The ITO, Ward-6(4), Surat V. M/s. Shyam RoadLines, Dist.Surat

ITA 2609/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0430 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 04-12-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: R N VEPARI
• Section: 271(1)(c); 44AD

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A-BENCH, AHMEDABAD. BEFORE: SHRI R.V. EASWAR, VICE PRESIDENT, AND SHRI M.V. NAYAR, ACCOUNTANT MEMBER. ITA NO.2609/AHD/2006 (ASSESSMENT YEAR 2001-2002) INCOME TAX OFFICER, WARD 6(4), SURAT. VERSUS M/S. SHYAM ROADLINES AT & POST POKHRAN, TAL. SONGADH, DIST. SURAT. (APPELLANT) (RESPONDENT) PAN: AATFS 3224 M FOR THE APPELLANT: SHRI GOVIND SINGHAL, SR. DR FOR THE RESPONDENT SHRI R.N. VEPARI, AR ORDER PER SHRI M.V. NAYAR, ACCOUNTANT MEMBER: THE REVENUE IS IN APPEAL AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, SURAT, IN APPEAL NO. CAS-IV/26/06-07, VIDE ORDER DA TED 21-09-2006. THE GROUNDS OF THE ASSESSEES APPEAL ARE AS GIVEN B ELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A), SURAT HAS ERRED IN DELETING THE PEN ALTY OF RS.3,48,387/- IMPOSED U/S. 271(1)(C) OF THE I.T. AC T. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), SURAT HAS NOT APPRECIATED THE FACT THAT THE ADDITION OF RS.15,45,807/- MADE BY THE ASSESSING OFFICER WAS BA SED ON UNPROVED LIABILITY OF LOADING EXPENSES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), SURAT HAS NOT APPRECIATED THE FACT THAT M/S. TARUNA ENTERPRISES WAS A FICTITIOUS NAME USED BY THE ASSES SEE FOR THE ENTIRE TRANSACTIONS OF LOADING EXPENSES. 2 ITA NO.2609/AHD/2006 ( ASSESSMENT YEAR 2001-2002 ) 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), SURAT HAS ERRED IN ESTIMATING THE PROFI T AT 8% OF THE TOTAL RECEIPTS U/S. 44AD OF THE I.T. ACT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), SURAT HAS OUGHT TO HAVE UPHELD THE ORDE R OF THE ASSESSING OFFICER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS A CARTING AGENT AND AN ADDITION OF RS. 15,45,807/- WAS MADE TO THE RETU RNED INCOME ON ACCOUNT OF BOGUS LOADING EXPENSES AND PENALTY PROCE EDINGS U/S. 271(1)(C) WERE INITIATED DURING THE COURSE OF ASSESSMENT. TH E ASSESSEE FILED AN APPEAL AND THE LD. COMMISSIONER OF INCOME TAX(APPEA LS), VIDE ORDER DATED 19.10.2004, AFTER DISCUSSING THE ISSUE IN DET AIL, HELD THAT THIS WAS THE CASE OF A CONTRACTOR, WHOSE TOTAL RECEIPTS WERE RS. 1,16,83,803/- AND APPLYING THE PROVISIONS OF SEC.44AD, ESTIMATED THE INCOME AT 8% OF THE TOTAL RECEIPTS. THE ASSESSING OFFICER, DURING THE PENALTY PROCEEDINGS, HELD THAT THE ADDITION OF RS.15,45,807/- WAS REDUCE D TO RS. 9,34,664/- AND THEREFORE, TO THIS EXTENT, THE ASSESSEE HAD CONCEAL ED THE INCOME AND THEREFORE, IMPOSED A PENALTY U/S. 271(1)(C). 3. THE MATTER TRAVELLED TO LD. COMMISSIONER OF INCO ME TAX(APPEALS), WHO HELD AS GIVEN BELOW: I HAVE CONSIDERED THE SUBMISSIONS AND HAVE PERUSED THE APPELLATE ORDER DATED 19.10.2004 IN THE QUANTUM APPEAL. THE OBSERVATION OF THE CIT(A) REPRODUCED AS UNDER: ALL THESE FACTS WERE DISCUSSED IN DETAIL WITH THE LD. AUTHORISED REPRESENTATIVE AND THE AO ONCE AGAIN ON 19.10.2004. THIS IS THE CASE OF A CONTRACTOR WHOSE TOTAL RECEIPTS ARE RS. 1,16,83,803/- 8% TO THE TOTAL RECE IPTS CAN BE TAXED U/S. 44AD. SINCE THE APPELLANT HAS FILED A N IL RETURN 3 ITA NO.2609/AHD/2006 ( ASSESSMENT YEAR 2001-2002 ) OF INCOME, THE AMOUNT TO BE TAXED THEREFORE COMES T O RS.9,34,664/-. THIS IS BEING DONE SINCE EVEN THE A SSESSING OFFICER HAS STATED IN HIS REMAND REPORT THAT THE WO RK MAY HAVE BEEN DONE BY SOME OTHER PARTY, DETAILS OF WHIC H ARE BEST KNOWN TO THE APPELLANT HIMSELF AND CASH MAY HA VE BEEN PAID. HOWEVER, IN THE ABSENCE OF ANY OTHER DETAILS , THE EXPENSES MAY HAVE BEEN HIGHLY EXAGGERATED. THE LD. AUTHORISED REPRESENTATIVE WAS ALSO NOT ADVERSE TO T HIS. HOWEVER, NO OTHER EXPENSES WOULD BE ALLOWABLE. IT IS, THEREFORE, SEEN THAT THE VERY BASIS OF ADDIT ION MADE BY THE ASSESSING OFFICER HAS BEEN KNOCKED OUT BY THE ORDER S OF CIT(A), WHERE IN ONLY AN ESTIMATE OF INCOME HAS BEEN MADE U /S. 44AD. SINCE THE BASIS OF INITIATING PENALTY PROCEEDINGS D OES NOT EXIST, NO PENALTY IN THIS CASE IS IMPOSABLE. THE SAME IS, TH EREFORE, CANCELLED. IN THE RESULT, THE APPEAL IS ALLOWED. 4. THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED SENIOR DR CONTENDED THAT THE ASSESSEE HAS SUBMITTED BOGUS BIL LS AND THERE IS ALSO MATERIAL TO SHOW THAT THE MONEY PAID TO THE CONTRAC TORS HAS BEEN RECEIVED BACK. HE POINTED OUT THAT THE BANK ACCOUNT OF THE CONTRACTOR WAS OPENED AT THE RECOMMENDATION AND INTERPRETATION OF THE ASS ESSEE. HE DREW OUR ATTENTION TO PARAGRAPHS 7.1 AND 7.6 OF THE ORDER OF TRIBUNAL DATED 29-06- 2007 IN THE QUANTUM PROCEEDINGS IN ITA NOS. 3856/AH D/2004 AND 37/AHMEDABAD/2005. HE SUBMITTED THAT THE FINDING O F THE TRIBUNAL IS THAT (A) THE CLAIM OF THE ASSESSEE IS INFIRM TO THE EXTREME (B) THE ASSESSEE WAS NOT ABLE TO PROVE THE EXISTENC E OF M/S. TARUNA ENTERPRISES AND ITS PROPRIETOR (C) THAT THE SIGNATURE OF THE PROPRIETOR OF TARUNA ENTERPRISE AS PER THE BANK REFERRED IS DIFFERENT FROM THE SIGNATURE A PPEARING IN THE BILLS RAISED BY TARUNA ENTERPRISES. 4 ITA NO.2609/AHD/2006 ( ASSESSMENT YEAR 2001-2002 ) THE LEARNED SENIOR DR SUBMITTED THAT THESE FINDINGS OF THE TRIBUNAL CLEARLY PROVED THAT THE ASSESSEES CLAIM OF LOADING EXPENSES IS NOT GENUINE AND THOUGH ULTIMATELY A PART OF THE CLAIM W AS ALLOWED, IT CANNOT BE SAID THAT THE DISALLOWANCE OF THE OTHER PART WAS SUSTAINED ONLY ON ESTIMATE. ACCORDINGLY, HE CONTENDED THAT THE PENAL TY SHOULD BE RESTORED. 5. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE ON T HE OTHER HAND SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX(A PPEALS) WHILE DEALING WITH THE ASSESSEES APPEAL AGAINST THE ASSE SSMENT, ADOPTED AN ENTIRELY DIFFERENT BASIS AND HELD THAT THE PROFITS OF THE ASSESSEE CAN BE ESTIMATED AT THE RATE OF 8% OF THE TURNOVER FOLLOWI NG THE SPIRIT OF SECTION 44AD AND WHEN THE MATTER REACHED TO THE TRIBUNAL, A DIFFERENT BASIS WAS ADOPTED AND THE FIRST INSTALLMENT OF RS. 5,00,000/- WAS ALLOWED ON THE FOOTING THAT THE ASSESSEE DID INCUR SOME LOADING EX PENSES WAS NOT GENUINE. THE LEARNED REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT THE SAME NUMBER VIZ. THAT OF PREPONDERANCE OF PROBABILI TY CANNOT BE APPLIED WHILE DEALING WITH PENALTY PROCEEDINGS FOR CONCEALM ENT OF INCOME WHERE STRICT PROOF OF THE ASSESSEES CONTUMACY IS REQUIRE D. SINCE IT IS ABSENT IN THE PRESENT CASE, IT WAS CONTENDED THAT THE PENALTY WAS RIGHTLY CANCELLED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS). 6. WE HAVE CONSIDERED THE FACTS AND THE RIVAL CONTE NTIONS. IT IS WELL SETTLED THAT ASSESSMENT PROCEEDINGS AND PENALTY PRO CEEDINGS ARE DIFFERENT AND THOUGH THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS ARE GOOD EVIDENCE, THEY CANNOT BE CONSIDERED TO BE CONCLUSIV E EVIDENCE IN THE COURSE OF THE PENALTY PROCEEDINGS INITIATED FOR CON CEALMENT OF INCOME. THIS PRINCIPLE HAS BEEN LAID DOWN BY THE SUPREME CO URT IN THE CASE OF. COMMISSIONER OF INCOME TAX, MADRAS V. KHODAY ESWARS A AND SONS. [1972] 83 ITR 369 AND CIT VS. ANANTRAM VEERSINGIAH & SONS 123 ITR 5 ITA NO.2609/AHD/2006 ( ASSESSMENT YEAR 2001-2002 ) 457. A PERUSAL OF THE ORDER OF THE TRIBUNAL IN THE ASSESSMENT PROCEEDINGS (SUPRA) SHOWS THAT THERE WAS NO DIRECT EVIDENCE TO SHOW THAT THE AMOUNT PAID BY THE ASSESSEE TO TARUNA ENTERPRISES WAS RECE IVED BACK AND WHAT THE TRIBUNAL HAS HELD IS ONLY THAT UNDER THE CIRCU MSTANCES, THEREFORE, THE INFERENCE DRAWN BY THE AO OF THE MONEY HAVING BEEN RECEIVED BACK BY THE ASSESSEE FIRM GAINS CONSIDERABLE CREDENCE. ( LAST SENTENCE OF PARA 7.4). THUS, THERE IS NO DIRECT EVIDENCE TO SHOW TH AT THE MONEY HAS BEEN RECEIVED BACK BY THE ASSESSEE. IT IS WELL SETTLED THAT SUCH INFERENCES MADE JUSTIFY THE DISALLOWANCE OF A PART OF THE LOADING C HARGES IN THE ASSESSMENT PROCEEDINGS, BUT WHEN IT COMES TO PENALTY PROCEEDIN GS; IT IS NOT PERMISSIBLE TO PENALIZE THE ASSESSEE FOR CONCEALMEN T ON THE BASIS OF INFERENCES OR PREPONDERANCE OF PROBABILITIES. IN P ENALTY PROCEEDINGS DIRECT EVIDENCE IS REQUIRED. IN PARA 7.6 OF THE OR DER, THE TRIBUNAL HAS EMPHASIZED THAT WHILE SUSTAINING A PARTICULAR OF DI SALLOWANCE OF THE LOADING CHARGES, THEY HAVE DECIDED TO IT SO ON A C ONSPECTUS OF THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , APPLYING THE PRINCIPLES OF REASONABLENESS AND PRUDENCE AS WELL AS THAT OF P REPONDERANCE OF PROBABILITIES, AS WOULD INFORM THE DECISION OF ANY PRUDENT PERSON SIMILARLY PLACED THESE OBSERVATIONS OF THE TRIB UNAL ALSO SHOW THAT THE DISALLOWANCE IS NOT BASED ON ANY DIRECT OR CLIN CHING EVIDENCE TO SHOW THAT THE CLAIM IS BOGUS OR FALSE. THE FINDINGS OF THE TRIBUNAL THEREFORE CANNOT COME TO THE AID OF THE REVENUE IN THE PENALT Y PROCEEDING AND IT CANNOT BE CONTENDED THAT THERE IS DIRECT EVIDENCE T O SHOW THAT THE MONEY CAME BACK TO THE ASSESSEE. 7. THE ASSESSEE MADE PAYMENTS TO CARRY OUT ITS CONT RACT WORK. THE TOTAL PAYMENTS MADE BY RS. 15,45,807/- IN RESPECT O F LOADING EXPENSES. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) APPLIED A GP RATE OF 8% 6 ITA NO.2609/AHD/2006 ( ASSESSMENT YEAR 2001-2002 ) TO CALCULATE THE GP OF THE ASSESSEE. IN APPEAL THE TRIBUNAL ALLOWED RS. 5,00,000/- AND DISALLOWED RS. 10.45 LACS ON THE GRO UND THAT LOADING EXPENDITURE WOULD BE REQUIRED TO BE NECESSARILY INC URRED IN PERFORMANCE OF THE CONTRACT. IT THEREFORE CANNOT BE DENIED THA T THE EXPENDITURE WAS INCURRED, ONLY PART OF THE SAME HAS BEEN DISALLOWED AS BEING INFLATED. ACCORDINGLY, WE ARE OF THE VIEW THAT THE INCOME OF THE ASSESSEE HAS BEEN ARRIVED AT BY ESTIMATION. IN SUCH A CASE THE PROVI SIONS OF SECTION 271(1)(C) DO NOT APPLY. ACCORDINGLY, WE CONFIRM TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) IN DELETING THE PENALTY IMPOSED ON THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 20 TH NOVEMBER, 2009. SD/- SD/- (R.V. EASWAR) (M .V. NAYAR) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED: 20/11/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.