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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.54-56/Rjt/2017 िनधा�रण वष�/Asstt. Years: 2008-2009, 2009-10 & 2010-11 D.C.I.T, M/s.Backbone Construction Pvt. Ltd., Circle-1(1), Vs. Ekta House, 2-Jalaram, Rajkot University Road, Rajkot. PAN: AACCB1167C
(Applicant) (Respondent)
Revenue by : Shri Jitender Kumar, CIT, DR Assessee by : Shri D.M. Rindani, AR सुनवाई क� तारीख/Date of Hearing : 27/03/2019 घोषणा क� तारीख /Date of Pronouncement: 08/04/2019 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeals have been filed at the instance of the Revenue against the separate order of the Commissioner of Income Tax – I, Rajkot [Ld.CIT (A) in short] of even dated 30/12/2016 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here- in-after referred to as "the Act") relevant to the Assessment Year (AYs) 2008- 2009, 2009-10 and 2010-11.
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The Revenue has raised the following grounds of appeal:
The Ld.CIT(A)-1, Rajkot has erred in law and on fact of the case in deleting the penalty u/s.271(1)(c) of Rs.23,81,859/- 2. It is therefore, prayed that the order of the ''Ld.CIT(A) be set aside and that of the Assessing Officer be restored.
The only issue raised by the Revenue in this appeal is that the Ld.CIT (A) erred in deleting the penalty u/s 271(1)(c) of the Act.
Briefly stated facts are that the assessee is a private limited company and engaged in the business of construction of Road, dams, water supply, water purification and other infrastructure work on behalf of the government. A search was carried out at the premises of the assessee company on 24-06- 2010.
4.1 The assessee declared its income for AY 2008-09 for Rs. 6,17,32,938/- but the assessment was framed u/s 153A r.w.s. 143(3) of the Act dated 22-03- 2013 at a total income of Rs. 18,65,26,818/- after making various addition as detailed under: 1. On account of 1,25,00,000/- Disallowance of bogus expenditure Claimed to have made to Jayshree Builder 2. On account of 60,00,000/- Disallowance u/s.40(a)(ia) 3. On account of 7,26,60,205/- Disallowance out of bogus claim of Soil expenses and non- deduction of TDS u/s.40(a)(ia)
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On account of Bogus 3,36,44,675/- claim of transport expenses 12,47,93,880/-
4.2 The assessee carried the matter to the ld. CIT-A who partly allowed the appeal of the assessee vide order dated 31-10-2014 by directing to the AO to re-compute the income of the assessee by applying the 16% rate of net profit on its turnover.
4.3 The assessee further carried the matter to the Hon’ble ITAT Rajkot bench which was pleased to direct the AO to estimate the net income of the assessee by adopting @ 8% of the turnover vide order dated 29-05-2015.
Accordingly, the AO computed the income of the assessee at Rs. 6,94,41,215/- being 8% of the total contract receipt of Rs. 86,80,15,187/-. Therefore addition confirmed by the ITAT for Rs. 77,08,277/- is being the difference in the amount income declared in return and assessed, i.e., ( 6,17,32,938 - 6,94,41,215)
In view of the above, the AO issued a penalty notice to the assessee under section 274 r.w.s. 271(1) © of the Act for levying the penalty. Finally, the AO levied the penalty of Rs. 23,81,859/- on the assessee being 100% of the tax sought to evaded on account of furnishing inaccurate particular of income.
Aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld.CIT(A) submitted that the addition confirmed by the appellate authority does not lead to conclude that the assessee furnished
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inaccurate particulars of income. The assessee in support its claim relied on the judgment of the Hon’ble Supreme Court in the case of Reliance Petroproducts Ltd reported in 332 ITR 158.
6.1 The assessee further submitted that the penalty proceeding is different from the assessment proceedings. Before imposing the penalty, the AO should consider all the relevant material afresh. The assessee in support of its claim relied on the judgment of Hon’ble Supreme Court in case of CIT Vs. Anva Ali reported in 76 ITR 696.
6.2 The assessee also relied on the Judgement of Hon’ble Gujarat High Court in case of CIT vs. Subhash trading Co. reported in 221 ITR 110 wherein it was held that no penalty could be imposed in a case where the income is assessed on estimated basis after the rejection of the books of account.
The Ld.CIT (A) after considering the submission of the assessee deleted the penalty imposed by the AO after having a reliance on the Judgment of Gujarat High court in case of Subhash trading co (Supra).
Being aggrieved by the order of the Ld.CIT (A) the Revenue is in appeal before us.
The Ld. DR vehemently supported the order of the AO. On the other hand the Ld. AR before us filed paper book running from pages 1 to 143 and vehemently supported the order of the ld. CIT-A.
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We have heard the rival contention and perused the material available on record. There is no dispute in the facts of the case as discussed above that the AO levied the penalty on the income determined on an estimated basis. It is settled law that there cannot be any penalty on the assessee where the addition is based on an estimated basis. Regarding this we find support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Subhash trading Co. reported in 221 ITR 110 wherein it was held as under: “The Explanation to section 271(1)(c) provides for raising a rebuttable presumption in favour of the revenue and is merely a rule of evidence. It is also true that the burden is on the assessee to prove that there has been no such gross or wilful neglect on his part in furnishing the correct income. It is equally true that this burden cast on the assessee is not of the same nature which rests on the prosecution in a criminal case for proving the guilt of the accused, but is a burden akin to that in civil litigation where it depends upon preponderance of probabilities. It is abo not necessary that any positive evidence be produced by the assessee before he could contend that failure to return the total assessed income had not arisen on account of any fraud or any gross or wilful neglect on his part. It can even be pointed out from, the material on record, and if he does so by which the presumption raised in favour of the revenue is rebutted, the position reverts to as if there was no explanation giving rise to a legal fiction. If it cart be said on preponderance of probabilities that failure to return the total assessed income had not arisen on account of any fraud or any gross or wilful neglect on the part of the assessee from the material on record, the presumption raised in favour of the revenue can be rebutted and revenue must fail in its attempt to impose penalty on that basis. In the instant case, a best judgment assessment had been made by rejecting the results disclosed by books of account maintained by the assessee and the figure of assessable income had been arrived at by applying an estimated gross profit rate on estimated sales, viz., both the figures were adopted by the revenue authorities on certain assumption but were not the actual figures of sales or gross profit earned by the assessee. There was bound to be a guess-work and application of rule of thumb to some extent in such matters. In these circumstances, in absence of any other material which might reflect on the conduct of the assessee about deliberate attempt to maintain false books of account, on a preponderance of probabilities, no other conclusion could be reached but that the failure to return the total assessed income was not on account of any fraud or gross or wilful neglect on the part of the assessee. In the instant case, the assessee had raised this contention. The material available on record in that regard was before the revenue authorities, and the Tribunal which accepted those contentions of the assessee about invalidity of levy of penalty
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under section 271(1)(c), merely by resorting to its Explanation. The only possible conclusion in the present circumstances was that necessary implication of the material appearing on the record was that failure to return the total assessed income was not on account of any fraud or gross or neglect on the part of the assessee. The burden which lay upon the assessee must be taken in the instant case to be discharged so as to repel the applicability of the legal fiction in the Explanation. There being no other ground the Tribunal was right in holding that penalty imposed by Assessing Officer was not justified. So long as presumption raised in favour of the revenue under the Explanation to section 271(1)(c) stood unrebutted and was operative the revenue need not lead any evidence to reach a positive finding that there was concealment of income of the previous year by the assessee but no soon the presumption raised under the Explanation stood rebutted, the revenue authorities must record a positive finding independent of presumption about concealment of income of the previous year which the assessee had concealed or particulars of which had been inaccurately furnished by him. As in the instant case the assessee's burden to rebut the presumption raised by the revenue stood discharged on the basis of the material available on record, the Tribunal was right to hold that penalty need not be sustained under section 271(1)(c) in absence of any evidence to conclude positive finding that there was concealment of the income”
In view of the above, we hold that the penalty under section 271(1)© of the Act cannot be levied where the income was determined on an estimated basis. Accordingly, we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is dismissed. 11. In the result, the appeal of the Revenue is dismissed Coming to the other appeals filed by the Revenue bearing Nos. 55/RJT/2017 & 56/RJT/2017 12. At the outset, we note that the facts of the case in other appeals of the Revenue are similar to the facts of the instant case i.e. 54/RJT/2017 which we have decided in favor of the assessee and against the revenue vide Para No. 10 of this order. Therefore respectfully following the same we do not find any reason to interfere in the order of the learned CIT (A). Hence the grounds of appeal of the Revenue in both the appeals are dismissed.
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In the result, both the appeals of the Revenue are dismissed.
In the combined results, all the appeals of the Revenue are dismissed.
Order pronounced in the Court on 08/04/2019 at Ahmedabad.
-Sd- -Sd- (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 08/04/2019 manish