TMI Blog2014 (4) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... see or explain its failure to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part - the assessee was taking a chance - sitting on the fence - despite the fact that there was a search towards the close of the relevant accounting year in the course of which incriminating documents were found - the intention of the assessee was to take a risk and disclose a lesser income than what it actually earned and rely upon the minor variations in the rate of profits adopted by the taxing authorities and the Tribunal as a defence in the penalty proceedings - The plea - accepted by the Tribunal - that the assessee agreed to be assessed at 11% of the gross receipts only “to buy peace” and “avoid litigation” cannot be accepted - the Tribunal was in error in upholding the order of the CIT (Appeals) cancelling the penalty – Decided in favour of Revenue. - ITA 244/2013 - - - Dated:- 15-4-2014 - S. Ravindra Bhat And R. V. Easwar,JJ. For the Appellant : Mr. Sanjeev Sabharwal, Sr. Standing Counsel with Sh. Ruchir Bhatia, Jr. Standing Counsel For the Respondent : Sh. R. K. Sharma, Advocate. ORDER R. V. Easwar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s explanation to the show-cause notice, which was only that the accounts maintained by the assessee were based on accounting policies consistently adhered to, the assessing officer proceeded to estimate the net profit of the assessee at 11% of the gross receipts from the contracts amounting to Rs.20,30,74,024/-, which came to Rs.2,23,38,143/-. The assessing officer also found that some income from business activities was not included in the aforesaid receipts and the profit from such activity was taken at Rs.13,34,308/-. The total business income was thus taken at Rs.2,36,72,451/- before allowing depreciation. Demands were accordingly raised. 3. It would appear that the assessee carried the matter in appeal to the Tribunal which by order dated 05.09.2002 passed in ITA No.28/JP/2000, reduced the income by adopting the profit rate of 8% on the gross receipts subject to allowance of depreciation and interest. The separate addition of Rs.13,34,308/- was deleted. 4. Penalty proceedings were initiated by the assessing officer for concealment of income and after rejecting the assessee s explanation, a minimum penalty of Rs.24,00,977/- was imposed for concealment of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties which itself would show that there is no merit in the charge of concealment of income. He further contended that the revenue is wrong in saying that a higher rate of profit was adopted to cover the discrepancies pointed out in the special audit report, since there was nothing preventing the assessing officer from making separate additions if those discrepancies were not explained by the assessee as alleged by him. He filed a copy of the order of the Tribunal dated 05.09.2002 passed in the quantum proceedings to support his contentions. He also emphasised that the assessee had agreed to be assessed on 11% of the gross receipts only on the condition that no inference of concealment of income would be drawn from such concession and in such circumstances, where the offer was conditional and to buy peace, there can be no levy of penalty for alleged concealment of income. 8. The learned counsel for the assessee would have been right if it was a simple case of one estimate against another. However, where incriminating materials are gathered in the course of search conducted by the tax authorities and the special audit report, which is based on those materials, reports a number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the income determined by the Tribunal in his own case for an earlier assessment year. In the course of the assessment proceedings he denied having maintained books of accounts and also did not produce the trip sheets, invoices and correspondence with the regional transport authorities. The assessing officer, therefore, enhanced the income from each bus to Rs.19,245/-. Such estimated assessments were made for two assessment years and in the later assessment year the income was estimated at Rs.22,000/- per bus. Penalty proceedings were initiated for concealment of income. The Madras High Court held that the assessee did not produce the relevant evidence despite being called upon and there was a finding by the Tribunal that the assessee chose to withhold the books of accounts. The assessee knew that the method adopted by him did not disclose the real income. Though he was in a position to know his real income, he deliberately estimated it at a lower amount. The High Court, therefore, held that the penalty proceedings were justified. Dealing with the argument that in cases of estimate of profits there can be no concealment, and rejecting the same, the High Court observed as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pancies and also to show why the profit rate of 11% cannot be adopted but these opportunities were not availed of by the assessee. He also has recorded in the assessment order that the assessee was permitted to inspect the seized documents and was given photocopies of the desired documents (para 7). This is not denied by the assessee. In these circumstances, the mere fact that the estimate was reduced by the Tribunal to 8% would in no way take away the guilt of the assessee or explain its failure to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part. It appears to us that the assessee was taking a chance - sitting on the fence - despite the fact that there was a search towards the close of the relevant accounting year in the course of which incriminating documents were found. It appears to us that the intention of the assessee was to take a risk and disclose a lesser income than what it actually earned and rely upon the minor variations in the rate of profits adopted by the taxing authorities and the Tribunal as a defence in the penalty proceedings. The plea - accepted by the Tribunal - that the assessee agree ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
