ACIT, Cir-40, Kolkata, Kolkata V. M/s Deepak Construction Co., Kolkata

ITA 179/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9419 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 05-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2014
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 143(3); 147

Judgement Text

ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 1 IN THE INCOME TAX APPELLATE TRIBUNAL,A BENCH KOLKATA BEFORE : SHRI M.BALAGANESH, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 179/KOL/2014 A.Y: 2006-07 A.C.I.T, CIR-40, KOLKATA VS. M/S. DEEPAK C ONSTRUCTION CO. PAN: AADFD 3069R (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI SALLONG YADEN, A DDL.CIT, DR SHRI B.K. PODDAR, FCA, AR DATE OF HEARING : 05-12-2016 DATE OF PRONOUNCEMENT : 03-02-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 07/11/2013 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS),XIX, KOLKATA FOR THE ASSESSMENT YEAR 2006-07, WHEREIN HE CANCELLED THE PENALTY AS IMPOSED BY THE AO U/S. 271(1) ( C) OF THE I.T ACT, 1961. 2. THE ONLY ISSUE IS TO BE DECIDED IN THIS APPEAL AS TO WHETHER THE CIT- A IS JUSTIFIED IN CANCELLING THE PENALTY OF RS.37,1 6,640/- IMPOSED BY THE AO U/S. 271(1) ( C) OF THE ACT IN THE FACTS AND CIRCU MSTANCES OF THE CASE. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F CONSTRUCTION. THE ASSESSEE FILED ITS RETURN FOR THE A.Y UNDER CONSIDE RATION DECLARING TOTAL INCOME AT RS.8,51,650/-. THE AO DETERMINED THE TOTA L INCOME AT ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 2 RS.1,64,00,350/- U/S. 143(3) OF THE ACT BY AN ORDER DATED 22.12.2008 MAKING ADDITIONS/DISALLOWANCES. LATER ON THE CASE W AS REOPENED U/S. 147 AND FURTHER DISALLOWANCES U/S. 40(A)(IA) WAS MADE I N ADDITION TO DISALLOWANCES MADE IN THE ORIGINAL ASSESSMENT U/S. 143(3) AND ACCORDINGLY THE PENALTY U/S. 271(1)( C) OF THE ACT WAS ALSO INI TIATED. IN APPEAL AGAINST SUCH ASSESSMENT ORDER THE CIT-A DELETED THE ADDITIO NS MADE UNDER THE HEAD MANDATORY LIABILITIES OF RS.18,60,229 AND CO NFIRMED THE ADDITIONS MADE UNDER THE HEAD OTHER LIABILITIES TO THE EXTE NT OF RS.37,16,640/- ( 50% OF RS.74,33,280/- ON ESTIMATE BASIS. PENALTY PR OCEEDING WAS INITIATED CONSEQUENT TO THE ASSESSMENT ORDER PASSED U/S.143(3 )/251 OF THE ACT AND PENALTY @ 100% OF RS.12,51,022/- WAS IMPOSED FOR C ONCEALMENT OF PARTICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME OF RS.37,16,640/- BEING OUTSTANDING LIABILITY. 4. AGAINST WHICH THE ASSESSEE PREFERRED AN APPEAL B EFORE THE CIT-A. THE CIT-A FOUND THE AO MADE ADDITIONS ON ESTIMATION AND THE SAME WERE CONFIRMED BY THE CIT-A IN AN APPEAL PREFERRED AGAIN ST THE ASSESSMENT ORDER. THE CIT-A IN PENALTY PROCEEDINGS CANCELLED THE IMPUGNED PENALTY OF RS.12,51,022/- AS IMPOSED BY THE AO BY OBSERVING TH AT THE PENALTY IS NOT MAINTAINABLE ON ADDITIONS MADE ON ESTIMATION BY OBS ERVING AS UNDER:- 5. THE PENALTY ORDER OF THE AO AND THE APPELLANT'S SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED IN DECIDING THE ISSUE AT HAND. GOING BY THE STATUTORY PROVISIONS OF THE ACT AND THE PLETHORA OF VARIOUS C OURT JUDGMENTS IN THIS REGARD, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE IMPOSED ON ESTIMATED ADDITIONS MADE BY THE AO. THE CONTENTION OF THE APPELLANT IN THIS REGARD CARRIES MUCH WEIGHT BACKED BY VARIOUS COURT VERDICTS WITH REGARD TO IMPOSITION OF PENALTY AS AFORESAID. IN ORDER TO APPLY THE PROVISIONS OF THE PENAL SECTION OF 271 (1)( C) OF THE ACT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME AND SECONDLY THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, THESE TWO CONDITIONS ARE FOUND MISSING. ADDIT IONS MADE BY THE AO AND A PART OF IT CONFIRMED BY THE CIT(A) ARE ALL BASED ON ESTIMATES WHERE NOTHING HAS BEEN BROUGHT ON RECORD PROVE THAT THE APPELLANT HAD CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS. IN A SIMILAR CASE OF SHRI NARAYANSINGH J. DEORA VS. ACIT, CIRCLE-R, THANE IN ITA NO.5895/MUM/2010 D ATED 09.12.2011, THE ITAT OF MUMBAI BENCH - 'B' HELD THAT 'IT IS SETTLED LAW THAT THE PENALTY IS NOT LEVIABLE ON ESTIMATE OF INCOME. HAVING CONSIDERED THE ISSUE IN ITS ENTIRETY, I DO NOT FIND ANY MERIT IN THE IMPOSITION OF PENALTY BY THE AO AS ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 3 MENTIONED (SUPRA) AND HENCE THE PENALTY IMPOSED AMO UNTING TO RS.12,51,022/- ON ACCOUNT OF THE ESTIMATED ADDITION S MADE IS HEREBY DELETED. 5. AGGRIEVED BY SUCH ORDER OF THE CIT-A, NOW THE RE VENUE IS IN APPEAL BEFORE US BY RAISING THE AFOREMENTIONED SOLITARY GR OUND OF APPEAL. 6. BEFORE US THE LD. DR SUBMITS THAT THE ASSESSEE D ID NOT FILE APPEAL BEFORE THE TRIBUNAL TO THE EXTENT AS UPHELD BY THE CIT-A OF RS.36,17,640/- UNDER THE HEAD OUTSTANDING LIABILIT IES BEING 50% OF RS.74,33,280/- AND RELIED ON THE ORDER OF THE AO. 7. THE LD.AR SUBMITS THAT NO SPECIFIC CHARGE WAS MA DE BY THE AO AND PENALTY AS IMPOSED BY THE AO U/S. 271(1)(C) OF THE ACT AND FURTHER ARGUED THAT THE PENALTY IMPOSED ON AN ADDITION MADE ON ESTIMATION IS NOT MAINTAINABLE UNDER THE PRESENT FACTS AND CIRCUMSTAN CES OF THE CASE AND RELIED ON THE ORDER OF CIT-A. 8. DURING THE COURSE OF ARGUMENTS THE LD. AR FOR TH E ASSESSEE FURTHER SUBMITTED THAT THE CASE UNDER CONSIDERATION IS COVE RED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF C IT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), AND ALSO BY THE ORDER OF THE TRIBUNAL IN THE CASE OF SUVAPRASAN NA BHATTACHARYA VS. ACIT, CIR-55, KOLKATA IN ITA NO. 1303/KOL/2010 DATE D 06-11-2015 WHICH CONSIDERED DECISION OF THE HONBLE KARNATAKA HIGH C OURT SUPRA AND PASSED DETAILED ORDER THE SAID ISSUE. ON THE CONTRARY, THE LD. DR HAS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 9. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE QUESTION BEFORE US IS AS TO WHETHER THE PENALTY ORDER PASSED BY THE AO AND CONFIRMED BY THE CIT(A) IS FALLS FOR OUR CONSIDERATION IN PURSUANCE OF THE LAW LAID DOWN BY THE HONBLE KARNA TAKA HIGH COURT ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 4 SUPRA . THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF C IT & ANR. VS MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEAL MENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND IN SUPPORT OF THE SAME THE LD.AR DID NOT BRING ON RECORD ANY NOTICE SHOWING TH E SAME AS DEFECTIVE NOTICE AS HELD BY THE HONBLE HIGH COURT OF KARNATA KA SUPRA AND IS NOT APPLICABLE IN RESPECT OF NON-SUBMISSION OF ANY EVID ENCE IN THAT REGARD CHARGING OF PENALTY UNDER BOTH THE CHARGES. 10. BUT, HOWEVER, WITH REGARD TO THE SUBMISSIONS TH AT THE PENALTY CANNOT BE IMPOSED ON INCOME BASED ON ESTIMATION, TH E LD. AR REFERRED TO THE PARA-5 OF IMPUGNED ORDER AND IN THIS REGARD, WE MAY EXAMINE THE DECISION IN THE CASE OF SANGRUR VANASPATI MILLS LTD OF HONBLE HIGH COURT OF PUNJAB & HARYANA REPORTED IN 303 ITR 53 (P&H). T HE FACTS THEREIN, THE ADDITION HAD BEEN MADE BY THE AO BY ESTIMATING THE SALES OUTSIDE THE BOOKS OF ACCOUNT. THE CIT(A) ESTIMATED THE YIELD AN D WORKED OUT THE ADDITIONAL PRODUCTION, ON THIS ESTIMATED ADDITIONAL PRODUCTION AND APPLIED AVERAGE SALE RATE AND WORKED OUT THE ADDITIONAL SAL E AT RS. 15,50,306 WHICH WAS ROUNDED OFF TO RS. 15,50,000 AND ADDED TO THE INCOME OF THE ASSESSEE. THE TRIBUNAL ALSO ESTIMATED THE YIELD ON THE BASIS OF PRECEDING YEAR AND THE ADDITION MADE BY THE LEARNED CIT(A) HA D BEEN SUSTAINED. THE HONBLE HIGH COURT HELD THAT THERE SHOULD BE CO NCLUSIVE EVIDENCE THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOM E OR FURNISHED INACCURATE PARTICULARS OF INCOME FOR LEVYING THE PE NALTY AND THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW: 6. WE HAVE HEARD COUNSEL FOR THE APPELLANT AND HAVE GO NE THROUGH THE IMPUGNED ORDER. THE ORDER PASSED BY THE TRIBUNAL IS BASED UPON TWO DECISIONS OF THIS COURT IN CIT VS. RAVAIL SINGH & CO. (2002) 173 CTR (P&H) 429 : (2002) 254 I TR 191 (P&H) AND HARIGOPAL SINGH VS. CIT (2002) 177 CTR (P&H) 580 : (2002) 258 ITR 85 (P &H). IN BOTH THESE DECISIONS, THIS COURT HAS HELD THAT IN ORDER TO ATTRACT CL. (C) OF S. 271(1) OF THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICUL ARS OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. THE PROVISIO NS OF S. 271(1)(C) OF THE ACT ARE NOT ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 5 ATTRACTED TO CASES WHERE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN. IT WAS HELD THAT WHEN T HE ADDITION HAD BEEN MADE ON THE BASIS OF ESTIMATE AND NOT ON ACCOUNT OF ANY CONCRETE EVID ENCE OF CONCEALMENT, THEN THE PENALTY WAS NOT LEVIABLE. THE SIMILAR VIEW WAS ALSO TAKEN B Y THIS COURT IN CIT VS. DHILLON RICE MILLS (2002) 256 ITR 447 (P&H), WHERE THE ADDITION WAS MA DE BY THE AO BY ESTIMATING THE YIELD OF SUPER PHAK AS WELL AS OF CHHILKA AND ALSO THE PR ICE OF CHHILKA, THAT ADDITION WAS REDUCED BY THE CIT(A). HOWEVER, THE PENALTY LEVIED BY THE AO W AS DELETED BY THE CIT(A). THE ORDER OF CIT(A) WAS CONFIRMED BY THE TRIBUNAL AND THE APPEAL FILED BY THE REVENUE AGAINST THE SAID ORDER OF THE TRIBUNAL WAS DISMISSED BY THIS COURT, ON THE GROUND THAT THE AO HAD MADE THE ADDITIONS ON THE BASIS OF ESTIMATE OF THE YIELD OF PHAK AND CHHILKA AND AN ESTIMATE OF THE PRICE AND THAT THE ESTIMATE WOULD NOT IPSO FACTO LE AD TO PENALTY. 7. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL POSITION , WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW IS ARISING FROM THE ORD ER PASSED BY THE TRIBUNAL. DISMISSED 11. IN THE PRESENT CASE, AS DISCUSSED ABOVE THE AO MADE THE IMPUGNED ADDITION ON PURELY ON THE BASIS OF ESTIMAT ION WHICH CAN BE ELICITED FROM THE PAGE NO-3 FOR NOT SUBSTANT IATING THE CLAIM OF EXPENDITURE OF RS.74,33,280/- AND THE CIT- A IN APPEAL PREFERRED AGAINST ASSESSMENT ORDER UPHELD TO THE EX TENT OF 50% OF RS.74,33,280/- WHICH SUGGESTS THAT THE CIT-A HELD THE SAME ON ESTIMATION. WE FIND THE CIT-A IN PENALTY PROCEEDING S RIGHTLY CANCELLED THE SAME BY OBSERVING THAT THE PENALTY IS NOT MAINT AINABLE ON THE ADDITIONS MADE ON THE BASIS OF ESTIMATION, THER EFORE, THE DISALLOWANCE AS DETERMINED BY THE AO AND CIT-A UNDE R THE HEAD BOGUS OUTSTANDING LIABILITY WAS MADE ON THE BA SIS OF ESTIMATION ON WHICH THE AO IMPOSED PENALTY. THEREFO RE, IT IS CLEAR FROM THE ADDITION WAS MADE ON THE BASIS OF ES TIMATION. THE HONOURABLE HIGH COURT IN THE DECISION SUPRA HELD THE FINDINGS OF THE TRIBUNAL IN SUSTAINING THE PENALTIE S IMPOSED ON THE BASIS OF ESTIMATION IS BAD. WE ARE OF THE OPINI ON THE FACTS AND CIRCUMSTANCES IN THE DECISIONS SUPRA ARE SIMILAR TO THE FACTS OF THE CASE IN HAND AND THEREFORE, THE PRINCI PLE LAID DOWN BY THE HONOURABLE HIGH COURT SUPRA IS APPLICABLE TO THE CASE ON HAND. RESPECTABLY FOLLOWING THE LAW LAID DOWN ABOVE , THE ORDER OF THE CIT-A IS JUSTIFIED AND WE CANCEL THE PENALTY OF RS. 12,51,022/- IMPOSED BY THE AO. THUS, THE GROUND AS DISCUSSED ABOVE RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 179/KOL/14 M/S. DEEPAK CONSTRUCTION CO. 6 12. IN THE RESULT, THE APPEAL OF REVENUE IS DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 03-02-2 017 SD/- SD/- M.BALAGANESH S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 03/02/2017 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT/ DEPARTMENT: ACIT, CIR - 40 18 RABINDRA SARANI, PODDAR COURT, 4 TH FLOOR, KOLKATA-700 001. 2 THE RESPONDENT/ A SSESSEE: M/S. DEEPAK CONSTRUCTION CO. 35D, BAGMARI ROAD, KOLKATA-700 054. 3 / THE CIT(A) 4.THE CIT 5 . DR, KOLKATA BENCH 6 . GUARD FILE . **PP/SPS TRUE COPY, BY ORDER, ASSTT REGISTRA R