Assessee can’t take Benefit of the fact that Penalty against his Partners was deleted: ITAT

In the case of M/s. H S Steel and M/s. Volga Steel, Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) held in its recent order that assessee cannot avoid penal consequences merely by relying on the fact that penalty against his partners was deleted in a similar case.

Assessees, M/s. H S Steel and M/s. Volga Steel are engaged in wholesale trading of iron sheets. They have filed their return of income for the relevant assessment year and declared total income of Rs.1,24,650 and Rs.2,10,050 respectively.

However a survey was conducted at the business premises of the assessees. Stock value was computed after the completion of the survey and declared Rs.45,36,120 as against Rs.20,35,105 in the case of M/s. H S Steel and Rs.43,25,880 as against Rs.18,25,355 in the case of M/s. Volga Steel and the same was admitted by the partners also. Assessing Officer (AO) was of the opinion that there was excess stock found during the survey and accordingly he made an addition of these excess stocks and imposed penalty on account of concealment of income by the assessee for avoiding the tax liability.

On appeal CIT(A) upheld the order passed by the AO and confirmed the penalty imposed by him. Aggrieved by the order assessee was on appeal before the tribunal.

Before the bench, assessee argued that in the case of M/s. Volga Steel, the learned CIT(A) has deleted the penalty on the same issue and challenged the same in support to its argument.

After considering the rival submissions of both the parties, the Tribunal bench consists of Judicial Member Rajpal Yadav and Accountant Member Pradip Kumar Kedia observed that “there is no negative equity in law namely if a person could not be caught for infringement of law, then one who caught has right to plead equity on the ground that such and such person was not punished for infringement of law. Therefore, the assessee cannot draw any benefit from the order of the CIT(A) in the case of M/s. Volga Steel”.

The Tribunal bench further observed that “the addition was not made on the basis of alleged admission in the statement, but on the basis of excess physical stock found at the time of survey which was accepted by the partners during the survey by putting their signatures on the inventory”. Hence, the bench upheld the order pronounced by the lower authorities.

To Read the full text of the Order CLICK HERE