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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI S.V. MEHROTRA
O R D E R PER S.V. MEHROTRA, V.P. :
This is an appeal filed by the assessee against the order dated 30.08.2016 passed by the Commissioner of Income Tax (Appeals), Rohtak, u/s 271(1)(c) of the Income Tax Act, 1961 (in short “the Act”), relating to assessment year 2010-11.
Brief facts of the case are that in the relevant assessment year, assessee derived income from civil construction business. He had declared income of Rs.5,28,310/-. The Assessing Officer noticed that assessee had received all the payments from Executive Engineer, PWD-B & R Br., Rewari which were recorded in his books of account. Certificate of TDS in Form No.16 from the deductor had also been produced by the assessee.
However, no vouchers of expenses, bills, etc. were produced and the assessee finally admitted that he had no other material to produce accept the account books. Therefore, the Assessing Officer, invoking the provisions of section 145(3), rejected the books of account. He noted that the assessee had shown a net profit rate of 5.6%. In the absence of any documentary evidence in the shape of purchases and expenses, Assessing Officer adopted the profit rate of 12% following the decision in the case of CIT vs. Prabhat Kumar (2010) 323 ITR 675 (P&H) and, accordingly, made an addition of Rs.6,57,819/-. The Assessing Officer had also made another addition of Rs.60,000/- on account of low withdrawals for household expenses.
Ld. CIT(A) confirmed the addition made by Assessing Officer by applying the net profit rate of 12% but deleted the addition made on account of low withdrawals for household expenses.
The Assessing Officer initiated penalty proceedings and, after considering the assessee’s submissions, levied penalty of Rs.2,03,267/- being 100% of the tax sought to be evaded. Ld. CIT(A), after considering the detailed submissions of assessee, confirmed the penalty, inter-alia, observing that the fact remained that the books of account were rejected as no vouchers were produced. Being aggrieved with the order of ld. CIT(A), the assessee is in appeal against the confirmation of the penalty made by Assessing Officer.
I have considered the submissions of both the parties and have perused the record of the case. Admittedly, the Assessing Officer determined the net profit by applying 12% rate on the basis of decision of the Hon’ble Punjab & Haryana High Court in the case of Prabhat Kumar (supra) only because that was also a case of contractor. However, he had not examined the facts obtaining in the said case. Before ld. CIT(A), the assessee had, inter-alia, submitted that even if no books of account were maintained, the income was to be taken u/s 44AD at the rate of 8%. The assessee had also relied on the decision of Tribunal in the case of Sehlanga Co-op L/C Society Ltd. vs. ITO. However, ld. CIT(A) did not agree with the assessee observing that the said decision differed in terms of the facts and merits of the case. Applying rate of net profit on the basis of best judgement assessment depends on facts obtaining in each case and in a given situation will be a question of fact. The estimate of 12% adopted in the case of other assessee in the same line of business cannot be an indicator of the real income earned in the hands of assessee. It is purely a guess work and the entire endeavour is to arrive at as best to the real income as possible but that cannot be a basis to saddle the assessee with penalty. Ld. counsel has relied on the decision of Hon’ble Delhi High Court in the case of CIT vs. Aero Traders (P.) Ltd., (2010) 322 ITR 316 (Delhi), wherein, Hon’ble Delhi High Court confirmed the deletion of penalty by Tribunal, which was levied on estimate basis after rejection of books of account. Ld. counsel also relied on the decision of Hon’ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT, 258 ITR 85 (P&H), wherein also the penalty was deleted which was levied on the basis of additions made on estimate basis, inter-alia, observing that there had to be a positive act of concealment on the part of the assessee and the onus was to prove this on the Department. Ld. counsel relied on the decision of the ITAT, Lucknow Bench in the case of Sahyog Sahkari Shram Samvida Samiti Ltd. vs. ACIT, (2008) 25 SOT 23 (Lucknow) (URO), wherein, the Tribunal deleted the penalty levied on estimate basis, wherein also, following the various case laws, the penalty levied on estimate basis was deleted. In view of above discussion, I am of the considered view that no penalty u/s 271(1)(c) of the Act could be validly levied in this case.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 12th day of April, 2017.