ITO, Ward 13 (4), New Delhi. Vs. M/s. Ocean Metals (P) Ltd., G 55, Masjid Moth, Greater Kailash Part II, New Delhi 110 048.
August, 06th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `E' : NEW DELHI)
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
SHRI ABY T. VARKEY, JUDICIAL MEMBER
(ASSESSMENT YEAR : 2005-06)
ITO, Ward 13 (4), vs. M/s. Ocean Metals (P) Ltd.,
New Delhi. G 55, Masjid Moth,
Greater Kailash Part II,
New Delhi 110 048.
(PAN : AAACO0922A)
ASSESSEE BY : Shri Shailesh Gupta, Advocate
REVENUE BY : Shri Sunil Sharma, Senior DR
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal filed by the revenue emanates from the order of CIT
(Appeals)-XVI, New Delhi dated 23.07.2012 for the assessment year 2005-
2. In this case, the revenue has challenged the deletion of penalty levied of
Rs.13,00,326/- u/s 271(1)(c) of the Income-tax Act, 1961.
3. We have heard both the sides on the issue. At the time of the hearing,
the ld. AR submitted that this penalty has been levied on the addition
sustained by the CIT (A) in respect of the addition made on account of low
2 ITA No.5778/Del./2012
gross profit to the extent of Rs.35,02,280/-. The original addition on this
issue was of Rs.53,77,921/-. The CIT (A) deleted the penalty on the basis
that there is a difference of opinion regarding the quantum of addition and
directed to delete the penalty. Ld. AR also submitted that this addition
sustained by the CIT (A) has been deleted by the ITAT in the quantum appeal
filed by the assessee while deciding the ITA No.2172/Del/2009 in its order
dated 14.03.2014. He draw our attention to paras 18 & 19 of the aforesaid
ITAT order. The relevant para of the order is reproduced below :-
"18. The Ld. CIT (A) has upheld the action of the Assessing Officer in
rejecting the books of account u/s 145(3) of the Act, on the basis that there
was drastic decline in the gross profit of the assessee as compared to the
preceding years, the payment of excise duty of Rs.39 lac included in the
sale price, will only have marginal impact on the operational results of the
assessee and that the assessee has not explained the mismatch in the
monthly production figure and corresponding production expenses. He has
also noted that the assessee has not added the excise duty component while
valuing its closing stock, though it is specifically provided in section 145A
of the I. T. Act. He has also noted that the assessee has made certain sales
to its sister concern, at a value lower than its purchase price of raw
material. We find that Ld. CIT (A) while noting above observation has not
considered the explanation of the assessee on those observations made by
the Assessing Officer. Still there is no dispute that payment of excise duty
of Rs. 39lac included in the sales price will only for marginal impact on the
operational results of the assessee, which will not bring down the gross
profit to such an extent and that there were mismatch in the assessees
monthly production figure and corresponding product
19. We are of the view that the Ld. CIT (A) rightly upheld the action of
the Assessing Officer in rejecting the books of account u/s 145(3). But
merely because books of account were rejected the action of the authorities
below in estimating the profit by adopting a particular GP rate without
assigning any reason in support resulting into the trading addition cannot be
justified. The addition made by the Assessing Officer at Rs.53,77,921/- and
sustained by the Ld. CIT (A) at Rs. 35,02,280/- on account of trading
addition applying an estimated gross profit rate without assigning the very
basis, thus cannot be justified. In this regard, we find support from the
decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Gotan
3 ITA No.5778/Del./2012
Lime Khanij Udhyog (supra, wherein the Hon'ble High Court has been
pleased to hold that Section 145 of the I.T. Act, 1961, only provides the
basis on which computation of income is to be made for the purpose of
determining the amount of tax. The provision by itself does not deal with
addition or deletion to the income. Therefore, mere rejection of, or some
deficiency in, the books of account would not mean that it must necessarily
lead to additions to the sustained income.
20. We thus while setting aside the addition made and sustained by the
authorities below direct the Assessing Officer to delete the addition.
Ground no.3 of the appeal of the Revenue is thus rejected and ground
no.1,1.1to 1.4 of the appeal preferred by the assessee are partly allowed.
21. In the result, the appeal preferred by the Revenue is dismissed and
that preferred by the assessee is partly allowed."
Thus, the basis on which the penalty was levied itself has been got deleted in
the quantum appeal, therefore, there is no question of sustaining any penalty
for concealment of income. We sustain the order of CIT (A) for deleting the
4. In the result, the appeal of the revenue is dismissed.
Order pronounced in open court on this 4th day of August, 2014.
(ABY T. VARKEY) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 4th day of August , 2014.
Copy forwarded to:
4.CIT(A)-XVI, New Delhi.
5.CIT(ITAT), New Delhi.