CHUDHARY & BROTHERS, Jaipur V. ACIT, Jaipur

ITA 721/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2015 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Rejection of books of accounts; Capital asset; Depreciation; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 143(3); 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 721/JP/2014 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 M/S CHOUDHARY & BROTHERS, VILL. LADANA, TEHSIL- PHAGI, JAIPUR CUKE VS. ACIT, CIRCLE-7, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFC0190M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A.VERMA (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 12/05/2017 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: /06/2017 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-III, JAIPUR 27.08.2014 FOR A.Y. 2008-09 WHER EIN THE ASSESSEE HAS TAKEN FOLLOWING GROUND OF APPEAL:- 1 (A). IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE LD. AO IN IMPOSING PENALTY U/S 271(1)(C) OF INCOME TAX ACT , 1961 AMOUNTING TO RS. 11,52,837/-. THE ACTION OF THE LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FAC TS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE PENALT Y OF RS. 11,52,837/- IMPOSING U/S 271(1)(C). ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 2 (B). IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN REFERRING TO AND RELYING ON THE ORDER OF THE LD. AO IN QUANTUM PROCEEDINGS WHEN THE SAID ORD ER HAD MERGED WITH THE ORDER OF THE LD. CIT(A). THE ORDER OF THE LD. CIT(A) SHOULD HAVE FORMED THE BASIS FOR PENALTY PRO CEEDINGS. THE ACTION OF THE CIT(A) IS ILLEGAL, UNJUSTIFIED, A ND ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE PENALTY OF RS. 11,52,837/- IMPOSING U/ S 271(1)(C) WHICH IS BASED ON IRRELEVANT CONSIDERATIONS. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND FILED HIS RETURN OF INCOME FOR AY 20 08-09 ON 08.10.2008, DECLARING TOTAL INCOME OF RS. 1,11,10,3 30. ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 WAS COMPLETE D ON 20.12.2010 AT TOTAL INCOME OF RS. 4,20,74,820 AND T HE PENALTY PROCEEDINGS WERE SIMULTANEOUSLY INITIATED. 3. THE AO THEREAFTER LEVIED PENALTY U/S 271(1)(C) OF R S. 11,52,837, ON THE ADDITION SUSTAINED BY THE LD. CIT (A) IN QUANTUM PROCEEDINGS AGAINST WHICH ASSESSEE DID NOT PREFER A PPEAL AND DEPARTMENTAL APPEAL WAS DISMISSED BY THE COORDINATE BENCH, THE DETAILS OF THE SAME ARE AS UNDER:- PARTICULARS ADDITION/ DISALLOWANCE (RS.) PENALTY (RS.) TRADING ADDITIONS BY LD. CIT(A), BY REJECTING BOOKS OF ACCOUNTS AND APPLYING NP RATE 3,122,932 1,061,485 CAPITAL EXPENDITURE DEBITED TO PROFIT & LOSS A/C 26 8,763 91,353 TOTAL 3,391,695 1,152,837 ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 3 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LD CIT(A) AND SUBMITTED THAT PENALTY CANNOT BE LEVIED WHEN PR OFITS HAVE BEEN ESTIMATED AND THAT THERE WAS NO FURNISHING OF INACC URATE PARTICULARS OR FALSE STATEMENT BY THE ASSESSEE FIRM. THE LD. CI T(A) HOWEVER CONFIRMED THE PENALTY LEVIED BY THE LD. AO STATING THAT THE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE SP ECIFIC DISALLOWANCES. ALTHOUGH, AT THE FIRST APPELLATE STA GE, INCOME WAS COMPUTED BY APPLYING NP RATE, STILL ADDITIONS CANNO T BE SAID TO BE MADE BASED ON ESTIMATION. AS A RESULT, JUDICIAL PRO NOUNCEMENTS, WITH REGARD TO PENALTY ON ESTIMATION, RELIED ON BY THE A SSESSEE ARE NOT APPLICABLE TO THE CASE AT HAND. FURTHER, HE STATED THAT WITH REGARD TO PURCHASE OF HYDRAULIC EXCAVATOR, ASSESSEE FIRM WRON GLY CONSIDERED IT AS PART OF THE REVENUE EXPENDITURE. 5. THE LD AR SUBMITTED THAT NO PENALTY CAN BE IMPOS ED WHERE THE WHOLE ADDITION IS PURELY BASED ON ESTIMATES. RELIANCE WAS PLACED ON DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF SHIV LAL TAK [2001] 251 ITR 373 (RAJASTHAN), WHERE ADDITIONS WERE MADE ON THE BASIS OF ESTIMATED INCOME AFTER REJECTION OF BO OKS OF ACCOUNTS AND PENALTY WAS LEVIED, HELD THAT :- HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES AS EMANATING FROM THE STATEMENT OF CASE AND CONTENTIONS RAISED B EFORE US, WE ARE OF THE OPINION THAT THE LEARNED TRIBUNAL HAS MISDIRECTED ITSELF IN CONSIDERING THE AMBIT AND SCOPE OF THE SA ID EXPLANATION AND ALSO IN DEALING WITH THE CASE WHERE ADDITIONS HAVE BEEN MADE NOT ON ANY SPECIFIC COUNT BUT BY APP LYING A GROSS PROFIT RATE WHILE REJECTING THE RESULT SHOWN IN THE BOOKS ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 4 OF ACCOUNT, THAT IS TO SAY, NOT ON THE BASIS OF ENT RIES MADE IN THE BOOKS OF ACCOUNT. ONCE BOOKS OF ACCOUNT WERE RE JECTED AND INCOME WAS ASSESSED BY APPLYING GROSS PROFIT RA TE WHICH RESULTED IN ADDITION OF INCOME, THOUGH THE PROVISIO NS OF EXPLANATION 1 TO SECTION 271(1)(C) MAY BE ATTRACTED FOR THE PURPOSE OF INITIATING PENALTY PROCEEDINGS BY RAISIN G PRESUMPTION UNDER THE EXPLANATION 1, THE SAME BY IT SELF, COULD NOT TAKE PLACE OF CONCLUSIVE PROOF SO AS TO DISCARD THE EVIDENCE AND ATTENDING CIRCUMSTANCES ON THAT BASIS ALONE 5.1 SIMILARLY, IN THE CASE OF MAHENDRA SINGH KHEDLA (20 12) 252 CTR 453 (RAJ), HONBLE JURISDICTIONAL HIGH COURT HE LD THAT THE ABOVE FINDING OF THE TRIBUNAL MAKES IT CLEAR THAT A DDITIONS MADE BY THE ASSESSING OFFICER WERE BASED ON ESTIMATION ONLY . A FACT OR ALLEGATION BASED ON ESTIMATION CANNOT BE SAID TO BE CORRECT ONLY, IT CAN BE INCORRECT ALSO. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY WAS WRONGLY LEVIED BY THE ASSESSI NG OFFICER. THE BASIS FOR LEVYING PENALTY IN THE PRESENT CASE IS ON LY ESTIMATION, WHICH IS PURELY A QUESTION OF FACT AND THERE IS A CONCURR ENT FINDING OF FACT RECORDED BY FIRST APPELLATE AUTHORITY AS WELL AS TH E APPELLATE TRIBUNAL BOTH. 5.2 RELIANCE WAS ALSO PLACED ON THE FOLLOWING JUDIC IAL PRONOUNCEMENTS WHERE IT HAS BEEN HELD THAT NO PENAL TY CAN BE IMPOSED U/S 271(1)(C) WHERE ASSESSMENT IS BASED ON ESTIMATE : - VATIKA CONSTRUCTION (P.) LTD. [2014] 45 TAXMANN.C OM 471 (DELHI) ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 5 - BOMBAYWALA READYMADE STORES [2015] 230 TAXMAN 313 (GUJARAT) - AJAIB SINGH & CO. [2002] 253 ITR 630 (PUNJAB & H ARYANA) 6. IT WAS FURTHER SUBMITTED THAT LD. CIT(A), DURING TH E COURSE OF PENALTY PROCEEDINGS, HAS HELD THAT ALTHOUGH, AT THE FIRST APPELLATE STAGE, IN QUANTUM PROCEEDINGS, BOOKS WERE REJECTED AND INCOME WAS COMPUTED BY APPLYING NP RATE, STILL INCOME HAS NOT BEEN COMPUTED ON ESTIMATE BASIS. REASON BEING, IN THE QUANTUM PRO CEEDINGS, THE LD. AO MADE SPECIFIC DISALLOWANCES. 7. IT WAS FURTHER SUBMITTED THAT LD. CIT(A) HAS TOTALL Y IGNORED THE CONCEPT OF DOCTRINE OF MERGER. AS PER THE SAID DOC TRINE, ORDER OF ASSESSMENT MERGES WITH THE ORDER OF THE FIRST APPEL LATE AUTHORITY AND ON THE DISPOSAL OF THE APPEAL WHAT OPERATES AND SUR VIVES IS ONLY THE APPELLATE ORDER AND NOT THE ASSESSMENT ORDER. DOCTR INE OF MERGERS HAS BEEN ELABORATELY DISCUSSED BY THE HONBLE SUPRE ME COURT IN THE CASE OF KUNHAYAMMED & ORS. VS. STATE OF KERALA (20 00) 245 ITR 360 (SC). IN THIS CASE, HONBLE APEX COURT HELD THAT WHERE AN APPEAL OR REVISION IS PROVIDED AGAINST AN ORDER PASSED BY A COURT, TRIBUNAL OR ANY OTHER AUTHORITY BEFORE SUPERIOR FORUM AND SU CH SUPERIOR FORUM MODIFIES, REVERSES OR AFFIRMS THE DECISION PUT IN I SSUE BEFORE IT, THE DECISION BY THE SUBORDINATE FORUM MERGES IN THE DEC ISION BY THE SUPERIOR FORUM AND IT IS THE LATTER WHICH SUBSISTS, REMAINS OPERATIVE AND IS CAPABLE OF ENFORCEMENT IN THE EYE OF LAW. THUS IF IN THE QUANTUM PROCEEDINGS, ORDER HAS BEEN PASSED BY THE LD. AO, MAKING SPECIFIC DISALLOWANCES, WHICH HAS BEEN M ODIFIED BY THE ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 6 FIRST APPELLATE AUTHORITY BY COMPUTING INCOME ON ES TIMATE BASIS AND AFFIRMED BY HONBLE ITAT, ORDER OF THE LD. AO WILL LOSE ITS IDENTITY AND THE SUBSEQUENT ORDER OF THE SUPERIOR AUTHORITY WILL SURVIVE. THE INCOME OF THE ASSESSEE FIRM, IN THE PRESENT CASE, S HALL BE CONSIDERED TO HAVE BEEN COMPUTED ON ESTIMATE BASIS IN THE QUAN TUM PROCEEDINGS. AS A RESULT, THE ABOVE CITED JUDICIAL PRONOUNCEMENTS WITH REGARD TO PENALTY ON ADDITION MADE ON ESTIMATE BASIS, ALSO OF THE JURISDICTIONAL HIGH COURT, SHALL SQUARELY APPLY TO THE CASE AT HAND. 8. LD. AO INITIATED PENALTY PROCEEDINGS BY RECORDING S ATISFACTION, WHILE PASSING ORDER U/S 143(3), ON ADDITIONS MADE O N ACCOUNT OF SPECIFIC DISALLOWANCES. THE SAID ADDITIONS WERE ALT OGETHER DELETED BY THE LD. CIT(A). LD. CIT(A) ON OBSERVING VARIOUS DE FECTS, AS POINTED OUT BY LD. AO, HELD IMPLIED REJECTION OF ACCOUNTS O F THE ASSESSEE U/S 145(3) AND APPLIED NET PROFIT RATE OF 11.5% [SUBJEC T TO INTEREST AND DEPRECIATION AND REMUNERATION PAYABLE TO PARTNERS], WHICH RESULTED INTO TRADING ADDITION OF RS 31,22,932. LD. AO, IN T HE PENALTY ORDER, IMPOSED PENALTY ON THE SAID TRADING ADDITIONS, WHIC H WAS SUSTAINED BY THE LD. CIT(A). IT IS PERTINENT TO NOTE THAT THE ENTIRE BASIS, ON WHICH LD. AO RECORDED HIS SATISFACTION AND INITIATE D PENALTY PROCEEDINGS, HAS UNDERGONE A COMPLETE CHANGE. NO S ATISFACTION WAS RECORDED BY THE LD. AO WHILE INITIATING PENALTY PRO CEEDINGS ON THE ADDITIONS BASED ON ESTIMATION. ALSO, LD. CIT(A), WH ILE ESTIMATING INCOME, DURING QUANTUM PROCEEDINGS, DID NOT CHOOSE TO RECORD NEW SATISFACTION AND INITIATE PENALTY PROCEEDINGS, AS H E HIMSELF WAS AWARE THAT NO PENALTY CAN BE LEVIED WHEN INCOME OF THE AS SESSEE IS ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 7 ESTIMATED. ACCORDINGLY, THE PRESENT PENALTY IS ILL EGAL AND WITHOUT FULFILLING THE REQUIREMENTS OF SECTION 271(1)(C). IN SUPPORT, RELIANCE WAS PLACED ON FOLLOWING DECISI ONS: - SHADIRAM BALMUKAND [1972] 84 ITR 183 (ALL.) - ANANDA BAZAR PATRIKA PVT. LTD. [1979] 1 TAXMAN 44 5 (CAL.), - FORTUNE TECHNOCOMPS (P) LTD (ITA 313/2016 DATED 1 3.05.2016 ) 9. WITH REGARD TO PURCHASE OF HYDRAULIC EXCAVATOR, THE LD AR SUBMITTED THAT THE ASSESSEE FIRM MADE A BONAFIDE MI STAKE OF CONSIDERING IT AS PART OF THE REVENUE EXPENDITURE. IT IS PERTINENT TO NOTE THAT THE ASSESSEE FIRM, DURING THE YEAR UNDER REFERENCE, INCURRED DIRECT AND INDIRECT EXPENDITURE OF MORE TH AN 15 CRORES AND MADE ADDITIONS OF RS. 64,76,250 TO ITS FIXED ASSETS . OF THIS DISCREPANCY, WITH REGARD TO CAPITALIZATION, WAS NOT ED ONLY IN ONE ASSET PURCHASED AMOUNTING TO RS. 3,16,191. ALSO, DU E TO THE ASSESSEES NATURE OF BUSINESS, WORK HAD TO BE CARRI ED OUT AT DIFFERENT FAR OFF LOCATIONS WITHOUT MUCH ADMINISTRATIVE AND T ECHNICAL SUPPORT, SUCH DISCREPANCIES WERE NOT DELIBERATE ON THE PART OF THE ASSESSEE. 10. IT IS SUBMITTED THAT IT WAS A BONAFIDE AND INADVERT ENT ERROR ON THE PART OF THE ASSESSEE AND THUS NO PENALTY CAN BE IMPOSED IN SUCH A CASE. RELIANCE IS BEEN PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPE RS PVT. LTD. [2012] 348 ITR 306 (SC) IN WHICH IT WAS HELD THAT IT APPEARS TO US THAT ALL THAT HAS HAPPENED IN THE PRESENT CASE IS T HAT THROUGH A BONAFIDE AND INADVERTENT ERROR, THE ASSESSEE WHILE SUBMITTING ITS ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 8 RETURN, FAILED TO DISCLOSE THE INTEREST INCOME IN I TS TOTAL INCOME. THIS CAN ONLY BE DESCRIBED AS HUMAN ERROR WHICH WE ARE A LL PRONE TO MAKE. THE CALIBER AND EXPERTISE OF THE ASSESSEE HAS LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THAT THE ASSESSEE SHOULD HAVE BEEN CAREFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE C ARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSE E IS GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR ATTEMPT ING TO CONCEAL ITS INCOME... 11. ONCE THE ERROR WAS HIGHLIGHTED BY THE LD. AO, DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ACCEPTED BY THE A SSESSEE FIRM. ONLY PLEA WAS TO ALLOW THE DEPRECIATION AMOUNT, ON SUCH CAPITAL EXPENDITURE, WHICH WAS ACCEPTED BY THE FIRST APPELL ATE AUTHORITY. ASSESSEE FIRM EVEN DID NOT PREFER AN APPEAL BEFORE THE HONBLE ITAT ON THIS ISSUE. 12. WE NOW REFER TO THE RELEVANT FINDINGS OF THE LD . CIT(A) WHICH ARE REPRODUCED AS UNDER:- ON CAREFUL CONSIDERATION OF ALL RELEVANT FACTS IT MAY BE NOTED THAT PENALTY U/S 271(1)(C) CAN BE IMPOSED ONLY WHEN EITH ER THERE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR T HERE IS CONCEALMENT OF INCOME. THE APPELLANT CASE IS TO BE DECIDED CONS IDERING THE FACT WHETHER IN RESPECT OF ADDITIONS CONFIRMED BY THE AP PELLATE AUTHORITY AMOUNTING TO RS. 3391695/-, THERE WAS ANY FURNISHIN G OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 9 IT MAY BE NOTED THAT IT IS NOT A CASE WHERE WHILE C OMPLETING THE ASSESSMENT U/S 143(3) OF IT ACT, THE A.O HAS REJECT ED THE BOOK OF ACCOUNTS AND APPLIED PROVISIONS OF SEC. 145(3) OF I T ACT AS ALSO THAT THE AO HAS APPLIED ANY G.P. OR N.P. RATE. IN FACT T HE A.O HAS MADE SPECIFIC DISALLOWANCES OUT OF VARIOUS EXPENSES BY A SSIGNING SPECIFIC REASONS. IT IS A CASE WHERE SUBSEQUENTLY DURING THE APPELLANT PROCEEDINGS ON THE BASIS OF PAST HISTORY OF THE CAS E AS AGAINST SPECIFIC ADDITIONS MADE BY THE A.O THE APPELLATE AU THORITY APPLIED A PARTICULAR N.P. RATE AND ACCORDINGLY REDUCED THE QU ANTUM ADDITION. IN THIS MATTER IT IS NOT A CASE WHERE THE AO MAY HAVE APPLIED A PARTICULAR G.P/N.P RATE AND SUBSEQUENTLY SUCH G.P/N .P. RATE MAY HAVE REDUCED BY THE APPELLATE AUTHORITIES. IT IS FU RTHER NOTICED THAT IN RESPECT OF SOME ADDITIONS MADE BY THE A.O PARTICULA RLY AS REGARDS THE CLAIM OF SUNDRY CREDITORS AMOUNTING TO RS. 85,00,00 0/- WHICH WAS DISALLOWED BY THE A.O ADMITTEDLY THE ASSESSEE WAS N OT HAVING EVEN THE BASIC DETAILS OF SUCH EXPENSES. SIMILAR WAS THE POSITION IN RESPECT OF DIESEL AND PETROL EXPENSES AGAINST WHICH PAYMENT TO THE EXTENT OF RS. 4057317/- WAS SHOWN TO BE OUTSTANDING AND IN WH ICH CASE THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 03.12.2010 AD MITTED THAT NO DETAILS ARE AVAILABLE IN RESPECT OF SUCH CLAIM. IN FACT THE A.O HAS TREATED SUCH OUTSTANDING AMOUNT TO BE OF BOGUS NATU RE. THE POSITION IN RESPECT OF WAGES PAYABLE AMOUNTING TO RS. 621260 0/- WAS ALSO SAME AND THE A.O HAS GIVEN A FINDING THAT SUCH OUTS TANDING LIABILITIES ARE NOT GENUINE. THESE FACTS WILL INDICATE THAT SUC H SPECIFIC ADDITIONS WERE MADE BY THE A.O BECAUSE OF THE REASON THAT SUC H CLAIMS WERE NOT FOUND TO BE GENUINE. IN OTHER WORDS IT IS NOT A CASE THAT THE CLAIMS OF THE ASSESSEE WERE GENUINE BUT DUE TO CERT AIN REASONS THE ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 10 ASSESSEE WAS NOT ABLE TO PROVE THE SAME. IN THIS BA CKGROUND THE QUANTUM OF ADDITION CONFIRMED BY THE 1 ST APPELLATE AUTHORITY ON THE BASIS OF APPLYING A PARTICULAR N.P. RATE CANNOT SAI D TO BE BASED ON ESTIMATES. IN FACT THOUGH THE APPELLATE AUTHORITY R ELYING ON THE DECISION OF THE HONBLE ITAT IN APPELLANT OWN CASE APPLIED A PARTICULAR N.P. RATE AND REDUCED THE QUANTUM OF ADD ITION BUT NOWHERE IN THE APPELLATE ORDER THE FINDING OF THE A .O. REGARDING FALSE CLAIM OR INCORRECT CLAIMS IS HELD TO BE INCORRECT. ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT IN RESPECT OF ADDITION OF RS. 3122932/- CONFIRMED BY 1 ST APPELLATE AUTHORITY, THE APPELLANT FURNISHED INACCURATE PARTICULARS AND ACCORDINGLY CONCEALED TH E INCOME. AS REGARDS VARIOUS CASE LAWS RELIED UPON BY THE APPELL ANT IT MAY BE MENTIONED THAT THE FACTS OF THE APPELLANTS CASE AR E DISTINGUISHABLE WITH THE FACTS OF THESE CASES IN AS SUCH AS IN APPE LLANT CASE THERE WAS NO ESTIMATION ON THE PART OF THE A.O IN RESPECT OF THE ADDITIONS CONFIRMED BY THE 1 ST APPELLATE AUTHORITY. AS REGARDS ANOTHER ADDITION OF RS. 316191/- ON ACCO UNT OF PURCHASES OF CAPITAL ASSETS I.E. HYDRAULIC EXCAVATOR, IT MAY BE NOTED THAT THERE IS NO DISPUTE ON THE FACT THAT THE EXPENDITURE WAS OF CAPITAL NATURE AND WAS NOT ALLOWABLE AS PER PROVISIONS OF INCOME TAX A CT. IT IS ALSO FACT THAT THE APPELLANT IS A REGULAR INCOME TAX ASSESSEE WHOSE BOOKS OF ACCOUNTS ARE AUDITED BY CHARTERED ACCOUNTANT AS ALS O THAT THE APPELLANT IS ADVISED AND GUIDED BY TAX EXPERTS. ACC ORDINGLY BY MAKING SUCH CLAIM IN THE P&L A/C WHICH IS NOT AN AL LOWABLE EXPENDITURE, THE APPELLANT HAS MADE A WRONG CLAIM A ND ACCORDINGLY FURNISHED INACCURATE PARTICULARS OF INCOME. AS THE ADDITION TO THE ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 11 EXTENT OF RS. 268763/- WAS ALSO RIGHTLY CONFIRMED B Y THE 1 ST APPELLATE AUTHORITY THEREFORE IN RESPECT OF THIS ADDITION THE ASSESSEE WAS LIABLE FOR PENAL ACTION U/S 271(1)(C) OF IT ACT. THE FACT THAT PENALTY U/S 271(1)(C) OF IT ACT IN RESPECT OF WRONG CLAIMS/CLAI MS WHICH ARE NOT ALLOWABLE AS PER PROVISIONS OF INCOME TAX ACT IS AL SO SUPPORTED FROM THE FOLLOWING DECISIONS: I. ASSTT. CIT VS. SURINDER LAL CHOPRA,[2010] 2 ITR (TRIB.)790 (DELHI) II. GUJARAT STATE FINANCIAL SERVICES LTD., VS. ASSTT. C IT, [2010] 39 SOT 570(AHD.) IT MAY ALSO BE MENTIONED THAT IN SIMILAR FACTS AND CIRCUMSTANCES IN APPELLANT OWN CASE PENALTY IMPOSED BY THE AO U/S 27 1 (1)(C) OF IT ACT WAS CONFIRMED IN RESPECT OF A.Y 2007-08 BY LD. CIT(A)-III, JAIPUR VIDE ORDER IN ITA NO. 926/JPR/2011-12 DATED 06.10.2 012. 13. THE LD DR HAS VEHEMENTLY ARGUED THE MATTER AND SUPPORTED THE ORDER OF THE LD CIT(A) IN CONFIRMING THE LEVY OF PE NALTY. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE AO HAS MADE SPECIFIC DISALLOWANCES AND THE LD CIT(A) HAS APPLIED N.P RAT E OF 11.5% AS AGAINST THE SPECIFIC DISALLOWANCES AND THE SAME WAS CONFIRMED BY THE COORDINATE BENCH IN THE QUANTUM PROCEEDINGS. AS ST ATED BY THE LD CIT(A), MATTER RELATING TO LEVY OF PENALTY U/S 271( 1)(C) UNDER IDENTICAL FACTS IN ASSESSEES OWN CASE IN AY 2007-0 8 HAD COME UP EARLIER BEFORE US WHERE WE HAVE EXAMINED EACH OF TH E ABOVE ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 12 CONTENTIONS RAISED BY THE ASSESSEE AND THE REVENUE AND HAS DELETED THE LEVY OF THE PENALTY. FOR EASE OF REFERENCE, OU R FINDINGS IN AY 2007-08 IN ITA NO. 928//JP/12 DATED 25.11.2016 IS R EPRODUCED AS UNDER: 2.6 IN THE PRESENT CASE, THE INCOME OF THE ASSESSE E WAS ASSESSED AFTER REJECTION OF BOOKS OF ACCOUNTS AND 10% OF CER TAIN EXPENSES HAVE BEEN DISALLOWED ON ESTIMATE BASIS. WHAT IS RE LEVANT IS FINDING OF FACT OR BRINGING ON RECORD ANY EVIDENCE SUPPORTI NG THE ESTIMATE. IF THERE IS NONE, IT IS ONLY A MATTER OF ONES PERSON ESTIMATE AGAINST THE OTHER. IN THE INSTANT CASE, THERE IS NO POSITIVE E VIDENCE AS TO WHY ONLY 10% OF THE EXPENSES HAVE BEEN DISALLOWED. THE AO HAS STATED THAT SINCE THESE EXPENSES ARE NOT VERIFIABLE, HE DI SALLOWS 10% OF THESE EXPENSES AND ALSO MADE THE BASIS FOR LEVY OF PENALTY. THIS RATHER SHOWS THAT THE AO HAS NOT DISPUTED THE VERY INCURRENCE OR GENUINENESS OF THE EXPENSES AT THE FIRST PLACE. TH E NON-VERIFIABILITY OF THE EXPENSES CAN BE THE BASIS FOR DISALLOWANCE O F EXPENSES BUT THE SAME CANNOT FORM THE BASIS FOR LEVY OF PENALTY WITH OUT BRINGING ON RECORD ANY CONCRETE EVIDENCE OF FURNISHING INACCURA TE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. FURTHER, THE ESTIM ATION DONE BY THE AO HAVE BEEN PARTIALLY CONFIRMED BY ITAT BY TAK ING A MACRO VIEW IN TERMS OF N. P RATE INSTEAD OF INDIVIDUAL EXPENSE S AND IS AGAIN AN ESTIMATION AND NOTHING MORE. THE HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. MAHENDRA SINGH KHEDLA (SUPRA) HAS H ELD THAT THE ADDITIONS HAVE BEEN SUSTAINED BY THE TRIBUNAL ONLY ON ESTIMATION AND A FACT OR ALLEGATION BASED ON ESTIMATION CANNOT BE SAID TO BE CORRECT ONLY, IT CAN BE INCORRECT ALSO. THEREFORE, PENALTY WAS WRONGLY LEVIED ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 13 BY THE AO. FURTHER, IN CASE OF CIT VS KRISHI TYRE RETREADING AND RUBBER INDUSTRIES 360 ITR 580 (RAJ), THE HONBLE RA JASTHAN HIGH COURT HAS HELD THAT WHERE THE ADDITION HAD BEEN SU STAINED PURELY ON ESTIMATE BASIS AND NO POSITIVE FACT OR FINDING HAD BEEN FOUND, ON SUCH GUESS WORK OR ESTIMATION, NO PENALTY COULD BE LEVIABLE. 2.7 IN LIGHT OF ABOVE DISCUSSIONS, TAKING INTO ACCO UNT THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULL Y FOLLOWING THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN ABOVE REFERRED CASES, THE PENALTY LEVIED IS HEREBY DELETED. 15. IN LIGHT OF ABOVE, GIVEN THE IDENTICAL FACTS UN DER CONSIDERATION, OUR FINDINGS AND DIRECTIONS CONTAINED IN AY 2007-08 SHALL APPLY IN THE YEAR UNDER CONSIDERATION. HENCE, THE LEVY OF PENALT Y U/S 271(1)(C) OF RS 10,61,485 IS HEREBY DELETED. FURTHER, EXPLANATI ON OF THE ASSESSEE REGARDING INADVERTENT CLAIM OF CAPITAL EXPENDITURE OF RS 268763 IS FOUND TO BE BONAFIDE GIVEN THE PECULIAR FACTS OF TH E PRESENT CASE AND THE PENALTY OF RS 91,353 IS ALSO DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON /06/2017. DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- /06/2017 ITA NO. 721/JP/2014 M/S CHOUDHARY & BROTHERS, JAIPUR VS. ACIT, JAIPUR 14 * GANESH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S CHOUDHARY & BROTHERS 2. IZR;FKHZ@ THE RESPONDENT- ACIT, CIRCLE-7, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 721/JP/2014} VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ@ ASST. REGISTRAR