Metropolitan Engg. Co-opt. Society Ltd., Nadia V. ACIT, Circle - Nadia, Nadia

ITA 2172/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54489 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2001-2002
• Appeal Filed On: 07-12-2010
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: A K CHAKRABORTYP S GUPTAD SAHA
• Keywords: Rejection of books of accounts; Business expenditure; Income from undisclosed sources; Assessment record

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE . . , ! '# '# '# '# /AND ' # , ! ) [BEFORE HONBLE SHRI S. V. MEHROTRA, AM & HONBLE S RI MAHAVIR SINGH, JM] #$ #$ #$ #$ / I.T.A NOS. 2172 & 2173/KOL/2010 %& ''( %& ''( %& ''( %& ''(/ // / ASSESSMENT YEAR: 2001-02 METROPOLITAN ENGG. CO-OPT. SOCIETY LTD. VS. ASSIS TANT COMMISSIONER OF INCOME-TAX, (PAN-AAEFM 4520 H) CIRCLE-NADIA. (*+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: S/SHRI A. K. CHAKRABORTY/P.S.GUPTA/D. SAHA FOR THE RESPONDENT: SHRI S. K. ROY . / ORDER PER MAHAVIR SINGH, JM ( ' # ' # ' # ' #, , , , ! ! ! ! ) THESE APPEALS BY ASSESSEE ARE ARISING OUT OF ORDERS OF CIT(A)-XXXVII, KOLKATA IN APPEAL NO.1087/SET ASIDE/CIT(A)-XXXVI/KOL/NADIA/09- 10 AND 1086/SET ASIDE / CIT(A)- XXXVI/KOL/37/NADIA/09-10 VIDE DATED 15.09.2010. ASS ESSMENT WAS FRAMED BY ACIT, CIRCLE- NADIA U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2001-02 VIDE HIS ORDER DATED 31.03. 2004. PENALTY UNDER DISPUTE WAS LEVIED BY ACIT, CIRCLE-NADIA U/S 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 29.09.2004. FOR THE SAKE OF BREVITY, WE DISPOSE OF BOTH THESE APPEALS BY THIS C ONSOLIDATED ORDER. 2. FIRST WE TAKE UP ITA NO.2172/KOL/2010. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF ASSESSING OFFICER IN ESTIMATING NET INCOME FROM WORK CONTRACT OF THE ASSESSEE @ 10% ON GROSS CONTRACT RECEIPTS. FOR THIS, THE ASSESSEE RAISED FOLLOWING GROUNDS: 1) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE 1D. C.I.T.(APPEALS) WAS NOT FAIR AND PROPER AND ON THE OTHER HAND IT WAS MADE CONTRARY TO 1AW, SOUND AND ADEQUATE PRINCIPLES. 2) FOR THAT THE LD. C.I.T.(APPEALS) WAS NOT AT ALL JUSTIFIED IN DETERMINING THE NET INCOME OF THE WORKS CONTRACT BUSINESS OF THE APPELLANT @ 1 0% OF THE GROSS CONTRACT RECEIPTS OF RS. 1,40,59,952.00 AS PER WHICH THE PROFIT WAS DETE RMINED AT RS. 14,05,995.00. 3) FOR THAT THE LD. C.I.T.(APPEALS) FAILED TO CONSI DER THE RATE OF NET PROFIT OF THE WORKS CONTRACT BUSINESS OF THE APPELLANT FOR THE PREVIOUS ASSESSMENT YEARS BEFORE ESTIMATING AND DETERMINING THE NET PROFIT @ 10% FOR THE YEAR U NDER APPEAL. 2 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 4) FOR THAT BOTH THE LD. C.I.T.(APPEALS) WAS NOT AT ALL JUSTIFIED IN MAKING THE ADDITION OF RS.10,86,736.00 IN RESPECT OF THE WORKS CONTRACT BU SINESS OF THE APPELLANT. 5) FOR THAT THE LD. C.I.T.(APPEALS) OUGHT TO HAVE C ONSIDERED THE WRITTEN SUBMISSION MADE BY THE APPELLANT AT THE APPELLATE STAGE AND ALSO TH E PAST RECORDS OF THE APPELLANT BEFORE MAKING THE ADDITION OF RS. 10,86,736.00 BY VIRTUE OF ESTIMATING THE PROFIT OF THE WORKS CONTRACT BUSINESS @ 10% OF THE GROSS RECEIPTS WITHO UT PASSING A SPEAKING ORDER IN RESPECT OF ESTIMATING THE PROFIT AT A HIGH RATE. 6) FOR THE BOTH THE LD. C.I.T.(APPEALS) AND THE LD. ASSESSING OFFICER EARED BOTH IN POINTS LAW AND ON FACTS. 3. THE BRIEF FACTS ARE THAT ASSESSEE IS AN ENGINEER S COOPERATIVE SOCIETY AND IS ENGAGED IN THE BUSINESS OF EXECUTION OF WORKS CONTRACT AND RET AIL DISTRIBUTION OF LIQUID PETROLEUM GAS AND MANUFACTURING OF BRICKS AND P.C.C. POLES CASTING. IT IS ALSO CARRYING ON BUSINESS OF EXECUTION OF WORKS CONTRACT AND LABOUR CONTRACT IN DISTRICT N ADIA AND DURING THE YEAR UNDER CONSIDERATION, IT RECEIVED GROSS WORK CONTRACT PAYMENT OF RS.1,40, 59,952/- FROM VARIOUS WORK AWARDED BY DEPARTMENTS OF GOVT. OF WEST BENGAL. OUT OF THE SA ID GROSS PAYMENT OF RS. 1,40,59,952/-, ASSESSEE DECLARED GROSS PROFIT @ 8.77%, WHICH COMES TO THE TUNE OF RS.12,33,042/- AND AFTER DEDUCTION OF ALL BUSINESS EXPENSES IT DISCLOSED NET PROFIT OF RS.3,19,261/- THAT IS @ 2.27% OF THE GROSS BILL RECEIVED. IT ALSO DISCLOSED THE TOTA L NET PROFIT OUT OF THE OTHER BUSINESS AS UNDER: I) WORKS CONTRACT BUSINESS RS.3,19,261.00 II) BRICK MFG. BUSINESS RS. 2,536.37 III) RETAIL DISTRIBUTION OF LPG RS.1,93,181.42 IV) P.C.C. POLE MFG. BUSINESS RS.1,65,368.33 TOTAL RS.6,80,347.12 THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDING CONSIDERING THE NET PROFIT OF THE ASSESSEE AS LOW AND TO VERIFY ASSESSEES PROFIT IN THE LINE OF BUSINESS AND THE CORRECTNESS OF CLAIM REGARDING PURCHASE OF STONE CHIPS AND OTHER M ATERIALS, HE GOT ENQUIRY MADE BY ITO, BURDWAN, SURI, DISTRICT BIRBHUM IN RESPECT OF PURCH ASE OF STONE CHIPS FROM M/S. BHAGAT STONE WORKS AND SHRI SHAMBHU BHAKAT. ASSESSING OFFICER A LSO ISSUED SUMMONS U/S. 131 OF THE ACT TO M/S. PINKY ENTERPRISES, SHRI BIBHUTI SAHA AND SR I APU LODH. SHRI RAGHUNATH PRASAD, PARTNER OF BHAGAT STONE WORKS AND SHRI SHAMBHU BHAG AT BEFORE THE ASSESSING OFFICER ADMITTED THAT THEY HAVE NOT ENTERED INTO ANY TRANSA CTION WITH THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION PARTICULARLY THE PURCHASES DISCLOSED BY THE ASSESSEE. SIMILARLY, SHRI BIBHUTI SAHA, SHRI APU LODH AND M/S. PINKY ENTERPRISES ALSO CLEARLY ADMITTED THAT THEY HAVE NOT ENTERED INTO ANY TRANSACTION OF PURCHASE AND SALE W ITH THE ASSESSEE REGARDING STONE CHIPS. IN VIEW OF THESE FACTS, ASSESSING OFFICER REFERRED THE MATTER BACK TO ASSESSEE FOR ITS COMMENTS BUT ASSESSEE COULD NOT STATE ANYTHING AND CONSIDERING A LL ASSESSING OFFICER CAME TO THE CONCLUSION THAT CLAIM OF THE ASSESSEE THAT HE HAS PURCHASED ST ONE CHIPS AND OTHER MATERIALS FROM THE ABOVE 3 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 CONCERNS IS NOT GENUINE, THEREFORE, THE AMOUNT SHOW N AS OUTSTANDING IS WITHOUT ANY BASIS. ACCORDINGLY, HE REJECTED THE BOOKS OF ACCOUNTS AND PROCEEDED TO ASSESS THE INCOME BY ESTIMATING THE INCOME. ASSESSING OFFICER MADE DISA LLOWANCE BY OBSERVING AS UNDER: SO, FROM THE ABOVE DISCUSSIONS AND DOCUMENTS AVAIL ED, IT IS CLEAR THAT IN THE CASE OF PINKY ENTERPRISES, ONE OF THE CREDITORS FOR TRANSPO RTATION WERE PAID RS.58,215/- DURING THE F.Y.2000-01 WHICH WERE NOT RECORDED IN THE CASH BOOK FROM UNDISCLOSED SOURCES. AND IN THE CASE OF OTHER LOAN CREDITORS NAMELY (1) SAMBHU BHAGAT RS.9,21,061/- (2) BHAGAT STONE WORKS RS. 2,640/- 3) BIBHUTI SAHA RS.4,43,800/- 4) APU LODH ALIAS ARPAN LODH RS.1,69,231/- EXPENSES DEBITED TO TRADING ACCOUNT WERE FALSE AND THE SOCIETY, THUS, SUPPRESSED THE GROSS PROFIT. AS A RESULT, THE ENTIRE AMOUNT OF RS .16,15,947/- IS ADDED TO NET PROFIT. S.CS NAME AMOUNT 1) PINKY ENTERPRISES RS. 58,215/- 2) SAMBHU BHAGAT RS. 9,42,061/- 3) BHAGAT STONE WORKS RS. 2,640/- 4) BIBHUTI SAHA RS. 4,43,800/- 5) APU LODH ALIAS ARPAN LODH RS. 1,69,231/- RS. 16,15,947/- SHRI M. L. BHOWMIK, A/R AND SHRI SOVAN ROY, DIRECTO R, ACCEPTED THE ADDITION OF RS.16,15,947/- AS INCOME FROM UNDISCLOSED SOURCES T O NET PROFIT. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO AFTER CONSIDERING REMAND REPORT OF ASSESSING OFFICER AS WELL AS SUBMISSIONS OF ASSESSEE ESTIMATED NET PROFIT AT 10% OF GROSS CONTRACT RECEIPTS BUT DELETED THE OTHER ADDIT IONS BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE. THE PREVIOU S YEAR UNDER CONSIDERATION IS 2000-01. IN OTHER WORDS MORE THAN 10 YEARS HAVE EL APSED. THEREFORE, ALLOWING CROSS EXAMINATION, NOW, IN MY VIEW DOES NOT SERVE ANY PUR POSE BECAUSE THE ALLEGED SUPPLIERS MAY NOT BE KEEPING OLD RECORDS WITH THEM NOW. I ALSO FIND FROM THE A/RS WRITTEN SUBMISSIONS, EXTRACTED ABOVE, THAT ALL THE NECESSARY BILLS AND VOUCHERS FOR THE PURCHASES AND OTHER PAYMENTS WERE ADMITTEDLY NOT MA INTAINED BY THEM AND THEREFORE THEY COULD NOT FURNISH THE SAME BEFORE THE A.O. FOR HIS SCRUTINY, AT THE TIME OF ASSESSMENT PROCEEDINGS. IN OTHER WORDS NON-FURNISHI NG OF ALL THE DETAILS AT THE TIME OF SCRUTINY PROCEEDINGS MADE THE SCRUTINY IN EFFECTIVE . CONSIDERING ALL, PARTICULARLY CONSIDERING THE FACTS THAT THE APPELLANT FAILED TO FURNISH NECESSARY EVIDENCE, FOR PURCHASE AND OTHER EXPENSES BEFORE THE AO AND ALSO CONSIDERING THE FACTS THAT WITHOUT THE PURCHASE OF STONE CHIPS AND OTHER MATERIAL THE APPELLANT COULD NOT HAVE EXECUTED CIVIL CONTRACT WO RKS AND FURTHER CONSIDERING THE FACT THAT THE NET PROFIT OF THE APPELLANTS CONTRAC T BUSINESS FOR THE YEAR WAS ONLY 2.27. I AM OF THE VIEW THAT ESTIMATING THE PROFIT FROM THE CIVIL CONTRACT BUSINESS OF THE APPELLANT @ 10% OF THE GROSS CONTRACT RECEIPTS WOUL D BE FAIR AND REASONABLE. ACCORDINGLY , THE AO. IS DIRECTED TO ESTIMATE THE P ROFIT OF THE APPELLANTS CONTRACT BUSINESS @ 10% OF THE GROSS CONTRACT RECEIPTS OF RS . 1,40,59,952/- AS PER WHICH THE PROFITS WORKS OUT AT RS. 14,05,995/-. 4 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 CONSIDERING THE NET PROFIT ADMITTED BY THE APPELLAN T IN THE RETURN AT 319261/- THE ADDITION IN THIS REGARD WOULD BE RS.10,86,734/-. AC CORDINGLY THE AO. IS DIRECTED TO RESTRICT THE ADDITION TO RS..10,86,734/- IN THE PLA CE OF RS. 16,15,947/-. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US, LD. COUNSEL FOR THE ASSESSEE FAIRLY STAT ED THAT A REASONABLE ESTIMATE TO NET PROFIT CAN BE MADE AND FOR THIS HE REFERRED NET PROFIT PERCENT AGE FOR EARLIER THREE YEARS RANGING 1.41% TO 1.92%, AS MAY BE SEEN FROM THE FOLLOWING TABLE: ASSESSMENT YEARS GROSS BILL RECEIVED NET PROFIT RATE OF NET PROFIT 1998-1999 1999-2000 2000-2001 2001-2002 71,03,860.00 1,21,37,121.00 1,21,76,378.00 1,40,59,952.00 1,00,425.40 9,17,448.00 2,34,873.00 3,19,261.00 1.41% ACCEPTED 1.08% DO 1.92% DO 2.27% ON ENQUIRY FROM THE BENCH, THE LD. COUNSEL FAIRLY S TATED THAT THESE WERE ACCEPTED U/S. 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENT WAS MADE. BUT L D. COUNSEL STATED THAT IN VIEW OF VERY SPECIFIC NATURE OF WORK CONTRACT BUSINESS, WHERE VE RIFICATION IS NOT POSSIBLE AND THE ONLY WAY OF COMPUTING INCOME FROM SUCH BUSINESS IS ONLY A REASO NABLE ESTIMATE CAN BE MADE BY APPLYING REASONABLE RATE OF PROFIT EXPECTED TO BE EARNED FRO M SUCH TYPE OF BUSINESS. LD. COUNSEL ALSO STATED THAT A FAIR ESTIMATE OF 5% TO NET PROFIT OUT OF GROSS RECEIPT WILL MEET ENDS OF JUSTICE. FOR THIS, HE STATED THAT PAYMENTS WERE RECEIVED FROM ST ATE GOVT. DEPARTMENT FOR CIVIL CONSTRUCTION WORK DONE AND ADMITTED. HE STATED THAT PURCHASES, LABOUR PAYMENTS AND TRANSPORT CHARGES EFFECTED THROUGH AFORESAID SUNDRY CREDITORS AMOUNTI NG TO RS.16,15,000/- AS HELD TO BE BOGUS WILL RESULT INTO ABNORMALLY HIGH PROFITS I.E. @ 15. 98% ON A TURNOVER OF RS.1,40,59,952/-. LD. COUNSEL FOR APPLYING A REASONABLE RATE OF NET PROFI T OF GROSS CONTRACT RECEIPT RELIED ON THE DECISION OF HONBLE ORISSA HIGH COURT DECISION IN T HE CASE OF CIT VS. NANDARAM HUNDATRAM (1976) 103 ITR 433 WHEREIN IT IS HELD THAT IF THE ASSESEE FAILED TO PRODUCE ACCEPTABLE ACCOUNTS, REVENUE WOULD BE JUSTIFIED IN ESTIMATING REAL INCOME AT CERTAIN PERCENTAGE OF GROSS RECEIPTS. LD. COUNSEL ALSO RELIED ON THE DECISION OF ROYAL MEDICAL HALL VS. CIT (1962) 46 ITR 748 (AP), WHEREIN IT IS HELD THAT ESTIMATE OF INCOME ON THE BASIS OF MATERIALS AVAILABLE AND THE PAST ASSESSMENT RECORD WAS HELD PROPER. 6. WE FIND THAT THE ASSESSEE IS AN ENGINEERING COOP ERATIVE SOCIETY AND ENGAGED IN THE BUSINESS OF EXECUTION OF WORK CONTRACTS INCLUDING R ETAIL DISTRIBUTION OF LPG AND MANUFACTURING OF BRICKS AND RCC POLE CASTING. IN VIEW OF THIS SP ECIFIC NATURE OF ASSESSEES BUSINESS AND AS CONCEDED BY LD. COUNSEL FOR THE ASSESSEE I.E. A FAI R AND REASONABLE ESTIMATE OF 6% OF NET PROFIT 5 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 OF GROSS CONTRACT RECEIPT WILL MEET THE ENDS OF JUS TICE AND WE ESTIMATE NET PROFIT AT 6%, IN VIEW OF FACTS AND CIRCUMSTANCES THAT ASSESSEES OUTSTAND ING SUNDRY CREDITORS ARE BOGUS AND BOOKS OF ACCOUNT REJECTED ARE NOT SUPPORTED BY VOUCHERS. AC CORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME BY APPLYING 6% OF NET PROFI T ON GROSS CONTRACT RECEIPTS. APPEAL OF THE ASSESSEE IS ALLOWED IN PART. 7. NOW, WE TAKE UP ITA NO.2173/KOL/2010. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING LEVY OF P ENALTY U/S. 271(1)(C) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING SEVEN GROUNDS: 1) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. C.I.T.(APPEAL) CONFIRMING THE PENALTY ORDER PASSED BY THE LD. A.C.I.T., CIRCLE- NADIA WAS NOT FAIR & PROPER AND ON THE OTHER HAND IT WAS MADE CONTRARY TO LAW, SOUND AND ADEQUATE PRINCIPLES. 2) FOR THAT THE LD. C.I.T.(APPEAL) WAS NOT AT ALL P ROPER AND JUSTIFIED IN CONFIRMING THE PENALTY U/S. 271(1)(C ) OF THE I.T. ACT, 1961 AND P ASSING THE ORDER FOR RE-COMPUTING THE PENALTY @ 100% ON ESTIMATED INCOME OF RS. 10,86,734 .00. 3) FOR THAT THE REASONS ADDUCED BY THE LD. C.I.T.(A PPEAL) IN SUPPORT OF CONFIRMING THE PENALTY ORDER ARE NOT AT ALL CONVINCING AND AS SUCH THE PENALTY U/S. 271(1)(C ) IS LIABLE TO BE WAIVED. 4) FOR THAT BOTH THE LD. AUTHORITIES BELOW FAILED T O ESTABLISH ANY MENSREA AND / OR EVIL MOTIVE OF THE HUMBLE APPELLANT IN HIS PENALTY ORDER PASSED U/S. 271(1)(C ) OF THE I.T. ACT,1961. 5) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE BOTH THE LD. C.I.T.(APPEAL) AND THE LD. ASSESSING OFFICER HAVE FAILED TO ESTABL ISH THAT THE HUMBLE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME OR HAD DELIBERA TELY FURNISHED INACCURATE PARTICULARS IN RESPECT OF THE PURCHASES MADE BY THE APPELLANT F ROM THE SUNDRY CREDITORS. 6) FOR THAT THE LD. C.I.T.(APPEAL) WAS WRONG IN OBS ERVING THAT THE A/R OF THE APPELLANT AND THE DIRECTOR OF THE APPELLANT SOCIETY ACCEPTED THE ADDITION OF RS. 16,15,947.00 AND HE OUGHT TO HAVE OBSERVED THAT THE HUMBLE APPELLANT DID NOT GET ANY OPPORTUNITY TO CROSS EXAMINE ALL THE SUNDRY CREDITORS WHO GAVE THEIR WIT NESSES BEFORE ANOTHER INCOME TAX OFFICER OF ANOTHER DISTRICT. 7) FOR THE BOTH THE LD. C.I.T.(APPEAL) AND THE LD. ASSESSING OFFICER EARED BOTH IN POINTS OF LAW AND ON FACTS. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING OFFICER HAS LEVIED PENALTY O N THE BASIS OF ADDITION MADE BY ASSESSING OFFICER IN RESPECT OF FOLLOWING SUNDRY CREDITORS: 1) PINKY ENTERPRISES RS. 58,215/- 2) SAMBHU BHAGAT RS. 9,42,061/- 3) BHAGAT STONE WORKS RS. 2,640/- 4) BIBHUTI SAHA RS. 4,43,800/- 5) APU LODH RS. 1,69,231/- 6 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 RS. 16,15,947/- WE FIND THAT CIT(A) HAS ESTIMATED THE INCOME BY AP PLYING 10% OF NET PROFIT OF GROSS CONTRACT RECEIPTS IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT. EVEN NOW, AS DECIDED ABOVE, WE HAVE DECIDED THE APPEAL OF THE ASSESSEE ESTIMATING THE N ET PROFIT AT 6%, BUT THE SAME CIT(A) HAS UPHELD THE PENALTY ENTIRELY ON DIFFERENT PREMISE FR OM WHAT WAS LEVIED BY ASSESSING OFFICER. NOW QUESTION ARISES WHETHER ON ESTIMATE PENALTY CAN BE LEVIED OR NOT. WE ARE OF THE VIEW THAT ON ESTIMATES PENALTY U/S 271(1)(C) OF THE ACT CANNO T BE LEVIED BECAUSE THERE REMAINS NO ELEMENT OF CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURA TE PARTICULARS OF INCOME AS IN THE GIVEN FACTS AND CIRCUMSTANCES OF THIS CASE. RECENTLY, HON BLE CHHATTISGARH HIGH COURT IN THE CASE OF CIT V VIJAY KUMAR JAIN (2010) 325 ITR 378(CHHATTISG ARH), HELD THAT NO PENALTY CAN BE LEVIED IN THE CASE OF ESTIMATING RATE OF PROFIT AND MORE P ARTICULARLY IN A CASE WHERE THE AO HAS MADE ADDITION ALTOGETHER ON DIFFERENT PREMISE AND INITIA TED PENALTY QUA THAT, BUT IN THE PRESENT CASE BEFORE US, THE CIT(A) HAS ESTIMATED THE NET PROFIT ON GROSS RECEIPTS AFTER APPLYING 10% OF NET PROFIT RATE AND SUBSEQUENTLY TRIBUNAL REDUCED THE E STIMATE TO 6%. HONBLE HIGH COURT IN VIJAY KUMAR JAIN (SUPRA) HELD AS UNDER: THE QUESTION FOR OUR CONSIDERATION FOR DECIDING THI S APPEAL IS WHETHER THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUN AL WERE JUSTIFIED IN CANCELLING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT IMPOSED BY THE ASSESSING OFFICER IN THE ADMITTED FACTS THAT THE ASSESSING OFFICER AFTER RE JECTING THE BOOK RESULTS ESTIMATED THE NET PROFIT OF THE ASSESSEE AT THE RATE OF 10 PER CENT. OF THE TOTAL RECEIPT IN THE RETURN AND ON DIFFERENCE OF PROFIT SO ESTIMATED, IMPOSED ADDITIO NAL TAX ? IN CHAIRMAN, SEBI [2006] 131 COMP CAS 591 ; [2006] 5 SCC 361, THE QUESTION BEFORE THE SUPREME COURT WAS WHETHER ONCE IT IS CONCLUSIVELY ESTABLISHED THAT A MUTUAL FUND HAS VIOLATED THE TERMS OF CERTIFICATE OF REGISTRATION AND STATUTORY REGULATIONS, THE IMPOSITION OF PENALTY BECOMES A SINE QUA NON OF THE VIOLATION. A NSWERING IN THE AFFIRMATIVE AND ALLOWING THE APPEALS, THE SUPREME COURT HELD THAT MENS REA I S NOT AN ESSENTIAL INGREDIENT FOR CONTRAVENTION OF THE PROVISIONS OF A CIVIL ACT. UNL ESS THE LANGUAGE OF THE STATUTE INDICATES THE NEED TO ESTABLISH THE ELEMENT OF MENS REA, IT IS GENERALLY SUFFICIENT TO PROVE THAT A DEFAULT IN COMPLYING WITH THE STATUTE HAS OCCURRED AND IT IS WHOLLY UNNECESSARY TO ASCERTAIN WHETHER SUCH A VIOLATION WAS INTENTIONAL OR NOT. THE BREACH OF A CIVIL OBLIGATION WHICH ATTRACTS A PENALTY UNDER THE PROVISIONS OF A N ACT WOULD IMMEDIATELY ATTRACT THE LEVY OF PENALTY IRRESPECTIVE OF THE FACT WHETHER THE CON TRAVENTION WAS MADE BY THE DEFAULTER WITH ANY GUILTY INTENTION OR NOT. IN DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519, THE SUPREME COURT, WHILE CONSIDERING THE NATURE AND APPLICABILITY OF SECTION 271(1)(C) A ND EXPLANATION 1 THERETO, HELD THAT EVEN IF THE STATUTE SAYS THAT ONE IS LIABLE FOR PENALTY IF ONE FURNISHES INACCURATE PARTICULARS, THE SAME MAY NOT BY ITSELF BE ENOUGH TO HOLD THAT NOTH ING MORE IS NEEDED IF THE PARTICULARS FURNISHED ARE FOUND TO BE INACCURATE. AN ELEMENT OF MENS REA IS NEEDED BEFORE PENALTY CAN BE IMPOSED. CONCEALMENT AND FURNISHING INACCURATE P ARTICULARS REFER TO A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE. A MERE OMISSI ON OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIO VERI OR SUGGESTIO FALS I. ANOTHER DIVISION BENCH OF THE SUPREME COURT, DOUBTING THE CORRECTNESS OF THE ABOVE VIEW E XPRESSED IN DILIP N. SHROFF REFERRED THE CONTROVERSY INVOLVED IN THE APPEALS TO A LARGER BE NCH. 7 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 IN UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS [2008] 306 ITR 277 (SC), IT WAS HELD BY THE THREE-JUDGE BENCH OF THE SUPREME COURT IN PARAGRAPH-20 THAT DILIP N. SHROFF CASE WAS NOT CORRECTLY DECIDED BUT CHAIRMAN, SEBI'S CASE HAS ANALYZED THE LEGAL POSITION IN THE CORRECT PERSPECTIVE AND ACCORDINGLY ANSWERE D THE REFERENCE. IN ATUL MOHAN BINDAL [2009] 317 ITR 1 (SC), IT HAS BEEN OBSERVED THAT IF THE ASSESSING OFFICER IS SATISFIED THAT A PERSON HAS CONCEALED TH E PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, SUCH PERSON MAY BE DIRECTED TO PAY PENALTY. IN PARAGRAPH 13, IT HAS BEEN FURTHER OBSERVED THAT FOR APPLICABILITY OF SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST. THE SUPREME COURT IN ITS LATEST DECISION IN THE MAT TER OF CIT V. RELIANCE PETROPRODUCTS P. LTD. [2010] 322 ITR 158, WHILE CONSIDERING THE APPL ICABILITY OF SECTION 271(1)(C) OF THE ACT, HELD THAT IN ORDER TO IMPOSE PENALTY UNDER THE AFO RESAID SECTION, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESS EE AND THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD 'PARTICULARS' USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURAT E, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPO SE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENA LTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAI M TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHE RE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS A RE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPL IED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERR ONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C). A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF , WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. S UCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. IF WE EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE PRINCIPLES OF LAW LAID DOWN BY THE SUPREME COURT IN THE AFORESAID JUDGMENTS, WE FI ND THAT THE ASSESSEE FURNISHED ACCURATE PARTICULARS OF THE ENTIRE RECEIPT OF RS.21,76,274. AFTER DEDUCTION TOWARDS EXPENDITURE AND ADDITION OF NET PROFIT THROUGH OTHER SOURCES, TAXA BLE NET INCOME WAS SHOWN AT RS. 70,818. HOWEVER, SINCE THE ASSESSEE DID NOT PRODUCE ANY EVI DENCE AND BOOKS OF ACCOUNT INCLUDING THE BALANCE-SHEET FOR THE ASSESSMENT YEAR, NET PROF IT WAS ESTIMATED AT THE RATE OF 10 PER CENT. OF THE RECEIPT FROM ALL SOURCES AND ON DIFFE RENCE OF PROFIT SO ESTIMATED, ADDITIONAL TAX WAS IMPOSED AND IT WAS FURTHER DIRECTED THAT PROCE EDING UNDER SECTION 271(1)(C) OF THE ACT FOR IMPOSITION OF PENALTY BE SEPARATELY DRAWN AGAI NST THE ASSESSEE FOR CONCEALMENT OF INCOME BY NOT PRODUCING PROPER EVIDENCE OF EXPENDIT URE. TO IMPOSE PENALTY UNDER SECTION 271(1)(C), CONDITIONS STATED THEREIN MUST EXIST ME ANING THEREBY THE ASSESSEE MUST HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISH ED INACCURATE PARTICULARS OF SUCH INCOME. IN THE INSTANT CASE, IT IS NOT THE CASE OF THE REVE NUE THAT THE ASSESSEE CONCEALED THE PARTICULARS OF HIS INCOME OR ANY PARTICULARS OF INC OME FURNISHED BY HIM WAS FOUND TO BE INACCURATE BY THE ASSESSING OFFICER. THE ASSESSEE D ECLARED THE NET PROFIT BY ESTIMATING IT AT THE RATE OF 6.36 PER CENT. OF HIS GROSS RECEIPT AS THE ASSESSING OFFICER IN SIMILARLY SITUATED CASES HAD ACCEPTED LOWER NET PROFIT THAN 6.36 PER CENT. DECLARED BY THE ASSESSEE. CONSIDERING THE AFORESAID FACTS, THE TRIBUNAL HELD THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN CANCELLING PENALTY CANNOT B E FAULTED WITH AND ACCORDINGLY UPHELD THE ORDER. 8 ITA 2172 & 2173/K/2010 METROPOLITAN ENGG. COOP. SOCIETY LTD. A.Y.01-02 IN OUR CONSIDERED OPINION, IN VIEW OF THE UNDISPUTE D FACTS THAT PARTICULARS FURNISHED BY THE ASSESSEE REGARDING RECEIPT IN THE RELEVANT FINANCIA L YEAR HAVE NOT BEEN FOUND INACCURATE ; IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE AS SESSEE CONCEALED ANY INCOME IN HIS RETURN, THE ORDER OF THE TRIBUNAL CONFIRMING THE ORDER OF T HE COMMISSIONER (APPEALS) CANCELLING THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE FAULTED WITH. IN VIEW OF THE ABOVE CASE LAW OF VIJAY KUMAR JAIN ( SUPRA), WE ARE OF THE VIEW THAT IN CASE OF ESTIMATE OF NET PROFIT, AS IS IN THE GIVEN FACTS AN D CIRCUMSTANCES OF THE CASE, PENALTY U/S. 271(1)(C) CANNOT BE LEVIED AND WE DELETE THE SAME. ORDERS OF THE LOWER AUTHORITIES ARE REVERSED AND APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEALS OF ASSESSEE IN ITA NO .2172/K/2010 IS PARTLY ALLOWED AND IN ITA NO. 2173/K/2010 IS ALLOWED. 10. ORDER PRONOUNCED IN OPEN COURT ON 12.8.2011 SD/- SD/- . . , ! ' '' ' # # # # , ! (S. V. MEHROTRA (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( / / / /) )) ) DATED 12 TH AUGUST, 2011 '01 %23 4' JD.(SR.P.S.) . 5 ,6 76'8- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT METROPOLITAN ENGG. COOP. SOCIETY LTD., BUS STAND, CHAKDAHA, NADIA 2 ,-*+ / RESPONDENT, ACIT, CIRCLE-NADIA 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . '> ,% / DR, KOLKATA BENCHES, KOLKATA -6 ,/ TRUE COPY, .%?/ BY ORDER, #3 /ASSTT. REGISTRAR .