IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : D : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
SMT. DIVA SINGH, JUDICIAL MEMBER
Assessment Year : 2006-07
Lukesh Singh, Vs. Addl. CIT, 39, Khanna Nagar, Haridwar Range, Jwalapur, Haridwar. Haridwar.
PAN : AWOPS9824L
Assessee by : Shri Ashwani Taneja, Advocate and Shri Somil Agarwal, CA
Revenue by : Ms Shumana Sen, DR
PER DIVA SINGH, JUDICIAL MEMBER
This is an appeal filed by the assessee against the order dated 18.7.2011 of CIT (A), Dehradun, pertaining to 2006-07 Assessment Year on the following grounds:-
" That having regard to the facts and circumstances o the case, Ld. CIT (A)-I has erred in law and on facts in confirming the penalty u/s 271(1)(c) imposed by the ld. A.O. of Rs.3,91,407/-."
2. The relevant facts of the case are that the assessee declared an income of ` 23,86,095/- wherein the Assessing Officer required him to produce the supporting vouchers for the expenses claimed after giving a few opportunities. Finally, on 27.11.2008, the ld. counsel of the assessee expressed his inability to produce the bills and agreed to offer the income from the civil contract at 8% of the gross receipt in 2 ITA No.3925/Del/2010
the absence of evidence. As such, the total income was computed at ` 35,48,918/- and penalty proceedings were initiated. The said addition was accepted by the assessee and as no appeal was filed against the said addition, however, the penalty proceedings were contested by the assessee before the Assessing Officer and the CIT (A), who upheld the action of the Assessing Officer in upholding the penalty imposed. Aggrieved by this, the assessee is in appeal before the Tribunal.
3. The Ld. AR, inviting attention to the assessment order, contended that a perusal of the assessment order would show that the assessee in the year under consideration, was the owner of three firms, namely, Creative Constructions, Shree Raj Enterprises and S.K. Enterprises. M/s Creative Constructions, it was submitted, is engaged in civil construction work and M/s Shree Raj Enterprises and M/s S.K. Enterprises were engaged in labour supply work as per the assessment order and the assessee had shown in the income and expenditure account of M/s Creative Enterprises net income of ` 20,15,576/- out of the gross receipts of ` 3,97,30,000/-. Inviting attention to the assessment order, it was further emphasized that on examination of the accounts submitted, it was found that the bills in regard to the expenses claimed of raw material consumed were found to be not supported completely by bills and vouchers and since the assessee expressed his inability to produce the bills, the assessee agreed to offer the income from civil contract at 8% of the gross receipts. The Ld. AR, emphasizing the fact that the assessee was engaged in civil construction work wherein certain bills were raised for purchase of 'bajri', ''Reta' (sand) and 'miti' (loose soil). As such, looking at the nature of purchases, which were from the unorganised sector, the bills necessarily either would be hand made or at times were self made as on account of dealing with illiterate and unorganized sector, necessary bills were not issued by the small parties who supplied some of their 3 ITA No.3925/Del/2010
raw materials on account of this reason in order to buy peace of mind and avoid litigation the assessee agreed to offer 8% of the gross receipts. However, this fact, it was argued, would not amount to either concealment or of filing of inaccurate particulars. It was his argument that there are a plethora of judgements which lay down the proposition that agreed additions would not attract penalty proceedings. It was also his argument that penalty proceedings and assessment proceedings are separate and distinct and simply because the assessee did not contest the addition in the quantum proceedings, as he had agreed to offer the same, it does not mean that automatically penalty is justified. It was also his contention that the gross receipts of the assessee had not been interfered with and it is only on account of the nature of the work of the assessee that expenses claimed were disallowed resorting to estimation of income. It was his stand that in the case of estimated additions, penal provisions are not attracted as no concealment or filing of inaccurate particulars can be made out. Reliance was placed upon:
(i) Sahyog Sahkari Shram Samveda Samiti Ltd. vs. ACIT , 111 TTJ 540 (Luck).
(ii) Ripudaman Singal vs. ITO, 55 TTJ 396 (Chd.) (iii) CIT vs. Sidhartha Enterprises, 322 ITR 80 (P&H)
4. Reliance was also placed upon National Textiles vs. CIT 249 ITR 125 (Guj). Specific attention was invited to the judgement of the Hon'ble Mumbai High Court in the case of CIT vs. Upendra V. Mithani rendered on 5th August, 2009 in ITA (L) No.1860 of 2009 for the proposition that if the assessee gives an explanation which is unproved, but not disproved i.e., it is not accepted, the circumstances do not lead to the reasonable and positive inference that the assessee's case is false, then, in such an eventuality, the view taken by the Tribunal that the penalty proceedings are not attracted is a 4 ITA No.3925/Del/2010
reasonable and possible view. Accordingly, it was his prayer that the impugned order be set aside and the penalty order be quashed.
5. The ld. Sr. DR, Ms Shumana Sen inviting specific attention to the assessment order, contended that three different and distinct opportunities were given by the Assessing Officer, namely, on 11.11.2008, 18.11.2008 and on 25.11.2008 and on each of these occasions the assessee could not produce the supporting bills. As such, the Assessing Officer had no alternative, but to estimate the addition which, as per facts has been agreed to by the assessee as no appeal has been filed. Inviting attention to the penalty order, it was the submission that neither in the penalty proceedings before the Assessing Officer or the CIT (A) the assessee could file original bills and nor have they been filed before the Tribunal. The books of the assessee have been rejected, as such, the CIT (A) was fully justified in holding that Explanation 1 to Section 271(1)(c) was attracted. Accordingly, it was her contention that the impugned order deserves to be upheld.
6. The Ld. AR, in reply, contended that it is a settled principle that penalty is not automatically attracted and penalty proceedings and assessment proceedings are separate and distinct. In the peculiar facts of the case, it was argued that the revenue has not demonstrated that there was concealment or filing of inaccurate particulars and in terms of the principle laid down by the Hon'ble Gujarat High Court, in National Textiles vs. CIT 249 ITR 125 (supra), it was his contention that falsity has to be proved and it cannot be presumed that the version of the assessee is false which view is supported by the judgement of the Hon'ble Karnataka High Court in CIT vs. M.M. Gujamgadi 290 ITR 168 (Kar.), (copy placed at pages 90 - 93 of the paper book) and the judgement of Hon'ble Supreme Court in CIT vs. Suresh Chand Mittal 251 ITR 9 (SC).
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7. We have heard rival submissions and perused the material available on record. On a careful consideration of the same, looking at the nature of the business of the assessee and taking note of the findings in the assessment order, which specifically records that the assessee, on account of his inability to produce the bills, agreed to offer the income from civil contract at 8% of the gross receipts in the absence of evidence, juxtaposed with the contention that the nature of the assessee's business necessarily had bills and vouchers which were from the unorganized sector pertaining to the 'bajri', sand, 'miti', etc., which, as per the assessment order, is borne out as the assessee has been required to support by way of vouchers of the raw material consumed. The explanation of want of supporting evidence in the peculiar facts and circumstances of the case can be accepted as necessarily the bills and vouchers in support of the raw materials like sand, 'reti', 'bajra', etc. may not be upto the satisfaction of the Assessing Officer. The facts remains that the gross receipts have not been interfered with. Thus, looking at the overall factual matrix and the explanations of the assessee qua the issue involved, we are of the view that the impugned order deserves to be set aside and the penalty order needs to be quashed.
8. In the result, the appeal filed by the assessee is allowed.
The order pronounced in the open court on 05.02.2013.
[G.D. AGRAWAL] [DIVA SINGH] VICE PRESIDENT JUDICIAL MEMBER
6 ITA No.3925/Del/2010
Copy forwarded to: -
5. DR, ITAT
ITAT, Delhi Benches