TaxTMI 
TaxTMI 
2017 (4) TMI 290
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....e business and residential premises of the assessee who belongs to Ashok Solomen and Chintels Group of cases. On post search enquiry, it was found that one Shri Tarun Goyal was subjected to search u/s 132 of the Act on 1st September 2008 wherein it was found that he had created more than 90 companies which were engaged in the business of bogus bills and providing accommodation entries such as share capital, share application money, loans and advances and who charged commission accordingly. During the enquiry it was noted that Shri Tarun Goyal had more than 120 bank accounts and that he had deposited more than Rs. 250 crores as cash in those bank accounts. It was also found that the Directors of those companies were bogus and the addresses of those companies were also bogus. Statement of Shri Tarun Goyal was recorded u/s 132(4) of the Act, wherein he accepted that he was engaged in providing accommodation entries and bogus bills to various persons. During the course of investigation it was found that one company M/s Macro Infotech Ltd. was also formed by Shri Tarun Goyal, which was engaged in issuing bogus bills and which did not have any expertise in software business. During the e....
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....4808/2012 to 4810/2012. The relevant findings are contained in paragraphs 32, 33, 34 and 35 of the said order in which the ITAT has observed that the assessee has not been able to prove that the software purchased was used in the business of the assessee. 2.4 In the mean while, the AO started penalty proceedings u/s 271(1)(c) of the Act and when the assessee's appeals in the quantum proceedings got dismissed by the Ld. CIT (Appeals), the AO proceeded to levy the penalty amounting to Rs. 28,84,021/-, Rs. 45,80,882/- and Rs. 27,68,661/- for assessment years from 2008- 09, 2009-10 and 2010-11 respectively . 2.5 Challenging the penalty orders, the assessee filed appeals before the Ld. CIT (A). The assessee also raised additional ground vide letter dated 16/03/2016 stating that the underlying assessments u/s 153A were bad for want of incriminating material which in turn made the penalty orders invalid in law. Further, the assessee also submitted before the Ld. CIT (A) that the AO had imposed the penalty in violation of the principles of natural justice. It was also argued before the Ld. CIT (A) that no independent enquiry from any external source was made in the quantum proceeding....
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.... by the learned CIT(A) itself is not sustainable on merits also. 6. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the levy of penalty despite the fact that the assessee has duly discharged the onus cast upon it to prove the purchase of software. (ii) That the learned CIT(A), both on facts and in law, in upholding the levy of penalty, ignoring the fact that the penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty. 7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the levy of penalty, despite the fact that the disallowance of depreciation claimed by the assessee cannot per se be treated as concealment of income or furnishing of inaccurate particulars of income. 2.9 Grounds of Appeal in ITA 3792/Del/2016 (A.Y. 2009-10) 1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (CITA) upholding the levy of penalty by the AO u/s 271(1)(c) of the Act is bad, both in the eyes of law as well as on facts. 2. On the facts and circum....
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....Rs. 27,68,661/- on account of disallowance of depreciation software made by the AO. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty despite the fact that the AO has not recorded satisfaction as whether the penalty be initiated for concealment of income or for furnishing of inaccurate particulars. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and law in upholding the levy of penalty despite the fact that the disallowance made by the AO and sustained by the learned CIT(A) itself is not sustainable on merits also. 5. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the levy of penalty despite the fact that the assessee has duly discharged the onus cast upon it to prove the purchase of software. (ii) That the learned CIT(A), both on facts and in law, in upholding the levy of penalty, ignoring the fact that the penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty. 6. On the facts and circumstances of the case, the learned CI....
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....lty can be imposed for facts not proved which are not disproved. Reliance was placed on Hon'ble Gujarat High Court's decision in the case of National Textiles reported in 249 ITR 125. Further, the Ld. AR placed his reliance on the very recent Hon'ble Apex Court's decision in the case of Gopal Sons HUF (order dated 4/1/2017) to highlight that deeming fiction needs strict interpretation and any doubt must go to the benefit of taxpayer. 3.2 Further, the Ld. AR drew our attention to the page 4 of the Early Hearing Petition of the assessee, dated 15/11/2016, filed before the Hon'ble VP ITAT Delhi Zone to argue that lack of cross examination of Shri Tarun Goyal made the entire penalty proceedings nullity, in spite of the fact that quantum was confirmed. Reliance was placed on the following judicial precedents: a) Pune Bench ITAT in Chandrabhan Mugale order dated 30.10.2015 b) Shri Nirmal Commercial Ltd vs CIT 308 ITR 406 (Bom) c) Calcutta high court CIT Vs Ratal Lal Surekha 61 Taxmann 133 d) Apex Court's decision in the case of Andaman Timber Industries vs CCE 281 CTR 472. 4. The Ld. DR strongly countered the submissions of the Ld. AR. The Ld. DR submitted that not ment....
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....ngs are not conclusive. Assessment proceedings and penalty proceedings are separate and distinct. Findings in the assessment proceedings don't operate as res judicata in the penalty proceedings. For this proposition reliance is placed on the decision in CIT vs. Dharamchand L. Shah (1993) 204 ITR 462 (Bom). In Vijay Power Generators Ltd vs. ITO (2008)6 DTR 64 (Del) it was held that "It is well settled that though they constitute good evidence do not constitute conclusive evidence in penalty proceedings." During penalty proceedings, there has to be reappraisal of the very same material on the basis of which the addition was made and if further material is adduced by the assessee in the course of the penalty proceedings, it is all the more necessary that such further material should also be examined in an attempt to ascertain whether the assessee concealed his income or furnished inaccurate particulars. Thus, under penalty proceedings assessee can discharge his burden by relying on the same material on the basis of which assessment is made by contending that all necessary disclosures were made and that on the basis of material disclosed there cannot be a case of concealment of income ....
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....ct, not according to truth or erroneous. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that in order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The court further observed that there can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of....
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.... the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Sec....
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....ment proceedings and that a mere confirmation of addition cannot be the sole ground to levy penalty. In the penalty orders, the AO has himself observed that the entire proceedings of assessments were based on a) post search enquiries b) statement of Shri Tarun Goyal, which have been the key factors to impose the penalty u/s 271(1)(c). In the present appeals, it is undisputed that no incriminating material was unearthed during assesssee's search u/s 132 of the Act, that no independent enquiry and examination took place during assessment proceedings qua Shri Tarun Goyal and Micro Infotech Ltd, that only post search enquiries were made the basis of the entire assessment and penalty proceedings/orders, that no cross examination of Shri Tarun Goyal took place, that no effort was made to find out the status of the supplier independently, that the assessee's contention that software purchase was genuine was discounted on the basis of preponderance of probabilities and inferences, that no material was brought on record to establish that cash found its way back to the coffers of the assessee. It is apparent that no independent inquiry was made from the concerned party by issuing notices u/s....