M/s. Industrial Security Services,, Surat v. The ACIT.,Circle-7,, Surat

ITA 1956/AHD/2009 | 2004-2005
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 195620514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 1956/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 26 day(s)
Appellant M/s. Industrial Security Services,, Surat
Respondent The ACIT.,Circle-7,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 11-03-2011
Date Of Final Hearing 28-02-2011
Next Hearing Date 28-02-2011
Assessment Year 2004-2005
Appeal Filed On 15-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI D.K. TYAGI JUDICIAL MEMBER AND SHRI A.N.PHAUJA ACCOUNTANT MEMBER ITA NO.1956/AHD/2009 ASSESSMENT YEAR:2004-05 DATE OF HEARING:28.2.11 DRAFTED:1.3.11 INDUSTRIAL SECURITY SERVICES 1 ST FLOOR UPPAL TOWER VAISHALI CINEMA ROAD SURAT PAN NO.AAKFM1044N V/S. ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE-9 SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI J.P. SHAH AR RESPONDENT BY:- SHRI P.R. GHOSH SR-DR O R D E R PER D.K. TYAGI JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME-TAX (APPEALS)-V SURAT IN APPEAL NO. CAS-V/2 82/08-09 DATED 31-03- 2009 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS :- 1. THE C.I.T.(APPEALS) ERRED IN HOLDING THAT THE A SSESSEE IS GUILTY OF THE OFFENCE OF CONCEALMENT OF INCOME UNDER SEC. 271(1)( C) IN RESPECT OF LEAVE WAGES OF RS.10 65 600/- AND INCENTIVE OF EMPL OYEES OF RS.20 08 297/- DISALLOWED BY THE ASSESSING OFFICER. 2. THE C.I.T.(APPEALS) OUGHT TO HAVE ALLOWED THE AP PEAL IN TOTO AND OUGHT TO HAVE HELD THAT THE ASSESSEE IS NOT LIABLE TO ANY PENALTY UNDER SEC. 271(1)(C) IN RESPECT OF ANY CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS. ITA 1956/AHD/2009 A.Y. 2004-05 INDUSTRIAL SECURITY SERVICES V. ACIT CIR-9 SRT PAGE 2 3. THE BRIEF FACTS OF THE CASE AS THEY EMERGE FROM THE PENALTY ORDER ARE THAT IN THIS CASE ASSESSEE FILED RETURNED OF INCOME FOR ASSESSMENT YEAR 2004- 05 DECLARING TOTAL INCOME OF RS.14 95 960/- AND ASS ESSMENT WAS COMPLETED U/S.143(3) OF THE I.T ON 29-11-2006 BY ASSESSING TO TAL INCOME OF RS.66 28 186/-. THE MAIN ADDITION WAS MADE ON LOW N ET PROFIT OF RS.42 28 443/- AND PENALTY PROCEEDINGS WAS INITIATE D U/S.271(1) OF THE IT ACT WHILE PASSING ASSESSMENT ORDER AND SHOW CAUSE NOTIC E U/S 271(1)(C) WAS ALSO ISSUED. 4. THE ASSESSEE IS A REGISTERED FIRM AND ENGAGED IN THE BUSINESS OF PROVIDING SECURITY SERVICES. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN NET PROFIT OF RS.14 83 635/- @ 0.85% OF T HE TURNOVER OF RS.17 36 68 915/- AS COMPARED TO NET PROFIT OF RS.7 1 30 820/- @ 5% ON THE TURNOVER OF RS.14 21 41 479/- IN THE IMMEDIATE PREC EDING YEAR. THERE WAS A FALL IN THE NET PROFIT SHOWN IN THE NET PROFIT IN T HE YEAR UNDER CONSIDERATION BY 4.15%. DURING THE SURVEY PROCEEDINGS U/S.133A FOR T HE ASSESSMENT YEAR 2003-04 THE ASSESSEE DISCLOSED UNACCOUNTED INCOME O F RS.60 LAKH. THE NET PROFIT RATIO IN THE LAST THREE YEARS IN ASSESSEES OWN CASE ITSELF WAS HIGHER WHEN COMPARED TO THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER FOUND FROM THE BALANCE SHEET THAT ASSESSEE HAS SHOWN UNPA ID SALARY AND WAGES OF RS.1 15 21 688/- UNPAID DIWALI BONUS EXPENSES OF RS .49 78 618/- AND UNPAID INCENTIVES TO EMPLOYEES OF RS.20 08 297/-. THE ASSE SSEE COULD NOT RECONCILE AND EXPLAIN SUCH A HUGE UNPAID LIABILITIES AFTER SE RVICE OF SPECIFIC SHOW CAUSE NOTICE. AS THERE WAS NO SATISFACTORY EXPLANATION AS SESSING OFFICER REJECTED THE BOOK RESULTS U/S.145 OF THE IT ACT. THE ASSESSING O FFICER ALSO MADE THE ADDITION OF RS.42 28 443/- ON ACCOUNT OF LOW PROFIT MARGIN AND INITIATED PENALTY PROCEEDINGS U/S.271(1) OF THE ACT FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. THE ASSESSEE AGGRIEVED BY THE ASSESSMENT OR DER FILED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE WRITTEN SUBMIS SIONS OF THE ASSESSEE CONFIRMED THIS ADDITION AND DISMISSED THE ASSESSEE S APPEAL. THEREAFTER ASSESSING OFFICER ISSUED NOTICE U/S. 271(1)(C) OF T HE IT ACT ON 16-12-2006 07- ITA 1956/AHD/2009 A.Y. 2004-05 INDUSTRIAL SECURITY SERVICES V. ACIT CIR-9 SRT PAGE 3 09-2007 AND FINALLY ON 21-01-2008 BUT THE ASSESSEE DID NOT REPLY ASSESSING OFFICER THEREFORE TREATED IT A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) AND IMPOSED MINIMUM PENALTY OF RS.15 16 954/- BEING 100 % OF TAX ON THE CONCEALED INCOME OF RS.42 28 443/- FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. AGGRIEVED BY PENALTY ORDER OF THE ASSESSING OFFICER ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) WHO AFTER TAKING INTO CONS IDERATION THE SUBMISSION OF THE ASSESSEE GAVE RELIEF OF RS.4 14 193/- TO THE AS SESSEE BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE ASSESSMENT ORDER PENALTY ORDER U/S.271(1) AS WELL AS SUBMISSIONS FILED ON BEHALF OF THE APPEL LANT. AFTER CAREFUL CONSIDERATION OF THE FACTS I FIND THAT EVEN THOUG H THE AO HAS RESORTED TO INVOKE THE PROVISIONS OF SECTION 145 AND ESTIMAT ED THE NET PROFIT SHE HAS VERY WELL QUANTIFIED THE ADDITIONS OF RS.10 65 600/- OUT OF LEAVE WAGES AND RS.20 08 297/- OUT OF INCENTIVES TO EMPLO YEES TOTAL RS.30 73 897/-. I DO NOT AGREE WITH THE ARGUMENTS OF THE APPELLANT/ AR THAT THIS IS PURELY A CASE OF ESTIMATE OF NET PROFIT AND THEREFO RE NO PENALTY IS LEVIABLE KEEPING IN VIEW THE VARIOUS JUDGEMENTS MEN TIONED IN THE SUBMISSIONS. IN PARA 5 OF THE ASSESSMENT ORDER THE AO HAS STATED THAT THE EXACT QUANTIFICATION OF BOGUS SALARY AS WE LL AS DIWALI BONUS EXPENSES IS SNOT POSSIBLE THEREFORE SHE PROCEEDED T O ESTIMATED THE NET PROFIT OF THE APPELLANT. THE AO BEING DEPRIVED WITH NECESSARY DOCUMENTS HAD TO ESTIMATE INCOME INSTEAD OF QUANTIF YING DISALLOWANCE UNDER THE ABOVE TWO HEADS. SHE HAS FUR THER STATED THAT THE ABOVE MENTIONED TWO ADDITIONS OF RS.20 08 297 A ND RS.1065600/- ARE COVERED UNDER THE ADDITION MADE ON THE GROUND OF NET PROFIT PERCENTAGE. I THEREFORE HOLD THAT THE AF ORESAID TWO ADDITIONS ON ACCOUNT OF WAGES AND INCENTIVE TOTAL RS.30 73 897 ARE RELATABLE TO LEVY OF PENALTY U/S.271(1) AS THE SAM E HAS BEEN QUANTIFIED BY THE AO. NEEDLESS TO MENTION THAT IN A RECENT DECISION OF HONOURABLE SUPREME COURT (UNION OF INDIA VS. DHA RMENDRA TEXTILE PROCESSORS & ORS 306 ITR 277 ) IT HAS BEEN HELD THAT THE SECTION 271(1)(C) HAS BEEN ENACTED WITH A VIEW TO P ROVIDE REMEDY FOR LOSS OF REVENUE- PENALTY UNDER THAT PROVISION I S A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTI ON U/S.276C. IN VIEW OF THIS I HOLD THAT THE APPELLANT HAS CONCEALED TH E PARTICULARS OF INCOME OF RS 30 73 897/- AND THE TAX SOUGHT TO BE E VADED COMES TO RS.11 02 761/-. THEREFORE I CONFIRM THE PENALTY U/S .271(1) TO THE EXTENT OF RS.11 02 761/-. THE APPELLANT GETS RELIEF OF RS.4 14 193/-. ITA 1956/AHD/2009 A.Y. 2004-05 INDUSTRIAL SECURITY SERVICES V. ACIT CIR-9 SRT PAGE 4 FURTHER AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE AT THE OUT SET SUBMITTED THAT IN QUANTUM APPEAL FILED BY ASSESSEE AGAINST THE ADDITION OF RS.42 28 443/- THE TRIBUNAL HAS DELETED THE ADDITI ON BY ALLOWING ASSESSEES APPEAL VIDE ITA NO.3826/AHD/2007 DATED 22-01-2010. SINCE THE ASSESSING OFFICER HAS INITIATED PENALTY AGAINST THE ADDITION OF RS.42 28 443/- WHILE PASSING THE ASSESSMENT ORDER AND ALSO IMPOSED THE P ENALTY ON THIS ADDITION AFTER THE ORDER OF THE TRIBUNAL DELETING THE ADDITI ON THE PENALTY IS NOT SUSTAINABLE AND THE SAME MAY KINDLY BE DELETED. 6. THE LD. SR-DR ON THE OTHER HAND SUBMITTED THAT L D. CIT(A) HAS CONFIRMED THE PENALTY ON THE QUANTIFIED ADDITION OF RS.10 65 600/- OUT OF LEAVE WAGES AND RS.20 08 297/- OUT OF INCENTIVE TO EMPLOY EES AND SINCE THIS ADDITIONS HAVE NOT BEEN DELETED BY TRIBUNAL THE PE NALTY IMPOSED ON SUCH AMOUNT CANNOT BE DELETED. HE THEREFORE PRAYED THAT THE ORDER OF LD. CIT(A) MAY KINDLY BE UPHELD. 7. IN REPLY LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THESE TWO ADDITIONS OF RS.10 65 600/- AND RS.20 08 297/- THE ASSESSING OFFICER REJECTED THE BOOK RESULTS U/S.145 OF THE ACT AND WE NT ON TO MAKE THE MAIN ADDITION OF RS.42 28 443/- ON ACCOUNT OF LOW PROFIT MARGIN AND PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR FURNIS HING INACCURATE PARTICULARS OF INCOME OF RS.42 28 443/- ONLY AND NO SUCH INITIATIO N WAS DONE IN RESPECT OF THE OTHER TWO ADDITIONS. THEREFORE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY IN RESPECT OF THOSE TWO ADDITIONS AND T HE ARGUMENTS ADVANCE BY THE LD.SR-DR ARE DEVOID OF MERITS. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS WE FIND PENALTY PROCEEDINGS WAS INITIATED ONLY IN RESPECT OF ADDITI ON OF RS.42 28 443/- FOR LOW ITA 1956/AHD/2009 A.Y. 2004-05 INDUSTRIAL SECURITY SERVICES V. ACIT CIR-9 SRT PAGE 5 PROFIT MARGIN AS IS CLEAR FROM THE ASSESSMENT ORDER THE RELEVANT PORTION OF WHICH READS AS UNDER:- 5. ADDITION ON NET PROFIT THERE IS FALL IN NET PROFIT RATIO FROM 5% SHOWN IN THE IMMEDIATELY PRECEDING YEAR TO 0.85% DURING THE YEAR UNDER CONSI DERATION. FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE THERE ARE MA NY DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ADDITION ON T HE GROUND OF INCENTIVES TO THE EMPLOYEES IS WORKED OUT TO RS.20 08 297/- AND ON THE LEAVE WAGES TO RS.10 65 600/-. FURTHER BY THE ORDER PASSED U/S.154 OF THE I.T. ACT DT 16.06.2006 THE INCOME-TAX DEBITED IN THE P & L A/C. OF RS.9 03 783/- WAS ALREADY ADDED BACK TO THE TOTAL I NCOME OF THE ASSESSEE. THE EXACT QUANTIFICATION OF BOGUS SALARY AS DISCUSSED IN FOREGOING PARAS AS WELL AS DIWALI BONI EXPENSES IS NOT POSSIBLE. TAKING ALL SUCH DISCREPANCIES IN TO CONSIDERATION THE NET PROFIT PERCENTAGE OF THE ASSESSEE IS HEREBY ENHANCED TO 3.5 % WHEREAS THE HAS SHOWN 0.85% ONLY. THE NET PROFIT RATIO OF 3.5% IS ARRIVED AFTER CONSIDERING THE PROFIT RATIO SHOWN BY M/S. UNITED SECURITIES ORGANISATION WHO IS ALSO INVOLVED IN PROVIDING SIMI LAR KIND OF SERVICES. THE ABOVE MENTIONED ADDITIONS ARE COVERED UNDER THE ADDITION MADE ON THE GROUND OF NET PROFIT PERCENTAGE (3.5 0.85 X 17 36 68 915) WHICH COMES TO RS.51 32 226/-. HOWEVER AFTER GIVIN G EFFECT TO THE ADDITION OF RS.9 03 783/- BY ORDER U/S.154 DATED 16 .6.2006 TOTAL ADDITION TO BE MADE NOW WORKS OUT TO RS.42 28 443 ( RS.51 32 226 RS.9 03 783). PENALTY PROCEEDINGS U/S.271(1) OF TH E INCOME-TAX ACT IS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. FROM THE PENALTY ORDER ALSO IT IS CLEAR THAT THE PE NALTY WAS IMPOSED ONLY FOR FURNISHING INACCURATE PARTICULARS OF INCOME OF RS.4 2 28 443/-. RELEVANT PORTION OF ORDER READS AS UNDER:- IN VIEW OF THE ABOVE SEVERAL NOTICE HAVE BEEN ISS UED AND SERVED UPON THE ASSESSEE. THE ASSESSEE HAS NOT RELIED THE ABOVE NOTICES TILL DATE. AS THE BOOK RESULT IS NOT ACCEPTED U/S.145 OF THE I .T. ACT AND ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OF R S.42 28 443/-. THIS IS A FIT CASE FOR LEVY OF PENALTY U/S.271(1) OF THE I .T. ACT. I IMPOSE MINIMUM PENALTY U/S.271(1) OF RS.1516954/- 100% OF TAX ON CONCEALED INCOME OF RS.4228 443/- AS AGAINST LEVIAB LE MAXIMUM PENALTY OF RS.5440862/- 300% OF TAX ON CONCEALED INCOME OF RS.4228443/-. THIS ADDITION HAS BEEN DELETED BY THIS TRIBUNAL BY OBSERVING AS UNDER:- ITA 1956/AHD/2009 A.Y. 2004-05 INDUSTRIAL SECURITY SERVICES V. ACIT CIR-9 SRT PAGE 6 EVEN IF BOOK RESULTS ARE REJECTED U/S.143(3) OF THE I.T. ACT 1961 THE ENTIRE ADDITION OF RS.42 28 443/- ON ACCOUNT OF NET PROFIT RATE IS CLEARLY UNJUSTIFIED UNREASONABLE AND WITHOUT ANY BASIS. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS I SSUE AND DELETE THE ADDITION OF RS.42 28 443/-. SINCE THE ADDITION MADE BY ASSESSING OFFICER WHICH WAS THE BASIS FOR INITIATING AS WELL AS IMPOSING THE PENALTY U/S.271(1) HAS BEE N DELETED THE PENALTY HAS NO LEG TO STAND HENCE NOT SUSTAINABLE IN LAW AND T HE SAME IS THEREFORE DELETED. 9. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11/03/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 11/03/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD