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Jayeshbhai J. Shah Versus Commissioner of Income-Tax

2016 (11) TMI 795 - GUJARAT HIGH COURT

Penalty under section 271(1)(c) - Held that:- The penalty under section 271(1)(c) is not sine qua non when there is no concealment of income or furnishing inaccurate particulars of income. Merely because there is difference between the income returned and income assessed as a result of disallowance made by the Assessing Officer, it cannot be said that the assessee has furnished inaccurate particulars of income. In the present case, outstanding expenses were not believed by the Assessing Officer .....

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er of Income-tax, Surat, under section 264 of the Act is quashed and set aside and the penalty under section 271(1)(c) of the Act imposed by the Assessing Officer vide order dated August 30, 2006 is also quashed and set aside. - Decided in favour of assessee - Special Civil Application No. 9315 of 2008 - Dated:- 15-7-2016 - K. S. Jhaveri And G. R. Udhwani, JJ. For the Petitioner : Manish J. Shah, Advocate For the Respondent : Sudhir M. Mehta, Senior Standing Counsel JUDGMENT K. S. Jhaveri, J. 1. .....

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it and loss account filed along with the return of income, the petitioner had shown labour charges to be paid at ₹ 15,19,030. The Assessing Officer made regular assessment under section 143(3) of the Act on March 31, 1997 determining total income at ₹ 10,86,800. While making assessment, the Assessing Officer accepted payment of ₹ 4,79,243 made to five workers who appeared before him and disallowed ₹ 10,39,787. Being aggrieved by the order of the Assessing Officer, the pet .....

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gs under section 271(1)(b) and 271(1)(c) of the Act. Thereafter, the Assessing Officer imposed penalty of ₹ 6,96,630 by order dated August 30, 2006. However, since the petitioner could not file appeal, the petitioner preferred revision application under section 264 of the Act to the respondent wherein he has clearly mentioned that the penalty is not imposable in view of the decision of the apex court in the case of T. Ashok Pai v. CIT reported in [2007] 292 ITR 11 (SC) and requested to set .....

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was no compliance on the part of the assessee and the Assessing Officer was constrained to pass ex-parte order under section 144 of the Income-tax Act as the assessee did not comply with the notices issued by him from time to time. During the course of penalty proceedings also the repeated opportunities allowed to the assessee were not complied with and which establishes that the assessee has concealed his income by furnishing inaccurate particulars of his income." 3. Learned counsel for t .....

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nted out that if the variation between the returned income and the assessed income arises by virtue of additions to the income made either because of disallowance or because of deemed income added or because of the estimate of the income made by the Income-tax Officer, then penalty is not leviable." 3.1 He has further relied on the decision of the Delhi High Court in the case of Devsons P. Ltd. v. CIT reported in [2010] 329 ITR 483 (Delhi) where in paragraph No. 27, it is observed as under .....

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e III as details of sundry creditors hire charges of ₹ 58,55,005 but during the course of hearing it was intimated by them that it was only the payments to be made to the contractors who were plying the trucks on behalf of the company and the company had hired them for Jaipur Municipality for removing the garbage. The list of these creditors to whom the amount is payable have been filed and affidavit to the effect for the person concerned have been filed stating thereby the amounts receiva .....

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At our instance, the learned counsel for the assessee pointed out to the ledger accounts of sundry creditors placed at pages 70-109 of paper book No. 1. The account of Morari Lal to whom an amount of ₹ 4,71,658 is outstanding as on March 31, 1995 is at pages 71A to 73A. The account shows that several payments were made during the year under appeal to this contractor and there has been no disallowance of the amounts so paid. This indicates that the Assessing Officer has no objection to allo .....

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n the hire charges paid to Morari Lal. The ledger accounts of all the other seven creditors have also been placed in the paper book and these also exhibit the same position.' " 3.2 Further reliance has been placed by the learned counsel for the petitioner on the decision of the apex court in the case of Tripal Singh v. CIT reported in [2014] 365 ITR 511 (SC) wherein it is held as follows (headnote) : "Held, that the assessees, who were not very educated persons, unfortunately could .....

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e decision of this court in the case of CIT v. Sonal Construction Co. reported in [2015] 55 taxmann.com 425 (Guj) wherein at paragraph Nos. 6 and 7, it is observed as under : "6. We are taking this view in light of the factual scenario as it emerges and more particularly, paragraph 5 of the reasons given by the Tribunal which we propose to reproduce hereunder : '5. We have heard rival submission and perused material available on record. As the facts emerge, it is clear that the assessee .....

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sessee reiterated its stand in penalty proceedings, the Assessing Officer should have inquired matter independently in penalty proceedings and given a finding about correctness or otherwise of the assessee's explanation. The Assessing Officer has imposed penalty solely on the basis of agreed addition by the assessee, in the given facts and circumstances, explanation furnished by the assessee remains uncontroverted, and therefore, it cannot be held that explanation given by the assessee have .....

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be sustained. In view thereof, we delete the penalty.' 7. We are even supported in our view by the latest decision of the apex court reported in Asst. CIT v. Gebilal Kanhaialal, HUF [2012] 348 ITR 561 (SC) and in the case of Northland Development and Hotel Corporation v. CIT reported in [2012] 349 ITR 363 (SC). The twin decisions will permit us to hold in favour of the assessee and against the Revenue." 3.4 Reliance has been placed on the decision of this court in the case of CIT v. Jyo .....

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58 (SC) where it is observed as under (headnote) : "A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word 'particulars' used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is fo .....

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can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous. Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not s .....

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