Sh. Gaurav Bhakri Prop: Gaurav Enterprises, New Delhi V. ITO, New Delhi

ITA 1936/DEL/2012

• Counselvise Citation: 193620114 RSA 2012
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: J P GULATI
• Keywords: Business income; Retrospective amendment
• Section: 44AD; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER I.T.A .NO.1936/DEL/2012 (ASSESSMENT YEAR-2008-09) GAURAV BHAKRI PROP. VS INCOME TAX OFFICER GAURAV ENTERPRISES WARD-38(1), O-41, LAJPAT NAGAR-II, NEW DELHI. NEW DELHI PAN-ADOPB4054A ( APPELLANT) (R ESPONDENT) APPELLANT BY: SH. J.P.GULATI, ADV. RESPONDENT BY: SH. SATPAL SINGH, SR. DR ORDER THIS APPEAL FILED ON 11-05-2012 BY THE ASSESSEE IS AGAINST THE ORDER DATED 12-03-2012 OF THE LD. CIT(A), NEW DELHI FOR A Y 2008-09. 2. THE ASSESSEE HAD FILED E-RETURN DECLARING INCOME OF RS.1,85,815/- FROM CIVIL CONSTRUCTION WORK MAINLY DONE FOR MCD AN D OTHER GOVERNMENT AGENCIES. APART FROM THE BUSINESS INCOME, ASSESSEE HAD SHOWN INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHOWN TOTAL GROSS RECEIPT S OF RS. 31,11,747/- ON WHICH NET PROFIT HAD BEEN DISCLOSED AT RS.84,385/- YIELDING NET PROFIT RATE OF 2.71% ONLY. WHEN ASKED TO SUBSTANTIATE THE TRADING RESULTS, THE ASSESSEE SUBMITTED THAT BUSINESS INCOME MAY BE WORKED OUT BY APPLYING THE RATE OF I.T.A .NO.1936/DEL/2012 2 8% OF THE TOTAL GROSS RECEIPTS. THE ASSESSING OFFI CER ACCEPTED THE ASSESSEES OFFER, INTER ALIA, OBSERVING THAT OFFER FOR TAXATIO N OF ENHANCED BUSINESS INCOME WAS NOT SUO MOTO AND SAME HAD BEEN DONE CONS EQUENT UPON GIVING OPPORTUNITY TO JUSTIFY THE BUSINESS RECEIPTS. 3. THE ASSESSING OFFICER FURTHER OBSERVED THAT AR O F THE ASSESSEE SUBMITTED THAT WHILE DECLARING THE RENTAL RECEIPTS FROM M/S INDIAN EXPLOSIVE LTD. LESS RENT HAD BEEN SHOWN TO THE EXTENT OF RS. 27,720/-. IT WAS POINTED OUT THAT ACTUAL RENT RECEIVED FROM M/S INDIAN EXPLO SIVE LTD. WAS RS. 1,59,720/- WHEREAS IN THE COMPUTATION, RENT TO THE EXTENT OF RS. 1,32,000/- WAS SHOWN. LD. AR OF THE ASSESSEE FURTHER SUBMITTE D THAT WHILE DECLARING INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, INTEREST INCOME TO THE EXTENT OF RS. 1,456/- WAS NOT INCLUDED AND, THEREF ORE, HE OFFERED THE SAME FOR TAXATION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT, ACCORDINGLY BY MAKING THIS VARIATION TO THE RETURNED INCOME. 4. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDI NGS U/S 271(1)(C) IN RESPECT OF ALL THESE THREE VARIATIONS TO THE INCOME RETURNED EARLIER. DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEES R EPRESENTATIVE SUBMITTED THAT SINCE INCOME HAD BEEN ACCEPTED AS PER THE PROV ISIONS OF SECTION 44AD OF THE ACT, PENALTY WAS NOT LEVIABLE. IN CONNECTIO N WITH SHORT DECLARATION OF INTEREST INCOME, LD. AR OF THE ASSESSEE CONTENDED T HAT ASSESSEE WAS UNDER BONA FIDE BELIEF THAT INTEREST INCOME WAS BELOW THE LIMIT PRESCRIBED U/S 80L, I.T.A .NO.1936/DEL/2012 3 THEREFORE, THE SAME WAS NOT SHOWN IN THE COMPUTATIO N OF TOTAL INCOME AND WHEN IT CAME TO THE NOTICE OF ASSESSEE, HE SURRENDE RED THE SAME FOR TAXATION. SIMILARLY, IN RESPECT OF LESS RENTAL INCOME SHOWN, IT WAS CONTENDED BY LD. AR OF THE ASSESSEE THAT ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT RENTAL INCOME HAD BEEN SHOWN ON CASH BASIS AND THIS FACT W AS NOT POINTED OUT BY HIS TAX CONSULTANT AT THE TIME OF FILING OF RETURN OF INCOME. 5. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES CONTENTION, INTER ALIA, OBSERVING THAT HAD THE CASE NOT BEEN SELECTED FOR SCRUTINY, INCOME TO THE EXTENT WOULD HAVE REMAINED UNDER ASSESSED. HE FURT HER OBSERVED THAT WHEN LEFT WITH NO OTHER OPTION TO JUSTIFY AND SUBSTANTIA TE THE PROFIT RATE WITH DOCUMENTARY EVIDENCES, ASSESSEE OFFERED TO APPLY TH E PROFIT RATE OF 8% INSTEAD OF 2.71% SHOWN IN THE RETURN OF INCOME. HE FURTHER OBSERVED THAT SIMILARLY, ENHANCED INCOME UNDER THE HEAD INCOME F ROM OTHER SOURCES BEING INTEREST FROM BANK AND RENTAL INCOME HAD BEEN ACCEPTED BY THE ASSESSEE WHEN NO OPTION LEFT WITH HIM. HE FURTHER OBSERVED THAT SINCE ASSESSEE HAD GOT HIS ACCOUNTS AUDITED AND, THEREFOR E, IF ANY LAPSE IS DETECTED AT THE TIME OF ASSESSMENT PROCEEDINGS, ASSESSEE COU LD NOT PLEAD THAT IT OCCURRED DUE TO INADVERTENCE. THE ASSESSING OFFICE R IMPOSED A PENALTY OF RS. 61,782/- BEING 100% OF TAX SOUGHT TO BE EVADED ON RS.2,05,939/-. I.T.A .NO.1936/DEL/2012 4 6. BEFORE LD. CIT(A), THE ASSESSEE HAD RAISED FOLLO WING GROUNDS :- 1. THE LD. ASSESSING OFFICER IS NOT JUSTIFIED IN LEVY ING PENALTY ON THE EXTRA INCOME OF RS. 1,64,585/- FROM CIVIL CONTRACT WORK OFFERED BY THE ASSESSEE BY APPLYING N ET PROFIT RATE OF 8% U/S 44AD, ON HIS OWN, WITHOUT ANY DETECTION MADE BY THE ASSESSING OFFICER, BECAUSE TH E AUDITED BOOKS OF ACCOUNT WHICH WERE UNDER THE CONTR OL OF THE CHARTERED ACCOUNTANT COULD NOT BE TRACED OUT AN D THUS NOT PRODUCED BEFORE THE ASSESSING OFFICER. 2. THE LD. ASSESSING OFFICER IS ALSO NOT JUSTIFIED IN IMPOSING PENALTY ON THE EXTRA RENTAL INCOME OF RS. 27,720/- AND INTEREST ON S.B.A/C WITH BANK AT RS. 1,456/-, DESPI TE WHEN PARTICULARS OF RENT WERE DECLARED IN THE TDS CERTIF ICATE FILED WITH THE RETURN OF INCOME AND NO CONCEALMENT OR INACCURATE PARTICULARS OF INCOME WAS FURNISHED/MADE , BUT IT WAS OFFERED BY THE ASSESSEE ON HIS OWN AND I NTEREST ON S.B.A/C AT RS. 1,456/- WITHOUT ANY DETECTION MAD E BY THE ASSESSING OFFICER, AND IN ANY CASE, THE MISTAKE IS EXCLUSIVELY ATTRIBUTED TO THE CA WHO PREPARED THE R ETURN OF INCOME AND NO ANIMUS CAN BE ATTRIBUTED TO THE ASSESSEE. 3. NOTWITHSTANDING TO THE GROUND NO. 1 AND 2 ABOVE, TH E LD. ASSESSING OFFICER HAS GROSSLY ERRED ON FACTS AN D IN LAW IN IMPOSING PENALTY U/S 271(1)(C) AT RS. 611,78 2/- ALLEGEDLY ON TAX SOUGHT TO BE EVADED ON THE INCOME OF RS. 2,05,939/- WHEREAS 100% OF THE TAX SOUGHT TO BE EVADED ON THE INCOME OF RS. 1,85,414/- WOULD WORK O UT AT RS. 50,683/-, MEANING THEREBY THAT IT HAS BEEN EXCE SS CHARGED BY RS. 11,099/-. LD. CIT(A) DISMISSED THE ASSESSEES APPEAL RELYING ON VARIOUS CASE LAWS. 7. AT THE OUTSET, LD. COUNSEL SUBMITTED THAT GROUND NO. 3 WHICH WAS AN ALTERNATE GROUND OF ASSESSEE BEFORE LD. CIT(A), HAD NOT BEEN ADJUDICATED BY LD. CIT(A). AS REGARDS, THE OTHER THREE ADDITIONS , WITH RESPECT TO WHICH I.T.A .NO.1936/DEL/2012 5 PENALTY WAS IMPOSED, LD. COUNSEL SUBMITTED THAT AS REGARDS ASSESSED INCOME FROM CONSTRUCTION WORK AT RS. 2,48,940/- BY APPLYIN G NET PROFIT RATE OF 8% AT RS. 31,11,747/- SINCE THE NATURE OF TRADE OF ASSESS EE WAS OF CIVIL CONTRACTOR, THE ASSESSEE COULD NOT SUBMIT THE VOUCHERS TO THE S ATISFACTION OF ASSESSING OFFICER AND, THEREFORE, ACCEPTED THAT BUSINESS INCO ME MAY BE WORKED OUT BY APPLYING RATE OF 8%. HE SUBMITTED THAT ASSESSEE HA D MAINTAINED CASH BOOK, BANK BOOK, GENERAL LEDGER, SUB-LEDGERS AND PURCHASE BOOKS ON COMPUTER AND CHARTERED ACCOUNTANT HAD DULY CERTIFIED THE ACC OUNTS. HE SUBMITTED THAT ASSESSING OFFICER DID NOT POINT OUT ANY EXPENS E DEBITED TO PROFIT & LOSS ACCOUNT WHICH WAS NOT GENUINE AND DID NOT FIND ANY OMISSION IN THE AUDIT REPORT. HE POINTED OUT THAT IN ORDER TO AVOID DISP UTE WITH THE DEPARTMENT, THE ASSESSEE OFFERED NET PROFIT AT 8%. HE, THEREFORE, S UBMITTED THAT ADDITION WAS MADE ON ESTIMATE BASIS AND NOT BECAUSE OF ANY OMISS ION AND FAILURE OR INACCURATE PARTICULARS OF INCOME OR EXPENDITURE FUR NISHED IN THE AUDITED STATEMENT OF ACCOUNT. SIMILARLY, IN REGARD TO OTHE R ITEMS, LD. COUNSEL SUBMITTED THAT WHEN THE MISTAKE WAS DETECTED, THE A SSESSEE OFFERED THE AMOUNTS. LD. COUNSEL REFERRED TO CIT(A)S ORDER AN D SUBMITTED THAT SHE HAS RELIED ON VARIOUS CASE LAWS WHICH ARE NOT AT ALL RE LEVANT TO THE ISSUE. IN THIS REGARD, HE HAS FILED A PAPER BOOK CONTAINING ALL TH E CASE LAWS RELIED UPON BY LD. CIT(A) AND HAS SUBMITTED AS UNDER TO DEMONSTRAT E THAT NONE OF THE CASE LAW IS RELEVANT TO THE ISSUE:- I.T.A .NO.1936/DEL/2012 6 S.NO. NAME OF THE CASE & ITS CITATION PAGE NO. FROM TO 1. CIT V. INDIAN METALS & FERRO ALLOYS (1994) 174 CTR (ORI.)378 HOLDING NO CASE FOR PENALTY FOR CONCEALMENT. 1 7 2. CIT V. JUGAL KISHORE HARGOPAL DASS (2000) 243 IT R 220 (KER.) MATTER REMANDED BACK TO TRIBUNAL FOR RECONSIDERATIO N 8 10 3. CIT V. SOHAN SINGH (2002) 254 ITR 117 (DEL.) MATTER REMANDED TO THE TRIBUNAL TO REHEAR THE APPEA L 11 14 4. BANARAS TEXTORIUM VS. CIT (1988) 169 ITR 782 (AI I) MATTER REMANDED TO THE TRIBUNAL FOR FRESH CONSIDERA TION 15 21 5. CIT V. ZEEKOO SHOE COY. (1981) 127 ITR 837 (AII. ) HOLDING THAT TRIBUNAL WAS JUSTIFIED IN CANCELING TH E PENALTY 22 26 6. CIT V. JAMNADAS & CO. (1994) 210 ITR 218 (GUJ.) CASH CREDIT ENTRIES IN RESPECT OF SECRET BUSINESS I N WRONG NAMES, HENCE IT WAS HELD THAT PENALTY RIGHTLY LEV IED 27 29 7. CIT V. GOLD COIN HEALTH FOOD (P) LTD. (2008) 172 TAXMAN 386(SC) THE ISSUE WAS FOR LEVY OF PENALTY WHERE BY ADDITION MADE LOSS RETURNED RESULTED TO POSITIVE INCOME AND ITS RETR OSPECTIVE EFFECT 30 36 8. CIT V. GATES FOAM & RUBBER CO. (1973) 91 ITR 464 (KER.) COMMISSION PAID WAS FOUND TO BE BOGUS EXPLN. TO S. 271(1)(C) 37 42 9. MADHUSHREE GUPTA V. UNION OF INDIA & ANR. (2009 ) 317 ITR 107 (DEL.) THE ISSUE WAS ABOUT RECORDING OF SATISFACTION AND I TS RETROSPECTIVE EFFECT U/S 271(1B) 43 74 8. LD. DR RELIED ON THE ORDER OF LOWER REVENUE AUTHORI TIES AND SUBMITTED THAT ASSESSEE CAME OUT WITH TRUE AND CORRECT INCOME ONLY AFTER HE COULD NOT SUBSTANTIATE HIS STAND. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE CASE. LD. CIT(A) HAD DISMISSED THE A SSESSEES APPEAL ON MERITS, THEREFORE, SHE WAS REQUIRED TO ADJUDICATE G ROUND NO-3 WHICH WAS AN ALTERNATE GROUND REGARDING THE QUANTUM OF PENALTY. HOWEVER, SINCE SHE HAS ADJUDICATED THE ISSUE ON MERITS, I FIRST PROCEED TO DECIDE THE SAME AS THE I.T.A .NO.1936/DEL/2012 7 FINDINGS WILL HAVE BEARING ON THE ALTERNATE CLAIM O F ASSESSEE REGARDING QUANTIFICATION OF PENALTY. 10. AS NOTED EARLIER, THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF THREE ADDITIONS. FIRST, INCOME FROM CONTRACT BUSINESS B EING ASSESSED AT 8 % AS AGAINST 2.71 % DECLARED BY ASSESSEE IN ITS ORIGINAL RETURN. THIS ADDITION HAS BEEN MADE AS THE ASSESSEE HAD AGREED FOR THIS ADDIT ION. THE SECOND ADDITION WAS IN REGARD TO RENTAL INCOME IN RESPECT OF ONE PR OPERTY WHICH WAS DISCLOSED FOR 10 MONTHS INSTEAD OF 12 MONTHS. THE THIRD ADDITION WAS ON ACCOUNT OF DIFFERENCE IN SAVINGS BANK INTERESTS OF RS. 1,456/-. 11. IT IS WELL-SETTLED LAW THAT PENALTY IS NOT AUT OMATIC MERELY AN ACCOUNT OF ADDITIONS BEING MADE. THERE ARE PLETHORA OF DEC ISIONS IN WHICH IT HAS BEEN HELD THAT MERELY ON THE BASIS OF AGREED ADDITI ON, PENALTY IS NOT LEVIABLE. THE DEPARTMENT HAS TO PROVE THAT THE CONDUCT OF THE ASSESSEE WAS NOT BONA FIDE AND WHEN HE WAS CORNERED TO SUCH AN EXTENT THA T IT WAS NOT POSSIBLE FOR HIM TO ESCAPE THE ADDITION THEN ONLY HE OFFERED THE AMOUNT. THE DEPARTMENT HAS TO ESTABLISH MALA FIDE MOTIVE ON THE PART OF TH E ASSESSEE IN NOT DISCLOSING THE AMOUNTS. THE MISTAKES COMMITTED BY ASSESSEE NO TICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IF OFFERED, CANNOT BE TE RMED AS MALA FIDE ACTION ON THE PART OF THE ASSESSEE PARTICULARLY WHEN THE M ISTAKES ARE PATENT. THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE TO BE EXAM INED TO FIND OUT WHETHER THE ASSESSEES CONDUCT WAS BONA FIDE OR MALA FIDE. IN THE PRESENT CASE, AS FAR I.T.A .NO.1936/DEL/2012 8 AS THE DIFFERENCE OF RENTAL INCOME IS CONCERNED THA T WAS ONLY FOR TWO MONTHS. THE ASSESSEE HAD DISCLOSED THE PROPERTY FR OM WHICH RENTAL INCOME WAS EARNED BUT THE RENT DISCLOSED WAS FOR 10 MONTHS ONLY. THE ASSESSEE OFFERED THE AMOUNT, THE MOMENT IT WAS DETECTED. TH E ASSESSEES CONDUCT IS TO BE EXAMINED FROM THE FACT THAT THE ASSESSEE HAD DISCLOSED THE INCOME FOR 10 MONTHS AND THERE WAS NO REASON TO CONCEAL THE IN COME FOR ONLY TWO MONTHS. THUS, IT WAS CLEARLY A CASE OF MISTAKE ON THE PART OF ASSESSEE. SIMILARLY, THE SAVING BANK INTEREST WHICH WAS NOT S HOWN, WAS ONLY RS. 1,456/- WHICH IS CLEARLY A CASE OF MISTAKE COMM ITTED BY ASSESSEE. THEREFORE, WITH REFERENCE TO THESE TWO ITEMS, PENAL TY COULD NOT BE LEVIED. 12. NOW, COMING TO THE MAIN ISSUE REGARDING ADDITI ON TO THE INCOME FROM CONTRACT BUSINESS, I FIND THAT ADDITION HAS BEEN MA DE BY APPLYING RATE OF 8% ON GROSS RECEIPTS. IN THE STATEMENT OF FACTS FILED BEFORE LD. CIT(A) IT WAS STATED THAT ASSESSING OFFICER HAD ISSUED A QUESTION NAIRE DATED 13.07.2010 ASKING FOR INFORMATION ON VARIOUS POINTS AND THE AS SESSEE IN HIS REPLY DATED 13.08.2010 OFFERED THAT INCOME FROM CIVIL CONTRACT WORK MAY BE TAKEN AT 8% OF THE RECEIPTS ONLY BECAUSE BOOKS OF ACCOUNT, KEPT BY THE CHARTERED ACCOUNTANT WHO HAD AUDITED THE ACCOUNTS, WERE NOT T RACEABLE. THE ASSESSING OFFICER HAD ACCEPTED THE INCOME AT 8% ACC ORDINGLY. UNDER SUCH CIRCUMSTANCES, THE QUESTION ARISES AS TO WHETHER TH E CONDUCT OF ASSESSEE WAS BONA FIDE OR MALA FIDE. THE ASSESSEE HAD GOT ALL H IS ACCOUNTS AUDITED BUT I.T.A .NO.1936/DEL/2012 9 BECAUSE OF CERTAIN IMPEDIMENTS CAUSED BY AUDITORS, COULD NOT PRODUCE THE ACCOUNTS. THE ASSESSEES GROSS RECEIPTS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND HE HAS ALSO NOT POINTED OUT ANY SPECIFI C ITEM FOR WHICH THE ASSESSEE WAS NOT ABLE TO PRODUCE THE DETAILS. THE ASSESSING OFFICER HAD ALSO ACCEPTED THE ASSESSEES OFFER OF TAKING THE INCOME AT 8% WHICH WAS PURELY ON ESTIMATE BASIS. IT IS WELL SETTLED LAW THAT AN ADDITION SOLELY ON ESTIMATE BASIS WITHOUT THERE BEING ANY MISTAKE POINTED OUT B Y THE ASSESSING OFFICER IN THE ACCOUNTS OF ASSESSEE CANNOT BE A BASIS FOR I MPOSING PENALTY. THE ASSESSEE MADE DISCLOSURE WITHOUT ANY SPECIFIC DETEC TION OF CONCEALED INCOME BY THE ASSESSING OFFICER. THEREFORE, IT IS CLEAR T HAT THE ASSESSEE HAD SURRENDERED THIS AMOUNT SOLELY TO AVOID ANY LITIGAT ION. UNDER SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE S CONDUCT WAS MALA FIDE IN ANY MANNER. 13. IN VIEW OF ABOVE DISCUSSION, I AM OF THE OPINI ON THAT IT IS NOT A FIT CASE FOR IMPOSITION OF PENALTY. AS I HAVE ALLOWED THE A SSESSEES APPEAL ON MERITS, THERE IS NO NECESSITY TO RESTORE THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR DECIDING THE ALTERNATE GROUND RAISED BY ASSESSEE. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30/08/2012 SD/- (S.V.MEHROTRA) ACCOUNTANT MEMBER DATED: 30/08/2012 *AMIT KUMAR* I.T.A .NO.1936/DEL/2012 10 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI