TMI Blog2016 (9) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... On merit, we find that the assessee was deriving income from trading of precious and semi precious stones and in the quantum proceedings, the Assessing Officer enquired about the correctness of the purchases made by the applicant and after following a due process, the Assessing Officer enquired from the assessee about the purchases made from three parties discussed in detail in paragraph No. 1 of the assessment order, but the assessee failed to produce the parties. The Assessing Officer thereafter, tried to examine the said parties after issuing the summons but the summons returned unserved as the concerned parties were non-existent. Thereafter, the Assessing Officer made enquiries by sending the Inspector but the addresses give by the assessee was not found. Therefore, the Assessing Officer had treated the purchases as bogus and disallowed 25% of such purchases by invoking the provisions of Section 145(3) of the Act. The same was confirmed in the appeal by the ld. CIT(A). No appeal was filed before the Tribunal. Thus the separate enquiries/proceedings were not required to be conducted by the Assessing Officer at the stage of penalty as the assessee, has failed to discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U/s 143(3) of the Income Tax Act, 1961 (in short the Act). The ld Assessing Officer after scrutiny assessment, assessed the income of the assessee at ₹ 33,30,963/-. Against the said assessment, the assessee filed appeal before the ld CIT(A). The ld CIT(A) partly granted the relief to the assessee and has disallowed the amount of ₹ 5,84,578/-. The order of the ld CIT(A) granting the relief provides as under:- On going through the facts of the case, I find that this is the first year of business of the assessee. Therefore, there is no past history in the appellant s case to guide in estimation of g.p rate. However, I find that the appellant has declared total turnover of ₹ 1,30,82,444/- which includes export turnover of ₹ 1,04,62,689/- which has not been disputed by the Ld. AO. But undisputedly, the correctness of the purchases of ₹ 23,38,314/- has remained to be verified. Further, there are no details available about the actual cost of the purchases. However, I find that the said purchases are relating to the buying of Emerald Tumble Shape and that the quantity shown in those purchase bills have also been exported by the assessee. It is also notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, thus the order in respect of amount of ₹ 5,84,578/- has accepted and become final. After giving the appeal effect on the basis of the ld CIT(A) s order, the income of the assessee was revised to ₹ 11,78,838/-. The penalty proceedings U/s 271(1)(c) of the Act was initiated at the time of completion of assessment order i.e. on 26/12/2008. In the assessment proceedings, in paragraph No. 3, it was mentioned as under:- As the assessee has concealed its income and has filed inaccurate particulars of income, penalty proceedings U/s 271(1)(c) are being initiated separately by way of issue of notice. Similarly at page No. 8 of the assessment order, it was mentioned as under:- Assessed. Issued demand notice, challan and other necessary forms. Issue notice U/s 271(1)(c) for initiation of penalty proceedings for concealment of income. Charged tax interest U/s 234B and 234D as per calculation sheet (ITNS150) annexed with the order which forms part of the order. 3.2 The assessee was called upon by a fresh notice to give the reply. The assessee has filed reply on 21/3/2011 and the ld AR of the assessee namely Shri Rajesh Agarwal, C.A appeared and filed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before us. The ld AR of the assessee has submitted that from the findings given by the CIT(A) in quantum appeal, it can be noted that there is no dispute that purchases were made by the assessee and these goods were exported. In this order he only presumed that assessee must have made purchases from some parties, other than those from whom purchases are shown in the books and therefore there is a possibility of violation of section 40A(3) and inflating the cost of purchase. Thus, the entire finding of CIT(A) is based on certain presumptions. It is a settled law that penalty proceedings are independent and separate proceedings. No evidence is brought on record by the AO even in the penalty proceedings to prove that purchases are not made from the parties recorded in the books of accounts but from some other parties and that the purchase price is inflated. It is to submit that penalty u/s 271(1)(c) is levied when assessee has concealed its income or furnished inaccurate particulars of income. The word particulars used in the s. 271(1)(c) would embrace the meaning of the purchases made and not the party from whom it was made since words concealed , particulars and inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the export sale. Thus, the fact of purchases is proved. The Ld. CIT(A) has himself admitted these facts in the quantum order but only on the assumption that purchases might have been made from some other parties by inflating the cost of purchase justified the disallowance of 25% of unverified purchases on estimate basis. This shows that explanation of the assessee regarding the genuineness of the purchases made is bonafide and therefore even if certain percentage of purchases is disallowed, it do not amount to concealment of income or furnishing of inaccurate particulars of income. In view of above, the penalty confirmed by CIT(A) be deleted. 5.1 Besides that, the ld AR of the assessee has further submitted as under:- 1. The AO in the body of assessment order dated 26.12.2008 at Para 3, Page 7 initiated penalty proceedings u/s 271(1)(c) of the IT Act, 1961 by mentioning as under:- As the assessee has concealed its income and has filed inaccurate particulars of income, penalty proceedings u/s 271(1)(c) are being initiated separately by way of issue of notice However, at the end of the assessment order, the AO mentioned as under:- Issue notice u/s 271(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kar.) HC) (v) Radha Mohan Maheshwari Vs. DCIT order dt. 18.03.2016 in ITA No.773/JP/13 (vi) Shankar Lal Khandelwal Vs. DCIT order dt. 11.03.2016 in ITA No. 878/JP/13 6. At the outset, the ld DR has submitted as under:- As per provisions of section 271(1) (c), the assessee is liable to penalty if he has concealed particulars of his income or he has furnished inaccurate particulars of his income . Both these phrases have not been defined in the Act but Hon ble Supreme Court in the case of Dilip N shroff Vs JCIT 291 ITR 519(SC) examined the meaning of words concealment and inaccurate in para 43 of their judgment as under:- 43. The expression conceal is of great importance. According to Law Lexicon, the word conceal means: to hide or keep secret. The word conceal is con + celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the Income-tax authorities. In Webster s Dictionary, inaccurate has been defined as: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Chuharmal Vs CIT reported in 172 ITR 250(SC). The jurisdictional High Court in the case of CIT Vs Goswami Chandralat Bahuii in 125 ITR 700(Raj) has held as under:- the finding given in the assessment proceeding would be relevant and admissible material in penalty proceedings, those findings cannot operate as res judicata because the considerations that arise in penalty proceedings are different from those in assessment proceedings. It was held that the circumstances of the case must be such as to lead to the reasonable and positive conclusion that the amount represents the assessee's income. In the present case it has been proved beyond doubt that the applicant has deliberately furnished incorrect, untrue and false claim of purchases and it has not offered any plausible explanation neither in the course of assessment proceedings nor during the penalty proceedings. Though in the case of the applicant, the disallowance was made after observing unexplained/bogus purchases and there is no case of simple estimate still a claim was made by the appellant before the CIT(A) that no penalty can be imposed when additions were made on estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existence of the grounds mentioned in Section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's case, it may attract both the offences, i.e. , the concealment of income as well as furnishing of inaccurate particulars of income and therefore, the Assessing Officer rightly initiated the penalty proceedings for both the offences. In the penalty notice also both the offences were mentioned and therefore, the assessee got the adequate opportunity to explain its stand with regard to both the offences. Thereafter, the Assessing Officer levied the penalty only for furnishing of inaccurate particulars of income. Since the initiation of penalty proceedings included both the offences and the show-cause notice also included both the offences, the assessee got the adequate opportunity to explain both the offences and therefore, there is no illegality in levying the penalty with reference to only one offence. It is not a case where the notice was issued for one offence and the penalty is levied for another offence. Therefore, in my opinion, the above decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory ( supra ) does not support the case of the assessee. 27. The next contention of the learned Counsel for the assessee was that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer. Even though the Assessing Officer, in our opinion, failed to discharge his onus as he was not sure at the initiation of penalty u/s 271(1)(c) for which specific charge penalty has been initiated by the Assessing Officer. Even while levying the penalty also, the Assessing Officer simply relied on the Explanation to Section 271(1)(c) even though he levied the penalty for furnishing the inaccurate particulars of income. This is apparent from the provisions of Section 271(1)(c) that explanation of Section 271(1)(c) is not applicable in case inaccurate particulars are furnished. Therefore, in our opinion, the basis of levy of penalty itself is not correct. In this regard, we rely on the decision of Hon'ble Gujarat High Court in the case of New Sorathia Engineering Co. v. CIT (2006) 282 ITR 642 (Guj), in which it was held (Head Note):- It is incumbent upon the Assessing Officer to state whether penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee. ' 28. From the above, it is clear that in the above mentioned case the Assessing Officer has initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss income which leads to attract penal provisions by virtue of section 271(l)(c). In view of totality of the facts and keeping in view the provisions of section 271(l)(c) as well as submission of the assessee, the assessee is found guilty of furnishing of inaccurate particulars of income to the extent of ₹ 3,02,33,672/- within the meaning of sec. 271(l)(c) and, therefore, penalty u/s 271(l)(c) is imposed on the concealed income as per working given below. . . . 30. From the above, it is evident that after discussing the legal provision, including Explanation (1), the Assessing Officer discussed the facts of the case and then levied penalty for furnishing of inaccurate particulars of income. However, in the conclusion, the Assessing Officer has not mentioned the levy of penalty under Explanation (1); though in the earlier part of his order, the Assessing Officer has discussed the main section as well as Explanation (1) thereof and has also mentioned the circumstances under which the Explanation (1) would be applicable. But, thereafter, he discussed the facts of the assessee's case pointed out how there was a furnishing of inaccurate particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of such purchases by invoking the provisions of Section 145(3) of the Act. The same was confirmed in the appeal by the ld. CIT(A). No appeal was filed before the Tribunal. 9. Before us, it was contended by the ld AR of the assessee that the order was passed on presumption and there was no quarrel with respect to export of articles and it was submitted that the order of the Assessing Officer and the ld. CIT(A) was passed on presumption. It was further submitted that the assessment proceedings and the quantum proceedings are separate proceedings and no separate evidence was brought on record by the Assessing Officer in the penalty proceedings to prove that the purchases are not made from the parties recorded in the books of account but from the some other parties. In our view, the separate enquiries/proceedings were not required to be conducted by the Assessing Officer at the stage of penalty as the assessee, has failed to discharge the initial onus of proving the genuineness of the parties from whom the said three bills were issued at the assessment stage or before the appellate stage. In our view, no separate proceedings were required at the stage of determining the penalty a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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