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2016 (1) TMI 714 - ITAT AHMEDABAD

2016 (1) TMI 714 - ITAT AHMEDABAD - TMI - Penalty order u/s.271(1)(c) - addition of work-in-progress, Unsecured Loan, Sundry Creditors and Disallowance of various expenses due to non production of evidence - Held that:- Proceedings u/s.271(1)(c) of the Act are altogether separate proceedings in the Act and should not be over shadowed by the proceedings held before during the assessment for that year and accordingly, we hereby remit the issue back to the file of Assessing Officer with a clear dir .....

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- Shri Rajpal Yadav, JM, & Manish Borad, AM. For The Appellant : Ms. Urvashi Shodhan, AR For The Respondent : Shri Narendra Singh, Sr.DR ORDER PER: Manish Borad, Accountant Member This is an appeal filed by the assessee against the order of CIT(A) -I, Surat, dated 23.09.2009 in Appeal No.CAS-I/249/08-09. The penalty order u/s.271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for A.Y. 2006-07 was framed on 25.3.2011 by ITO, Ward-1(4), Surat. Assessee has raised foll .....

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are that the assessee is a Private Limited Company engaged in the business of dyeing and printing of art silk cloth. The return of income was filed on 30.12.2006 at a total income of ₹ 4,87,760/-. Assessee s case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 10.09.2007 and duly served upon the assessee. However, nobody attended and submitted any details in response to the said notice and subsequently, notice u/s. 142(1) of the Act with detailed questionnaire was .....

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assessee company failed to file any proper submission and evidence during the appellate proceeding. However, on the basis of material available on record, ld. CIT(A) gave a relief of ₹ 23,14,517/- and sustained the remaining addition. Thereafter, assessee preferred the appeal before the Co-ordinate Bench, wherein appeal of the assessee was dismissed by the Co-ordinate Bench on the quantum proceeding by observing as under: 10. It is an admitted fact that assessee did not comply with the sta .....

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d have verified the facts from the other parties. This statement of fact would show that assessee did not produce any details and the books of accounts before the A.O. No books of accounts and details were furnished before the Ld. CIT (A). If the assessee wanted that matter may be remanded to the file of the A.O. assessee should have made out a case on the basis of the facts available on record but assessee did not even raised any ground of appeal before the Tribunal and no evidence or material .....

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furnish any evidence or material. For cash credit/sundry creditors even no confirmation of the parties have been filed. The ratio of the order of the Tribunal or the High Court could be applied if the facts are available on record. In the absence of any facts, details and evidences on record, no reliance could be placed on the decision cited by the Ld. Counsel for the assessee. Considering the facts of the case and in the absence of any evidence or material on record, we do not find any justific .....

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losure of business, were not able to submit at the time of assessment proceedings. However, Assessing Officer did not give any cognizance to the information and supporting documents furnished before him by taking a view that as the assessee failed to discharge the onus during the assessment proceedings, therefore, the same cannot be entertained during the penalty proceedings u/s. 271(1)(c) of the Act and accordingly, imposed the penalty of ₹ 38,94,372/-. 2.3. Aggrieved to the order u/s.271 .....

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me should be dealt on merit, but assessee could not succeed before the ld. CIT(A), who without looking into the merits of the evidences and submissions produced before him, dismissed the appeal of the assessee. 3. Now, aggrieved assessee has come before the Tribunal against the order of ld. CIT(A) confirming the penalty u/s.271(1)(c) of the IT Act. At the outset, ld. A.R. of the assessee humbly submitted that the assessee company is into business since 24.06.1993 and regularly assessed to income .....

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employees left the company. Ld. A.R. further submitted that the company was having all books of accounts and records for the year under appeal but due to lack of staff and miserable mental agony being faced by the Directors of the company, which restrained them to attend various proceedings before the lower authorities as well as to furnish evidences and records. 3.1 Ld. A.R. urged upon that the assessee has already lost in the quantum proceedings up to the level of Tribunal but now as the neces .....

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. The only issue to be examined is that whether the Assessing Officer was justified in imposing the penalty u/s.271(1)(c) of the Act. In a situation, where assessee has fully submitted proper evidences to prove that the additions made by the Assessing Officer at the time of framing the assessment order were not justified. 4.1 Out of total additions made in assessment proceedings completed u/s.144(4) r.w.s. 143(3) of the Act, Assessing Officer confirmed the penalty in respect of concealment of in .....

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al statements, details of various expenses, confirmation letter etc. as available on record in paper book from page nos. 1 to 225, which if had been examined by the lower authorities on merits, then there may had been a situation, wherein Assessing Officer either may had restrained from imposing penalty or reduced the penalty. We have gone through the reply of the appellant against various disallowances made by the Assessing Officer and from going through the same, it seems that assessee was hav .....

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75,500/- to Mr. Anil Garg and ₹ 4,50,000/- to Femina Fashion Designer Pvt. Ltd. This fact is supported by Annexure E of tax audit report appearing on page 26 of the paper book. The net loan remaining after the re-payment of loan during the year comes to ₹ 2,93,304/- in absence of requisite information at the time of assessment proceedings possibly due to lack of proper information, Assessing Officer made addition of ₹ 18,18,804/-. However, if during the penalty proceedings u/s. .....

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mstances of the case and perused the material available on record. The issue in appeal is imposition of penalty of ₹ 4,03,920/- by the A.O. and confirmed by the CIT(A) in regard to the confirmed addition of quantum of ₹ 12lacs up to the level of ITAT. 6.1 Assessment proceedings u/s.143(3) and penalty proceedings u/s.271(1)(c) are separate proceedings and the A.O. should pass his order on the basis of facts and supporting evidences available at the particular point of time and should .....

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enuineness of the unsecured loan taken. To the contrary, A.O. did not find it relevant to examine these documents to finalize the penalty proceedings rather keeping the same view as taken during proceedings u/s.144 of the Act that the assessee has not furnished the required details at the time of regular assessment proceedings. Further, Hon ble Jurisdictional High Court in the case of National Textile vs. CIT (supra) has held as under :- The provisions of section 68 of the Income-tax Act, 1961, .....

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levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee s income. It is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(1)(c) has no bearing on factor No. .....

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asonable and positive inference that the assessee s case is false, the Explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively, treating the Explanation as dealing with both the ingredients (i) and (ii) above, where the circumstances do not lead to the reasonable and positive inference that the assessee s explanation is false, the assessee must be held to have proved that there was no mens rea or g .....

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uced and it was stated that he had left the service as relations with him were strained. In this state of accounts and evidence in the quantum proceedings, the Department was justified in treating the cash credits as income of the assessee but merely on that basis by recourse to Explanation 1, penalty under section 271(1)(c) could not have been imposed without the Department making any other effort to come to the conclusion that the cash credits could in no circumstances have been amounts receiv .....

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ans in small amounts obtained from different parties. Therefore, the imposition of penalty was not justified. In the case of CIT vs. Jalaram Oil Mills (supra), Hon ble Jurisdictional High Court has held as under :- The Explanation to section 271(1)(c) of the Income-tax Act, 1961, provides that in case there is a difference, as statutorily provided, between the total income returned by any person and the income assessed, such person shall have to prove that the failure to return the correct incom .....

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that where a sum is found credited in the books of an assessee maintained for any previous year, and where the explanation offered by the assessee about the nature and source of such credits is not found to be satisfactory, the sum so credited may be charged as the income of the assessee for that previous year. The word may has been used in section 68 and so if an addition is not warranted in each and every case, there cannot be a situation where, merely because an addition has been made by inv .....

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id sums would be concealed income of the assessee for the year under consideration. The Tribunal had recorded a finding of fact to the effect that there was no past history of the assessee to show that the assessee had been earning business income outside the books, nor was there in the books relating to the year under consideration any instance pointed out indicating any transaction outside the books. The Tribunal was justified in holding that the penalty of ₹ 30,000 imposed by the Inspec .....

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ncealment or act of furnishing of inaccurate particulars on the part of the assessee. In the case of assessee who was having a sufficient reason for his non appearance before the A.O. during assessment proceedings u/s.143(3) r.w.s 144 due to heavy losses, closure of business and acute shortage of staffs, for which, quantum has been decided against him up to the level of Tribunal. However, during penalty proceedings initiated u/s.271(1)(c), assessee has furnished complete details of the unsecured .....

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T (supra) and CIT vs. Jalaram Oil Mills (supra) as well as to our discussions made above, are of the confirmed view that proceedings u/s. 271(1)(c) of the Act are separate proceedings and the observations and findings made during the original assessment proceedings, should not shadow over the proceedings u/s.271(1)(c) of the Act and the A.O. ought to have analyzed the evidences and supporting documents furnished before him during the penalty proceedings u/s.271(1)(c) and examined them in consona .....

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