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2024 (2) TMI 44
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....ITA No.375/RPR/2023 for A.Y.2012-13. The assessee has assailed the impugned order on the following grounds of appeal before us: "1) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) is not justified in confirming initiation of re-assessment proceedings this 147 of the Income-tax Act, 1961. 2) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) is not justified in confirming addition of Rs. 14,91,783/- by way of treating genuine purchases as unexplained expenditure u/s 69C of the Income-tax Act, 1961. 3) The impugned order is bad in law and on facts. 4) The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice. 3. Succinctly stated, the assessee who is engaged in the business of trading of minerals under the name and style of Balaji Enterprises, had e-filed his return of income for A.Y. 2009-10 on 26.02.2010 declaring an income of Rs. 3,22,050/-. Based on the input received from JDIT (Inv.), Raipur that as per information shared by the Commercial Tax Department the assessee firm was o....
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....ani Trading Company and (iii) M/s. Rajrani Trading Company. After disallowing the purchase of Rs. 14,91,783/- the income of the assessee was determined by the A.O at Rs. 18,13,830/-. 5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the relevant observations of the CIT(Appeals) qua the sustainability of the addition of the bogus purchases as was assailed by the assessee before him are culled out as under: "5.2 Ground No.2: "Ld. AO is not justified in making addition of Rs. 14,91,783/- u/s. 69C of the Income Tax Act, 1961 as unexplained expenditure". 5.2.1 I have carefully considered the facts of the case. In this regard, the relevant extract of the assessment order is reproduced hereunder: 5.2.2. During the assessment proceedings, it is well established that the appellant was indulged in acquiring bogus purchase bills from M/s. Rajdhani Trading Co. Raipur, M/s R.K.Sales Corporation and M/s Rajrani Trading Co., thereby debiting bogus purchases in its books during the F.Yr. 2009- 10. The evidences collected from Axis Bank, Raigarh clearly signify that the appellant was involved in....
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....is made on sound footings. The appellant has not been able to controvert the findings of the AO. So the addition of Rs. 14,91,783/- u/s 69C of the IT Act made by the AO is confirmed." 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 8. Admittedly, it is a matter of fact borne from record that the assessee had failed to substantiate the authenticity of his claim of having made genuine purchases from the aforementioned tainted parties, viz. (i) M/s. R.K Sales Corporation; (ii) M/s. Rajdhani Trading Company and (iii) M/s. Rajrani Trading Company. At the same time, we find that it is a matter of fact borne from record that the A.O in the course of the assessment proceedings, had observed that the assessee in the garb of bogus bills procured from the aforementioned parties had routed the unaccounted stock available with him through his ....
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.... only furnished copies of ledgers. After all, due to invasions by various Govt. Departments, the sellers of bogus bills have winded up their business and are no more available at their given addresses. They had to suspend their business as they had adopted unfair means to provide accommodation a entries to the purchasers without carrying out any actual trading. For these reasons, the ITAT's above order is squarely not applicable with the facts of this case and assessee cannot get any help with the above decision." 9. Based on the aforesaid facts, we are of the view that now when the A.O was of the view that the assessee had not made any genuine purchases from the aforesaid bogus/hawala parties and had merely procured bogus bill from them to route the unaccounted stock through his regular books of account, then, the sole inference which can be drawn is that the assessee had purchased goods not from the aforementioned tainted parties but had procured the same at a discounted value from open/grey market. Considering the aforesaid facts, we are unable to concur with the A.O who had made addition of the entire value of the impugned purchases in the hands of the assessee. Also, we....
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.... the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- "So far as the question regarding addition of Rs. 3,70,78,125/- as gross profit on sales of Rs. 37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs. 3,70,78,125/- which comes to Rs. 20,98,62 1.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs." It....
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....ould not substantiate the authenticity of the purchase of dolomite of Rs. 20,86,256/- that was claimed to have been made from M/s. Rajdhani Trading Company, Raipur. The A.O vide his order passed u/s. 143(3)/147 of the Act dated 26.12.2019 made an addition of the entire value of impugned purchases of Rs. 20,86,256/- in the hands of the assessee. 15. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: "5.2.1 During the assessment proceedings, it is well established that the appellant was indulged in acquiring bogus purchase bills from M/s Rajdhani Trading Co., Raipur, thereby debiting bogus purchases in its books during the F.Yr. 2012-13. The evidences collected from Axis Bank, Raigarh clearly signify that the appellant was involved in operating the account of the facilitator i.e. M/s Rajdhani Trading Co., Raipur. He possessed the signed cheque book of the facilitator, which he used to present in the bank to withdraw cash against the cheque deposited by him in the account of the facilitator. This amply from his signatures as bearer o....
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....Court. Further, I rely on the decision of the Division Bench of Gujrat High Court in the case of N.K. Industries Ltd. Vs Dy. C.I.T. in Tax Appeal No. 240 of 2003 and connected appeals decided on 20th June, 2016. In such judgment the Court had observed as under - "The Tribunal in the case of Vijay Proteins Ltd. Vs. CIT had observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25 % of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s Indian Woolen Carpet Factory (supra) or M/s Vijay Proteins Ltd. In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25 % of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categoric....
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.... writ petition filed assailing initiation of re-assessment proceedings u/s. 147 of the Act before Hon'ble Chhattisgarh High Court under Article 226 of Constitution of India. 4) The impugned order is bad in law and on facts. 5) The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice." 20. Succinctly stated, the assessee who is engaged in the business of transportation a/w. trading of coal and other minerals, had e-filed his return of income for A.Y.2010-11 on 23.10.2010, declaring an income of Rs. 4,72,530/-. 21. Original assessment, was thereafter, framed by the A.O vide his order passed u/s. 143(3) dated 14.01.2023, wherein income of the assessee was assessed at Rs. 5,79,870/-. On the basis of information that the assessee as a beneficiary had obtained bogus purchase bills from a tainted party, viz. M/s. Rajdhani Trading Company, Raipur, the A.O reopened the case of the assessee u/s. 147 of the Act. 22. Assessment was thereafter framed by the A.O vide his order passed u/s. 143(3) r.w.s. 147 dated 28.12.2017, wherein the entire value of the impugned purchases claimed by the assessee to....
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....oundness of the conclusion. It was conceivable that a mere denial by the assessee was not sufficient to rebut the circumstantial evidence which considered along with the conduct of the assessee had led to the inescapable conclusion that the appellant had taken accommodation entries and alleged purchases were not genuine. 5.6 The appellant has enclosed copy of order of Hon'ble Jurisdictional ITAT in the case of Vikash Nashine vs. DCIT in ITA No. 161 & 162 of RPR of 2018. However, the same is not applicable since the appellant derived income from salary in that case, whereas in the present case, the appellant derives income from business & profession. 5.7 In totality of the facts and circumstances of the which are distinguishable from the case laws relied upon by the appellant and considering the material brought on record by the AO with regards to bogus purchases and thereby furnishing inaccurate particulars of income, the penalty levied by the AO u/s 271(1)(c) is confirmed. 6. In the result, the appeal is dismissed." 24. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 25. We have heard ....
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....le calling upon the assessee to explain as to why he may not be subjected to penalty u/s 271(1)(c) of the Act. As such the aforesaid failure to point out the specific default for which penalty u/s 271(1)(c) was sought to be imposed, viz. "concealment of the particulars of income" or "furnishing of inaccurate particulars of income" or both the said defaults, was allowed by the A.O to perpetuate in the SCN, dated 28.12.2017 (supra). At this stage, we may herein observe that the A.O even while framing the assessment vide his order passed u/s. 143(3) r.w.s. 147 dated 28.12.2017, had failed to clearly specify the default for which penalty proceedings u/s. 271(1)(c) of the Act were being initiated, and had observed that the same were being initiated for "concealing the income on account of furnishing of inaccurate particulars of income". The A.O, had, thus, in no clear terms conveyed to the assessee the specific default for which the penalty proceedings were sought to be proceeded with in his hands. 30. Be that as it may, the A.O in the aforesaid SCN dated 28.12.2017 had failed to validly put the assessee to notice as regards the default for which he was called upon to explain that as....
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....ry provision was sought to be imposed on him. In our considered view, the indispensable requirement on the part of the A.O to put the assessee to notice as regards the specific charge contemplated under the aforesaid statutory provision, viz. 'concealment of income' or 'furnishing of inaccurate particulars of income' or both of the said defaults is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law. 33. We would now test the validity of the aforesaid 'Show Cause' notice dated 28.12.2017, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act, if in the course of the proceedings he is satisfied that the assessee had either 'concealed his income' or 'furnished inaccurate particulars of his income' or had committed both the defaults w.r.t. the various additions/disallowances made in its hands while framing the assessment. In our considered view as penalty proceedings are in the nature of quasi criminal proceedings, ther....
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....pra), which we find he had failed to do in the case before us. The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of his statutory right of an opportunity of being heard and defend his case. 34. We find that the Hon'ble High Court of Karnataka in the case of CIT Vs. SSA's Emerald Meadows (73 taxmann.com 241)(Kar) following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e. whether for 'concealment of particulars of income' or 'furnishing of inaccurate particulars', then, the same has to be held as bad in law. The 'Special Leave Petition' (for short 'SLP') filed by the revenue against the aforesaid order of the Hon'ble High Court of Karnataka had been dismissed by the Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). Apart from that, we find that a similar view had been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Sams....
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....s have quite correctly ordered the dropping of penalty proceedings against the assessee. 6. Besides, we note that the Division Bench of this Court in Samson (supra) as applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Soya furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 32) is perused, it is apparent that the inapplicable portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impu....
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....fter an event or incident, and asks what effects the decision about this case will have in the future-on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge ....
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....r initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice- and that prevention takes just a tick mark. Prud....
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....ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decis....
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.... express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication." Also, the Hon'ble High Court of Bombay in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay), had observed that where there was no recording of satisfaction by the AO in relation to any concealment of income or furnishing of inaccurate particulars by assessee in the notice issued for initiation of such proceedings, then, the Tribunal had in absence of said statutory requirement rightly vacated....
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.... was being proceeded against, therefore, the penalty under Sec. 271(1)(c) of Rs. 25,84,000/- imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty of Rs. 25,84,000/- imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. 36. As the penalty imposed on the assessee under Sec. 271(1)(c) of the Act had been quashed by us for want of valid assumption of jurisdiction on the part of the A.O, therefore, we refrain from adverting to and adjudicating the other grounds of appeal raised by the assessee on the basis of which he had assailed the imposition of penalty qua the merits of the case, which thus, are left open. 37. In the result, appeal of the assessee in ITA No.374/RPR/2023 for A.Y. 2010-11 is allowed in terms of our aforesaid observations. 38. In the combined result, appeals of the assessee are disposed of in terms of our aforesaid observations as indicated hereinabove. Order pronounce....
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....ut it is not real. The assessee statement of confirmation of accounts of the seller parties but the assessee only furnished copies of ledgers. After all , due to invasions by various Govt. Departments, the sellers of bogus bills have winded up their business and are no more available at their given addresses. They had to suspend their business as they had adopted unfair means to provide accommodation entries to the purchasers without carrying out any actual trading. For these reasons, the ITAT's above order is squarely not applicable with the facts of this case and assessee cannot get any help with the above decision. 5.2 The Inspector of this office was directed to visit the office of M/s R.K Sales Corporation, M/s Rajdhani Trading Co., M/s Rajrani Trading Co., Raipur on the addresses given on the bills furnished by the assessee. The Inspector in respect of M/s Rajdhani Trading & M/s Rajrani Trading has submitted that there was no such office at the given addresses. Around 20 persons were contacted in the proximity but no one could tell about the existence of these concerns carrying out the busi....