Shri Nitin Bharat Shah, Pune V. Dy. CIT, Central Circle1(1), Pune

ITA 1370/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6711 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: MAHENDRA MEHTASHRI BHARAT SHAH
• Keywords: Gift; Recovery proceedings; Search and seizure; Period of limitation; Procedural lapse
• Section: 143(3); 92B; 153A; 132; 10; 11; 15; 139; 92; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1365 / P N/ 20 1 3 ASSESSMENT YEAR : 200 8 - 09 SHRI RAJESH HIRALAL SHAH, KANCHAN , A/21, ADARSH SOCIETY, PUNE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. APRPS3212M ITA NO. 1366 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 SHRI RAJENDRA KESHAVLAL SHAH, B 602, SUJAY GARDEN, 1 2 MUKUNDNAGAR, PUNE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. ADWPS9357D ITA NO. 1367 /PN/20 13 ASSESSMENT YEAR : 2007 - 08 SHRI JAYANT HIRALAL SHAH, 11, SUJAY GARDEN, 12 MUKUNDNAGAR, PU NE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AEGPS3036L ITA NO. 1368 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 SHRI BHARAT KESHAVLAL SHAH, 27, SUJAY GARDEN, 12 MUKUNDNAGAR, PUNE - 411037 VS. D Y. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. ADXPS3821M 2 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE ITA NO. 1369 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 SHRI NILESH BHARAT SHAH, 27, SUJAY GARDEN, 12 MUKUNDNAGAR, PUNE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. ADXPS4008G ITA NO. 1370 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 SHRI NITIN BHARAT SHAH, 27, SUJAY GARDEN, 12 MUKUNDNAGAR, PUNE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRA L CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AFHPS4532H ITA NO. 1371 /PN/20 13 ASSESSMENT YEAR : 2008 - 09 SHRI HIRALAL DAYALAL SHAH, 9, SUJAY GARDEN, 12 MUKUNDNAGAR, PUNE - 411037 VS. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(1), PU NE (APPELLANT) (RESPONDENT) PAN NO. AGNPS4812P APPELLANT BY: SHRI MAHENDRA MEHTA/SHRI BHARAT SHAH RESPONDENT BY: SHRI S.P. WALIMBE DATE OF HEARING : 30 - 04 - 2014 DATE OF PRONOUNCEMENT : 28 - 05 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS BAT CH OF SEVEN APPEALS ARE FILED BY THE DIFFERENT ASSESSEE S CHALLENGING THE RESPECTIVE IMPUGNED O RDER S OF THE LD. CIT(A) - I, PUNE DATED 09 - 04 - 2013 A ND SAVE IN THE CASE OF THE ASSESSEE SHRI JAYANT HIRALAL SHAH , IN ALL OTHER CASES ASSESSMENT YEAR INVOLVED IS 200 8 - 09 AND IN THE CASE OF SHRI JAYANT HIRALAL SHAH THE ASSESSMENT YEAR IS 2007 - 08. 3 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE THE FACTS AS WELL AS ISSUES ARE IDENTICAL HENCE, WE DISPOSE OFF THIS BATCH OF APPEALS WITH THIS COMMON ORDER IN WHICH THE LD. CIT(A) HAS CONFIRMED THE ORDER S OF THE ASSESSING OFFICER LEVYING THE PENALTY U/S. 271(1)(C) OF THE INCOME - TAX ACT BY CONVERTING THE SAME AS A PENALTY U/S. 271 AAA OF THE ACT. 2. THE FOLLOWING GROUNDS ARE TAKEN IN ITA NO. 1365/PN/2013 WHICH ARE VERBATIM IN ALL OTHER APPEALS SAVE THE QUANTUM OF PENALTY: 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING TO RECOMPUTE AND LEVY PENALTY U/S 271AAA WHEN THE ASSESSING OFFICER HAD INITIATED AND LEVIED PENALTY OF RS.168573/ - U/S 271( 1 )(C) OF THE INCOME TAX ACT. THE DIRECTIO N SO ISSUED BY THE LEARNED CIT (A) MAY KINDLY BE QUASHED AND THE LEVY OF PENALTY SO DIRECTED U/S 271AAA BE TREATED AS AB INITIO NULL AND VOID. 2. ON FACTS AND CIRCUMSTANCES AND AS PER PROVISIONS OF LAW THE LEARNED CIT (A) ERRED IN CONCLUDING THAT SECTION 292 B COMES TO THE RESCUE OF THE ASSESSING OFFICER AND HENCE PENALTY PROCEEDINGS PURPORTEDLY TAKEN BY THE ASSESSING OFFICER U/S 271( 1 )(C) SHALL NOT TO BE DEEMED TO BE INVALID AND PENALTY CAN BE LEVIED U/S 271AAA INSTEAD OF U/S 271( 1 )(C). IT IS TO BE NOTED THAT THE LEARNED CIT (A) HAS CONCLUDED THAT THE ASSESSING OFFICER HAS GROSSLY ERRED IN LEVY OF PENALTY U/S 271( 1 )(C). 3. WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 1 AND 2 ABOVE AND ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IT BE HELD THAT THE LEARNED CI T (A) ERRED IN HOLDING THAT THE ADDITIONS MADE TO THE RETURNED INCOME IN THE ASSESSMENT U/S 153A ARE 'UNDISCLOSED INCOME' TO WHICH THE EXPLANATION (A)( I )(A) TO SECTION 271AAA WILL APPLY. 3. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THERE WAS A SEARCH AND SEIZURE ACTION U/S. 132 OF THE INCOME - TAX ACT ON 08 - 08 - 2007 AGAINST ALL THESE ASSESSEES. THE ASSESSMENT OF THE ASSESSEES WERE COMPLETED ON THE BASIS OF RETURN S OF INCOME FILED BY THE ASSESSEE S IN ALL THE CASES BY MAKING SOME ADDITIONS. T HE ASSESSING OFFICER INITIATED THE 4 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AND LEVIED THE PENALTY AS UNDER: SL. NO. ITA NO. A.Y. NAME OF THE ASSESSEE QUANTUM OF PENALTY 1 1365/PN/2013 2008 - 09 SHRI RAJESH HIRALAL SHAH RS.1,68,573/ - 2 1366/PN/2013 20 08 - 09 SHRI RAJENDRA KESHAVLAL SHAH RS.3,29,256/ - 3 1367/PN/2013 2007 - 08 SHRI JAYANT HIRALAL SHAH RS.9,92,970/ - 4 1368/PN/2013 2008 - 09 SHRI BHARAT KESHAVLAL SHAH RS.94,854/ - 5 1369/PN/2013 2008 - 09 SHRI NILESH BHARAT SHAH RS.2,94,074/ - 6 1370/PN/2013 200 8 - 09 SHRI NITIN BHARAT SHAH RS.79,755/ - 7 1371/PN/2013 2008 - 09 SHRI HIRALAL DAYALAL SHAH RS.4,02,472/ - 4. THE ASSESSEE S CHALLENGED THE PENALTY ORDERS BEFORE THE LD. CIT(A) BY TAKING THE LEGAL PLEA THAT THE PROVISIONS OF SEC. 271(1)(C) ARE NOT APPLICABL E TO THE ASSESSEES AND AT THE MOST THE ASSESSING OFFICER SHOULD HAVE LEVIED THE PENALTY U/S. 271AAA OF THE ACT. THE ASSESSEES FURTHER PLEADED THAT EVEN IF THERE IS MENTIONED IN THE ASSESSMENT ORDER IN RESPECT OF INITIATION OF THE PENALTY U/S. 271AAA BUT T HE ASSESSING OFFICER FINALLY LEVIED THE PENALTY U/S. 271(1)(C) OF THE ACT. THE LD. CIT(A) HELD THAT THERE WAS A DEFECT IN THE ISSUANCE OF THE IMPUGNED NOTICE S AND THE SAME DEFECT IS CURABLE U/S. 292B OF THE ACT. THE LD. CIT(A) REJECTED THE PLEA OF THE AS SESSEE THAT THE PENALTY ORDER PASSED U/S. 271(1)(C) OF THE ACT ARE BAD IN LAW. THE REASONS AND FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 3.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT IN RESPECT OF THE IMPUGNED PENALTY. SECTION 271AAA WAS INT RODUCED BY THE FINANCE ACT 2007 W.E.F. 1.4.2007 IN RESPECT OF THE PENALTIES WHERE SEARCHES HAVE BEEN INITIATED U/S 132 ON OR AFTER 1.6.2007. FOR READY REFERENCE THE SECTION IS REPRODUCED HEREUNDER: 5 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE '271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING A NYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007 BUT BEFORE THE 1ST DAY OF JULY, 2012 , THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITIO N TO TAX, IF ANY, PAYABLE BY HIM, A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB - SECTION (1) SHALL APPLY IF THE ASSESSEE, (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER SUB - SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME WAS DERIVED; AND (HI) PAYS THE TAX, TOGETHER WITH INTEREST, I F ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB - SECTION (1). (4) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, (A) 'UNDISCLOSED INCOME ' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EIT HER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFO RE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NOR MA/ COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN 6 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR - WHICH IS FOUND TO BE FAL SE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED; (B) 'SPECIFIED PREVIOUS YEAR ' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FILING THE RETURN OF INCOME UNDER SUB - SECTION (1) OF SECTI ON 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE SAID DATE; OR (II) IN WHICH SEARCH WAS CONDUCTED.] ' 3.3. ADMITTEDLY, THE APPELLANT HAS NOT CONTESTED THE QUANTUM ADDITION BY FILING AN APPEAL. AT THE SAME TIME, IN VIEW OF THE NON OBSTANTE CLAUSE IN SEC. 271AAA (1) WHICH STATES 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, THE ASSESSING OFFICER MAY DIRECT THAT, IN A CASE WHERE S EARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE SHALL PAY BY WAY OF PENALTY', THE PROVISIONS OF SEC. 271(1)(C) ARE CLEARLY NOT APPLICABLE TO THE A.Y. 2008 - 09. THE SEARCH TOOK PLACE ON 8.8.2007 WHICH IS THE PRE VIOUS YEAR 2007 - 08 RELEVANT TO A.Y. 2008 - 09. THE PENALTY THAT CAN BE IMPOSED RELEVANT TO THE YEAR OF SEARCH AS PER EXPLANATION (B)(II) TO SEC. 271AAA WHICH DEFINES THE SPECIFIED PREVIOUS YEAR FOR PURPOSES OF LEVY OF PENALTY, IS EXCLUSIVELY AND ONLY PENALTY U/S 271AAA. SECTION 271AAA (3) PROHIBITS THE LEVY OF PENALTY U/S 271(1)(C) IN RESPECT OF THE UNDISCLOSED INCOME FOR SEARCHES CONDUCTED ON OR AFTER 1.6.2007. THEREFORE, IT IS VERY CLEAR THAT THE ASSESSING OFFICER HAS ERRED IN LEVY OF THE PENALTY U/S 271(1) (C). AT THE SAME TIME, IT IS SEEN THAT THE SATISFACTION U/S 271AAA HAS BEEN DULY RECORDED BY THE ASSESSING OFFICER, AT THE TIME OF CONCLUSION OF ASSESSMENT PROCEEDINGS AND INITIATION OF PENALTIES. THE ONLY DEFECT WAS IN THE ISSUANCE OF THE IMPUGNED NOTICES U/S. 271(1)(C) RATHER THAN NOTICE U/S 271AAA. IT IS AT THIS STAGE THAT SECTION 292B COMES TO THE RESCUE OF THE ASSESSING OFFICER AND THE PENALTY PROCEEDINGS PURPORTEDLY TAKEN BY THE ASSESSING OFFICER U/S 271(1)(C) SHALL NOT BE DEEMED TO BE INVALID MERELY DUE TO THE OMISSION OR MISTAKE ON THE PART OF THE ASSESSING OFFICER IN ISSUING AND LEVYING THE PENALTY UNDER A WRONG SECTION OF THE ACT. THE DEFECT IN THE PENALTY PROCEEDINGS CAN BE ALSO CURED 7 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE CONSIDERING THE FACT THAT IN RESPONSE TO NOTICES U/S 271(1)(C), THE APPELLANT HAD FURNISHED REPLY DATED 7.6.2010 REFERRING TO PENALTY PROCEEDINGS U/S 271AAA AND EXPLAINING WHY NO PENALTY WAS LEVIABLE SINCE NO JEWELLERY HAD BEEN PURCHASED BY, - THE APPELLANT BUT RECEIVED BY WAY OF GIFTS FROM TIME TO TIME. 3.4. IN THIS R EGARD, IT IS SEEN THAT THE LEGALITY OF THE ASSESSMENT AND PENAL PROCEEDINGS HAS BEEN THE SUBJECT MATTER IN VARIOUS DECISIONS RENDERED BY THE COURTS. THE HONOURABLE SUPREME COURT IN CIT VS KANPUR COAL SYNDICATE REPORTED IN 53 ITR 225 HAS HELD THAT THE AAC U NDER THE 1922 ACT HAS PLENARY POWERS IN DISPOSING AN APPEAL. THE SCOPE OF HIS POWER IS CO - TERMINUS WITH THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. THE SUPREME COURT IN THE CASE OF ISHA BEEVI VS. TRO R EPORTED IN 101 ITR 449 HELD THAT MERE INCORRECT SECTION OR PROVISION OF LAW DOES NOT RENDER A NOTICE OR ORDER INVALID. THE SUPREME COURT WAS CONCERNED WITH THE COLLECTION AND RECOVERY PROCEEDINGS AGAINST THE LEGAL HEIRS OF THE DECEASED APPELLANT WHO WAS IN ARREARS OF TAX UNDER THE TRAVANCORE INCOME TAX ACT OF 1121. THE ADDITIONAL PERSONAL ASSISTANT OF THE DISTRICT COLLECTOR, FUNCTIONING AS TRO, ATTACHED A NUMBER OF IMMOVABLE PROPERTIES U/S 46(2) OF THE INCOME TAX ACT, 1922 AND U/S 221 OF THE INCOME TAX ACT, 196LLT WAS CONTENDED BY THE APPELLANTS THAT THE TRO HAD NO JURISDICTION TO START RECOVERY PROCEEDINGS. HOWEVER, THE COURT HELD THAT IN ORDER TO SUBSTANTIATE THE RIGHT TO OBTAIN A WRIT OF PROHIBITION FROM THE HIGH COURT OR SUPREME COURT, THE APPELLANT HAD TO DEMONSTRATE TOTAL ABSENCE OF JURISDICTION TO PROCEED ON THE PART OF THE OFFICER OR AUTHORITY COMPLAINED AGAINST. IT WAS THEREFORE, HELD THAT IT WAS NOT ENOUGH IF A WRONG SECTION OR A PROVISION OF LAW IS CITED IN A NOTICE OR ORDER IF THE POWER TO PROCEED BY THAT AUTHORITY IS ACTUALLY THERE UNDER ANOTHER PROVISION. 3.5. ALTHOUGH THESE DECISIONS WERE RENDERED IN THE CONTEXT OF ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY THE SAME MAY NOT BE MADE APPLICABLE TO PENALTY PROCEEDINGS. SECTION 292B HAS BEEN IN SERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1975 W.E.F. 1.10.1975 TO TACKLE SUCH INSTANCES OF MISTAKES IN ANY PROCEEDINGS UNDER THE INCOME TAX ACT. IT IS NOTED THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER RECORDED THE SATISFACTION FOR INITIATION OF THE PENALTY U/S 271AAA. THEREFORE, THE PRIMARY CONDITION FOR LEVY OF THE PENALTY STANDS FULFILLED. IT IS ALSO AN ADMITTED FACT THE DISCLOSURES 8 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE HAVE NOT BEEN MADE AS PRESCRIBED BY THE CONDITIONS LAID DOWN IN 271AAA (2). THE APPELLANT HAS ALSO NOT CHALLENGED THE ADDITIONS MADE SUBSEQUENT TO SEARCH BY WAY OF FILING APPEAL. IN FACT THE APPELLANT HAS CHOSEN TO FILE A REPLY TO THE NOTICES ISSUED U/S 271(1)(C) BY TREATING THE SAME AS PROCEEDINGS U/S 271AAA. KEEPING THE IN VIEW THE FACTS AND CIRCUMSTANCES AND THE P OSITION IN LAW, IT IS HELD THAT THE DEFECT IN THE PROCEEDINGS STANDS CURED IN VIEW OF THE PROVISIONS OF SEC. 292B. ACCORDINGLY, GROUND NO. 1 HAS TO BE TREATED AS DISMISSED. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND ALSO PERUSED THE RECORD. THE LD. COUNSEL VEHEMENTLY ARGUES THAT IN THE CASE OF SEARCH ACTION U/S. 132 WHICH HAVE BEEN INITIATED ON OR AFTER 01 - 07 - 2007 BUT BEFORE THE 01 - 07 - 2012 SPECIFIC PROVISION WAS MADE FOR LEVYING THE PENALTY AND THE PROVISION OF SEC. 271(1)(C) HAD BEEN SEIZED TO APPLY DURING THE SAID PERIOD BY VIRTUE OF SEC. 271AAA(3) . HE ARGUES THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MENTIONED THAT PENALTY PROCEEDINGS ARE INITIATED U/S. 271(1)(C) AND ALSO U/S. 271AAA BUT IN THE FINAL DIRECTIONS AT THE END OF THE ASSESSMENT ORDER , THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED THAT INITIATE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME - TAX ACT, 1961. THE LD. COUNSEL REFER S TO THE PENALTY ORDER AND SUBMITS THAT BY NO STRETCH OF IMAGINATION IT CAN BE INFERRED THAT IT IS MERELY A SHEER MISTAKE EITHER IN THE ISSUANCE OF THE NOTICE OR MENTIONING OF THE SECTION. HE ARGUES THAT THE LD. CIT(A) WRONGLY APPLIED THE PROVISIONS OF SEC. 292B AS THAT SECTION IS MERELY TO CU RE THE PROCEDURAL MISTAKES AND NOT FOR CORRECTING THE SUBSTANTIAL ACTIONS . HE TOOK US THROUGH THE PENALTY ORDER PASSED U/S. 271(1)(C) AND SUBMITS THAT EVEN IF GO WITH THE F ORM VS. SUBSTANCE THEORY , I T IS SEEN THAT THE F ORM IS IN CONCURRENCE WITH THE SUBST ANCE AS THE ENTIRE DISCUSSION, REASONING AND FINDING OF THE ASSESSING OFFICER IS AS PER AND IN COMPLIANCE WITH PROVISIONS OF SEC. 271(1)(C) OF THE INCOME - TAX ACT. HE SUBMITS THAT EVEN THE ASSESSING OFFICER HAS CALCULATED THE PENALTY AS 9 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE PROVIDED U/S. 271(1 )(C) OF THE ACT. THE LD. COUNSEL REFERRED TO SEC. 271AAA OF THE ACT AND SUBMITS THAT BY VIRTUE OF SPECIFIC BAR PROVIDED BY THE PARLIAMENT, THE ASSESSING OFFICER HAS NO JURISDICTION EVEN TO INITIATE THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. 6. THE LD. COUNSEL RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF V. RAMAIAH VS. CIT, CHENNAI 356 ITR 646 (MADRAS). HE ARGUES THAT THE HON'BLE HIGH COURT HAS EXPLAINED THE SCOPE OF SEC. 292B. HE FURTHER ARGUES THAT THE PROVISIONS OF TAX LAWS MUST BE STRICTLY INTERPRETED AND THERE IS NO SCOPE FOR THE INTENDMENT . HE SUBMITS THAT UNDER THE PROVISIONS OF SEC. 271AAA , ONLY THE ASSESSING OFFICER IS COMPETENT TO LEVY THE PENALTY AND THE LD. CIT(A) CANNOT ASSUME THE JURISDICTION OF THE AS SESSING OFFICER FOR THE PURPOSE OF HOLDING THAT THE PENALTY SHOULD BE LEVIED U/S. 271AAA EVEN THOUGH THE ASSESSING OFFICER HAS WRONGLY LEVIED U/S. 271(1)(C) OF THE ACT . HE REFERRED TO THE OBSERVATION OF THE LD. CIT(A), WHERE HE HAS ACCEPTED THE PLEA OF TH E ASSESSEE THAT THE ASSESSING OFFICER WAS WRONG IN APPLYING THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT. HE PLEADED FOR DELETING THE PENALTY IN ALL THESE CASES AS PER HIS SUBMISSION ALL THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER ARE BAD IN LAW AND VOID AB INITIO. 7. PER CONTRA, THE LD. DR SUPPORTED THE ORDER OF THE LD. CIT(A) , H E SUBMITS THAT SEC. 292B IS A CREATIVE PROVISION IN CASE WHERE THERE IS A MISTAKE COMMITTED BY THE ASSESSING OFFICER OR OTHER AUTHORITY. HE REFERRED TO THE ASSESSMENT OR DER AND SUBMITS THAT EVEN AT THE END OF THE ORDER THE ASSESSING OFFICER HAS NOT MENTIONED ABOUT SEC. 271AAA BUT IN THE BODY OF THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MENTIONED SEC. 271AAA. HE, THEREFORE, SUBMITS THAT THE CIT(A) BEING THE HIGHER AU THORITY CAN CORRECT THE MISTAKE COMMITTED BY THE ASSESSING OFFICER. 8. AS PER THE FACTS ON RECORD, THERE WAS A SEARCH AND SEIZURE ACTION OF THE INCOME - TAX ACT ON 08 - 08 - 2007 IN WHICH ALL THE ASSESSEES WERE 10 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE COVERED . IN CONSEQUENCE OF THE SEARCH AND SEIZURE ACTION ASSESSMENTS HAVE BEEN FRAMED IN THE CASE S OF THESE SEVEN ASSESSEES . S AVE SHRI JAYANT HIRALAL SHAH ITA NO. 1367/PN/2013 ALL OTHER ASSESSMENTS ARE FOR THE A.Y. 2008 - 09. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT ALL THE ASSESSMENT ORDERS A RE PASSED U/S. 143(3) OF THE INCOME - TAX ACT . IT APPEARS THAT AS THE SEARCH ACTION WAS IN THE F .Y. 2007 - 08, THE ASSESSMENTS ARE FRAMED FOR THE A.Y. 2008 - 09 U/S. 143(3) OF THE ACT. IN THE CASE OF SHRI JAYANT HIRALAL SHAH ITA NO. 1367/PN/2013 THE ASSESSMENT YEAR IS 2007 - 08 AND IN THAT CASE THE ASSESSMENT IS FRAMED U/S. 143(3) R.W.S. 153A OF THE ACT. THIS IS FOR THE OBVIOUS REASON THAT AS PER THE PROVISIONS OF SEC. 153A THE ASSESSING OFFICER IS REQUIRED TO ISSUE THE NOTICE IN RESPECT OF IMMEDIATE PROCEEDING SIX ASSESSMENT YEARS OTHER THAN THE FINANCIAL YEAR IN WHICH THE SEARCH ACTION HAS BEEN TAKEN. ON PERUSAL OF ALL THE ASSESSMENT ORDERS THERE SHOULD NOT BE QUARREL ON THE BASIC FACT THAT ALL THE ASSESSMENTS ARE FRAMED IN CONSEQUENCE OF THE SEARCH AND SEIZUR E ACTION ON 08 - 08 - 2007 AGAINST ALL THESE ASSESSEES . 9. ON PERUSAL OF THE ASSESSMENT ORDERS , IT IS SEEN THAT THE ASSESSING OFFICER HAS INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. THE ARGUMENT OF THE LD. COUNSEL IS THAT AS THE SEARCH ACTIO N WAS ON 08 - 08 - 2007 , THE APPLICA BILITY OF SEC. 271(1)(C) WAS BARRED BY THE NEWLY INSERTED SEC. 271AAA OF THE INCOME - TAX ACT. SEC. 271AAA IS ALREADY REPRODUCED HERE - IN - ABOVE WHILE REPRODUCING THE FINDINGS OF THE LD. CIT(A). SEC. 271AAA WAS BROUGHT ON THE STATUTE BOOK BY THE FINANCE ACT, 2007 W.E.F. 01 - 04 - 2007 AND THE SAID SECTION IS INTRODUCED TO LEVY THE PENALTY IN CASES W H ERE THE SEARCH ACTION IS INITIATED U/S. 132 OF THE INCOME - TAX ACT ON OR AFTER 01 - 06 - 2007. THE APPLICATION OF THE SAID SECTION WAS DON E AWAY WITH BY WAY OF AMENDMENT INSERTED BY THE FINANCE A CT, 2012 W.E.F. 01 - 04 - 2012 TO SEC. 271AAA BY PUTTING THE LIMITATION ON THE DATE IN RESPECT OF THE INITIATION OF THE SEARCH ACTION U/S. 132 OF THE ACT. 11 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE 10. SEC. 271AAA (3) READS AS UNDER: NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB - SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SUB - SECTION (1). 10. 1 IN SEC. 271AAA(3) IT IS SPECIFICALLY PROVIDED THAT THE PROVISI ONS OF SEC. 271(1)(C) WILL NOT APPLY IN RESPECT OF THE UNDISCLOSED INCOME MORE SPECIFICALLY WHICH IS DETECTED AND ASSESSED IN CONSEQUENCE OF THE SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT . WE FIND THAT THERE IS NO SUBSTANCE IN THE ARGUMENT OF THE LD. D R THAT IN THE BODY OF THE ASSESSMENTS THE ASSESSING OFFICER HAS MENTIONED SEC. 271(1)(C) OF THE ACT. ON PERUSAL OF THE ASSESSMENT ORDERS, IT IS SEEN THAT THE ASSESSING OFFICER HIMSELF IS NOT SURE WHETHER PENALTY IS TO BE LEVIED U/S. 271AAA OR SEC. 271(1)( C) OF THE ACT. IT IS OSTENSIBLY SEEN THE CONFUSED APPROACH OF THE ASSESSING OFFICER IN INTERPRETING THE LAW W HICH IN V ERY SIMPLE TERMS PROVIDES IN SEC. 271AAA(3) THAT THE PROVISIONS OF SEC. 271(1)(C) WOULD NOT APPLY. AT THE END OF THE ASSESSMENT ORDER, T HE ASSESSING OFFICER HIMSELF MENTIONED THAT TO INITIATE THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT . ADMITTEDLY, WHEN THE SEARCH TOOK PLACE I.E. ON 08 - 08 - 2007 , THE PROVISIONS OF SEC. 271AAA WERE IN FORCE AND ALSO APPLICABLE . LD. CIT(A) HAS NOT DISPUTED THAT THE ASSESSMENTS ARE FRAMED IN CONSEQUENCE OF SEARCH AND SEIZURE OPERATION. THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER HAS GROSSLY ERRED IN LEVY THE PENALTY U/S. 271(1)(C). THE LD. CIT(A) HAS ALSO OBSERVED THAT SEC. 271AAA (3) PROHIBITS THE LEVY OF PENALTY U/S. 271(1)(C) IN RESPECT OF THE UNDISCLOSED INCOME DETECTED IN CONSEQUENCE OF SEARCH CONDUCTED ON OR AFTER 01 - 06 - 2007. IN THE OPINION OF THE LD. CIT(A) THERE IS A DEFECT ON THE PART OF THE ASSESSING OFFICER IN THE ISSUANCE OF THE IMP UGNED NOTICES U/S. 271(1)(C) OF THE ACT RATHER THAN ISSUING THE NOTICE U/S. 271AAA. HE HAS HELD THAT IN VIEW OF THE PROVISIONS OF SEC. 292B OF THE ACT MERELY BECAUSE THE PENALTY PROCEEDINGS ARE TAKEN BY THE ASSESSING OFFICER U/S. 271(1)(C) SHALL NOT BE 12 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE DE EMED TO BE INVALID AS IN HIS OPINION IT IS AN OMISSION OR MISTAKE ON THE PART OF THE ASSESSING OFFICER IN ISSUING THE WRONG NOTICES AND LEVYING THE PENALTY ON THE WRONG SECTION OF THE ACT. 11 . THE SCOPE OF SEC. 2 92 B OF THE ACT HAS BEEN EXPLAINED BY THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF V. RAMAIAH (SUPRA) AND HELD AS UNDER: 20. BUT, THE TRIBUNAL, IN ORDER TO JUSTIFY THE ACTION OF THE REVENUE IN RESORTING TO THE PROVISIONS OF SECTION 158BC TO THE CASE ON HAND, HAS PROCEEDED FURTHER TO HOLD THAT EVEN IF THE ASSESSING OFFICER HAS COMMITTED ANY PROCEDURAL IRREGULARITY, THAT COULD BE CURED BY THE PROVISIONS OF 292B OF THE ACT. NOW, THEREFORE, THE STAGE IS SET TO SEE AS TO WHETHER THE IRREGULARITY, IF ANY, CAN BE RECTIFIED IN VIEW OF SECTION 292B. SEC TION 292B IS AS FOLLOWS: - '292B. NO RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING, FURNISHED OR MADE OR ISSUED OR TAKEN OR PURPORTED TO HAVE BEEN FURNISHED, OR MADE OR ISSUED OR TAKEN IN PURSUANCE OF ANY OF THE PROVISIONS OF THIS ACT S HALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDING IS IN S UBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT.' 21. A READING OF THE AFORESAID PROVISION MAKES IT CLEAR THAT THIS PROVISION ENABLES AN INVALID ASSESSMENT OR A PROCEEDING AS VALID FOR THREE REASONS, VIZ., MISTAKE , DEFECT OR OMISSION. EVEN IF THE ASSESSMENT ORDER SUFFERS FROM ANY MISTAKE OR ANY DEFECT OR ANY OMISSION, SUCH ASSESSMENT ORDER/PROCEEDING CANNOT BE STATED TO BE INVALID. NOW, ONE HAS TO SEE WHETHER THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER INV OKING SECTION 158BC SUFFERS FROM ANY PROCEDURAL IRREGULARITIES AS CONTEMPLATED UNDER SECTION 292B SO AS TO MAKE SUCH ASSESSMENT ORDER VALID. ACCORDING TO THE TRIBUNAL, BY APPLYING SECTION 292B THE PROCEDURAL IRREGULARITY, IF ANY, CAN BE RECTIFIED AND, ON T HAT SCORE, CONFIRMED THE DECISION OF THE ASSESSING OFFICER IN INVOKING SECTION 158BC TO THE CASE OF THE APPELLANT. IT IS NOT THE CASE OF THE REVENUE, AT ANY STAGE, THAT THE ASSESSMENT 13 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE ORDER SUFFERS FROM MISTAKE OR DEFECT OR ANY OMISSION. BUT, THE TRIBUNAL ITSELF HAS ASSUMED THAT SECTION 292B WOULD APPLY IN CASE OF ANY DEFECT IN THE PROCEDURE. SECTION 292B ITSELF IS HAVING ITS OWN LIMITATIONS OF APPLICATIONS WITH THREE EXCEPTIONS STATED IN SECTION 292B. CERTAINLY PASSING AN ORDER OF ASSESSMENT UNDER SECTION 158BC INSTEAD OF SECTION 158BD (IN SPITE OF CLEAR TERMINOLOGY USED IN BOTH THE SECTIONS) WOULD NOT AMOUNT TO A MISTAKE, A DEFECT OR AN OMISSION, MUCH LESS A CURABLE ONE. WHEN DIFFERENT CONTINGENCIES ARE DEALT WITH UNDER DIFFERENT SECTIONS OF THE ACT, ALLOW ING AN ILLEGALITY TO BE PERPETRATED AND THEN TAKING A PLEA BY THE REVENUE THAT SUCH AN ACTION ADOPTED ON THEIR PART WOULD NOT NULLIFY THE PROCEEDINGS, CANNOT BE APPRECIATED SINCE BY VIRTUE OF SUCH ACTIONS, THE REVENUE HAS ATTEMPTED TO NULLIFY THE SCHEME OF THINGS OF LIMITATIONS LEGALLY PROPOUNDED UNDER THE ACT. AT THIS JUNCTURE, WE FEEL IT APT TO QUOTE A JUDGMENT OF THE ALLAHABAD HIGH COURT IN MONGA METALS (P) LTD. VS. ASST. COMMISSIONER OF INCOME TAX [2000] 111 TAXMAN 175, WHEREIN, UNDER SIMILAR CIRCUMSTAN CES, IT HAS BEEN HELD AS FOLLOWS: 'VALIDITY OF THE NOTICE IS NOT SAVED BY THE PROVISIONS OF SECTION 292B BECAUSE THE CONTENTS OF THE NOTICE, AS FAR AS SUM AND SUBSTANCE IS CONCERNED, ARE NOT IN CONFORMITY WITH THE PROVISIONS OF THE ACT. SINCE, FOR THE ASS UMPTION OF JURISDICTION TO PROCEED WITH THE MAKING OF AN ASSESSMENT FOR BLOCK PERIOD, SERVICE OF A VALID NOTICE IN TERMS OF PROVISIONS OF SECTION 158BC IS A PREREQUISITE MANDATORY REQUIREMENT, MEANING THEREBY THAT THE ASSESSING OFFICER CANNOT HAVE JURISDIC TION TO MAKE AN ASSESSMENT FOR BLOCK PERIOD IF THERE IS NO SERVICE OF A NOTICE UNDER SECTION 158BC OR IF THE NOTICE SO SERVED IS FOUND TO BE BAD IN LAW OR INVALID OR VAGUE. CONSEQUENTLY, THE ASSESSMENT FRAMED UNDER ANY OF THESE CONDITIONS SHALL BE BAD IN T HE LAW AND VOID AB INITIO FOR WANT OF JURISDICTION.' 22. WE ARE IN PERFECT AGREEMENT WITH THE ABOVE FINDINGS OF THE ALLAHABAD HIGH COURT FOR THE SIMPLE REASON THAT TO MEET OUT DIFFERENT CIRCUMSTANCES AND CONTINGENCIES, THE LEGISLATURE HAS FRAMED DIFFERENT SECTIONS IN THE ACT AND AS ALREADY STATED SUPRA, HAVING COMMITTED AN ILLEGALITY, THE REVENUE CANNOT BE PERMITTED TO CLOTHE THEIR ILLEGALITY SEEKING AID FROM SECTION 292B. THEREFORE, THE OBSERVATION OF THE TRIBUNAL THAT THE PROCEDURAL IRREGULARITY CAN BE RE CTIFIED BY APPLYING THE PROVISIONS OF SECTION 292B IS UNWARRANTED AND CANNOT BE ACCEPTED. 14 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE 23. WHEN IT IS FOUND THAT THE ASSESSMENT SHOULD HAVE BEEN PROCEEDED ONLY AS CONTEMPLATED UNDER SECTION 158BD, INSTEAD OF SECTION 158BC AND THE INVOCATION OF SECTION 2 92B IS BY THE TRIBUNAL IS WRONG, THE NEXT QUESTION TO BE DEALT WITH IS REGARDING THE PERIOD OF LIMITATION . 1 2 . WE HAVE TO GIVE THE STRICT INTERPRETATION TO THE PROVISIONS OF TAX LAW AND THERE IS NO QUARREL ON THIS PROPOSITION ALSO. WHEN SEC. 271AAA WAS INTRODUCED THAT WAS ONLY WITH THE OBJECT OF LEVYING THE PENALTY IN THE CASES WERE UNDISCLOSED INCOME IS UNEARTH ED IN CONSEQUENCE OF THE SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT . W HEN THE SAID SECTION WAS IN OPERATION T HE APPLICABILITY OF SEC. 271(1) (C) WAS DONE AWAY WITH BY THE LEGISLATURE WITH SPECIFIC PROVISION OF SUB - SEC . ( 3 ) TO SEC. 271AAA. 1 3 . NOW THE NEXT QUESTION IS WHETHER THE LD. CIT(A) CAN IMPLIEDLY CONVERT THE WRONGLY LEVIED PENALTY BY THE ASSESSING OFFICER U/S. 271(1)(C) BY HOLDING THA T IT IS AN OMISSION OR MISTAKE AND HENCE, THE SAID PENALTY IS TO BE TREATED AND LEVIED U/S. 271AAA OF THE ACT. WE ARE UNABLE TO ACCEPT THE APPROACH OF THE LD. CIT(A). SEC. 292B WHICH HAS BEEN EXPLAINED BY THE HON'BLE HIGH COURT OF MADRAS IN V. RAMAIAH (S UPRA) IS FOR RECTIFYING THE PROCEDURAL DEFECT AND IT IS NOT FOR RECTIFYING THE JURISDICTIONAL ISSUES. MOREOVER, ON PERUSAL OF THE PENALTY ORDER, WE FIND THAT WITH NO STRETCH OF THE IMAGINATION IT CAN BE SAID THAT THE ASSESSING OFFICER HAS AT LEAST LOOKED AT THE PROVISIONS OF SEC. 271AAA OF THE ACT AS THE ENTIRE REASONING AND FINDING OF THE ASSESSING OFFICER ARE INCONFORMITY WITH THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT. IN THIS SITUATION WE ARE OF THE OPINION THAT THE ASSESSING OFFICER WITHOUT ANY JURI SDICTION AND AUTHORITY LEVIED THE PENALTY IN ALL THESE CASES U/S. 271(1)(C) OF THE ACT. WE FURTHER HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER LEVYING THE PENALTY U/S. 271(1)(C) IN ALL THESE CASES CANNOT BE TREATED AS A MERE OMISSION OR MISTAKE AS IT IS NOT THE FORM BUT IN SUBSTANCE ALSO THE PENALTY IS LEVIED AS PER THE PROVISIONS OF SEC. 271(1)(C) OF THE ACT . IN OUR 15 ITA NO S. 1365 TO 1371/PN/2013, SHRI RAJESH HIRALAL SHAH & ORS., PUNE OPINION IT IS NOT CURABLE DEFECT BUT THE ACTION OF THE ASSESSING OFFICER IS IN CONTRARY TO THE LAW APPLICABLE AND HENCE, ALL THE PEN ALTY ORDERS ARE VOID AB INITIO. WE, THEREFORE, ALLOW THE GROUNDS TAKEN BY THE ASSESSEE AND CANCEL LED THE PENALTY IN ALL THESE CASES. 1 4 . IN THE RESULT, ALL THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 - 05 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 28 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE