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TMI Blog2019 (3) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in CIT vs. Manjunatha Cotton and Ginning Factory & Ors. [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we are of the considered view that the AO has failed to fulfill the condition laid down u/s 271(1)(c) of the Act before levying the penalty which is not automatic. Even otherwise, when it is not discernible from the assessment order as to whether assessee has furnished inaccurate particulars of income or has concealed particulars of income so as to apply the deeming provisions contained under Explanation1 (A) & 1(B) of the Act, the penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee - ITA No.13/Del./2016, ITA No. 14/Del/2016 - - - Dated:- 27-2-2019 - Shri Kuldip Singh, Judicial Member And Shri B.R.R. Kumar, Accountant Member For the ASSESSEE : None For the REVENUE : Shri Amit Katoch, Sr. DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Since both the aforesaid appeals are inter connected, the same are being disposed of by way of composite order to avoid repetition of discussion. ITA no. 13/Del/2016 2. The appellant Income Tax Officer, New Delhi (hereinafter referred to as 'the revenue') by filing the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also not in dispute that the assessee has claimed that the payments were made in the subsequent years. 8. In the backdrop of the aforesaid facts and circumstances of the case when we examine para 5 of the impugned order passed by Ld. CIT(A) it is categorically recorded therein, that the assessee was asked by AO to produce evidence in support of genuineness of both the creditors, however, no confirmation or any subsequent documents to substantiate genuineness of the creditors were furnished ; that even no detail with regard to the payment made to those creditors even in the subsequent year was filed nor the assessee has produced those person, before before AO; that no payment even till date was made to those persons and as such the above two parties appeared to be Hwala Operators from whom assessee has received entries in the shape of purchases; that the purchases were shown from those parties with intention to inflate the amount of purchases and to reduce the profit that purchases shown in the name of M/s. Lotus Communication and M/s. Deepa Enterprises were not genuine. However, the Ld. CIT(A) by relying upon the case of M/s. Unique Metal Industries proceeded to restrict th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions contained u/s 271(1)(c) of the Act? 15. Bare perusal of the assessment order on the basis of which penalty proceedings have been initiated goes to prove that the Assessing Officer has not recorded valid satisfaction after applying his mind as to under which limb of Section 271(1)(c) as to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income rather proceeded to record that penalty proceedings u/s 271(1)(c) are being initiated separately for default of the assessee for concealment of particulars of his income and furnishing inaccurate particulars of income . Not only this even at the time of passing the penalty order the Assessing Officer was not clear enough if he has levied the penalty for concealing the particulars of income or for furnishing inaccurate particulars of income rather proceeded to pass the following orders :- Considering the above facts, I am satisfied that the assessee has concealed his particulars of income/furnished inaccurate particulars of income and has attempted to evade tax on such concealed income as per Section 271(1)(c) read with Explanation I thereto. Penalty imposable u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 1(A) (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from ..... 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