VISION JEWELLERS,JAIPUR vs. DCIT, CIRCLE-1, JAIPUR, JAIPUR

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR JhlanhixkslkbZ]U;kf;dlnL; ,oaJhjkBksMdeys'kt;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihy la-@ITA No. 530/JP/2023 fu/kZkj.ko"kZ@AssessmentYear : 2010-11 cuke M/s. Vision Jewellers The DCIT C/o R.K. Dhandia, 22, Moti Doongri Road, Vs. Circle-1 MootiDoongri Circle, Jaipur Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACFV 4559 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Rohan Sogani, CA jktLo dh vksjls@Revenue by: Smt. Monisha Choudhary, Addl. CIT lquokbZ dh rkjh[k@Date of Hearing : 27/09/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 22 /11/2023 vkns'k@ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM The assessee has filed an appeal against the order of the ld. CIT(A) dated 23-06-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2010-11 wherein the assessee has raised following grounds of appeal.

‘’1 In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in imposing penalty u/s 271(1)(c) without specifically pointing out in the show cause notice whether

2 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR the penalty was proposed on concealment of particulars of income or furnishing inaccurate particulars of income. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire penalty of Rs.1,37,000/- imposed by the AO and confirmed by the ld. CIT(A).

‘’2 In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the AO in imposing penalty of Rs.1,37,000/-u/s 271(1)(c) of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire penalty of Rs.1,37,000/- imposed by the AO and confirmed by the ld. CIT(A).’’

3 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR 3. Being aggrieved by the penalty order of the AO dated 09-03-2020 imposing penalty of Rs.1,37,000/- u/s 271(1)©r.w.s. 274 of the I.T. Act, 1961, the assessee carried the matter before the ld. CIT(A) who confirmed the penalty by observing as under:-

‘’5.2 I have carefully considered the facts of the case, penalty order and the submissions of the appellant. It is seen that the CIT(A) has confirmed the order of the Assessing Officer with minor relief to the appellant. It is a fact that the directors in their statement during the search and post search enquiries described the modus operandi of their business accepting the fact that they had been indulged in issuing bogus bills against certain commission and the appellant is one of the beneficiary of bogus purchases. Since the directors admitted to this transaction, it is conclusive evidence gathered by the Department. As per the detailed penalty order, the assessing officer has clearly indicated that the appellant has furnished inaccurate particulars of income and therefore levied the penalty. As per Section 274 of the Act, the appellant has to be given reasonable opportunity of hearing before passing the penalty order. The notice u/s271(1)(c) of the Act is on such opportunity provided to the appellant as the same has not created any charge by itself. Charge on which penalty is sought to be levied is initiated in the assessment order itself. Therefore not striking off the unrelated charge in the notice of hearing cannot be held to be invalid as it is not the case of the appellant that he could not present his case in view of non- specific charge in the notice. Further, the penalty is also levied on the same charge of furnish inaccurate particulars as seen from the penalty order. Considering the above, the decisions relied upon are not relevant to the facts of the case and therefore, the penalty levied is upheld and grounds raised in this regard are dismissed. 7. In the result, the appeal is dismissed.’’

4 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR confirmed by the ld. CIT(A) should be deleted as the levy of penalty imposed by the AO is in a mechanical manner and without application of mind. The submission filed reads as follows:

‘’Assessee firm, for the year under consideration, was involved in the business of jewellery. Assessee firm, for the relevant previous year, filed its Return of Income on 30.03.2011, declaring NIL Income. I. QUANTUM PROCEEDINGS:Assessment for the year under consideration was completed, vide order u/s 143(3), dated 18.12.2017 [CLC: 1-8]. In the said assessment, trading addition amounting to Rs. 4,39,437 was made by the ld. AO, being 25% of alleged unverified purchases aggregating to Rs. 17,57,750. Along with it, addition on account of alleged commission payment of Rs. 3,516 was made by the ld. AO, being 0.20% of alleged unverified purchases aggregating to Rs. 17,57,750 Aggrieved by the order passed by the ld. AO, assessee firm preferred appeal before the ld. CIT (A), who, vide order dated 28.12.2018, in Appeal No. 1/10875/17-18 (PB: 9-30), confirmed the addition made by ld. AO.Considering the quantum of additions made, assessee firm did not prefer any appeal before the Hon’ble ITAT, Jaipur Bench, against the order passed by ld. CIT(A). II. Penalty Proceedings: On the additions sustained in the quantum proceedings,of Rs. 4,42,953, ld. AO levied penalty under Section 271(1)(c) of Rs.1,37,000. Against the order passed by the ld. AO, assessee firm preferred appeal before ld. CIT(A)/ National Faceless Appeal Centre (“NFAC”) who vide order dated 28.12.2018, in Appeal No. 1/10875/17-18 sustained the order of ld.AO. Against the order of NFAC, present appeal has been preferred by the assessee firm before the Hon’ble ITAT Jaipur Bench.

GROUNDS OF APPEAL GROUND NO. 2 PENALTY LEVIED BY THE LD. AO OF RS.1,37,000 U/S 271(1)(C). [Submissions apropos Ground No. 1 have been made subsequently] 1. SUBMISSION 1.1. Ld. AO passed the penalty order, imposing penalty of Rs.1,37,000, u/s 271(1)(c), on the trading additions and commission payment sustained in the quantum proceedings of Rs. 4,42,953, worked out on estimate basis.

5 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR 1.2. During the course of quantum proceedings, before the lower authorities, all the details of the purchases made by the assessee firm from the parties, alleged to be bogus by the ld. AO, were submitted.Details/documents submitted apropos the purchase transaction is set out hereunder [Compilation Page 9-30]: - 1.2.i Copy of confirmation of statement of account from both the supplier; 1.2.ii Copy of the ITR return filed by both the supplier; 1.2.iii Copy of PAN card of both the supplier; 1.2.iv Copy of the stock register relevant pages showing the sale made to assessee; 1.2.v Copy of the Purchase Bills; 1.2.vi Copy of the relevant pages of the Bank Account of the supplier wherein the payment received by them from the assessee through banking channel was appearing; 1.2.vii Copy of the bank statement of the assessee wherein the payment made to both the supplier was appearing; 1.2.viii Stock Register relevant pages, wherein the purchase was duly entered and also consumption details were appearing; 1.2.ix Copy of letter of reconfirmation from supplier along with retracted statement in the form of Affidavit by the Supplier filed with DCIT Surat; 1.2.x Copy of stock register pages of relevant Diamond Purchased,wherein the purchases was duly recorded, price wise and the same was consumed during year in manufacturing of jewellery which hadalso been sold out. 1.3. Ld. AO in the quantum proceeding simply relied upon the third party statement and made addition on estimate basis to the income of the assessee firm. 1.4. Ld. AO rejected the books of accounts of the assesseefirmunder Section 145(3), however, on purchases made trading addition of Rs. 4,39,437, being 25% of alleged unverified purchases [Compilation Page 1-8]. Ld. AO could not prove to the hilt; the fact of income being concealed by the assessee firmby way of such alleged unverifiable purchases. 1.5. All the requisite evidences, as referred to in Para 1.2 above, for substantiating the purchases made were submitted by the assessee firm in the quantum proceedings. Even though not accepted in the quantum proceedings, however, by furnishing such evidences, assessee firmfully discharged its obligation of proving the purchases atleast for penalty proceedings. The extent of onus in penalty proceedings is different and much less. 1.6. The extent of onus in penalty proceedings is much higher on ld. AO. Needless to mentioned that even in the penalty proceedings, lower

6 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR authorities have not been able to discharge such greater burden casted on them by the statue. 1.7. Under such circumstances, additions could be made or sustained in the quantum proceedings, however, the same analogy cannot be imported in the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act, 1961. 1.8. It may be pointed that before penalty could be imposed on the assessee firm, the ld. AO was duty bound, in the entirety of circumstances, to point, with concrete evidences, to the conclusion that assessee firmmade purchases which were bogus and that the assesseefirm had consciously concealed the particulars of its income or had deliberately furnished inaccurate particulars. 1.9. Lower Authorities failed to bring to the fore any material which could be accepted as an evidence for falsity of the claim of the assesseefirm or that the assesseefirm consciously concealed any particulars of Income. On the other hand, the ld. AO in a mechanical manner levied penalty on the premise that when any additions are sustained irrespective of the facts of the case penalty has to be levied. 1.10. Hon’ble Supreme Court in the case of KhodayEswarsa& Sons [1972] 83 ITR 369 (SC) held that “…From the above it is clear that penalty proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. Apart from the falsity of the explanation given by the assessee, the department must have before it before levying penalty cogent material or evidence from which it could be inferred that the assessee has consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt the original assessment proceedings, for computing the tax may be a good item of evidence in the penalty proceedings but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. In the case before us we have already pointed out that in the order levying penalty the Income-tax Officer has categorically stated that the reasons for adding the disputed amounts in the total income of the assessee have been already discussed in the original order of assessment and that they need not be repeated again. The Appellate Assistant Commissioner, we have already pointed out, has made only a guess-work. That clearly shows that except the reasons given in the original assessment order, for including the disputed items in the total income, the department had no other material or evidence from which it could be reasonably inferred that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. For all the reasons given above, it follows that there is no merit in the appeal and it is accordingly dismissed….”

7 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR 1.11. Further Hon’ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd [2010] 322 ITR 158 (SC)“……We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature….” 1.12. The extent of onus in quantum proceedings is different and higher on the assesseefirm. As against this, the extent of onus in penalty proceedings is different and higher on the revenue. Undoubtedly Explanation 1 to Section 271(1)(c) raises a presumption of concealment against the assesseefirm, if there are any additions to the returned income but the said presumption is rebuttable. In the instant case the overwhelming evidencesproduced, to substantiate the arrangement of the assessee firmwith his tenants relieve the assessee firmof his onus under section 271(1)(c). Needless to mention that assesseefirm might be lacking in substantiating the explanation but the same is not proved to be false nor is lacking in bona-fides. In view of this penalty imposed is contrary to the basic framework of the provisions of section 271(1)(c). 1.13. Hon’ble Bombay High Court in the case of Upendra V. Mithani ITA (L) No. 1860 of 2009, decided on 05.08.2009, observed in the matter of levy of penalty under section 271(1)(c) of the Act, that if the assessee gives an explanation which is unproved but not disproved i.e it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false, then no penalty can be imposed in such cases. Same ratio was laid down by the Hon’ble Gujarat High Court in the case of National Textiles (2001) 249 ITR 0125 (Guj-HC) 1.14. Further reliance is placed on the judgment of the Hon’ble Delhi High Court in the case of Vatika Construction (P.) Ltd. [2014] 45 taxmann.com 471 (Delhi), in which it has been held that “…Head Notes - Section 271(1)(c), read with sections 40A(3) and 44AD of the Income-tax Act, 1961 - Penalty - For concealment of income (Agreed additions) - Assessment year 2004-05 - Assessee carried on construction business - It had issued large number of bearer cheques to small suppliers of building material - In response to notice issued by Assessing Officer seeking to disallow said payments under section 40A(3), assessee offered that its income might be computed by applying net profit rate of 8 per cent of gross receipts - Assessing Officer having accepted

8 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR assessee's offer, made addition in terms of section 44AD - He also passed a penalty order under section 271(1)(c) - Tribunal, however, set aside said penalty order - Whether since at time of initiating penalty proceedings Assessing Officer did not have any material on record showing that payments made to suppliers were bogus, he could not have merely on basis of assessee's offer to be taxed on estimate basis, concluded that assessee had provided inaccurate particulars in its return - Held, yes - Whether, therefore, Tribunal was justified in setting aside impugned penalty order - Held, yes [Para 14] [In favour of assessee]…” 1.15. Lower Authorities have not brought on record anything to prove that income to this extent, in exactness nothing more or nothing less was concealed. Ld. AO has also not brought on record how the difference amount reached back to the assesseefirm, on what date and through whom. The alleged inflation of purchase is nothing more than a mere surmise atleast for penalty proceedings. No penalty under these circumstances can be imposed. 1.16. In view of above, the case of the assessee firmis squarely covered by the following decisions of the Hon’ble Jurisdictional High Court: 1.16.i Mahendra Singh Khedla [2012] 252 CTR (Raj.) 453., wherein it was held as under: [Compilation Page 32 to 34] “…The above finding of the tribunal makes it clear that additions made by AO were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in facts and circumstances of the case, penalty was wrongly levied by AO. The basis for levying penalty in present case is only estimation, which is purely question of fact and there is concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both….” 1.16.ii Shiv Lal Tak vs. CIT [2001] 251 ITR 373 (Raj.) [Compilation Page 35 to 40] 1.17. Based on the above Jurisdictional High Court judgments, the Hon’ble ITAT Jaipur bench in the undernoted cases has held that no penalty can be imposed where additional are on estimate basis. 1.17.i Vikram Singh vs. DCIT, ITA No. 143/JP/2016 [Compilation Page 41 to 60] 1.17.ii Deepak Dalela vs. ITO, ITA No. 1027/JP/2013 [Compilation Page 61 to 66] 1.17.iii Indus Jewellery Pvt. Ltd vs. DCIT, ITA No. 933/JP/2013 [Compilation Page 67 to 71] 1.17.iv Sharmila Jain vs. ITO, ITO No. 237/JP/2016 [Compilation Page 72 to 77]

9 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR 1.18. Ld. AO has misplaced his reliance on the judgment of the Hon’ble Supreme Court in the case of Dharmedra Textile Processors & Others [2008] 306 ITR 277 (SC). Ld. AO has misread the judgment. Hon’ble Apex Court has not at all held that mens rea is not essential. 1.19. It is submitted that the Hon’bleApex court in Union of India v. Rajasthan Spg. &Wvg. Mills [2009] 224 CTR 1 (SC) and in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) observed that conditions in section 271(1)(c), namely, concealment and furnishing of inaccurate particular, must be proved to levy penalty, demonstrated its intention that one's 'state of mind' had to be taken into account to see if that person wanted to contravene law by concealing income. Relevant extracts of the Hon’ble Supreme Court judgments have been set out for the sake of convenience: - 1.19.i Union of India v. Rajasthan Spg. &Wvg. Mills [2009] 224 CTR 1 (SC) “…..we need to examine the recent decision of this Court in Dharamendra Textile Processors’ case (supra). In almost every case relating to penalty, the decision is referred to on behalf of the revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile Processors’ case (supra) and we see no reason to understand or read that decision in that manner. In Dharamendra Textile Processors’ case (supra) the court framed the issues before it, in paragraph 2 of the decision…..” “…..we fail to see how the decision in Dharamendra Textile Processors’ case (supra) can be said to hold that section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile Processors’ case (supra) could not have interpreted section 11AC in the manner as suggested because in that case that was not even the stand of the revenue.”

1.19.ii CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) “…..We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the

10 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature….”

1.20. The proper analysis of the Dharmendra Textile Judgment has been done by the Hon’ble ITAT Pune Bench in the case of Kanbay Software India (P.) Ltd. Vs. DCIT [2009] 31 SOT 153 (PUNE). The relevant extracts are reproduced below for proper appreciation of the position even post Dharmendra Textile. Kanbay Software India (P.) Ltd. Vs. DCIT [2009] 31 SOT 153 (PUNE):- “..The views expressed by Their Lordships in Dharamendra Textile Processors’ case (supra) cannot be viewed as an authority for the proposition that a penalty under section 271(1)(c) is an automatic consequence of an addition being made to income of the taxpayer, for the reason that whether it is a civil liability or a criminal liability, penalty under section 271(1)(c) can only come into play when the conditions laid down under that section are to be satisfied. In view of the elaborate discussions in the preceding paragraphs, by no stretch of logic or rationale it could be said that imposition of penalty under section 271(1)(c) has a cause and effect relationship with addition being made to the returned income per se. An addition being made to income does, because of impact of Explanation 1, effectively does raise a presumption against the assessee but that is an entirely rebuttable presumption and the scheme of rebuttal is provided in the Explanation itself…”In the light of the above discussions, and for the detailed reasons set out above, we are of the considered view that even post Dharamendra Textile Processors’ judgment (supra) by the Hon’ble Supreme Court, merely because an addition is made to the income declared by the assessee, penalty under section 271(1)(c) cannot be imposed. In our considered view, Hon’ble Supreme Court’s judgment in the case of Dharmendra Textile Processors (supra) does not bring about any radical change in the scheme of section 271(1)(c) though it does nullify the earlier Division Bench judgment on Hon’ble Supreme Court in the case of Dilip N. Shroff judgment (supra) to the extent that it held that the onus was on the tax authorities to establish mens rea before a penalty under section 271(1)(c) can be imposed - a proposition which, in the esteemed views of the larger Bench, did not take into account the correct scheme of things as these were - more particularly of Explanation 1, as it exists now, to section 271(1)(c). Their Lordships have indeed held that a penalty under section 271(1)(c) is a civil liability but that expression is used in contradistinction with criminal liability and, as held by the Hon’ble Supreme Court itself in the case of Om Prakash Shiv Prakash (supra), there is no conflict in a liability being a civil liability and at the same time being penal in character. In effect, therefore, liability under section 271(1)(c) continues to have its basic penal character even as it is held to be a civil liability…”

11 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR 1.21. NFAC also upheld the penalty levied on the assessee firm, without any cogent basis

1.22. NFAC,confirming the penalty levied by the ld.AO, relied on the statement of the Directors of the entities from whom purchases were made by the assessee firm. Further, NFAC relied upon order of the ld. AO in the quantum proceeding. NFAC completely ignored the fact that the supplier had retracted from statement made by way of affidavit filled with DCIT Surat. Copy of such letter was submitted by assessee firm during the course of quantum proceeding.NFAC also relied upon the observations made by the ld. AO in the assessment order. Whereas, the legal position, as also set out hereinbefore, is that the penalty and assessment proceedings are completely different and separate proceedings. Onus on the assessee and on the Department in both the proceedings is different. Accordingly, on cogent basis was adopted by the NFAC in confirming the penalty levied by ld.AO. In view of the above, penalty levied by the ld. AO and confirmed by the NFAC may please be deleted.

GROUND NO. 2: PENALTY IMPOSED WITHOUT SPECIFICALLY PINPOINTING LIMB 1. SUBMISSION 1.1. It is submitted that for levy of penalty u/s 271(1)(c), ld. AO has to apply his mind and come to a conclusion that whether the penalty is being levied for concealment of particulars of incomeORfurnishing inaccurate particulars of income. 1.2. In the penalty proceedings, there is heavy onus on the ld. AO, initiating penalty, of proving the assessee firm guilty of concealment of income as penalty proceedings result into undue hardship for the assessee firm. Thus, it is inevitable that the authority levying penalty should be fully satisfied, after proper application of mind, that it is a fit case for levy of penalty. 1.3. Attention is drawn towards the notice issued under section 274 read with Section 271(1)(c), copy enclosed at Compilation Page 31. Snapshot of the same is as under: -

12 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR

1.4. Any notice issued under section 274, read with Section 271(1)(c) of the Income Tax Act, 1961, should specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income ORfurnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee firm as determination of such limb is sine qua non for imposition of penalty under section 271(1)(c). 1.5. It is pertinent to note that in the said notice ld. AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. Ld. AO has simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the ld. AO was of the view that the assessee firm has concealed the income by furnishing inaccurate particulars of income, then he

13 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the ld. AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind.

1.6. Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon’ble Supreme Court in the case of T. Ashok Pai (Supra) held as under:- “….Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxmann 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non- application of mind….”

1.7. In the case of Jyoti Ltd. [2013] 34 taxmann.com 65 (HC-Guj), the assessing officer in his penalty order noted as under:- "In view of the above facts, it is clear that the assessee concealed income/furnished inaccurate particulars of income. I, therefore, consider it a fit case for levy of penalty under Section 271(1)(c)" Hon'ble Gujrat High Court in the above case held that, where the Assessing Officer in order of penalty did not come to a clear finding regarding the penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, the Tribunal was justified in setting aside the impugned penalty order. Hon’ble Gujarat High Court followed the ratio laid down in the case of New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-HC). 1.8. The above ratio laid down in the case of Manjunatha Cotton & Ginning Factory(Supra) has been followed by various High courts in the below mentioned cases:- 1.8.i. SSA'S Emerald Meadows[2016] 73 taxmann.com 241 (Karnataka High Court) 1.8.ii. Mitsu Industries Ltd., ITA No. 216 of 2004, Gujarat High Court 1.9. SLP filed by the department against the said order was dismissed by the Hon’ble Supreme Court in the case of SSA'S Emerald Meadows [2016] 73

14 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR taxmann.com 248 (SC). Hon’ble Apex Court in the above mentioned case held that “we do not find any merit in this petition. The special leave petition is, accordingly, dismissed” (Emphasis Supplied). Thus the matter has stamp of approval of the Hon’ble Apex Court. 1.10. Attention is drawn towards the recent judgment of the Hon’ble Jurisdictional High Count in the case of Sheveta Construction Co. Pvt. Ltd, ITA NO. 534/2008, wherein the Hon’ble High Court at Para 9 of the its order held as under:- …Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order….”(Emphasis Supplied) 1.11. Attention is also drawn towards the decision of Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh[2021]434ITR1(Bom)“CASE NOTE…Direct Taxation - Penalty - Notice for - Section 271 of Income Tax Act, 1961 (ITA) - Present reference relates to mere defect in notice of not striking out relevant words before culminating penalty proceedings - Whether income tax authority's mere failure to tick mark applicable grounds notice issued under Section 271 of ITA vitiate entire penalty proceedings - Held, contravention of mandatory condition or requirement for communication to be valid communication is fatal, with no further proof - Even if notice contains no caveat that inapplicable portion be deleted, in interest of fairness and justice, notice must be precise - It should give no room for ambiguity - Dilip N. Shroff disapproves of routine, ritualistic practice of issuing omnibus show-cause notices - That practice betrays non-application of mind - Infraction of mandatory procedure leading to penal consequences assumes or implies prejudice - Dilip N. Shroff treats omnibus show-cause notices as betraying non-application of mind - Disapproves of practice of issuing notices in printed form without deleting or striking off inapplicable parts of that generic notice - Reference answered. [188], [191]..” 1.12. Hon’ble ITAT Jaipur Bench, vide its recent order dated 27.07.2017, in the case of Mohd. Sharif Khan, in ITA. No 441/JP/14, followed the ratio laid down by the Hon’ble Jurisdictional High Court in the above mentioned case and deleted the penalty levied on the assessee under section 271(1)(c).

15 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR In view of the above, penalty levied by the ld. AO deserves to be deleted as the same has been levied in a mechanical manner and without application of mind.’’

16 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR (c) The assessee furnished inaccurate particulars of income while producing false facts in order to reduce profits. (d) Moreover, as per the principle laid down by the Hon'ble Supreme Court in the case of Dharmendra Textile Processors : (2008) 306 ITR 277(SC), the penalty proceedings are no longer quasi criminal proceedings and, hence, the presence of mensrea is not required to be established. (e) Notwithstanding to above, the assessee has shown that it has made purchases from M/s Kriya Impex Pvt. Ltd. of Rs. 6,99,500/-, and from M/s Sun Diam of Rs. 10,58,250/-. However, on verification, it was found that no such physical purchases have been made and both entries are only accommodation entries. It only substantiate that the assessee. deliberately furnished inaccurate particulars of purchases/job work charges made from both the parties. 04. The word 'inaccurate particulars' means "particulars which are disclosed but such disclosure is not correct, true or accurate". The assessee has furnished inaccurate particulars that purchases have been made from M/s Kriya Impex Pvt. Ltd. of Rs. 6,99,500/-, and from M/s Sun Diam of Rs. 10,58,250/-, Further, the Ld. CIT(A) also sustained the addition of Rs. 4,42,953/- (25% of Rs. 17,57,750/-) In view of totality of the facts and keeping in view the provisions of section 271(1)(c), the assessee is found guilty of furnishing of inaccurate particulars of income to the extent of amount of Rs. 4,42,953/-. For that reason, I am satisfied that 'Assessee' has committed default u/s 271(1)(c) of the IT Act and, therefore, penalty u/s 271(1)(c) is imposed on the concealed income ….’’

6.1 The ld. CIT(A) has vide his order dated 23-06-2023 confirmed the penalty as imposed by the AO and thus dismissed the appeal of the assessee by holding that considering the above, the decisions relied upon are not relevant to the facts of the

17 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR case and, therefore, penalty levied is upheld and grounds raised in this regard are dismissed.

6.2 The ld. AR of the assessee on being similar to the case of assessee the issue is decided by the jurisdictional High Court of Rajasthan in the case of Commissioner of Income Tax Vs. Mahendra Singh Khedia [ 33 taxmann.com 666]. The relevant finding of the Honourable high Court is as under :

18 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR creditors, stock register was not maintained and misc. expenses on water transportation etc. were not verifiable and purchase vouchers of sand, steel, bajri etc. were self made etc. Assessee explained reasons for the above defects which were not accepted by the AO as not found satisfactory. The AO accordingly made estimation. The circumstances suggest that it may be just and proper case of making estimated trading addition but an inference therefrom cannot be drawn beyond doubt especially keeping in mind the nature of work in not maintaining those books and details supported with proper vouchers etc. that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee to attract the penal provisions. In view of above discussion and keeping in mind the fact and circumstances of the present case, we are of the view that the ld. CIT (A) was justified in deleting the penalty in absence of positive evidence with the department that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the addition in question. The first appellate order on the issue is thus upheld." 8. The above finding of the Tribunal makes it clear that additions made by the Assessing Officer were based on estimation only. A fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, in the facts and circumstances of the case, penalty was wrongly levied by the Assessing Officer. The basis for levying penalty in the present case is only estimation, which is purely a question of fact and there is a concurrent finding of fact recorded by first appellate authority as well as the appellate Tribunal both. 9. The income tax appeal can be admitted only on substantial question of law, but in our view no substantial question of law is involved in the present appeal so as to entertain it. The appellate authority as well as the appellate Tribunal both have recorded a concurrent finding of fact that additions in the present case are based on estimation only. 10. In these circumstances, we are of the view that no substantial question of law is involved in this appeal and the same is, accordingly, dismissed in limine.

Respectfully following the said finding and as the addition in the quantum proceeding being made on the estimate of gross profit @ 25 % upon which considering the above finding of the jurisdiction High Court we vacate the order of levy of penalty for an amount of Rs. 1,37,000/-.

19 ITA NO. 530/JP/2023 VISION JEWELLERS VS DCIT CIRCLE-1, JAIPUR

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 22 /11/2023 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. Vision Jewellers, Jaipur 2. izR;FkhZ@ The Respondent- The DCIT, Circle-1, Jaipur 3. vk;djvk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA No.530/JP/2023) vkns'kkuqlkj@ By order,

सहायकपंजीकार@Aेेजज. त्महपेजतंत