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Mere difference in valuation method does not mean conscious concealment of income

In Shah Virchand Govanji Jwellers Pvt. Ltd. v. ACIT, Valsad Circle, Valsad, decided on 26-10-2017, the Income Tax Apellate Tribunal, Surat, passed an order for a case related to difference in the amount of income and furthermore, in the return, due to adoption of different methods by each party.

The brief facts of the case are that there was difference in the amount of income as two different methods were used by the parties respectively. Also there was an accusation of disallowance of computer expenses which was voluntarily agreed to by the assessee. The appeal for the same was filed before the CIT (A). However, the CIT (A) upheld the levity of penalty. Aggrieved by the same, the present appeal has been filed before the Tribunal.

The Tribunal observed that the difference in the valuation method alone does not amount to the conscious concealment of income. The Tribunal also said that issuing of notice without striking off the irrelevant clauses and without mentioning the specific charges against the assessee makes the notice vague and it is a settled principle now that when the charges are vague and not specific, no penalty can be levied. Further reliance in the case was made through CIT v. Manjunatha Cotton Ginning Factory, 2012 SCC OnLine Kar 8862 : [2013] 359 ITR 565, through which it was observed that the charges against the assessee should be specifically construed. Also reliance was placed on Meharjee Cassinath Holdings Pvt. Ltd.  v. ACIT Circle 4(2) , where there was a similar case of non-application of mind while serving the notice.

Article referred: http://blog.scconline.com/post/2017/11/23/mere-difference-valuation-method-not-mean-conscious-concealment-income/

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