TMI Blog2023 (9) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the audited accounts, on which either side his case on facts would ordinarily lie, it is not open for him on facts, to contend that the notice did not specify the default , which essentially is the under-reporting of income w.r.t. to the amount that the law deems as his income in case of non-audit of books of account in a given set of facts. Audit of accounts, of which requirement the assessee is well aware, cannot be regarded as a mere formality, even as sought to be explained by the Hon ble jurisdictional High Court, as in Peroorkkada Service Cooperative Bank Ltd. [ 2020 (1) TMI 624 - KERALA HIGH COURT] and in the context of s. 271B of the Act;the law thereby allowing due credence to the expert opinion of the Auditor, places reliance on the assessee s accounts. An assessee choosing not to get his accounts audited, cannot avoid the legal consequence/s thereof, and does so only at his own peril. Penalty u/s. 271(1)(c) is one such consequence, saved of course u/s. 273B on proving a reasonable cause, which is a reiteration of the principle that though a strict civil liability, penalty is yet not automatic and gets excluded where the assessee-defaulter was constraine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority for Assessment Year (AY) 2016-17 per order dated 19.03.2019, by the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] vide its order dated 05.08.2022. 2. The brief facts of the case are that the assessee, an individual in the retail business of electronic goods per a proprietary concern, M/s. Modern Enterprises, Kakkad, filed his return of income for the relevant year on 22.3.2018 at an income of Rs. 4,87,905. In assessment, it was found that his income was, in the absence of audit, liable to be assessed u/s. 44AD of the Act, i.e., at 8% of the turnover, being, at Rs. 97.58 lacs, less than Rs. 1 crore. Assessment was accordingly made, i.e., as against the returned income @ 5%, at Rs. 7,80,650, vide order u/s. 143(3) dated 20.11.2018, and proceedings for levy of penalty u/s. 271(1)(c) of the Act initiated by the simultaneous issue of notice u/s. 274. Penalty was levied and, further, confirmed in appeal, in the absence of any explanation by the assessee, at the minimum rate of 100% of the tax sought to be evaded. Aggrieved, the assessee is in second appeal. 3.1 Before us, the assessee s case was two-fold. Firstly, notice u/s. 274 of the Act, inasmuch as it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndeed his bona fides, failing which he is deemed to have concealed particulars of his income. The assessee failing to furnish any explanation, either before the authority levying penalty, before whom it is in law to be, or even the first appellate authority, as to why he did not, in the absence of audit of his accounts, return income, as statutorily mandated, at a net profit rate of 8 percent of the turnover, or, in the alternative, got them audited, returning income on the basis of the audited accounts, on which either side his case on facts would ordinarily lie, it is not open for him on facts, to contend that the notice did not specify the default , which essentially is the under-reporting of income w.r.t. to the amount that the law deems as his income in case of non-audit of books of account in a given set of facts. The provision being unambiguously clear, the explanation boils down to, as is generally the case, explaining the facts and circumstances leading to, given the law in the matter, returning a lesser income on account of (say) claim of expenditure, or income, or deductions there-from, etc. We find no explanation in the penalty proceedings. We observe none in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the assessee, it is clearly wrong to say that it goes to the root of the matter, particularly considering that there is no claim, and at any stage, of absence/lack of opportunity. In other words, the argument is a non-starter. Why, even in case of established non-grant of opportunity, the proceedings would go to the stage where the said irregularity intervened (Suptd. Central Excise v. Pratap Rai [1978] 114 ITR 231 (SC); Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC)). On merits, the argument that the exact default, i.e., concealment of particulars of income or furnishing inaccurate particulars of income, becomes largely irrelevant in the given facts and circumstances of the case where, as aforenoted, the income assessed is per the statutory mandate. There is no charge of unreported turnover, and the addition in assessment is by applying the prescribed profit rate on the reported turnover. All these facts are undisputed and within the knowledge of the assessee. How, one may ask, would it matter as to whether the said under-reported income is on account of concealment or furnishing inaccurate particulars of income? That, in any case a pure matter of fact, is something whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umes deliberateness on his part, so that irrespective of whether it is apparently a case of commission or omission, the two lead to the same default of concealment of income chargeable to tax. Explanation 1 to section 271(1)(c), as apparent from its reading and, further, well settled, shifts the burden of proof on the assessee to satisfactorily explain his conduct in relation to facts material to the computation of his income upon being called upon to through a notice u/s 274, which seeks to extend an opportunity to him to do so. How, one may ask, would it then matter whether it is a case of concealment of particulars of income or their inaccurate furnishing; the two representing acts of commission and omission respectively, inasmuch as the two are treated by law at par and, further, lead to the same default being deemed by law, i.e., of concealment of particulars of income? Why, in many a case the two may overlap or the difference a thin line, often blurred, as observed in A.M. Shah v. CIT [1999] 238 ITR 415 (Guj), to though no legal effect inasmuch as Explanation 1 to s. 271(1)(c), as is trite law, clarified by the Apex Court, as in Dilip Shroff v. Jt. CIT [2007] 291 ITR 519 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of it being a quasi-criminal levy, which is not the case as clarified by the larger bench decision by the Apex Court in Dharmendra Textile Processors v. UoI [2008] 306 ITR 277 (SC). There should though, without doubt, be a finding/s in the order to the effect that the elements of Explanation 1 (i.e., where the same stands applied), so that there is a statutory presumption as to deemed concealment, are satisfied. We are in agreement with the AO that the assessee s accounts for the earlier years having been subject to audit, their non-audit for the current year is intentional. In fact, the income returned at 5% (of the turnover) is not as per the accounts, but at a flat rate. The assessee is thus aware of both, i.e., the statutory obligation for audit, as indeed the profit rate that would otherwise hold. In other words, it is equally permissible in law for the assessing authority to hold it to be a case of concealment of particulars of income or furnishing inaccurate particulars thereof, as indeed expressed by the Hon ble Court in Sivagaminatha Moopanar Sons v. CIT [1964] 52 ITR 591 (Mad), so that nothing turns on the non-identification of the specific charge, much less in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been levied for furnishing inaccurate particulars of income, inasmuch as that was the default qua which he was questioned, and his explanation not furnished, was sought, and that it would fail in view of it having been stated differently in the penalty order. This is as ludicrous as it can get, particularly considering non-furnishing of any explanation, and the legal position that the penalty u/s. 271(1)(c) r/w Explanation 1 thereto is only for concealment of particulars of income; encompassing both the elements. This is as the presumption of deliberateness on the part of the assessee in not disclosing the correct state of affairs, or otherwise explaining it s conduct, i.e., w.r.t. it s return of income, gets thus validated. As a corollary, is it, one may ask, open in law for the assessee to state that though he has concealed particulars of his income, he is not liable to penalty u/s. 271(1)(c) as he has not furnished inaccurate particulars thereof, or vice versa? If that is not available as an argument in law, what grievance, one wonders, can be projected on its basis? 4.3 We may for the sake of completeness of our order, continue further. The Hon ble Apex Court in Vank ..... X X X X Extracts X X X X X X X X Extracts X X X X
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