M/S ASHA ENTERPRISES V. COMMISSIONER INCOME TAX BAREILLY and OTHERS

IAPL/369/2008

AI Insights

M/S Asha Enterprises, a partnership firm engaged in civil construction, faced scrutiny from the Income Tax Department for the assessment year 2003-04. The firm declared an income of Rs.1,04,470 in its return, which was processed under Section 143(1) of the Income Tax Act. However, during the scrutiny, the firm failed to produce essential financial documents, claiming they were lost in transit. The AO, noting the books were maintained on a computer, rejected this claim and applied a net profit rate of 8% on the total contract receipts, leading to an assessed income of Rs.14,92,250. The CIT(A) initially set aside the penalty imposed by the AO, but the Tribunal reinstated the penalty, emphasizing the deliberate non-production of documents constituted concealment of income.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 768788 (HC-LUCKNOW)
• Appeal Type: Others
• Pronouncement Date: 07-08-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: MANISH GOEL; MANU GHILDIYAL
• Assessee Lawyers: SHAKEEL AHMAD
• Keywords: Assessment; Concealment of income; Non-Production of Books; Penalty; Scrutiny
• Section: 143(2); 143(1); 271(1)(c); 145(3); 260-A

Judgement Text

"1 Court No. - 35 Case :- INCOME TAX APPEAL No. - 369 of 2008 Appellant :- M/S Asha Enterprises Respondent :- Commissioner Income Tax Bareilly & Others Counsel for Appellant :- Shakeel Ahmad Counsel for Respondent :- Manish Goel,Manu Ghildiyal Hon'ble Bharati Sapru,J. Hon'ble Dinesh Kumar Singh,J. 1. This Income Tax Appeal filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') is directed against the order dated 27.06.2008 passed by the Income Tax Appellate Tribunal, Lucknow Bench 'A', Lucknow (hereinafter referred to as 'the Tribunal') in ITA No. 81/LUC/2008 preferred by the Revenue against the order of Commissioner of Income Tax (Appeals) (hereinafter referred to as 'the CIT(A)'). The assessment year involved is 2003-04. 2. The following questions of law have been framed in the appeal for decision by this Court :- (i)Whether under the facts and circumstances of the case, the Tribunal was justified in reversing the order of Commissioner of Income Tax (Appeals) and upholding the levy of penalty on the appellants? (ii)Whether under the facts and circumstances of the case, the Tribunal was correct in holding that the appellant has concealed the income tax ignoring the fact that the accounts filed by the appellant was audited by the Chartered Accountant and the assessment was completed by applying flat rate on the turn over disclosed by the appellant? (iii)Whether under the facts and circumstances of the case, the Tribunal was right in upholding the penalty under Section 271(1) ignoring the fact that the assessment was completed on the estimate? (iv)Whether under the facts and circumstances of the case, the Tribunal was correct in law, while upholding the penalty imposed by misinterpreting the ratio of various Hon'ble Courts? (v)Whether under the facts and circumstances of the case, the 2 Tribunal was justified in holding that explanation 1A to Section 271(1)(c) of the Act is applicable in the case of the appellant ignoring the fact that the appellant had filed reply to the show cause notice under Section 271(1)(c) of the Act? 3. The assessee is partnership firm which has been carrying on work of civil construction. The assessee filed return on its income on 01.12.2003 declaring income at Rs.1,04,470/- which was processed under Section 143(1) of the Act. Later on the case was selected for scrutiny and notice under Section 143(2) of the Act was served on the assessee. 4. During the course of the assessment proceedings, the assessee was required to produce books of account, expenses vouchers etc. The assessee neither produced books of account nor expenses vouchers etc., nor he filed the name and address of sundry creditors declared at Rs.41,14,142.00/-. No detail of closing work in progress declared at Rs.18,20,700/- was furnished. 5. The asssessee took the plea before the Assessing Officer (hereinafter referred to as the 'the AO') that its books of account were lost in transit for which an FIR was lodged. When the AO noted that books of the assessee were generated through computer and, therefore, even if the audited books of account were lost, he could have submitted computer generated copies thereof for verification. The AO was supported for his this stand from the audit report where the auditor has mentioned in column 9(b) as “Cash Book, Ledger maintained by computer”. In column 9(c) it was written that only cash book and ledger had been examined by auditor meaning thereby that no purchase voucher and expense voucher had been maintained by the assessee. In view of the aforesaid facts, the AO rejected the claim of the assessee regarding the books of account having been lost and invoked the provisions of Section 145(3) of the Act and completed the assessment by applying net profit rate of 8% on total contact receipt. The assessment was completed at total income of Rs.14,92,250/- in the status of firm. 3 6. Against the aforesaid order of the AO, the assessee filed an appeal before the CIT(A). The learned CIT(A) vide his order dated 27.03.2006 confirmed the application of profit rate of 8% and did not believe the story set up by the assessee for loss of books of account. The CIT(A) specifically observed that the story was a cooked up story. 7. The AO thereafter, initiated penalty proceedings under Section 271(1)(c) of the Act. After considering the reply of the assessee to the notice, the AO vide his order dated 12.06.2006 passed the penalty order under Section 271(1)(c) of the Act after obtaining prior approval from Additional CIT, Range-I, Bareilly and imposed penalty of Rs.4,44,723/- being the minimum penalty. 8. Aggrieved by the aforesaid penalty order, the assessee filed an appeal before the CIT(A), Bareilly. The CIT(A) vide his order dated 02.11.2007 held that the only reason for application of Section 145 of the Act was loss of books of account and the income was determined by applying flat rate on the returned turn over. The CIT(A) was of the view that the assessee was not guilty either of fraud or willful negligence. The CIT(A) further held that there was no positive proof regarding concealment of income and, therefore, the order passed by the AO under Section 271(1)(c) of the Act was set aside. 9. The Department filed an appeal against the aforesaid order of the CIT(A) before the Tribunal. The Tribunal in its impugned judgment and order has held that it is not in dispute that the assessee could not furnish books of account, expenses vouchers etc. either before the AO or before the CIT(A) and same could not be furnished before the Tribunal as well. Though it was an admitted fact that the books of account were maintained in the computer but the computer generated copies were also not furnished for verification. The Tribunal has held that there was a deliberate attempt on the part of the assessee to conceal the particulars of income by not producing the books of account, bills, vouchers etc., despite several opportunities given to the assessee. It was not the case that the assessee did not have the books of 4 account inasmuch as the same were prepared in the computer but the assessee deliberately did not produce the same and failed to file appropriate explanation with regard to concealment of particulars of income. 10. The Tribunal has also held that non production of books of account amounts to concealment of particulars of income. The Tribunal, therefore, vide impugned judgment and order has set aside the order passed by the CIT(A) on 02.11.2007 and allowed the appeal of the Department and restored the order of the AO imposing penalty of Rs.4,44,723/-. 11. Heard Mr. Shakeel Ahmad, counsel for the appellant and Mr. Manish Goel, counsel for the Department. 12. The AO while finalising the assessment under Section 143(3) of the Act did not believe the story set up by the assessee for loss of books of account and invoked the provisions of Section 145(3) of the Act. The AO rejected the books of account while finalising the assessment order at an income of Rs.14,92,250/-. The aforesaid assessment order was upheld by the CIT(A) specifically rejecting the contention of the assessee for loss of books of account and holding that it was a cooked up story of the assessee and did not find any merit in the appeal. The assessment order was also upheld by the Tribunal. However, the CIT(A) in appeal filed against the penalty order passed by the AO under Section 271(1)(c) of the Act was of the view that no positive proof regarding the concealment of income was before the AO to impose the penalty. 13. It is no longer res integra that deliberate non production of books of account and other details of income and expenditure amounts to concealment of income. The assessee did not produce books of account, bills, vouchers etc., despite having been given adequate opportunity by the AO, CIT(A) and the Tribunal itself. The assessee could not furnish any explanation except setting up a cooked up story 5 for loss of the books of account. It was admitted case that the books of account were maintained in the computer. The assessee did not even furnish the computer generated copies of the books of account. 14. Thus, we find that there was an attempt made throughout by the assessee to conceal its correct income from assessment proceedings and, therefore, the penalty order was not liable to be interfered with by the CIT(A). 15. We, therefore, uphold the impugned order passed by the Tribunal and dismiss the appeal. Thus, the questions of law as framed are answered against the assessee and in favour of the Revenue. Order Date :- 7.8.2018 prateek "