TaxTMI 
TaxTMI 
2000 (12) TMI 220
X X X X Extracts X X X X
X X X X Extracts X X X X
....yr. 1991-92, AO noted that the assessee had shown contract receipt of Rs. 33,18,532 and miscellaneous receipt of Rs. 3,497. During assessment proceedings. AO called for details of miscellaneous receipt. On examination of these details, AO noted that the assessee had accounted for payments of Rs. 30,000, Rs. 41,563 and Rs. 16,934 (aggregating to Rs. 88,497) on 12th May, 1990, 16th June, 1990 and 16th Aug., 1990 respectively under the head 'miscellaneous receipt'. As against these receipts, the assessee had debited a sum of Rs. 85,000 with the narration "To security deposit' and balance amount of Rs. 3,497 was shown as credit balance in miscellaneous receipt account. On being asked to explain the nature of debit entry of Rs. 85,000, the assessee submitted that no such security deposit was paid as the amount was explained to be on account of penalty and liability of Rs. 3,68,980. The assessee had explained that it had undertaken a contract for construction of primary school building in Sector 43-A, Chandigarh. The portion of the building collapsed. As a result, the contracting authority imposed a penalty of Rs. 3,68,980, which was intimated to the assessee vide letter dt. 4th Oct., 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....curred during the period from 15th March, 1991, to 31st March, 1991, the assessee had completed other works for which raw material was supplied by the contracting party. The AO, therefore, found that the assessee had completed work-in-progress to the tune of Rs. 1 lac, which had not been reflected in P&L a/c. He, therefore, recasted trading-cum-P&L a/c by including cost of work-in-progress Rs. 1 lac on credit side and thereby made an addition of the like amount. Besides, AO verified various expenses with regard to actual bills. He noted that the assessee had not maintained any regular bills in respect of purchase of Bajri, Galka, sand, bricks, as payments were made purely on the basis of plain paper only. He, therefore, made a disallowance of Rs. 10,000 on estimate basis. While completing assessment, AO initiated penalty proceedings under 271(1)(c) for furnishing inaccurate particulars of income. The assessee did not file any appeal against order of AO on the point of quantum. 3. During penalty proceedings, the assessee replied that entry of Rs. 85,000 was made in miscellaneous receipt account because subsequently penalty was imposed at Rs. 3,68,980 and this intimation was recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grieved the assessee took the matter in appeal before CIT(A). The submissions of the assessee were the same as made before AO. As regards addition of Rs. 1 lac made on the basis of estimate of work progress, CIT(A) held that the explanation of the assessee was fully substantiated by assessment order for earlier asst. yr. 1990-91. No such work-in-progress was estimated for asst. yr. 1990-91. Addition of Rs. 1 lac made by AO was purely on the basis of following a different method for estimating the profit. In case results for both the years were prepared in a similar manner, there would not have been any material difference in profits disclosed. Learned CIT(A), therefore, held that there was no justification in treating this addition as concealed income of the assessee, even though no appeal had been filed against assessment order on this issue. However, as regards addition of Rs. 85,000, CIT(A) upheld the finding given by AO that this amount represented concealed income of the assessee. The relevant finding of CIT(A) is reproduced as under: "As regards the other amount of Rs. 85,000, it is observed that a debit entry was made in miscellaneous income account with, a narration 'to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the assessee was to conceal its income of Rs. 85,000. Relying on the judgment in the case of Shiv Narain Khanna, which was also relied upon by AO, learned Departmental Representative submitted that it was not necessary that some additional material should always be placed on record for levy of penalty in which assessment was based. The very same material can form the basis for assessment and penalty, depending on facts and circumstances of the case. Further, relying on the judgment in the case of Vishwakarma Industries learned Departmental Representative submitted that the onus was entirely on the assessee to prove that it had not concealed its income. He submitted that the assessee has not discharged the onus to establish that it had not concealed its income. He further submitted that on facts and circumstances of the case penalty @ 200 per cent was fully justified and CIT(A) was not correct in reducing concealed income to Rs. 85,000 and reducing the rate of penalty to 100 per cent in respect of concealed income of Rs. 85,000. 5.1. Learned counsel submitted that the assessee had all along been accounting for its receipts and expenses from contract works on cash basis. This ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted that for asst. yr. 1990-91, the assessee had claimed Rs. 75,800 out of amount of Rs. 1,75,800. In fact, the contracting authority intimated vide its letter dt. 4th Oct., 1991, i.e. relevant to asst. yr. 1992-93, that a sum of Rs. 3,68,980 was indeed recoverable from the assessee. Thus, eventually penalty of Rs. 1,75,800 was revised to Rs. 3,68,980. He further submitted that for asst. yr. 1990-91, the assessee had debited a sum of Rs. 75,800 in its accounts. AO had allowed Rs. 33,033 only. The basis of making such statement was to the effect that for asst. yr. 1990-91, AO had rejected the book results and estimated income by applying NPR of 9 per cent. He submitted that in case of contractors generally NPR of 10 per cent was being applied but AO had applied a rate of 9 per cent taking note of the fact that cost of inputs had increased, there was scarce position of labour in Punjab and also penalty of Rs. 75,800 was payable by the assessee which was levied by the contracting authority. He submitted that if we take 1 per cent reduction in NPR of total receipt of Rs. 33,00,330, it would mean that AO had allowed deduction of Rs. 33,033 for asst. yr. 1990-91, whereas actual amount ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e are of the opinion that CIT(A) was justified in holding that the explanation submitted by the assessee was not bona fide. Our findings are based on the following reasoning: (i) Because the assessee had debited a sum of Rs. 85,000 in miscellaneous receipt rather than debiting it to P&L a/c. Entry was also made with the narration 'to security deposit' when in fact no such payment for security deposit was made by the assessee. The assessee appears to have resorted to this procedure in order to camouflage income of Rs. 85,000; (ii) Because the assessee had not given any narration for making such entry which could easily be detected. It was only after the matter was subjected to detailed scrutiny by AO that the real nature of such debit entry was found; (iii) Because it is incorrect on the part of the assessee to say that for asst. yr. 1990-91 only a sum of Rs. 75,800 was claimed. In fact, we find that the contracting authority had intimated the assessee about levy of penalty of Rs. 1,75,800 by a letter dt. 29th Aug., 1989, i.e. relevant to asst. yr. 1990-91. The assessee had adjusted amount of Rs. 1,75,800 as under: Against security deposit &nbs....