Income Tax Appellate Tribunal - Ahmedabad
Perfect Security Services, Ahmedabad vs Assessee
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "C" AHMEDABAD
Before S/Shri Bhavnesh Saini, JM and D.C.Agrawal, AM
ITA No.420/Ahd/2009
Asst. Year 2003-04
Perfect Security Services, Prop. Vs. Dy. CIT, Circle-2,
Shyourajsingh B. Chauhan, 240, 2 n d floor, Ahmedabad.
Sarvodaya Commercial Centre, Salapose
Road, Near GPO, Ahmedabad.
Appellant Respondent
Appellant by :- Shri Sakar Sharma, AR
Respondent by:- Shri Mudit Nagpal, Sr.DR
ORDER
Per D.C. Agrawal, Accountant Member.
This is an appeal filed by the assessee raising following ground :-
(1) The ld. CIT(A) erred in law and on facts of the case in upholding the action of the AO in levy of penalty u/s 271(1)(c) on Rs.4,53,986/- added by applying estimated rate of profit.
2. The only issue involved in this appeal is levy of penalty under section 271(1)(c) on addition of Rs.4,53,986/-.
3. The assessee is engaged in the business of providing security personnel to various organizations in private and public sector. During the course of assessment proceedings the AO examined the bonus register and found various defects such as, lack of residential addresses of the personnel, their signatures and lack of revenue stamp on the payment, writing of the register apparently in one sitting and hence making it difficult to verify the payment. He also found bad debt written off but not ITA No.420/Ahd/2009 Asst. Year 2003-04 proved. There was claim of expenditure which was partly considered bogus. The assessee had moved a petition before the Settlement Commission for Asst. Year 1999-2000 to 2001-02 wherein income was estimated at 7% as against 2% declared by the assessee. In Asst. Year 2002-03 business income was estimated @ 10% of the gross receipt. In Asst. Year 2003-04 AO also estimated business income at Rs.3496919/- @ 10% of the gross receipt. He also initiated penalty proceedings. In penalty proceedings the AO levied penalty of Rs.4,55,172/- being 100% of the tax sought to be evaded in respect of the addition made. The ld. CIT(A) deleted the penalty in respect of bad debts.
4. Before us, the ld. AR for the assessee submitted that the Tribunal has deleted the quantum addition by directing to accept the tax as under :-
"6. We have considered the rival submissions and the material available on record. It is admitted fact that survey was conducted in the preceding assessment year. No survey was conducted in the assessment year under appeal. Therefore, the defects found during the course of survey and statement recorded in earlier years cannot be the basis for rejection of the book results of the assessee in the assessment year under appeal. The assessee maintained proper books of account which were also audited and the assessee produced all the details and ledger of various parities including bonus register and details of the bad debts. The learned Counsel for the assessee explained that bonus register was consolidated for several security provided to different organizations in which also no specific defect has been pointed out by the AO. Considering the history of the assessee as noted by the AO at page 4 of the assessment order it is clear that the assessee has more or less shown better results in the books of account as compared to the preceding assessment years 2000-01 and 2001-02. Since the book results cannot be rejected on the basis of the findings given in the earlier years, therefore, the AO should have applied mind independently in order to make out a case of rejection of book results in the assessment year under appeal. The defects noted in the bonus register regarding same PAN used by same person for making the entries are insignificant observations which would not make out a case of rejection of whole of the books of account of the assessee. The AO has not pointed out as to which bonus has been claimed without any justification. The AO has also not made out any case as to which of the bonus payment was not connected with the 2 ITA No.420/Ahd/2009 Asst. Year 2003-04 business activities of the assessee. The AO has mentioned in the assessment order that the assessee furnished Xerox copy of the bonus payment register of various parties for making claim for bonus expenditure. The AO instead of pointing out any specific defect in the payments rejected the whole of the book results of the assessee. Considering the above facts and circumstances and the fact that no specific defect has been pointed out in the books of account of the assessee, we do not find it to be a fit case for rejection of the book results merely on the basis of facts found during the course of survey in the previous years. As regards bad debts, the AO could have disallowed claim of the assessee separately but such cannot be the reason for rejection of the book results against the assessee. Similarly, if any bogus payment would have been found it would have been disallowed separately, but the AO has not identified which of the bonus payments were unjustified or not connected with the business activities of the assessee. We accordingly, hold that the authorities below were not justified in rejecting the book results of the assessee and applying higher profit rate in the matter. We accordingly, set aside the orders of the authorities below and direct the AO to accept the book results declared by the assessee. As a result, grounds No.1 and 2 of the appeal of the assessee are allowed."
He submitted that once addition does not survive the question of levying penalty under section 271(1)(c) does not arise.
5. The ld. DR on the other hand supported the order of AO.
6. After considering the rival submissions and perusing the material on record, we direct to cancel the penalty because addition which formed the basis of levy of penalty was deleted by the Tribunal. Similar issue came up before the Tribunal in the case of Dy CIT, Bharuch Circle vs. Dr.I.A. Khan, Prop. of Zain Burns Centre in ITA No.1477/Ahd/2010 Asst. Year 2006-07 wherein the issue has been decided in favour of the assessee. The observations of the Tribunal are as under :-
"9. Further clause (c) to section 271(1) mentions "as concealed........or furnished". They are past tense words indicating that assessee has committed certain act on which penalty is leviable. Thus the 3 ITA No.420/Ahd/2009 Asst. Year 2003-04 act of concealment or furnishing of inaccurate particulars should be viewed by the AO as done with respect to return of income. The omission or commission or contumacious conduct has to be viewed from the return of income and if certain thing is not disclosed or not furnished therein only then it can be said that assessee has concealed the particulars of income or furnished inaccurate particulars of income. Prior to this assessee has not done any contumacious conduct on which penalty can be levied. Merely because certain receipts are not recorded in the books of account or receipts are not issued to the patients, but income therefrom was finally declared in the return of income, then there is no contumacious conduct. For not maintaining books of account or not issuing receipts to the patients for the amount received by the assessee, the books, at the best, can be rejected by invoking provisions of section 145(3) and income can be estimated in accordance with section 144. But where the AO accepts the income declared in the return of income then assessee cannot be charged for any contumacious conduct. There are in fact several judgments according to which penalty is not leviable if addition is deleted. Hon. Punjab & Haryana High Court in CIT vs. Prakash Industries Ltd. (2010) 322 ITR 622 (P & H) held that basis for levy of penalty is returned income. If additions are deleted in quantum proceedings penalty could not be imposed. The Hon. High Court has held as under :-
"A search showed that the assessee had received amount of Rs.3.5 crores from the bank account of S. Faridabad. It was observed that the firm was a bogus firm and the claim of the assessee that the amount was received towards consideration for sale of material, was not accepted. Hence, addition was made to the declared income. Further additions were made by holding that lease rent shown to have been paid by the assessee had not been in fact been paid and the claim for depreciation could not be allowed as the machinery was not in the possession of the assessee during physical verification. The Commissioner (Appeals) upheld the addition in respect of receipts shown to have been made from S but deleted the addition towards lease rent and depreciation allowance, taking into account additional evidence led by the assessee. On further appeal, the Tribunal upheld the plea of the assessee in respect of amount received from S but dismissed the appeal of the Revenue in respect of deletions in respect of lease rent and depreciation allowance. The Tribunal cancelled the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. On appeal to the High Court:
Held, dismissing the appeal, that as regards the deletion by the Commissioner (Appeals) after referring to the additional evidence led before him, the Tribunal had examined the matter and recorded that a remand report was duly sought and thus no prejudice was caused by considering the additional evidence. With regard to the amount received from S the matter was in the realm of appreciation of evidence. Even if it is held that two views are possible, the inference drawn by the Tribunal, being the 4 ITA No.420/Ahd/2009 Asst. Year 2003-04 final fact finding authority, could not be held to be perverse. The cancellation of penalty was valid."
Similar view has been taken in the following judgments also:
CIT vs. Reliance Petro Products 322 ITR 158 (SC) Addl. CIT v. Badri Kashi Prasad (1993] 200 ITR 0206 (All) Prabhat Oil Traders v. ITO(No. 3) (1996) 218 ITR (A.T.) 0039 ITAT, Ahd.
City Dry Fish Company v. CIT (1999) 238 ITR 0063 (A.P.) CIT vs. Mohd. Bux Sokat Ali (2004) 265 ITR 326 (Raj) ACIT vs. VIP Industries (2009) 122 TTJ 289 (Mum)
10. Our view that no penalty is leviable if impugned amount is disclosed in the return of income is supported by the decision of Hon. Allahabad High Court in the case of Smt. Govinda Devi vs. CIT (2008) 304 ITR 0340 (All). In that case assessee received lottery prize money in January, 1992 and disclosed the same in the return filed for Asst. Year 1992-93 and paid the taxes. The assessing authority passed an ex parte assessment order and ex parte penalty order in Asst. Year 1991-92. It was held by the Hon. Court that once prize money has been disclosed in the return of income for Asst. Year 1992-93 and also taxes were paid then assessing authority had apparently committed an error in levying the penalty. In K.C. Builders vs. ACIT (2004) 265 ITR 562 (SC) it was held by the Hon. Apex Court that where additions are made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment. No penalty would survive if addition did not survive. In CIT vs. Arthanariswamy Chettiar (S.S.K.G.) (1982) 136 ITR 145 (Mad) Hon. Madras High Court held that penalty can be imposed with reference to the concealment done in the original return filed under section 139. In the case of Sulemanji Ganibhai vs. CIT (1980) 121 ITR 0373 (M.P.) it was held that an assessee incurs penalty under section 271(1)(c) if he files inaccurate particulars of his income in the return or conceals the particulars of income therein. There can be no concealment until there is a duty to disclose. The duty to disclose particulars of income arises at the time when assessee furnishes return of income under section 139 and if in filing his return he conceals the particulars of income or furnishes inaccurate particulars he incurs penalty under section 271(1)(c). In the case of Patna Guinea House vs. CIT (2000) 243 ITR 0274 (Pat) it is held that there is no case for levy of penalty if income is disclosed in the return of income but assessee has refused to disclose source of income."5 ITA No.420/Ahd/2009
Asst. Year 2003-04 Therefore, following the above decision of the Tribunal, we cancel the penalty levied by the AO and confirmed by the ld. CIT(A). As a result, the appeal filed by the assessee is allowed.
7. In the result, the appeal filed by the assessee is allowed.
Order was pronounced in open Court on 25/3/11.
Sd/- Sd/-
(Bhavnesh Saini) (D.C. Agrawal)
Judicial Member Accountant Member
Ahmedabad,
Dated : 25/3/11.
Mahata/-
Copy of the Order forwarded to:-
1. The Assessee.
2. The Revenue.
3. The CIT(Appeals)-
4. The CIT concerns.
5. The DR, ITAT, Ahmedabad
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT, Ahmedabad
1.Date of dictation 17/3/2011
2.Date on which the typed draft is placed before the Dictating 23/3/ 2011 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 Asstt. Registrar for signature on the order........................
9.Date of Despatch of the Order.................
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