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TMI Blog2016 (7) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr.DR ORDER PER Manish Borad, Accountant Member . This appeal of assessee is directed against the order of ld. CIT(A)-IV, Baroda, dated 7.11.2012 in appeal no.CAB/IV-107/2012- 13, passed against order u/s 271(1)(c) of the IT Act, 1961 for Asst. Year 1994-95 on 30.6.2006 by ITO, Wd-2, Bharuch. Following grounds have been raised by the assessee :- 1. On the facts and circumstances of the case and as per law, the learned Commissioner of Income-tax (Appeals) erred in confirming penalty u/s.271(l)(c)of the Act. 2. The appellant submits that since no default has taken place u/s.27l(l)(c). penalty may be deleted. 3. The appellant craves leave to add, alter or vary any of the grounds of appeal. 2. Briefly stated facts of the case as culled out from the assessment records are that the assessee is a partnership firm engaged in the business of whole sale dealer in clothes and job work of embroidery work. Return of income for Asst. Year 1994-95 was filed on 31.8.1994 declaring total income at ₹ 1,300/-. Survey proceedings were conducted u/s 133A of the Act at the premises of the assessee on 20.10.94. Pursuant thereto assessment proceedings were completed u/s 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te authority have also confirmed the addition made by the A.O. Further in the case of M/s Vimal Ginning and Pressing Factory Vs CIT 279 ITR 100 (MR), it was held that In our considered opinion, it is difficult to take a different view than the one taken by the three authorities on the bests of the factual explanation offered by the assessee in the question involved In the first place, it is a case where the assessee made an attempt to explain but could not persuade the three authorities. Thirdly the reference court cannot go into the adequacy of the explanation' again in its reference jurisdiction in abstract form for want of any legal issue/interpretation involved and lastly, once the addition Is upheld, then the penalty has got to be imposed, consequent upon the rejection of the explanation offered. In other words once the explanation offered by the assessee is rejected then in that event, a case for imposition of penalty under 271(1) (c) is made out. It is much more so when there is not technical issue is involved In view of the above discussion, I am of the opinion that it is fit case for levy of penalty U7s 271 (1(c) of the act, as the assessee has concealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orbitant is to some extent reasonable. However, the arguments of the appellant that income from unaccounted sales may be restricted to 5% is not acceptable. It may be mentioned that whatever expenses incurred by the appellant have already been debited to the P L account and it is only the unaccounted purchases and sales which were kept out of the books of account and hence the profit of margin on such sales have to be higher than the profit as declared in the books of account Taking a reasonable view, I hold that the net profit from the unaccounted sales at the rate of 20% will be reasonable. The learned C.I.T. (Appeals) in earlier assessment year perhaps estimated gross profit at the rate of 25% as in that year there was an element of initial unaccounted purchases have to be brought to tax under section 69 of the Act in addition to the profit on sales. This year, as explained by the A.R. that funds were available from last year which were used for initial purchases and hence the net profit adopted at 20% for this assessment year will be reasonable. The assessing officer is directed to tax only 20% of the total unaccounted sales . 13. The Ld. CIT(A) has clearly observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. are recorded. Total of both debits and credits in Vepar Yadi are wrongly suggested as sales whereas the other side is mere recovery. The sales are reflected in overall sales and therefore, there was no question of any income having remained undisclosed. The Assessing Officer, however, did not accept the explanation and made addition. (4) The assessee took this matter before the learned Commissioner of Income-tax (Appeals) to whom submissions were made by letter dated 21-01- 1998 (P. 10-11) and further in a note. (P. 12-17). These aspects were reiterated by the assessee. The learned Commissioner of Income-tax (Appeals), however, did not accept the view of the assessee. However, he restricted the addition to 20% of the sales as per order dated 25-02-1999 and thus addition was reduced by 80%. (P. 18-25). (5) The matter was further taken before the Income-tax Appellate Tribunal which took the view that the overall gross profit of 15.42% should be taken as income resulting in further reduction in income. Copy of the order of the Income-tax Appellate Tribunal dated 20-10-2005 is enclosed. (26-31). (6) On account of smallness of the amount and because this was essentially a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 is reproduced. The provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. However, the addition made on this count would not automatically justify imposition of penalty under section 271(l)(c) by recourse only to Explanation 1 below section 271(1)(c). In the instance case, the cash credits were not satisfactorily explained by evidence and documents. The parties who had advanced the alleged temporary loans were neither disclosed with their particulars nor any supporting documents were on record. Only two entries were explained. The accountant who had arranged the loan was not produced stating that he had left the service and relations with him are strained. On this state of accounts and evidence in the quantum proceedings, the Department was justified in treating the cash credits as income of the assessee but merely on that basis by recourse to Explanation 1, penalty under section 271(l)(c) could not have been imposed without the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same scheme where certain amounts though not proved to be the income of the assessee of the previous year concerned are for the purpose of charging to tax are deemed to be so by creating legal fiction absolving the Department from its initial duty to prove that any such is the income of the assessee. But for these provisions, it was for the Revenue to prove that any sum, not disclosed by the assessee but which is sought to be taxed as income of the assessee, is the income of the assessee for the previous year relevant to the assessment year. (iv) Amritsar Tribunal in case of Rakesh Gupta [107-TTJ-109] dealt with the case where addition was made u/s. 68 but it held that addition by operation of deeming provisions of section 68 by itself cannot justify penalty in the absence of any finding that assessee had furnished inaccurate particulars with malafide intention to evade tax or the explanation given by the assessee was not bonafide or false. In taking this view the Tribunal relied on the judgement of Delhi High Court in case of Mrs. Baljit Jolly [263- ITR-239] and of Calcutta High Court in case of Amalendu Paul ]145-ITR- 439]. The related portion of page.916 of the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer observed that on the basis of documents found during survey proceedings there stood unaccounted sales at ₹ 10,82,958/- which comprised of sales as per loose bills at ₹ 66,685/- and the remaining being unaccounted sales not accounted in the regular books of account at ₹ 10,16,273/-. Explanation was called for by the ld. Assessing Officer as to why the addition of ₹ 10,82,958/- should not be made to the total income of the assessee. Following reply was submitted by assessee on 13.3.1997 :- The account section at that relevant time was looked after by their partner Gulambhai. As he was old and uneducated he was helped by a part-time accountant. They are doing the embroidery work to attract more customers. They are not gaining anything from the embroidery work and the embroidery charges received are paid to skilled workers. They have further stated that Vepari Yadi reports, moneys received on credit, sales, advances, received, outstanding balances etc. All entries in embroidery book are again reported in Vepari Yadi and these are recorded in books of accounts. The totals of both debits and credits in Vepar Yadi are wrongly suggested to sales as one si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these cases, the issues relate to the cash credit u/s 68 of the Act and unaccounted investment u/s 69 of the Act whereas in the case under appeal penalty has been imposed on the income concealed by the assessee arising on unaccounted sales. In the case of assessee, since initiation of assessment proceedings u/s 143(3) r.w.s. 148 of the Act assessee has not challenged nor has been able to disprove the finding of the ld. Assessing Officer about the unaccounted sales at ₹ 10,82,958/- and has only requested for application of GP rather than making the addition to unaccounted sales. Penalty u/s 271(1)(c) of the Act is imposed if an assessee conceals income or furnishes inaccurate particulars of income and both these conditions are being fulfilled by the assessee by way of furnishing inaccurate particulars of sales and also concealing income earned on the unaccounted sales and, therefore, we are of the view that ld. Assessing Officer has rightly imposed the penalty u/s 271(1)(c) of the Act and we do not find any reason to interfere with the order of ld. CIT(A). We uphold the same. Accordingly ground nos. 1 2 raised by assessee are dismissed. 13. Other ground is general in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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