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2012 (10) TMI 808 - HC - Income TaxPenalty u/s 271(1)(c) - Whether the disclosure/admission of Assessee of taxing the income @ 8% when faced with detailed enquiry is a voluntary surrender and not liable for penalty under section 271(1)(c) of the Act - The assessee was asked to explain as to why the cash payments made ought not to be disallowed under Section 40A(3). It was also asked to explain the substantial expenses claimed in the P&L account with the aid of vouchers and bills. Held that:- The offer made by the assessee was on the basis that it could not give the details of the parties, and in order to buy peace, the AO was requested to tax the gross receipts on net profits basis. This, as noticed earlier, resulted in addition of over Rs. 51 lakh, which represented more than the amount disallowable under Section 40A(3). The assessee’s cash payments were concededly not the amount which was disallowed, they had no co-relation to what could not be established, and were disallowable. The assessee did provide particulars, but could not back up its claim with confirmation with the explanation that the payees insisted on immediate payment, to fulfill their contractual commitment to their suppliers. Considering a case for business expediency, the material which led to the penalty order i.e. absence of the payees at their places or address provided, was gathered after notice under Section 271 (1) (c) was issued. Thus assessee ought to have been provided with opportunity in this regard during the assessment and that material which did not exist at time of initiation of the penalty proceeding ought not to have been put against it. Thus addition on the basis of the assessee’s offer to be taxed at 8% on gross receipts cannot be concluded that it had provided inaccurate particulars in its returns & the imposition of penalty was not justified - in favour of the assessee
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