TaxTMI 
TaxTMI 
2022 (11) TMI 378
X X X X Extracts X X X X
X X X X Extracts X X X X
....en submission, as follows: "The assessee is engaged in the business of iron ore raising contracts for M/s. Serajuddin & Co through his proprietary concern namely M/s. Sarosh Aliza Mining. Besides he was also working as a partner in M/s. Serajuddin & Co. A search & seizure operation u/s.132 of the Income Tax Act was carried out on 28.05.2008 at the premises of the assessee. i.) Notice u/s.l5,3A (a) dated 11.03.2010 was sent through RPAD and same was duly served on the assessee. However the assessee did not file any return of income in response to said notice. The A.O. vide letters dated 16.07.2010 & 03.09.2010 also informed the assessee that since he had already been provided with the extracts of seized documents therefore he should immediately file return of income. But there was no compliance from the assessee. ii.) Notice u/s.l42(l) along with the questionnaire was issued on 26.07.2010 fixing the compliance on 05.08.2010 but there was non-compliance. The assessee neither sought any adjournment nor filed the requisite details. The A.O. thereafter issued a final show-cause notice dated 13.10.2010 informing the assessee that in case of non-compliance, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arosh Yazdani namely SY-06. It refers to cash withdrawals from bank account of M/s. Sarosh Aliza Mining (proprietary concern of Shri Sarosh Yazdani for the months i.e. April, 2007 to August, 2007. These handwritten pages contain narration like "Self for adjustment A/c" for different months. The page-31 of seized document namely SY-06 which is handwritten shows cash withdrawals for total amount of Rs.41,05,752/- for the month of April, 2007. It refers to adjustment account for February and March 2007, the required amount of cheques (two cheques) receipt and cash return and distribution among three partners. As per the same, immediately after the cheques were credited, the entire amount was withdrawn in cash and adjustment refers to the cash receipt by M/s. Serajuddin & Co. from Sarosh Aliza Mining which has been allocated to the partners of the assessee firm. The cash withdrawn is exactly equal to the aggregate amount paid by cheques for February and March, 2007 to M/s. Sarosh Aliza Mining as per statement prepared under the head "On account payment to contractors" as per RKS/Contractor Payment details/Sheet-1(6) and 1(7). These have been reproduced by the A.O. on page-5 of the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to M/s. Serajuddin & Co. through a carefully laid down modus-operandi of inflating expenses. The contractors had no other option but to co-operate and conspire with the mine owner. The excel sheets clearly and unambiguously point towards inflation of expenses and receipt of excess monies in cash from the contractors. Such cash received from the contractors was also allocated among partners and they had also shared the gains. Thus the order of the A.O. estimating NP @20% should be restored and that of the CIT(A) be reversed." 3. At the time of hearing, it was fairly agreed by both the sides that the issues involved in these appeals are squarely covered by the decision of the Co-ordinate Bench of this Tribunal in the case of Dillip Kumar Naik in IT(ss)A Nos.4 to 8/CTK/2015 for Assessment Years : 2005- 06 to 2009-10 and C.O. Nos.25 to 29/CTK/2015, order dated 21.10.2022, wherein, it para 8, it has been held as follows: "8. Coming to the issue of percentage of the net profit as determined by the ld CIT(A) at 10%. A perusal of the order of the ld CIT(A) clearly shows that the highest percentage disclosed by the assessee is 6%. This being so, we are of the view that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn beyond the due date is admittedly invalid return as there is no provision for filing the return belatedly once notice u/s. 153A has been issued. This being so, we are of the view that the assessee had a valid ground for non-filing of return. Accordingly, penalty levied by the AO and confirmed by the ld CIT(A) is deleted." 11. In reply, ld CIT DR vehemently supported the order of the AO and ld CIT(A). 12. We have considered the rival submissions. As it is noticed that the facts in assessee's case are similar to the facts in the case of Gobardhan Matia (supra) in respect of levy of penalty under section 271F of the Act. Respectfully following the decision of the Coordinate Bench in the case of Gobardhan Matia (supra), the penalty as levied u/s.271F of the Act by the AO and confirmed by the ld CIT(A) stands deleted." 8. As the facts of the present case are identical to the facts of the case of S.M.Enterprises referred to supra, and also in the case of Gobardhan Matia (supra), respectfully following the decision of the Co-ordinate Bench, in the above two cases, the penalty as levied u/s.271F of the Act by the AO and confirmed by the ld CIT(A) stands deleted. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....explain as to why it should not be done. Mere mistake in the language used or mere non-striking off of inaccurate portion cannot by itself invalidate the notice. ii.) This issue has also been decided in the favour of Revenue by the Hon'ble Madras High Court in the case of Sundaram Finance Ltd. vs. ACIT (93 taxmann.com 250) (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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces issued, provided that such notice, in substance and effect, was in conformity with the intent and purpose of the Act. Thus the Hon'ble Bench concluded that penalty could not be deleted on this ground. vi.) It must be appreciated that concealment of income is the result of furnishing inaccurate particulars of income. It is evident that for assessment year 2004-05, the assessee had filed the original return of income showing total income of Rs.45,99,790/- on 04.01.2005. The A.O. has computed the total income at Rs.79,24,640/-. Thus at the time of filing original return, the assessee was guilty of furnishing inaccurate particulars of income. The act of inflating the wages and power/fuel expenses and paying back cash to the extent of 50% against raising bills to M/s. Serajuddin & Co. clearly demonstrated that the assessee had concealed income to that extent. It has been held by the Hon'ble Jaipur 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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 607) by holding as under: " The facts stated above clearly disclose that the assessee first showed a loss of Rs. 50,000. Then he revised the return, showing profit of Rs.7,500. Apparently, it has been found that the estimate of the income was incorrect and he had concealed the income and inaccurate particulars were furnished. In our opinion, the case clearly falls under clause (c) of subsection (1) of section 271 of the Act and, therefore, the penalty was levied. We fail to see the logic behind the reasons assigned by the Tribunal to exonerate the assessee from payment of penalty. When the assessee submitted his return and showed a loss of Rs.50,000 and then revised it and showed a profit of Rs.7,500, he had necessarily suppressed the particulars of income and given an incorrect account of his income. It may also be mentioned that the assessee did not maintain books of account. Income had, therefore, to be assessed on estimate basis. That being so, it is difficult to swallow that since the assessee's income was assessed on estimate basis, the assessee was not liable to any penalty. Instead, we find that the reasons assigned by the Tribunal have no basis under the law.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rajan [1985] 151 ITR 189 (Mad) ; Cement Distributors Pvt. Ltd. vs. CIT [1966] 60 ITR 586 (Mad) ; A.K. Bashu Sahib vs. CIT [1977] 108 ITR 736 (Mad) ; CIT (Addl.) vs. Bhoopathy (E.) [1978] 113 ITR 188 (Mad) ; Rathnam and Co. vs. IAC [1980] 124 ITR 376 (Mad) and CIT vs. Mir Mohamed Ali [1981] 128 ITR 215 (Mad) and another, as held in Bombay Hardware. Syndicate vs. CIT [1978] 114 ITR 586 (Mad) ; (14 ITR 133 (Mad) (sic.)) and Addl. CIT vs. T.K. Perumalswamy [1984] 150 ITR 600 (Mad). As pointed out in CIT vs. E.V. Rajan [1985] 151 ITR 189 (Mad) at page 195 itself, the "uniform view" taken by this court is that the "penalty provision has been applied even in cases where assessment is made on the basis of an estimate". In that decision, all the abovereferred to decisions of this court, which took a similar view earlier have also been referred to. Even in a later decision in CIT vs. Balakrishna Textiles [1992] 193 ITR 561 (Mad) relied on by learned counsel for the Revenue, the same view has been reiterated. The relevant observation therein is as follows: (page 367): "Even if the Revenue had assessed the income at a higher estimate than that furnished by the assessees, it cannot be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he business year after year and in fact, the assessee was writing the accounts after the close of the year and inflating the expenses so as to show the income at his will. In these circumstances, it does not lie in the mouth of the assessee that it was not concealing his income by furnishing inaccurate particulars thereof, as concluded by the Assessing Officer and the Id. CIT(A)". The Hon'ble Ahmedabad Tribunal further held that there is no substance in the contention that penalty under section 271(l)(c) of the Act cannot be imposed in all circumstances whenever the income was assessed on estimate rejecting the explanation of the assessee. Even on estimated additions, levy of penalty has been upheld in the case of CIT Vs. Md. Warasat Hussain (171 ITR 405) (Patna High Court), CIT Vs. E.V. Rajan (151 ITR 189)(Madras High Court), CIT Vs. Hoshiarpur Express Transport Co. Ltd. (162 ITR 393) (Punjab & Haryana High Court), CIT Vs. Fazilka Dabwali Transport Co. (P.) Ltd. (178 ITR 656) (Punjab & Haryana High Court), and A.M. Shah & Co. Vs. CIT (238 ITR 415) (Gujarat High Court). It was further held that even the feeble plea on behalf of the assessee that penalty had been initia....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 years 2008-2009 & 2009-2010, which are the years in respect of which the AO issued notice u/s.271(1)(c) as also penalty notice u/s.271AAA of the Act, but has levied the penalty u/s.271(1)(c) of the Act by its order dated 16.03.2015 and has not levied any penalty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....harmendra 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 assessment order is not on the basis of any seized documents but by interpretation and presumption drawn out of the various seized documents. Thus, at no stage, it can be said that there has been a contumacious conduct on the part of the assessee, which....