2019 (6) TMI 1284 - AT - Income Tax

Addition of peak value of investment as Unexplained income - income estimated of profit by applying the provisions of section 44AF of the Act @ 5% of total turnover - HELD THAT - Estimating the profit @ 5% to the tune of ₹ 2,12,550/- u/s 44AF as unexplained income by CIT (A) is concerned, AR for the assessee has accepted the same and has not pressed Ground no.1 to that extent. So, we confirm the findings of ld. CIT (A) as to estimating the profit @ 5% of the total turnover of ₹ 42,50,993/-. We are inclined to agree with the contention raised by the ld. AR because when profit @ 5% on the total turnover has been estimated by the CIT (A) then peak value of the investment cannot be treated as unexplained income which would otherwise amount to double addition which is not permissible under the Act. So, we order to delete the addition made by the CIT (A) by making the peak value of the investment. Penalty u/s 271(1)(b) - Reopening of assessment u/s 148 - non compliance of notice sent in the name of Alam Zafar in place of Zafar Alam - no proof of service - HELD THAT - CIT (A) has confirmed the penalty on the basis of assumptions and presumptions that when the notice to the assessee was issued in the name of Alam Zafar in penalty proceedings and he attended the penalty proceedings then he must have been served in the quantum proceedings also. Penalty cannot be imposed on the basis of assumptions and presumptions rather to levy the penalty the Revenue has to make out a categoric case that the assessee was served upon by proving on record acknowledgements to show that assessee has received the notice and has failed to comply with the same by attending the proceedings. We are of the considered view that when the Revenue has failed to prove the service of notice upon the assessee, question of levying the penalty u/s 271(1)(b) does not arise, hence penalty levied u/s 271(1)(b) is ordered to be deleted. - Decided in favour of assessee.

Summary

Issues involved:
1. Disputed addition under section 44AF and peak credit of income.
2. Jurisdictional issues regarding notices and penalty imposition.

Issue 1: Disputed addition under section 44AF and peak credit of income:
In the case, the appellant challenged the addition made by the ld. CIT (A) under section 44AF of the Income-tax Act, 1961. The appellant argued against the addition of ?3,39,035 as income, contending that the peak value of investment cannot be treated as unexplained income when profit is already estimated at 5% of the total turnover. The Tribunal agreed with the appellant, ruling that treating the peak value of investment as unexplained income would result in double addition, which is impermissible under the Act. Consequently, the Tribunal ordered the deletion of the addition of ?3,39,035 made by the ld. CIT (A) based on the peak value of the investment.

Issue 2: Jurisdictional issues regarding notices and penalty imposition:
Regarding the penalty proceedings initiated under section 271(1)(b) of the Act, the Assessing Officer (AO) levied a penalty of ?10,000 on the appellant for non-compliance with notices issued under sections 142(1) and 144 of the Act. The appellant contended that no notice under section 148 was served upon him, as the notices were addressed to Alam Zafar instead of Zafar Alam, the appellant's actual name. The Tribunal noted that there was no proof of service of notices on the appellant, and the ld. CIT (A) confirmed the penalty based on assumptions and presumptions. The Tribunal emphasized that penalties cannot be imposed on assumptions and presumptions, stressing the need for concrete evidence of notice service. Consequently, the Tribunal ordered the deletion of the penalty imposed under section 271(1)(b) due to the lack of proof of notice service.

In conclusion, the Tribunal partly allowed the appeal in ITA No.1610/Del/2018 regarding the disputed addition under section 44AF and fully allowed the appeal in ITA No.1609/Del/2018 concerning jurisdictional issues related to notices and penalty imposition.