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M/s. Sejal Exports (India) Versus Asstt. Commissioner of Income Tax, Mumbai

2015 (10) TMI 2247 - ITAT MUMBAI

Penalty u/s 271(1)(c) - Held that:- It is well settled proposition that the additions made in the assessment order would not automatically give rise to penalty. In the penalty proceedings, the assessing officer is required to examine the issues afresh and for that purpose the discussions made in the assessment order can be taken as guidance. In the instant cases, the assessing officer has imposed penalty without establishing that there was concealment of income. Accordingly, we are of the view t .....

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contended that there is no variation between the returned income and assessed income and hence the penalty was not leviable. Since we have deleted the penalty on merits, we do not find it necessary to adjudicate these legal issues. We set aside the orders passed by Ld CIT(A) and direct the assessing officer to delete the penalty levied u/s 271(1)(c) of the Act for the years under consideration. - Decided in favour of assessee. - I.T.A. No. 5724,5727 and 5729/Mum/2012 - Dated:- 23-9-2015 - Shri .....

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and seizure operations u/s 132 of the Act in the business premises of the assessee. During the course of search, certain incriminating documents were seized from the office and also from the residential premises of one of the employees named Shri Ronak K Shah. In the statement taken from him u/s 132(4) of the Act, he admitted that the assessee firm is paying part of salary and also loans to employees in cash. Subsequently, one of the partners of the firm named Shri Parin S Shah was examined and .....

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t year 2008-09 - 25,63,854 Assessment year 2009-10 - 45,51,279 The assessee filed return of income in response to the notices issued u/s 153A of the Act, wherein it included the additional income referred above. The Assessing officer also completed the assessment by accepting the additional income so offered by the assessee. 3. The assessing officer initiated penalty proceedings u/s 271(1)(c) of the Act during the course of assessment proceedings and thereafter passed penalty orders levying pena .....

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1.00 lakhs made in that year. Accordingly he submitted that the tax authorities are not justified in invoking provisions of Explanation 5A to sec. 271 of the Act in this year. He further submitted that the alleged incriminating documents were found at the residence of one of the employees and he is claimed to have admitted that the payments towards salary and loans were made in cash. The partner of the assessee has admitted the same, after the consulting the employee, in order to avoid litigatio .....

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ed documents did reveal undisclosed income of the assessee. Accordingly he submitted that the tax authorities are not justified in invoking Explanation 5A to sec. 271 of the Act. He further submitted that the voluntary offer made by the assessee would not automatically lead to levy of penalty u/s 271(1)(c) of the Act. He further submitted that the additional income admitted by the assessee in the return of income filed u/s 153A of the Act has since been accepted by the assessing officer and henc .....

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enue has not taken any action in the hands of the employees in respect of salary alleged to have been received in cash outside the books of accounts. 5. The Ld A.R further submitted the provisions of sec. 271(1)(c) prescribes two limbs for levying penalty viz., concealment of particulars of income and furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act for assessment year 2008-09 and 2009-10, the assessing officer has not specified th .....

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onditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentio .....

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d be imposed on the assessee. Accordingly he submitted that the impugned penalty orders are liable to be quashed on this legal ground also. 6. On the contrary, the Ld D.R submitted that the search team has found documents evidencing payment of salary and loans in cash to the employees and the same has been confirmed by the concerned employee and also by the partner of the assessee firm. Further the additional income of ₹ 12.00 crores was offered only upon examining those documents only. Ac .....

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ome only. Accordingly he submitted that the Ld CIT(A) was justified in confirming the penalty imposed by the AO. 7. We heard the parties and perused the record. We notice that the partner of the assessee firm has agreed to offer a sum of ₹ 12.00 crores in the hands of various assessees of the group. The Ld A.R has furnished a letter, wherein he has stated that the revenue has not levied penalty in respect of the income surrendered in the hands of other assessees. The very fact that the par .....

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is that there were some documents evidencing payment of salary and loans in cash. With regard to the same, the employee of the assessee admitted that the salary and loans have been paid in cash. The partner of the assessee firm also, after consulting the employee, admitted the same. However, there is no discussion about the quantum of salary/loan paid in cash out of which, how much was accounted and how much was unaccounted, so that one can decipher about the undisclosed income, if any, that ca .....

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or furnished inaccurate particulars of income. It is well settled proposition of law that the penal provisions should be construed strictly, since the same imposes liability upon the assessee. When it comes to deeming provisions, the construction becomes stricter. In the instant case, the assessing officer refers to some documents found during the course of search with regard to the payment of salary and loans in cash. Hence clause (ii) of Expalanation 5A is applicable in the instant case and t .....

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r to any of the documents or materials found during the course of search from which the impugned undisclosed income was found out. Hence, in our view, the tax authorities could not have placed reliance on Explanation 5A to sec. 271 of the Act without making specific reference to the documents, which revealed about concealment of income, i.e., the conditions prescribed in the Explanation 5A has not been satisfied in the instant cases. On the contrary, we have noticed that the partner of the asses .....

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er I have gone through the statements of Shri Ronak Kiritkumar shah at his residence. I completely agree with the statements given by our employee. I further admit that salary and loans have been paid to the employees in cash as per statements and the papers found and seized. Over all, on account of various discrepancies, as mentioned above, found in various premises of this group and its employees, on account of seized materials found/Books of accounts/investments in the hands of the group conc .....

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ch persuaded him to surrender additional income of ₹ 12.00 crores. In view of the above, we are of the considered view that the Expalanation 5A to sec. 271 does not have application in the facts and circumstances of the case. 9. Further, we notice that the AO has made a bald statement that the salary and loan paid in cash could not be substantiated with withdrawals, meaning thereby he has also not done any exercise to corroborate the additional income with any material. A careful perusal o .....

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