for the impugned assessment year in respect of GP addition. The ld. AR submitted that in case the assessee s plea of allowing telescopic effect is accepted, there will not be any addition and hence the penalty would not be survive. 35. On the other hand ld. DR vehemently defended the impugned order and prayed for dismissing the appeal of assessee. 36. Both sides heard. Orders .....

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