DCIT, New Delhi V. M/s. National Travel Service, New Delhi

ITA 1605/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5102 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-05-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 18-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K K SHARMA; PRATAP GUPTA F
• Keywords: Opportunity of being heard; Question of law; Initiation of penalty proceedings; Difference of opinion; Deemed dividend
• Section: 273B; 143(3); 14A; 260A; 133(6); 32; 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA A. PILLAI , JM ITA NO. 1605 /DEL/2014 : ASSTT. YEAR : 2003 - 0 4 ITA NO. 1610 /DEL/2014 : ASSTT. YEAR : 2005 - 0 6 ITA NO. 1611 /DEL/2014 : ASSTT. YEAR : 2006 - 0 7 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 24(1) , NEW DELHI VS M/S NATIONAL TRAVEL SERVICE, 2, JETAIR HOUSE, 13, COMMUNITY CENTRE, YUSUF SARAI, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A AAFN2055Q AS SESSEE BY : SH. K. K. SHARMA, ADV. & SH. PRATAP GUPTA , F CA REVENUE BY : SH. RAJESH KUMAR, SR. DR DATE OF HEARING : 13 .06 .201 7 DATE OF PRONOUNCEMENT : 08 . 08 .201 7 ORDER PER BENCH : THE SE THREE APPE ALS BY THE DEPARTMENT ARE DIRECTED AGAINST THE CONSOLIDATED ORDER DATED 30.12.2013 OF LD. CIT(A) - XXII I, NEW DELHI FOR THE ASSESSMENT YEARS 2003 - 04, 2005 - 06 AND 2006 - 07. 2. THE COMMON GROUNDS RAISED IN THESE APPEALS READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY FOR AY 2003 - 04, 2005 - 06 AND 2006 - 07, ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 2 WHEREAS THE HON BLE DELHI HIGH COURT HAS ALREADY CONFIRMED THE QUANTUM ADDITION OF THE ASSESSEE BY HOLDING THAT THE PROVISIONS OF SE CTION 2(22)(E) OF THE INCOME TAX ACT IS APPLICABLE IN THIS CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS PERVERSE BOTH IN FACTS AND LAW. 3. THE APPELLANT CARVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. IT IS PRAYED THAT THE ORDER OF THE CIT(A) BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. FROM THE ABOVE GROUNDS, IT WOULD BE CLEAR THAT ONLY GRI EVANCE OF THE DEPARTMENT IN THESE APPEAL S RELATE TO THE DELETION OF PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4 . AT THE FIRST INSTA NCE WE WILL DEAL WITH THE APPEAL FOR THE ASSESSMENT YEAR 2003 - 04. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 27.11.2003 DECLARING A LOSS OF RS.6,69,330/ - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO FRAMED THE A SS ESSMENT AT AN INCOME OF RS.21,90 ,16,670/ - AND INITIATED THE PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE AO WHILE FRAMING THE ASSESSMENT NOTICED THAT ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 3 THE ASSESSEE HAD PROCURED A LOAN OF RS. 28,52,41,516/ - FROM ITS SISTER CONCERN M/S JETAIR PVT. LTD. WHO HAD ACCUMULATED PROFITS BEING RESERVES & SURPLUS AMOUNTING TO RS.21,95,21,000/ - , AS ON 31.03.2003. THE AO NOTED THAT THE ANNUAL RETURN OF M/S JETAIR PVT. LTD. RECEIVED FROM THE REGISTRAR OF COMPANY REVEALED THAT OUT OF THE TOTAL SHARE CAPITA L COMPRISING OF 2,9 8,800 SHARES, T HE ASSESSEE FIRM HELD 1,43,980/ - EQUITY SHARES THROUGH ITS PARTNERS SH. NARESH GOYAL AND SH. SURINDER GOYAL , THEREFORE, THE ASSESSEE FIRM WAS THE BENEFICIAL OWNER OF 48.18% SHARES HOLDING I.E. MORE THAN 10% OF THE VOTING POWER IN M/S JETAIR PVT. LTD. THE AO INVOKED THE PROVISION OF SECTION 2(22)(E) OF THE ACT AND TREATED THE AFORESAID LOAN TAKEN BY THE ASSESSEE FROM M/S JETAIR PVT. LTD. AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FIRM TO THE EXTENT OF ACCUMULATED PROFIT OF M/S JETAIR PVT. LTD. THE AO OBSERVED THAT SINCE 1,43,980 SHARES OF M/S JETAIR PVT. LTD. STOOD REGISTERED IN THE NAME OF THE ASSESSEE FIRM (THROUGH ITS PARTNERS) AS SUCH T HE ASSESSEE WAS THE REGISTERED OWNER OF SHARE. ACCORDINGLY, THE AO INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND TREATED THE LOAN TO THE EXTENT OF RS.21,95,21,000/ - AS DEEMED DIVIDEND AND ADDED THE SAME TO THE ASSESSEE S TOTAL INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES . ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 4 5 . BEING AGGRIEVED THE ASSESSEE CARRI ED THE MATTER TO THE LD. CI T(A) WHO VIDE ORDER DATED 11.09.2006 DELETED THE SAID ADDITION BY HOLDING THAT THE ASSESSEE FIRM WAS NOT A SHAREHOLDER AS PER LAW AND THEREFORE, THE LOAN RECEIVED BY IT FROM M/S JETAIR PVT. LTD. COULD NOT HAVE BEEN TREATED AS DEEMED DIVIDEND WITHIN THE MEA NING OF SECTION 2(22)(E) OF THE ACT. AGAINST THE SAID ORDER OF THE LD. CIT(A), THE DEPARTMENT FILED AN APPEAL BEFORE THE ITAT WHEREIN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION WAS CONFIRMED VIDE ORDER DATED 31.03.2009 BY HOLDING THAT THE ASSESSE E FIRM COULD NOT HAVE BEEN REGARDED AS A REGISTERED SHAREHOLDER. AGAINST THE ORDER OF THE ITAT, T HE DEPARTMENT FILED AN APPEAL BEFORE THE HON BLE HIGH COURT WHEREIN VIDE ORDER DATED 11.07.2011, THE ISSUE WAS DECIDED IN FAVOUR OF THE DEPARTMENT BY HOLDING THAT A PARTNERSHIP FIRM WAS ALLOWABLE TO BE TREATED AS SHAREHOLDER AND IT WAS NOT NECESSARY THAT IT HAS TO BE A REGISTERED SHAREHOLDER. CONSEQUENT UPON THE ORDER OF THE HON BLE JURISDICTIONAL HIGH COURT, THE ORIGINAL ASSESSMENT ORDER DATED 21.03.2006 PASSE D BY THE AO U/S 143(3) OF THE ACT WAS REVISED VIDE ORDER DATED 19.10.2011 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.21,90,16,670/ - AND THE PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE A CT WERE INITIATED. ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 5 6 . THE AO ISSUED A NOTICE TO THE ASSESSEE TO S HOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME SHOULD NOT BE IMPOSED. IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER: THUS AS PE R THE PROVISION OF SECTION 271(1 )(C) OF THE I.T. ACT, PENALTY CAN BE LEVIED WHEN ASSESSING OFFICE R IS SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. FURTHER, THE PROVISIONS, OF SECTION 273B OF THE I.T, ACT STATES THAT NO PENALTY SHALL BE IMPOSED ON THE ASSESSEE IF THERE WAS A REA SONABLE CAUSE FOR ANY FAILURE ON THE PART OF THE ASSESSEE. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING, HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD FULLY COOPERATED WITH THE INCOME TAX DEPARTMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. YOUR GOODSELF WILL ALSO APPRECIATE THAT THE HON'BLE ITAT, NEW DELHI WHICH THE HIGHEST FACT FINDING AUTHORITY HAD DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. IT IS WELL KNOWN THAT AN APPEAL IS ADMI TTED FOR HEARING BY THE HON'BLE DELHI HIGH COURT ONLY IF A SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN A MATTER. CONSIDERING THAT A SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THE ASSESSEE'S CASE, THE REVENUE FILED AN APPEAL BEFORE THE HON'BLE DELHI HIGH CO URT AND THE SAME WAS ADMITTED BY THE HON'BLE DELH I HIGH COURT....... THE HON'BLE DELHI HIGH COURT BY ALLOWING THE APPEAL OF THE REVENUE IN THE ASSESSEE'S CASE HAS ALSO ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 6 DEVIATED FROM ITS OWN J UD G MENT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANKITECH PVT . LTD . (I TA 462/2009) AND ALSO FROM JUDG MENT PRONOUNCED BY THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. C.P. SARATHY MUDALIAR [1972] 83 ITR 170. SINCE SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THE ASSESSEE'S CASE NO PENALT Y U/S 271(1 )(C) OF THE I. T. ACT CAN BE LEVIED ON THE ASSESSEE. IT IS ALSO SUBMITTED THAT WHERE TWO POSSIBLE VIEWS EXISTS, AS IN THE CASE OF THE ASSESSEE, MERE DIFFERENCE OF OPINION BETWEEN THE A.O. AND THE ASSESSEE INVOLVING SUBSTANTIAL QUESTION OF LAW CA NNOT ATTRACT PENALTY UNDER SECTION 271( 1 )(C) OF THE I. T. ACT.' THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS P.H.I. SEEDS INDIA LTD. REPORTED IN 159 TAXMAN 9 (DEL.) M/S NAYAN BUILDERS & DEVELOPERS PVT. LTD. VS ITO IN ITA NO. 2379/MUM/2009 I TO VS ROBORANT INVESTMENTS (P) LTD. REPORTED IN 7 SOT 181 (MUM) 2006) 7 . THE ASSESSEE VIDE LETTER DATED 16.02.2012 FURTHER SUBMITTED TO THE AO AS UNDER: HENCE, AGGRIEVED WITH THE HON'BLE DELHI HIGH COURT'S ORDER DATED 11.7.2011, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE HON'BLE SUPREME COURT AND CONSIDERING THE FACT THAT CONFLICTING JUDGEMENTS HAVE BEEN PASSED BY HIGH COURT ON THE ISSUE OF DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE I.T. ACT, THE HON'BLE SUPREME COURT HAS ADMITTED THAT ASSESSEE'S ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 7 APPEAL ALONGWITH THE APPEALS OF VARIOUS OTHER APPELLANTS FILED ON THE ISSUE OF INTERPRETATION OF THE PROVISIONS OF DEEMED DIVIDEND. SINCE A SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE ASSESSEE'S APPEAL, THE HON'BLE SUPREME COURT VIDE ORDER DATED 13.2.2012, HAS ALSO GRANTED STAY ON THE PENALTY AND INTEREST TILL THE PENDENCY OF THE ASSESSEE'S APPEAL BEFORE THE HON'BLE SUPREME COURT. IN VIEW OF ABOVE FACTS AND THE CASE LAWS RELIED UPON, IT IS CLEAR THAT NO PENALTY U/S 271(1 )(C) OF THE I.T. ACT CAN BE LEVIED ON TH E ASSESSEE. THUS, WE REQUEST YOUR GOODSELF TO KINDLY DROP THE PENALTY PROCEEDIN GS INITIATED UNDER SECTION 271(1 )(C) OF THE I.T. ACT OR SINCE THE HON'BLE SUPREME COURT HAS ADMITTED THE ASSESSEE'S APPEAL AND THE SAME IS PENDING BEFORE THE HON'BLE SUPREME COU RT, WE REQUEST YOUR GOODSELF TO KINDLY KEEP T HE PENALTY PROCEEDINGS U/S 271(1 )(C) OF T HE I.T. ACT I N ABEYANCE TILL THE PENDENCY OF THE ASSESSEE'S APPEAL BEFORE THE HON'BLE SUPREME COURT . 8 . HOWEVER, T HE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASS ESSEE AND HELD THAT THE ASSESSEE CONCEALED ITS TAXABLE INCOME BY OBSERVING AS UNDER: 6.2 IN THE INSTANT CASE, IT WAS THE A.O. WHO DETECTED THAT THE ASSESSEE HAD PROCURED A LOAN OF RS. 28,52,41,516 / - FROM ITS SISTER CONCERN M/S JETAIR PVT. LTD. WHICH HAD A CCUMULATED PROFIT, BEING RESERVES AND SURPLUS, AMOUNTING TO RS.21,95,21,000/ - AS ON 31.03.2003. THE A.O. CONDUCTED FURTHER ENQUIRES AND FOUND OUT THROUGH THE ANNUAL RETURN OF M/S JETAIR PVT. LTD. FILED WITH THE REGISTRAR OF COMPANIES THAT ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 8 THE ASSESSEE - FIR M WAS THE BENEFICIAL OWNER WITH A SHARE HOLDING OF MORE THAN 10% OF THE VOTING POWER IN M/S. JETAIR PVT. LTD., AND, THUS, ATTRACTED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT TREATING THE LOAN OF RS.21,95,21,000/ - GIVEN BY M/S JETAIR PVT. LTD. TO THE AS SESSEE FIRM AS DEEMED DIVIDEND, AND ADDED THE SAME TO THE ASSESSEE'S TOTAL INCOME. IT IS PALPABLY APPARENT THAT HAD THE RETURN OF INCOME FILED BY THE ASSESSEE NOT BEEN SELECTED FOR SCRUTINY, THE EVASION OF TAX WOULD HAVE GONE UNDETECTED LEADING TO THE ACCR UAL OF UNDUE TAX BENEFITS TO IT.. THE ABOVE CONCEALED FACT HAS BEEN UNEARTHED BY THE A.O. THROUGH INQUIRY FROM REGISTRAR OF COMPANIES. THE ASSESSEE HAS NOT FURNISHED THESE INFORMATIONS SUO MOTO IN COURSE OF ASSESSMENT PROCEEDINGS. HENCE, IT IS OBVIOUS THAT THE ASSESSEE HAS WILLFULLY CONCEALED PARTICULARS OF INCOME AND HAS NOTHING TENABLE TO O FFER BY WAY OF AN EXPLANATION U NDER THE ACT, PENALTY UNDER SECTION 271( 1 )(C) IS LEVIABLE FOR CONCEALING THE INCOME. THE INSTANT CASE FALLS SQUARELY WITHIN THE AMBIT OF SECTION 271( 1 )(C) OF THE ACT AS THE ASSESSEE HAS CONCEALED ITS TAXABLE INCOME. 9 . HE FURTHER OBSERVED THAT AS PER THE PROVISIONS CONTAINED IN EXPLANATION TO SECTION 271(1)(C) OF THE ACT, T HE ONUS TO ESTABLISH THAT EXPLANATION OFFERED WAS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF INCOME HAVE BEEN DISCLOSED WAS ON THE ASSESSEE AND IF HE FAILS TO DISCHARGE THAT BURDEN, THE PRESUMPTION THAT HE HAD CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF WAS AVAILAB LE TO BE DRAWN. THE AO WAS OF THE VIEW THAT THE ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 9 PRESUMPTION WOULD NOT STAND REBUTTED MERELY BY FURNISHING ANY GENERAL OR ROUTINE EXPLANATION BY THE ASSESSEE, THE EXPLANATION SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL. HE ALSO OBSERVED THAT IN A CASE W HERE THERE HAS BEEN AN OMISSION, THE DEPARTMENT CANNOT IGNORE THE MATERIAL COLLECTED AT THE ASSESSMENT STAGE AND IT IS NO LONGER NECESSARY THAT THE DEPARTMENT MUST GO FURTHER AND ESTABLISH THAT THERE WAS A CONSCIOUS CONCEALMENT OF PARTICULARS OF INCOME OR A DELIBERATE FAILURE TO FURNISH IN ACCURATE PARTICULARS. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS ANWAR ALI 76 ITR 696 (SC) B.A. BALASUBRAMANIAN & BROS. CO. VS CIT 236 ITR 977 (SC) CIT VS INDIAN METALS & FERRO ALLOYS LTD. (1994) 117 CTR 37 8 (ORI.) ADDL. CIT VS JEEVAN LAL SHAH 205 ITR 244 (SC) CIT VS OFFICIAL RECEIVER OF THE COURT (1993) 203 ITR 233 (CAL.) SANGAM ENTERPRISES VS CIT (2007) 288 ITR 396 CIT VS DRAPCO ELECTRIC CORPORATION 106 ITR 359 (GUJ.) ZOOM COMMUNICATION (P) LTD. 327 ITR 51 0 (DEL.) THE AO LEVIED THE PENALTY OF RS.8,06,73,968/ - U/S 271(1)(C) OF THE ACT AND HELD THAT THE ASSESSEE HAD CONCEALED THE INCOME TO THE EXTENT OF RS.21,95,21,000/ - . ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 10 10 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED TH AT THE ASSESSEE IS A PARTNERSHIP FIRM AND IS A BENEFICIAL OWNER OF 48.19% SHARES OF M/S JETAIR PVT. LTD. AND THAT THE SHARE S OF THE ASSESSEE FIRM WERE BEING HELD IN THE NAME OF ITS TWO PARTNERS NAMELY, SH. NARESH GOYAL (44.58%) AND SH. SURINDER GOYAL (3.61 %). IT WAS FURTHER SUBMITTED THAT THE PROFITS OF THE ASSESSEE FIRM ARE SHARED BY THE THREE PARTNERS IN THE FOLLOWING PROPORTION: SAME OF THE FIRM NAME OF PARTNERS PROFIT SHARING RATIO NATIONAL TRAVEL SERVICE (PARTNERSHIP FIRM) MR. NARESH GOYAL MR . SURINDER GOYAL JET ENTERPRISES PVT. LTD. 35% 15% 50% 11 . IT WAS FURTHER STATED THAT MR. NARESH GOYAL WAS A REGISTERED SHAREHOLDER OF M/S JETAIR PVT. LTD. BUT NOT THE BENEFICIAL OWNER OF MORE THAN 10% OF THE VOTING POWER, SINCE HE WAS HOLDING 1,33,180 SHARES BENEFICIALLY NOT FOR HIMSELF BUT FOR THE ASSESSEE. THEREFORE, THE BENEFICIAL OWNERSHIP OF 44.58% OF THE SHARES VESTS NOT WITH MR. NARESH GOYAL BUT WITH THE ASSESSEE FIRM. HENCE, MR. NARESH GOYAL WA S UNDOUBTEDLY A REGISTERED SHAREHOLDER BUT HE WA S N OT A PERSON WHO WA S THE BENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN 10% OF THE VOTING POWERS. ON THE OTHER HAND, THE ASSESSEE FIRM WA S THE BENEFICIAL HOLDER OF NOT LESS THAN 10% OF THE VOTING POWER BUT IT WA S NOT REGISTERED SHAREHOLDER OF M/S JETAIR P VT. LTD. THUS, ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 11 THE ASSESSEE FIRM WA S A BENEFICIAL OWNER OF THE SHARES BUT IT WA S NOT A REGISTERED SHAREHOLDER OF M/S JETAIR PVT. LTD. IT WAS FURTHER STATED THAT THE DEFINITION OF THE TERM DIVIDEND IN SECTION 2(22) OF THE ACT EXPAND S ITS ORDINARY MEANING TO PAYMENTS WH ICH ARE NOT DIVIDEND AS COMMONLY UNDERSTOOD AND BY THE EXPLANATION THE DEFINITION OF DIVIDEND HAS GIVEN AN ARTIFICIAL AND EXTENDED MEANING WHICH INCLUDES ITEMS AND CATEGORIES OF RECEIPTS WHICH MAY NOT BE OTHERWISE INCLUDED THERE. IT WAS FURTH ER STATED THAT AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, THERE MUST BE AN ADVANCE OF LOAN TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES NOT BEING SHARE ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIG HT TO PARTICIPATE IN PROFITS HOLDING NOT LESS THAN 10% OF THE VOTING POWER. IT WAS STATED THAT FOR THE APPLICABILITY OF SECTION 2(22)(E) OF THE ACT, THE SHAREHOLDER HAS TO BE BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER BUT THE ASSESSEE WAS UN DOUBTEDLY A BENEFICIAL HOLDER OF NOT LE SS THAN 10% OF THE VOTING POWER, H OWEVER, IT WAS NOT A REGISTERED SHAREHOLDER OF M/S JETAIR PVT. LTD. AND THUS, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE ON THE ASSESSEE FIRM. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS MARTIN BURN LTD. 136 ITR 805 CIT VS C.P. SARATHY MUDALIAR 83 ITR 170 ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 12 RAMESHWARLAL SANWARMAL VS CIT 122 ITR 1 (SC) HARISH CHAND GOLECHA VS CIT 132 ITR 30 (RAJ.) ACIT VS BHAUMIK COLOUR PVT. LTD. 313 ITR 146 12 . IT W AS FURTHER SUBMITTED THAT THE HON BLE DELHI HIGH COURT VIDE ORDER DATED 11.07.2011 HAS HELD THAT THE OUTCOME OF THE APPEALS BY THE REVENUE DEPENDS ON THE FOLLOWING QUESTION OF LAW: ( 1 ) TO ATTRACT THE FIRST LIMB OF SECTION 2(22)(E) OF THE ACT, IS IT NECESS ARY THAT THE PERSON WHO HAS RECEIVED THE ADVANCE OR LOAN IS A SHAREHOLDER AND ALSO BENEFICIAL OWNER. TO PUT IT OTHERWISE, WHETHER BOTH THE CONDITIONS ARE REQUIRED TO BE SATISFIED WILL DEPEND UPON THE INTERPRETATION TO BE GIVEN TO THE WORDS 'BEING A PER SON WHO IS A BENEFICIAL OWNER OF SHARES...' (2) WHETHE R THE ASSESSEE WHO IS A PARTNER SHIP FIRM CAN BE TREATED AS 'SHAREHOLDER' BECAUSE OF THE REASON THAT IT HAS PURCHASED THE SHARES IN THE NAMES OF THE TWO PARTNERS. 1 3 . IT WAS CONTENDED THAT A S REGARDS TO T HE 1 ST QUESTION OF LAW, THE HON BLE DELHI HIGH COURT HELD THAT TO ATTRACT THE PROVISION OF SECTION 2(22)(E) OF THE ACT, THE PERSON TO WHOM THE LOAN OR ADVANCE WAS MADE TO BE A SHAREHOLDER AS WELL AS THE BENEFICIAL OWNER AND THAT THE HON BLE DELHI HIGH COUR T RELIED UPON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS C.P. SARATHY MUDALIAR AND RAMESHWARLAL SANWARMAL VS CIT ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 13 WHEREIN IT HAS BEEN HELD THAT THE WORD SHAREHOLDER REFERS TO THE REGISTERED SHAREHOLDER AND NOT JUST TO THE BENEFICIAL S HAREHOLDER. IT WAS FURTHER STATED THAT AS REGARDS TO THE SECOND QUESTION OF LAW, THE HON BLE DELHI HIGH COURT HELD THAT FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT, PARTNERSHIP FIRM IS TO BE TREATED AS THE SHAREHOLDER AND IT IS NOT NECESSARY THAT IT HAS TO BE A REGISTERED SHAREHOLDER. IT WAS STATED THAT THE HOB BLE DELHI HIGH COURT IN THE CASE OF CIT VS ANKITECH PVT. LTD. (340 ITR 14) HAS HELD THAT THE LOAN GIVEN TO A COMPANY WHICH IS NOT A SHAREHOLDER CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND THAT THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT RELATES ONLY TO DIVIDEND AND NOT TO SHAREHOLDER AND IT IS THE DEFINITION OF DIVIDEND WHICH IS ENLARGED BY THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT, NOT THE DEFINITION OF S HAREHOLDER . IT WAS FURTHER STATED THAT THE HON BLE HIGH COURT ALSO OBSERVED THAT IF THE INTENTION OF THE LEGISLATURE WAS TO TAX THE LOAN OR ADVANCE AS DEEMED DIVIDEND AT THE HANDS OF THE DEEMING SHAREHOLDER, THE LEGISLATURE WOULD HAVE INSERTED DEEMING PROV ISION IN RESPECT OF SHAREHOLDER AS WELL, BUT THAT HAS NOT HAPPENED AND THAT THE DEEMING PROVISION OF SECTION 2(22)(E) OF THE ACT RELATES ONLY TO DIVIDEND AND NOT TO THE DEEMING SHAREHOLDER, AS PER THE JUDGMENT BY THE HON BLE HIGH COURT IN THE CASE OF CIT V S ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 14 ANITECH PVT. LTD. (SUPRA). IT WAS SUBMITTED THAT THE ASSESSEE FILED THE SLP AGAINST THE JUDGMENT OF THE HON BLE DELHI HIGH COURT FOR THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 AND BY CONSIDERING THE APPLICABILITY OF SECTION 2(22)(E) OF THE ACT IN ASSESSEE S CASE INVOLVING SUBSTANTIAL QUESTION OF LAW WHEREIN TWO LEGAL OPINION S EXIST AND THAT THE CONFLICTING JUDGMENTS HAD ALREADY BEEN PASSED ON THIS ISSUE BY THE SAME BENCH OF THE HON BLE DELHI HIGH COURT, THE HOB BLE SUPREME CO URT VIDE ORDER DATED 13.02.2012. IT WAS FURTHER SUBMITTED THAT THE HON BLE SUPREME COURT NOT ONLY ADMITTED THE APPEALS OF THE ASSESSEE BUT ALSO GRANTED A STAY ON INCOME TAX DEMAND AS FAR AS INTEREST AND PENALTY WA S CONCERNED. THEREFORE, THE PENALTY U/S 271(1)(C) OF THE ACT WAS TOTALLY UNW ARRANTED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS P.H.I. SEEDS INDIA LTD. 301 ITR 13 (DEL.) M/S NAYAN BUILDERS & DEVELOPERS PVT. LTD. VS ITO IN ITA NO. 2379/MUM/2009 ITO VS ROBORANT INVESTMENTS (P) LTD. REPORTED IN 7 SOT 181 (MUM) (2006) CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (2010) (SC) DILIP N. SHROFF VS JCIT 291 ITR 519 (2007) (SC) DCIT VS INTEGRATED MASTER SECURITIES (P.) LTD. IN ITA NO. 2645/DEL/2012 CIT VS M/S ADONIS ELECTRONICS PVT. LTD. (2013) TIOL - 147 - HC - MUM - IT ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 15 14 . THE SUBMISSIONS OF THE ASSESSEE IN RESPONSE TO THE CONTENTION OF TH E AO FOR LEVYING THE PENALTY HAVE BEEN INCORPORATED BY THE LD. CIT(A) AT PAGE NOS. 35 TO 42 OF THE IMPUGNED ORDER WHICH ARE REPRODUCED VERBATIM AS UNDER: P OINT - WISE REPLY IN THE SAME SERIA TIM AS ABOVE TO THE CONTENTIONS PUT FORTH BY THE A.O. FOR JUSTIFY ING LEVYING OF PENALTY U/S 271(1 )(C) OF THE I , T. ACT ARE AS FOLLOWS: - A. IN THE CASE OF SMT. MRUDULABEN B. PATEL VS. ACIT, THE HON'BLE ITAT HAS GIVEN A RATIONALE FOR INTRODUCING OF THE PROV ISI ONS OF SECTION 2(22)(E) OF THE I. T. ACT BY STATING THAT VARIOUS COMPANIES INSTEAD OF DISTRIBUTING THEIR ACCUMULATED PROFITS AS DIVIDEND AMONGST THE SHAREHOLDERS INDULGED IN ADVANCING LOANS TO THE SHAREHOLDERS SO AS TO AVOID TAXATION OF DIVIDEND IN HANDS OF SHAREHOLDERS. THE HON'BLE ITAT ALSO DISCUSSED THE CORRECT / PROPER PROCEDURE FOR INITIATION OF PENALTY PROCE EDINGS U/S 271(1)(C) OF THE I. T. ACT AND RELYING ON THE VARIOUS JUDGEMENTS HELD THAT PENALTY PROCEEDINGS SHOULD BE INITIATED BY THE A.O. BEFORE THE COMPLETION OF ASSESSMENT, IN THIS REGARD, IT IS SUBMITTED THAT THE PURPOSE / RATIONALE FOR INTRODUCING OF THE PROVISI ONS OF SECTION 2(22)(E) OF THE I. T. ACT HAS NEVER BEEN CHALLENGED BY THE APPELLA NT AT ANY STAGE. FURTHER, AS REG ARD TO THE CORRECT PROC EDURE OF INITIATION OF PENALTY PROCEEDINGS, IT IS SUBMITTED THAT IT WAS NEVER THE CONTENTION OF THE APPELLANT THAT PROPER PROCEDURE FOR INITIATION OF PENALTY HAS NOT BEEN FOLLOWED IN THE CASE OF APPELLANT AND SO, PENALTY LEVIED ON THE APPELLANT SHOULD BE D ROPPED ON TECHNICAL GROUND. ACCORDING TO THE APPELLANT, THE APPELLANT HAS NEITHER ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 16 CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND THIS ISSUE OF DEEMED DIVIDEND INVOLVES SUBSTANTIAL QUESTION OF LAW WHEREIN TWO LEG AL OP INIONS EXIST. EVEN THE A.O. HAS MERELY REPRODUCED THIS JUDGEMENT AND HAS NOWHERE IN HIS PENALTY ORDER EXPLAINED AS TO HOW THE SAID JUDGEMENT SUPPORTS THE CASE OF THE A.O. OF LEVYING OF PENALTY ON THE APPELLANT. HENCE, MERE REPRODUCTION OF THIS JUDGEMENT D OES NOT JUSTIFY LEVYING OF PENALTY ON THE APPELLANT. B. IN THIS REGARD, IT IS SUBMITTED THAT AS ALREADY EXPLAINED IN DETAIL ABOVE, THE APPELLANT HAS SUO MOTO DISCLOSED IN SCHEDULE 7 - LONG TERM INVESTMENTS OF THE AUDITED FINANCIAL STATEMENTS OF THE RELEVA NT ASSESSMENT YEAR THAT IT HOLDS 1,43,980 EQUITY SHARES OF JAPL. MOREOVER, THE FACT THAT APPELLANT HAS RECEIVE D LOAN AMOUNTING TO RS. 28,52,41 ,516/ - DURING THE RELEVANT ASSESSMENT YEAR FROM JAPL HAS ALSO BEEN SPECIFICALLY DISCLOSED IN ANNEXURE N OF THE TAX AUDIT REPORT OF THE RELEVANT ASSESSMENT YEAR (COPY OF THE AUDITED FINANCIAL STATEMENTS AND TAX AUDIT REPORT FOR THE RELEVANT ASSESSMENT YEAR IS ATTACHED AS ANNEXURE G). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE THEN A.O. VIDE QUESTIONNAIRE DATED 18 .07.2005 DIRECTED THE APPELLANT TO FURNISH SHAREHOLDING PATTERN OF THE APPELLANT AND ITS PARTNERS IN PRIVATE LIMITED COMPANIES AND THE APPELLANT I N DUE COMPLIANCE TO THE THEN A.O. 'S DIRECTION, FURNISHED THE RELEVANT DETAILS VIDE SUBMISSION DATED 26.08.2005 . THE SAID FACTS HAVE ALSO ADMITTED BY THE THEN A.O. IN HIS ASSESSMENT ORDER DATED 21.03.2006. THE SAME IS ALSO REPRODUCED ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 17 BELOW FOR YOUR HONOUR'S READY REFERENCE (PAGE 2, PARA 2 & 2.1): - '2.THE AUDIT REPORT FILED BY THE ASSESSEE ALONGWITH ITS RETURN OF IN COME SHOWED THAT DURING THE RELEVANT YEAR, THE ASSESSEE HAD TAKEN LOANS TOTALING TO RS. 28,52,41,516/ - FROM M/S JETAIR PVT. LTD. (PAN - AAACJ0121C), JETAIR HOUSE, 13, COMMUNITY CENTRE, YUSUF SARAI, NEW DELHI. THE ASSESSEE, VIDE QUESTIONNAIRE DATED 18.07.2005 , WAS DIRECTED TO FURNISH THE DETAILS OF SHAREHOLDING OF THE FIRM OR ITS PARTNERS IN SUCH PRIVATE LIMITED COMPANIES. 2.1 THE ASSESSEE VIDE ITS REPLY DATED 26.08 .2005, FURNISHED THE RELEVANT DETAILS, WHICH ARE REPRODUCED HEREUNDER:' THEREAFTER, AGAIN DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE THEN A. O. DIRECTED THE APPELLANT TO FURNISH THE COPY OF RETURN OF INCOME OF JAPL OF A. Y. 2003 - 04 WITH ALL ITS ENCLOSURES AND THE APPELLANT IN DUE COMPLIANCE TO THE THEN A.O.'S DIRECTION, FURNISH ED THE COPY OF RETURN ALONGWITH COMPUTATION & AUDITED FINANCIAL STATEMENT OF JAPL OF THE RELEVANT ASSESSMENT YEAR VIDE SUBMISSION DATED 23.11.2005. IT IS PERTINENT TO MENTION HERE THAT THE APPELLANT IN ITS SUBMISSION DATED 23.11.2005 AGAIN SUBMITTED THE SHAREHOLDING PATTERN OF THE FIRM AND ITS PARTNERS IN PRIVATE LIMITED COMPANIES WHEREIN IT WAS CLEARLY MENTIONED THAT THE APPELLANT IS THE BENEFICIAL OWNER OF 48.19% SHARES OF JAPL THROUGH ITS TWO PARTNERS AND MR. NARESH GOYAL (AS PARTNER OF NATIONAL T RAVEL SERVICE) HOLDS 44.58% IN JAPL AND MR. SURINDER GOYAL ( AS PARTNER OF NATIONAL TRAVEL SERVICE) HOLDS 3.61% ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 18 IN JAPL. IT IS ON THE BASIS OF DETAILS / DOCUMENTS FILED BY THE APPELLANT THAT THE THEN A.O. BECAME AWARE THAT DURING THE RELEVANT ASSESSMENT YEA R, JAPL HAD ACCUMULATED PROFITS OF RS. 21,95,21,000 / - AND THE APPELLANT FIRM WAS T HE BENEFICIAL OWNER OF SHARE HOL DIN G S NOT LESS THAN 10% OF VOTING POWER IN JAPL. ALL THESE ABOVE - MENTIONED FACTS HAVE ALSO BEEN ADMITTED BY THE THEN A.O. IN PARA 2.2 OF THE A SSESSMENT ORDER AND THE SAME IS REPRODUCED BELOW FOR YOUR HONOUR'S READY REFERENCE: - '2.2 VIDE ORDER SHEET ENTRY DATED 29.8.2005, THE ASSESSEE WAS DIRECTED TO FURNISH COPY OF THE RETURN OF INCOME WITH ALL ENCLOSURES OF M/S JETAIR PVT. LTD. INSPITE OF BEIN G SPECIFICALLY ASKED TO FURNISH THE RELEVANT RETURN OF INCOME OF M/S JETAIR PVT. LTD., THE ASSESSEE KEPT ON TAKING REPEATED ADJOURNMENTS VIDE LETTER DATED 22.9.2005, 20.10.2005, 7.11.2005 AND 18.11.2005. THE ASSESSEE FURNISHED THE RELEVANT COPY OF RETURN A FTER A GAP OF ALMOST THREE MONTHS ON 23.11. 2005. ON PERUSAL OF THE RETURN OF INCOME OF M/S JETAIR PVT. LTD. FOR AY 2003 - 04 IT WAS NOTED THAT DURING THE RELEVANT YEAR THE COMPANY HAD ACCUMULATED PROFITS BEING RESERVE & SURPLUS AMOUNTING TO RS. 21,95,2 1,000 / - AS ON 31.3. 2003. IT WAS ALSO ADMITTED BY THE ASSESSEE VIDE THE SAME LETTER DATED 23.11.2005 THAT DURING THE YEAR THE ASSESSEE HAD ACCEPTED LOAN AMOUNTING TO RS. 28,52,41,516/ - FROM M/S JETAIR PVT. LTD.' THEREAFTER AS PER ASSESSMENT ORDER DATED 21.03.200 6, THE THEN A.O. ISSUED A NOTICE U/S 133(6) ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 19 OF THE I.T. ACT ON 30.11.2005 TO THE REGISTRAR OF COMPANIES (ROC) FOR OBTAINING CERTAIN INFORMATION AND ON 02.12.2005, THE ROC PR OVIDED A CERTIFIED COPY OF THE ANNUAL RETURN OF JAPL FOR THE RELEVANT ASSESSMENT YE AR. FROM THE DETAILS FURNISHED BY THE ROC IN T HE FORM OF COPY OF THE ANNUAL RETURN OF JAPL, THE THEN A.O. AGAIN CAME TO THE SAME CONCLUSION THAT THE APPELLANT FIRM WAS THE BENEFICIAL OWNER OF SHARE HOLDING NOT LESS THAN 10% OF VOTING POWER IN JAPL. MOREOVE R, IT IS NOWHERE ALLEGED BY THE THEN A.O. IN HIS ENTIRE ASSESSMENT ORDER THAT THE DETAILS / DOCUMENTS PROVIDED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE INCORRECT, INACCURATE OR FALSE. IN VIEW OF THE ABOVE FACTS, THE A.O. IS ABSOLU TELY WRONG IN STATING THAT IT WAS THE THEN A.O. WHO DETECTED THAT THE APPELLANT HAD PROCURED A LOAN FROM JAPL SINCE THE SAID FACT WAS ALREADY DISCLOSED IN THE TAR OF THE RELEVANT ASSESSMENT YEAR. FURTHER, IT WAS AFTER FURNISHING OF ALL THE RELEVANT DETAILS /DOCUMENTS BY THE APPELLANT, THE THEN A.O. HAD ISS UED A NOTICE U/S 133(6) OF THE I .T. ACT ON 30.11.2005 TO THE ROC AND SO, THE A.O. IS TOTALLY INCORRECT IN STATING THAT IT IS THROUGH THE ANNUAL RETURN OF JAPL FILED BY THE ROC THAT THE THEN A.O. BECAME AWA RE THAT THE APPELLANT FIRM WAS THE BENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN 10% OF THE VOTING POWER IN JAPL. SINCE ALL THE REQUIRED INFORMATION WAS ALREADY PROVIDED BY THE APPELLANT TO THE THEN A.O., THE NOTICE U/S 133(6) OF THE I. T. ACT DATED 30.1 1.2005 TO THE ROC WAS PROBABLY ISSUED IN ORDER TO VERIFY THE CORRECTNESS OF THE DETAILS PROVIDED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. MOREOVER, IT IS NOWHERE ALLEGED BY THE THEN A.O. IN ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 20 HIS ENTIRE ASSESSMENT ORDER THAT THE DETAIL / DOCUMENTS PROVIDED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE INCORRECT, INACCURATE OR FALSE ON THE BASIS OF INDEPENDENT ENQUIRES MADE BY THE THEN A.O. HENCE, THE ALLEGATION OF THE A.O. THAT THE APPELLANT FIRM HAS NOT SUO - MOTO FURNI SHED THE INFORMATION IN THE COURSE OF ASSESSMENT PROCEEDINGS & HAS WILLFULLY CONCEALED THE PARTICULARS OF INCOME IS ABSOLUTELY WRONG, FALSE, INACCURATE AND BASELESS AND A DESPERATE ATTEMPT ON THE PART OF THE A.O. TO JUSTIFY LEVYING OF PENALTY ON THE APPELL ANT FIRM. ON THE CONTRARY, ALL THE RELEVANT DETAIL / DOCUMENTS / INFORMATION HAVE ALREADY BEEN PROVIDED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, MUCH BEFORE THE NOTICE U/S 133(6) OF THE I . T. ACT DATED 30.11.2005 WAS EVEN ISSUED BY THE THEN A.O. TO THE ROC AND ALL THESE FACTS ARE ALSO DISCLOSED BY THE THEN A.O. IN HIS ASSESSMENT ORDER. AS REGARD THE JUDGEMENT OF HON'BLE ORISSA HIGH COURT IN THE CASE OF CIT VS. INDIAN METALS & FERRO ALLOYS LTD., IT IS SUBMITTED THAT THE SAID CASE J USTIFI ES LEVYING OF PENALTY IF ANY INACCURACY IS MADE IN BOOKS OF ACCOUNT WHICH RESULTS IN HIDING OF INCOME. AS EXPLAINED IN DETAIL ABOVE, THE APPELLANT HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD PROVID ED ALL THE DOCUMENTS I DETAILS / INFORMATION CALLED FOR BY THE THEN A.O. AND THEREFORE, THE AFORESAID JUDGEMENT IS NOT APPLICABLE IN THE APPELLANT'S CASE. FURTHER, AS REGARD THE EXPLANATION 1 TO SECTION 271 REPRODUCED BY THE A.O. WHICH IS AN AUTOMATIC WAY OF IMPOSING PENALTY, IT IS SUBMITTED THAT THE SAID ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 21 EXPLANATION DOES NOT APPLY IN CASE OF APPELLANT SINCE EVERY POSSIBLE EXPLANATION HAS BEEN PROVIDED AND IT HAS NO WHERE BEEN PROVED THAT THE EXPLANATION IS FALSE AND EVERY EXPLANATION HAS ALSO BEEN SUBSTAN TIATED. THEREFORE, THE A.O. IS COMPLETELY UNJUSTIFIED IN LEVYING PENALTY U/S 271( 1 )(C) BASED ON EXPLANATION 1 TO SECTION 271 OF THE I.T. ACT. IN VIEW OF THE ABOVE, IT IS APPARENTLY CLEAR THAT THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDING, HAS N EITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND HAD PROVIDED ALL THE DOCUMENTS / DETAILS I INFORMATION CALLED FOR BY THE THEN A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, PENALTY U/S 271( 1 )(C) O F THE I.T. ACT CANNOT BE LEVIED IN THE APPELLANT'S CASE. C. IN THIS REGARD, IT IS SUBMITTED THAT THE APPE LLANT ALSO AGREES WITH THE A.O. 'S CONTENTION THAT ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO SEPARATE AND INDEPENDENT PROCEEDINGS. F URTHER, THE APPELLANT ALSO AGREES TO THE FACT THAT PRESENCE OF MENS - REA IS NOT REQUIRED TO BE ESTAB LISHED TO LEVY PENALTY U/S 271(1 )(C) OF THE I.T. ACT. IN FACT, THE APPELLANT HAS NOWHERE CONTENTED THAT PENALTY SHOULD NOT BE LEVIED SINCE PRESENCE OF MENS - R EA HAS NOT BEEN ESTABLISHED BY THE THEN A.O. MO REOVER, IN THE JUDGEMENT OF HON 'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT . LTD., IT HAS BEEN CLARIFIED THAT ALTHOUGH MENS - REA IS NOT AN ESSENTIAL CONDITION FOR LEVYING PENALTY U/ S 271(1 )(C) OF T HE I.T. ACT, NO ERROR WAS FOUND WITH THE MEANING OF 'CONCEAL' AND 'INACCURATE' GIVEN BY THE APEX COURT IN THE JUDGEMENT GIVEN IN CASE OF DILIP N. SHROFF. THE ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 22 RELEVANT PORTION OF THE JUDGEMENT GIVEN IN CASE OF RELIANCE PETROPRODUCTS PVT . LTD . IS REPRODUCED BELOW FOR YOUR HONOUR'S READY REFERENCE: - 'THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN TH AT THE CONDITIONS UNDER S. 271(1 )(C) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE T HAT IS THE ONLY DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. IN DILIP N. SHROFF VS. JT. CIT & ANR. (2007) 210 CTR (SC) 228 : (2007) 6 SCC 329, THIS COUR T EXPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THAT IN ORDER TO AT TRACT THE PENALTY UNDER S. 271(1)(C), MENS - REA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INACCURATE' SIGNI FIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CL. (III ) OF S. 271(1) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHORITY, IN AS MUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREOF. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THAT FURNISHIN G OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER HELD THAT THE ASSESSEE MUST BE FOUND TO HAVE FAILED TO PROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 23 HELD THAT THE EXPLANATION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE COURT ULTIMAT ELY WENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ESSENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFF VS. JT. CIT & ANR. (SUPRA) WAS UPSET. IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), AFTER QUOTIN G FROM S. 271 EXTENSIVE LY AND ALSO CONSIDERING S. 271(1 )(C), THE COURT CAME TO THE CONCLUSION THAT SINCE S. 271( 1 )(C) INDICATED THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING RETURN, TH ERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND ENACTMENT OF S. 271(1 )(C) R/W EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SUCH A PENALTY WAS A CIVIL LIABILITY AND, T HEREFORE, WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER S. 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFF VS. JT. CIT & ANR. (CITED SUPRA) WAS OVERRULED BY : THIS COURT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), WAS THAT ACCORDING TO THIS COURT THE EFFECT A ND DIFFERENCE BETWEEN S. 271(1 )(C) AND S. 276C OF THE ACT WAS LOST SIGHT OF IN CAS E OF DILIP N. SHROFF VS. JT. CIT & ANR, (CITED SUPRA). HOWEVER, IT MUST BE POINTED OUT THAT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (CITED SUPRA), NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DILIP N. SHROFF VS. JT. CIT & ANR. (CITED SUPRA), WHERE THE COURT EXPLA INED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMATE INFERENCE IN ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 24 DILIP N. SHROFF VS. JT. CIT & ANR. (CITED SUPRA) TO THE EFFECT THAT MENS REA WAS AN ESSENTIAL INGREDIEN T FOR THE PENALTY UNDER S. 271(1 )( C) THAT THE DECISION IN DILIP N. SHROFF VS. JT. CIT & AN R. (CITED SUPRA) WAS OVERRULED. ' HENCE, IN VIEW OF THE MEANING OF 'CONCEAL' AN D 'INACCURATE' GIVEN BY THE HON 'BLE SUPREME COURT IN CASE OF DILIP N. SHROFF MENTIONED ABOVE, THE APPELLANT HAS NEITHER C ONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME. THE APPELLANT HAS SUO - MOTO MADE ALL THE RELEVANT DISCLOSURES IN THE AUDITED FINANCIAL STATEMENTS & TAR AND HAD ALSO PROVIDE D ALL THE DOCUMENTS / DETAILS / INFORMATION CALLED FOR BY THE THEN A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. D. IN THE CASE OF CIT VS. DRAPCO ELECTRIC CORPORATION, THE HON'BLE GUJARAT HIGH COURT HELD THAT EVERY ASSESSEE IS BOUND TO COMPLY WITH PROVISIONS OF LAW AND TO KNOW CONSEQUENCES OF NON - COM PLIANCES. THE HON'BLE COURT FURTHER HELD THAT IF BY GROSS NEGLIGENCE, THE ASSESSEE BRINGS ABOUT A SITUATION WHERE THERE IS AVOIDANCE OR EVASION OF TAX, IT COULD BE DEEMED THAT THE ASSESSEE IS GUILTY OF CONSCIOUS CONCEALMENT. IN THIS REGARD, IT IS SUBMITTED THAT THE APPELLANT HAS NOT IGNORED ANY PROVISIONS OF LAW ON ACCOUNT OF GROSS NEGLIGENCE. THE APPELLANT ADOPTED THE PLAIN LITERAL INTERPRETATION OF PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT AND ACTED IN COMPLIANCE WITH PROVISIONS OF LAW. THE CONTENTIO N OF THE APPELLANT HAS ALSO BEEN SUPPORTED B Y VARIOUS JUDGEMENTS OF THE HON'BLE SUPREME COURT, HIGH COURTS, IT AT. FURTHERMORE, THE HON'BLE DELHI HIGH ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 25 COURT IN THE CASE OF APPELLANT HAS ITSELF ADMITTED THAT THE LITERAL INTERPRETATION OF PROVISIONS OF SECTIO N 2(22) (E) OF THE I . T. ACT GOES IN FAVOUR OF APPELLANT. HOWEVER, SINCE THE HON'BLE COURT WAS OF THE OP INION THAT LITERAL MEANING AS ADOPTED BY THE APPELLANT WOULD PRODUCE UNJUST RESULTS WHICH ACCORDING TO THE COURT, HAVE NOT BEEN INTEN DED BY THE LEGISLATUR E, THE HON 'BLE COURT MODIFIED THE LANGUAGE OF SECTION 2(22)(E) OF THE I.T. ACT BY ENLARGING ITS SCOPE AND HELD THAT FOR THE PURPOSE OF SECTION 2(22)(E) OF THE I.T. ACT, PARTNERSHIP FIRM IS TO BE TREATED AS THE SHAREHOLDER EVEN IF IT IS NOT A REGISTERED SHA REHOLDER. THUS, IT IS CRYSTAL CLEAR THAT THE SAID JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IS IN NO WAY APPLICABLE TO THE CASE OF APPELLANT. E. IN THE CASE OF ZOOM COMMUNICATIONS (P) LTD., THE HON'BLE DELHI HIGH COURT HELD THAT IF THE ASSESSEE MAKES A CL AIM WHICH IS NOT ONLY INCORRECT IN LAW BUT IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKING SUCH CLAIM IS FOUND TO BE NOT BONAFIDE, HE WOULD BE LIABLE TO PENALTY : U/S 271(1)(C) OF THE I. T. ACT. IN THIS REGARD, IT IS SUBMITTE D THAT FIRSTLY, THE APPELLANT HAS NOT MADE ANY CLAIM WHICH IS APPARENTLY INCORRECT IN LAW. SECONDLY, THE CONTENTION OF THE APPELLANT AS REGARD TO NON - APPLICABILITY OF PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT IN THE APPELLANT'S CASE IS ALSO NOT WITHOU T ANY BASIS OR EXPLANATION. FINALLY, ALL THE EXPLANATIONS OR CONTENTIONS PUT FORTH BY THE APPELLANT WERE NOT ONLY BONAFIDE BUT THE SAME WERE SUPPORTED BY VARIOUS JUDGEMENTS OF THE HON'BLE 'SUPREME COURT, HIGH COUR TS AND ITAT. MOREOVER, THE HON 'BLE HIGH COU RT IN THE CASE OF APPELLANT HAS ITSELF ADMITTED THAT THE LITERAL INTERPRETATION OF ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 26 PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT GOES IN FAVOUR OF APPELLANT. HENCE, IT CANNOT BE SAID THAT THE APPELLANT HAS MADE A CLAIM WHICH IS INCORRECT IN LAW AND WITHOU T ANY BASIS AND EXPLANATION. THEREFORE, THE AFORESAID JUDGEMENT IS NOT APPLICABLE IN THE APPELLANT'S CASE. CONSIDERING THE FACTS & CIRCUMSTANCES OF THE CASE, THE LAW AND VARIOUS JUDGEMENTS CITED ABOVE, IT IS CRYSTAL CLEAR THAT NO PENALTY U/S 271(1 )(C) OF THE I.T. ACT CAN BE LEVIED ON THE APPELLANT. HENCE, WE REQUEST YOUR HONOUR TO KINDLY DELETE THE PENALTY IMPOSED ON THE APPELLANT U/S 27 1 ( 1 )(C) OF THE I.T. ACT AND OBLIGE' 15 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE PEN ALTY BY OBSERVING IN PARA 5 OF THE IMPUGNED ORDER AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDERS, THE PENALTY ORDERS AND. THE SUBMISSIONS FILED BY THE APPELLANT FOR ALL THE THREE ASSESSMENT YEARS. I HAVE ALSO CAREFULLY CONSIDERED THE ARGUM ENTS ELOQUENTLY AND FORCEFULLY PUT FORTH BY THE ID. AR OF THE APPELLANT FIRM. I HAVE ALSO CAREFULLY PERUSED THE JUDICIAL PRONOUNCEMENTS QUOTED BY THE ID. AR IN FAVOUR OF HIS CLIENT. I AM OF THE CONSIDERED OPINION THAT THERE IS CONSIDERABLE MERIT IN THE ARG UMENTS PUT FORTH BY THE ID. AR THAT THIS IS NOT A FIT CASE FOR THE IMPOSITION OF PENALTY U/S. 271(1 )(C) OF THE ACT AS THE DISALLOWANCES HAVE BEEN MADE BY THE ID. AO ON LEGAL GROUNDS UNDER A DEEMING PROVISION. THERE IS MERIT IN THE ARGUMENT THAT IT IS A CAS E OF DIFFERENCE OF OPINION BETWEEN THE APPELLANT AND THE AO WITH REGARDS TO LEGAL INTERPRETATION OF THE STATUTE. IT IS APPRECIATED THAT IN ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 27 ALL THE THREE YEARS, THE APPELLANT HAD SUCCEEDED AT THE LEVEL OF HON'BLE ITAT, WHICH IS THE LAST FACT FINDING AUTHORI TY. IT IS ALSO APPRECIATED THAT HAD IT NOT BEEN A QUESTION OF INTERPRETATION OF LAW, THE MATTER WOULD NOT HAVE PROCEEDED TO THE LEVEL OF HON'BLE HIGH COURT. FURTHER, IT IS ALSO APPRECIATED THAT HON'BLE DELHI HIGH COURT HAD UPHELD THE DECISION OF HON'BLE IT AT, MUMBAI SPECIAL BENCH IN THE CASE OF BHAUMIK COLOR PVT. LTD. (SUPRA), IN ITS JUDGMENT IN THE CASE OF ANKITECH PVT. LTD. (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAD HELD THAT '...WE HAVE TO KEEP IN MIND THAT THIS LEGAL PROVISION RELATES TO 'DIVIDEND'. TH US, BY A DEEMING PROVISION, IT IS THE DEFINITION OF DIVIDEND WHICH IS ENLARGED. LEGAL FICTION DOES NOT EXTEND TO 'SHAREHOLDER'. ...THE FICTION HAS TO STOP HERE AND IS NOT TO BE EXTENDED FURTHER FOR BROADENING THE CONCEPT OF SHAREHOLDERS BY WAY OF LEGAL FIC TION.' THUS, THE HON'BLE DELHI HIGH COURT HELD THAT SHAREHOLDER U/S. 2(22)(E) MEANT BOTH A 'REGISTERED' AS WELL AS 'BENEFICIAL' SHAREHOLDER. IT IS APPRECIATED THAT IN ITS LATER JUDGMENT IN THE CASE OF THE APPELLANT FIRM, HON 'BLE DELHI HIGH COURT HAS DILUTE D ITS EARLIER STRICT INTERPRETATION OF SECTION 2(22)(E) MADE IN THE CASE OF AN KITECH PVT. LTD. (SUPRA) AND HAS ENLIGHTENED US FURTHER BY MAKING AN INTERPRETATION OF SECTION 2(22)(E) IN THE LIGHT OF LEGISLATIVE INTENT AND THEREBY HOLDING THAT THE APPELLANT FIRM, BEING 'BENEFICIAL OWNER' OF SHARES, WAS ALSO HIT BY THE DEEMING PROVISION OF SECTION 2(22)(E) OF THE ACT. IT IS ALSO NOTEWORTHY, THAT HON'BLE SUPREME COURT OF INDIA, ACKNOWLED GING THAT A QUESTION OF INTERPRETATION OF LAW WAS INVOLVED IN THIS PARTICUL AR CASE, HAS NOT ONLY ADMITTED THE SLP FILED BY THE APPELLANT FIRM, BUT, HAS ALSO IN ITS WISDOM, GRANTED A STAY ON COLLECTION OF PENALTY AND INTEREST FROM THE APPELLANT FIRM. ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 28 THEREFORE, IN THE LIGHT OF THE ABOVE MENTIONED FACTS AND CIRCUMSTANCES OF THE CAS E, I AM OF THE CONSIDER ED OPINION THAT THE QUESTION INVOLVED WAS CONTROVERSIAL, TO SAY THE LEAST, WHERE TWO DIFFERENT OPINIONS WERE POSSIBLE ON THE BASIS OF DIVERGENT INTERPRETATION OF STATUTE. UNDER THESE CIRCUMSTANCES, IT IS CLEAR THAT THIS IS NOT A FIT CASE FOR INVOKING THE PENAL PROVISIONS OF SECTION 271(1 )(C) OF THE ACT AND THEREFORE, THE ACTION OF THE AO IN IMPOSING PENALTY ON THE APPELLANT FIRM U/S. 271(1 )(C) WAS MISCONCEIVED. I HEREBY DELETE THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) RS.8,06,73,968 / - (FOR A.Y. 2003 - 04), OF RS.70,99,310/ - (FOR A.Y. 2005 - 06) AND OF RS.12,30,610/ - (FOR A.Y. 2006 - 07). REST OF THE GROUNDS OF APPEAL TAKEN BY THE APPELLANT FIRM ARE OF CONSEQUENTIAL NATURE AND DO NOT REQUIRE SPECIFIC ADJUDICATION. 16 . NOW THE DEPARTMENT I S IN APPEAL. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE, IT IS IMMATERIAL WHETHER THE ASSESSEE HAD CONCEALED INCOME OR FILED INACCURATE PARTICULARS OF INCO ME BECAUSE BOTH SI TUATIONS LEAD TO SAME CONCLUSION I.E. IMPROPER DETERMINATION OF INCOME OR EVASION OF TAX AND THAT THE PENALTY U/S 271(1)(C) OF THE ACT IS CIVIL LIABILITY. THEREFORE, MENS REA IS NOT REQUIRED TO IMPOSE PENALTY. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: UNION OF INDIA VS DHARAMENDRA TEXTILE PROCESSORS ( 2008 ) 306 ITR 277 (SC) GULRAJ INDUSTRIES LTD. VS CTO 293 ITR 584 (SC) ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 29 17 . IT WAS FURTHER SUBMITTED BY THE LD. DR THAT WHEN IT HAD BEEN HELD BY THE HON BLE SUPREME COURT THAT MENS REA IS NOT APPLICABL E IN PROCEEDINGS RELATING TO FISCAL STATUTES THEN WHETHER IT IS CONCEALMENT OF INCOME OR F ILING OF INACCURATE PARTICULARS OF INCOME, HOW DOES IT MATTER AND THAT IF A TECHNICALITY PREVENTS DISCUSSION ON MERIT, SHOULD THE TECHNICALLY IS ALLOWED TO PREVAIL. I T WAS FURTHER SUBMITTED THAT THE ITAT MUMBAI BENCH C IN THE CASE OF CLESTRA LIFE SCIENCES (P) LTD. (2016) 75 TAXMANN.COM 112 HELD THAT DISALLOWANCE IN COMPUTING TOTAL INCOME U/S 92C(4) OF THE ACT, WOULD REPRESENT INCOME IN RESPECT OF WHICH PARTICULARS HA VE BEEN CONCEALED OR INACCURATE PARTICULARS HAVE BEEN FURNISHED. AS THE ITAT MUMBAI BENCH C HAD USED BOTH THE WORDS, CONCEALED INCOME OR INACCURATE PARTICULARS OF INCOME, THEREFORE, THESE TWO WORDS ARE THE TWO SIDES OF THE SAME COIN AND RELIEF SHOULD NOT BE ALLOWED U/S 271(1)(C) OF THE ACT, EVEN IF THESE WORDS HAD NOT BEEN USED JUDICIOUSLY BY THE AO WHILE INITIATING PROCEEDINGS OR WHILE PASSING ORDER U/S 271(1)(C) OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE P ENALTY ON THE BASIS THAT IT HAD BEEN IMPOSED ON LEGAL GROUNDS UNDER DEEMING PROVISION. IT WAS STATED THAT EVEN IF THE SECTION 68 OF THE ACT IS ALSO A DEEMING PROVISION, THE PENALTY U/S 271(1)(C) OF THE ACT IN VIEW OF ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 30 INFRINGEMENT COMMITTED BY THE ASSESSEE U/S 68 OF THE ACT IS LEVIABLE. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CHUHARMAL VS CIT 172 ITR 250 (SC) CIT VS ABOO MOHMED 160 CTR 128 (KAR.) UNION OF INDIA VS DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) GULJAG INDUSTRIES LTD. VS CTO 293 I TR 584 (SC) 18 . IT WAS FURTHER SUBMITTED THAT AS ON DATE THE HON BLE HIGH COURT HAS HELD THAT THE ASSESSEE IS HIT BY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND THE ORDER DATED 11.07.2011 OF THE ITAT HAD BEEN REVERSED. THEREFORE, WHETHER AN ISSUE IS DEBATABLE OR NOT, HARDLY MATTERS AS FAR AS IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT IS CONCERNED BECAUSE THE PENALTY UNDER FISCAL STATUTE IS FOR BREACH OF CIVIL LIABILITY, IT MEANS WHENEVER THERE IS A BREACH OF SOME PROVISIONS OF FISCAL STATUTES, PE NALTY COMES AUTOMATICALLY WHETHER THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND WHETHER THE ISSUE IS DEBATABLE OR NOT. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: N.G. TECHNOLOGIES (IN LIQUIDATION) VS CIT (20 16) 70 TAXMANN.COM 37 (SC) HOTEL STEELWELL (P) LTD. VS DCIT, CIRCLE - 12(1), NEW DELHI (2016) 75 TAXMANN.COM 171 (DEL. - TRIB.) 19 . IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 31 AND FUR THER SUBMITTED THAT THE ORDER PASSED BY THE AO U/S 271(1)(C) OF THE ACT IS BARRED BY LIMITATION BECAUSE THE ORDER WAS REQUIRED TO BE PASSED WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER PASSED BY THE ITAT WAS RECEIVED. IT WAS FURTHER STATE D THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED VIDE ASSESSMENT ORDER DATED 21.03.2006 U/S 143(3) OF THE ACT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME (A REFERENCE WAS MADE TO PARA 2.9 OF THE ASSESSMENT ORDER AT PAGE NO. 30 ) WHEREAS THE PENALTY WAS LEVIED VIDE ORDER DATED 23.03.2012 U/S 271(1)(C) OF THE ACT FOR CONCEALMENT OF INCOME (A REFERENCE WAS MADE TO PARA 7 OF THE PENALTY ORDER DATED 23.03.2012 ). IT WAS STATED THAT THE SATISFACTION OF THE AO AT THE TIME OF INITIATION I N THE COURSE OF THE ASSESSMENT PROCEEDINGS IS THE VITAL AND KEY STAGE WHERE THE AO HAS TO SPECIFY WHETHER PENALTY IS TO BE INITIATED EITHER FOR CONCEAL ING THE PARTICULARS OF THE INCOME OR FURNISHING THE INACCURATE PARTICULARS OF INCOME . IT WAS FURTHER STAT ED THAT THE AFORESAID TWO CHARGES FOR INITIATING THE PENALTY U/S 271(1)(C) OF THE ACT OPERATE ON TWO DIFFERENT FOOTING S AND THAT UNDER THE PENAL PROVISION, THE CHARGE HAS TO BE VERY SPECIFIC AND NOT VAGUE, THESE CHARGES ARE NOT TO BE RECKONED AS ANY CASUAL REMARK , WHICH C AN BE IN TERCHANGED BY THE AO AT ANY STAG E ON HIS WHIMS AND FANCIES. IT WAS SUBMITTED THAT THE NOTICE ISSUED ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 32 BY THE AO U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT DID NOT SPECIFY ON THE BASIS OF WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED. IN OTHER WORDS, IT WAS NOT CLEAR AS TO WHETHER IT WAS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, THE PENALTY U/S 271(1)(C) OF THE ACT WAS LIABLE TO BE QUASHED. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS M/S SSAS EMERALD MEADOWS IN ITA NO. 380 OF 2015 (KAR. HC) CIT VS M/S SSAS EMERALD MEADOWS, SLP (CIVIL) 23272 OF 2016 CIT & ANR. VS MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 5 65 (KAR. HC) IDEAL UNEMPLOYED ENGINEERS CO - OPERATIVE SOCIETY LTD. VS DCIT (2016) 47 CCH 219 (KOL. TRIB.) 20 . IT WAS FURTHER SUBMITTED THAT THE AFORESAID ERROR IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT WAS NOT RECTIFIABLE AND IT VITIATED THE ENTIRE INITIATION ITSELF AND THAT EVEN THE PROVISIONS OF SECTIONS 292/292BB OF THE ACT CANNOT CURE THE DEFECT IN THE PENALTY NOTICE. THE RELIANCE WAS PLACED ON THE DECISIONS OF THE ITAT MUMBAI BENCHES IN THE FOLLOWING CASE S : ACIT VS DIPESH M PANJWANI & AN R. IN ITA NOS. 6330, 5878, 6328, 6188/MUM/2012 ORDER DATED 18.03.2016 ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 33 DR. SARITA MILIND DAVARE & ANR. VS ACIT IN ITA NO. 2187/MUM/2014 ORDER DATED 21.12.2016 21 . IT WAS STATED THAT THE ADDITION S MADE BY THE AO WERE DELETED BY THE LD. CIT(A) WHOSE ORDER WA S UPHELD BY THE ITAT. HOWEVER, ON APPEAL OF THE DEPARTMENT, THE HON BLE DELHI HIGH COURT DECIDED THE ISSUE AGAINST THE ASSESSEE BY FRAMING THE QUESTION OF LAW AND ADDITIONS MADE BY THE AO WERE CONFIRMED. IT WAS FURTHER STATED THAT ONCE THE APPEAL IS ADMITT ED BY THE HON BLE HIGH COURT OR THE HON BLE SUPREME COURT, IT CAN BE SAID THAT THE GROUNDS ON WHICH ADDITIONS HAVE BEEN MADE ARE DEBATABLE WHEREIN TWO DIFFERENT VIEWS ARE POSSIBLE AND NO PENALTY U/S 271(1)(C) OF THE ACT CAN BE LEVIED IN SUCH CASES. THE REL IANCE WAS PLACED ON THE FOLLOWING CASE LAWS: CIT VS LIQUID INVESTMENT TRADING CO., IN ITA NO. 240/2009 (DEL)(HC) ORDER DATED 05.10.2010 CIT VS NAYAN BUILDERS AND DEVELOPERS (2015) 231 TAXMAN 665 (MUM) (HC) 2 2 . IT WAS SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAS NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND SUO - MOTO DISCLOSED IN SCHEDULE 7 OF THE AUDITED FINANCIAL STATEMENT THAT 1,43,980 EQUITY SHARES OF M/S JETAIR PVT. LTD. WE RE HELD AS LONG TERM INVESTMENT AND MOREOVER, THIS FACT THAT ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 34 THE ASSESSEE HAD RECEIVED LOAN AMOUNTING TO RS. 29,89,51,031 / - DURING THE RELEVANT YEAR FROM M/S JETAIR PVT. LTD. HAD ALSO BEEN SPECIFICALLY DISCLOSED IN ANNEXURE M OF THE TAX AUDIT REPORT OF THE RELEVANT ASSESSMENT YEAR. IT WAS FURTHER STATED THAT IN A CASE WHERE ADDITION HAS BEEN MADE THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT AUTOMATIC AND THAT THE EXPLANATION 1 TO SECTION 271 OF THE ACT , WHICH SETS A WAY OF IMPOSING PENALTY, DOES NOT A PPLY TO THE ASSESSEE S CASE SINCE EVERY POSSIBLE EXPLANATION HAS BEEN PROVIDED AND IT H AS NO WHERE BEEN PROVED THAT THE EXPLANATION WAS FALSE. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT LEVIED BY THE AO. THE RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158. 23 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE AO MADE THE ADDITION OF RS.21,95,21,000/ - BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT TO THE EXTENT OF RESERVES & SURPLUS OF M/S JETAIR PVT. LTD. , BY CONSIDERING THE SAME TO B E ACCUMULATED PROFITS AND THE ASSESSEE BEING BENEFICIAL OWNER OF 48.18% SHARES WHICH WERE DULY REGISTERED IN THE NAMES OF THE PARTNERS OF THE ASSESSEE FIRM WHO HAD ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 35 RECEIVED RS.28,52,41,516/ - AS LOAN AND ADVANCES FROM M/S JETAIR PVT. LTD. THE SAID ADDITION WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 11.09.2006 DELETED THE ADDITION. THE SAID ORDER OF THE LD. CIT(A) WAS CHALLENGED BY THE DEPARTMENT BEFORE THE ITAT WHEREIN THE VIEW TAKEN BY THE LD. CIT(A) WAS AFFIRMED BY PASSING TH E ORDER DATED 31.03.2009. AGAINST THE SAID ORDER, THE DEPARTMENT PREFERRED AN APPEAL TO THE HON BLE JURISDICTIONAL HIGH COURT WHEREIN VIDE ORDER DATED 11.07.2011, THE ORDER OF THE ITAT WAS REVERSED AND THE ADDITION MADE BY THE AO WAS RESTORED. ON THAT BASI S, THE AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. IT IS WELL SETTLED THAT THE PENALTY U/S 271(1)(C) OF THE ACT MAY BE LEVIED, IF IT IS FOUND THAT THE ASSESSEE CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IN O THER WORDS, THE PROVISIONS ENVISAGED BY THE LEGISLATURE U/S 271(1)(C) OF THE ACT H AS TWO LIMBS , BOTH THE LIMBS ARE INDEPENDENT TO EACH OTHER AND ANY ONE OF THE INGREDIENTS MAY BE THE CAUSE FOR IMPOSITION OF THE PENALTY U/S 271(1)(C) OF THE ACT , IN ONE LIMB , THE CONCEALMENT MAY EXIST WHEREAS IN ANOTHER THERE MAY BE FURNISHING OF INACCURATE PARTICULARS OF INCOME. THESE TWO LIMBS ARE TWO SEPARATE CAUSE S OF ACTION AND ARE USED IN DIS JUNCTI VE TERM FOR THE PURPOSES OF LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT. IN ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 36 THE PRESENT CASE, THE AO INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT VIDE ASSESSMENT ORDER DATED 21.03.2006 ON THE GROUND THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME , WHICH IS EVIDENT FROM PAGE 13 OF THE SAID ORDER W HEREIN THE AO MENTIONED AS UNDER: THEREFORE, ALL THE CONDITIONS LISTED ABOVE ARE FULLY SATISFIED IN THE CASE OF THE ASSESSEE FIRM AND THUS, THE LOAN GIVEN BY M/S JETAIR PVT. LTD. TO THE ASSESSEE, TO THE EXTENT OF THE ACCUMULATED PROFITS AMOUNTING TO RS.21 ,95,21,000/ - IS TREATED AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE. THEREFORE, THE AMOUNT OF RS.21,95,21,000/ - IS HEREBY ADDED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . SINCE I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME, PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED SEPARATELY. (EMPHASIS SUPPLIED) 24 . FROM THE ABOVE NOTINGS, IT IS CRYSTAL CLEAR THAT THE AO INVOKED THE PROVISIONS O F SECTION 271(1)(C) OF THE ACT ON THE BASIS THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. HOWEVER, THE PENALTY WAS LEVIED U/S 271(1)(C) OF THE ACT VIDE ORDER DATED 23.03.2012 ON ACCOUNT OF WILLFUL CONCEALMENT OF INCOME WHICH IS EVIDENT FROM PARA 7 OF THE AFORESAID ORDER DATED 23.03.2012 WHICH READ AS UNDER: 7. THUS, IN VIEW OF ABOVE FACTS, I AM SATISFIED THAT THE ASSESSEE HAD WILLFULLY CONCEALED THE INCOME TO THE EXTENT OF RS.21,95,21,000/ - AS DISCUSSED ABOVE. ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 37 THEREFORE, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE I IMPOSE A PENALTY OF RS.8 , 06,73,968/ - UNDER SECTION 271(1)(C) OF THE ACT, WHICH IS MINIMUM IMPOSABLE PENALTY, BEING 100% OF THE TAX SOUGHT TO BE EVADED. 25 . FROM THE AFORESAID DISCUSSION, IT IS CLEAR THAT THE PEN ALTY PROCEEDINGS IN THE PRESENT CASE WERE INTIATED BY THE AO ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME WHILE THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED FOR CONCEALMENT OF INCOME. 26 . ON A SIMILAR ISSUE, THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANRS. VS MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 (SUPRA) HELD AS UNDER: CHAPTER XXI OF THE INCOME - TAX ACT, 1961, ENACTS PROVISIONS FOR THE LEVY, IMPOSITION AND COLLECTION OF PENALTY. THE GENERAL PRINCIPLES RELATING TO PENALTY OR CONCEALMENT OF INCOME ARE: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY ; (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES; (C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGRE DIENT FOR ATTRACTING CIVIL LIABILITY; (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271; (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDE R OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY; (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 38 FACTS SET OUT IN EXPLANATION 1(A) AND (B) SHOULD BE DISCERNIBLE F ROM THE ORDER WHICH WOULD BY LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. IT HAS FURTHER BEEN HELD AS UNDER: TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. 27 . IN THE P RESENT CASE ALSO , AS WE HAVE ALREADY POINTED OUT IN THE FORMER PART OF THIS ORDER THAT THE AO INITIATED THE PENALTY PROCEEDINGS ON ONE LIMB I.E. FURNISHING OF INACCURATE PARTICULARS OF INCOME AND LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT ON THE OTHER LIM B I.E. CONCEALMENT OF INCOME. THEREFORE, THE PENALTY ORDER DATED 23.03.2012 OF THE AO FOR LEVYING THE PENALTY U/S 271(1)(C) OF THE ACT IS BAD IN LAW. 28 . SIMILARLY, THE HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS LAKHDHIR LALJI (1972) 85 ITR 77 HELD A S UNDER: THAT THE PENALTY PROCEEDINGS HAD BEEN COMMENCED AGAINST THE ASSESSEE ON A PARTICULAR FOOTING, VIZ., CONCEALMENT OF PARTICULARS OF INCOME, BUT THE FINAL CONCLUSION FOR LEVYING THE PENALTY WAS BASED ON A DIFFERENT FOOTING ALTOGETHER, VIZ., ON THE F OOTING OF FURNISHING INACCURATE PARTICULARS OF INCOME. UNDER THE CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE ASSESSEE HAD BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE THE ORDER IMPOSING THE PENALTY WAS PASSED. THE VERY BASIS FOR THE PENALTY ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 39 P ROCEEDINGS AGAINST THE ASSESSEE INITIATED BY THE INCOME - TAX OFFICER DISAPPEARED WHEN THE APPELLATE ASSISTANT COMMISSIONER HELD THAT THERE WAS NO SUPPRESSION OF INCOME BY THE ASSESSEE. THE CONCLUSION OF THE TRIBUNAL THAT THE INSPECTING ASSISTANT COMMISSIONE R HAD NO JURISDICTION TO IMPOSE A PENALTY UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME WAS CORRECT. 29 . IN THE PRESENT CASE ALSO AS WE HAVE ALREADY POINTED OUT THAT THE AO INITIATED THE PENALTY PROCEEDINGS ON A PARTICULAR FOOTING VIZ., FURNISHING OF INACCURATE PARTICULARS OF INCOME BUT THE FINAL CONCLUSION FOR LEVYING THE PENALTY WAS BASED ON DIFFERENT FOOTING ALTOGETHER VIZ., ON CONCEALMENT OF INCOME. THEREFORE, THE VERY BASIS FOR INITIATING THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE BY THE AO D ISAPPEAR ED WHEN THE PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED ON DIFFERENT FOOTING. IN THAT VIEW OF THE MATTER, WE ARE OF THE CONFIRMED VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THE PENALTY U/S 271(1)(C) OF THE ACT LEVIED BY THE AO . 30. MOREOVER, IN THI S CASE THE LD. CIT(A) DELETED THE ADDITIONS MADE BY THE AO. THE SAID VIEW WAS CONFIRMED BY THE ITAT. HOWEVER, THE HON BLE JURISDICTIONAL HIGH COURT REVERSED THE VIEW TAKEN BY THE LD. CIT(A) WHICH WAS AFFIRMED BY THE ITAT AND RESTORED THE ADDITION MADE BY T HE AO. AGAINST THE SAID ORDER DATED 11.07.2011 OF THE HON BLE ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 40 JURISDICTIONAL HIGH COURT, THE ASSESSEE PREFERRED SLP BEFORE THE HON BLE SUPREME COURT WHEREIN VIDE ORDER DATED 13.02.2012 (COPY OF WHICH IS PLACED AT PAGE NOS. 219 & 220 OF THE ASSESSEE S PAPER BOOK), T HE SPECIAL LEAVE WAS GRANTED AND PENALTY OR INTEREST WAS STAYED. THE SAID FACT CLEARLY SHOWS THAT THE ISSUE WAS HIGHLY DEBATABLE SINCE BOTH CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE ADDITIONS MADE BY THE AO BUT THE HON BLE JURISDICTIONAL HIGH COURT NOT ONLY ADMITTED THE APPEAL OF THE DEPARTMENT BUT ALSO FRAMED THE QUESTION S OF LAW ON THE ISSUES WHICH WERE DECIDED AGAINST THE ASS ESSEE AND THE ADDITION MADE WAS CONFIRMED. THEREAFTER, THE HON BLE JURISDICTIONAL HIGH COURT ADMITTED THE SLP AGAINST THE ORDER OF THE HON BLE SUPREME COURT WHICH SHOWS THAT THE GROUNDS ON WHICH ADDITIONS HAD BEEN MADE ARE DEBATABLE WHEREIN TWO DIFFERENT VIEWS ARE POSSIBLE. 31 . ON A SIMILAR ISSUE THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS LIQUID INVEST MENT & TRADING CO. (SUPRA) HELD AS UNDER: BOTH THE CIT(A) AS WELL AS THE ITAT HAVE SET ASIDE THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT THE ISSUE OF DEDUCTION UNDER SECTION 14A OF TH E ACT WAS A DEBATABLE ISSUE. WE MAY ALSO NOTE THAT AGAINST THE QUANTUM ASSES SMENT WHERE UNDER DEDUCTION UND ER SECTION 14A OF THE ACT WAS ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 41 PRESCRIBED TO THE ASSESSEE, THE ASSESSEE HAS PREFERRED AN APPEAL IN THIS COURT UNDER SECTION 260A OF THE ACT WHICH HAS ALSO BEEN ADMITTED AND SUBSTANTIAL QUESTION OF LAW FRAMED. THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. 32 . SIMILARLY, THE ITAT MUMBAI BENCHES B , MUMBAI IN THE CASE OF M/S NAYAN BUILDERS & DEVELOPERS PVT. LTD. VS ITO, WARD - 7(1)(1), MUMBAI IN ITA NO. 2379/MUM/2009 FOR THE ASSESSMENT YEAR 1997 - 98 VIDE ORDER DATED 18.03.2011 HELD AS UNDER: 3. IT IS, THEREFORE, ABUNDANTLY CLEAR THAT THE ADDITIONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HON'BLE BOMBAY HIGH COURT LEADING TO SUB STANTIAL QUESTION OF LAW. WHEN THE HIGH COURT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, IT BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT BE LEVIED U/S 271(1)(C) AS HAS BEEN HELD IN SEVERAL CASES IN CLUDING RUPAM MERCANTILE VS. DCIT [(2004) 91 1TD 237 (AHD) (TM)] AND SMT. RAMILA RATILAL SHAH VS. ACIT [(1998) 60 TTJ (AHD) 171]. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HON'BLE HIGH COURT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN CLA IMING DEDUCTION. ONCE IT TURNS OUT THAT THE CLAIM OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LAW AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD TO THE IMPOSITION OF PENALTY. SINCE THE ADDITIONS, IN RESPECT OF WHICH PENALTY HAS BEEN UPHELD IN THE PRESENT PROCEEDINGS, HAVE BEEN HELD BY THE HON'BLE HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION OF LAW, IN OUR CONSIDERED OPINION, THE PENALTY IS NO T EXIGIBLE ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 42 UNDER THIS SECTION. WE, THEREFORE, ORDER FOR THE DELETION OF PENALTY. 33 . THE AFORE SAID ORDER DATED 18.03.2011 WAS A SUBJECT MATTER OF THE DEPARTMENTAL APPEAL IN ITA NO.415/2012 BEFORE THE HON BLE BOMBAY HIGH C OURT WHEREIN VIDE ORDER DATED 0 8.07.2014 (COPY IS PLACED ON RECORD) , THE ISSUE WAS DECIDED AGAINST THE DEPARTMENT BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW AROSE IN THE APPEAL AND THEIR LORDSHIPS HELD AS UNDER: 1. HAVING HEARD MR AHUJA, LEARNED COUNSEL APPEARING ON BEHALF OF THE A PPELLANT, WE FIND THAT THIS APPEAL CANNOT BE ENTERTAINED A S IT DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. THE IMPOSITION OF PENALTY WAS FOUND NOT TO BE JUSTIFIED AND THE APPEAL WAS ALLOWED. AS A PROOF THAT THE PENALTY WAS DEBATABLE AND ARGUABLE ISSUE, THE TRIBUNAL REFERRED TO THE ORDER ON ASSESSEE S APPEAL IN QUANTUM PROCEEDINGS AND THE SUBSTANTIAL QUESTIONS OF LAW WHICH HAVE BEEN FRAMED THEREIN. WE HAVE ALSO PERUSED THAT ORDER DATED 27 TH SEPTEMBER 2010 ADMITTING INCOME TAX APPEAL NO. 2368 OF 2009. IN OUR VIEW, THERE WAS NO CASE MADE OUT FOR IMPOSITION OF PENALTY AND THE SAME WAS RIGHTLY SET ASIDE. THE APPEAL RAISES NO SUBSTANTIAL QUESTION OF LAW, IT IS DISMISSED. NO COSTS. 34 . IN THE PRESENT CASE ALSO AS WE HAVE ALREADY POINTED OUT THAT THE ADDITION S ON THE BASIS OF WHICH THE PENALTY WAS LEVIED BY THE AO U/S 271(1)(C) OF THE ACT WAS DELETED BY THE LD. CIT(A) AND THE ITAT UPHELD THE ORDER OF THE LD. CIT(A). THEREAFTER, THE DEPARTMENT PREFERRED AN APPEAL BEFORE THE HON BLE DELHI HIGH COURT WHEREIN THE APPEAL WAS ADMITTED AND ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 43 A SUBSTANTIAL QUESTION OF LAW WAS FRAMED WHICH WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT. AGAINST THE SAID ORDER OF THE HON BLE JURISDICTIONAL HIGH COURT , THE ASSESSEE FILED SLP WHICH WAS ADMITTED BY THE HON B LE SUPREME COURT VIDE ORDER DATED 13.02.2012, COPY OF WHICH IS PLACED AT PAGE NOS. 219 & 22 0 OF THE ASSESSEE PAPER BOOK WHICH IS REPRODUCED VERBATIM AS UNDER: LEAVE GRANTED. PENDING APPEAL, THERE SHALL BE STAY AS FAR AS PENALTY OR INTEREST IS CONCERNED. 3 5 . IN THE PRESENT CASE , IT IS CLEAR THAT THE ISSUE RELATING TO THE ADDITIONS ON THE BASIS OF WHICH THE IMPUGNED PENALTY WAS LEVIED BY THE AO IS HIGHLY DEBATABLE. 36. ON A SIMILAR ISSUE THE HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HARSHVARD HAN CHEMICALS AND MINERAL LTD. (2003) 259 ITR 212 HELD AS UNDER: THAT NO PENALTY WAS LEVIABLE IN VIEW OF THE FINDING OF THE TRIBUNAL THAT WHEN THE ASSESSEE HAD CLAIMED DEDUCTION OF AN AMOUNT THAT WAS DEBATABLE IT COULD NOT BE SAID THAT THE ASSESSEE HAD CO NCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS FOR EVASION OF TAX, AND, IN VIEW OF THE FINDINGS OF THE TRIBUNAL, NO CASE WAS MADE OUT FOR INTERFERENCE. 37. IN THE PRESENT CASE ALSO THE ISSUE RELATING TO THE ADDITIONS ON THE BASIS OF WHICH THE PEN ALTY U/S 271(1)(C) OF THE ACT WAS ITA NOS. 1605, 1610 & 1611 /DEL /201 4 NATIONAL TRAVEL SERVICE 44 LEVIED BY THE ACT WAS DEBATABLE. THEREFORE, THE PENALTY U/S 271(1)(C) OF THE ACT WAS NOT EXIGIBLE. IN THAT VIEW OF THE MATTER AND BY CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE , WE ARE OF THE VIEW THAT T HE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 38 . THE FACTS INVOLVED IN ANOTHER ASSESSMENT YEAR S UNDER CONSIDERATION I.E. ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 ARE IDENTICAL TO THE FACTS INVOLVED IN TH E ASSESSMENT YEAR 2003 - 04. THEREFORE, OUR FINDINGS GIVEN IN RESPECT OF ITA NO. 1605/DEL/2014 IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR ITA NOS. 1601 & 1611/DEL/2014. 39 . IN THE RESULT, APPEAL S OF THE DEPARTMENT ARE DISMISSED . ( ORD ER PRON OUNCED IN THE COURT ON 08 /0 8 /2017 ) SD/ - SD/ - (BEENA A. PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DAT ED: 08 /08 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR