The Tax Publishers2012 TaxPub(DT) 0446 (Luck-Trib) : (2012) 134 ITD 0552 : (2011) 141 TTJ 0108 : (2011) 060 DTR 0081

INCOME TAX ACT, 1961

--Appeal (Tribunal)--Additional ground Scope--It is open to assessee to set up/raise question of validity of assessment in the appeal against levy of penalty. Since question of validity of assessment made in the matter was raised, which was a pure question of law and not involving any investigation into the facts, as the same were on record, the additional ground raised by assessee was admitted for decision.

Income Tax Act, 1961 Section 254(1)

INCOME TAX ACT, 1961

--Reassessment--Reason to believe Genuineness of cash credits--There was no attempt on the part of AO to demonstrate that the closing balance of the assessment year 2005-06 was not correct. It may be that the fresh credits for assessment year 2006-07 may themselves shown as opening balances instead of fresh deposits. The reassessment proceedings had been initiated on suspicion and for making roving enquiries and since it was settled law that proceedings under section 147 cannot be initiated either on the basis of mere suspicion or making fishing or roving enquiries, initiation of proceedings under section 147 in the present case was illegal and bad in law.

Income Tax Act, 1961 Section 147

Income Tax Act, 1961 Section 68

INCOME TAX ACT, 1961

--Penalty under section 271(1)(c)--Validity Absence of relevant finding--During the course of proceedings under section 143(3) for the assessment year 2006-07, certain credit balances were found appearing in the impounded books of accounts. Assessee was required to verify the opening balances of the creditors as appearing, in the books of accounts. Assessee replied that these balances related to assessment year 2005-06 and its genuineness may be examined in assessment year 2005-06, therefore, action under section 148 was taken for the assessment year 2005-06. AO completed assessment under section 147/143(3) on 20-5-2009 at the total income of Rs. 12,30,900 making certain additions as against original returned income of Rs. 68,960. AO initiated penalty proceedings under section 271(1)(c). During the course of assessment proceedings, it was revealed from the revised return that assessee had surrendered various cash credits and deposits totalling to Rs. 10,75,062. In order to 'verify the authenticity of other various creditors given in the list of sundry creditors, the books of accounts were examined and enquiry letters were issued for confirmation of these credit balances. On the basis of examination of books of accounts and direct enquiries made from trade creditors, further certain credit balances were not found correct. In the cases of P. Dye-chem and P. Overseas, enquiry letters were sent and the same were returned back unserved and in the cases of A Engineering Works, G Trading Co., and M Tin Decorators, enquiry letters were sent but no confirmations were received. It was also found that in the cases of P Tool & Industrial Corpn., Perfect Packaging, M Enterprises, B Silk Screen & A Sons, in each case single bill was raised and the same were outstanding till the end of the previous year. Since in all the above cases, the transactions were not confirmed and assessee had stated that payments were made in cash but assessee failed to substantiate his claim, therefore, an addition of Rs. 86,882 was made. However, the assessment was completed under section 147/143(3) on 20-5-2009 at the total income of Rs. 12,30,900 after making certain additions as against original returned income of Rs. 68,960 (revised income of Rs. 11,44,020 including surrender of Rs. 10,75,062 on account of creditors/depositors). AO observed that since assessee had furnished inaccurate particulars of income or concealed the particulars of income, a notice under section 271(1)(c) was issued on 20-5-2009 and duly served upon assessee. In compliance to show-cause notices, assessee filed written submission on 7-9-2009. AO did not accept the reply of assessee. AO concluded that assessee had consciously concealed particulars of income to the extent of Rs. 11,61,944 and furnished inaccurate particlars of his income, therefore, assessee is liable for penalty as provided in section 271(1)(c). Consequently, AO imposed a penalty under section 271(1)(c). On appeal, Commissioner (Appeals) confirmed the penalty in respect of addition of Rs. 86,882 and cancelled the penalty of Rs. 3,98,209 in respect of the amount of Rs. 10,75,062. Held: In the instant case penalty order showed that AO had not reached on any clear-cut finding as to whether there was concealment of income by assessee or whether any inaccurate particulars of such income had been furnished by assessee. No penalty can, therefore, be validly levied in this case.

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