ITO, Barnala V. M/s Lotus Infrabuild Ltd., Barnala

ITA 29/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6644 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 28-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Rejection of books of accounts; Search and seizure; Question of law; Onus to prove; Revised return
• Section: 44AD; 145; 27; 144; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR.B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 29/CHD/2017 ASSESSMENT YEAR: 2010-11 THE ITO VS. M/S LOTUS INFRABUILD LTD. WARD-1, BARNALA RAIKOT ROAD, NEAR RAILWAY CROSSING, BARNALA PAN NO. AABCL2654F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. ASHWANI KUMAR REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 06/09/2017 DATE OF PRONOUNCEMENT : 14/11/2017 ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF LD. CIT(A), PATIALA DT. 07/10/2016. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE LD. CIT(A) IS CORRECT IN DELETING THE PENALTY OF RS. 41,89,818/- IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT, 1961 FOR CONCEALING PARTICULARS OF INCOME AND WITHOUT APPRECIATING THE FACT THAT CONCEALMENT PENALTY CAN BE LEVIED EVEN IF THE ADDITION IS BASED ON ESTIMATED BASIS AS HELD IN THE FOLLOWING JUDGMENTS: (I). ADDL.CIT VS. CHANDRAKANTHA AND ANOTHER (MP) 20 5 ITR 607 (II). ADDL. CIT VS. LAKSHMI INDUSTRIES AND COLD STO RAGE CO. LTD. (ALL) 146 ITR 492 (III). SUSHIL KUMAR SHARAD KUMAR VS. CIT(ALL) 232 I TR 588 (IV). CIT VS. MD. WARASAT HUSSAIN (PATNA) 171 ITR 4 05 (V). A.M. SHAH & CO. VS. (GUJ) 238 ITR 415 (VI). CIT VS. KRISHNASWAMY AND SONS (MAD) 219 ITR 1 57 (VII). CIT VS. SWARUP COLD STORAGE & GENERAL MILLS( ALL) 136 ITR 435 (VIII). CIT VS. CHANDRA VILLAS HOTEL (GUJ) 291 ITR 202 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CONTRACTOR AND TRADER OF CONSTRUCTION MATERIALS. DURING THE YE AR THE ASSESSEE HAS SHOWN A NET PROFIT (NP) OF RS. 1,54,13,020/- ON THE TURNOVER OF RS. 33,12,92,343/- THUS DECLARING 4.65% NET PROFIT. THE NET PROFIT RATE FOR THE EARLIER YEARS OF 2008-09 & 2009-10 WER E 7.25% AND 6.24% RESPECTIVELY. 3.1 THE ASSESSING OFFICER AFTER GOING THROUGH THE E NTIRE AFFAIRS, HAS REJECTED THE BOOKS OF ACCOUNTS AND COMPUTED NET PROFIT @12% ON THE GROSS RECEIPT IN THE ORDER PASSED UNDER SECT ION 143 READ WITH SECTION 145 OF THE INCOME TAX ACT 1961. 3.2 THE HONBLE ITAT CHANDIGARH VIDE ORDER DT. 05/1 1/2015 IN ITA NO. 804 & 909/CHD/2014 CONFIRMED THE ACTION OF THE ASSESSING OFFICER AS MODIFIED TO AN EXTENT OF NP RATE OF 7% B Y THE LD. CIT(A), THUS FINALLY DETERMINING THE INCOME TO RS. 2,32,11, 982/-. 3.3 PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) HAV E BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME AND LEVIED PENALTY OF RS. 41,89,818/- VIDE ORDER DT. 09/03/2016. THE LD. CIT( A) HAS DELETED THE PENALTY ON THE GROUNDS THAT PENALTY LEVIED ON T HE ADDITION MADE ON ESTIMATE BASIS CANNOT BE SUSTAINED. 4. AGGRIEVED THE REVENUE FILED APPEAL BEFORE US. 5. DURING THE HEARING LD. DR HAS ARGUED THAT THE OB SERVATION OF THE LD. CIT(A) THAT THE PENALTY CANNOT BE LEVIED ON THE ADDITION MADE ON ESTIMATION BASIS IS NOT ACCEPTABLE AS THE A SSESSING OFFICER HAS FOUND OUT LOT OF DISCREPANCIES IN THE B OOKS OF ACCOUNTS AND THE ADDITION HAS BEEN MADE AFTER REJECTION OF T HE BOOKS OF ACCOUNTS. 5.1 THE LD. DR EXTENSIVELY QUOTED VARIOUS CASE LAWS WHICH ARE AS UNDER: 1. ADDL.CIT VS. CHANDRAKANTHA AND ANOTHER (MP) 205 ITR 607 2. ADDL. CIT VS. LAKSHMI INDUSTRIES AND COLD STORAG E CO. LTD. (ALL) 146 ITR 492 3. SUSHIL KUMAR SHARAD KUMAR VS. CIT(ALL) 232 ITR 5 88 4. CIT VS. MD. WARASAT HUSSAIN (PATNA) 171 ITR 405 3 5. A.M. SHAH & CO. VS. (GUJ) 238 ITR 415 6. CIT VS. KRISHNASWAMY AND SONS (MAD) 219 ITR 157 7. CIT VS. SWARUP COLD STORAGE & GENERAL MILLS(ALL) 136 ITR 435 8. CIT VS. CHANDRA VILLAS HOTEL (GUJ) 291 ITR 202 6. WHILE THE LD. AR RELIED ON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND THE ORDER OF THE LD. CIT(A). 6.1 LD. AR ARGUED THAT FAILURE ON THE PART OF ASSES SEE TO PRODUCE STOCK REGISTER OF CEMENT, BRICKS AND IRON GOODS LED TO REJECTION OF BOOKS UNDER SECTION 145(3) OF INCOME TAX ACT, 1961 AND GAVE THE POWER TO THE LD. ASSESSING OFFICER TO COMPLETE THE ASSESSMENT IN THE MANNER AS PROVIDED UNDER SECTION 144 BUT NO PEN ALTY UNDER SECTION 271(1)(C) CAN BE LEVIED ON THE ADDITION MAD E BY WAY OF ADOPTING A NET PROFIT ON GROSS RECEIPTS AS ASSESSEE HAD NEITHER CONCEALED HIS INCOME NOR FURNISHED ANY INACCURATE P ARTICULAR OF INCOME. HE FURTHER ARGUED THAT IN THE INSTANT CASE NO ITEM OF INCOME WHICH COULD BE SAID TO HAVE BEEN CONCEALED B Y ASSESSEE NOR THERE WAS ANY DETECTION BY THE LD. ASSESSING OF FICER. IT WAS ONLY AN ESTIMATE THAT ADDITION WAS MADE BY APPLYING THE NET RATE OF 12% WHICH ALSO DID NOT FIND FAVOUR WITH THE APPE LLATE AUTHORITIES AND WAS REDUCED TO 7%. 6.2 THE LD. AR RELIED ON JUDGMENTS OF HON'BLE PUNJA B & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX V. M.M.RICE MILLS (253 I TR 0017) WHEREIN IT WAS HELD AS UNDER : IN OUR OPINION, NO QUESTION OF LAW, MUCH LESS A SUB STANTIAL QUESTION OF LAW ARISES FOR DETERMINATION IN THIS APPEAL. A PERUSAL OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) SHOWS THAT HE HAD ACCEPTED THE ASSESSEE'S PLEA THAT THERE WAS NO CONCEALMENT OF IN COME BY MAKING THE FOLLOWING OBSERVATIONS. AS REGARDS THE PLEA THAT NO CONCEALMENT WAS ESTABLI SHED AND ADDITION WAS MADE ON ESTIMATE BASIS AFTER APPLYING THE PROVISO T O SECTION 145(1), THE PLEA IS CORRECT, AND THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY DOCUMENT OR MATERIAL TO SHOW THAT ASSESSEE WAS GUILTY OF CONCEA LING THE PARTICULARS OF INCOME. NO SALE/EXCESS STOCK OF KHUDI PHAK WAS DETE CTED OUTSIDE THE BOOKS OF ACCOUNT. AS SUCH THE ADDITION MADE BY APPLYING T HE PROVISO TO SECTION 145(1) CAN NOT BE MADE THE BASIS FOR IMPOSITION OF PENALTY UNDER SECTION . ' HE FURTHER RELIED ON THE JUDGMENT OF HON'BLE PUNJ AB. & HARYANA HIGH COURT IN ANOTHER CASE OF CIT VS METAL PRODUCTS OF INDIA 18 TAXMANN 412 WHEREIN IT WAS HELD THAT, 4 'MERELY BECAUSE THE ADDITION HAD BEEN MADE ON ESTIM ATE UNDER THE PROVISO TO SECTION 145(1) BY ADOPTING THE VIEW THAT THE GRO SS PROFIT SHOWN IN THE BOOKS OF ACCOUNT WAS TOO LOW AS THERE WERE DEFECTS IN THE METHOD EMPLOYED FOR THE ACCOUNT, DID NOT AUTOMATICALLY LEAD TO THE CONCLUSI ON THAT THERE WAS FAILURE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD OR GROS S OR WILFUL NEGLECT. THOUGH THE ONUS TO PROVE THAT IT WAS NOT BY MEANS OF ANY F RAUD OR GROSS OR WILFUL NEGLECT WAS ON THE ASSESSEE, YET THE QUANTUM OF PRO OF TO DISCHARGE IT WAS THAT AS REQUIRED IN A CIVIL CASE, THAT IS, BY PREPONDERA NCE OF PROBABILITIES. THIS HAD BEEN DISCHARGED BY THE ASSESSEE BY PRODUCING REGULA R BOOKS OF ACCOUNT AND THAT WAS ENOUGH-EVIDENCE FOR THE TRIBUNAL TO COME T O THE VIEW THAT THE ONUS HAD. BEEN DISCHARGED. ' AND ALSO ON THE RATIONALE LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF N. C. AGARWAL 357 ITR 0514 WHICH IS AS UNDER: ' IN THE INSTANT CASE, NOTHING WAS CONCEALED BY THE ASSESSEE. IT WAS THE A.O. WHO HAS REJECTED THE HOOKS OF ACCOUNT IN THE SECOND ROUND AND APPLIED THE 8% NET PROFIT RATE PRESCRIBED UNDER SECTION 44 AD. IN THE INSTANT CASE, THE TURNOVER IS MORE THAN 40 LACS, SO SECTION 44AD IS N OT APPLICABLE, NONETHELESS THE A.O. HAS INSPIRED WITH THE PROVISION OF SECTION 44AD AND MADE THE ADDITION BY ESTIMATING THE NET PROFIT RATE @ 8%. REJECTION O F THE BOOKS OF ACCOUNT ALLOWED THE A. O. TO MAKE THE ADDITION ON ESTIMATE BASIS. WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, NO PENALTY UNDER SECTION 27 1 (L)(C) OF THE INCOME TAX ACT, CAN BE IMPOSED. 7. ON THE OTHER HAND LD. SR. DR. SMT. CHANDRAKANTA RELIED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF CIT VS. CH ANDRA VILAS HOTEL 291 ITR 202 WHEREIN THE PENALTY UNDER SECTION 271(1)(C) WAS UPHELD. THE FACTS AND CIRCUMSTANCES OF UPHOLDING OF THE PENALTY COULD BE GAUZED FROM THE PARAGRAPH MENTIONED BELOW: PENALTY UNDER S. 271(1)(C), EXPLN.CONCEALMENTAGRE ED ADDITION VIS-A-VIS GROSS OR WILFUL NEGLIGENCEASSESSEE PERSISTENTLY MA INTAINED INCORRECT AND INCOMPLETE ACCOUNTS AND CONCEDED SUBSTANTIAL ADDITI ONS YEAR AFTER YEAR ADDITION OF 20 PER CENT TO THE RETURNED INCOME NOT CHALLENGED BY THE ASSESSEE IN THE RELEVANT YEAREVEN AFTER THE REMAND BY THE H IGH COURT THE ASSESSEE DID NOT PRODUCE ANY FURTHER MATERIAL TO SHOW THAT ITS A CTION WAS BONA FIDE OR IT WAS NOT MAKING ANY MISREPRESENTATION OR THAT THERE WAS NO GROSS OR WILFUL NEGLECT ON ITS PARTAPPROACH OF THE TRIBUNAL THAT THE BURDE N WAS UPON THE REVENUE TO PROVE THAT THE ASSESSEE WAS GUILTY OF FRAUD OR G ROSS OR WILFUL NEGLECT IS PATENTLY PERVERSEIF THE INCOME HAS TO BE ASSESSED UNDER S. 145(1), THEN THE PRESUMPTION WOULD BE THAT THE INCOME WAS NOT PROPER LY RETURNED AND IF THE VERY SAME CONDUCT IS REPEATED IN THE FOLLOWING YEAR S, THE INFERENCE HAS TO BE THAT THERE IS GROSS/WILFUL NEGLECT ON THE PART OF T HE ASSESSEETHEREFORE, TRIBUNAL WAS NOT JUSTIFIED IN CANCELLING PENALTY UNDER S. 27 1(1)(C) AFTER THE REMAND BY THE HIGH COURT, THE PARTIES DID NOT LEAD ANY EVIDENCE, THE ASSESSEE DID NOT PRODUCE ANY FURTHER MATERIAL TO SH OW THAT HIS ACTION WAS BONA FIDE OR IT WAS NOT MAKING ANY MISREPRESENTATIO N, OR THERE WAS NO GROSS OR WILFUL NEGLECT ON ITS PART. THE TRIBUNAL HAD SIMPLY HELD THAT THE IAC COULD NOT RELY UPON THE REPORT OF THE AUDITOR WHEN THE REPORT OBSERVED THAT THE SALE SLIPS FOR A PARTICULAR DAY COULD NOT BE PRODUCED AS THE S LIPS WERE THOUSANDS IN NUMBER. THE TRIBUNAL ALSO OBSERVED THAT THERE WAS M ATERIAL LACUNA IN THE ASSESSMENT PROCEEDINGS LESS REALISING THAT THE ASSE SSMENT PROCEEDINGS CAME TO AN END, THEY ATTAINED FINALITY AS THE ASSESSEE W AS FEELING CONTENT. THE ASSESSMENT PROCEEDINGS AND THE ORDER FRAMED BY THE AO, ADDING 20 PER CENT INCOME TO THE RETURNED INCOME, WERE NEVER CHALLENGE D BY THE ASSESSEE. THIS WAS NOT A CASE FOR ONE YEAR ONLY BUT IT WAS A REPEA TED AND PERSISTENT MANNER IN WHICH THE ACCOUNTS WERE MAINTAINED. THERE WAS A BONA FIDE MISTAKE OR 5 LAPSE ON THE PART OF THE ASSESSEE AND THAT THERE WA S NO FRAUD OR GROSS OR WILFUL NEGLECT ON ITS PART IF THE CASE WAS FOR ONE YEAR ON LY. IF FOR SIX YEARS THE ACCOUNTS WERE MAINTAINED IN THE SAME FORM AND EVERY YEAR ASS ESSMENTS WERE FRAMED WITH THE HELP AND ASSISTANCE OF S. 145(1), THEN AT LEAST SOME ORDER SHOULD HAVE WORKED AS AN EYE-OPENER FOR THE ASSESSEE. EVERY YEA R THE ASSESSEE WAS REPEATING THE SAME TREND. IF SIX LAPSES HAVE BEEN C OMMITTED BY THE ASSESSEE, THAT TOO ON THE SAME LINE, THEN IT WOULD BE A GROSS AND/OR WILFUL NEGLECT ON ITS PART. ASSESSEE HAVING PERSISTENTLY MAINTAINED INCORRECT A ND INCOMPLETE ACCOUNTS AND CONCEDED SUBSTANTIAL ADDITIONS YEAR AFTER YEAR INCLUDING THE RELEVANT ASSESSMENT YEAR, BY APPLICATION OF S. 145, THERE IS GROSS AND/OR WILFUL NEGLECT ON ITS PART AND, THEREFORE, PENALTY UNDER S. 271(1)(C) WAS SUSTAINABLE. 7.1 THE LD. SR. DR HAS ALSO RELIED ON S.K. SARAD KU MAR VS. CIT (ALLD.) 232 ITR 588 (1998) WHEREIN IT WAS HELD AS UNDER: PENALTY UNDER S. 271(1)(C)CONCEALMENTADDITION FOR LOW DOMESTIC EXPENSESSTATEMENT BY ASSESSEES SECOND WIFE DURING SEARCH AND SEIZURE PROCEEDINGS THAT ASSESSEE GAVE HER RS. 500 P.M. FOR DOMESTIC AND PERSONAL EXPENSESASSESSEE COMPLAINING THAT HE WAS NOT GIVEN OPPORTUNITY TO CROSS- EXAMINE HERNO SUCH PLEA EVER RAISED BEFORE LOWER A UTHORITIESCONTENTION THAT THE STATEMENT WAS RELEVANT ONLY FOR THE FINANC IAL YEAR WHEN IT WAS RECORDED HAS NO SUBSTANCESTATEMENT WAS RECORDED IN CONTEXT WITH HER ASSETS FOUND DURING SEARCHASSESSEES FIRST WIFE MA INTAINING SEPARATE ESTABLISHMENT WITH HER FIVE CHILDRENEXPENSES OF TW O ESTABLISHMENTS PUT TOGETHER FAR EXCEEDED THOSE RECORDED IN BOOKSSHOWS THAT PART OF EXPENSES MET FROM UNDISCLOSED INCOMEINITIAL BURDEN TO PROVE CONCEALMENT SUFFICIENTLY DISCHARGEDASSESSEE LED NO FRESH EVIDENCE IN PENALT Y PROCEEDINGS REASONABLE INFERENCE IS THAT THE AMOUNT ADDED REPRE SENTED INCOME AND THAT ASSESSEE CONCEALED PARTICULARS OF INCOMEPENALTY RI GHTLY UPHELD IT IS SETTLED POSITION IN LAW THAT LEVY OF PENALTY IS NOT AUTOMATIC CONCOMITANT OF THE ASSESSMENT. THE PENALTY CAN BE LEVIED IF THERE EXISTS ENOUGH MATERIAL ON RECORD AND ONLY IN APPROPRIATE CASES. IN OTHER WORD S, PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATING FROM PROCEED INGS OF ASSESSMENT, ARE INDEPENDENT PROCEEDINGS AND ARE PENAL IN CHARACTER. THERE IS NO RULE AND NONE WAS BROUGHT TO NOTICE THAT THE FINDING IN THE ASSESSMENT PROCEEDINGS WOULD NOT CONSTITUTE RELEVANT MATERIAL UPON WHICH T HE OFFICER MAY ACT WITHOUT CONSIDERING SUCH FINDINGS BINDING OR CONCLUSIVE IN NATURE. IT IS EVIDENT THAT THE SAID STATEMENT WAS RECORDED IN NORMAL COURSE AS POINTED OUT BY THE ASSTT. CIT. THE LADY KNEW WHAT SHE WAS S TATING. IT IS DIFFICULT TO READ IN THAT STATEMENT THAT THE AMOUNT OF RS. 500 PER MONTH PAID FOR HOUSE EXPENDITURE WAS IN REFERENCE TO FINANCIAL YEAR 1974 -75 ONLY AND NOT TO THE OTHER YEARS IN THE IMMEDIATE PAST. THE STATEMENT HA S TO BE READ AS A WHOLE AND NOT OUT OF CONTEXT WITH REFERENCE TO ONE WORD O R A SENTENCE. THE FINDINGS OF THE TRIBUNAL AND THAT OF THE ASSTT. CIT ARE ALSO TO THE SIMILAR EFFECT. THEY ARE PURE FINDINGS OF FACT AND HAVE NOT BEEN CHALLENGED BY ANY INDEPENDENT QUESTION IN THESE PROCEEDINGS. THE CONTENTION IS, A CCORDINGLY, REJECTED. IT IS NOT A CASE OF SIMPLE ESTIMATION OF DOMESTIC E XPENSES AS WAS SOUGHT TO BE MADE OUT BY THE COUNSEL FOR THE ASSESSEE. THE SECON D WIFE OF THE ASSESSEE SMT. J CLEARLY ADMITTED IN UNAMBIGUOUS TERMS THAT S HE WAS RECEIVING RS. 500 PER MONTH FROM HER HUSBAND TO MEET HER EXPENSES AND THAT OF HER TWO CHILDREN. THERE IS NO DISPUTE THAT THE FIRST WIFE W AS MAINTAINING A SEPARATE ESTABLISHMENT WITH HER FIVE CHILDREN. THE DOMESTIC AND OTHER EXPENSES FOR DAILY NEEDS FOR THE FAMILY OF THE FIRST WIFE WOULD OBVIOU SLY BE IN THE SAME RANGE IF NOT MORE BECAUSE OF THE BIGGER SIZE OF THE FAMILY. IT F OLLOWS THAT THE EXPENSES OF TWO ESTABLISHMENTS PUT TOGETHER FAR EXCEEDED THOSE RECORDED IN THE ACCOUNT BOOKS WHICH WERE TO THE TUNE OF RS. 6,521, RS. 8,27 5 AND RS. 9,043, RESPECTIVELY FOR THE THREE YEARS UNDER CONSIDERATION. IT IS CLEA R THAT PART OF THE EXPENSES WERE BEING MET FROM THE INCOME WHICH HAD NOT BEEN D ISCLOSED. ABOUT THE 6 EXPENDITURE FOR THE ESTABLISHMENT OF THE FIRST WIFE AND THE SOURCE FROM WHICH IT WAS MET, NO EXPLANATION HAS BEEN GIVEN WHATSOEVER. THESE FACTS CAME TO LIGHT BECAUSE OF SEARCH PROCEEDINGS. THIS IS CLEARL Y STATED BY THE REVENUE AUTHORITIES AND THE TRIBUNAL IN THEIR ORDERS. THE A SSESSEE WAS CONFRONTED WITH ALL THESE MATERIALS. THE INITIAL BURDEN, IF ANY, THAT L AY ON THE REVENUE TO PROVE THAT THE ADDITIONS MADE TO THE RETURNED INCOME OF THE AS SESSEE REPRESENTED CONCEALED INCOME, HAD BEEN SUFFICIENTLY DISCHARGED. ON THE FACTS OF THE CASE, IT WAS FOR THE ASSESSEE TO PROVE IN REBUTTAL THAT THE CASE WITH WHICH THE REVENUE HAD COME FORWARDED WAS UNTENABLE. THE ASSES SEE LED NO FRESH EVIDENCE IN THE PENALTY PROCEEDINGS. ON FACTS FOUND IN THE ASSESSMENT PROCEEDINGS WHICH WERE EXAMINED AND ANALYSED AFRESH IN THE PENALTY PROCEEDINGS, CONCEALMENT WAS PATENT. THERE IS NO RE ASON WHY THE REVENUE COULD NOT RELY AND REFER TO THE EVIDENCE AND OTHER CIRCUMSTANCES WHICH HAD BEEN BROUGHT ON RECORD ON THE QUANTUM SIDE, AFTER G IVING AN OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE. THIS IS WHAT HAD BEEN D ONE IN THIS CASE. THE PROCEDURE ADOPTED HAS DONE NO VIOLENCE EITHER TO TH E NATURE OF THE PENALTY PROCEEDINGS OR THE BURDEN ARISING THEREUNDER, OR TO THE PRINCIPLE THAT PENALTY PROCEEDINGS BEING OF A CHARACTER DIFFERENT FROM THA T IN THE ASSESSMENT PROCEEDINGS, FINDINGS IN LATTER CANNOT BE CONCLUSIV E OR OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. THERE IS NO SCOPE FOR A NY DOUBT THAT THE ACCOUNT BOOKS OF THE ASSESSEE DID NOT DEPICT THE TRUE STATE OF AFFAIRS AT LEAST SO FAR AS THE DOMESTIC EXPENSES WERE CONCERNED. THERE IS NO S UBSTANCE IN THE CONTENTION THAT THE PENALTY UNDER S. 271(1)(C) CANN OT BE IMPOSED IN ALL CIRCUMSTANCES WHENEVER THE INCOME IS ASSESSED ON ES TIMATE REJECTING THE EXPLANATION OF THE ASSESSEE FOR LOW DOMESTIC WITHDR AWALS OR FOR LIKE REASONS. THERE CANNOT BE ANY SUCH INFLEXIBLE RULE. IN A CASE LIKE THE PRESENT ONE, WHERE AFTER A DETAILED INVESTIGATION THE ASSESSEE WAS CON FRONTED WITH EVIDENCE AND MATERIALS AND HE FAILED TO DISLODGE THE FACTUAL POS ITION ON THE BASIS OF WHICH ADDITIONS WERE MADE, THE CASE STANDS ON DIFFERENT F OOTING. IN SUCH A CASE, IT IS ALWAYS OPEN TO DRAW AN INFERENCE OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME, RESULTING FROM DELIBERATE UN DERESTIMATE OF INCOME. IN OTHER WORDS, THE IT AUTHORITIES MUST BE SATISFIED O N EXAMINATION OF THE CUMULATIVE EFFECT OR THE ENTIRETY OF THE CIRCUMSTAN CES THAT THE ONLY REASONABLE INFERENCE FROM SUCH FACTORS OR MATERIAL THAT COULD BE DRAWN WAS THAT THE DISPUTED AMOUNT ADDED AS A RESULT OF ESTIMATE, REPR ESENTED INCOME AND THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS THEREOF. VIDYA SAGER OSWAL VS. CIT 1977 CTR (P&H) 8 : (1977) 108 ITR 861 (P&H) : TC 50R.158 RELIED ON. ASSESSEE HAVING SHOWN VERY LOW HOUSEHOLD EXPENSES W HEREAS THERE IS EVIDENCE OF HIGHER EXPENDITURE, AND LED NO FRESH EV IDENCE IN PENALTY PROCEEDINGS, REASONABLE INFERENCE IS THAT THE AMOUN T ADDED REPRESENTED CONCEALED INCOME JUSTIFYING PENALTY UNDER S. 271(1) (C). 7.2 WE OBSERVE THAT IN THIS CASE THE PENALTY WAS SU STAINED AS IT WAS LEVIED AFTER DETAILED INVESTIGATION AND THE ASSESSEE WAS C ONFRONTED WITH THE EVIDENCE AND MATERIAL AND ALSO BASED ON THE FACT TH AT THE ASSESSEE FAILED TO DISCHARGE THE FACTUAL POSITION ON THE BASIS OF WHIC H THE ADDITIONS WERE MADE. 7.3 FURTHER THE LD. DR RELIED ON THE JUDGMENT OF HO NBLE ALLAHABAD HIGH COURT IN THE CASE OF LAKSHMI INDUSTRIES AND COLD ST ORAGE COMPANY LTD. 146 ITR 492 WHEREIN THE PENALTY WAS CONFIRMED IN A CASE OF BEST JUDGE ASSESSMENT. THE HONBLE COURT HELD THAT PENALTY IS LEVIABLE WHEREIN A DIFFERENCE OF MORE THAN 20% AROSE BETWEEN THE INCOM E RETURNED AND INCOME ASSESSED AND THE ADDITIONS WERE MADE ON ACCOUNT OF IMPROPER MAINTENANCE 7 OF DETAILS OF RAW MATERIAL AND CASH CREDITS. THE RE LEVANT PART OF THE JUDGMENT IS AS UNDER: PENALTY UNDER S. 271(1)(C), EXPLN.CONCEALMENTAGRE ED ADDITION VIS-A-VIS GROSS OR WILFUL NEGLIGENCEASSESSEE PERSISTENTLY MA INTAINED INCORRECT AND INCOMPLETE ACCOUNTS AND CONCEDED SUBSTANTIAL ADDITI ONS YEAR AFTER YEAR ADDITION OF 20 PER CENT TO THE RETURNED INCOME NOT CHALLENGED BY THE ASSESSEE IN THE RELEVANT YEAREVEN AFTER THE REMAND BY THE H IGH COURT THE ASSESSEE DID NOT PRODUCE ANY FURTHER MATERIAL TO SHOW THAT ITS A CTION WAS BONA FIDE OR IT WAS NOT MAKING ANY MISREPRESENTATION OR THAT THERE WAS NO GROSS OR WILFUL NEGLECT ON ITS PARTAPPROACH OF THE TRIBUNAL THAT THE BURDE N WAS UPON THE REVENUE TO PROVE THAT THE ASSESSEE WAS GUILTY OF FRAUD OR G ROSS OR WILFUL NEGLECT IS PATENTLY PERVERSEIF THE INCOME HAS TO BE ASSESSED UNDER S. 145(1), THEN THE PRESUMPTION WOULD BE THAT THE INCOME WAS NOT PROPER LY RETURNED AND IF THE VERY SAME CONDUCT IS REPEATED IN THE FOLLOWING YEAR S, THE INFERENCE HAS TO BE THAT THERE IS GROSS/WILFUL NEGLECT ON THE PART OF T HE ASSESSEETHEREFORE, TRIBUNAL WAS NOT JUSTIFIED IN CANCELLING PENALTY UNDER S. 27 1(1)(C) AFTER THE REMAND BY THE HIGH COURT, THE PARTIES DID NOT LEAD ANY EVIDENCE, THE ASSESSEE DID NOT PRODUCE ANY FURTHER MATERIAL TO SH OW THAT HIS ACTION WAS BONA FIDE OR IT WAS NOT MAKING ANY MISREPRESENTATIO N, OR THERE WAS NO GROSS OR WILFUL NEGLECT ON ITS PART. THE TRIBUNAL HAD SIMPLY HELD THAT THE IAC COULD NOT RELY UPON THE REPORT OF THE AUDITOR WHEN THE REPORT OBSERVED THAT THE SALE SLIPS FOR A PARTICULAR DAY COULD NOT BE PRODUCED AS THE S LIPS WERE THOUSANDS IN NUMBER. THE TRIBUNAL ALSO OBSERVED THAT THERE WAS M ATERIAL LACUNA IN THE ASSESSMENT PROCEEDINGS LESS REALISING THAT THE ASSE SSMENT PROCEEDINGS CAME TO AN END, THEY ATTAINED FINALITY AS THE ASSESSEE W AS FEELING CONTENT. THE ASSESSMENT PROCEEDINGS AND THE ORDER FRAMED BY THE AO, ADDING 20 PER CENT INCOME TO THE RETURNED INCOME, WERE NEVER CHALLENGE D BY THE ASSESSEE. THIS WAS NOT A CASE FOR ONE YEAR ONLY BUT IT WAS A REPEA TED AND PERSISTENT MANNER IN WHICH THE ACCOUNTS WERE MAINTAINED. THERE WAS A BONA FIDE MISTAKE OR LAPSE ON THE PART OF THE ASSESSEE AND THAT THERE WA S NO FRAUD OR GROSS OR WILFUL NEGLECT ON ITS PART IF THE CASE WAS FOR ONE YEAR ON LY. IF FOR SIX YEARS THE ACCOUNTS WERE MAINTAINED IN THE SAME FORM AND EVERY YEAR ASS ESSMENTS WERE FRAMED WITH THE HELP AND ASSISTANCE OF S. 145(1), THEN AT LEAST SOME ORDER SHOULD HAVE WORKED AS AN EYE-OPENER FOR THE ASSESSEE. EVERY YEA R THE ASSESSEE WAS REPEATING THE SAME TREND. IF SIX LAPSES HAVE BEEN C OMMITTED BY THE ASSESSEE, THAT TOO ON THE SAME LINE, THEN IT WOULD BE A GROSS AND/OR WILFUL NEGLECT ON ITS PART. ASSESSEE HAVING PERSISTENTLY MAINTAINED INCORRECT A ND INCOMPLETE ACCOUNTS AND CONCEDED SUBSTANTIAL ADDITIONS YEAR AFTER YEAR INCLUDING THE RELEVANT ASSESSMENT YEAR, BY APPLICATION OF S. 145, THERE IS GROSS AND/OR WILFUL NEGLECT ON ITS PART AND, THEREFORE, PENALTY UNDER S. 271(1)(C) WAS SUSTAINABLE. 7.4 FURTHER RELIANCE WAS PLACED BY THE LD. SR. DR O N THE JUDGMENT OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CI T VS. SMT. CHANDRAKANTA & ANOTHER, 205 ITR 607, IN THIS CASE THE ASSESSEE H AS NOT MAINTAINED BOOKS OF ACCOUNTS AND THEN FILED A REVISED RETURN ENHANCING THE TAXABLE INCOME. THE RELEVANT PORTION IS EXTRACTED AS UNDER: THE ASSESSEE-RESPONDENT FIRST SHOWED A LOSS OF RS. 51,530. HE THEN REVISED HIS RETURN AND SHOWED PROFIT OF RS. 7,500. HE WAS NOT M AINTAINING ANY ACCOUNT BOOKS. THE ITO, THEREFORE, ESTIMATED AND DETERMINED THE INCOME AT RS. 51,000. THE IAC IMPOSED A PENALTY OF RS. 10,000, AS, ACCORD ING TO HIM, THE CASE FELL UNDER S. 271(1)(C) OF THE IT ACT. ON APPEAL, THE TR IBUNAL CANCELLED THE PENALTY, 8 HOLDING IN PARA 11 OF ITS ORDER (ANNEXURE II) THAT THE ASSESSEE GAVE HIS ESTIMATE OF INCOME AND THE ITO ALSO ASSESSED THE INCOME ON E STIMATED BASIS. IN THIS CASE THE ASSESSEE FIRST SHOWED A LOSS OF RS . 50,000. THEN HE REVISED THE RETURN, SHOWING PROFIT OF RS. 7,500. APPARENTLY, IT HAS BEEN FOUND THAT THE ESTIMATE OF THE INCOME WAS INCORRECT AND HE CONCEAL ED THE INCOME AND INACCURATE PARTICULARS WERE FURNISHED. IN OUR OPINI ON, THE CASE CLEARLY FALLS UNDER CL. (C) OF SUB-S. (1) OF S. 271 OF THE ACT AN D, THEREFORE, THE PENALTY WAS LEVIED. WE FAIL TO SEE THE LOGIC BEHIND THE REASONS ASSIGNED BY THE TRIBUNAL TO EXONERATE THE ASSESSEE FROM PAYMENT OF PENALTY. WHE N THE ASSESSEE SUBMITTED HIS RETURN AND SHOWED A LOSS OF RS. 50,00 0 AND THEN REVISED IT AND SHOWED A PROFIT OF RS. 7,500, HE HAD NECESSARILY SU PPRESSED THE PARTICULARS OF INCOME AND GAVE INCORRECT ACCOUNT OF HIS INCOME. IT MAY ALSO BE MENTIONED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT. INCOME HAD, THEREFORE, TO BE ASSESSED ON E STIMATE BASIS. THAT BEING SO, IT IS DIFFICULT TO SWALLOW THAT SINCE THE ASSES SEE'S INCOME WAS ASSESSED ON ESTIMATE BASIS, THE ASSESSEE WAS NOT LIABLE TO ANY PENALTY. THE FACTS RELATED TO THE ASSESSEE WERE EXAMINED IN THE LIGHT OF THESE JUDGMENTS. 8. THE ASSESSING OFFICER HAS OBSERVED THAT NO STOCK REGISTER OF CEMENT, BRICKS WAS MAINTAINED AND ALSO NO PROPER RECORDS OF LABOUR CHARGES AID AND ABSENCE OF ATTENDANCE REGISTER WITH COMPLETE ADDRES SES OF THE LABOURERS. AS A RESULT OF WHICH THE NET PROFIT WAS INCREASED BY 2 .35% 9. THE ASSESSEE HAS SHOWN A NET PROFIT OF 7.25% FOR THE AY 2008-09, 6.24% FOR THE AY 2009-10 WHEREAS FOR THE AY IN QUESTION T HE ASSESSEE HAS SHOWN A NET PROFIT OF 4.65% THE ASSESSEE HAS EXPLAINED THAT THE FALL IN NET PROFIT PERCENTAGE WAS DUE TO INCREASE OF CONSTRUCTION EXPE NSES, LABOUR CHARGES, AND MATERIAL CONSUMPTION WHICH IS IN THE RANGE OF 2 % TO 3.4%. 10. WE HAVE GONE THROUGH THE FACTS OF THE CASE AND DUE CONSIDERATION TO THE SUBMISSIONS MADE BY THE REVENUE AS WELL AS ASSE SSEE HAS BEEN GIVEN. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BEL OW, WE FIND THAT THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY INVOKING SECTION 154 OF THE ACT AND NET PROFIT IS ESTIMATED. THE BASIC PARAMETER CONSIDERED WHILE ESTIMATION OF NET PROFIT WAS THE EARLIER PROFITS MADE BY THE ASSESSEE . WHILE THE CASE LAWS QUOTED AND ARGUMENTS TAKEN BY THE LD. DR GROSSLY DE ALS WITH THE CASES WHEREIN ESTIMATION UNDER SECTION 145 WAS RESORTED T O AFTER CONDUCTING IN DEPTH ENQUIRIES AND BRINGING COGENT EVIDENCES ON RE CORD WHICH IS NOT THE SAME IN THE INSTANT CASE. 9 11. IN THE INSTANT CASE AS THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER ON ACCOUNT OF CER TAIN DISCREPANCIES IN ITS MAINTENANCE, AND THEREAFTER ESTIMATED THE PROFIT BY APPLYING NET PROFIT RATE ON THE GROSS RECEIPTS THEREFORE FOLLOWING THE JUDGM ENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M.M. RICE MILL 253 ITR 01 7 AND ALSO METAL PRODUCTS OF INDIA, 18 TAXMANN 412, WE ARE OF THE CONSIDERED VIE W THAT PENALTY UNDER SECTION 271(1)(C) CANNOT BE IMPOSED IN THE INSTANT CASE. THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY LEVIED. 12. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/11/2017. SD/- SD/- (DIVA SINGH) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14/11/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR