TaxTMI 
TaxTMI 
2022 (11) TMI 275
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....recorded from the Chartered Accountant of the assessee also. The Chartered Accountant of the assessee had stated that the assessee used to give notings in respect of the expenses incurred by the assessee for the purpose of preparation of the profit and loss account and filing its return. It was the submission that the assessment came to be completed wherein the income of the assessee had been estimated by adopting the turnover of the assessee as recorded by M/s Serajuddin & Co. because the assessee was doing raising of minerals ore as a contractor for Serajuddin & Co. only. The AO had treated 50% of the turnover as recorded in the books of account of Serajuddin & Co. in respect of the assessee and granted the assessee expenses of about 30% and had determined the net profit. From the net profit the AO had reduced 50% of the turnover as having been returned to Serajuddin & Co and had made the addition on protective basis. The balance of the net profit had been treated as substantive in the hands of the assessee. It was the submission that the AO had levied penalty u/s.271(1)(c) of the Act for concealment. It was further submitted that in respect of the quantum matter, on appeal befor....
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....% of the assessed income and after considering the effect of Explanation to Section 271(1)(c) of the Act as the assessment was best judgment and there was no proof of concealment of income, it was held that the penalty was not imposable. Further, the ld. AR placed reliance on the decision of Hon'ble Chhattisgarh High Court in the case of Vijay Kumar Jain, reported in 325 ITR 378 (Chhattisgarh), wherein it has been held that in that case the assessee had estimated the profit as 6.36% of the gross profit and the AO has assessed profit as 10% of the gross profit and consequently, it was held that there was no concealment of income and therefore penalty could not be levied. He also relied upon the decision of the Hon'ble Madras High Court in the case of Smt. K. Meenakshi Kutty, reported in [2002] 258 ITR 494 (Madras), decision of Punjab & Haryana High Court in the case of Harigopal Singh, reported in [2002] 258 ITR 85 (Punjab & Haryana) and the decision of Hon'ble Gujarat High Court in the case of Valimkhhai H. Patel, reported in [2006] 280 ITR 487 (GUJ.). All of which was in respect of non-levy of penalty u/s.271(1)(c) of the Act when the income is estimated. The ld. AR further placed....
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.... been held that the provisions of Section 271(1)(c) of the Act even held to be specifically excluded in the provisions of Section 271AAA(3) of the Act, where the search has been initiated u/s.132 on or after 01.06.2007. It was the submission that for the relevant assessment years the search had taken place on 27.09.2008 and consequently for the assessment years 2008-2009 and 2009-2010, the provisions of Section 271AAA was applicable and not the provisions of Section 271(1)(C) of the Act. 4. In reply, ld. CIT-DR vehemently supported the order of the AO and CIT(A). It was the submission that even in the case of estimation of income, penalty is leviable. He placed reliance on the decision of Hon'ble Madhya Pradesh High Court in the case of Smt. Chandrakanta, reported in 205 ITR 607, wherein the Hon'ble High Court has held that penalty is leviable. He also placed reliance on the decision of Hon'ble Madras High Court in the case of S. Krishnaswamy & Sons, reported in 219 ITR 157 and the decision of coordinate bench of the Tribunal in the case of Shuorajsingh B. Chauhan, 41 SOT 453. It was the further submission that in respect of non-striking off of the relevant portion of the penalty ....
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.... (para 16). It was held that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r /w Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at a belated stage. The Hon'ble Madras High Court also noted the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) while rendering its decision on the issue. The SLP against the decision of High Court in this case has also been dismissed by Hon'ble Supreme Court (99 taxmann.com 152). iii.) The satisfaction for initiating the penalty proceedings is recorded by the A.O. in the assessment order. The notice which is being issued u/s.274 is merely to allow the assessee an opportunity of being heard. It is not mandatory to specify the nature of charges in such a notice. It must be borne in mind that no statutory form has been prescribed for such notice.....
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....lars of income as well as concealing the income by way of inflation of expenses. It has been held by the Hon'ble Iaipur ITAT in the case of Grass Field Farms & Resorts (P) Ltd. vs. DCIT (70 taxmann.com 176) on identical facts that where notice seeking to levy penalty mentioned both offences, i.e. one was concealing particulars of income and second for furnishing inaccurate particulars of income and since assessee was given adequate opportunity to explain both offences, there was no illegality in levying penalty with reference to only one offence. It was held that under the facts of the assessee's case, it may attract both the offences i.e. the concealment of income as well as furnishing of inaccurate particulars of income and, therefore, the Assessing Officer rightly initiated the penalty proceedings for both the offences. In the penalty notice also both the offences were mentioned and therefore, the assessee got the adequate opportunity to explain its stand with regard to both the offences. Thereafter the Assessing Officer levied the penalty only for furnishing of inaccurate particulars of income. In these facts & Circumstances, the issue was decided in the favour of the R....
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....t account of his income. The assessee did not maintain books of account. His income had, therefore, to be assessed on estimate basis. The Tribunal committed an error in holding that since the assessee's income was assessed on estimate basis, the assessee was not liable to any penalty. In the case of CIT Vs. S.Krishnaswamy& Sons (219 ITR 157), the assessee was doing transport business. The original assessments for the assessment years 1979-80 and 1980-81 were completed on a total income of Rs.81,370/- and Rs.53,610/- respectively. Subsequently, there was a raid in the premises of the assessee. During the course of the search, trip-sheets were seized which showed suppression of collections from buses for 33 days for the assessment year 1979-80 and for 54 days for the assessment year 1980-81. The assessee admitted the suppression and filed revised returns for the two years which were accepted. Penalty was levied but it was cancelled by the Tribunal. On a reference, it was held by Honourable Madras High Court that !}le Tribunal had not expressly held that for the default committed by the accountant, penalty under section 271(1)(c) of the Income-tax Act, 1961, could not be levied. T....
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....ty business. It was submitted that not a single deficiency in the books of account was pointed out by the Assessing Officer and that the Assessing Officer over assessed the income. Moreover, the Assessing Officer while applying net profit rate of 10 percent had not given any comparable case. The Assessing Officer had initiated penalty proceedings for concealment of income whereas penalty has been levied for furnishing inaccurate particulars of income and as such on this ground alone penalty so levied needed to be quashed. On appeal, the Honourable Ahmedabad ITAT. held that in the case under consideration the desire to conceal was apparent when the assessee was not maintaining the books of account in the course of business and inflated expenses were being debited year after year in the books written well after the close of the year even when payments for such expenses was not being made. The assessee failed to substantiate the expenditure debited in his own accounts. The Income-tax Officer noticed various defects in the maintenance of books of account. If the income had to be assessed under section 145 of the Act, then the presumption would be that the income was not properly return....
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....his view of the matter, the levy of penalty was held to be justified. In view of above facts, the appeal of the assessee is required to be rejected/ dismissed. 5. In respect of penalty levied for the assessment years 2008-2009 & 2009-2010, it was the submission of the ld. CIT-DR that in the assessment order the AO has mentioned that the penalty has been initiated both u/s.271(1)(c) of the Act and u/s.271AAA of the Act. It was the submission that mentioning of the wrong section in the penalty order is a curable defect. It was further submitted that the mistake in the penalty order should not be lead to the cancellation of the penalty order. For this proposition, he placed reliance on the decision of the Hon'ble Supreme Court in the case of T. Ashok Pai, reported in [2007] 161 TAXMAN 340 (SC). It was the submission that inadvertent and bonafide mistake has been held to be ground enough for cancellation of penalty u/s.271(1)(c) of the Act by the Hon'ble Supreme Court, the corollary being a bonafide mistake in mentioning of the section in respect of levy of penalty by the AO should also be treated as bonafide mistake. 6. We have considered the rival submissions. For the assessment ye....
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....he decision of the Hon'ble Apex Court in the case of Reliance Petro Products Ltd. (supra), would show that the decision in the case of Dilip N. Shroff (supra) continues to hold good in spite of the decision of the Hon'ble Supreme Court in the case of Dharmendra Textiles (supra). 8. Further it is an admitted fact that there are catena of decisions both in favour of the assessee and against the assessee in respect of issue as to whether the penalty u/s.271(1)(c) of the Act is leviable on an estimated income. The penalty admittedly is leviable on the facts of each case. A perusal of present case clearly shows that the estimation of income has been done by the assessee when it filed its return insofar as books are not available. Estimation has been done by the AO when making the assessment by following a particular method of estimation. This method of estimation by the AO has been disturbed by the ld. CIT(A) who has applied an alternative method of estimation of the assesee's income. The coordinate bench of the Tribunal went further to revise the estimation as done by the ld. CIT(A). A perusal of the assessment order clearly shows that the estimation as done by the AO in the assessmen....