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2016 (9) TMI 804 - ITAT AHMEDABAD

2016 (9) TMI 804 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - addition u/s 68 - non-disclosure of certain shares in the closing stock - Held that:- As in the Asstt.Year 2005-06, the addition of ₹ 3.20 lakhs was made by the AO under section 68 of the Income Tax Act. The explanation of the assessee in that year was that he had withdrawn the cash from this firm, M/s.Manishkumar & Co., which was introduced in the capital account for business. This explanation of the assessee was accepted b .....

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sessee is that inadvertent mistake was happened at the end of the accountant. This is the item which is revenue neutral and it was not going to affect materially to the Revenue. This explanation was rejected by the Revenue authorities on the ground that it is difficult to accept as to how the accountant has committed the mistake. To my mind, this will always be a difficult question, because, there is no scientific instrument which can tests the mind of an individual as to how he has committed a .....

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ove discussion, it is of the view that the assessee does not deserves to be visited with penalty.- Decided in favour of assessee. - ITA.No.2456 and 2457/Ahd/2012 - Dated:- 1-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER For The Assessee : Shri Tushar Hemani For The Revenue : Shri Dinesh Singh, Sr.DR ORDER Present two appeals are directed at the instance of the assessee against the orders of the ld.CIT(A) dated 6.8.2012 and 16.8.2012 passed for the Asstt.Years 2005-06 and 2006-07. 2. Grievance of t .....

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,280/-. Penalty in the Asstt.Year 2005-06 has been initiated for two additions viz. (a) on account of cash credit under section 68 of ₹ 3,20,000/- and (b) on account of unaccounted stock at ₹ 1,14,188/-. The addition on account of unexplained cash credits stands deleted by the ld.CIT(A). Therefore, the ld.First Appellate Authority has confirmed the penalty qua the addition made on account of unaccounted stock of ₹ 1,14,188/-. This way penalty has been confirmed at ₹ 53,32 .....

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he Asstt.Year 2006-07. In this year, first amount considered by the AO for visiting the assessee with penalty is on addition of ₹ 25 lakhs. 6. Brief facts of the case are that survey under section 133A was carried out at the premises of the assessee on 23.8.2005. The statement of the assessee under section 131 was recorded on 298.2005 and 2.9.2005. The assessee has admitted unaccounted income of ₹ 25 lakhs being deposited in VijayBank, Sardargunj, Anand. When the assessee filed retur .....

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lakhs was made. 7. I find that similar addition was made in the Asstt.Year 2005-06, which is being deleted by the ld.CIT(A). The finding of the ld.CIT(A) in the Asstt.year 2005-06 on this issue reads as under: 2. First ground of appeal is regarding addition of ₹ 3,20,000/- u/s.68. The Assessing Officer found that appellant had credited ₹ 6,70,000/-, out of which ₹ 2,85,000/- was offered as income, being unexplained cash credit, for taxation. Since the appellant could not explai .....

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ar & Co. Appellant further filed cash book extracts from books of Manishkumar &. Co. and certified that the same were filed before the Assessing Officer during assessment proceedings. 2.2. I have considered the matter. Assessing Officer made the addition on the ground that nature of source of ₹ 3,20,000/- could not be satisfactorily explained by the appellant. However, the appellant had explained the source to be from M/s.Manishkumar & Co., the firm. The cash book of this firm .....

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e with regard to the alleged non-disclosure of the closing stock of shares was that the accountant inadvertently left out to include the value of certain shares in the trading and profit & loss account. The assessee further contended that it was insignificant from the point of the Revenue because the closing stock of one year was nothing but the opening stock of immediately succeeding year. According to the assessee, the addition is ultimately revenue neutral. But this explanation was reject .....

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Bench of the Hon ble Punjab & Haryana High court and other decisions which have been mentioned in the submissions of the assessee filed before the First Appellate Authority which has been reproduced from page nos.5 to 13 o the impugned order in the Asstt.Year 2006-07. 10. In his second fold submissions, he contended that though the addition of ₹ 25 lakhs was made by the AO on the basis of the statement given by the assessee during the course of survey, but the stand of the assessee ta .....

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naccurate particulars and concealment of income. But while impugning penalty, the ld.AO has recorded a specific finding that the assessee has concealed the income, and therefore, penalty has been imposed for concealing the income. There is no ambiguity in the finding of the AO. 12. Section 271(1)(c) of the Act has a direct bearing on the controversy which reads as under: "271. Failure to furnish returns, comply with notices, concealment of income, etc.- (1) The Assessing Officer or the Comm .....

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e times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits: Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such p .....

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A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result .....

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1(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the asses .....

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ssessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to s .....

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.20 lakhs was made by the AO under section 68 of the Income Tax Act. The explanation of the assessee in that year was that he had withdrawn the cash from this firm, M/s.Manishkumar & Co., which was introduced in the capital account for business. This explanation of the assessee was accepted by the ld.CIT(A). According to the ld.CIT(A), the assessee has explained the source to be from the firm, M/s.Manishkumar & Co. On similar items, the explanation was not thoroughly examined by the AO i .....

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