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Judgment
These appeals have been filed by the assessee against the order of ld. CIT(A)-24, New Delhi dated 21.03.2022 for Assessment Years 2009-10 to 2015-16.
The assessee has raised the following grounds of appeal:
“1. That the order of learned Commissioner of Income Tax (Appeals) is bad in law as well as on the facts and in the circumstances of the case.
That the Id. CIT(Appeals) has erred in summarily dismissing the ground of appeal that appellant was not provided a fair and proper opportunity of being heard.
That the Id. CIT(Appeals) has erred in giving a finding that the appellant has chosen not to represent his case on merits and ignoring the written submissions and evidences filed by the appellant in the appellate proceedings
That the Id. CIT(Appeals) has erred in not dealing with ground no. 4 raised before him contending that the Id. AO had exceeded his jurisdiction in initiating and imposing penalty u/s 271(1)(c) and in sustaining the penalty imposed by the assessing officer on account of estimated profits amounting to Rs. 1,85,924/- from alleged undisclosed sales by ignoring the written submissions and evidences filed by the appellant in the appellate proceedings.
That the Id. CIT(Appeals) has erred in sustaining the penalty amounting to Rs. 55,777/- u/s 271(1)(c) of the Act as imposed by the assessing officer.”
The issues involving Section 271(1)(c) and Section 271AAB in all the appeals are common in nature and hence being adjudicated by a common order.
In the case of M/s German Homoeopathic Distributors Pvt. Ltd., a company in which the appellant is a Director, the AO made the following estimated additions in the assessment order on account of local medicine sales.
Asst. Year
Local Medicines sales
Addition estimated @ 18 . 23 %
( 1 )
( 2 )
( 3 )
2009-10
21,95,180
4,00,181
2010-11
88,97,660
16,22,043
2011-12
1,41,72,765
25,83,695
2012-13
2,26,86,064
41,35,669
2013-14
2,83,98,538
51,77,053
2014-15
3,55,66,486
64,83,774
2015-16
1,10,35,754
20,11,818
12,29,52,4
The above additions were deleted by the ld. CIT(A) in the case of M/s German Homoeopathic Distributors Pvt. Ltd. vide his common order dated 09.05.2017 for A.Y. 2009-10 to 2014-15 and a separate order dated 09.05.2017 for A.Y. 2015-16.
The ld. CIT(A) in the case of M/s. German Homoepathic Distributors Pvt. Ltd. while deleting the additions made on account of sales of local medicines directed the AO to make the following additions in the hands of the assessee, Sh. Kamlesh Gupta, by applying GP Rate of 9.11% on net sales after discount instead of the GP Rate of 18.23% on gross sales:
Asst. Year
Local Medicines sales
Discount
Net s ales of local medicine after reducing discount
G. P.
Rate
Addition
direc ted to be made by CIT( A) in the hands of Sh. Kam le sh Gupta vide
orders d ated 09.05.2017
( 1 )
( 2 )
( 3 )
( 4 ) = ( 2 )-( 3 )
( 5 )
( 6 )
2009-10
21,9 5,18 0
1,54,297
20,4 0,88 3
9.11 %
1,85,924
2010-11
88,9 7,66 0
3,89,412
85,0 8,24 8
9.11 %
7,75,101
2011-12
1,41,72,765
9,48,797
1,32,23,968
9.11 %
12,0 4,703
2012-13
2,26,86,064
20,0 0,481
2,06,85,583
9.11 %
18,8 4,457
2013-14
2,83,98,538
45,1 1,593
2,38,86,945
9.11 %
21,7 6,101
2014-15
3,55,66,486
41,0 5,141
3,14,61,345
9.11 %
28,6 6,129
2015-16
1,10,35,754
3,37,708
1,06,98,046
9.11 %
9,74,592
12,29,52,447
1,24,47,429
11,05,05,018
1,00,67,007
The addition on account of transaction of sale of local medicines has been made on estimate basis by applying G.P rate of 9.11% on the sales appearing the bank account.
Heard the arguments of both the parties and perused the material available on record.
It is a trite law that any addition made on account of estimated rate of profit applied to the turnover does not amount to concealment.
In the judgment of ITAT, Delhi Bench in the case of Rajiv Kumar Garg vs. ITO in ITA No. 519/Del/2014 the Bench following the judgment in the case of CIT vs. Aero Traders (P) Ltd and the decision of Hon'ble P & H High Court in the case of Harigopal Singh vs. CIT (2002) 258 ITR 85 (P&H) and the decision of Gujrat High Court in CIT vs. Subhash Trading Company 221 ITR 110 (Guj) has followed the settled legal position that when income is estimated, then, there can be no question of imposing penalty u/s 271(1)(c) of the Act and has deleted the penalty imposed u/s 271(1)(c). Similar view is upheld in the judgment of ITAT, Jaipur in the case of Vishnu Tambi v. DCIT, ITA no. 965 to 969/JP/2018.
Reliance is placed on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Aero Traders (P) Ltd (2010) 322 ITR 316 (Delhi).
The AO has also stated that since the appellant has not filed any appeal in this matter it shows that the appellant has no plea to offer and concluded that the above transaction is concealed. Merely because the appellant has not filed any appeal against the addition cannot be a ground for imposing penalty. We find that this cannot at all lead to a conclusion that the levy of penalty is automatic when addition is not appealed against or for that matter it is sustained. There can be many reasons due to which an assessee may choose not to file an appeal, for example, for want of proper legal advice. It is settled law that the assessment proceedings and penalty proceedings are different.
Hence, keeping in view, the entire facts and circumstances peculiar to the instant case, we hold that the penalty levied by the Assessing Officer cannot be sustained.
In the results, the appeals of the assessee are allowed.