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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
This appeal by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-3, Coimbatore dated 29.06.2016 in for the assessment year 2012-13 passed u/s.250(6) r.w.s.271(1)(c) of the Act.
The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in deleting the penalty of Rs.15,45,000/- levied by the Assessing Officer U/s.271(1)(c) of the Act.
The brief facts of the case are that the assessee is a firm engaged in the business of civil engineering contract works, filed its return of income for the assessment year 2012-13 electronically on 30.09.2012 admitting total income of Rs.1,78,97,340/-. The case was taken up for scrutiny under CASS and finally orders U/s. 143(3) was passed on 30.03.2015, wherein the Ld.AO made several additions. Thereafter penalty proceedings was initiated and finally the Ld.AO levied penalty U/s.271(1)(c) of the Act with respect to the addition made towards closing work-in-progress of Rs.50,00,000/- because the assessee had not disclosed its closing-work in progress in its statement of affairs filed along with the return of income. On appeal the Ld.CIT(A) deleted the penalty by observing as under:- “6.0 I have carefully considered the grounds of the appellant and the penalty order u/s 271 (1) (c). In this case certain discrepancies in the accounts of certain work sites were found by the Assessing Officer and the appellant has offered
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.”
At the outset, we find that on the identical issue and facts in the case of the assessee’s sister concern M/s. R R Thulasi Builders in vide order dated 27.07.2017, we have confirmed the penalty. The relevant portion of the order is reproduced herein below for reference:-
“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
In the case of the assessee also, the same facts prevail as in the case of M/s. R.R. Thulasi Builders (supra). The assessee had grossly erred by not disclosing its closing-work-in-progress in its statement of affairs filed along with the return of income. This results in understatement of profit. Therefore, following the above order of the Bench of the Tribunal where the facts are identical, we hereby set aside the order of the Ld.CIT(A) and confirmed the order of the Ld.AO.
In the result, appeal filed by the Revenue is allowed.
Order pronounced on the 28th July, 2017 at Chennai.