M/s Dee Contro And Electric Private Ltd., Kanpur V. Asstt. Commissioner of Income Tax-6, Kanpur

ITA 76/LKW/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78636 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: B P YADAV
• Keywords: Business income; Question of law
• Section: 44AD; 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 76, 77 & 79/LKW/2014 ASSESSMENT YEAR S : 2007 - 08, 2008 - 09 & 2009 - 10 M/S DEE CONTROL & E LECTRIC PVT. LTD. C - 8, PANKI SITE 5 UDYOGKUNJ, KANPUR V. ACIT - 6 KANPUR PAN: AABCD6695G (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. B.P. YADAV, ADVOCATE RESPONDENT BY: SHRI. ALOK MITRA, D.R. DATE OF HEARING: 22 0 7 2014 DATE OF PRONOUNCEMENT: 28 0 7 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) CONFIRMING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT' ). SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 2 . DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT SURVEY OPERATION UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEES PREMISES ON 26.2.2010 AND DURING THE COURSE OF SURVEY , AUDITED BALANCE SHEET ALONG WITH SOME OTHER DOCUMENTS, BOOKS OF ACCOUNT AND COMPUTER HARD DISC, ETC WERE IMPOUNDED. ALONG WITH ALL THESE DOCUMENTS, ANOTHER AUDITED BALANCE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : SHEET NOTARIZED BY NOTARY OFFICER DISCLOSING CERTAIN INFLATED FIGURES OF DEBTORS TURNOVER AND GROSS RECEIPT WERE ALSO IMPOUNDED. THE ASSESSEE HAS EXPLAINED THAT THE INFLATED BAL ANCE SHEETS WERE PREPARED FOR OBTAININ G CONTRACTS FROM DIFFERENT AGENCIES BY PROJECTING BETTER FINANCIAL POSITION OF THE ASSESSEE . T HE ASSESSING OFFICER HAS CONSIDERED ALL THESE DOCUMENTS AND REJECTED THE BOOKS OF ACCOUNT FOR ASSESSMENT YEAR 2009 - 10. ON THE BASIS OF THE SURVEY REPORT, ASSESSMENT S FOR ASSESSMENT YEARS 2007 - 08 AND 20 0 8 - 09 WERE RE - OPENED AND THE BOOKS OF ACCOUNT WERE REJECTED FOR THE SAME REASONS AND NET PROFIT RATE OF 2.35% OF THE GROSS RECEIPTS WAS WORKED OUT. THE ORDER OF THE ASSESSING O FFICER WAS ACCEPTED BY THE ASSESSEE , AS NO APPEAL WAS PREFERRED BEFORE THE LD. CIT(A). THOUGH IT WAS AGREED UPON BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER THAT NO PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WOULD BE INITIATED, BUT THE ASSE SSING OFFICER HAS INVITED PENALTY PROCEEDINGS AND LEVIED PENALTY IN ALL THE THREE ASSESSMENT YEARS , AGAINST WHICH APPEALS WERE FILED BEFORE THE LD. CIT(A), BUT THE ASSESSEE COULD NOT FIND FAVOUR WITH HIM. 3 . NOW THE ASSESSEE IS BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND NET PROFIT RATE IS ESTIMATED, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE INITIATED, AS THERE IS NO MATERIAL ON RECORD IN ORDER TO ESTABLISH THAT THE ASSESSEE HAS EITHER CONCEALED THE INCOME CHARGEABLE TO TAX OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. IN SUPPORT OF IS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PACED RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT - 6, KANPUR VS. M/S VISI ON RESEARCH & MANAGEMENT PVT. LTD., KANPUR IN I.T.A. NO.422/LKW/2012 AND THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NARESH CHAND AGARWAL VS. CIT, 98 DTR (ALL) 280, IN WHICH THEIR LORDSHIPS OF THE HON'BLE ALLAHABAD HIGH COURT HAS H ELD THAT IN A CASE OF ESTIMATION OF INCOME AFTER REJECTION OF BOOKS, NO PENALTY COULD BE IMPOSED UNDER SECTION PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : 271(1)(C) OF THE ACT. COPIES OF THE ORDER OF THE TRIBUNAL AND THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT ARE PLACED ON RECORD. 4 . PER CO NTRA, THE LD. D.R. HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 5 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT UNDISPUTEDLY THE BOOKS OF ACCOUNT OF T HE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER HAVING INVOKED THE PROVISIONS OF SECTION 145 OF THE ACT AFTER NOTING DISCREPANCY IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT. ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND NET PROFIT IS ESTIMATED, PENALTY UND ER SECTION 271(1)(C) OF THE ACT CANNOT BE ATTRACTED, AS THERE IS NO MATERIAL ON RECORD TO ESTABLISH AS TO HOW ASSESSEE HAS CONCEALED THE INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME FOR ATTRACTING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 6 . THE HON'BLE JURISDICTIONAL HIGH COURT HAS EXAMINED THIS ISSUE AND HAS CATEGORICALLY HELD IN THE CASE OF NARESH CHAND AGARWAL VS. CIT (SUPRA) THAT IN A CASE OF ESTIMATION OF INCOME AFTER REJECTION OF BOOKS, NO PENALTY COULD BE IMPOSED UNDER SECTION 271(1)(C) O F THE ACT. THE RELEVANT OBSERVATION OF THE HON'BLE HIGH COURT IS EXTRACTED HEREUNDER: - 11. IN THE INSTANT CASE, NOTHING WAS CONCEALED BY THE ASSESSEE. IT WAS THE AO WHO HAS REJECTED THE BOOKS OF ACCOUNT IN THE SECOND ROUND AND APPLIED THE 8 PER CENT NET PROFIT RATE PRESCRIBED UNDER S. 44AD. IN THE INSTANT CASE, THE TURNOVER IS MORE THAN 40 LACS, SO S. 44AD IS NOT APPLICABLE, NONETHELESS THE AO INSPIRED W ITH THE PROVISION OF S. 44AD AND MADE THE ADDITION BY ESTIMATING THE NET PROFIT RATE @ 8 PER CENT. REJE CTION OF THE BOOKS OF ACCOUNT ALLOWED THE AO TO MAKE THE ADDITION ON ESTIMATE BASIS. WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, NO PENALTY UNDER S. 271(1 )(C) OF THE IT ACT CAN BE IMPOSED AS PER THE RATIO LAID DOWN IN THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : CASE OF CIT VS. ARJUN PRASAD A/IT KUMAR (2008) 214 CTR (ALL) 355 : (2008) 1 DTR (ALL) 272, WHERE IT WAS OBSERVED THAT : 'APPEAL (HIGH COURT) SUBSTANTIAL QUESTION OF LAW. PENALTY UNDER S. 271( 1 )(C) CIT(A) DELETED PENALTY UNDER S. 271( 1) (C) ON THE GROUND THAT THERE BEING NOTHING ON RECORD THAT ASSESSEE'S EXPLANATION LACKED BONA FIDES, PENALTY UNDER S. 271(1)( C) COULD NOT BE IMPOSED ON THE BASIS OF ESTIMATING SALES AND MAKING ADDITION BY APPLYING NET PROFIT RATE SAME WAS RIGHTLY SUSTAINED BY TRIBUNAL AND NO SUBSTANTIAL QUESTION OF LAW ARISES ' 12. MOREOVER, IT MAY BE MENTIONED THAT NO FINDING OF DELIBERATE CONCEALMENT OF INCOME WAS BROUGHT IN THE INSTANT CASE AS THE ASSESSEE HAS NEVER SUPPRESSED THE INTEREST INCOME FROM FDRS. INTEREST INCOME FROM FDR WAS DULY SHOWN. IT WAS FOR THE AO TO TREAT THIS INCOME AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. BUT THE FACT REMAINS THAT THERE IS NO CONCEALMENT ON THE PART OF ASSESSEE. SO, NO PENALTY FOR CONCEALMENT IS LEVIABLE AS PER THE RATIO LAID DOWN IN THE CASE OF CIT US. ATTAR SINGH & BROS. 2008 ( 11) MTC 35 (ALL). 13. BY CONSIDERING THE TOTALITY AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE IMPUGNED ORDERS AND CANCEL THE LEVY OF THE PENALTY OF RS. 4,00,000 (FOUR LACS). THE ASSESSEE WILL GET THE RELIEF ACCORDINGLY. THE ANSWER FOR BOTH THE SUBSTAN TIAL QUESTIONS OF LAW IS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7 . RELYING UPON THE AFORESAID JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT, THE TRIBUNAL OF THIS BENCH HAS ALSO TAKEN A VIEW THAT WHERE THE BOOKS OF ACCOUNT ARE REJECTED BY TH E ASSESSING OFFICER HAVING INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT, PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS ALSO EXTRACTED HEREUNDER: - PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : 4.1 FROM THE ABOVE PARAS OF THE ORDER OF LEARNED CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT NO POSITIVE MATERIAL IS BROUGHT BY THE ASSESSING OFFICER ON RECORD TO INDICATE THAT THE SAID EXPENDITURE CLAIMED BY THE ASSESSEE WAS BOGUS AND/OR THE ASSESSEE HAD CONCEALED ITS INCOME OR HAD FURNISHED INACCURATE PARTICULAR OF THE INCOME. THESE FINDINGS OF THE CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE. WE ALSO FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE PENALTY ORDER THAT IN THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSEE HAS FILED DETAILS OF VARIOUS EXPENSES BUT WAS UNABLE TO FURNISH COMPLETE VOUCHERS IN RESPECT OF EXPENSES CLAIMED. IT IS ALSO NOTED BY THE ASSESSING OFFICER IN THE PENALTY ORDER THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER U/S 145(3) OF THE ACT AND THE ASSESSING OFFICER ESTIMATED THE INCOME BY ALLOWING EXPENSES ON ESTIMATE BASIS. UNDER THESE FACTS, THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE IS SQUARELY APPLICABLE . IN THAT CASE ALSO, THE INCOME WAS ASSESSED BY THE ASSESSING OFFICER BY APPLYING THE NET PROFIT RATE OF 8% AND IT WAS HELD BY HON'BLE HIGH COURT THAT WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, NO PENALTY U/S 271(1)(C) CAN BE IMPOSED. IN THE PRESENT CA SE ALSO, THE DISALLOWANCE IS MADE ON ESTIMATE BASIS AND RESPECTFULLY FOLLOWING THIS JUDGMENT, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 8 . SIMILAR IS THE POSITION IN THE INSTANT CASE, AS THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED BY THE ASSESSING OFFICER HAVING NOTICED CERTAIN DISCREPANCIES IN ITS MAINTENANCE AFTER INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THEREAFTER ESTIMATED THE PRO FIT BY APPLYING THE NET PROFIT RATE OF THE GROSS RECEIPTS. THEREFORE, FOL LOWING THE AFORESAID JUDGMENT ON THE HON'BLE JURISDICTIONAL HIGH COURT AND THE ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED AND NE T PROFIT IS ESTIMATED BY THE ASSESSING OFFICER, PENALTY UNDER PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : SECTION 271(1)(C) OF THE ACT CANNOT BE IMPOSED. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE PENALTY LEVIED IN THE INSTANT APPEALS. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LD. CIT(A) AND DEL ETE THE PENALTY IN ALL THESE THREE CASES. 9 . IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.7.2014. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28 TH JU LY , 2014 JJ: 2407 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )