ITO, V. M/s. Abhay Mishra,

ITA 214/JAB/2008

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1003 (ITAT-JABALPUR)
• Duration Of Justice: 10 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 25-06-2008
• Court: TRIBUNAL
• Department Lawyers: CO SATNA; B K NEMA; SUNIL NEMA S S R NEMA
• Assessee Lawyers: ABHISHEK SHUKLA
• Keywords: Depreciation; Opportunity of being heard; Opportunity of cross examination; Wrong claim
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE SHRI JOGINDER SINGH,(JM) AND SHRI R.C. SHAR MA (AM) I.T.A. NOS. 213 & 214/JAB/2008 ASSESSMENT YEAR: 2003-04 & 20 04-05 THE INCOME TAX OFFICER, WARD-1, REWA, M.P. VS. M/S. ABHAY MISHRA, CONTRACTOR, ARJUN NAGAR, REWA, M.P. PAN/GIR NO. : AAHFA 8856 F ( APPELLANT) .. RESPONDENT) APPELLANT BY : SHRI B.K.NEMA & SHRI SUNIL NEMA, ADVOCATES, S.R.NEMA & CO., SATNA RESPONDENT BY : SHRI ABHISHEK SHUKLA DATE OF HEARING : 12/ 09/2013 DATE OF PRONOUNCEMENT : 31/10/20 13 O R D E R PER R.C.SHARMA, AM: THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEARS 2003-04 AND 2004-05 IN THE MATTER OF PENALTY IMPOSED U/S 271(1)(C) OF THE INCO ME-TAX ACT, 1961. M/S. ABHAY MISHRA - I.T.A.NO. 213/JAB/2008 A. Y. 2 003-04 : 2. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECOR DS PERUSED. THE FACTS FOR THE ASSESSMENT YEAR 2003-04 ARE THAT ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 2 PAGE 2 OF 15 ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS. 1,28,36,430/- AS AGAINST RETURNED INCOME OF RS. 4,8 8,199/-. OUT OF VARIOUS AMOUNTS ADDED, CIT (A) SUSTAINED THE FOL LOWING ADDITIONS. (I) DISALLOWANCE OF RS 29804/- OUT OF PAYMENT OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCES TO SHRI UDAY PRAK ASH MISHRA AND MISS NIDHI MISHRA OUT OF INTEREST BEARIN G FUNDS. (II) DISALLOWANCE OF RS 72,922/- OUT OF DEPRECIAT ION ON MACHINERY FOR REASONS THAT THE PARTY FROM WHOM MACHINERY WAS PURCHASED ON WHICH DEPRECIATION HAS BEEN CLAIMED DENIED SALE OF MACHINERY TO THE APPELLANT, AND - (III) RS. 26,74,270/- ON ACCOUNT OF WORK IN PROGRES S NOT CONSIDERED IN COMPUTATION OF TOTAL INCOME. THE A.O. HAS LEVIED PENALTY U/S 271(1)(C) ON THE AMOUNT CONFIRMED BY CIT (A). 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) CANCELLED THE PENALTY AFTER HAVING THE FOLLOWING OBSERVATIONS :- THE SPECIFIC SUBMISSIONS WHY PENALTY U/S 271(1)(C) IS NOT ATTRACTED ON ANY OF THE THREE AMOUNT CONFIRMED IN ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 3 PAGE 3 OF 15 APPEAL ARE AS FOLLOWS: ADDITION ON WHICH PENALTY HAS BEEN LEVIED APPELLANT'S SUBMISSION MY DECISION RS 29804/- ON ACCOUNT OF DISALLOWANCE OF INTEREST CIT( A) ERRED IN CONFIRMING THE DISALLOWANCE. HE IGNORED THE FACT THE APPELLANT HAD SUFFICIENT CAPITAL BALANCE TO GIVE THE ADVANCE TO HIS CHILDREN UDAY & NIDHI FROM HIS CAPITAL ACCOUNT. THE APPELLANT IS IN SECOND APPEAL BEFORE THE ITAT ON THIS ISSUE. THE DISALLOWANCE CAN BE SAID TO BE OF ROUTINE NATURE. IT HAS BEEN HELD . BY THE IT AT, JABALPUR BENCH IN CHANDRA PRASAD LIQUOR CONTRACTOR VIS ACIT-INV- BILASPUR, ITA NO. 197/JAB/2001 THAT DISALLOWANCE ON GROUND THAT EXPENSES ARE NOT ALLOWABLE UNDER THE ACT ARE NOT THE SAME THING AS CONCEALMENT OF INCOME ATTRACTING PENALTY U/S 271(1)(C) IN THE INSTANT CASE, IT CANNOT BE SAID THAT APPELLANT HAD RESORTED TO SUBTERFUGE TO REDUCE HIS TAXABLE INCOME. PENALTY U/S 271 (1 )(C) CANNOT BE SAID TO BE ATTRACTED FOR THIS DISALLOWANCE. ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 4 PAGE 4 OF 15 RS 72,922/- OUT OF DEPRECIATION ON MACHINERY. ACCOUNTS HAVE BEEN AUDITED AND AUDITORS HAVE FOUND NOTHING WRONG WITH THE CLAIM. THE DISALLOWANCE HAS BEEN MADE BECAUSE SUPPLIER OF MACHINERY HAS DENIED HAVING SOLD THE MACHINERY TO THE APPELLANT. TWO ISSUES EMERGE OUT HERE. THE FIRST IS APPELLANT IS IN POSSESSION OF THE MACHINERY AND IS BEING USED FOR PURPOSES OF BUSINESS. IF THE SUPPLIER HAS NOT SUPPLIED THE MACHINERY, HOW COULD THE APPELLANT BE IN POSSESSION OF THE MACHINERY? THE SECOND ISSUE IS THAT THE LETTER OF SUPPLIER DENYING THE SALE OF MACHINERY TO THE APPELLANT WAS COLLECTED BEHIND THE ASSESSEE'S BACK. IT WAS NOT CONFRONTED TO HIM BEFORE FINALIZATION OF HIS ASSESSMENT. AT LEAST WHEN PENALTY IS BEING THE RECORDS OF THE ASSESSEE SHOW PURCHASE OF THE MACHINERY IN CASH. IT IS QUITE POSSIBLE THAT THE SUPPLIER HAS DENIED HAVE SOLD THE MACHINERY TO THE APPELLANT BECAUSE HE HAS HIMSELF NOT RECORDED SALE OF THE SAME IN HIS REGULAR BOOKS OF ACCOUNT TO AVOID PAYMENT OF SALES TAX OR EXCISE DUTY. LEVY OF PENALTY REQUIRES A STRICTER DEGREE OF PROOF THAN THAT OF MAKING OF QUANTUM ADDITION IN ASSESSMENT ORDER. SINCE APPELLANT WAS NOT GIVEN OPPORTUNITY OF CROSS EXAMINATION OF THE SUPPLIER BEFORE LEVY OF PENALTY U/S 271 (1)(C ) AND THE PENALTY HAS BEEN LEVIED MERELY BECAUSE ADDITION OF QUANTUM HAS BEEN CONFIRMED BY CIT(A), THE PENALTY LEVIED ON ACCOUNT OF ALLEGED WRONG CLAIM OF ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 5 PAGE 5 OF 15 LEVIED, THE AO WAS DUTY BOUND TO HAVE ALLOWED THE ASSESSEE OPPORTUNITY OF CROSS EXAMINING THE SUPPLIER. THIS NOT HAVING BEEN DONE, DECISION OF THE HON'BLE SUPREME COURT IN KISHANCHAND CHELARAM 125 ITR 713 (SC) ALONG WITH ORDER OF JURISDICTIONAL TRIBUNAL ON THE SAME ISSUE RELIED UPON. DEPRECATION STANDS DELETED. RS 26,74,270/- ON ACCOUNT OF WORK IN PROGRESS COUNSEL OF THE APPELLANT SUBMITTED THAT ADDITION WAS SUSTAINED BECAUSE WORK IN PROGRESS IS NECESSARY TO BE TAKEN INTO ACCOUNT FOR DERIVING CORRECT PROFIT OF AN ENTERPRISE IN A GIVEN FINANCIAL YEAR. ADJUSTMENT ON ACCOUNT OF WORK IN PROGRESS COULD HAVE RESULTED IN EITHER INCREASE OR DECREASE IN PROFIT DURING THE YEAR UNDER CONSIDERATION, BUT I AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE APPELLANT. SINCE INCEPTION, THE APPELLANT WAS NOT TAKING INTO ACCOUNT WORK IN PROGRESS FOR PURPOSES OF COMPUTATION OF TOTAL INCOME. THIS DEFINITELY DOES NOT GIVE THE ACCURATE PROFIT OF BUSINESS CALCULATED AS PER MERCANTILE SYSTEM OF ACCOUNTANCY IN A GIVEN FINANCIAL YEAR, BUT OVERALL IMPACT OF NOT ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 6 PAGE 6 OF 15 OVERALL IMPACT OF ADDITION ON ACCOUNT OF WORK IN PROGRESS OVER A LARGE NUMBER OF YEARS IS NEGLIGIBLE. THERE CAN NO DELIBERATE CONCEALMENT OF INCOME BY NOT TAKING INTO ACCOUNT WORK IN PROGRESS WHILE COMPUTING TOTAL INCOME BECAUSE VARIATION OF PROFITS OR LOSSES ON ACCOUNT OF ADJUSTMENT OF WORK IN PROGRESS WOULD NULLIFY EACH OTHER OVER A PERIOD OF TIME AND OVERALL PROFITS DISCLOSED BY THE ASSESSEE OVER A PERIOD OF TIME WOULD BE ONE AND THE SAME. HENCE, PENALTY U/S 271(1)( C) CANNOT BE ATTRACTED IN THIS CASE. COUNSEL ALSO RELIED ON TAKING INTO CONSIDERATION WORK IN PROGRESS IN COMPUTATION OF TOTAL INCOME OVER A NUMBER OF YEARS IS NEGLIGIBLE. IT IS QUITE POSSIBLE THAT APPELLANT DID NOT GET BEST PROFESSIONAL ADVICE AS TO HOW HIS ACCOUNTS HAVE TO BE MAINTAINED FOR WHICH REASON HE DID NOT TAKE INTO CONSIDERATION IMPACT OF WORK IN PROGRESS WHILE COMPUTING HIS TOTAL INCOME. BUT BECAUSE OVERALL IMPACT OF NOT TAKING INTO CONSIDERATION WORK IN PROGRESS IN COMPUTATION OF TOTAL INCOME OVER A NUMBER OF YEARS IS NEGLIGIBLE, APPELLANT CANNOT BE SAID TO BE GUILTY OF HAVING DELIBERATELY CONCEALED PARTICULARS OF HIS INCOME. HENCE THE PENALTY STANDS QUASHED. IN RESULT, THE APPEAL IS ALLOWED. ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 7 PAGE 7 OF 15 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT PENALTY WAS IMPOSED BY THE ASSESSING OFFICER WITH REF ERENCE TO DISALLOWANCE OF INTEREST OF RS. 29,804/-. ASSESSEES CLAIM OF INTEREST WAS DISALLOWED, BECAUSE IT WAS NOT ALLOWABLE UNDER THE INCOME-TAX ACT, 1961. IT IS NOT THE CASE OF ASSESSING OFFICER THAT E XPENDITURE HAS NOT BEEN INCURRED. THE LD. CIT(A) FOUND THAT DISA LLOWANCE WAS OF ROUTINE NATURE, DISALLOWANCE ON THE GROUND THAT EXP ENSES ARE NOT ALLOWABLE UNDER THE ACT ARE NOT THE SAME THING AS CONCEA LMENT OF INCOME ATTRACTING PENALTY U/S 271(1)(C). THE LD. CIT(A ) FURTHER FOUND THAT IN THE INSTANT CASE, IT CANNOT BE SAID THAT THE ASSESS EE HAD RESORTED TO SUBTERFUGE TO REDUCE HIS TAXABLE INCOME. LE VY OF PENALTY FOR DISALLOWANCE OF INTEREST EXPENDITURE WAS HELD TO BE NOT JUSTIFIED BY HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LIMITED, 322 ITR 158. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING PENALTY LEVIED WITH R EFERENCE TO DISALLOWANCE OF INTEREST. 5. WITH REGARD TO DENIAL OF DEPRECIATION ON MA CHINERY AMOUNTING TO RS. 72,922/-, WE FOUND THAT THE ASSESSEE H AS ACTUALLY PURCHASED THE MACHINERY, WHICH WAS USED IN THE BUSINE SS. HOWEVER, SINCE THE SUPPLIER HAS NOT FILED CONFIRMATIO N, THE ASSESSING OFFICER DISALLOWED CLAIM OF DEPRECIATION O N SUCH MACHINERY. FACT THAT THE ASSESSEE HAD ACTUALLY PURCHASE D THE MACHINE AND THE SAME WAS CONTINUOUSLY USED IN THE BUSI NESS OF ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 8 PAGE 8 OF 15 CONTRACTOR-SHIP IS NOT IN DISPUTE. THE LD. CIT(A) OBSER VED THAT THE ASSESSEE HAD SHOWN PURCHASE OF MACHINERY IN CASH AN D IT IS QUITE POSSIBLE THAT THE SUPPLIER HAS DENIED HAVING SOLD THE M ACHINERY TO THE ASSESSEE, BECAUSE HE HAS HIMSELF NOT RECORDED SAL ES IN HIS REGULAR BOOKS TO AVOID PAYMENT OF SALES TAX OR EXCISE DUTY. LEVY OF PENALTY REQUIRES STRICTURES DECREE OF PROOF THAN THAT OF MAKING OF QUANTUM ADDITION IN ASSESSMENT ORDER. THE LD. CIT(A) ALSO FOUND THAT THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO CROSS-EXA MINE THE SUPPLIER BEFORE LEVY OF PENALTY U/S 271(1)(C) AND TH E PENALTY HAS BEEN LEVIED MERELY BECAUSE ADDITION OF QUANTUM HAD B EEN CONFIRMED BY CIT(A). UNDER THESE FACTS AND CIRCUMSTANC ES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) DELETIN G PENALTY IMPOSED WITH REFERENCE TO THE DISALLOWANCE OF CLAIM O F DEPRECIATION. 6. WITH REGARD TO ADDITION MADE ON ACCOUNT OF V ALUATION OF WORK IN PROGRESS, WE FOUND THAT SINCE INCEPTION OF BUS INESS, THE ASSESSEE WAS NOT TAKING INTO ACCOUNT WORK-IN-PROGRESS W HILE COMPUTING TOTAL INCOME. THE LD. CIT(A) FOUND THAT ASSESS EE WAS ENGAGED IN CIVIL CONTRACT BUSINESS AND OVER-ALL IMPAC T OF NOT TAKING INTO CONSIDERATION THE WORK IN PROGRESS IN COMPUTATION OF TOTAL INCOME OVER A NUMBER OF YEARS IS NEGLIGIBLE, THEREFO RE, ASSESSEE CANNOT BE SAID TO BE GUILTY OF HAVING DELIBERATELY CO NCEALED PARTICULARS OF HIS INCOME. CONSIDERING THE FACTS AND C IRCUMSTANCES DISCUSSED BY THE LD.CIT(A), WE DO NOT FIND ANY INFIRM ITY IN HIS ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 9 PAGE 9 OF 15 ORDER FOR DELETING THE PENALTY LEVIED WITH REFERENCE TO ADDITION SUSTAINED ON ACCOUNT OF VALUATION OF WORK IN PROGRESS . 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. M/S. ABHAY MISHRA - I.T.A.NO. 214/JAB/2008 A.Y. 2 004-05: 8. THE FACTS OF ASSESSMENT YEAR 2004-05 ARE THAT ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF RS 2,99,27,460/- AS AGAINST RETURNED INCOME OF RS 4,77 ,700/-. THE CIT(A) HELD THAT ON FACTS OF THIS CASE, BOOK RE SULTS CAN BE REJECTED BUT HE ESTIMATED PROFIT AT 7% OF CONTRACT RECEIPTS BEFORE SALARY AND INTEREST TO PARTNERS AND CLAIM OF DEPRECIATION. WHILE DECIDING THE QUANTUM APPEAL, TH E CIT(A) HAD HELD THAT AN ADDITION OF RS 15,99,485/- ON ACCO UNT OF SUPPRESSED WORK IN PROGRESS IS REQUIRED TO BE MADE TO CLOSING WORK IN PROGRESS WHILE COMPUTING THE PROFIT . THE A.O. HAS LEVIED PENALTY WITH REFERENCE TO TWO AMOUNTS, T HE FIRST IS RS 15,99,485/- WHICH IS ON ACCOUNT OF ALLEGED SUPPR ESSION OF CLOSING WORK IN PROGRESS, THE OTHER IS RS. 20,89,48 5/- ON ACCOUNT OF CLOSING WORK IN PROGRESS. THE PENALTY HA S BEEN WORKED OUT AT MINIMUM RATE BY ASSUMING THE SUMS OF RS. 15,99,485/- AND RS. 20,89,485/- TO BE THE CONCEALED INCOME ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 10 PAGE 10 OF 15 OF THE ASSESSEE. 9. WITH REGARD TO THE ADDITION OF RS 15,99,485/-, THE FACTS ARE THAT THE ASSESSEE IS A GOVERNMENT CONTRACTOR. I N AUDITED ACCOUNTS, WORK IN PROGRESS HAS BEEN SHOWN AT RS 4,90,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD REFERRED THE CASE OF THE APPELLANT TO THE JT. CIT-R G-SATNA FOR DIRECTIONS U/S 144. ASSESSEE WHILE GIVING DIRECTION S U/S 144A, THE JT.CIT COLLECTED INFORMATION FROM VARIOUS CONTR ACTEE DEPARTMENTS ON WORK COMPLETED AND MEASURED BEFORE 3 1 ST OF MARCH 2004 BUT FOR WHICH BILLS WERE PASSED AFTER 1 ST APRIL 1, 2004. THE TOTAL OF SUCH PAYMENT AS REPORTED BY THE CONTRACTEE DEPARTMENTS WAS RS 20,89,485/-. ON THIS BASIS THE JT. CIT HAD DIRECTED THE AO TO ADD RS 15,99,485/- AS SUPPRESSED WORK IN PROGRESS TO TOTAL INCOME OF THE ASSESSEE. THE INFOR MATION WAS COLLECTED BY THE JT.CIT AT THE BACK OF THE ASSESSEE . IT WAS NOT CONFRONTED TO HIM AT THE TIME OF PROCEEDINGS U/S 14 4-A. WHILE GIVING DIRECTIONS, THE JT. CIT DIRECTED THE AO THAT BEFORE PASSING OF THE ASSESSMENT ORDER, HE SHOULD GIVE THE ASSESSE E OPPORTUNITY OF BEING HEARD AND THE TOTAL INCOME COMPUTED AFTER HEARING THE ASSESSEE. THE INSTRUCTION OF THE JT.CIT WAS RECEIVE D BY THE AO ON 29-12-2006. THE ASSESSMENT ORDER OF THE AO IS DATED 29-12- ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 11 PAGE 11 OF 15 2006. 10. WHILE ADJUDICATING THE QUANTUM APPEAL, THE CIT [A] DID NOT CONFIRM ANY SPECIFIC ADDITION. HE HELD THAT THIS IS CASE WHERE BOOK RESULTS CAN BE REJECTED. HE DIRECTED THA T NET INCOME OF THE ASSESSEE BE DETERMINED AT 7% OF CONTRACT REC EIPTS (BEFORE ALLOWING INTEREST AND SALARY TO PARTNERS AND CLAIM OF DEPRECIATION) AND FROM WHICH ADJUSTMENT FOR OPENING AND CLOSING WORK IN PROGRESS HAS TO BE MADE. WHILE ADJUDICATING THE APPEAL, THE CIT(A) HAD HOWEVER HELD THAT THE SUM OF RS 15,99,485/- WHICH THE CONTRACTEE DEPARTMENTS HAD CERTIFIED AS W ORK DONE BEFORE 31 ST MARCH 2004 FOR WHICH PAYMENT HAS BEEN MADE AFTER 1 ST APRIL-04, HAS TO BE ADDED TO CLOSING WORK IN PROGR ESS WHILE COMPUTING TOTAL INCOME OF THE ASSESSEE. AS ALREADY MENTIONED EARLIER, THE AO HAS LEVIED PENALTY WITH REFERENCE T O BOTH SUMS RS. 15,99,484/- AND ALSO RS.20,89,485/-. 11. BY THE IMPUGNED ORDER, THE LD. CIT(A) CANCELLE D THE PENALTY AFTER HAVING THE FOLLOWING OBSERVATIONS :- DECISION: THE ASSESSEE IS A GOVERNMENT CONTRACTOR. ALL PAYMENT FOR WORK DONE IS RECEIVED BY CHEQUE. IT IS N OT THE CASE OF THE DEPARTMENT THAT THE ASSESSEE IS SUPPRES SING THE PART OF HIS RECEIPTS BY CREDITING SUM OF THE CHEQUE S TO A ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 12 PAGE 12 OF 15 SEPARATE BANK ACCOUNT AND NOT INCLUDING THEM AS PAR T OF HIS RECEIPTS. THEREFORE, TO SAY THAT WORK IN PROGRESS T O THE EXTENT OF RS. 15,99,485/- WAS NOT SHOWN IN ACCOUNTS TO DELIBERATELY EVADE PAYMENT OF TAX IS DIFFICULT TO BELIEVE BECAUSE IF THE RECEIPT IS NOT INCLUDED IN ACCOUNTS OF ONE FINANCIAL YEAR, IT WOULD HAVE BEEN INCLUDED IN THE ACCOUNTS OF THE NEXT FINANCIAL YEAR . THE EXPLANATION OF THE APPELLANT THAT THE CONTRACTE E DEPARTMENTS INFLATED THE STATISTICS OF MEASUREMENT TO SHOW ACHIEVEMENT OF TARGET BY YEAR END CANNOT BE DISMISSED OFF HAND IN ABSENCE OF ALLOWING APPELLANT OPPORTUNITY OF CROSS EXAMINATION OF THE CONTRACTEE DEPARTMENTS. WHEN THIS HAS NOT BEEN DONE , THE EVIDENCE GATHERED FROM THE CONTRACTEE DEPARTMEN T CANNOT BE USED AGAINST THE APPELLANT ESPECIALLY IN PENALTY PROCEEDINGS. FOR REASONS (I) THAT THE ALLEG ED SUPPRESSION OF THE SO CALLED WORK IN PROGRESS OF RS 15,99,485/- CANNOT BE SAID TO HAVE BEEN DONE WITH T HE MOTIVE OF KEEPING THE CORRESPONDING CONTRACT PAYMEN T ENTIRELY OUTSIDE THE SYSTEM OF ACCOUNTS OF THE APPE LLANT AND (II) THAT THE INFORMATION REGARDING SO CALLED ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 13 PAGE 13 OF 15 SUPPRESSION OF WORK IN PROGRESS WAS COLLECTED BEHIN D APPELLANT'S BACK AND APPELLANT WAS NEVER ALLOWED OPPORTUNITY OF CROSS EXAMINATION OF THE CONTRACTEE DEPARTMENTS, THE PENALTY LEVIED ON THIS AMOUNT STAN DS DELETED. AS FAR AS THE LEVY OF PENALTY OF RS 20,89, 485/- IS CONCERNED, IT IS QUITE CLEAR THAT THE SUCCESSOR AO NEVER BOTHERED EVEN TO READ THE ORIGINAL ASSESSMENT ORDER OR THE ORDER OF THE CIT(A) ON THE QUANTUM ADDITION. THE AMOUNT OF RS 20,89,485/- WAS NEVER ADDED IN ORIGINAL ASSESSMENT ORDER AND WAS NEVER CONFIRMED IN FIRST APPEAL. HENCE, LEVY OF PENALTY O N THIS AMOUNT IS TOTALLY MISCONCEIVED. ADDL. CIT-RG-SATNA HAS ALSO GIVEN APPROVAL TO THE AO ON LEVY OF THIS PENAL TY MECHANICALLY. THE LEVY OF PENALTY ON THIS AMOUNT STANDS DELETED. 12. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND REC ORDS PERUSED. WE FOUND THAT ADDITION OF RS. 15,99,485/- WAS SUSTAINED ON ACCOUNT OF VALUATION OF WORK IN PROGRE SS. THIS ADDITION WAS DONE ON THE BASIS OF MEASUREMENT DONE BY THE CONTRACTEE DEPARTMENT, AS AT THE END OF THE YEAR, P AYMENT OF WHICH WAS RECEIVED BY THE ASSESSEE IN THE SUBSEQUEN T YEAR. ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 14 PAGE 14 OF 15 SUCH MEASUREMENT OF WORK IN PROGRESS WAS DONE BY CO NTRACTEE DEPARTMENT BEHIND THE BACK OF THE ASSESSEE AND INFO RMATION WAS COLLECTED BY THE ASSESSING OFFICER BEHIND THE A SSESSEE AND WITHOUT GIVING HIM OPPORTUNITY TO CROSS EXAMINE, TH E ADDITION WAS MADE. THE LD. CIT(A) ALSO OBSERVED THAT EVEN AS PER DIRECTION OF ADDITIONAL CIT U/S 144A, THE ASSESSING OFFICER WAS REQUIRED TO GIVE OPPORTUNITY TO THE ASSESSEE BEFORE MAKING THE ADDITION. SUCH DIRECTION WAS GIVEN TO JT. CIT ON 29 .12.2006 AND THE ASSESSING OFFICER PASSED ORDER MAKING ADDITION ON 29.12.2006 ITSELF WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE. UNDER THESE CIRCUMSTANCES, THE LD. CIT(A) FOUND THA T ADDITION ON THE BASIS OF ESTIMATION/MEASUREMENT OF WORK IN P ROGRESS, WHICH WAS DONE WITHOUT ALLOWING ASSESSEE TO CROSS E XAMINE THE CONTRACTEE DEPARTMENT WILL NOT FIT FOR LEVY OF PENA LTY U/S 271(1)(C). FROM THE RECORD, WE ALSO FOUND THAT CONT RACTEE DEPARTMENT INFLATED THE STATICS OF MEASUREMENT TO S HOW ACHIEVEMENT OF TARGET BY THE YEAR END. ACCORDINGLY, IT WAS NOT A FIT CASE FOR LEVY OF PENALTY IN RESPECT OF ADDITION MADE FOR THE VALUATION OF WORK IN PROGRESS MADE BY THE ASSESSING OFFICER ON THE BASIS OF MEASUREMENT DONE BY THE CONTRACTEE DEP ARTMENT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR CANCELLING ABHAY MISHRA, CONTRACTOR, I.T.A.NOS. 166 AND 187/JA B/2007 ASSESSMENT YEARS 2004-05 15 PAGE 15 OF 15 THE PENALTY WITH REFERENCE TO THE ADDITION OF RS. 15,99,485/-. HOWEVER, THERE IS NO SEPARATE ADDITION OF RS. 20,89 ,485/-, ACCORDINGLY, THE ASSESSING OFFICER WAS NOT JUSTIFIE D FOR LEVY PENALTY WITH REFERENCE TO THIS ADDITION. ACCORDING LY, THE LD. CIT(A) WAS JUSTIFIED FOR DELETING PENALTY WITH REFE RENCE TO THIS AMOUNT OF RS. 28,89,485/-WHICH WAS NOT ADDED WHILE FRAMING THE ASSESSMENT. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2013. SD/- SD/- ( JOGINDER SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED :31/10/2013 CPU* 23242831