I.T.O.24(3)-1, MUMBAI V. KIRAN CONSTRUCTION CO., MUMBAI

ITA 7247/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8666 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2000-2001
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3); 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) THE INCOME TAX OFFICER 24(3)-1, C-11, 7 TH FLOOR, ROOM NO.703, BANDRA -KURLA COMPLEX, BANDRA (E), MUMBAI -51 (APPELLANT) VS. M/S.KIRAN CONSTRUCTION CO., B-1/6, VEENA VADNI CHS LTD., M.G.ROAD, GOREGAON (W), MUMBAI - 90 PAN:AAAFK 0398R (RESPONDENT) APPELLANT BY : SHRI MANOJ KUMAR RESPONDENT BY : NONE DATE OF HEARING : 09/1 0/2012 DATE OF PRONOUNCEMENT : 19/10/2012 ORDER PER I.P.BANSAL, J.M BOTH THESE APPEALS ARE FILED BY THE REVENUE. TH EY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A)34, MUMBAI DATE D 16/8/2011 IN RESPECT OF ASSESSMENT YEARS 2000-01 AND 2001-02. IN THESE APP EALS THE REVENUE IS CONTESTING THE DELETION OF CONCEALMENT PENALTY. GR OUND OF APPEAL IN BOTH THE APPEALS IS IDENTICAL EXCEPT DIFFERENCE IN FIGURES. THE GROUND OF APPEAL FOR A.Y 2000-01 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) AMOUNTING TO RS.4,07,088/-, IGNORING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY BOOKS OF ACCOUNTS AND DOCUMENTS IN SUPPORT OF ITS I NCOME WITH TANTAMOUNTS TO NOT DISCLOSING THE CORRECT INCOME BY THE ASSESSEE. ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) 2 2. IN RESPECT OF ASSESSMENT YEAR 2001-02 THE AMOUNT IS RS.3,81,452/-. THE FACTS OF BOTH THE YEARS ARE SIMILAR. HENCE, FOR T HE SAKE OF CONVENIENCE REFERENCE WILL BE MADE TO THE FACTS RELATING TO ASSESSMENT YE AR 2000-01 AND THE DECISION TAKEN THEREON WILL BE APPLICABLE TO ANOTHER YEAR I .E. A.Y 2001-02. 3. NOTICE OF HEARING WAS SENT TO THE ASSESSEE, HOWE VER, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. THEREFORE, WE PROCEED TO D ECIDE THE DEPARTMENTAL APPEALS EX-PARTE QUA THE ASSESSEE AFTER HEARING LD. D.R. 4. THE ASSESSEE IS A BMC / TMC CONTRACTOR. ORIGI NALLY IT WAS ASSESSED VIDE ASSESSMENT ORDER DATED 26/3/2003 AT AN INCOME OF RS. 20,77,650/- AGAINST RETURNED INCOME OF RS.8,83,700/-. THE SAID ASSESSM ENT ORDER WAS SET ASIDE BY THE CIT VIDE ORDER DATED 22/2/2005 PASSED UNDER SEC TION 263 OF THE INCOME TAX ACT,1961 (THE ACT). IN PURSUANCE TO THE SAID ORDER AGAIN ASSESSMENT WAS FRAMED VIDE ORDER DATED 14/2/2006 PASSED UNDER SECTION 144 R.W.S. 263 OF THE ACT. THE ASSESSMENT WAS FRAMED EX-PARTE FOR THE FAILURE OF THE ASSESSEE TO ATTEND THE ASSESSMENT PROCEEDINGS BEFORE AO ON VARIOUS DATES A ND ASSESSEE WAS ASSESSED ON ESTIMATE BASIS BY ADOPTING 8% NET PROFIT ON THE CONTRACT RECEIPTS OF RS.3,92,67,940/- AND PENALTY PROCEEDINGS UNDER SECT ION 271(1)(C) OF THE ACT WERE INITIATED IN RESPECT OF ASSESSMENT SO FRAMED. THE ASSESSE PREFERRED AN APPEAL AGAINST THE SAID ORDER CONTESTING THE ASSESSABILITY AT THE NET PROFIT RATE OF 8%. LD. CIT(A) VIDE HIS ORDER DATED 22/6/2007 HAS REDUC ED THE NET PROFIT RATE FROM 8 TO 5.5% THEREBY REDUCING THE NET PROFIT TAKEN BY AO FROM RS.31,41,435/- TO 21,59,736/-. THE AO WHILE LEVYING THE PENALTY HAS CONSIDERED THE INCOME DECLARED IN THE ORIGINAL RETURN AT RS.8,83,700/- AN D THE SAME WAS REDUCED FROM ASSESSED INCOME OF RS.19,41,071/- AND DIFFERENCE HA S BEEN WORKED OUT AT RS.10,57,371/- ON WHICH PENALTY @ 100% IS COMPUTED AT RS.4,07,088/- AND IN THIS MANNER AO LEVIED PENALTY OF RS.4,07,088/- IN R ESPECT OF A.Y 2000-01. SIMILARLY PENALTY WAS IMPOSED AT RS.3,81,452/- IN R ESPECT OF A.Y 2001-02. ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) 3 4.1 THE CONTENTION OF THE ASSESSEE BEFORE LD. CIT(A ) WAS THAT DURING THE PERIOD OF JULY 2005 THERE WAS A HEAVY FLOOD SITUATION IN MUMBAI ON 26/07/2005 AND THE RECORD OF THE ASSESSEE HAD LOST IN THE FLOOD LI KE SITUATION AND, THEREFORE, THE ASSESSEE COULD NOT PROPERLY REPRESENT BEFORE AO. I T IS FOR THAT REASON ESTIMATION OF INCOME WAS ARRIVED AT BY THE AO FOR NON-PRODUCTI ON OF ACCOUNTS. LD. CIT(A) AFTER CONSIDERING ALL THESE SUBMISSIONS HAS REDUCED THE ESTIMATION FROM 8% TO 5.5%. EARLIER ASSESSEE WAS ASSESSED AT AN INCOME O F RS.20,77,650/-, WHICH WAS FOR THE REASON OF DISALLOWANCE OF DEPRECIATION CLAI MED AMOUNTING TO RS.6,08,016/- AND ADHOC ADDITION OF RS.5.00 LACS. SIMILAR PENALTY WAS ALSO LEVIED IN THAT RESPECT AND ITAT VIDE ITS ORDER DATED 31/7 /2008 IN ITA NO.1897/M/2004 HAD DELETED THE SAID PENALTY. FOR ASSESSMENT YEAR 2005-06 THE ASSESSMENT WAS COMPLETED IN SIMILAR MANNER BUT NO PENALTY WAS LEV IED. RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS TO CONTENT THAT PEN ALTY IS NOT LEVIABLE IN THE CASES WERE ASSESSED INCOME IS BASED ON ESTIMATE. 4.2 CONSIDERING ALL THESE SUBMISSIONS LD. CIT(A) HA S ARRIVED AT A CONCLUSION THAT THERE IS FORCE IN THE ARGUMENTS AND SUBMISSIO NS OF THE ASSESSEE THAT THERE IS NO CASE FOR LEVY OF CONCEALMENT PENALTY. THE R EJECTION OF CLAIM APPEARS TO BE BONAFIDE WHICH CANNOT LEAD TO A SITUATION WHERE CO NCEALMENT PENALTY CAN BE IMPOSED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO CHEMICALS PVT. LTD., 322 ITR 158(SC) . HE ALSO HELD THAT IT IS A CASE WHERE ADDITION IS BASED ON ESTIMATE OF INCOME BY APPLYING GROSS PROFIT RATE ON TURNOVER AND AS PER THE DECISION LAID DOWN IN T HE CASE OF DILIP SHROFF, 291 ITR 519(SC) THE AMENDMENTS OF WORDS CONCEAL AND INA CCURATE CONTINUES TO BE GOOD LAW BECAUSE WHAT IS OVERRULED IN DHARMENDRA TEXTILES PROCESSORS,306 ITR 277 (SC) WAS ONLY THAT PART IN DILIP SHROFF(SUPRA) , WHEREIN IT WAS HELD THAT MENS REA WAS AN ESSENTIAL REQUIREMENT FOR CONCEALMENT PENALTY. IT IS IN THIS MANNER LD. CIT(A) HAS DELETED THE PENALTY. THE DEPARTMENT IS AGGRIEVED WITH THESE FINDINGS OF LD. CIT(A) AND HAS FILED THE AFOREMENTI ONED APPEALS. ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) 4 5. LD. DR AFTER NARRATING THE FACTS SUBMITTED THAT PENALTY WAS RIGHTLY LEVIED BY AO AND HAS WRONGLY BEEN DELETED BY LD. CIT(A). HE SUBMITTED THAT EVEN IN THE CASE WHERE ESTIMATED ADDITION HAS BEEN MADE PENALTY CAN BE SUSTAINED. FOR THIS PURPOSE LD. DR RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF B.A. BALASUBRAMANIAM & BROS.CO., 236 ITR 977, WHERE IN IT HAS BEEN HELD THAT DIFFERENCE BETWEEN INCOME ASSESSED AND THE INCOME R ETURNED BEING MORE THAN 20%, THE EXPLANATION TO SECTION 271(1)(C) BECAME AP PLICABLE AND THE ITO WAS JUSTIFIED IN IMPOSING PENALTY BECAUSE THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE ONUS WHICH WAS ON IT UNDER THE SAID EXPLANATION , NOTWITHSTANDING THE FACT THAT INCOME WAS ASSESSED AT ESTIMATE BASIS. THUS L D. D.R PLEADED THAT ORDER PASSED BY LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. DR AND WE HAVE ALSO CAREFULLY GONE THROUGH ASSESSMENT ORDER , PENALTY O RDER PASSED BY THE AO AND THE ORDER PASSED BY LD. CIT(A). THE FACTS HAVE ALR EADY BEEN DESCRIBED IN DETAILS IN THE ABOVE PART OF THIS ORDER. THE ASSESSEE WAS EARLIER ASSESSED UNDER SECTION 143(3) WHEN TWO ADDITIONS WERE MADE TO THE INCOME O F THE ASSESSEE. ONE WAS OF DEPRECIATION AND OTHER AN ADHOC ADDITION. PENALTY WAS LEVIED UPON THAT ITAT AND HAD DELETED THE PENALTY. THUS THE ASSESSEE WAS HA VING BOOKS OF ACCOUNT EARLIER. HOWEVER, DUE TO FLOOD ASSESSEE HAD LOST THE BOOKS O F ACCOUNT AND EVIDENCE TO SUPPORT ITS CASE. IT IS BECAUSE OF THAT NET PROFI T RATE WAS APPLIED BY THE AO. THE RECEIPTS OF THE ASSESSEE ARE MORE THAN RS.40.00 LAC S, WHICH IS THRESHOLD LIMIT TO APPLY SECTION 44AD. EVEN LD. CIT(A) HAD ACCEPTED T HE CLAIM OF THE ASSESSEE PARTLY AND REDUCED THE APPLICATION OF NET PROFIT RATE FROM 8% TO 5.5% AND THAT ORDER OF THE LD. CIT(A) HAS BEEN UPHELD BY THE TRIB UNAL. BUT FACT REMAINS THAT THE ADDITION WHICH IS MADE AND SUSTAINED IS PURELY AN ESTIMATED ADDITION IN ABSENCE OF BOOKS OF ACCOUNT OF THE ASSESSEE. 6.1 ACCORDING TO WELL SETTLED LAW ACCEPTED BY THE COURTS THAT ADDITION IF MADE ON ESTIMATE BASIS UNDER THE PROVISO OF SECTION 14 5(1) BY ADOPTING THE VIEW THAT GROSS PROFIT SHOWN IN THE BOOKS OF ACCOUNT WAS TOO LOW, THEN THAT DOES NOT ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) 5 AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS FAILURE TO RETURN THE CORRECT INCOME BY MEANS OF FRAUD OR WILLFUL NEGLECT AND RE FERENCE IN THIS REGARD CAN BE MADE TO THE DECISION OF HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS. DHILLON RICE MILLS, 256 ITR 447 (P&H) AND THE D ECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M.M.RICE MILLS, 253 ITR 17 (P&H). THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF B. A. BALASUBRAMANIAM & BROS.CO. (SUPRA) WILL NOT BE APPLICABLE AS IN THE S AID DECISION HONBLE SUPREME COURT HAD CONSIDERED THE EXPLANATION TO SECTION 271 (1)(C) OF THE ACT, ACCORDING TO WHICH IF THE DIFFERENCE BETWEEN THE INCOME ASSESSED AND THE INCOME RETURNED BEING MORE THAN 20% THEN A PRESUMPTION WOULD ARISE THAT ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME. UNLESS THAT P RESUMPTION IS REBUTTED, PENALTY LEVIABLE DESPITE THE FACT THAT ESTIMATED ADDITION HAS BEEN MADE. HOWEVER, FACTS IN THE PRESENT CASE ARE ENTIRELY DIFFERENT. THE P RESUMPTION, IF ANY, HAS BEEN REBUTTED BY THE ASSESSEE AS DURING THE COURSE OF O RIGINAL ASSESSMENT PROCEEDINGS, THE INCOME OF THE ASSESSEE WAS ASSESSE D ONLY THE BASIS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THE ACCOUNTS OF THE AS SESSEE WERE LOST IN THE FLOOD, THEREFORE, ASSESSEE COULD NOT PRODUCE THE ACCOUNTS, IN ABSENCE OF WHICH THE ESTIMATED ADDITION WAS MADE BY APPLYING THE NET PRO FIT RATE. 6.2 IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE OPINION THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. WE DECLINE TO INTERF ERE AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 19 TH DAY OF OCT., 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 19 TH OCT., 2012. ITA NO.7247/MUM/2011(A.Y. 2000-01) ITA NO.7248/MUM/2011(A.Y. 2001-02) 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R A BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.