M/S ZUBERI ENGINEERING CO., Jaipur V. ITO, Jaipur

ITA 787/JPR/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5246 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Question of law; Agreed addition; Onus to prove
• Section: 143(3); 133A

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 FOE FLAG ;KNO] YS[KK LNL; ,OA JH YFYR DQEKJ] U; KF;D LNL; DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM & SHRI LALIET K UMAR, JM VK;DJ VIHY LA-@ ITA NOS. 787/JP/2012, 977 & 978/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 , 07-08 & 08-09. M/S. ZUBERI ENGINEERING CO., C/O SHRI ANIL KUMAR SHARMA, CHARTERED ACCOUNTANT, 407, DBC TOWER, OPP. HOTEL GANGAUR, NEAR PINK CITY PETROL PUMP, M.I. ROAD, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 2(1)/ACIT, CIRCLE-2/DCIT CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAAFZ 2103 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI ANIL SHARMA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P. R. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/05/2016. VKNS'K@ ORDER PER BENCH : THESE ARE THREE APPEALS FILED BY THE ASSESSEE ARIS ING OUT OF THE SEPARATE ORDERS PASSED BY THE LD. CIT (A)-I, JAIPUR DATED 28 .08.2012, 31.10.2013 AND 30.10.2013 FOR THE A.Y. 2006-07 , 07-08 & 08-09 RESPECTIVELY. THE GROUND TAKEN BY THE ASSESSEE IS AS UNDER :- A.Y. 2006-07 (ITA NO. 787/JP/2012) : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE NET PROFIT HAS BEEN ESTIMATED BY APPLICATION OF N.P. RATE, THE LD. CIT (APPEAL) IS NOT 2 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. JUSTIFIED IN CONFIRMING THE PENALTY OF RS. 34,53,91 3/- LEVIED U/S 271(1)(C) OF IT ACT, 1961, FOR CONCEALMENT OF INCOM E. A.Y. 2007-08 (ITA NO. 977/JP/2013) : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE NET PROFIT HAS BEEN ESTIMATED BY APPLICATION OF N.P. RATE, THE LD. CIT (APPEAL) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY OF RS. 16,48,39 0/-(SUBJECT TO RECOMPUTATION AFTER GIVING CORRECT APPEAL EFFECT) L EVIED U/S 271(1)(C) OF IT ACT, 1961, FOR CONCEALMENT OF INCOME. A.Y. 2008-09 (ITA NO. 978/JP/2013) : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE NET PROFIT HAS BEEN ESTIMATED BY APPLICATION OF N.P. RATE, THE LD. CIT (APPEAL) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY OF RS. 17,72,08 0/-(SUBJECT TO RECOMPUTATION AFTER GIVING CORRECT APPEAL EFFECT) L EVIED U/S 271(1)(C) OF IT ACT, 1961, FOR CONCEALMENT OF INCOME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME ON 20.03.2007 DECLARING TOTAL INCOME OF RS. 4,94,620/- . THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE I.T. ACT, 196 1 ON 14.05.2009 AT A TOTAL INCOME OF RS. 1,97,99,170/-. THE AO BY APPLYING N. P. RATE OF 8% ON TOTAL CONTRACT RECEIPTS OF RS. 22,77,28,588/- HAS ESTIMATED THE NE T PROFIT OF THE APPELLANT FROM CONTRACT BUSINESS AT RS. 1,82,18,287/-. THE AO HAS ALSO ASSESSED INCOME FROM OTHER SOURCES AT RS. 15,80,884/- TOWARDS INTEREST FROM BA NK. THEREFORE, THE AO MADE THE TOTAL ADDITION OF RS. 1,93,04,550/- TO THE RETURNED INCOME. ON APPEAL BY THE ASSESSEE BEFORE LD. CIT (A), THE LD. CIT (A) VIDE H IS ORDER DATED 28.10.2009, AFTER DISCUSSING THE MATTER AND TAKING INTO CONSIDERATION VARIOUS DECISIONS OF HIGH COURTS AND ALSO OF THE TRIBUNAL, DIRECTED THE AO TO ALLOW DEDUCTION ON ACCOUNT OF DEPRECIATION OF RS. 8,22,245/-, INTEREST OF RS. 87 ,88,167/- AND SALARY PAID TO 3 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. PARTNERS OF RS. 4,80,000/-. THUS, AFTER APPEAL EFFE CT, THE INCOME FROM CONTRACT BUSINESS REMAINED AT RS. 1,02,61,179/- AND AS SUCH ADDITION OF RS. 1,02,61,179/- WAS CONFIRMED BY LD. CIT (A). THEREFORE, THE ASSES SEE WAS ASKED TO SHOW CAUSE AS TO WHY THE PENALTY U/S 271(1)(C) SHOULD NOT BE IMPO SED FOR CONCEALING THE PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICU LARS OF INCOME. IN RESPONSE, THE ASSESSEE FURNISHED ITS REPLY ON 17.03.2008. THE A O CONSIDERED THE SUBMISSIONS OF THE ASSESSEE BUT HE FOUND IT NOT TENABLE. THE AO O BSERVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS U/S 133A OF THE IT ACT, IT WA S FOUND THAT THE ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. IT WAS ALSO FOUND THAT BILLS & VOUCHERS OF EXPENDITURE CLAIMED IN THE RETURN OF INCOME WERE NOT AVAILABLE. DURING THE COURSE OF SURVEY PROCEEDINGS, STATEMENT RECORDED OF SHRI MOHD. JAKIR ZUBERI, PARTNER OF THE ASSESSEE FIRM, A DMITTED NON MAINTENANCE OF REGULAR BOOKS OF ACCOUNTS AND INCOME DECLARED IN TH E RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT CORRECT. HE ALSO ADMITT ED THAT PROPER BILLS/VOUCHERS WERE NOT MAINTAINED. THE AO HELD THAT DURING THE C OURSE OF SURVEY CONDUCTED ON 10.09.2008 DISCREPANCIES WERE NOTICED IN THE BOOKS OF THE ASSESSEE AND ACCORDINGLY SURRENDERED THE UNDISCLOSED INCOME. FURTHER, ASSES SEES PLEA THAT PENALTY CANNOT BE LEVIED ON ESTIMATION BASIS IS NOT ACCEPTABLE. TH E DECISION RELIED ON BY THE ASSESSEE IN THE CASE OF SHIV LAL TAK VS. CIT, 251 I TR 373 (RAJ.) IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. THE OTHER CASE LAWS RELIE D ON BY THE ASSESSEE ARE ALSO NOT RELEVANT TO THE CASE IN HAND, BEING ON DIFFERENT FA CTS AND ARE NOT APPLICABLE TO THE PRESENT CASE. ON THE CONTRARY, THE AO PLACED RELI ANCE ON THE FOLLOWING DECISIONS :- CIT VS. SWAROOP COLD STORAGE, 136 ITR 435 (ALL.) 4 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. A.K. BASHU SAHIB VS. CIT 108 ITR 736 (MAD.) CIT VS. K.D. ARORA 162 ITR 481 (PAT.) DHARMENDRA TEXTILE PROCESSORS & OTHERS, 306 ITR 277 (SC) THE AO, THEREFORE, HELD THAT IN VIEW OF TOTALITY OF THE FACTS AND KEEPING IN VIEW THE PROVISIONS OF SECTION 271(1)(C), THE ASSESSEE IS FO UND GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME TO THE EXTENT OF RS. 1,02,61,179/- AND, THEREFORE, HE LEVIED PENALTY OF RS. 34,53,913/-. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A). THE LD. CIT (A) DISCUSSED THE MATTER AT GREAT LENGTH AT PAGE 5 TO 10 OF HER ORDER AND CONFIRMED THE PENALTY BY OBSERVING IN VIEW OF THE ABOVE DETAILED DISCUSSION PENALTY U/S 271(1)(C) IS CONFIRMED FOR C ONCEALMENT OF INCOME AS PER THE TRADING ADDITION CONFIRMED AT THE RATE OF 8% OF BUS INESS RECEIPTS AFTER ALLOWING A SET OFF OF INCOME DECLARED BY THE ASSESSEE IN ITS RETUR N AND FILING OF INACCURATE PARTICULAR OF INCOME WITH RESPECT TO INTEREST INCOME ON FDRS T REATED AS BUSINESS INCOME BY THE ASSESSEE AND CONFIRMED AS INCOME FROM OTHER SOU RCES BY THE LD. CIT (A) AND SUBSEQUENTLY UPHELD BY THE ITAT. THUS THE PENALTY U /S 271(1)(C) OF RS. 34,53,913/- IS UPHELD. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4.1 THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT THE ADDITION HAS BEEN MADE BY WAY OF ESTIMATING THE NET PROFIT BY APPLICATION OF NP RATE AS AGREED BY THE ASSESSEE IN SURVEY PROCEEDINGS. HE SUBMITTED THAT AS THE ASS ESSEE COULD NOT PRODUCE THE 5 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. COMPLETE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS AT T HE TIME OF ASSESSMENT PROCEEDINGS, THEREFORE, ONE OF THE PARTNERS OF THE ASSESSEE FIRM SHRI MOHD. ZAKIR ZUBERI, TO BUY PEACE AND TO AVOID LITIGATION AND HA RASSMENT, AGREED FOR ESTIMATION OF INCOME FROM CONTRACT BUSINESS BY APPLICATION OF NP RATE. THE ASSESSEE NEVER ADMITTED THAT THE ASSESSEE HAS CONCEALED THE INCOME WHICH HAS NOT BEEN DISCLOSED IN THE RELEVANT RETURN OF INCOME, NOR THE AO HAS BR OUGHT ANYTHING ON RECORD TO CONCLUDE THAT THE AGREED ADDITION WAS CONCEALED INC OME OF THE ASSESSEE. THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER AND PENA LTY ORDER THAT SHRI MOHD. ZAKIR ZUBERI HAS ADMITTED THAT THE INCOME DECLARED IN THE RETURN OF INCOME IS NOT CORRECT, IS PERVERSE AND WITHOUT ANY BASIS. IN THIS REGARD, THE LD. A/R REFERRED THE REPLY GIVEN IN RESPONSE TO QUESTION NOS. 7, 8, 13, 14 AND 15 PU T DURING THE RECORDING OF THE STATEMENT OF SHRI ZAKIR ZUBERI. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT EXCEPT THE ACCEPTANCE OF THE ASSESSEE FOR ESTIMATING ITS N ET PROFIT AT A HIGHER FIGURE AS COMPARED TO THAT OF DECLARED IN THE RETURN OF INCOM E, THERE IS NOTHING ON RECORD TO CONCLUDE THAT ANY OF THE EXPENDITURE CLAIMED IN THE RETURN OF INCOME WAS EITHER BOGUS OR FALSE. ADMITTEDLY THE BOOKS OF ACCOUNTS FO UND DURING THE COURSE OF SURVEY WERE INCOMPLETE AND IT HAS BEEN CONCLUDED VIDE ORDE R DATED 24.06.2009 PASSED U/S 271 THAT THE ASSESSEE HAS NOT MAINTAINED ANY REGULA R BOOKS OF ACCOUNTS, THEREFORE SUCH INCOMPLETE BOOKS OF ACCOUNTS CANNOT BE A BASIS FOR HOLDING THAT THE ASSESSEE HAS CLAIMED BOGUS/FALSE EXPENSES. THE AO HAS NOT MA DE ANY INQUIRY AND GIVEN ANY FINDING THAT ANY OF THE EXPENSES CLAIMED BY THE ASS ESSEE WAS EITHER BOGUS/FALSE OR EXCESSIVE OR NOT INCURRED FOR THE PURPOSE OF THE BU SINESS WITH REFERENCE TO QUANTUM AND NATURE OF THE BUSINESS AND BILLS AND VOUCHERS I MPOUNDED IN SURVEY PROCEEDINGS OR OTHERWISE. THUS THIS IS NOT A CASE WHERE EITHER ANY UNDISCLOSED INCOME HAS BEEN 6 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. FOUND OR ANY BOGUS EXPENDITURE HAS BEEN DISALLOWED AND ADDITION OF THE SAME HAS BEEN MADE TO RETURNED INCOME. THE ADDITION HAS BEE N MADE AND SUSTAINED ON LUMP SUM BASIS WITHOUT ANY SPECIFIC AND REAL FINDING. TH ERE IS NO POSITIVE EVIDENCE OR FINDING ON RECORD TO SHOW THAT THE ASSESSEE HAS SUP PRESSED ANY INCOME BY UNDERSTATING THE SAME OR OTHERWISE OR BOOKED BOGUS AND FALSE EXPENSES OR OTHERWISE OVERSTATED THE SAME. MERE IN ABILITY OF THE ASSESSEE TO EXPLAIN SOMETHING OR ANY BONAFIDE INACTION ON HIS PART CANNOT BE CHAR ACTERIZED AS CONCEALMENT OF INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. IN ABSENCE OF ANY POSITIVE FINDINGS THAT THERE WAS SOME INCOME WHICH HAS BEEN CONCEALED BY THE ASSESSEE OR ANY CLAIM OF THE ASSESSEE IS BOGUS OR FALSE, IT WIL L BE WRONG TO HOLD THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTIC ULARS THEREOF. IN THIS REGARD, THE LD. A/R PLACED RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SIR SHADI LAL SUGAR & GENERAL MILLS LTD. VS. CIT, 168 I TR 705 (SC) WHEREIN IT IS HELD THAT WE FIND THAT THE ASSESSEE ADMITTED THAT THESE WER E THE INCOMES OF THE ASSESSEE BUT THAT WAS NOT AN ADMISSION THAT THERE WAS DELIBE RATE CONCEALMENT. FROM AGREEING TO ADDITIONS, IT DOES NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED INCOME. THERE MAY BE A HUNDRED AND ONE RE ASONS FOR SUCH ADMISSION. RELIANCE IS ALSO PLACED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. JAYARAJ TALKIES 239 ITR 914 (MAD.) WHEREIN IT IS HELD THAT MERE AGREEMENT TO ADDITION OF INCOME OR SURRENDER OF INCOME DID NO T IMPLY CONCEALMENT OF INCOME WHERE THE ASSESSEE SURRENDERED CERTAIN AMOUNT TO AS SESSMENT BECAUSE IT WAS UNABLE TO SUBSTANTIATE ITS CLAIMS WITH NECESSARY VO UCHERS . 4.2. THE LD. A/R PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIV LAL TANK VS. CIT, 251 ITR 373 (RAJ.) WHEREIN IT IS HELD THAT 7 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. THE LANGUAGE OF EXPLANATION USES TWO EXPRESSIONS AS INDEPENDENT ANY AMOUNT ADDED OR DISALLOWED. IT POSTULATES ADDITION OF SPECIFIC AMOUNT IN THE INCOME AS INCOME NOT DISCLOSED OR A SPECIFIC AMOUNT CLAIMED A S DEDUCTIONS HAS BEEN DISALLOWED. IN MAKING COMPUTATION OF TOTAL INCOME WHERE INCOME RETURNED HAS BEEN REJECTED BY REJECTING THE TRADING RESULTS, FINDING SOME DISCREPANCY IN THE BOOKS OF ACCOUNT AND SUBSTITUTING THE SAME BY ESTIMATED FIGU RE, IN STRICT SENSE, CAN NEITHER BE SAID TO BE ADDITION OF ANY AMOUNT IN THE RETURNE D INCOME OR DISALLOWANCE OF ANY AMOUNT AS DEDUCTIONS CLAIMED. THE WORD AMOUNT OF WHICH ADDITIONS MADE OR DEDUCTIONS DISALLOWED ALSO DENOTES REFERENCE TO SPE CIFIC ITEM OF AMOUNT ADDED OR DISALLOWED AS DEDUCTION IN CONTRAST TO SUBSTITUTION OF ALTOGETHER A NEW ESTIMATED SUM IN PLACE OF INCOME RETURNED. IT IS A CASE NEITH ER OF ADDITION OR DISALLOWANCE BUT A CASE OF SUBSTITUTION . THE LD. A/R FURTHER RELIED ON THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MA HENDRA SINGH KHEDLA, 33 TAXMANN.COM 666 WHEREIN IT IS HELD THAT A FACT OR ALLEGATION BASED ON ESTIMATION CANNOT BE SAID TO BE CORRECT ONLY, IT CAN BE INCORR ECT ALSO. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, PENALTY WAS WRONGLY LEVI ED BY THE ASSESSING OFFICER . 4.3. THE LD. A/R ARGUED THAT THE AO HAS MISDIRECTED HIMSELF IN HOLDING THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CA SE OF SHIV LAL TAK VS. CIT (SUPRA) IS MORE APPLICABLE AFTER THE OMISSION OF PROVISO TO CL AUSE (B) OF EXPLANATION-1 TO SECTION 271(1)(C) W.E.F. 10.09.1986. IT IS EVIDENT THAT W.E.F 10.09.1986 THE PROVISO TO CLAUSE (B) OF EXPLANATION-1 TO SEC. 271(1)(C) HA S BEEN DELETED, HOWEVER PROVISIONS OF THE SAME HAVE BEEN INCORPORATED IN TH E CLAUSE (B) ITSELF. THUS THE SAID AMENDMENT IN THE /EXPLANATION BY ANY STRETCH OF IMA GINATION DO NOT AFFECT THE ABOVE SAID LAW DECLARED BY THE JURISDICTIONAL HIGH COURT. 8 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. 4.4. THE LD. A/R HAS FURTHER PLACED RELIANCE ON THE DECISION OF THE ITAT JAIPUR IN THE CASE OF ACIT VS. SHRI ASHOK KUMAR JAIN IN ITA N O. 830/JP/2011 DATED 18.10.2012 WHEREIN THE TRIBUNAL DELETED THE PENALTY LEVIED BY THE AO, EXACTLY ON THE SIMILAR FACTS AS INVOLVED IN THE CASE OF THE PR ESENT ASSESSEE. AS IN THE CASE OF ACIT VS. SHRI ASHOK KUMAR JAIN (SUPRA), IN THE CASE OF THE PRESENT ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS SURVEY WAS CON DUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE AND THE ASSESSEE VIDE HIS STATEMENTS RECORDED IN THE SURVEY PROCEEDINGS SURRENDERED CERTAIN INCOME TO BE INCLUDED IN ITS RETURNED INCOME AND FILED REVISED COMPUTATION OF INCOME BEFORE THE AO, WITH THE REQUEST THAT NO PENAL PROVISIONS SHOULD BE INITIATED. HE, HOWEVER, INITIATED THE PENALTY PROCEEDINGS IN RESPECT OF THE AMOUNT SO SURRENDERED BY THE ASSE SSEE STATING THAT THIS SURRENDER CANNOT BE TREATED AS SUO MOTTO SURRENDER AND IMPOSE D THE PENALTY. HOWEVER, IN THE CASE OF THE ASSESSEE, LD. CIT (A) CONFIRMED THE PEN ALTY LEVIED BY THE AO HOLDING THAT THE ASSESSEE BY WAY OF FURNISHING INACCURATE PARTIC ULARS OF INCOME, CONCEALED THE INCOME OF THE ASSESSEE. 4.5. THE LD. A/R IN SUPPORT OF HIS SUBMISSIONS PLAC ED RELIANCE ON THE FOLLOWING DECISIONS :- CIT VS. VATIKA CONSTRUCTION PVT LTD. ITA NO. 1246/2010 (DELHI HC) CIT VS. M/S. UNIQUE PRECURED RETRADERS ITA NO. 80/2006 (RAJ. HC) SIR SHADI LAL SUGAR & GENERAL MILLS LTD. VS. CIT 168 ITR 705 (SC) CIT VS. JAYARAJ TALKIES 239 ITR 914 (MAD.HC) 9 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. CIT VS. M. GEORGE & BROS. 160 ITR 511 (KER.HC) CIT VS. SANGRUR VANASPATI MILLS LTD. 171 TAXMAN 320 (P&H HIGH COURT) CIT VS. SUBHASH TRADING CO. 221 ITR 110, 117 (GUJ. HC) CIT VS. M.M. RICE MILLS 253 ITR 17 (P&H HIGH COURT) CIT VS. GORDHAN DASS MOOLCHAND 116 ITR 893 (MAD. HC) IN VIEW OF THE FACTS MENTIONED ABOVE, SUBMISSIONS M ADE AND JUDICIAL PRECEDENTS RELIED ON, THE LD. A/R REQUESTED TO QUASH THE IMPUG NED ORDER AND DELETE THE PENALTY IMPOSED BY THE AO. 4.6. ON THE OTHER HAND, THE LD. D/R FOR THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND REQUESTED TO CONFIRM THE ORDE R OF LD. CIT (A). 4.7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS AGREED FOR ESTIMATION OF I NCOME BY APPLYING THE NET PROFIT RATE OF 8% ON THE TOTAL CONTRACT RECEIPTS. HOWEVER, LATER ON THE ESTIMATION OF INCOME AGREED BY HIM WAS SUBJECTED TO MODIFICATION IN TERM S OF THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL ON 09.07.2010 IN I TA NO. 949/JP/2009 WHEREBY THE ASSESSEE WAS ALLOWED DEDUCTION ON ACCOUNT OF DE PRECIATION, INTEREST TO BANK AND SALARY TO PARTNERS, OUT OF THE PROFIT ESTIMATED BY THE ASSESSEE DURING THE COURSE OF SURVEY. IN OUR VIEW, THE ASSESSMENT ORDER WAS PASS ED ON ESTIMATION BASIS AND FURTHER THE ESTIMATION AGREED BY THE ASSESSEE DURIN G THE COURSE OF SURVEY WAS MODIFIED BY THE ORDER OF THE TRIBUNAL. IT IS AN AD MITTED POSITION THAT WHEN THE 10 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. ASSESSMENT WAS PASSED ON ESTIMATION BASIS, THEN NO PENALTY FOR CONCEALMENT OF INCOME CAN BE IMPOSED. THIS HAS BEEN SO HELD IN THE CASE OF HARI GOPAL SINGH VS. CIT (2002) 258 ITR 85. IF WE APPLY THE RATIO LAID DOWN IN THE ABOVE SAID MATTER AND ALSO IN VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT VS. KRISHI TYRE RETREADING & RUBBER INDUSTRIES (2014) 4 4 TAXMAN.COM 9 WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT AFTER REFERRING T O THE ABOVE SAID JUDGMENT HAS CONCLUDED THAT IF THE ADDITION HAS BEEN MADE ON EST IMATION BASIS AND NO POSITIVE FACT OR FINDING HAS BEEN FOUND OR BROUGHT ON RECORD , THEN NO PENALTY WAS LEVIABLE UNDER SECTION 271(1)(C) OF THE ACT. PARA 9 TO 23 OF THE SAID ORDER ARE MENTIONED AS UNDER :- 9. ON A PERUSAL OF THE FACTS STATED HEREINBEFORE, IT TRANSPIRED THAT THE ADDITION HAS BEEN SUSTAINED PURELY ON ESTIMATE BASI S AND, IN OUR VIEW, NO POSITIVE FACT OR FINDING HAS BEEN FOUND SO AS TO EV EN MAKE THE SAID ADDITION. IT IS, ACCORDING TO US, A PURE GUESS WORK AND, IN O UR VIEW, ON SUCH GUESS WORK OR ESTIMATION, NO PENALTY U/S. 271(1)(C) OF THE ACT CAN BE SAID TO BE LEVIABLE. FOR IMPOSING PENALTY U/S. 271(1)(C) OF THE ACT, THE ASSESSING OFFICER HAS TO CLEARLY PROVE THE CONDUCT OF THE ASSESSEE, WHICH IN THIS CASE, HAS NOT BEEN PROVED. MERELY BECAUSE THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED OR ESTIMATED ADDITION WAS MADE, IN OUR VIEW, NO PEN ALTY IS LEVIABLE. THE ASSESSEE OFFERED AN EXPLANATION, WHICH COULD NOT BE TERMED AS NOT BONA FIDE. IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE TO PRO VE THE CHARGE OF CONCEALMENT, IN OUR VIEW, THE PENALTY COULD NOT BE IMPOSED. 10. PENALTY PROCEEDINGS ARE ENTIRELY DISTINCT FROM ASSESSMENT PROCEEDINGS AND, HOWSOEVER RELEVANT AND GOOD, THE FINDINGS IN A SSESSMENT PROCEEDINGS MAY BE, THEY ARE NOT CONCLUSIVE SO FAR AS THE PENAL TY PROCEEDINGS ARE CONCERNED. 11. FROM THE ABOVE DISCUSSION, IT CAN BE S EEN THAT THE OPINION OF THE TRIBUNAL WITH RESPECT TO THE DELETION IS BASED ON APPRECIATION OF EVIDENCE ON RECORD. 12. THE HON'BLE APEX COURT IN THE CASE OF DILIP N. SHROFF VS. JOINT CIT (2007) 291 ITR 519 (SC) HAS HELD THAT IF THERE IS N O EVIDENCE ON MATERIAL TO SHOW THAT THE ASSESSEE HAD DELIBERATELY FURNISHED I NACCURATE PARTICULARS AND THERE WAS ANY MALA FIDE INTENTION ON HIS PART SO AS TO MAKE HIM LIABLE FOR PENALTY. A MERE OMISSION OR NEGLIGENCE WOULD NOT CO NSTITUTE DELIBERATE ACT OF 11 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. CONCEALING PARTICULARS OF INCOME OR SUPPRESSED OR F URNISHED INACCURATE PARTICULARS OF INCOME. 13. THE PATNA HIGH COURT IN THE CASE OF CIT VS. KA ILASH CROCKERY HOUSE REPORTED IN (1999) 235 ITR 544 (PATNA), HAD AN HIGH COURT OCCASION TO CONSIDER THE ISSUE OF PENALTY U/S. 271(1)(C) ON THE BASIS OF THE FACT THAT THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE WAS FOUND T O BE LOW AND TRADING ADDITION WAS MADE ON ESTIMATE BASIS THOUGH THE TRAD ING ADDITION WAS SUSTAINED BY THE TRIBUNAL BUT IN SO FAR AS PENALTY U/S. 271(1)(C) IS CONCERNED, IT HELD THAT THE TRADING ADDITION HAD BEEN MADE ON THE BASIS OF AN ESTIMATE AND ON ACCOUNT OF ESTIMATED TRADING ADDITION PENALT Y COULD NOT BE LEVIED U/S. 271(1)(C) OF THE I.T. ACT. 14. THE PUNJAB AND HARYANA IN THE CASE OF CIT VS. METAL PRODUCTS OF INDIA (1984) 150 ITR 714 (P&H), HAS HELD HIGH COURT THAT MERELY BECAUSE THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS THAT DID N OT AUTOMATICALLY LEAD TO THE CONCLUSION THAT THERE WAS FAILURE TO RETURN THE CORRECT INCOME. 15. THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. WHITELENE CHEMICALS (TAX APPEAL NO. 496 OF 2012), VIDE ORDER DATED JANU ARY 15, 2013, SINCE REPORTED IN (2014) 360 ITR 385 (GUJ) HAS OBSERVED T HAT NO PENALTY CAN BE IMPOSED MERELY BECAUSE ACCOUNT BOOKS OF THE ASSESSE E WERE REJECTED AND THAT PROFIT WAS ESTIMATED ON THE BASIS OF FAIR GROS S PROFIT RATIO. THE ASSESSEE FILED ITS EXPLANATION WHICH COULD NOT BE TERMED AS NOT BONA FIDE AND, ACCORDINGLY, THE GUJARAT CAME TO A CONCLUSION HIGH COURT THAT MERE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT CANNOT BE A GROUND FOR IMPOSITION OF PENALTY. 16. THE GUJARAT HIGH COURT IN THE CASE OF C IT VS. SUBHASH TRADING CO. (1996) 221 ITR 110 (GUJ), HAS HELD AS UNDER HIGH COURT (HEADNOTE) : 'HELD, THAT A BEST JUDGMENT ASSESSMENT HAD BEEN MAD E. WHILE THE ASSESSEE IN ITS BOOKS OF ACCOUNT DISCLOSED THE TOTA L SALES TO BE RS. 7,75,000, THE INCOME-TAX OFFICER ON REJECTION OF TH E BOOKS OF ACCOUNT ESTIMATED THE SALES TO BE RS. 8,75,000 WHICH ON APP EAL, THE TRIBUNAL REDUCED TO RS. 8,00,000. SO ALSO, WHILE THE GROSS P ROFIT DISCLOSED BY THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS 5 PER CENT ., THE INCOME-TAX OFFICER ESTIMATED THE GROSS PROFIT RATE AT 15 PER C ENT. WHICH AGAIN WAS REDUCED BY THE TRIBUNAL TO 12 PER CENT. IN THIS CIR CUMSTANCE, IN THE ABSENCE OF ANY OTHER MATERIAL WHICH MIGHT REFLECT O N THE CONDUCT OF THE ASSESSEE ABOUT A DELIBERATE ATTEMPT TO MAINTAIN FALSE BOOKS OF ACCOUNT, ON A PREPONDERANCE OF PROBABILITIES, NO OTHER CONCLUSION COULD BE REACHED THAN THAT THE FAILURE TO RETU RN THE CORRECT INCOME WAS NOT ON ACCOUNT OF ANY FRAUD OR GROSS OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. THE TRIBUNAL WAS RIGHT IN HO LDING THAT PENALTY OF 12 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. RS. 92,894 IMPOSED BY THE INSPECTING ASSISTAN T COMMISSIONER U/S. 271(1)(C) OF THE ACT WAS NOT JUSTIFIED.' 17. THE PUNJAB AND HARYANA IN THE CASE OF HARIGOP AL SINGH VS. CIT (2002) 258 ITR 85 (P&H) ; (2002) 177 CTR HIGH COURT 580, HAS HELD AS UNDER (PAGE 86) : 'IN ORDER TO ATTRACT CLAUSE (C) OF SECTION 271(1) O F THE ACT, IT IS NECESSARY THAT THERE MUST BE CONCEALMENT BY THE ASS ESSEE OF THE PARTICULARS OF HIS INCOME OR IF HE FURNISHES INACCU RATE PARTICULARS OF SUCH INCOME. WHAT IS TO BE SEEN IS WHETHER THE ASSE SSEE IN THE PRESENT CASE HAD CONCEALED HIS INCOME AS HELD BY TH E ASSESSING OFFICER AND THE TRIBUNAL. HE HAD NOT MAINTAINED ANY ACCOUNT S AND HE FILED HIS RETURN OF INCOME ON ESTIMATE BASIS. THE ASSESSING O FFICER DID NOT AGREE WITH THE ESTIMATE OF THE ASSESSEE AND BROUGHT HIS INCOME TO TAX BY INCREASING IT TO RS. 2,07,500. THIS, TOO, WAS ON ESTIMATE BASIS. THE TRIBUNAL AGREED THAT THE INCOME OF THE ASSESSEE HAD TO BE ASSESSED ON AN ESTIMATE OF THE TURNOVER BUT WAS OF THE VIEW THA T THE ESTIMATE AS MADE BY THE ASSESSING OFFICER WAS HIGHLY EXCESSIVE AND IT FIXED THE TOTAL INCOME OF THE ASSESSEE AT RS. 1,50,000 FOR TH E YEAR UNDER APPEAL. IT IS, THUS, CLEAR THAT THERE WAS A DIFFERENCE OF O PINION AS REGARDS THE ESTIMATE OF THE INCOME OF THE ASSESSEE. SINCE THE A SSESSING OFFICER AND THE TRIBUNAL ADOPTED DIFFERENT ESTIMATES IN ASS ESSING THE INCOME OF THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSE E HAD 'CONCEALED THE PARTICULARS OF HIS INCOME' SO AS TO ATTRACT CLAUSE (C) OF SECTION 271(1) OF THE ACT. THERE IS NOT EVEN AN IOTA OF EVIDENCE O N THE RECORD TO SHOW THAT THE INCOME OF THE ASSESSEE DURING THE YEAR UND ER APPEAL WAS MORE THAN THE INCOME RETURNED BY HIM. ADDITIONS IN HIS INCOME WERE MADE, AS ALREADY OBSERVED, ON ESTIMATE BASIS AND TH AT BY ITSELF DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE EITHER CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THERE HAS TO BE A POSITIVE ACT OF CONCEALME NT ON HIS PART AND THE ONUS TO PROVE THIS IS ON THE DEPARTMENT. WE ARE ALSO OF THE CONSIDERED VIEW THAT THE TRIBUNAL GROSSLY ERRED IN LAW IN RELYING ON EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE ACT TO RAISE A PRESUMPTION AGAINST THE ASSESSEE. THE ASSESSEE HAD JUSTIFIED HI S ESTIMATE OF INCOME ON THE BASIS OF HOUSEHOLD EXPENDITURE AND OTHER INV ESTMENTS MADE DURING THE RELEVANT PERIOD. IT IS NOT THE CASE OF T HE REVENUE THAT HE HAD, IN FACT, INCURRED EXPENDITURE IN EXCESS OF WHA T HE HAD STATED. IN THIS VIEW OF THE MATTER, IT CANNOT BE SAID THAT THE EXPLANATION FURNISHED BY THE ASSESSEE HAD NOT BEEN SUBSTANTIATED OR THAT HE HAD FAILED TO PROVE THAT SUCH EXPLANATION WAS NOT BONA FIDE.' 13 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. 18. THE MADHYA PRADESH IN THE CASE OF CIT VS. SHI VNARAYAN JAMNALAL AND CO. (1998) 232 ITR 311 (MP) HELD THUS HIGH COURT (P AGE 313) : 'WE HAVE GONE THROUGH THE ORDERS OF THE TRI BUNAL AND THE COMMISSIONER OF INCOME-TAX (APPEALS). WE ARE S ATISFIED THAT BOTH THE AUTHORITIES HAVE CORRECTLY APPROACHED THE MATTE R AND FOUND THAT THERE WAS NO FRAUDULENT ATTEMPT ON THE PART OF THE ASSESSEE. THE ASSESSEE HAD PLACED BEFORE THE AUTHORITIES WHATEVER BOOKS OF ACCOUNT IT HAD MAINTAINED-WHETHER THEY WERE PROPERLY MAINTA INED OR NOT BUT IT HAS NOT WITHHELD OR CONCEALED ANY MATERIAL OR MADE ANY DELIBERATE ATTEMPT TO DEFRAUD THE AUTHORITIES. THE ASSESSING A UTHORITY HAS EMPLOYED THE FLAT RATE FOR ASSESSING THE INCOME OF THE ASSESSEE AND ON THAT BASIS, HE HAS BEEN TAXED. THEREFORE, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE TRIBUNAL IN SETTING ASIDE THE PENALTY APPEARS TO BE JUSTIFIED AND WE ANSWER BOTH THESE QUESTIONS AGA INST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' 19. THE ALLAHABAD IN THE CASE OF CIT VS. RAJ BANS SINGH (2005) 276 ITR 351 (ALL) HAS HELD THAT 'ON APPEAL, THE HIGH COURT TRIBUNAL CAME TO THE CONCLUSION THAT IT WAS A CASE OF AN ESTIMAT E AGAINST AN ESTIMATE AND THERE WAS NO CONCEALMENT AND ACCORDINGLY IT WAS HELD THAT NO PENALTY WAS IMPOSABLE'. 20. THIS COURT IN THE CASE OF CIT VS. CHATURBHUJ B HANWARLAL (1987) 166 ITR 659 (RAJ) OBSERVED AS UNDER (PAGE 682) : 'HAVING GIVEN OUR ANXIOUS CONSIDERATION TO THE RIVA L CONTENTIONS ADVANCED BEFORE US AND TO THE LAW CITED BY BOTH TH E SIDES, WE ARE OF THE VIEW THAT THE TRIBUNAL PROCEEDED TO TAKE INTO ACCOUNT VARIOUS CIRCUMSTANCES REFERRED TO ABOVE AND HAD RE ACHED THE FINDING AFTER CONSIDERING THOSE CIRCUMSTANCES. IT CANNOT BE SAID THAT THE FINDING REACHED BY THE TRIBUNAL WAS BASED ON NO EVI DENCE. ALL MATERIAL FACTS AND CIRCUMSTANCES POSITIVE AND NEGATIVE, CONS TITUTE EVIDENCE AND ON CONSIDERATION OF THE POSITIVE AND NEGATIVE CIRCU MSTANCES, THE FINDING CAN BE ARRIVED AT AFTER WEIGHING THE PROBAB ILITIES. SUCH A FINDING, IN OUR OPINION, CANNOT BE SAID TO BE A FIN DING WHICH IS VITIATED ON ANY COUNT, I.E., SUCH A FINDING CANNOT BE SAID T O BE PERVERSE OR BASED ON NO EVIDENCE. IT IS TRUE THAT THIS COURSE WAS ALSO OPEN TO THE TRIBUNAL AND THE TRIBUNAL SHOULD HAVE AS KED THE ASSESSEE TO SUBMIT HIS EXPLANATION WITH RESPECT TO CAPITAL ACCRETION CONSIDERED BY THE AUTHORITIES BELOW, BUT FAILURE TO DO SO BY T HE TRIBUNAL WOULD NOT IN ANY WAY AFFECT THE JURISDICTION OF THE TRIBUNAL TO PROCEED TO DECIDE THE APPEAL ON THE BASIS OF THE MATERIAL ON RECORD. THE FINDING OF THE 14 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. TRIBUNAL, THEREFORE, CANNOT BE SAID TO BE BASED ON NO EVIDENCE AND THE FINDING THAT THERE HAS BEEN NO CONCEALMENT OF INCOM E IS A FINDING OF FACT AND IT DOES NOT RAISE ANY QUESTION OF LAW AND THE TRIBUNAL WAS RIGHT IN CANCELLING THE PENALTY IMPOSED ON THE ASSE SSEE.' 21. THE DELHI IN THE CASE OF CIT VS. AERO TRADERS P. LTD. (2010) 322 ITR 316 (DELHI) ; (2010) 231 CTR 524 HAS HIGH COURT HEL D THAT PENALTY IS NOT LEVIABLE WHEN INCOME WAS BASED ON ESTIMATED PROFIT AND SUBSTANTIALLY REDUCED BY THE TRIBUNAL. 22. THE PUNJAB AND HARYANA IN THE CASE OF CIT VS. MODI INDUSTRIAL CORPORATION (2010) 195 TAXMAN 68 (P & H) HIGH COURT HAS HELD THAT WHERE THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED ON EST IMATED BASIS PENALTY U/S. 271(1)(C) OF THE ACT WAS NOT IMPOSABLE WITH RE SPECT TO THE ADDITIONS MADE ON SUCH ESTIMATE BY THE ASSESSING OFFICER. 23. THE CHHATTISGARH IN THE CASE OF CIT VS. VIJAY KUMAR JAIN (2010) 325 ITR 378 (CHHATTISGARH) HAS HELD THAT THE HIGH COURT ASSESSEE DECLARED THE NET PROFIT BY ESTIMATING IT AT THE RATE OF 6.36 PER CENT. OF HIS GROSS RECEIPT WHILE IT WAS ESTIMATED AT THE RATE OF 10 PER CENT. OF GROSS RECEIPTS BY THE ASSESSING OFFICER AND ON THESE FACTS HELD THAT PENA LTY FOR CONCEALMENT CANNOT BE LEVIED AS THE ASSESSEE CANNOT BE SAID TO HAVE CO NCEALED ANY PARTICULARS OF INCOME OR FURNISHED ANY INACCURATE PARTICULARS OF I NCOME. IN VIEW THEREOF, THE APPEAL OF THE ASSESSEE IS ALLO WED AND PENALTY IS DIRECTED TO BE DELETED. ITA NOS. 977 & 978/JP/2013 (AY 2007-08 & 0809) : 5. THE GROUNDS RAISED IN THESE APPEALS ARE SIMILAR TO ITA NO. 787/JP/2012 EXCEPT THAT WHILE CALCULATING THE PENALTY, THE AO H AS NOT GIVEN THE CORRECT APPEAL EFFECT. 6. AS THE FACTS AND CIRCUMSTANCES INVOLVED IN THESE TWO APPEALS ARE EXACTLY SIMILAR, THEREFORE, TAKING INTO CONSIDERATION THE S UBMISSIONS MADE AND JUDICIAL 15 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. PRECEDENTS RELIED UPON IN ITA NO. 787/JP/2012, WE Q UASH THE IMPUGNED ORDERS BY DELETING THE PENALTY LEVIED BY THE AO IN RESPECTIVE YEARS. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/05/2016 . SD/- SD/- FOE FLAG ;KNO] YFYR DQEKJ (VIKRAM SINGH YADAV) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31/05/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. ZUBERI ENGINEER CO., JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 2(1), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 787/JP/2012 & 977 & 978/JP/2013 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 16 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO. SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER 17 ITA NO. 787(3)/JP/2012 ZUBERI ENGINEERING CO.