S.M.ENTERPRISERS,KEONJHAR vs. DCIT,CIRCLE-2(1), BHUBANESWAR

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अऩीऱ सं/ITA Nos.199, 200, 201 & 202, 233 & 234/CTK/2020 (ननधाारण वषा / Assessment Years :2004-2005 to 2009-2010) S.M.Enterprises, Vs DCIT, Circle-2(1), Bhubaneswar At : Balda, PO : Joda, Keonjhar-758034 Bhubaneswar-751013 PAN No. : AATFS 6804 M (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. ननधााररती की ओर से /Assessee by : Shri Sunil Mishra, Advocate राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR सुनवाई की तारीख / Date of Hearing : 20/10/2022 घोषणा की तारीख/Date of Pronouncement : 20/10/2022 आदेश / O R D E R Per Bench : These are the appeals filed by the assessee against the separate orders of the ld.CIT(A)-1, Bhubaneswar passed in I.T.Appeal Nos.0105- 0108/15-16, dated 01.09.2020 and in I.T.Appeal Nos.0109 & 0110/15-16, dated 22.09.2020 for the assessment years 2004-2005 to 2009-2010. 2. It was submitted by the ld. AR that the assessee had originally filed its return of income declaring its income from extraction of iron ore as a contractor in the mines of Serajuddin & Co. There was a search in the premises of the Serajuddin & Co. on 28.05.2008. Consequent 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

2 ITA Nos.199-202, 233&234/CTK/2020 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 net profit had been treated as substantive in the hands of the assessee. It was the submission that the AO had levied penalty u/s.271(1)(c) of the Act for concealment. It was further submitted that in respect of the quantum matter, on appeal before the ld. CIT(A), the ld. CIT(A) had directed the AO to estimate the income of the assessee at 10%. It was the submission that the penalty has not been revised after giving effect to the order of the ld.CIT(A). It was further submitted that on appeal before the Tribunal, the Tribunal vide its order dated 20.10.2022, passed in IT(SS)A Nos.128-137/CTK/2013, had reduced the estimation to

3 ITA Nos.199-202, 233&234/CTK/2020 8% of the turnover as recorded in the books of Serajuddin & Co. in respect of the assessee. It was the submission that the fact that the AO himself has taken the stand that 50% of the turnover has been returned to Serajuddin & Co., has not been considered by the ld. CIT(A) or by the Tribunal for the purpose of estimation of the assessee’s income. Thus, clearly the income of the assessee is on an estimation basis by the AO, by the CIT(A) and by the Tribunal. It was the submission that admittedly the assessee had not cooperated before the AO. It was the submission that though the AO mentions that a lot of seized documents and incriminating documents have been found in the case of the assessee, the assessment was culminated on an estimation basis. It was this estimation basis which was challenged in appeal before the ld. CIT(A) and further before the Tribunal. It was the submission that an addition made on estimate basis, at the outset, cannot lead to conclusion of concealment and no penalty is liable to be levied on the assessee. For this proposition, ld. AR placed reliance on the decision of Hon’ble Delhi High Court in the case of Aero Traders (P.) Ltd. [2010] 322 ITR 316 (Delhi), wherein the Hon’ble Delhi High Court has held that the estimation was based on an estimation of profit and such estimation was reduced by the ld. CIT(A) as no conclusive proof was available and no penalty u/s.271(1)(c) of the Act was leviable. He further placed reliance on the decision of the Hon’ble Punjab & Haryana High Court in the case of Sangrur Vanaspati Mills Ltd., reported in [2008] 303 ITR 53 (Punjab & Haryana), wherein it was held that the addition to income was based on estimation that there was no

4 ITA Nos.199-202, 233&234/CTK/2020 evidence on concealment of income and consequently 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 the decision of Hon’ble Gujarat High Court in the case of Valimkhhai H. Patel, reported in [2006] 280 ITR 487 (GUJ.). All of which was in respect of non-levy of penalty u/s.271(1)(c) of the Act when the income is estimated. The ld. AR further placed before us the copies of the notices issued u/s.274/271(1)(c) of the Act to submit that the AO has not cancelled much less intimated the assessee as to whether he proposed to levy the penalty for concealment

5 ITA Nos.199-202, 233&234/CTK/2020 of particulars of income or for furnishing of inaccurate particulars of such income. It was submitted that the coordinate bench of the Tribunal in the case of M/s Bishandayal Jewellers, passed in ITA Nos.88 & 89/CTK/2019, order dated 15.10.2020, following the principle laid down by the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (SC), wherein the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, reported in [2013] 35 taxmann.com 250 (Karnataka), had held that non-striking of inappropriate words in the penalty notice would lead to the cancellation of the penalty levied. It was also the submission that the Hon’ble Supreme Court in the case of Dilip N. Shroff, reported in [2007] 291 ITR 519 (SC), has observed that while issuing the notice u/s.274/271(1)(c) of the Act in the standard format, the AO should delete the inappropriate words in the paragraph otherwise it may indicate that the AO himself was not sure as to whether he had proceeded on the basis that the assessee had concealed its income or had furnished the inaccurate particulars of income and, thus, according to the Hon’ble Supreme Court, this itself deprives the assessee a fair opportunity to explain its stand thereby violating the principle of natural justice as has been held by the Hon’ble Supreme Court in the case of Reliance Petro Products, reported in 322 ITR 158 (SC). It was the submission that the principle laid down by the Hon’ble Supreme Court in the case of Dilip N. Shroff (supra) holds good in spite of the decision of the Hon’ble Supreme Court in the case of Dharmendra Textiles Processors, reported in 306 ITR 277 (SC).

6 ITA Nos.199-202, 233&234/CTK/2020 3. It was further submitted that for the assessment years 2008-2009 & 2009-2010, being in respect of ITA Nos.233 & 234/CTK/2020, the penalties have been levied u/s.271(1)(c) of the Act, whereas the penalty in both the appeals were to be leviable 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. Krishnaswamy & Sons, reported in 219 ITR 157 and the decision of coordinate bench of the Tribunal in the case of Shuorajsingh B. Chauhan, 41 SOT 453. It was the further submission that in respect of non-striking off of the relevant portion of the penalty notice,

7 ITA Nos.199-202, 233&234/CTK/2020 the issues had been held in favour of the revenue in the case of Sundaram Finance ltd., 93 taxmann.com 250 and the SLP against the said decision had also been dismissed by the Hon’ble Supreme Court reported in 99 taxman.com 152. He also relied upon the decision of Hon’ble Mumbai High Court in the case of Maharaj Garage & Company, 400 ITR 292 and the decision of the coordinate bench of the Tribunal in the case of Earth Moving Equipment Service Corporation, reported in 84 taxman.com 51. He also relied upon in the case of Smt. Chandrakanta, reported in 205 ITR 607. Ld. CIT-DR has also filed his written submissions as follows :- i.) The question for adjudication in the present case is that where the Assessing Officer directs initiation of penalty proceedings in the assessment order but in the show cause notice, it is not indicated whether penalty is sought to be imposed for furnishing inaccurate particulars of income or for concealment of income by not striking off the inapplicable portion in the printed notice, whether it would vitiate the penalty proceeding and the consequential order of penalty or not. This issue has been decided in the favour of Revenue by the Hon'ble Mumbai High Court in the case of CIT vs. Smt. Kaushalya (216 ITR 660) (paras 7 to 12). It was held by the Hon'ble Mumbai High Court that section 274 or any other provision in the Act or the Rules, does not either mandate the giving of the notice or its issuance in a particular form. Penalty proceedings are quasi-criminal in nature. Section 274 contains a principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint for failure of principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or 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

8 ITA Nos.199-202, 233&234/CTK/2020 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 notice which is being issued u/s.274 is merely to allow the assessee an opportunity of being heard. It is not mandatory to specify the nature of charges in such a notice. It must be borne in mind that no statutory form has been prescribed for such notice. This issue also stands settled by the decision of Hon'ble Mumbai High Court in the case of Maharaj Garage & Company vs. CIT (400 ITR 292) (para 15) wherein it was held that the requirement of Section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged. The assessee was supplied with the findings recorded in the order of re-assessment, which was passed on the same date on which the notice under Section 271(1)(c) was issued, initiating the proceedings of imposing the penalty. The assessee had sufficient notice of the action of imposing penalty. Therefore the High Court did not find either any jurisdictional error or unjust exercise of power by the authority. iv.) In the case of Earth moving Equipment Service Corporation (84 taxmann.com 51), the penalty u/s. 271(1)(c) was sustained by the Hon'ble Mumbai ITAT on the ground that the AO therein had levied penalty after due application of mind, in as much as in the assessment order, it was mentioned that penalty proceedings were being initiated for furnishing of inaccurate particulars of income and the penalty was finally levied on the same ground. Further the ITAT held that mere non marking of the relevant clause in the notice is a curable defect, and the action of the revenue is rescued by the provisions of section 292BB of the Act, which cures minor defects in the various notices issued, provided that such notice, in substance and effect, was in conformity with the intent and purpose of the Act. Thus the Hon'ble Bench concluded that penalty could not be deleted on this ground. v.) It must be appreciated that concealment of income is the result of furnishing inaccurate particulars of income. It is evident that for assessment year 2004-05, the assessee had filed the original return

9 ITA Nos.199-202, 233&234/CTK/2020 of income showing total income of Rs.19,32,190/- on 06.10.2004. The A.O. has computed the total income at Rs.47,93,532/- excluding protective addition 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 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. In these facts & Circumstances, the issue was decided in the favour of the Revenue. The decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) which was delivered without considering the earlier decision of Hon'ble Mumbai High Court in the case of CIT vs. Smt. Kaushalya (supra) is Per Incuriam and can't be considered as a binding precedent. vi.) Reliance is also placed on the decision in the case of Smt Ram Piari Vs CIT (327 ITR 318), wherein the Assessing Officer found undisclosed income from capital gains on account of sale of property and he imposed penalty which was upheld by the Commissioner (Appeals) as well as by the Tribunal. It was held by Honourable Punjab & Haryana High Court that the contention that the penalty was liable to be set aside on account of the Commissioner (Appeals) describing the action of the assessee as "showing inaccurate particulars, while the Assessing Officer described it as "concealing the particulars" could not be upheld. The observations of the Commissioner (Appeals) were also in the context of concealing and mere fact that mention of inaccurate particulars was also made, did not make any difference. It was clear that the assessee had concealed the particulars of income as well as given inaccurate particulars. The penalty provision was to provide remedy for loss of revenue for which the element of "wilful" concealment was not essential.

10 ITA Nos.199-202, 233&234/CTK/2020 vii.) The penalty can be levied even in the cases where the income is estimated. In the case of CIT Vs. Smt. Chandrakanta (205 ITR 607), the assessee filed a return showing a loss of Rs.51,530/- for the assessment year 1963-64. He then revised his return and showed profit of Rs.7,500/-. He was not maintaining any books of account. The Income-tax Officer, therefore, estimated and determined the income at Rs.51,000/-. Since the minimum penalty leviable exceeded Rs.1,000/-, the matter was referred to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner imposed a penalty of Rs.10,000/- as, according to him, the case fell under section 271(l)(c) of the Income-tax Act, 1961. On appeal, the Tribunal cancelled the penalty. On a reference, 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 cancelled by the Tribunal. On a reference, it was held by Honourable Madras High Court that !}le Tribunal had not expressly held that for the default committed by the accountant, penalty under section 271(1)(c) of the Income-tax Act, 1961, could not be levied. This question did not arise from the order of the Tribunal and could not be considered. The Tribunal had not given any finding on the question whether the assessment was based on compromise and this question could not be considered by the High Court. The Tribunal had accepted the contention that two of the assessee- firm's partners were not able to look after the assessee firm's business. The assessee firm had four partners and if two of the partners were engaged otherwise, the other partners could have looked after the business. This was not a case of the Assessing Authority estimating the income. Even assuming that the revised assessment was based on an estimate, penalty could be levied. In view of the search made and the seizure effected gross omissions of collections were found out and subsequently, the assessee itself had filed revised returns accepting the omissions. Accordingly it was held by Honourable Madras High Court that the cancellation of penalty was not valid. In the case of Shuorajsingh B. Chauhan Vs.

11 ITA Nos.199-202, 233&234/CTK/2020 ACIT (41 SOT 453), a survey under section 133A of the Act had been conducted in the premises of the assessee on 24-1-2002.It was further noticed that books of account for the financial year in question were to be written only after completion of March as regular practice every year. The Assessing Officer also did not find any evidence in support of the various expenses incurred by the assessee. In the light of statements of the assessee and his employees that books of account had not been written until the date of survey and on the basis of enquiries made in consequence of survey, especially when genuineness of various expenses was not proved while the assessee had declared additional income before the Settlement Commission in the preceding assessment years, the Assessing Officer rejected the book results for the year under consideration, having recourse to provisions of section 145(3) of the Act and estimated 10 percent of the receipts amounting to Rs.32,48,902/- as net business income for the year under consideration. Inter alia, penalty proceedings under section 271(1)(c) were also 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 expenditure debited in his own accounts. The Income-tax Officer noticed various defects in the maintenance of books of account. If the income had to be assessed under section 145 of the Act, then the presumption would be that the income was not properly returned, as held by Hon'ble jurisdictional High Court in Chandra Vilas Hotel's case and levy of penalty has to be upheld. The Tribunal further held that there is no substance in the contention that penalty under section 271(1)(c) of the Act cannot be imposed in all circumstances whenever the income was assessed on estimate rejecting the explanation of the assessee. Even on estimated additions, levy of penalty has been upheld in the case of CIT Vs. Md. Warasat Hussain (171 ITR 405) (Patna High Court), CIT Vs. E.V. Rajan (151 ITR 189)(Madras High Court), CIT Vs. Hoshiarpur Express Transport Co. Ltd. (162 ITR 393) (Punjab & Haryana High Court), CIT Vs. FazilkaDabwali Transport Co. (P.)

12 ITA Nos.199-202, 233&234/CTK/2020 Ltd. (178 ITR 656) (Punjab & Haryana High Court), and A.M. Shah & Co. Vs. CIT (238 ITR 415) (Gujarat High Court). It was further held that even the feeble plea on behalf of the assessee that penalty had been initiated for concealment of income while had been levied for furnishing inaccurate particulars of thereof was not correct since both the Assessing Officer and the CIT(A) had levied penalty because the assessee concealed his income by claiming inflated expenditure i.e., furnishing inaccurate particulars of such claim of expenditure. The CIT(A) held that the assessee had deliberately manipulated its books of account in such a fashion that there was no other way but to estimate the income of the assessee and that the assessee concealed his income by claiming the inflated expenditure in his books of account. The Ahmedabad Tribunal further held that it agreed with the CIT(A) that this was not a case of pure and simple estimation but a case of estimation for the reason that the expenditure claimed was deliberately inflated and there were various wrong claims. In the light of the above discussions, it was held that all the material facts and particulars relating to the assessee's computation of income were never disclosed by the assessee and it was further clear that the explanation offered by the assessee had not been substantiated and as well as it was not found to be plausible and bona fide one and it was against all 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

13 ITA Nos.199-202, 233&234/CTK/2020 (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) of the Act by the Hon’ble Supreme Court, the corollary being a bonafide mistake in mentioning of the section in respect of levy of penalty by the AO should also be treated as bonafide mistake. 6. We have considered the rival submissions. For the assessment years 2008-2009 & 2009-2010, which are the years in respect of which the AO issued notice u/s.271(1)(c) as also penalty notice u/s.271AAA of the Act, but has levied the penalty u/s.271(1)(c) of the Act by its order dated 16.03.2015 and has not levied any penalty u/s.271AAA of the Act is considered, the penalty as levied by the AO is 100% of the tax sought to be evaded. The penalty leviable u/s.271AAA of the Act is only 10% of the undisclosed income. Thus, clearly the intention of the AO was to levy penalty u/s.271(1)(c) of the Act and it cannot be considered as a mistake on the part of the AO. A perusal of the provisions of Section 271AAA of the Act shows that when a search has been conducted on or after 1st June, 2007 but before 1st day of July, 2012 then for the specified previous year being the previous year which has ended before the date of search but the date of filing of the return u/s.139(1) of the Act has not expired and the assessee has not filed his return as also the 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

14 ITA Nos.199-202, 233&234/CTK/2020 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. Thus, ITA Nos.233 & 234/CTK/2020 stand allowed. 7. Coming to the appeals filed by the assessee in ITA Nos.199- 202/CTK/2020 for AYs. 2004-2005 to 2007-2008, a perusal of the notice issued u/s.274/271(1)(c) of the Act, dated 19.12.2014 for all the above assessment years, it is found that the AO has not struck off the inappropriate words in the penalty notices. A perusal of the decision of the Hon’ble Supreme Court in the case of Dilip N. Shroff, referred to supra, clearly shows that the non-striking 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

15 ITA Nos.199-202, 233&234/CTK/2020 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. The coordinate bench of the Tribunal went further to revise the estimation as done by the ld. CIT(A). A perusal of the assessment order clearly shows that the estimation as done by the AO in the assessment order is not on the basis of any seized documents but by interpretation and presumption drawn out of the various seized documents. Thus, at no stage, it can be said that there has been a contumacious conduct on the part of the assessee, which can lead to the conclusion of concealment of income. In the circumstances, as the income of the assessee has been estimated at all stages and there is no evidence of concealment of income at any of its stages, right from the filing of return to the appeal before the Tribunal, we are of the view that no penalty is leviable. 9. It is further recognised that when there are catena of decision both in favour the assessee and against the assessee, the view in favour of the assessee is to be adopted as has been held by the Hon’ble Supreme Court in the case of Vegetable Products, reported in 88 ITR 192 (SC). In the circumstances, as no concealment has been proved in the case of the assessee, the penalty as levied by the AO and confirmed by the ld. CIT(A) stands deleted. Our decision to delete the penalty also gets support from

16 ITA Nos.199-202, 233&234/CTK/2020 the fact that the AO has not struck out inappropriate words in the paragraphs of notice issued u/s.274/271(1)(c) of the Act and on account of the fact that income of the assessee has been assessed only on estimation basis and no evidence of concealment of income has been found in the case of the assessee. In the circumstances, all the four appeals of the assessee for AYs.2004-2005 to 2007-2008 stand allowed. 10. In the result, all appeals of the assessee are allowed. Order dictated and pronounced in the open court on 20/10/2022. Sd/- Sd/- (अरुण खोड़पऩया) (जाजज माथन) (ARUN KHODPIA) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 20/10/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- 1. प्रत्यथी / The Respondent- 2. आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. 4. आयकर आयुक्त / CIT पवभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, 5. ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. आदेशानुसार/ BY ORDER, सत्यापऩत प्रयत //True Copy// (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack