TaxTMI 
TaxTMI 
2020 (1) TMI 613
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....es, the assessee has set-up two units in Mumbai and two export oriented units in Sachin Special Economic Zone (SEZ), Surat. In addition, the assessee also has two retail outlets. A search and seizure operation under section 132 of the Act was conducted in assessee's case on 25th September 2008. Pursuant to such search and seizure action, proceeding under section 153A of the Act was initiated. In response to the notice issued under section 153A of the Act, the assessee filed its return of income on 26th May 2009, declaring loss of Rs. 31,77,157. While completing the assessment, the Assessing Officer made various additions, including, addition on account of disallowance of deduction claimed under section 10A of the Act. Since, the subject matter of imposition of penalty under section 271(1)(c) of the Act is on the basis of the disallowance of deduction claimed under section 10A of the Act, we will discuss facts relating to this issue only. During the assessment proceedings, the Assessing Officer noticing that the assessee has claimed deduction under section 10A of the Act in respect of the profit earned from its units located in the SEZ, proceeded to verify the authenticity of assess....
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....ough, the assessee objected to the initiation of penalty proceedings, however, the Assessing Officer rejecting the explanation of the assessee passed an order imposing penalty of Rs. 19,31,604, under section 271(1)(c) of the Act. Though, the assessee challenged the imposition of penalty under section 271(1)(c) of the Act before the first appellate authority, however, learned Commissioner (Appeals) upheld the penalty order passed by the Assessing Officer. 4. The learned Authorised Representative submitted, the Assessing Officer has disallowed assessee's claim of deduction under section 10A of the Act on the ground that the assessee has not carried out any manufacturing and export activity. Whereas, learned Commissioner (Appeals) has allowed assessee's claim of deduction under section 10A of the Act, though, he has reduced the quantum of such deduction by re-allocating expenditure to SEZ and non-SEZ units. He submitted, the reasoning on the basis of which learned Commissioner (Appeals) sustained part disallowance under section 10A of the Act is altogether different from the reasoning on which the Assessing Officer has disallowed assessee's claim of deduction under section 10A of t....
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....mental Representative submitted, the Assessing Officer while disallowing assessee's claim of deduction under section 10A of the Act in the assessment order has initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. Therefore, assessee's contention that proceedings for imposition of penalty under section 271(1)(c) of the Act has not been initiated in the assessment order is without any basis. As regards the merits of the issue, the learned Departmental Representative submitted, undisputedly, a part of the deduction claimed by the assessee under section 10A of the Act has been found to be unacceptable. Therefore, to that extent, the assessee has furnished inaccurate particulars of income justifying imposition of penalty under section 271(1)(c). 6. We have considered rival submissions and perused the material on record. As regards the issue raised in grounds no.2.1 and 2.2, on a perusal of the assessment order it is very much clear that the Assessing Officer while disallowing assessee's claim under section 10A of the Act has initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. The disallowance of deduction under section 10....
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....diture at the directions of learned Commissioner (Appeals), he concluded that the expenditure has to be distributed proportionately between the SEZ and non-SEZ units on the basis of total turnover. Thus, as could be seen from the facts on record, the part disallowance out of deduction claimed under section 10A of the Act was on a presumptive/estimate basis. From the observations of learned Commissioner (Appeals), it is very much clear that the allegation of the Assessing Officer that no manufacturing activity was carried on by the assessee was found to be baseless as learned Commissioner (Appeals) has specifically stated that the assessee furnished clearance from the Customs and Central Excise Department, bills of establishment, proper invoices, foreign remittance through banking channels with the approval of the Reserve Bank of India and machineries installed in the SEZ unit. He has also specifically recorded a finding of fact that no incriminating documents were found and seized to disprove assessee's claim that it was carrying on manufacturing and export activities from the SEZ unit. Thus, the facts narrated above clearly indicate that the addition/disallowance sustained by lear....
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....leting the assessment under section 143(3) of the Act, the Assessing Officer made various additions which resulted in determination of total income at Rs. 63,99,61,340. The additions made by the A.O. are as under:- i) Addition on account of labour charges Rs. 38,11,78,904 ii) Addition on account of unexplained expenditure Rs. 70,05,000 iii) Addition on account of excess stock Rs. 16,44,14,449 iv) Addition on account of salary paid in cash Rs. 10,02,000 v) Addition on account of cash payment made towards property Rs. 2,00,00,000 Against the assessment order so passed, the assessee preferred appeal before the first appellate authority. 17. While disposing off assessee's appeal, learned Commissioner (Appeals) deleted the addition made in respect of labour charges while confirming the other additions. Against the said order of learned Commissioner (Appeals), the assessee went in further appeal before the Tribunal. After considering the submissions of the assessee, the Tribunal allowed further relief to the assessee. However, the Tribunal sustained additions, either partially or fully, under the following heads:- Unexplained Expendit....
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....salary paid in cash, learned Authorised Representative submitted, the addition has been made purely relying upon the statement of certain third parties without confronting them to the assessee. He submitted, even the assessee was not allowed any opportunity to cross examine the parties whose statements were relied upon for making the additions. Further, he submitted, though, similar additions were made in preceding assessment years, however, no penalty proceedings under section 271(1)(c) of the Act was initiated. As regards the addition made on account of stock discrepancy, the learned Authorised Representative submitted, ultimately the Tribunal has directed to restrict the addition to gross profit rate. Thus, no penalty can be imposed as ultimately the addition is on estimate basis. 20. The learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 21. We have considered rival submissions and perused the material on record. As regards the legal issue raised in ground no.2.1 and 3.1, while completing the assessment, in the penultimate paragraph of the assessment order the Assessing Officer has initiat....
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....uthorities found the claim of the assessee acceptable. In fact, the Tribunal while dealing with the issue has held that the evidence on record is sufficient to hold that the entity with whom the assessee has entered into such transaction is a paper entity created by the assessee to inflate the turnover. The Tribunal also held that the assessee has miserably failed to prove that the transaction with such entities is genuine. In view of such concurrent finding of fact by the appellate authorities including the Tribunal, assessee's claim that the transaction with M/s. Manav Jewelers, cannot be accepted. On a perusal of the assessment order passed in case of Proprietor of M/s. Manav Jewelers, we are convinced that the Assessing Officer has not accepted the transaction to be genuine. Merely because the said entity has filed a return of income showing certain income, the Assessing Officer has passed the assessment order on that basis. However, the assessment order so passed cannot grant authenticity to the activity carried on by the said entity with the assessee. Therefore, to that extent, we are of the view that imposition of penalty under section 271AAA of the Act in respect of additio....