Shri Jagdishchandra Natverlal Gandhi v. The Income Tax Officer- Ward-6(2)
[Citation -2007-LL-0810-11]

Citation 2007-LL-0810-11
Appellant Name Shri Jagdishchandra Natverlal Gandhi
Respondent Name The Income Tax Officer- Ward-6(2)
Court ITAT-Ahmedabad
Relevant Act Income-tax
Date of Order 10/08/2007
Judgment View Judgment
Keyword Tags concealment of income • imposition of penalty • discrepancy in stock • additional income • bona fide mistake • managing director • concealed income • original return • civil liability • payment of tax • fresh evidence
Bot Summary: The facts of the case are that on verification of purchases made by the assessee, the AO noticed that the assessee had shown ITA No. 2610/Ahd/2007 2 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6, Surat purchases of Rs.4,32,844/- from M/s. Shree Mahalaxmi Synthetics but the seller had shown sales of Rs.3,82,782/- only. During the penalty proceedings the assessee did not furnish any reply and therefore, the AO holding that the assessee had furnished inaccurate particulars of income, imposed penalty of Rs.10,211/- being 100 of the tax sought to be evaded. The learned CIT(A) considering the explanation of the assessee confirmed the penalty and dismissed the appeal of the assessee. The AO issued specific show cause notice to the assessee to explain the discrepancy and the said discrepancy was not satisfactorily explained by the assessee it was not a bona fide mistake and the assessee has not voluntarily surrendered the excessive amount. The manner in which the assessee had tried to prolong the case before the Assessing Officer by not providing information immediately and by narrating incorrect facts in the letter dated December 6, 2006 showed that the assessee had concealed the income and disclosure was not voluntary but under compulsion being cornered by the Assessing Officer. In the case of the assessee, the assessee agreed for addition only when the assessee was cornered by the AO at the assessment stage. In the absence of any explanation from the side of the assessee, the learned CIT(A) was justified in holding that Explanation to section 271 of the IT Act is clearly attracted against the assessee.


IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER) ITA No.2610/Ahd/2007 A. Y.: 2002-03 Jagdishchandra Natverlal Gandhi, Vs Income Tax Officer, C/O. Natverlal Maganlal Gandhi, Ward 6 (2), Aayakar Baranpuri Bhagal, Bhavan, Majura Gate, Surat Surat PA No. ABRPG 0962 F (Appellant) (Respondent) Appellant by Shri S. N. Divetia, AR Respondent by Shri Vinod Tanwani, DR Date of hearing: 23-08-2011 Date of pronouncement: 25-08-2011 ORDER PER BHAVNESH SAINI, JM: This appeal by assessee is directed against order of CIT(A)-IV, Surat dated 10-10-2006 for assessment year 2002-03, challenging levy of penalty u/s 271 (1) ( c ) of IT Act. 2. This appeal was earlier dismissed in default by order dated 10-08-2007. Same order was recalled by allowing Misc. Application of assessee. appeal was accordingly re-fixed for hearing on merit. 3. facts of case are that on verification of purchases made by assessee, AO noticed that assessee had shown ITA No. 2610/Ahd/2007 2 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat purchases of Rs.4,32,844/- from M/s. Shree Mahalaxmi Synthetics but seller had shown sales of Rs.3,82,782/- only. Thus, there was difference of Rs.50,062/- in books of accounts of party. When required to explain, assessee stated that purchase bill of Rs.50,062/- was excessively accounted in this case and excess purchases shown may be added back to income. AO initiated penalty proceedings u/s 271 (1) (c) of IT Act on this account. During penalty proceedings assessee did not furnish any reply and therefore, AO holding that assessee had furnished inaccurate particulars of income, imposed penalty of Rs.10,211/- being 100% of tax sought to be evaded. Before learned CIT(A) it was submitted that when discrepancy was pointed out by AO, it was submitted that due to bona fide mistake by data entry operator, purchase bill was over stated by said amount and immediately offered same for taxation. Since offer was made during course of assessment, no penalty u/s 271 (1) (c) of IT Act should be imposed. 4. learned CIT(A) considering explanation of assessee confirmed penalty and dismissed appeal of assessee. His findings are reproduced as under: After going through records and submissions of appellant, I find that offer for addition was made only after discrepancy was noted by AO and therefore, it tentamount to furnishing of inaccurate particulars of income. Therefore, Explanation 1 to Sec. 271 (1) (c) is clearly attracted in this case and penalty has been rightly imposed for furnishing ITA No. 2610/Ahd/2007 3 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat of inaccurate particulars of income. same is, therefore, confirmed. In result, appeal is dismissed. 5. learned Counsel for assessee reiterated submissions made before authorities below. He has submitted that it was bona fide mistake by data entry operator and purchase bills were overstated. Therefore, no penalty is leviable in this case. 6. On other hand, learned DR relied upon orders of authorities below and submitted that AO verified purchase transaction and issued notice u/s 133(6) of IT Act and on verification it was found that assessee has shown purchases of Rs.4,32,844/- from M/s. Shree Mahalaxmi Synthetics but said party has shown sales of Rs.3,82,782/- only. AO issued specific show cause notice to assessee to explain discrepancy and said discrepancy was not satisfactorily explained by assessee, therefore, it was not bona fide mistake and assessee has not voluntarily surrendered excessive amount. assessee made surrender only after assessee was cornered by AO at assessment stage to explain correct facts. learned DR submitted that even at penalty stage assessee did not file any reply despite giving opportunity of being heard. Since assessee did not turn up and no explanation was filed, therefore, penalty was correctly levied in matter. learned DR, therefore, submitted that Explanation (1) to section 271 (1) (c) of IT Act is clearly attracted in case of assessee. ITA No. 2610/Ahd/2007 4 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat 6.0. I have considered rival submissions and do not find any justification to interfere with order of learned CIT(A) in confirming penalty. Explanation (1) to section 271 (1) (c) of IT Act reads as under: Explanation 1. Where in respect of any facts material to computation of total income of any person under this Act, (A) such person fails to offer explanation or offers explanation which is found by [Assessing] Officer or [***] [Commissioner (Appeals)] [or Commissioner] to be false, or (B) such person offers explanation which he is not able to substantiate [and fails to prove that such explanation is bona fide and that all facts relating to same and material to computation of his total income have been disclosed by him], then, amount added or disallowed in computing total income of such person as result thereof shall, for purposes of clause (c) of this sub-section, be deemed to represent income in respect of which particulars have been concealed. 6.1 Hon ble M. P. High Court in case of Vimal Ginning and Pressing Factory Vs CIT 279 ITR 100 held as under: When no explanation offered when penalty proceedings were initiated, imposition of penalty u/s 271 (1) ( c ) is valid. 6.2 Hon ble M. P. High Court in case of Rukmini Bai 276 ITR 650 held as under: ITA No. 2610/Ahd/2007 5 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat Held, rejecting application, that assessee did not file any explanation when penalty proceedings were initiated. explanation could be same as that given before Assessing Officer and if that had been so, it would have had to be looked into in penalty proceedings, but when no explanation was filed, it could not be taken into consideration. assessee could not contend for first time before court that interference was warranted in facts and circumstances of case. Calling for statement of case was not warranted in this case because Tribunal had rightly recorded that imposition of penalty under section 271(1) (c) in case was just and proper . 6.3 Hon ble Delhi High Court in case of CIT Vs Harparshad and Company Ltd. 328 ITR 53 held as under: Held, that reasons given by Tribunal for quashing penalty proceedings were irrelevant, not germane to issue and Tribunal had lost sight of aspects which had been conclusively established in quantum proceedings. Tribunal had failed to take note of fact that part of claim as commission was allowed to assessee not because R had rendered any services but because J had rendered services for which it was paid 1 per cent of commission by R out of 3 per cent received by her. As far as commission to R was concerned, it was accepted by Tribunal in quantum proceedings that she did not render any services at all. assessee had failed to offer any explanation in respect of addition of Rs.1,83,078 and it could be deemed to have concealed particulars of income or furnished inaccurate particulars thereof, by virtue of this explanation. Tribunal was not justified in deleting penalty imposed by Income-tax Officer under section 271 (1) (c) of Act. ITA No. 2610/Ahd/2007 6 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat findings given in assessment proceedings are relevant and have probative value. Where assessee produces no fresh evidence or presents any additional or fresh circumstances in penalty proceedings, he would be deemed to have failed to discharge onus placed on him and levy of penalty could be justified. Even if there is no concealment of income or furnishing of inaccurate particulars, but on basis thereof claim which is made is ex facie bogus, it may still attract penalty provision. Explanation appended to section 271 (1) (c) of Act entirely indicate element of strict liability on assessee for concealment or for giving inaccurate particulars while filing return. object behind enactment of section 271 (1) (c) read with Explanations indicate that section has been enacted to provide for remedy for loss of revenue. penalty under that provision is civil liability. Willful concealment is not essential ingredient for attracting civil liability as is case in mater of prosecution under section 276C of Act. 6.4 Hon ble Bombay High Court in case of Jyoti Laxman Konkar Vs CIT, 292 ITR 163 held as under: assessee had filed return for assessment year 1999-2000 declaring income of Rs.7,40,510. Not satisfied therewith, Assessing Officer carried out survey under section 133A of Income-tax Act, 1961, and during survey found that there was discrepancy in stock to tune of Rs.18,28,706 which was brought to notice of assessee, and assessee filed revised return disclosing additional income of Rs.18,28,706. Assessing Officer imposed penalty under section 271 ITA No. 2610/Ahd/2007 7 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat (1) (c) and this was upheld by Tribunal. On appeal to High Court: Held, dismissing appeal, that question whether there is concealment of income or not has to be decided with reference to facts of given case and fact finding authorities under Act having come to conclusion that in facts of case, assessee had concealed income initially with view to avoid payment of tax, imposition of penalty was valid. 6.5 Hon ble Gujarat High Court in case of LPM Precision Engg. Co. Ltd. Vs DCIT(Assessment), 330 ITR 93 held as under: Held, that it was only after statement of chairman and managing director was recorded by Deputy Director of Income-tax (Investigation), Mumbai, that first disclosure dated October 20, 1988, Rs.54,71,463 was made accompanied by another disclosure of Rs.54 lakhs in round figure being divided into three segments of Rs.18 lakhs each for assessment years 1986-87, 1987-88 and 1988-89. revised return declaring sum of Rs.78,56,613 came about as consequence of follow- up proceedings undertaken by Deputy Director of Income-tax in relation to other three suppliers, viz., SC, NB and NPST. Therefore, assessee could not be stated to have voluntarily come forward to disclose income which had unintentionally been omitted from original return of income. imposition of penalty was valid. 6.6 Hon ble Allahabad High Court in case of CIT Vs Rakesh Suri, 331 ITR 458 held as under: Held, allowing appeal, that assessee had concealed material facts and given incorrect ITA No. 2610/Ahd/2007 8 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat statement of facts in application and also not provided information required by Assessing Officer, after receipt of notice. Accordingly action of assessee was neither bona fide nor voluntary. manner in which assessee had tried to prolong case before Assessing Officer by not providing information immediately and by narrating incorrect facts in letter dated December 6, 2006 showed that assessee had concealed income and disclosure was not voluntary but under compulsion being cornered by Assessing Officer. Penalty had to be imposed. 7. Considering facts of case in light of Explanation (1) to section 271 (1) (c) of IT Act and above decisions, I am of view that Explanation (1) to section 271 (1) (c) of IT Act is clearly attracted in case of assessee. AO during course of assessment proceedings called for information to verify genuineness of purchases and on basis of reply furnished by M/s. Shree Mahalaxmi Synthetics it was found that assessee has shown excessive purchases in books of accounts. Explanation of assessee was called for by giving show cause notice. assessee instead of explaining discrepancy in purchases has admitted excess purchases and agreed to addition. Therefore, in case of assessee, assessee agreed for addition only when assessee was cornered by AO at assessment stage. If AO would not have called for information from concern party and would not have given show cause notice to assessee, assessee would not have disclosed above concealed income on account of excessive purchases. Even at penalty stage, assessee failed to offer any ITA No. 2610/Ahd/2007 9 Shri Jagdishchandra Natverlal Gandhi Vs ITO, W- 6 (2), Surat explanation and also failed to prove that its explanation regarding wrong entry made by data entry operator was bona fide. In absence of any explanation from side of assessee, learned CIT(A) was justified in holding that Explanation (1) to section 271 (1) ( c ) of IT Act is clearly attracted against assessee. Considering facts of case in light of above decisions, I am of view that penalty was rightly confirmed by learned CIT(A). There is no merit in appeal of assessee. Same is dismissed. 8. In result, appeal of assessee is dismissed. Order pronounced in open court. Sd/- (BHAVNESH SAINI) JUDICIAL MEMBER Lakshmikant/- Copy of order forwarded to: 1. Appellant 2. Respondent 3. CIT concerned 4. CIT(A)- concerned 5. DR, ITAT, concerned 6. Guard File BY ORDER Dy. Registrar, ITAT, Ahmedabad Shri Jagdishchandra Natverlal Gandhi v. Income Tax Officer- Ward-6(2)
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