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TMI Blog2020 (1) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the SEZ unit. He has also specifically recorded a finding of fact that no incriminating documents were found and seized to disprove assessee s claim that it was carrying on manufacturing and export activities from the SEZ unit. Thus, the facts narrated above clearly indicate that the addition/disallowance sustained by learned Commissioner (Appeals) on account of deduction claimed under section 10A of the Act is not due to any inaccurate particulars furnished by the assessee but on a purely presumptive basis. That being the case, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income so as to be visited with penalty under section 271(1)(c) of the Act. In the course of hearing, it was brought to our notice by learned Authorised Representative that under identical facts and circumstances, learned Commissioner (Appeals) has deleted the penalty imposed under section 271(1)(c) of the Act in the assessment year 2005 06. Thus, considering the overall facts and circumstances of the case, we are of the view that the penalty imposed under section 271(1)(c) deserves to be deleted - Decided in favour of assessee Penalty imposed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income showing certain income, the Assessing Officer has passed the assessment order on that basis. However, the assessment order so passed cannot grant authenticity to the activity carried on by the said entity with the assessee. Therefore, to that extent, we are of the view that imposition of penalty under section 271AAA of the Act in respect of addition of ₹ . 42,05,000, has to be sustained. As regards the excess stock the Tribunal has found that the difference is not huge, hence, has directed for addition of gross profit rate. Similarly, as regards the salary paid in cash, the addition has been made purely on the basis of statement recorded from third parties without confronting them to the assessee or allowing the assessee an opportunity of cross examination. Further, it is noticed that though identical addition was made by the Assessing Officer in assessment years 2005 06, 2006 07 and 2008 09, however, penalty proceedings under section 271(1)(c) was not initiated against such additions though penalty under the said provisions was imposed on some other additions. Thus, after considering overall facts and circumstances of the case, we direct the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its units located in the SEZ, proceeded to verify the authenticity of assessee s claim. He observed, in course of survey conducted under section 133A of the Act in the SEZ units, it was found that most of the time the units remained closed. The plant and machineries are rusted and not functioning. There was no trace of any manufacturing activities. There was no permanent employee in these units. He observed, the machineries which are in good condition are also not capable of huge production of such high value addition in the time frame available. Power consumption was also not sufficient to support the huge production shown. Thus, on the basis of the aforesaid analysis of the facts, he observed that the profit shown from the SEZ units against which the assessee has claimed deduction under section 10A of the Act is not correct. Referring to a quotation given by another entity engaged in similar activity, the Assessing Officer observed that making charges for coins are at 0.074% of the gold value, whereas, the assessee has reported making charges of 9% to 14%. Thus, the Assessing Officer observed that high profit margin shown from the SEZ unit is not correct and acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning on which the Assessing Officer has disallowed assessee s claim of deduction under section 10A of the Act. He submitted, with regard to the disallowance made by learned Commissioner (Appeals) under section 10A of the Act, no satisfaction has been recorded for initiation of penalty proceedings under section 271(1)(c) of the Act either by the Assessing Officer or by learned Commissioner (Appeals). Therefore, the order passed by the Assessing Officer imposing penalty under section 271(1)(c) of the Act is without jurisdiction. Without prejudice to the aforesaid submissions, the learned Authorised Representative submitted, neither during the search and seizure operation nor at any other time any incriminating material was recovered which could establish that the assessee is not carrying out its manufacturing and export activity from the SEZ units. He submitted, though the Assessing Officer has disallowed assessee s claim of deduction under section 10A of the Act, however, learned Commissioner (Appeals) having factually found that the assessee has carried on manufacturing and export activities from its SEZ units has partly allowed deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 10A of the Act has initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. The disallowance of deduction under section 10A of the Act was made by the Assessing Officer on various allegations. Though, learned Commissioner (Appeals) has held that the assessee is entitled to deduction under section 10A of the Act, however, he has disallowed part of deduction claimed under section 10A of the Act on the basis of his own reasoning. Therefore, the issue ultimately boils down to the disallowance of deduction claimed under section 10A of the Act for which the Assessing Officer has already initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. That being the case, the argument of the learned Authorised Representative that the Assessing Officer has not initiated penalty proceedings under section 271(1)(c) of the Act on the basis of the specific reasoning of learned Commissioner (Appeals) on which a part disallowance under section 10A of the Act was made, in our view, is hyper technical and superfluous. Therefore, it does not merit consideration. 7. As regards ground nos. 3.1 and 3.2, it is evident, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im that it was carrying on manufacturing and export activities from the SEZ unit. Thus, the facts narrated above clearly indicate that the addition/disallowance sustained by learned Commissioner (Appeals) on account of deduction claimed under section 10A of the Act is not due to any inaccurate particulars furnished by the assessee but on a purely presumptive basis. That being the case, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income so as to be visited with penalty under section 271(1)(c) of the Act. Moreover, in the course of hearing, it was brought to our notice by learned Authorised Representative that under identical facts and circumstances, learned Commissioner (Appeals) has deleted the penalty imposed under section 271(1)(c) of the Act in the assessment year 2005 06. Thus, considering the overall facts and circumstances of the case, we are of the view that the penalty imposed under section 271(1)(c) of the Act amounting to ₹ 19,31,604, deserves to be deleted. Accordingly, we do so. Consequently, grounds no.2.1 and 2.2 are dismissed, whereas grounds no.3.1 and 3.2 are allowed. 8. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,02,000 v) Addition on account of cash payment made towards property ₹ 2,00,00,000 Against the assessment order so passed, the assessee preferred appeal before the first appellate authority. 17. While disposing off assessee s appeal, learned Commissioner (Appeals) deleted the addition made in respect of labour charges while confirming the other additions. Against the said order of learned Commissioner (Appeals), the assessee went in further appeal before the Tribunal. After considering the submissions of the assessee, the Tribunal allowed further relief to the assessee. However, the Tribunal sustained additions, either partially or fully, under the following heads: Unexplained Expenditure ₹ 42,05,000 Salary paid in cash ₹ 10,02,000 18. As regards excess stock of gold jewellery and bullion, the Tribunal directed the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without confronting them to the assessee. He submitted, even the assessee was not allowed any opportunity to cross examine the parties whose statements were relied upon for making the additions. Further, he submitted, though, similar additions were made in preceding assessment years, however, no penalty proceedings under section 271(1)(c) of the Act was initiated. As regards the addition made on account of stock discrepancy, the learned Authorised Representative submitted, ultimately the Tribunal has directed to restrict the addition to gross profit rate. Thus, no penalty can be imposed as ultimately the addition is on estimate basis. 20. The learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 21. We have considered rival submissions and perused the material on record. As regards the legal issue raised in ground no.2.1 and 3.1, while completing the assessment, in the penultimate paragraph of the assessment order the Assessing Officer has initiated proceedings for imposition of penalty under section 271AAA of the Act. Therefore, the contention of the learned Authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the issue has held that the evidence on record is sufficient to hold that the entity with whom the assessee has entered into such transaction is a paper entity created by the assessee to inflate the turnover. The Tribunal also held that the assessee has miserably failed to prove that the transaction with such entities is genuine. In view of such concurrent finding of fact by the appellate authorities including the Tribunal, assessee s claim that the transaction with M/s. Manav Jewelers, cannot be accepted. On a perusal of the assessment order passed in case of Proprietor of M/s. Manav Jewelers, we are convinced that the Assessing Officer has not accepted the transaction to be genuine. Merely because the said entity has filed a return of income showing certain income, the Assessing Officer has passed the assessment order on that basis. However, the assessment order so passed cannot grant authenticity to the activity carried on by the said entity with the assessee. Therefore, to that extent, we are of the view that imposition of penalty under section 271AAA of the Act in respect of addition of ₹ . 42,05,000, has to be sustained. However, as regards the additions made on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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