M/s Nandkishor Proteins, JUNAGADH V. The Income Tax Officer, Ward-1(2), JUNAGADH

ITA 642/RJT/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0065 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-10-2016
• Assessment Year: 1995-1996
• Appeal Filed On: 10-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND N SONTAKKE
• Assessee Lawyers: MJ RANPURA
• Keywords: Bogus purchase; Search and seizure; Question of law; Cost of acquisition
• Section: 6; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.642 AND 643/RJT/2014 ASSTT.YEAR 1995-96 AND 1996-97 M/S.NANDKISHOR PROTEINS SARANGWADA JUNAGADH. VS ITO, WARD - 1(2) JUNAGADH. )* / (APPELLANT) +, )* / (RESPONDENT) ASSESSEE BY : SHRI M.J. RANPURA, AR REVENUE BY : SHRI ARVIND N. SONTAKKE, SR.DR / DATE OF HEARING : 19/10/2016 / DATE OF PRONOUNCEMENT: 25/11/2016 -.// O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST COMMON ORDER OF THE LD.CIT(A)-IV, RAJKOT DATED 25.9 .2014 PASSED FOR THE ASSTT.YEARS 1995-96 AND 1996-97. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN CONFIRMING PENALTY OF RS.6,00,000/- AND RS.1,76,000 /- FOR THE ASSTT.YEARS 1995-96 AND 1996-97 RESPECTIVELY. 3. FACTS ON ALL VITAL POINTS ARE COMMON IN BOTH THE ASSESSMENT YEARS. THEREFORE, FOR THE FACILITY OF REFERENCE, WE TAKE U P THE FACTS FROM THE ASSTT.YEAR 1995-96. ITA NO.642 AND 643/RJT/2014 2 4. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 2 0.10.1995 DECLARING TOTAL INCOME AT RS.4,46,130/-. THE ASSESSEE-FIRM A T THE RELEVANT TIME WAS ENGAGED IN EXTRACTION OF EDIBLE OILS FROM OIL SEEDS AND OIL CAKE, AND IT WAS HAVING OIL MILL. IT HAS MADE PURCHASES OF RS.4,68, 33,880/- FROM M/S.SHREENATHJI INDUSTRIES, SHAHPUR. SIMILARLY, IN THE ASSTT.YEAR 1996-97, IT HAS MADE PURCHASES FROM UMIYA INDUSTRIES, VANTHALI. CASE OF THE AO IS THAT THE CIVIL SUPPLIES DEPARTMENT AND SALES-TAX DEPARTM ENT CARRIED OUT SEARCH ON THE PREMISES OF M/S.SHREENATHJI INDUSTRIES. THEY H AVE EXAMINED SHRI MUKESH C. KAMDAR, DIRECTOR OF M/S.CAPTAIN ENTERPRISE PVT. LTD. IN THEIR INQUIRY, IT REVEALED THAT M/S.SHREENATHJI INDUSTRIES AND UMIYA INDUSTRIES WERE NOT DOING ACTUAL TRADING OF OIL SEEDS AND OIL CAKES RATHER, T HEY WERE PROVIDING ONLY ACCOMMODATION BILLS. THE INCOME TAX DEPARTMENT HAS ALSO CARRIED OUT SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT ON THESE CO NCERNS AND ALSO AT THE PREMISES OF SHRI MUKESH C. KAMDAR. ON THE STRENGTH OF THIS INFORMATION, THE AO HAS CONFRONTED THE ASSESSEE AS TO HOW THE EXPENS ES FOR PURCHASE CAN BE ALLOWED TO THE ASSESSEE. IN RESPONSE TO THE QUERY OF THE AO, THE ASSESSEE HAS PRODUCED PHOTO-COPIES OF GODOWN REGISTER, PURCHASE REGISTER, SALES-REGISTRAR, BECAUSE, ORIGINALLY, THESE BOOKS WERE SEIZED BY THE SALES-TAX DEPARTMENT. 5. ASSESSEE HAS SUBMITTED DETAILS OF TRANSPORTATION . THE ASSESSEE HAS SUBMITTED DETAILS OF BANK ACCOUNT EXHIBITING PAYMEN T TO THESE CONCERNS, THROUGH ACCOUNT PAYEE CHEQUES. THE AO VERIFIED THE DETAILS AND FOUND THAT THE ASSESSEE HAS MADE SALES, AND THERE CANNOT BE AN Y DISPUTE ABOUT THE SALES FIGURES. THUS, ON CONSIDERATION OF ALL THESE FACTS AND CIRCUMSTANCES, THE LD.AO HAS DISALLOWED 3% OF PURCHASE COST ON THE GRO UND THAT THE ASSESSEE MUST HAVE AVOIDED PAYMENT OF SALES-TAX AT THIS LEVE L BY ADOPTING THIS MODUS OPERANDI . ACCORDINGLY, AN ADDITION OF RS.14,05,015/- WAS M ADE IN THE ASSTT.YEAR 1995-96 WHICH LEAD TO A PENALTY OF RS.6 LAKHS. SIMILAR ADDITION OF ITA NO.642 AND 643/RJT/2014 3 RS.4,39,745/- WAS MADE IN THE ASSTT.YEAR 1996-97 AN D A PENALTY OF RS.1,76,000/- HAS BEEN IMPOSED. 6. DISSATISFIED WITH THE LEVY OF PENALTY, THE ASSES SEE CARRIED THE MATTER BEFORE THE LD.CIT(A). BUT THE LD.CIT(A) HAS REJECT ED THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE PENALTY IMPOSED BY THE A O. THE FINDING OF THE LD.CIT(A) READS AS UNDER: 6. I HAVE CONSIDERED CAREFULLY, THE SUBMISSIONS MA DE BY THE AUTHORIZED REPRESENTATIVE AND THE PENALTY ORDRES PA SSED BY THE ASSESSING OFFICER FOR BOTH THE ASSESSMENT YEARS UND ER APPEAL. THE FACTS AVAILABLE ON RECORD REVEAL THAT THIS IS NOT A CASE OF SIMPLE ESTIMATION OF INCOME. THIS IS A CASE WHERE CERTAIN PERSONS WERE C OVERED UNDER SEARCH AND SEIZURE ACTION U/S. 132 OF THE IT ACT, 1 961, AS A RESULT OF WHICH, IT CAME TO LIGHT THAT APPELLANT HAS OBTAINED BOGUS BILLS FOR PURCHASE OF GROUNDNUT OIL FROM M/S. SHREENATHJI IND USTRIES, SHAPUR AND UMIYA INDUSTRIES, VANTHALI. THIS MATTER WAS ALSO IN VESTIGATED BY CIVIL SUPPLIES DEPARTMENT OF GOVERNMENT OF GUJARAT. BASED ON THE CONCRETE EVIDENCE FOUND, THE ASSESSING OFFICER HAS COME TO A CONCLUSION THAT THE APPELLANT BY OBTAINING BOGUS PURCHASE BILLS HAS INF LATED THE PURCHASE VALUE. THE ADDITION MADE IN RESPECT OF BOTH THE ASS ESSMENT YEARS HAS BEEN CONFIRMED BY THE HON'BLE ITAT, RAJKOT BENCH, R AJKOT. THEREFORE, THE APPELLANT BY WAY OF INDULGING IN PROCURING BOGU S PURCHASE BILLS IN RESPECT OF PURCHASE OF GROUNDNUT OIL IS A CLINCHING EVIDENCE TO SHOW THAT THERE WAS A CLEAR CUT INTENTION TO CONCEAL THE INCOME BY INFLATION OF PURCHASES. IT IS ONLY THAT THE ASSESSING OFFICER HAS ADOPTED THE 3% OF THE PURCHASES ALLEGED TO HAVE BEEN MADE FORM -M/S. SHREENATHJI INDUSTRIES, SHAPUR AND UMIYA INDUSTRIES, VANTHALI A S BOGUS. THEREFORE, THE ESTIMATION OF PROFIT OR INCOME PER SE DO NOT AB SOLVE THE APPELLANT FROM THE RIGOURS OF SECTION 271(L)(C) OF THE IT ACT , 1961. THOUGH, THE HON'BLE HIGH COURT OF GUJARAT HAS ADMITTED THE APPE AL OF THE APPELLANT AGAINST THE ORDERS OF BY THE HON'BLE ITAT, RAJKOT B ENCH, RAJKOT TO ANSWER THE SUBSTANTIAL QUESTION OF LAW, BUT AS PER THE JUDGMENT OF THE SAME HON'BLE COURT IN THE CASE OF DHARAMSHI B. SHAH IN TAX APPEAL NO. 189 OF 2014 DATED 09/06/2014, THE MERE ADMISSIO N OF APPEAL IS NOT A RELEVANT FACTOR FOR DECIDING THE PENALTY. THE JUR ISDICTIONAL HIGH COURT HAS HELD THAT NOTWITHSTANDING THE ADMISSION O F ANY APPEAL BY IT, THE MATTERS PERTAINING TO PENALTY U/S. 271(L)(C) OF THE IT ACT, 1961 ITA NO.642 AND 643/RJT/2014 4 SHOULD BE DECIDED ON THE MERITS OF THE CASE. CONSID ERING THE FACTUAL MATRIX, IT IS QUITE EVIDENT THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS TO CONCEAL THE INCOME BY WAY OF OBTAINI NG BOGUS PURCHASE BILLS, WHICH WAS EVIDENT FROM THE RESULTS OF SEARCH AND SEIZURE ACTION MOUNTED ON SEVERAL OTHER PERSONS AS REFERRED TO IN THE ASSESSMENT ORDER. ALL THE JUDICIAL PRONOUNCEMENT RELIED UPON B Y THE AUTHORIZED REPRESENTATIVE ARE DISTINGUISHABLE BOTH ON 6CTS AND IN LAW, HENCE, NOT APPLICABLE. THEREFORE, I DECLINE TO INTERFERE WITH THE ACTION OF FEE ASSESSING OFFICER IN LEVYING PENALTY AT RS. 6,00,00 0/- FOR A.Y. 1995-96 AND RS.1,76,000/- FOR A.Y. 1996-97. THE PENALTIES L EVIED U/S. 271(L)(C) OF THE IT ACT, 1961, STANDS CONFIRMED. THE GROUNDS TAKEN ARE HEREBY DISMISSED. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE SHRI HARISH RANPARA, C.A. HAS TAKEN AN ADDITIONAL GROUND, WHEREBY HE CHALLENGED THE VALIDITY OF PENAL TY PROCEEDINGS FOR BOTH THE ASSESSMENT YEARS ON THE GROUND THAT PENALT IES LEVIED ARE BARRED BY LIMITATION OF TIME ON 31/03/2007, AS AGAI NST WHICH THE ASSESSING OFFICER HAS PASSED THE PENALTIES ORDER ON 27/07/2009. THE AUTHORIZED REPRESENTATIVE HAS TAKEN THE DATE OF DIS POSAL BY THE CIT (APPEALS) ON 18/08/2005 AS THE BASIS FOR WORKING OU T THE LIMITATION. HOWEVER, THE ARGUMENT MADE BY THE AUTHORIZED REPRES ENTATIVE HAS NO BASIS. THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF RAYALA CORPORATION (P.) LTD. (2007) 288 ITR ? 452 (MAD.) A ND THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF MOHAIR INVESTMEN T AND TRADING CO. PVT. LTD. (2012) 345 ITR 51 (DELHI) HAVE HELD THAT PROVISO TO SECTION 275 (L)(A) DOES NOT NULLIFY THE PERIOD OF SIX MONTH S FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL IS RECEIVE D. IN THIS CASE FOR BOTH THE ASSESSMENT YEARS, THE ORDER FORM HON'BLE I TAT, RAJKOT BENCH, RAJKOT HAS BEEN RECEIVE ON 06/01/2009. THEREAFTER, THE ASSESSING OFFICER HAS PASSED THE PENALTY ORDERS IN RESPECT OF BOTH THE ASSESSMENT YEARS UNDER APPEAL ON 27/07/2009 AND 29/07/2009. TH EREFORE, THERE IS NO INFIRMITY IN THE ACTION OF THE ASSESSING OFFICER IN PASSING THE PENALTY ORDERS WITH REFERENCE TO LIMITATION OF TIME. THE PE NALTY ORDERS PASSED ARE WELL WITHIN THE TIME. THE ADDITIONAL GROUND TAK EN BY THE APPELLANT IS DISMISSED. 7. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARING ON THE CONTROVERSY, THEREFORE, WE TAKE NOTE RELEVANT PROVI SION, WHICH READS AS UNDER: ITA NO.642 AND 643/RJT/2014 5 '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 8. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SH OULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100 % TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OT HER MOST IMPORTANT FEATURES ITA NO.642 AND 643/RJT/2014 6 OF THIS SECTION IS DEEMING PROVISIONS REGARDING CON CEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERT AIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEM ING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FI RST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCO ME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE AS SESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD CO ME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSE E IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME HAV E BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANAT ION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION ITA NO.642 AND 643/RJT/2014 7 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE I NCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 9. IN THE LIGHT OF THE ABOVE, LET US EXAMINE FACTS OF THE PRESENT CASE. THE LD.COUNSEL FOR THE ASSESSEE IN HIS FIRST FOLD OF SU BMISSIONS HAS SUBMITTED THAT PENALTY ORDER IS TIME BARRED, BECAUSE, IT WAS NOT P ASSED WITHIN SIX MONTHS FROM THE RECEIPT OF THE CIT(A)S ORDER. WE HAVE D ULY CONSIDERED ARGUMENTS, BUT DID NOT FIND ANY MERIT IN IT, IN VIEW OF THE FI NDING RECORDED BY THE LD.CIT(A) IN PARA-7 EXTRACTED (SUPRA). IN OUR OPIN ION, THE LD.CIT(A) HAS APPRECIATED THE FACTS IN RIGHT PERSPECTIVE ON THIS ISSUE. 10. IN THE NEXT FOLD OF SUBMISSIONS, IT WAS CONTEND ED BY THE LD.COUNSEL FOR THE ASSESSEE THAT ORDER OF THE TRIBUNAL IN QUANTUM HAS BEEN CHALLENGED BY THE ASSESSEE IN TAX APPEAL NO.1872 AND 1255 OF 2009 BEF ORE THE HONBLE HIGH COURT. THE HONBLE COURT HAS ALREADY ADMITTED THE APPEALS. IN VIEW OF THIS SITUATION, IT IS TO BE INFERRED THAT THE QUESTION O F LAW IS INVOLVED, AND IT IS DEBATABLE WHETHER THE ASSESSEE HAS RIGHTLY CLAIMED THE EXPENSES OF PURCHASES OR NOT. HE ALSO CONTENDED THAT THE AO HAS NOT RECO RDED ANY FINDING WHETHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, AND IF THE PENALTY ORDER IS SILENT AND DOES NOT SPELL O UT REASONS FOR WHICH PENALTY HAS BEEN IMPOSED, SUCH AN ORDER IS NOT SUSTAINABLE. IN ORDER TO BUTTRESS HIS CONTENTION, HE RELIED UPON THE JUDGMENT OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. WHITEFORD INDIA LTD., 38 TAXMAN N.COM 15 (GUJ.). ON THE OTHER HAND, THE LD.DR HAS RELIED UPON THE ORDER OF THE CIT(A). 11. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS SUBMITTED AN EXPLANATION BEFORE THE AO THAT ITS PURCHASES ARE GENUINE. IN ORDER TO BUTTRESS THIS SUBMISSION, THE ASSESSEE HAS FILED DOCUMENTARY DETAILS INCLUDING BANK ACCOUNT EXHIBITI NG PAYMENT THROUGH ITA NO.642 AND 643/RJT/2014 8 ACCOUNT PAYEE CHEQUES. AS AGAINST THIS EVIDENCE, T HE AO HAS ONLY AN INFORMATION FROM THE CIVIL SUPPLIES DEPARTMENT OR F ROM THE SEARCH CARRIED OUT BY THE INCOME TAX DEPARTMENT UNDER SECTION 132 OF T HE ACT. WHAT HAS HAPPENED ULTIMATELY IN THESE PROCEEDING HAS NOT BEE N HIGHLIGHTED BY THE AO. THE AO HAS SIMPLY OBSERVED THAT SINCE SHREENATHJI I NDUSTRIES WAS FOUND TO BE ISSUED ONLY BOGUS BILL, THEREFORE, PURCHASES OF THE ASSESSEE ARE DOUBTFUL. THIS OBSERVATION IS BASED ON INITIATION OF ACTION ON THE SUPPLIER BUT WHETHER ULTIMATELY WHAT HAPPENED IN THOSE WAS NOT BROUGHT O N THE RECORD. THE EXPLANATION OF THE ASSESSEE WAS FACTUALLY NOT FOUND TO BE FALSE, BUT RATHER ON APPRECIATION OF NATURE OF EVIDENCE, IT WAS NOT ACCE PTED BY THE AO. HE MADE DISALLOWANCE OF 3% OF THE EXPENDITURE, WHICH IS AN ESTIMATED DISALLOWANCE. QUANTUM ADDITIONS MADE BY THE AO AND UPHELD BY THE TRIBUNAL IS ALREADY SUBJECT MATTER OF APPEAL BEFORE THE HONBLE COURT. IT SUGGESTS THAT CONCLUSIONS ARE STILL DEBATABLE. APART FROM THE ABO VE, THE AO HAS NOT CONCLUSIVELY RECORDED A FINDING THAT WHETHER THE AS SESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS. THE FI NDING OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF WHITEFORD INDIA L TD.(SUPRA) IS WORTH TO NOTE IN THIS CONNECTION. IT READS AS UNDER: 4. HAVING HEARD SHRI VARUN PATEL, LEARNED ADVOCATE APPEARING ON BEHALF OF THE APPELLANT AND CONSIDERING THE OBSERVA TIONS MADE BY THE ASSESSING OFFICER, WHILE PASSING THE ORDER OF PENAL TY, IT IS NOT IN DISPUTE AND/OR CANNOT BE DISPUTED THAT THERE WAS NO CLEAR F INDING BY THE ASSESSING OFFICER WHETHER THE ASSESSEE WAS GUILTY O F CONCEALING THE INCOME OR FURNISHING INACCURATE PARTICULARS OF THE INCOME. WHILE CONSIDERING THE SIMILAR SITUATION, THE DIVISION BEN CH IN THE CASE OF MANU ENGINEERING WORKS (SUPRA) HAS OBSERVED AND HEL D AS UNDER; WE FIND FROM THE ORDER OF THE INSPECTING ASSISTANT COMMISSIONER, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA. 4 OF THE ORDER; I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSES SEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED I NACCURATE ITA NO.642 AND 643/RJT/2014 9 PARTICULARS OF SUCH INCOME. NOW, THE LANGUAGE OF AND/OR MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER O R FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASICRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE INSPECTING ASSISTANT COMMISSIONE R TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCE ALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PA RTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR- CUT FINDING WAS REACHED BY THE INSPECTING ASSISTANT COMMISSIONER AND, ON THAT GROUND ALONE, THE ORDER O F PENALTY PASSED BY THE INSPECTING ASSISTANT COMMISSIONER WAS LIABLE TO BE STRUCK DOWN. 4.1. SIMILAR VIEW HAS BEEN SUBSEQUENTLY EXPRESSED B Y ANOTHER DIVISION BENCH IN THE CASE OF NEW SORATHIA ENGINEERING CO. ( SUPRA). CONSIDERING THE RATIO LAID DOWN BY THIS COURT IN TH E AFORESAID TWO DECISIONS AND THE FACTS OF THE CASE ON HAND, MORE P ARTICULARLY, WHEN IT IS OBSERVED THAT THERE WAS NO CLEAR FINDING BY THE ASSESSING OFFICER WHETHER THE ASSESSEE IS GUILTY OF CONCEALING THE IN COME AND/OR FURNISHING INACCURATE PARTICULARS OF THE INCOME AND THE LEARNED INCOME TAX APPELLATE TRIBUNAL HAS SET ASIDE THE ORDER PASS ED BY THE CIT(A) CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICE R IMPOSING PENALTY UNDER SECTION 278(1)(C) OF THE ACT, IT CANNOT BE SA ID THAT THE INCOME TAX APPELLATE TRIBUNAL HAS COMMITTED ANY ERROR. 4.2. RELIANCE PLACED UPON SECTION 271(1)(B), WHICH HAS BEEN INSERTED BY THE FINDING OF THE FINANCE ACT, 2005 WITH EFFECT FROM 01/04/2006 IS NEITHER HERE NOR THERE. STILL THE REQUIREMENT WHILE IMPOSING THE PENALTY UNDER SECTION 271(1) (C) ARE REQUIRED TO BE COMPLIE D WITH. IT CANNOT BE DISPUTED THAT WHILE IMPOSING THE PENALTY UNDER SECT ION 271(1)(C) OF THE ACT, TWO CONDITIONS ARE REQUIRED TO BE SATISFIED I. E. (I) THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME (II) THE AS SESSEE HAS FURNISHED INCORRECT PARTICULARS OF SUCH INCOME. AS HELD BY TH E DIVISION BENCH IN THE CASE OF MANU ENGINEERING WORKS (SUPRA) THE ASSE SSING OFFICER IS REQUIRED TO GIVE CLEAR FINDING WHETHER THE ASSESSEE IS GUILTY OF CONCEALING THE INCOME AND/OR FURNISHING INCORRECT P ARTICULARS OF INCOME. 5. IN VIEW OF THE ABOVE, WE SEE NO REASON TO INTERF ERE WITH ITA NO.642 AND 643/RJT/2014 10 TAKING INTO CUMULATIVE EFFECT OF ALL THESE REASONIN G, WE ARE OF THE VIEW THAT THE ASSESSEE DOES NOT DESERVE TO BE VISITED WITH PE NALTY. ACCORDINGLY, WE ALLOW BOTH THESE APPEALS OF THE ASSESSEE AND DELETE IMPUGNED PENALTY. 12. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE COURT ON 25 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER