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TMI Blog2023 (11) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... AO for initiation of penalty proceedings which can be discerned from reading of the assessment order. There is no direction for initiation of penalty proceedings and merely addition has been made to the returned income on a presumptive basis which is not sufficient for acquiring jurisdiction as contemplated by the provisions of section 271(1B) of the Act. Appeal of the assessee is allowed. - SHRI A.D. JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER For the Assessee by : None For the Revenue by : Smt. Amanpreet Kaur, Sr. DR ORDER PER VIKRAM SINGH YADAV, AM: This is an appeal filed by the assessee against the order of the ld. CIT(A)-3 Ludhiana dated 11.12.2018 wherein the assessee through various grounds of appeal has challenged the sustenance of penalty u/s 271(1)(c) of the Act amounting to Rs. 1,29,203/-. 2. Briefly the facts of the case are that the assessee filed his return of income declaring total income of Rs. 2,65,520/- which was selected for scrutiny and notices u/s 143(2) and 142(1) were issued. Subsequently information u/s 133(6) was also called for from the sundry creditors as well as copy of the bank statements w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons while initiating the penalty proceedings, the same are liable to be set aside and in support reliance was placed on the Hon'ble Karnataka High Court decision in case of CIT Vs MWP Ltd. [2014] 41 taxmann.com 496. It was further contended that in the Show Cause Notice, the AO has not specified which specific limb of Section 271(1)(c) of the Act is proposed to be initiated against the assessee and in support, reliance was placed on the Hon'ble Karnataka High Court decision in case of Manjunatha Cotton Ginning Factory. It was further contended that the assessment has been framed by estimating the income of the assessee at 1% of the gross turnover and the said estimate is without reference to any material and without bringing any positive evidence against the assessee and it was, accordingly, submitted that no penalty can be levied in case of estimation of income and reliance was placed on the Hon'ble Punjab Haryana High Court decision in case of CIT Vs Sangrur Vanaspati Mills Ltd. 303 ITR 53 besides various other decisions. It was further contended that the penalty has been imposed on debatable issue and on genuine difference of opinion wherein the AO has es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be levied on debatable issue on estimated income. I have carefully considered appellant's plea and additional grounds of appeal, which are on legal grounds. I have carefully considered the written submission filed by the appellant during the course of appellate proceedings wherein the assessee has challenged that the assessing officer has not drawn any specific satisfaction before initiating the penalty and other grounds. I have also carefully considered facts of the case, and various judicial pronouncements relied upon by the assessee. I do- not find any substance in the contention of the assessee. In the case of assessee it is an admitted fact, that the assessee has been found to be indulged in providing accommodation entries to various parties, in lieu of commission. In my considered view the assessing officer has assessed the income of assessee in justified manner by only assessing 1% of commission. Therefore in view of the facts , the income of the assessee was assessed at 1% on the gross sale of Rs. 10,06,63,636 which came to Rs. 10,06,636/-. It is undoubted that the assessee has been found to be involved in providing failed to disclose inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the Hon ble High Court are as under: Shri Sawhney argued that failure of the assessee to file a correct return was by itself sufficient for levy of penalty under Section 271(1)(c) of the Act and the Tribunal committed a serious error by setting aside the orders of the assessing authority and the Commissioner of Income-tax (Appeals) only on the ground of non-recording of satisfaction by the Assessing Officer in the order of assessment. In our opinion, there is no merit in the argument of learned counsel. A reading of the order passed by the Tribunal shows that after making a reference to the judgments of the Supreme Court and some High Courts in Jain Brothers v. Union of India (1970) 77 ITR 107(SC), D.M. Manasvi v. CIT (1972) 86 ITR 557 (SC), CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568(Del) and Diwan Enterprises v. CIT (2000) 246 ITR 571(Del), the Tribunal culled out the proposition of law in the following words : It is clear from above that jurisdiction to impose penalty flows from recording of the satisfaction and in case there is a jurisdictional defect in the assumption of jurisdiction, it cannot be cured. With the aforesaid legal quoting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Delhi High Court in case of Ms. Madhushree Gupta vs UOI ANR. (WP(C) No. 5059 of 2008 dated 24.07.2009) wherein it was held that the prima facie satisfaction of the Assessing officer has to be discernable from the records at the stage of initiation of penalty proceedings and the same remains a jurisdictional requirement even post amendment and the relevant observations read are as under: 15.5 In our opinion the impugned provision only provides that an order initiating penalty cannot be declared bad in law only because it states that penalty proceedings are initiated, if otherwise it is discernible from the record, that the Assessing Officer has arrived at prima facie satisfaction for initiation penalty proceedings. The issue is of discernibility of the satisfaction arrived at by the Assessing Officer during the course of proceeding before him. 15.6 As indicated hereinabove, the position is no different post-amendment. The contra-submission of the learned ASG that prima facie satisfaction of the Assessing Officer need not be reflected at the stage of initiation but only at the stage of imposition of penalty is in the teeth of Section 271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the manner in which the deeming has been contemplated to be restricted in the manner sought to be deemed. As the words used in the legal fiction or the deeming provisions of Section 271 (IB) is Direction, it is imperative that the assessment order contains a direction. Use of the phrases like (a) penalty proceedings are being initiated separately and (b) penalty proceedings under Section 271(l)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. The word 'direction' has been interpreted by the decision of the Apex Court in the case of Rajinder Nath v. CIT [1979] 120 ITR 14 where it has been held that in any event whatever else it may amount to, on its very terms the observation that the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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