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TMI Blog2012 (6) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) was leviable on addition made on account of unaccounted sale of raw-material. Regarding penalty levied for diversion of income by sale to sister concern - addition was made due to the reason that the assessee-firm had disclosed lower profit on sale made to sister concern - Held that:- There is no definite finding that the transaction of sale made to 'ME' was a sham transaction. The figures of sale made to 'ME' (sister concern) were disclosed in the accounts statement and those figures had not been disputed by the department. The conduct of the assessee was bona fide. Material particulars with regard to the sale made to 'ME' were disclosed by the assessee, at the time of filing of its return of income with the department. Facts of the case may justify the addition made on account of low rate of profit on sale made to the sister concern but were not sufficient to sustain the penalty imposed under section 271(1)(c). - IT APPEAL NOS. 1444 & 1445 (AHD.) OF 2008 - - - Dated:- 25-1-2012 - G. C. Gupta, Mukul Kr. Shrawat, A. N. Pahuja And A. Mohan Alankamony, JJ. K. C. Patel and M. K. Patel for the Appellant S. K. Gupta and Vinod Tanwani for the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal effect of the order of the Tribunal was conferred, however, after giving effect to the directions of the ITAT, the income was assessed on the same figures as it was assessed earlier while giving the effect of the order of the Learned CIT (Appeals). With this brief background, once the fresh assessment was made and the income was finally determined by the Assessing Officer, then the penalty proceedings were started and as per the impugned order of section 271(1)(c) of the Act, 1961 dated 28/06/2007, it was held that the assessee had failed to furnish the explanation against the levy of penalty, hence placing reliance on the assessment order through which the revised income was finally assessed, it was held that the amount of income on which the tax was sought to be evaded was ₹ 10,70,765/- over which tax evaded was computed at ₹ 4,79,478/- and, accordingly, penalty was levied. The appellant has challenged the action of the Assessing Officer and it was argued that the penalty proceedings are separate proceedings, therefore, the Assessing Officer should not have made the levy of penalty on the findings as made during the quantum proceedings. It was also argued that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,18,965/- which was made on account of diversion of income to M/s. Milton Exports, the Learned CIT (Appeals) has reproduced a finding of the Tribunal which was made not for the year under consideration but for the year 1992-93. In the opinion of Learned CIT (Appeals), the said arrangement of diversion of income to M/s. Milton Exports was a collusive arrangement with a motive to evade the tax. The third addition was disallowance of purchase of clothes and since that disallowance was also confirmed by the Hon'ble ITAT, therefore, Learned CIT (Appeals) has held that on account of furnishing of inaccurate particulars, the said addition was also exigible to penalty u/s. 271(1)(c) of the I.T. Act, 1961. As a result, the levy of penalty was upheld. 4. After hearing the submissions of both the sides we have noticed that while deciding the quantum appeal the Tribunal has followed an earlier decision of the Tribunal pertaining to the assessment year 1992-93. The said quantum order was passed by the respected co-ordinate Bench B, ITAT Ahmedabad in ITA Nos. 1576 1810/Ahd/1997 for A.Y. 1993-94 dated 25.4.2005. Vide para (3) it was held that the issues involved were covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89,851/- the AO worked out the income diverted at ₹ 46,51,220/-. The FAA while disposing the assessee's appeal on the issue worked out the cost of the said goods sold considering the manufacturing expenses involved and he having considered their cost price at ₹ 47,37,232/- worked out the income diverted at ₹ 23,47,381/-. We, therefore, note that the said goods have been sold by Milton to foreign buyers for ₹ 31,28,118/- and thereby Milton earned a profit of ₹ 7,38,267/-. According to the assessee, Milton was set up as a separate organization for export of goods under the brand name MILTON by various concerns of the group including the assessee firm and with a view to have a foot-hold in the export market the goods were exported at a price so low which in the commercial term is called dumping . If so was the intention for business expediency of the group including the assessee firm the goods should have been transferred to Milton for export purpose at a price at which the same were sold to foreign buyers. Such price rate charged from the foreign buyers is also substantially lower than the local market rate, but the assessee firm along with others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome unless such discrepancy is borne out of the books of account maintained in the normal course of business and independent material evidence is brought on record in support. The AO having made no effort either to examine the books of account so as to see the relationship of the raw material consumed and goods produced on fortnightly basis or monthly basis or to examine the raw material purchased at the close of the year so as to see its consumption and that shown in the closing stock and the consumption as well as the stock shown is not sufficient to explain the last month's purchases made indicating inflation in consumption of raw material, the addition made is based on guess work or estimate and the same being not justified in the absence of material evidence in support deserves to be deleted. The conclusion so reached by us is fully supported by the ratio of the decision in the cases of Dhakeshwari Cotton Mills Ltd. (supra) and Raghubar Mandal Harihar Mandal (supra). We accordingly, declare the addition sustained by the FAA at ₹ 73,55,911/-. 6. In the light of the above discussion, we have to decide whether the concealment penalty was leviable or not, particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cion which was created on account of non-availability of certain specific record . While deleting the addition an observation was made by the Tribunal (A.Y. 92-93, para already reproduced supra) that if the consumption of raw material as worked out did not tally with the total raw-material claimed as consumed as per the books of account, that itself was not the sufficient ground or basis for making any addition. In our considered opinion the said observation was sufficient to hold that the appellant was not guilty of concealment of income. The facts and figures were duly disclosed by the assessee on the basis of the available record and that was not held by the Revenue as a false evidence but due to difference of opinion in respect of percentage of burning loss an addition was made, however it is a trite law that such a condition is not a cogent or sufficient reason for the imposition of concealment penalty. As a result we hereby direct to delete the penalty. (B) ITA No. 1445/Ahd/2008 (in the case of M/s. Panorama Plastics) 8. The appellant has challenged the confirmation of levy of penalty of ₹ 13 lacs by the Learned Commissioner of Income Tax (Appeals)-II Vadodara d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the aforesaid associate concerns having factories at Halol. The AO further noticed that the assessee purchased raw material, moulded the components and after assembling the same sold these during the period 1.4.1992 to 31.8.1992. Thereafter, only job work was done for M/s Milton Plastic Industries. For the year under consideration, the assessee did not furnish the details nor produced relevant records sought by the AO. The AO pointed out that a similar situation had arisen in the AY 1992-93, when despite persistent queries and issue of summons, the assessee did not produce the records like hourly production reports, daily production report, raw material stock report, finished goods dispatch report, goods inward register, quality control report, assembly reports on the ground that these were destroyed after collation of financial reports and records. Even summons issued to Shri Kanhaiyalal Vaghani were not responded. Accordingly, additions were made in the AY 1992-93 on account of discrepancies in consumption of raw material and sale of goods to M/s Milton Exports at a price lower than the cost. The AO further observed that during the survey u/s 133A of the Act in the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales of ₹ 6.62 crores. Thus, their net profit rate worked out to 29.54% as against meagre net profit rate of 2.99% shown by the assessee. The AO also found that M/s Milton Exports was entitled to deduction u/s 80HHC of the Act and the assessee contended that sales were made at lower prices to in order to enable M/s Milton Exports to penetrate International market and that the assessee was under obligation to sell the goods at a low price. However, for detailed reasons given on pages 8 to 12 of the assessment order and relying on his own findings in the AY 1992-93 , which had been upheld by the ld. CIT(A), the AO added an amount of ₹ 7,02,950/- to the income on the ground that real motive was diversion of income to M/s Milton Exports and avoidance of tax on such income. 2.2 Besides, the AO also disallowed an amount of ₹ 66,750/- on account of purchase of quartz clocks on 7.9.1992, since the assessee did not furnish any evidence regarding distribution of these clocks while the business of trading in goods had been discontinued on 31.8.1992 itself. 2.3 Inter alia, penalty proceedings u/s 271(1)(c) of the Act were also initiated for the aforesaid additions. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to allow the partial relief due to burning loss and other factors. The Hon'ble ITAT, Ahmedabad Bench B vide order dated 25.4.2005 also relied on its earlier order for A.Y. 1992-93 wherein burning loss to the extent of 1% of the total material was allowed. In other words the Tribunal had after examining all the details, weight of all the materials manufactured and the raw material required for manufacturing confirmed in principal the disallowance on ground of unaccounted sale and only allowed partial relief to the extent of 1% of the burning loss. The Assessing Officer accordingly computed the unaccounted sale of raw material as ₹ 5,84,550. In other words the disallowances were not based on mere estimates of Assessing Officer, CIT(A) or ITAT but were principally on account of excessive consumption which led to finding of unaccounted sale outside the books. A partial relief of burning loss was provided look into the processes involved in manufacturing and it no way militate against the very basis of quantitative comparison of raw materials and sale of finished goods. During the course of penalty proceedings the appellant did not make any submissions before the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed clocks of ₹ 66,750 from M/s. Kamdar Kamdart Bombay on 7.9.1992. It was explained by the assessee that the above clocks were distributed by the assessee for sales promotion. The Assessing Officer has recorded the finding that the assessee has discontinued its business of sale of goods from 31.8.1992. The above finding of fact recorded by the Assessing Officer is not controverted before us. We therefore do not find any justification to interfere with the findings of the lower authorities in this respect. 3. From above it is apparent that the expenditure incurred on purchase of clocks claimed to be given to distributors as sales promotion measure was not an allowable expenditure as the business of the appellant was discontinued from 31.8.1992 whereas the clocks were purchased on 7.9.1992. In other words the said expenditure was not at all a business expenditure and it was a blatantly wrong claim by the appellant. The said claim is therefore clearly within the ambit of furnishing of inaccurate particulars of income exigible to penalty u/s. 271(1)(c). In view of above penalty is imposable on all the three additions. The penalty of ₹ 4,79,478/- is therefore confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancies in consumption of raw material and sale of goods to M/s Milton Exports at a price lower than the cost. The AO further observed that during the survey u/s 133A of the Act in the premises of the assessee on 29.9.1995 5.10.1995, it was noticed that though the hourly, daily and monthly productions reports and assembly reports were being prepared but these were not available for the full financial year. Though Shri A.K. Chari in his statement u/s 131 of the Act assured to produce the same, these were not produced during the course of assessment proceedings. Even deficit in stock was in Green Trophy no. 2, juicy mug, Cafeterina, Senator, Janiter noticed during the survey was not explained. As a result, accounts of the assessee were rejected in the AY 1992-93 and findings of the AO were upheld in appeal for the AY 1992-93 by the ld. CIT(A). In the year under consideration, since the assessee did not produce relevant stock records nor complied with various notices issued by the AO, the AO concluded that the accounts of the assessee were not true and complete and accordingly, rejected trading results, having recourse to provisions of sec. 145(2) of the Act. On the basis of find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinued on 31.8.1992 itself. 4.3 Inter alia, penalty proceedings u/s 271(1)(c) of the Act were also initiated for the aforesaid additions. On appeal, the ld. CIT(A) in his order dated 28.1.1997, followed his own order dated 22.3.1996 for the AY 1992-93 in the assessee's own case as also his order for the AY 1992-93 in the case of M/s Vikram Plastics and upheld the rejection of book results and the aforesaid additions made by the AO subject to the directions that additions may be quantified in the light of his findings in the AY 1992-93 in his order dated 22.2.96 in the assessee's own case and order dated 28.1.1997 in the case of M/s Vikram Plastics. 4.4 On further appeal, both the parties agreed that the issues may be adjudicated in the light of decision of the ITAT in the AY 1992-93 in ITA nos. 1159 1480/Ahd./1996.The ITAT, accordingly vide their order dated 25.4.2005 in ITA nos. 1577-1811/Ahd./1997 directed the AO to recalculate the additions in the light of findings of the ITAT in AY 1992-93 after allowing opportunity to the assessee. As regards disallowance of ₹ 67,500/-, since the assessee did not controvert the findings of facts recorded by the AO, the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged by the Revenue in penalty proceedings. ( vi ) Assessment proceedings and penalty proceedings are distinct and penalty proceedings are distinct and findings in the assessment is not conclusive by itself and hence no penalty can be justified in absence of any evidence in addition to what is referred to in the assessment proceedings. ( vii ) Even otherwise, assessment proceedings cannot be taken into account disjunctively, ignoring the appellate order in quantum in favour of the assessee on factual aspects. ( viii ) No reliable evidence is brought on record in penalty proceedings as well as assessment proceedings justifying penalty and in holding that all circumstances lead to the said conclusion as to concealment of income as alleged. ( ix ) Assuming for a while that the burden of proof is on the assessee, the same is duly discharged on account of cogent explanation duly supported by evidence on record especially the evidence produced before the learned Assessing Officer himself and before CIT(A) in quantum appeal. ( x ) Negative burden is otherwise discharged by the assessee on account of various submissions and evidence referred by the assessee above. 4.6 Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble ITAT held that M/s Milton Exports had sold the relevant goods in foreign market at sales price substantially lower than the local market rates. Therefore, the profit diverted by the assessee to M/s Milton Exports is taxable in the hands of the assessee firm to the extent of profit earned by M/s. Milton Exports on sales of the relevant goods. Accordingly, the assessee firm was asked by the Assessing Officer to furnish necessary details of sale price regarding sales made by M/s. Milton Exports of the goods purchased from the assessee firm. In response, the assessee firm has submitted that it has no exact information regarding the sale price of the relevant goods sold by M/s Milton Exports is available with it. However, the goods were sold by M/s. Milton Exports, almost at the same price in foreign market. During the course assessment proceedings, a notice u/s. 133(6) has also been issued to the associate concern M/s Milton exports, asking to furnish the information regarding its relevant sale price. Vide its letter dated 14.10.2006, M/s Milton Exports has submitted that the required information is now not available with it as the relevant record is almost 15 years old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased at ₹ 15,51.664/- from the assessee firm. This gross profit was worked out considering the sale price of preceding year. Since the assessee as well as M/s Milton Exports did not furnish the sale price of the relevant goods for the year under consideration, further addition of ₹ 1,00,000/- is made to the gross profit of ₹ 6,19,200/- as worked out above to plug the possible leakage in revenue on this account Thus, the addition of ₹ 7,19,200/-was rightly made by the Assessing Officer on account of profit diverted to M/s Milton Exports by the assessee by way of making sales at too low rate. The penalty proceedings u/s 271(1) (c) of the Act have also rightly been initiated by the Assessing Officer for furnishing the inaccurate particulars of income and thereby concealing the particulars of income. In this case, it is crystal clear that the assessee diverted its profit to M/s Milton Exports by way of making sales at too low rate in the assessment year under consideration with the sole motive to evade the tax. In this case the assessee has diverted its income to Milton Exports for non-business consideration and by doing so the assessee has avoided the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade taxes. There is no doubt that appellant concealed the income by diverting profit to Milton Exports. As regards other addition on account of excess consumption of raw material Hon. ITAT has confirmed the addition of excess consumption on the basis of findings given in order for A.Y. 1992-93. On the basis of elaborate study and analysis of statements, Tribunal came to the conclusion that appellant claimed excess burning loss and in view of the same, excess raw materials were shown as consumed. The appellant's arguments are that the burning loss and wastage as per the past experience of the appellant firm was approximate 10% and based on such estimation, consumption of raw material was worked out. Since, the addition was confirmed on the basis of estimated wastage and burning loss, there was no concealment according to the appellant. I do not agree with the appellant since by claiming excess wastage and burning loss it had reduced its taxable income. Claiming such burning loss in earlier year is not a basis for making such claim and the same does not justify it if the claim is found to be incorrect Without going into much details into the facts leading to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the assessee while carrying us through the impugned orders reiterated their submissions before the ld. CIT(A) in the case of M/s Vikram Plastics. As regards Panorma Plastics, the ld. AR added that facts being similar, his submissions in the case of M/s Vikram Plastics may be considered. To a query by the Bench , the ld. AR did not reply as to the fate of penalty levied u/s 271(1)(c) of the Act in the AY 1992-93 in the case M/s Vikram Plastics or in the case of other associate concerns wherein similar additions had been made. The learned DR, on the other hand, supported the impugned orders of the AO and the ld. CIT(A). 7. We have heard both the parties and gone through the fact of the case. Indisputably, in these cases additions have been made by the AO after rejection of book results. On appeal, the ld. CIT(A) sustained the additions in the light of his findings in the AY 1992-93 while upholding rejection of book results. The ITAT also upheld the additions in the light of order of the ITAT for the AY 1992-93 while observing that the issue of rejection of books was academic in nature. As is apparent from the facts of the case, the assessee in the case of M/s Vikram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of his income' or furnished 'inaccurate particulars of such income'. Thus, both in case of concealment and inaccuracy, the phrase 'particulars of income' has been used. The Legislature has not used the words 'concealed his income'. From this it would be apparent that penal provision would operate when there is a failure to disclose fully or truly all the particulars. The words 'particulars of income' refer to the facts which lead to the correct computation of income in accordance with the provisions of the Act. So when any fact material to the determination of an item as income or material to the correct computation is not filed or that which is filed is not accurate, then the assessee would be liable to penalty under s. 271(1)(c) of the Act. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income are detected as inaccurate, then such figure will also make the total income inaccurate in particulars to the extent it does not include such income. Whether it be a case of only concealment or of only inaccuracy or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected. The opportunity of hearing given by the notice under section 271(1)(c), obviously is against such concealment and inaccuracy as is detected in the assessment proceedings . 7.2 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 CIT v. Chandra Vilas Hotel [2007] 291 ITR 202/163 Taxman 298 (Guj.). In this decision the Hon'ble High Court found that the assessee was not maintaining its account for six years and every year assessments were framed with the help a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on the assessee to rebut the inference of concealment. The absence of explanation itself would attract penalty. The explanation offered by the assessee should not be false. The onus laid down upon the assessee to rebut the presumption raised under Explanation 1 would not be discharged by any fantastic or fanciful explanation. It is not the law that any and every explanation has to be accepted. In my considered view, the provisions of Explanation 1 to section 271(1)(c), when M/s Vikram Plastics did not submit any explanation during penalty proceedings nor relevant details and documents desired by the AO, is clearly attracted and the assessee has miserably failed to discharge the onus laid down in this explanation. Likewise M/s Panorama Plastics failed to substantiate their own explanation when they did not submit relevant details and documents desired by the AO. Thus provisions of the aforesaid Explanation 1 get attracted. I find that after the insertion of Explanation 1 to section 271(1)(c) of the Act by the Taxation laws (Amendment) Act, 1975, if the explanation offered by the assessee regarding the additions is either found to be false and remained unsubstantiated, the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r neglect on his part. The assessee is, therefore, by virtue of the notice under section 271 put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to the penalty provided by that section. No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provisions of the Explanation therein are applied. The High Court at Bombay was, therefore, in error in the view that it took and the Division Bench in the impugned judgment was right. 7.4 Similarly in the case of CIT v. Shama Magazine [1995] 213 ITR 64/82 Taxman 614 (Delhi), it was held by the Hon'ble Delhi High Court that whenever there was a failure on the part of the assessee in the circumstances referred to in Explanation to section 271(1)(c), the statutory presumption automatically followed and it had to be deemed that the assessee had concealed the particulars of his income. Though the said decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eroded, especially regarding economic crimes. In economic offences, the notion that a penalty or a punishment cannot be cast in the form of an absolute or no fault liability but must be preceded by mens rea must be rejected. A rule of strict liability or absolute liability should be imposed without insisting mens rea to deal with such socio economic crimes, vide S. Bagavathy v. State of Tamil Nadu [2007] 1 LW 892. 7.6.2 Mens rea is not an essential ingredient for contravention of the provisions of the civil Act. Unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred and it is wholly unnecessary to ascertain whether such a violation was intentional or not. 7.6.3 The breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not, vide Chairman, SEBI v. Shriram Mutual Fund [2006] 131 Comp Cas 591 (SC) ; [2006] 5 SCC 361. This view has been reiterated by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted rule of evidence. ( iii ) there is no discretion on the Assessing Officer as to whether he can invoke the Explanation or not. 7.9 In the case of Usha Fertilisers v. CIT [2004] 269 ITR 591/[2005] 142 Taxman 414 (Guj.), while upholding the levy of penalty, Hon'ble jurisdictional High Court observed that ..........The Supreme Court in the case of Mussadilal Ram Bharose [1987] 165 ITR 14 has specifically laid down the scope of the Explanation in the following words: The position, therefore, in law is clear. If the returned income is less than 80 per cent, of the assessed income, the presumption is raised against the assessee that the assessee is guilty of fraud or gross or wilful neglect as a result of which he has concealed the income but this presumption can be rebutted. The rebuttal must be on materials relevant and cogent As to what could be the explanation by which the assessee can rebut the presumption raised against it, is stated by the apex court in the same decision in the following words while confirming the view expressed by the Full Bench of the Patna High Court in the case of CIT v. Nathulal Agarwala and Sons [1985] 153 ITR 292: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these assessees show that these assessees have been diverting profits to M/s Milton Exports year after year, resulting in evasion of tax. In this view of the matter and in the light of decisions of the Hon'ble Supreme Court and jurisdictional High Court referred to above, I am of the opinion that these assessees have not been able to discharge the burden that lay upon them by Explanation 1 to s. 271(1)(c) of the Act. Therefore, I have no hesitation in upholding the orders of the ld. CIT(A) in confirming the penalty imposed by the AO under s. 271(1)(c) of the Act in these two cases. 9. In the result, both these appeals are dismissed. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion in these two cases, the matter is being referred to the Hon'ble President of ITAT with a request that following common question may be referred to a Third Member or pass such orders as may think fit. Whether, on the facts and circumstances of the case, the Learned CIT (Appeals) was justified in upholding penalty u/s. 271(1)(c) of the I.T. Act, 1961 levied by the Assessing Officer. THIRD MEMBER ORDER G.C. Gupta, Vice President ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal and the Tribunal restored the matter by setting aside the assessment order to the file of the AO. Consequently, after the issue was set aside to his file, the AO framed assessment at the same figure as was assessed earlier while giving effect to the order of the learned CIT(A). The AO placed heavy reliance on the assessment order through which the revised income was finally assessed and held these amounts as amount of income on which tax was evaded and the levied penalty under Section 271(1)(c) of the Act. 4. The learned counsel for the assessee submitted that the additions were made purely on estimate basis, and therefore, could not become base for imposition of penalty for concealment of income or filing of inaccurate particulars of income. He submitted that regarding unaccounted sale of raw-material, the AO has computed the wastage of raw-material at 10%, however, the Tribunal has allowed the wastage of raw-material at the rate of 1% and is a case of difference of opinion in respect of percentage of burning loss forming the basis for the addition. Regarding other addition on account of diversion of income by sale to ME , the learned counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment, in the order passed under Section 143(3) of the Act, two additions were made viz. (i) in respect of unaccounted sale of raw-material of ₹ 7,53,362/- and diversion of income by sale to ME of ₹ 7,02,950/-. Against these two additions, an appeal was preferred by the assessee before the first appellate authority and part relief was granted by the CIT(A) and the additions were reduced i.e. in respect of unaccounted sale of raw-material to ₹ 5,84,500/- and on account of income diversion by sale to ME to ₹ 4,18,965/. The assessee still being aggrieved, preferred an appeal to the Tribunal and the Tribunal has restored the matter by setting aside the assessment to the file of the AO. However, after giving effect to the directions of the ITAT, the AO assessed the assessee on the same figure of income as was assessed earlier while giving effect to the order of the CIT(A). The AO in the penalty proceeding held that the assessee has failed to furnish any explanation against the levy of penalty and hence placing reliance on the assessment order, levied penalty under Section 271(1)(c), against which the appeal to the CIT(A) was dismissed and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition was in fact made due to difference of opinion in respect of percentage of burning loss. The facts of the case with regard to this issue may justify the addition made in the assessment case of the assessee but on mere possibility or suspicion or difference of opinion on some issue is not sufficient to impose penalty for concealment of income or filing of inaccurate particulars of income. In these facts, I am of the considered opinion that no penalty under Section 271(1)(c) of the Act was leviable on the first issue of addition made on account of unaccounted sale of raw-material and I agree with the learned JM in directing to delete the penalty on this issue. 9. Regarding other issue of penalty levied for diversion of income by sale to ME , I find that quantum of addition made on the issue was reduced from ₹ 7,02,950/- made by the AO to ₹ 4,18,965/- by the CIT(A) and part relief was allowed by the CIT(A). The case of the assessee was that the addition on this issue was also made on estimate basis only. The addition was made due to the reason that the assessee-firm had disclosed lower profit on sale made to ME . I find that the Revenue had not brought any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M has sustained the penalty by observing that the assessee has submitted the explanation which it failed to substantiate during the assessment and penalty proceedings. He has relied on the decision of the Hon'ble Courts in support of the conclusion reached by him. He has observed that it is not a law that each and every explanation of the assessee has to be accepted. He further observed that in matters of economic offences, the rules of interpretation contemplate a strict interpretation rather than a liberal and wider interpretation. He has further observed that the classical view that no mens rea, no crime has long ago been eroded, especially regarding economic crimes. He has observed that unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred and it is wholly unnecessary to ascertain whether such a violation was intentional or not. The learned AM has further observed that a very heavy onus was placed on the assessee to explain the difference between the assessed income and returned income and the assessees did not discharge the said onus. I am u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after hearing the parties and considering the facts and circumstances of the cases, vide order dated 25/01/2012, has concurred with the proposed order of the Ld. J.M., by observing as under:- 11. In the facts of the case and in accordance with the relevant provisions of law and applicability of decisions of the Hon'ble Courts, I have no hesitation to hold that the penalty under Section 271(1)(c) of the Act was not leviable on the assessee and question referred to me is answered in negative i.e. in favour of the assessee and against the Revenue. In view of this, I agree with the learned JM on the issue of levy of penalty referred to me by the Hon'ble President and uphold his cancelling the penalty levied under Section 271(1) (c) of the Act. 12. In ITA No. 1445/Ahd/2008 in the case of M/s. Panorma Plastics both the parties agreed that the facts of this case are identical with the facts of the appeal in the case of M/s. Vikram Plastics in ITA No. 1444/Ahd/2008 and hence, following the same reasoning as assigned hereinabove, I agree with the decision of the learned JM in cancelling the penalty under Section 271(1) (c) of the Act. 3. Therefore, in accordance with ..... 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