ITO, Rohtak V. M/s. Hooda Construction Co., New Delhi

ITA 2296/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3966 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.2296/DEL/2010 ASSESSMENT YEAR : 2001-02 ITO, WARD-1, ROHTAK. VS. HOODA CONSTRUCTION CO., H.NO.1884, SECTOR 2 &3, NEW DELHI. PAN : AABFH9518B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, CA REVENUE BY : SMT. MONA MOHANTY, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT (A) DATED 9 TH MARCH, 2010 FOR ASSESSMENT YEAR 2001-02. THE GROUNDS OF APPEAL READ AS UNDER:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN CANCELING THE PENALTY OF RS.4,75,271/- CORRECTLY LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT, 1 961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN CANCELING THE PENALTY BY RELYING THE ORDE R OF THE HONBLE ITAT DATED 17.7.2009 IN ITA NO.212(DEL)/2 007, WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN CANCELING THE PENALTY AS THE PENALTY WAS A LSO LEVIABLE IN VIEW OF EXPLANATION 1 OF SECTION 271 OF TH E INCOME-TAX ACT, 1961. 4. THE APPELLANT CRAVES TO PER MISSION TO ADD, AMEND OR DELETE ANY GROUND OF APPEAL AT THE TIME OF HEARING. ITA NO.2296/DEL/2010 2 DELETE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2. THE ORDER OF THE CIT (A) IS A CONSOLIDATED ORDER I N RESPECT OF ASSESSMENT YEARS 2001-02 AND 2002-03. THE ASSESSEE IS A CIVI L CONTRACTOR AND IS ASSESSED AT AN INCOME OF ` 17,32,370/- AGAINST THE RETURNED INCOME OF ` 1,51,210/-. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD SHOWN PAYABLES OF ` 26,80,9 46/- TO THE TRADE CREDITORS AND THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SAME. IT WAS SUBMITTED THAT CREDITOR FOR GOODS SHOULD NOT BE ADD ED BACK TO THE INCOME OF THE ASSESSEE AS IT DOES NOT HAVE EFFECT ON TRAD ING AND PROFIT & LOSS OF THE ASSESSEE. IN THE ALTERNATIVE, IT WAS SUBMITT ED THAT IN THE IMMEDIATE PRECEDING YEAR A SUM OF ` 14,55,619/- WAS A DDED TO THE INCOME OF THE ASSESSEE SO THE CREDIT FOR THE SAME MAY BE GIVEN WHILE CONSIDERING SUCH ADDITION. THE ASSESSING OFFICER DID NOT FIND MUCH FORCE IN THE FIRST CONTENTION OF THE ASSESSEE AND HE ALL OWED THE ALTERNATIVE CONTENTION OF THE ASSESSEE. REDUCING FROM THE SUM SHOWN PAYABLE TO THE TRADE CREDITORS AMOUNTING TO ` 26,80, 946/-, AN AMOUNT OF ` 14,55,619/- ADDED IN THE IMMEDIATE PRECEDING Y EAR, A BALANCE ADDITION OF ` 12,25,327/- WAS MADE ON WHICH THE CONC EALMENT PENALTY WAS INITIATED AS, ACCORDING TO THE ASSESSING OFFICER, HE WAS SATISFIED THAT FOR SUCH ADDITION, IT IS A FIT CASE FOR INITIATIO N OF PENALTY PROCEEDINGS. CERTAIN OTHER ADDITIONS WERE ALSO MADE F OR WHICH NO SEPARATE SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER FOR INITIATION OF CONCEALMENT PENALTY. HOWEVER, AT THE END OF THE ORDER, THE ASSESSING OFFICER HAS MENTIONED ISSUE PENALTY NOTICE U/S 271 (1)(C) OF THE IT ACT, 1961 READ WITH SECTION 274. AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT A SUM OF ` 17,32,370/-. IN T HE PENALTY ORDER, THE ASSESSING OFFICER HAS TAKEN TOTAL INCOME INC LUDING CONCEALED INCOME AT ` 15,91,497/-. IF RETURNED IN COME OF ` 1,51,210/- IS REDUCED THEREFROM, THEN, THE CONCEALED INCOME WIL L BE AN AMOUNT OF ` 14,40,287/- WHICH WILL BE COMPRISING OF TWO ADDITI ONS; FIRST ` ITA NO.2296/DEL/2010 3 12,25,327/- AS DISCUSSED ABOVE AND FURTHER SUM OF ` 2,1 4,960/- ON ACCOUNT OF INTEREST THOUGH CREDITED TO THE ACCOUNTS O F THE PARTNERS, BUT, NOT ACTUALLY PAID. ACCORDING TO THE ASSESSING OFF ICER, THE ASSESSEE WAS MAINTAINING ITS ACCOUNT ON THE BASIS OF CASH SYSTEM OF ACCOUNTING AND SINCE THE INTEREST WAS NOT PAID TO THE PARTNERS AND IT WAS SIMPLY CREDITED TO THEIR ACCOUNT, THE SAME WAS DISALLOWED. T HE INTEREST PAID TO PARTNERS ARE AS FOLLOWS:- SHRI PRATAP SINGH HOODA RS.1,16,096/- SHRI VIPIN KUNDU RS.44,115/- SHRI CHAND SINGH HOODA RS.54,749/- ------------------ RS.2,14,960/- ======== 3. THE REQUEST OF THE ASSESSEE FOR KEEPING IN ABEYANCE T HE PENALTY PROCEEDINGS TILL THE DISPOSAL OF THE APPEAL BY THE ITA T WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND HE HAS LEVIED THE PENALTY FOR BOTH THE ABOVE MENTIONED ADDITIONS BY IMPOSING 100% P ENALTY OF THE TAX SOUGHT TO BE EVADED AMOUNTING TO ` 4,75,271/- VI DE IMPUGNED ORDER DATED 24 TH MARCH, 2009. THE LEVY OF PENALTY WAS AGITATED IN A N APPEAL FILED BEFORE THE CIT (A) WHICH HAS BEEN DECID ED BY THE IMPUGNED ORDER DATED 9 TH MARCH, 2010. REFERENCE WAS MADE TO THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE DATED 6 TH MARCH, 2009 IN ITA NOS.530 AND 531/DEL/2008 FOR ASSESSMENT YEARS 2001-02 AND 2002-03 WHEREIN THE APPEAL OF THE ASSESSEE WAS ACCEPTED ON THE ISSUE OF SALARY AND INTEREST BEING PAID TO THE PARTNERS AND IT WAS CONTENDED THAT NO PENALTY WAS LEVIABLE IN RESPECT OF THE SAID ISSU E AS THE ADDITION HAS BEEN DELETED BY THE ITAT. SO AS IT RELATES TO THE OTHER ADDITION OF ` 12,25,327/-, IT WAS SUBMITTED THAT ON SIMILAR ISSUE THE TRIBUNAL VIDE ITS ORDER DATED 17 TH JULY, 2009 IN ITA NO.212/DEL/2007 FOR ASSESSMENT YEAR 1999-2000 HAS DISMISSED THE DEPARTMENTAL APPEAL ON THE ISSUE OF LEVY ITA NO.2296/DEL/2010 4 OF CONCEALMENT PENALTY. THE PENALTY WAS DELETED BY THE CIT (A) ON SIMILAR FACTS AND CIRCUMSTANCES AND HIS ORDER WAS UPHELD BY THE ITAT AND IT WAS SUBMITTED THAT, THEREFORE, THE PENALTY SHOU LD BE DELETED. IN VIEW OF THESE SUBMISSIONS OF THE ASSESSEE LD. CIT (A) HAS DEL ETED THE PENALTY. THE DEPARTMENT IS AGGRIEVED, HENCE, IN APP EAL. 4. AT THE OUTSET, IT WAS SUBMITTED BY LD. AR THAT THE ISSUE RELATING TO LEVY OF CONCEALMENT PENALTY ON THE AMOUNT OF ` 1 2,25,327/- IS SQUARELY COVERED BY THE AFOREMENTIONED ORDER OF THE TRIBUNAL DATED 17 TH JULY, 2009 IN ITA NO.212/DEL/2007 BEING AN APPEAL FILED BY THE DEPARTMENT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 1 999- 2000 WHEREIN SIMILAR ADDITION OF ` 17,21,334/- WAS MA DE AND THE TRIBUNAL, AFTER CONSIDERING THE FACTS, HAD DELETED TH E PENALTY. 5. HE SUBMITTED THAT FOR OTHER ISSUE, THE ADDITION ITSE LF HAS BEEN DELETED BY THE TRIBUNAL AS MENTIONED IN THE ORDER OF THE CIT (A), HENCE, NO PENALTY WAS LEVIABLE IN THE CASE OF THE ASSESSEE AND T HE ORDER OF THE CIT (A) SHOULD BE UPHELD. 6. ON THE OTHER HAND, LD. DR, RELYING UPON THE ORDE R OF THE ASSESSING OFFICER SUBMITTED THAT THE PENALTY HAS WRONGLY BEEN DELETED BY THE CIT (A) AND THE ORDER OF THE ASSESSING OFFICER SH OULD BE UPHELD AND THE ORDER OF CIT (A) SHOULD BE SET ASIDE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. ON SIMILAR ISSUE, FOR A SSESSMENT YEAR 1999-2000, A PENALTY OF ` 6,04,304/- WAS IMPOSED FOR AN ADDITION OF ` 17,21,334/- WHICH WAS ADDED ON ACCOUNT OF PAYMENT PA YABLE TO VARIOUS SUNDRY CREDITORS AS SHOWN IN THE BALANCE SHEET FO R THAT YEAR AND IT WAS FOUND THAT THE MATTER WAS RESTORED TO THE F ILE OF THE ASSESSING OFFICER WITH CERTAIN OBSERVATIONS AND IT WAS HEL D BY THE TRIBUNAL THAT LEVY OF PENALTY WAS NOT JUSTIFIED. TH E RELEVANT ITA NO.2296/DEL/2010 5 OBSERVATIONS OF THE TRIBUNAL ARE REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE:- 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERU SED. FACTS IN BRIEF ARE THAT IN THE ASSESSMENT ORDER COMPLETED U/S 143(3) OF THE IT ACT, THE AO NOTED THAT THE ASSESSEE WAS FOLLOWING CASH SYSTEM OF ACCOUNTING AND THE PAYMENT MAD E FOR EXPENSES WHICH ARE DEBITED TO INCOME AND EXPENDITURE A /C SHOULD ALSO BE TAKEN ON THE CASH PAYMENT BASIS. IN FA CT, THE ASSESSEE HAD SHOWN A SUM OF RS.17,21,334/- AS PAYME NT PAYABLE TO VARIOUS SUNDRY CREDITORS AS PER BALANCE SH EET GIVEN BY THE ASSESSEE. THE AO DISALLOWED A SUM OF RS.17,2 1,334/- FROM EXPENSES CLAIMED BY THE ASSESSEE IN THE INCOME A ND EXPENDITURE ACCOUNT. THE AO ALSO LEVIED PENALTY U/S 2 71(1)(C) PERTAINING TO THIS ADDITION. THE CIT(A) DELETED THE PENA LTY ON LEGAL GROUNDS AS WELL AS ON MERITS. IN AN APPEAL FI LED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A), THE TRIBUNAL CON FIRMED THE ORDER OF CIT(A) AFTER OBSERVING THAT NO SATISFACTION WAS RECORDED WHILE INITIATING PENALTY U/S 271(1)(C). THE MATTER REACHED TO THE HIGH COURT AND THE HIGH COURT RESTORED THE MATTER BACK TO THE TRIBUNAL FOR DECIDING THE LEVIABLITY O F PENALTY ON MERITS. THUS, THE APPEAL WAS AGAIN PLACED BEFORE US FOR DECIDING THE MERITS OF THE PENALTY IMPOSED U/S 271(1)( C). THE LEARNED AR PLACED ON RECORD THE ORDER OF THE TRIBUNAL IN THE QUANTUM APPEAL, DATED 7.12.2007, WHEREIN FOLLOWING WA S THE OBSERVATION, WITH REGARD TO DISALLOWANCE OF EXPENDITURE ON THE BASIS OF SYSTEM OF ACCOUNTING FOLLOWED:- IN THE PAST WHILE THE INCOME HAS BEEN ACCOUNTED FOR ON CASH BASIS BUT THE EXPENSES HAVE BEEN ACCOUNTED FOR ON MERCANTILE BASIS. AS A CONSEQUENCE OF THE CHANGE CARRIED OUT IN THIS YEAR, THE NECESSARY ADJUSTMENT SHALL BE REQUIRED TO BE EFFECTUATED. THE ASSESSEE SHALL BE ELIGIBLE FOR DEDUCTION OF EXPENSES ON THE BASIS OF ACTUAL PAYMENT MADE IN THIS YEAR IRRESPECTIVE AS TO WHETHER THE EXPENDITURE IN QUESTION RELATES TO A PERIOD OTHER THAN THE INSTANT YEAR. WE THEREFORE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE BY EMPLOYING THE CASH SYSTEM OF ACCOUNTING KEEPING IN MIND THE AFORESAID DISCUSSION. 3. THUS, THE TRIBUNAL HELD THAT ASSESSEE SHALL BE ELIG IBLE FOR DEDUCTION OF THE EXPENSES ON THE BASIS OF ACTUAL PAYMEN TS MADE IN THIS YEAR IRRESPECTIVE AS TO WHETHER THE EXPENDI TURE IN QUESTION RELATES TO A PERIOD OTHER THAN THE INSTANT YEAR. IT IS CRYSTAL CLEAR THAT IN ITS ORDER, THE TRIBUNAL ITSELF HAD DIRECTED THE AO TO RECOMPUTE THE INCOME ON THE BASIS OF ACTUAL PAYMEN T ITA NO.2296/DEL/2010 6 MADE BY THE ASSESSEE IN THIS YEAR IRRESPECTIVE OF AS TO WHETHER THE EXPENDITURE IN QUESTION RELATES TO A PERIOD OTHER THAN THE INSTANT YEAR. WE FOUND THAT IN THE INSTANT CASE, THERE WAS NO FURNISHING OF ANY INACCURATE PARTICULARS BY THE ASSESS EE AND THE EXPENSES WERE CLAIMED ON THE BASIS OF CHANGE IN METHO D OF ACCOUNTING FROM CASH TO HYBRID AND WHEN THE TRIBUNAL I TSELF HAD OBSERVED IN QUANTUM PROCEEDINGS THAT THE ASSESSEE SHALL BE ELIGIBLE FOR DEDUCTION OF THE EXPENSES ON THE BASIS OF ACTUAL PAYMENTS, MERE DISALLOWANCE OF SUCH EXPENSES BY THE A O WILL NOT AMOUNT TO FURNISHING OF ANY INACCURATE PARTICULARS O R CONCEALMENT OF INCOME. ACCORDINGLY, WE UPHOLD THE OR DER OF THE CIT(A) FOR CANCELLING THE PENALTY, KEEPING IN VIEW TH E OBSERVATION MADE BY THE TRIBUNAL IN ASSESSEES OWN CA SE IN THE QUANTUM PROCEEDINGS. FURTHERMORE, THE EXPLANATION FURN ISHED BY THE ASSESSEE FOR ACCOUNTING OF EXPENSES AS PER METH OD OF ACCOUNTING WAS NOT FOUND TO BE UNTRUE. MERELY BECAUSE THE EXPLANATION AND JUSTIFICATION GIVEN BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO, THE SAME WILL NOT BE SUFFICIENT FOR LEVY OF PENALTY U/S 271(1)(C) OF IT ACT. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. DECISION PRONOUNCED IN THE OPEN COURT ON 17 TH JULY, 2009. 8. IN THE LIGHT OF THE AFOREMENTIONED ORDER OF THE TRIBUNAL, WE ARE OF THE OPINION THAT IT IS NOT A FIT CASE WHERE LEVY OF P ENALTY COULD BE UPHELD. THEREFORE, THERE IS NO INFIRMITY IN THE ORD ER OF THE CIT (A) VIDE WHICH THE IMPUGNED PENALTY HAS BEEN DELETED. WE DEC LINE TO INTERFERE AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.05.20 11. SD/- SD/- [K.D. RANJAN] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 13.05.2011. DK ITA NO.2296/DEL/2010 7 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES