Om Construction, Baroda V. The Income tax Officer, Ward-2(2), Baroda

ITA 2300/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9841 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 01-10-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI SRDR
• Assessee Lawyers: J P SHAH SRAR
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.2300/AHD/2010 ASSESSMENT YEAR :2003-04 DATE OF HEARING:1.1010 DRAFTED:4.10.10 M/S. OM CONSTRUCTION, SUNDER BAZAR, AT & P.O. SOKHADA, VADODARA PAN NO.AAAFO3920D V/S . INCOME TAX OFFICER, WARD-2(2), BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI J.P. SHAH, SR-AR RESPONDENT BY:- SHRI A.K. TIWARI, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)- III, BARODA IN APPEAL NO.CAB/ III/207/09-10 DATED 05-04-2010. THE ASSESSMENT WAS FRAMED BY ITO WARD-2(2), VADODAR A U/S 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 14-03-2006 FOR ASSESSMENT YEAR 2003-04. THE PENALTY UNDER DISPUTE WAS LEVIED BY ASSESSING OFFICER U/S 271(1)(C) OF THE ACT VIDE HIS ORDER DAT ED 27-03-2009. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT. 3 THE BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND ASSESSMENT U/S.143(3) OF THE ACT W AS MADE BY ASSESSING OFFICER DETERMINING TOTAL INCOME AT RS.15,45,550/- AS AGAIN ST THE RETURN INCOME OF THE ASSESSEE AT RS.2,53,150/-. THE AO ESTIMATED THE NET PROFIT AT RS.19,57,861/- FROM THE GROSS CONTRACT RECEIPT OF RS.2,44,73,263/- BEFO RE REMUNERATION AND INTEREST TO THE ITA NO2300/AHD/2010 A.Y. 2003-04 OM CONSTRUCTION V. ITO WD-2(2),BRD PAGE 2 PARTNERS ON THEIR CAPITAL. FINALLY, THE ASSESSEE WA S ASSESSED AT AN INCOME OF RS.10,06,085/- BY APPLYING NET PROFIT RATE OF 8% AF TER REJECTING THE BOOK RESULTS. BEFORE THE ASSESSING OFFICER BOOKS OF ACCOUNT WERE NOT PRODUCED AND ACCORDINGLY AO ESTIMATED THE NET PROFIT BY APPLYING 8%. IN QUAN TUM APPEAL, CIT(A) VIDE HIS ORDER NO.CAB/II/55/06-07 DIRECTED THE ASSESSING OFFICER T O ADOPT NET PROFIT @ 6% AS AGAINST THE NET PROFIT ESTIMATED BY AO AT 8%. THE C IT(A) UPHELD THE REJECTION OF BOOK RESULTS BUT DIRECTED THE ASSESSING OFFICER TO ADOPT NET PROFIT RATE AT 6%. THE AO LEVIED THE PENALTY U/S.271(1)(C) ON ESTIMATE NET PR OFIT OF 6% BY CIT(A). AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO C ONFIRMED THE LEVY OF PENALTY. AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEFORE US . 4. BEFORE US, IT WAS CONTENDED THAT COMPLETE SET OF BOOKS COULD NOT BE PRODUCED BECAUSE THE SAME WERE IN THE POSSESSION OF WIFE OF ONE OF THE PARTNERS WHO EXPIRED ON 26-07-2004. IT IS ALSO ARGUED THAT THE ACCOUNTS ARE AUDITED U/S.44AB OF THE ACT AND THE SAME CANNOT BE REJECTED. THE LD. COUNSEL F OR THE ASSESSEE STATED THAT THE ASSESSEE HAS FURNISHED COPY OF LEGAL NOTICE ADDRESS ED TO GITABEN C PATEL, WIFE OF DECEASED PARTNER ISSUED ON 31-03-2006 BY ADVOCATE R .R. PATEL BUT THE LOWER AUTHORITIES HAS REJECTED THE SAME BY STATING THAT T HIS LETTER IS NOT SUFFICIENT TO PROVE THAT THE BOOKS OF ACCOUNT COULD NOT BE PRODUCED BEF ORE THE AO AT THE ASSESSMENT STAGE AS THERE IS NO INFORMATION AVAILABLE AS TO WH AT HAPPENED SUBSEQUENT TO THE ISSUE OF THIS LETTER AND THEREFORE NO MUCH RELIANCE CAN BE PLACED ON THIS LETTER. WE FIND THAT THE CIT(A) HAS CONFIRMED THE PENALTY BY G IVING FOLLOWING FINDINGS:- 3.2 COMING TO THE LEVY OF PENALTY ON THIS INCOME, THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY BONA FIDE EXPLANATION EITHER BE FORE THE AO OR BEFORE THE UNDERSIGNED SHOWING THAT THE INCOME SHOWN IN THE RE TURN OF INCOME WAS ACTUAL INCOME EARNED DURING THE YEAR. IN THE ABSENC E OF ANY SUPPORTING DOCUMENTS FROM THE APPELLANT, THE ESTIMATION OF INC OME BY THE AO WAS THE ONLY COURSE LEFT AND DON THE FACTS OF THE APPELLANT S CASE IT HAS TO BE HELD THAT THERE WAS FURNISHING OF INACCURATE PARTICULARS IN R ETURNING AN INCOME WHICH IS NOT SUPPORTED BY ANY EVIDENCE. ACCORDINGLY, LEVY OF PENALTY IS UPHELD IN THE CASE OF THE APPELLANT. AGGRIEVED, NOW ASSESSEE CAME IN SECOND APPEAL BEFOR E US. 5. WE FIND THAT THE ASSESSEE-FIRM HAS MAINTAINED RE GULAR BOOKS OF ACCOUNT AS PER NORMAL ACCOUNTING PRINCIPLES CONSISTENTLY FOLLO WED FROM YEAR-TO-YEAR SINCE INCEPTION OF THE BUSINESS AND ASSESSEE-FIRM HAS ALS O GOT ITS ACCOUNTS AUDITED AS PER PROVISIONS OF SECTION 44AB OF THE ACT AND SAID AUDI TED ACCOUNTS WERE ALREADY ITA NO2300/AHD/2010 A.Y. 2003-04 OM CONSTRUCTION V. ITO WD-2(2),BRD PAGE 3 SUBMITTED TO THE ASSESSING OFFICER ALONG WITH THE R ETURN OF INCOME FILED AND FURNISHED ALMOST ALL THE DETAILS EXCEPT FEW ONE AS AND WHEN C ALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER IT WAS CATEGORICALLY STATED THAT ONE OF THE WORKING PARTNER SHRI CHANDRAKANT P PATEL WAS EXPIRED ON 27-06-2004 ON ACCOUNT OF SEVERE ILLNESS AT THE VERY YOUNG AGE AND WITHIN A SHORT SPAN OF TIME. HE WAS THE MAIN WORKING PARTNER OF THE FIRM AND WAS LO OKING AFTER DAY-TO-DAY TRANSACTIONS AND OTHER RELEVANT MATTERS OF THE FIRM INCLUDING ACCOUNTING ASPECTS OF THE FIRM TILL HE WAS ALIVE. THE PHOTO COPY OF THE D EATH CERTIFICATE OF LATE SHRI CHANDRAKANT P PATEL WAS ALREADY FURNISHED TO THE AO DURING THE COURSE OF HEARING PROCEEDINGS AND THE CASH BOOK, BANK BOOK, PURCHASE REGISTER, JV REGISTER AND LEDGER WERE IN FACT FURNISHED TO THE ASSESSING OFFI CER. THE SUPPORTING EVIDENCES WERE LYING IN THE CUSTODY OF THE WIFE OF DECEASED P ARTNER LT. MR. CHANDRAKANT P PATEL AND SHE WAS NOT CO-OPERATING TO PART WITH THE SAID RECORDS AND IN VIEW OF THIS, THE OTHER WORKING PARTNER OF THE FIRM, MR. RAKESH R PAT EL WAS NOT IN A POSITION TO PRODUCE THE RELEVANT SUPPORTING VOUCHERS TO THE ASS ESSING OFFICER DURING THE COURSE OF HEARING PROCEEDING AND TIME ALLOWED TO THE ASSES SEE-FIRM. WE FIND THAT THE NET PROFIT RATIOS OF THE EARLIER THREE YEARS AS DEPICTE D IS UNDER:- (AMOUNT RS. IN LACS) ASSESSMENT YEAR TURN OVER GROSS PROFIT GROSS PROFIT RATIO NET PROFIT NET PROFIT RATIO 2001-02 62.66 10.08 16.09 % 01.91 03.05% 2002-03 224.93 23.56 10.47% 05.90 02.62% 2003-04 243.88 23.90 09.79% 06.99 02.86% IN VIEW OF THE ABOVE, WE FIND THAT THE NET PROFIT R ATIO IN EARLIER YEAR WAS 2 TO 3% AND IN THIS YEAR THE PROFIT WAS ACCEPTED AT 6%. WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS FILED FALSE INFORMATI ON OR HE HAS FILED INACCURATE PARTICULARS OF INCOME RATHER INCOME IS ASSESSED BY APPLYING NET PROFIT RATE. WE HAVE TO TAKE INTO CONSIDERATION THE FACT THAT THE ASSESS EE HAS AGREED FOR DISALLOWANCE AT 8% AND IT IS A CASE OF BONA FIDE EXPLANATION. WE AR E OF THE VIEW THAT THE PENALTY U/S.271(1) OF THE ACT CANNOT BE IMPOSED WHERE THE DISALLOWANCE OF CLAIM FOR DEDUCTION WAS MADE UNDER BONA FIDE AND THERE IS NO FINDING BY THE LOWER AUTHORITIES THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXPLANATION-1 TO SECTION 271(1) OF THE ACT IN ITA NO2300/AHD/2010 A.Y. 2003-04 OM CONSTRUCTION V. ITO WD-2(2),BRD PAGE 4 RESPECT OF ANY FACT RELATING TO THE COMPUTATION OF TOTAL INCOME STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME O F AN ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HA VE BEEN CONCEALED. THIS DEEMING PROVISION FOR CONCEALMENT IS NOT ABSOLUTE ONE. THE PRESUMPTION UNDER EXPLANATION-I IS REBUTTABLE AND NOT CONCLUSIVE. THE ASSESSEE CAN SUBMIT THE EXPLANATION AS THE ONUS SHIFTED ON THE ASSESSEE TO PROVE THAT HE HAS N OT CONCEALED THE PARTICULARS OF THE INCOME. THE ASSESSEE IN THIS CASE HAS DULY SUBM ITTED THE EXPLANATION. AND NO COGENT MATERIALS OR EVIDENCE WAS BROUGHT TO OUR KNO WLEDGE WHICH MAY PROVE THAT THE REVENUE HAS DELETED THE CONCEALMENT OR THE EXPL ANATION SUBMITTED BY THE ASSESSEE WAS FALSE ONE. EVEN THERE IS NO MATERIAL W HICH MAY PROVE THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE ITS EXPLANATI ON. MERELY THE ADDITION HAS BEEN MADE IN THE ASSESSMENT AND IN OUR OPINION THE ASSES SEE CAN NOT BE ENTRUSTED WITH THE PENALTY BY SIMPLY INVOKING EXPLANATION-I. ACCOR DINGLY WE DELETE THE PENALTY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 01/10/2010 SD/- SD/- (D.C.AGRAWAL) (MAHAV IR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 01/10/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-III, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD