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2020 (1) TMI 613 - AT - Income TaxPenalty u/s 271(1)(c) - disallowing assessee’s claim of deduction u/s 10A - assessment u/s 153A - HELD THAT:- Assessing Officer has already initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. That being the case, the argument of the learned Authorised Representative that the Assessing Officer has not initiated penalty proceedings under section 271(1)(c) of the Act on the basis of the specific reasoning of learned Commissioner (Appeals) on which a part disallowance under section 10A of the Act was made, in our view, is hyper–technical and superfluous. Therefore, it does not merit consideration. Allegation of the Assessing Officer that no manufacturing activity was carried on by the assessee was found to be baseless as learned Commissioner (Appeals) has specifically stated that the assessee furnished clearance from the Customs and Central Excise Department, bills of establishment, proper invoices, foreign remittance through banking channels with the approval of the Reserve Bank of India and machineries installed in the SEZ unit. He has also specifically recorded a finding of fact that no incriminating documents were found and seized to disprove assessee’s claim that it was carrying on manufacturing and export activities from the SEZ unit. Thus, the facts narrated above clearly indicate that the addition/disallowance sustained by learned Commissioner (Appeals) on account of deduction claimed under section 10A of the Act is not due to any inaccurate particulars furnished by the assessee but on a purely presumptive basis. That being the case, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income so as to be visited with penalty under section 271(1)(c) of the Act. In the course of hearing, it was brought to our notice by learned Authorised Representative that under identical facts and circumstances, learned Commissioner (Appeals) has deleted the penalty imposed under section 271(1)(c) of the Act in the assessment year 2005–06. Thus, considering the overall facts and circumstances of the case, we are of the view that the penalty imposed under section 271(1)(c) deserves to be deleted - Decided in favour of assessee Penalty imposed u/s 271AAA - contention of AR that in the assessment order AO has not initiated proceedings u/s 271AAA in respect of addition made towards unexplained expenditure and excess stock - HELD THAT:- As regards the legal issue raised while completing the assessment, in the penultimate paragraph of the assessment order the Assessing Officer has initiated proceedings for imposition of penalty under section 271AAA - contention of the learned Authorised Representative that no separate penalty proceeding has been initiated against certain additions is without any basis. As regards the claim of the assessee that proceedings under section 271AAA, can be initiated only if there is undisclosed income in the specified previous year, on going through the facts on record it is very much evident that the Assessing Officer has made additions under various heads on account of undisclosed income. Further, learned Commissioner (Appeals) while dealing with the aforesaid aspect has passed a very well reasoned order negating assessee’s claim. We do not find any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Therefore, we do not find any merit in the grounds above Additions on the basis of which penalty u/s 271AAA was imposed were on account of unexplained expenditure, excess stock and salary paid in cash - Though, the assessee before learned Commissioner (Appeals) and also before the Tribunal made an attempt to impress upon the fact that the transaction with M/s. Manav Jewelers, is genuine, however, none of the appellate authorities found the claim of the assessee acceptable. In fact, the Tribunal while dealing with the issue has held that the evidence on record is sufficient to hold that the entity with whom the assessee has entered into such transaction is a paper entity created by the assessee to inflate the turnover. The Tribunal also held that the assessee has miserably failed to prove that the transaction with such entities is genuine. In view of such concurrent finding of fact by the appellate authorities including the Tribunal, assessee’s claim that the transaction with M/s. Manav Jewelers, cannot be accepted. On a perusal of the assessment order passed in case of Proprietor of M/s. Manav Jewelers, we are convinced that the Assessing Officer has not accepted the transaction to be genuine. Merely because the said entity has filed a return of income showing certain income, the Assessing Officer has passed the assessment order on that basis. However, the assessment order so passed cannot grant authenticity to the activity carried on by the said entity with the assessee. Therefore, to that extent, we are of the view that imposition of penalty under section 271AAA of the Act in respect of addition of ₹ . 42,05,000, has to be sustained. As regards the excess stock the Tribunal has found that the difference is not huge, hence, has directed for addition of gross profit rate. Similarly, as regards the salary paid in cash, the addition has been made purely on the basis of statement recorded from third parties without confronting them to the assessee or allowing the assessee an opportunity of cross examination. Further, it is noticed that though identical addition was made by the Assessing Officer in assessment years 2005–06, 2006–07 and 2008–09, however, penalty proceedings under section 271(1)(c) was not initiated against such additions though penalty under the said provisions was imposed on some other additions. Thus, after considering overall facts and circumstances of the case, we direct the Assessing Officer to impose penalty u/s 271AAA of the Act, only on the amount of ₹ 42,05,000, and delete the balance penalty. - Decided partly in favour of assessee.
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