Vijay Ramchandra Shirsatha, Pune V. ACIT, Nashik

ITA 1498/PUN/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2262 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: NILESH KHANDELWAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 1 498 /PN/201 2 / ASSESSMENT YEAR : 20 0 6 - 07 VIJAY RAMCHANDRA SHIRSATH MZSK & ASSOCIATES, CHARTERED ACCOUNTANTS, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO (SANGAM BRIDGE), PUNE 411001 . / APPELLANT PAN: ACAPS3712R VS. THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2, NASHIK . / RESPONDENT / APPELLANT BY : SHRI NILESH KHANDELWAL / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 04 . 1 1 .2015 / DATE OF PRONOUNCEMENT: 16 .1 2 .2015 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - II , NASHIK , DATED 19 . 0 4 .20 1 2 RELATING TO ASSESSMENT YEAR 20 0 6 - 07 AGAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1 498 /PN/20 1 2 SHRI VIJAY RAMCHA NDRA SHIRSATH 2 1. ON FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE AND AS PER PROVISIONS OF LAW AND SCHEME OF THE ACT IT BE HELD THAT, NO PENALTY IS IMPOSSIBLE IN TERMS OF PROVISION UNDER SECTION 271(1)(C) OF THE ACT IN THE CASE OF APPELLANT. 2. THE PART OF PENALTY SUSTAINED BY THE FIRST APPELLATE AUTHORITY ON RS.4,51,411/ - FOR ALLEGED CONCEALMENT I S BE HELD AS IMPROPER, UNJUSTIFIED AND UN - WARRANTED. THE PART OF PENALTY SUSTAINED BY THE FIRST APPELLATE AUTHORITY BE DELETED. THE APPELLANT BE GRANTED JUST AND PROPER RELIEF IN THIS RESPECT. 3 . THE A PPELLANT PRAYS LEAVE TO GRANT PERMISSION TO ADD , AM END , MODIFY, RECTIFY, DELETE, RAISE AN Y GROUNDS OF APPEAL AT THE TIME OF HEARING . 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON ADDITION OF RS. 4,51,411/ - . 4. BRIEFLY, IN THE FACTS OF THE PRESEN T CASE, THE ASSESSEE HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 13,40,550/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. WHILE COMPLETING ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE ASSESSING OFFICER MADE THE FOLLOWIN G ADDITIONS IN THE HANDS OF ASSESSEE: - I) DISALLOWANCE U/S 40(A)(IA) OF THE ACT - RS. 1,50,47,046/ - II) DISALLOWANCE U/S 40(A)(IA) OF THE ACT OUT OF PETTY CONTRACT - RS. 5,78,000/ - III) FOR PROFIT ESTIMATED ON SUB - CONTRACT - RS. 4,51,411/ - IV) OUT OF SAND & LABOUR CHARGES - RS. 1,00,000/ - V) OUT OF PETROL EXP. - RS. 50,000/ - VI) OUT OF TELEPHONE EXP. - RS. 20,000/ - VII) ON ACCOUNT OF DELAYED PAYMENT OF ESCI & PF - RS. 7,220/ - 5. IN RESPECT OF THE AFORESAID ADDITIONS MADE BY THE ASSESSING OFFICER, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. IN THE QUANTUM APPEAL, THE CIT(A) GRANTED CERTAIN RELIEFS TO THE ASSESSEE ON ACCOUNT OF CERTAIN EXPENSES INCURRED BY THE ASSESSEE. T HE DISALLOWANCE MADE ON ACCOUNT OF LATE PAYMENT OF ESCI & PF WAS CONFIRMED BY THE CIT(A) ALONG WITH DISALLOWANCES AT ITEM NOS.(I) TO (III) AS TABULATED ABOVE. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. HOWEVER, DURING THE PENDENCY OF APPEAL BEFORE THE TRIBUNAL, THE ASSESSING OFFICER LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ITA NO. 1 498 /PN/20 1 2 SHRI VIJAY RAMCHA NDRA SHIRSATH 3 ON CONCEALED INCOME OF RS.1,60,76,457/ - . THE PENALTY WAS LEVIED AT 100% OF THE TAX SOUGHT TO BE EVADED I.E. RS. 54,11,334/ - . THE CIT(A) NOTED THAT THE TRIBUNAL IN ASSES SEES OWN CASE IN ITA NO.185/PN/ 2010, RELATING TO ASSESSMENT YEAR 2006 - 07 , VIDE ORDER DATED 29.09.2011 HAVE DELETED THE ADDITIONS AT SERIAL NOS. (I) AND (II) I.E. DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. HOWEVER , NO DISCUSSION ON ADDITION OF R S. 4,51,411/ - WAS EVIDEN T FROM THE ORDER OF TRIBUNAL. CONSEQUENTLY, THE CIT(A) CONFIRMED THE PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME OF RS. 4,51,411/ - ONLY. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT INITIALLY THE TRIBUNAL BY AN ERROR HAD NOT ADJUDICATED THE GROUND OF APPEAL IN RESPECT OF ESTIMATION OF PROFIT ON SUB - CONTRACT AT RS.4,51,411/ - . HOWEVER, THE SAID MISTAKE WAS BROUGHT TO THE KNOWLEDGE OF T RIBUNAL AND VIDE MA NO. 04/PN/2015 , ORDER DATED 18 .03.2015 , THE ORDER WAS RECTIFIED FOR THE LIMITED PURPOSE TO ADJUDICATE THE GROUND OF APPEAL NO.3 RAISED IN THE APPEAL. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE TR IBUNAL VIDE ORDER DATED 09.10.2015 CONFIRMED THE ORDERS OF AUTHORITIES BELOW THAT ON SUB - CONTRACT RECEIPTS OF MORE THAN RS.1.50 CRORES, THE ASSESSEE MUST HAVE EARNED SOME PROFIT. HOWEVER, BOTH THE ASSESSING OFFICER AND CIT(A) HAD ESTIMATED THE PROFIT @ 3% , WHICH WAS RESTRICTED TO 2% OF SUB - CONTRACT RECEIPTS I.E. RS. 3,00,940/ - BY THE TRIBUNAL. THE COPY OF TRIBUNAL ORDER IS PLACED ON RECORD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT COMPLETE PARTICULARS IN THIS REGARD WERE FURNISHED IN THE RETURN OF INCOME ITSELF AND RECEIPTS WERE DECLARED AS PART OF CONTRACT RECEIPTS, AGAINST WHICH THE ASSESSEE HAD CLAIMED THE EXPENSES OF SUB - CONTRACT. HE FURTHER POINTED OUT THAT ON MERE ESTIMATION OF INCOME IN THE HANDS OF ASSESSEE, THERE ITA NO. 1 498 /PN/20 1 2 SHRI VIJAY RAMCHA NDRA SHIRSATH 4 WAS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HE FURTHER POINTED OUT THAT THE ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS OF INCOME, WHEREAS THE PENALTY HAS BEEN LEVIED BY INVOKING EXPLANATION ( 1 B) TO SECTIN 271(1)(C) OF THE ACT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT THE PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND HAS BEEN LEVIED I N THIS REGARD. HE FURTHER PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS LIMITED TO THE ADDITION MADE ON ACCOUNT OF ES TIMATION OF PROFIT ON SUB - CONTRACT. THE ASSESSEE CLAIMED THAT IT HAD EARNED NO PROFITS ON CERTAIN RECEIPTS WHICH WERE SUB - CONTRACTED. THE ASSESSEE HAD REFLECTED THE SAID RECEIPTS IN ITS PROFIT & LOSS ACCOUNT, AGAINST WHICH THE EXPENSES WERE CLAIMED IN TH E PROFIT & LOSS ACCOUNT ITSELF. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT CERTAIN PROFIT NEEDS TO BE ESTIMATED ON SUCH CONTRACT RECEIPTS. THE ASSESSING OFFICER HAD ESTIMATED PROFIT @ 3% OF THE RECEIPTS, WHICH WAS RESTRICTED TO 2% BY THE TRIBUNA L VIDE ITS ORDER DATED 09.10.2015 . THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IT HAD FURNISHED COMPLETE INFORMATION WITH REGARD TO THE RECEIPTS AND EXPENDITURE IN THE RETURN OF INCOME AND MERE ESTIMATION OF CERTAIN PROFITS IN ITS HANDS DOES NOT ESTABLISH THAT IT HAD FURNISHED INACCURATE PARTICULARS OF INCOME. ON PERUSAL OF RECORD, WE FIND THAT THE ASSESSEE HAD CLAIMED THAT IT HAD NOT EARNED ANY PROFIT ON SUCH RECEIPTS, WHEREAS REJECTING THE CONTENTION OF ASSESSEE, THE ESTIMATION OF PROFIT HAS BEEN MADE I N THE HANDS OF ASSESSEE FIRST AT 3%, WHICH WAS REDUCED TO 2% BY THE TRIBUNAL. IN SUCH CIRCUMSTANCES, WHERE THE ASSESSEE HAD FURNISHED COMPLETE DETAILS ALONG WITH RETURN OF INCOME, MERE ESTIMATION OF ITA NO. 1 498 /PN/20 1 2 SHRI VIJAY RAMCHA NDRA SHIRSATH 5 INCOME BY REJECTING EXPLANATION OF THE ASSESSEE , WHICH W AS NOT FOUND TO BE MALAFIDE, THERE IS NO WARRANT FOR HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXPLANATION FURNISHED BY THE ASSESSEE WAS BONAFIDE EXPLANATION. HOWEVER, THE ASSESSEE WAS UNA BLE TO SUBSTANTIATE ITS CLAIM . S UCH NON - SUBSTANTIATION OF THE CLAIM BY THE ASSESSEE DOES NOT WARRANT LEVY OF PENALTY FOR CONCEALMENT OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY LEVIED ON ACCOUNT OF ESTIMATION OF PRO FIT ON SUB - CONTRACT. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF DECEM BER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH DECEM BER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - II , NASHIK ; 4. / THE CIT - II , NASHIK ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE