The ITO, Ward 1 (3), JAMNAGAR V. Landmark Buildcon Pvt Ltd, JAMNAGAR

ITA 1364/RJT/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62798 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2012
• Assessment Year: 1998-1999
• Appeal Filed On: 30-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Keywords: Depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . . . . , , , , . .. . . . . . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. S RIVASTAVA, AM. ITA NO.1364/RJT/2010. / ASSESSMENT YEAR 1998-99. / V/S. THE INCOME TAX OFFICER, WARD 1(3), JAMNAGAR. ( +/ APPELLANT) LANDMARK BUILDCON PVT. LTD., C/O. JAGRUTI MATERNITY HOSPITAL, 58-DIGVIJAY PLOT, JAMNAGAR. PAN: AAACL3620J. ,-+/ RESPONDENT . / REVENUE BY SHRI M. K. SINGH, D. R. 0. / ASSESSEE BY NONE. . / DATE OF HEARING 17-04-2012 . / DATE OF PRONOUNCEMENT 20 - 04-2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 20-10-2010 OF CI T (A), JAMNAGAR CANCELING THE PENALTY OF RS.9,84,340/- LEVIED BY AO U/S.271(1 )(C) OF THE I.T. ACT FOR THE ASSESSMENT YEAR 1998-99. 2. DESPITE THE SERVICE OF NOTICE, ON THE DATE OF HE ARING, NONE WAS PRESENT FROM THE SIDE OF THE ASSESSEE. WE THEREFORE, PROCEE D TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSION MADE BY LD. D.R. AND MATERI AL AVAILABLE ON RECORD. ITA NO 1364/RJT/2010 2 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY. FOR THE ASSESSMENT UNDER APPEAL, IT FILED THE RETURN OF INC OME ON 30-11-1998 SHOWING LOSS OF RS.29,37,960/-. THE BUSINESS OF THE COMPAN Y WAS OF CONSTRUCTION AND IT WAS DOING THE WORK OF RELIANCE PETROLEUM LTD. THE B OOKS OF ACCOUNTS WERE AUDITED U/S.44AB OF THE I.T. ACT. FOR THE ASSESSME NT UNDER APPEAL, AO FRAMED THE ASSESSMENT U/S.144 AND TOOK THE PROFIT @F 3% OF THE GROSS RECEIPTS. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND LD. CIT(A) ALLOWED SOME RELIEF STATING THAT THE RATE ADOPTED AT 3% WAS CORR ECT, HOWEVER, ASSESSEE WAS ENTITLED TO GET THE DEDUCTION FOR DEPRECIATION, DIR ECTORS REMUNERATION AND INTEREST AND FINANCE CHARGES. ACCORDINGLY, THE NET LESS WAS WORKED OUT AT RS. 1,25,552/- AFTER GIVING THE EFFECT TO THE ORDER OF LD. CIT(A). THE APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE AGAINST THIS ORDER OF CIT(A) WERE DISMISSED. THEREAFTER. AO LEVIED PENALTY U/S.271(1)(C) OF THE ACT AMOUNTING TO RS.9,84,340/- IN RESPECT OF ADDITION MADE BY AO ON ACCOUNT OF EST IMATION OF GROSS PROFIT @ 3% OF GROSS RECEIPTS. 4. AGAINST THE AFORESAID ORDER, ASSESSEE PREFERRED AN APPEAL AND IN THE IMPUGNED ORDER, THE LD. CIT(A) CANCELLED THE PENALT Y FOR THE DETAILED REASON GIVEN IN PARA-5 AND 6 OF THE IMPUGNED ORDER WHICH R EADS AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE APPELLANT. SECTION 275 PROVIDES THAT AN ORDER IMPOSING PENALTY SHOULD BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH TH E PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HA S BEEN INITIATED, ARE COMPLETED. HOWEVER, THIS WOULD NOT BE APPLICABLE IN THE PRESENT CASE BECAUSE OF PROVISO TO SECTION 275, WHICH PROVIDED T HAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS SUBJECT M ATTER OF AN APPEAL TO THE CIT(A), AND THE CIT(A) PASSES THE ORDER ON OR A FTER THE 1 ST DAY OF JUNE,2003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSI NG PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN W HICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION OF IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR WITHIN ONE YEAR FROM THE END OF THE FI NANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CHIEF CO MMISSIONER OR COMMISSIONER, WHICHEVER IS LATER. IN THIS CASE THE ORDER OF CIT(A) HAS BEEN PASSED AFTER 1 ST DAY OF JUNE, 2003 AND THEREFORE, THE LIMITATION FO R PASSING THE ORDER OF PENALTY WOULD BE AS PER THE PR OVISO. IN THIS CASE THE ORDER OF CIT(A) WAS PASSED ON 08-01-2007 AND WAS SE RVED ON THE COMMISSIONER IN THE MONTH OF FEBRUARY,2007. THUS, AS PER THE PROVISO THE ITA NO 1364/RJT/2010 3 ORDER OF PENALTY HAD TO BE PASSED LATEST BY 31-03-2 008. THE ORDER HAS BEEN PASSED IN THE MONTH OF AUGUST, 2009 AND IS DEF INITELY BARRED BY LIMITATION AS HELD BY ITAT, AMRITSAR BENCH IN THE C ASE OF TARLOCHAN SINGH & SONS (HUF) REPORTED IN 114 TTJ PAGE 82. THUS, TH E PENALTY ORDER HAS TO BE CANCELLED, BEING BARRED BY LIMITATION. 6. EVEN ON MERITS, IT IS SEEN THAT THIS IS A CASE W HERE AUDITED ACCOUNTS HAVE BEEN REJECTED AND NET PROFIT RATE HA S BEEN APPLIED. HERE IT WOULD BE RELEVANT TO NOTE THE FINDINGS OF CIT(A) IN QUANTUM APPEAL. IN PARA 9.1 OF THE APPELLATE ORDER, THE CIT(A) HAS MEN TIONED THAT THE ONLY REASON FOR ESTIMATING THE INCOME ON ESTIMATE @ 3% W AS THAT THERE WAS NO APPEARANCE FROM THE APPELLANTS SIDE AND THE AO HAS NOT GIVEN REASONS AS TO WHY AUDITED BOOKS OF ACCOUNTS ARE NOT RELIABL E AND HE HAS MERELY OBSERVED THAT IN THE LINE OF CONSTRUCTION BUSINESS THERE ARE NO CHANCES OF INCURRING ANY LOSS. THE LD. CIT(A) HAS FURTHER MEN TIONED THAT THE AO HAS NOT SUBSTANTIATED HIS OBSERVATION WITH ANY FINDING AND APPLIED THE RATE OF 3% ON GROSS CONTRACT RECEIPTS BY TAKING AVERAGE RAT E OF FIVE OTHER CONTRACTORS. THIS FINDING OF THE CIT(A) SHOWS THAT THIS IS A CASE WHERE BOOK RESULTS HAVE BEEN MERELY REJECTED AND THE ONLY REASON FOR REJECTION IS THAT SOME OTHER CONTRACTORS HAVE SHOWN A HIGHER RATE OF PROFIT. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. S UBHASH TRADING CO., REPORTED IN 221 ITR PAGE 110, HAS HELD THAT WHEN A BEST JUDGMENT ASSESSMENT IS MADE BY REJECTING THE RESULTS DISCLOS ED BY BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND ASSESSABLE INCOME HAS BEEN ARRIVED AT BY APPLYING AN ESTIMATED GROSS PROFIT RA TE ON ESTIMATED SALES, THERE IS BOUND TO BE A GUESS WORK AND SUCH A CASE W OULD NOT BE FIT FOR LEVY OF PENALTY U/S.271(1)(C) OF THE ACT MERELY BY RESORTING TO ITS EXPLANATION. SIMILAR VIEW HAS BEEN TAKEN BY THE HON BLE MADRAS HIGH COURT IN THE CASE OF ADDL. CIT VS. SMT. KANAKAMMAL REPORTED IN 118 ITR PAGE 94 AND BY THE HONBLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF HARIGOPAL SINGH VS. CIT REPORTED IN 258 ITR PAGE 85 . THERE ARE SEVERAL OTHER DECISIONS ALSO, WHICH CLEARLY STATE THAT WHEN AN ASSESSMENT IS MADE ON ESTIMATE BASIS, PENALTY SHOULD NOT BE IMPOSED. AS STATED EARLIER, IN THIS CASE A BEST JUDGMENT ASSESSMENT HAS BEEN MADE BY ADOPTING 3% PROFIT RATE ON GROSS RECEIPTS. THERE WAS NO SPECIF IC REASON FOR ADOPTING THIS PROFIT EXCEPT THAT SOME OTHER CONTRACTORS WERE SHOWING THIS AVERAGE RATE OF PROFIT. NO SPECIFIC DEFECT HAS BEEN FOUND IN THE BOOKS OF ACCOUNTS EXCEPT FOR NON-APPEARANCE FROM THE SIDE OF APPELLAN T. THEREFORE, IN SUCH A CASE, WHEN INCOME IS ASSESSED ON ESTIMATE BASIS, PENALTY U/S.271(1) SHOULD NOT HAVE BEEN IMPOSED. APART FROM THAT, AS DISCUSSED EARLIER, THE PENALTY ORDER IS ALSO BARRED BY LIMITATION. IN VIE W OF THE ABOVE, THE PENALTY IS CANCELLED. 5. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE REVE NUE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO 1364/RJT/2010 4 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF R EVENUE, SHRI M. K. SINGH, D.R. APPEARED AND RELYING ON THE REASONING GIVEN BY AO IN THE PENALTY ORDER, CONTENDED THAT N.P. RATE OF 3% APPLIED BY THE AO WA S FAIR AND REASONABLE. ON THESE BASIS, WHATEVER INCOME HAS BEEN ESTIMATED BY THE AO HAS BEEN UPHELD BY THE TRIBUNAL. THEREFORE, ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF WITHIN THE MEANING OF SEC.271(1)(C). LOOKING TO THE TOTALITY OF THE FACTS AND CIRCUMSTAN CES OF THE CASE, PENALTY WAS RIGHTLY LEVIED AND LD. CIT(A) CLEARLY ERRED IN CANC ELING THE SAME SOLELY RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. SUBHASH TRADING CO.(SUPRA). 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT BO OKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED. IN THE ASSESSMENT ORDER, AO NOWHERE HA S MENTIONED WHY THE AUDITED BOOKS OF ACCOUNTS ARE NOT RELIABLE. JUST B Y CITING CERTAIN OTHER CASES, AO HAS MENTIONED THAT THERE ARE NO CHANCES OF INCURRIN G ANY LOSS. BE IT THAT MAY BE, FROM THE PERUSAL OF ORDER OF LD. CIT(A), IT IS CLEA R THAT HE HAS FOLLOWED THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. SUBHASH TRADING CO. REPORTED IN 221 ITR PAGE 110 WHEREIN IT HAS BEEN HELD THAT WHEN BEST JUDGMENT IS MADE BY REJECTING THE RESULTS DISC LOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS MAINTAINED BY HIM AND ASSESSABLE INCOME HAS BEEN ARRIVED AT BY APPLYING AN ESTIMATED GROSS PROFIT RATE, IN S UCH CASE, PENALTY U/S.271(1)(C) IS NOT LEVIABLE. THIS JUDGMENT OF JURISDICTIONAL HI GH COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE THEREFORE, IN CLINED TO UPHELD THE ORDER OF LD. CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. . 5 20 /04/2012 7 . THIS ORDER PRONOUNCED IN OPEN COURT ON 20/04/2012. SD/- SD/- ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER ITA NO 1364/RJT/2010 5 5/ ORDER DATE 20/04/2012. /RAJKOT . .. . ,9 ,9 ,9 ,9 :9 :9 :9 :9 / COPY OF ORDER FORWARDED TO:- 1. + / APPELLANT-THE I.T.O.,WARD 1(3), JAMNAGAR. 2. ,-+ / RESPONDENT-LANDMARK BUILDCON PVT. LTD., JAMNAGAR . 3. > / CONCERNED CIT-, JAMNAGAR. 4. >- / CIT (A), JAMNAGAR. 5. 9 ,, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , ASSTT. REGISTRAR , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.