VISHNU PRAKASH GOYAL HUF, Jaipur V. ITO, Jaipur

ITA 112/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5123 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Bogus purchase; Business income; Principle of natural justice; Initiation of penalty proceedings; Wrong claim; Bad and doubtful debts
• Section: 40A(3); 143(3); 234B; 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 112/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 VISHNU PRAKASH GOYAL HUF, D-70, BRIJ VILLA, RESIDENCY ROAD, C-SCHEME, JAIPUR. CUKE VS. ITO, WARD 6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAHV 6805 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/08/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 14/09/2016 VKNS'K@ ORDER PER: LALIET KUMAR, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18/11/2013 PASSED BY THE LD CIT(A)-II, JAIPUR FOR T HE A.Y. 2006-07. THE GROUNDS TAKEN BY THE ASSESSEE IN APPEAL ARE AS UNDE R:- (I) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN CONFIRMING THE PENALT Y ON ASSESSEE U/S 271(1)(C) AT RS. 1.80 LACS. ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 2 (II) THE PENALTY IS UNJUST AND BAD IN LAW AND LIABLE TO BE DELETED AS THE ASSESSEE HAS GIVEN BONA FIDE AND FUL L DISCLOSURE OF ALL THE INFORMATION. 2. IN THIS CASE, THERE IS ONE DAY DELAY IN FILING T HE APPEAL, FOR WHICH THE C.A. OF THE ASSESSEE, WHO APPEARED ON BEHALF OF HIM BEFORE THE LD CIT(A) HAS FILED AN APPLICATION AND STATED THAT HE H AD RECEIVED ORDER OF THE LD CIT(A) ON 13/12/2013 AND DUE TO MISCALCULATI ON OF THE PERIOD OF 60 DAYS FROM 13/12/2013 WAS TAKEN TO BE 12/2/2014 IN STEAD OF 11/02/2014. THEN TO COMPLY WITH TIME LIMIT, HE RUSHE D TO FILE THE APPEAL BUT THE ASSESSEE WAS NOT AVAILABLE ON 11/02/2014. RE GARDING THIS STATEMENT, AFFIDAVIT OF THE ASSESSEE WAS FILED, IN WH ICH, HE STATED THAT FOR THE PURPOSE OF HIS BUSINESS, HE HAD GONE TO JAPAN A ND RETURNED ON 12/02/2014. DUE TO WHICH, THERE WAS ONE DAY DELAY IN FILING THE APPEAL AND PRAYED TO CONDONE THE DELAY. 2.1 THE DR HAS RAISED OBJECTION AND PRAYED THAT APPE AL MAY BE DISMISSED ON THE BASIS OF CONDONATION OF DELAY. 2.2 WE HAVE PERUSED THE SUBMISSION MADE BY THE AR O F THE ASSESSEE AS WELL AS THE AFFIDAVIT SWORN BY THE ASSESSEE AND FI ND THAT THERE IS NO LACHES ON THE PART OF THE ASSESSEE AND THEREFORE, WE CONDONE THE DELAY OF ONE DAY IN FILING THE APPEAL. ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 3 3. THE ASSESSEE DERIVES INCOME FROM TRADING OF PRECI OUS AND SEMI PRECIOUS STONES AND FILED HIS RETURN FOR THE YEAR U NDER CONSIDERATION ON 31/10/2006 DECLARING TOTAL INCOME OF RS. 5,94,260/- . THE CASE WAS SELECTED FOR SCRUTINY U/S 143(3) OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT). THE LD ASSESSING OFFICER AFTER SCRUTINY ASSESS MENT, ASSESSED THE INCOME OF THE ASSESSEE AT RS. 33,30,963/-. AGAINST THE SAID ASSESSMENT, THE ASSESSEE FILED APPEAL BEFORE THE LD CIT(A). THE LD CIT(A) PARTLY GRANTED THE RELIEF TO THE ASSESSEE AND HAS DISALLOWE D THE AMOUNT OF RS. 5,84,578/-. THE ORDER OF THE LD CIT(A) GRANTING THE RELIEF PROVIDES AS UNDER:- ON GOING THROUGH THE FACTS OF THE CASE, I FIND THA T THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE. THEREFORE, THERE I S NO PAST HISTORY IN THE APPELLANTS CASE TO GUIDE IN ESTIMATION OF G .P RATE. HOWEVER, I FIND THAT THE APPELLANT HAS DECLARED TOTAL TURNOVER OF RS.1,30,82,444/- WHICH INCLUDES EXPORT TURNOVER OF RS.1,04,62,689/- W HICH HAS NOT BEEN DISPUTED BY THE LD. AO. BUT UNDISPUTEDLY, THE CORRECTNESS OF THE PURCHASES OF RS.23,38,314/- HAS REMAINED TO BE VERI FIED. FURTHER, THERE ARE NO DETAILS AVAILABLE ABOUT THE ACTUAL COS T OF THE PURCHASES. HOWEVER, I FIND THAT THE SAID PURCHASES ARE RELATING TO THE BUYING OF EMERALD TUMBLE SHAPE AND THAT THE QUANTITY SHOWN IN THOSE PURCHASE BILLS HAVE ALSO BEEN EXPORTED BY THE ASSES SEE. IT IS ALSO NOTICED THAT THE GENUINENESS OF THE EXPORT SALES BY THE ASSESSEE IS NOT IN DOUBT. THEREFORE, THESE FACTS INDICATE THAT T HE ASSESSEE MUST HAVE MADE THE PURCHASES OF EMERALD TUMBLE SHAPE FROM SOME ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 4 PARTIES OTHER THAN THOSE FROM WHOM THE PURCHASES AR E SHOWN IN ASSESSEES BOOKS OF ACCOUNTS. IN THESE CIRCUMSTANCE S, THE POSSIBILITY OF THE ASSESSEE MAKING THOSE PURCHASES IN CASH (THE REBY VIOLATING THE PROVISIONS OF SECTION 40A(3) OF THE ACT, WHEREIN DIS ALLOWANCE OF 20% OF SUCH EXPENDITURE IS PRESCRIBED) AND INFLATING TH E COST OF PURCHASES TO SOME EXTENT COULD NOT BE RULED OUT IN THE ABSENC E OF ACTUAL DETAILS SUCH AS QUANTITY, QUALITY, RATE, ETC. OF THOSE PURC HASES. THEREFORE, IT IS HELD THAT THE LD. AO WAS JUSTIFIED IN DISALLOWING 25% OF THE UNVERIFIED PURCHASES OF RS.23,38,314/- ON ESTIMATE BASIS LEADING TO ADDITION OF RS.5,84,578/-. HOWEVER, IT IS ALSO NOTIC ED THAT APART FROM THE AFOREMENTIONED DEFECT NOTED IN THE PURCHASES OF RS.23,38,314/-, LD.AO HAS NOT POINTED OUT ANY OTHER SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT, RELATING TO THE APPELLANTS EXPORT BUSINES S. THEREFORE, ONCE THE AO HAD MADE THE ADDITION OF RS.5,84,578/-, ON A CCOUNT OF THE DISALLOWANCE OF THE 25% OF THE UNVERIFIED PURCHASES OF RS.23,38,314/-, NO FURTHER ADDITION WAS CALLED FOR I N THE APPELLANTS CASE. IN THIS RESPECT( IT IS ALSO OBSERVED THAT, UN DISPUTEDLY, THE APPELLANT IS HAVING TWO TYPES OF BUSINESS I.E. THE B USINESS OF SELLING OF HANDICRAFT GOODS FROM A SHOWROOM AND THE BUSINESS OF DIRECT EXPORT OF DIAMONDS, SILVER ARTICLES / JEWELLERY OUT OF INDI A AND THAT IT WAS THE FIRST YEAR OF THE ASSESSEES BUSINESS. HENCE, THERE IS MERIT IN THE CONTENTION OF LD.AR THAT THE CASE OF M/S KANCHWALA G EMS FOR A.Y. 1997-98 WAS NOT COMPARABLE WITH THE APPELLANTS CASE FOR A.Y.2006- 07. THEREFORE, IT IS HELD THAT LD.AO WAS NOT CORRECT IN APPLYING THE GP RATE OF 30% IN THE APPELLANTS CASE, FOLLOWING THE G P RATE OF 30% UPHELD IN THE CASE OF M/S KANCHWALA GEMS IN A.Y. 199 7-98, AND THEREBY, IN MAKING A FURTHER ADDITION OF RS.21,52,1 25/-, OVER AND ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 5 ABOVE THE ADDITION OF RS.5,84,578/- MADE ON ACCOUNT OF THE(, 25% DISALLOWANCE OUT OF THE UNVERIFIED PURCHASES. ACCORD INGLY, THE ADDITION MADE BY THE AO, TO THE EXTENT OF RS.5,84,5 78/- IS SUSTAINED AND THE BALANCE ADDITION OF RS.21,52,125/- IS DIREC TED TO BE DELETED. 3.1 AGAINST THE SAID ORDER, THE ASSESSEE HAS NOT FI LED THE APPEAL, THUS THE ORDER IN RESPECT OF AMOUNT OF RS. 5,84,578/- HA S ACCEPTED AND BECOME FINAL. AFTER GIVING THE APPEAL EFFECT ON THE BASIS OF THE LD CIT(A)S ORDER, THE INCOME OF THE ASSESSEE WAS REVISED TO RS. 11,78,838/-. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WAS INI TIATED AT THE TIME OF COMPLETION OF ASSESSMENT ORDER I.E. ON 26/12/2008. IN THE ASSESSMENT PROCEEDINGS, IN PARAGRAPH NO. 3, IT WAS MENTIONED AS UNDER:- AS THE ASSESSEE HAS CONCEALED ITS INCOME AND HAS F ILED INACCURATE PARTICULARS OF INCOME, PENALTY PROCEEDIN GS U/S 271(1)(C) ARE BEING INITIATED SEPARATELY BY WAY OF I SSUE OF NOTICE. SIMILARLY AT PAGE NO. 8 OF THE ASSESSMENT ORDER, IT WAS MENTIONED AS UNDER:- ASSESSED. ISSUED DEMAND NOTICE, CHALLAN AND OTHER NECESSARY FORMS. ISSUE NOTICE U/S 271(1)(C) FOR INITIATION OF PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME. CHARGED TAX & INTEREST U/S 234B AND 234D AS PER CALCULATION SHEET (ITNS150) ANNEXED WITH THE ORDER WHICH FORMS PART OF THE ORDER. ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 6 3.2 THE ASSESSEE WAS CALLED UPON BY A FRESH NOTICE TO GIVE THE REPLY. THE ASSESSEE HAS FILED REPLY ON 21/3/2011 AND THE LD AR OF THE ASSESSEE NAMELY SHRI RAJESH AGARWAL, C.A APPEARED AND FILED R EPLY. THE LD ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANAT ION GIVEN BY THE ASSESSEE AND THEREFORE HAS IMPOSED THE PENALTY FOR FURNISHING INACCURATE PARTICULARS AND CONCEALING THE PARTICULARS OF INCOM E. RELEVANT PARAGRAPH OF THE ORDER IS AS UNDER:- IN THE IMPUGNED CASE TRADING ADDITION WAS NOT MADE MERELY ON ESTIMATE BUT THE SAME WAS BASED UPON THE FACT OF BOG US PURCHASES MADE BY THE ASSESSEE. THE EXPLANATION OFFE RED BY THE ASSESSEE REGARDING BOGUS PURCHASES HAS NOT BEEN SUB STANTIATED WITH RELEVANT FACTS AND EVIDENCES AND HENCE NOT FOUN D ACCEPTABLE. THE FACTS BEING SO I AM SATISFIED IN HOL DING THAT THE ASSESSEE HAD CLAIMED BOGUS PURCHASES TO THE EXTENT OF RS. 23,38,314/- AND THEREBY FURNISHED INACCURATE PARTIC ULARS OF INCOME TO THE EXTENT OF RS. 5,84,578/-. OF COURSE, WITHOUT CONSCIOUS AND DELIBERATE ATTEMPT THIS DEFAULT COULD NOT TAKE PLACE. THE CONDUCT OF ASSESSEE IS CONTUMACIOUS FOR W HICH PENALTY HAS TO BE INFLICTED UPON HIM. 4. BEING AGGRIEVED BY THE ORDER PASSED BY THE LD AS SESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A ), WHO HAD CONFIRMED THE LEVY OF PENALTY BY HOLDING THAT THE ASSESSEE HA D SHOWN PURCHASES ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 7 FROM THE PARTIES, WHO ARE ONLY SUPPLYING THE BILLS A ND NO REAL GOODS. THE CONCLUSION OF THE LD CIT (A) IS AS UNDER:- IT IS NOT IN DISPUTE THAT APPELLANT HAS SHOWN PURC HASES FROM THE PARTIES WHO WERE ONLY SUPPLYING BILLS AND NO T THE REAL GOODS. APPELLANT COULD NOT COUNTER THE AO'S AL LEGATIONS OF BOGUS PURCHASES. CONSIDERING THESE FACTS IT IS C LEAR THAT ADDITION MADE BY THE A.O. AND CONFIRMED BY THE ITAT IS NOT ON MERE ESTIMATE OF GROSS PROFIT. BY INDULGING INTO BOGUS PURCHASES, APPELLANT FURNISHED INACCURATE PARTICULA RS OF INCOME AND ACCORDINGLY ADDITION WAS MADE/CONFIRMED T O THE EXTENT OF 25% OF BOGUS PURCHASES. THE DECISION RELI ED UPON BY THE APPELLANT ARE RELATING TO PENALTY LEVIED ON PURE ESTIMATE OF INCOME AND NOT ON ANY ADVERSE FINDINGS RELATING TO PURCHASES. THEREFORE, THESE DECISIONS DO NOT SUPP ORT TO THE APPELLANTS CLAIM. SINCE APPELLANT COULD NOT PR OVE THE PURCHASES FROM THESE PARTIES GENUINE, THE ADDITION BASED ON SUCH FACTUAL FINDINGS CANNOT BE TREATED AS MERE ESTIMATE OF INCOME. ACCORDINGLY, I HOLD THAT APPELLANT FURNI SHED INACCURATE PARTICULARS OF INCOME RESULTING IN ADDIT ION TO TRADING RESULT. PENALTY LEVIED BY THE A.O. IS THERE FORE, CONFIRMED. 5. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT FROM THE FINDINGS GIVEN BY THE C IT(A) IN QUANTUM APPEAL, IT CAN BE NOTED THAT THERE IS NO DISPUTE TH AT PURCHASES WERE MADE BY THE ASSESSEE AND THESE GOODS WERE EXPORTED. IN THIS ORDER HE ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 8 ONLY PRESUMED THAT ASSESSEE MUST HAVE MADE PURCHASE S FROM SOME PARTIES, OTHER THAN THOSE FROM WHOM PURCHASES ARE S HOWN IN THE BOOKS AND THEREFORE THERE IS A POSSIBILITY OF VIOLATION O F SECTION 40A(3) AND INFLATING THE COST OF PURCHASE. THUS, THE ENTIRE FI NDING OF CIT(A) IS BASED ON CERTAIN PRESUMPTIONS. IT IS A SETTLED LAW THAT PE NALTY PROCEEDINGS ARE INDEPENDENT AND SEPARATE PROCEEDINGS. NO EVIDENCE I S BROUGHT ON RECORD BY THE AO EVEN IN THE PENALTY PROCEEDINGS TO PROVE THAT PURCHASES ARE NOT MADE FROM THE PARTIES RECORDED IN THE BOOKS OF ACCOUNTS BUT FROM SOME OTHER PARTIES AND THAT THE PURCHASE PRICE IS I NFLATED. IT IS TO SUBMIT THAT PENALTY U/S 271(1)(C) IS LEVIED WHEN ASSESSEE H AS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE WORD 'PARTICULARS' USED IN THE S. 271(1)(C) WOULD EMBRAC E THE MEANING OF THE PURCHASES MADE AND NOT THE PARTY FROM WHOM IT WA S MADE SINCE WORDS 'CONCEALED', 'PARTICULARS' AND 'INACCURATE' AR E WITH REGARD TO INCOME NOT WITH REGARD TO ANY OTHERS. THUS, ONLY BECA USE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM TO THE EXTENT THAT THE PU RCHASES WERE MADE FROM THAT PARTICULAR PARTY, LEVY OF PENALTY IS NOT JUSTI FIED. FURTHER, ONCE IT IS ACCEPTED AS A FACT THAT THE GOODS HAD INDEED BEEN P URCHASED, AN ADDITION ON ACCOUNT OF A POSSIBILITY OF HAVING INCU RRED A LOWER EXPENDITURE THAN CLAIMED, THOUGH VALID FOR AFFECTIN G A DISALLOWANCE OF THE ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 9 CLAIMED EXPENDITURE, CANNOT LEAD TO THE INFERENCE O F A WRONG CLAIM, JUSTIFYING THE LEVY OF PENALTY. HE ALSO SUBMITTED T HAT IN THE PRESENT CASE, THERE ARE THREE PARTIES WHOSE PURCHASES ARE CONSIDER ED AS NON VERIFIABLE, AO ISSUED SUMMONS AND CONDUCTED THE ENQUIRES THROUG H INSPECTOR WHO REPORTED THAT THESE PARTIES ARE NOT FOUND AT THEIR RESPECTIVE ADDRESS. WHEN CONFRONTED ASSESSEE VIDE LETTER DATED 22.11.20 08 REPRODUCED AT PG 3 OF THE ASSESSMENT ORDER HAS CATEGORICALLY STATED THAT THE PARTIES ARE TRACEABLE AT THE GIVEN ADDRESS. ASSESSEE HAS CONTAC TED THEM AND HAS PROVIDED THE CONFIRMATION. REQUEST WAS MADE TO DEPUT E THE INSPECTOR AGAIN, HOWEVER, NO FURTHER ENQUIRY WAS MADE THEREAFTE R. EVEN IN PENALTY PROCEEDINGS, NO FURTHER ENQUIRIES WERE MADE. IN THES E CIRCUMSTANCES, EVEN THOUGH ASSESSEE HAS ACCEPTED 25% OF DISALLOWANC E OUT OF THESE PURCHASES AS CONFIRMED BY CIT(A), WHICH HE HIMSELF AD MITTED TO BE ON ACCOUNT OF ESTIMATION, NO PENALTY ON SUCH DISALLOWAN CE IS WARRANTED MORE PARTICULARLY WHEN RATE OF PURCHASE OF EMERALD TU MBLE SHAPE @ 1650 PER CTS IS AT SAME RATE ON LOWER RATE COMPARED TO PURCHASE OF SAME ITEM FROM OTHER PARTIES. HE RELIED ON THE FOLLOWING CASE LAWS:- (I) KAMLESH DANGAYACH VS. ACIT 32 CCH 258 (JAIPUR) (TRIB.) (II) CHEMPURE VS. ITO 29 CCH 40 (MUM.) (TRIB.) THE LD AR FURTHER SUBMITTED THAT THE DECISIONS RELIE D BY AO IN THE PENALTY ORDER ONLY LAYS DOWN A LAW THAT AFTER INSERTION OF EX PLANATION 1, IT IS NOT ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 10 REQUIRED BY THE REVENUE TO PROVE THE MENS REA. THOUG H IT IS ADMITTED POSITION OF LAW THAT REVENUE IS NOT TO PROVE THE WILL FUL NEGLECT OR FRAUD ON PART OF THE ASSESSEE BUT AT THE SAME TIME WHERE ASSE SSEE OFFERS AN EXPLANATION WHICH IS NOT FOUND FALSE OR WHERE THE EXP LANATION OFFERED IS BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF TOTAL INCOME IS DISCLOSED, NO PENALT Y CAN BE LEVIED. IN PRESENT CASE, ASSESSEE HAS CO-RELATED THE PURCHASES MADE FROM THESE THREE PARTIES WITH THE EXPORT SALE. THUS, THE FACT OF PURCHASES IS PROVED. THE LD. CIT(A) HAS HIMSELF ADMITTED THESE FACTS IN T HE QUANTUM ORDER BUT ONLY ON THE ASSUMPTION THAT PURCHASES MIGHT HAVE BE EN MADE FROM SOME OTHER PARTIES BY INFLATING THE COST OF PURCHASE JUS TIFIED THE DISALLOWANCE OF 25% OF UNVERIFIED PURCHASES ON ESTIMATE BASIS. TH IS SHOWS THAT EXPLANATION OF THE ASSESSEE REGARDING THE GENUINENE SS OF THE PURCHASES MADE IS BONAFIDE AND THEREFORE EVEN IF CERTAIN PERC ENTAGE OF PURCHASES IS DISALLOWED, IT DO NOT AMOUNT TO CONCEALMENT OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN VIEW OF ABOVE, THE PENALTY CONFIRMED BY CIT(A) BE DELETED. 5.1 BESIDES THAT, THE LD AR OF THE ASSESSEE HAS FUR THER SUBMITTED AS UNDER:- ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 11 1. THE AO IN THE BODY OF ASSESSMENT ORDER DATED 26.12. 2008 AT PARA 3, PAGE 7 INITIATED PENALTY PROCEEDINGS U/S 27 1(1)(C) OF THE IT ACT, 1961 BY MENTIONING AS UNDER:- AS THE ASSESSEE HAS CONCEALED ITS INCOME AND HAS F ILED INACCURATE PARTICULARS OF INCOME , PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIATED SEPARATELY BY WAY OF I SSUE OF NOTICE HOWEVER, AT THE END OF THE ASSESSMENT ORDER, THE AO MENTIONED AS UNDER:- ISSUE NOTICE U/S 271(1)(C) FOR INITIATION OF PENAL TY PROCEEDINGS FOR CONCEALMENT OF INCOME 2. IN THE NOTICE DATED 26.12.2008 ISSUED U/S 274 R.W.S . 271 OF THE IT ACT, 1961, IT IS MENTIONED THAT YOU HAVE CONCEAL ED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. EVEN IN THIS NOTICE, IT IS NOT SPECIF IED WHETHER THE CHARGE AGAINST THE ASSESSEE IS FOR CONCEALMENT OF I NCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3. IN THE BODY OF PENALTY ORDER DATED 28.03.2011, THE AO AT PARA 1 MENTIONED THAT PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME WERE INITIATED AT THE TIME OF COMPLETION OF ASSESSMENT U/S 143(3) I.E . ON 26.12.2008. AT THE END OF PENALTY ORDER, IT WAS MENT IONED AS UNDER:- THIS IS FOUND TO BE A FIT CASE FOR LEVYING PENALTY U/S 271(1)(C) OF IT ACT FOR FURNISHING INACCURATE PARTIC ULARS AND CONCEALING THE PARTICULARS OF INCOME ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 12 4. THE LD. CIT(A) WHILE CONFIRMING THE PENALTY ORDER U/S 271(1)(C) HAS CONFIRMED THE PENALTY ON FURNISHING INACCURATE PARTICULARS OF INCOME. 5. FROM THE ABOVE, IT CAN BE NOTED THAT THE AO IS NOT SPECIFIC WHETHER THE CHARGE IS FOR CONCEALMENT OF INCOME OR F URNISHING INACCURATE PARTICULARS OF INCOME. AT DIFFERENT POIN T OF TIME, HE HAS MENTIONED DIFFERENT CHARGE. THE TWO CHARGES FOR I NITIATING THE PENALTY OPERATE ON TWO DIFFERENT FOOTING AND UND ER THE PENAL PROVISION THE CHARGE HAS TO BE VERY SPECIFIC AND NOT VAGUE. THESE CHARGES ARE NOT TO BE RECKONED AS ANY C ASUAL REMARK, WHICH CAN BE INTERCHANGED BY THE AO AT ANY S TAGE ON HIS WHIMS AND FANCIES. THE AO CANNOT INITIATE A PENAL TY FOR ONE CHARGE AND THEN AMBUSH THE ASSESSEE BY LEVYING PENA LTY ON A DIFFERENT CHARGE BECAUSE THE INITIAL ONUS TO EXPLAI N AND REBUT THE CHARGE IS UPON THE ASSESSEE. IF CHARGE ITSELF I S VAGUE AND NOT CLEAR, THEN THE ONUS CAST UPON THE ASSESSEE UND ER EXPLANATION ITSELF GETS VITIATED AS ASSESSEE IS PRE CLUDED FROM A CHANCE TO GIVE A SPECIFIC REBUTTAL ON THAT CHARGE. 6. RELIANCE IN THIS CONNECTION IS PLACED ON THE FOLLO WING CASES:- (I) ACIT & ANR. VS. DIPESH M PANJWANI & ANR. 46 CCH 0 322 (MUM.) (TRIB.) DATED. 18.03.2016 (II) ROSHAN LAL TILAK RAJ & CO. VS. ITO 46 CCH 0130 (ASR.) (TRIB.) DATED 22.01.2016 (III) TRISTAR INTECH P. LTD. VS. ACIT 43 ITR (TRIB.) 0 279 (DEL.) DT. 07.09.2015 ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 13 (IV) CIT VS. M/S MANJUNATHA COTTON & GINNING FACTORY & ORS. 359 ITR 565 (KAR.) HC) (V) RADHA MOHAN MAHESHWARI VS. DCIT ORDER DT. 18.03.2 016 IN ITA NO.773/JP/13 (VI) SHANKAR LAL KHANDELWAL VS. DCIT ORDER DT. 11.03. 2016 IN ITA NO. 878/JP/13 6. AT THE OUTSET, THE LD DR HAS SUBMITTED AS UNDER: - AS PER PROVISIONS OF SECTION 271(1) (C), THE ASSESS EE IS LIABLE TO PENALTY IF HE HAS CONCEALED PARTICULARS OF HIS INC OME OR HE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. B OTH THESE PHRASES HAVE NOT BEEN DEFINED IN THE ACT BUT HONBLE SUPREME COURT IN THE CASE OF DILIP N SHROFF VS JCIT 291 ITR 519(SC) EXAMINED THE MEANING OF WORDS CONCEALMENT AND INA CCURATE IN PARA 43 OF THEIR JUDGMENT AS UNDER:- 43. THE EXPRESSION 'CONCEAL' IS OF GREAT IMPORTANC E. ACCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL IS CON + CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION ; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNO WLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN I TEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME-TAX AUTHOR ITIES.' IN WEBSTERS DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS: 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT.' IN THE PRESENT CASE BOTH THESE PHRASES ARE EQUALLY APPLICABLE IN AS MUCH AS THE APPLICANT HAS FURNISHED INACCURATE P ARTICULARS OF INCOME BY WAY OF CLAIMING PURCHASES BY FURNISHING BO GUS/ FALSE ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 14 BILLS OF PURCHASE AND SIMULTANEOUSLY HE HAS CONCEAL ED THE PARTICULARS OF PERSONS FROM WHOM IT HAS ACTUALLY MA DE THE PURCHASES IN CASH. IN THAT WAY THE APPLICANT HAS NOT ONLY INVOLVED ITSELF IN THE CONCEALMENT OF INCOME BUT HA S ALSO INDUCED OTHER PERSONS FOR TAX EVASION AND VIOLATION OF LEGA L PROVISIONS. IT IS THUS LIABLE FOR PENALTY FOR CONCEALMENT OF INCOM E. AFTER THE INSERTION OF EXPLANATION 1 TO SECTION 271 (1)(C), THE ONUS FOR PROVING THE BONAFIDES AND FURNISHING AN EX PLANATION ACCEPTABLE TO THE AO IS UPON THE ASSESSEE AND IF HE FAILS TO SATISFACTORILY EXPLAIN HIS CASE, HE IS LIABLE FOR P ENALTY ON THE ADDITIONS MADE IN QUANTUM/ ASSESSMENT PROCEEDINGS. THE FULL BENCH OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF VISHVAKARMA INDUSTRIES V CIT IN 135 ITR 652(P&H) HAS EXPLAINED THE LEGAL IMPLICATION OF THIS EXPLANATION AS UNDER:- THAT ONCE THE EXPLANATION IS HELD TO BE APPLICABLE TO THE CASE OF AN ASSESSEE, THREE PRESUMPTIONS ARE RAISED, VIZ-' (I ) THAT THE AMOUNT OF THE ASSESSED INCOME IS THE CORRECT INCOME AND IT IS IN FACT THE INCOME OF THE ASSESSEE HIMSELF; (II) THAT THE FAILURE OF THE ASSESSEE TO R ETURN THE CORRECT ASSESSED INCOME WAS DUE TO FRAUD; OR (III) THAT THE FAILURE OF THE ASSESSEE TO RETURN THE CORRECT ASSESSED INCOME WAS DUE TO GROSS OR WILFUL NEGLECT ON HIS PART. IT WAS OBSERVED THAT IN CASES OF CONCEALMENT OF INCOME AND TAX EVASION, THE MODUS OF CONCEALMENT IS OBVIOUSLY WITHIN THE SPECIAL KNOW LEDGE OF THE ASSESSEE. CONSEQUENTLY, IN CASES OF BLATANT EVASION, THE LEGI SLATURE WAS COMPELLED TO TAKE OFF THE IMPOSSIBLE BURDEN OF ESTABLISHING FACT S WHICH ARE OBVIOUSLY IN THE SPECIAL KNOWLEDGE OF THE ASSESSEE ALONE. THE ON US WAS, THEREFORE, RIGHTLY PLACED ON THE SHOULDERS OF THE ASSESSEE WHO ALONE C OULD REASONABLY DISCHARGE THE SAME. THE INSERTION OF THE EXPLANATIO N AND THE OMISSION OF THE WORD 'DELIBERATELY' WAS NOT MERELY DECLARATORY OF T HE EXISTING LAW BUT DESIGNED TO EFFECT A CHANGE IN LAW. ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 15 THE FINDINGS OF THE JUDGMENT OF THE PUNJAB AND HARYA NA HIGH COURT WERE APPROVED BY THE HONBLE SUPREME COURT IN THE CASE OF CHUHARMAL VS CIT REPORTED IN 172 ITR 250(SC). THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GOSWAMI CHANDRALAT BAHUII IN 125 ITR 700(RAJ) HAS HELD AS UNDER:- ' THE FINDING GIVEN IN THE ASSESSMENT PROCEEDING WO ULD BE RELEVANT AND ADMISSIBLE MATERIAL IN PENALTY PROCEEDINGS, THOSE F INDINGS CANNOT OPERATE AS RES JUDICATA BECAUSE THE CONSIDERATIONS THAT ARISE IN PENALTY PR OCEEDINGS ARE DIFFERENT FROM THOSE IN ASSESSMENT PROCEEDINGS. IT WAS HELD THAT THE CIRCUMSTANCES OF THE CASE MUST BE SUCH AS TO LEAD T O THE REASONABLE AND POSITIVE CONCLUSION THAT THE AMOUNT REPRESENTS THE ASSESSEE'S INCOME. IN THE PRESENT CASE IT HAS BEEN PROVED BEYOND DOUBT THAT THE APPLICANT HAS DELIBERATELY FURNISHED INCORRECT, UNT RUE AND FALSE CLAIM OF PURCHASES AND IT HAS NOT OFFERED ANY PLAUS IBLE EXPLANATION NEITHER IN THE COURSE OF ASSESSMENT PRO CEEDINGS NOR DURING THE PENALTY PROCEEDINGS. THOUGH IN THE CASE OF THE APPLICANT, THE DISALLOWANCE WAS MADE AFTER OBSERVING UNEXPLAINED/BOGUS PURCHASES AND THE RE IS NO CASE OF SIMPLE ESTIMATE STILL A CLAIM WAS MADE BY TH E APPELLANT BEFORE THE CIT(A) THAT NO PENALTY CAN BE IMPOSED WHE N ADDITIONS WERE MADE ON ESTIMATE BASIS. HE RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS MAHESH TRANSPORT CO 210 ITR 550(RAJ) (II) YASHWANT SINGH VS CIT 212 ITR 207 (RAJ). (III) CIT VS MAHAVEER MIRROR INDUSTRIES 353 ITR 553 (MAD). (IV) KALPAKA BAZR VS CIT 313 ITR 414 (KER). (V) VIJAY PROTEINS VS ACIT 80 TTJ 215 (ITAT RAJKOT). ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 16 (VI) ASSOCIATE ENGINEER VS ACIT ITA NO. 2433/AHD/20 08 DATED 15/10/2010 ITAT AHMADABAD. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE MA IN THRUST OF THE LD AR OF THE ASSESSEE IS THAT THE NOTICE ISSUED FOR PE NALTY WAS VAGUE AND THE NECESSARY PARTICULARS HAVE NOT BEEN PROVIDED IN THE NOTICE DATED26/12/2008. IT WAS SUBMITTED THAT NEITHER THE A SSESSING OFFICER HAS MENTIONED THAT THE PENALTY WAS RAISED FOR CONCEALME NT OF PARTICULARS OF INCOME NOR IT IS MENTIONED THAT THE ASSESSEE HAS FU RNISHED INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES, THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX AND ANOTHER V. MANJUNATHA COTTON AND FINNING FACTORY [2013] 359 ITR 565 (KAR ) HAS HELD THAT THE PENALTY PROCEEDINGS ARE REQUIRED TO BE DELETED. IN FACT, THE THIRD MEMBER IN THE CASE OF GRASS FIELD FARMS AND RESORTS PVT. LTD. VS. DCIT (2016) 70 TAXMANN.COM 176 HAS THE OCCASION TO EXAMI NE ALL THE JUDGMENTS RELIED UPON BY THE LD AR AND THEREAFTER H AD COME TO THE CONCLUSION AS UNDER:- 25. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF LEARN ED COUNSEL FOR THE ASSESSEE AND HAVE GONE THROUGH THE DECISION OF HON' BLE KARNATAKA HIGH COURT. THE LEARNED COUNSEL, AT THE TIME OF HEARING BEFORE ME, HAS SPECIFICALLY REFERRED TO PARAGRAPH 60 AND 61 OF THE REPORT, I.E. , MANJUNATHA COTTON & GINNING FACTORY, WHICH READS AS UNDER: ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 17 '60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENC ES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFEN CES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER 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 THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY 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 IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO A NSWER. 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. O THERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING TH E 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 WHICH, 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 COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURAT E PARTICULARS OF INCOME ARE DIFFERENT. 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 ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. THE GUJRAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 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 UNCLEAR P ENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TH E STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON-APPLICATION OF MIND.' ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 18 26. FROM THE ABOVE, IT IS EVIDENT THAT THEIR LORDSHIPS OF HON'BLE KARNATAKA HIGH COURT HAVE NOTICED THAT THE PENALTY U/S 271(L)(C) C AN BE LEVIED FOR TWO SPECIFIC OFFENCES; ONE IS CONCEALING THE PARTICULARS OF INCO ME AND SECOND FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSING OFFICER CANNOT INITIATE PENALTY PROCEEDINGS FOR ONE OFFENCE AND THEN FINALL Y LEVY THE PENALTY FOR ANOTHER OFFENCE, BECAUSE IN SUCH CIRCUMSTANCE THE ASSESSEE WILL NOT GET PROPER OPPORTUNITY TO EXPLAIN THE CHARGE LEVELLED AGAINST HIM. THEIR LORDSHIPS HAVE ALSO NOTICED THAT THE FACTS OF SOME CASES MAY ATTRA CT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THESE TWO OF FENCES, BUT IN SUCH CASES THE INITIATION OF PENALTY PROCEEDINGS SHOULD ALSO B E FOR BOTH THE OFFENCES. IN MY OPINION, UNDER THE FACTS OF THE ASSESSEE'S CASE, IT MAY ATTRACT BOTH THE OFFENCES, I.E. , THE CONCEALMENT OF INCOME AS WELL AS FURNISHING O F INACCURATE PARTICULARS OF INCOME AND THEREFORE, THE ASSESSING OFFICER RIGHTLY INITIATED THE PENALTY PROCEEDINGS FOR BOTH THE OFFENCES. IN THE PENALTY N OTICE ALSO BOTH THE OFFENCES WERE MENTIONED AND THEREFORE, THE ASSESSEE GOT THE ADEQUATE OPPORTUNITY TO EXPLAIN ITS STAND WITH REGARD TO BOTH THE OFFENCES. THEREAFTER, THE ASSESSING OFFICER LEVIED THE PENALTY ONLY FOR FURNISHING OF I NACCURATE PARTICULARS OF INCOME. SINCE THE INITIATION OF PENALTY PROCEEDINGS INCLUDED BOTH THE OFFENCES AND THE SHOW-CAUSE NOTICE ALSO INCLUDED BOTH THE OF FENCES, THE ASSESSEE GOT THE ADEQUATE OPPORTUNITY TO EXPLAIN BOTH THE OFFENCES A ND THEREFORE, THERE IS NO ILLEGALITY IN LEVYING THE PENALTY WITH REFERENCE TO ONLY ONE OFFENCE. IT IS NOT A CASE WHERE THE NOTICE WAS ISSUED FOR ONE OFFENCE AN D THE PENALTY IS LEVIED FOR ANOTHER OFFENCE. THEREFORE, IN MY OPINION, THE ABOV E DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY ( SUPRA ) DOES NOT SUPPORT THE CASE OF THE ASSESSEE. 27. THE NEXT CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE ASSESSING OFFICER HAS LEVIED THE PENALTY FOR FURNIS HING OF INACCURATE PARTICULARS OF INCOME AND AT THE SAME TIME INVOKED THE EXPLANATION (1) TO SECTION 271(L)(C). EXPLANATION (1) TO SECTION 271(L)(C) WOULD BE APPLICABLE ONLY FOR CONCEALMENT OF INCOME AND NOT FOR FURNISHING OF INACCURATE PART ICULARS OF INCOME. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASS ESSEE RELIED UPON THE DECISION OF ITAT, INDORE BENCH IN THE CASE OF NEPA LTD. ( SUPRA ). THE RELEVANT FINDING OF THE ITAT, INDORE BENCH READS AS UNDER: '8. EXPLANATION (1) IS A DEEMING PROVISION AND IT IS APPLICABLE WH EN AN AMOUNT IS ADDED OR DISALLOWED IN COMPUTATION OF TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CO NCEALED. EXPLANATION (1) IS NOT APPLICABLE IN THIS CASE OF FURNISHING INACCURAT E PARTICULARS OF INCOME. IN THIS CASE, WE NOTED THAT THE ASSESSING OFFICER HAS INITI ATED PENALTY PROCEEDINGS U/S 271(L)(C) WITHOUT POINTING OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. THE PENALTY ULTIMATELY WAS LEVIED ON THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS BY OBSERVING THAT THE CASE O F THE ASSESSEE IS COVERED BY THE EXPLANATION TO SECTION 271(1)(C). WE MAY OBSERVE THAT IN THE C ASE OF FURNISHING INACCURATE PARTICULARS OF INCOME, THE ON US IS ON THE REVENUE TO, PROVE THAT THE ASSESSEE HAD FURNISHED THE INACCURATE PART ICULARS, WHILE IN THE CASE OF ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 19 CONCEALMENT OF PARTICULARS OF INCOME, WHERE THE EXPLANATION (1) IS APPLICABLE, THE ONUS IS ON THE ASSESSEE TO PROVE THAT HE HAS NO T CONCEALED THE PARTICULARS OF INCOME. AS IS APPARENT FROM THE EXPLANATION , THIS EXPLANATION CLEARLY STATES WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF TOTAL INCOME OF ANY PERSON SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER TO BE FALSE OR SUCH PERSON OFFERS AN EXPLANATION, WHICH HE IS NOT ABLE TO SUBSTANTIATE OR FAILS TO PR OVE THAT SUCH EXPLANATION IS BONA FIDE AND WITH ALL THE FACTS RELATING TO THE SAME AND MA TERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THIS IS NOT DENIED THAT THE PARTICULARS OF PROVISIONS OF DOUBTFUL DEBT S HAVE DULY BEEN SHOWN BY THE ASSESSEE AND DEBITED IN THE AUDITED PROFIT AND LOSS ACCOUNT. IT IS ALSO NOT DENIED THAT THE ASSESSEE HAS SUBMITTED THE EXPLANATION IN REPLY TO SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER. EVEN THOUGH THE AS SESSING OFFICER, IN OUR OPINION, FAILED TO DISCHARGE HIS ONUS AS HE WAS NOT SURE AT THE INITIATION OF PENALTY U/S 271(1)(C) FOR WHICH SPECIFIC CHARGE PEN ALTY HAS BEEN INITIATED BY THE ASSESSING OFFICER. EVEN WHILE LEVYING THE PENALTY A LSO, THE ASSESSING OFFICER SIMPLY RELIED ON THE EXPLANATION TO SECTION 271(1)(C) EVEN THOUGH HE LEVIED THE PENALTY FOR FURNISHING THE INACCURATE PARTICULARS O F INCOME. THIS IS APPARENT FROM THE PROVISIONS OF SECTION 271(1)(C) THAT EXPLANATIO N OF SECTION 271(1)(C) IS NOT APPLICABLE IN CASE INACCURATE PARTICULARS ARE FURNI SHED. THEREFORE, IN OUR OPINION, THE BASIS OF LEVY OF PENALTY ITSELF IS NOT CORRECT. IN THIS REGARD, WE RELY ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. V. CIT (2006) 282 ITR 642 (GUJ) , IN WHICH IT WAS HELD (HEAD NOTE):-'IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STATE WHETH ER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASS ESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE ASSESSEE.'' 28. FROM THE ABOVE, IT IS CLEAR THAT IN THE ABOVE MENT IONED CASE THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS U/S 2 71(L)(C) WITHOUT POINTING OUT THE OFFENCE UNDER WHICH ASSESSEE IS LIABLE TO BE PE NALIZED. WHILE IN THE CASE OF THE ASSESSEE, THE PENALTY PROCEEDINGS HAVE BEEN INI TIATED, BOTH FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INACCURATE PARTICUL ARS OF INCOME. IN THE ABOVE MENTIONED CASE BEFORE THE ITAT INDORE BENCH, THE PE NALTY HAS BEEN LEVIED IN RESPECT OF PROVISION OF DOUBTFUL DEBTS WHICH HAVE B EEN DULY SHOWN BY THE ASSESSEE AND DEBITED IN THE AUDITED PROFIT AND LOSS ACCOUNT. WHILE IN THE CASE OF THE ASSESSEE, IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE DISCLOSED TOTAL INCOME OF RS. 1,87,697/-. DURING THE COURSE OF SURVEY, THE RE WAS DETECTION OF UNDISCLOSED INCOME AND ITS INVESTMENT IN THE PURCHA SE OF AGRICULTURAL LAND. AFTER SUCH DETECTION, THE ASSESSEE FILED THE REVISED RETU RN DISCLOSING ADDITIONAL INCOME OF RS. 3,02,33,672/-. THUS, IT WAS A CLEAR CASE WHE RE THE PARTICULARS OF INCOME FURNISHED BY THE ASSESSEE IN THE ORIGINAL RETURN WE RE INCORRECT. ON THE OTHER HAND, IN THE CASE OF ITAT INDORE BENCH, ALL THE REL EVANT FACTS WERE DULY DISCLOSED IN THE ORIGINAL RETURN, I.E. , THE PROVISION FOR BAD AND DOUBTFUL DEBT. IT WAS ONLY A LEGAL DISPUTE WHETHER THE PROVISION FOR BAD AND DOUBTFUL DEBT IS AN ALLOWABLE DEDUCTION OR NOT. THEREFORE, THE FACTS OF THE CASE UNDER CONSIDERATION BEFORE ME ARE ALTOGETHER DIFFERENT THAN THE FACTS B EFORE THE ITAT, INDORE BENCH. ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 20 29. I HAVE CAREFULLY PERUSED THE PENALTY ORDER AT PAGE NOS 1 & 2, WHEREIN THE ASSESSING OFFICER HAS DISCUSSED THE FACTS OF THE CA SE, THE ASSESSEE'S WRITTEN SUBMISSION, AND THEREAFTER AT PAGE NO.3, THE ASSESS ING OFFICER HAS DISCUSSED THE PROVISIONS OF SECTION 271(L)(C), EXPLANATION (1) AND THEN HIS CONCLUSION FOR LEVYING THE PENALTY U/S 271(L)(C) WAS AS UNDER: '. . . IN THIS CASE ASSESSEE COMPANY WAS ENGAGED IN UNDISCLOSED INVESTMENT IN PURCHASE OF AGRICULTURAL LAND WHEREIN THE REAL TRAN SACTION WAS RECORDED AT A LESSER VALUE IN THE REGULAR BOOKS OF ACCOUNT. THE D IRECTORS OF THE COMPANY ADMITTED THE SAME. FURTHER, DURING COURSE OF SURVEY THE FACT WAS PROVED THAT ASSESSEE HAD CONCEALED THE CORRECT PARTICULARS OF I NCOME BY NOT SHOWING CORRECT POSITION OF STOCK IN BOOKS AND AS SUCH ASSESSEE HAS SHOWN LESSER BUSINESS PROFIT WHICH WAS DETECTED BY THE DEPARTMENT. HENCE, ASSESS EE COMPANY FURNISHED OF INACCURATE PARTICULARS OF INCOME BY DISCLOSING LESS ER BUSINESS INCOME WHICH LEADS TO ATTRACT PENAL PROVISIONS BY VIRTUE OF SECT ION 271(L)(C). IN VIEW OF TOTALITY OF THE FACTS AND KEEPING IN VIE W THE PROVISIONS OF SECTION 271(L)(C) AS WELL AS SUBMISSION OF THE ASSESSEE, TH E ASSESSEE IS FOUND GUILTY OF FURNISHING OF INACCURATE PARTICULARS OF INCOME TO T HE EXTENT OF RS. 3,02,33,672/- WITHIN THE MEANING OF SEC. 271(L)(C) AND, THEREFORE , PENALTY U/S 271(L)(C) IS IMPOSED ON THE CONCEALED INCOME AS PER WORKING GIVE N BELOW. . . . ' 30. FROM THE ABOVE, IT IS EVIDENT THAT AFTER DISCUSSIN G THE LEGAL PROVISION, INCLUDING EXPLANATION (1), THE ASSESSING OFFICER DISCUSSED THE FACTS OF THE CASE AND THEN LEVIED PENALTY FOR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. HOWEVER, IN THE CONCLUSION, THE ASSESSING OFFICER H AS NOT MENTIONED THE LEVY OF PENALTY UNDER EXPLANATION (1); THOUGH IN THE EARLIER PART OF HIS ORDER, THE ASSESSING OFFICER HAS DISCUSSED THE MAIN SECTION AS WELL AS EXPLANATION (1) THEREOF AND HAS ALSO MENTIONED THE CIRCUMSTANCES UN DER WHICH THE EXPLANATION (1) WOULD BE APPLICABLE. BUT, THEREAFTER, HE DISCUS SED THE FACTS OF THE ASSESSEE'S CASE POINTED OUT HOW THERE WAS A FURNISHING OF INAC CURATE PARTICULARS OF INCOME BY THE ASSESSEE AND THEN LEVIED THE PENALTY FOR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. IN THE CONCLUDING PARAGRAPH, WHEN THE PENALTY HAS BEEN FINALLY LEVIED, THE ASSESSING OFFICER HAS NOT RELIE D UPON THE EXPLANATION (1) TO SECTION 271(L)(C). THEREFORE, THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ASSESSING OFFICER LEVIED PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME UNDER EXPLANATION (1) IS CONTRARY TO THE FACTS ON RECORD. THE ASSESSING OFFICER HAS NOT INVOKED EXPLANATION (1). THEREFORE, THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS ALSO REJECTED. THEREFORE, THE LEGAL SUBMISSIONS MADE AGAINST THE IM POSITION OF PENALTY ON THE BASIS OF THE SHOW CAUSE NOTICES, IN OUR VIEW, IS NOT SUSTAINABLE. MOREOVER, U/S 274 OF THE ACT PROVIDES THE PROCEDURE FOR IMPOSING THE ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 21 PENALTY. A BARE READING OF THE PROVISION POSTULATES THAT THE PENALTY UNDER THE CHAPTER SHALL NOT BE MADE UNLESS THE ASSESSEE H AS BEEN EARNED OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. AS NOTICED HEREINABOVE IN THE PENALTY ORDER, THE ASSESSEE WAS C ALLED UPON TO FILE THE REPLY, THEREAFTER THE ASSESSEE WAS ALSO CALLED UPON IN THE PERSONAL HEARING. THE ASSESSEE WAS GIVEN OPPORTUNITY TO REPRES ENT HIS CASE BEFORE THE LD ASSESSING OFFICER AT THE TIME OF FINALIZATIO N OF PENALTY AND AFTER GIVING THE REASONABLE OPPORTUNITY TO THE ASSESSEE, THE PENALTY ORDER WAS PASSED BY THE LD ASSESSING OFFICER. THEREFORE, ALSO, IN OUR VIEW, THERE WAS NO VIOLATION OF THE PROCEDURE AS LAID DOWN U/S 27 4 OF THE ACT. 8. ON MERIT, WE FIND THAT THE ASSESSEE WAS DERIVING INCOME FROM TRADING OF PRECIOUS AND SEMI PRECIOUS STONES AND IN THE QUANTUM PROCEEDINGS, THE ASSESSING OFFICER ENQUIRED ABOUT T HE CORRECTNESS OF THE PURCHASES MADE BY THE APPLICANT AND AFTER FOLLOWING A DUE PROCESS, THE ASSESSING OFFICER ENQUIRED FROM THE ASSESSEE ABOUT THE PURCHASES MADE FROM THREE PARTIES DISCUSSED IN DETAIL IN PARAGRAPH NO. 1 OF THE ASSESSMENT ORDER, BUT THE ASSESSEE FAILED TO PRODUC E THE PARTIES. THE ASSESSING OFFICER THEREAFTER, TRIED TO EXAMINE THE SAID PARTIES AFTER ISSUING THE SUMMONS BUT THE SUMMONS RETURNED UNSERV ED AS THE CONCERNED PARTIES WERE NON-EXISTENT. THEREAFTER, THE ASSESSING OFFICER ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 22 MADE ENQUIRIES BY SENDING THE INSPECTOR BUT THE ADD RESSES GIVE BY THE ASSESSEE WAS NOT FOUND. THEREFORE, THE ASSESSING OFFI CER HAD TREATED THE PURCHASES AS BOGUS AND DISALLOWED 25% OF SUCH PURCHA SES BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE SAM E WAS CONFIRMED IN THE APPEAL BY THE LD. CIT(A). NO APPEAL WAS FILED BEF ORE THE TRIBUNAL. 9. BEFORE US, IT WAS CONTENDED BY THE LD AR OF THE A SSESSEE THAT THE ORDER WAS PASSED ON PRESUMPTION AND THERE WAS NO QUAR REL WITH RESPECT TO EXPORT OF ARTICLES AND IT WAS SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A) WAS PASSED ON PRESUMPTION. IT WAS FURTHER SUBMITTED THAT THE ASSESSMENT PROCEEDINGS AND THE Q UANTUM PROCEEDINGS ARE SEPARATE PROCEEDINGS AND NO SEPARAT E EVIDENCE WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER IN THE P ENALTY PROCEEDINGS TO PROVE THAT THE PURCHASES ARE NOT MADE FROM THE PART IES RECORDED IN THE BOOKS OF ACCOUNT BUT FROM THE SOME OTHER PARTIES. I N OUR VIEW, THE SEPARATE ENQUIRIES/PROCEEDINGS WERE NOT REQUIRED TO BE CONDUCTED BY THE ASSESSING OFFICER AT THE STAGE OF PENALTY AS THE AS SESSEE, HAS FAILED TO DISCHARGE THE INITIAL ONUS OF PROVING THE GENUINENE SS OF THE PARTIES FROM WHOM THE SAID THREE BILLS WERE ISSUED AT THE ASSESSME NT STAGE OR BEFORE THE APPELLATE STAGE. IN OUR VIEW, NO SEPARATE PROCEE DINGS WERE REQUIRED AT THE STAGE OF DETERMINING THE PENALTY AGAINST THE ASSESSEE IN THE ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 23 PENALTY PROCEEDINGS. RECENTLY HONBLE DELHI HIGH CO URT IN THE MATTER OF ROGER ENTERPRISES (P.)LTD. VS. COMMISSIONER OF INCO ME-TAX, DELHI [2016] 67 TAXMANN.COM 344 (DELHI) HAS HELD AS UNDER 41. THE COURT FIRST NOTES THAT ON MERITS, THE FINDING OF THE ITAT THAT NO MATERIAL WAS PLACED ON RECORD BY THE ASSESSEE TO DEMONSTRATE THE NATURE OF SERVICE RENDERED BY THE THREE COMPANIES TO WHOM THE COMMISS ION WAS PAID HAS BEEN CONCURRENTLY UPHELD BY THIS COURT. THE ASSESSEE IND EED FAILED TO DISCHARGE ONUS ON PROVING THE GENUINENESS OF THOSE PAYMENTS. THE C ONCLUSION THAT THE PAYMENT OF COMMISSION WAS BOGUS HAS BEEN CONCURRENTLY HELD BY THE CIT (A), BY THE ITAT AND THIS COURT. 42. CONSEQUENTLY, THE ESSENTIAL CONDITIONS FOR ATTRACT ING THE PENALTY UNDER SECTION 271 (1) (C) OF THE ACT STAND FULFILLED IN T HE PRESENT CASE. FURTHER OBSERVED IN DHARAMENDRA TEXTILE PROCESSORS ( SUPRA ), THE FINDINGS IN THE ASSESSMENT (QUANTUM) PROCEEDINGS WOULD BE RELEVANT AND ADMISSIBLE IN THE PENALTY PROCEEDINGS. THE ADVERSE INFERENCE AGAINST THE ASSESSEE FOR FAILING TO CROSS-EXAMINE MR. JHUNJHUNWALA WOULD EQUALLY APPLY TO THE PENALTY PROCEEDINGS. THERE WAS NO NECESSITY TO AGAIN OFFER THE ASSESSEE A FURTHER OPPORTUNITY OF CROSS-EXAMINING MR. MEATTLE AND MR. JHUNJHUNWALA IN THE PENALTY PROCEEDINGS. 43. AS ALREADY NOTED, THE CIT (A) ERRED IN PROCEEDING TO DELETE THE PENALTY ON THE GROUND THAT THE ASSESSEE HAD BEEN DENIED AN OPP ORTUNITY OF CROSS-EXAMINING BOTH MR. MEATTLE AND MR. JHUNJHUNWALA. THE ITAT ERR ED IN CONCLUDING THAT THE MERE PENDENCY OF THE ASSESSEE'S QUANTUM APPEAL MADE THE ISSUE A DEBATABLE ONE. 44. THE COURT REJECTS THE PLEA OF THE ASSESSEE THAT TH E MATTER SHOULD BE REMANDED TO THE AO FOR ARRIVING AT A SATISFACTION DE NOVO REGARDING INITIATION OF PENALTY PROCEEDINGS. IN THE FACTS OF THE PRESENT CA SE, WHERE THE DISALLOWANCE OF THE COMMISSION PAYMENT HAS BEEN UPHELD BY THIS COUR T, ON ACCOUNT OF THE ASSESSEE FAILING TO FURNISH THE TRUE AND CORRECT PA RTICULARS, THE INITIATION OF THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE UNDER SECT ION 271 (1) (C) OF THE ACT IS PERFECTLY JUSTIFIED. 45. THE DECISION IN CIT V. RELIANCE PETROPRODUTS (P.) LTD. [2010] 322 ITR 158/189 TAXMAN 322 (SC) PROCEEDED ON THE BASIS THAT NO INFORMATION GIVEN I N THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS IN THAT CONTEXT THAT IT WAS OBSERVED THAT THE MERE MAKING OF AN INCORRECT C LAIM WOULD NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. HERE THE QUES TION IS NOT MERE MAKING OF A WRONG CLAIM BUT IN MAKING A CLAIM THAT IS DEMONSTRA BLY FALSE. WITH THE ASSESSEE FAILING TO ESTABLISH THE GENUINENESS TO THE COMMISS ION PAYMENTS THE ESSENTIAL ITA 112/JP/2014_ VISHNU KUMAR GOYAL HUF VS ITO 24 CONDITIONS FOR ATTRACTING PENALTY UNDER SECTION 271 (1)(C) OF THE ACT STOOD FULFILLED. IN OUR VIEW, THE APPEAL OF THE ASSESSEE IS LIABLE TO BE DISMISSED AND ACCORDINGLY, WE DISMISS THE SAME. 10. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/09/2016. SD/- SD/- HKKXPAN YFYR DQEKJ (BHAGCHAND) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 TH SEPTEMBER, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI VISHNU PRAKASH GOYAL HUF, JAIPUR . 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 6(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 112/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR