ACIT, Erode V. M/s. S. Selvaraj & Co., Erode

ITA 2777/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4051 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• 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.2777/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE (1), ERODE 638 001. VS M/S. S. SELVARAJ & CO., NO.63, SAKTHI MAHAL, PERUNDURAI ROAD, ERODE 638 011. PAN: AAHFS0382A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SMT. YAMUNA, JCIT /RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE /DATE OF HEARING : 08.05.2017 !' /DATE OF PRONOUNCEMENT : 28.07.2017 / 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.281/15-16 FOR THE ASSESSMENT YEAR 2012-13 PASSED U/S.250(6) R.W.S.271 (1)(C) OF THE ACT. 2 ITA NO.2777/MDS/2016 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 DELETING THE PENALTY OF RS.15,45,000/- 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 FIRM ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING CONTRA CT WORKS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-1 3 ELECTRONICALLY ON 30.09.2012 ADMITTING TOTAL INCOME OF RS.1,78,97,340/-. THE CASE WAS TAKEN UP FOR SCRUTIN Y UNDER CASS AND FINALLY ORDERS U/S. 143(3) WAS PASSED ON 3 0.03.2015, WHEREIN THE LD.AO MADE SEVERAL ADDITIONS. THEREAFT ER PENALTY PROCEEDINGS WAS INITIATED AND FINALLY THE LD.AO LEV IED PENALTY U/S.271(1)(C) OF THE ACT WITH RESPECT TO THE ADDITI ON MADE TOWARDS CLOSING WORK-IN-PROGRESS OF RS.50,00,000/- BECAUSE THE ASSESSEE HAD NOT DISCLOSED ITS CLOSING-WORK IN PROG RESS IN ITS STATEMENT OF AFFAIRS FILED ALONG WITH THE RETURN OF INCOME. ON APPEAL THE LD.CIT(A) DELETED THE PENALTY BY OBSERVI NG AS UNDER:- 6.0 I HAVE CAREFULLY CONSIDERED THE GROUNDS OF THE APPELLANT AND THE PENALTY ORDER U/S 271 (1) (C). IN THIS CASE CERTAIN DISCREPANCIES IN THE ACCOUNTS OF CERTAIN WORK SITES WERE FOUND BY THE ASSESSING OFFICER AND THE APPELLANT HAS OFFE RED 3 ITA NO.2777/MDS/2016 ADDITIONAL INCOME DURING THE COURSE OF SCRUTINY PRO CEEDINGS. THIS ADDITION INCOME IS TREATED AS CONCEALED AND PE NALTY U/S 271 (1) (C) HAS BEEN LEVIED. THE ASSESSING OFFICER IS CORRECT IN HOLDING THAT ADDITIONAL INCOME OFFERED AFTER DETECT ION BY THE DEPARTMENT FOR AVOIDING LITIGATION AND TO PURCHASE PEACE SQUARELY FALLS IN THE RATIO IN APEX COURT JUDGEMENT IN MAK DATA (P) LTD. 358 ITR 593. BUT IN THAT CASE INCOME BASED ON EVIDENCE FROM MATERIALS FOUND WITH THE SISTER CONCE RN WAS NOT OFFERED FOR ASSESSMENT EVEN AFTER 10 MONTHS OF SURV EY DURING WHICH THERE WAS DETECTION OF CONCEALMENT BY THE DEP ARTMENT. THE FACTS OF THE PRESENT CASE HAVE TO BE LOOKED AT BEFORE APPLYING THE RATIO OF MAK DATA (P) LTD. IN THE INST ANT CASE THE APPELLANT HAS 13 WORK SITES AND DISCREPANCIES IN WO RK SITE ACCOUNTS WERE FOUND BY THE ASSESSING OFFICER AND TH E SAME WAS OFFERED AS INCOME BY THE APPELLANT. IN THE PENA LTY ORDER, THIS ADDITIONAL INCOME IS TREATED AS CONCEALMENT. T HE PERTINENT POINT TO THE LOOKED AT IS THAT THE ACCOUNTS OF THE APPELLANT WILL HAVE TO BE SEEN AT THE ENTITY LEVEL AND NOT AT THE WORK SITE LEVEL. AT THE ENTITY LEVEL NO DEFICIENCY HAS BEEN FOUND. T HE DISCREPANCY IN EXPENSES INCURRED AT THE SITE CANNOT BE HELD AS CONCEALMENT THOUGH THERE HAS BEEN FAILURE ON THE IN TERNAL CONTROL MECHANISM RESULTING IN DISCREPANCY. NO CONC EALMENT OR INACCURATE PARTICULARS HAVE BEEN FURNISHED BY TH E APPELLANT. THERE ARE NO SUFFICIENT REASONS FOR LEVY OF PENALTY FOR CONCEALMENT. THE QUANTUM ADDITION IS JUSTIFIED BUT LEVY OF PENALTY IS NOT SUPPORTED ADEQUATELY. THE PENALTY LE VIED IS DELETED. 4 ITA NO.2777/MDS/2016 4. AT THE OUTSET, WE FIND THAT ON THE IDENTICAL ISS UE AND FACTS IN THE CASE OF THE ASSESSEES SISTER CONCERN M/S. R R THULASI BUILDERS IN ITA NO.2776/MDS/2016 VIDE ORDER DATED 2 7.07.2017, WE HAVE CONFIRMED THE PENALTY. THE RELEVANT PORTIO N OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 7. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE ASSESSEE IS MAINTAINING THE BO OKS OF ACCOUNTS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNT ING. FURTHER THE ASSESSEE IS DECLARING ITS PROFIT ON THE BASIS OF PERCENTAGE METHOD OF COMPLETION LEAVING OUT THE RET ENTION MONEY WHICH HE ACCOUNTS ON RECEIPT BASIS. WHILE DO ING SO, IT IS MANDATORY ON THE PART OF THE ASSESSEE TO COMPUTE THE CLOSING STOCK AND DISCLOSE THE SAME IN THE PROFIT & LOSS AC COUNT AND THE BALANCE SHEET, WHICH THE ASSESSEE HAS GROSSLY F AILED TO DO SO. THIS CERTAINLY WILL AMOUNT TO CONCEALMENT OF F ACTS WHICH HAS ALSO RESULTED IN UNDERSTATEMENT OF PROFITS. TH E ASSESSEE HAD NOT EVEN MADE AN EFFORT TO ESTIMATE THE CLOSING WORK-IN- PROGRESS AND DISCLOSE THE SAME IN ITS STATEMENT OF AFFAIRS. IN SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW T HAT THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT WILL BE DIRECTLY APPLICABLE BECAUSE THERE IS CONCEALMENT OF FACT WIT H RESPECT TO CLOSING WORK-IN-PROGRESS WHICH RESULTS IN UNDERSTAT EMENT OF PROFIT. THEREFORE, WE ARE OF THE CONSIDERED VIEW T HAT THE LD.AO WAS RIGHT IN HIS REALM TO INVOKE THE PROVISIO NS OF SECTION 271(1)(C) OF THE ACT, IN THE CASE OF THE AS SESSEE. HENCE, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND REINSTATE THE ORDER OF THE LD.AO. THE DECISION OF THE HONBL E MADRAS HIGH COURT CITED BY THE LD.AR IN THE CASE OF CIT VS . GEM GRANITES REPORTED IN 86 CCH 160 WILL NOT BE APPLICA BLE IN THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE HAS PATEN TLY 5 ITA NO.2777/MDS/2016 CONCEALED THE CLOSING STOCK IN ITS STATEMENT OF AFF AIRS AND THEREBY UNDERSTATED ITS PROFIT. 5. IN THE CASE OF THE ASSESSEE ALSO, THE SAME FACTS PREVAIL AS IN THE CASE OF M/S. R.R. THULASI BUILDERS ( SUPRA ). THE ASSESSEE HAD GROSSLY ERRED BY NOT DISCLOSING ITS CLOSING-WOR K-IN-PROGRESS IN ITS STATEMENT OF AFFAIRS FILED ALONG WITH THE RE TURN OF INCOME. THIS RESULTS IN UNDERSTATEMENT OF PROFIT. THEREFOR E, FOLLOWING THE ABOVE ORDER OF THE BENCH OF THE TRIBUNAL WHERE THE FACTS ARE IDENTICAL, WE HEREBY SET ASIDE THE ORDER OF THE LD. CIT(A) AND CONFIRMED THE ORDER OF THE LD.AO. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED. ORDER PRONOUNCED ON THE 28 TH JULY, 2017 AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER #$ /CHENNAI, %& /DATED 28 TH JULY, 2017 JR & () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF