SHRI RAJENDRA KUMAR GARG, Bhopal V. THE DCIT 1(1), Bhopal

ITA 672/IND/2014

• Counselvise Citation: 67222714 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Depreciation; Loose papers; Document seized; Application of stay; Question of law; Initiation of penalty proceedings; Corroborative evidences; Onus to prove; Retraction; Revised return; Documents seized; Revenue expenditure
• Section: 133A; 32; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 672 /IND/201 4 A.Y. : 2007-08 SHRI RAJENDRA KUMAR GARG, DY. CIT, BHOPAL VS. 1(1) BHOPAL APPELLANT RESPONDENT PAN NO.AEPPG4982H APPELLANTS BY : NONE (WRITTEN SUBMISSIONS) RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R PER D. T. GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE CONFIRMATION OF PENALTY OF RS. 43,00,000/- IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. DATE OF HEARING : 0 8. 10.2015. DATE OF PRONOUNCEMENT : 08 .1 2 .2015 SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 2 2 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. BECAUSE THE ORDER PASSED BY THE LD C.I.T (A) CONFIRMING ADDITION FOR IMPOSING PENALTY OF RS. 43,00,000/- LEVIED U/S 271(1)(C) OF THE INCOME TAX ACT,1961 BY THE ASSESSING OFFICER IS UNJUSTIFIED, ILLEGAL AND BAD IN LAW; 2. BECAUSE THE LD C.I.T. (A) ERRED IN LAW AND ALSO ON FACTS BY NOT APPRECIATING THAT THE A.O. WAS REQUIRED TO IDENTIFY AND BRING ON RECORD INCRIMINATING MATERIAL BY SPECIFYING THE CONTENTS THEREOF WHILE IMPOSING PENALTY UNDER SE.271(1)( C); 3. BECAUSE THE LD. CIT (A) ERRED IN CONFIRMING THE FINDING OF ADDITION OF RS. 84,44,250/-FOR IMPOSING AND CALCULATING PENALTY AMOUNT WITHOUT CONSIDERING THE FACT SITUATION THAT INCOME SHOWN IN THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 3 3 REVISED RETURN HAD BEEN ACCEPTED AND BENEFIT THEREOF IS ALLOWED TO BE GIVEN IN THE APPELLATE ORDER QUOTED IN PAGE 13 OF THE IMPUGNED ORDER OF APPEAL AGAINST PENALTY THEREBY RESULTING IN MISCARRIAGE OF JUSTICE; 4. BECAUSE THE LD CIT (A) HAD ERRED IN LAW IN CONFIRMING THE FINDING/ ORDER OF THE A.0. BY GIVING WEIGHTAGE TO THE STATEMENT OF ASSESSEE RECORDED IN SURVEY WHICH BY ITSELF AND HAVING BEEN RETRACTED IMMEDIATELY THEREAFTER DID NOT CONSTITUTE LEGAL EVIDENCE AND THE ORIGINAL ORDER OF ASSESSMENT IS STILL SUBJUDICE IN ITA NO. 154/2012 IS STILL PENDING BEFORE THE HON'BLE HIGH COURT OF M.P. AT JABALPUR; 5.BECAUSE THE FIRST APPELLATE A UTHORITY HAS FAILED TO APPRECIATE THAT U/S 274 OF THE I. T. ACT, REASONABLE OPPORTUNITY OF HEARING SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 4 4 WAS TO BE PROVIDED BY THE A.O AND HAVING PASSED THE ORIGINAL PENALTY ORDER IN HASTE, AND NOT PASSING ANY ORDER ON THE REQUEST OF THE ASSESSEE TO STAY PROCEEDINGS ON GROUND OF PENDENCY OF I T A NO. 154/12 BEFORE THE HIGH COURT IT WAS ARBITRARY AND UNFAIR TO INFER THAT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE HAS BEEN HAS BEEN PROPERLY GIVEN TO THE ASSESSEE AND HENCE THE IMPUGNED ORDER UNDER APPEAL CONFIRMING THE ORIGINAL ORDER OF PENALTY IS UNJUSTIFIED, ILLEGAL AND BAD IN LAW; 6. BECAUSE THE LD CIT (A) ERRED IN APPLYING THE RATIO OF 'CIT VS. KALINDI RAIL NIRMAN ENGG. LIMITED, (2014) 365 ITR 304 (DEL) AS THE FACTUAL SITUATION WAS TOTALLY DIFFERENT IN THAT CASE AND A SEARCH U/S 132(4) WHEREBY THE MATERIAL COLLECTED SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 5 5 IN SEARCH CONSTITUTE LEGAL EVIDENCE. IN THE PRESENT CASE THE MATERIAL COLLECTED DURING SURVEY AND MARKED AS LPI 'LOOSE PAPERS' AND THE CONTENTS OF THESE 'LOOSE PAPERS' HAVE NEITHER BEEN PROVED NOR TALLIED WITH THE CONTENTS IN THE AUDITED ACCOUNT REPORT AND RETURN OF INCOME. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF CIVIL CONTRACT RELAT ING TO PUBLIC ROADS WITH GOVERNMENT DEPARTMENTS AND PUBLIC UNDERTAKINGS IN MADHYA PRADESH. THE ASSESSEE FILED HIS RETURN OF INCOME FO R A.Y. 2007-08 ON 29.10.2007 DECLARING TAXABLE INCOME AT RS.58,34,290/-. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS P REMISES OF THE ASSESSEE ON 20.01.2009. DURING THE COURSE OF SURVEY , CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED. W HEN THE ASSESSEE WAS CONFRONTED WITH THESE INCRIMINATING DO CUMENTS, IN THE STATEMENT RECORDED U/S 133A, THE ASSESSEE ACCEPTED THAT HE HAD BEEN EARNING NET INCOME @ 10% OF THE TOTAL TURNOVER. DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER AGAI N CONFRONTED THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 6 6 ASSESSEE WITH THE TRANSACTIONS RECORDED IN IMPOUNDED DOCUMEN TS AND ASKED TO EXPLAIN HOW THESE WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT. BUT THE ASSESSEE FAILED TO FURNISH ANY SAT ISFACTORY EXPLANATION IN THIS REGARD. ACCORDINGLY, THE A.O. H ELD THAT BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE FOR A.Y. 2007-0 8 WERE NOT CORRECT AND COMPLETE AND, THEREFORE, REJECTED THE B OOKS OF ACCOUNT U/S 145(3) OF THE ACT. SINCE THE ASSESSEE HIMSELF H AD ADMITTED THE NET PROFIT RATE OF 10% OF THE TOTAL TURNOVER IN HIS STA TEMENT RECORDED DURING SURVEY U/S 133A OF THE ACT, THE A.O. ESTIMAT ED A NET PROFIT @ 10% OF THE TOTAL TURNOVER. THE ASSESSEE HAD SHOWN T OTAL TURNOVER OF RS.14,27,85,374/-. THEREFORE, THE A.O. ASSESSED THE TOTAL INCOME AT RS.1 ,42,78,537/-. THE A.O. INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PART ICULARS OF INCOME BY THE ASSESSEE. THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) AND THE CIT(A) HAS CONFIRMED THE ADDITION. THE ASSESSEE FILED THE APPEAL BEFORE I.T.A.T. AND I.T.A.T. HAS CONFIRMED THE TAXA BLE INCOME FOR A.Y. 2007-08 AT RS. 1,42,78,540/-. THE ASSESSEE WENT TO, HON'BLE JABALPUR HIGH COURT OF M.P. AND PENALTY PROCEEDINGS WERE NOT STAYED BY HON'BLE HIGH COURT. THE AO NOTICED THAT DURING THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 7 7 COURSE OF SURVEY, THE ASSESSEE HAD ACCEPTED NET PROFIT RATE OF 10% AND HE ALSO ADMITTED THAT NO MUSTER ROLLS, DETA ILS OF LEDGER EXPENSES AND OTHER BILLS & VOUCHERS WERE MAINTAINED BY THE ASSESSEE. THEREFORE, THE AO SATISFIED THAT THE ASSE SSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME AND LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. THE A.O. LEVIED P ENALTY OF RS. 43 LACS ON CONCEALED INCOME OF RS. 1 ,42,78,540/- FOR A. Y. 2007- 08 AGAINST WHICH THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND LD. CIT(A) HAS DISMISSED THE APPEAL. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE HAS FILED THE WRI TTEN SUBMISSIONS, WHICH READS AS UNDER :- THE APPELLANTS' COUNSEL WILL BE BUSY IN HIGH COURT CASES AT JABALPUR IN THE WEEK COMMENCING FROM 15.06.2015, AND IS UNABLE TO APPEAR PERSONALLY AND ARGUE THE CA SE BEFORE THIS HON'BLE TRIBUNAL, THE FOLLOWING WRITTEN SUBMISSIONS MAY KINDLY BE TAKEN ON RECORD AND CONSIDERED WHILE DISPOSING OF THE APPEAL: SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 8 8 THAT AS PER ASSESSMENT ORDER FOR THE YEAR 2007-08, THE A.O. ASSESSED THE TAXABLE INCOME OF THE APPELLA NT TO BE RS. 1,42,78,540/-AND DIRECTED INITIATION OF PENALTY PROCEEDINGS VIDE ASSESSMENT ORDER DATED 20.12.2009 COPY WHEREOF IS BROUGHT ON RECORD OF THI S APPEAL. THEREAFTER, THE A.O. ISSUED THE NOTICE U/S 271(1)(C) OF THE IT ACT DT. 20.12.2009 THE TEXT WHE REOF IS AS BELOW :- 'SUB- PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCO ME TAX ACT, 1961, FOR THE AY 2007-08. IN CONNECTION WITH THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEARS(S) 2007-08 YOU A RE REQUESTED TO ATTEND MY OFFICE ON 18.01.2010 AT LL.00 A.M.TO SHOW CAUSE WHY PENALTY SHOULD NOT BE IMPOSED. HOWEVER, IF YOU DO NOT WISH TO BE HEARD IN PERSON IN THIS REGARD YOU MAY SUBMIT YOUR WRITTEN SUBMISSIONS SO AS TO REACH ME BY THE ABOVE DATE WHICH WILL BE CONSIDERED BEFORE DISPOSAL OF THE MATTER. SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 9 9 SD/(BHARTI SINGH)' THAT THE APPELLANT REPLIED TO THE SAID ABOVE SAID NOTICE VIDE HIS MEMO DATED 12.01.20120 STATING THEREIN THAT A STATUTORY APPEAL HAD BEEN FILED BY HIM BEFORE THE CIT(A) AND THEREFORE PRAYED FOR STAY OF THE PENALTY PROCEEDINGS. THIS REPLY IS ON RECORD OF THE PENALTY PROCEEDINGS OF THE A. O. THEREAFTER, THE PROCEEDINGS REMAINED STAND STILL AND THERE WAS NO FURTHER COMMUNICATION FOR MORE THAN 3 YEARS. THAT THEREAFTER THE SECOND NOTICE DATED 25.02.2013 WAS ISSUED TO THE APPELLANT WHICH IS IN THE FOLLOWINGS TERMS: ' SUB: PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961- REGARDING: IN CONNECTION WITH THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEAR(S) 2007-08, YOU A RE REQUESTED TO ATTEND MY OFFICE ON 07.03.2013 AT 11.3 0 A.M. TO SHOW CAUSE WHY PENALTY SHOULD NOT BE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 10 10 IMPOSED. HOWEVER, IF YOU DO NOT WISH TO BE HEARD IN PERSONS IN THIS REGARD, YOU MAY SUBMIT YOUR WRITTEN SUBMISSIONS SO AS TO REACH ME BY THE ABOVE DATE WHICH WILL BE CONSIDERED BEFORE DISPOSAL OF THE MATTER. SD/ (POONAM ROY) DY. COM MISSIONER IT 1-(1) BHOPAL' T HE APPELLANT SENT HIS REPLY TO THE NOTICE DATED 04.03.2013 BY STATING THEREIN THAT APPEAL NO. 154/12 IS PENDING BEFORE THE HON'BLE HIGH COURT OF M P AT JABALPUR AND PRAYED THAT THE DECISION OF THE HIGH COURT MAY KINDLY BE AWAITED BEFORE ANY PENALTY IS IMPOSED. THEREAFTER WITHOUT PASSING ANY ORDERS ON THE REPLY - REQUEST OF THE APPELLANT THE A.O PASSED THE IMPUGNED ORDER OF PENALTY DATED 28.03.2013 THE PECULIAR FEATURES WHEREOF ARE AS BELOW: (1) THAT THE TOTAL AMOUNT OF INCOME OF RS.1,42,78,540/- ASSUMED TO BE 10 % OF THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 11 11 GROSS TURN OVER IN THE ASSESSMENT ORDER HAS BEEN TAKEN AS THE AMOUNT OF CONCEALED INCOME; (2) THAT THE APPELLANT FILED RETURN OF INCOME SHOWING RS.5834290/- WHICH IS MENTIONED IN PARA 10F THE PENALTY ORDER. HOWEVER THERE IS NO MENTION OF THE REVISED RETURN FILED BY THE APPELLANT DT. 09.03.2009 SHOWING INCOME OF RS. 95,47,610/-. THIS RETURN WAS NOT TAKEN NOTICE OF IN THE ASSESSMENT PROCEEDINGS AS ALSO IN THE PENALTY PROCEEDINGS AS IS APPARENT FROM THE ASSESSMENT ASS ALSO PENALTY ORDER. (3) THAT THE REVISED RETURN WHICH WAS BASED ON THE FACTUAL ISSUE OF AMOUNT OF A COMPLETED WORKS FOR WHICH BILLS WERE RAISED BUT NOT ADMITTED BY THE DEPARTMENT DUE TO END OF THE FINANCIAL YEAR WERE OMITTED IN THE ORIGINAL RETURN DUE TO INADVERTENCE AND HENCE THE MISTAKE WAS CORRECTED BY FILING REVISED RETURN WHEN IT CAME TO THE NOTICE OF THE APPELLANT. SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 12 12 (4) THAT ON PAGE 10 OF THE LAST PARA OF THE APPELLATE ORDER AGAINST ASSESSMENT DT. 29.12.11 WHICH IS THE DATE OF HEARING IT IS STATED THUS: 'THEREFORE, THE ACTION OF ASSESSING OFFICER IN ESTIMATING N. P @ 10% IS HEREBY CONFIRMED. HOWEVER, BENEFIT OF REVISED RETURN IS TO BE A GIVEN TO THE APPELLANT SUBJECT TO THE VERIFICATION THAT DUE TAX HAS BEEN PAID ON SUCH INCOME AS PER REVISED RETURN.' IN COMPLIANCE TO ABOVE DIRECTION IN THE 1ST APPELLATE ORDER, NO FRESH ASSESSMENT ORDER HAD BEEN PASSED BY THE A.O. AND INSTEAD AFTER GETTING COPY OF THE ORDER IN APPEAL BY THIS TRIBUNAL, THE A. O. HAD HASTENED TO PASS THE PENALTY ORDER WITHOUT LOOKING TO THE FACTUAL POSITION THAT INCOME HAD BEEN SHOWN IN THE ORIGINAL AS ALSO ADDED INCOME IN THE REVISED RETURN WHICH HAS BEEN ACCEPTED BY THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 13 13 APPELLATE AUTHORITY AS ABOVE. THE APPELLANT CHALLENGED THE IMPUGNED PENALTY ORDER OF THE A.O. BEFORE THE CIT(A) WHO FAILED TO SEE THAT PENALTY CAN BE IMPOSED ON THE AMOUNT OF TAX SOUGHT TO BE EVADED. IN THIS CASE THE AMOUNT OF TAX SOUGHT TO BE EVADED BY NO STRETCH OF IMAGINATION CAN BE SAID TO BE WHAT IS SHOWN IN THE ASSESSMENT ORDER AND ORDER OF PENALTY BY THE A.O. THUS BOTH THE PENALTY ORDER AS ALSO THE APPELLATE ORDERS ARE PATENTLY ILLEGAL AND NOT SUSTAINABLE IN THE EYE OF LAW AS NO 'SHOW CAUSE' NOTICE AS REQUIRED BY LAW HA, BEEN SERVED / ISSUED TO THE ASSESSEE BEFORE PASSING THE PENALTY ORDER AND THE TWO MEMOS INTIMATING THE DATE OF HEARING SENT BY THE A.O. DATED 20.12.09 AND 25.02.2013 ARE ROUTINE INTIMATION OF THE DATE AND CAN NOT BE TERMED AS 'SHOW CAUSE' NOTICES AS THERE IS NO BRIEF SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 14 14 DESCRIPTION OF THE CHARGE TO WHICH THE APPELLANT WAS EXPECTED TO MAKE HIS SUBMISSIONS IN DEFENCE. THE LEARNED CIT(A) HAD FAILED TO APPRECIATE THIS LEGAL GROUND AND HAD BRUSHED ASIDE IT BY STATING ON PAGE 5 OF THE ORDER AND FROM 14'H LINE FROM BELOW AS: 'IN REGARD TO NON-MENTIONING OF PRECISE CHARGE IN THE SHOW CAUSE NOTICE UNDER SEC. 274 OF THE ACT, IT IS PERTINENT TO NOTE THAT THE A.O. H AD CATEGORICALLY MENTIONED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AS DISCUSSED IN THE ORDER' THIS IS NOT ONLY UNFAIR BUT APPARENTLY ILLEGAL AND SHOWS A BIASED MIND ON THE PART OF APPELLATE AUTHORITY WHO IS EXPECTED IN LAW TO EXAMINE THE LEGALITY OF THE PROCEEDINGS OF PENALTY AS PER SPECI FIC PROVISIONS OF LAW CONTAINED IN SEC. 274 OF THE ACT. EVEN OTHERWISE, SINCE PENALTY PROCEEDINGS AND THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 15 15 ASSESSMENT PROCEEDINGS IMPOSES A DUTY ON THE EXAMINE THE LEGALITY AND ARE SEPARATE, THE BASIC REQUIREMENT OF LAW WHICH QUASI - JUDICIAL AUTHORITY / APPELLATE AUTHORITY TO PROPRIETY OF THE ORDER UNDER CHALLENGE IN THE APPEAL. THUS NON - ISSUE OF SHOW CAUSE NOTICE CALLING UPON THE ASSESSE TO EXPLAIN WH Y PENALTY ON THE GROUND / REASON MENTIONED BE IMPOSED IS AN ESSENTIAL REQUIREMENT OF LAW AND IN WHOLE PENALTY PROCEEDINGS ARE AVOID AND UNSUSTAINABLE IN THE NOTICE MAY NOT ABSENCE OF WHICH THE LAW. EVEN OTHERWISE QUESTION OF PENALTY IS NOT GERMANE I N THIS CASE AS THERE IS NO FINDING OF FACT THAT AS TO WHAT OR WHICH ITEM SHOWN IN THE RETURN IS INACCURATE. TH E ASSESSMENT ORDER IS SILENT AND IS WHOLLY BASED ON T HE GENERAL DESCRIPTION THAT VARIOUS INCRIMINATING DOCUMENTS WERE FOUND IN SURVEY. IN ABSENCE OF SURVE Y REPORT ON RECORD WHAT THOSE DOCUMENTS ARE AND HOW THEY ARE CONCERNED WITH THE ITEMS OF RECEIPT AND EXPENDITURE SHOWN IN THE RETURN IS NOT AT ALL DISCU SSED SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 16 16 OR CLARIFIED. THUS THE ORIGINAL ORDER OF PENALTY WA S BAD IN LAW AND CONFIRMING THE SAID ORDER THE APPELLATE AUTHORITY HAD FAILED TO EXERCISE ITS JURISDICTION V ESTED IN IT BY LAW AS CONTAINED IN SEC. 250/274 OF THE AC T. THE LAW IS TRITE THAT PENALTY CAN NOT BE IMPOSED INVARIABLY THE MOMENT THERE IS AN ADDITION IN THE ASSESSMENT. SINCE THE PENALTY PROCEEDINGS ARE SEPARATE AND THE BURDEN OF PROOF IN SUCH PROCEEDING S VARIES FROM THAT IN THE ASSESSMENT INCRIMINATING IN PENALTY PROCEEDINGS, A FINDING IN THE ASSESSMENT PROCEEDING THAT VARIOUS DOCUMENTS WERE FOUND AND IMPOUNDED IN SURVEY IS MEANINGLESS PROCEEDINGS WHICH CANNOT BE MADE THE BASIS OF IMPOSITION OF PENALTY. THE APPELLANT QUOTES THE FOLLOWING VERDICT OF THE A PEX COURT IN 'CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD- (2010)322 ITR 158: MERELY BECAUSE THE ASSESSEE HAD SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 17 17 ACCLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY U/S 271(1)(C ). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENTION OF THE LEGISLATURE.' 5. THE LD. DR RELIED UPON THE DECISION OF CIT(A). LD. DR ALSO RELIED UPON THE DECISION OF HON'BLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF CIT VS. SURENDRA PAL NAIR, 327 ITR 326. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES. WE FIND THAT AS REGARDS PROPER OPPORTUNITY DURING PENA LTY PROCEEDINGS, IT WAS NOTED THAT THE AO HAD ISSUED INITIALLY A SHOW- CAUSE NOTICE U/S 271(1)(C) R.W.S. 274 OF THE ACT, A LONGWITH THE DEMAND NOTICE ON THE DATE OF ASSESSMENT ORDER DATED 20.12.2009. SUBSEQUENTLY, AFTER THE DECISION OF THE HON'BLE ITA T, THE A.O. AGAIN ISSUED A SHOW-CAUSE TO THE ASSESSEE ON 25.02.2013. THUS, PROPER SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 18 18 OPPORTUNITY WAS GIVEN TO THE ASSESSEE. AS REGARDS T HE ASSESSEE'S REQUEST FOR STAY OF PENALTY PROCEEDINGS TILL THE DE CISION OF THE HON'BLE HIGH COURT OF M.P. AT JABALPUR, IT MAY BE MENTIONED THAT THERE WAS NO PROVISION FOR KEEPING THE PENALTY IN ABEYANCE TI LL THE DECISION OF HIGH COURT IN SECTION 275(1) OF THE I.T.ACT AND, TH EREFORE, THE A.O. WAS JUSTIFIED IN DECIDING THE PENALTY WITHOUT WAITI NG THE DECISION OF THE HON'BLE HIGH COURT. HOWEVER, IT MAY BE PERTINEN T TO MENTION HERE THAT AS PER PROVISIONS OF SECTION 275(1A), THE A.O. WAS EMPOWERED TO REVISE THE PENALTY AFTER THE DECISION OF HON'BLE HI GH COURT. IT IS PERTINENT TO NOTE THAT HON'BLE HIGH COURT HAD NOT A DMITTED ANY QUESTION OF LAW REGARDING REJECTION OF BOOKS OF ACC OUNT OR APPLICATION OF NET PROFIT @ 10%.. THE ONLY QUESTION OF LAW ADMITTED IS AS TO WHETHER DEPRECIATION U/S 32 OF THE ACT SHALL BE PRE SUMED TO HAVE BEEN ALLOWED WHILE ARRIVING ON ESTIMATION OF NET PR OFIT @ 10% OF THE GROSS RECEIPTS. HENCE, THE ISSUES REGARDING THE REJ ECTION OF BOOKS OF ACCOUNT AND APPLICATION OF NET PROFIT @ 10% WERE NOT UNDER CONSIDERATION OF THE HON'BLE HIGH COURT. IN REGARD TO NON-MENTIONING OF PRECISE CHARGE IN THE SHOW-CAUSE NOTICE U/S 274 OF THE ACT, IT IS NOTED THAT THE A.O. HAD CATEGORICALLY MENTIONED IN THE ASSESSMENT SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 19 19 ORDER THAT 'PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS D ISCUSSED IN THE ORDER.' THUS, THE A.O. HAD DULY INDICATED THE CHAR GE FOR LEVYING PENALTY U/S 271(1)(C) OF THE ACT. THE MAIN ISSUE RAISED BY THE ASSESSEE ON MERIT WAS THAT PENALTY U/S 271(1)(C) OF THE ACT COULD NOT BE LEVIED WHEN THE ADDITION WAS MADE ON THE BASIS O F ESTIMATION OF NET PROFIT. IN THIS REGARD, IT WOULD BE PERTINENT T O EXAMINE THE FACTS OF THE INSTANT CASE. AS MENTIONED ABOVE, IN THIS CASE, AFTER FILING OF INCOME-TAX RETURN FOR A.Y. 2007-08, SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 20.01.2009. DURING THE COURSE OF SURVEY, CERTAIN INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED. IT WAS ALSO NOTICED THAT THE A SSESSEE HAD NOT MAINTAINED PROPER BILLS, VOUCHERS, MUSTER ROLLS AND HAD ALSO MADE CERTAIN INADMISSIBLE PAYMENTS WHICH WERE NOT RECORD ED IN THE REGULAR BOOKS OF ACCOUNT SUCH AS ILLEGAL PAYMENTS OF RS.47. 60 LAKHS RECORDED ON IMPOUNDED DOCUMENTS. SIMILARLY, AS PER IMPOUNDED DOCUMENTS, ILLEGAL PAYMENTS OF RS. 28,00,000/- WERE ADMITTED. THUS, THERE WERE SPECIFIC DOCUMENTS FOUND DURING TH E COURSE OF SURVEY, WHICH INDICATED THAT BOOKS OF ACCOUNT MAINT AINED BY SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 20 20 THE ASSESSEE WERE NOT RELIABLE AND SUCH GLARING FAC TS NECESSITATED REJECTION OF BOOKS OF ACCOUNT AND APPL ICATION OF NET PROFIT @ 10%, AS ADMITTED BY THE ASSESSEE, FOR ASSESSING THE CORRECT INCOME OF THE ASSESSEE. IT MAY BE RELEVANT TO MENTION HERE THAT THE STATEMENT OF THE ASSESSEE RECORDED DU RING SURVEY U/S 133A OF THE ACT WAS ALSO RELEVANT AS IT WAS RECORDE D BASED ON INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SURVEY. THE LD. CIT(A) HAS REPRODUCED THE RELEVANT PARA 8.3 OF THE ORDER OF THE ID. CIT(A) IN THE ASSESSEE'S CASE IN APPEAL NO. CIT(A)- I/BPL/IT-31 0109-10 ORDER DATED 05.01.2012, WHICH READS AS UNDER:- '8.3 I HAVE CAREFULLY CONSIDERED TH E SUBMISSION OF THE ASSESSEE. I HAVE ALSO GONE THROUGH THE STATEMENT OF THE ASSESSEE RECORDED DURING THE SURVEY OPERATIONS. I H AVE ALSO GONE THROUGH THE VARIOUS CASE LAWS REFERRED AN D RELIED UPON BY THE LD. AR OF THE ASSESSEE. IN THE C ASE LAWS REFERRED BY THE LD AR, ESSENTIALLY IT HAS BEEN LAID DOWN THAT THE IT AUTHORITIES DO NOT HAVE THE POWER TO RECORD THE STATEMENT U/S 133A OF THE ACT UNDER OATH AS SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 21 21 IS RECORDED U/S 132(4) OF IT ACT. IN THIS BACKGROUN D, IT HAS BEEN HELD THAT THE SIMPLE STATEMENT RECORDED DURING THE SURVEY MAY NOT HAVE THE EVIDENTIARY VALU E UNLESS IT IS SUPPORTED BY OTHER CORROBORATIVE OR DOCUMENTARY EVIDENCES. NOW, IN THIS CONTEXT IT HAS TO BE SEEN WHETHER THE STATEMENT RECORDED DURING THE SURVEY WAS UNDER ANY COERCION OR DURESS AND WHETHER THE FACTS ADMITTED BY THE ASSESSEE WERE SUPPORTED B Y ANY MATERIAL DOCUMENTS OR SUCH STATEMENTS WAS SIMPLY RECORDED WITHOUT ANY BASIS. ON PERUSAL OF STATEMENT OF SHRI RAJENDRA KUMAR GARG I.E. ASSESSEE , IT IS NOTICED THAT AS PER HIS ANSWER TO Q.NO.2 HE ADMI TTED THAT NO VOUCHERS AND MUSTER ROLLS WERE MAINTAINED A ND THAT ALL THE ACCOUNTS ARE MAINTAINED IN KACHA I.E. ROUGH MANNER AND AT THE END OF THE FINANCIAL YEAR, SUCH INCOMPLETE RECORDS I.E. KACHA RECORDS ARE HAND ED OVER TO HIS COUNSEL I.E. CA. IN ANSWER TO Q.NO.3 HE VERY SPECIFICALLY ADMITTED THAT THE RETURN OF INCOME WAS FILED SIMPLY ON THE BASIS OF KACHA BILLS AND ON ESTIMATE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 22 22 BASIS AND WHILE FILING SUCH RETURNS, THE EXPENSES INCURRED ON ACCOUNT OF ILLEGAL GRATIFICATION ARE AL SO TO BE ADJUSTED. THE ASSESSEE IN Q.NO. 4 WAS SPECIFICALLY ASKED AS TO WHAT IS THE EVIDENCE IN THE FORM OF BOO KS OF ACCOUNT TO PROVE THE LABOUR PAYMENT OF RS.I.74,50,463/- AND SUBCONTRACTOR CHARGES AMOUNTIN G TO RS. 49,00,00 OF- SHOWN IN THE IT RETURN FOR 2006 -07 AND THE ASSESSEE ADMITTED THAT THERE WAS NO BASIS F OR SHOWING SUCH EXPENSES AND THAT ALL SUCH EXPENSES HAVE SIMPLY BEEN SHOWN ON ESTIMATE BASIS. THE ASSESSEE WAS ALSO CONFRONTED REGARDING CERTAIN DOCUMENTS AS PER LPI-8 PAGE 164 WHICH INDICATED ILLEGAL PAYMENTS FOR RS.47.66 LACS AND IN ANSWER TO THIS QUESTION NO.8(A) THE ASSESSEE ADMITTED THAT SU CH ILLEGAL PAYMENTS WERE MADE TO VARIOUS PERSONS. THE ASSESSEE EVEN IDENTIFIED THE SPECIFIC PERSONS TO WH OM SUCH PAYMENTS WERE MADE. SIMILARLY, AS PER ANSWER T O Q. NO.8 (C), THE ASSESSEE ADMITTED FURTHER ILLEGAL PAYMENTS OF RS.28,00,00 OF- AS PER DOCUMENTS SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 23 23 INVENTORIED AS LPI-8 PAGE -II. IN Q.NO.9 AS PER DOC UMENT D-2 PAGE 2, THE ASSESSEE FURTHER ADMITTED SUCH ILLEGAL PAYMENTS. THE PERUSAL OF STATEMENT OF SHRI RAJENDRA KUMAR GARG INDICATES THAT SUCH STATEMENT WAS RECORDED IN A SYSTEMATIC AND ELABORATE MANNER. SPECIFIC QUESTIONS HAVE BEEN ASKED AND THE ASSESSEE HAS ALSO REPLIED IN A SPECIFIC MANNER. THE STATEMEN T IS CONTAINED IN 7 PAGES AND EACH PAGE IS SIGNED BY THE ASSESSEE AS WELL AS THE OFFICIAL IN WHOSE PRESENCE STATEMENT WAS RECORDED. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS BEEN CONFRONTED ON THE VITAL INCRIMINA TING DOCUMENT ON WHICH HE HAS GIVEN VERY SPECIFIC REPLIE S. IN THE LAST, THE ASSESSEE HAS ADMITTED TO HAVE READ THE WHOLE STATEMENT AND THAT SUCH STATEMENT WAS GIVEN I N COMPLETE CONSCIOUS WITHOUT ANY DURESS. IT ALSO APPE ARS THAT THE COUNSEL OF THE ASSESSEE WAS ALSO AVAILABLE ON THE PREMISES WHEN THE STATEMENT WAS RECORDED AS THE AR HAS FURTHER STATED THAT POST DATED CHEQUES WERE FILLED IN BY THE ASSESSEE. THESE FACTS WILL INDICAT E THAT SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 24 24 PRIMA FACIE IT IS NOT A CASE OF COERCION OR DURESS. RATHER IT APPEARS THAT THE RETRACTION OF THE STATEMENT BY THE ASSESSEE WAS SIMPLY AN AFTER THOUGHT TO AVOID THE CONSEQUENCE OF PAYMENT OF TAXES ARISING ON ACCOUNT OF SUCH INCRIMINATING PAPERS. IT MAY ALSO BE MENTIONED THAT THE STATEMENT OF THE ASSESSEE IS VERY WELL SUPPORTED BY INCRIMINATING DOCUMENTS WHICH HAVE BEE N REFERRED IN THE STATEMENT ITSELF. THE STATEMENT OF ASSESSEE IS ALSO SUPPORTED BY OTHER CORROBORATIVE EVIDENCES. IN THIS BACKGROUND, IT MAY NOT CORRECT T O SAY THAT THE STATEMENT RECORDED DURING THE SURVEY OPERATIONS DOES NOT CARRY ANY EVIDENTIARY VALUE. FURTHER RELIANCE IS PLACED ON THE FOLLOWING CASE LA WS WHEREIN IT HAS BEEN LAID DOWN THAT THE STATEMENT RECORDED DURING SURVEY EVEN IF IT IS NOT RECORDED U NDER OATH HAVE DEFINITELY AN EVIDENTIARY VALUE IF SUPPOR TED BY ANY OTHER INDEPENDENT CORROBORATIVE EVIDENCES. (I) DR. S.C. GUPTA VS. CIT, 248 ITR 782 (ALL.). (II) CIT VS. HOTEL SAMART (KERALA), (2010), SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 25 25 323 ITR 353. IN THE ASSESSEE CASE THE STATEMENT IS DEFINITELY SUPPORTED BY DOCUMENTS FOUND DURING THE SURVEY AS ALSO ON OTHER CORROBORATIVE EVIDENCES. IN THIS BACKGROUND I DON'T FIND ANY MERIT IN THE CONTENTION OF THE ASSESSEE AS REGARDS THESE GROUNDS. THESE GROUNDS ARE ACCORDINGLY DISMISSED. 7. THE CIT(A) FURTHER REPRODUCED THE FINDINGS GIVEN B Y THE LD. CIT(A) CONFIRMING THE NET PROFIT RATE OF 10% IN PAR A 9.4 OF THE APPEAL, WHICH READS AS UNDER :- '9.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE ASSESSEE AND FACTS OF THE CASE. IT MAY BE NOTICED THAT AS PER PROVISIONS OF SECTION 145(3) OF INCOME-TAX ACT, 1961, WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB- SECTION (1) OR ACCOUNTING STANDARDS AS NOTIFIED SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 26 26 UNDER SUB-SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER CAN MAKE ASSESSMENT IN THE MANNER PROVIDED U/S 144 OF IT ACT. IT IS FURTHER NOTICED THAT IN THE ASSESSEES CASE, SURVEY U/S 133A OF IT ACT WAS CONDUCTED ON 20.01.2009. DURING THE SURVEY OPERATIONS VARIOUS DOCUMENTS STATED TO BE OF INCRIMINATING NATURE WERE FOUND AND IMPOUNDED AND THE STATEMENT OF THE ASSESSEE I.E. SHRI RAJENDRA KUMAR GARG WAS ALSO RECORDED. THE APPLICABILITY OF PROVISIONS OF SECTION 145(3) OF IT ACT IS TO BE EXAMINED KEEPING IN VIEW THE FINDINGS OF THE SURVEY AS ALSO THE FACTS ADMITTED BY THE ASSESSEE. DURING THE SURVEY OPERATIONS, ON THE BASIS OF INCRIMINATING DOCUMENTS THE ASSESSEE HIMSELF ADMITTED THAT THE ACCOUNTS OF CONTRACT BUSINESS WERE MAINTAINED IN A KACCHA MANNER I.E. ROUGH MANNER AND THAT SUCH ROUGH DETAILS WERE HANDED OVER TO THE COUNSEL AT THE END OF THE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 27 27 FINANCIAL YEAR FOR PREPARATION OF INCOME TAX RETURN. ADMITTEDLY NO MUSTER ROLES I.E. DETAIL OF LABOUR EXPENSES AND OTHER BILLS VOUCHERS WERE NOT MAINTAINED (REFER ANSWER 2 OF STATEMENT). THE ASSESSEE ALSO AD MILLED ILLEGAL PAYMENTS OF RS.47.60 LACS ON THE BASIS OF IMPOUNDED DOCUMENTS, INVENTORIED AS LPI-8 PAGE 164 AND IT WAS ALSO ADMITTED THAT SUCH ILLEGAL PAYMENTS WERE ADJUSTED IN THE EXPENSES SHOWN ON ACCOUNT OF CONTRACT BUSINESS. SIMILARLY, AS PER IMPOUNDED DOCUMENTS INVENTORIED AS PER LPI-8 PAGE 41, ILLEGAL PAYMENT OF RS. 28.00 WAS ADMITTED. AS PER IMPOUNDED DOCUMENTS D-2, PAGE-2 ALSO ILLEGAL PAYMENT WAS ACCEPTED. THE APPELLANT DURING THE APPELLATE PROCEEDINGS ALSO ADMITTED IRREGULARITIES IN THE MAINTENANCE OF BOOKS OF ACCOUNT. THE DOCUMENTS IMPOUNDED DURING SURVEY DEFINITELY INDICATED THAT THE BOOKS O F ACCOUNT MAINTAINED BY THE APPELLANT WERE NOT SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 28 28 RELIABLE AND SUCH GLARING DEFECTS NECESSITATED APPLICATION OF PROVISIONS OF SECTION 145(3) OF IT ACT. THEREFORE, KEEPING IN VIEW SUCH GLARING DEFECTS IN THE BOOKS OF ACCOUNT AND THE STATEMENT 0F THE ASSESSEE DURING THE SURVEY OPERATION, IT IS FOUND THAT THE BOOKS OF ACCOUNT 0F THE ASSESSEE WERE NOT TRUE AND COMPLETE AND ACCORDINGLY, THE ASSESSING OFFICER RIGHTLY APPLIED PROVISIONS OF SECTION 145(3 ) OF THE INCOME-TAX ACT, 1961. AS REGARDS, APPLICATION OF NP RATE OF10 % (NET OF ALL EXPENSE INCLUDING DEPRECIATION CLAIMED) IT MAY BE STATED THAT SUCH RATE WAS ADMITTED BY THE ASSESSEE KEEPING IN VIEW THE VARIOUS GLARING DEFECTS IN THE BOOKS OF ACCOUNT AS ALSO INCRIMINATING DOCUMENTS FOUND DURING THE SURVEY ACTION. AS ALREADY DISCUSSED IN 'PARA 8.3' OF THIS ORDER, THE STATEMENT RECORDED DURING THE SURVEY IS PRIMA FACIE NOT FOUND TO BE RECORDED UNDER DURESS OR COMPULSION. IN THIS PARA IT IS ALSO SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 29 29 DISCUSSED AS TO HOW THE STATEMENT RECORDED DURING THE SURVEY IS HAVING EVIDENTIARY VALUE. FURTHER, THE ADMISSION MADE BY THE ASSESSEE DURING THE SURVEY OPERATION WAS BASED ON INCRIMINATING DOCUMENT WHICH WERE CONFRONTED TO THE ASSESSEE AND FOR WHICH VERY SPECIFIC REPLY IS GIVEN. THE ASSESSEE HAS CONTENDED THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER DOES NOT HAVE POWER TO MAKE ARBITRARY ADDITION AND THAT ASSESSMENT HAVE TO BE MADE IN A REASONABLE AND FAIR MANNER AFTER CONSIDERING ALL THE CIRCUMSTANCE OF THE CASE. IT IS ALSO STATED THA T BENEFIT OF STATUTORY DEDUCTIONS U/S 32(1) ON ACCOUNT OF DEPRECIATION HAS TO BE GIVEN. THE ASSESSEE HAS ALSO PLACED RELIANCE ON CERTAIN CASE LAWS WHERE PROFIT OF LESS 10 % WAS ESTIMATED AND APPROVED BY VARIOUS APPELLATE COURTS. IN THIS CONNECTION, IT MAY BE STATED THAT IT IS ABSOLUTELY SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 30 30 CORRECT THAT THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNT THE ASSESSMENT CANNOT BE MADE IN AN ARBITRARY MANNER AND PROFITS ARE TO BE ESTIMATED EITHER ON THE BASIS OF RESULTS SHOWN BY THE ASSESSEE IN EARLIER YEARS OR ON THE BASIS OF RESULTS SHOWN BY OTHER ASSESSEES IN COMPARABLE CASES. IN THIS CONTEXT IT MAY BE NOTED THAT THE ASSESSEE HIMSELF HAS ADMITTED NET PROFIT (AFTER CLAIM OF ALL SUCH EXPENSES) AT 10 % DURING THE SURVEY OPERATIONS. THE INCRIMINATING DOCUMENTS FOUND DURING THE SURVEY OPERATION ALSO JUSTIFIED APPLICATION OF SUCH RATE. MOREOVER, IT IS NOTICED THAT IN A SIMILAR CASE OF M/S DILIP BUILDERS, E- 5/99, ARERA COLONY, BHOPAL, PAN: ANRPS22L5H, NET PROFIT OF 9.5 % WAS SHOWN IN RESPECT OF A. Y. 2007-08. THE ABOVE MENTIONED ASSESSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION (ROAD CONSTRUCTION) AND DURING A. Y. 2007-08 ON GROSS RECEIPTS OF RS.4291.07 LACS, NET PROFIT OF RS. SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 31 31 407.65 LACS (AFTER CLAIM OF ALL SUCH EXPENSES INCLUDING DEPRECIATION CLAIM) WAS SHOWN. THE CASE MENTIONED ABOVE IS OF THE SAME LOCALITY AND PERTAINED TO SAME ASSESSMENT YEAR. IN THE ASSESSEE CASE, THE TOTAL TURNOVER WAS FOR RS. 1427.85 LACS ON WHICH IN THE ORIGINAL RETURN, NET PROFIT OF RS. 58.67 LACS WAS SHOWN WHICH WAS INCREASED TO RS. 36.13 LACS BY WAY OF FILING OF REVISED RETURN. THE NET PROFIT AS PER REVISED RETUR N WAS ARRIVED AT RS.94.80 LACS. THE NET PROFIT RATE AS PER REVISED RETURN IS ACCORDINGLY ARRIVED AT 6.63 % WHICH DEFINITELY LOW AS COMPARED TO THE COMPARABLE CASE. IT MAY ALSO BE MENTIONED THAT THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. SURENDRA PAL NAIR REPORTED IN (2010) 327 I TR 336 HAS UPHELD FLAT RATE OF 12 %. IN THIS CASE, THE ASSESSEE FIRM WAS CARRYING ON BUSINESS OF CONSTRUCTION OF ROADS AND THE ASSESSING OFFICER SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 32 32 HAS ESTIMATED NET PROFIT OF 12 % ON GROSS RECEIPTS. THE COMMISSIONER APPEAL UPHELD THE ACTION OF THE ASSESSING OFFICER WHILE APPLYING FLAT RATE OF 12 %. SEPARATE CLAIM OF DEPRECIATION WAS ALSO NOT ALLOWED AND IT WAS BELIEVED THAT ALL THE EXPENSES INCLUDING DEPRECIATION ARE DEEMED TO HAVE BEEN ALLOWED IN SUCH FLAT RATE OF 12 %. THE HON'BLE ITAT AND SUBSEQUENTLY HON'BLE HIGH COURT UPHELD THE ADOPTION OF NET PROFIT RATE OF 1 2 % SUBJECT TO, CLAIM OF INTEREST AND SALARY PAYMENT TO THE PARTNERS. THE ABOVE FACTS WILL INDICATE THAT ESTIMATION OF INCOME BY APPLYING NET PROFIT RATE OF 10 % WAS REASONABLE AND JUSTIFIED. THE INCRIMINATING DOCUMENTS FOUND DURING THE SURVEY OPERATION, VERY SPECIFIC AND UNAMBIGUOUS ADMISSION OF THE ASSESSEE DURING THE SURVEY OPERATION, RESULTS SHOWN BY A COMPARABLE CASE OF BHOPAL WHERE THE TURNOVER IS APPROXIMATELY THREE TIMES MORE THAN THE ASSESSEE AND THE RECENT SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 33 33 DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURENDRA PAL NAIR REPORTED IN (2010) 327 I TR 336 INDICATE THAT THE ESTIMATION OF PROFIT NEITHER ARBITRARY NOR UNJUSTIFIED AND IN FACT IT WAS MOST REASONABLE. THE ASSESSEE HAS SHOWN RECEIPTS FROM CONTRACT WORKS AT RS. 142785374/- AND APPLYING NET PROFIT @ 10 %, THE TAXABLE INCOME WAS ARRIVED AT RS. 1427853/-, FROM CONTRACT RECEIPTS, WHEREAS, IN THE REVISED RETURN OF INCOME THE NET PROFIT FROM CONTRACT RECEIPTS IS SHOWN AT RS. 94,80,605/-. IN THIS BACKGROUND, ADDITION TO THE EXTENT OF RS.80,52,752/- IS CONFIRMED. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN ESTIMATING NP @ 10 % IS HEREBY CONFIRMED. HOWEVER BENEFIT OF REVISED RETURN IS 10 BE GIVEN 10 THE APPELLANT SUBJECT TO THE VERIFICATION THAT DUE LAX HAS BEEN PAID ON SUCH INCOME AS PER REVISED RETURN. THESE GROUNDS OF APPEAL ARE ACCORDINGLY, SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 34 34 DISMISSED. 8. THE ABOVE DECISION OF THE ID. CIT(A) WAS CONFIRMED BY THE HON'BLE ITAT IN ITA NO. 106/ IND/2012 FOR A. Y. 2007-08 IN ORDER DATED 12.06.2012. FROM THE ABOVE, IT IS EVIDENTLY C LEAR THAT THERE WERE SPECIFIC INSTANCES OF FURNISHING OF INACCURATE PART ICULARS OF INCOME BY THE ASSESSEE IN HIS RETURN OF INCOME FOR A.Y. 2007- 08. IT IS NOT A LAW THAT PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE LEV IED IN A CASE WHERE ASSESSMENT IS MADE ON THE BASIS OF ESTIMATION. IT D EPENDS ON THE FACTS OF EACH CASE. NOW, IN THE CASE OF THE ASSESSEE, IT MAY BE NOTED THAT IT IS A CASE WHERE THERE WERE SPECIFIC EVIDENCES FOUND DURING THE COURSE OF SURVEY U/S 133A OF THE ACT AND THE ASSESSEE FAIL ED TO SATISFACTORILY EXPLAIN THE TRANSACTIONS RECORDED IN THE INCRIMINAT ING DOCUMENTS. THE EXPENSES CLAIMED BY THE ASSESSEE WERE ALSO NOT BASE D ON PROPER BILLS & VOUCHERS. THUS, IT WAS A CLEAR-CUT CASE OF FURNISHING INACCUR ATE PARTICULARS OF INCOME AND, THEREFORE, EVEN THOUGH T HE INCOME WAS ASSESSED BY APPLYING NET PROFIT RATE ON THE TOTAL T URNOVER DECLARED, THE ASSESSEE WAS LIABLE FOR PENALTY U/S 271(1)(C) OF THE ACT. 9. THE HON'BLE DELHI HIGH COURT HAD AN OCCASION TO CON SIDER THE SIMILAR ISSUE IN THE CASE OF C IT VS KALINDI RAIL NIRMAN ENGINEERING SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 35 35 LTD. (2014) 365 ITR 304 (DE L ) . IN THIS CASE, THE ASSESSEE, A CONTRACTOR, UNDERTAKING PROJECTS OF THE INDIAN RAIL WAYS ON TURNKEY BASIS, FILED ITS RETURN OF INCOME FOR THE ASSESSMEN T YEAR 1995-96. ON THE BASIS OF THE MATERIALS GATHERED BY THE INCOME-T AX AUTHORITIES IN THE COURSE OF A SEARCH CARRIED OUT IN THE ASSESSEE' S PREMISES ON MARCH 14, 1995, AS WELL AS IN THE PREMISES OF THE DIRECTO RS AND TRUSTED PERSONS, THE ASSESSING OFFICER REFERRED THE MATTER FOR SPECIAL AUDIT IN TERMS OF SECTION 142(2A) OF THE INCOME-TAX ACT, 196 1. THE SPECIAL AUDIT REPORT, INTER ALIA, REPORTED THAT THERE WERE LARGE NUMBER OF TRANSACTIONS FOR WHICH NO SUPPORTING VOUCHERS WERE AVAILABLE, THAT SEVERAL DISCREPANCIES IN CASH AND JOURNAL VOUCHERS AND CHANGES IN THE DATES OF THE VOUCHERS WERE NOTICED, THAT THE RE WERE DISCREPANCIES IN THE ADJUSTMENT OF CASH BOOKS WITH CASH VOUCHERS, THAT THERE WERE PAYMENTS MADE TO THE RAIL WAY STAFF WHICH WERE NOT ALLOWABLE AS DEDUCTION UNDER THE ACT , THAT SEVERAL PAYMENTS WERE MADE WITHOUT OBTAINING ANY SI GNATURE OF THE RECIPIENTS, THAT THE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER AND DID NOT DISCLOSE ANY WORK-IN-PROGRESS IN THE BALANCE-SHEET, THAT SEVERAL ITEMS OF CAPITAL EXPEND ITURE WERE SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 36 36 PASSED OFF AS REVENUE EXPENDITURE AND SO ON AND SO FORTH. IN RESPONSE TO THE QUERIES RAISED BY THE ASSESSING OFF ICER ON THE BASIS OF THE SPECIAL AUDIT REPORT THE ASSESSEE COUL D NOT GIVE ANY PROPER EXPLANATION AND WHEREVER AN EXPLANATION WAS GIVEN, IT WAS FOUND TO BE EVASIVE. THE ASSESSEE WAS ALSO ALLO WED INSPECTION OF THE SEIZED DOCUMENTS AND WAS SUPPLIED PHOTOCOPIES OF THE SEIZED RECORDS. NOT CONVINCED BY THE ASSESSEE'S EXPLANATION TO THE SHOW-CAUSE NOTICE, WH ICH WAS ONLY THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE B ASED ON ACCOUNTING POLICIES CONSISTENTLY ADHERED TO THE ASS ESSING OFFICER PROCEEDED TO ESTIMATE THE NET PROFIT OF THE ASSESSE E AT 11 PER CENT OF THE GROSS RECEIPTS. THE TRIBUNAL REDUCED TH E ESTIMATE AND ADOPTED A PROFIT RATE OF 8 PER CENT OF THE GROS S RECEIPTS. PENALTY WAS IMPOSED BUT IT WAS CANCELLED BY THE COM MISSIONER (APPEALS) AND THE CANCELLATION WAS UPHELD BY THE TR IBUNAL. ON APPEAL BY THE DEPARTMENT, THE HON'BLE HIGH COURT DE CIDED THAT IT WAS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. IT WAS HELD AS UNDER (HEAD NOTES): SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 37 37 HELD, ALLOWING THE APPEAL, THAT THE NUMBER OF DISCREPANCIES AND IRREGULARITIES LISTED BY THE SPECIAL AUDITOR IN HIS REPORT WHICH WERE REPRODUCED IN THE ASSESSMENT ORDER BORE TESTIMONY TO THE FACT THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE WHOLLY UNRELIABLE. THE ASSESSING OFFICER GAVE DUE OPPORTUNITY TO THE ASSESSEE ASSESSEE TO EXPLAIN THE DISCREPANCIES AND ALSO TO SHOW WHY THE PROFIT RATE OF 11 PER CENT COULD NOT BE ADOPTED BUT THESE OPPORTUNITIES WERE NOT AVAILED OF BY THE ASSESSEE. HE ALSO HAD RECORDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE WAS PERMITTED TO INSPECT THE SEIZED DOCUMENTS AND WAS GIVEN PHOTOCOPIES OF THE DESIRED DOCUMENTS. THIS WAS NOT DENIED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, THE MERE FACT THAT THE ESTIMATE WAS REDUCED BY THE TRIBUNAL TO 8 PER CENT WOULD IN NO WAY SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 38 38 TAKE AWAY THE GUILT OF THE ASSESSEE OR EXPLAIN ITS FAILURE TO PROVE THAT THE FAILURE TO RETURN THE CORRECT INCOME DID NOT ARISE FROM ANY FRAUD OR ANY GROSS OR WILLFUL NEGLECT ON ITS PART. THE IMPOSITION OF PENALTY WAS JUSTIFIED. ' 10. IN THE INSTANT CASE ALSO, ON THE BASIS OF DOCUMEN TS FOUND DURING THE COURSE OF SURVEY AND STATEMENT OF THE AS SESSEE RECORDED DURING THE COURSE OF SURVEY, IT WAS CLEAR THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE DISCREPANCIES NO TED IN THE INCRIMINATING DOCUMENTS FOUND; THAT NO SUPPORTING V OUCHERS WERE AVAILABLE FOR LARGE NUMBER OF TRANSACTION; THA T ILLEGAL PAYMENTS WERE MADE WHICH WERE NOT ALLOWABLE AND THA T NO MUSTER ROLLS AND OTHER SUPPORTIVE DOCUMENTS WERE MA INTAINED. WE FIND THAT BEFORE THE AO, THE ASSESSEE ADMITTED THE DEFECTS AND DEFICIENCIES AND AGREED NET INCOME AT 10% OF TH E TOTAL TURNOVER. THESE FACTS GO TO PROVE THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFO RE, IN THESE CIRCUMSTANCES, THE MERE FACT THAT THE INCOME WAS AS SESSED ON SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 39 39 ESTIMATE BASIS WOULD IN NO WAY TAKE AWAY T HE FAILURE OF THE ASSESSEE TO EXPLAIN FURNISHING OF INACCURATE PARTIC ULARS OF INCOME IN THE RETURN OF INCOME. THEREFORE, THE IMPO SITION OF PENALTY BY THE A.O. U/S 271(1)(C) OF THE ACT WAS JUSTIFIED. WE ALSO NOTED THAT THE ASSESSEE HAD DECLARED INCOME OF RS. 58,34,290/- IN THE ORIGINAL RETURN OF INCOME FURNISHED ON 29.10.2007, BEFORE THE DATE OF SURVEY U/S 133A OF THE ACT. THEREFORE, INCOME DECLARED IN THE ORIGINAL RETURN O F INCOME CANNOT BE SUBJECT MATTER OF PENALTY U/S 271(1)(C) OF THE ACT. AS REGARDS THE REVISED RETURN OF INCOME, IT IS PERTINE NT TO NOTE THAT THE ASSESSEE HAD FILED REVISED RETURN ON 09.03.2009 AFTER THE DEPARTMENT DETECTED THE DEFECTS AND DISCREPANCIES D URING SURVEY U/S 133A OF THE ACT ON 20.01.2009. THE ASSESSEE CANNOT BE ABSOLVED FROM PENALTY FOR REVISING, THE RETURN O F INCOME AFTER DETECTION OF THE CONCEALED INCOME BY THE DEPARTMENT . THEREFORE, CONSIDERING THE ORIGINAL RETURN OF INCOME, THE AMOU NT OF CONCEALED INCOME WOULD BE THE DIFFERENCE BETWEEN TH E ASSESSED INCOME AT RS. 1,42,78,540/- AND THE INCOME DECLARED IN THE ORIGINAL RETURN OF INCOME OF RS. 58,34,290/- AT RS. 84,44,250/- SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 40 40 ( RS,1,42,78,540 RS. 58,34,290). ACCORDINGLY, THE A,O. WAS DIRECTED TO RECOMPUTE THE TAX SOUGHT TO BE EVADED A S PER EXPLANATION 4 OF SECTION 271 (1)( C) OF THE ACT, ON THE CONCEALED INCOME OF RS. 84,44,250/- AND IMPOSE PENALTY U/S 271(1)(C) OF THE ACT AT THE MINIMUM RATE OF 100% OF TAX SOUGHT TO BE EVADED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. C IT(A). WE UPHOLD HIS ACTION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 8 TH DECEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER SHRI RAJENDRA KUMAR GARG, BHOPAL VS. DY. CIT, 1(1), BHOPAL I.T.A.NO. 672/IND/2014 A.Y. 2007-08 41 41 DATED : 8 TH DECEMBER, 2015. CPU*