B.M.S. Projects Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2188/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94248 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA NO.2188/AHD/2011 /BLOCK ASSTT. YEAR: 2005-2006 B.M.S. PROJECTS P. LTD. A-508, TIRUPATI PLAZA ATHWAGATE, SURAT 395 001. PAN : AAACB 9707 G VS DCIT, CIR.1 SURAT. %& / (APPELLANT) '( %& / (RESPONDENT) ASSESSEE BY : NONE (WRITTEN SUBMISSIONS) REVENUE BY : SHRI D.C. MISHRA, SR.DR / DATE OF HEARING : 10/08/2015 / DATE OF PRONOUNCEMENT: 13/08/2015 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE LD.CIT(A)-I DATED 22.6.2011 FOR THE ASSTT.YEAR 2005 -06. 2. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT (A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.38,07,784/- IMPOSED UN DER SECTION 271(1)(C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF INFRASTRUCTURE P ROJECTS, MAINLY, WATER SUPPLY. IT HAS FILED ITS RETURN OF INCOME ON 24.1 0.2005 DECLARING A TOTAL INCOME OF RS.45,94,650/-. THE CASE OF THE ASSESSE E WAS SELECTED FOR ITA NO.2188/AHD/2011 2 SCRUTINY ASSESSMENT AND ASSESSMENT ORDER UNDER SECT ION 143(3) OF THE ACT WAS PASSED ON 17.12.2007. 4. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS FILE D WRITTEN SUBMISSIONS. FOR THE PURPOSE OF THIS PENALTY, IT I S PERTINENT TO TAKE NOTE OF THE FOLLOWING DETAILS SUBMITTED BY THE ASSESSEE IN TABULAR FORMS: SR. NO. PARTICULARS ADDITION MADE BY THE LD.AO ADDITIONAL UPHELD BY THE LD. CIT(A) ADDITION UPHELD BY THE HONBLE ITAT. 1. DISALLOWANCE OF SUB-CONTRACT EXP. 3,41,38,500 87 ,35,038 86,643 2. ADDITION OF OPENING STOCK OF WIP 1,30,50,500 NIL NIL 3. DISALLOWANCE OUT OF THE MNFG. AND ADMN. EXPS. 73,31,295 5,33,909 5,33,909 4. DISALLOWANCE OUT OF TRANSPORTATION CHARGES 31,78,606 11,36,949 NIL 5. A PERUSAL OF THE ABOVE TABLE WOULD INDICATE THAT MAJOR ADDITIONS MADE BY THE AO TO THE INCOME OF THE ASSESSEE HAVE B EEN EITHER DELETED BY THE CIT(A) OR BY THE ITAT. AFTER THE ORDER OF T HE ITAT , THE ONLY ADDITIONS LEFT ARE OF RS.86,643/- AND RS.5,33,909/- WHICH ARE TO BE CONSIDERED FOR THE PURPOSE OF VISITING THE ASSESSEE WITH THE IMPUGNED PENALTY. THE COPY OF THE TRIBUNAL DATED 21.1.2013 HAS BEEN PLACED ON RECORD. THE TRIBUNAL HAS DISMISSED THE APPEAL FILE D BY THE REVENUE AND ALLOWED THE APPEAL OF THE ASSESSEE PARTLY. 6. WITH THE ASSISTANCE OF THE LEARNED DR, WE GONE T HROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT I S PERTINENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** ITA NO.2188/AHD/2011 3 (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THE N, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O R SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB- SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPE CT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UN DER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FE ATURES OF THIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCO ME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HA S CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN ITA NO.2188/AHD/2011 4 WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUT ORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEE MING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATE S TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO T HE COMPUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE A SSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE AS SESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL T HE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMP UTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE T WO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWAN CE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 8. IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE FA CTS OF THE PRESENT CASE. THE FIRST GROUND, ON WHICH, IT IS TO BE DECI DED WHETHER THE ITA NO.2188/AHD/2011 5 PENALTY SHOULD BE IMPOSED OR NOT ON THE ADDITION OF RS.86,643/-. THIS PAYMENT CONTAINED TWO PAYMENTS. ACCORDING TO THE A SSESSEE, A SUB- CONTRACT BILL OF RS.1,56,337/- HAD BEEN RAISED BY S HRI DINESH JETHAWA AGAINST WHICH THE ASSESSEE HAD MADE PAYMENT OF RS.7 0,000/- THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS CLAIMED DED UCTION OF RS.1,56,337/-. THE PAYMENT EXCEPT CHEQUE PAYMENT H AS BEEN DISALLOWED. THE REASON FOR DISALLOWANCE IS THAT SH RI JETHAWA HAD DENIED PAYMENT FROM THE ASSESSEE. THE STAND OF THE ASSESS EE IS THAT, AT THE FIRST INSTANCE, SHRI JETHAWA HAD CONTENDED THAT HIS BOOKS WERE DESTROYED IN FLOOD OF 2006, AND THEREFORE, HE HAS N O DETAILS. THE SECOND AMOUNT IS DISALLOWANCE OF RS.11,293/- WHICH IS IN RESPECT OF SUB-CONTRACTOR, PRATIK CONSTRUCTION. THE ASSESSEE CONTENDED THAT MEAGER AMOUNT WAS INVOLVED, THEREFORE, IT DID NOT P UT MUCH ENERGY IN LOCATING THIS ASSESSEE. ON DUE CONSIDERATION OF TH E ABOVE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS MADE PAYMENT OF R S.70,000/- TO SHRI DINESH JETHWA, MEANING THEREBY, THIS PARTY IS A GEN UINE PARTY, IT HAS RELATION WITH THE ASSESSEE, OTHERWISE HAS NO OCCASI ON TO MAKE A PAYMENT OF RS.70,000/- ALSO. THE ASSESSEE FAILED T O SUBSTANTIATE THE REMAINING PAYMENT. THEREFORE, IN OUR OPINION, THE ASSESSEE HAS AN EXPLANATION, WHICH CANNOT BE PROVED AS A FALSE BY T HE AO. IT IS A DIFFERENT MATTER THAT THE ASSESSEE FAILED TO SUBSTA NTIATE ITS EXPLANATION. THIS ASPECT IS TO BE APPRECIATED IN THE LIGHT THAT THE AO HAS DISALLOWED SUB-CONTRACT EXPENSES OF RS.3,41,38,500/-. THE LD. CIT(A) HAS ONLY UPHELD THE DISALLOWANCE OF RS.87,35,038/- WHICH HAS BEEN FURTHER REDUCED TO RS.86,643/- BY THE TRIBUNAL. IN VIEW O F THE ABOVE FACTS, THE ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PENALT Y ON THIS ISSUE. AS FAR AS SECOND AMOUNT IS CONCERNED, THE LD.AO HAS MADE AN AD HOC DISALLOWANCE AT 10% OF THE TOTAL ADMINISTRATIVE EX PENSES. HE DISALLOWED A SUM OF RS.73,31,295/-. OUT OF WHICH, THE DISALLOWANCE UPHELD BY THE CIT(A) IS RS.5,33,909/-. IT IS AN ES TIMATED DISALLOWANCE FROM A PAYMENT OF RS.7.33 CRORES. THIS AMOUNT HAS BEEN DISALLOWED FOR ITA NO.2188/AHD/2011 6 THE REASON THAT COMPLETE BILLS AND VOUCHERS COULD N OT BE PRODUCED BY THE ASSESSEE. IN OUR OPINION, GENUINENESS OF THE A SSESSEES CLAIM TO THE EXTENT OF 99% WAS NOT IN DOUBT. THEREFORE, ON THIS AD HOC DISALLOWANCE, THE ASSESSEE SHOULD NOT BE VISITED WI TH PENALTY HIS EXPLANATION IS, OTHERWISE, NOT FALSE. IN VIEW OF T HE ABOVE DISCUSSION, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PEN ALTY. 9. IN THE RESULT OF THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER