TaxTMI 
TaxTMI 
2016 (7) TMI 97
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....ged in the business of whole sale dealer in clothes and job work of embroidery work. Return of income for Asst. Year 1994-95 was filed on 31.8.1994 declaring total income at Rs. 1,300/-. Survey proceedings were conducted u/s 133A of the Act at the premises of the assessee on 20.10.94. Pursuant thereto assessment proceedings were completed u/s 143(3) r.w.s. 148 of the Act on 17.3.1997 after making addition on account of unaccounted purchase and sales at Rs. 10,16,273/- and addition on account of loose bills impounded during survey proceedings at Rs. 66,685/-. 3. On appeal before ld. CIT(A) on quantum additions, addition relating to unaccounted sales at Rs. 10,16,273/- was sustained at 20% of the unaccounted sales bringing down the addition to Rs. 2,03,255/- and addition of Rs. 66,685/- as per loose bills was confirmed. Thereafter both the assessee and the Revenue went in appeal before the Tribunal, Ahmedabad, through which assessee got further relief as the additions were sustained by applying GP rate at 15.42% on the total unaccounted sales at Rs. 10,82,958 (Rs.10,16,273 + Rs. 66,685/-). 4. At the time of completion of assessment u/s 143(3) r.w.s. 148 penalty proceedings u/s ....
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....ee is rejected then in that event, a case for imposition of penalty under 271(1) (c) is made out. It is much more so when there is not technical issue is involved" In view of the above discussion, I am of the opinion that it is fit case for levy of penalty U7s 271 (1(c) of the act, as the assessee has concealed the income by furnishing inaccurate particulars of its income. Accordingly the assessee is liable for penalty U/s 271(1) (c) of the Act. The minimum and maximum penalty leviable in the case is Rs. 74,8107- and Rs. 2,24,4307-. (I.e. at the rate of 100% & 300% respt.) As against maximum penalty of Rs. 2,24,430/-,the minimum penalty is hereby levied of Rs. 74,810/-" 5. Aggrieved, assessee went in appeal before ld. CIT(A) who confirmed the penalty of Rs. 74,810/- by observing as under :- "12. I have considered the penalty order u/s 271(l)(c) of the IT Act passed by the AO as well as the submission of appellant. The above entire submission of the appellant is not found to be tenable. I agree with the view of the AO that issuance of notice u/s 147 itself is based upon the additional evidence of escapement of income from the tax. The Ld. CIT (A) in the case of appellant vi....
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.... that funds were available from last year which were used for initial purchases and hence the net profit adopted at 20% for this assessment year will be reasonable. The assessing officer is directed to tax only 20% of the total unaccounted sales". 13. The Ld. CIT(A) has clearly observed that the purchases and corresponding sales were out of books of account. During the course of survey action in the case of appellant, separate set of books of account were found and hence profit from sales as per these books of account had to be brought to tax. The Ld. CIT(A) has not accepted the argument of the appellant that the income from unaccounted sales may be restricted to 5%. Thus, in the case of appellant it is clear that the purchases and corresponding sales were out of books of account and it was maintaining separate set of books of account. These facts clearly show that the appellant had concealed its income by furnishing inaccurate particulars of income. Considering these facts, I confirm the above penalty of Rs. 74,810/- as levied by the AO u/s 271(l)(c) of the IT Act. Thus, the above grounds of appeal no. l and 2 of the appellant are here by dismissed." 6. Aggrieved, assessee i....
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....overall gross profit of 15.42% should be taken as income resulting in further reduction in income. Copy of the order of the Income-tax Appellate Tribunal dated 20-10-2005 is enclosed. (26-31). (6) On account of smallness of the amount and because this was essentially a matter of fact, the assessee did not take up any further proceedings. (7) In the course of penalty proceedings, the assessee replied vide letter dated 26- 12-2006 (Page 32-33). It was pointed out that the assessee has been contending from day one that these were all estimates. (8) It is further put on record that the explanation given by the assessee has not been found to be false but merely not accepted. In the circumstances, it is submitted that no penalty would be leviable. (9) I may further draw attention to section 69 of the Income-tax Act which is reproduced. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, i....
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....this state of accounts and evidence in the quantum proceedings, the Department was justified in treating the cash credits as income of the assessee but merely on that basis by recourse to Explanation 1, penalty under section 271(l)(c) could not have been imposed without the Department making any other effort to come to a conclusion that the cash credits could in no circumstances could have been amoujnts received as temporary loans from various parties. The assessee in the quantum proceedings failed to produce the accountant but the Department also in penalty proceedings made no effort to summon him. Applying the test (ii) discussed above, therefore it was a case where there was no circumstance to lead to a reasonable and positive inference that the assessee's case - that the cash credits were arranged as temporary loans, was false. The facts and circumstances are equally consistent with the hypothesis that it could have been sundry loans in small amounts obtained from different parties. In our opinion, therefore even taking recourse to Explanation 1, the same circumstances or state of evidence on which the cash credits were treated as income, could not by themselves justify imp....
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....ion given by the assessee was not bonafide or false. In taking this view the Tribunal relied on the judgement of Delhi High Court in case of Mrs. Baljit Jolly [263- ITR-239] and of Calcutta High Court in case of Amalendu Paul ]145-ITR- 439]. The related portion of page.916 of the judgement is reproduced. "Moreover the addition can be made u/s. 68 if the explanation of the assessee in regard to the source of credit found in the books of account of the assessee has not been found satisfactory by the AO. The addition is made under the deeming provisions of s. 68 of the Act. But the operation of the deeming provisions of s. 68 cannot be extended to penalty under s. 271(l)(c). For the purpose of levy of penalty, the AO is required to establish the explanation furnished by the assessee is false or the same is not bona fide and that all the material facts relating to computation of income have not been disclosed." (v) Karnataka High Court in case of M. M. Gujamgadi [290-ITR-168] dealt with similar issue. Unable to produce the lenders who had given loans to the assessee, the assessee voluntarily agreed for addition of Rs. 2,01,000/- to his income as cash credits. The High Court....
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....redit, sales, advances, received, outstanding balances etc. All entries in embroidery book are again reported in Vepari Yadi and these are recorded in books of accounts. The totals of both debits and credits in Vepar Yadi are wrongly suggested to sales as one side is of sales which is already reflected in books and other is mere recovery thereof. In para 6 of their reply it is stated that "purchases of unaccounted sales, as also admitted by you, were made out of undisclosed income earned." In such circumstances what is required to be added is net profit of Rs. 10,62,958/- as per the direct judgement of Calcutta High Court (201 ITR 608). Loose bills of Rs. 66,685/- may include duplicate bills and copies of which are also included in Vepar Yadi". 10. On going through the above reply made by assessee, it is pertinent to note that assessee has accepted that there is unaccounted sales of Rs. 10,82,958/- during the year and has requested for addition only to the extent of net profit of unaccounted sales, which means that assessee has furnished inaccurate particulars of income at the time of filing income-tax return and if the survey proceedings had not been initiated then the assessee....