9911796707
TMI Blog2024 (2) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has assailed the impugned order on the following grounds of appeal before us: "1) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) is not justified in confirming initiation of re-assessment proceedings this 147 of the Income-tax Act, 1961. 2) In the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals) is not justified in confirming addition of Rs. 14,91,783/- by way of treating genuine purchases as unexplained expenditure u/s 69C of the Income-tax Act, 1961. 3) The impugned order is bad in law and on facts. 4) The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice. 3. Succinctly stated, the assessee who is engaged in the business of trading of minerals under the name and style of Balaji Enterprises, had e-filed his return of income for A.Y. 2009-10 on 26.02.2010 declaring an income of Rs. 3,22,050/-. Based on the input received from JDIT (Inv.), Raipur that as per information shared by the Commercial Tax Department the assessee firm was one of the beneficiaries which had obtained bogus purchase bills amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/- the income of the assessee was determined by the A.O at Rs. 18,13,830/-. 5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the relevant observations of the CIT(Appeals) qua the sustainability of the addition of the bogus purchases as was assailed by the assessee before him are culled out as under: "5.2 Ground No.2: "Ld. AO is not justified in making addition of Rs. 14,91,783/- u/s. 69C of the Income Tax Act, 1961 as unexplained expenditure". 5.2.1 I have carefully considered the facts of the case. In this regard, the relevant extract of the assessment order is reproduced hereunder: 5.2.2. During the assessment proceedings, it is well established that the appellant was indulged in acquiring bogus purchase bills from M/s. Rajdhani Trading Co. Raipur, M/s R.K.Sales Corporation and M/s Rajrani Trading Co., thereby debiting bogus purchases in its books during the F.Yr. 2009- 10. The evidences collected from Axis Bank, Raigarh clearly signify that the appellant was involved in operating the account of the facilitator i.e. M/s Rajdhani Trading Co., Raipur. H3 possessed the signed cheque book of the facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO is confirmed." 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 8. Admittedly, it is a matter of fact borne from record that the assessee had failed to substantiate the authenticity of his claim of having made genuine purchases from the aforementioned tainted parties, viz. (i) M/s. R.K Sales Corporation; (ii) M/s. Rajdhani Trading Company and (iii) M/s. Rajrani Trading Company. At the same time, we find that it is a matter of fact borne from record that the A.O in the course of the assessment proceedings, had observed that the assessee in the garb of bogus bills procured from the aforementioned parties had routed the unaccounted stock available with him through his regular books of account. For the sake of clarity, the relevant observations of the A.O to the said effect are culled out as under: "3.4 Here Sales Tax Department not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addresses. They had to suspend their business as they had adopted unfair means to provide accommodation a entries to the purchasers without carrying out any actual trading. For these reasons, the ITAT's above order is squarely not applicable with the facts of this case and assessee cannot get any help with the above decision." 9. Based on the aforesaid facts, we are of the view that now when the A.O was of the view that the assessee had not made any genuine purchases from the aforesaid bogus/hawala parties and had merely procured bogus bill from them to route the unaccounted stock through his regular books of account, then, the sole inference which can be drawn is that the assessee had purchased goods not from the aforementioned tainted parties but had procured the same at a discounted value from open/grey market. Considering the aforesaid facts, we are unable to concur with the A.O who had made addition of the entire value of the impugned purchases in the hands of the assessee. Also, we find that the A.O had at no stage rejected the books of account of the assessee u/s.145(3) of the Act. 10. Be that as it may, we are of the view that in light of the aforesaid facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs. 3,70,78,125/- which comes to Rs. 20,98,62 1.88 we think it fit to direct the revenue to add Rs. 20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue." 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs." It was, thus, observed by the Hon'ble High Court that the addition in respect of purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire value of impugned purchases of Rs. 20,86,256/- in the hands of the assessee. 15. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: "5.2.1 During the assessment proceedings, it is well established that the appellant was indulged in acquiring bogus purchase bills from M/s Rajdhani Trading Co., Raipur, thereby debiting bogus purchases in its books during the F.Yr. 2012-13. The evidences collected from Axis Bank, Raigarh clearly signify that the appellant was involved in operating the account of the facilitator i.e. M/s Rajdhani Trading Co., Raipur. He possessed the signed cheque book of the facilitator, which he used to present in the bank to withdraw cash against the cheque deposited by him in the account of the facilitator. This amply from his signatures as bearer on the cheques of M/s Rajdhani Trading Co., Raipur. The prevalent practice of providing accommodation entry ends with the execution of return of the amount in cash to the beneficiary, which is established in this case. Recently in its judgment dated 16.01.2017 reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT had observed that it would be just and proper to direct the Assessing Officer to restrict the addition in respect of the undisclosed income relating to the purchases to 25 % of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of M/s Indian Woolen Carpet Factory (supra) or M/s Vijay Proteins Ltd. In the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to Rs. 2,92,93,288/- and taxing only 25 % of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/-." SLP against the above decision was dismissed by Supreme Court. In view of the above discussion, this ground is dismissed. 5.4 Ground Nos. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated, the assessee who is engaged in the business of transportation a/w. trading of coal and other minerals, had e-filed his return of income for A.Y.2010-11 on 23.10.2010, declaring an income of Rs. 4,72,530/-. 21. Original assessment, was thereafter, framed by the A.O vide his order passed u/s. 143(3) dated 14.01.2023, wherein income of the assessee was assessed at Rs. 5,79,870/-. On the basis of information that the assessee as a beneficiary had obtained bogus purchase bills from a tainted party, viz. M/s. Rajdhani Trading Company, Raipur, the A.O reopened the case of the assessee u/s. 147 of the Act. 22. Assessment was thereafter framed by the A.O vide his order passed u/s. 143(3) r.w.s. 147 dated 28.12.2017, wherein the entire value of the impugned purchases claimed by the assessee to have been made from, viz. (i) M/s. Rajdhani Trading Company, Raipur and (ii) M/s. Sai Sales, Raipur aggregating to an amount of Rs. 83,62,471/- was added to his returned income by dubbing the same as bogus purchases. The A.O while culminating the assessment-initiated penalty proceedings u/s. 271(1)(c) of the Act for "concealing the income on account of furnishing of inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 161 & 162 of RPR of 2018. However, the same is not applicable since the appellant derived income from salary in that case, whereas in the present case, the appellant derives income from business & profession. 5.7 In totality of the facts and circumstances of the which are distinguishable from the case laws relied upon by the appellant and considering the material brought on record by the AO with regards to bogus purchases and thereby furnishing inaccurate particulars of income, the penalty levied by the AO u/s 271(1)(c) is confirmed. 6. In the result, the appeal is dismissed." 24. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 25. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 26. Shri S.R. Rao, Ld. Authorized Representative (for short 'AR') for the assessee at the threshold assailed the validity of the jurisdiction that was assumed by the A.O for imposing penalty u/s. 271(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O even while framing the assessment vide his order passed u/s. 143(3) r.w.s. 147 dated 28.12.2017, had failed to clearly specify the default for which penalty proceedings u/s. 271(1)(c) of the Act were being initiated, and had observed that the same were being initiated for "concealing the income on account of furnishing of inaccurate particulars of income". The A.O, had, thus, in no clear terms conveyed to the assessee the specific default for which the penalty proceedings were sought to be proceeded with in his hands. 30. Be that as it may, the A.O in the aforesaid SCN dated 28.12.2017 had failed to validly put the assessee to notice as regards the default for which he was called upon to explain that as to why penalty u/s.271(1)(c) may not be imposed on him. Although the A.O was obligated to have validly put the assessee to notice about the default for which penalty u/s.271(1)(c) was sought to be imposed on him w.r.t the additions/disallowances in question, but we find that he had in fact kept the latter guessing and failed to do so. 31. Insofar the validity of the jurisdiction assumed by the A.O for imposing penalty u/s 271(1)(c) is concerned, we find that the same has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the mandate of law. 33. We would now test the validity of the aforesaid 'Show Cause' notice dated 28.12.2017, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act, if in the course of the proceedings he is satisfied that the assessee had either 'concealed his income' or 'furnished inaccurate particulars of his income' or had committed both the defaults w.r.t. the various additions/disallowances made in its hands while framing the assessment. In our considered view as penalty proceedings are in the nature of quasi criminal proceedings, therefore, the assessee as a matter of a statutory right is supposed to know the exact charge for which he is being called upon to explain that as to why the same may not be imposed on him. The non-specifying of the charge in the 'Show cause' notice not only reflects the non-application of mind by the A.O, but in fact defeats the very purpose of giving a reasonable opportunity of being heard to the assessee as envisaged under Sec. 274(1) of the I.T Act. We find that the fine distinction b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e. whether for 'concealment of particulars of income' or 'furnishing of inaccurate particulars', then, the same has to be held as bad in law. The 'Special Leave Petition' (for short 'SLP') filed by the revenue against the aforesaid order of the Hon'ble High Court of Karnataka had been dismissed by the Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). Apart from that, we find that a similar view had been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Samson Perinchery (ITA No. 1154 of 2014; Dt. 05.01.2017) (Bom). The Hon'ble High Court relying on the judgment of the Hon'ble High Court of Karnataka in the case of Manjunathja Cotton and Ginning Factory (supra), which in turn had relied on the judgment of the Hon'ble Apex Court in T. Ashok Pai Vs. CIT, 292 ITR 1 (SC) had approved the order of the Tribunal that had deleted the penalty u/s 271(1)(c) imposed by the A.O and had, inter alia, observed, that the failure of the AO to strike-off the irrelevant def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struck off, so as to indicate clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 32) is perused, it is apparent that the inapplicable portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order is quite consistent with the law laid down in the case of Samson Perinchery and New Era Soya Mine (supra) and therefore, warrants no interference." The Special Leave Petition (SLP) filed by the revenue against the aforesaid order had thereafter been dismissed by the Hon'ble Apex Court in Pr. CIT (Central) Vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 249 (SC). Also, the "Full bench" of the Hon'ble High Court of Bombay in the case of Mohd. Farhan A. Shaikh V. DCIT, Central Circle-1, Bengalu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatically lead to a penalty 176. Second, not always do we find the assessment proceedings revealing the grounds of penalty proceedings. Assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice- and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter- vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187. In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther adjudication." Also, the Hon'ble High Court of Bombay in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay), had observed that where there was no recording of satisfaction by the AO in relation to any concealment of income or furnishing of inaccurate particulars by assessee in the notice issued for initiation of such proceedings, then, the Tribunal had in absence of said statutory requirement rightly vacated the penalty proceedings. Also, the Hon'ble High Court of Bombay in the case of PCIT, Panaji Vs. Goa Dourdo Promotions (P) Ltd. (2021) 433 ITR 268 (Bombay) relying upon its earlier orders in the case of, viz.(i). Goa Coastal Resorts & Recreation P. Ltd. (supra); (ii). Samson Perinchery (supra); and (iii). New Era Sova Mine (supra), had observed that recording of satisfaction by AO in relation to any concealment of income or furnishing of inaccurate particulars by the assessee in notice issued u/s 271(1)(c) is the sine qua non for initiation of such proceedings. Further, we find that the ITAT, Pune in Ashok Sahahakari Sakhar Karkhana Ltd. Vs. ACIT (2018) 99 taxman.com 374 (Pune), had held that where ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
