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2016 (9) TMI 1075 - ITAT CHANDIGARH

2016 (9) TMI 1075 - ITAT CHANDIGARH - TMI - Levy of penalty under section 271(1)(C) - whether the assessee firm had inflated the profits by introducing the income from undeclared sources to get maximum deduction under section 80IC? - Held that:- The facts in the present case, we find, are identical to that in the preceding year, being penalty levied on addition made of unproved cash sales. As in the preceding year, the assessee in the impugned year had maintained complete Books of accounts which .....

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ies to whom cash sales was made was not disclosed. - Since on identical facts the Hon'ble I.T.A.T. has deleted penalty in the case of the assessee in the preceding year , respectfully following the same, we set aside the order of the authorities below and delete the penalty levied in the impugned year. Decided in favour of assessee - ITA No. 254/Chd/2015 - Dated:- 29-7-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER Appellant by : Shri Tej Mohan Singh R .....

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ason for the delay was that the appeal was to be filed by 08-032015, which was a Sunday, further the partners who were to sign the documents resided in Mumbai and the representative reached Chandigarh with the documents only in the late hours of 09-03-2015. Thus the appeal could only be filed the next day i.e. 10-03-2015. The counsel also pointed out that the requisite fee had been deposited on 0303-2015 and Form 36 signed on that day ,which was well within the period of limitation. Thus Ld. Cou .....

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n short the Act ) at ₹ 1,94,37,600/-. During the course of assessment proceedings, it was noticed by the Assessing Officer while examining the books of accounts that the assessee had shown cash sales. The assessee was asked to justify the cash sales and furnish details of the parties. The reply filed by the assessee was considered and was not found satisfactory, The Assessing Officer stated that the mere fact that VAT was paid on the sales did not establish that the sales were genuine. The .....

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essee under section 68 of the Act and penalty proceedings under section 271(1)(c) of the Act initiated thereon. The quantum appeal filed by the assessee was dismissed by the CIT (Appeals) vide order dated 27.2.2012. In response to show cause notice under section 271(1)(c), the reply filed by the assessee was found unsatisfactory. The Assessing Officer referring to the order of CIT (Appeals), Shimla, held that the assessee firm had inflated the profits by introducing the income from undeclared so .....

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ccount. It was argued that all the sales were backed by the sales bills, sales tax paid challans and Sales Tax Return filed by the assessee with the Commercial Tax Department of Una. It was argued that books of account alongwith inventory record were duly audited by the tax auditor and the cash sales should not have been treated as unexplained cash credits merely because the address of all the customers were not found to be complete on the cash sales bills. It was further argued that the Assessi .....

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TR 158 and argued that merely because the assessee's explanation was not acceptable to the revenue, that by itself would not attract the penalty under section 271(1)(c) of the Act. 5. The ld. CIT(Appeals) did not accept contention of the assessee and on the basis of finding of fact recorded by the authorities below as confirmed by the Tribunal and following the decision of the learned CIT (Appeals) in assessment year 2007-08, came to the conclusion that assessee had furnished inaccurate part .....

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sidered the submissions and material available on record. On perusal of the order of the Hon'ble I.T.A.T., Chandigarh Bench in ITA No.1327/Chd/2012 in the case of the assessee for assessment year 2007-08, we find that penalty levied on identical addition of unexplained cash sales was deleted for the reason that no evidence of concealment of income or furnishing of inaccurate particulars of income was brought on record except the explanation of the assessee was found unacceptable. The Hon ble .....

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though the quantum addition had been sustained but the assessee had been able to make out an arguable and debatable case to prove that penalty need not be imposed. The relevant finding of the Hon'ble I.T.A.T. at para-8 of its order deleting the levy of penalty are as follows : In this case, the penalty has been imposed because the Assessing Officer found that assessee has booked cash sales of ₹ 3 Crores in the month of September,2006 to different parties. This was the sole basis for l .....

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aw that findings given in the quantum proceedings have a probative value, however, assessee is still at liberty to explain the addition in the penalty proceedings so as to explain that levy of the penalty is not justified in the matter because the quantum and penalty proceedings are distinct and independent proceedings. Merely because addition on merit have been confirmed by itself is no ground to sustain the penalty automatically. It is an admitted fact that cash sales of ₹ 3.12 Cr were o .....

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ed by sales tax paid challans and sales tax return filed by the assessee with Commercial Tax Department of Una and as well as shown by the assessee in the books of account have been accepted by the sales tax authorities (VAT authorities). Thus, the sales made by the assessee including the cash sales have been accepted by the sales tax authorities. The authorities below dis-believed the explanation of the assessee with regard to cash sales made to different parties because their complete details .....

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ld that the books of account cannot be rejected if in cash sales, names and address of the purchasers are not mentioned. There is no need to mention name and address in the cash sales. These judgements support the version of the assessee that mere dis-believing the explanation of the assessee would not be enough to levy the penalty under section 271(1)(c) of the Act against the assessee for merely not mentioning the complete details of the purchaser in the cash sale bills. No evidence has been b .....

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ord to hold assessee had made any false claim of cash sales. In our opinion, in the cash sales bills, there was no need to mention the complete names and addresses of the purchasers further because if some customer gave some other wrong name and address to the seller, the seller in the interest of its business would be bound to record what-so-ever address have been supplied by the purchaser. The facts and circumstances of the case, therefore, clearly show that it is not a case of furnishing inac .....

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lanation-I to Section 271(1)(c) of the Act deals with deemed concealment of income. Since the assessee has been able to explain its case through the material on record, therefore, Explanation-I to Section 271(1)(c) of the Act would not apply against the assessee. It is a matter of record also that assessee maintained stock register of the raw material purchased and purchase bills were also produced. The assessee also placed the details of raw material used in the manufacturing of its product, th .....

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is discretionary in nature. The Hon'ble Supreme Court in the case of M/s Rajasthan Spinning & Weaving Mills 2009-TIOL-63-SC held that on every demand, penalty is not automatic. 9. Considering the facts of the case in the light of the above discussion, we are of the view that even if addition on quantum have been sustained, however assessee has been able to make out an arguable and debatable case to prove that penalty need not be imposed in this case. We, therefore, do not subscribe to t .....

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