Appeal details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 8638 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 11 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-09-2017
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
SMC
Next Hearing Date
07-06-2017
Assessment Year
2009-2010
Appeal Filed On
11-09-2013
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER , .., ./ ITA NO. 2281/AHD/2013 / ASSESSMENT YEAR: 2009-10 NEXUS SOFTWARE LTD., 316, ABHISHEKH PLAZA, B/H. NAVGUJARAT COLLEGE, OFF. ASHRAM ROAD, AHMEDABAD-14 PAN : AAACN 6794 K VS. DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD ./ ITA NO. 2588/AHD/2013 / ASSESSMENT YEAR: 2009-10 DCIT, CENTRAL CIRCLE - 2(2), AHMEDABAD VS. NEXUS SOFTWARE LTD., ASHRAM ROAD, AHMEDABAD-14 PAN : AAACN 6794 K / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI P.F. JAIN, AR REVENUE BY : SHRI T. SHANKAR, SR DR / DATE OF HEARING : 11/07/2017 ( * / DATE OF PRONOUNCEMENT : 08/09/2017 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE AND REVENUE ARE IN CROSS APPEALS AGAIN ST THE ORDER OF LD. CIT(A)-III, AHMEDABAD DATED 22.08.2013 PASSED F OR ASSESSMENT YEAR 2009-10. 2. THE LD. ASSESSING OFFICER HAS IMPOSED A PENALTY OF RS.15,00,000/- UPON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE IN COME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). THE LD. CI T(A) HAS CONFIRMED THE PENALTY EQUIVALENT TO THE TAX SOUGHT TO BE EVADED A S AGAINST THE HIGHER ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 2 PENALTY IMPOSED BY THE ASSESSING OFFICER. THE REVEN UE IS AGGRIEVED WITH THE PART DELETION OF THE PENALTY; WHEREAS, THE ASSE SSEE IS AGGRIEVED WITH THE CONFIRMATION OF THE PENALTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL LOSS AT RS.(-) 6,33,138/-. THE LD. ASSESSING OFFICER HAS ISSUED TEN NOTICES UNDER SECT ION 143(2) AND 142(1) OF THE ACT. ALL THESE NOTICES REMAINED UNCOMPLIED WIT H; HENCE, THE ASSESSING OFFICER HAS PASSED AN ASSESSMENT ORDER UN DER SECTION 144 OF THE ACT, ACCORDING TO HIS BEST JUDGMENT. ON AN AN ALYSIS OF THE DETAILS, LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE DID NOT C ARRY OUT ANY SPECIFIC BUSINESS AS PER ITS MEMORANDUM OF ASSOCIATION. HE O BSERVED THAT STATEMENT OF THE DIRECTOR, SHRI JAYESH PATEL, AS A WITNESS IN THE CASE OF CHARTERED MOTORS PVT LTD, WAS RECORDED ON 08.03.201 0. ACCORDING TO THE DETAILS AVAILABLE WITH THE ASSESSING OFFICER, IT RE VEALED THAT THE ASSESSEE USED TO RECEIVE THE FUNDS AND PASSED ON THE FUNDS T O ANOTHER ENTITY ON THE VERY SAME DAY OR NEXT DAY. THE ASSESSING OFFICER F OUND HUGE TRANSACTIONS IN VARIOUS BANK ACCOUNTS OF THE ASSESS EE. HE, THEREFORE, OBSERVED THAT THE ASSESSEE IS PROVIDING ACCOMMODATI ON ENTRIES TO OTHER CONCERNS. THE ASSESSING OFFICER ESTIMATED THE COMMI SSION INCOME AT 0.5% OF THE ENTIRE WITHDRAWALS FROM THE BANK ACCOUNTS OF THE ASSESSEE AND DETERMINED THE TAXABLE INCOME AT RS.26,35,726/-. 4. THE LD. ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. HE ISSUED A SHOW-CAU SE NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT ON 30.12.2011, BUT THE ASSESSEE DID NOT REPLY. HE AGAIN ISSUED ANOTHER NOTICE ON 01.06.2012, BUT T HE ASSESSEE DID NOT REPLY. ULTIMATELY, THE ASSESSING OFFICER HAS PASSED AN EX-PARTE ORDER. THE ASSESSING OFFICER HAS OBSERVED THAT ON CONCEALED CO MMISSION INCOME OF ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 3 RS.26,35,726/-, A MINIMUM PENALTY EQUIVALENT TO THE TAX SOUGHT TO BE EVADED WORKS OUT TO RS.11,11,087/-; WHEREAS, THE MA XIMUM PENALTY @ 300% OF THE TAX SOUGHT TO BE EVADED WOULD BE RS.33, 33,261/-. HOWEVER, CONSIDERING THE NON-COOPERATIVE ATTITUDE OF THE ASS ESSEE, THE LD. ASSESSING OFFICER IMPOSED A PENALTY OF RS.15,00,000/-. 5. BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN CONFIRMING THE INCOME AT RS.26,35,726/ -. ACCORDING TO THE ASSESSEE, THE ASSESSING OFFICER FAILED TO TAKE CORR ECT WITHDRAWAL FROM ONE OF THE BANK ACCOUNTS. THE TOTAL INCOME, AFTER TAKIN G INTO CONSIDERATION THE CORRECT WITHDRAWAL, WOULD BE RS.19,85,089/- INSTEAD OF RS.26,35,726/- WORKED OUT BY THE ASSESSING OFFICER. IN ITS FIRST F OLD OF CONTENTIONS, IT WAS CONTENDED THAT THE ASSESSING OFFICER HAS ERRED IN L EVYING THE PENALTY MORE THAN THE MINIMUM LEVIABLE. IN ITS NEXT FOLD O F CONTENTIONS, IT WAS SUBMITTED THAT INCOME OF THE ASSESSEE WAS DETERMINE D ON AN ESTIMATE BASIS AND THEREFORE, NO PENALTY OUGHT TO BE IMPOSED UPON THE ASSESSEE. IN SUPPORT OF ITS CONTENTIONS, THE ASSESSEE HAS RELIED UPON FIVE DECISIONS, WHICH HAVE BEEN REPRODUCED BY THE LD. CIT(A) IN HIS ORDER WHILE TAKING NOTE OF THE SUBMISSIONS OF THE ASSESSEE. THE LD. CI T(A), IN PRINCIPLE, CONCURRED WITH THE ASSESSING OFFICER THAT THE ASSES SEE DESERVES TO BE VISITED WITH PENALTY; BUT, ACCEPTED TWO ALTERNATIVE CONTENTIONS NAMELY HE DIRECTED THE ASSESSING OFFICER TO TAKE THE CORRECT FIGURE OF ESTIMATED INCOME AND THEREAFTER CALCULATE THE PENALTY @ 100% OF THE TAX SOUGHT TO BE EVADED. THE RELEVANT PART OF THE SUBMISSIONS AND FI NDINGS OF THE LD. CIT(A) READ AS UNDER:- THE A.O. HAS ESTIMATING NET INCOME AT RS.26,35,726 /- WHICH AFTER RECTIFICATION WILL GET REDUCED TO RS. 19,85,089/-. THEREFORE IT IS WRONG TO OBSERVE THAT THE COMMISSION INCOME HAS NOT BEEN DIS CLOSED IN ITS RETURN OF INCOME. ACCORDING TO ASSESSEE THE GROSS EARNING IS 16,10,850/-WHEREAS IT ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 4 HAS BEEN ESTIMATED AT MORE AMOUNT BY THE A.O. AND T HE ESTIMATED AMOUNT HAS BEEN TREATED AS NET INCOME. IT IS NOT THE CASE THAT THE ASSESSEE HAS RECEIVED CASH COMMISSION WHICH HAS NOT BEEN ACCOUNT ED FOR. EVEN IF IT IS ASSUMED THAT ASSESSEE WAS PROVIDING CHEQUE ENTRIES, THE INCOME EARNED BY THE ASSESSEE WILL BE DIFFERENCE OF CHEQUE ENTRIES R ECEIVED AND GIVEN AND THE SAID INCOME IS DULY REFLECTED IN THE ACCOUNTS OF CO MPANY WHICH ARE ALSO AUDITED. THE INCOME HAS BEEN ONLY ESTIMATED AND THE RE IS NO POSITIVE CONCEALMENT HAS BEEN DETECTED AND THE ESTIMATED INC OME BY NO STRETCH, OF IMAGINATION CAN BE TREATED AS CONCEALED INCOME AND THE ASSESSEE CANNOT BE CHARGED OF FURNISHING INACCURATE PARTICULARS OF INC OME OR CONCEALING PARTICULARS OF COMMISSION INCOME. THE SAID INCOME A S EARNED BY THE COMPANY IS DULY SHOWN IN THE ACCOUNT AND THEREFORE THE VERY BASIS OF LEVYING PENALTY FOR NOT DISCLOSING COMMISSION INCOM E DISAPPEARS OR VANISHES. THE WITHDRAWALS IN THE BANK ACCOUNTS AND DEPOSIT IN THE BANK ACCOUNT ARE DULY ACCOUNTED FOR AND THE INCOME FLOWI NG FROM SUCH TRANSACTIONS HAS ALSO BEEN ACCOUNTED FOR. IT IS SET TLED LEGAL POSITION THAT ON ESTIMATED INCOME NO PENALTY U/S. 271(1)(C) CAN BE L EVIED. IN THIS CONNECTION YOUR KIND ATTENTION IS DRAWN TO THE FOLL OWING LEGAL DECISION. (1) IQBALSINGH & CO. 180 TAXMAN - 355 (P & H.): IN THIS CASE ADDITION ON THE BASIS OF ESTIMATE WAS MADE BUT THE PENALTY WAS DELETED BY THE ITAT AND (HE ORDER OF IT AT WAS CONFIRMED BY THE HIGH COURT. (2) M.M.RICE MILLS-253 ITR-17 (P.& H) : IN THIS CASE ADDITION MADE ON ESTIMATE BASIS AFTER APPLYING SECTION 145(1) AND A.O. IMPOSED PENALTY U/S. 271(1)(C) WHIC H WAS SET ASIDE IN APPEAL BY HOLDING THAT ADDITION MADE BY APPLYING PROVISO TO SECTION S. 145(1) CANNOT BE MADE A BASIS FOR IMPOSI TION OF PENALTY U/S. 271(1)(C). THE HIGH COURT DISMISSED THE APPEAL OF THE DEPARTMENT. (3) VALMIKBHAI H. PATEL - 280ITR 487 (GUI): IN THIS CASE PENALTY WAS IMPOSED FOR ADDITION MADE BY REVALUE IN THE STOCK, IT WAS HELD BY CIT(APPEALS) THAT MERELY BECA USE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM IN TERMS OF QUANTITY PEN ALTY U/S. 271(1)(C) CANNOT BE IMPOSED AS ONE ESTIMATE WAS SUBSTITUTED B Y ANOTHER ESTIMATE. THE APPEAL OF DEPARTMENT WAS DISMISSED B Y HIGH COURT. (4) S. RAHAMAT KHAN BIRBALKHAN BADRUDDI N & PARTY- 240 ITR - 778 (RAJ.) : IN THIS CASE ALSO ADDITION WAS MADE ON ACCOUNT OF S UPPRESSED SALES AND ADDITION TO THE EXTENT OF RS. 1 LACK WAS SUSTAI NED BY THE ITAT BUT PENALTY WAS DELETED ON THE FINDING THAT THERE W AS NO ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 5 CONCEALMENT OF INCOME AND THE ADDITION WAS MADE ON THE BASIS OF ESTIMATION. THE HIGH COURT DISMISSED THE APPEAL OF THE DEPARTMENT. (5) RAVAIL SINGH & CO : 254 ITR- 191 (P&H): IN THIS CASE ALSO ADDITION WAS MADE ON THE BASIS OF ESTIMATE AND NOT ON ANY CONCRETE EVIDENCE OF CONCEALMENT OF ANY TRAN SACTION FOR FURNISHING OF INACCURATE PARTICULARS. PENALTY WAS D ELETED BY ITAT AND THE COURT HELD THAT THERE IS NO ERROR IN THE OR DER OF THE TRIBUNAL. IN THE CASE OF ASSESSEE ALSO INCOME HAS BEEN ESTIMA TED ON THE BASIS OF WITHDRAWALS FROM THE BANK ACCOUNTS WHICH CANNOT BE MADE BASIS TO ARRIVE AT INCOME. AS THIS IS A CASE OF PURE ESTIMAT ION OF INCOME, THE RATIOS OF ABOVE DECISIONS WILL APPLY AND THE PENALT Y LEVIED MAY KINDLY BE DELETED. KINDLY CONSIDER THE APPEAL OF THE ASSESSEE IN ITS P ROPER PERSPECTIVE AND OBLIGE.' 6. COPY OF SUBMISSIONS OF THE APPELLANT WAS ALSO FO RWARDED TO THE AO AND HE WAS ASKED TO FURNISH HIS REPORT IN THE MATTER. A O FURNISHED REPORT VIDE HIS LETTER NO. DCLT.CC-2(2)/ REMAND REPORT/NEXUS/20 13-14 DATED 22-08- 2013 IN WHICH HE STATED THAT 'I HAVE GONE THROUGH THE SUBMISSION AND THE ASSESSE E'S MAJOR CONTENTION WAS REGARD THE RECTIFICATION PENDING WIT H THIS OFFICE. THE ASSESSEE HAS STATED THAT THERE IS A MISTAKE IN COMP UTING WITHDRAWALS IN ACCOUNT NO. 1817 WITH VINAYAK SAHKARI BANK LTD., KALUPUR, AHMEDABAD. HE HAS STATED THAT AS PER PARA NO. 4.2 O F ASSESSMENT ORDER THE WITHDRAWALS OF THE SAID BANK HAS BEEN PUT AT RS.16,65,38,138/- WHEREAS THE WITHDRAWAL RELEVANT T O A.Y. 2009-10 FROM SAID BANK COMES TO RS. 3,64,10,855/- WHICH AS RESULTED INTO EXCESS COMPUTATION OF BANK WITHDRAWALS BY RS. 13,01 ,27,283/-. IT IS PERTINENT TO NOTE HERE THAT THE ASSESSEE HAS NOT CO -OPERATED DURING THE ASSESSMENT PROCEEDINGS EVEN AFTER SEVERAL REMIN DERS VIDE NOTICE U/S. 142(1)/ 142(3) HE HAS NOT SUBMITTED ITS REPLY. IN ABSENCE OF ANY INFORMATION FROM THE ASSESSEE THE AO CALLED FOR INF ORMATION FROM ALL THE BANKS U/S. 133(6) OF THE ACT, IN WHICH ASSESSEE WAS HAVING ACCOUNTS AND COMPUTED HIS COMMISSION INCOME ACCORDI NGLY. FURTHER, THE STATEMENT OF SHRI JAYESH PATEL, DIRECT OR OF ASSESSEE- COMPANY HAS CONFIRMED THAT THE COMPANY IS ENGAGED I N PROVIDING CHEQUE ENTRIES TO OTHER ENTITIES AND HAS RECEIVED T HE COMMISSION @ RS. 0.50/- PER RS. 100/-. THE UNDERSIGNED HAS VERIF IED THE WITHDRAWALS FROM ACCOUNT NO. 1817 OF SHRI VINAYAK S AHKARI BARTK LTD., KALUPUR. THE CONTENTION OF THE ASSESSEE IS FO UND-TO BE CORRECT- ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 6 THE TOTAL WITHDRAWAL FROM THE BANK STANDS AT RS. 3, 64,10,855/- FOR A.Y. 2009-10.' 7. FACTS OF THE CASE AND ARGUMENTS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. THE MAJOR ARGUMENT OF THE APPELLANT IS THAT IN ITS CASE THE INCOME HAS BEEN ESTIMATED BY AO AND THEREFORE, PENA LTY U/S. 271(1)(C) IS NOT LEVIABLE IN VIEW OF VARIOUS COURT DECISIONS. TH IS ARGUMENT OF THE APPELLANT IS NOT ACCEPTABLE. THE FACT REMAINS THAT THE VERY EXISTENCE OF THE APPELLANT COMPANY WAS FOR FALSIFICATION OF BOOKS OF ACCOUNT OR DOCUMENTS. AS MENTIONED EARLIER, APPELLANT COMPANY WAS SHOWING HUGE TRANSACTIONS OF PURCHASE AND SALE BUT IN REALITY ALL THESE TRANS ACTIONS WERE ONLY ACCOMMODATION ENTRIES. THE APPELLANT COMPANY WAS PR OVIDING ENTRIES TO VARIOUS TAX PAYERS AND THUS WAS INSTRUMENTAL IN ENA BLING THEM TO EVADE TAXES. FALSIFICATION OF BOOKS OF ACCOUNTS OR DOCUME NTS IS A SERIOUS OFFENCE UNDER THE INCOME TAX ACT FOR WHICH THERE IS PROVISI ON FOR PROSECUTION U/S. 277 A. SECTION 277A READS AS FOLLOWS: 'FALSIFICATION OF BOOKS OF ACCOUNT OR DOCUMENT, ETC . 277A. IF ANY PERSON (HEREAFTER IN THIS SECTION REFE RRED TO AS THE FIRST PERSON) WILLFULLY AND WITH INTENT TO ENABLE ANY OTH ER PERSON (HEREAFTER IN THIS SECTION REFERRED TO AS THE SECON D PERSON) TO EVADE ANY TAX OR INTEREST OR PENALTY CHARGEABLE AND IMPOS ABLE UNDER THIS ACT, MAKES OR CAUSES TO BE MADE ANY ENTRY OR STATEM ENT WHICH IS FALSE AND WHICH THE FIRST PERSON EITHER KNOWS TO BE FALSE OR DOES NOT BELIEVE TO BE TRUE, IN ANY BOOKS OF ACCOUNT OR OTHE R DOCUMENT RELEVANT TO OR USEFUL IN ANY PROCEEDINGS AGAINST TH E FIRST PERSON OR THE SECOND PERSON UNDER THIS ACT, THE FIRST PERSON SHALL BE PUNISHABLE WITH RIGOROUS IMPRISONMENT FOR A TERM WHICH SHALL N OT BE LESS THAN THREE MONTHS BUT WHICH MAY EXTENT TO [TWO] YEARS AN D WITH FINE.' 8. THUS IT IS CLEAR THAT THE INTENTION OF THE LEGIS LATURE IS THAT FALSIFICATION OF BOOKS OF ACCOUNTS OR DOCUMENTS SHALL BE SERIOUSLY D ISCOURAGED. IT IS A FUNDAMENTAL PRINCIPLE OF CRIMINAL LAW THAT ANY PERS ON WHO AIDS, ABETS, COUNSELS, OR PROCURE THE COMMISSION OF AN OFFENCE, IS LIABLE TO BE TRIED, PROCEEDED AGAINST, AND PUNISHED AS A PRINCIPAL OFFE NDER. THIS PRINCIPLE APPLIES TO SUMMARY OFFENCES AS WELL AS TO INDICTABL E OFFENCES. 9. THE APPELLANT BY PROVIDING ACCOMMODATION ENTRIES TO VARIOUS TAX PAYERS IS RESPONSIBLE FOR CAUSING SUBSTANTIAL LOSS OF REVE NUE TO THE EXCHEQUER AND THEREFORE, HE DOES NOT DESERVE ANY SYMPATHY. I THER EFORE HOLD THAT THIS IS A SUITABLE CASE FOR LEVY OF PENALTY U/S. 271(1)(C). T HE RELIANCE PLACED BY THE APPELLANT ON VARIOUS COURT DECISIONS IS OF NO HELP BECAUSE THE FACTS OF THOSE CASES ARE ENTIRELY DIFFERENT. LEVY OF PENALTY U/S. 271(1)(C) IN THIS CASE IS CONFIRMED. HOWEVER, IT HAS BEEN POINTED OUT BY THE APPELLANT THAT ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 7 COMMISSION INCOME HAS NOT BEEN CORRECTLY WORKED OUT BY AO. FROM THE PERUSAL OF BANK STATEMENT OF APPELLANT IT IS FOUND THAT THIS CONTENTION IS CORRECT. MOREOVER, THE MINIMUM PENALTY LEVIABLE IN THIS CASE WAS RS.11,11,087/- WHEREAS AO HAS LEVIED PENALTY OF RS. 15,00,000/-. NO REASONS HAVE BEEN GIVEN FOR THE SAME BY AO IN THE P ENALTY ORDER. IT WILL BE FAIR AND REASONABLE TO RESTRICT THE PENALTY TO THE MINIMUM AMOUNT. AO IS THEREFORE, DIRECTED TO COMPUTE INCOME OF THE APPELL ANT CORRECTLY AND LEVY PENALTY @100% ON THE SAME. GROUND NO.1 OF THE APPEA L IS PARTLY ALLOWED. 7. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS RAIS ED AN ALTERNATIVE CONTENTION. HE FILED AN APPLICATION FOR PERMISSION TO RAISE AN ADDITIONAL GROUND OF APPEAL, WHEREBY THE ASSESSEE HAS PLEADED THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS NOT TENABLE BECAUSE THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE IN THE SHOW-CAUSE NOTICE, I.E. WHETHER THE PENALTY IS BEING IMPOSED FOR FURNISHING OF INACCURATE PARTI CULARS OR FOR CONCEALING THE INCOME. 8. APART FROM THE ABOVE, LD. COUNSEL FOR THE ASSESS EE HAS REITERATED ITS CONTENTIONS AS WERE RAISED BEFORE THE LD. CIT(A). H E MADE REFERENCE TO FIVE ORDERS WHICH HAVE BEEN RELIED UPON BEFORE THE LD. CIT(A), AS ALSO TO THE SUBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN EXT RACTED BY THE LD. CIT(A) IN HIS ORDER. THE LD. COUNSEL FOR THE ASSES SEE HAS PLACED ON RECORD THE COPY OF THE SHOW-CAUSE NOTICE DATED 20.12.2011 AT PAGE NO.1 OF THE PAPER-BOOK. 9. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE RELIED UPON THE ORDER OF THE CIT(A). HE FURTHER CONTENDED THAT HON BLE GUJARAT HIGH COURT IN THE CASE OF SNITA TRANSPORT (P.) LTD. VS. ACIT, REPORTED IN [2014] 42 TAXMANN.COM 54 (GUJ), HAS CONSIDERED THE ISSUE W ITH REGARD TO SERVICE OF NOTICE UPON THE ASSESSEE FOR ITS EXPLANATION AS TO WHY THE PENALTY BE IMPOSED OR NOT. HE POINTED OUT THAT THE HONBLE G UJARAT HIGH COURT HAS DEALT WITH THE ISSUE AND OBSERVED THAT IN A SHOW-CA USE NOTICE THE ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 8 ASSESSING OFFICER CAN USE THE LANGUAGE OF AND/OR WHILE SPECIFYING THE CHARGES AGAINST THE ASSESSEE. IN OTHER WORDS, THE ASSESSING OFFICER CAN ISSUE A SHOW-CAUSE NOTICE, ASKING THEREIN THAT WHY THE PENALTY BE NOT IMPOSED FOR CONCEALING THE INCOME AND/OR FURNISHING INACCURATE PARTICULARS OF INCOME. IF IN THE PENALTY ORDER THE ASSESSING OFFICER HAS CONCLUSIVELY HELD THAT THE PENALTY IS BEING IMPOSED EITHER FOR CONCEALING THE INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THEN THERE WILL NOT BE ANY PROCEDURAL IRREGULARITIES WHICH ARE FATAL TO THE PROCEEDINGS ITSELF. 10. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. LET US FIRST TAKE THE ADDIT IONAL GROUND OF APPEAL RAISED BY THE ASSESSEE. THE COPY OF THE SHOW-CAUSE NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT IS AVAILABL E AT PAGE NO.1 OF THE PAPER-BOOK. THE ASSESSING OFFICER HAS GIVEN AN OPP ORTUNITY TO THE ASSESSEE TO SUBMIT ITS EXPLANATION AS TO WHY THE PE NALTY BE NOT IMPOSED UPON IT UNDER SECTION 271(1)(C) OF THE ACT. NO DOU BT, THE ASSESSING OFFICER HAS NOT SCORED THE SPECIFIC CHARGE AS TO WH ETHER THE PENALTY IS BEING INTENDED TO INITIATE FOR CONCEALMENT OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. BUT IT IS PERTINE NT TO OBSERVE THAT THIS SHOW-CAUSE NOTICE WAS NOT REPLIED BY THE ASSESSEE. THE PENALTY PROCEEDINGS ARE EX-PARTE . WE FAILED TO UNDERSTAND THAT WHAT AMBIGUITY CAUSED IN THE MIND OF THE ASSESSEE FOR PUTTING ITS DEFENSE BEFORE THE ASSESSING OFFICER. IT HAS NOT PUT ANY DEFENSE IN T HE ASSESSMENT PROCEEDINGS OR IN THE PENALTY PROCEEDINGS. THE ASSE SSMENT ORDER IS EX- PARTE , PASSED UNDER SECTION 144 OF THE ACT. SIMILARLY, P ENALTY ORDER IS ALSO EX-PARTE . THE ASSESSEE HAS EVEN FAILED TO SUBMIT BEFORE US THAT HOW THIS NON-SPECIFICATION OF CHARGE IN THE ALLEGED SHOW-CAU SE NOTICE PUTS ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 9 HINDRANCE IN PREPARING ITS DEFENSE FOR ABSOLVING IT SELF FROM THE RIGOROUS PENALTY. APART FROM THE ABOVE, WE FIND THAT IN PARA GRAPH NO.5.1 OF THE PENALTY ORDER, THE ASSESSING OFFICER HAS IMPOSED TH E PENALTY FOR CONCEALMENT OF THE PARTICULARS OF INCOME. THERE IS NO AMBIGUITY IN THE MIND OF THE ASSESSING OFFICER AS TO WHETHER HE INTE NDS TO IMPOSE THE PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS. THE CONCLUSIONS ARE FIRM THAT THE ASSE SSEE HAS CONCEALED PARTICULARS OF INCOME. IN THIS BACKGROUND, LET US T AKE NOTE OF THE OBSERVATIONS MADE BY THE HONBLE JURISDICTIONAL HIG H COURT IN THE CASE OF SNITA TRANSPORT (P.) LTD (SUPRA). THE RELEVANT DIS CUSSIONS READ AS UNDER:- 9. REGARDING THE CONTENTION THAT THE ASSESSING OFF ICER WAS AMBIVALENT REGARDING UNDER WHICH HEAD THE PENALTY WAS BEING IM POSED NAMELY FOR CONCEALING THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS, WE MAY RECORD THAT THOUGH IN THE ASSESSMENT ORDER T HE ASSESSING OFFICER DID ORDER INITIATION OF PENALTY ON BOTH COUNTS, IN THE ULTIMATE ORDER OF PENALTY THAT HE PASSED, HE CLEARLY HELD THAT LEVY O F PENALTY IS SUSTAINED IN VIEW OF THE FACT THAT THE ASSESSEE HAD CONCEALED TH E PARTICULARS OF INCOME. THUS INSOFAR AS FINAL ORDER OF PENALTY WAS CONCERNE D, THE ASSESSING OFFICER WAS CLEAR AND PENALTY WAS IMPOSED FOR CONCEALING PA RTICULARS OF INCOME. IN LIGHT OF THIS, WE MAY PERUSE THE DECISION OF THIS C OURT IN CASE OF MANU ENGINEERING WORKS (SUPRA). IN THE SAID DECISION, TH E DIVISION BENCH CAME TO THE CONCLUSION THAT LANGUAGE OF AND/OR MAY BE PROPER IN ISSUING A NOTICE FOR PENALTY, BUT IT WAS INCUMBENT UPON THE A SSESSING AUTHORITY TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULA RS OF SUCH INCOME HAD BEEN FURNISHED BY THEM. IF NO SUCH CLEAR CUT FINDIN G IS REACHED BY THE AUTHORITY, PENALTY CANNOT BE LEVIED. IT WAS A CASE IN WHICH IN FINAL CONCLUSION THE AUTHORITY HAD RECORDED THAT I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. I T WAS IN THIS RESPECT THE BENCH OBSERVED THAT NOW THE LANGUAGE OF AND/OR M AY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMEN T OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF S UCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR CUT FINDIN G WAS REACHED BY THE ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 10 IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN. 11. CONSIDERING THE FACTS AND CIRCUMSTANCES IN THE LIGHT OF ABOVE, WE DO NOT FIND ANY MERIT IN THIS ADDITIONAL GROUND OF APP EAL RAISED BY THE ASSESSEE. 12. SO FAR AS THE PLEA THAT THE INCOME OF THE ASSES SEE WAS ESTIMATED AND THEREFORE, NO PENALTY SHOULD BE IMPOSED UPON THE AS SESSEE IS CONCERNED, WE ARE OF THE VIEW THAT THE ASSESSEE WAS NOT DOING ANY SPECIFIC BUSINESS. IT WAS INDULGED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS TAX EVADERS. ITS ACTIVITY HAS CAUSED SUBSTANTIAL LOSS OF REVENUE TO THE EXCHEQUER. IT HELPED THE PEOPLE TO PREPARE FALSE BOOKS OF ACCOUNT S. THE ASSESSEE HAS NOT DISCLOSED ITS BUSINESS ACTIVITY AS PROVIDING OF ACC OMMODATION ENTRIES. IT HAS NOT SHOWN THE INCOME FROM THIS ACTIVITY. SO TH E CHARGE AGAINST THE ASSESSEE IS THAT IT HAS CONCEALED PARTICULARS OF IN COME. THE ULTIMATE DETERMINATION OF INCOME IN SUCH TYPE OF THING WOULD ALWAYS BY WAY OF ESTIMATION. IT IS NOT THE CASE THAT SOME CLAIM WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THEREAFTER HE ESTIMATED THE I NCOME. IT IS ALSO NOT THE CASE THAT THE ASSESSEE HAS SHOWN HOUSEHOLD EXPE NSES WHICH WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND HIGHER HOUSEH OLD EXPENSES WERE TAKEN FOR ESTIMATION OF INCOME. IN SUCH TYPE OF IS SUES, IT COULD BE ALLEGED THAT INCOME WAS ESTIMATED; THEREFORE, NO PENALTY BE IMPOSED. IN THE PRESENT CASE, THE COMPUTATION OF INCOME ON ESTIMATI ON BASIS IS BY COMPULSION AND NOT BY CHOICE. THUS, THERE IS NO FO RCE IN THIS CONTENTION ALSO. 13. SO FAR AS THE OTHER ALTERNATIVE PLEAS ARE CONCE RNED, THE LD. CIT(A) HAS ALREADY GIVEN DIRECTIONS. THE LD. FIRST APPELL ATE AUTHORITY HAS CONFIRMED THE PENALTY @ 100% OF THE TAX SOUGHT TO B E EVADED. WE, ITA NOS. 2281 & 2588/AHD/2013 NEXUS SOFTWARE LTD VS. DCIT AY : 2009-10 - 11 THEREFORE, DO NOT FIND ANY FORCE IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 14. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D, THE TAX EFFECT INVOLVED IN THIS APPEAL IS LESS THAN THE LIMIT PRES CRIBED BY THE CBDT CIRCULAR NO.21 OF 2015 DATED 10.12.2015. THEREFORE , THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE ON ACCOUNT OF LOW TAX E FFECT IN VIEW OF THE AFORESAID CBDT CIRCULAR. OTHERWISE ALSO WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN THIS REGARD. HIGHER RATE OF PENALTY SHOULD NOT BE IMPOSED UPON THE ASSESSEE MER ELY ON ACCOUNT OF ASSESSEES NON-APPEARANCE IN THE PENALTY PROCEEDING S. THERE SHOULD BE SOME OTHER STRONG LOGIC. THUS, WE DO NOT FIND ANY M ERIT IN THE APPEAL OF THE REVENUE ALSO. IT IS ALSO DISMISSED. 15. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 08 TH SEPTEMBER, 2017 AT AHMEDABAD. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 08/09/2017 **BT ! '!/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONCERNED CIT 4. & ) ( / THE CIT(A)- 5. ! $ , $ , /DR,ITAT, AHMEDABAD, 6. 1 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) $ ITAT, AHMEDABAD
