ACIT, Erode V. M/s. R.R. Thulasi Builders India (P) Ltd., Erode

ITA 2776/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3965 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: YAMUNA
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2776/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE (1), ERODE 638 001. VS M/S. R R THULASI BUILDERS INDIA (P) LIMITED, SAKTHI MAHAL, 63, PERUNDURAI ROAD, ERODE 638 001. PAN: AADCR2519R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SMT. YAMUNA, JCIT /RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE /DATE OF HEARING : 08.05.2017 !' /DATE OF PRONOUNCEMENT : 27.07.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-3, COIMBATORE DATED 29.06.2016 IN ITA NO.234/15-16 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S.271 (1)(C) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN 2 ITA NO.2776/MDS/2016 DELETING THE PENALTY OF RS.48,66,750/- LEVIED BY TH E ASSESSING OFFICER U/S.271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING CONTRACT WORKS, FILED ITS RETURN OF INC OME FOR THE ASSESSMENT YEAR 2012-13 ELECTRONICALLY ON 29.09.201 2 ADMITTING TOTAL INCOME OF RS.7,28,63,730/-. THE CASE WAS TAKE N UP FOR SCRUTINY UNDER CASS AND FINALLY ORDER U/S. 143(3) W AS PASSED ON 30.03.2015, WHEREIN THE LD.AO MADE SEVERAL ADDITION S. THEREAFTER PENALTY PROCEEDINGS WAS INITIATED AND FI NALLY THE LD.AO LEVIED PENALTY U/S.271(1)(C) OF THE ACT WITH RESPECT TO THE ADDITION MADE TOWARDS CLOSING WORK-IN-PROGRESS OF RS.1,50,00,000/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE WAS CONSIST ENTLY RECEIVING MOBILIZATION ADVANCE AGAINST WHICH THE AS SESSEE WAS EXECUTING CONSTRUCTION WORK FOR ITS CLIENTS. THE C LIENTS OF THE ASSESSEE WERE ALSO WITHHOLDING THE RETENTION MONEY WHICH IS TREATED AS INCOME BY THE ASSESSEE ON RECEIPT BASIS. THE ASSESSEE WAS MAINTAINING ITS BOOKS OF ACCOUNTS ON M ERCANTILE 3 ITA NO.2776/MDS/2016 BASIS. HOWEVER, THE ASSESSEE FAILED TO DISCLOSE TH E CLOSING WORK-IN-PROGRESS AS ON THE END OF THE PREVIOUS YEAR AND THEREBY UNDERSTATED HIS PROFITS. WHEN THIS WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE BY THE LD.AO, THE ASSESSEE ADMITTED THE CLOSING WORK-IN-STOCK AT RS.1,50,00,000/-. THUS HIS INCOME WAS ENHANCED TO THAT EXTENT. SINCE THE ASSESSEE HAD NO T DISCLOSED THE CLOSING WORK-IN-PROGRESS OR RATHER NOT TAKEN AN Y EFFORT TO DISCLOSE THE CLOSING WORK-IN-PROGRESS IN HIS BOOKS OF ACCOUNTS, THE LD.AO INVOKED THE PROVISIONS OF SECTION 271(1)( C) OF THE ACT AND ACCORDINGLY LEVIED PENALTY AT RS.48,66,750/- BE ING 100% OF TAX SOUGHT TO BE EVADED. 5. ON APPEAL, THE LD.CIT(A) DELETED THE PENALTY BY OBSERVING AS UNDER:- 6.0 I HAVE CAREFULLY CONSIDERED THE GROUNDS OF THE APPE LLANT AND THE PENALTY ORDER U/S 271 (1) (C) OF THE INCOME TAX ACT, 1961. IN THIS CASE SOME DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF CERTAIN WORK SITES WERE FOUND BY THE ASSESSING O FFICER AND THE APPELLANT HAS OFFERED ADDITIONAL INCOME DURING THE COURSE OF SCRUTINY PROCEEDINGS. THIS ADDITIONAL INCOME IS TREATED BY THE ASSESSING OFFICER AS CONCEALMENT AND PENALTY U/ S 271 (1) (C) HAS BEEN LEVIED. THE ASSESSING OFFICER IS CORRE CT IN HOLDING THAT ADDITIONAL INCOME OFFERED AFTER DETECTION BY T HE DEPARTMENT FOR AVOIDING LITIGATION AND TO PURCHASE PEACE SQUARELY FALLS IN THE RATIO OF THE DECISION OF THE APEX COURT IN MAK DATA (P) LTD 358 ITR 593. BUT IN THAT CASE INCO ME BASED ON EVIDENCE FROM MATERIALS FOUND WITH THE SISTER CO NCERN WAS 4 ITA NO.2776/MDS/2016 NOT OFFERED FOR ASSESSMENT EVEN AFTER 10 MONTHS OF SURVEY DURING WHICH THERE WAS DETECTION BY THE DEPARTMENT. THE DISTINCT FACTS OF THE PRESENT CASE HAVE TO BE LOOKE D AT BEFORE APPLYING THE RATIO OF MAK DATA (P) LTD. IN THE INST ANT CASE, THE APPELLANT HAS 47 WORK SITES AND DISCREPANCY IN WORK SITE ACCOUNTS HAVE BEEN FOUND BY THE ASSESSING OFFICER A ND THE SAME HAS BEEN TREATED AS CONCEALMENT AND THERE SUBS EQUENTLY OFFERED BY THE APPELLANT WHICH HAS BEEN CONSIDERED FOR LEVY OF PENALTY. THE PERTINENT POINT TO THE LOOKED AT IS TH AT THE ACCOUNTS OF THE APPELLANT WILL HAVE TO BE SEEN AT T HE ENTITY LEVEL AND NOT AT THE WORK SITE LEVEL. AT THE ENTITY LEVEL, THE BILLS ACCOUNTED FOR DURING THE YEAR ARE MORE THAN THE EXP ENSES INCURRED DURING THE YEAR. THE EXPENSES INCURRED AT THE SITE CANNOT BE HELD AS UNACCOUNTED THOUGH THERE HAS BEEN FAILURE ON THE INTERNAL CONTROL MECHANISM RESULTING IN DISC REPANCY IN CERTAIN WORK SITES. NO CONCEALMENT OR INACCURATE PA RTICULARS HAVE BEEN FURNISHED BY THE APPELLANT. THERE IS NEIT HER BASIS NOR SUFFICIENT REASONS FOR LEVY OF PENALTY FOR CONC EALMENT. THE QUANTUM ADDITION IS JUSTIFIED BUT LEVY OF PENALTY I S NOT SUPPORTED ADEQUATELY. THE PENALTY LEVIED IS DELETED . 6. BEFORE US THE LD.DR VEHEMENTLY ARGUED STATING TH AT THE ASSESSEE HAD FAILED TO DISCLOSE THE CLOSING WORK-IN -PROGRESS IN ITS STATEMENT OF AFFAIRS, WHICH RESULTED IN UNDERST ATEMENT OF INCOME, WHICH WAS WISELY DETECTED BY THE LD.AO AT T HE TIME OF ASSESSMENT, THEREBY PLUGGED THE LOSS OF REVENUE. H E FURTHER ARGUED STATING THAT FAILURE ON THE PART OF THE ASSE SSEE TO DISCLOSE THE FACTUAL STATE AFFAIRS OF THE ASSESSEE RESULTING IN UNDERSTATEMENT OF PROFIT WILL AMOUNT TO CONCEALMENT OF INCOME AS PER THE PROVISIONS OF THE ACT. HE THEREFORE PLEADE D THAT THE ORDER 5 ITA NO.2776/MDS/2016 OF THE LD.AO MAY BE REINSTATED. THE LD. AR ON THE O THER HAND RELIED ON THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOU NTS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING. FURTHER THE A SSESSEE IS DECLARING ITS PROFIT ON THE BASIS OF PERCENTAGE MET HOD OF COMPLETION LEAVING OUT THE RETENTION MONEY WHICH HE ACCOUNTS ON RECEIPT BASIS. WHILE DOING SO, IT IS MANDATORY ON THE PART OF THE ASSESSEE TO COMPUTE THE CLOSING STOCK AND DISCL OSE THE SAME IN THE PROFIT & LOSS ACCOUNT AND THE BALANCE S HEET, WHICH THE ASSESSEE HAS GROSSLY FAILED TO DO SO. THIS CER TAINLY WILL AMOUNT TO CONCEALMENT OF FACTS WHICH HAS ALSO RESUL TED IN UNDERSTATEMENT OF PROFITS. THE ASSESSEE HAD NOT EV EN MADE AN EFFORT TO ESTIMATE THE CLOSING WORK-IN-PROGRESS AND DISCLOSE THE SAME IN ITS STATEMENT OF AFFAIRS. IN SUCH CIRCUMST ANCES, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTI ON 271(1)(C) OF THE ACT WILL BE DIRECTLY APPLICABLE BECAUSE THERE I S CONCEALMENT OF FACT WITH RESPECT TO CLOSING WORK-IN-PROGRESS WH ICH RESULTS IN UNDERSTATEMENT OF PROFIT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD.AO WAS RIGHT IN HIS REALM TO INVOK E THE 6 ITA NO.2776/MDS/2016 PROVISIONS OF SECTION 271(1)(C) OF THE ACT, IN THE CASE OF THE ASSESSEE. HENCE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND REINSTATE THE ORDER OF THE LD.AO. THE DECISION OF THE HONBLE MADRAS HIGH COURT CITED BY THE LD.AR IN THE CASE OF CIT VS. GEM GRANITES REPORTED IN 86 CCH 160 WILL NOT BE APP LICABLE IN THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE HAS P ATENTLY CONCEALED THE CLOSING STOCK IN ITS STATEMENT OF AFF AIRS AND THEREBY UNDERSTATED ITS PROFIT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED ON THE 27 TH JULY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 27 TH JULY, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF