SHRI KANHEYA LAL, AJMER V. ITO, WARD-1(3), AJMER

ITA 1316/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8676 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 11-11-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MISS CHANCHAL MEENA ACIT
• Keywords: Initiation of penalty proceedings; Condonation of delay; FORM 26AS
• Section: 271(1)(c); 250; 274; 192; 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,A JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA- @ ITA NO. 1316/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2015-16 SHRI KANHEYA LAL 179, RAVATON KA MOHALLA, AJMER. CUKE VS. THE ITO, WARD-1(3), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AFFPL 3307 R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : NONE JKTLO DH VKSJ LS @ REVENUE BY : MISS CHANCHAL MEENA (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 16/07/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 21/07/2020 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 20.08.2019 OF LD. CIT(A), AJMER ARISING FROM THE P ENALTY ORDER PASSED U/S 271(1)(C) OF THE IT ACT FOR THE ASSESSMENT YEAR 2015-16. DUE TO PREVAILING COVID-19 PANDEMIC CONDITION THE HEARING OF THE APPEAL IS CONCLUDED THROUGH VIDEO CONFERENCE. 2. THERE IS DELAY OF 8 DAYS IN FILING THE PRESENT A PPEAL. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY. SINCE, NOBODY HAS ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 2 APPEARED ON BEHALF OF THE ASSESSEE THOUGH WRITTEN S UBMISSION HAS BEEN FILED, THEREFORE, WE CONSIDERED THE REASONS EXPLAIN ED IN THE APPLICATION FOR CONDONATION OF DELAY AS WELL AS ARGUMENTS OF TH E LD. DR. THE ASSESSEE HAS EXPLAINED THE REASONS FOR DELAY OF 8 D AYS THAT DUE TO FESTIVALS SEASON IN THE MONTH OF SEPTEMBER, 2019 AN D OCTOBER, 2019 BEING NEVRATRI, DUSSEHRA AND DIWALI AND THEREAFTER THERE WERE CLOSED HOLIDAY ON 2 ND AND 3 RD NOVEMBER, 2019 BEING SATURDAY AND SUNDAY THE ASSESSEE COULD FILE THE PRESENT APPEAL ONLY ON 11.1 1.2019. THUS, THE ASSESSEE HAS PRAYED THAT THE DELAY OF 8 DAYS IN FIL ING THE APPEAL MAY BE CONDONED. HAVING CONSIDERED THE REASONS EXPLAINED B Y THE ASSESSEE AS WELL AS FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT IN THE INTEREST OF JUSTICE THE DELAY O F 8 DAYS IN FILING THE PRESENT APPEAL BE CONDONED SO THAT THE APPEAL OF TH E ASSESSEE SHALL BE DECIDED ON MERITS INSTEAD OF TECHNICALITIES. ACCORD INGLY THE DELAY OF 8 DAYS IN FILING THE PRESENT APPEAL IS CONDONED. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE THE COMMISSIONER(APPEAL) UPHELD THE ITOS ORDER IS CORR ECT. 2. THE BODY OF THE ASSESSMENT ORDER AT PAGE 7 PENAL TY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT ARE SEPAR ATELY INITIATED FOR FURNISHING WRONG PARTICULARS OF THE INCOME. ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 3 3. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. AC T ARE SEPARATELY INITIATED FOR CONCEALMENT OF THE PARTICU LARS OF INCOME. 4. IN THE SAME ASSESSMENT ORDER AO IS NOT ASCERTAIN ED THAT FOR WHICH FINDING THE PENALTY U/S 271(1)(C) IS INITIATE D. 5. AS PER DECISION PENALTY CONCEALMENT PENALTY-PENA LTY CANNOT BE LEVIED FOR TWIN CHARGES-LEVY OF PENALTY NOT JUST IFIED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF PARTICULARS OF INCOME ARE TWO SEPARATE DEFAULTS AND ASSESSING OFFICER AT NO STAGE SPECIFIED UNDER WHICH LIMB PENALTY PROCEEDING INITIATED- ADITYA CHEMICALS LTD. VS. INCOME TAX OFFICER (2018) 62 ITR 150 (TRIB.,DELHI). 6. IN THIS CASE THE DECISION OF HONOURABLE SUPREME COURT CIT VS. RELIANCE PETROPRODUCTS LTD. REPORTED AT 322 ITR 158 IS ALSO APPLICABLE AND OTHER CASES ARE ALSO APPLICABLE. 7. THE CIT(A)HAS NOT CONSIDERED THE FACTS OF THE CA SE. THE AO HAS MENTIONED THE SHORT DISCLOSED PURCHASES. IT I S MENTIONED HERE THAT THE PURCHASES ARE MADE FROM THE TURNOVER OF THE ASSESSEE AND THESE ARE REFLECTED IN THE TRANSACTION S WITH THE RSBCL. IT IS BONAFIDE ALSO. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAI L TRADING OF LIQUOR UNDER THE LICENCE OF EXCISE DEPARTMENT IN THE STATE OF RAJASTHAN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT AS PER THE DETAILS SHOWN IN 26AS PURCHASES FOR THE YEAR UN DER CONSIDERATION FROM THE VARIOUS STATE GOVERNMENT SUPPLIERS AND DIS TRICT EXCISE OFFICE IS RS. 2,07,40,326.37 ON WHICH TAX COLLECTED AT SOURCE OF RS. 2,15,276.85 WHEREAS THE ASSESSEE IN THE BOOKS OF ACCOUNTS HAS S HOWN THE PURCHASES WHICH IS LESS TO THE TUNE OF RS. 6,05,536 /-. THE AO ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 4 ACCORDINGLY MADE AN ADDITION OF THE SAID AMOUNT OF RS. 6,05,536/- AS UNEXPLAINED SOURCE OF PURCHASES. THE SAID ADDITION MADE BY THE AO HAS ATTAINED FINALITY AS THE ASSESSEE HAS NOT CHALLENGE D THE SAID ACTION OF THE AO. THE AO INITIATED THE PENALTY PROCEEDINGS U/ S 271(1)(C) OF THE ACT BY ISSUING NOTICE U/S 274 OF THE ACT ON 26.12.2 017. THE AO LEVIED OF PENALTY OF RS. 1,89,169/- BEING 100% OF THE TAX SOUGHT TO BE EVADED IN RESPECT OF THE SAID ADDITION OF RS. 6,05,536/-. THE ASSESSEE CHALLENGED THE LEVIED OF PENALTY U/S 271(1)(C) OF T HE ACT BY FILING THE APPEAL BEFORE THE LD. CIT(A) HOWEVER, THE LD. CIT(A ) HAS CONFIRMED THE LEVY OF PENALTY WHILE PASSING THE IMPUGNED ORDER. THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AS WELL BEFORE THE TRIB UNAL ARE REPRODUCED AS UNDER:- IT IS HUMBLY REQUESTED THAT IN THIS CASE THE DECISI ON OF THE HONOURABLE SUPREME COURT DECISION CIT VS. VEGETABLE PRODUCTS LTD. IN 88 ITIZ 192 (SC) (CLC PAGE NO. 120 -124) DCIT VS. ANANDA MARAKALA IN 150 ITD 323 (BANG) '30 IS APPLICABLE ----T HUS THERE ARE TWO VIEWS ON THE ISSUE, ONE IN FAVOUR OF THE ASSESSEE EXPRESSED BY THE HON'BLE ALL AHABAD HIGH COURT AND THE OTHER AGAINST THE ASSESSEE EXPRESSED BY THE HON'BLE GUJARAT & CALCUTTA HIGH COURTS. ADMITTEDLY, THERE IS NO DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT ON THIS ISSUE. IN THE GIVEN CIRCUMSTANCES, FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PROD UCTS LTD. (SUPRA), WE HOLD THAT WHERE TWO VIEWS ARE POSS IBLE ON AN ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE PREFERRED. ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 5 FOLLOWING THE DECISION OF THE HON'BLE ALLAHABAD HIG H COURT, WE UPHOLD THE ORDER OF THE CIT(A). WELGROW LINE (INDIA) (P.) LTD. VS. ACIT IN 54 TAXMA RM,COM 117 (CHENNAI) ACTT VS. M/S ESKAY DESIGNS IN ITA NO. 1951/MDS/2012 A.Y. 2009-10 JITENDRA MANSUKHLAL SHAH VS. DOT IN ITA NO. 2293/MUM/2013 DATED 4.3.2015. AMRITSAR ITAT (THIRD MEMBER) IN THE CASE OF HPCL MI TTAL ENERGY LTD. VS. ACIT ITA NOS. 554 &555/ASR/2014 HEL D THAT THE A.O. CANNOT INITIATE PENALTY ON THE CHARGE OF ' CONCEALMENT OF PARTICULARS OF INCOME', BUT ULTIMATELY FIND THE ASSESSEE GUILTY IN PENALTY ORDER OF 'FURNISHING INACCURATE PARTICUL ARS OF INCOME' (AND VICE VERSA). IN THE SAME MARINER, HE CANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. IF THE ADDITION MADE BY THE A.O. BUT HE HAS NOT DIS PUTED IN THE SAME IN THE APPEAL SUCH ACCEPTANCE OF ADDITION DOES NOT MEAN CONCEALMENT OF INCOME. IT IS HELD BY THE HONOURABLE SUPREME COURT IN CASE OF SIR SHADILAL SU GAR MILLS (168 ITR 705) --- INDEED THERE MAY BE NUMEROU S REASONS WITH THE TAX PAYER FOR NOT APPROACHING THE FIRST APPELLATE AUTHORITY FOR JUSTICE. KARNATAKA HIGH COURT IN CASE OF CIT VS. MANUNATHNA COTTON & GINNING ITA NO. 1307/BANG/2003/ [2013-ITR-HC-KAR- 093] HAS HELD THAT EVEN IF THE ASSESSEE HAS NOT CHA LLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AN D HAS PAID THE SAME, THAT BY ITSELF WOULD NOT BE SUFFICIE NT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY. THERE IS DECISION OF HONOURABLE SUPREME COURT IN CI T VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 6 KOLKATA ITAT BENCH IN THE CASE OF M/S. NEW LIFE SON OSCAN CENTRE, VS ITO, WARD - 24(2)1TA NO.2560/ KOL/ 2017 HELD THAT THE SHOW CAUSE NOTICE ISSUED IN THE PRESENT CA SE U/S 274 OF THE ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICU LARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. THE SHOW CAUSE NOTICE U/S 274 OF THE A( T DOES NOT STRI KE OUT THE INAPPROPRIATE WORDS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSITION OF PENALTY CANNOT BE SUSTAINED . THUS, IT IS CLEAR THAT THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY ONLY ON THE GROUND OF VALIDITY OF INITIATION OF THE PENALTY. THOUGH THE ASSESSEE HAS ALSO REFERRED SOME OF THE JUDGMENTS ON THE POINT THAT MERELY BECAUSE THE ADDITION IS MADE BY THE AO DOES NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME. 5. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT IT IS A CLEAR CASE OF CONCEALMENT PARTICULARS OF INCOME AS THE ASSESSEE H AS UNDERSTATED THE PURCHASES IN THE BOOKS OF ACCOUNT WHICH WAS DETECTE D BY THE AO FROM FORM 26AS AND THE ASSESSEE HAS NOT DISPUTED THE COR RECTNESS OF THE PARTICULARS OF PURCHASES AS SHOWN IN FORM 26AS. EVE N THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF THE PURCHASES FROM THE SUPPLIERS WHO ARE ALL STATEMENT GOVERNMENT COMPANIES AS WELL AS D EPARTMENT. THEREFORE, THERE IS NO DISPUTE REGARDING THE FACT T HAT THE ASSESSEE HAS UNDERSTATED PURCHASES IN THE BOOKS OF ACCOUNT AND T HEREBY THE SOURCE ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 7 OF UNACCOUNTED PURCHASES HAS NOT BEEN EXPLAINED BY THE ASSESSEE. THE LD. DR HAS FURTHER CONTENDED THAT AS REGARDS THE VA LIDITY OF INITIATION OF THE PROCEEDINGS THE AO HAS RECORDED THE SATISFACTIO N IN THE ASSESSMENT ORDER WHICH CANNOT BE A BASIS FOR CHALLENGING THE I NITIATION OF THE PENALTY PROCEEDINGS SECTION 271(1B) PROVIDES THAT A NY AMOUNT IS ADDED OR DISALLOWANCE IN THE TOTAL INCOME OF THE ASSESSEE AND THE ASSESSMENT ORDER CONTAINS A DIRECTION FOR INITIATION OF PROCEE DINGS U/S 271(1)(C) OF THE ACT SUCH ASSESSMENT SHALL BE DEEMED TO CONSTITU TE SATISFACTION OF THE AO FOR INITIATION OF THE PENALTY PROCEEDINGS. T HEREFORE, THE LD. DR HAS SUBMITTED THAT RECORDING OF SATISFACTION IN THE ASSESSMENT ORDER IS IN COMPLIANCE OF PROVISIONS OF SECTION 271(1B) OF T HE ACT. AS REGARD UNCERTAIN CHARGES ALLEGED BY THE ASSESSE THE LD. DR HAS SUBMITTED THAT THIS ISSUE HAS BEEN DULY CONSIDERED BY THE AO IN TH E REMAND REPORT AS WELL AS BY THE LD. CIT(A) AND THE ASSESSING OFFICER HAS GIVEN A DEFINITE FINDING WHILE PASSING THE PENALTY ORDER U/S 271(1)( C) OF THE ACT THAT THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME. SHE HA S RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS NOT DISPUTED T HE DISCREPANCY FOUND REGARDING THE SUPPRESSION OF THE PURCHASES RE CORDED IN THE BOOKS ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 8 OF ACCOUNT. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS CLEARLY RECORDED THE FACTS REGARDING THE PURCHASE MADE BY T HE ASSESSEE AS REFLECTED IN FORM 26AS AS UNDER:- SR. NO. NAME AMOUNT TCS 1. DIST. EXCISE OFFICER, AMER. 6479130.00 65200.00 2. RAJ STATE GANGANAGER SUGAR MILLS 4063199.00 40660.00 3. RAJ STATE BAVERAGE CORP. LTD. 10171997.37 109416.85 TOTAL 20714326.37 215276.85 THESE FACTS AS FOUND BY THE AO IN FORM 26AS WERE NO T DISPUTED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND CONS EQUENTLY THE AO HAS MADE AN ADDITION OF THE DIFFERENTIAL AMOUNT OF RS. 6,05,536/-. IT IS NOT A CASE CLAIM OF DEDUCTION BY THE ASSESSEE WHICH WAS NOT ALLOWED BY THE AO BUT IT IS A CASE OF CONCEALMENT OF CERTAIN T RANSACTIONS THEREBY THE ASSESSEE HAS SUPPRESSED THE PURCHASES RECORDED IN THE BOOKS OF ACCOUNTS. THIS FACT WAS DETECTED BY THE AO WHEN HE HAS EXAMINED THE DETAILS GIVEN IN FORM 26AS. THEREFORE, THE DECISION RELIED UPON BY THE ASSESSEE THAT MERE DISALLOWANCE OR ADDITION MADE BY THE AO WOULD NOT AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME OR F URNISHING INACCURATE PARTICULARS OF INCOME ARE NOT APPLICABLE. THOSE DEC ISIONS ARE APPLICABLE WHEN THE ASSESSEE MADE A CLAIM OF DEDUCTION WHICH I S A BONAFIDE CLAIM ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 9 BUT THE SAME WAS DISALLOWANCE BY THE AO AS THE CLAI M IS NOT ALLOWABLE AS PER PROVISIONS OF THE ACT. THUS THE DECISIONS RE LIED BY THE ASSESSEE INCLUDING JUDGMENT OF HONBLE SUPREME COURT IN CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 ARE NO T APPLICABLE IN THE FACTS OF THE PRESENT CASE. THEREFORE, THE ASSESSEE HAS NO CASE ON THE MERITS OF LEVY OF PENALTY U/S 271(1)(C) OF THE IT A CT. 7. AS REGARDS THE ASSESSEES OBJECTION AGAINST THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS WE FIND THAT THE ASSESSEE IS CHALLENGING THE INITIATION OF THE PROCEEDINGS FOR LEVY OF PENAL TY U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS INITIATED THE PENALTY FOR FURNISHING WRONG PART ICULARS OF INCOME. HOWEVER, THE SATISFACTION RECORDED IN THE ASSESSMEN T ORDER DOES NOT REQUIRE ANY SPECIFIC CHARGE BUT THE STATEMENT OF TH E AO THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE SEPARATELY INITIATED IS SUFFICIENT. THEREFORE, THE SATISFACTION RECORDED BY THE AO IN THE ASSESSMENT ORDER SHALL HAVE NO LEGAL IMPLEMENTATION AS REGARD THE CHARGE FOR WHICH THE PENALTY IS INITIATED AND FINAL LY LEVIED. THE NOTICE ISSUED BY THE AO U/S 274 OF THE ACT THOUGH STATES T HAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 10 INCOME. THEREFORE, THE ASSESSING OFFICER HAS NOT SP ECIFIED THE DEFINITE CHARGE FOR INITIATION OF PENALTY IN THE NOTICE ISSU ED U/S 274 OF THE ACT HOWEVER, IN THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT THE ASSESSING OFFICER HAS GIVEN A DEFINITE FINDING AS U NDER:- IN VIEW OF THIS IT IS CONCLUDED THAT THE ASSESSEE H AS INTENTIONALLY CONCEALED HIS INCOME OF RS. 6,05,536/-. THEREFORE L OOKING TO THE FACTS OF THE CASE, I AM SATISFIED THAT IT IS FIT CA SE OF LEVY OF PENALTY U/S 271(1)(C) OF THE IT ACT. HENCE, I IMPOSE PENALT Y U/S 271(1)(C) OF THE IT ACT, 1961. THEREFORE, EVEN IF THE AO HAS NOT MENTIONED A SPECI FIC/DEFINITE CHARGE FOR INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT AT THE TIME OF ISSUING NOTICE U/S 274 OF THE ACT IF THE AO HAS GIVEN A DEF INITE FINDING AT THE TIME OF LEVY OF PENALTY THEN INITIATION OF THE PENA LTY PROCEEDINGS CANNOT BE HELD AS INVALID. THE ASSESSEE HAS RELIED UPON TH E THIRD MEMBER DECISION OF THE AMRITSAR BENCHES IN CASE OF HPCL MI TTAL ENERGY LTD. VS. ACIT 97 TAXMANN.COM 3 WHEREIN THE TRIBUNAL HAS HELD IN PARA 11 TO 21 ARE AS UNDER:- 11. IT TRANSPIRES FROM THE ABOVE DISCUSSION THAT, INSOFAR AS THE ISSUE BEFORE ME IS CONCERNED, THERE ARE BROADLY TWO DIFFERENT STAGES HAVING BEARING ON THE IMPOSITION OF PENALTY, NAMELY, ASSESSMENT AND PENALTY. AT THE ASSESSMENT STAGE, TH E AO HAS TO RECORD A SATISFACTION IN THE ASSESSMENT ORDER AS TO WHETHER THE ADDITIONS/DISALLOWANCES, ON WHICH PENALTY IS LIKELY TO BE IMPOSED, ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 11 REPRESENT CONCEALMENT OF PARTICULARS OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME. THERE CAN BE TWO SUB-STAGES IN PENALTY PROCEEDINGS REQUIRING THE AO TO RECORD SUCH SATISFACTION, VIZ., AT THE TIME OF INITIATING THE P ENALTY PROCEEDINGS AND AT THE TIME OF PASSING THE PENALTY ORDER. I WIL L DEAL WITH SUCH TWO STAGES IN THE PRESENT CONTEXT. (A) RECORDING OF SATISFACTION AT THE ASSESSMENT STA GE. 12. IT HAS BEEN NOTICED HEREINABOVE THAT THE FIRST STA GE OF IMPOSITION OF PENALTY IS RECORDING OF SATISFACTION BY THE AO IN THE ASSESSMENT ORDER AS TO WHETHER THE ASSESSEE CONCEAL ED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. THERE WAS A LOT OF LITIGATION ON THIS POINT. THE AS SESSEES WERE CONTENDING BEFORE THE APPELLATE COURTS THAT THE AO HAD NOT RECORDED PROPER SATISFACTION IN THE ASSESSMENT ORDE R AND HENCE THE PENALTY SHOULD BE DELETED. ON THE OTHER HAND, THE D EPARTMENT WAS CONTENDING THAT THE SATISFACTION WAS PROPERLY RECOR DED. CONSIDERING THE MAGNITUDE OF LITIGATION ON THE POINT, THE FINAN CE ACT, 2008, INSERTED SUB-SECTION (1B) TO SECTION 271, W.R.E.F. 1.4.1989, WHICH RUNS AS UNDER: 'WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTI NG THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSES SMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTIO N 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 FOR INITIATIO N OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C).' 13. THE EFFECT OF THIS INSERTION IS THAT WHEN AN AMOUN T IS ADDED OR DISALLOWED IN AN ASSESSMENT AND THE ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271(L)(C), I T SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE AO FOR INITIATION OF THE PENALTY PROCEEDINGS. CRUX OF THE NEW PROVISION IS THAT A ME RE DIRECTION IN THE ASSESSMENT ORDER TO INITIATE PENALTY PROCEEDING S UNDER CLAUSE (C) IS SUFFICIENT TO CONCLUDE THAT THE AO RECORDED PROPER SATISFACTION ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 12 AS TO WHETHER THE ADDITIONS/DISALLOWANCES ARE 'CONC EALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' OR BOTH. IT IS INCORRECT TO ARGUE THAT EVEN AFTER THE INSERTION OF SUB-SECTION (1B), THE AO STILL NEEDS TO SPECIFIC ALLY RECORD AS TO WHETHER EACH ITEM OF ADDITION/DISALLOWANCE IS A CAS E OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. DEEMING 'SATISFACTION' UNDER CLAUSE (C) IN TERMS OF SUB-SECTION (1B) MEANS DEEMING 'PROPER SAT ISFACTION' AND 'PROPER SATISFACTION' MEANS GETTING SATISFIED AS TO WHETHER IT IS A CASE OF CONCEALMENT OF PARTICULARS OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF SUCH INCOME. IT CANNOT BE CONCEIVED THAT A DIRECTION TO INITIATE PENALTY PROCEEDINGS IN THE AS SESSMENT ORDER IS ONLY 'SATISFACTION' AND NOT 'PROPER SATISFACTION'. THIS CONTENTION, IF TAKEN TO A LOGICAL CONCLUSION, WOULD MEAN THAT AFTE R SUCH A DIRECTION IN THE ASSESSMENT ORDER CONSTITUTING HIS SATISFACTI ON, THE AO SHOULD ONCE AGAIN SPECIFICALLY RECORD SATISFACTION WITH RE FERENCE TO EACH ADDITION OR DISALLOWANCE AS TO WHETHER IT IS A CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IT IS OBVI OUSLY AN ABSURD PROPOSITION AND GOES AGAINST THE UNAMBIGUOUS LANGUA GE OF THE PROVISION. THUS, IT IS OVERT THAT AFTER INSERTION O F SUB-SECTION (1B) TO SECTION 271, INVARIABLY, THE AO SHOULD BE DEEMED TO HAVE RECORDED PROPER SATISFACTION WITH REFERENCE TO EACH ADDITION /DISALLOWANCE AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICUL ARS, ONCE A DIRECTION IS CONTAINED IN THE ASSESSMENT ORDER TO I NITIATE PENALTY U/S. 271(L)(C) OF THE ACT. REQUIRING THE RECORDING OF SEPARATE SATISFACTION, ONCE AGAIN, BY THE AO WOULD MILITATE AGAINST THE DEEMING PROVISION CONTAINED IN SUB-SECTION (1B). AD MITTEDLY, IN ALL THE FOUR APPEALS UNDER CONSIDERATION, THE AO DIRECT ED TO INITIATE PENALTY U/S. 271(L)(C) OF THE ACT IN THE ASSESSMENT ORDERS. THUS, THE REVENUE CAN BE SAFELY CONSIDERED TO HAVE SUCCESSFUL LY PASSED OUT THE FIRST STAGE. (B) RECORDING OF SATISFACTION AT THE PENALTY STAGE 14. IT HAS BEEN NOTED ABOVE THAT PENALTY PROCEEDINGS A RE SEPARATE FROM ASSESSMENT PROCEEDINGS, WHICH GET KIC KED WITH THE ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 13 ISSUE OF NOTICE U/S. 274 AND CULMINATE IN THE PENAL TY ORDER U/S. 271(L)(C) OF THE ACT. MANY A TIMES, PENALTY INITIAT ED IN THE ASSESSMENT ORDER ON ONE OR MORE COUNTS BY MEANS OF NOTICE U/S. 274, IS NOT EVENTUALLY IMPOSED BY THE AO ON GETTING SATISFIED WITH THE EXPLANATION TENDERED BY THE ASSESSEE IN THE PEN ALTY PROCEEDINGS. IN ANY CASE, CONFRONTING THE ASSESSEE WITH THE CHARGE AGAINST HIM IS SINE QUA NON FOR ANY VALID PE NALTY PROCEEDINGS. IT IS ONLY WHEN THE ASSESSEE IS MADE A WARE OF SUCH A CHARGE AGAINST HIM THAT HE CAN PRESENT HIS SIDE. THUS PRESCRIBING THE CHARGE IN THE PENALTY NOTICE AND PE NALTY ORDER IS MUST. ABSENCE OF A CHARGE IN THE PENALTY NOTICE OR NOT FINDING THE ASSESSEE GUILTY OF A CLEAR OFFENCE IN THE PENALTY O RDER, VITIATES THE PENALTY ORDER. 15. THE MOOT QUESTION IS THAT WHAT SHOULD BE THE NATUR E OF SPECIFICATION OF A CHARGE BY THE AO AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS AND AT THE TIME OF PASSING THE PENALTY ORDER. IS THE AO REQUIRED TO SPECIFY IN THE PENALTY NOTICE /ORDER AS TO WHETHER IT IS A CASE OF 'CONCEALMENT OF PARTICULARS OF INCOME'; OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'; O R BOTH OF THEM, WHICH CAN BE EXPRESSED BY USING THE WORD 'AND' BETW EEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF CONCEALMENT OF PARTICULARS OF INCOME, HE MUST SPECI FY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEED INGS AND ALSO IN THE PENALTY ORDER. THE AO CANNOT INITIATE PENALTY O N THE CHARGE OF 'CONCEALMENT OF PARTICULARS OF INCOME', BUT ULTI MATELY FIND THE ASSESSEE GUILTY IN THE PENALTY ORDER OF 'FURNISHING INACCURATE PARTICULARS OF INCOME'. IN THE SAME MANNER, HE CANN OT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST AGAIN SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATI ON OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. AFTER IN ITIATING PENALTY ON THE CHARGE OF 'FURNISHING OF INACCURATE PARTICUL ARS OF INCOME', ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 14 HE CANNOT IMPOSE PENALTY BY FINDING THE ASSESSEE GU ILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME'. AGAIN, HE C ANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF IMPOSITION OF PENALTY U/S. 271(L)(C) OF THE ACT ON TWO OR MORE ADDITIONS/DISALLOWANCES, ONE OR MORE FALLING UNDER THE EXPRESSION 'CONCEALMENT OF PARTICULARS OF INCOME' AND THE OTHE R UNDER THE 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST SPECIFY IT SO BY USING THE WORD 'AND' BETWEEN THE TWO EXPRESSI ONS IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEED INGS. IF HE REMAINS CONVINCED IN THE PENALTY PROCEEDINGS THAT T HE PENALTY WAS RIGHTLY INITIATED ON SUCH COUNTS AND IMPOSES PE NALTY ACCORDINGLY, HE MUST SPECIFICALLY FIND THE ASSESSEE GUILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME' AND ALSO 'FU RNISHING OF INACCURATE PARTICULARS OF INCOME' IN THE PENALTY OR DER. IF THE CHARGE IS NOT LEVIED IN THE ABOVE MANNER IN ALL THE THREE CLEAR- CUT SITUATIONS DISCUSSED ABOVE IN THE PENALTY NOTIC E AND ALSO IN THE PENALTY ORDER, THE PENALTY ORDER BECOMES UNSUST AINABLE IN LAW. 16. THE HON'BLE KARNATAKA HIGH COURT IN CIT V. MANJUNA THA COTTON AND GINNING FACTORY [2013] 359 ITR 565/218 TAXMAN 423/35 TAXMANN.COM 250 HAS HELD THAT A PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSI NG PENALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPOR TUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE C ONDITIONS STIPULATED IN SECTION 271(L)(C) DO NOT EXIST AS SUC H HE IS NOT LIABLE TO PAY PENALTY. THE HON'BLE HIGH COURT WENT ON TO H OLD THAT: 'CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME.... BUT DRAWING UP PENALTY PR OCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOT HER OFFENCE OR ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 15 FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW.. THUS ONCE THE PROCEEDINGS ARE I NITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID'. 17. IN MANU ENGG. WORKS (SUPRA) PENALTY WAS IMPOSED BY NOTING: 'THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME '. STRIKING DOWN THE PENALTY, THE HON'BLE HIGH COURT HELD THAT: 'IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDIN G AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSE SSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME H AD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDIN G WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN.' 18. IN PADMA RAM BHARALI (SUPRA), THE HON'BLE HIGH COU RT DID NOT SUSTAIN PENALTY LEVIED U/S. 271(L)(C) WHEN: 'TH E INITIATION OF THE PENALTY PROCEEDING WAS FOR CONCEALMENT OF THE P ARTICULARS OF INCOME. BUT THE TRIBUNAL FINALLY HELD THAT THE ASSE SSEE WOULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR TO HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' 19. THUS IT IS EVIDENT THAT WHEN THE AO IS SATISFIED A T THE STAGE OF INITIATION OF PENALTY PROCEEDINGS OF A CLEAR-CUT CHARGE AGAINST THE ASSESSEE IN ANY OF THE THREE SITUATIONS DISCUSS ED ABOVE (SAY, CONCEALMENT OF PARTICULARS OF INCOME), BUT IMPOSES PENALTY BY HOLDING THE ASSESSEE AS GUILTY OF THE OTHER CHARGE (SAY, FURNISHING OF INACCURATE PARTICULARS OF INCOME) OR AN UNCERTAI N CHARGE (CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME), THE PENALTY CANNOT BE SUSTA INED. 20. ANOTHER CRUCIAL FACTOR TO BE KEPT IN MIND IS THAT THE SATISFACTION OF THE AO AS TO A CLEAR-CUT CHARGE LEV ELED BY HIM IN THE PENALTY NOTICE OR THE PENALTY ORDER MUST CONCUR WITH THE ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 16 ACTUAL DEFAULT. IF THE CLEAR-CUT CHARGE IN THE PENA LTY NOTICE OR THE PENALTY ORDER IS THAT OF 'CONCEALMENT OF PARTICULAR S OF INCOME', BUT IT TURNS OUT TO BE A CASE OF 'FURNISHING OF INACCUR ATE PARTICULARS OF SUCH INCOME' OR VICE-VERSA, THEN ALSO THE PENALTY O RDER CANNOT LEGALLY STAND. 21. APART FROM THE ABOVE THREE SITUATIONS IN WHICH THE AO HAS CLEAR-CUT SATISFACTION, THERE CAN BE ANOTHER FO URTH SITUATION AS WELL. IT MAY BE WHEN IT IS DEFINITELY A CASE OF UND ER-REPORTING OF INCOME BY THE ASSESSEE FOR WHICH AN ADDITION/DISALL OWANCE HAS BEEN MADE, BUT THE AO IS NOT SURE AT THE STAGE OF I NITIATION OF PENALTY PROCEEDINGS OF THE PRECISE CHARGE AS TO 'CO NCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'. IN SUCH CIRCUMSTANCES, HE MAY USE SLASH BE TWEEN THE TWO EXPRESSIONS AT THE TIME OF INITIATION OF PENALT Y PROCEEDINGS. HOWEVER, DURING THE PENALTY PROCEEDINGS, HE MUST GE T DECISIVE, WHICH SHOULD BE REFLECTED IN THE PENALTY ORDER, AS TO WHETHER THE ASSESSEE IS GUILTY OF 'CONCEALMENT OF PARTICULARS O F INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOM E'. UNCERTAIN CHARGE AT THE TIME OF INITIATION OF PENALTY, MUST N ECESSARILY BE SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT THE TIME O F PASSING THE PENALTY ORDER. IF THE PENALTY IS INITIATED WITH DOU BT AND ALSO CONCLUDED WITH A DOUBT AS TO THE CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF S UCH INCOME ETC., THE PENALTY ORDER IS VITIATED. IF ON THE OTHER HAND , IF THE PENALTY IS INITIATED WITH AN UNCERTAIN CHARGE OF 'CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF I NCOME' ETC., BUT THE ASSESSEE IS ULTIMATELY FOUND TO BE GUILTY OF A SPECIFIC CHARGE OF EITHER 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', THEN NO FAULT CA N BE FOUND IN THE PENALTY ORDER. THEREFORE, EVEN IF THE AO WAS NOT CERTAIN ABOUT THE CHARGE AT THE TIME OF INITIATION OF THE PENALTY PROCEEDINGS BUT HE HAS GIVEN A DEFINITE ITA NO. 1316/JP/2019 SHRI KANHEYA LAL VS. ITO 17 CONCLUSIVE FINDING REGARDING THE DEFAULT OR CHARGE AT THE TIME OF PASSING THE PENALTY ORDER THEN NO DEFAULT CANNOT BE FOUND I N THE PENALTY ORDER. IN VIEW OF THE ABOVE DISCUSSION, WHEN THE AO HAS GI VEN A CERTAIN AND DEFINITE FINDING AT THE TIME OF PASSING THE PENALTY ORDER THEN THERE IS NO ILLEGALITY IN THE PENALTY ORDER PASSED U/S 271(1)(C ) OF THE IT ACT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/07/2020. SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21/07/2020. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KANHEYA LAL, AJMER. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-1(3), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1316/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR