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Karim K. Lakhani Versus ACIT, CC-1, Surat.

2017 (1) TMI 890 - ITAT AHMEDABAD

Penalty u/s 271(1)(c) - additions made with the aid of section 68 - Held that:- The assessee failed to substantiate the alleged loans given by five entities. According to the assessee, representatives of all the concern came to Income-tax department in the quantum proceedings but after examination of one, rest of them ran away. It shows that transaction was not genuine. Facts in the case of National Textiles (2000 (10) TMI 19 - GUJARAT High Court) relied upon by the ld.counsel for the assessee a .....

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f ld.CIT(A)- IV, Ahmedabad dated 26.8.2013 passed for the Asstt.Year 2004-05. 2. Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of ₹ 3,41,232/- which was imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961. 3. Brief fact of the case are that the assessee has filed his return of income on 1.11.2004 declaring total income at ₹ 4,66,590/-. The assessee at relevant time was running a proprietorship concern in the name and style .....

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.N. Traders from whom a loan of ₹ 2,07,500/- alleged to have been taken. Shri Rana could not substantiate that he had given loan to the assessee. Therefore, loan was treated as bogus, penalty proceedings under section 271D were dropped and reasons were recorded for reopening of the assessment. The ld.AO has initiated re-assessment proceedings. He made an addition of ₹ 9,85,500/-. The reopening was upheld upto the ITAT, and the appeal of the assessee bearing ITA No.1363/Ahd/2009 was d .....

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opy of balance sheet, capital account and copy of return. In the penalty proceedings, the ld.AO did not grant adequate opportunity to produce all these creditors before him. It was also pleaded that the assessee is trading in scrap. These are small vendors, who supplied him scrap and also purchased scrap from him. They belonged to disorgnised sector of business community. All the representative of five concerns came to the Aaykar Bhavan during the assessment proceedings, and after knowing the qu .....

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ith notices, concealment of income, etc.- (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the of course of any proceedings under this Act, is satisfied that any person (a) and (b) ** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** ** ** (iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, paya .....

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ing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to repr .....

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ween 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of incom .....

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he Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) .....

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by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished. 7. In the light of the above, if explanation of the assessee is being exami .....

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r persons had run away from the Income Tax Office when they knew about the questioning of first person by the department. It itself suggest that they were not telling the truth. The ld.CIT(A)has confirmed the penalty by observing as under: 5. Having gone through the facts, the orders of the authorities, findings of the A.O. and the arguments of the AR, I am of the opinion that the order levying penalty is required to be upheld. The appellant has as also opined by the ITAT and at no stage establi .....

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.O. should have summoned them. The appellant's reliance on the fact that Mr. Mayur Rana presented himself and accepted giving advance to the appellant has been rejected as not of any help to the appellant by the Hon'ble Tribunal. The plea of the appellant that it had filed confirmations before the A.O. is also of no avail as these confirmatory letters were not signed by the parties and no address and PAN were mentioned in the letters and therefore they have no evidentiary value. That it .....

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should have carried out investigations cannot help the appellant any more than his claim that A.O. has not brought anything about positive income. The facts on record were that the creditors were bogus and in penalty proceedings it was for the appellant to show that his explanation that amount had been received from creditors was substantiated. The appellant has failed to do so. His reliance on the decision in the case of Bharthesh Jain, which is claimed to be directly applicable, also does not .....

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