TaxTMI 
TaxTMI 
2021 (8) TMI 335
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....ces of the case the ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 1065919 imposed by the ld. Assessing Officer under section 271(1)(c) of the I.T. Act, 1961. 3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. Brief facts of the case are that the assessee is an individual and engaged in business of trading of gem stones. The assessee filed his return of income declaring total income of Rs. 30,51,620/- on 27-09-2008 which was processed u/s 143(1) of the Income Tax Act, 1961 (in short, the Act) on 28-07-2009. The A.O. completed the assessment u/s 147/143 (3) of the Act on 30/09/2015 holding purchases made by assessee recorded in books of accounts amounting to Rs. 2,29,97,192/- as bogus/not verifiable and disallowed 25% which was added in total income of assessee and also initiated penalty proceedings u/s 271 (1) (c) of the Act. On appeal, the ld. CIT(A) reduced the addition by disallowing 15% of the disputed purchases by following his....
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....her in the penalty notice u/s 274 read with section 271 of the I. Tax Act dated 30.09.2015 (copy enclosed). A.O. mentioned that: - "Concealed the particulars of income or furnished inaccurate particulars of such income." c) Notice dated 09.01.2018 Further in the penalty notice u/s 274 read with section 271 (1) (c) of I. Tax Act dated 09.01.2018 (copy enclosed). A.O. mentioned that: - Penalty proceedings u/s 271 (1) (c) were initiated against you during the course of assessment proceedings for A.Y. 2008-09 and notice was already served on you. It is submitted any notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should specify under which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c). It is pertinent to note that in the said assessment order and notice Ld. A.O. has not clearly mentioned....
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....placed on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA's EMERALD MEADOWS reported in 2015 (11) TMI 1620. He also relied on the decision in the case of Manjunatha Cotton & Ginning Factory [20131 359 ITR 565 (Karnataka) and Jyoti Ltd. [20131 taxmann.com 65 (High Court-Guj), New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-High Court). 4. The above ratio laid down in the case of Manjunatha Cotton & Ginning Factory Supra) has been followed by various High Courts in the below mentioned cases: i. Shri Samson Perinchery. ITA 1154, 953, 1097, 1226 of 2014 (Order date - 5.01.2017) (Bombay High Court) ii SSA's Emerald Meadows [20161 73 taxmann.com 241 (Karnataka High Court) iii Mitsu Industries Ltd. ITA No. 216 of 2004. Gujarat High Court 5. Further attention is drawn towards the following judgement of the Hon'ble ITAT, Jaipur Bench: i. Narayana Heights & Towers, Vs. I.T.O. Ward - 2- 4 Jaipur ITA No. 1033/JP/2016. ii.) Shankar Lal Khandelwal v. DCIT - ITA No. 878/JP/2003. iii) Radha Mohan Maheshwari v. DCIT - ITA No. 773/JP/2013. iv) Murari Lal Mitta....
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.... furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee" 6. On the other hand, the ld Sr.DR has vehemently supported the orders of the authorities below. 7. We have considered the rival contentions and carefully perused the material available on record. From perusal of record, we noticed that the penalty in this case was initiated by the A.O. on account of concealment of income or for furnishing inaccurate particulars of income and thus, the ld AR has pointed out before us that notice U/s 274 r.w.s. 271(1)(c) of the Acdt should have specifically indicated in which limb of Sec. 271(1)(c) of the Act, the penalty proceedings were initiated i.e. whether for concealment of income or furnishing of inaccurate particulars of income. Thus, in absence of a particular limb, no penalty should have been levied on the assessee as the determination of such limb is sine qua non for imposition of penalty U/s 271(1)(c) of the Act. Wherein on the contrary, the ld DR while relying on the orders passed by the lower authoritie....
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....NG FACTORY (2013) 359 ITR 565. 4. In our view, since the matter is covered by judgement of the Division Bench of this Court, we are of the opinion, no substantial question of law arise in this appeal for determination by this Court. The appeal is accordingly dismissed." The department has filed SLP in Hon'ble Supreme Court which has been dismissed. Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs. SSA's Emerald Meadows and CIT Vs Manjunatha Cotton & Ginning Factory & others [2013] 359 ITR 565. Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [20131 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under: - "......... Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or* is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pal reported in 292 1TR 11 at page 19 has held that concealm....
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....t the assessee has nothing to say and has no objection regarding imposing the penalty us/ 271(1) (c) of I. T Act, 1961. Therefore, I impose a penalty of equal to 100% of tax sought to be evaded on account of the above acts of the assessee of Rs. 34,05,436/- i.e. 100% tax evaded. In the light of the above, we need to examine whether assessment order and the penalty order comply with the provisions of section 271 (1) (c) of the Act. We find that on page 3 of the assessment order, the assessing officer, A.O. observed as under: - "As the assessee has concealed/furnished the inaccurate particulars of income therefore, penalty u/s 271 (1) (c) is also initiated." 3.3 As per section 271 (1) (c), the assessing officer is empowered to impose penalty if in the course of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. From the above provision it is clear that there has to be a specific satisfaction by the Assessing officer that the assessee is guilty of concealing the particulars of his income or furnishing inaccurate particulars of such incomes. ....
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....decision was rendered on 27.08.2012. In view of the observation made in the said judgement, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order ...." (Emphasis Supplied). Further the latest view of the Hon'ble Supreme Court in case of PCIT (Central) Vs Golden Peace Hotels & Resorts Pvt. Ltd. (2021) 124 Taxmann.Com 249 (SC) wherein it was held that "SLP dismissed against High Court ruling that recording of satisfaction by Assessing Officer that there was concealment of income or that any inaccurate particulars were furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee" Therefore, considering the totality of the facts a....
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.... fall within the purview of Section 271 (1) (c). The assessee furnished all particulars correctly and no deficiency or mistake found therein and technically. invoking of provision of section 145 (3) is on account of and lack of verifiability of some purchases made while the G.P. rate declared by assessee was much better than in previous years and no trading addition would have been called for and thus it is not a case of furnishing inaccurate particulars as held by Ld. A.O. Thus the additions is purely on estimate. It is settled law that addition based on estimated higher trading profit as against the declared gross profit cannot be considered as concealed income or of furnishing inaccurate particulars within the provisions of section 271 (1) (c) as held in case of CIT Vs. Dhillon Rice Mills (2002) 256 ITR 209 (ALL) and in case of Hari Gopal Singh Vs. CIT (2002) 258 ITR 85. In both these decisions, it was held that the provisions of section 271 (1) (c) are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. In case of CIT Vs. Aero Traders P. Ltd. (2010) 322 ITR 316 it was held thatthe Assessing officer, obser....
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....e ld. CIT(A). Thus, according to the ld. AR, it is a case where purchases are not doubted but bills of purchases were held unverifiable because of non-verification thereof from sellers. 13. The additions in the present case have been made as trading additions by invoking Section 145(3) of the Act. As per the ld. AR, the appeal filed by the assessee against order of ld. CIT(A) was got wrongly withdrawn under misconception and in assessee's own case for the preceeding year i.e. A.Y. 2007-08 on the same facts, the ITAT did not uphold disallowance of 15% of purchases but ordered to assess the income of assessee on average gross profit declared and admitted by the A.O.. Thus, in this way, the purchases which was held unverifiable cannot be held to be bogus and the addition on the basis of estimation do not fall within the purview of Section 271 (1) (c) of the Act. 14. After appreciating the facts of the case, we noticed that the assessee had furnished all particulars before the A.O. and no deficiency or mistake was found therein and technically, the invocation of provision of Section 145 (3) of the Act by the A.O. was on account of and lack of verifiability of some of the purchase....