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TMI Blog2012 (7) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 1,786/-. e) In respect of Disallowance Travelling Expenses ₹ 2,000/- f) In respect of Disallowance of Telephone & Trunk Call ExpensesRs.2,500/-. g) In respect of Disallowance of 10% of Depreciation on Car ₹ 7,694/-. 4.That on the facts & in the circumstances of the case, the ld CIT(A) erred in confirming the levy of penalty in respect of estimated trading addition and disallowances out of expenses made on estimate basis." 2. The brief facts of the case are that a survey under section 133A of the Income Tax Act, 1961 ('the Act' hereinafter) was carried out on 23rd November,2004. During the course of survey proceedings, some loose papers and books in the form of note books were found some of them pertaining to the assesse for the F.Y. 2003-04. Therefore, after recording reasons, notice under section 148 of the Act dated 30.03.2009 was issued. In compliance to the notice under section 148 of the Act, the assessee vide letter dated 15.04.2009 requested that earlier return filed be treated as return filed against the notice under section 148 of the Act. A Coy of the reason recorded was given to the assessee on 20.04.2009. During the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d inaccurate particulars of income. 3. The CIT(A) after considering the assessee's submission and after considering various judgement including the judgement of Apex Court in the case of M/s. Dharmendra Textile Processors, 306 ITR 277 confirmed the penalty rejecting contentions of the assessee as under :- (Paragraph nos.3.19 & 3.20) "3.19 When the present case is examined in view of this legal position, it is found that in this case return declaring income of ₹ 1,01,931/- was filed on 30.09.2004. Subsequently survey was conducted on 23.11.2004 at the premises of appellant. Appellant revised his return on 25.11.2009 by declaring additional income of ₹ 3,16,000/-. However even this disclosure was not true and full and the assessment was completed on total income of ₹ 7,04,216/-. No further appeal was filed by the appellant. In such a situation AO has rightly concluded that appellant furnished inaccurate particulars of his income, not only in the return filed by him originally on 30.09.2004 but also in the revised return filed on 25.11.2009. In this case it is not established that the conduct and explanation of appellant was bonafide, therefore the case falls in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax on revised retuned income of ₹ 461930 + ₹ 20070 disallowing of expenses Rs.118600/- Tax on concealed income Rs.66666/- Minimum penalty 100% Rs.66670/-" 6. The ld. Departmental Representative, on the other hand, relied upon the order of CIT(A) and submitted that the addition made by the A.O. was on the basis of loose paper found at the time of survey. Thus, the concealment has been detected by the Department. The revised return filed by the assessee was after the survey proceedings. Ld. Departmental Representative in support of his contention relied upon the judgement of Allahabad High Court in the case of CIT Vs. Handloom Emporium, 282 ITR 431 (All). 7. We have heard the ld. Representatives of the parties and records perused. The proceedings under section 271(1) (C) can be initiated only if the A.O or the first Appellate authority is satisfied in the course of any proceedings under the Act as per clause (c) of the section 271(1) that any person has concealed the particulars of his income or has furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty the sum mentioned in sub-clause (iii) of clause (c) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of duty and that penalty in respect of section 271(1)(c) of the Income-tax Act would be leviable, subject only to the conditions thereunder. It required the matter to be considered not solely with reference to Dharamendra Textile Processors' case but along with the decision of Rajasthan Spinning and Weaving Mills' case (supra). In the case of CIT v. Reliance Petroproducts Pvt Ltd 322 ITR 158 the Supreme Court further explained the matter and finally settled the controversy created in Dharamendra Textile Processors' case (supra). The Supreme Court in this case has analysed the facts in Dilip N. Shroff's case (supra) and found from the facts, that the explanation given by the assessee was bona fide nor did not assessee furnish any inaccurate particulars. It no doubt went on to observe that the element of mens rea was essential. The Supreme Court in Dharamendra Textile Processors' case (supra) had pointed out only to this aspect of the decision in that, there was no necessity to prove mens rea on a plain reading of the provisions of section 271(1)(c) in the context of a penalty being a compensation for loss of revenue likely to have been occasioned by the acceptance of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of business wherein the assessee has to go through various small noting on loose papers before completion of a particular transaction. Some time such loose papers on which purchase and sales are recorded are repeated for covering same transaction more than one times. No doubt, under the circumstances in such cases, the books of accounts maintained by the assessee cannot be accepted in Toto. Therefore in the case under consideration for the purpose of assessment proceedings, the A.O. has rightly invoked section 145(3).But a case of penalty under section 271 (1)© is different and there is separate proceedings. In the case under consideration the AO has come to the conclusion that it is a case of estimation of income after rejecting the books of accounts. This situation is supported by the facts recorded by the A.O. himself in the penalty order that income declared by the assessee neither in original return nor in the revised return is acceptable as it is. The A.O. also tried to calculate the unaccounted sale and purchase and commission income on the basis of loose papers and note books found during the course of survey proceedings but ultimately the A.O. himself failed to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated out of all type of purchases and after considering the reply of the assessee placed on file. I therefore, estimate total turnover of the assessee at ₹ 1,55,00,000/- and the commission earned including Mandi Tax is taken at 7.6% as authorized by the government and the income from commission is estimated at ₹ 11,78,000/- as against which the assessee has disclosed the gross commission receipts at ₹ 5,95,788/- thus the assessee has under sated the income from commission at ₹ 5,82,212/- out of which the assessee himself admitted ₹ 3,60,000/- and has surrendered the income vide revised return dated 25.11.2009. I, therefore, make trading addition of ₹ 2,22,212/- and the same is added to the total income of the assessee. The assessee has concealed the particulars of his true income and committed default u/s 271(1)(c) of the I.T. Act, 1961." 12. Further it is presumption of the A.O. that since the assessee did not file appeal against the addition and disallowance made by the A.O. in assessment order that means the assessee has accepted the decision of the A.O. for filing inaccurate particulars of income whereas the A.O. failed to point out a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of noting on loose papers and note books if the A.O. has estimated, in such case it cannot be held that the penalty under section 271(1)(c) of the Act is leviable. 14. Further we noticed that the A.O. initiated penalty proceedings under section 271(1)(c) of the Act on the ground that the assessee has concealed the particulars of income whereas after considering the facts of the case, ultimately the A.O. reached to the conclusion that the assessee has furnished inaccurate particulars of income. Under the facts and circumstances of the case under consideration, we notice that on identical set of facts, Hon'ble jurisdictional High Court of Rajasthan in the case of Addl. Commissioner of Income Tax vs. Kejriwal Iron Stores, 168 ITR 715 (Raj.) held that penalty under section 271(1)(c) of the Act is not leviable in case where commencement of penalty on a particular ground and finally levied penalty on different ground. The head-note of the judgement is reproduced as under :- "The satisfaction for initiation of penalty proceedings has to be recorded by the Income-tax Officer and the basis for the satisfaction of the Income-tax Officer cannot subsequently be altered by the Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose transactions represented unexplained investments on the part of the assessee, as the assessee was showing the cash balances without corresponding withdrawals in respect of the amounts alleged to have been paid to the sellers. It was open to the Inspecting Assistant Commissioner to initiate fresh penalty proceedings on the basis of the aforesaid conclusion arrived at by him in his penalty order dated February 11, 1972, but in the absence of initiation of any fresh proceedings, the Inspecting Assistant Commissioner of Income Tax could not modify the basis on which the Income Tax Officer proceeded to record his satisfaction for initiation of penalty proceedings. The cancellation of penalty was justified," 15. In the light of above judgment of jurisdictional High Court in the case of Addl. Commissioner of Income Tax vs. Kejriwal Iron Stores (supra) and in the light of detailed discussions made above, we are of the considered view that under the facts and circumstances of the case, penalty under section 271(1)(c) of the Act is not leviable. We, therefore, cancel the penalty of ₹ 1,74,594/- levied by the A.O. and sustained by the CIT(A). 11. In the result, appeal filed by t ..... 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