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TMI Blog2015 (2) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... icular manner and set out the related facts. This gets proved in favour of the assessee, when the AO writes in the assessment order, “on careful perusal of all submissions, it cannot be denied that purchases have not been made”. Hence The assessee’s explanation regarding bona fides of claim did not suffer from any apparent in consistencies or factual errors and it was quite in line with human probabilities and market trends, therefore, there was no good reason to reject the explanation and proceed to initiate and levy of penalty under section 271(1)(c). Thus explaining as to where the penalty is to be levied and to be deleted, we are of the view that the years under consideration, the revenue authorities erred in initiating penalty proceeding and levying of penalty. - Decided in favour of assessee. - ITA No. : 5948/Mum/2014 And ITA No. : 5949/Mum/2014 - - - Dated:- 11-2-2015 - Shri R.C. Sharma And Shri Vivek Varma JJ. For the Appellant : Shri D V Lakhani For the Respondent : Shri Love Kumar ORDER Per Vivek Varma, JM: The two appeals are against levy of penalty of ₹ 11,80,489/- and ₹ 13,43,019/- u/s 271(1)(c) has been filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived figurer which is computed in order to work out what could be the maximum amount of the quantum which can be added to the total income. In the assessment order also there is no allegation that the appellant has concealed the income to the extent of the peak credit. The original allegation was the purchases are not genuine from certain parties. However, for each and every purchase from these parties the corresponding sale is established. In view of this the Assessing Officer has adopted the peak credit method for the purpose of making addition. We submit that \ the peak credit is not the amount of the income for which it could be alleged that the appellant has filed in accurate particulars of income. We therefore submit that the levy of penalty on the peak credit amount is not justified and be deleted. 14. The penalty proceedings are quasi criminal proceedings and the burden is on the Department to prove that the assessee had acted with a guilt mind to defraud the revenue. The intention of the appellant should be such that knowingly and willingly he conducts his business in such a manner with the ultimate objective of evading tax. This particular aspect is totally missing fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.5 As assessment and penalty proceedings deal with different aspects meaning thereby the assessment proceedings are to assess the income correctly whereas the penalty proceedings are there to deal with the issue if inaccurate particulars or wrong particulars were filed, resulting into concealment of income. In these case of appellant on the given facts these parameters are to be seen irrespective of the fact that income due was assessed. Accordingly, all the pleas taken by the appellant before A.O and reiterated in appellate proceedings are dealt one after other as under: 1. The first plea taken by the appellant is that consequent to survey action they have offered the income for AY.2010-11 and as regards the AY.2009-10 they have offered income by filing return of income which has been treated as filed in response to the notice u/s. 148 and has been accepted with minor addition on some other issue. I have considered this plea and I am not able to agree with the appellant for the very reason that for AY.2009- 10 though return of income was filed it was not a return filed u/s.139(1) nor it was a revised return as per provisions of sec.139(5). In fact 'consequent to survey act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing totally different the plea taken by appellant is discarded. The appellant falls on this ground. 2. The appellant have taken another plea that they were not give cross examination of all the parties and hence their statement should not be relied upon. However, cross examination done of two concerns managed by one individual party has proved beyond doubt that they have not purchased any such material from the said two concerns which account for almost 50% of total purchases claimed by appellant. Besides this, the appellant have also failed to furnish any supporting document of transportation and physical delivery of such purchases claimed from these parties as is evident from records that there are no document to support Transportation and further there is no acknowledgment of physical delivery of material (i.e. weighing slip and transportation charges paid etc)as claimed to have been purchased by all these alleged bogus bills provided by these 18 parties.)appellant have also tried to plead that said party which was cross not identified them and hence they are under no obligation to prove the purchases which have been stated by them as accommodation bills. I find that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are liable for furnishing inaccurate particulars as well as wrong particulars. Hon ble Supreme Court in CIT vs Reliance Petroproducts Pvt Ltd [20101 322 ITR 158 have also defined what is the meaning of furnishing incorrect particulars of income According to that the word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, undoubtedly and undisputed fact has been confirmed that claim of purchase from these parties as made by appellant could not be proved and they have further failed to give names of actual parties and details of transaction of purchases of these trials. As the purchases shown in name of these 18 parties as supplied by the assessee in its return were found to be incorrect or erroneous or false, they are liable for consequences i.e. provisions of penalty under section 271(1)(c) are attracted in their case in these instant appeals. 3.7. The appellants' other plea is that penalty cannot be levied because the tax amount sought to be evaded does not relate to any specific transaction and when income concealed itself is not determined, penalty c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a profit or loss, was really of no consequence. Therefore, even if no tax was payable, the penalty was still leviable. Even prior to the amendment, it could not be read to mean that if no tax was payable by the assessee due to filing of the return disclosing loss, the assessee was not liable to pay penalty even if it had concealed and/or furnished inadequate particular. 3.9 In the instant appeals the appellant having filed wrong particulars thus cannot get away with the plea taken that they have offered the income . 7. The CIT(A), thus sustained the penalty u/s 271(1)(c), as levied by the AO. 8. Against this order of the CIT(A), the assessee is now before the ITAT. 9. Before us, the AR pointed out that during the survey operations, the assessee had offered ₹ 34,73,047/- and included the amount in its return of income u/s 148. The AR further pointed out that the assessee had offered the peak of purchase, which had been held to be bogus, which accordingly were ₹ 3,18,55,857/-. The AR pointed out though the purchases were questioned and the 18 parties deposed before the AO that they were providing only the entries, the AR submitted that the purchases as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The AR submitted that on the one hand the revenue authorities are accepting that the purchase had been made and recorded in the books and on the other hand, what was taken to be bogus was only the peak of the whole amount. 17. The AR further submitted that no allegation has been leveled against the assessee with regard to the quantum of business done and/or incorrect keeping and maintaining of books of accounts. This is evident because the GP and NP both are better in the impugned years and accepted by the revenue authorities. 18. In such a case, both on facts and legality, the penalty should not be sustained. 19. The DR on the other hand supported the orders of the revenue authorities and submitted that it is a clear case of substantiated purchase, where the source has not been established. The DR further submitted that the argument of the AR, that there are no charges leveled against the assessee is also not correct because furnishing of inaccurate particulars would lead to concealment. In the case at hand, the revenue authorities have proved beyond point of any comprehension, that the assessee has furnished inaccurate particulars of income, which by itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by the assessee were correct and gave true and fair view, which gets further proved from the comparison of GP NP ratios, Asst. Year GP NP 2009-10 7.25% (survey period) 1.18% 2010-11 7.08% (survey period) 0.98% 2011-12 6.39% 1.4% 2012-13 6.00% 0.95% 29. The fact that no charge as such has been leveled against the assessee, as seen from the notice u/s 274 also go to prove that the revenue authorities did not have any ground to prove either the concealment or inaccurate particulars, which resulted in revenue loss. 30. We are supported by the decision of the coordinate Bench at Bangalore in the case of Muninapa Reddy vs ACIT, reported in 2013-37 taxman.com 440, where it was held, There can be no concealment or non-disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax and, therefore, no penalty under section 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer or the Commissioner (Appeals) or the Commissioner does not arise. One has to keep in mind that it is the Assessing Officer who initiates penalty proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is taken while making assessment order. It is, thus, obvious that the expression 'in the course of any proceedings under this Act' cannot have the reference to survey proceedings. It necessarily, follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in return filed by it. The assessee can furnish the particulars of income in his return and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4 as well as 5 and 5A of section 271. Obviously, no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be, it would not have disclosed the income but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed any income except for the statement recorded under section 132(4), even the CBDT has cautioned the Assessing Officers to make additions based purely on the sworn statements recorded under section 132(4), the Explanation 5A as it stood on the date of filing of return/revised return by the assessee, levy of penalty on the additional income included in the return based only on the sworn statement of the assessee cannot be sustained. Accordingly the penalty levied upon the assessee deserved to be deleted . 35. In the case of SVC Projects (P) Ltd. vs JCIT, reported in 2011-12 taxman.com 155, the coordinate Bench at Vishakhapatnam held, Turning to the facts of the case, we find that the additional income was offered during the course of survey for discrepancies in the maintenance of vouchers of different expenses. The assessee filed a revised return of income on 17-3-2005 and paid the taxes thereon. The revised return filed by the assessee was accepted by the Assessing Officer by passing an order dated 30-3-2006 without tinkering with the accounts maintained by the assessee. Therefore, in the assessment no additions were made by the Assessing Officer under any account. Now t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. 37. We are also supported by the order of the coordinate bench of Pune in the case of Kanbay Software India (P) Ltd. vs DCIT, reported in 31 SOT 153 (Pune), it was held, it is not for AO to ponder over what should have happened in ideal circumstances and reject explanation but he is to consider explanation objectively and unless he finds some against human probabilities or unless there are any real inconsistencies or factual errors in such an explanation, AO ought to accept the same . In the instant cases before us, we have found that the revenue authorities have accepted that the purchases had been made and rightly recorded in stock book and books of account and giving out correct result. The AO did not disturb anything, but went on to levy the penalty, which even he could not substantiate under the phrase, inaccurate particulars of income . We are in acceptance with the argument of the AR that if the revenue authorities were holding the purchase of ₹ 3,18,55,857/- in 2009-10 and ₹ 2,44,98,719/- as bogus in assessment year 2010-11, why accept assessee s declaration of peak amounts and not add back the purchase taken to be bogus, by rejecting the books. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income have been duly disclosed by the assessee. 41. The expression 'concealment of income' has not been defined in the Act but the natural meanings of the expression 'concealment' are 'to keep from being seen, found, observed, or discovered'. It would, therefore, follow that the expression 'concealment of income', in its natural sense and grammatical meaning, implies that an income is being hidden, camouflaged or covered up so that it cannot be seen, found, observed or discovered. That was certainly not the case. 42. The assessee filed its ROI declaring the amount surrendered. This income was accepted by the AO. By no stretch of logic, this situation could be treated as a situation in which any income was concealed by the assessee. 43. Concealment of an income by an assessee cannot be a passive situation. It implies that the person concealing the income is hiding, covering up or camouflaging an income - something which essentially requires a conscious effort. On the contrary, the assessee had acted in very transparent and straight forward manner by maintaining proper and regular primary and final books, which were accepted by the revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factually been accepted but still not considered appropriate by the revenue authorities brings in an absurdity in the approach of the revenue authorities. Therefore, the instant case could not be said to be a case of furnishing of inaccurate particulars of income, in its normal sense. 44. There is one more eventuality in which penalty can be imposed and that is the situation in which deeming fiction of the Explanation 1 to section 271(1)(c) comes into play. This deeming fiction comes into play, where in respect of any facts material to the computation of the total income would show that it relates only to the factual aspects. In the instant case, the only controversy was regarding the amount offered and including the same to the returned income. This deeming fiction cannot be invoked in the instant case at all. The deeming fiction of the Explanation 1 to section 271(1)(c) can only be pressed into service in connection with facts material to the computation of income and not in connection with the computation of income per se, which in the instant cases are apparent from the fact that the revenue authorities did not touch the facts leading to the computation, but initiated penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reject explanation, but he is to consider explanation objectively and unless he finds something against the human probabilities or unless there are any real inconsistencies or factual errors in such an explanation, the AO ought to accept same, because nobody can explain anything to the hilt. Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. It was in this regard that the higher judicial fora has tried to keep mens rea outside the perimeters for sustaining the penalty under normal business conduct or explanations of the assessee. All that the assessee can do, is to explain the circumstances in which he has acted in a particular manner and set out the related facts. This gets proved in favour of the assessee, when the AO writes in the assessment order, on careful perusal of all submissions, it cannot be denied that purchases have not been made . Hence The assessee s explanation regarding bona fides of claim did not suffer from any apparent in consistencies or factual errors and it was quite in line with human probabilities and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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