Concealment means positive act on part of the assessee and onus to prove is on Revenue – ITAT

Concealment means positive act on part of the assessee and the onus to prove is on Revenue. Penalty can not be levied on estimate or guess work – ITAT

ABCAUS Case Law Citation:
ABCAUS 1214 (2017) (04) ITAT

The Grievance:
The appellant assessee company was aggrieved by the order of the Commissioner of Income Tax (Appeals) in confirming the order of the Assessing Officer (AO) imposing penalty u/s 271(1)(c) of the Income tax Act, 1961 (‘the Act’).

Assessment Year : 2010-11
Date/Month of Pronouncement: April, 2017

Important Case Laws Cited/relied upon:
CIT vs. Prabhat Kumar (P&H)
Harigopal Singh vs. CIT (P&H)
CIT vs. Aero Traders (P.) Ltd. (Delhi)
Sehlanga Co-op L/C Society Ltd. vs. ITO

Brief Facts of the Case:
The assessee derived income from civil construction business. During the course of assessment proceedings, the AO noticed that the assessee had received all the payments from State Public Works Department  (‘PWD’) which were recorded in his books of account. Certificate of TDS in Form No.16 from the deductor had also been produced by the assessee.

However, no vouchers of expenses, bills, etc. were produced and the assessee finally admitted that he had no other material to produce accept the account books. Therefore, the Assessing Officer, invoking the provisions of section 145(3), rejected the books of account. He noted that the assessee had shown a net profit rate of 5.6%. In the absence of any documentary evidence in the shape of purchases and expenses, Assessing Officer adopted the profit rate of 12% and, accordingly, made an addition. The AO had also made another addition of Rs. 60,000/- on account of low withdrawals/drawings for household expenses.

On appeal, CIT(A) confirmed the addition made by Assessing Officer by applying the net profit rate of 12% but deleted the addition made on account of low withdrawals for household expenses.

Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) and, after considering the assessee’s submissions, levied penalty of Rs.2,03,267/- being 100% of the tax sought to be evaded. CIT(A), after considering the detailed submissions of assessee, confirmed the penalty, inter-alia, observing that the fact remained that the books of account were rejected as no vouchers were produced.

Observations made by the Tribunal:
The Tribunal observed that the AO determined the net profit by applying 12% rate on the basis of decision of the Hon’ble Punjab & Haryana High Court only because that was also a case of contractor. However, he had not examined the facts obtaining in the said case.

It was noted that before CIT(A), the assessee had, inter-alia, submitted that even if no books of account were maintained, the income was to be taken u/s 44AD at the rate of 8%. However,  CIT(A) did not agree with the assessee observing that the said decision differed in terms of the facts and merits of the case.

Application of Net Profit rate not indicator of real income

The Tribunal observed that application of rate of net profit on the basis of best judgement assessment depends on facts obtaining in each case and in a given situation will be a question of fact. The estimate of 12% adopted in the case of other assessee in the same line of business cannot be an indicator of the real income earned in the hands of assessee. It is purely a guess work and the entire endeavour is to arrive at as best to the real income as possible but that could not be a basis to saddle the assessee with penalty.

No concealment Penalty on estimate basis on rejection of books

The Tribunal observed that the assessee had relied on various decisions of Tribunals and High Courts wherein, penalty was deleted when levied merely on estimate basis after rejection of books of account was deleted

Concealment means positive act on part of the assessee

The Tribunal observed that it was also held by the High Court that there had to be a positive act of concealment on the part of the assessee and the onus was to prove this on the Department.

Held:
Held that o penalty u/s 271(1)(c) of the Act could be validly levied in this case.