The DCIT, Circle Circle-2, RAJKOT-GUJARAT V. Classic Construction Co., RAJKOT-GUJARAT

ITA 267/RJT/2013

• Counselvise Citation: 26724914 RSA 2013
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-12-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 05-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI
• Assessee Lawyers: D M RINDANI CA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA JM AND SHRI B. R. JAIN AM ITA NO. 267/RJT/2013 / ASSESSMENT YEAR 2002-03. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, RAJKOT. ( / APPELLANT V/S CLASSIC CONSTRUCTION CO. 202, ARPAN COMPLEX, OPP. SWAMINARAYAN TEMPLE, RAJKOT. PAN- AABFC3833A / RESPONDENT ! '# / REVENUE BY DR. J.B. JHAVERI, D.R. $% ! '# / ASSESSEE BY SHRI D.M. RINDANI, C.A. ' & ' %( / DATE OF HEARING 31-12-2013 ) %( / DATE OF PRONOUNCEMENT 31 - 12-2013 / ORDER PER B. R. JAIN, A. M. : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 22/03/2013 OF THE LEARNED CIT(A)-II, RAJKOT RAISES THE SOLITARY G ROUND AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CANCELLING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON THE ADDI TIONS OF RS. 10,96,000/- BEING THE ADDITIONS MADE IN ASSESSMENT ON ACCOUNT OF SUPPRESSION OF WORK IN PROGRESS. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS IN CO NSTRUCTION BUSINESS. THE ASSESSEE FIRM CEASED TO EXIST ON 19/3/2002 AND ALL ITS ASSETS AND LIABILITIES STOOD TAKEN OVER BY THE COMPANY KNOWN A S CLASSIC INFRASTRUCTURE PVT. LTD.. THE ASSESSEE DID NOT FURNISH COMPLETE DE TAILS OF WORK IN PROGRESS OF RS. 61,17,134/- WITH THE RETURN OF INCO ME FILED BY IT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. REQUIRED THE ASSESSEE TO SUBSTANTIATE THE WORKING OF WORK IN PROGRESS OF RS. 61,17,134/-. IN ITA 267/RJT/2013 2 RESPONSE THERETO, THE ASSESSEE GAVE WORKING OF WORK IN PROGRESS OF RS. 61,04,458/- ONLY AS UNDER:- BILL DATE PARTICULARS OF WORK GROSS BILL (RS.) GROSS PROFIT 15.08% COST OF BILLS RS. 21.03.02 KAMBHALIA DWARKA ROAD- R & B JAMNAGAR 3179563 479478 2700085 26.03.02 MENDARDA TO NANIKHODIYAR OFC ROUTE ITI LTD. 75950 11453 64497 26.03.02 NEW DELHI 100270 15121 85149 28.03.02 GIDC EXCHANGE-ITI NEW DELHI 847196 127757 719439 28.03.02 CHAVAND COMPOUND WALL- GWS & SB BHARWALA 1094476 165047 929429 31.03.02 DPEP DHORAJI 1852016 279284 1572732 31.03.02 BHILAD CHECK POST WORK NH VALSAD GMTD JUNAGADH 38986 5879 33107 TOTAL 7188457 1084019 6104438 THERE BEING A DIFFERENCE OF RS. 17,000/- IN THE VAL UE OF WORK IN PROGRESS FURNISHED WITH THE VALUE OF WORK IN PROGRESS DISCLO SED, THE A.O. VENTURED INTO THE CORRECTNESS OF THE CLAIM AND FOUND THAT TH E ASSESSEE HAS SUPPRESSED THE VALUE OF WORK IN PROGRESS BY RS. 10, 96,000/- IN RESPECT OF ITS TWO PROJECTS AS UNDER:- (A) KHAMBHALIA DWARKA ROAD: THE GROSS BILL OF RS. 31,79,563/- IS OF 31.03.2002 AND THE DATE OF MEASUREMENT IS NOT AVAILABLE FROM THE ABOVE BILL. N ORMALLY THE RUNNING BILLS ARE PREPARED ON THE MEASUREMENT OF TH E WORK DONE IN RESPECT OF THE ITEM OF PARTICULAR WORK. SUCH MEASUR EMENT ARE TAKEN PRIOR TO 10 DAYS FROM THE DATE OF BILL. AS SUCH IN THIS CASE THE MEASUREMENT CONSIDERED IS TO HAVE BEEN TAKEN ON 11. 03.2002. THE NEXT RUNNING BILL (IN THE HANDS OF THE COMPANY) WAS OF 27.03.2002 I.E. FOR 16 DAYS FOR RS. 25,08,008/-. AS SUCH THE W ORK IN PROGRESS FOR THE BALANCE PERIOD OF THE YEAR IN RESPECT OF THE AS SESSEE IS FROM 11.03.2002 TO 19.03.2002 I.E. 8 DAYS. AS SUCH PROPO RTIONATELY THE WORK IN PROGRESS FOR THESE PERIOD WOULD BE RS. 12,5 4,004/-. THE ASSESSEE IS SHOWN GROSS PROFIT AT 15.08%. ACCORDING LY ON RS. 12,54,004/-, THE GP WOULD BE RS. 1,89,104/-. AS SUC H THE WORK IN PROGRESS WOULD BE RS. 10,64,900/- (RS. 1254004-RS. 189104/-). THE SAME IS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE BEING UNDERSTATEMENT OF VALUE OF CLOSING STOCK. ACC ORDINGLY THE SAME IS ADDED TO THE TOTAL INCOME. ITA 267/RJT/2013 3 (B) BILL NO. 5 DPEP DHORAJI . IN THIS CASE, CONTRACT WORK IS BILL DATE IS 28.03.2 002 AND AS SUCH THE MEASUREMENT IS CONSIDERED TO BE TAKEN ON 18.03.2002 . THE NEXT RUNNING BILL WAS OF RS. 8,53,194/- FOR WHICH THE ME ASUREMENT DATE IS TAKEN ON 04.05.2002 IS FOR 46 DAYS. AS SUCH THE WOR K IN PROGRESS FOR THE PERIOD 18.03.2002 TO 19.03.2002, IT IS FOR TWO DAYS IS PROPORTIONATELY TAKEN FROM THE BILL OF RS. 8,53,194 /- FOR 46 DAYS. THE SAME HAS BEEN WORKED OUT TO RS. 37,095/-. THE SAME IS FURTHER REDUCED BY THE GP OF 15.08% I.E. RS. 5,594/- RESULT ING INTO NET ADDITION OF WORK IN PROGRESS OF RS. 31,501/- (RS. 3 7095-RS. 5594). AS SUCH THERE WOULD BE AN ADDITION OF RS. 31,501/- ON THIS GROUND. 3. IN THE ASSESSMENT COMPLETED ON 04/3/2005, THE A. O. MADE THE ADDITION OF RS. 10,96,000/- AND ALSO INITIATED PENA LTY PROCEEDINGS. THE SAID ADDITION STOOD CONFIRMED BY THE LD. CIT(A) VIDE ITS ORDER DATED 09/09/2004. THE ASSESSEE DID NOT CARRY THE DISPUTE BEFORE THE A PPELLATE TRIBUNAL. THE ADDITION SO MADE, THUS ACQUIRED FINALITY. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE R ELIED ON THE EARLIER TRIBUNALS ORDER DATED 20/4/2012 FOR ASSESSMENT YEA R 2001-02 IN ITA NO. 303/RJT.02008 AND CONTENDED THAT DIFFERENCE IN VALU ATION OF WORK IN PROGRESS COULD NOT BE A SUBJECT MATTER OF PENALTY U /S 271(1)(C) OF THE ACT, AS THE VALUATION RELATED TO UNCERTIFIED WORK IN PRO GRESS. THIS EXPLANATION, HOWEVER, WAS NOT FOUND BONAFIDE. THE A.O., THEREFOR E, WAS SATISFIED THAT THE ASSESSEE HAS CONCEALED THE INCOME BY FURNISHING INACCURATE PARTICULARS BY THE AMOUNT OF RS. 10,96,000/-. ACCOR DINGLY, THE PENALTY EQUAL TO 100% OF THE TAX SOUGHT TO BE EVADED STOOD IMPOSED ON THE ASSESSEE. 5. THE LD. CIT(A), HOWEVER, FORMED AN OPINION THAT THE INCOME HAS DULY BEEN DECLARED BY THE APPELLANT IN HIS RETURN O F INCOME AND ALSO IN THE BOOKS OF ACCOUNT, WHICH ARE DULY AUDITED. THERE WAS , THUS, FULL DISCLOSURE OF ALL RELEVANT MATERIALS. EVEN THOUGH THE APPELLAN T HAD MADE AN ERRONEOUS CLAIM, IT DOES NOT MAKE HIM LIABLE FOR PE NALTY AS THERE IS NO ITA 267/RJT/2013 4 PROOF OF DELIBERATE CONCEALMENT WITH THE DEPARTMENT . HE, THEREFORE, CANCELLED THE PENALTY IN RESPECT OF ADDITION OF RS. 10,96,000/- SUSTAINED ON ACCOUNT OF THE WORK IN PROGRESS. 6. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND THE EARLIER TRIBUNAL ORDERS BROUGHT TO OUR NOTICE. IT I S A CASE WHERE THE ASSESSEE HAS SUPPRESSED THE VALUE OF WORK IN PROGRE SS BY RS. 10,96,000/- AND WAS NOT ABLE TO GIVE EVEN THE CORRECT WORKING O F THE AMOUNT OF WORK IN PROGRESS DISCLOSED IN THE RETURN OF INCOME FILED BY HIM. THE LD.CIT(A) IS NOT FOUND CORRECT IN SAYING THAT THE ASSESSEE HAS M ADE AN ERRONEOUS CLAIM AND HAD MADE FULL DISCLOSURE OF RELEVANT MATE RIAL IN THE RETURN OF INCOME. SUCH A FINDING BEING PERVERSE TO FACTS ON R ECORD IS HEREBY SET ASIDE. THE ASSESSEES EXPLANATION TO THE SHOW CAUSE NOTICE ALONE WAS TO BE TESTED FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IN HIS EXPLANATION, THE RESPONDENT ASSESSEE SEEKS TO RELY ON THE EARLIER TR IBUNAL ORDER FOR ASSESSMENT YEAR 2001-02 WHEREBY PENALTY ON THE AMOU NT OF ADDITION OF WORK IN PROGRESS STOOD DELETED MERELY BECAUSE THE A SSESSEE WAS FOUND TO HAVE CARRIED THE BUSINESS IN SUBSEQUENT YEAR I.E. I N ASSESSMENT YEAR 2002-03 AND THE DIFFERENCE IN VALUE OF WORK IN PROG RESS HAD BECOME ITS OPENING STOCK FOR THE SUBSEQUENT YEAR BY AN AMOUNT OF RS. 8,27,520/-. IN THE PRESENT CASE, HOWEVER, THE APPELLANT FIRM HAS C EASED TO EXIST AND THEREFORE THE FINAL INCOME WITH REFERENCE TO THE SU PPRESSION OF AMOUNT OF WORK IN PROGRESS THAT HAS ACCRUED TO HIM IN THE YEA R UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2002-03 STOOD FINALLY DETERMIN ED. THE ASSESSEE DID NOT CARRY DISPUTE WITH RESPECT TO SUCH ADDITION ON ACCOUNT OF SUPPRESSION IN VALUATION OF WORK IN PROGRESS. UNDER THESE CIRCU MSTANCES, THE ASSESSEES EXPLANATION IN RESPONSE TO SHOW CAUSE NO TICE BEFORE LEVY OF PENALTY IS NEITHER BONAFIDE NOR TENABLE. THE EXPLAN ATION TENDERED DOES NOT ABSOLVE THE ASSESSEE FROM RIGORS OF PENALTY. THE LD . CIT(A), THEREFORE, IS ITA 267/RJT/2013 5 FOUND TO HAVE ERRED IN DELETING THE PENALTY. WE, TH EREFORE, SET ASIDE HIS ORDER AND RESTORE THE ORDER OF THE ASSESSING AUTHOR ITY. 7. BEFORE, WE PART, WE MAY ALSO ADDRESS ON THE ALTE RNATE CLAIM OF THE RESPONDENT ASSESSEE THAT AN AMOUNT OF RS. 8,27,520/ - ON ACCOUNT OF UNDERSTATEMENT OF WORK IN PROGRESS THAT STOOD SUSTA INED IN ASSESSMENT YEAR 2001-02 BECAME OPENING STOCK OF THE YEAR UNDER CONSIDERATION AND THUS THE BENEFIT THEREOF HAS TO BE GIVEN AGAINST TH E UNDERSTATEMENT OF VALUE OF WORK IN PROGRESS OF RS. 10,96,000/- AS ON THE CLOSE OF THE YEAR UNDER CONSIDERATION. THE REVENUE, HOWEVER, CLAIMED THAT SUCH UNDER VALUATION OF STOCK OF RS. 8,27,520/- OF ASSESSMENT YEA 2001-02 HAS ALREADY BEEN TAKEN AS PART OF INCOME OF THE YEAR UN DER CONSIDERATION I.E. ASSESSMENT YEAR 2002-03. NO SUCH BENEFIT CAN BE ALL OWED TO THE ASSESSEE FOR SUPPRESSED VALUE OF WORK IN PROGRESS O F RS. 10,96,000/- HELD IN THE STOCK AT THE END OF THE YEAR UNDER CONSIDERA TION. THE FACTS ON RECORD REVEAL THAT THE ADDITION OF RS. 10,96,000/- ON ACCO UNT OF SUPPRESSION OF VALUE OF WORK IN PROGRESS HAS BEEN SUSTAINED AND AC QUIRED FINALITY IN THAT REGARD. IN CASE THE ALTERNATE PLEA OF THE RESPONDEN T IS ACCEPTED, IT WILL AMOUNT TO WRITING OF QUANTUM ORDER DENOVO IN PENALT Y PROCEEDINGS. SUCH AN EXERCISE IS BEYOND THE SCOPE OF POWERS OF THE TR IBUNAL IN PENALTY PROCEEDINGS. FINDING NO MERIT, THE ALTERNATE PLEA O F THE RESPONDENT ALSO STANDS REJECTED. 8. IN THE RESULT, APPEAL BY REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/12/2013. SD/- SD/- ( T. K. SHARMA ) ( B. R. JAIN ) '* /JUDICIAL MEMBER #( '* / ACCOUNTANT MEMBER *#+ ,*-/ ORDER DATE 31/12/2013 /RAJKOT *RANJAN ITA 267/RJT/2013 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- DEPUTY COMMISSIONER OF INCOME TAX, CEN TRAL CIRCLE-2, RAJKOT. 2. /RESPONDENT- CLASSIC CONSTRUCTION CO., RAJKOT. 3. '-2- % & 3% / CIT-I, RAJKOT. 4. & 3%- / CIT (A)-II, RAJKOT. 5. 789 % , , / DR, ITAT, RAJKOT 6. 9; <= / GUARD FILE. *#+ '# / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.