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Sh. Rajeev Kumar Versus ITO, Ward 2 (3) , Muzaffarnagar

2016 (5) TMI 759 - ITAT DELHI

Penalty u/s 271(1)(c ) - addition u/s 69 - Held that:- CIT(A) in this case has travelled beyond his jurisdiction in levying the penalty u/s 271(1)(c ) of the Act. It is well settled that penalty can be levied by the Ld.CIT(A) only with respect to enhancement of assessment. In this case there is no enhancement of assessment. Moreover when the AO had initiated penalty proceedings u/s 271(1)(c) of the Act and dropped the same, the Ld.CIT(A) does not have any jurisdiction to reinitiate such proceedi .....

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passed u/s 271(1)(c ) of the Income Tax Act, 1961 (the Act) on 21.7.2013. 2. Facts in brief:- The assessee is an individual and is in the business of whole sale trading of sugar, ghee etc. He carries on business under the name and style M/s N.R.Trading Co. He filed return of income for the A.Y. 2009-10 on 30.9.2009 declaring net profit of ₹ 87,713/-. The A.O. completed the assessment u/s 143(3) of the Act on 27.12.2011 determining the total income at ₹ 90,06,406/-. He made an additio .....

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nd that the assessee might have earned profit of ₹ 70 per sugar bag on total sales of 3090 bags on behalf of M/s Jai Shree Traders, Delhi which works out to ₹ 2,16,300/-. 2.2. The Ld.CIT(A) further states in his appellate order that penalty proceedings u/s 271(1)(c ) of the Act are separately initiated on account of concealment of income of the assessee. Subsequently show cause notice dt. 16.1.2013 u/s 271(1)(c ) of the Act was issued. In this notice the Ld.CIT(A), Muzaffarnagar stat .....

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le income is more than established, and, therefore, I impose penalty u/s 271(1)(c ) of the Act at @ 300% of tax concealed on ₹ 2,16,300/- which comes to ₹ 1,94,670/-. The AO is directed to issue notice of demand. 3. Aggrieved the assessee is in appeal before us on the following grounds. 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in imposing the penalty u/s 271(1) (c) ,which is not payable under the Income Tax Act. 2. Tha .....

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ing. 3. That the penalty u/s 271 (1) (c) has been wrongly imposed where the addition was made on estimate basis in the income of the appellant. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in imposing the penalty @300 % of tax due amounting ₹ 1,94,670/- while the tax demand was ₹ 15,602/- only . 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and al .....

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penalty proceedings u/s 271(1)(c) of the Act and dropped the same, the Ld.CIT(A) does not have any jurisdiction to reinitiate such proceedings or start a fresh proceedings. Thus on this ground alone the penalty is to be quashed. 6. Be it as it may, the Ld.CIT(A) is not clear as to the charge under which he proposes to levy penalty in the show cause notice. The Hon ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory, 359 ITR 565, wherein the Hon ble High Court consid .....

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Penalty under Section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Wilful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. (e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Auth .....

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Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1 (B). (h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. (i) The imposition of penalty is not automatic. (j) Imposition of penalty even if the tax liability is admitted is not automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itsel .....

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to be false or when the assessee fails to prove that the explanation offered is not 'bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any a .....

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