2024 (9) TMI 726 - AT - Income Tax

Computation of income at 8% of the purchase value of broiler chickens - NP determination - AR filed charts and case law compilations on consistency and a paper book pertaining to lower proceedings - HELD THAT - We find substance in the submissions of the assessee that a reasonable estimate may be taken seeing the past and subsequent years profits of the assessee. It is true that doctrine of res judicata does not aply to income tax proceedings but rule of consistency should be maintained for the finality of the controversy, otherwise it will lead to nowhere. We, therefore following rule of consistency, direct AO to take profit of Rs. 0.50 per kg for assessment year 2011-12 and Rs. 0.75 per kg for assessment year 2014-2015 as both assessment years are prior to assessment year 2015-2016. Therefore, the ld. Assessing Officer will re-compute the income keeping in mind the consequential relief, if any as prayed in the grounds of appeal. Penalty proceedings u/s 271(1)(c) - furnishing inaccurate particulars of income - In our considered opinion, additions which are mere estimated additions do not attract penalty u/s. 271(1)(c) of the Act and it is not a fit case of levy of penalty. The decision of Sri Saibaba Guest House 2021 (8) TMI 1421 - ITAT CHENNAI wherein the penalty on similar factual matrix, has been cancelled. Accordingly, we delete the impugned penalty.

Summary

Issues Involved:
1. Quantum of income estimation for assessment years 2013-14 and 2015-16.
2. Penalty under sections 271A and 271(1)(c) for assessment years 2013-14 and 2015-16.

Issue-wise Detailed Analysis:

1. Quantum of Income Estimation for Assessment Years 2013-14 and 2015-16:

The assessee, involved in the wholesale broiler chicken business, was subject to reassessment for AY 2013-14 based on information from the DDIT (INV), Pune, indicating suppressed turnover. The AO issued a notice u/s 148 and reassessed the income by estimating it at 8% of the purchase value of Rs. 3,70,25,571/-, resulting in an income of Rs. 29,52,529/-. The assessee contended that previous assessments used a profit rate of Rs. 0.50 per kg of chicken purchased, which should apply here. However, the AO found this rate unreliable due to insufficient documentation and absence of proper sales details.

The CIT(A) upheld the AO's estimation, noting that the profit percentage claimed (0.82%) was implausibly low. The CIT(A) emphasized that the financials submitted must be logical and reliable, and the principle of res judicata does not apply to income tax proceedings.

Upon further appeal, the Tribunal recognized the need for consistency in income estimation. The Tribunal directed the AO to re-compute the income using a profit rate of Rs. 0.50 per kg for AY 2011-12 and Rs. 0.75 per kg for AY 2014-15, consistent with past assessments. This approach aligns with the rule of consistency as highlighted in the cases of Radhasoami Satsang vs. CIT and CIT vs. Neo Poly Pack (P) Ltd.

2. Penalty under Sections 271A and 271(1)(c) for Assessment Years 2013-14 and 2015-16:

Penalty proceedings were initiated based on the quantum order. The assessee argued that the additions were based on estimated income without reference to regularly maintained books of accounts. The Tribunal found that both authorities below estimated the income, and such estimated additions do not attract penalty under section 271(1)(c). The Tribunal referred to the decision in Sri Saibaba Guest House vs. ITO, where penalty on similar grounds was canceled. Consequently, the Tribunal deleted the penalties for both assessment years.

Summary of Results:

The appeals for quantum of income estimation for AYs 2013-14 and 2015-16 were partly allowed for statistical purposes, directing the AO to re-compute the income based on consistent profit rates. The penalty appeals for the same assessment years were fully allowed, resulting in the deletion of penalties.

Order Pronouncement:

The order was pronounced in the open court on 28th August 2024 at Chennai.