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TMI Blog2011 (8) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... T.K. Sharma, A.N. Pahuja, JJ. Samir Tekriwal, DR, for the Appellant ORDER A.N. Pahuja: This appeal by the Revenue against an order dated 10-09-2009 of the ld. CIT(Appeals)-I, Baroda, for the Assessment Year 1996-97, raises the following grounds:- "[1] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied u/s 271(1)(c) of the Act on G.P. addition on the ground that the addition was solely on estimation. [2] The appellant craves leave to add to amend or alter the above grounds as may be deemed necessary. Relief claim in Appeal: The order of the CIT(A) on the above issue may be set aside and that of the AO be restored." 2. None appeared on behalf of the Revenue despite service of notice nor any request for adjournment had been received. Considering the nature of issue, we, therefore, decided to dispose of the appeal after hearing the learned Departmental Representative. 3. Facts, in brief, as per relevant orders are that in consequence of investigation of transactions by the Enforcement Directorate in the case of Shri Dhiren A Modi, Prop.M/s Tirupati Enterprises, it was revea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-97 21,37,44,297 12,88,41,541 1997-98 2,93,97,220 57,73,076 1999-2000 7,05,74,013 4,46,04,613 There is apparent contradiction between the cash purchases from unidentified and unregistered dealers on the one hand and huge outstanding shown as due to them on the other. The appellant's explanation that these dealers always approach the appellant for getting the outstanding dues is too specious to lend credit. It is conspicuous that despite such huge transactions, the appellant has not shown any closing stock in any of these 4 years. In the tax audit report, under the head 'Audit Notes', the auditors have pointed out that- (i) There were no balance confirmation certificates from debtors, (ii) Some vouchers of payment made for purchases from unregistered dealers have been found unsigned or unstamped. (iii) For the 'nil' value of closing stock, there was nothing else but the certificate of the proprietor. (iv) There was no satisfactory evidence regarding loans accepted from various parties, only verbal explanation was given by the assessee's accountant. In the assessment year 1995-96 this is specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts are not correct and complete. The only explanation of the appellant offered in the course of appellate proceedings was that the books of account were accepted by the sales tax authorities. This explanation is lame one inasmuch as the levy of sales tax is on the sales turnover which has not been questioned by the A.O. whereas income tax is a charge on the profits. Moreover, the appellant has failed to support this explanation by filing any express order of the sales tax authorities indicating that his books of account (as distinct from total sales) were accepted as correct and complete. 4.1 As regards basis of estimation of G.P, the ld. CIT(A) concluded asunder. "It is seen that in the case of Shri Kaushikkumar Natwarlal Bhavsar, Proprietor of Disha Exports, having loan transactions with the appellant and being in the same line of business (the nature and the modus operandi of their business being identical), the G.P. rate disclosed in the assessment year 1998-99 was 0.79%. Having regard to these facts and circumstances of the case, it would be fair and reasonable to determine the profits in all the years under appeal by applying the g.p. rate of O.79%." 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the addition u/s 68/69 of the Act appears to have been restored to the file of the AO by the learned CIT(A) and was not in dispute before the Tribunal, the AO while giving effect to the order of the learned CIT(A), added an amount of Rs.3,38,708/- in the name of M/s Asha Enterprises, Rs.6,14,739/- in the name of Lunar Diamond and Rs.9,50,000/- in the name of Chandra Diamond u/s 68/69 of the Act, the assessee having failed to establish identity and creditworthiness of these creditors as also genuineness of the transactions. 7. After receipt of the aforesaid order of the Tribunal, in response to a showcause notice before levy of penalty, the assessee submitted his reply, citing certain decisions which are not mentioned in the penalty order. After considering the reply of the assessee, the AO while relying upon the decisions in the case of B A Balasubramaniam and Brothers Co. vs. CIT [1999] 236 ITR 977, 978 (SC), CIT vs. Mussadilal Ram Bharose [1987] 165 ITR 14, 20 (SC), CIT vs. K R Sadyappan [1990] 185 ITR 49 (SC), CIT (Addl.) vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC) and K. C. Builders v. CIT [2004] 135 Taxman 461 (SC), levied a penalty of Rs.11,77,759/- u/s 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly imposed penalty u/s 271(1)(c) in respect of Rs.9,53,447 and Rs.9,50,000/- for AY 1996-97 and in respect of Rs.9,00,000 for 1997-98. Penalties relatable to these additions are accordingly confirmed." 9. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A) while none appeared on behalf of the assessee despite service of notice. Even earlier also when the appeal was fixed for hearing, none appeared on behalf of the assessee on 26-05-2011. Since there is nothing to suggest as to whether or not the assessee is in appeal before us in respect of levy of penalty in relation to the amounts added u/s 68/69 of the Act, we proceeded to dispose of the appeal of the Revenue after hearing the learned Departmental Representative in relation to the penalty on GP addition. The learned DR merely supported the findings of the AO. 10. We have heard the learned DR and gone through the facts of the case. Indisputably, the AO while rejecting the book results, estimated GP @1% of the turnover, which was reduced to 0.79% by the ld. CIT(A) and 0.65% by the ITAT in their common order dated 31.8.2007. In these circumstances, the learned CIT(A) cancelled the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Act merely by resorting to its Explanation. In this circumstance, we are unable to sustain the contentions of learned counsel for the Revenue that merely because the finding recorded by the Tribunal is not happily worded, the order of the Tribunal must be held to be erroneous, particularly when the Tribunal has recorded succinctly the contentions raised by the assessee in this regard and allowed its appeal. At best, it can be said to be an opinion unhappily worded on this aspect of the matter. 10.2 In the light of aforesaid decision, especially when in the case under consideration also addition has been made merely on estimating the gross profits, we are in agreement with the findings of ld. CIT(A) that this is not a clear case of furnishing inaccurate particulars of income. In order to examine the case of penalty, one has primarily to see the nature of concealment, the explanation offered by the assessee, his conduct, etc. These are essentially the matters which are required to be gone into with a view to find out whether or not any case as contemplated in section 271(1)(c) is made out so as to exercise the discretion of imposing the penalty on the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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