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Nexus Software Ltd. Versus DCIT, Central Circle - 2 (2) , Ahmedabad

Penalty u/s 271(1)(c) - providing accommodation entries to tax evaders - Estimated Commission Income - Concealment of Income - CIT(A) confirmed penalty restricted to tax sought to be evaded - Held that:- There is no ambiguity in the mind of the Assessing Officer as to whether he intends to impose the penalty for concealment of income or for furnishing inaccurate particulars. The conclusions are firm that the assessee has concealed particulars of income. - Levy of penalty confirmed. - Also th .....

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ee by : Shri P.F. Jain, AR Revenue by : Shri T. Shankar, Sr DR ORDER Per Rajpal Yadav, Judicial Member The assessee and Revenue are in cross appeals against the order of ld. CIT(A)-III, Ahmedabad dated 22.08.2013 passed for Assessment Year 2009-10. 2. The ld. Assessing Officer has imposed a penalty of ₹ 15,00,000/- upon the assessee under Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The ld. CIT(A) has confirmed the penalty equivalent to the tax sough .....

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the Assessing Officer has passed an assessment order under Section 144 of the Act, according to his best judgment. On an analysis of the details, ld. Assessing Officer found that the assessee did not carry out any specific business as per its Memorandum of Association. He observed that statement of the Director, Shri Jayesh Patel, as a witness in the case of Chartered Motors Pvt Ltd, was recorded on 08.03.2010. According to the details available with the Assessing Officer, it revealed that the .....

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Officer has initiated penalty proceedings under Section 271(1)(c) of the Act. He issued a show-cause notice under Section 274 r.w.s. 271(1)(c) of the Act on 30.12.2011, but the assessee did not reply. He again issued another notice on 01.06.2012, but the assessee did not reply. Ultimately, the Assessing Officer has passed an ex-parte order. The Assessing Officer has observed that on concealed commission income of ₹ 26,35,726/-, a minimum penalty equivalent to the tax sought to be evaded w .....

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ounts. The total income, after taking into consideration the correct withdrawal, would be ₹ 19,85,089/- instead of ₹ 26,35,726/- worked out by the Assessing Officer. In its first fold of contentions, it was contended that the Assessing Officer has erred in levying the penalty more than the minimum leviable. In its next fold of contentions, it was submitted that income of the assessee was determined on an estimate basis and therefore, no penalty ought to be imposed upon the assessee. .....

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t to be evaded. The relevant part of the submissions and findings of the ld. CIT(A) read as under:- The A.O. has estimating net income at ₹ 26,35,726/- which after rectification will get reduced to ₹ 19,85,089/-. Therefore it is wrong to observe that the commission income has not been disclosed in its return of income. According to assessee the gross earning is 16,10,850/-whereas it has been estimated at more amount by the A.O. and the estimated amount has been treated as net income. .....

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eated as concealed income and the assessee cannot be charged of furnishing inaccurate particulars of income or concealing particulars of commission income. The said income as earned by the company is duly shown in the account and therefore the very basis of levying penalty for not disclosing commission income disappears or vanishes. The withdrawals in the bank accounts and deposit in the bank account are duly accounted for and the income flowing from such transactions has also been accounted for .....

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(1) and A.O. imposed penalty u/s. 271(1)(c) which was set aside in appeal by holding that addition made by applying proviso to section s. 145(1) cannot be made a basis for imposition of penalty u/s. 271(1)(c). The High Court dismissed the appeal of the Department. (3) VALMIKBHAI H. PATEL - 280ITR 487 (Gui): In this case penalty was imposed for addition made by revalue in the stock, It was held by CIT(appeals) that merely because assessee could not substantiate his claim in terms of quantity pena .....

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Court dismissed the appeal of the Department. (5) RAVAIL SINGH & CO : 254 ITR- 191 (P&H): In this case also addition was made on the basis of estimate and not on any concrete evidence of concealment of any transaction for furnishing of inaccurate particulars. Penalty was deleted by ITAT and the court held that there is no error in the order of the Tribunal. In the case of assessee also income has been estimated on the basis of withdrawals from the bank accounts which cannot be made basi .....

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have gone through the submission and the assessee's major contention was regard the rectification pending with this office. The assessee has stated that there is a mistake in computing withdrawals in Account no. 1817 with Vinayak Sahkari Bank Ltd., Kalupur, Ahmedabad. He has stated that as per Para no. 4.2 of assessment order the withdrawals of the said bank has been put at ₹ 16,65,38,138/- whereas the withdrawal relevant to A.Y. 2009-10 from said bank comes to ₹ 3,64,10,855/- wh .....

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statement of Shri Jayesh Patel, director of assessee- company has confirmed that the company is engaged in providing cheque entries to other entities and has received the commission @ ₹ 0.50/- per ₹ 100/-. The undersigned has verified the withdrawals from account no. 1817 of Shri Vinayak Sahkari Bartk Ltd., Kalupur. The contention of the assessee is found-to be correct- The total withdrawal from the bank stands at ₹ 3,64,10,855/- for A.Y. 2009-10." 7. Facts of the case an .....

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sale but in reality all these transactions were only accommodation entries. The appellant company was providing entries to various tax payers and thus was instrumental in enabling them to evade taxes. Falsification of books of accounts or documents is a serious offence under the Income Tax Act for which there is provision for prosecution u/s. 277 A. Section 277A reads as follows: "Falsification of books of account or document, etc. 277A. If any person (hereafter in this section referred to .....

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this Act, the first person shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extent to [two] years and with fine." 8. Thus it is clear that the intention of the Legislature is that falsification of books of accounts or documents shall be seriously discouraged. It is a fundamental principle of criminal law that any person who aids, abets, counsels, or procure the commission of an offence, is liable to be tried, proceeded agains .....

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cases are entirely different. Levy of penalty u/s. 271(1)(c) in this case is confirmed. However, it has been pointed out by the appellant that commission income has not been correctly worked out by AO. From the perusal of bank statement of appellant it is found that this contention is correct. Moreover, the minimum penalty leviable in this case was ₹ 11,11,087/- whereas AO has levied penalty of ₹ 15,00,000/-. No reasons have been given for the same by AO in the penalty order. It wil .....

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g Officer has not specified the charge in the show-cause notice, i.e. whether the penalty is being imposed for furnishing of inaccurate particulars or for concealing the income. 8. Apart from the above, ld. Counsel for the assessee has reiterated its contentions as were raised before the ld. CIT(A). He made reference to five orders which have been relied upon before the ld. CIT(A), as also to the submissions of the assessee which have been extracted by the ld. CIT(A) in his order. The ld. Counse .....

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e pointed out that the Hon ble Gujarat High Court has dealt with the issue and observed that in a show-cause notice the Assessing Officer can use the language of and/or while specifying the charges against the assessee. In other words, the Assessing Officer can issue a show-cause notice, asking therein that why the penalty be not imposed for concealing the income and/or furnishing inaccurate particulars of income. If in the penalty order the Assessing Officer has conclusively held that the penal .....

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Assessing Officer has given an opportunity to the assessee to submit its explanation as to why the penalty be not imposed upon it under Section 271(1)(c) of the Act. No doubt, the Assessing Officer has not scored the specific charge as to whether the penalty is being intended to initiate for concealment of income or furnishing of inaccurate particulars of income. But it is pertinent to observe that this show-cause notice was not replied by the assessee. The penalty proceedings are ex-parte. We f .....

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absolving itself from the rigorous penalty. Apart from the above, we find that in paragraph No.5.1 of the penalty order, the Assessing Officer has imposed the penalty for concealment of the particulars of income. There is no ambiguity in the mind of the Assessing Officer as to whether he intends to impose the penalty for concealment of income or for furnishing inaccurate particulars. The conclusions are firm that the assessee has concealed particulars of income. In this background, let us take n .....

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ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language o .....

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ssee had concealed its income and/or that it had furnished inaccurate particulars of such income. It was in this respect the Bench observed that Now the language of and/or may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the ass .....

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any specific business. It was indulged in providing accommodation entries to various tax evaders. Its activity has caused substantial loss of revenue to the exchequer. It helped the people to prepare false books of accounts. The assessee has not disclosed its business activity as providing of accommodation entries. It has not shown the income from this activity. So the charge against the assessee is that it has concealed particulars of income. The ultimate determination of income in such type of .....

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