TaxTMI 
TaxTMI 
2023 (11) TMI 842
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....e has shown total turnover of Rs. 10 Cr and has made banking transaction of Rs. 4 Cr. It was held by the AO that the assessee has failed to produce any documentary evidence in support of his claim of expenses and in the absence of the same, sale and purchase vouchers could not be verified with the bank statements and also the creditors could not be verified and accordingly, the books of account were rejected. 3. Further, the AO has recorded his finding stating that it is presumed that the assessee has done the business of providing accommodation entries by bogus bills of sale and purchase and therefore, the income of the assessee was assessed at 1% of the gross sales amounting to Rs. 10,06,636/-. Thereafter, after giving credit of the income declared in the return of income amounting to Rs. 2,65,520/-, addition of Rs. 7,41,116/- was made and assessed income was determined at Rs. 10,06,636/-. Penalty proceedings were separately initiated u/s 271(1)(c)of the Act for furnishing inaccurate particulars of income. 4. Subsequently, during the course of penalty proceedings, the assessee did not attend to the said proceedings nor filed any submissions. Thereafter given the fact that t....
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....come, it cannot be held that the assessee has furnished any inaccurate particulars of income. It was submitted that the sale figures have been taken by the AO basis the return of income and therefore, where the same is not disputed and only the income has been estimated, it cannot be a case of furnishing of inaccurate particulars of income. 6. The submissions and the contentions so advanced by the assessee were considered but not found acceptable to the ld. CIT(A) and the levy of penalty amounting to Rs. 129,203/- was sustained and the relevant findings of the ld. CIT(A) are contained at para 4.2 of the impugned order which reads as under : "4.2 I have carefully considered rival submission. As per the facts of the case the appellant has been found to be involved in providing accommodation entries to various persons on commission. During the course of assessment proceedings the assessing officer found that the assessee had done the business of trading of building material and had provided the accommodation entries by bogus bills of sale/purchase. Accordingly the income of the assessee was assessed @ 1% on the gross sale of Rs. 10,06,63,636/- which came to Rs. 10,06,636/-....
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....usal of the assessment penalty order shows that at the time of assessment proceedings the assessee has duly accepted the disallowance and therefore the assessee has not file any appeal against this disallowance. In my considered view it is undoubted fact that the appellant has failed to furnish accurate particular of his income in his return of income. Therefore, the levy of penalty on the part of AO, is justified. Accordingly the penalty of Rs. 1,29,203/- under section 271(1)(c) of the Act for furnishing inaccurate particulars of Income is upheld. With the result these grounds of appeal are dismissed." 7. We have heard the rival contentions and pursued the material available on record. We find that one of the contentions which has been raised by the assessee before the ld CIT(A) relates to the fact that the AO has not drawn any specific satisfaction at the time of initiation of penalty proceedings u/s 271(1)(c)of the Act and even in terms of Section 271(1B) in absence of specific directions while initiating the penalty proceedings, the penalty proceedings are liable to be set aside and in support reliance was placed on the Hon'ble Karnataka High Court decision in case of CI....
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.... the recording of legal and valid satisfaction cannot be assumed." The Tribunal then referred to the order of assessment passed by the Assessing Officer and observed: "It is clear from the above that not a word has been written about concealment of income. The Assessing Officer quietly accepted the revised return and the income disclosed therein. He did not record how and why the revised return was submitted. The statement of the partner on pages 14-16 of the paper book, Shri Ramesh Kumar was recorded and in that statement, he did explain the reasons which led to filing of the revised return. Learned counsel for the assessee contended that those reasons were impliedly accepted by the Assessing Officer. Looking at the assessment order, one cannot challenge the above assertion of learned counsel for the assessee. At any rate, the satisfaction about the concealment of income of furnishing of inaccurate particulars of income to assume jurisdiction to initiate and levy penalty is clearly not recorded as enjoined by law. The above jurisdictional defect in our view cannot be cured. Accordingly, we hold that penalty imposed is not valid and jurisdiction to impose the same....
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.... and remains a jurisdictional fact which cannot be wished away as the provision stands even today, i.e., post amendment. If an interpretation such as the one proposed by the Revenue is accepted then, in our view, the impugned provision will fall foul of Article 14 of the Constitution as it will then be impregnated with the vice of arbitrariness. The Assessing Officer would in such a situation be in a position to pick a case for initiation of penalty merely because there is an addition or disallowance without arriving at a prima facie satisfaction with respect to infraction by the assessee of clause (c) of sub-section (1) of Section 271 of the Act. A requirement which is mandated by the provision itself. 15.7 Learned ASG also sought to place reliance on the Memorandum as well as Clause 48 of the Notes on Clauses appended to the Finance Act, 2008. Even though both the Memorandum as well as Notes On Clauses refers to the conflict in judicial opinion and gives that, as the reason for insertion of the impugned provision, in our opinion, in subsection (1B) of Section 271 does not do away with the principle that the prima facie satisfaction of the Assessing officer must be discer....