TaxTMI 
TaxTMI 
TaxTMI 
2007 (9) TMI 728
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....unt towards 'purchase transaction' on account of its failure to get the same verified from the 'supplier company?. (ii) The Ld. CIT(A) even otherwise erred in not appreciating that the assessee firm had voluntarily surrendered 'Purchase' aggregating to Rs. 15,15,400 for the reason that the 'supplier company' could not be located, and that too merely to purchase 'peace of mind' subject to no penalty under section 271(1) (c) and prosecution. 2. That the Ld. CIT(A) while sustaining the penalty imposed by the Assessing Officer under section 271(1) (c), erred in not appreciating that the Assessing Officer had erroneously recasted the "Trading account" of the assessee firm, because : (i) The Assessing Officer while recasting the Trading account of the assessee firm had reduced the 'purchases' by an amount of Rs. 15,15,400, while the figure of 'Sales' and 'Closing Stock' as reflected by the assessee firm remained untouched by him. (ii) The Assessing Officer gravely erred in calculating the 'gross profit' rate of 30.29 per cent in the hands of the assessee firm, which rate of profit was ....
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....rying on business of manufacture and sale of nut-bolts. For the assessment year under consideration, the assessee had shown G.P. rate of 12.79 per cent on sales of Rs.86,64,745 as against G.P. shown at 14.15 per cent on sales of Rs. 53,59,390 of the last assessment year. The assessee was, therefore, asked to furnish copies of purchase and sale bills. On verification of the same, the Assessing Officer observed that the assessee had made purchases worth Rs. 15,15,400 from M/s. H.K. Enterprises Pvt. Ltd.; Mandi Gobindgarh during the period from 10-4-1999 to 1-6-1999. The Assessing Officer addressed a letter dated 30-5-2002 to M/s. H.K. Enterprises Pvt. Ltd.; which was returned by the postal authorities unserved with the remarks "No such Man". When the assessee was confronted with this fact, a fresh address of Khanna was given. Accordingly, the Assessing Officer sent a registered letter at Khanna address to the party for confirmation of the transactions. Instead of M/s. H.K. Enterprises Pvt. Ltd.; Khanna sending a reply to Assessing Officer, the assessee itself sent photocopies of the purchase bills and a copy of account of the said party appearing in its books of account, which indica....
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....rately for furnishing inaccurate particulars of purchases to the extent of Rs. 15,15,400 of M/s. H.K. Enterprises Pvt. Ltd. The appeals filed by the assessee in quantum addition before the CIT(A) and the Tribunal were dismissed on the ground that the assessee could not establish that delay in filing the appeals was due to a reasonable cause. 6. In response to show cause notice issued, the assessee submitted that during the course of assessment proceedings, the assessee surrendered an amount of Rs. 15,15,400 subject to no penalty. Such surrender was made in good faith and in order to avoid any litigation. Relying on certain judgments of the High Courts, the assessee submitted that penalty under section 271(1) (c) was not leviable because the surrender was made voluntarily and in good faith. The Assessing Officer considered these submissions and observed that M/s. H.K. Enterprises Pvt. Ltd., Mandi Gobindgarh/Khanna was non-existing at the given address as per enquiry made and therefore, the surrender made could not be a ground for contending that penalty under section 271(1) (c) was not leviable. He took into account the following facts for rejecting the submissions of the asse....
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....ith the CIT(A), who upheld the penalty imposed by the Assessing Officer by recording following findings in para 5 to 8 of the impugned order : (5) I have considered the issue. The quantum appeal already stands dismissed. It is too late for the ld. Counsel to give the colour of "purchase transactions" to the simple purchases amounting to Rs. 15,15,400A "surrendered" by the appellant firm for not being" able to establish the identity or the genuineness of the purchases in disputed. What is worst that the appellant firm was not willing even to part with the information as to from which bank branch the related demand drafts were purchased and who had encashed the same. Even assuming that there is a grain of truth in the submissions made before me, the appellant could part with this information even at this stage. The ld. Counsel has blamed the proximity of the time barring date that prompted the appellant to surrender, but nothing prevented the appellant from making efforts to collect evidences in its support till today. The fact remains that the appellant had come to terms with the situation after having been conclusively proved to have furnished inaccurate particulars of inc....
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....s is made in the following citations : Banaras Chemical Factory v. CIT [1977] 108 ITR 96 (All.) Ayyasami Nadar & Bros. v. CIT [1956] 30 ITR 565 (Mad.) India Sea Foods v. CIT [1978] 114 ITR 124 (Ker.) H.V. Venugopal Chettiar v. CIT [1985] 153 ITR 376 (Mad.) Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom.) CIT v. Krishna & Co. [1979] 120 ITR 144 (Mad.) CIT v. P.B. Shah & Co. Pvt. Ltd. [1978] 113 ITR 587 (Cal.) CIT v. Dr. R.C. Gupta & Co. [1980] 122 ITR 567 (Raj.) (8) In fact, it would be appropriate to invoke the Hon'ble Supreme Court's decision in the case of Chikkam Koteshwara Rao v. Chikkam Subharao AIR 1971 SC 1542 holding that there should be no doubt for ambiguity about such admission inasmuch as the implication of including bogus purchases is very much clear and conclusive. The assessee is aggrieved with the order of the CIT(A) . Hence, this appeal before this Bench. 8. The Ld. Counsel for the assessee, Sh. Ravish Sood, drew our attention to the concluding part of the assessment order, where the Assessing Officer has simply mentioned that penalty notice under section 271....
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....urate with the past history of the case. Therefore, he submitted that a mere fact that the assessee had surrendered an amount voluntarily does not mean that the entire amount represents concealed income of the assessee. 9. The Ld. DR. on the other hand, heavily relied on the orders of the authorities below. He submitted that the income was surrendered by the assessee when derailed investigations were carried out and the assessee was cornered with the fact that the purchases shown from M/s. H.K. Enterprises Pvt. Ltd.; were not genuine. He further submitted that the detailed findings recorded by the Assessing Officer in the assessment order show that the Assessing Officer has recorded valid satisfaction at the time of initiating the penalty proceedings. Thus, he submitted that the order of the CIT(A) does not merit any interference. 10. We have heard both the parties and given our thoughtful consideration to the rival contentions, gone through the facts, evidence and material placed on record as well as the orders of the authorities below. We have also referred to the relevant judgments referred to by the parties at the bar. The additional grounds raised by the assessee are two....
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....it, the Assessing Officer referred the case to Inspecting Assistant Commissioner of Income-tax, who came to the conclusion that assessee had concealed his income and furnished inaccurate particulars thereof for all the four assessment years and accordingly imposed the penalty for all the four assessment years. The penalty was sought to be assailed on the ground that there was no proper initiation of proceedings for the imposition of penalty because the requisite satisfaction of the ITO has not been shown to have existed for the initiation of the proceedings. It was also argued that there was no material or evidence before the Tribunal to hold that the assessee had deliberately concealed the particulars of income or had deliberately furnished inaccurate particulars of income. On these facts, the Hon'ble Supreme Court held that what is contemplated by section 271(1) (c) is that the ITO or Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub-section. The Apex court further observed that it was not necessary that notice to the person proceeded against should have also been issue....
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....he Assessing Officer has recorded proper satisfaction or not has to be seen from the reasons recorded in the assessment order. 11.3 In the present case, the facts have already been detailed at length in para 6 of this order. The Assessing Officer has extensively dealt with the detailed enquiries made in the case which conclusively established that the purchases of Rs. 15,15,400 made from M/s. H.K. Enterprises Pvt. Ltd., were not genuine. The Assessing Officer has recorded on page 4 of the assessment order that PST/CST No. given in the purchase bills were false and the so called bills produced were bogus bills. The assessee has also not surrendered the amount voluntarily. It was only after the assessee was cornered with the facts found on enquiries, the assessee came forward to surrender an amount of Rs. 15,15,400 subject to no penalty and prosecution. The Assessing Officer has mentioned in para 5 of the assessment order that the detailed enquiries made in this case has established that the purchases were not genuine. The Ld. Counsel for the assessee has laid emphasis on the concluding part of the assessment order, where the Assessing Officer has mentioned that the penalty notice....
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....nd held that it was not necessary that notice under section 271(1) (c) should also be issued alongwith the assessment order. Therefore, the observations of the Supreme Court that recording of satisfaction must precede before issue of notice under section 271(1) (c), was made in this context. But in the present case, detailed discussion in the body of the assessment order and then factum of issuance of notice under section 271(1) (c) for furnishing inaccurate particulars of purchases forms part of the same assessment order and, therefore, the same constitutes a valid satisfaction in consonance with the provisions of the Act and ratio of the above mentioned judgments. Besides, the Income-tax Act does not prescribe the manner in which satisfaction is to be recorded. It must be discernible from the assessment order which in the present case exists. 11.5 None of the judgments relied upon by the Ld. Counsel in regard to recording of satisfaction is applicable to the facts of the present case. In the case of Aan Aam Prop. Narindra Palace (supra), the Assessing Officer had simply mentioned in the assessment order that proceedings under section 271(1) (c) have been initiated without spec....
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.... 1961. I hereby levy a penalty of Rs. 6,00,310 only (Rs. Six lacs, three hundred, ten only) which is 100 per cent of the tax sought to be evaded in this case. 13. Thus, the Assessing Officer has concluded that the assessee has concealed/furnished inaccurate particulars of income to the extent of Rs. 15,15,400. This shows that the Assessing Officer was not sure as to which specific default the assessee had committed referred to in clause (c) of sub-section (1) of section 271. An identical issue came to be considered by the Hon'ble Gujarat High Court in the case of Manu Engg. Works (supra) where in the penalty order, the Inspecting Assistant Commissioner of Income-tax had concluded that he was of the opinion that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income. The Hon'ble Gujarat High Court observed that the language of 'and/or' may be proper in issuing a notice for a penalty order for framing of charge in a criminal case or a quasi-criminal case but it is incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars o....
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....e judgment of Hon'ble Punjab & Haryana High Court (F.B.) in the case of Vishwakarma Industries v. CIT 135 ITR 652. The same view was held by the Madhya Pradesh High Court in the case of Smt. Padma Vati Jain 245 ITR 818. In the case of CIT v. Inden Bislers 240 ITR 943, the Hon'ble Madras High Court held that merely because additions have been made to the income does not mean that there has been concealment of income. It was held that a mere disallowance of expenditure does not result in imposition of penalty under section 271(1) (c) . In the case of Durga Kamal Rice Mills v. CIT 265 ITR 26, the Hon'ble Calcutta High Court has held that when two views are possible and when no clear and definite inference can be drawn in a penalty proceedings, penalty could not be imposed. In the case of CIT v. Balraj Sahni 119 ITR 36, the Bombay High Court held that findings of Tribunal given in quantum appeal are not binding in penalty appeal. I the case of CIT v. Clive Mills Co. Ltd. 138 ITR 188, the Hon'ble Calcutta High Court upheld the order of the Tribunal for cancelling the penalty on the ground that even though addition was justified, there was no evidence of concealment of in....