TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 1277
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....y on 8/10/2014 and 3/12/2014 voluntarily and in good faith suo motto offered for taxation on estimation basis 8% of gross receipts as its income, which declaration of assessee became the final/concluding basis of assessment , so in such glaring facts, imposition of penalty u/s 271(l)(c) is out rightly bad and ex-facie unlawful. 2. That on the facts and in the circumstances of the case and in law, ld CIT-A erred in sustaining the penalty u/s 271(1)(c) of the Act amounting to Rs. 68,77,152 as levied by ld AO, in hands of appellant who is civil contractor, on basis of invalid initiation of penalty proceedings in assessment order dated 25/03/2015 where no express and explicit finding is "discernible " from the body of the order; 3. That on the facts and in the circumstances of the case and in law, ld C1T-A erred in sustaining the penalty u/s 271(l)(c) of the Act amounting to Rs. 68,77,152 as levied by ld AO, in hands of appellant who is civil contractor, on basis of vague and mechanical show cause notice issued u/s 274 of the Act which ground was duly raised in appeal memo in Form 35 before first appellate authority: 4. That on the facts and in the circumstances of the case an....
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....he entire addition made in this case is on the basis of estimation of net profit by the AO. 6. The Ld. AR for the assessee company challenging the impugned order contended inter alia that show-cause notice issued by the AO u/s 274, available at page 4 of the Paper Book is not a valid notice to initiate the penalty proceedings as the assessee company has not been made aware if it has, "concealed the particulars of income or has furnished inaccurate particulars of such income", and relied upon the decision rendered by the Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory & Ors. 359 ITR 565 (Karn.); that during survey proceeding assessee has made suo moto surrender on the basis of which net profit @ 8% has been assessed by the AO, and in such cases penalty cannot be levied; and that AO while framing the assessment u/s 143(3) has not recorded specific satisfaction to initiate the penalty proceedings. 7. However, on the other hand, Ld. DR for the Revenue to repel the arguments addressed by the Ld. AR for the assessee company contended inter alia that the notice issued by the AO u/s 274 of the Act is not standalone documents which is based on assessm....
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....dy been confirmed. It is settled principle of law that the penalty cannot be imposed merely on the ground that the additions made in the income of the assessee has been confirmed rather to proceed with imposition of penalty u/s 271(1)(c), the AO has to prove that there was concealment of particulars of income or assessee has furnished inaccurate particulars of such income. 11. First of all, perusal of para 5 of Assessment Order framed u/s 143(3) of the Act, goes to prove that the AO has not recorded his specific satisfaction to initiate penalty proceedings either for furnishing 'inaccurate particulars of income or for concealment of particulars of income' rather stated that initiate proceeding u/s 271(1)(c) of the Act separately. For ready perusal para 5 of the assessment order is extracted as under:- " In view of the above discussion, the assessment is completed on income of Rs. 3,46,75,166/-. Issue notice of demand accordingly. Initiate proceedings u/s 271(1)(c) of the I.T. Act, is being issued." 12. From the assessment order itself it is proved on record that at the time of framing the assessment, AO was not clear nor he appears to have applied his mind as to whether penalty....
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....lenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from 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 dir....
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....s assessee has not concealed any particulars of income or has furnished inaccurate particulars of income. We are of the considered view that when assessee has made voluntary surrender of income and his books of accounts have been rejected by the AO, who has proceeded to estimate the net profit on the basis of voluntary surrender to the rate of 8%, there is no concealment of particulars of income or furnishing of inaccurate particulars of such income, on the part of the assessee, so as to initiate penalty proceeding against the assessee. Hon'ble Allahabad High Court in the case of CIT vs. Radha Kishan Goel -(2005) 278 ITR 454 (All.), while deciding the identical issue as to levy penalty in case of voluntarily surrender has held as under:- "From a perusal of Expln. 5 it is evident that in circumstances which otherwise did not attract the penalty provisions of s. 271(l){c), a deeming provision was introduced as to attract the penalty provisions to those cases as well. But an exception in cl. (2) of Expln. 5 where the deeming provision will not apply if during the course of search the assessee makes the statement under sub-so (4) of s. 132 that the money, bullion, jewellery, etc., fo....
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....ttached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere non-statement of the manner in which such income was derived would not make Expln. 5(2) inapplicable. For the reasons stated above, there is no error in the order of the Tribunal and the same is upheld. " 17. Identical issue has also come up before Hon'ble Allahabad High court in the case of Commissioner of Income Tax Kanpur vs. M/s Dee Control and Electric Pvt. Ltd. in ITA No. 82 of 2017 vide order dated 19.12.2017 wherein penalty was imposed on the basis of estimated net profit made by the AO after rejecting the books of accounts and decided the issue in favour of the assessee by returning the following findings:- Having considered the arguments so advanced, we note neither the assessing officer gave any reason how the books of account etc. impounded during the survey brought out the fact of concealment of income nor he established how such books of account etc. rendered the regular books of account maintained by the assessee unworthy of acceptance. However, it is a fact that ....
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....essee are declared inaccurate, it may be open to the assessing officer to draw such a conclusion if after issuance of a show cause notice and confronting the assessee with such material the assessee makes a surrender. However, such is not the case here. According to the assessing Officer himself (as per the assessment order) nothing incriminating was discovered during the survey. Then, if the assessing officer has relied on the self same material and also estimated the income of the assessee at virtually the same quantum as disclosed by the assessee. The penalty order does not disclose any independent or other reasoning to prove the allegation of concealment of income and/or furnishing of inaccurate particulars of income. In fact, the assessing officer has not even made any distinction between the two contingencies. He had merely reiterated the language of the statute while concluding that "the assessee has concealed it's income and furnished inaccurate particulars of it's income without giving reasoning to establish either of the two conditions that may invite imposition of penalty under Section 271(1 )(c) of the Act. In this regard, we find the Gujarat High Court ha....