The Commissioner Of Income Tax-Iii, Ludhiana v. M/S Modi Industrial Corporation, Village Barewal, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No. 666 of 2009DATE OF DECISION : 25.11.2009 The Commissioner of Income Tax-III, Ludhiana .... APPELLANT Versus M/s Modi Industrial Corporation, Village Barewal, Ludhiana. ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE MEHINDER SINGH SULLAR Present:Mr. Rajesh Sethi, Advocate, for the appellant-revenue. SATISH KUMAR MITTAL , J. The revenue has filed this appeal under Section 260-A of theIncome Tax Act, 1961 (hereinafter referred to as `the Act'), against the orderdated 26.3.2009, passed by the Income Tax Appellate Tribunal, ChandigarhBench `B', Chandigarh (hereinafter referred to as `the ITAT') in ITA No.1081/Chd/2008, pertaining to the assessment year 2000-01. In the present case, the assessee is running a rice sheller. Forthe assessment year 2000-01, the assessee filed the income tax return on25.12.2000, declaring his income as Rs. 31,49,444/-. Vide order dated26.2.2003, the Assessing Officer completed the assessment under Section143 (3) of the Act at net taxable income of Rs. 31,53,943/-. Subsequently,vide order dated 30.3.2005, the Commissioner of Income-Tax-III, Ludhiana, cancelled the assessment, while exercising the powers under Section 263 ofthe Act, with a direction to the Assessing Officer to re-frame the assessmentafter affording due and reasonable opportunity of being heard to theassessee. Thereupon, vide order dated 2.3.2006, the fresh assessment wascompleted at net taxable income of Rs. 92,76,557/-, after making addition ofRs. 57,74,857/- on account of processing of unaccounted rice bran andRs.3,52,260/- on account of under valuation of closing stock of the ricebran. On second appeal by the assessee, the ITAT vide its order dated30.3.2007 directed to apply the growth profit rate of 10% and consequently,the income of the assessee was assessed at Rs.51,13,637/-. It is specificallymentioned here that the ITAT had adopted the flat rate of 10% for workingout the unaccounted profits. Thus, the assessment was made on estimatebasis. In the meanwhile, the penalty proceedings were initiated by theAssessing Officer against the assessee under Section 271 (1) (c) of the Actfor furnishing inaccurate particulars of income and ultimately, vide orderdated 27.3.2008, penalty of Rs. 11,31,723/- @ 150% was imposed. In thesecond appeal by the assessee, the ITAT has set aside the said order ofpenalty, while observing as under :- “... the Tribunal adopted the flat rate of 10% for working outthe unaccounted profits. The assessee surrendered Rs. 50 lakhsto cover up suppressed transactions. Now question arises,whether further penalty at the rate of 150% is justified. Theobvious reply is `no' because the assessee may not be put todouble jeopardy. In this case, it can be seen that though the “... the Tribunal adopted the flat rate of 10% for working outthe unaccounted profits. The assessee surrendered Rs. 50 lakhsto cover up suppressed transactions. Now question arises,whether further penalty at the rate of 150% is justified. Theobvious reply is `no' because the assessee may not be put todouble jeopardy. In this case, it can be seen that though the Tribunal has also sustained certain addition, but the additionsustained is not on the basis adopted by the Assessing Officerin the assessment order. For this reason also, there is nojustification in levy of penalty under Section 271 (1) (c) of theAct as held by the Hon'ble Madhya Pradesh High Court inAddl. CIT Vs. Nihalchand Badrilal (135 ITR 519) (M.P.) andCalcutta High Court in the case of CIT Vs. Anada BazarPatrika P. Ltd. (116 ITR 416) (Cal.). Even otherwise, when theassessment is made on estimate basis, some error of judgmentcannot be ruled out, therefore, penalty should not be imposed.For this proposition, we are fortified by the decision from theHon'ble Jurisdictional High Court in the cases of Hari GopalSingh Vs. CIT (258 ITR 85), CIT Vs. Rawail Singh &Company (254 ITR 191), CIT Vs. Dhillon Rice Mills (256 ITR447) (P&H), CIT Vs. Metal Products of India (150 ITR 714)and Vishwakarma Inds Vs. CIT (135 ITR 652) (P&H) (FB).Reliance can also be placed upon the decision of the Tribunalin Sudesh Khanna Vs. ACIT (2005) 98 TTJ (Ahd) 106. Evenwhile framing the original assessment, the assessee declaredtotal income of Rs. 31,49,444/- which was assessed at Rs.31,53,943/- and originally there is no finding that the assesseeeither concealed its income or furnished inaccurate particularsof income. For imposing penalty under section 271 (1) (c), adefinite finding about concealment is necessary. However, inthe present appeal the addition is based on estimation. As wehave discussed earlier, when there is estimation, there is apossibility of human error. Therefore, at least penalty shouldnot be imposed because it may be a good ground for quantumaddition but may not be for imposition of penalty as penaltyproceedings and quantum proceedings are altogether different.” Against the said order, the instant appeal has been filed by the revenue,while raising the following substantial questions of law :- (i)Whether on the facts and in the circumstances of thecase, the ITAT is justified in deleting the penaltyimposed u/s 271 (1) (c) amounting to Rs. 11,31,723/- byholding that the additions are based on the estimationwhen the same is on the basis of the concrete evidence inthe form of documents found during the course of surveyoperation?case, the ITAT is justified in deleting the penaltyimposed u/s 271 (1) (c) amounting to Rs. 11,31,723/- byholding that the additions are based on the estimationwhen the same is on the basis of the concrete evidence inthe form of documents found during the course of surveyoperation? (ii)Whether on the facts and in the circumstances of thecase, the ITAT is justified in holding that there is a caseof double jeopardy in respect of penalty imposed u/s 271(1) (c) of the Act, considering the fact that the paymentof tax and penalty are under the different provisions ofthe Act?case, the ITAT is justified in holding that there is a caseof double jeopardy in respect of penalty imposed u/s 271(1) (c) of the Act, considering the fact that the paymentof tax and penalty are under the different provisions ofthe Act? (ii)Whether on the facts and in the circumstances of thecase, the ITAT is justified in holding that there is a caseof double jeopardy in respect of penalty imposed u/s 271(1) (c) of the Act, considering the fact that the paymentof tax and penalty are under the different provisions ofthe Act?case, the ITAT is justified in holding that there is a caseof double jeopardy in respect of penalty imposed u/s 271(1) (c) of the Act, considering the fact that the paymentof tax and penalty are under the different provisions ofthe Act? (iii)Whether on the facts and in the circumstances of thecase, the ITAT is justified in holding that there was nodefinite findings of concealment considering the fact thatadditions made by the Assessing Officer on account ofunaccounted investments were confirmed by AppellateAuthorities and penalty proceedings u/s 271 (1) (c) of theAct were initiated by the Assessing Officer for furnishingthe inaccurate particulars of income during the course ofassessment proceedings?case, the ITAT is justified in holding that there was nodefinite findings of concealment considering the fact thatadditions made by the Assessing Officer on account ofunaccounted investments were confirmed by AppellateAuthorities and penalty proceedings u/s 271 (1) (c) of theAct were initiated by the Assessing Officer for furnishingthe inaccurate particulars of income during the course ofassessment proceedings? Learned counsel for the appellant-revenue argued that in theinstant case, the addition was made on the basis of estimate, but it was madeon complete evidence based on documents found during the course ofsurvey operation. He further submitted that in the assessment order, a definite finding with regard to concealment of income was recorded by theAssessing Officer, therefore, the ITAT is not justified in deleting thepenalty, which was rightly imposed by the Assessing Officer. After hearing learned counsel for the appellant-revenue andgoing through the impugned order, we are of the opinion that the learnedITAT has recorded a finding of fact with regard to the addition of incomebeing made on the basis of estimate, which in our opinion does not requireany interference. A perusal of the order dated 30.3.2007, passed by theITAT in the assessment proceedings which has been quoted in extenso inthe impugned order, makes it clear that addition of the income was madeonly on the basis of estimate. Therefore, we do not find that the learnedITAT has recorded a wrong finding in this regard. As far as the finding withregard to concealment of income is concerned, it is clear that in the originalassessment order, there was no finding that the assessee has concealed itsincome and furnished inaccurate particulars of income, but subsequentlyafter the cancellation of the assessment, the Assessing Officer hasproceeded on the basis that the assessee, while inflating the electricitycharges and under-valuing the closing stock of rice bran, has suppressed theincome. Therefore, the additions on account of processing of unaccountedrice bran and under valuation of closing stock of rice bran were made andincome was assessed on the estimate base. Therefore, in our opinion, theITAT is right while coming to the conclusion that when the assessment ismade on estimate basis, the penalty should not be imposed. In this regard, reference can be made to a decision of this Court in Harigopal Singhv.-Commissioner of IncomeTax,(2002) 258 ITR 85. In view of the above, we do not find any merit in the instantappeal and in our opinion no substantial question of law arises from theorder of the ITAT. Dismissed. ( SATISH KUMAR MITTAL )JUDGE November 25, 2009 ndj ( MEHINDER SINGH SULLAR )JUDGE