M/s Parbhat Kumar Contractor, Sirsa V. DCIT, Sirsa

ITA 1089/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5377 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 17-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Business income; Set aside
• Section: 271(1)(c); 40A(3); 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1089 /CHD/2010 (ASSESSMENT YEAR : 2001-02) M/S PARBHAT KUMAR CONTRACTOR, VS. THE D.C.I.T., BHIM COLONY, SIRSA. SIRSA, HARYANA PAN: AABFP2022J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.R.SHARMA RESPONDENT BY : SMT.JAISHREE SHARMA, DR O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 4.6.2010 RELA TING TO ASSESSMENT YEAR 2001-02 AGAINST THE ORDER PASSED U/S 271(1)(C) OF THE INCOME-TAX ACT. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER : 1. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX(APPEALS) IS BAD IN LAW AND IS BEYOND ALL THE CANNONS OF LAW AND JUSTICE. 2. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX(APPEALS) LEVYING A PENALTY OF RS.1,78,800/- U/S 271(1)(C) IS BAD IN LA W AS THERE IS NEITHER FURNISHING OF INACCURATE PARTICULARS NOR CONCEALMENT OF INCOME WITHIN THE MEANING OF SAID SECTION AND AS SUCH THE ORDER NEEDS 2 TO BE SET ASIDE IN VIEW OF THE JUDICIAL DECISIONS I N THIS BEHALF. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TORS.17 8,800/-. THE BRIEF FACTS OF THE CASE ARE THAT WHILE COMPLETING THE ASS ESSMENT U/S 143(3) OF THE ACT, ADDITION OF RS.109,958/- WAS MADE ON ACCOU NT OF CASH PAYMENT MADE TO A PARTY WHICH WAS NOT REFLECTED IN THE BOOK S OF ACCOUNT; DISALLOWANCE OF RS.21,991/- U/S 40A(3) OF THE ACT I N RESPECT OF THE AFORESAID CASH PAYMENT AND DISALLOWANCE OF A SUM OF RS.10,00,000/- OUT OF WAGES SHOWN AS PAYABLE AS ON 31.3.2001 AT RS.14, 48,675/-. THE CIT(A) CONFIRMED THE ADDITION OF RS.109,958/-, ALLO WED RELIEF OF RS.21,991/- AND ENHANCED THE INCOME BY RS.648,675/- , HOLDING THAT THE WHOLE OF THE WAGES PAYABLE I.E. 14,48,675/- WERE TO BE DISALLOWED ALONGWITH RS.2,00,000/- OUT OF LABOUR PAYMENT FOR T HE MONTH OF APRIL,2000 TO JAN.,2001. THE CIT(A) AFTER ENHANCIN G THE INCOME ALSO RECORDED SATISFACTION FOR THE PURPOSE OF SECTION 27 1(1)(C) OF THE ACT IN RESPECT OF SUCH INCOME TO THE EXTENT OF RS.16,48,67 5/-. THE CIT(A) SHOW CAUSED THE ASSESSEE AS TO WHY PENALTY BE NOT I MPOSED IN RESPECT OF THE AFORESAID ADDITIONS OF RS.109,958/- AND RS.16,4 8,675/-. THE CIT(A) REJECTING THE PLEA OF THE ASSESSEE FOR THE PENALTY PROCEEDINGS TO BE KEPT IN ABEYANCE TILL THE DISPOSAL OF THE APPEAL FILED B EFORE THE TRIBUNAL, HELD IT TO BE A FIT CASE FOR LEVY OF PENALTY U/S 271(1)( C) OF THE ACT AND PENALTY OF RS.6,89,382/- WAS IMPOSED VIDE ORDER DATED 27.04 .2005. THE TRIBUNAL IN THE QUANTUM APPEAL VIDE ORDER DATED 25.5.2007 IN ITA NO.323/CHANDI/2005, IN RESPECT OF ADDITION OF RS.10 9,958/- REDUCED THE SUM BY RS.19,000/-, UPHOLDING ADDITION OF RS.90,958 /-. THE TRIBUNAL WITH REGARD TO ADDITION OFRS.16,48,675/- OBSERVED T HAT IT WOULD BE REASONABLE IF RATE OF PROFIT IS APPLIED AND IT WAS DIRECTED TO APPLY RATE OF 12% TO CONTRACT RECEIPTS, OUT OF WHICH DEDUCTION ON ACCOUNT OF SALARY 3 AND INTEREST PAID TO PARTNERS WAS ALLOWED. THE NET PROFIT WAS COMPUTED AT RS.10,99,801/- AND DIRECTION WAS GIVEN TO ALLOW DEDUCTION ON ACCOUNT OF SALARY AND INTEREST PAID TO THE PARTNERS AS PERM ISSIBLE IN LAW. THE TOTAL INCOME INCLUDING THE ADDITION OF RS.90,958/- WAS DETERMINED AT RS.708,629/-, AFTER ALLOWANCE OF SALARY AND INTERES T PAID TO THE PARTNERS, AS AGAINST RS.2,52,590/- DECLARED BY THE ASSESSEE I N THE RETURN OF INCOME. THE DEPARTMENTAL APPEAL WAS DISMISSED BY T HE HON'BLE PUNJAB & HARYANA HIGH COURT HOLDING THAT THE ASSESSMENT BY APPLYING 12% OF NET PROFIT RATE OF CONTRACT RECEIPT WAS NOT ARBITRA RY OR PERVERSE. 4. THE ASSESSEE ALSO FILED AN APPEAL AGAINST THE OR DER OF CIT(A) LEVYING PENALTY U/S 271(1)(C) OF THE ACT. THE TRIB UNAL IN ITA NO.564/CHD/2005 VIDE ORDER DATED 28.2.2008 OBSERVED THAT THE INCOME HAD BEEN ASSESSED AS A RESULT OF THE ORDER OF THE T RIBUNAL, WHICH WAS NOT MANIFESTED IN THE IMPUGNED ORDER OF PENALTY. AS TH E ASSESSEE HAD NOT GOT AN OPPORTUNITY TO EXPLAIN THE FINALLY ASSESSED INCOME ON THE DIRECTIONS OF THE TRIBUNAL, THE ORDER OF THE CIT(A) WAS SET ASIDE AND THE AO WAS DIRECTED TO CONSIDER THE QUESTION OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN THE SECOND ROUND OF PENALTY PROCEEDI NGS, THE EXPLANATION OF THE ASSESSEE WAS THAT THE PAYMENTS TO THE PARTY AT GOBINDGARH OF RS.109,958/- WERE MADE OUT OF WITHDRAWALS WHICH WAS REFLECTED IN THE BOOKS OF ACCOUNT ITSELF AND AS THE PAYMENT WAS MADE OUT OF CASH AVAILABLE FROM EXPLAINED SOURCES, THERE WAS NO MERI T IN HOLDING THE ASSESSEE TO HAVE CONCEALED ITS INCOME. IN RESPECT OF THE ESTIMATION OF BUSINESS INCOME BY APPLYING NET PROFIT RATE, THE PL EA OF THE ASSESSEE WAS THAT WHERE THE INCOME IS ASSESSED ON ESTIMATE BASIS , NO PENALTY IS LEVIABLE U/S 271(1)(C) OF THE ACT. THE AO HELD THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME TO THE E XTENT OF INCOME OF RS.365,961/- AND PENALTY OF RS.178,800/- WAS LEVIED ON TOTAL ADDITION OF 4 RS.456,039/- U/S 271(1)(C) OF THE ACT. THE CIT(A) UPHELD THE PENALTY LEVIED BY THE AO. 5. SHRI M.R.SHARMA APPEARED FOR THE ASSESSEE AND SM T.JAISHREE SHARMA APPEARED FOR THE REVENUE AND PUT FORTH THEIR CONTENTION. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE IN ALL SUCH CA SES WHERE THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME. IN THE FACTS OF THE PRESENT CASE BEFORE US , THE BASIS FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IS TWO ADDITIONS M ADE IN THE HANDS OF THE ASSESSEE. THE FIRST ADDITION MADE IS ON ACCOUN T OF THE UNRECORDED CASH PAYMENT TO A PARTY IN GOBINDGARH. THE TRIBUNA L WHILE DECIDING THE ISSUE HAD HELD THAT THE ASSESSEE TO HAVE MADE THE S AID PAYMENT TO THE PARTY ON 4.9.2000, THOUGH ON THE SAID DATE THE ASSE SSEE HAD DEBITED ONLY RS.19000/- PAID IN CASH TO THE SAID PARTY. THE BAL ANCE PAYMENT OF RS.90,358/- WAS HELD TO BE PAID OUT OF UNDISCLOSED SOURCES IN SO FAR AS THE SAME WAS NOT RECORDED IN BOOKS OF ACCOUNT. THE EXPLANATION OF THE ASSESSEE THAT THE PARTY HAD ASKED IT NOT TO DEBIT T HE SAID CASH WAS NEITHER ESTABLISHED NOR BELIEVED. THE ADDITION OF RS.90,35 8/- BEING THE AMOUNT OF CASH PAID NOT RECORDED IN THE BOOKS OF ACCOUNT T ANTAMOUNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE, MAKING THE ASSESSEE LIABLE TO THE LEVY OF PENALTY U/S 271( 1)(C) OF THE ACT. ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT(A) IN TH IS REGARD. 7. SECOND ADDITION WAS MADE IN THE HANDS OF THE ASS ESSEE AFTER REJECTION OF THE BOOK RESULTS SHOWN BY THE ASSESSEE IN VIEW OF THE EXPENSES ON WAGES NOT BEING VERIFIABLE. HOWEVER, T HE TRIBUNAL IN QUANTUM ORDER AFTER REJECTING THE PLEA OF THE ASSES SEE AND ALSO THE ORDERS OF THE AUTHORITIES BELOW ESTIMATED THE INCOME FROM BUSINESS IN THE HANDS 5 OF THE ASSESSEE @ 12% OF THE GROSS CONTRACT RECEIPT S. SUCH ESTIMATION OF INCOME IN THE HANDS OF THE ASSESSEE WAS HELD TO BE FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE AO AND CIT( A). THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V SANGRUR VANASP ATI MILLS LTD. (303 ITR 53 P&H ) HAD IN SIMILAR CIRCUMSTANCES WHER E ADDITION TO THE INCOME WAS BASED ON ESTIMATION, HAD HELD THAT PENAL TY U/S 271(1)(C) COULD NOT BE IMPOSED, OBSERVING AS UNDER : IN ORDER TO ATTRACT CLAUSE (C) OF SECTION 271(10(C ) OF THE INCOME-TAX ACT,1961, IT IS NECESSARY THAT THERE MUS T BE CONCEALMENT BY THE ASSESSEE OF THE PARTICULARS OF H IS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH IN COME. THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT ARE NOT ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED O N ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN. WHEN THE ADDI TIONS HAVE BEEN MADE ON THE BASIS OF ESTIMATE AND NOT ON ACCOU NT OF ANY CONCRETE EVIDENCE OF CONCEALMENT, THEN THE PENALTY IS NOT LEVIABLE. 8. FOLLOWING THE ABOVESAID RATIO LAID DOWN BY THE H ON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V SANGRUR VANASPATI MILLS LTD.(SUPRA) WE HOLD THAT NO PENALTY U/S 271(1)(C) OF THE ACT IS LE VIABLE AGAINST THE AFORESAID ESTIMATION OF INCOME ON ACCOUNT OF INCOME FROM BUSINESS. THE AO IS DIRECTED TO DELETE THE AFORESAID PENALTY LEVI ED U/S 271(1)(C) OF THE ACT. HOWEVER, AS OBSERVED IN PARA ABOVE, PENALTY U /S 271(1)(C) ON ADDITION OF RS.90358/- IS UPHELD. THE GROUND OF APP EAL RAISED BY THE ASSESSEE IS THUS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF JUNE, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE, 2011 POONAM COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. 6 BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH