TMI Blog2022 (11) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... he year in which the search was conducted are to be considered only u/s.271AAA of the Act. The provisions of Section 271AAA(3) of the Act specifically excludes the provisions of Section 271(1)(c) of the Act for the said two specified previous years. The search in assessee s case having been conducted on 27.09.2008. Two specified previous years are AYs.2008-2009 2009- 2010. For these two assessment years, the penalty, if at all leviable, was u/s.271AAA of the Act and not u/s.271(1)(c) of the Act. Consequently, on this ground, the penalty as levied by the AO and as confirmed by the CIT(A) for the said two assessment years, stands deleted. Penalty u/s 271(1)(c) - defective notice u/s 274 - HELD THAT:- The penalty admittedly is leviable on the facts of each case. A perusal of present case clearly shows that the estimation of income has been done by the assessee when it filed its return insofar as books are not available. Estimation has been done by the AO when making the assessment by following a particular method of estimation. This method of estimation by the AO has been disturbed by the ld. CIT(A) who has applied an alternative method of estimation of the assesee s income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent survey had been done on the assessee on 09.07.2008. Admittedly, books of account of the assessee had not been found. There was a search on the assessee s premises also on 27.09.2008. Books of accounts were not found. The statements had been recorded from the Chartered Accountant of the assessee also. The Chartered Accountant of the assessee had stated that the assessee used to give notings in respect of the expenses incurred by the assessee for the purpose of preparation of the profit and loss account and filing its return. It was the submission that the assessment came to be completed wherein the income of the assessee had been estimated by adopting the turnover of the assessee as recorded by M/s Serajuddin Co. because the assessee was doing raising of minerals ore as a contractor for Serajuddin Co. only. The AO had treated 50% of the turnover as recorded in the books of account of Serajuddin Co. in respect of the assessee and granted the assessee expenses of about 30% and had determined the net profit. From the net profit the AO had reduced 50% of the turnover as having been returned to Serajuddin Co and had made the addition on protective basis. The balance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty could not be imposed. Ld. AR further placed reliance on the decision of Hon ble Gujarat High Court in the case of Subhash Trading Co., reported in [1996] 221 ITR 110 (Gujarat), wherein it was held that the return of income was less than 80% of the assessed income and after considering the effect of Explanation to Section 271(1)(c) of the Act as the assessment was best judgment and there was no proof of concealment of income, it was held that the penalty was not imposable. Further, the ld. AR placed reliance on the decision of Hon ble Chhattisgarh High Court in the case of Vijay Kumar Jain, reported in 325 ITR 378 (Chhattisgarh), wherein it has been held that in that case the assessee had estimated the profit as 6.36% of the gross profit and the AO has assessed profit as 10% of the gross profit and consequently, it was held that there was no concealment of income and therefore penalty could not be levied. He also relied upon the decision of the Hon ble Madras High Court in the case of Smt. K. Meenakshi Kutty, reported in [2002] 258 ITR 494 (Madras), decision of Punjab Haryana High Court in the case of Harigopal Singh, reported in [2002] 258 ITR 85 (Punjab Haryana) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viable u/s.271AAA of the Act. He drew our attention to the decision of the coordinate bench of Delhi Bench of the Tribunal in the case of Business Park Construction Co. Pvt. Ltd., passed in ITA No.3332/Del/2012, order dated 17.04.2013, wherein it has been held that the provisions of Section 271(1)(c) of the Act even held to be specifically excluded in the provisions of Section 271AAA(3) of the Act, where the search has been initiated u/s.132 on or after 01.06.2007. It was the submission that for the relevant assessment years the search had taken place on 27.09.2008 and consequently for the assessment years 2008-2009 and 2009-2010, the provisions of Section 271AAA was applicable and not the provisions of Section 271(1)(C) of the Act. 4. In reply, ld. CIT-DR vehemently supported the order of the AO and CIT(A). It was the submission that even in the case of estimation of income, penalty is leviable. He placed reliance on the decision of Hon ble Madhya Pradesh High Court in the case of Smt. Chandrakanta, reported in 205 ITR 607, wherein the Hon ble High Court has held that penalty is leviable. He also placed reliance on the decision of Hon ble Madras High Court in the case of S. Kri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere non-striking off of inaccurate portion cannot by itself invalidate the notice. ii.) This issue has also been decided in the favour of Revenue by the Hon'ble Madras High Court in the case of Sundaram Finance Ltd. vs. ACIT (93 taxmann.com 250) (para 16). It was held that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r /w Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at a belated stage. The Hon'ble Madras High Court also noted the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory (supra) while rendering its decision on the issue. The SLP against the decision of High Court in this case has also been dismissed by Hon'ble Supreme Court (99 taxmann.com 152). iii.) The satisfaction for initiating the penalty proceedings is recorded by the A.O. in the assessment order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,87,33,830/- on account of cash returned to M/s. Serajuddin Co. The expenses were unvouched and claimed on the basis of notings on a sheet of paper. Thus at the time of filing original return, the assessee was guilty of furnishing inaccurate particulars of income as well as concealing the income by way of inflation of expenses. It has been held by the Hon'ble Iaipur ITAT in the case of Grass Field Farms Resorts (P) Ltd. vs. DCIT (70 taxmann.com 176) on identical facts that where notice seeking to levy penalty mentioned both offences, i.e. one was concealing particulars of income and second for furnishing inaccurate particulars of income and since assessee was given adequate opportunity to explain both offences, there was no illegality in levying penalty with reference to only one offence. It was held that under the facts of the assessee'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 adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the Honourable Madhya Pradesh High Court held that when the assessee submitted his return and showed a loss of Rs.50,000/- and then revised it and showed a profit of Rs.7,500/-, he had necessarily suppressed the particulars of income and given an incorrect account of his income. The assessee did not maintain books of account. His income had, therefore, to be assessed on estimate basis. The Tribunal committed an error in holding that since the assessee's income was assessed on estimate basis, the assessee was not liable to any penalty. In the case of CIT Vs. S.Krishnaswamy Sons (219 ITR 157), the assessee was doing transport business. The original assessments for the assessment years 1979-80 and 1980-81 were completed on a total income of Rs.81,370/- and Rs.53,610/- respectively. Subsequently, there was a raid in the premises of the assessee. During the course of the search, trip-sheets were seized which showed suppression of collections from buses for 33 days for the assessment year 1979-80 and for 54 days for the assessment year 1980-81. The assessee admitted the suppression and filed revised returns for the two years which were accepted. Penalty was levied but it was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o initiated. The assessee contended that the Settlement Commission, Additional Bench, Mumbai for the assessment year 1999-2000 to assessment year 2001-02 in their case directed to assess the income at the rate of 7 percent of the gross receipts from the security business. It was submitted that not a single deficiency in the books of account was pointed out by the Assessing Officer and that the Assessing Officer over assessed the income. Moreover, the Assessing Officer while applying net profit rate of 10 percent had not given any comparable case. The Assessing Officer had initiated penalty proceedings for concealment of income whereas penalty has been levied for furnishing inaccurate particulars of income and as such on this ground alone penalty so levied needed to be quashed. On appeal, the Honourable Ahmedabad ITAT. held that in the case under consideration the desire to conceal was apparent when the assessee was not maintaining the books of account in the course of business and inflated expenses were being debited year after year in the books written well after the close of the year even when payments for such expenses was not being made. The assessee failed to substantiate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... human probabilities, especially when the conduct of the assessee showed that he had been inflating expenses and writing books well after the close of the year not only in the year under consideration but even in the preceding three assessment years also. In this view of the matter, the levy of penalty was held to be justified. In view of above facts, the appeal of the assessee is required to be rejected/ dismissed. 5. In respect of penalty levied for the assessment years 2008-2009 2009-2010, it was the submission of the ld. CIT-DR that in the assessment order the AO has mentioned that the penalty has been initiated both u/s.271(1)(c) of the Act and u/s.271AAA of the Act. It was the submission that mentioning of the wrong section in the penalty order is a curable defect. It was further submitted that the mistake in the penalty order should not be lead to the cancellation of the penalty order. For this proposition, he placed reliance on the decision of the Hon ble Supreme Court in the case of T. Ashok Pai, reported in [2007] 161 TAXMAN 340 (SC). It was the submission that inadvertent and bonafide mistake has been held to be ground enough for cancellation of penalty u/s.271(1)(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riking off of the inappropriate words in the paragraph deprives the assessee a fair opportunity to explain its stand thereby violating the principle of natural justice. The decision of the Hon ble Supreme Court in the case of Dilip N. Shroff (supra) when read with the decision of the Hon ble Apex Court in the case of Reliance Petro Products Ltd. (supra), would show that the decision in the case of Dilip N. Shroff (supra) continues to hold good in spite of the decision of the Hon ble Supreme Court in the case of Dharmendra Textiles (supra). 8. Further it is an admitted fact that there are catena of decisions both in favour of the assessee and against the assessee in respect of issue as to whether the penalty u/s.271(1)(c) of the Act is leviable on an estimated income. The penalty admittedly is leviable on the facts of each case. A perusal of present case clearly shows that the estimation of income has been done by the assessee when it filed its return insofar as books are not available. Estimation has been done by the AO when making the assessment by following a particular method of estimation. This method of estimation by the AO has been disturbed by the ld. CIT(A) who has appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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