TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2247
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....e firm named Shri Parin S Shah was examined and while taking statement u/s 132(4) of the Act, he consulted the employee Shri Ronak K Shah and admitted that salary and loans have been paid to employees in cash. He also agreed to offer a sum of Rs. 12.00 crores as income in the hands of various assessees of the group. Since the assessee was not able to substantiate the payments made in cash with the withdrawals, following amounts were offered in the hands of the assessee in the following years:- Assessment year 2007-08 - 1,00,000 Assessment year 2008-09 - 25,63,854 Assessment year 2009-10 - 45,51,279 The assessee filed return of income in response to the notices issued u/s 153A of the Act, wherein it included the additional income referred above. The Assessing officer also completed the assessment by accepting the additional income so offered by the assessee. 3. The assessing officer initiated penalty proceedings u/s 271(1)(c) of the Act during the course of assessment proceedings and thereafter passed penalty orders levying penalty of Rs. 33,660/-, Rs. 8,71,454/- and Rs. 15,46,980/- respectively for assessment years 2007-08, 2008-09 and 2009-10 respectively. The assessing offic....
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....of salary alleged to have been received in cash outside the books of accounts. 5. The Ld A.R further submitted the provisions of sec. 271(1)(c) prescribes two limbs for levying penalty viz., concealment of particulars of income and furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act for assessment year 2008-09 and 2009-10, the assessing officer has not specified the limb under which the penalty was proposed to be imposed. He submitted that the non-specification of specific charge or limb under which the penalty was proposed to be imposed, would vitiate the penalty proceedings. In support of this proposition, the Ld A.R placed reliance on the decision rendered by Hon'ble Karnataka High Court in the case of Manjunath Cotton & ginning Factory (359 ITR 565), wherein the Hon'ble High Court held as under:- "In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Departm....
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....ed, i.e., it was a lump sum surrender to take care of all the deficiencies, if any. In respect of the years under consideration also, the additional income surrendered by the assessee has not been linked by the assessing officer to any of the seized documents. What we notice from the discussions made in the penalty order is that there were some documents evidencing payment of salary and loans in cash. With regard to the same, the employee of the assessee admitted that the salary and loans have been paid in cash. The partner of the assessee firm also, after consulting the employee, admitted the same. However, there is no discussion about the quantum of salary/loan paid in cash out of which, how much was accounted and how much was unaccounted, so that one can decipher about the undisclosed income, if any, that can be gathered from those documents. 8. The assessing officer and Ld CIT(A) has placed reliance on the provisions of Explanation 5A to sec. 271 of the Act in support of the penalty levied by them. Under the deeming provisions provided in Explanation 5A, any income based on any entry in the books of account or other documents or transactions is found and if the assessee has no....
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.... Over all, on account of various discrepancies, as mentioned above, found in various premises of this group and its employees, on account of seized materials found/Books of accounts/investments in the hands of the group concerns as well as individuals related, I offer Rs. 12 crores in the hands of the concerns and individuals as Additional income for the relevant year. The exact bifurcation on the heads of income as well as persons will be provided in a short while. I have consulted with all the family members and partners/Directors of our group concerns and they abide by the same" Thus we notice that there is no reference to any of the seized documents in the reply given by the partner of the assessee firm, which persuaded him to surrender additional income of Rs. 12.00 crores. In view of the above, we are of the considered view that the Expalanation 5A to sec. 271 does not have application in the facts and circumstances of the case. 9. Further, we notice that the AO has made a bald statement that the salary and loan paid in cash could not be substantiated with withdrawals, meaning thereby he has also not done any exercise to corroborate the additional income with any materia....