9911796707
TMI Blog2016 (6) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned assessment order, no return of income was filed by the assessee for AY 2003-04. Later, on the basis of some information and finding during scrutiny of assessment for the AY 2002-03, a notice under section 148 was issued for assessing the income of the assessee. Accordingly, the assessment was completed under section 144 r.w.s. 147 and income of the assessee was determined as per the provisions of section 44AD, vide order dated 28.12.2005. The income was estimated at a net profit of Rs. 3,20,866/- which was 8% of the gross receipts. Later, on an information was received/collected from some earlier survey action in the premises of the assessee in the year 2002, during the course of which, assessee had disclosed an amount of Rs. 35 lakhs to be assessed as his income in the assessment year 2003-04. This information was stated to have been received by the AO on 13.04.2006, that is, after the passing of the assessment order under section 144 r w s 147 and accordingly, proposal under section 263 was sent to CIT- 20, Mumbai so as to include the income of Rs. 35 lakhs declared by the assessee during the survey action carried. Thereafter, CIT-20 passed an order under section 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order, the assessee preferred an appeal before the CIT(A). We find that Ld. CIT(A) though held that the computation of income by estimating the net profit @ 8% is correct, however, he deleted the amount of Rs. 35,00,000/- which was surrendered in his order dated 03.03.2009 after giving detail reasoning and holding as under: "I have carefully considered the assessment order and the arguments and submissions of the AR as discussed above for deciding this ground of appeal. It is noticed that the addition of Rs. 35 lakhs declared by the appellant during the survey proceedings is worked out on the basis of difference between the estimation of appellant's income @ 8% of the gross contract receipts found to be credited in his bank account, pertaining to the assessment years 1996-97 to 2001-02 and the net profit already disclosed by the appellant in his respective returns of income. This is evident from the relevant part of the assessment order reproduced above, wherein the AO has computed estimated income of the appellant @ 8% of gross contract receipt of Rs. 79,48,499/- and reduced there from the net profit as per return of income already disclosed in the respective assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant assessment year. On the contrary, form the assessment order; it is more than evident that the addition is made blindly following the declaration of the appellant worked out on the basis of difference between estimated income computed for the A.Yrs. 1996-97 to 2001-02 and the net profit disclosed in the concerned assessment years as discussed above. There are no evidences or any incriminating material found in survey to suggest that the net profit shown in the current assessment years is understated by the appellant to the extent of Rs. 35 lakhs. The income pertaining to the current assessment year as discussed above in the para 3 of this order is separately worked out @ 8% of his gross contract receipts credited in his bank account, in the absence of proper books of account maintained by the appellant. Therefore, based on these facts and aforesaid discussion, I am of the considered opinion that the AO is not justified in making such an addition of Rs. 35 lakhs in the case of the appellant for the current assessment year. I also find that the declaration made by the appellant in the absence of supporting documentary evidences is of no use or help. If there is no evidence agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as carried out on 12.08.2002; during the course of the said proceedings, the appellant has voluntarily disclosed a sum of Rs. 35 lakhs for the assessment year 2003-04. Therefore, on account of these facts as well as considering to the fact that the appellant has consistently carried out or executed various civil contracts during the accounting years relevant to the assessment years 2001-02 to 2003-04; notices under section 148 of the Act for filing the returns of the income was issued which were properly served upon the appellant. However, these notices issued remained un-complied with inasmuch as no returns of income were filed by the appellant in response to the notices issued under section 148 of the Act. Besides, as per the facts brought on record by the AO in the assessment orders under appeal, the appellant has failed to attend the assessment proceedings before the AO and he has also failed to furnish the relevant details and its supporting evidences as called for the AO. Therefore, on account of these facts and circumstances, all the three assessment orders were completed ex parte under section 144 of the Act. These facts are not disputed or denied by the AR. However, as dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR that the appellant could not file his returns of the income due to noncooperation of his earlier chartered accountant and due to non-availability of the books of account and records. The AR has also failed to substantiate the relevant submissions made inasmuch as no such details and evidences were furnished or placed on record. Nothing is brought on record to prove the non-cooperation on the part of his earlier Chartered Accountant as well as non-availability of the books of account and records. Moreover, the additions made and sustained in appeal are accepted or admitted by the appellant; therefore, it proves the findings of the AO that the appellant has concealed his taxable income and corresponding payment of taxes due to the Government by not filing its returns of income as well as not making payment of taxes to in all these assessment years under appeal. No proper explanation for the same is furnished by the appellant. Therefore, on account of these facts brought on record, I find that the AO is fully justified in holding that the demining provisions of Explanation (1) to section 271(1)(c) are clearly attracted in the case of the appellant and therefore, making him liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Explanation (1) to section 271(1)(c) are satisfied or attracted in the case of the appellant. Or in other words under the given facts and circumstances of the case as discussed above the AO is fully justified in the levy of penalty under section 271(1)(c) of the Act". The Ld. CIT(A) in the impugned order has failed to take note of quantum orders of the ITAT order, whereby, the whole premise of making the addition and the addition itself was deleted. The only income surviving was originally assessed income. This factum itself vitiates the finding of ld. CIT(A). 4. Before us, the Ld. Counsel for the assessee canvassed a very pertinent point that here in this case, original assessment was completed under section 144/148 whereby the income of the assessee was assessed after estimating at a net profit @ 8% on the lines of section 44AD at Rs. 3,20,870/-. In such an order, no penalty proceedings under section 271(1)(c) was initiated at all. Later on, the said assessment order was cancelled only to include income disclosed by the assessee during the survey action of Rs. 35 lakhs, which has been deleted by the CIT(A) and such a deletion has been confirmed by the Tribunal also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the addition of Rs. 35 lakhs was deleted and confirmed from the stage of ITAT and has attained finality. Since the very basis for the initiation of penalty and satisfaction of the AO for the addition of Rs. 35 lakhs got vitiated, therefore, the entire proceedings for levy of penalty does not have any legs to stand. So far as the levy of penalty for the original assessed income of Rs. 3,20,870/- is concerned, there was no initiation at the time of original assessment, therefore, the same cannot be revived in the second assessment order sans any satisfaction or initiation. Thus, on this preliminary ground itself, we are of the opinion that, contention raised by the Ld. Counsel appears to be correct and no penalty under section 271(1)(c) on addition of Rs. 3,20,870/- can be sustained. Accordingly, we direct the AO to delete the penalty of Rs. 73,774/-. Thus, the appeal for the assessment year 2003-04 is allowed. 7. Now, we will take-up the penalty appeal for the assessment year 2002-03 and 2001-02, which have identical set of facts. From the perusal of the facts as discussed in the assessment order is that, a survey action was conducted in the case of the assessee's office premise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed under section 143(3) r.w.s. 263. Though assessee may not have filed return in response to section 148 but otherwise the return of income was there on the record along with contract receipts as well as net profit shown. Thus, the very premise for levy of penalty does not stand. 9. On the other hand, Ld. DR strongly relied upon the order of the CIT(A) and submitted that, there is a categorical observation and finding of CIT(A) that assessee has not filed the return of income and hence a penalty confirmed by the CIT(A) is justified. 10. After considering the rival submissions and on perusal of the relevant material discussed in the impugned order we find that, the income has been assessed after estimating the net profit @ 8% on the gross contract receipts as per reconciled bank statement. The penalty has been levied by the AO on the ground that, assessee had not filed the return of income and has also not complied with the statutory notices issued to the assessee from time to time. Such an addition has also attained finality from the appellate stage. The Ld. CIT(A) too has harped upon the fact that, no return of income has been filed disclosing any contract receipts and net prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts and secondly, the net profit estimated in the assessment proceedings initiated under section 148. The AO in the assessment order has neither given any credit for the contract receipts already disclosed as per the original return of income nor the relief of the net profit shown. Thus, this fact itself goes to show that, the entire assessment has been made purely on ad-hoc manner and without considering material already on record. Even though there has been non-cooperation by the assessee, which has led to passing of the best judgment assessment under section 144, however, it is trite law that while framing the best judgment assessment under section 144, all the relevant material, facts and circumstances on record has to be taken into account. A high pitch assessment cannot be justified under the garb of best judgment assessment. Now in light of the fact that return of income was there on the record and certain contract receipts and net profit was shown by the assessee, then issue revolves around the appropriate income which has to be assessed. Here in this case there has been enhancement of contract receipts and estimate of net profit purely on ad-hoc basis without any rele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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