SHRI SHYAM CONSTRUCTION COMPANY,JAIPUR V. ITO WD 1(1), JAIPUR, JAIPUR

ITA 910/JPR/2025

AI Insights

The case involves Shri Shyam Construction Company appealing against penalties imposed for underreporting income in the assessment years 2017-18 and 2018-19. The penalties were levied following the disallowance of certain expenses and interest payments due to non-deduction of tax at source, as well as the failure to maintain adequate records. The Tribunal considered the arguments and evidence presented, including the assessee's admission of record-keeping issues and the application of Section 270A of the Income Tax Act, which pertains to penalties for underreporting income. The Tribunal found that the additions to the assessee's income were correctly classified as underreported, thus affirming the penalties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824792 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 13-06-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: ATHARV MUNDRA; DISALLOWING
• Keywords: Non-deduction of tax
• Section: 115JB; 40(a)(ia)

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jherh vUukiw.kkZ xqIrk] ys[kk lnL; ds le{k BEFORE: SMT. ANNAPURNA GUPTA, AM vk;dj vihy la-@ITA Nos. 909 & 910/JPR/2025 fu/kZkj.k o\"kZ@Assessment Years : 2017-18 & 2018-19 Shri Shyam Construction Company, 6 Shyam Kunj Nangal Road, Jhotwara, Jaipur cuke Vs. Income Tax Officer , Ward- 1(1), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACSFS 4743 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Atharv Mundra, Advocate Ms. Shreya Sharda, CA and Smt. Prabha Rana, Advocate jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 23/12/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 31/12/2025 vkns'k@ ORDER PER: ANNAPURNA GUPTA, AM Both the present appeals have been filed by the assessee for different assessment years and are against the order passed by the National Faceless Appeal Centre (NFAC), under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “Act”), confirming the levy of penalty u/s. 270A of the Act. 2. It was a common ground that the default for which penalty was levied in both the appeals was identical. Therefore, it stated that in both the appeals common arguments needed to be advanced against the levy of penalty. Both the appeals were therefore taken up for hearing and are being disposed of by vide this common consolidated order. Printed from counselvise.com 2 ITA Nos. 909 & 910/JPR/2025 Shri Shyam Construction Company 3. For the sake of convenience, the facts relating to the appeal of the assessee in ITA No.909/JP/2025 pertaining to assessment year 2017-18 are being considered for adjudication and our judgment rendered in the said case will apply mutatis mutandis to the other appeal of the assessee also in ITA No 910/JP/2025 for A.Y 2018-19. 4. ITA No.909/JP/2025 A.Y 2017-18 The grounds raised by the assessee are as under:- 1. Confirming of Invoking the provisions u/s 270A of the Income Tax Act and confirming the penalty levied on assessee u/s 270A of Rs. 1,70,537 /- for the reason of under reporting of income is bad in law and facts. 2. Non considering the submission made during appellate proceeding is bad in law and facts. 3. The CIT passed the order without application of mind and without any speaking order on the submission made. 5. The penalty order passed by the AO reveals penalty to have been levied on account of the addition made to the income of the assessee by disallowing expenses on lump sum basis and disallowing interest expenses for non-deduction of tax at source u/s 40(a)(ia) of the Act. The lump sum disallowance of expenses amounted to Rs.5 lacs and deduction claimed of donation disallowed amounts to Rs.38,226/-. The assessee is noted to be engaged in the business of carrying the work of construction on contract basis for the Government/semi-government and private organization and also carries out the work of supply of building material. During assessment proceedings the AO noted the GP of the assessee to have decreased, while the NP showed at marginal increase. 6. The Assessing Officer finding no record of material consumed, labour employed, stock register, site wise details of work-in-progress, quantitative and Printed from counselvise.com 3 ITA Nos. 909 & 910/JPR/2025 Shri Shyam Construction Company qualitative details of opening stock, expenses vouchers along with bills and work in progress, he held that the authenticity of expenses incurred to have remained unverifiable. 7. The assessee was show caused as to why the books of account maintained by the assessee should not be rejected by invoking Section 145(3) of the Act and the lump sum disallowance of Rs.5 lacs of expenses be not made. The assessee merely submitted impossibility of maintaining site-wise accounts considering the nature of business of the assessee. Accordingly, the disallowance of Rs.5 lacs of expenses was made to the income of the assessee and penalty proceedings initiated u/s. 270A of the Act for ‘underreporting of income’. 8. Similarly, the AO noted the assessee to have made interest payment of Rs.1,27,420/- without deducting tax at source thereon. The assessee admitted to have mistakenly failed to do the needful and therefore the AO, invoking the provisions of section 40(a)(ia) of the Act, disallowed 30% of the interest amounting to Rs.38,226/-. Penalty proceedings u/s. 270 A of the Act for ‘underreporting of income’ pertaining to the same was also initiated. Subsequently penalty order was passed levying penalty u/s 270A of the Act on the total addition made to the income of the assessee of Rs.5,38,230/-, being 50% of the amount of tax payable thereon amounting to Rs.1,70,537/-. The same was confirmed by the Ld. CIT(A). 9. It was submitted before me during the course of hearing that the addition/disallowance made while computing the income of the assessee were not challenged in appeal. However, it was contended that since the addition was made to the income of the assessee on estimate basis only, no penalty for ‘underreporting of income’ was leviable in terms of the provision Section 270A of Printed from counselvise.com 4 ITA Nos. 909 & 910/JPR/2025 Shri Shyam Construction Company the Act. Learned counsel for the assessee contended that this pleading of the assessee had been wrongly rejected by the ld. CIT(A). 10. At this juncture the attention of the learned counsel for the assessee was drawn to the provision of Section 270A of the Act and it was pointed out that as per the provision of Section 270A(2)(a) of the Act the addition made to the income of the assessee qualified as ‘underreporting of income’. The provisions of Section 270A(2) of the Act are reproduced hereunder:- Penalty for under-reporting and misreporting of income. 270A. …………………. (2) A person shall be considered to have under-reported his income, if— (a) the income assessed is greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143; (b) the income assessed is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (c) the income reassessed is greater than the income assessed or reassessed immediately before such reassessment; (d) the amount of deemed total income assessed or reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income determined in the return processed under clause (a) of sub-section (1) of section 143; (e) the amount of deemed total income assessed as per the provisions of section 115JB or section 115JC is greater than the maximum amount not chargeable to tax, where no return of income has been furnished or where return has been furnished for the first time under section 148; (f) the amount of deemed total income reassessed as per the provisions of section 115JB or section 115JC, as the case may be, is greater than the deemed total income assessed or reassessed immediately before such reassessment; (g) the income assessed or reassessed has the effect of reducing the loss or converting such loss into income. ……………………………… 11. Learned counsel for the assessee fairly agreed that the assessed income exceeded the income processed u/s 143(1)(a) of the Act and as per 270A(2)(a) therefore the addition made qualified as underreported income . Printed from counselvise.com 5 ITA Nos. 909 & 910/JPR/2025 Shri Shyam Construction Company 12. The attention was thereafter drawn to sub-Section (6) of Section 270A of the Act which provided for exclusions of ‘underreporting of income’ for the purpose of levy of penalty more particularly sub-clause (b) thereof which reads as under:- ………… ………… (6) The under-reported income, for the purposes of this section, shall not include the following, namely:— …….. …….. (b) the amount of under-reported income determined on the basis of an estimate, if the accounts are correct and complete to the satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Commissioner or the Principal Commissioner, as the case may be, but the method employed is such that the income cannot properly be deduced therefrom; 13. It was pointed out that as per the law any ‘underreported income’ determined on the basis of estimate is to be excluded for the levy of penalty u/s. 270A of the Act only if the accounts are correct and complete to the satisfaction of the AO but the method employed is such that the income cannot be properly deduced therefrom. Learned counsel for the assessee was pointed out from the assessment order that the AO had categorically noted the accounts of the assessee to be not correct and complete, since he found several discrepancies in the same with regards to maintenance of proper registers and records as also vouchers being not duly supported. Learned counsel for the assessee was unable to controvert the above facts. 14. In the light of the same I have no hesitation in holding that the assessee’s case clearly qualifies as ‘underreporting of income’ in terms of Section 270A(2) of the Act and is not excluded from the same as per Section 270A(6) of the Act. The assessee has been unable to demonstrate as to how still addition made to Printed from counselvise.com 6 ITA Nos. 909 & 910/JPR/2025 Shri Shyam Construction Company its income on estimation basis does not qualify for levy of penalty u/s. 270A of the Act. Further with respect to the penalty levied on the addition made to the income of the assessee on account of disallowance of expense u/s 40(a)(ia) of the Act, no submissions were advanced against the same before me. 15. In view of the above the order of the ld. CIT(A) confirming the levy of penalty u/s. 270A of the Act for ‘underreporting of income’ stands confirmed. The appeal of the assessee is dismissed. In effect both the appeals of the assessee are dismissed. The order to be pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal ) Rules, 1963 by placing the details on the notice Board. Sd/- ¼ vUukiw.kkZ xqIrk ½ (Annapurna Gupta) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31/12/2025 *Mittali, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Shyam Construction Company, Jaipur 2. izR;FkhZ@ The Respondent- Income Tax Officer Ward-1(1), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA Nos. 909 & 910/JPR/2025) vkns'kkuqlkj@ By order, True Copy lgk;d iathdkj@Asst. Registrar Printed from counselvise.com "