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13-06-2019, Vipin Jain & Associates, Section 271(1)(c), 271, Tribunal Delhi

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3 months 1 week ago #9744 by amit
Section - 271(1)(c), 271, 271(1Kc), 80IA
Order Date - 13-06-2019
Favouring - Revenue
Court - Tribunal Delhi
Appellant - Vipin Jain & Associates
Respondent - ITO
Justice - H.S. Sidhu JM & B.R.R. Kumar AM
Citation - 619Taxpundit160
Appeal No. - ITA No. 3497/Del/2016
Asstt. Year - 2007-08


PER : B.R.R. Kumar

The appeal was filed 13.06.2016 and notice has been issued to the assessee by the Tribunal on 29.04.2019 by RPAD intimating the date of hearing on 12.06.2019. On the designated date nobody appeared on behalf of the assessee nor any letter of adjournment is filed before us. Hence, the matter is being adjudicated based on the materials available on record.

2. The brief facts of the case are that subsequent to the information received pertaining to financial affairs of the assessee by the Income-tax Department, a survey u/s. 133A was conducted at the business premises of the assessee. During the survey, it was found that the assessee is running a proprietary concern by the name of M/s. Eves Trading and involved in export of readymade garments to Europe and U.S. Subsequently, net profit was determined at Rs.50,48,792/- being 6.33% of the total turnover of Rs.7,93,83,533/-. Consequently, the penalty u/s. 271(1)(c) has been levied.

3. We have gone through the details available on record and find that the business affairs of the assessee have been concealed from the eyes of the Income-tax Department and no returns have been filed pertaining to the profits relating to this business income. It was argued before the Revenue authorities that the profits have been the part of the AOP which has been disproved by the Revenue. During that time, a copy of the agreement of AOP claimed to have been prepared on 30 03.2005 effecting the AOP from 01.04.2004 has been rightly proved to be invalid, as the Advocate who notarized the deed has confirmed that the notarization has not been executed by him. Even the PAN of the AOP has been obtained in March, 2017 subsequent to the survey action by the department. Hence, this income do not form a part of income of the AOP as claimed by the assessee. Before the ld. CIT(A), the assessee has relied on the judicial pronouncements in the case of Manunatha Cotton and Ginning Factory (Karnataka High Court) and heavily relied on the ratio that when two views are possible, no penalty can be levied.

He further argued that making a claim which is not sustainable under law cannot lead to levy of penalty. The ld. CIT(A) after considering the arguments of the assessee held that the penalty is leviable in view of the rationale given by Hon’ble Supreme Court in the case of Dharmendra Textiles, 306 ITR 277 and various other case laws mentioned below. For the sake of brevity, the order of the ld. CIT(A) is reproduced as under :

4.1 I have carefully considered the written submissions filed by the Ld. AR and penalty order passed by the AO. From the penalty order, it is established that AO imposed penalty specifically holding that creation of AOP was an after-thought with the sole motive of minimizing the effect of taxability on the income, which was not disclosed in the return.

4.1.1 From perusal of Sec. 271(1)(c), it is seen that the provisions of Sec 271 (1)(c) are attracted only when the conditions stipulated in Section 271 (1)(c) are met. Explanation 1 to Sec 27(1 )(c) sets out the circumstances which justifie levy of penalty. It reads as under:

Explanation 1. Where in respect of any facts material to the computation of the total income of any person under this Act,-

(A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or

(B). Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the comput tion of his total income have been disclosed by him. then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed.

The implication of the Explanation as under:

(1) Every difference between reported and assessed income needs an explanation.
(2) If no explanation is offered, levy of penalty may be justified.
(3) If explanation is offered, but is found to be false, penalty will be exigible.
(4) If explanation is offered and it is not found to be false, penalty may not be leviable,-
(a) such explanation is bona fide.
(b) the Assessee had made available to the Assessing Officer all the facts and materials necessary in computation of income

It is seen that in the instant case, at the time of survey on 09.01.2007, statement of Sh. Gunjeev Saluja and Sh. G.S.Saluja was recorded and they admitted that assessee was the proprietor of M/s AVI Impex, but no books of accounts were found to be maintained and the income was not included in the ITR filed. However on 19.03.2007, Sh. Gunjeev Saluja changed his statement and claimed that M/s AVI Impex was an AOP of M/s Gunjeev saluja and others and came into

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