D.b. Income Tax Appeal v. M/S Mahendra Singh Khedla

Reportable IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANJAIPUR BENCH, JAIPUR D.B. INCOME TAX APPEAL NO.174/2010Commissioner of Income Tax, CIT-III, JaipurVs. M/s Mahendra Singh Khedla Date of Judgment: MARCH 19,2012 PRESENT HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA'HONBLE MR. JUSTICE NARENDRA KUMAR JAIN-I Mr. Sameer Jain for the appellant BY THE COURT(Per Hon'ble Jain J.) Heard the learned counsel for the appellant. 2.The Revenue has preferred this Income TaxAppeal under Section 260A of the Income Tax Act againstorder dated 27[th] November, 2009 passed by the Income TaxAppellate Authority, Jaipur Bench 'B', Jaipur, whereby appealfiled by revenue, against order of first appellate authoritydeleting the penalty levied under Section 271(1)(c) of the Actof Rs.10,87,752/- has been dismissed. 3.Briefly stated the facts of the appeal are thatAssessing Officer passed an order dated 4.6.2008 underSection 271(1)(c) of the Income Tax Act levying penalty ofRs.10,87,752/- on the following alleged concealed particularsof income and thereby furnishing inaccurate particulars ofincome :- (i) Trading addition on application of N.P rate of 8% subject to further deduction on a/c of Interest & Remuneration paid of N.P rate of 8% subject to further deduction on a/c of Interest & Remuneration paid to partners (6268288-4295681) Rs.19,72,607/- 4.Being aggrieved with the aforesaid penalty order,the assessee preferred an appeal, which was allowed byCommissioner of Income Tax (Appeals)-III, Jaipur vide orderdated 23.1.2009 and penalty levied by Assessing Officer wasset aside. Thereafter, revenue preferred an appeal beforeIncome Tax Appellate Tribunal, which was dismissed byTribunal vide order dated 27[th] November, 2009. Hence,revenue has now preferred this appeal before this Court. 5.Submission of learned counsel for appellant is thatassessee furnished inaccurate particulars of income asmentioned in Assessment Order, therefore, penalty wasrightly levied by Assessing Officer, which has wrongly been setaside by Appellate Authority and Appellate Tribunal. 6.We have considered the submissions of learnedcounsel for appellant and examined the reasons assigned byAppellate Authority as well as Appellate Tribunal for settingaside the penalty order. 7.The appellate authority as well as the appellateTribunal both considered the matter in detail and by speakingorder set aside the penalty levied by Assessing Officer, in the facts and circumstances of the present case. The relevantportion of Para 7 of order of the Tribunal is reproduced asunder:- “Para 7. ..... ....... ..... ..... ...... ...... The enquiry conducted by the AO may lead toarrive at the findings as to whether the particularsdisclosed are truthful or false or not proved to besatisfactory. In the first case it would be a positivecase of no concealment, in second case it wouldbe a positive case of concealment and in third casebenefit of doubt will go in favour of the assessee.The case of the assessee falls within third categorywhere the alleged fact of introduction of capital isfound to be not proved satisfactorily. Therefore, itis not a case of positive concealment and benefitof doubt goes in favour of the assessee. There isno dispute that trading addition was made on thebasis of estimation because the results shown bythe assessee was not found satisfactory by theAO. Where an estimated addition was concealmentof particulars of income or furnishing inaccurateparticulars thereof on the part of the assessee tothe extent of amount in difference shown by theassessee and estimated by the departmentdepends upon the facts and circumstances of thecase. ..... ..... ..... .... ..... ..... ..... ....... ..... ..... ..... .... ..... ..... ..... ....... Under these circumstances when in the presentcase there was no positive evidence beyond doubtregarding estimated trading addition that theamount in difference between the result shown bythe assessee and that estimated by the AO wasresultant of concealment of particulars of incomeor furnishing inaccurate particulars thereof on thepart of the assessee, penalty under section 271(1)(c) of the Act cannot be levied. The AO hadrejected the books of account and estimated thetrading addition on the basis that the assessee hadnot maintained site-wise account, no head-wisedetails of claimed purchases were furnished, noseparate head of expenses was maintained, workin progress was not declared, some wages wereshown outstanding without complete details ofcreditors, stock register was not maintained andmisc. expenses on water transportation etc. werenot verifiable and purchase vouchers of sand,steel, bajri etc. were self made etc. Assesseeexplained reasons for the above defects whichwere not accepted by the AO as not foundsatisfactory. The AO accordingly made estimation.The circumstances suggest that it may be just andproper case of making estimated trading addition but an inference therefrom cannot be drawnbeyond doubt especially keeping in mind thenature of work in not maintaining those books anddetails supported with proper vouchers etc. thatthere was concealment of particulars of income orfurnishing inaccurate particulars thereof on thepart of the assessee to attract the penalprovisions. In view of above discussion andkeeping in mind the fact and circumstances of thepresent case, we are of the view that the ld. CIT(A) was justified in deleting the penalty in absenceof positive evidence with the department thatthere was concealment of particulars of income orfurnishing inaccurate particulars thereof on thepart of the assessee towards the addition inquestion. The first appellate order on the isuse isthus upheld.” 8.The above finding of the Tribunal makes it clearthat additions made by the Assessing Officer were based onestimation only. A fact or allegation based on estimationcannot be said to be correct only, it can be incorrect also.Therefore, in the facts and circumstances of the case, penaltywas wrongly levied by the Assessing Officer. The basis forlevying penalty in the present case is only estimation, which ispurely a question of fact and there is a concurrent finding offact recorded by first appellate authority as well as theappellate Tribunal both. 9.The income tax appeal can be admitted only onsubstantial question of law, but in our view no substantialquestion of law is involved in the present appeal so as toentertain it. The appellate authority as well as the appellateTribunal both have recorded a concurrent finding of fact thatadditions in the present case are based on estimation only. 10.In these circumstances, we are of the view that nosubstantial question of law is involved in this appeal and the same is, accordingly, dismissed in limine. (NARENDRA KUMAR JAIN-I),J. (ARUN MISHRA),CJ. BKS/- “All corrections made in the judgment/order have beenincorporated in the judgment/order being emailed.” B.K. SHRIVASTAVAPRIVATE SECRETARY.