2013 (6) TMI 764 - AT - Income Tax

Summary

Issues involved:
The issues involved in this judgment are the imposition of penalty u/s.271(1)(c) on the addition to the extent of Rs. 25,48,649/- on account of Gross Profit and valuation of Closing Stock.

Issue 1: Penalty on Gross Profit addition
The assessee challenged the addition of Rs. 25,48,666/- before the ld.CIT(A), while penalty proceedings were initiated by the AO and a penalty of Rs. 8,14,412/- was imposed. The AO made the addition by estimating net profit after rejecting books of account. The Tribunal later deleted the entire Gross Profit addition made by the AO. The penalty was imposed by the AO before the Tribunal order in quantum proceedings. The Tribunal held that no addition stands confirmed on which a penalty has been imposed by the AO. The Tribunal found that no penalty is justifiable on the GP addition as it was already deleted by the Tribunal in quantum proceedings.

Issue 2: Penalty on Stock Valuation
Regarding the unaccounted investment in stock found during a survey and disclosed by the assessee, no penalty was deemed justified. Even if some part of the addition stood upheld by the Tribunal, imposing a penalty on the returned income itself was not warranted. The Tribunal highlighted that there were no provisions in section 271(1)(c) to address situations where additional income is included in the return based on material found during a survey. In the absence of such provisions, it was held that the assessee did not conceal any income or furnish inaccurate particulars of income. Consequently, the penalty imposed by the AO and confirmed by the CIT(A) was deemed unsustainable and was deleted.

In conclusion, the Appellate Tribunal ITAT Ahmedabad allowed the assessee's appeal, holding that the penalty imposed u/s.271(1)(c) on the Gross Profit addition and stock valuation was not sustainable. The Tribunal found that the penalty was not justified as the Gross Profit addition had been deleted in quantum proceedings and there were no provisions to penalize the inclusion of additional income based on survey findings in the return.