Vivek Jairath, Delhi V. DCIT, Ghaziabad

ITA 4103/DEL/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8883 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR MATTA
• Assessee Lawyers: B S ANANT
• Keywords: Rejection of books of accounts
• Section: 271(1)(c); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4103/DEL/2015 ASSESSMENT YEAR: 2006-07 TA NO. 4104/DEL/2015 ASSESSMENT YEAR: 2009-10 SHRI VIVEK JAIRATH, VS DCIT, C/O MATTA & ASSOCIATES, CIRCLE-2, 877, AGGARWAL CYBER PLAZA-II, GHAZ IABAD. NETAJI SUBHASH PLACE, PITAMPURA, DELHI-110034 (PAN: ADNPJ0779P) (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AJAY KUMAR MATTA, CA ASSESSEE BY: SHRI B.S. ANANT, SR. DR DATE OF HEARING: 4.10.2018 DATE OF PRONOUNCEMENT : 27.12.2018 ORDER PER BENCH: ITA NO. 4103/DEL/2015 IS THE ASSESSEES APPEAL AGA INST THE ORDER DATED 19.02.2015 PASSED BY THE LD. CIT (APPEA LS), MUZAFFARNAGAR FOR ASSESSMENT YEAR 2006-07 WHEREIN, VIDE THE IMPUGNED ORDER, THE LD. CIT (APPEALS) HAS PARTLY C ONFIRMED THE PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). ITA NO. 41 04/DEL/2015 IS ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 2 THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 A ND IS PREFERRED AGAINST THE ORDER DATED 11.03.2015 PASSED BY LD. CIT (APPEALS), GHAZIABAD. BOTH THESE APPEALS WERE HEAR D TOGETHER AND FOR THE SAKE OF CONVENIENCE, THEY ARE BEING DIS POSED OF THROUGH THIS COMMON ORDER. 2.0 BRIEF FACTS OF THE CASE ARE THAT FOR ASSESSMEN T YEAR 2006-07, THE RETURN OF INCOME WAS FILED DECLARING I NCOME OF RS. 14,63,340/- AND THE TURNOVER DECLARED BY THE ASSESS EE WAS RS. 4,79,88,247/-. THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF CONSTRUCTION WORK AND, THEREFORE, THE ASSESSING OFF ICER PROCEEDED TO ASSESS THE NET PROFIT @8% OF THE TURNOVER, THERE BY COMPUTING THE PROFIT AT RS. 38,39,060/-. ON APPEAL, THE LD. CIT (APPEALS) DIRECTED THE ASSESSING OFFICER (AO) TO COMPUTE THE NET PROFIT BY APPLYING THE RATE OF 6.75%, THUS PARTLY ALLOWING TH E ASSESSEES APPEAL. SUBSEQUENTLY, PENALTY U/S 271(1)(C) OF THE ACT WAS IMPOSED ON THE DIFFERENTIAL AMOUNT OF THE NET PROFI T AS DECLARED BY THE ASSESSEE AND THE NET PROFIT AS DIRECTED TO B E COMPUTED BY THE LD. CIT (APPEALS). THE PENALTY IMPOSED WAS RS. 17 LAKH ON THE ALLEGED SUPPRESSION OF INCOME TO THE TUNE OF RS . 17,17,100/-. ON APPEAL, THE LD. CIT (APPEALS) REDUCED THIS PENAL TY TO RS. 5,95,815/- BEING PENALTY @100% ON THE TAX ALLEGEDLY SOUGHT TO ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 3 BE EVADED BY THE ASSESSEE. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT AGAINST THE UPHOLDING OF PENALTY BY THE LD . CIT (APPEALS). 2.1 IN ASSESSMENT YEAR 2009-10, THE RETURN OF INCO ME WAS FILED DECLARING INCOME OF RS. 39,70,085/- AND THE TURNOVER DECLARED BY THE ASSESSEE WAS RS. 7,93,68,845/-. TH E ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT BY ADOPTING NET PR OFIT RATE OF 8% AND THE RESULTANT PROFIT WAS COMPUTED AT RS. 6,3 49,508/-, THUS MAKING AN ADDITION OF RS. 22,93,408/-. THE AS SESSEES APPEAL AGAINST THE ASSESSMENT WAS DISMISSED BY THE LD. CIT (APPEALS) AND THE ASSESSEE IS NOW IN APPEAL BEFORE THE ITAT AGAINST THE DISMISSAL OF HIS APPEAL IN ITA NO. 4104 /DEL/2015. 3.0 ARGUING AGAINST THE UPHOLDING OF PENALTY, THE LD. AR SUBMITTED THAT THE PENALTY HAD BEEN IMPOSED ON ADDI TION BASED ON ESTIMATION OF PROFIT WITHOUT BRINGING ON RECORD ANY DEFECT IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. IT WAS SUBMITTED THAT NO PENALTY U/S 271(1)(C) IS IMPOSABL E IN CASE WHERE THE NET PROFIT IS ESTIMATED. 4.0 IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON THE CONCURRENT FINDINGS OF BOTH THE LOWER AUTHORITIES A ND ALSO DREW ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 4 ATTENTION TO THE FACT THAT THE BOOKS OF ACCOUNTS HA D BEEN REJECTED BY THE ASSESSING OFFICER AND, THEREFORE, THE PENALT Y HAD BEEN RIGHTLY IMPOSED. 5.0 WITH RESPECT TO ASSESSEES APPEAL FOR ASSESSME NT YEAR 2009-10, THE LD. AR ASSAILED THE ORDER OF THE ASSES SING OFFICER BY SUBMITTING THAT THE NET PROFIT OF 8% HAD BEEN ARBIT RARILY APPLIED BY THE ASSESSING OFFICER. HE ALSO DREW OUR ATTENT ION TO A CHART, WHICH WAS PLACED ON PAGE 40 OF THE PAPER BOOK, DEPI CTING THE PERCENTAGE OF ASSESSED PROFITS IN PRECEDING ASSESSM ENT YEARS BY THE ASSESSING OFFICER AND SUBMITTED THAT NEVER EARL IER HAD THE NET PROFIT BEEN COMPUTED @ 8% OF THE TURNOVER. IT WAS SUBMITTED THAT IT WAS IN ASSESSMENT YEAR 2006-07 ONLY THAT TH E ASSESSMENT HAD BEEN MADE @8% WHICH HAD BEEN REDUCED TO 6.75% B Y THE LD. CIT (APPEALS) AND AGAINST WHICH NO FURTHER APPE AL HAD BEEN PREFERRED BY THE ASSESSEE BUT APART FROM THIS, THE NET PROFIT PERCENTAGE RANGED FROM 1.84% TO 7.5% ONLY. IT WAS S UBMITTED THAT THE RESULTS DECLARED BY THE ASSESSEE BE DIRECT ED TO BE ACCEPTED. 6.0 IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON THE CONCURRENT FINDINGS OF BOTH THE LOWER AUTHORITIES A ND SUBMITTED THAT THE ADDITION HAD BEEN RIGHTLY MADE. ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 5 7.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE ISSUE O F PENALTY IN ITA 4103/DEL/2015 IS CONCERNED, IT IS UNDISPUTED THAT T HE PENALTY WAS IMPOSED ON ESTIMATED PROFIT ENHANCEMENT. THE A SSESSEE HAS ALSO FILED A CHART DEPICTING THE NET PROFIT PERCENT AGES DURING THE IMMEDIATELY FOUR PRECEDING ASSESSMENT YEARS WHEREIN IT IS SEEN THAT THE NET PROFIT ASSESSED WAS 1.84% FOR ASSESSME NT YEAR 2002- 03, 3.3% FOR ASSESSMENT YEAR 2003-04, 2.71% FOR ASS ESSMENT YEAR 2004-05 AND 5% FOR ASSESSMENT YEAR 2005-06. A LTHOUGH, IN THE CAPTIONED YEAR, THE ASSESSEE DID NOT PREFER FUR THER APPEAL AFTER THE LD. CIT (APPEALS) REDUCED THE NET PROFIT ESTIMATION RATE FROM 8% TO 6.75%, THE FACT REMAINS THAT THIS IS AN ESTIMATE OF PROFIT AND THE LD. CIT (APPEALS), WHILE ALLOWING PA RTIAL RELIEF BY DIRECTING APPLICATION OF NET PROFIT RATE OF 6.75%, HAS NOT GIVEN ANY COGENT REASON FOR ARRIVING AT THIS PERCENTAGE. THU S, THE NET PROFIT RATE, AS DIRECTED TO BE APPLIED BY THE LD. CIT (APP EALS), IS JUST AN ESTIMATE WITHOUT HAVING ANY SOUND BASIS AS THE PAST FINANCIAL RESULTS OF THE ASSESSEE HAVE NOT BEEN DULY CONSIDER ED. IT IS SETTLED LAW THAT PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME CAN NEITHER BE IMPOSED NOR SUSTAINED ON ENHA NCEMENT OF NET PROFIT RATE BASED ON AN ESTIMATE. THE HON'BLE D ELHI HIGH ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 6 COURT IN CIT VS. AERO TRADERS PVT. LTD ., (2010) 322 ITR 316 (DEL), HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE IMPOS ED WHEN INCOME IS DETERMINED ON ESTIMATE BASIS. SIMILAR VIE W HAS BEEN TAKEN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN HARIGOPAL SINGH VS. CIT (2002) 258 ITR 85 (P&H) AND THE HON'BLE GUJARAT HIGH COURT IN CIT VS. SUBHASH TRADING COMPANY , 221 ITR 110 (GUJ). ACCORDINGLY, WE ARE OF THE CONSIDERED OPINIO N THAT NO PENALTY IS IMPOSABLE ON THE FACTS OF THE PRESENT CA SE. WE SET ASIDE THE ORDER OF THE LD. CIT (APPEALS) AND DIRECT THE ASSESSING OFFICER TO DELETE THE PENALTY. 7.1 IN THE RESULT ITA 4103/DEL/2015 STANDS ALLOWED . 8.0 WE NOW TAKE UP THE ASSESSEES APPEAL FOR ASSES SMENT YEAR 2009-10 BEARING ITA 4104/DEL/2015 WHEREIN THE ASSESSEE HAS CHALLENGED THE APPLICATION OF RATE OF 8% FOR CO MPUTING NET PROFIT BY THE ASSESSING OFFICER WHICH HAS BEEN FUR THER CONFIRMED BY THE LD. CIT (APPEALS). HERE ALSO, WE FIND THAT RIGHT FROM ASSESSMENT YEAR 2002-03 TO THE YEAR UNDER CONSIDERA TION, THE NET PROFIT RATE HAS RANGED BETWEEN 1.84% TO 6.75%. A PERUSAL OF THE ASSESSMENT ORDER ALSO SHOWS THAT THE BOOKS OF A CCOUNTS WERE REJECTED BEFORE APPLYING THE NET PROFIT RATE OF 8%. HOWEVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY REASON FOR JUST IFYING THE ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 7 REJECTION OF BOOKS OF ACCOUNTS EXCEPT FOR MENTIONIN G THAT THE BOOKS OF ACCOUNTS COULD NOT BE HELD RELIABLE ON ACC OUNT OF A LARGE NUMBER OF SELF-GENERATED CASH VOUCHERS. THUS, IN O UR CONSIDERED OPINION, THIS CANNOT BE HELD TO BE A JUSTIFIABLE RE ASON FOR REJECTING THE BOOKS OF ACCOUNTS. ON A DIRECT QUERY FROM THE BENCH, BOTH THE PARTIES HAVE ALSO AGREED THAT INTEREST OF JUSTI CE WOULD BE MET IF THE NET PROFIT RATE OF 6% IS DIRECTED TO BE APPL IED IN THIS YEAR. ACCORDINGLY, WE MODIFY THE ORDER OF THE LD. CIT (AP PEALS) TO THE EXTENT THAT NOW THE ASSESSING OFFICER SHALL COMPUTE THE NET PROFIT BY APPLYING NET PROFIT RATE OF 6% AS AGAINST 8%. 8.1 THUS, ITA 4104/DEL/2015 STANDS PARTLY ALLOWED. 9.0 IN THE RESULT, ITA 4103/DEL/2015 STANDS ALLOWE D AND ITA 4104/DEL/2015 STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/12/ 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL M EMBER DATED: 27 TH DECEMBER, 2018 GS ITA 4013 & 4104/D/2015 ASSESSMENT YEARS 2006-07, 2009-10 8 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR