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2019 (3) TMI 1459 - ITAT MUMBAIPenalty u/s 271(1)(c) - assessee was showing reasonably big quantities of sale of milk in its books of accounts in survey no documentary evidences was found - Statement of director recorded u/s. 131 - assessment completed u/s 153A/143(3) - Allegation of department that company is engaged in milk products- Gross Profit rate of milk product was applied to the sale of milk declared by the assessee to estimate higher profits - Quantum additions as were made by the AO were upheld by all the appellate authorities concurrently upto Hon’ble Bombay High Court - HELD THAT:- Merely because quantum additions are upheld by appellate authorities as one of the possible view will not automatically lead to levying of penalty u/s 271(1)(c) is a well settled position of law and the AO ought to have brought on record cogent incriminating material to show that the assessee had infact furnished inaccurate particulars of income or had concealed its particulars of income in the return of income filed with the Revenue, before fastening liability to penalty u/s 271(1)(c) of the 1961 Act. AO could not brought on record any cogent material/evidences to conclusively prove that the milk was diverted toward production of milk products and the production of milk products was camouflaged as sale of milk with a view of suppress profit and evade taxes. The additions have been made on preponderance of probability by estimating of profits by treating sale of milk being unproved and applying GP ratio of milk products, but no enquiry was made by the authorities as to the installed capacity of the factory to process milk and produce milk products vis-a-vis production achieved during the period or to prove that milk was diverted for producing milk products but sales were camouflaged as sale of milk. No correlation of electricity consumed, raw material consumed, labour employed, milk processed, milk products produced etc were done to prove that milk was never sold as such but were infact used for producing milk products but camouflaged in books of accounts as sale of milk. There is no evidences on record to show that any excess stock of milk product was found from factory outlet or the sales outlet vis-a-vis records maintained by the assessee. The books of accounts were available at the time of survey on 08.5.2007 but survey team who conducted survey u/s 133A did not examine the same on 08.05.2007 and neither impounded the available books of accounts. The assessee however submitted purchase and sale of milk record before the AO as well analysis of purchase and sale of milk was submitted before the AO. No discrepancy was found by the AO in these record except that the whole story of sale of milk was disbelieved. The assessee has also brought on records VAT audit report before learned CIT(A) to substantiate that the assessee was engaged in the sale of milk but that was also rejected. The books of accounts might not have been produced before investigation wing or proper productions/ consumption records were not kept could be sufficient to reject books of accounts u/s 145(3) and to estimate profits based on premise that sales of milk was not proved on the touchstone of preponderance of probabilities but is not sufficient to fasten liability to penalty u/s 271(1)(c) as in penalty proceedings, the assessee has come out with a bonafide explanations and its burden stood discharged but it was for the AO to have rebut the contentions of the assessee and brought on record clinching evidence that the assessee furnished inaccurate particulars of income or concealed the particulars of income while filing return of income with the Revenue, which in our considered view as per detailed discussions above the AO failed to bring on record clinching evidence justifying leviability of penalty u/s 271(1)(c) - Decided in favour of assessee.
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