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Before: SHRI H.S. SIDHU
Date of Hearing : 27-10--2015 Date of Order : 27-10-2015
O R D E R This appeal by the Assessee is directed against the Order of the Ld. Commissioner of Income Tax (Appeals)-Meerut dated 18.7.2014 pertaining to assessment year 2006-07.
The grounds of appeal read as under:-
The Ld. CIT(A) has failed to appreciate that no penalty can be imposed in the facts and the circumstances of the case which are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. The explanation of the assessee merely remaining disproved, it
cannot tantamount to a positive inference that the assessee’s contention is false. The impugned order be therefore, quashed.
2. That the Ld. CIT(A) has further erred and grossly violated the judicial discipline in not following rulings of various courts cited before him. He has not bothered to even refer them or distinguish them or distinguish tem in the body of his order.
3. On the facts and in the circumstances of the case the Ld. CIT(A) has failed to appreciate that the income element has been estimated as it is a no account case and thus in such a situation, the assessee cannot be visited with penalty u/s. 271(1)(c).
The brief facts of the case are that the assessee is a firm, engaged in the business of Civil Construction. Assessment was completed on 29.12.2008 on total income of Rs. 13,87,426/- against returned of Rs. 3,30,470/-. The total income assessed at Rs. 13,87,426/- included Rs. 7,49,145/- which stood unexplained. The assessee firm had shown gross turnover of Rs. 1,21,03,459/-. Statement on oath of Sh. Baljeet Singh Bakshi, partner revealed that no books of accounts were maintained. It was also admitted by the partner aforesaid that the firm purchases goods/ material, in cash, and as such there was no need to maintain book of account regularly. The AO in his assessment order has recorded that from the above statement of Sh. Baljeet Singh Bakshi, it is evident that the assessee could not have carried out a business of turnover exceeding Rs. 1 Crore without maintaining any books. This fact is also established from the above statement of Sh. Bakshi as he is unable to tell the names of the parties to whom payments has to be made as on date. Furthermore, it is not possible to conduct a business of such a huge size without keeping any account of receipts and payments. As per the AO during the course of entire assessment proceedings, the assessee had been evading reply to the queries raised and also failed to comply with the statutory notices u/s. 142(1). From the bank statement filed by the assessee and the incomplete narration of these entries filed by him the credit entry dated 5.9.2005 of Rs. 3,00,000/- and dated 30.11.2005 for Rs. 4,49,145 were remained unexplained. Thereafter, the AO completed the assessment u/s. 144 of the I.T. Act, 1961 and the Ld. CIT(A) in turn confirmed the decision of the AO. Accordingly, the Asstt. Commissioner of Income Tax, Circle-2, Meerut vide his penalty order dated 28.6.2011 passed u/s. 271(1)(c) of the I.T. Act, 1961 has observed that the assessee has concealed the true particulars of his income and levied the penalty at Rs. 5,32,000/-.
Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 18.7.2014 has restricted the penalty to Rs. 3,54,771/- instead of Rs. 5,32,000/- and partly allowed the appeal of the assessee.
At the time of hearing, Ld. Counsel for the Assessee has stated that the penalty proceedings ought to fail, that in terms of the satisfaction note recorded in the assessment order, the penalty was initiated for furnishing of inaccurate particulars. The notice for penalty was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. He stated that that both the concealment of particulars of income or furnishing of inaccurate particulars, the eventual penalty order is for concealment of particulars of income where the penalty proceedings were initiated for furnishing of inaccurate particulars, if finally culminated into an order for concealment of particulars of income. In other words, no proper or reasonable opportunity was given by the AO to meet the charge. The charge itself was stated to be nebulously. It has been held by the Hon’ble Gujrat High Court that where the show cause notice of penalty is vague or ambiguous, no penalty is sustainable. The penalty notice contains both ingredients of penalty without satisfying the particular contravention for which the proceedings have been initiated. In such circumstances, the penalty as levied by the AO in terms of his order dated 29.12.2008 in ab initio invalid, illegal and must be quashed. Ld. Counsel for the assessee relied upon the following citations:-
a) New Sorathia Engg. Co. (2006) 282 ITR 642 (Guj) b) Manu Engg. Works (Supra) (1980) 122 ITR 306 (Guj) c) Chennakesava Pharmaceuticals (2012) 349 ITR 196 (AP) d) Whiteford India Ltd. (2013) 38 Taxman.com 15
Finally, he stated that penalty in dispute has been levied by the AO and wrongly confirmed by the Ld. CIT(A) is in violation of principles of natural justice, in as much as, without specifying the exact charged on the Assessee, the penalty has been levied on a premise which the assessee was never told and or allowed to meet. He requested that on legal issue the issue may be cancelled.
On the contrary, Ld. DR relied upon the order of the Ld. CIT(A) and stated that the quantum in dispute has been upheld by the Revenue Authority and the penalty in dispute has rightly been levied by the AO, because the Assessee has not offered any explanation on the issue in dispute before the Revenue Authorities and even before this Bench.
I have heard both the parties and perused the orders passed by the Revenue Authorities alongwith relevant records available with the Appeal filed. I have perused the notice dated 29.12.2008 issued by the Asstt. Commissioner of Income Tax, Circle-2, Meerut for the asstt. Year in dispute for initiating the penalty and directing the assessee to appear before her at 3.00 PM on 8.1.2009 and issued a Show Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notice dated 29.12.2008 issued by the AO to the assessee, I am of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income, but in the penalty order dated 28.6.2011 he has stated that he is satisfied that the assessee has concealed the true particulars of his income. For the sake of convenience, the relevant para at page no. 2 of the penalty order is reproduced as under:-
“In view of the clear cut confirmation of the addition of aforesaid two accounts of Rs. 3.00 lacs and Rs. 4,49,145/- totaling to Rs. 7,49,145/- by the CIT(A) in his order dated 25.11.2010, I am satisfied that the assessee has concealed the true particulars of his income.”
7.1 Similarly, the AO as well as the Ld. CIT(A) has given clear finding regarding the concealment of income by the assessee. For the sake of convenience, the relevant lines of para 4.1 of the impugned order passed by the Ld. CIT(A) is reproduced as under:-
“4.1………….From an analysis of the original assessment order, appellate order as well as the penalty order it is clear that enough opportunity to explain the credit entries were given to the appellant at the stage of assessment, appeal and penalty proceedings. The AO as well as Ld. CIT(A) has given clear findings regarding concealment of income by the Assessee. The appellant on the other hand has raised the same arguments which he has made before the AO and before the Ld. CIT(A) who decided the case of quantum addition. The case laws quoted by the AR of the appellant are not of much relevance because in this case the Ld. CIT(A) has found that the quantum addition has been correctly made. Moreover, the addition which is being contested here was not made on estimates basis as has been alleged in the write-up of the AR. The addition which has led to initiation of penalty has been made after due enquiry by the AO. Based on above observations Ground Nos. 1 & 2 are dismissed.”
Keeping in view of the aforesaid finding given by the AO as well as the Ld. CIT(A), I am of the considered view that the AO has issued notice dated 29.12.2008 to the assessee for initiation of penalty u/s. 271(1)(c) of the I.T. Act for furnishing of inaccurate particulars of income, but has levied the penalty in dispute for concealment of income by the assessee. In my view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income, whereas the penalty in dispute has been levied by the AO on account of 6 concealment of true particulars of income by the assessee. In my view the penalty is not sustainable in the eyes of law and my view is supported by the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Whiteford India Ltd. {2013} 38 taxmann.com 15 (Gujarat). Accordingly, I delete the penalty in dispute and decided the issue in dispute in favor of the assessee and against the Revenue.
In the result, the appeal filed by the assessee stands allowed.