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2019 (5) TMI 301 - HC - Income TaxPenalty u/s 271(1)(c) - penalty was imposed for two reasons viz., (i) Unvouched Expenses and (ii) Unexplained Credits - Revised Return surrendering the amounts as income - coercion of the authorities concerned - fair investigation - income in the Revised Return as 'Cessation of Liability' u/s 41 (1) - HELD THAT:- We are satisfied that the authorities below, right from the Assessing Authority, have abused their powers u/s 271 (1) (c) in the present case. The explanation furnished by the Assessee for both the additions made to the declared income in the Revised Return filed by the Assessee was a plausible explanation which required consideration at the hands of the Assessing Authority. Part of expenses, which were not at all even claimed as deduction from the profits of the Assessee, were said to have been incurred by the Assessee-the forwarding Agent- to be reimbursed by his customers. Without holding any inquiry in the matter from the said customers as to whether they were reimbursed or not, no such finding of guilty animus or concealment of income could have been rendered by the Assessing Authority in such cases. The surrender on the part of the Assessee appears to be under the coercion exercised by the Survey Authority at the time of survey or the Assessing Authority. The Assessee furnished a plausible explanation, which required an investigation and inquiry. Instead of undertaking such fair exercise, the Assessing Authority and subsequently the Appellate Authorities just imposed and upheld the penalty in question to the extent of 100% of tax on such surrendered income, which was not at all called for. The reconciliation of the accounts of the Sundry Creditors is a routine accounting practice in day-to-day business and it was a matter for scrutiny and, therefore, the explanation of the Assessee that there were some unreconciled balances only required further examination and an opportunity was to be given to the Assessee to reconcile such account balances with creditors. Such unreconciled balances could not have been added as 'income' on account of 'Cessation of Liability' to be brought to tax u/s 41 (1) and invoking of Section 41 (1) in the present case was wholly erroneous. The said provision applies if a liability has completely ceased for Assessee, de facto and de jure. Having carefully gone through the order of the Tribunal, we are sorry to observe that it was passed by the final fact finding body comprising of responsible Members. The tenor of the order does not impress us at all and leaves much to be desired. The said order seems to be a ''cut and paste'' order, taking pieces from here and there and as if quoting some of the judgments of Supreme Court and High Courts would be enough for the final fact finding body. Further, we are sorry to notice this quality of order passed by the learned Tribunal in this case. The very premise on which the penalty u/s 271 (1) (c) was imposed by the Assessing Authority should have invoked the good conscience of the learned Members of the Tribunal, who should have either sent back the matter to the Assessing Authority for investigating into the affairs once again or set aside the penalty in the fair exercise of their discretion in the matter. It seems, the learned Tribunal chose to uphold the order of penalty, which was passed wholly on erroneous premises, just by citing and quoting some judgments and not giving any of their own findings. The said order of the Tribunal, therefore, cannot be sustained in the eye of law. Present Appeals filed by the Assessee deserves to be allowed with costs, quantified at ₹ 10,000/-, to be borne by the Assessing Authority, who passed the impugned penalty orders in the present case to be paid to the Appellant-Assessee within three months from today and Compliance Report should be sent to this Court.
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