Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI R C SHARMA & SHRI AMIT SHUKLA
आदेश ORDER अिमत शु�ला : �या. स.: PER AMIT SHUKLA, JM: The aforesaid appeals have been filed by the assessee against common impugned order dated 23.12.2011, passed by Ld. Commissioner of Income Tax (Appeals)-31 [CIT(A)] Mumbai, in relation to the penalty proceedings under section 271(1)(c) for the assessment year 2001-02, 2002-03 and 2003-04. The quantum of penalty levied for all the three years:
अ�नल मेहरा 2 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 Assessment year Quantum penalty levied 2001-02 Rs.5,98,661/- 2002-03 Rs.2,31,900/- 2003-04 Rs. 73,774/-
We will first take-up appeal for the assessment year 2003-04 in .
Brief background of the case is that, the assessee is an individual and carrying out activities of a Civil Contractor, mainly working for the Government Department under his Proprietary concern, M/s Ancons. In this case, as noted in the impugned assessment order, no return of income was filed by the assessee for AY 2003-04. Later, on the basis of some information and finding during scrutiny of assessment for the AY 2002-03, a notice under section 148 was issued for assessing the income of the assessee. Accordingly, the assessment was completed under section 144 r.w.s. 147 and income of the assessee was determined as per the provisions of section 44AD, vide order dated 28.12.2005. The income was estimated at a net profit of Rs.3,20,866/- which was 8% of the gross receipts. Later, on an information was received/collected from some earlier survey action in the premises of the assessee in the year 2002, during the course of which, assessee had disclosed an amount of Rs.35 lakhs to be assessed as his income in the assessment year 2003-04. This information was stated to have been received by the AO on 13.04.2006, that is, after the passing of the assessment order under section 144 r w s 147 and accordingly, proposal under section 263 was sent to CIT- 20, Mumbai so as to include the income of Rs.35 lakhs declared by the assessee during the survey action carried. Thereafter, CIT-20 passed an order under section 263 directing the AO to reframe the अ�नल मेहरा 3 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 assessment so as to include the said income. In pursuance thereof, assessment was made at an income of Rs.38,20,870/-. The relevant facts about the total contract receipts declared by the assessee and net profit shown for various assessment years including AY 2003-04 as discussed in the assessment order is reproduced hereunder :- “It is important to note that during the survey proceedings, an understatement of income was worked by the survey party, as shown below and accordingly the assessee had agreed to offer Rs.35 lakhs being undisclosed income accrued out of income for various previous years. The survey party had gathered information on total contract receipt of the assessee for AY 1996-97 to AY 2001-02 on the basis of return of income filed and cross verified it with net profit actually declared by the assessee in these years, whereby it was evident that there was an omission of Rs.40,98,041/- (as worked out below) on the part of the assessee to offer the same for tax.
Assessment Total Contract Receipts Net profit as per return year as per return 1996-97 34,75,525 2,80,500 1997-98 52,27,768 3,24,439 1998-99 1,16,22,047 7,11,375 1999-00 3,59,29,196 12,35,560 2000-01 2,01,01,713 6,06,904 2001-02 23,00,000 6,91,680 Total 9,93,56,249 38,50,458 Estimation of profit @ 8% u/s 44AD, of Rs.9,93,56,249 Rs.79,48,499/- Profit offered by the assessee for These years Rs.38,50,458/- Difference is treated as Understatement of income Rs.40,98,014/- From this it is crystal clear that the survey party had gathered enough evidence and therefore, the assessee conceded exclusion of the above amount and offered Rs.35 lakhs in toto as undisclosed income for AY 2003-04. Hence, the argument of the assessee that the survey party forcefully obtained declaration is baseless and is rejected and the declaration of Rs.35 Lakhs by the assessee is added to h is total income assessed relying on the declaration made during the survey action. Penalty proceedings u/s. 271(1)(c) are initiated separately for the same. Subject to the aforesaid discussion, the total income is computed as under:
अ�नल मेहरा 4 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12
Total income as per order u/s 144 Dated 28/12/2005 Rs.3,20,870 Add: Income disclosed by the assessee during the survey action u/s133-A Rs.35,00,000 Total Taxable Income Rs.38,20,870” ===========
3. Against the said order, the assessee preferred an appeal before the CIT(A). We find that Ld. CIT(A) though held that the computation of income by estimating the net profit @ 8% is correct, however, he deleted the amount of Rs.35,00,000/- which was surrendered in his order dated 03.03.2009 after giving detail reasoning and holding as under: “I have carefully considered the assessment order and the arguments and submissions of the AR as discussed above for deciding this ground of appeal. It is noticed that the addition of Rs.35 lakhs declared by the appellant during the survey proceedings is worked out on the basis of difference between the estimation of appellant’s income @ 8% of the gross contract receipts found to be credited in his bank account, pertaining to the assessment years 1996-97 to 2001-02 and the net profit already disclosed by the appellant in his respective returns of income. This is evident from the relevant part of the assessment order reproduced above, wherein the AO has computed estimated income of the appellant @ 8% of gross contract receipt of Rs.79,48,499/- and reduced there from the net profit as per return of income already disclosed in the respective assessment years of Rs.38,50,556/- and, accordingly worked out the difference as under statement of income of Rs.40,98,071/- of the appellant. The AO, therefore, taking into consideration, the declaration of the appellant made additions of Rs.35 lacs instead of Rs.40,98,041/- computed for this purpose, as discussed above. From the working as well as the manner of computation restored to for the computation of understated income of the appellant, as noted above, it is clear that same is purely based on ad-hoc basis, without brining any evidence on record. Even otherwise, if the said estimation is considered to be correct, the addition worked out should have been made in the respective assessment years and not in the present assessment year. It is a settled law that as per the scheme of the Income –tax Act, the income of an assessee for a particular previous year relevant to the concerned assessment year is अ�नल मेहरा 5 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 only to be assessed in the relevant assessment year. The income pertaining to one year cannot be clubbed or assessed in another assessment year. If the AO had valid reasons or evidence that the appellant has concealed or not disclosed income of a particular assessment year, the various provisions of the Act require that the concerned assessment year should have been reopened and the income so found and not disclosed in the relevant assessment should have been reopened and the income so found and not disclosed in the relevant assessment should have been re-assessed as per law. However, from the facts as discussed above, the AO instead of following the required provisions of law, chosen to compute the entire such additional income pertaining to A.Yrs. 1996-97 to 2001-02, in the AY 2003-04. I find that same is not warranted since the same is found to be contrary to the basic provisions of the Act. The declaration or disclosure made by the appellant during the survey based on above mentioned facts are also found to be against the basic provisions of the Act. There is no material or evidences brought on record, which suggest that the appellant has earned the declared income in the previous year relevant to current assessment year. There is no evidence or findings brought on record by survey team or by the AO, in the assessment order that any undisclosed asset, cash or bullion was found during the survey, for making such an addition in the hands of the appellant in the relevant assessment year. On the contrary, form the assessment order; it is more than evident that the addition is made blindly following the declaration of the appellant worked out on the basis of difference between estimated income computed for the A.Yrs. 1996-97 to 2001-02 and the net profit disclosed in the concerned assessment years as discussed above. There are no evidences or any incriminating material found in survey to suggest that the net profit shown in the current assessment years is understated by the appellant to the extent of Rs.35 lakhs.
The income pertaining to the current assessment year as discussed above in the para 3 of this order is separately worked out @ 8% of his gross contract receipts credited in his bank account, in the absence of proper books of account maintained by the appellant. Therefore, based on these facts and aforesaid discussion, I am of the considered opinion that the AO is not justified in making such an addition of Rs.35 lakhs in the case of the appellant for the current assessment year. I also find that the declaration made by the appellant in the absence of supporting documentary evidences is of no use or help. If there is no evidence against the appellant to prove the above addition made, I am of the considered opinion that under the given circumstances, AO is not required to make the अ�नल मेहरा 6 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 addition, just for the sake of making an addition. Nevertheless, even if it is construed that the AO is fair and reasonable to estimate net contract income of the appellant @ 8% of gross contract receipts for the relevant assessment years, I find that the AO should have proceeded to re-assess the escaped income of relevant assessment years of the appellant, as per various provisions of the Act. His action to assess the income pertaining to A.Y. 1996-97 to 2001-02 in the AY 2003-04, as discussed above, is found to be without any evidence or basis and therefore, I consider the same to be unjustified and unwarranted. Therefore, the AO is directed to delete the entire addition of Rs.35 lakhs made on this account. This ground of appeal is accordingly allowed”.
This order of the CIT(A) was confirmed by the ITAT in revenue’s appeal. Thus the only addition sustained in this year was Rs.3,20,870/- which was as per the original assessment order dated 28.11.2005 passed under section 144 r w s 147. The AO has levied the penalty of Rs.73,774/- on this amount after discussing the issue in detail. This penalty has been confirmed by the Ld. CIT(A) in his consolidated order. However, in the impugned order, the Ld. CIT(A) has mainly gone by the fact that, assessee had not filed his return of income and was solely guided by the fact that assessee has voluntarily disclosed a sum of Rs.35 lakhs for the assessment year 2003-04 and also he has not responded to AO in filing explanations and details as required by the AO from time to time in the course of assessment proceedings. The relevant observations of the CIT(A) reads as under:- “2.3 I have carefully considered the penalty orders, assessment orders and the appellate orders as well as the written submission and arguments of the AR, as discussed above before deciding this issue. From the same as I find the appellant is engaged in the business of a civil contractor mainly executing road construction for various Government Departments during the relevant accounting years under consideration He has not filed his returns of income for these assessment years as required under section 139(1) of the Act. Further, in the case of the appellant a survey under section 133A of the Act was carried out on 12.08.2002; during the course of the said proceedings, the appellant has voluntarily disclosed a sum of Rs.35 lakhs for the assessment year 2003-04. Therefore, on account of these facts as well as अ�नल मेहरा 7 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 considering to the fact that the appellant has consistently carried out or executed various civil contracts during the accounting years relevant to the assessment years 2001-02 to 2003-04; notices under section 148 of the Act for filing the returns of the income was issued which were properly served upon the appellant. However, these notices issued remained un-complied with inasmuch as no returns of income were filed by the appellant in response to the notices issued under section 148 of the Act. Besides, as per the facts brought on record by the AO in the assessment orders under appeal, the appellant has failed to attend the assessment proceedings before the AO and he has also failed to furnish the relevant details and its supporting evidences as called for the AO. Therefore, on account of these facts and circumstances, all the three assessment orders were completed ex parte under section 144 of the Act. These facts are not disputed or denied by the AR. However, as discussed above, the AR has submitted that this lapse on the part of the appellant is due to (i) non co-operation from his earlier chartered Accountant; and (ii) non-availability of the books of account and records. It was therefore submitted that the appellant has sufficient and reasonable cause for not filing his return of income in all these assessment years under appeal. It was also submitted that the appellant has no mala fide intention to deliberately avoid or evade the payment of taxes due to the Government. However, the AR has submitted that it is only because of the above reasons that the appellant could not furnish his returns of income and therefore, could not make the payment of taxes due in all these assessment years under appeal. 2.3.1 With this background, I find no merits in the submissions of the AR, a discussed above. From the bare facts available on record as discussed in detail in the assessment orders, penalty orders and in may appellate orders dated 30.12.2008 for the assessment years 2001-02 and 2002-03 and dated 03.03.2009 for the assessment year 2003-04, it is categorically held that the appellant has failed to file his returns of income even after the issue of specific notices issued under section 148 of the Act. The appellant has also failed to comply with the various statutory notices issued under sections 142(1) and 143(2) issued on the appellant on various occasions, in all these three assessment years under appeal. This coupled with the fact that the appellant has also failed to furnish any necessary details and supporting evidences which has directly resulted into the completion of assessment orders in an ex parte manner as per the provisions of section 144 of the Act. Therefore, on account of these facts placed on record which are not disputed or denied by the AR, I find little merits in the submissions of the AR that अ�नल मेहरा 8 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 the appellant has reasonable or sufficient cause for not furnishing or disclosing or filling his relevant returns of income and accordingly making the payment of taxes due to the Government. The mere fact that a survey under section 133A of the Act was carried out in the case of the appellant; wherein, the appellant himself has voluntarily disclosed undisclosed income of Rs.35 lakhs but still, he has failed to file his return of income for the relevant assessment year. These facts disprove the submissions of the AR that the appellant could not file his returns of the income due to non- cooperation of his earlier chartered accountant and due to non-availability of the books of account and records. The AR has also failed to substantiate the relevant submissions made inasmuch as no such details and evidences were furnished or placed on record. Nothing is brought on record to prove the non-cooperation on the part of his earlier Chartered Accountant as well as non-availability of the books of account and records. Moreover, the additions made and sustained in appeal are accepted or admitted by the appellant; therefore, it proves the findings of the AO that the appellant has concealed his taxable income and corresponding payment of taxes due to the Government by not filing its returns of income as well as not making payment of taxes to in all these assessment years under appeal. No proper explanation for the same is furnished by the appellant. Therefore, on account of these facts brought on record, I find that the AO is fully justified in holding that the demining provisions of Explanation (1) to section 271(1)(c) are clearly attracted in the case of the appellant and therefore, making him liable for the levy of penalty under section 271(1)(c) of the Act in all these assessment yeas under appeal”. 3.3.2 x x x.. 3.3.3 x x x… 3.3.4 In the case of the appellant the explanation furnished by the AR as discussed above is unsubstantiated inasmuch as noting is brought on record to prove that the appellant did not file his returns of income even having substantial taxable income only at the instance of his earlier CA or due to non- availability of the books of account and records. Admittedly, the appellant is a civil contractor manly constructing roads on behalf of various Government Departments and his bank account statements which were always available with the appellant. However, inspite of the issue of specific notices under section 148 of the Act for this purpose, the appellant has chosen not to file the relevant returns of income which has ultimately resulted into completion of ex parte assessment orders u/s 144 of the Act in all these assessment years under अ�नल मेहरा 9 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 appeal. It may further be noted that even after conducting a survey u/s 133A and voluntary disclosure of undisclosed income therein, the appellant has still failed to furnish his return of income for the AY. 2003-04. These undisputed facts demolish the submissions of the AR that the appellant has reasonable or sufficient cause for not furnishing or filing his return of income on time and therefore, submitting that the appellant has neither concealed his taxable income nor furnished inaccurate particulars thereof. However, considering to the above mentioned facts and circumstances of the case, I find that the AO is fully justified in holding that the appellant has concealed his taxable income by not filing his returns of income in all these years under appeal despite having substantial table income. The concealment of the income on the part of the appellant is duly established as per the assessment orders passed in the case of the appellant which are substantially confirmed in the appellate orders dated 30.12.2008 for the assessment year 2001-02 and 2002-03 and dated 03.30.2009 for the Assessment year 2003-04. Therefore, on account of these fact the explanation of the AR furnished before the AO as well as in appeal, as discussed above is proved to be false or unsubstantiated. Therefore, on account of these facts of the case, I find that the AO is fully justified in inferring that the deeming provisions of Explanation (1) to section 271(1)(c) are satisfied or attracted in the case of the appellant. Or in other words under the given facts and circumstances of the case as discussed above the AO is fully justified in the levy of penalty under section 271(1)(c) of the Act”.
The Ld. CIT(A) in the impugned order has failed to take note of quantum orders of the ITAT order, whereby, the whole premise of making the addition and the addition itself was deleted. The only income surviving was originally assessed income. This factum itself vitiates the finding of ld. CIT(A).
Before us, the Ld. Counsel for the assessee canvassed a very pertinent point that here in this case, original assessment was completed under section 144/148 whereby the income of the assessee was assessed after estimating at a net profit @ 8% on the lines of section 44AD at Rs.3,20,870/-. In such an order, no penalty proceedings under section 271(1)(c) was initiated at all. Later on, the said assessment order was cancelled only to include अ�नल मेहरा 10 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 income disclosed by the assessee during the survey action of Rs.35 lakhs, which has been deleted by the CIT(A) and such a deletion has been confirmed by the Tribunal also. Thus, when the penalty was not initiated on the income assessed originally then same cannot be initiated again, because the second assessment order was only for the addition of Rs.35 lakhs which the underlying substance of second assessment proceedings and the assessment order. Thus, on this ground, the penalty levied by the AO cannot be sustained.
On the other hand, Ld. DR strongly relying upon the order of the CIT(A) submitted that, even though penalty was not initiated originally but the original order got merged with the second order, therefore, penalty which has been initiated in the second order should be the basis for levy of penalty.
We have heard the rival submissions, perused the relevant material as discussed in the impugned orders and also the background discussed above. Here in this case, original assessment order completed under section 144 r.w.s. 148, whereby the income was assessed @ 8% of gross contract receipts of Rs.40,10,825/- which was reflected in the bank statement of the assessee in the relevant assessment year. The income was finally assessed at Rs.3,20,866/- on which it has been contended that, no penalty under section 271(1)(c) has been initiated. Subsequently, in the wake of survey action whereby assessee has offered Rs.35 lakhs to be assessed as income, a proposal was moved before the CIT to revise the assessment order under section 263. Thereafter assessment order in pursuance thereof was passed and assessment framed for making further addition of Rs.35 lakhs. In the second assessment order, the AO has solely given his finding on the additional income of Rs.35 lakhs offered by the assessee during the survey. The income which was originally assessed was अ�नल मेहरा 11 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 taken in the computation for which there is no finding or any observation. The income which has been assessed in the second order at Rs.38,20,870/- is by making the addition of Rs.35 lakhs. Thus, there are two components of income assessed, one, income originally assessed and other, addition made in the second assessment order. Now, in the second order penalty under section 271(1)(c) has been initiated, which was not in the original assessment order . Satisfaction of the AO in the second order was with regard to Rs.35 lakhs only, which was evident from the finding and observation of the AO as reproduced above. It is an undisputed fact in the appellate proceedings the addition of Rs.35 lakhs was deleted and confirmed from the stage of ITAT and has attained finality. Since the very basis for the initiation of penalty and satisfaction of the AO for the addition of Rs.35 lakhs got vitiated, therefore, the entire proceedings for levy of penalty does not have any legs to stand. So far as the levy of penalty for the original assessed income of Rs.3,20,870/- is concerned, there was no initiation at the time of original assessment, therefore, the same cannot be revived in the second assessment order sans any satisfaction or initiation. Thus, on this preliminary ground itself, we are of the opinion that, contention raised by the Ld. Counsel appears to be correct and no penalty under section 271(1)(c) on addition of Rs.3,20,870/- can be sustained. Accordingly, we direct the AO to delete the penalty of Rs.73,774/-. Thus, the appeal for the assessment year 2003-04 is allowed.
Now, we will take-up the penalty appeal for the assessment year 2002-03 and 2001-02, which have identical set of facts. From the perusal of the facts as discussed in the assessment order is that, a survey action was conducted in the case of the assessee’s office premise on 12.08.2002 during the course of which assessee had declared an income of Rs.35 lakhs which was to be taxed in the assessment year 2003-04. Based on this information, a notice अ�नल मेहरा 12 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 under section 148 for the assessment year 2001-02 and 2002-03 was issued. It has been noted in the assessment order that in response to the show cause notice, the assessee has not filed any return of income and there was no response whatsoever despite various notices issued under section 142(1) and 143(2) to the assessee. The Ld. AO left with no alternative passed the best judgment assessment under section 144, after taking into account the receipts shown in the Proprietor business bank account and also individual saving account, which reflected total transaction of Rs.85,28,521/- in the case of Proprietorship Firm and Rs.76,73,044/- in his individual capacity for the assessment year 2001-02 and aggregate of Rs.2,61,01,900/- in the assessment year 2002-03 on account of the bank account of the firm as well as the individual saving account. Accordingly, the AO estimated the net profit of gross receipts for both the assessment year in the following manner:- Assessment year Gross Contract Receipts Net Profit estimated @ 8% 2001-02 Rs.1,62,01,565 Rs.12,96,120 2002-03 Rs.2,61,01,900 Rs.29,88,152 In the first appeal, the aforesaid income assessed by estimating the 8% net profit based on reconciled contract receipts from the bank account got sustained, barring some relief on contract receipts on reconciliation. Now, on such an addition, penalty was initiated by the AO. In the penalty order, the Ld. AO held that, since no return of income was filed and no books of accounts were maintained, therefore, there was no option but to estimate the income on some reasonable basis and accordingly, he levied the penalty of Rs.5,98,661/- for the assessment year 2001-02 and Rs.2,31,891/- for the assessment year 2002-03. The Ld. CIT(A) too has confirmed the penalty, the relevant finding on which has already been reproduced by us while deciding the appeal for the assessment year 2003-04.
अ�नल मेहरा 13 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 8. Before us, the Ld. Counsel submitted that entire premise is based on the fact that, assessee has not filed return of income originally. This fact itself is incorrect as the assessee had filed his return of income which fact has been specifically noted by the AO in the assessment order dated 15.11.2003 passed under section 143(3) r.w.s.
Though assessee may not have filed return in response to section 148 but otherwise the return of income was there on the record along with contract receipts as well as net profit shown. Thus, the very premise for levy of penalty does not stand.
On the other hand, Ld. DR strongly relied upon the order of the CIT(A) and submitted that, there is a categorical observation and finding of CIT(A) that assessee has not filed the return of income and hence a penalty confirmed by the CIT(A) is justified.
After considering the rival submissions and on perusal of the relevant material discussed in the impugned order we find that, the income has been assessed after estimating the net profit @ 8% on the gross contract receipts as per reconciled bank statement. The penalty has been levied by the AO on the ground that, assessee had not filed the return of income and has also not complied with the statutory notices issued to the assessee from time to time. Such an addition has also attained finality from the appellate stage. The Ld. CIT(A) too has harped upon the fact that, no return of income has been filed disclosing any contract receipts and net profit and assessee do not bother to comply with the notices and did not put forth any explanation. While confirming the penalty he has taken note of the disclosure of undisclosed income of Rs. 35 Lakhs offered by the assessee during the survey, without realizing the fact that the said order and addition does not survive as the addition itself stands deleted by the CIT(A) in the quantum proceedings but also got confirmed by the Tribunal in Revenue’s appeal vide order dated 28th December, 2011 in ITA अ�नल मेहरा 14 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 No.3593/Mum/2009, whereby the order of the CIT(A) have been confirmed. Further, it has been specifically noted in the quantum proceeding/orders for the assessment year 2003-04, not only by the AO as well as by the CIT(A) that, the Survey Party has gathered the information regarding total contract receipts of the assessee as well as net profit disclosed in returns of income for the assessment years 1996-97 to 2001-02. The relevant portion of the assessment order for AY 2003-04 which has been reproduced above, is again being reiterated as under: “The survey party had gathered information on total contract receipt of the assessee for AY 1996-97 to AY 2001-02 on the basis of return of income filed and cross verified it with net profit actually declared by the assessee in these years, whereby it was evident that there was an omission of Rs.40,98,041/- (as worked out below) on the part of the assessee to offer the same for tax. Assessment Total Contract Receipts Net profit as per return year as per return 1996-97 34,75,525 2,80,500 1997-98 52,27,768 3,24,439 1998-99 1,16,22,047 7,11,375 1999-00 3,59,29,196 12,35,560 2000-01 2,01,01,713 6,06,904 2001-02 23,00,000 6,91,680 Total 9,93,56,249 38,50,458 Estimation of profit @ 8% u/s 44AD, of Rs.9,93,56,249 Rs.79,48,499/- Profit offered by the assessee for These years Rs.38,50,458/- Difference is treated as Understatement of income Rs.40,98,014/-
Now, in wake of this information already on record, that return of income was filed and also cross verified by the Survey Party, can the finding of CIT(A) be sustained. Once the contract receipts has been shown in the return of income along with the net profit, then the whole premise on which penalty has been levied and confirmed gets vitiated. Only issue for the levy of penalty can अ�नल मेहरा 15 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 be, firstly, the enhancement of contract receipts and secondly, the net profit estimated in the assessment proceedings initiated under section 148. The AO in the assessment order has neither given any credit for the contract receipts already disclosed as per the original return of income nor the relief of the net profit shown. Thus, this fact itself goes to show that, the entire assessment has been made purely on ad-hoc manner and without considering material already on record. Even though there has been non-cooperation by the assessee, which has led to passing of the best judgment assessment under section 144, however, it is trite law that while framing the best judgment assessment under section 144, all the relevant material, facts and circumstances on record has to be taken into account. A high pitch assessment cannot be justified under the garb of best judgment assessment. Now in light of the fact that return of income was there on the record and certain contract receipts and net profit was shown by the assessee, then issue revolves around the appropriate income which has to be assessed. Here in this case there has been enhancement of contract receipts and estimate of net profit purely on ad-hoc basis without any relevant material on record. Here in this case, the contract receipts has been taken on the basis of entire credit appearing in the bank accounts which cannot be the basis for determining the turnover of contract receipts, at least while levying a penalty under section 271(1)(c), because consideration which arises in the penalty proceedings are separate and distinct from assessment proceedings. Here, in this case now the entire assessment and consequent addition rests upon pure estimation of income, therefore, neither the case of concealment of income nor for furnishing of inaccurate particulars. Thus, penalty levied by the AO and confirmed by the CIT(A) on the premise raised by the authorities below cannot be confirmed. Accordingly, we delete the penalty for both the years.
अ�नल मेहरा 16 Anil Mehra ITA 1117/M/12 ITA 1118/M/12 ITA 1119/M/12 12. Thus, grounds raised by the assessee for the assessment years 2001-02 and 2002-03 are allowed and accordingly, both the appeals of the assessee stands allowed. Order pronounced in the open court on 25th April, 2016 To sum-up All the three appeals filed by the assessee stands allowed.
Sd/- Sd/- (आर सी शमा�) (अिमत शु�ला) लेखा सद�य �याईक सद�य (R C SHARMA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 25th April, 2016 �ित/Copy to:- 1) अपीलाथ� /The Appellant. 2) ��यथ� /The Respondent. 3) The CIT(A) -31, Mumbai. 4) The Commissioner of Income Tax –20, Mumbai. 5) िवभागीय �ितिनिध “ए”, आयकर अपीलीय अिधकरण, मुंबई/ The D.R. “A” Bench, Mumbai. 6) गाड� फाईल \ Copy to Guard File. आदेशानुसार/By Order / / True Copy / /