TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1017
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....sales of rupees three crores and Valued Added Tax (VAT) of rupees twelve lacs was remitted to Sales Tax Authorities on the cash sales made only during the month of September, 2006 to different parties. The Assessing Officer asked the respondent to justify the cash sales and give complete addresses of the parties to whom the sales had been made. 3. The respondent-assessee, in its reply, submitted as under:- (i) We, as a policy of the firm do not encourage nor entertain 'over the counter sale' due to administrative difficulties involved in collecting cash and other security reasons associated with the same. However, due to extreme demand and to catervarious traders/end users who have been constantly knocking our manufacturing facility at Una requesting us to supply smaller retail quantity not exceeding 50 kgs for sale at retail counter, we have agreed to sell our captioned product across counter to traders/end users who have approached us for supply of this unique and distinctive synthetic essence PAN SHAMAMA directly on cash basis. (ii) The decision to sale on cash basis across the counter was largely aimed on developing bigger consumer base so that we get repetitive orders fr....
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....e of specific amount of rupees six lacs and rupees three lacs only. The amount of cash sales credited to the Books of Account were transferred to the accounts of the partners as cash withdrawals in the month of September, 2006 itself. Thus, the respondent had failed to establish genuineness of cash sales amounting to Rs.3,12,00,000/- including VAT. Hence, the Assessing Officer, vide order dated 13.03.2012, imposed penalty to the tune of Rs.1,06,04,880/- on the respondent. 5. Appeal filed by the respondent against the said order dated 13.03.2012, was dismissed by the Commissioner of Income Tax (Appeals), Shimla, vide order dated 22.10.2012. However, the appeal filed by the respondent against the order dated 22.10.2012, passed by the Commissioner of Income Tax (Appeals), was allowed by the Tribunal vide impugned order dated 25.08.2015. Hence, the present appeal by the appellantrevenue. 6. At the time of admission of appeal on 01.11.2016, following substantial question of law was framed:- "Whether the Hon'ble ITAT has erred in deleting the penalty levied u/s 271(I)(C), despite the fact that assessee has furnished inaccurate particulars of income in the garb of fictitious cash sale....
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....s versus Dharamendra Textile Processors and Others", reported in (2008) 13 SCC 369, wherein, it was held as under:- "2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai and Anr. (2007 (8) SCALE 304). The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the `Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division Bench, stand of the revenue was that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the `IT ....
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....l the facts relating to the same and material to the computation of his total income have been disclosed by him), then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed. A close look at Section 271(1) (c) and Explanation (1) appended thereto would show that in the course of any proceedings under the Act, inter alia, if the Assessing Officer is satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income, such person may be directed to pay penalty. 10. The quantum of penalty is prescribed in Clause (iii). Explanation 1, appended to Section 271 (1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating the same and material to the computation of his total income has been disclosed by him, for the purposes of Section 271(1)(....
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....uty normally three issues are likely to arise relating to (i) recovery, (ii) interest and (iii) penalty. The three issues are dealt with under Section 11-A (Recovery of duties), Section 11AA (Interest for the period from three months after the determination of duty payable till the date of payment of duty), Section 11 AB (Interest for the period from the first day of the month succeeding the month in which duty was payable till the payment of duty) and section 11AC (Penalty for short levy or non levy of duty). xxx xxx xxx 21.From sub-section 1 read with its proviso it is clear that in case the short payment, non payment, erroneous refund of duty is unintended and not attributable to fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made under it with intent to evade payment of duty then the Revenue can give notice for recovery of the duty to the person in default within one year from the relevant date (defined in sub section 3). In other words, in the absence of any element of deception or malpractice the recovery of duty can only be for a period not exceeding one year. But in case the non....
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....sions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of Section 11-A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person." The main body of sub-section 1 lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. xxx xxx xxx 30. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam,J.) was a party to the decision in Dharamendra Textile and we see no reason to under....
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....n 271(1)(c) on the ground that the respondent had furnished inaccurate particulars of his income in the garb of fictitious cash sales with a view to claim exemption under Section 81-IC of the Act. The Assessing Officer while examining the return filed by the respondent with respect to Financial Year 2006-2007 (Assessment Year 2007- 2008) under Section 143(3) of the Act, vide order dated 24.12.2009, held that respondent had failed to explain the cash sales amounting to Rs.3,12,00,000/- effected in the month of September, 2006. The said order has been admittedly upheld upto the Hon'ble Supreme Court vide order dated 23.08.2019. Appeal filed by the appellant was dismissed by this Court vide order dated 5th November, 2018. Penalty proceedings with regard to inaccurate cash sales set up by the respondent were separately initiated. It was observed by the Assessing Officer as well as the Appellate Authority (Commissioner of Income Tax (Appeals) that the respondent had claimed cash sales amounting to Rs.3,12,00,000/- only for the month of September, 2006. No such cash sale was ever set up prior to or after the month of September, 2006. The cash sales were duly scrutinized and it was found ....