DCIT, NEW DELHI vs. M/S. D.D. CONSTRUCTION PVT. LTD., NEW DELHI

order dated 19.02.2014 qua Assessment Year 2010-11 passed by Ld. CIT(A)-III, New Delhi, deleting the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’) on the grounds inter alia that:-

“ 1. On the facts and in the circumstances of the case, the CIT(A) has erred in cancelling the penlty of Rs. 16,76,195/- levied by the AO under section 271(1)(c) of the Income Tax Act, 1961. 2. The Order of the CIT(A) is erroneous and is not tenable on facts and in law. 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

2. Briefly stated the facts necessary for adjudication of the controversy at hand are: On the basis of assessment order framed u/s 153C read with Section 143(3) of the Income tax Act, 1961 whereby AO made addition of Rs. 49,31,437/- on account of discrepancies in the transactions and AO estimated the addition of net profit @ 0.25% of the total turnover declared by the assessee. Assessee pleaded during the assessment proceedings that such discrepancies are natural since transactions are being handled by the employees stationed at various sites and has proposed surrender of Rs.

. M/s D.D. Construction Pvt. Ltd., New Delhi.

20,00,000/- to the total income. The AO initiated the penalty proceedings u/s 271(1)(c). Declining the contentions raised by assessee, AO levied the penalty of Rs. 16,76,195/- @ 100% of the tax sought to be evaded, on the ground that the assessee had concealed part of its income.

surrendered an amount of Rs 20,00,000/-, over and above the return income which was not accepted by the AO, who has made minimum addition on estimated basis @ 0.25% of net profit of total turnover to the tune of Rs. 49,31,437/- to the total income of the assessee. It is also not in dispute that the penalty proceedings have been initiated on noticing certain discrepancies in the books of accounts of the assessee. It is also not in dispute that a penalty proceeding were also initiated against the M/s N.K.G Infrastructure Ltd., wherein AO assessed the additional income at 0.25% of the total turnover declared by the assessee.

“As to whether the assessee has concealed part of his income by making discrepancies in the transactions recorded in the books of account and the Assessing Officer is empowered to levy the penalty u/s 271(1)(c) on the basis of addition made on estimated basis in the net profit to the tune of 0.25% of the total turnover declared by the assessee.“

. M/s D.D. Construction Pvt. Ltd., New Delhi.

“A glance at the provisions of section 271(l)(c) of the l.T. Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word “particulars” used in section 271(l)(c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(l)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”

. M/s D.D. Construction Pvt. Ltd., New Delhi.

“The Assessing Officer, observing that the profit was estimated after rejection of the books of account due to certain discrepancies, imposed a penalty on the assessee, on the ground that it was a clear case of furnishing of inaccurate particulars of income. The Tribunal held that as substantial quantum relief was given by the Commissioner (Appeals) which had been confirmed by the Tribunal and the balance pertained to estimated rate of profit applied on the turnover of the assessee, it did not amount to concealment or furnishing of inaccurate particulars. The Tribunal, therefore, deleted the penalty. Held that, the finding arrived at by the Tribunal did not warrant interference from this court as it was purely a finding of fact. No perversity had been pointed in such a finding. Consequently, no substantial question of law arose for consideration.”

When the assessee company has produced account books before

. M/s D.D. Construction Pvt. Ltd., New Delhi. the AO during assessment proceedings, AO was required to compute the income on the basis of documentary evidence and not on the basis of estimation. Moreover the AO has estimated the net profit of the total turnover without rejecting the books of account of the assessee which is not permissible under law. But the AO proceeded to guesswork the additional income on the basis of some defects in the account books and on the ground that the income offered is not adequate. In the given circumstances, we are of the considered view that there is no question of concealing part of the income to attract the provisions contained u/s 271(1)(c) of the Act.

perversity in the impugned order passed by Ld. CIT(A), hence, present appeal filed by the Revenue is hereby dismissed.

Order pronounced in the open court on 7/6/2018