Fine Line Construction Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4907/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69219 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Assessee Lawyers: P K JAIN
• Keywords: Question of law
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SMT. DIVA SING H, JM AND SHRI J.SUDHAKAR RED DY, AM ITA NO. 4907/DEL/2012 ASSESSMENT YEA R : 2006-07 FINE LINE CONSTRUCTION P.LTD. VS. ACIT, CIRCLE 11( 1) JAIN RAJ ASSOCIATES, CA C.R.BLDG. 208, HANS BAHWAN, 1 NEW DELHI BAHADURSHAH ZAFAR MARG NEW DELHI 110 002 PAN: AAACF 2057 P (APPELLANT) (RESPONDENT) APPELLANT BY:- SH. P.K. JAIN, C.A. RESPONDENT BY:- MS. SHUMANA SEN , SR . D.R O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-XIII, NEW DELHI DATED 24.04.2012 PERTAI NING TO THE ASSESSMENT YEAR 2006-07, WHEREIN HE CONFIRMED THE PENALTY ORDER PAS SED U/S 271(1)(C ) OF THE INCOME TAX ACT, 1961. 2. FACTS IN BRIEF:- THE ASSESSEE COMPANY AND IS ENGAGED IN THE BUSINE SS OF CONSTRUCTION WORK. IT FILED ITS RETURN OF INCOME O N 15.12.2006 SHOWING TOTAL 2 INCOME AT RS.10,18,101/-. THE ASSESSING OFFICER , DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASKED THE ASSESSEE TO FURNI SH DETAILS OF SITE WISE MATERIAL CONSUMED AND LABOUR EXPENSES. THE ASSESSI NG OFFICER OBSERVED THAT IN SOME CASES, THERE WAS ONLY LABOUR CONTRACT AND M ATERIAL SUPPLIED BY THE CONTRACTEE. ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH EVIDENCES TO SUBSTANTIATE THIS ASPECT, AND AS THE ASSESSEES REP RESENTATIVE AGREED TO DETERMINATION OF NET PROFIT AT 5% OF THE GROSS RECE IPTS AFTER REJECTING THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER APPLIED PROVISIO NS OF SECTION 145 OF THE ACT AND COMPUTED THE TOTAL INCOME AT 5% OF TURNOVER. T HEREAFTER THE ASSESSING OFFICER LEVIED PENALTY U/S 271(1)(C ) VIDE ORDER DT . 25.6.2009, AFTER CONSIDERING THE REPLY OF THE ASSESSEE DT. 24.6.2009. THE LD.CO MMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE PENALTY. 3. AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLO WING GROUNDS. 1. THAT THE BOOKS OF ACCOUNTS WERE REJECTED BY TH E ASSESSING OFFICER WITHOUT RECORDING ANY DEFECT IN THE BOOKS OF ACCOUN TS AND MADE THE ADDITION PURELY ON ESTIMATION OF INCOME BY APPLYING NET PROFIT RATE OF 5% WITHOUT ESTABLISHING THE PARTICULARS CONCEALED BY T HE ASSESSEE. 2. THE LD.AO ERRED IN LEVYING PENALTY U/S 271(1)(C ) OF THE ACT ON THE GROUND THAT THERE WAS NO CONCEALMENT OF INCOME AND INCOME WAS ASSESSED ON ESTIMATION BASIS. 3. THAT THE PENALTY SO LEVIED MAY PLEASE BE DELETE D. 4. WE HAVE HEARD SHRI P.K.JAIN, THE LD.COUNSEL FOR THE ASSESSEE AND MS.SHUMANA SEN, THE LD.SR.D.R. ON BEHALF OF THE RE VENUE. 3 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD AND ORDERS O F THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS. 6. THIS IS A CASE WHERE THE ASSESSEE AGREED TO DETE RMINATION OF NET PROFIT @ 5% OF TOTAL TURNOVER AS HE COULD NOT FURNISH DETAIL S OF SITE WISE MATERIAL CONSUMED AND LABOUR EXPENSES INCURRED, TO THE SATIS FACTION OF THE ASSESSING OFFICER. THE ASSESSEES REPRESENTATIVE HAD SUBMITT ED THAT THE EXPENSES IN QUESTION DEPEND ON THE STAGE OF WORK BEING UNDERTAK EN BY THE ASSESSEE AND THAT IN SOME CONTRACTS THERE IS ONLY LABOUR ELEMENT AS THE MATERIAL IS SUPPLIED BY THE CONTRACTEE. THE ASSESSING OFFICER WAS NOT S ATISFIED WITH THIS EXPLANATION. HE APPLIED THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF K.P.MADHUSUDAN VS. CIT, 251 ITR 99, THE LD.COMMI SSIONER OF INCOME TAX (APPEALS) RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATIONS, REPORTED IN 191 TAXMAN 179 (DEL) AND CONFIRMED THE PENALTY. 7. THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE FO LLOWING DECISIONS. I. CIT VS. VATIKA CONSTRUCTION P.LTD. IN ITA 1246/2010 JUDGEMENT DT. 11.10.2012 OF HONBLE DELHI HIGH COURT. II. DCIT VS. M/S FINE LINE CONSTRUCTION P.LTD. IN ITA N O.1270/DEL/2011 DELHI B BENCH OF THE TRIBUNAL ORDER DT. 20.7.2012 III. MADNANI CONSTRUCTION CORPORATION P.LTD. VS. CIT (GU J) 296 ITR 045 4 8. THE LD.D.R. RELIED ON THE CASE LAWS CITED BY THE LD.COMMISSIONER OF INCOME TAX (APPEALS). 9. IN THE CASE OF VATIKA CONSTRUCTIONS P.LTD. (SUPR A) THE JURISDICTIONAL HIGH COURT WAS CONSIDERING A SIMILAR CASE AND HELD AS F OLLOWS. 11. THERE CAN BE NO TWO OPINIONS ABOUT THE PU BLIC INTEREST ELEMENT UNDERLYING S.271(1)(C ), THAT IT PUTS ALL THOSE WHO FILE RETURNS, ON NOTICE ABOUT THE CONSEQUENCES THEY WOULD FACE IN THE EVENT THEY WITH HOLD PARTICULARS THAT HAVE A MATERIAL BEARING IN THEIR CASES, OR ATTEMPT TO MISL EAD THE REVENUE. AT THE SAME TIME, THE ASSESSING OFFICER, WHILE DECIDING TO INIT IATE PROCEEDINGS, HAS TO BASE HIS OPINION ON THE MATERIALS AVAILABLE ON RECORD. HERE, THE ASSESSEE HAD CLAIMED DEDUCTION IN THE COMPUTATION OF EXPENSES, A PART OF THAT AMOUNT WAS ACTUALLY ACCEPTED. THE AMOUNT ADDED BACK AS A RESULT OF THE ASSESSEES OFFER, DID NOT CORRESPOND WITH THE TOTAL AMOUNT REPRESENTING THE P AYMENTS MADE THROUGH BEARER CHEQUES OR CASH, THAT WAS RS.40,73,180/- (EV IDENT FROM THE CALCULATION AND DOCUMENTS PLACED ON RECORD BEFORE THE TRIBUNAL) . THE IMPUGNED JUDGEMENT HAS TAKEN NOTICE OF THIS FACT. 12. THE OFFER MADE BY THE ASSESSEE WAS ON THE BASI S THAT IT COULD NOT GIVE THE DETAILS OF THE PARTIES, AND IN ORDER TO BUY PEACE, THE ASSESSING OFFICER WAS REQUESTED TO TAX THE GROSS RECEIPTS ON NET PROFITS BASIS. THIS, AS NOTICED EARLIER, RESULTED IN ADDITION OF OVER RS.51 LAKHS, WHICH REP RESENTED MORE THAN THE AMOUNT DISALLOWABLE U/S 40A(3). 14. IN THE PRESENT CASE, THE ASSESSEES CASH PAYME NTS WERE CONCEDEDLY NOT THE AMOUNT WHICH WAS DISALLOWED; THEY HAD NO CORRELATIO N TO WHAT COULD NOT BE ESTABLISHED, AND WERE DISALLOWABLE. FURTHER, THE J UDICIAL RECORD WOULD SHOW THAT WHEN THE ASSESSING OFFICER DECIDED TO INITIATE PENALTY PROCEEDINGS, HE HAD NO MATERIAL TO CONCLUDE THAT THE ASSESSEE HAD CONCE ALED INCOME OR PROVIDED INACCURATE PARTICULARS. THE ASSESSEE DID PROVIDE P ARTICULARS, BUT COULD NOT BACK UP ITS CLAIM WITH CONFIRMATION; ITS EXPLANATION WAS THAT THE PAYEES INSISTED ON IMMEDIATELY PAYMENT, TO FULFILL THEIR CONTRACTUAL C OMMITMENT TO THEIR SUPPLIERS. THE PAYEES WERE SMALL VENDORS, WILLING TO ENSURE SU PPLY OF MATERIALS TO THE ASSESSEES SITE. CLEARLY, A CASE FOR BUSINESS EXPE DIENCY HAD BEEN URGED. MOST IMPORTANTLY, THE MATERIAL WHICH LED TO THE PENALTY ORDER I.E. ABSENCE OF THE PAYEES AT THEIR PLACES OR ADDRESS PROVIDED, WAS GAT HERED AFTER NOTICE U/S 271(1)(C ) WAS ISSUED. THE ASSESSEE COMPLAINED OF THIS PROCEDURE, CALLING IT UNFAIR, AS IT OUGHT TO HAVE BEEN PROVIDED WITH OPPO RTUNITY IN THIS REGARD DURING 5 THE ASSESSMENT AND THAT MATERIAL WHICH DID NOT EXIS T AT TIME OF INITIATION OF PENALTY PROCEEDING OUGHT NOT TO HAVE BEEN PUT AGAIN ST IT. THIS COURT IS OF THE OPINION THAT THE OBJECTION IS WELL FOUNDED, BECAUSE THE ASSESSING OFFICER DID NOT HAVE THE BENEFIT OF SUCH MATERIAL, AND THEREFORE CO ULD NOT HAVE, ONLY ON THE BASIS OF THE ASSESSEES OFFER TO BE TAXED AT 8% ON GROSS RECEIPTS, HAVE CONCLUDED THAT IT HAD PROVIDED INACCURATE PARTICULARS IN ITS RETURNS. MOREVOER, THE COURSE OF ACTION SUGGESTED BY THE ASSESSING OFFICER WAS IN FACT ACCE PTED BY THE ASSESSEE, AS REASONABLE. IN THESE CIRCUMSTANCES, THE IMPOSITION OF PENALTY WAS NOT JUSTIFIED. THE COURT THEREFORE IS OF OPINION THAT THERE IS NO INFIRMITY IN THE IMPUGNED ORDER OF THE TRIBUNAL. THE QUESTION OF LAW IS THEREFORE ANSWERED AGAINST THE REVENUE, AND IN FAVOUR OF THE ASSESSEE, THE APPEAL IS ACCORD INGLY DISMISSED. NO COSTS. 10. AS THE PROPOSITIONS LAID DOWN IN THIS CASE ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE, WE APPLY THE SAME AND DE LETE THE PENALTY IN QUESTION. 11. WE HAVE ALSO GONE THROUGH THE OTHER CASE LAWS R ELIED UPON BY THE PARTIES. SUFFICE TO SAY THAT THEY ARE NOT APPLICAB LE TO THE FACTS OF THE PRESENT CASE. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY, 2013. SD/- SD/- (DIVA SINGH) (J.SUDHA KAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED: THE 26TH JULY, 2013 *MANGA 6 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR 1. DATE OF DICTATION: 2. DRAFT PLACED BEFORE THE AUTHOR ON: 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR.P.S. ON: 6. DATE OF PRONOUNCEMENT : 7. FILE SENT TO BENCH CLERK ON : 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON :