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Income Tax Appellate Tribunal, PATNA BENCH ‘SMC’, PATNA
Before: Sh. N. K. Saini
IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH ‘SMC’, PATNA Before Sh. N. K. Saini, Accountant Member ITA No. 09/Pat./2017 : Asstt. Year : 2007-08 ITA No. 10/Pat./2017 : Asstt. Year : 2007-08 M/s Vatsa Constructions Pvt. Vs Asstt. Commissioner of Income Tax, Ltd., Kasturba Path, North S.K. Circle-2, Puri, Patna-800013 Patna (APPELLANT) (RESPONDENT) PAN No. AABCV2236R Assessee by : Sh. Rakesh Kumar, Adv. Revenue by : Sh. Kausik Kumar Das, Sr. DR Date of Hearing : 13.03.2018 Date of Pronouncement : 15.03.2018 ORDER These two appeals by the assessee are directed against the separate orders each dated 06.10.2016 of ld. CIT(A)-1, Patna.
Since, the appeals relate to the same assessee which were heard together, so, these are being disposed off by this consolidated for the sake of convenience and brevity.
In ITA No. 09/Pat./2017, the grievance of the assessee relates to the sustenance of penalty of Rs.4,00,000/- levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee filed the return of income showing total income at Rs.2,44,400/-. The AO framed the assessment ex-parte u/s 144 of the Act and rejected the books of accounts. The assessment was framed by estimating the income @ 8% on the gross receipts. The AO also initiated the penalty proceedings u/s 271(1)(c) of the Act and levied the penalty of Rs.4,00,000/-
ITA Nos. 09 & 10/Pat./2017 2 Vatsa Construction 5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the AO had applied net profit rate of 8% without any reference to the provisions of Section 44AD of the Act. It was further stated that there was no concealment and/or furnishing of inaccurate particulars of income by the assessee. A reference was made of the order of the ITAT in ITA No. 94/Pat./2010 in the case of Prasad Construction & Co. wherein the penalty u/s 271(1)(c) of the Act on estimated addition was deleted. The ld. CIT(A), however, did not find merit in the submissions of the assessee and sustained the penalty by observing that the expenditure claimed by the assessee, unsecured loan and sundry creditors so shown remained unverified and unsubstantiated for which the AO rightly concluded that inaccurate particulars had been filed in the returns of income.
Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the income was estimated without pointing out any instance of concealment of income or furnishing of inaccurate particulars of income. Therefore, the penalty levied by the AO u/s 271(1)(c) of the Act and sustained by the ld. CIT(A) was not justified. The reliance was placed on the following case laws: DCIT, Circel-5, Patna Vs M/s Prasad Construction & Co. in ITA No. 94/Pat./2010 order dated16.07.2010 M/s Pioneer Construction Company Vs DCIT, Circle, Patna in ITA Nos. 26 & 27/Pat./2012 order dated 03.07.2014
In his rival submissions, the ld. Sr. DR supported the impugned order passed by the ld. CIT(A).
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it
ITA Nos. 09 & 10/Pat./2017 3 Vatsa Construction is an admitted fact that the AO made the estimate of the income by applying the net profit rate of 8% on the contract receipt shown by the assessee. On a similar issues, the ITAT Patna Bench has taken a consistent view that the penalty u/s 271(1)(c) of the Act is not leviable on the estimated income in ITA Nos. 26 & 27/Pat./2012 for the assessment years 2002-03 and 2004-05 in the case of M/s Pioneer Construction Company Vs DCIT, Circle, Patna, wherein vide order dated 03.07.2014 it has been held as under: “7. We have heard ld. Representatives of parties and perused the record placed before us. With regard to penalty imposed on the basis of estimated income, we find that various Hon’ble High Courts have held that penalty cannot be imposed on the basis of estimated income. In the present appeals, we observe that the assessee’s income has been determined on an estimate basis and no case of any concealment and/or furnishing of inaccurate particulars is made out against the assessee. Hon’ble Allahabad High Court in the case of Sushil Kumar Sarad Kumar Vs Commissioner of Income Tax, 232 ITR 588 (All) has held that where additions are made purely on estimate without reference to any evidence/materials being on record, penalty cannot be levied on the figures which are merely based on guess work or estimate. In view of this and respectfully following the judgments cited (supra), we are of the view that it is not a fit case to levy penalty under section 271(1)(c) of the Act. Accordingly, we delete the penalty or both the assessment years under consideration.”
On a similar issue, the Hon’ble Punjab & Haryana High Court in the case of Harigopal Singh Vs CIT 258 ITR 85 held as under: “That there was a difference of opinion as regards the estimate of the income of the assessee. Since the Assessing Officer and the Tribunal adopted different estimates in assessing the income of the assessee, it could not be said that the assessee had concealed the particulars of his income so as to attract clause (c) of section 271(1).”
ITA Nos. 09 & 10/Pat./2017 4 Vatsa Construction 10. We, therefore, by respectfully following the ratio laid down in the aforesaid referred to cases delete the penalty levied by the AO u/s 271(1)(c) of the Act and sustained by the ld. CIT(A).
In ITA No. 10/Pat./2017, the only grievance of the assessee relates to the sustenance of penalty levied by the AO u/s 271(1)(b) of the Act.
Facts of the case in brief are that the AO levied the penalty of Rs.10,000/- by observing that the assessee failed to comply the notices issued on 08.01.2010 and 16.06.2010 u/s 142(1)/143(2) of the Act.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and stated that the notices u/s 143(2), 142(1), show cause notice u/s 271(1)(b) of the Act and the assessment order u/s 143(3)/144 of the Act had never been served upon the assessee or its Director or any of the employee either by post or by hand. Therefore, the penalty levied by the AO u/s 271(1)(b) of the Act was not justified. The reliance was placed on the following decisions of the ITAT Patna Bench: Sri K. P. Sinha in ITA No. 485/Pat./2003, order dated 21.06.2004 Gopal Prasad Sultania in ITA No. 425/Pat./2002, order dated 22.12.2003
The ld. CIT(A), however, did not find merit in the submission of the assessee and sustained the penalty u/s 271(1)(b) of the Act levied by the AO.
Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessment order has been passed ex-parte which clearly shows that no notice for hearing was served upon the assessee, so there was no question of non-compliance.
ITA Nos. 09 & 10/Pat./2017 5 Vatsa Construction 16. In his rival submissions, the ld. Sr. DR supported the orders of the authorities below.
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the AO passed the assessment order dated 14.12.2009 ex- parte u/s 144 of the Act. He simply stated that the assessee did not comply the notices issued u/s 142(1) of the Act on 27.11.2009 to produce the books of accounts and other details on 10.12.2009. However, nothing is brought on record that the said notice was served upon the assessee. Therefore, in the absence of the notice being served upon the assessee, the penalty levied for non-compliance u/s 271(1)(b) of the Act was not justified. In that view of the matter, the impugned penalty levied by the AO and sustained by the ld. CIT(A) is deleted.
In the result, the appeals of the assessee are allowed. (Order Pronounced in the Court on 15/03/2018)
Sd/- (N. K. Saini) ACCOUNTANT MEMBER Dated: 15/03/2018 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT ASSISTANT REGISTRAR