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Facts
The assessee, a transport contractor, reported gross receipts of Rs. 13.96 crores, while Form 26AS showed Rs. 15.69 crores, leading to an apparent non-disclosure of Rs. 1.73 crores. The assessee explained that this amount was received and accounted for in the subsequent year. The Assessing Officer rejected the books, estimated profits, and imposed a penalty of Rs. 4.18 lakhs under Section 271(1)(c) for furnishing inaccurate particulars and concealing income (including an addition under Section 44AE), which was upheld by the CIT(A).
Held
The Tribunal held that the difference in contract receipts was accounted for and taxed in the subsequent year, with corresponding expenditures, and there was no deliberate intention to conceal income. Regarding the Section 44AE addition, the Tribunal found that the truck was used in the assessee's own already-taxed contract business, so no separate income under Section 44AE was concealed. Consequently, the penalty imposed was deleted.
Key Issues
Whether a penalty under Section 271(1)(c) is leviable for alleged non-disclosure of contract receipts and truck income when the amounts are subsequently accounted for and taxed without intent to conceal; and the technical validity of the notice issued under Section 274.
Sections Cited
250, 271(1)(c), 145(3), 44AE, 133(6), 148, 274, 44AB
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: SH. UDAYAN DASGUPTA & SH. KHETTRA MOHAN ROY
This appeal is filed by the assessee against the order of the ld. CIT(A) NFAC, Delhi dated 25.11.2024 passed u/s 250 of the Income Tax Act, 1961 which has emanated from the penalty order of the AO, Ward-3, Moga passed u/s 271(1)(c)of the Act, 1961, dated 17.03.2020 (imposing a penalty of Rs.4.18 lakhs).
(Food Corporation of India)engaged in the business of providing goods carriage (trucks)for transportation of food grains from their godowns, as per requirement of FCI (the contractee in this case).
For the year under appeal return of income was filed disclosing gross transport contract receipt at Rs.13.96 crores (from FCI), but as per Form 26AS (income tax portal), the gross contract receipts from FCI was reflected at Rs.15.69 crores (and TDS deducted accordingly), which resulted in an apparent non -disclosure of gross contract receipts to the tune of Rs.1.73 crores, as per the return filed.
The assessee explained the difference that the said transport bill amount of Rs.1.73 crores has been actually received on 17th April, 2015, and the same has also been considered in the gross receipts of the subsequent year (FY 2015-16) and has formed a part of the total turnover in the Asst year 2016-17 and has been duly subjected to taxation and the corresponding expenditure relating to the said contract receipts has also been booked in the subsequent year and duly reflected in audited profit and loss account, (in support of which a certificate has also been filed from the tax auditor).
The AO has rejected the book results u/s 145(3) of the Act, and has completed the assessment by estimating the business profits at 23.53 lakhs @ 1.5% of the gross of interest income of Rs. 4.11 lakhs under other source and truck income u/s 44AE Rs. 90,000/-).
Penalty has been initiated u/s 271(1) ( c) of the Act , in course of assessment proceedings, both for (i) furnishing of inaccurate particulars on the estimated contract income of Rs. 23.53 lakhs and also (ii) for concealment of particulars of income on the addition of Rs. 90,000/- being the alleged undisclosed truck income u/s 44AE.
Penalty subsequently imposed amounting to Rs. 4.18 lakhs, has been carried in first appeal and the Ld CIT (A) has dismissed the appeal by observing as follows:
Observation of first appellate authority:
“In the present case, estimation of profit on the gross receipt is secondary issue. The gross receipt reflected in the audit report itself is questionable and not found correct as was confirmed by the FCI that amount of Rs. 1.73 cr., the difference in gross receipt was actually credited in the month of March only in the books of the appellant. Hence, assessee has misled the department and concealed the gross receipt. AO has fairly applied the net profit on concealed gross receipt by following the decision of Hon'ble ITAT, Amritsar. Therefore, it is not a case of increasing and estimating the net profit on the declared gross receipt. But the net profit has been applied on the concealed gross receipt not declared by the appellant. Hence, AO has rightly concluded that gross receipts are not estimated but based on form no. 26AS and confirmed by the FCI under section 133(6). I also concur with the view of AO that the decision of Hon'ble P&H High court in the case of Sandeep Kumar Garg and Company Vs. ITO reported in 298-ITR-106 is squarely applicable in the present Assessment Year: 2015-16 case wherein it has been held that showing lower receipt of income itself proves concealment. Hon'ble High Court dealing with the similar issue as in the present case has held as under-
“5. Front perusal of the material on record, it is clear that the mistake, as was sought to be explained by the assessee in non-declaring the receipt of amount from Haryana State Agricultural Marketing Board, was not a bona fide mistake. On consideration of the entire material on record, all the authorities below came to the conclusion that showing of less receipt of amount by the assessee itself proved the concealinent. Even otherwise in the case in hand, the income which was finally assessco; is more than what was declared by the assessee in response to notice under Section 148 of the Act so the mens rea for concealment is clear on the face of The decisions of Hon'ble Calcutta High Court in the case of James Finlay and Co. Ltd. Vs. CIT reported in 144-ITR-423 also applicable in the present case wherein Hon'ble High Court has held that penalty is leviable in case assessee is following Mercantile System of accounting and failed to include accrued interest in his return and also failed to show that there is no change in method of accounting.”
In course of hearing before the tribunal the Ld AR of the assessee has challenged the imposition of penalty on merits and also on the legal issue of the notice u/s 274 dated 22/12/2017, being technically defective.
The Ld AR has filed a written submission in course of the hearing and submitted that no penalty can be levied in cases where income has been estimated and has relied on the decision of the jurisdictional High court in the case of CIT vs Sangrur Vanaspati Mills 303 ITR 053 ( P&H ).
The relevant portion of his written arguments are reproduced:
“In CIT vs. Ravail Singh & Co. (2002) 254 ITR 191 (P&H) and Harigopal Singh vs. CIT (2002) 258 ITR 85 (P&H). In both these decisions, this Court has held that in order to attract cl. (c) of s. 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or furnishing of inaccurate particulars of such income. The provisions of s. 271(1)(c) of the Act are not attracted to cases where the income of an assessee is assessed on estimate, basis and additions are made therein. It was held that when the addition had been made on the basis of estimate and not on account of any concrete evidence of concealment, then the penalty was not leviable. The similar view was also taken by this Court in CIT vs. Dhillon Rice Mills (2002) 256 ITR 447 (P&H), where the addition was made by the AO by estimating the yield of super phak as well as of chhilka and also the price of chhilka, that addition was reduced by the CIT(A). However, the penalty levied by the AO was deleted by the CIT(A). The order of CIT(A) was confirmed by the Tribunal and the appeal filed by the Revenue against the said order of the Tribunal was dismissed by this Court, on the ground that the AO had made the additions on the basis of estimate of the yield of phak and chhilka and an estimate of the price and that thestimate would not ipso facto lead to penalty."
'Concealment vis-a-vis 'furnishing inaccurate particulars': The first question that arises for determination is as to when the assessee can be said to have concealed the particulars of his income. The dictionary meaning of 'conceal' is to 'keep secret, not allow to be seen or noticed. The meaning of the word "concealment as found in Shorter Oxford English Dictionary, third edition is "In law, the intentional suppression of truth or fact known, to the injury or prejudice of another". Webster in his New International Dictionary equates its meaning "to hide or withdraw from observations; to cover up or keep from sight to prevent discovery of: to withhold knowledge of.
The Madras High Court, in A.V. Thomas & Co. (India) Ltd v CIT (1966) 59 ITR 499 (Mad) analyzed the implications of word conceal thus: it has been held that The word "conceal" implies something more than mere failure to disclose and it pertains to an affirmative action likely to prevent or intended to prevent knowledge of a fact and refers to some advantage to the concealing party or disadvantage to some interested party from whom the fact is withheld. Webster in his Dictionary gives the meaning for the word
"conceal" as to hide, withdraw from observation or to cover to keep from sight". Secrecy is an essential ingredient of the act of concealment. To constitute "concealment, it must appear that the statement or act of the person was calculated and designed to prevent discovery of the act with which he is charged. His act must be misleading, false or deceptive."
He further referred to the jurisdictional high court decision in the case of CIT vs Sidhartha Enterprise [ 2010] 322 ITR 80 (P & H), to submit that it has been held:
“In the case of CIT Vs. Sidhartha Enterprises [2010] 322 ITR 80 (P&H) it has been held that it cannot be said that in every case where particulars of income are inaccurate, penalty must follow Penalty is imposed only when there is some element of deliberate default and not a mere mistake the finding have been recorded on facts that the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade of tax.
In this connection, it may also be submitted that by their very nature, penalty proceedings are too initiated and penalty is to be levied only in cases where the conduct of an appellant is of such a nature as to bring out a willful or deliberate attempt at concealment of income or avoidance of tax. Penalty provisions have been incorporated into the act in order to penalize and deal with cases and appellant who have resorted to actions which can be termed as mala-fide and in blatant contravention of the provisions of the act. They are meant to be strictly construed and are not meant to cover cases where difference between the returned income and assessed income had arisen only on a matter of difference of opinion and where it cannot be clearly and succinctly established that there was a willful and deliberate default on the part of the appellant.”
He further draw reference to the following decisions for support:
Assessment Year: 2015-16 “In the case of CIT VS Filtrex Technologies (P) Ltd. [2015] 93 CCH 0244 (Kar HC) it has been held that Penalty proceedings are quite different from assessment proceedings and levy of penalty is not automatic if addition/disallowance is sustained by appellate authorities, thus provisions of Section 271(1)(c) are to be satisfied for levying penalty.
In the case of ITO Vs. Kuldeep Sood Enterprises [2006] 103 TTJ (Chd) 573 it has been held that Quantum Proceedings and penalty proceedings being altogether different penalty under section 271(1)(c) cannot be levied simply on account of the fact that an addition has been sustained in quantum appeal, Reliance is also placed in the case of Hon'ble High Court of Punjab & Haryana Vishwakarma Industries Vs. CIT [1982] 135 ITR 652 (P&H) (FB) it has been held that the assessment proceedings and penalty proceedings must be kept sharply distinct and independent from each other.”
He further relied on DCIT vs Pathankot Primary Cooperative Development Bank Ltd – 142 TTJ ( ASR ) 401 and also on the decision of the Hon’ble Apex court in the case of K.C. Builders and Another vs ACIT 265 ITR ( SC ) 562,to put forth his submission that the assessee in this case has not filed any particulars in his return which are inaccurate and there are no claims in the accounts which are found to be incorrect , and he further explained that the difference in contract receipt as per accounts vis a vis the form 26AS has arisen not because of any intentional or willful default on the part of the assessee to conceal any particulars of income , but only due to the fact that a meager part of the contract receipt has been accounted for in the books of accounts in the month of April following, because the said amount has been actually received in the month of April, and all expenditures relating to such contract is to be considered in the month of March 2015, then for all practical purpose the pro rata related expenditure also needs to be considered and claimed in March,(which has not been done in this case )and both the receipts and corresponding expenditure, has been booked in the month of April 2015, and duly disclosed in audited accounts in subsequent year ( Asst year 2016-17 )and has formed a part of the returned income and accepted by the department without a noise.
As such he prayed that in absence of any willful concealment or intentional default on the part of the assessee the penalty imposed may please be deleted.
Thereafter, the Ld AR further explained that addition of Rs. 90,000/- has arisen because the assessee being the owner of a truck , (goods carriage) during the FY 2014-15,the provisions of section 44AE (2) of the Act , has been applied , which itself is a presumptive provision, and the said addition is legally not justified because the assessee being a transport contractor himself (in the same nature of business ), the goods carriage owned by the assessee, has been utilized by the assessee himself, for carrying out his own contract (which is already assessed to tax) , and as such no separate income u/s 44AE has been disclosed.
Lastly, he argued on the legal ground that the show cause notice issued u/s 274 (rws 271(1)(c), dated 22.12.2017, has not specifically struck off the limb as to inaccurate particulars of income and as such the said notice is technically invalid and in support he relied on the Hon’ble Apex court in the case of CIT vs SSA Emerald Meadows [2016] 173taxmann.com ( SC ).
He prays for deletion of the penalty imposed.
The Ld DR relied on the order of the Ld CIT (A), and further relying on jurisdictional HC in the case of Sandeep Kumar Garg & Co vs ITO 298 ITR 106 , he argued that in this case lower receipt of income has been disclosed in the return which itself proves concealment and he further relied on the Hon’ble Calcutta High court in the case of James Finlay& co v. CIT 144 ITR – 423, to argue that in case of accounts being maintained in mercantile system failure to include income in the return without showing change in method of accounting , calls for penalty to be imposed.
He further argued that in the instant case there is nothing wrong in the notice issued u/s 274rws 271(1) (c), because as evident from the body of the assessment order the AO has initiated penalty after identifying both the defaults, separately, concealment of particulars of income and also for furnishing of inaccurate the AO to struck off any particular limb.
He prayed for sustaining the penalty and for dismissing the appeal.
We have heard the rival contentions and considered the materials on record and we are of the opinion that on the facts before us the difference of the contract receipt amounting to Rs. 1.73 crores has already been accounted for and has formed a part of the gross receipt in the immediately following year and has been subjected to taxation (and for all practical purpose it has not gone untaxed)and the corresponding expenditure relating to that part of the receipts has not been claimed in the year under appeal and as such the disclosed net profit from contract has remained unaffected for the year under appeal and as such possibility of reduction of income on that count is ruled out.
We are of the opinion that mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless there is some evidence to show or some evidence found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon, which is not the case here, because in the instant case the receipt from contractee along with its pro rate claim of expenditure) and has been subjected to taxation and the assessee in this case cannot be said that he had any intention to hide or conceal the income.
Regarding the issue of non disclosure of truck income on presumptive basis u/s 44AE, we are of the opinion that the assessee being the owner of the truck has plied the same in his own contract business, (along with other goods carriages) and the profits from the said business is already taxed separately, and the assessee will be covered by the provisions of section 44AE (7) the Act 61, the entire business being part of audited accounts u/s 44AB of the Act 61.
As such we are of the opinion there is no concealment of truck income u/s 44AE of the Act 61
In the result, the penalty imposed u/s 271(1) (c) amounting to Rs. 4.18 lakhs , is deleted and the appeal filed by the assessee is allowed.
Since we have allowed the appeal on merits we do not adjudicate on the technical aspect of the notice u/s 274 of the Act, 61.
Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 18.11.2025.