N.Sethumadhavan, CHENNAI V. ITO, CHENNAI

ITA 2574/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7642 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 21-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-09-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Business income; Reasonable cause
• Section: 143(3); 142(1); 194C; 27

Judgement Text

, ' ' , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , ! . , & ! ' BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER A ND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2574/MDS/2016 /ASSESSMENT YEAR : 2009-10 N. SETHUMADHAVAN, NO 594, ALAGIRI SAMY SALAI, K.K. NAGAR, CHENNAI - 600 078. [ PAN: AMRPS 6175K] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 14(1), CHENNAI. ( / APPELLANT) ( / RESPONDENT) () * / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE -.() * / RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT * / /DATE OF HEARING : 21.12.2016 * / /DATE OF PRONOUNCEMENT : 10.03.2017 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE ASSESSEE FILED APPEAL AGAINST THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS)-14, IN ITA NO. 38/2015-16 DATED 27.06 .2016 PASSED U/S. 271(1)(C) AND 250 OF THE INCOME TAX ACT. ITA NO. 2574 / MDS/2016 :- 2 -: 2. THE ASSESSEE HAS RAISED ONLY SUBSTANTIVE GROUND THAT THE LD CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S. 27 1(1)(C) OF THE ACT BY THE ASSESSING OFFICER, WHERE THE INCOME HAS BEEN ESTIMA TED AT 10% OF GROSS RECEIPTS AND SUBSEQUENTLY THE TRIBUNAL HAS REDUCED THE ESTIM ATION OF INCOME TO 8%. FURTHER, THE LD. CIT(A) FAILED TO APPRECIATE THE PR OVISIONS GOVERNING THE LEVY OF PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INA CCURATE PARTICULARS OF INCOME ARE NOT AUTOMATIC IN NATURE AND PRAYED FOR DELETING THE PENALTY. 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS IN THE BUSINESS OF CIVIL CONTRACT WORKS AND THE PROPRIETOR OF M/S. SIVA CONS TRUCTIONS ENGAGED IN CIVIL CONSTRUCTIONS WORKS AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009- 10 ON 30.11.2010 WITH TOTAL INCOME OF RS. 9,96,330/ -. THE BOOKS OF ACCOUNTS ARE AUDITED UNDER PROVISIONS OF SECTION 44B OF THE ACT, THE ASSESSEE FILED AUDITED FINANCIAL STATEMENTS AND TAX AUDIT REPORT IN FORM 3 CB AND 3CD AND THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE ACT. SU BSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S. 14 3(2) AND 142(1) OF THE ACT WAS ISSUED ALONG WITH QUESTIONNAIRE. IN COMPLIANCE TO THE NOTICE, THE LD. AR APPEARED FROM TIME TO TIME AND PRODUCED DETAILS OF CASH DEPOSITS IN ASSESSEE'S SAVING BANK ACCOUNT AND DETAILS OF RBS CREDIT CARD PAYMENTS. THE ASSESSING OFFICER ON VERIFICATION OF THE BANK ACCOUNTS FOUND THE CASH DEPOSITS ARE MADE OUT OF WITHDRAWAL OF THE BUSINESS RECEIPTS FROM THE CUR RENT A/C OF THE PROPRIETARY BUSINESS AND WERE DEPOSITED IN ASSESSEE'S SAVING BA NK ACCOUNT IN ICICI BANK. THE ASSESSEE EXPLAINED PAYMENT OF RBS CREDIT CARD P AYMENTS WITH DOCUMENTARY EVIDENCE. THE LD. AO IN THE COURSE OF ASSESSMENT P ROCEEDINGS REQUIRED THE LD. ITA NO. 2574 / MDS/2016 :- 3 -: AR TO PRODUCE BANK OF ACCOUNTS AND OTHER NECESSARY DETAILS OF BUSINESS FOR THE FINANCIAL YEAR 2008-09 AS THE ASSESSEE HAS NOT PROD UCED ANY BILL VOUCHERS FOR CLAIMS. THE LD. AR SUBMITTED THAT DOCUMENTS AND BO OKS OF ACCOUNTS PROVIDED TO THE PREVIOUS AUDITORS FOR AUDIT WORK AND SAME COULD NOT BE OBTAINED AND EXPRESSED HIS INABILITY TO PRODUCED DETAILS OF AGRE EMENTS AND CIVIL CONTRACTS. THE LD. AO ON VERIFICATION OF FORM 26AS FOUND THAT THE TOTAL CONTRACT RECEIPTS U/S. 194C OF THE ACT ARE RS. 1,70,56,850/- AND TDS AT 2% WAS DEDUCTED BUT AS PER THE RETURN OF INCOME FILED THE ASSESSEE OFFERED CON TRACT RECEIPTS OF RS. 2,33,09,087/-. THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIMS WITH BILLS AND VOUCHERS. THE LD. AO HAS REJECTED THE ASSESSEE SUB MISSIONS AND ESTIMATED INCOME AT 10% OF GROSS RECEIPTS OF RS. 2,33,09,087/ - AND PASSED ASSESSMENT ORDER U/S. 143(3) DATED 29.12.2011. SUBSEQUENTLY, ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE LD. AO IN PENALTY PROCEEDINGS HAS CONSIDERED THE FINDINGS OF THE ASSESSING OFFICE R IN ASSESSMENT PROCEEDINGS AND SUBMISSIONS OF THE ASSESSEE ON NON-AVAILABILITY OF BOOKS OF ACCOUNTS, BILLS AND VOUCHERS. THE LD. AO FOUND THE ASSESSEE HAS FI LED AN APPEAL AGAINST ORDER DATED 29.12.2011 WITH CIT(A) AND LD. CIT(A) HAS CON FIRMED THE ACTION OF THE ASSESSING OFFICER AND, ON FURTHER APPEAL THE CO-ORD INATE BENCH OF THE TRIBUNAL IN ITA NO. 244/MDS/2013 DATED 19.12.2014 HAS CONSIDERE D THE GROUNDS AND OBSERVATIONS OF THE ASSESSING OFFICER AND DIRECTED THE AO TO ESTIMATE THE INCOME AT 8% OF GROSS RECEIPTS. THE ASSESSEE IN THE PENAL TY PROCEEDINGS FILED LETTER ON 07.11.2014 EXPLAINING THE AUDIT OF BOOKS OF ACCOUNT S, APPLICATION OF PROVISION OF LAW AND RELIED ON THE JUDICIAL DECISIONS ON LEVY OF PENALTY. THE LD. AO OBSERVED THAT NOTICE U/S. 143(2) WAS ISSUED ON 19.08.2010 AN D THE ASSESSMENT WAS ITA NO. 2574 / MDS/2016 :- 4 -: COMPLETED ON 29.12.2011 AND INSPITE OF 16 MONTHS TI ME AVAILABLE THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT. THE LD AO FOUND THE LEGAL DECISIONS RELIED BY THE ASSESSEE ARE DISTINGUISHABLE, AND ALS O FIND THAT THE ASSESSEE HAS HIGHER CONTRACT RECEIPTS AS AGAINST RS. 1,70,56,850 /- IN FORM 26AS AND THE BALANCE AMOUNT IS NOT COVERED BY TDS, AND WAS NOT P ROVED, AND ACCOUNTED. THE ASSESSEE HAS FAILED TO FURNISH DETAILS OF CLOSING S TOCK AND OTHER CLAIMS OF P & L ACCOUNT. THEREFORE, LD. AO IS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO FURNISH BOOKS OF ACCOUNTS AND EXPENDITURE DETAILS A ND LEVIED MINIMUM PENALTY OF RS 6,50,999/- U/S. 271(1)(C) OF THE ACT VIDE PASSED ORDER DATED 20.03.2015. 4. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE FIL ED AN APPEAL WITH THE CIT(A). THE LD. AR ARGUED THE GROUNDS AND REITERATE D SUBMISSIONS OF ASSESSMENT PROCEEDINGS AND EXPLAINED THE CIRCUMSTANCES AND REA SONS FOR NOT PROVIDING THE BOOKS OF ACCOUNTS. THE LD. CIT(A)RELIED ON DECISION OF THE QUANTUM APPEAL OF THE ASSESSEE AND THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND IS OF THE OPINION THAT THE ASSESSEE HAS SUBMITTED INACCURATE PARTICUL AR AND CONFIRMED THE ORDER OF ASSESSING OFFICER AND DISMISSED THE ASSESSEE APPEAL . 5. AGGRIEVED BY THE CIT(A) ORDER, ASSESSEE FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED THAT THE CI T(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WITHOUT CONSIDERING THE FACT THAT THE PENALTY CANNOT BE LEVIED ON THE ESTIMATION OF INCOME IN THE ORIGIN AL ASSESSMENT AND THE PENALTY IS NOT AUTOMATIC IN NATURE ON ANY ADDITION, THE LD. CIT(A) HAS OVERLOOKED THE FACTS THAT THE BOOK OF ACCOUNTS OF THE ASSESSEE ARE AUDITED UNDER PROVISIONS OF ITA NO. 2574 / MDS/2016 :- 5 -: SECTION 44AB OF THE ACT AND THE ASSESSEE COULD NOT PRODUCED BOOK OF ACCOUNTS AS THE CIRCUMSTANCES WERE BEYOND THE CONTROL OF THE AS SESSEE AND WAS EXPLAINED BEFORE THE ASSESSING OFFICER, AND LD. AR RELIED ON THE JUDICIAL DECISIONS AND PRAYED FOR DELETION OF PENALTY. CONTRA, THE LD. DR STIPULATED ON THE ORDERS OF THE CIT(A) AND OPPOSED THE ASSESSEE GROUNDS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AR SUBMITTED THAT THE PENALTY CANNOT BE LEVIED WHEN INCOME IS ESTIMATED BY THE ASSESSING OFFICER. THE ASSESSEE'S BOOKS OF ACCOUNTS ARE AUDITED U/S. 44AB OF THE ACT BUT DUE TO CHANGE OF AUDITORS THE AUDITED BOOKS COULD NOT BE OBTAINED AND ALSO DUE TO VARIOUS CIRCU MSTANCES AND COULD NOT BE PRODUCED. WHEREAS, THE ASSESSING OFFICER HAS ESTI MATED THE INCOME REJECTING PROFIT & LOSS ACCOUNT AND BALANCE SHEET AND RELIED ONLY ON THE INFORMATION OF FORM 26AS WHERE CONTRACT RECEIPTS ARE RS. 1,70,56,8 50/- BUT WHEREAS IN THE RETURN OF INCOME FILED BY THE ASSESSED THE TOTAL CO NTRACT RECEIPTS ADMITTED ARE RS. 2,33,09,087/-. THE ASSESSING OFFICER REJECTED THE CONTENTIONS AND ESTIMATED INCOME AT 10% OF GROSS RECEIPTS ON APPEAL THE CO-OR DINATE BENCH OF THE TRIBUNAL IN ITA NO. 2214/MDS/2013 DATED 19.12.2014 HAS RESTR ICTED THE STATEMENT AT 8% OF GROSS RECEIPTS. THE LD. DR CONTENTIONS ARE THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS AND BILL OF VOUCHERS. WE FOUND O N PERUSAL OF ASSESSMENT ORDER, THE ASSESSEE FILED THE TAX AUDIT REPORT IN F ORM 3CB AND 3CD AND SUBSTANTIATED THE FACTS OF MAINTENANCE OF BOOKS OF ACCOUNTS WHICH THE ASSESSING OFFICER SHOULD HAVE CONSIDERED BEFORE ESTIMATION OF INCOME. THE LD. CIT(A) HAS DEALT ON PROVISIONS OF EXPLANATION 1 TO SEC. 271(1 )(C) OF THE ACT AND CONFIRMED ITA NO. 2574 / MDS/2016 :- 6 -: THE PENALTY ORDER. WE FIND THE LEVY OF PENALTY CAN NOT BE AUTOMATIC AND LD. AO SHALL APPLY DESECRATINARY PROCESS BEFORE INITIATING PROCEEDINGS AND APPLY PRINCIPAL OF JUDICIAL DECISIONS OF CIT VS MANJUNANTH GIMMING MILLS359 ITR 555 (KTKA). THE LEVY OF PENALTY IS NOT AUTOMATIC AND EVERY ADDITION CANNOT BE A GATEWAY FOR INITIATING THE PENALTY. FURTHER, WHERE THE INCOME IS ESTIMATED BY THE ASSESSING OFFICER, HIGH COURT OF DELHI HAS HELD IN CIT VS AER O TRADERS PVT. LTD., 322 ITR 316 (DELHI), SIMILARLY, IN THE CASE OF CIT VS SUBHA SH TRADING CO. 221 ITR 110 (SUPRA), HON'BLE HIGH COURT HAS HELD 'WHERE THE INC OME IS ASSESSED ON ESTIMATED BASIS AFTER REJECTING THE BOOKS RESULTS, PENALTY U/ S. 271(1)(C) CANNOT BE IMPOSED BY MERE APPLICATION OF EXPLANATION, THEREFORE, IN T HE ABSENCE, OF ANY EVIDENCE TO CONCLUDE A POSITIVE FINDINGS THAT THERE WAS A CONCE ALMENT OF INCOME. WE FIND THE JURISDICTIONAL HIGH COURT IN THE CASE CIT VS SMT K. MEENAKSHI KUTTY (258 ITR 494) HELD THAT THE RETURN, ASSESSMENT BOTH BEING ON THE ESTIMATION BASIS, PENALTY U/S. 271(1)(C) WAS NOT ATTRACTED. CONSIDERING THE APPAR ENT FACTS, MATERIAL ON RECORD AND JUDICIAL DECISIONS, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS LEVIED PENALTY IRRESPECTIVE OF THE FACT THAT THE INCOME HA S BEEN ESTIMATED AND THERE IS NO CONCEALMENT OF INCOME OR SUBMISSIONS OF INACCURA TE PARTICULARS BY THE ASSESSEE. FURTHER, THE ACCOUNTS ARE AUDITED U/S. 4 4AB OF THE ACT BUT DUE TO CIRCUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE FO R PRODUCTION BOOKS OF ACCOUNTS AND THE ASSESSING OFFICER HAS ESTIMATED TH E INCOME. WE RELY ON JUDICIAL DECISIONS AND ARE OF THE OPINION THAT THE PENALTY C ANNOT BE LEVIED IN THE CASE OF ESTIMATION OF INCOME BY THE ASSESSING OFFICER AND T HE ASSESSEE HAS EXPLAINED THE REASONABLE CAUSE. ACCORDINGLY, WE SET ASIDE THE OR DER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY AND ALLOW T HE GROUNDS OF THE ASSESSEE . ITA NO. 2574 / MDS/2016 :- 7 -: 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON FRIDAY, THE 10TH DAY OF MARCH, 2017 AT CHENNAI. /CHENNAI, 3 $ /DATED: 10TH MARCH, 2017. JPV * -&/56 76/ /COPY TO: 1. () /APPELLANT 2. -.() /RESPONDENT 3. 8/ ( )/CIT(A) 4. 8/ /CIT 5. 69: -&/& /DR 6. :; /GF SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) $ /JUDICIAL MEMBER