The Ward-1(3),Non-Corporate, Kochi, Kochi V. M/s.Kite maker, Kochi

ITA 320/COCH/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8007 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-09-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: K N SREEKUMAR
• Keywords: Business income; Search and seizure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM I .T . A. NO. 320 / COCH/ 2017 ASSESSMENT YEAR : 2010 - 11 THE INCOME TAX OFFICER, WARD-1(3), NON CORPORATE, RANGE-1, KOCHI. VS. M/S. KITE MAKER, KTS SHOPPING CENTRE, 1 ST FLOOR, PONNURUNNI ROAD, CHALIKKAVATTOM, KOCHI-682019. [PAN: AAIFK 7933Q] ( REVENUE - APPELLANT) ( ASSESSEE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, DR ASSESSEE BY SHRI K.N. SREEKUMAR, A DV. D ATE OF HEARING 12 / 09 /2018 DATE OF PRONOUNCEMENT 25 / 0 9 /2018 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, KOCHI DATED 09/03/2017 FOR THE ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE GROUND WITH REGARD TO DELETION OF LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. I.T.A. NO.320 /COCH/2017 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM ENGAGED IN ADVERTISEMENT CONTRACT. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 26/03/2013. THE ASSESSEES TOTAL CONTRACT RECEIPT FOR THE YEAR SHOWN IN THE P&L ACCOUNT WAS AT RS.1,01,45,542/-. ON VERIFICATION OF THE ITS DETAIL AND FORM 26AS, IT WAS FOUND THAT THE ASSESSEE WAS IN RECEIPT OF RS.2,26,39,040/-. THERE WAS AN OMISSION OF INCOME TO THE TUNE OF RS.1,40,49,048/-. WHEN THIS WAS BROUGHT TO THE NOTICE OF THE ASSESSEE, THE PARTNERS OF THE FIRM ADMITTED THAT THEY HAD ALREADY RECEIVED THE AFORESAID AMOUNT. THE ASSESSEE FAILED TO FURNISH THE EXPLANATION FOR THE OMISSION OF RS.1,40,49,048/- IN THEIR TOTAL TURNOVER DESPITE REPEATED REQUESTS. MOREOVER, THE ASSESSEE DID NOT FURNISH ONE BANK ACCOUNT STATEMENT RELATING TO THE BUSINESS WHERE THE BUSINESS RECEIPTS WERE CREDITED. THUS, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT 12% OF THE TOTAL TURNOVER AT RS.27,38,409/- AND AFTER GIVING CREDIT FOR UNCLAIMED TDS OF RS.4,63,824/- WORKED OUT THE BALANCE TAX PAYABLE AT RS.5,88,800/-. THE ASSESSEE PAID THE TAX AND DID NOT FILE ANY APPEAL AGAINST THE DEPARTMENT. SUBSEQUENTLY, PENALTY PROCEEDINGS WERE ALSO INITIATED U/S. 271(1)(C) R.W.S. 274 OF THE ACT. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY EXPLANATION EVEN DURING THE PENALTY PROCEEDINGS. HENCE, THE TAX SOUGHT TO BE EVADED WAS DETERMINED AT RS.10,25,850/- AND THE AMOUNT OF MINIMUM PENALTY LEVIABLE U/S. 271(1)(C) WAS AT 100% OF THE TAX AND MAXIMUM AMOUNT LEVIABLE WAS 300% OF THE TAX SOUGHT TO BE EVADED. FINALLY, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD I.T.A. NO.320 /COCH/2017 3 CONCEALED ITS INCOME AND PENALTY AT THE RATE OF 200% AMOUNTING TO RS.20,51,700/- WAS LEVIED U/S. 271(1)(C) OF THE ACT. 4. ON APPEAL, THE CIT(A) DELETED THE PENALTY/S. 271(1)(C) BY OBSERVING THAT THE ASSESSING OFFICER HAD NOT GIVEN ANY CREDIT FOR TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 4,63,824/- WHILE CALCULATING TAX SOUGHT TO BE EVADED. THE CIT(A) WAS OF THE OPINION THAT THE ASSESSEE HAD ACCEPTED THE MISTAKE, OFFERED INCOME TO BE TAXED AT A MUCH HIGHER RATE THAN ACTUALLY EARNED AND DID NOT FILE ANY APPEAL. ACCORDING TO THE CIT(A), THE ASSESSING OFFICER ADOPTED A GP RATE AT A MUCH HIGHER RATE THAN ACTUALLY EARNED BY THE ASSESSEE WITHOUT ASSIGNING ANY REASON OR COMPARING THE PROFITABILITY OF THE ASSESSEE WITH ANY OTHER ASSESSEE ENGAGED IN THE SIMILAR LINE OF BUSINESS. FURTHER, THE CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICER HAD LEVIED PENALTY AT THE RATE OF 200% WITHOUT GIVING ANY REASONS WHATSOEVER. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) CONCLUDED THAT THE ASSESSEE HAD BEEN ADEQUATELY TAXED AT THE RATE OF 12% OF THE GROSS TURNOVER WHICH IS MUCH HIGHER THAN THE INCOME ACTUALLY EARNED BY THE ASSESSEE. ACCORDINGLY, THE CIT(A) DELETED THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 5. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT OFFERED THE CORRECT CONTRACT RECEIPTS FOR THE YEAR. THE LD. DR SUBMITTED THAT AS PER ITS DETAILS AND FORM 26AS, IT WAS FOUND THAT THE I.T.A. NO.320 /COCH/2017 4 ASSESSEE WAS IN RECEIPT OF RS.2,26,39,040/- AS CONTRACT RECEIPT AND THERE WAS AN OMISSION OF INCOME TO THE TUNE OF RS.1,40,49,048/- FURTHER, IT WAS SUBMITTED THAT THE PROVISION OF EXPLANATION 1 TO SECTION 271(1)(C) IS APPLICABLE TO THE ASSESSEES CASE SINCE THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME FOR WHICH THE ASSESSEE HAD NO SATISFACTORY EXPLANATION. 6. THE LD. AR SUBMITTED THAT THE CIT(A)S FINDINGS SHOWED THAT THE ASSESSMENT WAS BASED ON A ESTIMATE BASIS. ACCORDING TO THE LD. AR WHEN THE PROPOSAL TO ESTIMATE INCOME AT 12%, WHICH IS 3 TIMES OF THE NET INCOME RETURNED IN PROPORTION TO THE GROSS RECEIPTS, AS FOUND IN THE FORM 26AS, THE SAME WAS ACCEPTED EVEN WITHOUT FILING AN APPEAL, AND ALSO THE ENTIRE BALANCE TAX WAS PAID TOGETHER WITH INTEREST. THE LD. AR SUBMITTED THAT THIS BEING AN ESTIMATE OF INCOME, THERE IS NO POSITIVE INCOME IN THE CONTEXT OF LEVY OF PENALTY FOR CONCEALMENT OR FOR FURNISHING INACCURATE PARTICULARS. THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF D.K.B. & CO. VS. DCIT(ASSESSMENT) REPORTED IN 198 TAXMAN 339 WHEREIN THE HIGH COURT HELD THAT HOWEVER, IN PENALTY PROCEEDING, THE TRIBUNAL FOUND THAT, OUT OF RS. 15,00,000/- PENALTY LEVIED, RS. 6,74,600/- REPRESENTED ESTIMATED INCOME IN RESPECT OF WHICH PENALTY CANNOT BE LEVIED. IT WAS SUBMITTED THAT THIS PART OF THE DECISION WAS TAKEN ON APPEAL BY THE DEPARTMENT AND THE HIGH COURT DISMISSED THE APPEAL OF THE DEPARTMENT BY HOLDING THAT SO FAR AS THE DEPARTMENT APPEAL IS CONCERNED, WE MAY NOT THINK, THERE IS NO NEED TO INTERFERE WITH THE TRIBUNAL I.T.A. NO.320 /COCH/2017 5 ORDER, BECAUSE, TRIBUNAL HAS TAKEN A LENIENT VIEW IN RESPECT OF ESTIMATED INCOME, WHICH IS NOT POSITIVE INCOME CONCEALED, BUT SUPPRESSION NOTICED BY THE DEPARTMENT'. IT WAS SUBMITTED THAT IN THE ASSESSEES CASE, EXCEPT THAT THERE WAS NO RAID, ALL OTHER FACTS ARE SIMILAR. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOUND MISMATCH IN THE GROSS RECEIPTS RETURNED AND AS FOUND IN FORM 26AS AND THE INCOME WAS ESTIMATED AS 12% AS AGAINST RETURNED 31/2% WHICH WAS ACCEPTED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE KERALA HIGH COURT OPINED THAT IN THE CASE OF ESTIMATE INCOME, THERE IS NO POSITIVE INCOME EVEN IN A CASE OF SUPPRESSION NOTICED BY THE DEPARTMENT AND THIS VIEW TAKEN BY THE KERALA HIGH COURT IS ECHOED IN FOLLOWING DECISIONS OF THE OTHER HIGH COURTS AND TRIBUNAL: I) NAVJIVAN OILK MILLS VS. CIT REPORTED IN 252 ITR 417 (GUJARAT) II) CIT VS. P. ROJES REPORTED IN 31 TAXMAN.COM 253 (MADRAS) III) CALIFORNIA DESIGN & CONSTRUCTION INC INDIA VS. ITO REPORTED IN 156 ITD 919 (ITAT, CHANDIGARH BENCH) . 6.1 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AR PRAYED THAT THE ORDER OF THE CIT(A) SHOULD NOT BE DISTURBED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN GROSS RECEIPTS IN THE P&L ACCOUNT AT RS.1,01,45,542/-. ON VERIFICATION OF FORM 26AS, IT WAS FOUND THAT THE ASSESSEE WAS IN RECEIPT OF RS.2,26,39,040/-. THUS, THERE WAS DIFFERENCE IN TURNOVER OF RS. 1,40,49,048/-. AFTER GIVING DUE NOTICE, THE ASSESSING OFFICER I.T.A. NO.320 /COCH/2017 6 ESTIMATED THE INCOME AS SUPPRESSED TURNOVER AT 12% OF THE GROSS RECEIPTS AND COMPLETED THE ASSESSMENT. THE ASSESSEE HAS NOT CHALLENGED THE ASSESSMENT ORDER AND HAS PAID THE TAX ON IT. CONSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY AT 200% OF THE TAX SOUGHT TO BE EVADED WHICH WORKED OUT AT RS.20,51,700/-. 7.1 NOW THE CONTENTION OF THE ASSESSEE IS THAT THE INCOME OF THE ASSESSEE WAS ONLY ESTIMATED AND PENALTY CANNOT BE LEVIED. ADMITTEDLY, IN THIS CASE, THE ASSESSEE HAS CONCEDED THE TURNOVER TO THE TUNE OF RS.1,40,49,048/- WHICH LED TO THE ESTIMATION OF INCOME BY THE ASSESSING OFFICER AND CONSEQUENT LEVY OF PENALTY. THEREFORE, QUANTIFICATION OF SUPPRESSED TURNOVER IS NOT BASED ON MERE ESTIMATION. IT IS ONLY BASED ON FORM 26AS RELATED TO THE ASSESSEE. CONSEQUENT TO THE QUANTIFICATION OF THE SUPPRESSED TURNOVER, PROFIT ON IT WAS ESTIMATED. THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE REASON FOR NOT DISCLOSING THE CORRECT TURNOVER TO THE DEPARTMENT. HENCE, IN OUR OPINION, THERE WAS ACTUAL SUPPRESSION OF TURNOVER BY THE ASSESSEE WHICH RESULTED IN CONCEALMENT OF INCOME OF THE ASSESSEE. THE ESTIMATION OF INCOME WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HIGHER FORUM WHICH MEANS THAT THE ASSESSEE HAS ADMITTED CONCEALMENT OF INCOME. HENCE, LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS JUSTIFIED. HOWEVER, IN OUR OPINION, LEVY OF PENALTY AT 200% OF THE TAX SOUGHT TO BE EVADED IS NOT PROPER AND NOT REASONABLE. IT IS VERY EXCESSIVE. ACCORDINGLY, WE MODIFY THE PENALTY ORDER OF THE ASSESSING OFFICER AND SUSTAIN THE I.T.A. NO.320 /COCH/2017 7 PENALTY AT 100% OF THE TAX SOUGHT TO BE EVADED WHICH WORKS OUT TO RS.10,25,850/-. THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH SEPTEMBER, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25 TH SEPTEMBER, 2018 GJ COPY TO: 1. M/S. KITE MAKER, KTS SHOPPING CENTRE, 1 ST FLOOR, PONNURUNNI ROAD, CHALIKKAVATTOM, KOCHI-682019. 2. THE INCOME TAX OFFICER, WARD-1(3), NON CORPORATE, RANGE-1, KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCHI. 4. THE PR. COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN