TaxTMI 
TaxTMI 
2018 (5) TMI 1589
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....Assessee A.Y. 2008-09 2. Assessee raised the following grounds of appeal : "On facts and circumstances of the case and in law, 1. Without considering the facts and circumstances of the case, the Ld.AO has erred in levying the penalty u/s.271(1)(c) of the Act and the CIT(A)-1, Aurangabad has erred in retaining the penalty to the extent of Rs. 5,65,685/-. 2. Without considering facts and circumstances of the case and the law obtaining, the AO has erred in levying the penalty u/s.271(1)(c) of the Act and the Ld.CIT(A)-1, Aurangabad has erred in not deleting the entire penalty. 3. The penalty of Rs. 5,65,685/- u/s.271(1)(c) of the Income Tax Act, 1961 imposed on the assessee is bad in law. 4. The appellant craves leave to add, amend or alter any of the grounds of appeal." From the above grounds, it is evident that all the grounds revolve around the penalty levied by the AO u/s.271(1)(c) of the Act for the A.Y. 2008-09. 3. Briefly stated relevant fact are that the assessee is a company and is engaged in the business of manufacturing and trading of flow measuring instruments, components, parts and accessories. Assessee filed the return of i....
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.... legal ground, he relied on various decisions of Pune Benches of the Tribunal and the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. Shri Samson Perinchery as well as the judgment of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory. 7. On the other hand, Ld DR for the Revenue relied on the order o the AO. 8. We heard both the sides on this issue and perused the orders of the Revenue and considered the decisions relied on by the Ld. Counsel for the assessee. We find the AO vide assessment order dated 27-12-2011 has initiated the penalty proceedings holding as under : "5. . . . . . . . . . Therefore, penalty proceedings u/s.271(1)(c) are initiated separately for "concealment of particulars of income." Further, the AO vide penalty order dated 24-03-2014 has levied the penalty recording the following satisfaction: "9. I am satisfied that the assessee has furnished inaccurate particulars of income and made itself liable for levy of penalty u/s.271(1)(c) of the Act, 1961. Accordingly, order u/s.271(1)(c) of the I.T. Act, 1961, levying penalty of Rs. 17,23,306/- is passed." Therefore, on ....
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.... and accorded the same treatment as in a case where the A.O had failed to strike off the irrelevant default in the 'Show cause'notice, because, in both the situations the assessee is not informed and rather is left guessing of the default/defaults for which he is being proceeded against for. We thus in the backdrop of our aforesaid observations are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default/defaults for which he was being proceeded against, therefore, are of the considered view that the penalty under Sec. 271(1)(c) of Rs. 12,14,140/- imposed by the A.O in clear violation of the mandate of Sec. 274(1) of the Act, cannot be sustained. We thus not able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set aside the order of the CIT(A) who had upheld the same. The penalty of Rs. 12,14,140/-imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations." In view of the above discussion, we hold that the orders of AO/ CIT(A) are required to be set-aside on the legal ground of recording of satisfaction by the....
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...., Ld. Counsel for the assessee submitted that the assessee is a company engaged in the business of manufacturing and trading in flow measuring instruments, components parts and accessories. Assessee filed the return of income on 08-10-2010 declaring total income of Rs. 2,56,65,706/-. During the course of assessment proceedings, AO held that the assessee made the additional production to the extent of 643.02 Metric Tonnes worth of Rs. 5,05,18,770/-. The discussion given in Para No.3.2 of the assessment order is relevant. Thus, the AO rejected the books of account and made addition of Rs. 5.05 crores (rounded off). Further, the AO also denied the claim of deduction u/s.10B of the Act amounting to Rs. 20,53,859/-. This claim relates to receipts from interest income from fixed deposits/deposits, sale of scrap and other miscellaneous business receipts. Assessee treated them as business receipts. However, the AO denied the deduction claimed u/s.10B of the Act on these receipts. 16. In the First Appellate proceedings, the CIT(A) deleted the issue relating to additional production worth Rs. 5.05 crores (rounded off). CIT(A) held that the said addition constitutes the addition made on su....
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....is determined accordingly. (iii) There is no evidence on record brought by the Assessing Officer which proves the fact of suppression of sales or increase of raw material prices. (iv) The Assessing Officer has rejected the books simply based on consumption figures being excessive in certain months without going into depth of the same. No specific defects having been pointed out in books of account. The working of AO is a hypothetical working based on one month's data without bringing on record any defect or discrepancy and without any basis. (v) The CIT (A) has allowed this ground of appeal." 20. After hearing both the parties, we perused the orders of the revenue and the contents of Para No.5 and find the AO arrived at the additional production of 743.02 MT merely based on the surmises. No evidence is found regarding the production of raw-material, consumption of electricity or any other method to demonstrate the allegation of additional production. Further, we have gone through the relevant lines from the said paragraph 5 and find it relevant to extract the same for the sake of completeness : "5. . . . . . . . .On careful consideration o....
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....vers for such a flowmeter will be more. Similarly if a flowmeter ordered by a customer has to record even a minute variation in flow, then it will require more sensors. Similarly if the fuse & circuits are also required to be protected then the flowmeter will require more covers. Sometimes in a flowmeter, certain parts are not required to be exposed then also it will require more covers. The flowmeters are also of different types namely electromagnetic, coriolis, vortex or ultrasonic each working on different principle. Hence there can't be a fixed consumption of raw material for each unit of final product as assumed by the AO. Further the appellant has maintained quantitative details in respect of various raw materials in numbers. The AO on the contrary has worked out average consumption of raw materials at 22.85 per unit which is not possible in such line of business where the finished products have to be made as per the requirements of the customers i.e. customized. The appellant company has been exporting such flowmeters to South Africa, Australia, Malaysia and Thailand. Further the domestic sales are also to the government undertakings such as HPCL, IOCL, BPCL & NMDC and t....
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....other hand, the assessee had argued that major quantity of Copra purchased during the year was of low and inferior quality. Therefore it took more time to extract the oil and crush the Copra. It was held that the suppressed production could not be worked out by applying any mathematical formula as per thought and mind of the AO. Similarly in the case of SRJ Peety Steel Pvt. Ltd. (137 TTJ 627), one of the reasons for rejecting the books of account by the AO was inconsistent electricity consumption. In this regard, the stand of the assessee company was that the AO had simply taken the lowest electricity consumption for a month in the whole year and treated the production in that month as the correct production and then proceeded to arrive at the production figure by multiplying the production in the books by the ratio of production to the electricity consumption for the month in which electricity consumption was minimum. However the method of computing the so-called suppressed production was not based on cogent reasons. The AO had gone by supposition but not by actual detection which was not justified. The entire method in this regard was based on pre-supposition and lacked scientifi....
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....dditions were deleted. These decisions are squarely applicable to the facts and circumstances of the present case. Respectfully following the above decisions, I hold that the AO had absolutely no basis to adopt consumption of raw material at 22.85 per unit and applying the same to the various months to compute additional production/suppressed sales at Rs. 5,05,18,770/- for the year under reference. Further the appellant company is selling its final products through an associate concern namely Endress-Hauser (India) Pvt. Ltd., Bombay and no direct sales are being made. The various factors as submitted by the appellant company did have an impact on the production and could not be brushed aside as done by the AO." Considering the elaborate reasoning given by the CIT(A) on this issue, we are of the opinion that the order of CIT(A) on this issue is fair and reasonable and therefore, it does not call for any interference on this issue. Accordingly, the grounds raised by the Revenue are dismissed. 21. Consequently, considering the relief granted by us in Ground No.1, we find adjudication of legal issue raised vide Ground No.2 by the Revenue becomes an academic. 22. In the result,....
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....elying on the decision in the case of Ishrawati Devi Vs. ITO 298 ITR AT 313 and another decision in the case of Uplaksh Metal Industries Vs. CIT 177 Taxman 298. 28. Before us, at the outset, Ld. Counsel for the assessee submitted that the above addition made by the AO is premature as the AO has not granted proper opportunity to put up his case properly before the AO. Therefore, Ld. Counsel for the assessee prayed for remanding this issue to the file of AO. In this regard, Ld. Counsel filed the following written submissions : "(1) The addition has been made since the balance confirmations are not produced and the creditworthiness and genuineness could not be proved. (2) The letter to parties was sent by Department for balance confirmation and we understand the notice went unserved. (3) All the parties whose credit balances are appearing and which has been considered as income, are regular suppliers of the company. The creditors balance is arising out of purchase of credit materials from these parties. Purchase bills have been produced during course of hearing. The entire purchases have been accepted in the assessment. Therefore, the purchase price that ....