Vildirect: IncomeTax-caselaws-2011-VIL-734-ITAT-MUM

2011-VIL-734-ITAT-MUM

Income Tax Appellate Tribunal MUMBAI

ITA No.5895/Mum/2010

Date: 09.12.2011

SHRI NARAYANSINGH J. DEORA

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-R, THANE

Respondent by : Shri O.A.Mao

BENCH

SHRI R.S. SYAL (A.M.) AND SHRI D.K.AGARWAL (JM)

JUDGMENT

2. Briefly stated facts of the case are that the assessee is a civil contractor and proprietor of Ashapura Construction Company. It filed return of income for AY.2001-02 on 30 .10.2001 declaring total income of Rs. 5,09,819/-. During the course of assessment proceedings the assessee produced the books of accounts which were not complete and not supported by necessary bill/vouchers, etc. In view of the incomplete books o f account the AO rejecte d the books u/s 145(2) of the Income Tax Act, 1961 (in short the Act). The AO proceeded to estimate the profit of the business of the assessee @ 12% of the total receipts. The assessee agitated the above estimation of the profit of business @ 12% befo re the ld. CIT(A), who reduced the estimated profits of the assessee from 12% to 5%. In appeal, before the ITAT, by the Revenue, the estimate of the profits of the assessee was increased to 8% of the gross receipts on the basis of section 44AD of the Income Tax Act. After receiving the order of the ITAT, Mumbai, a show cause u/s. 274 read with section 271(1)(c) was issued by the AO to the assessee and in response to that the assessee vide its letter dated 25.06.2007 interalia stated that all the facts of the income and expenditure were disclose d by the assessee and all particular of income was also furnished while filing of the return and during the course of assessment. Therefore there was no concealment on part of the assessee falling under the ambit of section 271(1)(c) of the Act and hence it was requested to drop the penalty proceedings. However, The AO did no t accept the assessee' s explanation, on the ground that assessee had produced fabricate d documents. According to AO, productio n of the fabricated documents clearly shows that assessee had intention to conceal the particulars of income and the refore the assessee is liable for penalty action u/s 271(1)(c) of the Act and accordingly, he imposed the pe nalty o f Rs. 3,24,078/- vide order dated 8.8.2007 passed u/s 271(1 )(c) of the Act.

3. On appeal before the ld. CIT(A), while agreeing with the vie ws of the AO confirmed the penalty imposed by the AO.

4. Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us challenging in all the grounds the sustenance of penalty imposed by the AO u/s 271(1)(c) of the Act.

5. The assessee in his written statement dated 25.11.2011 after narrating the facts of the case interalia submitted that in the absence of required information, the AO was within his rights to estimate the pro fits but there is no particulars suggesting any specific concealment of income and hence levy of penalty merely on the basis of estimated income as concealed income dese rves to be delete d. In the alternative, the assessee submits that the penalty may be restricted to the extent o f income at the rate of 5% of the to tal contract receipt.

6. On the other hand, the ld. DR supports the order of the AO and ld. CIT(A).

7. We have carefully co nsidered the submissions of the rival parties and perused the material available on record. We find that the re is no dispute that the AO after rejecting the books of accounts estimated the assessee' s income by applying 12% of the total contract receipt of Rs. 1,98,75,956/- and estimated the assessee' s income at Rs. 23,87,869/-. On appeal, the ld. CIT(A) reduced the percentage of profit to 5% of the total contract receipt. On further appeal by the Revenue, the Tribunal, in view of the provisions of section 44AD directed the AO to apply net rate of profit at 8% o f the gross receipts. Thus, there is no dispute that the assessee's inco me was assessed on estimate basis. It is settled law that the penalty is not leviable on estimate of income.

8. In order to apply the pro visions of section 271(1)(c) the re has to be conce alment of particulars of income, secondly the assessee must have furnished inaccurate particulars of income.

9. In the recent judgment of the Hon'ble Apex Court in CIT V/s Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158(SC) The ir Lordships, after conside ring various decisions including Dilip N. Shroff vs. JCIT (2007) 291 ITR 519(SC), Union of India V/s Dharamendra Textile Processors (2008) 306 ITR 277(SC) and Sree Krishna Electricals Vs. State of Tamil Nadu (2009) 23 VST 249 (SC) have observed and held (page 158 headnote s) as under:

"A glance at the provisions of section 271(1)(c) of the Income- tax Act, 1961, suggests that in order to be co vered by it, there has to be concealment of the particulars o f the income of the assessee. Seco ndly, the assessee must have furnished inaccurate particulars o f his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covere d by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.

Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars."

10. Respectfully following the ratio of the above decisions and keeping in view that it is not the case of the Revenue that the gross receipts shown by the assessee are not correct or it is not a case of estimation o f income we are of the view that there is no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) of the Act and accordingly, the penalty imposed by the AO and sustained by the ld. CIT (A) is deleted. The grounds taken by the assessee are , therefore, allowed.

11. In the result, the assessee's appeal stands allowed.

Order pronounced in the open court on 9th Dec.,2011.

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