The DCIT, Circle-1, RAJKOT-GUJARAT V. M/s. Classic Construction Co., RAJKOT-GUJARAT

ITA 303/RJT/2008

• Counselvise Citation: 30324914 RSA 2008
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 22-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LD BHARTI
• Assessee Lawyers: DM RINDANI

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . .. . . . . . , , , , . .. . . . . . , , , , $ $ $ $ BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. S RIVASTAVA, AM. ITA NO.303/RJT/2008 / ASSESSMENT YEAR 2001-02. THE D.C.I. T., CIRCLE-1, RAJKOT. ( */ APPELLANT) M/S. CLASSIC CONSTRUCTION COMPANY, 202, ARPAN COMPLEX, KALAWAD ROAD, RAJKOT. PAN: AABFC3833A +,*/ RESPONDENT - / REVENUE BY SHRI L. D. BHARTI, D. R. /- / ASSESSEE BY SHRI D. M. RINDANI, C.A. - / DATE OF HEARING 21-03-2012 - / DATE OF PRONOUNCEMENT 20 - 04-2012 / / / / ORDER . .. . . . . . , , , , / T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 05-03-2008 OF CI T(A)-I, RAJKOT CANCELING THE PENALTY OF RS.3,32,228/- LEVIED BY AO ON U/S.271(1 )(C) OF I.T. ACT, 1961 FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY. THE ASSESSING OFFICER VIDE ORDER DATED 01-03-2006 LEVIED THE PENA LTY OF RS.3,32,228/- U/S. 271(1) (C) IN RESPECT OF FOLLOWING TWO ADDITIONS:- SR. NO. PARTICULARS AMOUNT (RS.) 1 WORK IN PROGRESS 827,520 2. DEFICIENCY IN EXPENSES/VOUCHERS ETC. 20,000 TOTAL 847,520 ITA NO 303/RJT/2008. 2 3. ON APPEAL, THE LD. CIT(A)-I, RAJKOT VIDE ORDER D ATED 05-03-2008 CANCELLED THE PENALTY FOR THE DETAILED REASON GIVEN IN PARA 5 .1 OF IMPUGNED ORDER WHICH READS AS UNDER:- 5.1 I AGREE WITH THE CONTENTION OF THE AR THAT THI S KIND OF ADDITION DOES NOT HAVE A REAL EFFECT ON THE TAXABLE INCOME THIS I S BECAUSE THE CLOSING WIP ADDED IN THIS YEAR HAS TO BE ALLOWED AS DEDUCTI ON AS THE OPENING WIP FOR THE NEXT YEAR. IN ANY CASE SINCE THE SAME METHOD OF ACCOUNTING WAS FOLLOWED BY THE APPELLANT CONSISTENTLY OVER THE YEARS, THE ADDITION MADE BECAUSE OF REJECTION IN METHOD OF ACCOUNTING C ANNOT BE TREATED AS CONCEALED INCOME FOR THE PURPOSE OF PENALTY. THE J UDICIAL DECISION RELIED ON BY THE APPELLANT ARE ALL RELEVANT AS THEY DIRECT LY DEAL WITH THIS ISSUE. ACCORDING TO THE DECISIONS NO PENALTY CAN BE IMPOSE D IN RESPECT OF ADDITION ON ACCOUNT OF WORK IN PROGRESS. IN VIEW O F THIS I AM OF THE OPINION THAT ONE OF THE ADDITION IS FIT FOR BEING T REATED AS FURNISHING OF INACCURATE PARTICULARS FOR IMPOSING PENALTY U/S.271 (1)(C). ACCORDINGLY, THE PENALTY OF RS.3,32,228/- IS CANCELLED. 4. ON FURTHER APPEAL BY THE REVENUE, TRIBUNAL VIDE ORDER DATED 24-07-2009 FILLING THE ORDER OF ITAT RAJKOT BENCH THE CASE OF M/S. BACKBONE PROJECTS LIMITED IN ITA NO.370/RJT/2007 FOR THE A.Y. 1998-99 AND ITA NO.386/RJT/2008 FOR THE A.Y. 2004-05 ORDER DATED 19-12-2008 REVERSED THE ORDER O F LD. CIT(A) AND RESTORED THE PENALTY OF RS.3.32.228/- LEVIED BY AO U/S.271(1 )(C). 5. AGAINST THE AFORESAID ORDER OF TRIBUNAL, THE ASS ESSEE PREFERRED AN APPEAL U/S.260A OF I.T. ACT. THE HONBLE GUJARAT HIGH COU RT VIDE ORDER DATED 28 TH DECEMBER, 2011 IN TAX APPEAL NO.1955 OF 2010 SET AS IDE THE ORDER OF TRIBUNAL AND REMANDED THE MATTER BACK TO THE TRIBUNAL FOR DE CIDING THE FOLLOWING QUESTION AFRESH:- WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN RESTORING THE PENALTY OF RS.3,32,228/- IMPOSED UNDE R SECTION 271 (1) (C) OF THE ACT ? 6. IN PURSUANCE OF AFORESAID ORDER OF HONBLE GUJAR AT HIGH COURT, WE PROCEED TO DECIDE THIS APPEAL OF THE REVENUE AFRESH . ITA NO 303/RJT/2008. 3 7. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE, SHRI D. M. RINDANI, C.A. APPEARED AND POINTED OUT THAT THE TRI BUNAL CONFIRMED THE PENALTY LEVIED U/S. 271(1)(C) FOLLOWING ITS DECISION IN THE CASE OF M/S. BACKBONE PROJECTS LTD.(SUPRA). SUBSEQUENTLY, THE HONBLE GUJARAT HIG H COURT SET ASIDE THE DECISION OF M/S. BACKBONE PROJECTS LTD. AND DIRECTE D THE TRIBUNAL TO RE-DECIDE THE SAID APPEAL. THE TRIBUNAL IN THE CASE OF M/S. BACKBONE PROJECTS LTD. VIDE ORDER DATED 02-12-2011 IN ITA NO.370/RJT/2007 FOR T HE A.Y. 1998-99, CANCELLED THE PENALTY OF RS.13,27,306/-. THE COUNSEL OF THE ASSESSEE POINTED OUT THAT REASONING GIVEN BY LD. CIT(A) IS CONTAINED IN PARA- 7 OF THE TRIBUNAL ORDER IN THE CASE OF M/S. BACKBONE PROJECTS LTD. FROM ITS PERUS AL, IT CAN BE SEEN THAT IN THAT CASE ALSO THE PENALTY WAS LEVIED ON ACCOUNT OF DIFF ERENCE IN VALUATION OF WORK IN PROGRESS. THEREFORE, IN THE CASE OF ASSESSEE ALSO, FOLLOWING THE DECISION OF TRIBUNAL IN THE CASE OF M/S. BACKBONE PROJECTS LTD. THE PENALTY LEVIED IN RESPECT OF DIFFERENCE IN WORK OF PROGRESS AMOUNTING TO RS.8 ,27,520/- BE CANCELLED. WITH REGARD TO DEFICIENCY IN EXPENSES/VOUCHERS, COUNSEL OF THE ASSESSEE PLEADED THAT ADDITION TO THE EXTENT OF RS.20,000/- WAS UPHELD ON ACCOUNT OF DEFECTS IN VOUCHERS. FROM THIS, IT CANNOT BE INFERRED THAT ASS ESSEE HAS INFLATED THE EXPENSES OR DEBITED EXPENSES OF PERSONAL NATURE. HE POINTED OUT THAT THIS ADDITION TO THE EXTENT OF RS.20,000/- WAS CONFIRMED ON DOUBT AND SUSPICIOUS, THEREFORE, ON THIS AMOUNT ALSO, PENALTY U/S.271(1)( C) IS NOT LEVIABLE. 8. ON THE OTHER HAND, SHRI L.D. BHARTI, D.R. APPEAR E ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). HE P OINTED OUT THAT THOUGH THE ADDITION MADE IN RESPECT OF WORK IN PROGRESS WILL R EDUCE THE INCOME OF NEXT YEAR, BUT SO FAR AS THIS ASSESSMENT YEAR IS CONCERNED, TH E ASSESSEE HAS NOT DECLARED ITS CORRECT INCOME THEREFORE, PENALTY U/S.271(1)(C) ON DIFFERENCE IN WORK OF PROGRESS WAS RIGHTLY LEVIED AND THE LD. CIT(A) IS N OT JUSTIFIED IN DELCIDING THE SAME. WITH REGARD TO PENALTY LEVIED IN RESPECT OF D ISALLOWANCE OF RS.20,000/- OUT OF LABOUR EXPENSES, LD. D.R. POINTED OUT THAT SINCE THIS ADDITION HAS BEEN ITA NO 303/RJT/2008. 4 CONFIRMED IN APPEAL, THE PENALTY IS RIGHTLY LEVIED AS THE ASSESSEE HAS INFLATED THE EXPENSES TO THE EXTENT OF RS.20,000/-. 9. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDER OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN THE CASE OF M/S. BACKBONE PROJECTS LTD., TRIBUNAL VIDE ORDER DATED 02-12-2011 , RELIED BY LD. COUNSEL OF THE ASSESSEE, THE TRIBUNAL UPHELD THE ORDER OF LD. CIT( A) WHEREBY HE CANCELLED THE PENALTY U/S.271(1)(C) IN RESPECT OF UNDERVALUATION OF WORK IN PROGRESS. THE RELEVANT DISCUSSION IS CONTAINED IN PARA-7 OF THE T RIBUNAL ORDER IN THE CASE OF M/S. BACKBONE PROJECTS LTD.(SUPRA) WHICH READS AS U NDER :- 7. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT ADDITION OF RS.37,92,307 WHICH IS CONFIRMED BY THE TRIBUNAL IS ON ACCOUNT OF VALUE OF CLOSING WORK-IN-PROGRESS. THE CLOSING WORK-IN-PROG RESS OF THE ASSESSMENT YEAR UNDER APPEAL IS OPENING WORK IN PROGRESS OF TH E SUBSEQUENT ASSESSMENT YEAR. THEREFORE, THE ASSESSEE WAS ENTITL ED TO HOLD A BONA FIDE BELIEVE THAT UNCERTIFIED WORK IN PROGRESS WAS NOT L IABLE TO BE TREATED AS TAXABLE ITEM, SINCE IT WAS REFLECTED IN THE FOLLOWI NG YEAR. WHILE CANCELING THE PENALTY, IN THE IMPUGNED ORDER, THE LD. CIT(A), RELYING UPON THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF CIT VS PAVAN KUMAR DALMIYA HAS HELD THAT THE WORD CONCEALMENT IN LAW MEANS INTENTIONAL SUPPRESSION OF TRUTH OR FACT KNOWN TO T HE JURY OR PREJUDICE OF ANOTHER. IT IS TRUE THAT THE HONBLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS & ORS HAS HELD THAT W ILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LI ABILITY BUT IN THE PRESENT CASE, THE ASSESSEE WAS OF THE BONA FIDE BELIEF THAT METHOD OF VALUATION OF THE CLOSING STOCK DEBITED IS FAIR AND REASONABLE BE CAUSE UINCERTIFIED WORK IN PROGRESS CANNOT BE ADDED TO THE VALUE OF CLOSING STOCK. THOUGH THIS BELIEF OF THE ASSESSEE IS NOT LEGALLY CORRECT, BUT ON NON ACCEPTANCE OF THIS BELIEF, PENALTY U/S.271(1)(C) CANNOT BE LEVIED. WE , ARE THEREFORE, OF THE VIEW THAT THE LD. CIT(A) HAS GIVEN COGENT REASON FO R CANCELING THE PENALTY OF RS.13,27,306 LEVIED BY THE ASSESSING OFFICER U/S .271(1)(C) OF THE ACT. WE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF LD.C IT(A). 10. THE AFORESAID RATIO OF THE DECISION IS SQUARELY APPLICABLE IN RESPECT OF PENALTY LEVIED IN THE PRESENT APPEAL IN ADDITION TO THE EXTENT OF RS.8,27,520/- RELATING TO WORK IN PROGRESS. WE THEREFORE, FOLLOWI NG THE DECISION OF TRIBUNAL IN ITA NO 303/RJT/2008. 5 CASE OF M/S. BACKBONE PROJECTS LTD.(SUPRA) HOLD THA T PENALTY U/S.271(1)(C) IS NOT LEVIABLE IN RESPECT OF ADDITION TO THE EXTENT OF RS .8,27,520/- WORK IN PROGRESS. 11. WITH REGARD TO ADDITION OF RS.20,000/- SUSTAINE D OUT OF LABOUR EXPENSES, WE ARE OF THE VIEW THAT THIS ADDITION IS SUSTAINED ON ACCOUNT OF DOUBT AND SUSPICIOUS FOR WHICH, NO PENALTY U/S.271(1)(C) IS L EVIABLE. CONSEQUENTLY, WE UPHOLD THE ORDER OF LD. CIT(A) CANCELLING THE PENAL TY OF RS.3,32,228/- LEVIED BY AO U/S.271(1) (C) OF I.T. ACT, 1961. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. - 4 /04/2012 6 - THIS ORDER PRONOUNCED IN OPEN COURT ON 20/04/2012. SD/- SD/- ( .. / D. K. SRIVASTAVA) ( .. / T. K. SHARMA) / ACCOUNTANT MEMBER /JUDICIAL MEMBER 4/ ORDER DATE 20/04/2012. /RAJKOT - -- - + ++ + 8 88 8 98 98 98 98 / COPY OF ORDER FORWARDED TO:- 1. * / APPELLANT-THE D.C.I.T., CIRCLER-1, RAJKOT.. 2. +,* / RESPONDENT-M/S. CLASSIC CONSTRUCTION COMPANY, RA JKOT. 3. > / CONCERNED CIT-I, RAJKOT. 4. >- / CIT (A)-I, RAJKOT.. 5. 8 +, , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER , ASSTT. REGISTRAR , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.