M/s National Construction Co., Amritsar. V. The Dy. Commissioner of Income Tax, Amritsar.

ITA 462/ASR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9522 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.462(ASR)/2016 ASSESSMENT YEAR: 2006-07 M/S. NATIONAL CONSTRUCTION CO., 117-PHASE-II, KRISHNA SQUARE, AMRITSAR. PAN:AAAFN8509P VS. THE DY. CIT, CIRCLE-IV, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA, ADV. RESPONDENT BY: SH. RAHUL DHAWAN, DR DATE OF HEARING: 22/11/2016 DATE OF PRONOUNCEMENT: 25/11/2016 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A), AMRITSAR, DATED 23.06.2016 FOR ASST. YEAR: 2006-07. 2. THE ASSESSEE HAS TAKEN VARIOUS GROUNDS OF APPEAL , HOWEVER, THE CRUX OF THE GRIEVANCE OF ASSESSEE IS THE ACTION OF LD. CIT(A), BY WHICH HE HAS CONFIRMED THE PENALTY OF RS.5,22,972/- IMPOSED BY ASSESSING OFFICER U/S.271(1)(C) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN ASSESSME NT ORDER ARE THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED CERTAIN DISCREPANCIES IN THE BOOKS OF ACCOUNT AND NOTED THE DISCREPANCIES IN HIS ASSESSMENT ORDER AT ITA NO.462/ASR/2016 A.Y. 2006-07 2 PAGE 1 & 2 AND CONFRONTED THESE DISCREPANCIES TO TH E ASSESSEE. THE COUNSEL OF THE ASSESSEE HAD SUBMITTED CERTAIN SUBMI SSIONS, WHICH THE ASSESSING OFFICER DID NOT ACCEPT AND THEREFORE, HE SHOW CAUSED THE ASSESSEE AS TO WHY THE BOOKS OF ACCOUNT OF THE ASSE SSEE SHOULD NOT BE REJECTED. IN RESPONSE TO WHICH, THE COUNSEL OF THE ASSESSEE SUBMITTED THAT NET PROFIT RATE OF 10% MAY BE APPLIED ON GROSS RECEIPTS AND THE ASSESSEE BE ALLOWED DEDUCTION OF DEPRECIATION, SALA RY AND INTEREST TO PARTNERS. THE ASSESSING OFFICER, HOWEVER, MADE THE ESTIMATION OF NET PROFIT @ 8% OF GROSS RECEIPTS AND DID NOT ALLOW THE CLAIM OF DEPRECIATION, SALARY AND INTEREST. IN VIEW OF THIS ADDITION, THE ASSESSING OFFICER INITIATED AND IMPOSED A PENALTY OF RS.5,22,972 U/S 271(1) (C) OF THE ACT. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD. C IT(A) AND SUBMITTED VARIOUS SUBMISSIONS, HOWEVER, THE LD. CIT(A) DID NO T ACCEPT THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE PENAL TY. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. AR INVITED OUR ATTENTI ON TO THE FACT THAT THE INCOME OF THE ASSESSEE HAS BEEN ESTIMATED BY APPLYI NG 8% NET PROFIT RATE TO GROSS RECEIPTS, AND THEREFORE, THE PENALTY U/S 2 71(1)(C) IS NOT APPLICABLE AS PENALTY CANNOT BE IMPOSED WHERE INCOM E IS ASSESSED AFTER ESTIMATION. RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING JUDGMENTS OF HONBLE HIGH COURT AND ALSO ON ITAT, A MRITSAR BENCH IN VARIOUS CASE LAWS. ITA NO.462/ASR/2016 A.Y. 2006-07 3 1. CIT VS. SANGRUR VANASPATI MILLS LTD. 303 ITR 53 (P&H) 2. CIT VS. SURESH KUMAR BANSAL & ANR. 254 ITR 130 3. CIT VS. IQBAL SINGH & CO. 180 TAXMNA 0355. 4. HARIGOPAL VS. CIT, 125 TAXMAN 0242 5. CIT VS. RAVAIL SINGH & CO. 122 TAXMAN 0831. 6. CIT VS. M.M. RICE MILLS 123 TAXMAN 0308. 7. ITO, WARD -1 (1), BATHINDA VS. SH. JARNAIL SING H CONTT. ITA NO.212(ASR)/2007 ASST. YEAR 2001-2002. 8. M/S. AMIT NANDA CONTRACTOR VS. ITO, WARD IV(1), AMRITSAR, ITA NO.323(ASR)/2012, ASST. YEAR: 2007-2008. 9. ITO, WARD-2(1), JAMMU VS. SH. ASHOK KUMAR, ITA NO. 571(ASR)/2011 ASST. YEAR 2007-08. 10. ACIT, CIRCLE-3, SRINAGAR VS. M/S STAR CONSTRUC TIONS, ITA NO.148(ASR)/2014, ASST. YEAR 2004-2005. 11. ACIT, CIRCLE-VI, PATHANKOT VS. SH. LAKWINDER SI NGH, ITA NO.526(ASR)/2015, ASST. YEAR 2011-12. 7. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E PRESENT CASE IS NOT ONLY OF ESTIMATION OF INCOME BUT IT IS A CASE W HERE THE ASSESSING OFFICER HAD DETECTED VARIOUS DISCREPANCIES AND WHIC H HE HAS LISTED IN HIS ASSESSMENT ORDER AND ONLY AFTER THAT THE ASSESSEE A GREED FOR CALCULATION OF HIS INCOME ON ESTIMATE BASIS. HE SUBMITTED THAT SINCE THE ASSESSEE WAS CORNERED AND HAD NO REPLY TO THE OBSERVATIONS M ADE BY ASSESSING OFFICER, THEREFORE, HE SURRENDERED BY AGREEING TO T HE ESTIMATION ON PERCENTAGE BASIS AND THEREFORE, THE DIFFERENCE IN R ETURNED INCOME AND ASSESSED INCOME IS NECESSARILY A CONCEALED INCOME A ND THE AUTHORITIES BELOW HAS RIGHTLY IMPOSED AND UPHELD THE PENALTY. R ELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS. ITA NO.462/ASR/2016 A.Y. 2006-07 4 1. ACIT VS. BHARTIYA BHANDAR 122 ITR 0622 (MADHYA PRADESH) 2. CIT VS. B.A. BALASUBRAMANIAN & BROS. COMPANY 152 ITR 0529(MAD) 3. TUBE FABRICO (I.) LTD. VS. CIT 210 ITR 1035 (DEL ) 4. TELU RAM JAIN (SIRSA AIRFIELD) VS. CIT 111 ITR 0 500 (P&H) 5. CIT VS. N.S. ICHOPONANI 330 ITR 0125 (P&H) 6. A.M. SHAH & CO. VS. CIT 238 ITR 0415 (GUJ) 7. CIT VS. HOSHIARPUR EXPRESS TRANSPORT CO. LTD. 16 2 ITR 0393 (P&H) 8. IN HIS REJOINDER, THE LD. AR SUBMITTED THAT THE CASE LAWS RELIED UPON LD. DR ARE VERY OLD AND ARE DISTINGUISHABLE ON FACTS, WHEREAS THE CASE LAWS RELIED BY HIM ARE VERY RECENT AND THE FAC TS AND CIRCUMSTANCES OF THE CASE LAWS RELIED UPON BY HIM ARE SIMILAR AS IN THE PRESENT CASE. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. TO RESOLVE THE CONTROVER SY AS TO WHETHER THE PENALTY WAS IMPOSABLE IN THE PRESENT CASE OR NOT, W E HAVE TO GO THROUGH THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HA D NOTED DOWN THE VARIOUS DISCREPANCIES. FOR THE SAKE OF COMPLETENESS THE DISCREPANCIES NOTED DOWN BY ASSESSING OFFICER ARE REPRODUCED BELO W. 1 . PURCHASE OF SCORPIO FROM A PARTNER DURING THE COURSE .OF ASSESSMENT PROCEEDINGS THE AS SESSEE WAS ASKED TO FILE DOCUMENTARY EVIDENCE REGARDING PURCHA SE OF SCORPIO AMOUNTING TO RS.698500/- WHICH HAD BEEN INTRODUCED IN THE FIXED ASSETS. THE COUNSEL PRODUCED DOCUMENTS SHOWING PURC HASE OF SCORPIO BY SH.ROJNECSH KUMAR IN HIS INDIVIDUAL CAPACITY FROM M ISS. ANITA SHARMA. THE DATE OF THE RECEIPT WAS 5/5/2005 AND IT WAS EVI DENT FROM THE EXAMINATION OF THE RECEIPT THAT THE DATE HAD BEEN C HANGED FROM 5/5/2004. THIS SUSPICION WAS FURTHER STRENGTHENED B Y THE ACCOMPANYING, DOCUMENTS I.E. FORM NO.30 IN WHICH AN ITA SHARMA HAD DECLARED THAT SHE WAS SELLING THE VEHICLES IN THE Y EAR 2004. SH. RAJNEESH KUMAR PARTNER IN THE ASSESSEE FIRM ALSO WORKS AS CO NTRACTOR IN PROPRIETOR SHIP BUSINESS UNDER THE NAME AND STYLE O F M/S DEVGAN CONSTRUCTION CO. THIS SHOWED THAT SH. RAJNEESH KUMA R HAD PURCHASED THE SCORPIO IN THE YEAR 2004 FOR RS.6 LACS AND USED THE VEHICLES FOR ITA NO.462/ASR/2016 A.Y. 2006-07 5 BUSINESS AND AFTER ONE YEAR TRANSFERRED THE SCORPIO TO THE FIRM AT. AN EXCESSIVE PRICE OF RS.698500/-. THESE FACTS WERE CONFRONTED TO THE COUNSEL. THE COU NSEL SUBMITTED THAT AS REGARD THE PURCHASE OF SCORPIO BY RAJNEESH KUMAR IT IS CORRECT THE DATE IS 05.05.2005 BECAUSE FROM THE APPRAISAL O F R/C OF SCORPIO (PHOTOCOPY) SHOWS THAT IT IS TRANSFERRED ON 04.05,2 005. THE BANK LOAN STATEMENT ALSO SHOWS THAT THE LOAN CHEQUE WAS RECEI VED BY RAJNEESH KUMAR ON 27.04.2005 WHICH WAS LATER ON TRANSFERRED IN FIRMS ACCOUNT. THAT COST OF RS.600000/- IS ALSO DEBITED TO CAPITAL ACCOUNT WHICH IS CLEAR FROM COPY OF ACCOUNT FILED. HOWEVER, THE SUBMISSIONS OF THE COUNSEL CANNOT BE V ERIFIED FROM THE MATERIAL AVAILABLE ON THE RECORD. THE AMOUNT PA ID TO SH. RAJNEESH KUMAR FOR THE SCORPIO APPEARS TO BE A EXCESSIVE CON SIDERING THAT THE SAME HAD BEEN USED BY HIM PERSONALLY FOR SOME TIME BEFORE BEING TRANSFERRED TO THE FIRM. 2. CREDIT IN THE CAPITAL ACCOUNTS OF THE PERTNERS THE PERUSAL OF RETURNED SHOWED THAT RS. L LAC WAS I NTRODUCED AS CAPITAL IN THE ACCOUNT OF SH'. HARBANS LAI AND RS.5 -LACS WAS INTRODUCED IN THE CAPITAL ACCOUNT OF SH. RAJNEESH KUMAR. THE A SSESSEE WAS ASKED TO FILE DOCUMENTARY EVIDENCE IN SUPPORT OF THE INTRODU CTION OF CAPITAL IN THE ACCOUNTS OF THE AFORESAID PARTNERS. THE COPY OF ACC OUNT FILED IN THE CASE OF SH.HARBANS LAI SHOWED THAT CASH WAS WITHDRAWN FR OM THE ASSESSEE FIRM ON 06.06.2005. THE SAME WAS DEPOSITED IN THE B ANK BY SH. HARBANS LAI AND ON 06.06.2005 A CHEQUE OF RS.L LAC WAS WITH DRAWN IN THE NAME OF ASSESSEE FIQP. IN THE CASE OF SH. RAJNEESH KUMAR LOAN OF RS.5 LACS WAS RECEIVED FROM ICICI FOR SCORPIO WHICH WAS INTRO DUCED IN THE ASSESSEE FIRM. THESE ENTIRE TRANSACTIONS SHOW THAT THE PARTN ERS AS ALSO THE FIRM DO NOT ACT REASONABLY AS IS EXPECTED FROM A PRUDENT BU SINESS MAN. THEIR STATEMENT OF AFFAIRS ARE NOT CONDUCTED IN A TRANSPA RENT MANNER AS THE PARTNERS ARE DOING INDEPENDENT CONSTRUCTION BUSINES S AS WELL. 3. PURCHASE OF STONE METAL CRUSHERS: THE PERUSAL OF RETURN SHOWED THAT THE ASSESSEE HAS DEBITED RS.3719731/- AS PURCHASES OF CRUSHER. THE EXAMINATI ON OF BILLS PRODUCED SHOW THAT CRUSHER HAS BEEN PURCHASED OF VA LUE OF RS.5-6 LACS FROM CRUSHER HOUSES. ALL PAYMENTS MADE IN CASH REST OF THE CRUSHER HAS BEEN PURCHASED FROM TRUCKERS WHICH AGAIN WAS IN CAS H. IT IS SURPRISING THAT A FIRM WHICH IS DOING CRORES OF BUSINESS HAS N OT MADE EVEN A SINGLE PAYMENT IN CHEQUE. THE BILLS AND VOUCHERS OF THE CR USHER WERE NOT VERIFIABLE AS THE COUNSEL ADMITTED THAT THE CRUSHER HAS BEEN PURCHASED FROM TRUCKERS. DURING THE COURSE OF PROCEEDINGS, SH RI JAMWAL HAS GIVEN AN EXPLANATION THAT THE CREDITORS WERE DRIVERS OF V EHICLES BECAUSE THE STONE CRUSHERS WERE NOT WILLING TO SUPPLY THE GOODS TO THE CONTRACTOR ASSESSEE AND MATERIAL WAS PURCHASED DIRECTLY FROM T HE DRIVERS OF THE TRUCKS. THE CONTRACT HAS TO BE COMPLETED IN A TIME BOUND PERIOD. THEREFORE TO AVOID PENALTY FROM THE DEPARTMENT FOR NOT COMPLETING THE WORK ALLOTTED IN THE PRESCRIBED PERIOD, HIS BOUND T O MAKE PURCHASES OF ITA NO.462/ASR/2016 A.Y. 2006-07 6 CRUSHER THROUGH TRUCKS. THE CONTRACTOR CANNOT KNOW THE NAME OF THE OWNER OF THE TRUCK AS HE IS DEALING ONLY WITH THE T RUCK DRIVERS WAS NOT THE OWNERS THIS EXPLANATION LACKS CREDIBILITY AS IT IS UNBELIEVABLE THAT SUCH AN ESTABLISHED CONTRACTOR SHOULD NOT BUY CRUSH ER FROM ESTABLISHED CRUSHER HOUSES AND INSTEAD BUY CRUSHER, FROM TRUCK DRIVERS. THE REQUIREMENTS OF THESE CONTRACTORS WERE HUGE AND IT CANNOT BE FULFILLED BY BUYING CRUSHER FROM ORDINARY TRUCK DRIVERS. IT IS A NORM THAT ESTABLISHED CONTRACTORS WILL BUY, THEIR REQUIREMENTS OF CRUSHER FROM ESTABLISHED SUPPLIERS ON A WHOLESALE BASIS SO THAT GOOD TERMS O F TRADE CAN BE OBTAINED. ALL PAYMENTS ARE IN CASH MAINLY IN SMALL SUMS RS.20 ,000/- AND LESS ON EACH OCCASION. THIS FEATURE OF THE LABOUR A CCOUNTS CASTS A SHADOW OF DOUBT ABOUT THE GENUINENESS OF THE EXPENS ES CLAIMED. SIMILAR WAS THE FEATURE IN PAYMENTS MADE FOR SAND, CEMENT & EARTH WORK. 4. TRUCK NUMBER AS CREDITOR THE EXAMINATION OF THE LIST OF SUNDRY CREDITORS REV EALED THAT CREDITORS AMOUNTING TO RS.L9,69,955/- FOR EXPENSES WERE NOT IDENTIFIED AS INDIVIDUAL PERSONS DOING BUSINESS BUT WERE ONLY MEN TIONED AS TRUCK NUMBERS OR TROLLEY NUMBERS. THE EXPLANATION GIVEN I S THAT VARIOUS MATERIAL LIKE CRUSHER STONES WERE PURCHASED DIRECTL Y FROM THE TRUCK/TROLLEY DRIVERS AND HENCE THE TRUCK/TROLLEY N UMBERS WERE GIVEN AS IDENTIFICATION OF THE SUPPLIERS. THIS IS AGAINST TH E NORMAL CONDUCT OF BUSINESS. BIG ASSESSES ARE ALWAYS ABLE TO ARRANGE T HE SUPPLY-OF GOODS FROM THE REPUTED FIRMS ON FAVORABLE TERMS ON LONG T ERM BASIS. NO ESTABLISHED CONTRACTOR IS LIKELY TO CONDUCT HIS BUS INESS THROUGH TRUCK/TROLLEY DRIVERS. THE ADDRESSES OF THE TRUCK/T ROLLEY DRIVERS WERE NOT SUPPLIED NOR ANY KIND OF CONFIRMATION FILED. IT IS ALSO SURPRISING THAT THESE SMALL TRUCK/TROLLEY DRIVERS WOULD NOT TAKE PA YMENTS FOR DAYS TOGETHER. WHILE THE TROLLEYS WERE USED FOR CARRIAGE OF EARTH WORK, THE TRUCKS WERE USED FOR CARRIAGE OF CRUSHER. A TROLLEY IN ONE GO CAN CARRY 200-250 E.FT OF EARTH WORK @ RS.L PER C.FT. EVEN IF A TROLLEY MAKES 5 TO 6 ROUNDS IN A DAY; IT WILL BE ENTITLED TO PAYMENT OF NOT MORE THAN RS.L500/. THE CREDITS SHOWN AGAINST THE TROLLEY AVERAGE AT AR OUND RS.30000/- WHICH SHOWS THAT THE TROLLEY DRIVER IS NOT PAID FOR 20 DAYS AT A STRETCH WHICH CANNOT BE ACCEPTED AT FACE VALUE BECAUSE THES E SMALL DRIVERS CANNOT SURVIVE WITHOUT RECEIVING THE PAYMENTS IMMED IATELY. SAME IS TRUE FOR THE TRUCK DRIVERS. THIS ALSO HAS TO BE SEEN IN THE LIGHT OF THE FACT THAT THE ASSESSEE HAS MADE PAYMENT OF AROUND RS.70 LACS IN CASH FOR THE CARRIAGE OF THE CRUSHER. FROM THE ABOVE DISCREPANCIES AS NOTED BY ASSESSING OFFICER, WE FIND THAT IN RESPECT OF PURCHASE OF SCORPIO FROM A PARTNER, T HE OBJECTION OF THE ASSESSING OFFICER IS THAT THE AMOUNT PAID TO SH. RA JNEESH KUMAR FOR THE PURCHASE OF SCORPIO APPEARED TO BE EXCESSIVE. THIS OBSERVATION IS NOT ITA NO.462/ASR/2016 A.Y. 2006-07 7 SUBSTANTIATED BY ANY EVIDENCE AND IS BASED UPON CON JECTURE AND SURMISES. 9.1 AS REGARDS THE SECOND OBJECTION REGARDING CREDI T IN THE CAPITAL ACCOUNTS OF THE PARTNERS, THE ASSESSING OFFICER HAD DOUBTED THE TRANSACTION BY HOLDING THAT THE TRANSACTION COULD N OT HAVE BEEN DONE BY A PRUDENT BUSINESS MAN. THIS OBSERVATIONS IS ALSO NOT SUPPORTED BY ANY SOLID EVIDENCE AND IS BASED UPON ASSUMPTIONS ONLY. 9.2 AS REGARDS THIRD OBJECTION REGARDING PURCHASE OF STONE METAL CRUSHERS, THE ASSESSING OFFICER HAS DOUBTED THE GEN UINENESS OF EXPENSES AS IN HIS OPINION NORMALLY A PERSON WILL BUY THEIR REQUIREMENTS OF CRUSHER FROM ESTABLISHED SUPPLIERS ON A WHOLESALE B ASIS SO THAT GOOD TERMS OF TRADE CAN BE OBTAINED. THIS OBSERVATION AL SO DOES NOT HOLD FORCE AND DO NOT INDICATE ANY CONCEALMENT OF INCOME. 9.3 AS REGARDS THE FOURTH OBJECTION REGARDING INCLU SION IN THE SUNDRY CREDITORS AN AMOUNT OF RS.19,69,955/- AS OUTSTANDIN G TO VARIOUS TRUCKS, THE FINDING OF THE ASSESSING OFFICER IS THAT NO EST ABLISHED CONTRACTOR IS LIKELY TO CONDUCT HIS BUSINESS THROUGH TRUCK/TROLLE Y DRIVERS. HE HAS ALSO HELD THAT WHILE THE TROLLEYS WERE USED FOR CARRIAGE OF EARTH WORK, THE TRUCKS WERE USED FOR CARRIAGE OF CRUSHER. 9.4 ON THE BASIS OF THESE OBSERVATIONS HE HAS REJ ECTED THE BOOKS OF ACCOUNT AND HAS ESTIMATED THE INCOME OF ASSESSEE @ 8%. IN ARRIVING AT THE ESTIMATION THE ASSESSING OFFICER HAD THE CONSEN T OF ASSESSEE ALSO WHO HIMSELF HAD OFFERED FOR ESTIMATION @ 10% WITH T HE CLAIM OF ITA NO.462/ASR/2016 A.Y. 2006-07 8 DEPRECIATION, SALARY AND INTEREST. THIS OBSERVATION CAN ALSO NOT BE USED TO SAY THAT THE EXPENDITURE WAS BOGUS AND THEREFORE , THE ASSESSEE HAD CONCEALED THE INCOME. 10. NONE OF THE OBSERVATIONS MADE BY ASSESSING OFFI CER REVEAL THAT ASSESSEE HAD CONCEALED ITS INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS CORRECT THAT ASSESSING OFFICER HAD OBSERVED CERTAIN DISCREPANCIES BUT THAT ITSELF CANNOT LEAD T O THE CONCLUSION THAT ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME. T HE ASSESSEE IS A CONTRACTOR AND IN THE CASE OF CONTRACTS COMPLETE VO UCHERS CANNOT BE MAINTAINED IN VIEW OF THE NATURE OF EXPENSES INCURR ED BY THEM. TO COVER ANY LEAKAGE OF INCOME ON ACCOUNT OF HIS OBSERVATION S, THE ASSESSING OFFICER HAD ESTIMATED THE INCOME BY REJECTING THE B OOKS OF ACCOUNT. IT IS CORRECT THAT ASSESSEE ITSELF HAD OFFERED TO BE ASSE SSED ON INCOME ARRIVED AT BY ESTIMATION BUT THAT DOES NOT MEAN THAT ASSESS EE HAD CONCEALED ITS INCOME. SOMETIMES TO BUY PEACE OF MIND AND TO FINIS H THE ASSESSMENT PROCEEDINGS THE ASSESSEE OPTS FOR THIS METHOD TO AV OID FURTHER HARASSMENT AND TO SAVE TIME. IF THE ASSESSING OFFIC ER WAS SO SURE ABOUT CONCEALMENT OF INCOME THEN HE SHOULD NOT HAVE ACCEP TED THE REQUEST OF ASSESSEE AND SHOULD HAVE FURTHER PROBED THE DISCREP ANCIES TO UNEARTH THE CONCEALED INCOME WHICH HE HAS NOT DONE AND JUST ESTIMATED THE INCOME ON %AGE BASIS AND THEREFORE, PENALTY U/S 271 (1)(C) IS NOT IMPOSABLE. THE HONBLE PUNJAB & HARYANA HIGH COURT IN VARIOUS CASES HAS HELD THAT WHERE THE INCOME OF ASSESSEE IS ASSES SED ON ESTIMATE ITA NO.462/ASR/2016 A.Y. 2006-07 9 BASIS, THE PENALTY CANNOT BE LEVIED. THE JUDGMENT O F PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SANGRUR VANASPATI MILLS 303 ITR 0053 (P&H) IS QUITE RELEVANT IN THIS REGARD. THE RELEVAN T FINDINGS OF THE HONBLE COURT ARE REPRODUCED BELOW. 6. THE ORDER PASSED BY THE TRIBUNAL IS BASED UPON TWO DECISIONS OF THIS COURT IN CIT VS. RAVAIL SINGH & CO. (2002) 173 CTR (P&H) 429 : (2002) 254 ITR 191 (P&H) AND HARIGOPAL SINGH VS. CIT (2002 ) 177 CTR (P&H) 580 : (2002) 258 ITR 85 (P&H). IN BOTH THESE DECISIONS, THIS COURT HAS HELD THAT IN ORDER TO ATTRACT CL. (C) OF S. 271(1) OF THE ACT , IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASSESSEE OF THE PARTICUL ARS OF HIS INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME . THE PROVISIONS OF S. 271(L)(C) OF THE ACT ARE NOT ATTRACTED TO CASES WHE RE THE INCOME OF AN ASSESSEE IS ASSESSED ON ESTIMATE, BASIS AND ADDITI ONS ARE MADE THEREIN. IT WAS HELD THAT WHEN THE ADDITION HAD BEEN MADE ON THE BASIS OF ESTIMATE AND NOT ON ACCOUNT OF ANY CONCRETE EVIDENC E OF CONCEALMENT, THEN THE PENALTY WAS NOT LEVIABLE. THE SIMILAR VIEW WAS ALSO TAKEN BY THIS COURT IN CIT VS. DHILLON RICE MILLS (2002) 256 ITR 447 (P&H), WHERE THE ADDITION WAS MADE BY THE AO BY ESTIMATING THE YIELD OF SUPER PHAK AS WELL AS OF CHHILKA AND ALSO THE PRICE OF CHHILKA, T HAT ADDITION WAS REDUCED BY THE CIT(A). HOWEVER, THE PENALTY LEVIED BY THE A O WAS DELETED BY THE CIT(A). THE ORDER OF CIT(A) WAS CONFIRMED BY THE TR IBUNAL AND THE APPEAL FILED BY THE REVENUE AGAINST THE SAID ORDER OF THE TRIBUNAL WAS DISMISSED BY THIS COURT, ON THE GROUND THAT THE AO HAD MADE T HE ADDITIONS ON THE BASIS OF ESTIMATE OF THE YIELD OF PHAK AND CHHILKA AND AN ESTIMATE OF THE PRICE AND THAT THE ESTIMATE WOULD NOT IPSO FACTO LE AD TO PENALTY. SIMILARLY PUNJAB & HARYANA HIGH COURT IN THE CASE O F CIT VS. SURESH KUMAR BANSAL & ANR. HAS HELD AS UNDER: 8. UNDER S.271(1)(C) OF THE ACT THE PENALTY CAN BE IM POSED ONLY WHEN IT IS FOUND THAT THE ASSESSEE HAS CONCEALED THE PARTI CULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. I N THESE CASES, IT HAS NOT BEEN SHOWN THAT THE ASSESSEE HAD CONCEALED THE PART ICULARS OF ANY INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. 9. MR. SAWHNEY HAS REFERRED TO THE ASSESSMENT ORDER PASSED BY THE AO. A PERUSAL THEREOF SHOWS THAT THE ASSESSMENT HAS BEE N MADE ON THE BASIS OF 'ESTIMATE'. NO CATEGORICAL FINDING REGARDING CON CEALMENT IS SHOWN TO HAVE BEEN RECORDED. STILL FURTHER, EVEN WHILE IMPOS ING THE PENALTY, NO DEFINITE FINDING THAT THE ASSESSEE HAD CONCEALED TH E PARTICULARS OF ANY INCOME, OR THAT IT HAD FURNISHED INACCURATE PARTICU LARS, IS SHOWN TO HAVE BEEN RECORDED. ITA NO.462/ASR/2016 A.Y. 2006-07 10 10. MR. SAWHNEY HAS REFERRED TO THE DECISION OF A DIVI SION BENCH OF THIS COURT IN MAHAVIR METAL WORKS VS. CIT (1973) 92 ITR 513 (P&H): TC 50R.618. EVEN IN THIS CASE IT WAS HELD THAT 'PENALT Y PROCEEDINGS BEING OF PENAL NATURE, IT IS FOR THE IT DEPARTMENT TO ESTABL ISH THAT THE ASSESSEE WAS GUILTY OF CONCEALMENT OF PARTICULARS OF HIS INCOME' . THE REST WAS A DECISION ON FACTS OF THE CASE. STILL FURTHER, IT DESERVES ME NTION THAT MR. MAHAJAN HAS REFERRED TO THE DECISION OF THEIR LORDSHIPS OF THE SUPREME COURT IN CIT VS. SURESH CHANDRA MITTAL (2001) 169 CTR (SC) 406 : (20 01) 251 ITR 7 (SC). IN THIS CASE THE PLEA OF THE ASSESSEE THAT 'HE HAD OFF ERED ADDITIONAL INCOME TO BUY PEACE OF MIND AND AVOID LITIGATION' WAS ACCEPTE D BY THE HIGH COURT AND THE APPEAL FILED BY THE REVENUE WAS DISMISSED B Y THEIR LORDSHIPS OF THE SUPREME COURT. SIMILAR IS THE POSITION IN THE P RESENT SET OF CASES. 11. MR. SAWHNEY HAS ALSO DRAWN OUR ATTENTION TO THE D ECISION OF THE APEX COURT IN UNION OF INDIA & ANR. VS. BANWARI LAI AGAR WAL (1999) 156 CTR (SC) 300 : (1999) 238 ITR 461 (SC). THIS CASE RELAT ED TO THE PROSECUTION OF THE ASSESSEE ON ACCOUNT OF DELAY IN FILING THE RETU RNS. THIS CASE HAS NO RELEVANCE TO THE FACTS OF THE PRESENT CASE. 12. NO OTHER POINT HAS BEEN RAISED. IN VIEW OF THE ABOVE, WE FIND THAT THE TRIBUNAL HAS DECIDED THESE CASES ON APPRECIATION OF THE EVIDENCE ON RECORD. NO QUESTION OF LAW, WHICH MAY REQUIRE AN EXPRESSION OF OPINION BY THIS COURT, ARI SES IN THESE CASES. CONSEQUENTLY, THE PETITIONS ARE DISMISSED. THE PART IES ARE, HOWEVER, LEFT TO BEAR THEIR OWN COSTS. 11. THE CASE LAWS RELIED UPON BY LD. DR ARE HAVIN G DISTINGUISHABLE FACTS. FOR EXAMPLE IN THE CASE OF CIT VS. HOSHIARPUR EXPRESS TRANSPORT CO. LTD., 162 ITR 393 (P&H), THE HONBLE TRIBUNAL IN QUANTUM PROCEEDINGS HAD HELD THAT ASSESSEE WAS MAINTAINING TWO SETS OF ACCOUNTS, ONE FOR THE PURPOSE OF THE INCOME-TAX DEP ARTMENT AND THE OTHER FOR THE PURPOSE OF DISTRIBUTION OF CONCEALED INCOME AMONGST THE SHARE HOLDERS. IT HAD ALSO CONFIRMED THE FINDING OF THE ASSESSING OFFICER THAT THE FOUR DIARIES PRODUCED IN THE CRIMINAL COUR T BELONGED TO THE ASSESSEE AND THAT SUBSTANTIAL INCOME HAD BEEN CONCE ALED BY THE ASSESSEE, HOWEVER, THE TRIBUNAL RECOMPUTED THE INCO ME ON OPTIMUM BASIS AND ESTIMATED THE SAME AT A LOWER FIGURE AND IN THIS CASE THE ITA NO.462/ASR/2016 A.Y. 2006-07 11 HONBLE COURT HAD REVERSED THE ORDER OF TRIBUNAL ON THE BASIS THAT THERE WAS SUFFICIENT MATERIAL FOR IMPOSITION OF PENALTY, WHEREAS IN THE PRESENT CASE THERE IS NO FINDING BY ASSESSING OFFICER OR LD . CIT(A) THAT ASSESSEE HAD REALLY CONCEALED THE PARTICULARS OF INCOME. THE Y HAVE ONLY OBSERVED CERTAIN DISCREPANCIES AND DID NOT MAKE ANY ADDITION ON THE BASIS OF DISCREPANCIES AND PROCEEDED TO MAKE ADDITION BY EST IMATING THE INCOME OF ASSESSEE. THEREFORE, THIS CASE LAWS IS DISTINGUI SHABLE ON THE FACTS. 12. IN THE CASE OF CIT VS. N. S. ICHOPONANI 330 ITR 0125(P&H), THE TRIBUNAL HAD HELD THAT SINCE THE ADDITION WAS A RES ULT OF DISALLOWANCE, THE ASSESSEE COULD NOT BE HELD TO HAVE CONCEALED TH E PARTICULARS OF INCOME. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS REMANDED THE MATTER BACK TO THE TRIBUNAL BY HOLDING THAT TRIBUNA L HAD ALSO NOT INDICATED ANY MATERIAL IN SUPPORT OF ITS FINDINGS, THEREFORE, THIS CASE LAWS IS ALSO NOT APPLICABLE AS THE FACTS IN THE PRESENT CASE ARE ENTIRELY DIFFERENT. SIMILARLY, THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TELU RAM JAIN (SIRSA AIRFIELD) VS. CIT 111I TR 0500(P&H), HAD HELD THAT ASSESSEE HAD FAILED TO REBUT THE PRESUMPT ION AND TO SHOW THAT THE FAILURE TO RETURN THE CORRECT INCOME DID NOT AR ISE FROM ANY FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON HIS PART AND HAD TH EREFORE, DECIDED THE ISSUE IN FAVOUR OF REVENUE. THE OTHER CASE LAWS REL IED UPON BY LD. DR RELATES TO DECISIONS GIVEN BY HONBLE DELHI HIGH. G UJRAT HIGH COURT AND MADRAS HIGH COURT, MADHYA PRADESH, WHEREAS THE CASE LAWS RELIED UPON BY LD. AR RELATES TO JURISDICTIONAL HIGH COURT OF P UNJAB & HARYANA AND ITA NO.462/ASR/2016 A.Y. 2006-07 12 ARE DIRECTLY APPLICABLE TO THE FACTS AND CIRCUMSTAN CES OF THE CASE. SIMILARLY, THE HONBLE ITAT, AMRITSAR BENCH IN VARI OUS CASES HAS HELD THAT WHERE THE PROFITS OF THE ASSESSEE ARE CALCULAT ED BY ESTIMATION, THE PENALTY U/S 271(1)(C) CANNOT BE IMPOSED. IN VIEW OF THE ABOVE, AND KEEPING IN VIEW THE JUDICIAL PRECEDENTS, WE REVERSE THE ORDER OF LD. CIT(A) AND ALLOW THE APPEAL FILED BY ASSESSEE. 13. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/11/2016. SD/- SD/- (SANJAY GARG) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25/11/2016 /PK/PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.