Commissioner Of Income-Tax vs Mecon Builders And Engineers
2000 Latest Caselaw 1011 Del

JUDGMENT

Arijit Pasayat, C.J.

1. This appeal under Section 260A of the Income-tax Act, 1961 (in short the "Act"), relates to the order of the Income-tax Appellate Tribunal, Delhi Bench "A" (in short the "Tribunal"). By its order dated June 30, 1999, in I.T.A. No. 7398 (Del) of 1992, penalty to the extent of Rs. 1,69,900 imposed under Section 271(1)(c) of the Act was cancelled.

2. The factual position in a nutshell is as follows :

3. The assessed a partnership firm was engaged in execution of civil construction works. In respect of the work relatable to the Vikaspuri

Project, it had indicated the value of stock and work-in-progress at Rs. 3,61,132. On examination of its 11th and 12th running bills, the Assessing Officer was of the view that value of the work-in-progress was to be enhanced by Rs. 3,08,401, The assessed agreed for the enhancement of the value of the work. Accordingly, the addition was made. Penalty proceedings under Section 271(1)(c) were initiated. The assessed's stand was that it had agreed to the addition on the understanding that for the subsequent assessment year, an equal amount would be given as deduction. It was pointed out that there was no concealment and on the other hand the factual position was to the effect that the amount of bill for the month of December, 1987, was to be accounted for in the next year. The bill for the particular month is made at the end of the month. The work executed during the period is measured and the bill is prepared. Thereafter the bill is sent to the clients for verification of the amount and specification and for approval for payment. This took some time. Therefore, the running bills for the month of December, 1987, were accounted for in the next year. The plea did not find acceptance by the Assessing Officer who held that the assessed had concealed the particulars of income by furnishing inaccurate particulars. Accordingly, penalty of Rs. 1,61,900 was imposed. The matter was carried in appeal before the Commissioner of Income-tax (Appeals) (in short the "CIT (A)"). It was submitted that there was no loss of revenue as there was no change in the tax structure. Further, penalty does not become automatically imposable merely because of the fact that the assessed had agreed to an addition. It was also pointed out that for the subsequent years, i.e., 1989-90, deduction of an identical amount, i.e., Rs. 3,08,401 was allowed. The Commissioner of Income-tax (Appeals) did not accept the contention and upheld the findings recorded by the Assessing Officer that the assessed had concealed the particulars of income. The matter was carried in appeal before the Tribunal. Taking note of the factual position as highlighted above, the Tribunal was of the view that the assessed was not guilty of any contumacious conduct or any gross or willful neglect. Accordingly, penalty was cancelled.

4. Learned counsel for the Revenue submitted that the return for the year 1989-90 was submitted after the detection of the discrepancy during the course of assessment proceedings for the preceding year, i.e., 1988-89. Therefore, the filing of the return indicating the figures for the subsequent accounting year was of no consequence. Learned counsel for the assessed, on the other hand, submitted that there was no difference in tax effect as the rate of tax was the same for both the years. Accordingly, the assessed had agreed to the addition. Mere concession to make an addition does not per se lead to an inference of guilt or acceptance of concealment. Therefore, the Tribunal was justified in cancelling the penalty.

5. At this juncture it would be necessary to take note of the explanation furnished by the assessed and the submissions made before the authorities. It needs to be pointed out that there is specific mention about the stand of the assessed regarding absence of any tax effect. We find that the Tribunal on consideration of the factual position came to hold as follows :

"We have carefully considered the facts and circumstances of the case, the material, to which our attention was invited and the rival submissions. What appears from the penalty order is that the assessed has been held guilty of concealing the particulars of its income merely because it had agreed to an addition of Rs. 3,08,401. In view of the apex court decision (supra), merely because the assessed had agreed to certain addition it did not automatically follow that the amount agreed to be added was the concealed income. We find that neither in the assessment order nor in the penalty order, the Assessing Officer has given any basis for coming to the conclusion that the assessed had concealed the particulars of its income. The penalty has been imposed under the main provisions of Section 271(1)(c) of the Act but it is not shown in any manner that the assessed was guilty of contumacious conduct or any gross or willful neglect. We are of the considered opinion that the essential ingredients of Section 271(1)(c) are not satisfied. Accordingly, we hold that for the addition of Rs. 3,08,401 no penalty was exigible under Section 271(1)(c) of the Income-tax Act. The orders of tbe authorities below are set aside.

In the result, the appeal is allowed."

6. Though it cannot be laid down as a principle of universal application that whenever an addition is made on a concession, penalty is not to be levied, the factual position in each case has to be considered and the background in which the agreement is made for the addition has to be taken note of. The fact that for the subsequent period deduction has been granted is a relevant factor that has been duly noted by the Tribunal. In the circumstances, we find nothing wrong in the conclusion of the Tribunal cancelling the penalty. The appeal is not entertained.