ACIT, New Delhi V. Sh. Anil Mehra Prop., New Delhi

ITA 2695/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66006 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Keywords: Bonafide belief; Capital expenditure

Judgement Text

ITA NO. 2695/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2695/DEL/2012 A.Y. : 2007-08 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 36(1), NEW DELHI VS. SH. A NIL MEHRA, PROP. M/S ARCHITECT THE LIVING, 6, MADHUBAN, DELHI 110 092 (PAN/GIR NO. : AAMPM 8628E) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. C.S. ANAND, ADV. DEPARTMENT BY : SH. BHIM SINGH, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXVII, NEW DELHI DATED 10.2.2012 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (A) ERRED IN DELETING THE PENALTY OF ` 6.77 LACS LEVIED BY TH E ASSESSING OFFICER U/S. 271(1)(C) OF THE I.T. ACT. 3. THE ASSESSEE IN THIS IS AN ARCHITECT. ON VERIFIC ATION OF THE PROFIT AND LOSS ACCOUNT, ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN RECEIPT OF ` 6,72,247/- FROM M/S STARCON BACK OFFI CE SOLUTION LTD. ASSESSEE HAS FURTHER SUBMITTED THAT ASSESSEE HAS RE CEIVED ` 3,30,90,744/- FROM M/S STARCON BACK OFFICE SOLUTION LTD. ASSESSEE CLAIMED AN EXPENDITURE OF ` 32418494/- AND CALCULAT ED A PROFIT OF ` 6,72,247/-. HOWEVER, THE ASSESSEE DID NOT GIVE ANY DETAIL OF THE ITA NO. 2695/DEL/2012 2 EXPENDITURE INCURRED. ASSESSEE WAS NOT ABLE TO PR ODUCE THE DETAILS OF EXPENDITURE IN THIS REGARD. THEREFORE, ASSESSING OFFICER HELD THAT THE BOOK RESULTS OF THE ASSESSEE FOR THE CONTRACT CANNO T BE VERIFIED AND CANNOT BE RELIED UPON AND IS NOT SHOWING TRUE AND C ORRECT INCOME OF THE ASSESSEE. THEREFORE, THE BOOK RESULT FOR INCO ME FROM CONTRACT OF M/S STARCON BACK SOLUTION PVT. LTD. WAS REJECTED. ASSESSING OFFICER FURTHER APPLIED PROFIT RATE @ 8% ON THE GROSS RECE IPT AND THUS CALCULATED THE INCOME OF THE ASSESSEE IN THIS REGARD AT ` 2647260/- FROM THIS CONTRACT. AS THE ASSESSEE HAS ALREADY SHOW N INCOME OF ` 672247/- FROM THIS CONTRACT THE BALANCE OF ` 20,13, 000/- WAS ADDED TO THE INCOME OF THE ASSESSEE. IN THIS REGARD, PENAL TY PROCEEDING U/S. 271(1)(C) WAS ALSO INITIATED AND THE ASSESSING OFFI CER LEVIED THE PENALTY OF ` 677576/-. IN THE PENALTY ORDER ASS ESSING OFFICER HAS INTER-ALIA OBSERVED THAT ASSESSEE HAS ACCEPTED THES E ADDITIONS BY NOT FILING THE APPEAL AGAINST THE ADDITION, HENCE, THE ASSESSEE HAD CONCEDED THE CONCEALMENT OF INCOME WHICH HE OFFERED FOR TAXATION ON AGREED BASIS. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT THE ASSESSEE HAS AGREED TO THE APPLICATI ON OF 8% OF PROFIT RATE ON THE RECEIPTS BECAUSE HE WAS NOT ABLE TO F ILE DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPENDITURE CLAIMED AGAIN ST THE RECEIPTS FROM THE WORK CONTRACT WITH M/S STARCON BACK OFFICE SOLUTION LTD. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT RETURN OF INCOME WAS FILED BY THE ASSESSEE ON THE BASIS OF AU DITED ACCOUNTS. BECAUSE THE ASSESSEE WAS NOT ABLE TO FILE DOCUMENT ARY EVIDENCE IN SUPPORT OF CLAIM OF EXPENDITURE BECAUSE OF THE CIRCU MSTANCE PREVAILING AT THAT TIME, HE AGREED TO BE ASSESSED AT HIGHER INC OME @ 8% OF THE GROSS RECEIPTS. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED ITA NO. 2695/DEL/2012 3 THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT ASS ESSEE HAS INFLATED HIS EXPENDITURE OR HAD CLAIMED BOGUS EXPENDITURE. LD. COMMISSIONER OF INCOME TAX (A) HELD THAT APPLICATION OF 8% PROFIT RATE IS AN ADHOC AND ESTIMATED ADDITION, NOT BASED ON ANY FINDING OF ANY CONCEALMENT OF INCOME BUT BECAUSE OF THE REASONS THAT THE ASSES SEE WAS NOT ABLE TO FILE DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPE NDITURE CLAIMED. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASSESSE E HAS INTER-ALIA SUBMITTED THAT ASSESSEES ACCOUNTANT DUE TO SOME D ISPUTE HAS TAKEN AWAY THE ACCOUNT BOOKS OF THE ASSESSEE. HENCE, THE ASSESSEE WAS NOT ABLE TO PRODUCE THE ASSESSEES BOOKS OF ACCOUNTS. HENCE, HE AGREED TO THE ADDITION IN THIS REGARD. THEREFORE, LD. CO MMISSIONER OF INCOME TAX (A) HELD THAT PENALTY U/S. 271(1)(C) IN THIS REGARD WAS NOT LEVIABLE AND THE SAME WAS DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. 7. WE FIND THAT SECTION 271(1(C) OF THE ACT POSTUL ATES IMPOSITION OF PENALTY FOR FURNISHING OF INACCURATE PARTICULARS AN D CONCEALMENT OF INCOME. IN THIS CASE ASSESSEE HAS NOT BEEN ABLE T O PRODUCE THE NECESSARY BOOKS OF ACCOUNTS AND BILLS, VOUCHERS IN SUPPORT OF ONE OF THE CONTRACT. THE REASON IN THIS REGARD HAS BEEN SUBMITTED THAT THE THERE WAS SOME DISPUTE WITH THE ACCOUNTANT OF THE AS SESSEE WHO HAS TAKEN AWAY THE NECESSARY DETAILS WITH HIM. TH E ASSESSING OFFICER HAS APPLIED 8% OF PROFIT RATE ON THE RECEIPT IN THIS REGARD AND MADE THE ADDITION OF ` 20,13,000/- AND ACCORDINGLY, O N THIS AMOUNT PENALTY WAS LEVIED ON THE ASSESSEE. WE FIND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CONDUCT OF THE ASSESS EE WAS NOT ITA NO. 2695/DEL/2012 4 CONTUMACIOUS ENOUGH SO AS TO WARRANT THE LEVY OF PE NALTY U/S. 271(1)(C) OF THE I.T. ACT. 8. IN THIS REGARD, WE PLACE RELIANCE FROM THE APE X COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 26 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMIN AL PROCEEDINGS, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PA RTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY B ECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAI LURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF T HE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL T HE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBE D, THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE. 9. WE WOULD ALSO LIKE TO REFER TO THE HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. I N CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2 010 IT HAS BEEN HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE C ONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDE R TEXTILE CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WA S HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C ). THE HONBLE ITA NO. 2695/DEL/2012 5 APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CL AIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSE SSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INT ENDMENT OF LEGISLATURE. 10. AS REGARDS RELIANCE OF THE LD. DEPARTMENTAL RE PRESENTATIVE IN THE CASE OF C.I.T. VS. ZOOM COMMUNICATION PVT LTD. (S UPRA), WE FIND THAT FACTS OF THAT CASE ARE NOT APPLICABLE HERE. IT WAS HELD IN THE SAID DECISION THAT THE TRIBUNAL ERRED IN LAW IN DELETING THE PENALTY U/S. 271(1)(C) IN RESPECT OF THE CLAIM ON ACCOUNT OF PAYME NT OF INCOME TAX AND CAPITAL EXPENDITURE WRITTEN OFF IN THE PROFIT A ND LOSS ACCOUNT OF THE ASSESSEE, THE CLAIM BESIDES BEING INCORRECT IN LAW WAS ALSO MALAFIDE. HENCE, WE FIND THAT THE CASE LAW RELIED UPON BY TH E LD. DEPARTMENTAL REPRESENTATIVE IS NOT APPLICABLE ON THE FACTS OF TH E PRESENT CASE. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRE CEDENTS, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (A) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/12/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 19/12/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES