M/s. Nexus Infracon Pvt. Ltd., New Delhi V. ACIT, New Delhi

CO 327/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3857 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-05-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 08-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAMITA M BISWAS
• Keywords: Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 153A; 139(1); 13; 153; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.4637/DEL./2016 (ASSESSMENT YEAR : 2012-13) ACIT, CENTRAL CIRCLE 2, VS. M/S. NEXUS INFRACON PV T. LTD., NEW DELHI. 1497, BHARDWAJ BHAWAN, WAZIRNAGAR, KOTLA MUBARAKPUR, NEW DELHI 110 003. (PAN : AADCN2232R) CO NO.327/DEL/2016 (IN ITA NO.4637/DEL./2016) (ASSESSMENT YEAR : 2012-13) M/S. NEXUS INFRACON PVT. LTD., VS. ACIT, CENTRAL C IRCLE 2, 1497, BHARDWAJ BHAWAN, NEW DELHI. WAZIRNAGAR, KOTLA MUBARAKPUR, NEW DELHI 110 003. (PAN : AADCN2232R) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS. PRAMITA M. BISWAS, CIT DR DATE OF HEARING : 13.04.2021 DATE OF ORDER : 27.05.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN THE AFORESAID APPEAL AND CROSS OBJECTIONS, THE S AME ARE BEING ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 2 DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REP ETITION OF DISCUSSION. 2. APPELLANT, ACIT, CENTRAL CIRCLE 2, NEW DELHI (HE REINAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 03.06.2016 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-23, NEW DELHI DELETING THE PENALTY ORDER DATED 29.09.2015 PASSED U/S 271(1)(C) OF THE INCOME- TAX ACT, 1961 (FOR SHORT THE ACT), QUA THE ASSE SSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW IN CANCELLING THE PENALTY AMOU NTING TO RS.3,26,61,833/- IMPOSED BY THE AO U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. 3. THE CROSS OBJECTOR, M/S. NEXUS INFRACON PVT. LIM ITED (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT CROSS OBJECTIONS SOUGHT TO QUASH THE PENALTY ORDER DATED 29.09.2015 AND UPHOLD THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA T HAT :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE WORTHY CIT (A) IN APPEAL NO.48/15-16 HAS E RRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIO NS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961, TO THE EXTENT O F NOT ALLOWING SOME OF THE GROUNDS RAISED BY THE APPELLAN T. 2. THAT ON LAW, FACTS AND CIRCUMSTANCES AND LEGAL P OSITION OF THE CASE, THE IMPUGNED PENALTY ORDER IMPOSED BY THE LD. AO U/S 271(1)(C) WAS A NULLITY AND DESERVED TO BE QUAS HED ON MULTIPLE TANGENTS. THE WORTHY CIT (A) HAS QUASHED THE ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 3 IMPOSITION OF PENALTY BY CONSIDERING ONLY ONE TANGE NT. THE IMPOSITION OF PENALTY DESERVES TO BE DECLARED A NUL LITY ON OTHER TANGENTS OF SEC 271(1)(C) ALSO. 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF ASSESSMEN T ORDER FRAMED UNDER SECTION 153A READ WITH SECTION 143(3) OF THE ACT AT AN INCOME OF RS.10,06,10,680/- I.E. AT THE DECLARED IN COME IN THE RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE IS SUED U/S 153A OF THE ACT, ASSESSING OFFICER (AO) INITIATED THE PENAL TY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT IF THE PROCEEDINGS U/S 153A OF THE ACT WERE NOT INITIATED THEN INCOME TO T HE TUNE OF RS.10,05.53,048/- WOULD HAVE ESCAPED FROM ASSESSMEN T. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, AO LEVIED T HE PENALTY TO THE TUNE OF RS.3,26,61,833/- @ 100% OF THE TAX SOUGHT T O BE EVADED. 5. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE PENALTY BY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE AS WELL AS ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT AP PEAL AND CROSS OBJECTIONS RESPECTIVELY. 6. ASSESSEE HAS NOT PREFERRED TO PUT IN APPEARANCE DESPITE ISSUANCE OF THE NOTICE AND CONSEQUENTLY, WE PROCEED ED TO DECIDE THE PRESENT APPEAL WITH THE ASSISTANCE OF THE LD. D R AS WELL AS ON THE BASIS OF DOCUMENTS AVAILABLE ON THE FILE. ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 4 7. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. UNDISPUTEDLY, ORIGINAL RETURN OF INCOME WAS E-FI LED BY THE ASSESSEE U/S 139 OF THE ACT ON 17.09.2012 DECLARING LOSS OF RS.57,632/-. IT IS ALSO NOT IN DISPUTE THAT CONSEQ UENT TO THE SEARCH AND SEIZURE OPERATION CARRIED OUT ON KANWAR SINGH T ANWAR GROUP OF CASES ON 08.02.2013, NOTICE U/S 153A OF THE ACT WAS ISSUED TO THE ASSESSEE ON 06.06.2014. IT IS ALSO NOT IN DISP UTE THAT IN RESPONSE TO THE NOTICE ISSUED U/S 153 OF THE ACT, A SSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10,06 ,10,680/- AND DECLARED INCOME WAS ACCEPTED BY THE AO. 9. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, ORDER PASSED BY THE LOWER AUTHORITIES AND ARGUMENTS ADDRESSED BY THE LD. DR FOR THE REVENUE, THE SOLE Q UESTION ARISES FOR DETERMINATION IN THIS CASE IS:- AS TO WHETHER THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME D URING ASSESSMENT PROCEEDINGS? 10. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) RELIED UPON THE ORDER PAS SED BY THE AO AND CONTENDED THAT THIS IS A CASE OF FURNISHING OF INACCURATE ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 5 PARTICULARS OF INCOME BY THE ASSESSEE BECAUSE IN TH E INITIAL RETURN OF INCOME E-FILED U/S 139 OF THE ACT, ASSESSEE CLAIMED LOSS OF RS.57,632/- BUT, SUBSEQUENTLY IN RESPONSE TO THE NO TICE U/S 153A, IT FILED THE RETURN OF INCOME AT RS.10,06,10,680/-. H AD THE NOTICE U/S 153A OF THE ACT BEEN NOT ISSUED TO THE ASSESSEE INC OME OF RS.10,05.53,048/- WOULD HAVE ESCAPED ASSESSMENT. 11. HOWEVER, BARE PERUSAL OF THE ASSESSMENT ORDER M ORE PARTICULARLY PARA 5 GOES TO SHOW THAT AO HAS FAILED TO APPLY HIS MIND TO RECORD HIS VALID SATISFACTION AS TO WHETHER HE IS INITIATING THE PENALTY PROCEEDINGS U/S 271AAB OR INITIATING PE NALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. FOR READY PERUSAL, OPERATIVE PART OF THE ASSESSMENT ORDER IS EXTRACTED AS UNDER :- 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAS BEEN NOTICED THAT THE ASSESSEE COMPANY HAD FILED ITS RET URN OF INCOME U/S 139(1) OF THE ACT DECLARING LOSS OF RS.5 7,632/- AND SUBSEQUENTLY IN RESPONSE TO NOTICE U/S 153A OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10,06,10,680/-. THIS INCREASE IN INCOME IS ON A CCOUNT OF A SEIZED DOCUMENT IS PERTINENT TO MENTION HERE THAT I F PROCEEDINGS U/S 153A OF THE ACT WERE NOT INITIATED THEN THE INCOME AMOUNTING TO RS.10,05,53,048/- WOULD HAVE ES CAPED FROM ASSESSMENT. THEREFORE, PENALTY PROCEEDINGS U/ S 271AAB OF THE ACT IS BEING INITIATED SEPARATELY. AFTER EXAMINATION OF DETAILS, INCOME DECLARED AT RS.10,06,10,680/- IS ACCEPTED AND ASSESSED. CHARGE INTEREST AS PER LAW. ISSUE NOTICE OF DEMAND AND CHALLAN TO THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 IS INITIATED SEPARATELY. 12. WHEN WE EXAMINE PARA 8 OF THE PENALTY ORDER PAS SED IN THIS CASE IT CONTAINS THE FINDING THAT I HOLD THE ASSESSEE IN DEFAULT FOR ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 6 FURNISHING INACCURATE PARTICULARS OF HIS INCOME AND SOUGHT TO COVER THIS CASE WITHIN THE SWEEPING PROVISIONS OF EXPLANA TION 1 APPENDED TO SECTION 271(1)(C) OF THE ACT. 13 AGAIN, WE ARE CONSTRAINED TO RECORD THAT WHEN TH ERE IS INVALID SATISFACTION OF THE AO THAT, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS INITIATED SEPARATELY RATHER IT IS NO SATISFACTION BECAUSE NEITHER EXPLANATION 1 OF SECT ION 271(1)(C) OF THE ACT WAS INVOKED WHILE RECORDING THE SATISFACTIO N NOR IT IS BROUGHT ON RECORD AS TO WHETHER HE IS INITIATING TH E PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME DURING THE PENALTY PROCEEDING S BY THE ASSESSEE. SO, RECORDING A VALID SATISFACTION BY TH E AO IS A SINE QUA NON FOR INITIATING THE PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT, WITHOUT WHICH SUBSEQUENT PROCEEDINGS ARE NULLITY. 14. HONBLE HIGH COURT OF KARNATAKA IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 HELD THAT VALID SATISFACTION IS MANDATORY REQUIREMENT FOR INI TIATING THE PENALTY. OPERATIVE PART OF THE JUDGMENT IS EXTRACT ED AS UNDER :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY AT TRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PE NALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOT HER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF TH E EXISTENCE OF THE ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 7 GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUN ITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE I MPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLE S OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEE DINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUEN T TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHI CH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIF FERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COUR T IN THE CASE OF T ASHOK POI V. CIT [2007] 292 ITR 11 /161 TAXMAN 340 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INAC CURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF CIT V. MANU ENGG. [1980] 122 ITR 306 AND TH E DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING (P) LTD . [2008] 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLE AR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE H AS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOU T STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NO N-APPLICATION OF MIND. 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT WHEN THE AO HAS FAILED TO APPL Y HIS MIND WHILE RECORDING SATISFACTION AT THE TIME OF FRAMING ASSESSMENT TO INITIATE THE PENALTY PROCEEDINGS U/S 271(1)(C) OF T HE ACT AS TO UNDER ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 8 WHICH LIMB OF SECTION 271(1)(C) OF THE ACT I.E. FOR CONCEALING OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME, SUCH PENALTY PROCEEDINGS INITIATED ON THE B ASIS OF VAGUE AND AMBIGUOUS SATISFACTION ARE NOT SUSTAINABLE IN T HE EYES OF LAW. CONSEQUENTLY, LD. CIT(A) HAS RIGHTLY DELETED THE PE NALTY LEVIED BY THE AO. FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER, APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. C ONSEQUENTLY, CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DIS MISSED HAVING BEEN WITHDRAWN OR HAVING BEEN BECOME INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF MAY, 2021. SD/- SD/- (O.P. KANT) (KULDIP SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF MAY, 2021. TS ITA NO.4637/DEL./2016 CO NO.327/DEL/2016 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-23, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.