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2015 (7) TMI 661 - ITAT PUNE

2015 (7) TMI 661 - ITAT PUNE - TMI - Levy of penalty u/s.271(1)(c) - sale outside books of accounts - Held that:- No infirmity in the order of the CIT(A) sustaining the penalty levied by the AO u/s.271(1)(c) of the IT. Act. It is an admitted fact that in the instant case the assessee has sold bagasse outside books of account amounting to ₹ 1,19,32,050/-. Similarly, the assessee was also unable to explain the shortage of molasses stock at ₹ 9,62,150/-. The explanation of the assessee .....

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dingly, the same is upheld - Decided against assessee. - ITA No.1690/PN/2012 - Dated:- 10-7-2015 - Shri R.K. Panda and Shri Vikas Awasthy, JJ. For the Petitioner : None For the Respondent : Shri B.C. Malakar P. Singh ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 09-02-2012 of the CIT(A)-I, Pune relating to Assessment Year 1989-90. 2. This appeal was first fixed for hearing on 01-10-2013. At the request of the Ld. Counsel for the assessee Shri Pr .....

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On 02-02-2015 the Ld. Counsel for the assessee sought adjournment on the ground that the quantum appeals are pending, accordingly the hearing of the case was adjourned to 27-04-2015. On 27-04-2015 nobody appeared on behalf of the assessee for which the hearing of the case was adjourned to 09- 07-2015 by issue of notice through RPAD which was duly served on the assessee and the acknowledgement is placed on record. When the name of the assessee was called none appeared on behalf of the assessee. I .....

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laring loss of ₹ 1,26,90,560/-. The AO passed the order u/s.143(3) on 10-03-2013 after making various additions against which the assessee went in appeal. The CIT(A) vide order dated 03-11-1995 granted part relief against which the assessee as well as the revenue preferred appeal before the Tribunal. The Tribunal decided the appeals on 26-07-2001 and 20- 09-2001 by restoring some of the issues to the file of the AO for further verification and order. Accordingly, the AO passed the order u/ .....

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, he observed that the assessee was unable to explain the shortage of molasses found during the assessment proceedings and the sale of bagasse made outside books of account. 5. The assessee preferred an appeal before the CIT(A). Despite service of notice given for a number of times none appeared before the CIT(A) on behalf of the assessee. However, a written submission dated 12-05-2009 was filed. Considering the non-appearance of the assessee and the written submission filed before him earlier t .....

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facts are that the appellant company had filed its return of income at loss of ₹ 1,26,90,560/- on 31-10-1989 (as noted in the penalty order). The original assessment was completed on 10.3.1992 after making various additions, against which the appellant had gone in appeal. The Assessing Officer also had initiated penalty proceedings u/s 271(1)(c) of the IT. Act. The Ld. CIT(A), Nasik before whom the appeal was filed [decided the appeal on 3.11.1995 granting part relief. Department as well a .....

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ated while giving the appeal effect to the order of the ITAT. In response to the said notice u/s 271(1)(c), the appellant company requested to keep the penalty proceedings in abeyance on the ground that appeal was filed again with CIT(A)-I, Pune. The Assessing Officer kept the penalty proceedings under absence till finalization of the appeal by CIT(A)-I vide order No. Pn/CIT(A)-l/AC Cir.AN/36/03-04 dated 21.2.2005. Notice was again issued by the Assessing Officer on 17.2.2006 by the registered p .....

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materials available before him, the Assessing Officer levied the penalty u/s 271(1)(c) r.w. Explanation 1 of section 271(1)(c). However, he has decided to levy almost the minimum of the penalty leviable u/s 271(1)(c) of the IT. Act. The detailed discussions made by the Assessing Officer in the penalty order can be seen from the earlier paragraph. Appellant has not made any compliance in response to the notice issued on 3.1.2012 fixing the compliance on 19.1.2012, however, the materials submitte .....

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is evident that the additions are of income kept outside books of accounts, for which no explanation or evidence were available during assessment or even during the penalty levied by the Assessing Officer. Therefore, any evidence or claim now being made to explain the basis of additions, has to be treated as an afterthought, which cannot be accepted. 6.2. On careful consideration of the facts of the case and the law, it is seen that the penalty u/s.271(1)(c) was imposed in the present case in r .....

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ee has concealed income or when the assessee has furnished inaccurate particulars of income. As the Courts required the Department to not only prove the concealment and/or filing of inaccurate particulars of income but even the existence of mensrea, the legislature amended the provisions to relieve the revenue from the burden of proving the mensrea in certain cases as defined in different explanations introduced in this section from time to time. The explanations created rebuttable presumption o .....

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und to be false by the AO or the CIT(A); and (b) second, where in respect of any facts material to the computation of total income under the provisions of this Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by the assessee. In the first situation, the deeming fiction is triggered by the inaction of the .....

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ny fact material to the computation of total income, and the assessee is also not able to prove that such explanation was bonafide and all the facts relating to the same and material to the computation of total income have been disclosed by the assessee. When this deeming fiction comes into play, which can only happen in one of the above situations, the related addition or disallowance made in computing the total income of the assessee, for the purposes of s. 271(1)(c), is deemed to represent th .....

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fers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. The penalty under sec. 271(1)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, under the extended definition by the virtue of Expln. 1 to sec. 271(1)(c), for a deemed concealment of income. As a corollary to this legal posit .....

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ns of Explanation 1 of section 271(1)(c) or not. 6.3. The necessary precondition for imposition of penalty under the main provisions of sec. 271(1)(c) is that the A.O. should satisfy himself that the appellant concealed its income or furnished inaccurate particulars of income. The expression 'concealment of income1 has not been defined in the Act, but the natural meaning of the expression 'concealment' is to keep from being seen, found, observed, or discovered'. It would, therefo .....

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Assessing Officer has been able to fulfill the conditions prescribed in the main sec, 271(1)(c). Despite that the Assessing Officer has also invoked Explanation 1, to strengthen the penalty order and to plug any escape route that the appellant may try to find to escape from the levy of penalty. From the facts of the case it is apparent that the appellant had no explanation for either of the two additions made by the Assessing Officer during the two cycles of assessment and appeal through which .....

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re, Explanation 1 also can be considered to be applicable in the facts of this case. For the above reason, Ground No. 1 of the appellant has to be dismissed. The decision of the Supreme Court given in the case of Dharmendra Textile Processors, even after the clarifications given in the case of Reliance Petro Products Ltd., can be considered to be applicable in this case, on the basis of which the penalty can be held to have been correctly levied. Ground No. 1 is dismissed. 6.4. The appellant in .....

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ferent Courts including the P&H High Court in the case of CIT.Vs. Prithpal Singh & Co. (1990) 183 ITR 69 (P&H) has held that the penalty cannot be levied in the case where the return income is at loss. However, divergent views were taken by other Courts including Kerala High Court in the case of CIT Vs. India Seafoods (1976) 105 ITR 708 (Ker). In this case the Kerala High Court while dealing with a case where the final income was a loss, upheld the levy of penalty with reference to t .....

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upreme Court in Prithpal Singh & Co. (2001) 249 ITR 670 (SC). However, the Supreme Court in the case of Virtual Soft System Ltd. Vs. CIT, quoted above, considered the different aspects of this issue in detail and it has been upheld that the rule of Prithpal Singh & Co.'s case should apply for years prior to A.Y. 2003-04 where there is no positive total income even after additions. This amendment brought by Finance Act 2002 was held to be prospective in nature, applicable from A.Y. 20 .....

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