Full News
ITAT deleted penalty based on presumption of unexplained investment and GP
ITAT deleted penalty based on presumption of unexplained investment and GP
AO in order u/s 143(3) (of Income Tax Act, 1961) did not take into account unrecorded cash sales found in a suvey and disclosed by assessee. CIT set aside assessment order u/s 263 (of Income Tax Act, 1961). Tribunal in quantum proceedings set aside matter to AO on issue of additional income. AO repeated addition, and levied penalty. CIT(A) held GP on unaccounted sales at Rs 1 lakh and confirmed penalty. ITAT deleted penalty as it was based on presumption of unexplained investment and GP.-500641
1. Assessee was a proprietor of M/s Maharashtra Impex Corporation, and was dealing in chemicals.
2. A survey u/s 133A (of Income Tax Act, 1961) was carried out iin its premises, during which assessee admitted entries made in the register regarding cash sales of Rs. 13,05,597, which were not recorded in the regular books of accounts.
3. Assessee had offered additional income of Rs. 22 lakhs over and above his regular income.
4. However, while passing the order u/s 143(3) (of Income Tax Act, 1961), the unrecorded cash sales and excess stock found which was disclosed by assessee was not taken into account.
5. CIT set aside assessment order u/s 263 (of Income Tax Act, 1961).
6. Tribunal in the quantum proceedings had set aside the matter to the file of the AO on the issue of additional income of Rs. 22 lakhs, and AO repeated the same addition.
7. AO levied penalty.
8. CIT(A) held that gross profit was to be worked out at Rs. 1,20,090/- on unaccounted sales and investment on such unaccounted sales was taken by him at Rs. 1 lakh.
9. CIT(A) confirmed the penalty.
On appeal, the ITAT held as under:
10. So far as the addition on account of unexplained investment is concerned, same is based on the presumption that for effecting the sales of Rs.13.05 lakhs some investment is required which has been estimated at Rs. 1 lakh.
11. On such a estimated undisclosed investment, no penalty can be levied u/s 271(1)(c) (of Income Tax Act, 1961), because there is no material to substantiate the same.
12. Thus, penalty on Rs. 1 lakh stands deleted.
13. So far as the addition of Rs. 1,20,090/- on account of gross profit, the same is definitely in the realm of undisclosed income which the assessee has been found to be doing outside the books. 14 However, such an estimate of gross profit cannot lead to inference or presumption that assessee has admittedly concealed his income simply for the reason that quantification of GP is based on certain presumption and estimate.
15. Thus, penalty cannot be levied on such presumption, especially when there is no complete evidence that assessee has actually earned gross profit of Rs. 1,20,000/- on sale of Rs. 13,05,597/-. 16 Thus, the penalty levied and confirmed by the CIT(A) on this score is also deleted.
Case Reference - Charudutt B Shah, Vs ITO.
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "C", MUMBAI
BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER
AND SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 5742/Mum/2013
(Assessment year :1999-2000)
×
