ACIT, ERODE vs. M/S. S. SELVARAJ & CO., ERODE

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

additional income during the course of scrutiny proceedings. This addition income is treated as concealed and penalty u/s 271 (1) (c) has been levied. The Assessing Officer is correct in holding that additional income offered after detection by the Department for avoiding litigation and to purchase peace squarely falls in the ratio in Apex Court judgement in Mak Data (P) Ltd. 358 ITR 593. But in that case income based on evidence from materials found with the sister concern was not offered for assessment even after 10 months of survey during which there was detection of concealment by the Department. The facts of the present case have to be looked at before applying the ratio of Mak Data (P) Ltd. In the instant case the appellant has 13 work sites and discrepancies in work site accounts were found by the Assessing Officer and the same was offered as income by the appellant. In the penalty order, this additional income is treated as concealment. The pertinent point to the looked at is that the accounts of the appellant will have to be seen at the entity level and not at the work site level. At the entity level no deficiency has been found. The discrepancy in expenses incurred at the site cannot be held as concealment though there has been failure on the internal control mechanism resulting in discrepancy. No concealment or inaccurate particulars have been furnished by the appellant. There are no sufficient reasons for levy of penalty for concealment. The quantum addition is justified but levy of penalty is not supported adequately. The penalty levied is deleted.”

“7. We have heard the rival submission and carefully perused the materials on record. From the facts of the case it is apparent that the assessee is maintaining the books of accounts following the mercantile system of accounting. Further the assessee is declaring its profit on the basis of percentage method of completion leaving out the retention money which he accounts on receipt basis. While doing so, it is mandatory on the part of the assessee to compute the closing stock and disclose the same in the Profit & Loss account and the Balance Sheet, which the assessee has grossly failed to do so. This certainly will amount to concealment of facts which has also resulted in understatement of profits. The assessee had not even made an effort to estimate the closing work-in- progress and disclose the same in its statement of affairs. In such circumstances, we are of the considered view that the provisions of section 271(1)(c) of the Act will be directly applicable because there is concealment of fact with respect to closing work-in-progress which results in understatement of profit. Therefore, we are of the considered view that the Ld.AO was right in his realm to invoke the provisions of Section 271(1)(c) of the Act, in the case of the assessee. Hence, we set aside the order of the Ld.CIT(A) and reinstate the order of the Ld.AO. The decision of the Hon’ble Madras High Court cited by the Ld.AR in the case of CIT vs. Gem Granites reported in 86 CCH 160 will not be applicable in the case of the assessee because the assessee has patently

Order pronounced on the 28th July, 2017 at Chennai.