ACIT, Chandigarh v. M/s Chandigarh Erector & Engineers (P) Ltd., Chandigarh

ITA 339/CHANDI/2011 | 2005-2006
Pronouncement Date: 27-07-2011 | Result: Allowed

Appeal Details

RSA Number 33921514 RSA 2011
Assessee PAN AAACC6062D
Bench Chandigarh
Appeal Number ITA 339/CHANDI/2011
Duration Of Justice 3 month(s) 26 day(s)
Appellant ACIT, Chandigarh
Respondent M/s Chandigarh Erector & Engineers (P) Ltd., Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 27-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2005-2006
Appeal Filed On 01-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA AM AND MS. SUSHMA CHOWL A JM ITA NO. 339/CHANDI/2011 ASSESSMENT YEAR: 2005-06 A.C.I.T. C-3 (1) CHANDIGARH V M/S CHADIGARH ERECT OR ENGINEERS (P) LTD. SCO 116-117 SEC 22- B CHANDIGARH PAN: AAACC 6062 D APPELLANT BY: SMT. JAISHREE SHARMA RESPONDENT BY: SHRI SUDHIR SEHGAL ORDER THE APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAI NST THE ORDER PASSED BY THE LD. CIT(A) ON 7.12.2010 ON THE FOLLOWING GR OUNDS: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN CANCELING THE PENALTY LEVIED U/S 271(1 )(C) OF INCOME-TAX ACT AS THE AO HAS PROVED THAT THE ASSESSEE FURNISHE D INACCURATE PARTICULARS OF INCOME. 2 THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 3 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE AO MAY BE RESTORED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME ON 29.10.2005 RETURNING TOTAL INCOME AT R S. 42 87 111/- AS AGAINST WHICH ASSESSMENT WAS COMPLETED BY THE AO AT RS.1 07 87 111/-. FACTS GIVING RISE TO ADDITION OF RS. 65.00 LAKHS MADE BY THE AO ARE THAT THE AO INITIATED THE PROCESS OF INQUIRY WITH REGARD TO VARIOUS CREDITORS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. FOR THIS PURPOSE THE AO ISSUED N OTICES U/S 133(6) TO VARIOUS CREDITORS SEEKING THEM TO SUBMIT INFORMATION. ON PE RUSAL OF THE INFORMATION RECEIVED BY THE AO FROM THE CREDITORS THE AO FOUND THAT THERE WAS HUGE DIFFERENCE IN THE OUTSTANDING BALANCES SHOWN BY THE ASSESSEE IN THE NAMES OF CREDITORS IN ITS BOOKS OF ACCOUNT VIS-A-VIS THE BAL ANCES CONFIRMED BY THE RESPECTIVE CREDITORS. THE DIFFERENCES IN RELATION T O TWO CREDITORS NAMELY M/S RAJ ENGINEERING WORKS AND M/S BHAWANI STEELS HAVE B EEN HIGHLIGHTED BY THE A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 2 AO IN HIS ASSESSMENT ORDER. ON BEING CONFRONTED WIT H THE RESULTS OF INQUIRY MADE BY THE AO THE ASSESSEE VIDE ITS WRITTEN COMM UNICATION DATED 24.12.2007 OFFERED TO SURRENDER A SUM OF RS. 65.00 LAKHS TO COVER ANY DISCREPANCY IN ITS BOOKS OF ACCOUNT OR ANY OTHER MI STAKE/DISCREPANCY INCLUDING THE CREDITS IN QUESTION. AFTER TAKING INTO ACCOUNT THE RESULTS OF INQUIRY AND THE EXPLANATION FURNISHED BY THE ASSESSEE THE AO ADDED A SUM OF RS. 65.00 LAKHS SURRENDERED BY THE ASSESSEE TO THE RETURNED INCOME. ON APPEAL BEFORE THE LD. CIT(A) AND THEREAFTER BEFORE THIS TRIBUNAL THE SAI D ADDITION OF RS. 65.00 LAKHS MADE BY THE AO WAS CONFIRMED. 3. ON THE BASIS OF THE AFORESAID ADDITION MADE BY T HE AO THE AO INITIATED THE PROCEEDINGS FOR LEVY OF PENALTY U/S 271(1)(C) O F THE INCOME-TAX ACT. AFTER HEARING THE ASSESSEE THE AO VIDE HIS LETTER DATED 18.3.2010 HAS LEVIED THE IMPUGNED PENALTY BEING MINIMUM IMPOSABLE U/S 271(1) (C) FOR THE DETAILED REASONS GIVEN IN THE ORDER OF PENALTY. ON APPEAL T HE LD. CIT(A) HAS CANCELLED THE IMPUGNED PENALTY FOR THE REASONS GIVEN IN HIS A PPELLATE ORDER. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEA L THE LD. DR TOOK US THROUGH THE FINDINGS RECORDED IN ASSESSMENT ORDER AND THE O RDER OF PENALTY PASSED BY THE AO. SHE SUBMITTED THAT THE AO HAD ALREADY INITI ATED THE PROCESS OF INQUIRY AND COLLECTED MATERIAL TO ESTABLISH THAT THE AMOUNT S SHOWN IN THE NAMES OF CREDITORS WERE INFLATED AND THAT IT WAS ONLY THEN T HAT THE ASSESSEE CAME FORWARD BEFORE THE AO TO SURRENDER A SUM OF RS. 65. 00 LAKHS. ACCORDING TO HER THE ACTION OF THE ASSESSEE IN SURRENDERING A SUM OF RS. 65.00 LAKHS WAS NOT AT ALL BONA-FIDE. SHE CONTENDED THAT THE ACTION OF THE ASSESSEE IN SURRENDERING A SUM OF RS. 65.00 LAKHS WAS CONFIRMATION OF THE FACT THAT THE ASSESSEE HAD NOT DECLARED ITS INCOME TRULY AND FULLY IN ITS RETURN O F INCOME AND THEREFORE THE PENALTY LEVIED BY THE AO SHOULD BE RESTORED. IN SUP PORT OF HER SUBMISSIONS SHE INVITED OUR ATTENTION TO THE JUDGMENT OF THE HO N'BLE SUPREME COURT IN K.P. MADHUSUDAN V. CIT 251 ITR 99 (S.C) AND THE JUDGMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT IN RAJESH CHAWLA V. CIT 203 CTR 209 AND PREM PAL V. CIT 203 CTR 100 (P&H). SHE SUBMITTED THAT THE ORDE R PASSED BY THE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO RESTORED. A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 3 5. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE SUPPO RTED THE ORDER PASSED BY THE LD. CIT(A). HE HAS ALSO FILED WRITTEN SUBMISSIO NS. THE MATERIAL PORTIONS OF HIS WRITTEN SUBMISSIONS READ AS UNDER:- 1. THIS IS A CASE OF LEVY OF PENALTY BY THE AO WH ICH HAD BEEN DELETED BY THE LD. CIT(A) CHANDIGARH. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS CER TAIN ISSUES WERE RAISED BY THE AO WHICH HAVE BEEN EXPLAINED IN TOTO VIDE LETTER DATED 24.12.2007 IN WHICH EACH AND EVERY THING WITH REG ARD TO THE DIFFERENCE IN THE BALANCES OF THE CREDITORS WITH THE HELP OF T HE RECONCILIATION EXPLAINED COMPLETE PARTICULARS OF CREDITORS ALSO F URNISHED EXPENSES INCURRED BY THE TWO EMPLOYEES NAMELY SARVASHRI SARV JEET SINGH AND SHRI BALRAJ SINGH THROUGH THE IMPREST ACCOUNT WITH THE COMPANY FOR FABRICATION CHARGES INCURRED BY THEM PROVED BY FILI NG THE AFFIDAVIT OF EMPLOYEES AND CONFIRMED BY THEM BY WAY OF STATEMENT S AND VOUCHERS OF EXPENSES BOOKS OF ACCOUNT PRODUCED AND ALL OTHE R CLARIFICATIONS GIVEN IN DETAIL AND NO ADVERSE VIEW TAKEN BY THE AO VIZ. EXPLANATION GIVEN BY THE ASSESSEE. 3. IT IS A FACT THAT THE MANAGING DIRECTOR OF THE C OMPANY NAMELY SHRI M.S. SANDHU HAD BEEN IN SERIOUS HEALTH PROBLEM AT THAT TIME AND THE OLD ACCOUNTANT HAD LEFT AND ON ACCOUNT OF THESE FACTS AN OFFER OF RS. 65 LACS WAS MADE SUBJECT TO NO PENALTY AND THE SAME HAS BEEN ACCEPTED BY THE AO. 4. THE AO HAS NOT MADE ANY INDEPENDENT ADDITION ON ACCOUNT OF VARIOUS ISSUES OR IN RESPECT OF ANY SPECIFIC ALLEGA TION MADE AGAINST THE ASSESSEE BUT HAS ACCEPTED A LUMPSUM OFFER OF RS. 6 5 LACS AS MADE BY THE ASSESSEE SUBJECT TO NO PENALTY U/S 271(1)(C). T HUS NO SPECIFIC ADDITION HAVE BEEN MADE ON ACCOUNT OF ANY ISSUE AS RAISED BY THE AO AND THE ADDITION HAVE BEEN MADE ON THE BASIS OF OFF ER MADE BY THE ASSESSEE AND THUS IT CAN BE SAID THAT THE ADDITIO N OFFERED ON ADHOC AND LUMPSUM BASIS WITHOUT ANYTHING POINTED OUT SPEC IFICALLY. 5. EVEN IN THE PENALTY ORDER IN PARA 3 THERE IS A REFERENCE TO CERTAIN DISCREPANCY OF THE CREDIT BALANCES AND NON MAINTENA NCE OF VOUCHERS OF FABRICATION CHARGES ON WHICH THE AO HAS ACCEPTED TH E OFFER OF RS. 65 A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 4 LACS AS MADE BY THE ASSESSEE. WE HAVE IN OUR LETTER DATED 24.12.2007 EXPLAINED THE VARIOUS DIFFERENCES IN THE CREDIT BAL ANCES OF PARTIES AND THE AO HAS NOT BEEN ABLE TO REBUT ANY OF THE EXPLAN ATION GIVEN IN OUR LETTER DATED 24.12.2007 AND THEREFORE BEING A CO NDITIONAL OFFER AND ONLY ON ADHOC ADDITION OF RS. 65 LACS AS OFFERED BY THE ASSESSEE THE PENALTY U/S 271(1)(C) CANNOT BE LEVIED. RELIANCE IS BEING PLACED TO THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. SMT. SUDARSHAN GUPTA AS REPORTED IN 10 DTR 184 IN WHICH IT HAS BEEN HELD AS UNDER:- IF THE DEPARTMENT DOES NOT ALLOW THE ASSESSEE TO B UY PEACE OF MIND WHY SHOULD BE ASSESSEE BE BOUND BY THE OFFER TO PAY TAX. THE STATEMENT OF SURRENDER HAS GOT TO BE ACCEPTED I N TOTO OR IT HAS GOT TO BE IGNORED. THUS WE FIND NO ERROR OR IN FIRMITY IN THE ORDER OF THE TRIBUNAL. THUS EVEN ADDITION WAS NOT LIABLE TO BE MADE. COPY OF THE JUDGMENT IS PLACED AT PAGES 1 TO 4 OF THE JUDGMENT SET. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS IN SUPPORT OF THE ORDER PASSED BY THE CIT(A): 1. CIT V. M/S SANGRUR VANASPATI 303 ITR 53 (P&H) 2. RELIANCE PETRO-PRODUCTS 322 ITR 158 (SC) 3. ACIT V. AGGARWAL SANITARY AND HARDWARE CO. 82 T TJ 501 4. CIT V. C.J. RATHNASWAMY 223 ITR 5 (MAD) 5. CIT V. ORIENTAL (INDORE) 52 ITD 631 6. RAM SARAN GUPTA V. CIT 58 TTJ 702 7. KRISHANLAL SHIV CHAND RAI V. CIT 88 ITR 293 (P& H) 8 MAHENDRA TRANSPORT CO. V. ASSESSING OFFICER 43 T TJ 13 9. ANIL KUMAR SUSHIL KUMAR V. ITO 44 TTJ 135 10. SOUTHERN GAS FITTINGS (P) LTD V. DCIT 80 ITD 2 02 11. SAMPATH RAJ V. ACIT 1 SOT 218. 12. CIT V. SUDARSHAN GUPTA 10 DTR 184 (P&H) 13. CIT V. AGGARWAL SANITARY & HARDWARE CO. 82 TTJ 501 14. CIT V. CJ RATHNASWAMY 223 ITR 5 (MAD.) 15. ACIT V. M/S ORIENTAL 52 ITD 631 A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 5 16. RAM SARAN GUPTA V. ACIT 58 TTJ 702 17. KTRISHAN LAL SHIV CHAND V. CIT 88 ITR 293 (P&H ) 18. MAHENDRA TRANSPORT CO. V. ASSESSING OFFICER 43 TTJ 13 19. ANIL KUMAR SUSHAL KUMAR V. ITO 44 TTJ 135 20. SOUTHERN GAS FITTINGS V. DCIT 80 ITD 202 21. CIT V. SANGRUR VANASPATI MILLS 303 ITR 53 (P&H ) 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THREE FACTS CLEARLY EMERGE FROM THE RE CORD PLACED BEFORE US. ONE THE AO HAD ALREADY COLLECTED MATERIAL TO ESTAB LISH THAT THE AMOUNTS SHOWN AS OUTSTANDING IN THE NAMES OF CREDITORS WERE HIGHER THAN THOSE CONFIRMED BY THE CREDITORS. TWO THE ASSESSEE HAD F AILED TO SATISFACTORILY EXPLAIN THE AFORESAID DISCREPANCY NOT ONLY BEFORE T HE AO BUT ALSO BEFORE THE CIT(A) AND THIS TRIBUNAL. THREE THE ASSESSEE HAD S URRENDERED A SUM OF RS. 65.00 LAKHS AFTER IT WAS DETECTED BY THE AO. 7. EXPLANATION 1 TO SEC 271(1)(C) PROVIDES THAT WHE RE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME T HE ASSESSEE (A) OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO TO BE FALSE O R (B) OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONA-FIDE AND THAT ALL THE FACTS RELATING TO THE SA ME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSE D BY HIM THEN THE AMOUNT ADDED OR DISALLOWED FOR COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSE OF SEC 271(1)(C) BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. THE CASE OF THE ASSESSEE SQUARELY FALLS WITHIN THE AMBIT OF EXPLANA TION 1 TO SEC 271(1)(C). THERE IS NO DISPUTE THAT THE AMOUNT ADDED BY THE AO TO THE RETURNED INCOME HAS BEEN CONFIRMED BOTH BY THE LD. CIT(A) AND THIS TRIBUNAL AND THEREFORE THE AMOUNT SO ADDED WOULD BE DEEMED BY VIRTUE OF THE L EGAL FICTION CREATED BY EXPLANATION 1 TO SECTION 271(1)(C) TO REPRESENT TH E CONCEALED INCOME OF THE ASSESSEE. PERUSAL OF THE RECORDS PLACED BEFORE US S HOWS THAT THE ASSESSEE HAD FAILED TO OFFER ANY SATISFACTORY EXPLANATION TO REC ONCILE THE DISCREPANCY BROUGHT BY THE AO TO ITS NOTICE. THE FACT THAT THE ASSESSEE ITSELF CAME FORWARD TO SURRENDER THE SAID SUM OF RS. 65.00 LAKHS AFTER THE DISCREPANCY WAS DETECTED BY THE AO SHOWS THAT THE ASSESSEE HAD NO EXPLANATIO N TO OFFER IN THIS BEHALF. A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 6 NEITHER ALL THE FACTS MATERIAL TO THE COMPUTATION O F TOTAL INCOME WERE FULLY AND TRULY DISCLOSED BY THE ASSESSEE NOR WAS THE CONDUCT OF THE ASSESSEE IN THIS BEHALF BONA-FIDE. ON THE FACTS OF THE CASE IT IS Q UITE CLEAR THAT THE ASSESSEE HAS FAILED TO REPORT ITS CORRECT AND TRUE INCOME IN ITS RETURN OF INCOME FILED BEFORE THE AO. WE ARE SATISFIED THAT THE PENALTY LE VIED BY THE AO IS IN CONFORMITY WITH THE PROVISIONS OF SECTION 271(1)(C) READ WITH EXPLANATION 1 THERETO. IN THIS VIEW OF THE MATTER THE ORDER PASS ED BY THE LD. CIT(A) IS REVERSED AND THAT OF THE AO RESTORED. 8. THE JUDGMENTS REFERRED TO BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE AND MORE PARTIC ULARLY IN THE CONTEXT OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN K.P. MADH USUDAN V. CIT 251 ITR 99 AND THE JUDGMENTS OF THE HON'BLE JURISDICTIONAL HIGH COURT REFERRED TO BY THE LD. DR. 9. APPEAL FILED BY THE DEPARTMENT IS ALLOWED. ORDER PRONOUNCED ON 27TH JULY 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER CHANDIGARH: THE 27TH JULY 2011 SURESH COPY TO THE: 1. APPELLANT A.C.I.T C-3(1) CHANDIGARH 2. RESPONDENT M/S CHANDIGARH ERECTOR AND ENGINEERS (P) LTD CHANDIGARH 3. CIT(A) CHANDIGARH 4. CIT CHANDIGARH 5. D.R INCOME-TAX DEPARTMENT CHANDIGARH ASSISTANT REGISTRAR ITAT CHANDIGARH A.C.I.T. C-3 (1) CHANDIGARH V. M/S CHANDIGARH EREC TOR & ENGINEERS (P) LTD . ITA NO. 339/CHANDI/2011 7