The Commissioner Of Income Tax-Iii, Ludhiana v. Shri N.s.ichoponani

of 2005 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No. 319of 2005 Date of decision: 1.12.2010 The Commissioner of Income Tax-III, Ludhiana ...Petitioner Versus Shri N.S.Ichoponani...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Denesh Goel, Advocate for the appellant. Mr. Animesh Sharma, Advocate for the respondent.**** ADARSH KUMAR GOEL, J (Oral). This appeal has been preferred under Section 260A ofIncome Tax Act, 1961 (hereinafter referred to as 'the Act”) proposingfollowing substantial questions of law arising out of order dated6.12.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench,Chandigarh (hereinafter referred to as “the Tribunal”) passed in ITANo.855/Chandi/93 in respect of assessment year 1984-85:- “I).Whether on the facts and in the circumstances ofthe case, Hon'ble ITAT was justified in deleting thepenalty by holding that nothing was brought on record bythe Revenue to prove that net profit arrived at by theassessee was a result of concealment of income by theassessee when it was categorically proved in the orderafter utilizing the documents and evidences available coupled with corroborate evidences in the shape ofvarious figures found in the return filed by the assesseethat the assessee had concealed its income? ii)Whether on the facts and in the circumstances ofthe case the Hon'ble ITAT was justified in taking adifferent view of facts that penalty was imposed only onmere disallowance of expenditures when the penalty wasactually imposed on the basis of evidences collectedduring the assessment proceedings on which basis theITAT itself confirmed the addition made by the A.O. whiledeciding the quantum appeal? iii)Whether on the facts and in the circumstances ofthe case without prejudice to the above grounds, the ITATwas justified in altogether ignoring Explanation 1 to theprovisions of section 27(1)(c) while deleting the penalty?” The assessee is engaged in the business ofmanufacturing of Poultry Feed and for the assessment year inquestion income declared by the assessee was Rs.15,350/-. Aftersearch on the premises of the assessee and also the Accountant ofthe assessee on 14.10.1986, the Assessing Officer madeassessment at income of ` 14,64,280/-. The Assessing Officer alsolevied penalty. On appeal by the assessee, the addition was upheldexcept for reduction of the quantum to certain extent. Finally, theTribunal sustained addition to the extent of ` 6,70,781/-. Appealarising out of the order of penalty was considered separately. The Tribunal held that since the addition was result of disallowance, theassessee could not be held to have concealed the particulars ofincome. The observations of the Tribunal are:- Tribunal held that since the addition was result of disallowance, theassessee could not be held to have concealed the particulars ofincome. The observations of the Tribunal are:- “We, however, after perusing the paper book page-1 findthat the ITAT while sustaining the addition ofRs.6,70,681/- basically relied upon the authenticity of thepaper seized wherein net profit of Rs.6,70,681/- wasarrived at by the ex-accountant of the assessee Sh. Sidhufor a/y 1983-84. However, we have noticed the fact thatthe nothing could be brought by the revenue that such netprofit arrived was a result of concealment of any incomeby the assessee whereas we find force in the submissionof the ld. AR that such net profit was a result ofdisallowance of excess expenditure claimed by theassessee, which cannot attract penal provisions u/s 271(1) (c ). We, therefore, after going through the said orderof ITAT, find merit in the submission of ld. AR that theaddition sustained by the ITAT was basically on accountof disallowance of expenditure and not on account ofappraisal of seized material. We are, therefore, of theopinion that the AO was not justified in levying theimpugned penalty u/s 27(1)(c) and the CIT(A) wasjustified in deleting such penalty. We, therefore, do notfind any infirmity in the order of the CIT(A) and uphold thesame.” **** We have heard learned counsel for the parties. Assumption in the impugned order of the Tribunal is thatthere was no concealment of particulars of income. According to theassessee the net profit was arrived at as a result of disallowance ofexcess expenditure as held by the Tribunal. Learned counsel for the revenue submits that assumptionin the order of the Tribunal that addition was based on net profitarrived at by disallowance of excess expenditure was without anymaterial on record and the assumption was unfounded and thus,impugned order was perverse to that extent. Addition was upheld asthe assessee had concealed material particulars. We have not been shown any material by learnedcounsel for the assessee which may support the assumption in theorder of the Tribunal that addition was on account of material whichdid not relate to concealment by the assessee. The Tribunal has alsonot indicated any material in support of its finding. On the otherhand, the finding recorded by the Assessing Officer is as under:- “The entire blame of manipulation of figures was placedat the door of Sh. Sidhu, accountant of the assessee. Itwas further contended that at one stage the accountantapplied GP rate of 19% and the same was applied at 13%thereafter and the same was made the basis for theadditions. The assessee wants to convey that mainaddition are only on account of higher gross profit rateafter deducting the trading discount from turnover. The assessee wants to convey that applying a GP rate of19.7% did not make the assessee liable for penal actionu/s 271(1)(c ). As regards the sales outside the books of accountsare concerned, the same were computed at Rs.4545744/-outside books of account and they were confirmed inappeal also. It will also be appropriate to mention herethat application u/s 245C(1) was rejected by theSettlement Commission. The appeal of the assesseehad been heard by the ITAT but the judgment has notbeen received so far. The penalty is going to be barredby limitation by 31.5.92 and, therefore, it is not possiblefor the undersigned to keep nit pending. Taking intoconsideration the totality of circumstances, I do not agreewith the contention of the assessee and accordingly, holdthat this is a fit case for levy of penalty and penalty @100% of the tax sought to be evaded.” The above observations have not been dealt with by the Tribunal. The above observations have not been dealt with by the Tribunal. In this view of the matter, finding recorded by theTribunal vitiated by perversity. Thus, substantial question as toperversity of finding of Tribunal arises and has to be answered infavour of the revenue. Accordingly, we allow this appeal, set asidethe impugned order and remand the matter to the Tribunal for a freshdecision in accordance with law after considering the rival Income-tax Appeal No. 319of 2005 **** submissions. The parties may appear before the Tribunal for furtherproceedings on 15.2.2011.The revenue may serve the assessee forthe said date. (Adarsh Kumar Goel) Judge December 01,2010Pka (Ajay Kumar Mittal) Judge