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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: SHRI J. SUDHAKAR REDDY & SHRI KULDIP SINGH
ORDER
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
This is an appeal filed by the assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-XXVIII, New Delhi dated 16.08.2013 pertaining to the Assessment Year (A.Y.) 2009-10.
Facts in brief:- The assessee is a Civil Contractor. He filed his return of income for the A.Y. 2008-09 on 30.9.2009 declaring income of Rs.48,20,880/-. The A.O. rejected the books of accounts on the ground that the assessee has not produced: (a) details of purchases/creditors, original books of accounts along with bills and vouchers of the said expenses; (b) details with respect of expenditure on wages or the supporting documents; (c ) evidence in proof of facts that there were outstanding liabilities; (d) Non
ITA 6562/Del/2013 A.Y. 2009-10 Indraprastha Construction Co., Ghaziabad submission of the basis and working of valuation of opening and closing stocks. 2.1. The books of accounts were rejected on the above stated grounds and the profit estimated by applying net profit rate of 5.11% as declared for the previous A.Y. 2008-09. A further amount of Rs.3,11,260/- was added as income from other sources, being bank interest received. The assessee did not carry the matter in appeal. The circumstances under which an appeal in the quantum proceedings were not filed was explained by the Chartered Accountant of the assessee by way of an affidavit. We do not get into these issues. 2.2. Penalty u/s 271(1)(c ) of the Act was levied on the ground that the assessee has concealed true and correct particulars of income by the A.O. vide order dt. 19.6.2012. On appeal the First Appellate Authority confirmed the penalty. Further aggrieved the assessee is in appeal before us on the following grounds . “1. Because, the order of Ld.CIT(A) is bad in law and against the facts and circumstances of the case as neither there is any concealment nor assessee has filed any inaccurate particulars.
2. Because, the Ld.CIT(A) grossly erred in not appreciating the fact that the assessment is framed mainly by estimating the income with application of flat rate on the basis of previous history and factually there is no specific item/transaction/material which is found wrong/concealed, hence order is arbitrary.
3. Because, the Ld.CIT(A) further erred in not appreciating the fact that further addition of Rs.3.11 lakhs is on account of difference of interest as from 26 AS which was neither in the knowledge of assessee nor he claimed benefit TDS on said amount which proves the bona fide of assessee and in the absence of any malafide or intention to conceal income order sustaining penalty is against the settled law.
4. Because, the Ld.CIT(A) failed to appreciate the fact that the assessee had not filed any appeal against on the basis of conditional surrender as desired by the then Ld.AO with the assurance not to impose penalty hence imposition of penalty is against the rules of fair play.
ITA 6562/Del/2013 A.Y. 2009-10 Indraprastha Construction Co., Ghaziabad As per the above grounds, penalty of Rs.12,07,000/- imposed u/s 271(1(c ) of the Income Tax Act 1961 is prayed to be quashed.”
We have heard Shri R.S.Negi, the Ld.Sr.D.R. on behalf of the Revenue and Shri Akhilesh Kumar, the Ld.Counsel for the assessee.
On a careful consideration of the facts and circumstances of the case, perusal of papers on record and orders of the authorities below, as well as case laws cited, we hold as follows.
This is a case where there is no positive finding was given by the A.O. that there is concealment of income. There is no adverse material found by the A.O. during assessment No investigation is done by the A.O. The books of accounts were rejected and profits estimated, because the assessee could not substantiate its claim for expenses. The percentage of profit adopted by the A.O. is an estimate. 5.1. On these facts, we are applying the decision of the Jurisdictional High Court in the case of CIT vs. Vatika Construction Pvt.Ltd. (2014) reported in 45 Taxmann.com 471 (Del) wherein it was held as follows. “14. In the present case, assessee’s cash payments were concededly not the amount which was disallowed, they had no co relation to what could not be established, and were disallowable. Further, the judicial record would show that when the AO decided to initiate penalty proceedings, he had no material to conclude that the assessee had concealed income or provided inaccurate particulars. The assessee did provide particulars, but could not back up its claim with confirmation, its explanation that the payee insisted on immediate payment, to fulfill their contractual commitment to their suppliers. The payees were small vendors, willing to ensure supply of materials to the assessee’s site. Clearly, a case for business expediency had been urged. Most importantly, the material which led to the penalty order i.e. absence of the payees at their places or address provided, was gathered after notice u/s 271(1)(c ) was issued. The assessee complained of this procedure, calling it unfair, as it ought to have been provided with opportunity in this regard during the assessment and that material which did not exist at times of ITA 6562/Del/2013 A.Y. 2009-10 Indraprastha Construction Co., Ghaziabad initiation of penalty proceeding ought not to have been put against it. This Court is of opinion that the objection is well founded, because the AO did not have the benefit of such material, and therefore could not have, only on the basis of the assessee’s offer to be taxed at 8% on gross receipts, have concluded that it had provided inaccurate particulars in its returns. Moreover, the course of action suggested by the AO was in fact accepted by the assessee, as reasonable. In these circumstances, the imposition of penalty was not justified. The Court therefore, is o the opinion that there is no infirmity in the impugned order of the Tribunal. The question of law is therefore answered against the revenue, and in favour of the assessee, the appeal is accordingly dismissed. No costs.” 5.2. Similarly the Delhi “D” Bench of the ITAT in the case of DCIT vs. Kalindi Rail Nirman Engineering Ltd. reported in 21 taxmann.com 24 (Del) (2012) held as follows. “Therefore, in our considered view, for levying penalty u/s 271(1)(c ), there has to be concealment of particulars of income by the assessee or the assessee must have furnished inaccurate particulars of income. Ultimately, in assessee’s case, addition sustained was based on ad hoc estimation of income by applying a flat rate of 8% of profit which can neither be held as concealment of income nor filing of inaccurate particulars of income. Further, we also observe that the assessee’s offering of the profit rate was a conditional proposal as the assessee was not able to collect the while information about the context and produce the same. Thus, offer made by assessee was to buy peace and not to enter into dispute with revenue authorities. To purchase the peace and avoid any dispute with the revenue authorities in the quantum of income, assessee offered the estimated rate of profit. Considering all the facts and circumstances, in our considered view, the order of CIT(A) was justified in deleting the penalty levied u/s 271(1)(c ) of the Act. In the result, the appeal of the Revenue is dismissed.”
ITA 6562/Del/2013 A.Y. 2009-10 Indraprastha Construction Co., Ghaziabad 5.3. Respectfully following the proposition laid down in the above cases, we delete the penalty. 6. In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 05th January, 2016.