Income Tax Appellate Tribunal - Jaipur
Deepshree Buildcon Ltd. , Kota vs Assessee on 9 January, 2015
1 ITA No. 310/JP/2012
M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota
IN THE INCOME TAX APPELLATE TRIBUNAL
JAIPUR BENCH, JAIPUR
(BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA)
ITA No. 310/JP/2012
Assessment year: 2006-07
PAN : AACCD0605 M
M/s. Deepshree Buildcon Ltd. vs. The ACIT
Ist floor, Deepshree Parisar Circle- 1
Jhalawar Road, Opp. HDFC Bank, Kota Kota
(Appellant) (Respondent)
Assessee by : Shri Siddharth Ranka, Advocate.
Department by: Shri Kailash Mangal, JCIT
Date of Hearing: 08-12-2014
Date of Pronouncement: 09 -01-2015
ORDER
PER R.P. TOLANI, JM
This is an appeal filed by the assessee against the order of the ld. CIT(A), Kota dated 20-01-2012: the solitary issue agitated by the assessee pertains to imposition of penalty of Rs. 90,000/ u/s 271(1)(c) of the Act. 2.1 Brief facts of the case are that the assessee is engaged in the business of real estate including repair and reconstruction of all types of building and sale and purchase of land. Regular books of accounts are maintained which are audited u/s 44AB. During the course of assessment proceedings, the AO observed that the assessee could not furnish some of the vouchers and WIP 2 ITA No. 310/JP/2012 M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota stock details as finely required by him. The assessee filed explanation in this behalf dated 26-12-2008 contending that the books of account were duly audited under the Companies Act as well as Income Tax Act u/s 44AB. The record has been maintained to the maximum possible extent. The valuation of work in progress has been done by way of physical verification. Looking at the nature of the assessee's business, it was not possible to maintain the minute details which were being asked for, however in the conclusion of the letter, assessee stated as under.
'' To avoid any further litigation and purchase peace you are kindly requested to make trading addition reasonably with the request that no pecuniary action whatsoever provided in the Act will be initiated against the assessee.'' The AO rejected the books of account of the assessee u/s 145(3) of the Act and made impugned addition as under:-
'' In the instant case of the assessee, even the sales are not verifiable nor the expenses can be said to be completely vouched or verifiable. Thus, considering the facts, the gross sales are estimated at Rs. 9865000/- enhancing the declared receipts of Rs. 9365000/- by Rs. 5 lakhs. On the estimated gross receipts net profit rate of 12.5% is applied. This gives the net profit of Rs. 1233125/-. The assessee has already disclosed the net profit rate of Rs. 980282/- in the return. Thus the addition of Rs. 252843/- is made to the total income of the assessee to cover up the discrepancies in the construction of business.'' 3 ITA No. 310/JP/2012 M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota 2.2 Consequent to additions, penalty proceedings were initiated u/s 271(1)© of the Act. The assessee defended the same contending that despite proper books of account maintained they have been arbitrarily rejected and the sales, closing stock of work in progress and the gross profit all were estimated. The entire edifice of the addition was indiscriminate rejection of books and estimation on adhoc basis for which penalty cannot be imposed.
The assessee relied on the following case laws.
(1) Moti Lal Padampat Sugar Mills Ltd. vs. State of UP & Others 118 ITR 326.
(2) Hindustan Steel Ltd. vs. State of Orrisa, 80 ITR 26(S.C.) (3) D.M. Dhanukar vs. CIT , 65 ITR 280 (Bombay) (4) Chhota Bhai Jetha Bhai Patel & Co. vs. CIT, 134 ITR 201 (Guj.) The AO however, imposed the penalty.
2.3 In the first appeal, the ld. CIT(A) confirmed the finding of the AO that the assessee has not furnished the correct particulars of income and upheld the penalty.
2.4 Being aggrieved, the assessee is before us.
2.5 The ld. Counsel for the assessee reiterated the facts and circumstances of the case as contended before the lower authorities. It is pleaded that assessee did not offer to reject the books and as AO was unrelenting on the 4 ITA No. 310/JP/2012 M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota specific details which were not possible to be furnished in time urged for a reasonable addition. The AO however rejected the books and made ad hoc additions on various counts. Quantum and penalty proceedings are separate and independent of each other. Merely because some additions are made on ad hoc estimate, concealment penalty cannot be automatically levied. Reliance is placed on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading and Rubber Industries (ITA No. 542/2008 dated 19-09-2013) where on the similar facts and circumstances, ITAT Jaipur Bench deleted the penalty. In departmental appeal, the Hon'ble High Court held that no substantial question of law arose. 2.6 The ld. Counsel for the assessee reemphasized the judgement of Hindustan Steel Ltd. vs. State of Orrisa (supra) for the proposition that penalty cannot be imposed for technical and venial breach. In this case, the assessee's books of account are duly audited as per Companies Act and Income-tax Act, The expenditure in respect of the assessee's business was incurred at various sites. Sometimes, in assessee business of working the exact details may not be available with the assessee but they do not tantamount to furnishing inaccurate particulars of income. Besides addition in respect of WIP stock amounts to postponement of income as the same stock becomes opening stock of the next year. Further reliance is placed on 5 ITA No. 310/JP/2012 M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota the case of CIT vs. Reliance Petro Products (P) Ltd. , 322 ITR 158 (SC) for the proposition that the assessee has filed all the relevant details along with return of income. Thereafter if some disallowances or additions by AO based on the information furnished in the return do not amount to furnishing of inaccurate particulars of income and is not exigible to impugned penalty. Thus the penalty imposed by the ld. CIT(A) may be deleted. 2.7 The ld. DR relied on the orders of the lower authorities and also placed reliance in the case of Mak Data (P) Ltd. vs. CIT ,358 ITR 593 (SC). 2.8 The ld. Counsel for the assessee in reply of Mak Data (P) Ltd. case (supra) contended that in Mak Data case there was un-quantified surrender whereas in this case of the assessee there was no surrender to reject books of accounts and request was to make some reasonable addition to avoid litigation and conclude the proceedings. This does not amount to un- quantified surrender as held in the case of Mak Data (P) Ltd. vs. CIT(supra). 2.9 We have heard the rival contentions and perused the material available on record. It has not been disputed that the books of account are audited and the expenses are incurred at various sites. The additions are as a result of estimation based on assessee's efforts to get the proceedings settled with a pertinent request to make reasonable addition. The assessee no where agreed for rejection of books and same does not amount to un-quantified 6 ITA No. 310/JP/2012 M/s. Deepshree Buildcon Ltd. vs. ACIT, Circle- 1, Kota surrender in terms of facts of Mak Data (P) Ltd. vs. CIT (supra). Besides WIP stock addition leads to increase in the opening stock of next year. We are of the view that decisions of Hon'ble Supreme Court in the cases of CIT vs. Reliance Petro Products (P) Ltd. (supra) and Hindustan Steel Ltd. vs. State of Orrisa (supra) are squarely applicable to the assessee case Therefore, in the facts and circumstances of the case, we are inclined to delete the penalty imposed u/s 271(1)© by the lower authorities. Thus the appeal of the assessee is allowed 3.0 In the result, the appeal of the assessee is allowed The order is pronounced in the open Court on 09-01-2015 Sd/- Sd/-
(T.R. MEENA) (R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Jaipur
Dated: 9th JAN 2015
*Mishra
Copy forwarded to:-
1.M/s. Deepshree Buildcon Ltd. , Kota
2. The ACIT, Circle- 1, Kota
3. The ld. CIT(A)
4. The ld. CIT By Order
5..The ld. DR
6.The Guard File (IT No. 310/JP/2012)
AR ITAT, Jaipur