TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 430
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....ocated at various locations where tea plantation was being done, in particular from Venniar factory and from Manalaar factory. As a practice, produce of Manalaar was sold under the brand of produce of Venniar factory. 6. In the return that was filed, the assessee claimed the deduction under section 80HH at Rs. 62,20,057/-, being 20% of Rs. 3,11,00,284/-. Accordingly, the net profit was worked out at 42.06%. The AO called for an explanation with regard to highly inflated net profit of 42% of Venniar Tea Gardens, in whose comparisons, the other tea gardens were showing the net profit at 20.43%. 7. On the above query, as raised by the AO, the assessee sought clarifications internally for all units where there were tea gardens and production facilities were located, along with HO, as the accounts of each unit was maintained separately. It was also noticed by the management, that profit & loss account of various unit, though the same had been prepared but was not yet audited. For that reason, there was no authentication of correctness of the accounts of Venniar tea garden facility. 8. At this juncture, the assessee recast its Profit & Loss Account of Venniar unit. 9. Vide its letter....
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....1. In support of the above claim, the appellant Enclosed annexure V-12 with the return as a statement showing deduction under section. 80HH at 20% of Rs. 3,11,00,284/- and in Annexure VI(14) enclosing the profit & loss account for 21 months of the accounting period deriving net profit of Rs. 3,15,64,748 against the total sale of Rs. 7,50,30,922/- such that the net profit rate worked out at 42.06% of gross turnover. The appellant was requested to explain the basis for computation of highly inflated net profit of 42% over gross turnover for the Venniar factory whereas for all the garden taken together the net profit was 9,16,96,434 on the total turnover of Rs. 44,86,98,935/- giving the rate of 20.43%. 8 The AO noticed that the auditors of the appellant namely M/s. Price Water Houses audited accounts of each tea garden and the head office from the regular books of accounts maintained at the head office and the gardens. However, the profit & loss account for the Venniar factory was prepared by the officials of the appellant company and was not audited by the auditors regarding the correctness of receipts shown in the P&L account. When the appellant was confronted with the above facts,....
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....eturn of income. 11 The ARs argument that the AO recorded the satisfaction for initiation of penalty proceedings under section. 271(1)(c) w.r.t. Deduction under section. 80HH while in the last but one Para of the assessment orders he actually initiated penalty proceedings under section. 80HHC for wrong claim of deduction under section. 8OHHC is not correct as the entire order is to be read in totality. It confirms that the addition of letter 'c' with 80HH in the last but one para of the assessment order is a typographical error in the order due to abundantly clear satisfaction recorded in para 8(pg 12) of the assessment order. The AO correctly recorded his satisfaction for initiation of penalty proceedings under section 271(1)(c) for wrong claim under section 80HH. English language is not the mother tongue of the AO and therefore any such mistake does bring illegality in the facts and circumstances. Similarly, the recorded satisfaction confirms the evasion of tax and the word 'avoidance' is only because of English being a foreign language. The recording of satisfaction by the A.O is legally correct to initiate penalty proceedings under section. 271(1)(c) in accorda....
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....me is this deduction was consequential to the deduction admissible under section 80HHC. 16. The deduction under section 80HH is allowable under rule 8 of I T Rules,1962 and therefore the appellant was having full knowledge of admissible deduction to it in AY 1989-90, The facts of the case simply prove that the appellant, with deliberate motive to evade tax, claimed wrong deduction under section. 8OHH by furnishing inaccurate particulars of income. The levied penalty under section. 271(1)(c) is legally correct in view of the judgments in the cases of Padam Kumar Jain Vs CIT, 230 ITR 766 (Pat.), Hukumchand Premchand Vs CIT, 143 ITR (ST) 40 (SC), Suneel Kumar Malhotra Vs CIT, 249 ITR 125(Guj.), Beena Metals Vs CIT, 240 ITR 222 (Ker.) and Jain Brothers Vs CIT, 251 ITR 302 (Del)". 12. The CIT(A), thus sustained the levy of penalty under section 271(1)(c), by the AO. 13. Against this order of the CIT(A), the assessee is now before the ITAT. 13. Before us, the AR once again raised a technical ground with regard to the initiation of penalty, that the AO in the body of the assessment order mentioned that penalty "has" to be initiated, but while ordering to initiate the penalty, he decid....
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.... charged with concealment of income, but should also be charged with furnishing of inaccurate particulars of income, as the AO had cornered the assessee on both the fronts. The DR also countered the arguments of the AR for illegal penal proceedings, as there was no order, for initiating penalty under section 80HH. He, submitted that the AO's remark in the body of the assessment order, where it says "separate penalty proceedings under section 271(1)(c) of the IT Act, 1961 has to be initiated". The DR submitted that whether the mistake was due to omission or commission, under both situations, the error on the part of the assessee was culpable. He further submitted that sales of Manallar unit entering into the sales of Venniar unit was not an error which could be said to be clerical error, rather it was a major error, which, if not detected by the AO, would have gone a long way and benefitted the assessee year to year. Since, the AO detected the inaccurate particulars both on sales and quantum of deduction, the assessee's claim was rejected. The DR, submitted that as the facts are emerging from the assessment order, at this point in time, the theory of inadvertent mistake cannot be ac....