Income Tax Appellate Tribunal - Delhi
Sachin Security Services, Haridwar vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'G' NEW DELHI)
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No.3191 /Del/2012
Assessment year : 2008-09
M/s Sachin Security Services, DCIT,
T-65, Shivalik Nagar, Circle Haridwar,
BHEL Ranipur, Haridwar. V. Haridwar.
(Appellant) (Respondent)
PAN /GIR/No.ABDFS
/GIR/No.ABDFS-
ABDFS-9206-
9206-N
Appellant by : Shri Rakesh K. Sehgal, C.A.
Respondent by : Smt. Surjani Mohanty, Sr. DR.
ORDER
PER TS KAPOOR, AM:
This is an appeal filed by the assessee against the order of Ld CIT(A) dated 24.6.2011. The grounds raised by the assessee are as under:-
1. Imposition of penalty u/s 271(1)( c) by the Assessing Officer amounting to `.5,00,000/- and modification of the same by the CIT(A) with reference to the tax sought to be evaded after giving effect of appeal order of CIT(A) is contrary to facts and law.
2. The appellant craves leave to add or amend any of the grounds of appeal.
2. The brief facts of the case are that the assessee is a partnership firm and it filed its return of income through e.filing on 29.9.2008 2 ITA No...../Del/ declaring a total income of `.6,16,310/-. Thereafter, the return was revised on 20.10.2008 declaring total income at nil. The case of the assessee was selected for scrutiny. Various notices u./s 142(1) were issued and served on the address furnished in the return of income but the assessee did not make compliance with any of these notices issued from time to time. Therefore, the assessment was completed on 27.12.2010 u/s 144 of the Income Tax Act, 1961 on the basis of material available on record. The Assessing Officer found that from Form No.26 that assessee had received contractual receipts of `.1,85,70,848/- from various parties. The Assessing Officer then assessed the income of assessee in accordance with the provisions of section 4AAD of the Act i.e. 8% of total turnover. The Assessing Officer then proceeded to impose penalty u/s 271(1)(c) of the Act on account of concealment of income. In reply to penalty notice, the assessee submitted that both the returns were filed by his previous counsel and it was not aware of the revised return as revised return had been filed without any reason as well as without their consent. Therefore, it pleaded that there was no mala fide intention. The Assessing Officer after considering the reply of the assessee did not agree with the contention of assessee and imposed penalty of `.5 lakhs.
3. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and submitted that the addition was made on estimate and therefore penalty should not have been imposed. Reliance was placed on the judgment of Hon'ble Supreme Court in the case of CIT v. Reliance Petro products Pvt. Ltd. The Ld CIT(A) after considering the submissions of assessee observed that expenditure to the tune of `.6,16,900/- was increased in the revised return of income and correspondingly sundry creditors were increased with the equivalent amount. The ld CIT(A) observed that the assessee had failed to explain 3 ITA No...../Del/ as to why it was done and had failed to substantiate the contention with regard to the relevant documentary evidence. The Ld CIT(A) further observed that assessed income after giving appeal effect should work out at `.7,62,802/- and thus there was a difference between the assessed income and assessee's own admitted income in the first instance. As regards the assessee's reliance on the judgment of Hon'ble Supreme Court in the case of CIT v. Reliance Petro Products Pvt. Ltd. (supra) the ld CIT(A) observed that there is nothing in the decision which prevents the Assessing Officer to impose penalty u/s 271(1)( c) where inaccurate particulars are furnished. He further held that law itself allows the assessee an opportunity to show that it has offered an explanation in connection with facts material to the computation of his total income. He observed that in this case the assessee sought to convert its net profit from `.6,16,312/- to net loss of `.588/- by inflating the expenditure between two P&L Accounts furnished with two returns of income and failed to furnish any explanation for the same. In view of this, the action of Assessing Officer was confirmed. However, direction was given to Assessing Officer to re-compute the penalty with reference to tax sought to be evaded instead of `.5 lakhs imposed by the Assessing Officer.
4. Aggrieved, the assessee filed appeal before this Tribunal.
5. At the outset, Ld AR submitted that assessment was completed u/s 144 and Ld CIT(A) had upheld the addition but had allowed deduction on account of partner's salary and assessee did not file appeal because it had got relief as partner's salary was allowed to be adjusted against profit estimated by Assessing Officer. He further argued that penalty u/s 271(1)(c) cannot be imposed where additions 4 ITA No...../Del/ are made on account of estimation of income. Reliance was placed on the following judgments:-
1. CIT v. Vijay Kumar Jain 325 ITR 378.
2. CIT v. Mahendra Singh Khadla 71 DTR (Raj.) 189.
3. CIT v. Aero Traders Pvt. Ltd. 322 ITR 316 (Del.).
6. The Ld AR argued that in all these cases decided by Hon'ble Courts of Chhatisgarh, Jaipur and Delhi it was held that where profits are estimated or where income is estimated, penalty u/s 271(1)(c) cannot be levied.
7. The Ld DR, on the other hand, strongly relied upon the Assessing Officer's order and ld CIT(A)'s order and argued that assessee had suppressed the earlier income declared in the original return of income and therefore no explanation was furnished by assessee in respect of increased expenses and therefore assessee had on the one hand had furnished inaccurate particulars of income and on the other hand had failed to furnish the explanations for difference in the two returns of income and therefore Assessing Officer had rightly imposed the penalty. Reliance was placed on the following judgments:-
1. CIT v., Smt. Chander Kanta & Others 205 ITR 607 (MP).
2. CIT v. Barsat Hussain (Pat.). 171 ITR 405.
3. AM Shah & Co. v. CIT 238 ITR 415 (Guj.).
4. CIT v. H. Krishnaswamy & Sons 219 ITR 157 (Mad.).
8. In his rejoinder the Ld AR submitted that the addition in the present case was not made on the basis of revised return but on the basis of estimation of income and therefore the facts and 5 ITA No...../Del/ circumstances of the case are fully covered with facts and circumstances of the case laws relied upon by him.
9. We have heard the rival submissions of the parties and has gone through the material available on record. We find that the assessee did not appear before Assessing Officer for completion of assessment proceedings and Assessing Officer on the basis of gross receipts as per Form No.26 AS estimated the income of assessee on the basis of 8% of gross receipts in the light of provisions of section 44AD. Both the P&L Account attached with original return and revised returns were audited by different Chartered Accountants. However, gross receipts in both the cases was same i.e. `.2,18,71,876/-. The decrease in profit in the revised return was due to increase in labour, wages and expenses and consequent increase of an equal amount in the figure of trade creditors. In view of non cooperation by the assessee, the Assessing Officer had estimated the profits on the basis of 8% of turnover. However, the penalty was imposed because of the failure on the part of assessee to furnish explanation with regard to difference in profit figures in the two returns. The explanation before Ld CIT(A) that revised return was without its consent is of no force. In our opinion, the assessee took this plea before ld CIT(A) as it was unable to explain the difference in expenses. Therefore, in our view, the assessee had necessarily failed to furnish explanation to the difference in original return and revised return. The case laws relied upon by Ld AR of the assessee are wherein the books of accounts were rejected and income was estimated on the basis of some percentage. Whereas in the present case, the assessee had filed original return and had revised it by lowering the profits and on explanation it could not explain the difference. The facts of the case laws relied upon by ld DR in the case of CIT v. Chander Kanta & Others are similar to the facts and 6 ITA No...../Del/ circumstances of the case. In that case also, the assessee had filed return showing loss of `.51,530/- and then revised return was filed showing profit of `.7500/-. The Assessing Officer estimated the total income and determined the income at `.51,000/-. On a reference to Hon'ble Madhya Pradesh High Court, the Hon'ble Court held that when the assessee had submitted his return and showed loss of `.50,000/- and then revised it and showed a profit of `.7500/- he had necessarily suppressed the particulars of income and given an incorrect account of his income. The assessee did not maintain books of accounts and therefore his income was to be assessed on estimated basis only. Therefore, the assessee was liable to penalty. Similar views were held by Hon'ble Madras High Court in the case of CIT v. H. Krishnaswamy &sons 219 ITR 157. The facts of that case are that assessee was doing transport business. Original assessments for assessment year 1979-80 & 1980-81 were completed on a total income of `.81,370/- and `.53,610/-. Subsequently there was a raid in the premises of the assessee. The assessee filed revised return for two years and admitted the suppression. The Hon'ble Court had held that cancellation of penalty by the Tribunal was not valid.
10. In the present case the penalty u/s 271(1)( c) was imposed due to failure of the assessee to explain the difference in original return and revised return. Though Assessing Officer had imposed the penalty for a lump sum amount of `.5,00,000/-, the Ld CIT(A) modified it and directed the Assessing Officer to calculate the penalty on the basis of tax ought to be evaded. In our opinion, the tax ought to be evaded is difference between figures of profits between the two Profit & Loss Accounts for which assessee could not furnish any explanation.
7 ITA No...../Del/11. In view of the above discussion, we do not see any infirmity in the order of Ld CIT(A) except regarding quantum of penalty which should be calculated on the basis of difference between figures of profits between two profits & loss accounts. We direct the Assessing Officer to calculate penalty accordingly.
12. In view of the above, the appeal filed by the assessee is partly allowed.
13. Order pronounced in the open court on 19th day of October, 2012.
Sd/- Sd/- (I.C. SUDHIR) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dt. 19.10.2012. HMS Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.
By Order (ITAT, New Delhi).
Date of hearing 28.8.2012
Date of Dictation 19.10.2012
Date of Typing 19.10.2012
Date of order signed by 19.10.2012
8 ITA No...../Del/
both the Members &
pronouncement.
Date of order uploaded on net 22.10.2012
& sent to the Bench concerned.