DCIT Co. Circle 5 (1), v. Kalindi Rai Nirman Engg. Ltd,

ITA 322/DEL/2008 | 2003-2004
Pronouncement Date: 29-03-2012 | Result: Dismissed

Appeal Details

RSA Number 32220114 RSA 2008
Assessee PAN AAACK6371P
Bench Delhi
Appeal Number ITA 322/DEL/2008
Duration Of Justice 4 year(s) 1 month(s) 28 day(s)
Appellant DCIT Co. Circle 5 (1),
Respondent Kalindi Rai Nirman Engg. Ltd,
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 29-03-2012
Date Of Final Hearing 01-11-2011
Next Hearing Date 01-11-2011
Assessment Year 2003-2004
Appeal Filed On 01-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.322/DEL./2008 (ASSESSMENT YEAR : 2003-04) DCIT CIRCLE 5 (1) VS. M/S. KALINDI RAIL NIRMAN ENGG. LTD. NEW DELHI. F 5 GAUTAM NAGAR GULMOHAR PARK ROAD NEW DELHI 110 049. (PAN : AAACK6371P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. SHARMA ADVOCATE REVENUE BY : SHRI N.K. CHAND DR ORDER PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF CIT (APPEALS)-I JAIPUR DATED 26.10.2007 FOR THE ASSESS MENT YEAR 2003-04. 2. THE ASSESSEE IS A CONTRACTOR UNDERTAKING PROJECT OF INDIAN RAILWAYS ON TURNKEY BASIS. A SEARCH ACTION UNDER SECTION 132 O F THE INCOME-TAX ACT WAS CARRIED OUT ON 14.3.1995. THE ASSESSEE COMPANY MAI NTAINS MANY BRANCHES/PROJECT OFFICES ALL OVER INDIA. THE ASSES SING OFFICER APPLIED NET PROFIT RATE @ 11% ON THE TOTAL CONTRACT RECEIPTS ON ESTIMATE BASIS WHICH WAS REDUCED TO 8% BY ITAT VIDE ITS ORDER DATED 05.09.20 02. A PENALTY UNDER ITA NO.322/DEL./2008 2 SECTION 271(1)(C) WAS LEVIED OF RS.24 00 977/- ON 3 1.03.2002. THE CIT (A) DELETED THE PENALTY ON THE GROUND THAT THE ESTIMATI ON OF INCOME BY APPLYING FLAT NET PROFIT RATIO DOES NOT TANTAMOUNT TO CONCEA LMENT OR FILING INACCURATE PARTICULARS. THE CIT (A) GRANTED THE RELIEF BY HOL DING AS UNDER :- THE CONTENTION OF THE A/R IS CONSIDERED. THE HON' BLE ITAT'S ORDER (DB) WAS GONE THROUGH. WHILE FIXING PR OFIT RATE AT 8% AND SUBJECT TO ALLOWANCE OF DEPRECIATION AND INT EREST THERE ON THE HON'BLE ITAT HAS FOUND PROFIT RATE OF 8% AS 'QUITE REASONABLE'. THE HON'BLE ITAT ALSO OBSERVED THAT TH E PROPOSAL OF THE ASSESSEE FOR FIXING NET PROFIT RATE OF 11 % WAS A CONDITIONAL PROPOSAL AND WAS A COUNTER OFFER TO THE PROPOSAL MADE BY THE AO WHICH CAME TO BE MADE AS APPELLANT A T THE RELEVANT TIME WAS NOT ABLE TO COLLECT INFORMATION A BOUT SUCH CONTRACTS OR PRODUCE THOSE PERSONNEL. IT WAS MERELY TO PURCHASE PEACE AND AVOID ANY DISPUTE WITH THE DEPARTMENT. FROM THE RECORD IT APPEARS THAT THE AO THOUGH MADE VARIOUS QUERIES BUT HAS NOT STATED BASIS OF ITS EST IMATION NOR GAVE CHANCE TO THE APPELLANT TO REBUT BASIS OF ARRIVING AT THE APPLICATION OF THE PRESION RATE OF 11 %. THE COUNTE R PROPOSAL OF THE ASSESSEE WAS CONDITIONAL OFFER AS TO THE ALLOWA BILITY FASTENED WITH THE CONDUCT OF THE ACTIVITY. BUT THE ASSESSING OFFICER NEITHER INFORMED THE APPELLANT WITH THE PROPOSAL SO MADE IS ACCEPTABLE NOR HE DID ACT IN ACCORDANCE WITH THE OFFER SO MADE BY THE APPELLANT. THE AO TOOK PROFIT RATE AT 11 % AND ALLO WED DEPRECIATION ALONE LEAVING INTEREST WHICH WAS A CON DITION PRECEDENT TO THE PROPOSAL OF THE APPELLANT. THE CO UNTER OFFER OF THE APPELLANT THEREFORE COULD NOT BE TERMED AS AN A GREEMENT WITHIN THE TRUE SPIRIT OF WELL KNOWN 'DOCTRINE OF E LECTION' AS IT WAS NECESSARY FOR THE ASSESSING OFFICER TO CONFIRM TO ALL THE PROVISIONS AND CONDITIONS OF THE INSTRUMENT OF OFFE R MADE BY THE APPELLANT SO AS TO TERMED IT AS AN AGREED ASSESSMEN T OR APPLICATION OF RATE OF PROFIT ON AGREED BASIS. EVEN IF THE NET PROFIT RATE TAKEN BY THE AO IS AS PER THE AGREEMENT WITH THE APPELLANT IT AUTOMATICALLY DOES NOT TANTA AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AN D LEVYING OF PENALTY U1S 271(1)(C) AND AO IS SUPPOSED TO ESTABLI SH POSITIVE ITA NO.322/DEL./2008 3 CONCEALMENT. AS PER EXPLANATION TO SECTION 271(1) T HE ASSESSEE HAS OFFERED EXPLANATION AND AO HAS NOT PROVED THAT THE EXPLANATION OF THE APPELLANT WAS NOT BONAFIDE AND T HAT ALL THE FACTS AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE NOT BEEN DISCLOSED BY THE APPELLANT. UNDER THE CIRC UMSTANCES AND FACTS OF THE CASE AND IN THE LIGHT OF VARIOUS C ASE LAWS RELIED UPON BY THE APPELLANT IT IS NOT A CASE OF POSITIVE CONCEALMENT OF INCOME AND THEREFORE PENALTY LEVIED BY THE AO IS HE REBY DROPPED. 3. NOW THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT (A) ON THE FOLLOWING GROUNDS :- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT (APPEALS) WAS JUSTIFIED IN CANCELING TH E PENALTY UNDER SECTION 271(1)(C) IMPOSED AT RS.24 00 977/- H OLDING THAT THERE WAS NO POSITIVE CONCEALMENT DETECTED BY THE A O EVEN THOUGH THE NET PROFIT RATE OF 11.64% IS RECORDED IN THE SIZED MATERIALS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN CANCELIN G THE PENALTY UNDER SECTION 271(1)(C) EVEN THOUGH THE ASSESSEE HA S CONCEALED PARTICULARS OF INCOME IN THE FORM OF ILLEGAL PAYMEN T OF RS.30 00 000/- TO RAILWAY OFFICIALS INFLATED PAYME NTS OF RS.38 00 000/- THROUGH ADJUSTMENT OF LAST DATE OF T HE ACCOUNTING PERIOD & UNDISCLOSED BENAMI INVESTMENT OF RS.32 00 000/- IN PUBLIC ISSUE (PROMOTER'S QUOTA). 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT (APPEALS) WAS JUSTIFIED IN CANCELIN G THE PENALTY UNDER SECTION 271(1)(C) IMPOSED AT RS.24 00 977/- W HEREAS THE ASSESSED INCOME WORKED OUT AT RS.1 38 79 261/- AS A GAINST DECLARED INCOME OF RS.88 91 700/- RESULTING IN THE CONCEALED INCOME OF RS.49 87 561/-WHICH HAS BEEN ACCEPTED BY THE ASSESSEE & FOR WHICH NO FURTHER APPEAL HAS BEEN FIL ED. ITA NO.322/DEL./2008 4 5. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN CANCELING THE PENALTY UNDER SECTION 271(1)(C) RELYING ON DECISIONS AS REP ORTED ON 1105 ITR 602 125 ITR 700 131 ITR 619 & 83 ITR 26. THESE CASE LAWS RELATE TO EARLIER YEARS I.E. BEFOR E THE INSERTION OF EXPLANATION UNDER SECTION 211(1)(C) WHEN THE ONUS W AS ON THE DEPARTMENT TO PROVE THAT ASSESSEE HAS DELIBERATELY FILED INACCURATE PARTICULARS. 6. THE. APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUNDS OR THE APPEAL RAISED ABOVE AT THE TIME OF H EARING. 4. THESE GROUNDS RAISED BY THE REVENUE ARE BASICALL Y BASED ON THREE REASONS VIZ. FIRSTLY PLACING RELIANCE ON THE STA TEMENT OF SHRI A.K. SOLANKI IN WHICH IT WAS ALLEGED THAT NET PROFIT RATIO WAS IN T HE RANGE OF 11.64%; SECONDLY RELYING ON THE ANNEXURE A ON THE BASIS OF WHICH THE ALLEGATION HAS BEEN MADE THAT THERE WAS AN ILLEGAL PAYMENT TO THE RAILWAY OFFICIALS OF RS.30 LACS THERE WAS INFLATED PAYMENTS OF RS.38 LA CS AND THERE WAS UNDISCLOSED BENAMI TRANSACTION OF RS.38 LACS; AND T HIRDLY THE REASONS WAS THAT THERE WAS A DISPARITY BETWEEN THE ASSESSED INC OME AND RETURNED INCOME TO THE TUNE OF RS.49 87 561/- WHICH IS TO BE TREATE D AS CONCEALED INCOME. 5. AFTER HEARING BOTH THE SIDES WE FIND THAT THE R EASONS ON WHICH THE REVENUE HAS COME IN APPEAL BEFORE US BY CHALLENGING THE ORDER OF THE CIT (A) FOR DELETING THE PENALTY ARE NOT SUSTAINABLE IN VIE W OF THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT WHILE DISP OSING OF THE APPEAL IN THE QUANTUM THE ITAT HAS HELD ON THESE ISSUES AS UNDER :- ITA NO.322/DEL./2008 5 ON THE ISSUE OF STATEMENT OF SHRI A.K. SOLANI FOR THE PURPOSES OF NET PROFIT RATIO OF 11.64% THE ITAT HAS HELD IN PARA N OS.26 & 27 AS UNDER :- 26. FROM PARA 3.3 OF THE ORDER OF THE LD. CIT (A) WE ALSO FIND THAT RELIANCE HAS BEEN PLACED ON THE STATEMENT OF M R. A.K.SOLANKI ABOUT NET PROFIT RATE OF 11.64%. THIS HAS BEEN DONE WITHOUT BRINGING ON RECORD AS TO THE CIRCUMSTANCES UNDER WH ICH SUCH A STATEMENT HAS BEEN MADE BY THE SAID PERSON AND AS T O WHAT HE MEANT BY THE NET PROFIT SO INFORMED NOR THE ASSESSI NG OFFICER ENQUIRED INTO THE CORRECTNESS OF VERACITY OF SUCH S TATEMENT. NOTHING HAS BEEN BROUGHT ON RECORD AS TO HOW THE SAID RATE OF 11.64% HAS BEEN STATED BY THE SAID SLIM A.K.SOLANKI AND WHAT W ERE THE BASIS OF STATING THE RATE OF 11.64%. WHAT WAS HIS AUTHORITY TO MAKE SUCH A STATEMENT HAS ALSO NOT BEEN ENQUIRED. ALL THESE QUE STIONS REMAIN UNANSWERED AND AS THE ASSESSING OFFICER HIMSELF DID NOT STRICTLY APPLIED THE RATE SO STATED BY HIM NO CREDENCE CAN BE GIVEN TO SUCH A STATEMENT FOR APPLYING RATE OF 11 % BY THE A SSESSING OFFICER IN THE CASE OF THE APPELLANT MORE PARTICULARLY WHE N THE SAME WAS NOT PRODUCED BEFORE THE TRIBUNAL ALSO WHEN ASKED TO DO SO. 27. FROM THE VARIOUS REPLIES FURNISHED BY THE ASSES SEE AND FROM THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER IT CANNOT CONCLUSIVELY BE SAID AS TO WHAT ARE THE REMA INING PAYMENTS WHICH COULD BE SAID NOT TO HAVE BEEN INCURRED WHOLL Y AND EXCLUSIVELY FOR PURPOSE OF CARRYING ON OF THE BUSIN ESS AS THE ASSESSEE HAS BEEN ABLE TO SUBSTANTIATE ITS CLAIM BE FORE THE ASSESSING OFFICER. WE ALSO FIND THAT NOWHERE IN THE ASSESSMEN T ORDER THE ASSESSING OFFICER MADE IT CLEAR AS TO HOW HE HAS AR RIVED AT THE SURGICAL PRECISION RATE OF 11 %. EVEN IF IN THE ABS ENCE OF ANY SUPPORTING VOUCHERS THE ASSESSING OFFICER WAS JUSTI FIED IN INVOKING PROVISIONS OF SEC. 145 OF THE ACT THOUGH NOT CHALL ENGED BY THE APPELLANT BEFORE US IT DID NOT MEAN THAT HE HAD GO T ABUNDANT POWER TO MAKE THE ADDITIONS OR ESTIMATION AT HIS SWEET WI LL. IT IS SETTLED PROPOSITION OF LAW THAT ASSESSMENT IS A QUASI JUDIC IAL PROCEEDING IN WHICH THE PERSONAL WILL OR ROUGH ESTIMATION DID NOT HAVE ANY PLACE. THE ASSESSING OFFICER IS BOUND TO DISCLOSE THE MENT AL PROCESS THROUGH WHICH HE ARRIVED AT A PARTICULAR FIGURE OF INCOME AS HIS ORDERS ARE BEING SUBJECTED TO APPEAL AND THEREFORE SHOULD HAVE BEEN SPEAKING ONE. IT IS EVIDENCED FROM THE PAST HI STORY OF THE APPELLANT THAT NEVER A PROFIT RATE OF MORE THAN 7% WAS APPLIED IN THE CASE OF THE APPELLANT MORE PARTICULARLY WHEN TWO O F THE PAST ASSESSMENTS HAVE ALREADY BEEN COMPLETED AS A CONSEQ UENCE OF THE SEARCH AND INCRIMINATING DOCUMENTS AS ALLEGED IN TH E YEAR UNDER APPEAL WERE ALSO AVAILABLE WITH THE ASSESSING OFFIC ER IN THOSE ITA NO.322/DEL./2008 6 ASSESSMENTS. KEEPING IN VIEW THE PECULIAR CIRCUMSTA NCES LIKE NATURE OF - BUSINESS EXPENSES ON PUBLIC ISSUE ETC. IN THE YEAR UNDER APPEAL THE ASSESSEE'S OWN HISTORY FOR THE EARLIER YEARS O VER ALL FACTS FINDINGS AND CIRCUMSTANCES OF THE CASE SUPPRESSION OF PROFITS HAVING NOT BEEN ESTABLISHED ALLEGATIONS HAVING NOT BEEN PROVED EXPLANATION RENDERED BY THE APPELLANT AND THE LEGIS LATIVE HISTORY WE FIND THAT THERE WAS NO JUSTIFICATION IN APPLYING OR CONFIRMING NET PROFIT RATE OF 110/0 WHICH WE HOLD THAT THE AD-HOE APPLICATION OF 8% NET PROFIT RATE SUBJECT TO ALLOW ABILITY OF DEPRECI ATION AND INTEREST THEREON IN THE CASE OF THE ASSESSEE WAS JUSTIFIED I N ORDER TO COVER ALL THE DISCREPANCIES ERRORS AND ALLEGATIONS FOUND THR OUGH THE TRANSACTIONS RECORDED IN THE BOOKS OR THE LOOSE PAP ERS SO FOUND AND SEIZED FROM THE PREMISES OF THE APPELLANT OR ITS DI RECTORS AND ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RECALC ULATE THE INCOME OF THE APPELLANT.' ON THE ISSUE OF ILLEGAL PAYMENT TO THE RAILWAY OFF ICIALS OF RS.30 LACS THE ITAT HAS HELD IN PARA NO. 17 & 19 AS UNDER :- 17. SIMILARLY THE LD. DEPARTMENTAL REPRESENTATIVE HAS DRAWN A REFERENCE TO THE ILLEGAL PAYMENT TO RAILWAY OFFICIA LS ETC. WE FIND THAT SUCH PAYMENTS HE HIMSELF HAS HELD TO BE EXTORTIONS PAYMENT. NOWHERE THE ASSESSING OFFICER HAS GIVEN ANY FINDING THAT THE ASSESSEE MADE THESE PAYMENTS WILLFULLY OR ILLEGALLY. THE EXT ORTIONS PAYMENTS ARE NOTHING BUT PAYMENTS MADE FOR BUSINESS COMPULSI ONS AND THE SAME BEING A BUSINESS NECESSITY CANNOT BE SAID TO B E NOT DEDUCTIBLE. (II) INFLATED PAYMENTS OF RS.38 LAKHS THE SAID ALLE GATION IS ALSO STRUCK DOWN BY ITAT'S ORDER AS BASELESS & UNSUBSTAN TIATED. THE RELEVANT PARA OF ITATS ORDER IS STATED AS UNDER :- 19. THE INTEREST FREE ADVANCES STATED TO BE GIVEN T O DIRECTORS STAND DULY REPLIED BY THE APPELLANT AS PER PAPER BOOK PAG E 132. THE RECORD REVEALS THAT SUCH ADVANCES ARE NOT RS.50 LACS BUT O NLY RS.36.7 LACS. THE CIRCUMSTANCES UNDER WHICH THE ADVANCES HAVE BEE N MADE HAVE ALSO BEEN DETAILED WHICH INTER-ALIA INCLUDED THE P AYMENTS AS REQUIRED FOR MEETING OUT THE CONTINGENCIES OF THE BUSINESS S INCE THE WORK OF THE APPELLANT IS SPREAD OVER TO 19 SITES. THE SAID PAYMENTS ARE DULY ACCOUNTED FOR AND THE ACCOUNT THEREOF HAD BEEN REND ERED BY THE DIRECTORS BEFORE THE CLOSE OF THE ANNUAL ACCOUNT AN D EXPENDITURE INCURRED ON THAT ACCOUNT HAS ALSO BEEN DULY RECORDE D IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS NOT PROBED THE I NFLATION OF EXPENSES AND THEREFORE THERE IS NO MATERIAL WHICH COULD LEAD TO ITA NO.322/DEL./2008 7 APPLICATION OF HIGHER RATE OF PROFIT ON THIS ACCOUN T. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO MENTIONED ABOU T INFLATED PAYMENTS OF RS-38 LACS. WE HAVE VERIFIED THIS ALLEG ATION WITH REFERENCE TO THE REPLY FURNISHED BY THE ASSESSEE AT PAGES 127 & 128. AS REFERRED IN THE PRECEDING PARAGRAPH SUCH WITHDR AWALS ARE BEING MADE BY THE DIRECTORS FOR MEETING OUT BUSINESS CONT INGENCIES AND NECESSITIES AT DIFFERENT SITES OF THE APPELLANT COM PANY AS ITS WORKS ARE SPREAD OVER EVEN TO A VERY SMALL PLACES WHERE ADEQU ATE FACILITY OF EACH AND EVERY MATERIAL OR SUPPLIES THERETO ARE NOT AVAILABLE. BESIDES THIS THE ASSESSING OFFICER HAVING NEITHER PROVED T HE INFLATION NOR BROUGHT ON RECORD EVEN A SINGLE TRANSACTION TO SHOW THE SUPPRESSION OF PROFITS IT CANNOT BE SAID THAT THE AMOUNTS SO W ITHDRAWN BY THE DIRECTORS AND ADJUSTED AT THE END OF THE YEAR ARE I NFLATED PAYMENTS. IN FACT IN THE ACCOUNTING PARLANCE & BUSINESS CIRCLES THE PURPOSE OF MAKING IMPREST ADVANCE IS TO MEET LIABILITY OF THE BUSINESS ON DAY TO DAY BASIS FOR THE CONVENIENT HANDLING AND ACCOUNTIN G AND TO AVOID DAY TO DAY REPEATED WITHDRAWALS. BEFORE THE ANNUAL ACCOUNTS ARE CLOSED AN ACCOUNT OF THE IMPREST ADVANCE IS TAKEN FROM THE PERSON TO WHOM IT IS SO MADE. THE APPELLANT HAS RESORTED TO T HE SAME PRACTICE WHICH IS PREVALENT IN THE BUSINESS CIRCLES AND NOTH ING NEW HAS BEEN DONE BY HIM. THE ASSESSING OFFICER MIGHT NOT BE AWA RE OF SUCH A PRACTICE AND HIS IGNORANCE COULD HAVE AROUSED GENU INE SUSPICION. BUT IT IS SETTLED LAW THAT SUSPICION HOWSOEVER STRO NG CANNOT TAKE THE PLACE OF PROOF. NO ADVERSE INFERENCE THUS COULD HAV E BEEN DRAWN BY THE ASSESSING OFFICERS.' ON THE ISSUE OF UNDISCLOSED BENAMI TRANSACTIONS I TAT HAS HELD THE SAME AS BASELESS AND UNSUBSTANTIATED. THE RELEVANT PORTION OF THE ITAT ORDER VIDE PARA NO. 19 IS REPRODUCED AS UNDER :- '19. THE INTEREST FREE ADVANCES STATED TO BE GIVEN TO DIRECTORS STAND DULY REPLIED BY THE APPELLANT AS PER PAPER BOOK PAG E 132. THE RECORD REVEALS THAT SUCH ADVANCES ARE NOT RS.50LACS BUT ON LY RS.36.7 LACS. THE CIRCUMSTANCES UNDER WHICH THE ADVANCES HAVE BEE N MADE HAVE ALSO BEEN DETAILED WHICH INTER-ALIA INCLUDED THE P AYMENTS AS REQUIRED FOR MEETING OUT THE CONTINGENCIES OF THE BUSINESS S INCE THE WORK OF THE APPELLANT IS SPREAD OVER TO 19 SITES. THE SAID PAYMENTS ARE DULY ACCOUNTED FOR AND THE ACCOUNT THEREOF HAD BEEN REND ERED BY THE DIRECTORS BEFORE THE CLOSE OF THE ANNUAL ACCOUNT AN D EXPENDITURE INCURRED ON THAT ACCOUNT HAS ALSO BEEN DULY RECORDE D IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS NOT PROBED THE I NFLATION OF EXPENSES AND THEREFORE THERE IS NO MATERIAL WHICH COULD LEAD TO APPLICATION OF HIGHER RAT OF PROFIT ON THIS ACCOUNT . THE LD. ITA NO.322/DEL./2008 8 DEPARTMENTAL REPRESENTATIVE HAS ALSO MENTIONED ABOU T INFLATED PAYMENTS OF RS.38 LACS. WE HAVE VERIFIED THIS ALLEG ATION WITH REFERENCE TO THE REPLY FURNISHED BY THE ASSESSEE AT PAGES 127 & 128. AS REFERRED IN THE PRECEDING PARAGRAPH SUCH WITHDR AWALS ARE BEING MADE BY THE DIRECTORS FOR MEETING OUT BUSINESS CONT INGENCIES AND NECESSITIES AT DIFFERENT SITES OF THE APPELLANT COM PANY AS ITS WORKS ARE SPREAD OVER EVEN TO A VERY SMALL PLACES WHERE ADEQU ATE FACILITY OF EACH AND EVERY MATERIAL OR SUPPLIES THERETO ARE NOT AVAILABLE. BESIDES THIS THE ASSESSING OFFICER HAVING NEITHER PROVED T HE INFLATION NOR BROUGHT ON RECORD EVEN A SINGLE TRANSACTION TO SHOW THE SUPPRESSION OF PROFITS IT CANNOT BE SAID THAT THE AMOUNTS SO W ITHDRAWN BY THE DIRECTORS AND ADJUSTED AT THE END OF THE YEAR ARE I NFLATED PAYMENTS. IN FACT IN THE ACCOUNTING PARLANCE & BUSINESS CIRCLES THE PURPOSE OF MAKING IMPREST ADVANCE IS TO MEET LIABILITY OF THE BUSINESS ON DAY TO DAY BASIS FOR THE CONVENIENT HANDLING AND ACCOUNTIN G AND TO AVOID DAY TO DAY REPEATED WITHDRAWALS. BEFORE THE ANNUAL ACCOUNTS ARE CLOSED AN ACCOUNT OF THE IMPREST ADVANCE IS TAKEN FROM THE PERSON TO WHOM IT IS SO MADE. THE APPELLANT HAS RESORTED TO T HE SAME PRACTICE WHICH IS PREVALENT IN THE BUSINESS CIRCLES AND NOTH ING NEW HAS BEEN DONE BY HIM. THE ASSESSING OFFICER MIGHT NOT BE AWA RE OF SUCH A PRACTICE AND HIS IGNORANCE COULD HAVE AROUSED GENU INE SUSPICION. BUT IT IS SETTLED LAW THAT SUSPICION HOWSOEVER STRO NG CANNOT TAKE THE PLACE OF PROOF. NO ADVERSE INFERENCE THUS COULD HAV E BEEN DRAWN BY THE ASSESSING OFFICERS.' ON THE ISSUE OF DISPARITY BETWEEN THE ASSESSED INC OME AND THE RETURNED INCOME OF RS.49 87 561/- IT CAN BE SAID THAT THIS GROUND IS NOT SUSTAINABLE AS THE ADDITION WAS PURELY ON AD HOC ESTIMATION OF NET PROFIT RATIO. THE ASSESSING OFFICER APPLIED A PARTICULAR FLAT RATE OF 11% AGAINST THE DECLARED PROFIT RATE OF 3% BY THE ASSESSEE. THE ITAT HAS REDUCED THE ESTIMATE INCOME BY ADOPTING 8% OF PROFIT RATE WHICH IS ALSO BASED ON AD HOC ESTIMATION. ULTIMATELY THE ADDITION SUSTAINED OR SURVIVED IS AD HOC ESTIMATION OF INCOME BY APPLYING FLAT RATE OF 8% OF THE PROFIT WHICH CANNOT BE HELD EITHER AS CONCEALMENT OR FILING INACCURATE PAR TICULARS. THE ITAT IN THE ITA NO.322/DEL./2008 9 QUANTUM APPEAL HAS ALSO OBSERVED THAT SUPPRESSION O F THE PROFIT HAVE NOT BEEN ESTABLISHED AND THE ALLEGATION HAVE NOT BEEN PROVED . ON THE BASIS OF THE EXPLANATION SUBMITTED BY THE ASSESSEE THE ITAT HAS FOUND NO JUSTIFICATION IN APPLYING AND CONFIRMING THE NET PROFIT RATE OF 11% WHICH HAS BEEN REDUCED TO 8% ON AD HOC BASIS SUBJECT TO THE ALLOWABILITY OF D EPRECIATION AND INTEREST THEREON. KEEPING THESE FACTS IN VIEW WE FIND THAT ULTIMATELY ON AD HOC ESTIMATION OF INCOME BY APPLYING FLAT RATE OF 8% OF THE PROFIT HAS SURVIVED WHICH IN NO CERTAIN TERMS CAN BE HELD EITHER AS CON CEALMENT OR AS FILING INACCURATE PARTICULARS OF INCOME. THIS VIEW ALSO G ETS SUPPORT FROM FOLLOWING CASE LAWS : (I) IN THE CASE OF CIT VS. AERO TRADERS PVT. LTD. 322 ITR 316 THE ITAT HAS HELD AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND PERUSED THE FACTS THAT ARE RULING IN THE INSTANT CASE. THERE IS NO DO UBT THAT THERE ARE CERTAIN DISCREPANCIES NOTICED IN THE COURSE OF SPECIAL AUDI T AS BROUGHT OUT IN THEIR REPORT. HOWEVER SUCH DISCREPANCIES BY ITSELF IPSO FACTO LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CONCEALED THE INCO ME. ULTIMATELY THE AO HAS TO RESORT TO ESTIMATED ADDITION ONLY. HE COULD NOT POINT OUT ANY J SPECIFIC ITEM OF ANY ADDITION WITH ANY CONCLUSIVE E VIDENCE. C1 EVEN THE ADDITION MADE BY THE AO ON ESTIMATED BASIS IS SUBST ANTIALLY REDUCED BY THE CIT(A) AFTER CONSIDERING THE VARIOUS FACTS AND FIGU RES AND CIRCUMSTANCES OF THE CASE. THE SAID ACTION OF THE CIT (A) HAS BECOME FINAL CONSEQUENT TO THE DECISION OF THE HON'BLE TRIBUNAL IN DISMISSING THE DEPARTMENTAL APPEAL. RESULTANTLY THE INCOME OF RS.1 02 980 IS ON THE BAS IS OF ESTIMATED PROFIT RATE ONLY. IT IS NOT ON ACCOUNT OF ANY SPECIFIC ITE M OF ADDITION OR DISALLOWANCE. SUCH AN ADDITION MADE ON THE BASIS OF GUESS WORK CANNOT BE SUBJECTED MATTER OF PENALTY FOR CONCEALMENT OF INCO ME. PENALTY BEING A QUASI CRIMINAL PROCEEDING THERE IS A DUTY CAST ON T HE AO TO ESTABLISH THE GUILT OF THE ASSESSEE IN CONCEALING IN CONCEALING T HE INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. ITA NO.322/DEL./2008 10 (II) IN THE CASE OF CIT VS. MODI INDUSTRIAL CORPOR ATION - (2010) 34 DTR (P&H) 158 THE HON'BLE PUNJAB & HARYANA HIGH C OURT HELD AS UNDER :- PENALTY UNDER S. 271(1)(C) CONCEALMENT-ADDITIONS B ASED ON ESTIMATE- AO MADE ADDITIONS ON ACCOUNT OF PROCESSING OF UNACCOUN TED RICE BRAN AND UNDERVALUATION OF CLOSING STOCK-IN APPEAL TRIBUNAL APPLIED FLAT RATE OF 10 PER CENT FOR WORKING OUT UNACCOUNTED PROFITS- THERE FORE ASSESSEE'S ASSESSMENT HAVING BEEN MADE ON ESTIMATE BASIS PENA LTY UNDER S. 271(1)(C) IS NOT IMPOSABLE VIS-A-VIS THE ADDITION MADE TO THE INCOME-NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUN AL DELETING THE PENALTY. (III) IN THE CASE OF CIT VS. RELIANCE PETROPRODUCT S (P) LTD. 322 ITR 158 THE HON'BLE SUPREME COURT HAS HELD AS UNDER : - HON'BLE SUPREME COURT WHILE CONSIDERING THE APPLIC ABILITY OF SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 HELD THAT IN ORDER TO IMPOSE A PENALTY UNDER SECTION THERE HAS TO BE CONCEALMENT OF INCOME OF THE ASSESSEE AND THE ASSESSEE MUST HAVE FURNISHED INACC URATE PARTICULARS OF 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 INACCURAT E THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. I N ORDER TO EXPOSE THE ASSESSEE TO PENALTY UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION THE PENALTY PROVISION CANNOT BE INVOKED. THE ASSESSEE FILED HIS RETURN FOR THE YEAR UNDER CO NSIDERATION DECLARING A TOTAL INCOME AT RS.70 818. THE ASSESSING OFFICER RE JECTED THE BOOK RESULTS AND MADE AN ADDITION OF RS.1 70 920 ESTIMATING THE NET PROFIT AT 10PER CENT. OF RECEIPT AS AGAINST 6.36 PER CENT. SHOWN BY THE A SSESSEE. PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271(1)(C). THE COMMISSIONER (APPEALS) CANCELLED THE PENALTY AND THIS WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT: HELD DISMISSING THE APPEAL THAT THE UNDISPUTED FAC TS WERE THAT PARTICULARS FURNISHED BY THE ASSESSEE REGARDING RECEIPTS IN THE RELEVANT FINANCIAL YEAR HAD NOT BEEN FOUND INACCURATE AND IT WAS ALSO NOT T HE CASE OF THE REVENUE THAT THE ASSESSEE CONCEALED ANY INCOME IN HIS RETUR N. THUS PENALTY COULD NOT BE IMPOSED. THEREFORE IN OUR CONSIDERED VIEW FOR LEVYING PENA LTY UNDER SECTION 271(1)(C) THERE HAS TO BE CONCEALMENT OF PARTICULA RS OF INCOME BY THE ITA NO.322/DEL./2008 11 ASSESSEE OR THE ASSESSEE MUST HAVE FURNISHED INACCU RATE PARTICULARS OF INCOME. ULTIMATELY IN ASSESSEES 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 OR FILING OF INACC URATE PARTICULARS OF INCOME. FURTHER WE ALSO OBSERVED THAT THE ASSESSE ES OFFERING OF THE PROFIT RATE WAS A CONDITIONAL PROPOSAL AS THE ASSESSEE WAS NOT ABLE TO COLLECT THE WHOLE 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 D ISPUTE WITH THE REVENUE AUTHORITIES IN THE QUANTUM OF INCOME ASSESSEE OFFE RED THE ESTIMATED RATE OF PROFIT. CONSIDERING ALL THESE FACTS AND CIRCUMSTAN CES IN OUR CONSIDERED VIEW THE ORDER OF THE CIT (A) WAS JUSTIFIED IN DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MARCH 2012. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 29 TH DAY OF FEBRUARY 2012/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I JAIPUR 5.CIT(ITAT) NEW DELHI AR ITAT NEW DELHI.