JOSEPH SELVAKUMAR SELVAN, CHENNAI V. ACIT NON CORPORATE CIRCLE 22, TAMBARAM

ITA 2948/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4028 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 23-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR
• Assessee Lawyers: S SEETHARAMAN
• Keywords: Question of law
• Section: 271(1)(c); 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.2948/CHNY/2018 / ASSESSMENT YEAR: 2014-15) SHRI JOSEPH SELVAKUMAR SELVAN, NO.19, MUTHUMARIAMMAN STREET, EAST TAMBARAM, CHENNAI 600 059. VS THE ACIT, NON CORPORATE CIRCLE 22, TAMBARAM. PAN: AANPS2430H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI S.SEETHARAMAN, CA / RESPONDENT BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL.CIT /DATE OF HEARING : 04.03.2019 /DATE OF PRONOUNCEMENT : 07.03.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, CHENNAI, DATED 11.07.2018 IN ITA NO.18/17-18/CIT(A)-10 FOR THE ASSESSMENT YEAR 2014-15 PASSED U/S.250(6) R.W.S. 271(1)(C) OF THE ACT. 2 ITA NO.2948/CHNY/2018 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS APPEAL HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD.AO WHO HAD LEVIED PENALTY INVOKING THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS DEALING IN PETROLEUM AND PETROCHEMICALS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2014-15 ON 29.11.2014 ADMITTING TOTAL INCOME OF RS.26,35,400/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) & 142(1) OF THE ACT WAS ISSUED ON 28.08.2015 & 19.04.2016 RESPECTIVELY. FINALLY THE ASSESSMENT ORDER WAS PASSED U/S. 143(3) OF THE ACT ON 29.11.2016 WHEREIN THE LD.AO MADE ADDITION OF RS.4,55,315/- TOWARDS THE DISALLOWANCE OF 3% OF EXPENDITURE CLAIMED BY THE ASSESSEE FOR NON ARABILITY OF BILLS/VOUCHERS. THEREAFTER THE LD.AO HAD INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED PENALTY AMOUNTING TO RS.1,40,961/-. 3 ITA NO.2948/CHNY/2018 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD DISCLOSED CONSTRUCTION CONTRACT EXPENSE OF RS.1,88,55,122/- OUT OF WHICH RS.36,78,000/- WAS PAID TO THE SUB-CONTRACTOR TOWARDS SUB- CONTRACT. SINCE THE ASSESSEE HAD NOT MAINTAINED THE VOUCHERS PROPERLY, THE LD.AO ESTIMATED THE DISALLOWANCE AT 3% OF THE CONSTRUCTION CONTRACT EXPENDITURE OTHER THAN THE PAYMENT MADE TO SUB-CONTRACTORS AMOUNTING TO RS.1,51,77,122/- (RS.1,88,55,122 RS.36,78,000) WHICH WORKS OUT TO RS.4,55,314/- AND THEREAFTER INITIATED PENALTY PROCEEDINGS. SUBSEQUENTLY THE LD.AO LEVIED PENALTY MINIMUM PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED WHICH WORKS OUT TO RS.1,40,961/-. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF LD.AO BY AGREEING WITH HIS VIEW. 5. AT THE OUTSET WE DO NOT FIND MERIT IN THE ORDERS OF THE LD.REVENUE AUTHORITIES FOR INVOKING THE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT IN THE CASE OF THE ASSESSEE. FROM THE ORDER OF THE LD.AO, IT IS EVIDENT THAT THE LD.AO HAS NOT GIVEN A FINDING WITH RESPECT TO THE AMOUNT OF UNAVAILABLE VOUCHERS, INSTEAD HE HAS MADE AN ESTIMATE DISALLOWANCE OF 3% TOWARDS THE ENTIRE 4 ITA NO.2948/CHNY/2018 CONSTRUCTION EXPENDITURE INCURRED OTHER THAN WHAT IS PAID TO THE SUB-CONTRACTORS. IN SOMEWHAT SIMILAR CIRCUMSTANCES THE HONBLE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE CIT VS. THE LAKSHMI VILLAS BANK LTD., IN TAX APPEAL NO.896 OF 2013 VIDE ORDER DATED 16.04.2014 HAD EVEN DELETED THE ADDITION MADE WITH RESPECT TO ADHOC DISALLOWANCE. ON THE QUESTION OF LAW, 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS RIGHT IN DELETING THE DISALLOWANCE OF 10% OF THE ASSESSEE'S CLAIM OF OTHER EXPENSES AMOUNTING TO RS.84,33,561/- ON THE GROUND THAT THERE IS NO SPECIFIC REJECTION OF DETAILS PLACED BY THE ASSESSEE ON RECORD WHEN THE ASSESSEE HAD NOT PRODUCED ANY VOUCHERS IN SUPPORT OF THE CLAIM?' THE HONBLE MADRAS HIGH COURT HELD 3. WE DO NOT FIND ANY GROUND TO ADMIT THIS TAX CASE (APPEAL) SINCE THE ISSUE HEREIN IS PURELY A FACTUAL ONE. IT IS NOT DENIED BY THE REVENUE THAT THE ASSESSEE HAS 24 BRANCHES, 8 DIVISIONAL OFFICE AND A HEAD OFFICE. THE EXPENDITURE CLAIMED BY THE ASSESSEE RELATED TO PETTY CASH EXPENDITURE AND WHEN THE REVENUE HAD THOUGHT FIT TO ALLOW 90% OF THE CLAIM, THERE WAS NO REASON TO REJECT THE BALANCE 10%ATTRIBUTING IT TO THE POSSIBILITY OF HAVING THE SHADE OF A PERSONAL EXPENDITURE. EXCEPT FOR THIS REASONING, WE DO NOT FIND ANY JUSTIFICATION IN THE REVENUE'S CONTENTION THAT THE DISALLOWANCE OF 10%IS WARRANTED IN THE FACTS OF THE CASE, WHICH, BEING A PURE FACTUAL ISSUE, WE REJECT THE APPEAL AT THE ADMISSION STAGE ITSELF. FURTHER THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE SHRI HARIGOPAL SINGH VS. CIT REPORTED IN 258 ITR 85 HAS CATEGORICALLY HELD THAT PROVISIONS OF SECTION 271(1)(C) OF THE ACT WILL NOT BE 5 ITA NO.2948/CHNY/2018 ATTRACTED TO THE CASE WHERE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE BASIS AND ADDITIONS ARE MADE THEREIN ON THAT BASIS. 5.1 THEREFORE FOLLOWING THE DECISIONS OF THE HIGHER JUDICIARY CITED HEREIN ABOVE WE HEREBY HOLD THAT IN THE CASE OF THE ASSESSEE PENAL PROVISIONS OF SECTION 271(1)(C) OF THE ACT, CANNOT BE INVOKED BECAUSE THE ADDITIONS ARE MADE WITHOUT EXAMINING THE FACTS PROPERLY AND WHERE ADHOC ADDITIONS ARE MADE ON ESTIMATION BASIS. HENCE WE HEREBY DIRECT THE LD.AO TO DELETE THE PENALTY LEVIED IN THE CASE OF THE ASSESSEE FOR RS.1,40,961/-. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 7 TH MARCH, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 7 TH MARCH, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF