Concealment penalty upheld on profit estimated on suppressed turnover conceded by assessee and quantified on the basis of Form 26AS Statement
ABCAUS Case Law Citation:
ABCAUS 2560 (2018) (10) ITAT
Important Case Laws Cited/relied upon by the parties:
D.K.B. & Co. vs. DCIT 198 Taxman 339
Navjivan Oilk Mills vs. CIT reported 252 ITR 417 (Gujarat)
CIT vs. P. Rojes 31 taxman.com 253 (Madras)
California Design & Construction INC India vs. ITO 156 ITD 919
In the instant case, the Revenue had filed the appeal against the order of the CIT(A) deleting penalty u/s. 271(1)(c) of Income Tax Act, 1961 (the Act).
The assessee firm was engaged in advertisement contract. During the course of scrutiny proceedings u/s 143(3), on verification of the ITS detail the Assessing Officer (AO) noted that the assessee’s total contract receipt shown in the P&L account was substantially lower than as reflected by Form 26AS.
When this was brought to the notice of the assessee, the partners of the firm admitted that they had already received the aforesaid amount. However, the assessee failed to furnish the explanation for the omission in their total turnover despite repeated requests.
Moreover, the assessee did not furnish one bank account statement relating to the business where the business receipts were credited.
Therefore the AO assessed the total income of the assessee at 12% of the total turnover. The assessee paid the tax and did not file any appeal against the department.
Subsequently, penalty proceedings were also initiated u/s 271(1)(c) r.w.s. 274 of the Act. However, the assessee failed to furnish any explanation even during the penalty proceedings.
The Assessing Officer held that the assessee had concealed its income and penalty levied penalty at the rate of 200% of the tax sought to be evaded.
On appeal, the CIT(A) deleted the penalty/s. 271(1)(c) by observing that the Assessing Officer had not given any credit for tax deducted at source (TDS).
The CIT(A) was of the opinion that the assessee had accepted the mistake, offered income to be taxed at a much higher rate than actually earned and did not file any appeal. According to the CIT(A), the Assessing Officer adopted a GP rate at a much higher rate than actually earned by the assessee without assigning any reason or comparing the profitability of the assessee with any other assessee engaged in the similar line of business.
Further, the CIT(A) was of the opinion that the Assessing Officer had levied penalty at the rate of 200% without giving any reasons whatsoever.
CIT(A) concluded that the assessee had been adequately taxed at the rate of 12% of the gross turnover which was much higher than the income actually earned by the assessee.
Before the case of the assessee was that being an estimate of income, there was no positive income in the context of levy of penalty for concealment or for furnishing inaccurate particulars.
The Tribunal opined that admittedly, the assessee had conceded the turnover which led to the estimation of income by the Assessing Officer and consequent levy of penalty. Therefore, quantification of suppressed turnover was not based on mere estimation.
The Tribunal explained that the quantification of suppressed turnover was only based on Form 26AS related to the assessee and consequent to it the profit was estimated.
The Tribunal opined that the assessee had not been able to substantiate the reason for not disclosing the correct turnover to the Department. Hence there was actual suppression of turnover by the assessee which resulted in concealment of income of the assessee.
The estimation of income was not challenged by the assessee before the higher forum which meant that the assessee admitted concealment of income. Hence, levy of penalty under section 271(1)(c) of the Act was justified.
However, the Tribunal opined that the levy of penalty at 200% of the tax sought to be evaded was very excessive. Accordingly, the penalty was modified at 100% of the tax sought to be evaded.