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2009 (8) TMI 972

..... tax (Appeals) dated March 20, 2009 on the ground that the order of the learned first appellate authority confirming the penalty under section 271(1)(c) of the Income-tax Act, 1961, ignoring the evidence furnished for reconsidering the addition afresh for penalty purposes and computing the same on the basis of estimated addition/ disallowances finally confirmed at Rs.18,98,670 reduced on appeal effect from Rs. 8,76,319 to Rs. 7,30,989 is bad in law and against the judicial decision. During hearing of the appeal, we have heard Shri M. R. Sharma, learned counsel for the assessee and Mrs. Inoshi Sharma, learned Departmental representative. Mrs. Sharma contended that a less fee has been filed by the assessee, therefore, the appeal is not maintainable. Our attention was also invited to the defect memo issued to the assessee. Mr. Sharma contended that in view of the decisions from the hon ble High Court of Patna in the case of Dr. Ajit Kumar Pandey v. ITAT [2009] 21 DTR (Pat) 103 for levy of penalty under section 271, there is no connection or bearing with the total income of the assessee, therefore, the appeal is maintainable. Admittedly, the hon ble High Court concluded that for imposit .....

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..... , whether the penalty was rightly sustained by the learned Commissioner of Income-tax (Appeals). The assessee-firm is deriving income from transportation contracts disclosed transportation receipt of Rs. 1,88,54,650 and declared net profit of Rs. 78,160 only after debiting expenses on account of transportation, labour, interest and salary of partners. It was noticed by the Assessing Officer that the assessee claimed expenditure of Rs. 37,79,920 as labour expenses in respect of loading and unloading of wheat bags for Haryana Warehouse, FCI and other departments. It was further noticed by the Assessing Officer that a sum of Rs. 2,44,555 was shown as outstanding unloading charges at the rate of Rs. 2.50 per bag. The assessee was asked to substantiate the claim of expenditure of Rs. 37,89,920. As per the Revenue the complete records were not maintained by the assessee and even the particulars of drivers to whom the payments were made were also not maintained. The Assessing Officer made disallowance of Rs. 20,00,000. On appeal before the learned Commissioner of Income-tax (Appeals), it was claimed that complete records of labour, payments were maintained by the assessee, therefore, the .....

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..... aid. The penalty of Rs. 8,76,319 was imposed. On appeal, the penalty order was affirmed. A perusal of the assessment records shows that the books of account were duly audited and the firm showed net profit at the rate of 0.41 percent against 0.47 percent showed in the immediate preceding year. The impugned profit was declared after setting off interest and salaries to the partners. Admittedly, the profit declared in the assessment year 1999-2000 was accepted by the Department. The huge labour and transportation expenses left unpaid during the assessment year 1999-2000 and disbursed this year had already been explained and accepted and verified during scrutiny proceedings for the assessment year 2000-01. Similarly, the labour and transport expenses carried over this year and paid in the next year were also verified by the learned Assessing Officer during assessment proceedings for 2001-02. In view of these facts, it can be said that there was no conscious act by the assessee, which lead to the concealment of income or furnishing of inaccurate particulars of income. The decision from the hon ble apex court in K. C. Builders v. Asst. CIT [2004] 265 ITR 562 supports the case of the ass .....

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..... ocessors [2008] 306 ITR 277 (SC) ; 18 VST 180. In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile Processors [2008] 306 ITR 277 (SC) the court framed the issue before it, in paragraph 2 of the decision, as follows (page 280 of 306 ITR): 2. A Division Bench of this court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) ; [2007] 8 SCALE 304 . The question which arises for determination in all these appeals is whether section 11AC of the Central Excise Act, 1944 (in short the Act ) inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whet .....

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