Meghraj Kesaji Chaudhari, Nashik V. Assistant Commissioner of Income-tax,

ITA 1296/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7244 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 24-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Invalid notice; Depreciation; Retrospective amendment; Initiation of penalty proceedings; Revised return
• Section: 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1 296 /P U N/20 1 5 / ASSESSMENT YEAR : 20 11 - 1 2 SHRI MEGHRAJ KESAJI CHAUDHARI PROP. M/S MADHUR FOOD PLAZA, PIPLELINE ROAD, ANANDWALI, NASHIK 422003 . / APPELLANT PAN:A EHPC0396N VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, NASHIK . / RESPONDENT / APPELLANT BY : S HRI SANKET JOSHI / RESPONDENT BY : S HRI ACHAL SHARMA, ADDL.CIT / DATE OF HEARING : 1 6 .0 8 .2017 / DATE OF PRONOUNCEMENT: 31 . 1 0.2017 / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY THE ASSESSEE IS AGAINST ORDER OF CIT(A) - 1 , NASHIK , DATED 2 4 . 0 7 .201 5 RELATING TO ASSESSMENT YEAR 2011 - 12 AGAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271( 1 )(C) OF RS.25,50,000/ - . 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD CONCEALED HIS INCOME BY MAKING UNACCOUNTED INVESTMENT IN PURCHASE OF SHOPS OF RS.85,00,000/ - AND HENCE, THE LEARNED A.O. WAS JUSTIFIED IN LEVYING THE PENALTY ON THE SAID AMOUNT. 3] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REVISED RETURN FILED BY THE ASSESSEE AFTER THE SURVEY ACTION WAS NOT VOLUNTARY AND HENCE, THE PENALTY LEVIED U/S 271(1)(C) WAS VALID IN LAW. 4] THE LEARNED CIT(A) FAI LED TO APPRECIATE THAT THE ASSESSEE HAD OFFERED ADDITIONAL INCOME OF RS.85,00,000/ - TO TAX IN THE REVISED RETURN WHICH WAS ACCEPTED BY THE A.O. AND HENCE, THERE WAS NO QUESTION OF LEVYING PENALTY ON THE AMOUNT OF RS.85,00,000/ - WHICH WAS OFFERED BY THE ASS ESSEE IN THE REVISED RETURN. 5] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE PENALTY U/S 271( 1 )(C) WAS NOT LEVIABLE ON THE FACTS OF THE CASE AND ALSO BECAUSE OF THE FACT THAT THE TAX SOUGHT TO BE EVADED WAS NIL AND HENCE, THE QUESTION OF LEVY OF PENALTY SIMPLY DID NOT ARISE. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AT RS.25,50,000/ - . 4. THE ASSESSEE DURING THE COURSE OF HEARING RAISED THE ADDITIONAL GROUND OF APPEAL AGAINST INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT , WITHOUT SPECIFYING EXACT CHARGE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ADDITIONAL GROUND OF APPEAL READS AS UNDER: - 1] THE ASSESSEE SUBMITS THAT THE EXACT CHARGE O N THE BASIS OF WHICH THE PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED HAS NEITHER BEEN STATED IN THE ASST. ORDER NOR IN THE NOTICE U/S 274 R.W.S. 271(1)(C) AND THUS, THE NOTICE ISSUED U/S 274 IS BAD IN LAW AND HENCE, THE PENALTY LEVIED IN PURSUANCE OF SUCH INVALID NOTICE IS BAD IN LAW AND THE SAME OUGHT TO HAVE BEEN DELETED. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,31,14,038/ - . THE ASSESSEE WAS AN INDIVIDUAL AND HAD EARNED IN COME FROM BUSINESS, HOUSE PROPERTY AND OTHER SOURCES. THE ASSESSEE WAS ENGAGED IN THE PROPRIETARY BUSINESS OF TRADING IN ALL 3 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI TYPES OF MS SCRAP AND MACHINES SCRAP , ETC . THE ASSESSMENT OF ASSESSEE WAS TAKEN UP FOR SCRUTINY AND THE FIRST ADDITION WHICH WAS MADE IN THE HANDS OF ASSESSEE WAS ON ACCOUNT OF ESCI NOT PAID WITHIN DUE DATE AS STIPULATED UNDER SECTION 36(1)(VA) OF THE ACT I.E. CONTRIBUTION FROM THE EMPLOYEES TOWARDS THE WELFARE FUND. THE ADDITION WAS MADE IN THE HANDS OF ASSESSEE OF RS.16,815/ - . A NOTHER ADDITION WHICH WAS MADE WAS ON ACCOUNT OF PERSONAL USE OF VEHICLE AND SUM OF RS.50,000/ - WAS DISALLOWED ON ADHOC BASIS. FURTHER, THE ASSESSEE HAD SHOWN SUM OF RS.12,76,435/ - AS HIS AGRICULTURAL INCOME. THE ASSESSEE WAS ASKED TO PRODUCE CERTAIN DET AILS WITH REGARD TO AGRICULTURAL INCOME. HOWEVER, SUM OF RS.1,50,000/ - WAS DISALLOWED FROM AGRICULTURAL INCOME AND WAS CONSIDERED AS INCOME FROM OTHER SOURCES IN HIS HANDS. FURTHER, THE ASSESSING OFFICER HAD RECEIVED INFORMATION FROM THE SALES TAX DEPA RTMENT OF MAHARASHTRA IN RESPECT OF HAWALA TRANSACTIONS. THE ASSESSEE IN REPLY, POINTED OUT THAT HE HAD NEITHER PURCHASED ANY MATERIAL FROM THE SAID PARTY I.E. CABLE INDIA COMMUNICATION FROM FINANCIAL YEARS 2008 - 09 TO 2010 - 11 NOR TILL DATE. THE ASSESSEE POINTED OUT THAT IT HAD PURCHASED THE MATERIAL FROM AVI SHKAR TRADING COMPANY AND NECESSARY DETAILS INCLUDING THE COPY OF BILL , LEDGER ACCOUNTS AND BANK STATEMENTS AND ALSO THE DELIVERY CHALLANS IN SUPPORT THEREOF WERE FILED. IT WAS FURTHER POINTED OUT THA T THE ITEM PURCHASED WAS S . S . TRAY I.E. CAPITAL ASSET FOR HIS CONCERN NAMELY MADHUR FOOD PLAZA AT THE TIME OF COMMENCEMENT OF BUSINESS. HOWEVER, IN THE SUBMISSIONS DATED 08.07.2013, THE ASSESSEE ACCEPTED THAT HE HAD PURCHASED FIXED ASSETS FROM HAWALA DEALER OF RS.26,516/ - AND DEPRECIATION CLAIMED @ 10% OF RS.2,651/ - WAS ADDED IN THE HANDS OF ASSESSEE. FURTHER, VIDE PARA 8, THE ASSESSING OFFICER NOTES THAT THE ASSESSEE DURING THE COURSE OF SURVEY CONDUCTED ON 03.10.2011 HAD ADMITTED INCOME OF RS.2.07 C RORES FOR ASSESSMENT YEARS 2009 - 10, 2011 - 12 AND 2012 - 13. CONSEQUENT THERETO, THE ASSESSEE HAD REVISED THE RETURN OF INCOME FOR 4 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI ASSESSMENT YEAR 2011 - 12 AND SHOWN UNDISCLOSED INVESTMENT IN STOCK OF RS.85 LAKHS UNDER THE HEAD INCOME FROM OTHER SOURCES. FU RTHER, DECLARATION OF RS.15 LAKHS ON THE ISSUE OF MOU FLATS WAS TO BE CONSIDERED IN THE RETURN OF INCOME FOR ASSESSMENT YEAR 2012 - 13. THE ASSESSING OFFICER WHILE CONCLUDING THE ASSESSMENT NOTES THAT THE ASSESSEE HAD DECLARED AND INCLUDED RS.85 LAKHS IN TH E RETURN OF INCOME, HENCE, NO SEPARATE ADDITION WAS TO BE MADE BUT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. THE ASSESSING OFFICER WHILE LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT NOTED THE ABOVE SAID FACTS AND THE DEC LARATION OF ADDITIONAL INCOME OF RS.85 LAKHS ON ACCOUNT OF UNDISCLOSED INVESTMENTS IN THE HANDS OF ASSESSEE . THE ASSESSING OFFICER OBSERVED THAT THE ACT OF CONCEALMENT WAS COMPLETE , WHEN THE ASSESSEE FILED THE REVISED RETURN OF INCOME DECLARING HIGHER INC OME AS COMPARED TO THE INCOME DECLARED IN THE ORIGINAL RETURN OF INCOME. THE ASSESSING OFFICER VIDE PARA 5 OF ORDER LEVYING PENALTY FURTHER NOTES THAT THE ACTION OF ASSESSEE FITS INTO DEFAULT DELINEATED UNDER SECTION 271(1)(C) OF THE ACT READ WITH EXPLANA TION 1. THE ASSESSEE IN REPLY, POINTED OUT THAT SURRENDER OF INCOME IN SURVEY WAS NOT CONCEALMENT AS THE RETURN OF INCOME ON THE POINT OF ADDITIONAL INCOME HAS BEEN ACCEPTED. IT WAS STRESSED THAT THE CASE OF ASSESSEE DOES NOT FALL WITHIN CLAUSE (A) OR CL AUSE (B) OF EXPLANATION 4 TO SECTION 271(1)(C) OF THE ACT AND THERE CANNOT BE ANY TAX SOUGHT TO BE EVADED . THE ASSESSING OFFICER REJECTING THE EXPLANATION OF ASSESSEE WAS OF THE VIEW THAT THE ASSESSEE HAD CONCEALED INCOME WITHIN MEANING OF SECTION 271( 1)(C) OF THE ACT READ WITH EXPLANATION 1 AND PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED ON THE CONCEALED INCOME OF RS.85 LAKHS AT RS. 25,50,000/ - . 6. THE CIT(A) AFTER DELIBERATING UPON THE ISSUE AND VARIOUS JUDICIAL PRONOUNCEMENTS OBSERVED THAT THE ASSESSEE HAD MADE UNDISCLOSED INVESTMENTS 5 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI IN SHOPS WHICH WAS ADMITTED DURING THE COURSE OF S URVEY AND THE RETURN OF INCOME WAS REVISED INCORPORATING THE DISCLOSURE MADE DURING THE COURSE OF SURVEY OF RS.85 LAKHS. THE REVISION OF RETURN OF INCOME INCOR PORATING THE SAID DECLARATION WAS THE TESTIMONY OF THE FACT THAT THE ASSESSEE WAS ADMITTING ITS CONCEALMENT, WAS HELD BY THE CIT(A) AND PENALTY LEVIED BY THE ASSESSING OFFICER WAS UPHELD OBSERVING AS UNDER: - 6.25 ADVERTING TO THE FACT IN THE INSTANT CASE IT IS EVIDENT THAT THE ASSESSEE HAD UNDISCLOSED THE INVESTMENTS IN SHOPS WHICH WAS ADMITTED DURING THE COURSE OF SURVEY. THE RETURN WAS REVISED INCORPORATING THE DISCLOSURE MADE DURING SURVEY OF 85,00,000/ - . THE REVISION OF RETURN OF INCOME WAS NOT VOLUNTARY. THE REVISION OF RETURN INCORPORATING THE DECLARATION OF 85,00,000/ - DURING SURVEY IS TESTIMONY OF THE FACT THAT THE ASSESSEE IS ADMITTING ITS CONCEALMENT. THEREFORE, THE ACTION OF THE AO DESERVES TO BE UP HELD IN LEVYING PENALTY U/S 271(1)(C) AS THE ASSESSEE HAS NOT MADE TRUE DISCLOSURE AND HAS FURNISHED INACCURATE PARTICULARS OF INCOME BY CONCEALING THE INVESTMENTS IN SHOPS. 7. THE CIT(A) FURTHER NOTES THAT ORIGINAL RETURN OF INCOME WAS FILED ON 28.09.2011 DECLARING TOTAL INCOME OF RS.45,86,890/ - AND THE REVISED RETURN OF INCOME WAS FILED AFTER SURVEY WAS CONDUCTED ON THE PREMISES OF ASSESSEE ON 0 3.10.2011 I.E. ON 31.03.2012. THUS, THE CIT(A) HELD THAT THE DECLARATION OF INCOME IN THE REVISED RET URN OF INCOME COULD NOT BE SAID TO BE A VOLUNTARY ACT AND THE PENALTY LEVIED OF RS.25,50,000/ - WAS UPHELD. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FIRST REFERRED TO THE ADDITIONA L GROUND OF APPEAL RAISED IN THE PRESENT APPEAL AND POINTED OUT THAT NO SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN FULFILLED BY THE ASSESSEE. HE FUR THER POINTED OUT THAT EXPLANATION 1 IS ATTRACTED ONLY IN CASES WHERE THERE IS ADDITION OR DISALLOWANCE MADE IN THE HANDS OF ASSESSEE. 6 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI FOR THIS, HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE VIZAG BENCH OF TRIBUNAL IN GODAVARI TOWNSHIPS PVT. LTD. VS. DC IT (2014) 148 ITD 463 (VISAKHAPATNAM) . HE FURTHER POINTED OUT THAT PENAL PROVISIONS ARE TO BE INTERPRETED STRICTLY AND PENALTY FOR CONCEALMENT COULD BE LEVIED ONLY IF IT FITS INTO FOUR CORNERS OF LAW. HE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CIT VS. SAS PHARMACEUTICALS (2011) 335 ITR 259 (DEL) . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE DECISIONS OF THE PUNE BENCH OF TRIBUNAL IN NANDKISHOR TULSIDAS KATORE VS. ACIT IN ITA NOS.2174 TO 2180/PN/2014, RELATING TO ASSESSMENT YEARS 2002 - 03 TO 2008 - 09, ORDER DATED 14.12.2016, SHRI ANAND SURESH JAIN VS. DCIT IN ITA NO.353/PUN/2015 AND SHRI SURESH N. JAIN VS. DCIT IN ITA NO.354/PUN/2015, R ELATING TO ASSESSMENT YEAR 2006 - 07, ORDER DATED 13.01.2017 AND THE HONBLE HIGH COURT OF CALCUTTA IN CIT VS. ARUN KUMAR KHETWAT (2015) 94 CCH 154 (CAL) FOR THE PROPOSITION THAT IF AFTER THE SURVEY, REVISED RETURN OF INCOME WAS FILED AND THE SAME HAS BEEN A CCEPTED, THERE IS NO BASIS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. HE FURTHER STRESSED THAT WHETHER THE RETURN OF INCOME FILED AFTER SURVEY WAS VALID RETURN UNDER SECTION 139(5) OF THE ACT AND WHETHER THE ASSESSING OFFICER MADE ANY ADDITIO N THEREAFTER ARE THE ISSUES TO BE DECIDED. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN MAK DATA ( P ) LTD. VS. CIT (2013) 358 ITR 593 (SC) AND THE HONBLE HIGH COURT OF K ARNATAKA IN B. DAMODAR VAMAN BALIGA JEWELLERS VS. JCIT (2013) 353 ITR 206 (KAR) . HE FURTHER REFERRED TO THE PROVISIONS OF SECTION 271(1 B ) OF THE ACT AND POINTED OUT THAT ONCE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, THEN THERE IS DEEMED SATISFACTION I N THE CASE. 7 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI 11. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN REJOINDER POINTED OUT THAT EVEN IN THE CASE OF DEEMED SATISFACTION, IT IS THE REQUIREMENT OF LAW THAT SPECIFIC CHARGE SHOULD BE RAISED IN THE PENALTY PROCEEDINGS ITSELF. IN RESPECT OF RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN B. DAMODAR VAMAN BALIGA JEWELLERS VS. JCIT (SUPRA), THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE FACTS OF SAID CASE WERE AT VARIANCE WITH THE FACTS OF THE ASSESSEE, WHEREIN THE ORIGINAL RETURN OF INCOME WHICH WAS FILED BY THE SAID ASSESSEE WAS NOT WITHIN TIME, HENCE, THE REVISED RETURN OF INCOME WAS NOT ACCEPTED AS FILED UNDER SECTION 139(5) OF THE ACT . HENCE, THE ADDITION WAS MADE IN THE HANDS OF ASSESSEE, ON WHICH THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIED WHICH WAS CONFIRMED BY THE HONBLE HIGH COURT . HOWEVER, IN THE FACTS OF PRESENT CASE, ORIGINAL RETURN OF INCOME WAS FILED IN TIME AND THEREFORE, PURSUANT TO SURVEY, THE ASSESSEE HAD FILED THE REVISED RETURN OF INCOME UNDER SECTION 139(5) OF THE ACT, WHICH WAS ALSO WITHIN TIME AND HENCE, NO MERIT IN REJECTING THE PLEA OF ASSESSEE THAT NO ADDITION WAS MADE IN THE HANDS OF ASSESSEE AFTER IT HAD FILED THE REVISED RETURN OF INCOME AND THE PENALTY WAS LEVIED ON THE RETURNED INCOME FILED AFTER THE SURVEY BUT BEFORE THE START OF ASSESSMENT PROCEEDINGS. HE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN SAS PHARMA CEUTICALS (SUPRA) , WHICH WAS RELIED UPON BY THE PUNE BENCH OF TRIBUNAL IN THE CASE S OF NANDKISHOR TULSIDAS KATORE VS. ACIT (SUPRA) AND SHRI ANAND SURESH JAIN VS. DCIT (SUPRA) . 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINS T LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. IN THE FACTS OF THE CASE, THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,31,14,038/ - . FURTHER, CONSEQUENT 8 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI TO SURVEY OPERATION CARRIED ON AT THE PREMISES OF ASSES SEE, THE ASSESSEE MADE CERTAIN DECLARATION OF ADDITIONAL INCOME FOR THREE DIFFERENT ASSESSMENT YEARS ON ACCOUNT OF INVESTMENTS IN SHOPS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE OFFERED THE ADDITIONAL INCOME OF RS.85 LAKHS. THE SAID ADDITIONAL INCO ME WAS PART OF REVISED RETURN OF INCOME FILED BY THE ASSESSEE AND WAS ASSESSED AS SUCH IN THE HANDS OF ASSESSEE. THE QUESTION WHICH ARISES FOR ADJUDICATION BEFORE US IS WHETHER IN SUCH CIRCUMSTANCES, WHERE THE ADDITIONAL INCOME HAS BEEN DECLARED BY THE AS SESSEE IN THE REVISED RETURN OF INCOME FILED IN RESPONSE TO SECTION 139(5) OF THE ACT, CAN THE ASSESSEE BE HELD LIABLE FOR NOT HAVING VOLUNTARILY DECLARED THE SAID INCOME ? . ADMITTEDLY, THE ASSESSEE HAD NOT DECLARED THE SAID INCOME IN THE ORIGINAL RETURN OF INCOME AND HAD DECLARED THE SAME WHILE FILING THE REVISED RETURN OF INCOME , AFTER SURVEY ON THE PREMISES OF ASSESSEE . THE SAID RETURN FILED UNDER THE PROVISIONS OF SECTION 139(5) OF THE ACT IS ADMITTEDLY, A VALID RETURN AND THE ADDITIONAL INCOME OFFERE D IN SUCH RETURN OF INCOME HAS BEEN ACCEPTED AS SUCH, BY THE ASSESSING OFFICER. ONCE THE INCOME HAS BEEN DECLARED BY THE ASSESSEE AND HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS SUCH, CAN THE ASSESSEE BE HELD LIABLE FOR LEVY OF PENALTY FOR CONCEALMENT U NDER SECTION 271(1)(C) OF THE ACT ? . 13. BEFORE GOING INTO JURISDICTIONAL ISSUE OF RECORDING OF SATISFACTION OR NOT BY THE ASSESSING OFFICER WHILE INITIATING PENALTY PROCEEDINGS, THE FIRST PART OF THE ISSUE IS LEVY OF PENALTY UNDER SECTION 271(1)(C) OF T HE ACT ON THE RETURNED INCOME, WHICH INCLUDES ADDITIONAL INCOME OFFERED DURING THE COURSE OF SURVEY. THE CASE OF ASSESSEE BEFORE US IS ONCE THE INCOME RETURNED HAS BEEN ASSESSED IN THE HANDS OF ASSESSEE AS SUCH WITHOUT MAKING ANY ADDITION, THERE IS NO MER IT IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE CASE OF THE REVENUE ON THE OTHER HAND, IS THAT THE ADDITIONAL INCOME HAS BEEN OFFERED IN THE HANDS OF 9 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI ASSESSEE PURSUANT TO SURVEY AND IN CASE NO SURVEY WAS CONDUCTED, SUCH ADDITIONAL INCOME WOU LD NOT BE OFFERED, HENCE, IT IS A FIT CASE FOR LEVY OF PENALTY. 14. WE FIND THAT SIMILAR CASE OF LEVY OF PENALTY ON THE ADDITIONAL INCOME, WHICH WAS OFFERED IN THE RETURN OF INCOME AND WHETHER THE SAME WAS LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT, AROSE BEFORE THE TRIBUNAL IN THE CASE OF NANDKISHOR TULSIDAS KATORE VS. ACIT (SUPRA). THE TRIBUNAL IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. SAS PHARMACEUTICALS (SUPRA) , HELD AS UNDER: - 13. THE PER USAL OF ABOVE DETAILS REFLECTS THAT THE RETURNED INCOME HAS BEEN ACCEPTED WITH MINOR VARIATIONS IN THE FINAL ASSESSED INCOMES. THE ISSUE WHICH ARISES FOR ADJUDICATION BEFORE US IS THAT WHERE THE ADDITIONAL INCOME HAS BEEN DECLARED IN HIS HANDS WHETHER THE SAME IS LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST ISSUE RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT IN CASE ANY INCOME IS DECLARED PURSUANT TO SURVEY, THEN THE SAME IS NOT COVERED UNDER EXPLANAT ION 5A TO SECTION 271(1)(C) OF THE ACT. WE FIND MERIT IN THE STAND OF ASSESSEE IN THIS REGARD, WHEREIN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT CATEGORICALLY PROVIDES THAT THE SAME IS APPLICABLE IN CASE OF SEARCHES. HOWEVER, THE STATUTE IS SILENT A BOUT THE ADDITIONAL INCOME OFFERED BY THE PERSONS IN THE REVISED RETURN OF INCOME FILED PURSUANT TO SURVEY PROCEEDINGS. THE ADDITIONAL INCOME WAS DECLARED DURING THE SURVEY AND IF OFFERED BY THE PERSON IN THE REVISED RETURN OF INCOME FILED THEREAFTER, THE N THE SAME DOES NOT PARTAKE THE NATURE OF ADDITIONAL INCOME TAKEN NOTE IN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. SAS PHARMACEUTICALS REPORTED IN 3 35 ITR 259 (DEL), WHEREIN IT HAS BEEN HELD AS UNDER: - 12. AFTER CONSIDERING THE RESPECTIVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE HAS TO PREVAIL AS IT CARRIED SUBSTANTIAL WEIGHT. IT IS TO BE KEPT IN MIND THAT S. 271(1)( C) OF THE ACT IS A PENAL PROVISION AND SUCH A PROVISION HAS TO BE STRICTLY CONSTRUED. UNLESS THE CASE FALLS WITHIN THE FOUR CORNERS OF THE SAID PROVISION, PENALTY CANNOT BE IMPOSED. SUB - S. (1) OF S. 271 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENING WHE REOF THE AO OR THE CIT(A) MAY DIRECT PAYMENT OF PENALTY BY THE ASSESSEE. WE ARE CONCERNED HEREWITH THE FUNDAMENTALITY PROVIDED IN CL. (C) OF S. 271(1) OF THE ACT, WHICH AUTHORIZES IMPOSITION OF PENALTY WHEN THE AO IS SATISFIED THAT THE ASSESSEE HAS EITHER : A) CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 13. IT IS NOT THE CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME, AS IN THE IT RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE IT RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCO ME WERE CONCEALED BY THE 10 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI ASSESSEE OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONCEALMENT HAS REFERENCE TO THE IT RETURN FILED BY THE ASSESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE IT RETURN. 14. WE MAY, FIRST OF ALL, REJECT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE RELYING UPON THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT OCCURRING IN SUB - S. (1) OF S. 271 OF THE ACT AND CONTENDING THAT EVEN DURING SURVEY WHEN IT WAS FOUND THAT THE ASSESSEE HAD CONC EALED THE PARTICULAR OF HIS INCOME, IT WOULD AMOUNT TO CONCEALMENT IN THE COURSE OF ANY PROCEEDINGS. THE WORDS IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT(A). WHEN THE SURVEY IS CONDUCTED BY A S URVEY TEAM, THE QUESTION OF SATISFACTION OF AO OR THE CIT(A) OR THE CIT DOES NOT ARISE. WE HAVE TO KEEP IN MIND THAT IT IS THE AO WHO INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COU RSE OF SURVEY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAKEN WHILE MAKING ASSESSMENT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT CANNOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS IN THIS CASE. 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY THE ASSESSEE HAS TO BE IN THE IT RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN THE CASES OF C IT VS. MOHAN DAS HASSA NAND (1983) 34 CTR (DEL) 361 : (1983) 141 ITR 203 (DEL) AND IN RELIANCE PETROPRODUCTS (P) LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT, VIZ., THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE IT RETURN FILED BY THE ASSESSEE. THIS VIEW GETS SUPPORTED BY EXPLNS. 4 AS WELL AS 5 AND 5A OF S. 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING THE SURVEY. T HIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMOUNT SURRENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS AS TO WHETHER THIS WOULD ATTRACT PENALTY UPON THE ASSESSEE UNDER THE PROVISI ONS OF S. 271(1)(C) OF THE ACT. OBVIOUSLY, NO PENALTY CAN BE IMPOSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING SURVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY ONLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SEC. 271(1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON - DISCLOSURE OF THE PARTICUL ARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONCEALMENT OR NON - DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE IT RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 17. WE, THUS, ANSWER THE QUESTIONS AS FOR MULATED ABOVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE FINDING NO FAULT WITH THE DECISIONS OF THE CIT(A) AS WELL AS THE TRIBUNAL. AS A RESULT, THIS APPEAL IS DISMISSED. 14. ANOTHER FACET WHICH HAS TO BE CONSIDERED IS THAT THE ADDITIONAL INCOME WAS OFFERED DURING THE COURSE OF SURVEY, WHICH WAS CONDUCTED AT THE PREMISES OF ASSESSEE. HOWEVER, IT WAS THE ASSESSING OFFICER WHO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE AND LEVIED THE SAME. THE HONBLE DELHI HIGH COURT HAS CATEGORICALLY LAI D DOWN THAT WHERE THE ASSESSING OFFICER HAD NOT 11 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI RECORDED ANY SATISFACTION DURING THE COURSE OF SURVEY, THE DECISION TO INITIATE PENALTY PROCEEDINGS BEING TAKEN WHILE MAKING THE ASSESSMENT ORDER, THEN IT WAS HELD THUS, THE EXPRESSION IN THE COURSE OF ANY P ROCEEDINGS UNDER THIS ACT COULD NOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS, IN THIS CASE. SINCE THE ASSESSEE HAD MADE COMPLETE DISCLOSURE IN THE RETURN AND SURRENDERED THE AMOUNT FOR THE PURPOSE OF TAX, THE HONBLE HIGH COURT HELD THAT THERE WAS NO SUC H CONCEALMENT OF NON - DISCLOSURE AND THE ASSESSEE WAS HELD TO BE NOT LIABLE FOR LEVY OF PENALTY. APPLYING THE SAID PROPOSITION TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO LEVY OF PENALTY ON THE ADDITIONAL INCOME WHICH WAS D ECLARED BY THE ASSESSEE DURING THE COURSE OF SURVEY AND WAS OFFERED TO TAX IN THE REVISED RETURN OF INCOME FILED AFTER THE SURVEY. 15. THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS BEFORE THE PUNE BENCH OF TRIBUNAL IN NANDKISHOR TULSIDAS KATORE VS. ACIT (SUPRA). THE ASSESSEE HEREIN HAD ALSO OFFERED ADDITIONAL INCOME DECLARED DURING THE COURSE OF SURVEY IN THE RETURN OF INCOME FILED PURSUANT TO SURVEY, WHICH ADMITTEDLY, WAS A VALID RETURN OF INCOME UNDER SECTION 139(5) OF THE ACT. APPLYING THE R ATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CIT VS. SAS PHARMACEUTICALS (SUPRA), WE FIND NO MERIT IN LEVY OF PENALTY ON THE ADDITIONAL INCOME WHICH WAS OFFERED TO TAX IN THE REVISED RETURN OF INCOME FILED AFTER SURVEY. 1 6 . NOW, WE TAKE UP T HE FIRST ASPECT OF SATISFACTION WHICH WAS RECORDED BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT IN THE HANDS OF ASSESSEE I.E. RECORDING OF SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE PERUSAL OF ASSESSMENT ORDER REFLECTS THAT VIDE PARA 8 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER ACKNOWLEDGES THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE, WHEREIN THE UNDISCLOSED AMOUNT OF INVESTMENT IN SHOPS AT RS.85 LAKHS HAS BEEN OFFERED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER FURTHER ACKNOWLEDGES THAT NO SEPARATE ADDITION IS TO BE MADE BUT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS INITIATED. THEREAFTER, THE ASSESSING OFFICER DECLARES THAT ISSUE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C ) OF THE ACT. UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO RECORD SATISFACTION TO THE EFFECT THAT THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE 12 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI PARTICULARS OF INCOME FOR INITIAT ING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. SUCH RECORDING OF SATISFACTION IN THE CASE OF ASSESSEE IS MISSING AND CONSEQUENTLY, THE ACTION OF THE ASSESSING OFFICER IN INITIATING PENALTY PROCEEDINGS IS INVALID. IN THIS REGARD, WE FIND SUPP ORT FROM THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 WITH OTHER INCOME TAX APPEALS NOS.953 OF 2014, 1097 OF 2014 AND 1226 OF 2014, JUDGMENT DATED 05.01.2017 , WHEREIN IT WAS HEL D THAT WHERE INITIATION OF PENALTY IS ON ONE LIMB AND THE LEVY OF PENALTY IS ON OTHER LIMB, THEN IN THE ABSENCE OF PROPER SHOW CAUSE NOTICE TO THE ASSESSEE, THERE IS NO MERIT IN LEVY OF PENALTY 1 7 . APPLYING THE SAID PRINCIPLE AS LAID DOWN BY THE HONBLE B OMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY (SUPRA) , THE REQUIREMENT OF THE ACT IS TO INITIATE PENALTY PROCEEDINGS ON ACCOUNT OF NON SATISFACTION OF ONE LIMB ESPECIALLY IN A CASE WHERE ONE ADDITION IS SOUGHT TO BE MADE, FOR LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE ACT. AS REFERRED TO BY US IN THE EARLIER PARAS AND ALSO IN THIS PARA, WE FIND THAT THERE IS TOTAL NON RECORDING OF ANY SATISFACTION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN COMPLIED WITH BY THE ASSESSEE AND IN TH E ABSENCE OF SUCH SHOW CAUSE NOTICE, WHERE THE ASSESSING OFFICER HAS NOT POINTED OUT THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED ITS INCOME, THEN NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE LEVIED. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN THIS REGARD HAS PLACED RELIANCE ON THE PROVISIONS OF SECTION 271(1B) OF THE ACT AND POINTED OUT THAT ONCE PENALTY PROCEEDINGS HAS BEEN INITIATED, THEN THERE IS DEEMED SATISFACTION IN THE CASE. IN THIS REGARD, WE PLACE RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN NANDKISHOR TULSIDAS KATORE VS. ACIT (SUPRA), WHEREIN REFERENCE WAS MADE TO SUBSTANTIAL QUESTIONS RAISED BEFORE THE 13 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI HONBLE HIGH COURT OF KARNATAKA IN KARNATAKA IN CIT VS . SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 241 (KAR) I.E. THE AMENDMENT TO SECTION 271(1B) OF THE ACT WITH RETROSPECTIVE EFFECT AND IT WAS OBSERVED AS UNDER: - 16. ANOTHER ASPECT RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US WAS IN RESPECT OF DECISION OF HONBLE HIGH COURT OF KARNATAKA IN CIT VS. SSAS EMERALD MEADOWS (SUPRA). THE SUBSTANTIAL QUESTIONS WHICH WERE RAISED BEFORE THE HONBLE HIGH COURT ARE AS UNDER: - (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MEN TION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALE D INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE T HE AMENDMENT OF SECTION 271(1B) WITH RETROSPECTIVE EFFECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? 17. THE HONBLE HIGH COURT HAD ALLOWED THE CLAIM OF ASSESSEE WHE RE THE ASSESSING OFFICER HAD NOT EXPLICITLY MENTIONED THAT AS TO WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, SUFFERS FROM INFIRMITY EVEN IF IT IS ESTABLISHED THAT THE ASSESSEE HAD CONCEALED THE INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APEX COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT. APPLYING THE SAID PRINCIPLE, WE HOLD THAT EVEN IF IT IS ESTABLISHED THAT THE ADDITIONAL INCOME IS ON ACCOUNT OF CONCEALMEN T OF INCOME BUT WHILE RECORDING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER SHOULD EXPLICITLY MENTIONS AS TO WHETHER PENALTY IS BEING INITIATED FOR CONCEALMENT OR INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF THE SAME, NOTICE ISSUED IN SUCH CIRCUMSTANCES, WHICH ALSO IS NOT CLEAR AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS ATTRACTED, STANDS VITIATED AND THE PENALTY ORDER PASSED CONSEQUENT TO SUCH NOTICE IS INVALID IN LAW. ACCORDINGLY, WE DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN THE CASE OF ASSESSEE. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS THUS, ALLOWED. OTHER GROUNDS OF APPEAL RAISED ON MERITS OF ISSUE BECOME ACADEMIC AND ALSO ADDITIONAL GROUND OF APPEA L. 18. BEFORE PARTING, WE MAY ALSO REFER TO THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN (1) MS. MADHUSHREE GUPTA (2) BRITISH AIRWAYS PROFIT AND LOSS ACCOUNT VS. UNION OF INDIA AND ANOTHER (2009) 317 ITR 107 (DEL) , WHEREIN THE RETROSPECTIVE OPERATION OF SECTION 271(1B) OF THE ACT WAS CHALLENGED BEING VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION. THE HONBLE HIGH COURT OF DELHI UPHOLDING THE RETROSPECTIVE OPERATION OF SUB - SECTION (1B) HELD THAT THE ISSUE OF 14 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI DESCERN A BILITY OF SATISFACTION WAS TO BE ARRIVED AT BY THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDINGS BEFORE HIM. SECTION 271(1)(C) OF THE ACT HAD TO BE READ IN CONSONANCE WITH SECTION 271(1B) OF THE ACT. THE HONBLE HIGH COURT OF DELHI HELD THAT PRIMA F ACIE SATISFACTION OF THE ASSESSING OFFICER THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM THE ORDER PASSED DURING THE COURSE OF PROCEEDINGS. FURTHER, REFERRING TO THE PROVISIONS OF THE ACT WHILE INITIATING PENALTY PROCEEDIN GS, THE COURT HELD THAT FOLLOWING PRE - REQUISITES SHOULD BE THERE. UNDER SECTION 271(1)(C) TO INITIATE PENALTY PROCEEDINGS THE FOLLOWING PRE - REQUISITES SHOULD OBTAIN: (I) THE ASSESSING OFFICER SHOULD BE SATISFIED THAT : (A) THE ASSESSEE HAS EITHER CONC EALED PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF HIS INCOME; OR (C) INFRACTED BOTH (A) AND (B) ABOVE. (II) THIS SATISFACTION SHOULD BE ARRIVED AT DURING THE COURSE OF ANY PROCEEDINGS. THESE COULD BE ASSESSMENT, REASSESSMENT O R RECTIFICATION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO SHOW CAUSE UNDER S. 274 OF THE ACT SHALL ISSUE SETTING OUT THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITTED. THE N OTICE UNDER S. 274 OF THE ACT CAN BE ISSUED BOTH DURING OR AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS, HOWEVER, THE SATISFACTION OF THE AO THAT THERE HAS BEEN AN INFRACTION OF CL. (C) OF SUB - S. (1) OF S. 271 SHOULD PRECEDE CONCLUSION OF THE PROCEEDINGS PENDING BEFORE THE ASSESSING OFFICER. (IV) THE ORDER IMPOSING PENALTY CAN BE PASSED ONLY AFTER ASSESSMENT PROCEEDINGS ARE COMPLETED. THE TIME FRAME FOR PASSING THE ORDER IS CONTAINED IN S. 275 OF THE ACT. DUE COMPLIANCE WOULD BE REQUIRED TO BE MADE IN RE SPECT OF THE PROVISIONS OF SECTIONS 274 AND 275 OF THE ACT. 19. HENCE, WE FIND NO MERIT IN THE PLEA OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. IN THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS NOT BEEN FULFILLED AND HAVE NOT ISSUED SHOW CAUSE NOTICE IN THIS REGARD AND HENCE, INITIATION OF PEN ALTY PROCEEDINGS ARE BAD IN LAW. 15 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI 20. THE NEXT ASPECT WHICH HAS TO BE CONSIDERED I S THAT THE ASSESSING OFFICER WHILE LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT , IN PARA 5 HAD HELD THE ASSESSEE TO HAVE DEFAULTED UNDER SECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION 1 I.E. THE ACT OF CONCEALMENT OF ADDITIONAL INCOME IN THE HANDS OF ASSESSEE. THE ASSESSING OFFICER VIDE PARA 7 OF PENALTY ORDER THUS, SPECIFIED THAT THE ASSESSEE HAD CONCEALED THE INCOME WITHIN MEANING OF SECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION 1 ON THE ADDITIONAL INCOME OF RS.85 LAKHS, HENCE, PENALTY OF RS.25,50,000/ - WAS LEVIED. THE CIT(A) VIDE PARA 6.25 UPHOLDS THE ACTION OF ASSESSING OFFICER IN LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT AS THE ASSESSEE HAD FURN ISHED INACCURATE PARTICULARS OF INCOME BY CONCEALING THE INVESTMENTS IN SHOPS. HENCE, PENALTY HAS BEEN CONFIRMED BY THE CIT(A) ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS AT VARIANCE TO THE EXPLANATION 1 TO SECTION 271(1)(C) OF T HE ACT APPLIED BY THE ASSESSING OFFICER. THUS, THERE WAS A CONTRAST BETWEEN THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THE APPELLATE ORDER, WHEREIN THE PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFICER FOR VIOLATION OF EXPLANATION 1 T O SECTION 271(1)(C) OF THE ACT AND THE CIT(A) HAS CONFIRMED THE SAME FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY CONCEALING THE INCOME OF RS.85 LAKHS. FIRST OF ALL, THE ASSESSING OFFICER HAS FAILED TO RECORD ANY SATISFACTION AND FURTHER, THE ORDER OF THE ASSESSING OFFICER LEVYING PENALTY IS FOR CONCEALMENT OF INCOME AND THE ORDER OF CIT(A) CONFIRMING THE LEVY OF PENALTY IS ON FURNISHING OF INACCURATE PARTICULARS OF INCOME. SUCH CONTRARY ORDERS BY THE ASSESSING OFFICER AND THE CIT(A) CANNOT SURVIVE AS THEY HAVE FAILED TO COME TO CONCLUSION AS TO WHETHER THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT CANNOT BE A CASE OF SATISFACTION OF BOTH OF LIMBS, ONE BY THE ASSESSING OFFICER AND THE SECOND BY THE CIT(A). H ENCE, THERE IS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WHERE THE INITIATION OF PENALTY PROCEEDINGS IS WITHOUT 16 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI RECORDING SATISFACTION. FURTHER, LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT , WHICH HAS BEEN LEVIED BY THE ASSESSING OFFICER FOR CONCEALMENT OF INCOME BUT HAS BEEN CONFIRMED BY THE CIT(A) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AGAIN SUFFERS FROM INFIRMITIES AND CANNOT BE UPHELD. 21 . BEFORE PARTING, WE MUST ALSO REFER TO T HE STAND OF THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE IN PLACING HEAVY RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN B. DAMODAR VAMAN BALIGA JEWELLERS VS. JCIT (SUPRA). THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO THE HEAD NOTE AND POINTED OUT THAT IN THE FIRST INSTANCE WHERE PENALTY PROCEEDINGS WERE INITIATED IN RE - ASSESSMENT PROCEEDINGS THAT ITSELF WOULD BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER IN TERMS OF SECTION 271(1 B ) OF THE ACT I.E. WHERE THE ASSESSMENT ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB - SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FO R INITIATION OF PENALTY PROCEEDINGS. FIRST, WE SHALL DEAL WITH THIS ASPECT OF RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA. IN THIS REGARD, WE AGAIN PLACE RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN (1) MS. MADHUSHREE GUPTA (2) BRITISH AIRWAYS PLC & UNION OF INDIA & ANOTHER (SUPRA). FURTHER, WE RELY ON THE PROPOSITION OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. SHRI SAMSON PERINCHERY (SUPRA) WHEREIN IT HAS BEEN CATEGORICALLY HELD BY THE TRIBUNAL AND UPHELD BY THE HONB LE HIGH COURT THAT WHILE RECORDING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, ONE OF THE LIMBS I.E. EITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME SHOULD BE CLEARLY MENTIONED. SO, MEREL Y INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS NOT SUFFICIENT. ACCORDINGLY, APPLYING THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH 17 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI COURT IN THE CASE, WE HOLD THAT IN THE ABSENCE OF SPECIFYING THE LIMB FOR WHICH PENALTY PROCEEDINGS HAVE BEEN INITIATED, SUCH RECORDING OF SATISFACTION IS INVALID IN LAW. 22 . NOW, COMING TO THE ISSUE WHICH WAS DECIDED BY THE HONBLE HIGH COURT OF KARNATAKA IN B. DAMODAR VAMAN BALIGA JEWELLERS VS. JCIT (SUPRA) , WHEREIN IT WAS HELD THAT WHERE THE REVISED RETURN OF INCOME WAS FILED AS A RESULT OF SURVEY UNEARTHING UNDISCLOSED INCOME THAT THE SAME COULD NOT BE CONSIDERED AS VOLUNTARY RETURN AND PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS LEVIABLE IN SUCH CASES. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAD NOT FILED THE COMPLETE COPY OF JUDGMENT AND HAD ONLY FILED THREE PAGES OF THE SAID DECISION. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO GO THROUGH THE SAME AND FILE WRITTEN SUBMISSIONS AND APPLICABILITY OF THE SAID DECISION TO THE FACTS OF THE CASE. IN THIS REGARD, WRITTEN SUBMISSIONS WERE FILED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND IT WAS POINTED OUT THAT THE FACTS O F THE SAID CASE ARE AT VARIANCE. THE FIRST DIFFERENCE WHICH WAS POINTED OUT WAS THE REVISED RETURN FILED BY THE ASSESSEE IN THE CASE OF B. DAMODAR VAMAN BALIGA JEWELLERS VS. JCIT (SUPRA), WHICH WAS FILED POST SURVEY ACTION BUT AFTER THE TIME LIMIT PRESCRI BED UNDER SECTION 139(5) OF THE ACT. HENCE, THE SAME WAS NOT ACCEPTED AS VALID RETURN. THUS, THE ASSESSING OFFICER HAD MADE THE ADDITION IN RESPECT OF ADDITIONAL INCOME DECLARED BY THE ASSESSEE DURING SURVEY AND ASSESSED INCOME WAS DETERMINED OVER AND AB OVE THE INCOME ORIGINALLY RETURNED BY THE ASSESSEE. HENCE, EXPLANATION 1 WAS APPLIED TO INITIATE PENALTY PROCEEDINGS. WE AGREE WITH THE PROPOSITION RAISED BY THE ASSESSEE AND HOLD THAT THE FACTS IN THE CASE BY THE HONBLE HIGH COURT OF KARNATAKA IN B. DA MODAR VAMAN BALIGA JEWELLERS VS. JCIT (SUPRA) AND THE FACTS OF THE PRES ENT CASE ARE AT VARIANCE AND THE ASSESSEE ADMITTEDLY, BEFORE US HAS REVISED THE 18 ITA NO. 1296 /PUN/20 15 MEGHRAJ KESAJI CHAUDHARI RETURN OF INCOME WHICH WAS ACCEPTED AS BEEN FILED WITHIN THE PROVISIONS OF SECTION 139(5) OF THE ACT. TH E ASSESSMENT WAS MADE ON THE BASIS OF SAID REVISED RETURN OF INCOME AND HENCE, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN CIT VS. SAS PHARMACEUTICALS (SUPRA). THERE IS NO MERIT IN HOLDING THAT THE ASSESSEE IS LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IS HEREBY CANCELLED. 23 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 3 1 S T DAY OF OCTO BER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 3 1 S T OCTO BER , 201 7 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 1, NASHIK ; 4. THE PR. C IT - I , NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE