Manmohan Anandsingh Rajput, Ahmedabad vs Department Of Income Tax

Income Tax Officer, Shri Manmohan Anandsi ngh W ard-9(4), Rajput, Prop: Real Security Ahmedabad Vs & Detective Service, 351, (Appellant) Gujarat Housi ng Board, Bapunagar, Ahmedabad PAN:ADFPR9067E (Respondent)

Revenue by: Shri M.K. Singh, Sr. D.R Assessee by: Shri H.V. Gandhi, A.R.

Date of heari ng : 12-06-2015 Date of pronouncement : 19-06-2015

आदेश /ORDER

PER : RAJPAL YADAV, JUDICIAL MEMBER

The revenue is in appeal before us against the order of Ld. Commissioner of Income Tax (Appeals) dated 29th August, 2011 passed for Assessment Year 2005-06.

2. The solitary grievance of the revenue is that Ld. Commissioner of Income Tax (Appeals) has erred in deleting the penalty of Rs. 7,35,638/- imposed u/s. 271(1)(c) of the Income Tax Act by the Assessing Officer.

I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 2 ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

3. The brief facts of the case are that assessee has filed his return of income on 31-10-2005 declaring total income at Rs. 2,42,150/-. The assessee at the relevant time was running two proprietorships namely; (a) Real Securities and Detective Services and (b) Real Industries Commandoes. The main business of the assessee was of providing security services. He has shown turn-over of Rs. 72,25,257/- in Real Securities and Rs. 1,90,709/- in Real Industries Commandoes. On scrutiny of the accounts, it revealed to the Assessing Officer that there is a discrepancy in the gross receipts shown by the assessee vis-à-vis the gross receipts available in the TDS certificate. He confronted the assessee about this discrepancy. The assessee had contended that the receipts for the month of March are not accounted because he has not received the charges for the services provided by him. The Ld. Assessing Officer rejected the contention of the assessee and observed that once assessee is following mercantile system of accountancy, he must have debited the expenditure and therefore he should have accounted the receipts for the month of March in this very accounting year. In this way, an addition of Rs. 16,77,766/- was made to the income of the assessee.

4. The ld. Assessing Officer has further observed that books of accounts of the assessee are not reliable. The assessee has shown a net profit of Rs. 2.15% in the current year which is far below than 8% shown in preceding year. Ld. Assessing Officer has rejected the contentions of the assessee and estimated the profit on the gross receipts. He made an addition of Rs. 4,61,770/-

I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 3 ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

5. These additions were confirmed up to the Tribunal. Copy of the Tribunal's orders passed in ITA No. 3899/Ahd/2010 has been placed on the record.

6. The ld. Assessing Officer had issued a show cause notice u/s. 274 r.w.s. 271(1)(c). In response to the notice, it was contended by the assessee that as far as non-inclusion of the receipts for the month of March in the gross receipts is concerned, the assessee has raised the bills on 01-04-2005 for the services rendered up-to midnight March, 2005. This fact was duly disclosed. The assessee has accounted these receipts in Assessment Year 2006-07. The attention of ld. Assessing Officer was withdrawn towards the computation of income for Assessment Year 2006-

07. With regard to the estimated addition of net profit, it was contended that in Assessment Year 2004-05, the assessee has declared losses but Assessing Officer has estimated the profit at 8%. In Assessment Year 2005-06, it has declared profit at Rs. 2.15% which is enhanced by the Assessing Officer at 8%. Therefore, no penalty as such is imposable. .

7. With the assistance of Ld. Representatives, we have gone through the record carefully. Section 271(1)(c) of the Act has a direct bearing on the controversy and, therefore, it is salutary upon us to take note of the relevant provisions of section 271(1)(c) along with Explanation 1 which read as under:

"271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the of course of any proceedings under this Act, is satisfied that any person I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 4 ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

(a) and (b)** ** **

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income.

He may direct that such person shall pay by way of penalty.

(i)and (Income-tax Officer,)** ** **

(iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits:

Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."

8. A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 5 ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 6 ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.

9. In the light of above, if we examine the facts in the present case, then it will reveal that Assessing Officer was unable to bring any evidence indicating that the explanation offered by the assessee was not bonafide or false. It is a difference of opinion between the Assessing Officer and the assessee. The assessee was of the view that since he will receive the receipts for the month of March in April, therefore, he will raise bill in the month of April and account the receipts in the next month. It is a misconception in the mind of assessee but he has not deliberately withheld something from the Assessing Officer. He has accounted these receipts in the next year and rather raised the dispute with regard to credit of the TDS. The next item is an addition on an estimate basis. Again, a debatable point, there is no concrete material on the record which demonstrates that assessee has deliberately concealed the particulars of income or furnished inaccurate particulars. The Ld. First Appellate Authority has righty deleted the penalty. We do not find any merit in this appeal. It is dismissed.

Order pronounced in the open court on 19-06-2015

Sd/- Sd/-

(N.S. SAINI) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/06/2015 ak I.T.A No. 2635/Ahd/2011 A.Y. 2005-06 Page No 7

ITO vs. Manmohan Anandsingh Rajput, Prop: Real Security & Detective Service

आदेश क त ल प अ े षत / Copy of Order Forwarded to:-

1. Assessee

2. Revenue

3. Concerned CIT

4. CIT (A)

5. DR, ITAT, Ahmedabad

6. Guard file.

By order/आदेश से,

उप/सहायक पंजीकार (आयकर अपील य अ धकरण, अहमदाबाद