Ajit Ramchandra Jadhav, V. Assistant Commissioner of Income-tax,

ITA 2104/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0958 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings; Revised return
• Section: 143(3); 133A; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KED IA , AM ITA NO. 2104 /PN/201 3 ASSESSMENT YEAR : 200 3 - 04 SHRI AJIT RAMCHANDRA JADHAV, PLOT NO.68, ANAND NAGAR, NANDED 431 602. PAN : AFRPJ2707H . APPELLANT VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 3, NANDED. . RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI RAJESH DAMOR / DATE OF HEARING : 10 .0 9 .2015 / DATE OF PRONOUNCEMENT: 30 . 1 0.2015 / ORDER PER SUSHMA CHOWLA, JM : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), AURANGABAD DATED 21.11.2013 RELATING TO ASSESSMENT YEAR 200 3 - 04 AGAINST PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT , 1961. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS), AURANGABAD HAS ERRED IN FACTS AND ON LAW IN INITIATING AND LEVYING FRESH PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ON DIFFERENTIAL AMOUNT ARISING FROM ORIGINAL RETURN FILED U/S 139 AND AGAI NST THE REVISED RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.1,24,56,810/ - . THE PENALTY AMOUNTING TO RS.39,23,895/ - MAY BE DELETED. 2 ITA NO. 2104 /PN/201 3 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD HAS ERRED IN FACT S AND ON LAW IN TREATING THE INCOME DECLARED IN REVISED RETURN AS CONCEALED INCOME INSPITE OF THE FACT THAT THE LEARNED ASSESSING OFFICER HAS ACCEPTED THE REVISED RETURN FILED AFTER SURVEY. THE PENALTY INITIATED AND LEVIED AMOUNTING TO RS.39,23,895/ - MAY BE DELETED. 3. SUCH OTHER ORDERS BE PASSED AS MAY BE DEEMED FIT AND PROPER. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER VARY AND/OR WITHDRAW ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE INITIATI O N AND LEVY OF FRESH PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY THE CIT(A). 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME ON 18.12.2003 DECLARING TOTAL INCOME OF RS.82,842/ - . THE SAID RETURN OF INCOME W AS PROCESSED UNDER SECTION 143(1) OF THE ACT. SURVEY ACTION UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE AND DECLARATION OF ADDITIONAL INCOME OF RS.1.75 CRORES WAS MADE BY THE ASSESSEE. PURSUANT TO THE ISSUE OF NOTICE UND ER SECTION 148 OF THE ACT, THE ASSESSEE FILED REVISED RETURN ON 05.11.2009 DECLARING TOTAL INCOME OF RS.1,25,39,650/ - AND AGRICULTURAL INCOME OF RS.3,26,988/ - . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER VIDE PARA 4 NOTES TH AT THE ASSESSEE HAD CREDITED A SUM OF RS.1.42 CRORES TO ITS PROFIT & LOSS ACCOUNT BEING THE DECLARATION ACCOUNT. THE ASSESSEE WAS ASKED TO FURNISH THE BASIS OF DECLARATION OF ADDITIONAL INCOME OF RS.1.42 CRORES AS AGAINST THE DECLARATION MADE DURING THE S URVEY OF RS.1.75 CRORES. THE ASSESSEE EXPLAINED THE SAID OFFER OF RS.1.42 CRORES WHICH IS INCORPORATED UNDER PARA 4 AT PAGES 2 TO 3 OF THE ASSESSMENT ORDER AND THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF THE ASSESSEE AND THE DECLARATION OF RS.1.42 C RORES OF ADDITIONAL INCOME. THEREAFTER, THE ASSESSING OFFICER VIDE PARA 5 ON VERIFICATION OF BALANCE SHEET NOTED THAT THE ASSESSEE HAD SHOWN INVESTMENT IN HOTEL VARSHA AT RS.51,98,433/ - . A FTER DELIBERATING UPON THE VARIOUS ASPECTS OF THE SAID INVESTMENT , AN ADDITION OF RS.23,01,567/ - WAS MADE AS UNEXPLAINED EXPENDITURE FROM UNDISCLOSED SOURCES AND PENALTY PROCEEDINGS UNDER SECTION 3 ITA NO. 2104 /PN/201 3 271(1)(C) OF THE ACT WERE I NITIATED AGAINST THE ASSESSEE. ANOTHER ISSUE NOTED BY THE ASSESSING OFFICER WAS AGRICULTURAL INCOM E DECLARED BY THE ASSESSEE AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AGRICULTURAL INCOME WAS RESTRICTED TO THE INCOME SHOWN IN THE ORIGINAL RETURN OF INCOME AND THE DIFFERENCE OF RS.1,51,640/ - WAS CONSIDERED AS INCOME FROM UNEXPLAINED SO URCES AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE SAID ADDITION. THE ASSESSMENT ORDER UNDER SECTION 143(3) WAS PASSED BY THE ASSESSING OFFICER ON 2 9.12.2009. PURSUANT THERETO, THE ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 271(1)(C) OF THE ACT DATED 25.06.2010. THE ASSESSING OFFICER NOTES THE FACTUAL ASPECTS OF THE CASE THAT THE ORIGINAL RETURN OF INCOME WAS FILED AT RS.82,842/ - , THE NOTICE IS SUED UNDER SECTION 148 OF THE ACT , THE FILING OF REVISED RETURN AT RS.1.52 CRORES INCLUDING AGRICULTURAL INCOME AND THEREAFTER THE ASSESSMENT BEING COMPLETED UNDER SECTION 143(3) OF THE ACT AT RS.1.49 CRORES PLUS AGRICULTURAL INCOME OF RS.1,75,348/ - . THE ASSESSING OFFICER FURTHER NOTED THAT THE ADDITIONS INCOME OF RS.1,75,348/ - . THE ASSESSING OFFICER FURTHER NOTED THAT THE ADDITIONS WERE MADE ON ACCOUNT UNEXPLAINED INVESTMENT IN HOTEL VARSHA AT RS.23,01,567/ - AND AGRICULTURAL INCOME BEING UNPROVED AT RS.1,51,640/ - . THE ASSESSING OFFICER CONSIDERING THE CONTENTION OF THE ASSESSEE AND THE NATURE OF ADDITIONS HELD THE ASSESSEE TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF RS.24,53,207/ - I.E. ON ACCOUNT OF ADDITION OF RS.23,01,567/ - PLUS RS.1,51,640/ - . THE ASSESSING OFFICER THUS LEVIED PENALTY UNDER SECTION 271(1)(C ) OF THE ACT AT RS.7,72,759/ - . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WITH REGARD TO THE SAID LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 5 . THE CIT(A) VIDE ORDER DATED 21.11.2013 HELD THAT THE ASSESSEE WAS NOT LIABLE FOR ANY LEVY OF PE NALTY UNDER SECTION 271(1)(C) OF THE ACT O N ADDITIONS OF RS.23,01,567/ - ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN HOTEL VARSHA. THE REVENUE IS NOT IN APPEAL AGAINST THE SAID DELETION OF PENALTY BY THE CIT(A). THE 4 ITA NO. 2104 /PN/201 3 CIT(A) FURTHER HELD THAT THE PENALT Y ON ADDITION OF RS.1 , 51 , 640/ - ON ACCOUNT OF EXCESSIVE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE WAS JUSTIFIED. THE ASSESSEE IS NOT IN APPEAL AGAINST THE SAID CONFIRMATION OF PENALTY ON THE ADDITIONS OF RS.1,51,640/ - . 6. THE CIT(A) THEREAFTER VIDE PA RA 11 NOTED THAT THE ASSESSING OFFICER HAD NOT INITIATED OR LEVIED PENALTY ON ADDITIONAL INCOME DECLARED BY THE ASSESSEE DURING THE SURVEY ACTION ON 22.11.2007 AND IN THE RETURN OF INCOME FILED AFTER SURVEY ACTION ON 05.11.2009. 7 . THE CIT(A) ISSUED A NOT ICE UNDER SECTION 251 OF THE ACT ALLEGING THAT THE ASSESS ING OFFICER HAD FAILED TO LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE UNDISCLOSED INCOME OF RS.1,24,56,842/ - , WHICH HAD BEEN REVEALED DURING THE SURVEY ACTION AND WHICH HAS NOT BEEN DECLAR ED IN THE ORIGINAL RETURN OF INCOME BUT WHICH WAS DECLARED IN THE REVISED RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THEREFORE, IN VIEW OF THE PROVISIONS OF CLAUSE (B) TO SECTION 251(1) OF THE ACT, THE CIT(A) PROPOSED TO ENHANCE THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE UNDISCLOSED INCOME OF RS.1,24,56,842/ - . THE PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT WHERE THE ASSESSING OFFICER HAD NOT INITIATED THE PENALTY ON THE INCOME OFFERED TO TAX DURING THE SURVEY ACTION AND IN THE RETURN OF INCOME FILED PURSUANT TO SURVEY ACTION, NO SUCH PENALTY COULD BE LEVIED , A S THE SAID LEVY WOULD NOT AMOUNT TO ENHANCEMENT OF PENALTY BUT WOULD AMOUNT TO LEVY OF PENALTY AFRESH ON THE AMOUNT ON WHICH PENALTY WAS NOT INITIATED IN THE ASSESSM ENT ORDER. THE CIT(A) AFTER NOTING THE FACTUAL ASPECTS OF THE CASE UNDER PARA 11.2 AT PAGES 11 AND 12 OF THE APPELLATE ORDER OBSERVED AS UNDER : - 11.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, AVAILABLE RECORD AND SUBMISSION OF THE APPELLANT. ON PERUSAL OF THE SAME IT HAS BEEN NOTICED THAT IT IS UNDISPUTED FACT THAT THE APPELLANT HAS FILED ORIGINAL RETURN OF INCOME FOR A.Y.2003 - 04 ON 18/12/2003 DECLARING INCOME OF RS.82,842/ - AND AGRICULTURAL INCOME OF RS. 1 ,75,348/ - . IT IS ALSO UNDISPUTED F ACT THAT DURING THE COURSE OF 5 ITA NO. 2104 /PN/201 3 SURVEY PROCEEDINGS U/S 133A CONDUCTED ON 22/11/2007, IT HAS BEEN REVEALED THAT THE APPELLANT HAS EARNED SUBSTANTIAL UNDISCLOSED INCOME OF RS.1,24,56,810/ - [RS.1,25,39,650/ - ( - ) RS.82,840/ - ] WHICH HAS ALSO BEEN DISCLOSED AN D INCLUDED IN THE RETURN OF INCOME FILED AFTER SURVEY ACTION. FROM THE BALANCE SHEETS FILED WITH ORIGINAL RETURN OF INCOME, IT HAS BEEN NOTICED THAT INVESTMENT IN LAND HAS BEEN SHOWN IN THE AUDITED BALANCE SHEET AT RS.66,33,000/ - WHEREAS IN THE RETURN OF INCOME FILED AFTER SURVEY ACTION, THE SAME HAS BEEN SHOWN AT RS.2,08,13,572/ - , THEREFORE, THE UNDISCLOSED INVESTMENT WAS RS.1,41,80,572/ - . IT HAS ALSO BEEN NOTICED THAT IN THE AUDITED PROFIT AND LOSS ACCOUNT FILED WITH ORIGINAL RETURN, THE BUSINESS PROFIT HAS BEEN SHOWN AT RS.1,22,029/ - AND THE SAME HAS BEEN SHOWN AS PER PROFIT & LOSS ACCOUNT FILED AFTER SURVEY ACTION AT RS.1,25,79,646/ - BY CREDITING DECLARATION ACCOUNT TO PROFIT & LOSS ACCOUNT TO THE EXTENT OF RS.1,42,00,000/ - . AS THE RETURN FILE D BY THE APPELLANT WAS BEYOND THE TIME LIMIT PRESCRIBED U/S 139(5), THE A.O. HAS ISSUED NOTICE U/S 148 ON 26/02/2009 FOR ASSESSING THE UNDISCLOSED INCOME, REVEALED DURING SURVEY ACTION AND OTHER INCOME, IF ANY. THE APPELLANT HAS, THE REFORE, FILED REVISE D RETURN ON 05/11/2009 DECLARING TOTAL INCOME OF RS.1,25,39,650/ - INCLUDING ADDITIONAL INCOME OF RS.1,24,56,810/ - IN RESPONSE TO NOTICE ISSUED BY THE A.O. U/S 148 OF THE ACT. IN THIS RETURN, AGRICULTURAL INCOME HAS ALSO BEEN SHOWN AT RS.3,26,988/ - AS AGAI NST RS.1,75,348/ - SHOWN IN THE ORIGINAL RETURN. FROM THE ABOVE FACTS, IT IS EVIDENT THAT THE INCOME DISCLOSED IN THE RETURN FILED BY THE APPELLANT AFTER SURVEY ACTION, IN RESPONSE TO NOTICE U/S 148, IS NOT VOLUNTARY BUT ON ACCOUNT OF FACTS REVEALED DUE TO SURVEY ACTION. THE APPELLANT HAS UNDISPUTEDLY CONCEALED THE INCOME OF RS.1,24,56,810/ - WHICH HAS BEEN OFFERED TO TAX BY HIM IN RETURN OF INCOME FILED ON 05/11/2009 AND WHICH HAS BEEN CONCEALED IN THE ORIGINAL RETURN FILED ON 18/12/2003. THEREFORE, IN VIE W OF THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE PENALTY U/S 271(1)(C) IS LEVIABLE AND HENCE PENALTY SECTION 271(1)(C) OF THE ACT, THE PENALTY U/S 271(1)(C) IS LEVIABLE AND HENCE PENALTY HAS BEEN INITIATED ON THE SAID CONCEALED INCOME BY THE UNDERSIGNED BY ISSUING NOTICE DATED 31/10/2013 U/S 251 OF THE ACT. THE FACT OF INITIATION O F PENALTY HAS BEEN FURTHER COMMUNICATED TO THE A.R. OF THE APPELLANT DURING THE APPELLATE PROCEEDINGS. 8 . THE CIT(A) FURTHER OBSERVED AS UNDER : - 11.3 THE LD.AR OF THE APPELLAN T, IN THIS REGARD HAS CONTENDED THAT THE A.O. HAS NOT INITIATED PENALTY ON T HE UNDISCLOSED INCOME OF RS.1,24,56,810/ - AND HENCE THE PENALTY CANNOT BE INITIATED BY CIT(APPEALS) AS SECTION 251(1) ALLOWS ENHANCEMENT OF PENALTY LEVIED ON CONCEALED INCOME AND DOES NOT ALLOW LEVY OF PENALTY ON ANY OTHER CONCEALED INCOME IN RESPECT OF WH ICH THE A.O. HAS NOT INITIATED PENALTY U/S 271(1)(C) OF THE ACT. THIS CONTENTION OF THE AR OF THE APPELLANT IS INCORRECT IN VIEW OF PROVISIONS OF SECTION 271(1)(C) R.W.S. 275(1)(C) OF THE ACT. THE RELEVANT PORTION OF THE ABOVE MENTIONED SECTIONS IS REPRO DUCED BELOW 271(1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER, IN THE COURSE OF ANY PROCEEDING S UNDER THIS ACT IS SATISFIED THAT ANY PERSON (A) (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURA TE PARTICULARS OF SUCH INCOME. (D) 6 ITA NO. 2104 /PN/201 3 HE MAY DIRECT THAT SUCH PERSON S SHALL BY WAY OF PENALTY, 275(1) NO ORDER IMPOSING PENALTY UNDER THIS CHAPTER SHALL BE PASSED - (A) (C) I N ANY OTHER CASE, AFTER THE EXPIRY OF FINANCIAL YEAR IN WHICH THE PROC EEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES LATER. FROM THE ABOVE PROVISION OF SECTION 271(1)(C), IT IS EVIDENT THAT CIT(APPEALS) IN THE COURSE OF ANY PROCEEDINGS I.E. INCLUDING APPELLATE PROCEEDINGS CAN INITIATE AND LEVY PENALTY U/S 271(1)(C), IF HE IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IN THE CASE UNDER APPEAL, THE APPELLANT HAS CONCEALED INCOME OF RS.1,24,56,810/ - AS THE SAME HAS NOT BEEN DISCLOSED IN THE ORIGINAL RETURN FILED ON 18/12/2003 AND THE SAME HAS BEEN DISCLOSED IN THE RETURN FILED ON 05/11/2009 AFTER SURVEY ACTION, FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. IT HAS ALSO BEEN NOTICED THAT THE APPELLANT HAS NOT FILED ANY BONAFIDE EXPLANATION IN RESPECT OF THE CONCEALED INCOME OF RS.1,24,56,810/ - . THE PENALTY U/S 271(1)(C) IS LEVIAB LE IN VIEW OF EXPLANATION - 1 TO SECTION 271(1)(C) OF THE ACT OF RS.1,24,56,810/ - . THEREFORE, I AM SATISFIED THAT THE APPELLANT HAS CONCEALED THE INCOME OF RS.1,24,56,810/ - AND HENCE THE PENALTY U/S 271(1)(C) IS LEVIABLE IN THE CASE OF THE APPELLANT IN RESP ECT OF THE CONCEALED INCOME OF RS.1,24,56,810/ - . FURTHER, THE TIME LIMIT PRESCRIBED IN SECTION 271(1)(C), REPRODUCED ABOVE, IS TO BE COUNTED WITH REFERENCE TO THE INITIATION OF THE PENALTY. IN THE CASE UNDER TO BE COUNTED WITH REFERENCE TO THE INITIATION OF THE PENALTY. IN THE CASE UNDER APPEAL, THE PENALTY U/S 271(1)(C) IN RESPECT OF CONCEALMENT OF INCOME HAS BEEN INITIATED BY THE UNDERSIGNED ON 31/10/2013 AND HENCE THE PRESCRIBED TIME LIMIT IS UP TO 30 TH APRIL, 2014 I.E. 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE PENALTY HAS BEEN INITIATED. THE CONTENTION OF THE LD.AR OF THE AP PELLANT IS THAT SECTION 251 REFERS TO ENHANCEMENT OF PENALTY LEVIED BY THE A.O. THIS CONTENTION OF THE AR THE APPELLANT IS INCORRECT AS THE ENHANCEMENT OF PENALTY REFERRED IN SECTION 251 ALSO INCLUDES PENALTY INITIATED AND LEVIED BY THE CIT(APPEALS) ON TH E AMOUNT ON WHICH THE A.O. HAS NOT INITIATED AND LEVIED PENALTY U/S 271(1)(C) FROM 100% TO ANY PERCENTAGE ABOVE 100% UP TO 300%. NOTICE U/S 251(1) ISSUED ON 31/10/2013 BY THE UNDERSIGNED MAY BE TREATED AS ENHANCEMENT AS WELL AS INITIATION OF PENALTY BY TH E UNDERSIGNED AS MENTIONED IN DETAIL IN THE NOTICE DATED 31/10/2013 GIVING OPPORTUNITY OF BEING HEARD. 9 . THE CIT(A) THUS HELD THE ASSESSEE TO HAVE CONCEALED ITS INCOME IN THE ORIGINAL RETURN OF INCOME WHICH WAS FILED PURSUANT TO SURVEY AND THE ASSESSEE WAS HELD TO BE LIABLE TO LEVY OF PENALTY ON THE UNDISCLOSED INCOME OF RS.1,24,56,810/ - . PENALTY OF RS.39,23,895/ - WAS LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 7 ITA NO. 2104 /PN/201 3 10 . THE ASSESSEE IS IN APPEAL AGAINST THE SAID LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 11 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AFTER TAKING US THROUGH THE FACTS OF THE CASE, POINTED OUT THAT PURSUANT TO SURVEY ON THE PREMISES OF ASSESSEE ON 22.09.2007, THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.1.75 CRORES A ND HAD FILED REVISED RETURN DECLARING TOTAL INCOME OF RS.1,25,39,650/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON TOTAL INCOME OF RS.1,49,92,850/ - I.E. AFTER MAKING TWO ADDITIONS OF RS.23,01,567/ - AND RS.1,51,640/ - . IN RESPECT OF THE ADDITIONAL I NCOME OFFERED BY THE ASSESSEE IN ITS REVISED RETURN OF INCOME, THOUGH ON LOWER LEVEL THE ASSESSING OFFICER DID NOT INITIATE ANY PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT WHILE LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE ONLY ON TWO ADDITIONS MADE BY HIM AND THEREAFTER, LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON RS.7,72,760/ - . THE CIT(A) IN THE APPEAL DELETED THE PENALTY ON ADDITION OF RS.23,01,567/ - , BUT CONFIRMED THE ADDITION ON ACCOUNT OF AGRICULTURAL INCOME OF RS.1,51,640/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT NO APPEAL HAS BEEN FILED EI THER BY THE REVENUE OR THE ASSESSEE IN RESPECT OF ABOVE SAID DIRECTIONS OF THE CIT(A). HOWEVER, VIDE PARA 11, THE CIT(A) SHOW CAUSED THE ASSESSEE AS TO WHY PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED ON THE ADDITIONAL INCOME DECLARED B Y THE ASSESSEE PURSUANT TO SURVEY UPON THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE PROVISIONS OF SECTION 251(1) OF THE ACT TO POINT OUT THAT IT TALKS OF THE POWERS OF CIT(A) TO VARY THE QUANTUM OF PENALTY LEVIED, WHICH HAS ALREADY BEEN LEVIED. OUR ATTEN TION WAS ALSO DRAWN TO THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT TO POINT OUT THAT THE SECTION REQUIRES THAT IN THE COURSE OF ANY PROCEEDINGS, WHERE THE ASSESSING OFFICER / CIT(A) IS SATISFIED, THEY HAVE THE POWER 8 ITA NO. 2104 /PN/201 3 TO INITIATE AND IMPOSE THE PENALTY UN DER SECTION 271(1)(C) OF THE ACT. AS PER THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, THE WORD USED IN PROCEEDINGS IN SECTION MEANS ASSESSMENT OR RE - ASSESSMENT PASSED BY THE ASSESSING OFFICER, 263 ORDER PASSED BY THE COMMISSIONER AND / OR ENHAN CEMENT ORDER IN QUANTUM PROCEEDINGS PASSED BY THE CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT WHERE THE ASSESSING OFFICER DID NOT INITIATE OR DID NOT LEVY ANY PENALTY FOR CONCEALMENT, THEN EVEN WHERE THE POWERS OF THE C IT(A) ARE CO - TERMINUS WITH THE POWERS OF THE ASSESSING OFFICER, HE HAS NO POWER TO LEVY PENALTY. IN THIS REGARD, RELIANCE W AS PLACED ON THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN M/S. VIJAY BUILDERS VS. ITO IN ITA NO.863/PN/2013, RELATING TO ASSESSM ENT YEAR 2008 - 09, ORDER DATED 25.02.2015. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE PROVISIONS OF SECTION 275(1) OF THE ACT, WHICH PROVIDED THE TIME LIMIT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND POIN TED OUT THAT FOR LEVYING THE PENALTY, THERE HAS TO BE TWO DIFFERENT PROCEEDINGS I.E. FIRST, COMPLETION OF PROCEEDINGS IN WHICH PENALTY WAS INITIATED AND PROCEEDINGS I.E. FIRST, COMPLETION OF PROCEEDINGS IN WHICH PENALTY WAS INITIATED AND THEN, LEVY OF PENALTY FOR CONCEALMENT. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT WHERE THE CIT(A) WAS SATISFIED ON ACCOUNT OF REVISED RETURN FILED BY THE ASSESSEE, HE HAD THE POWER TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. OUR ATTENTION WAS DRAWN TO THE EXPLANATION BELOW SECTI ON 251(1) OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE RELIED ON THE ORDER OF CIT(A). AFTER CLOSE OF HEARING, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FILED A LETTER DATED 18.09.2015 TO POINT OUT THAT THE ISSUE I S COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (2013) 359 ITR 565 (KAR), WHEREIN, IT HAS BEEN HELD THAT THE CIT(A) CAN INITIATE AND LEVY PENALTY FOR CONCEALMENT ON ANY ISSUE INCLUDING AN ISS UE FOR WHICH THE ASSESSING OFFICER HAD 9 ITA NO. 2104 /PN/201 3 NOT INITIATED THE PENALTY, BUT THE CIT(A) COULD NOT DIRECT THE ASSESSING OFFICER TO INITIATE AND LEVY PENALTY ON ANY ISSUE. IN THE SAID LETTER, IT HAS BEEN MENTIONED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE THAT HE HAD AN OCCASION TO BE PRESENT IN B BENCH OF THE TRIBUNAL, WHEREIN THE SAME LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AS IN THE PRESENT CASE WAS ARGUING ONE CASE OF VIVEK CHOWDHARY, WHEREIN THE ISSUE INVOLVED WAS ABOUT THE POWERS OF CIT(A) TO ISSUE AND LEVY THE PENALTY. IN THE CASE OF VIVEK CHOWDHARY, THE CIT(A) RATHER THAN INITIATING AND LEVYING PENALTY BY HIMSELF HAD PROCEEDED TO DIRECT THE ASSESSING OFFICER TO INITIATE AND LEVY PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) O F THE ACT. IN SUPPORT OF ITS CLAIM THAT THE CIT(A) CANNOT DIRECT THE ASSESSING OFFICER TO INITIATE AND LEVY PENALTY, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THE CASE OF VIVEK CHOWDHARY HAD RELIED UPON THE DECISION OF HONBLE KARNATAKA HI GH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA). IN VIEW THEREOF, A PRAYER WAS MADE BEFORE US TO CONSIDER THE SAID DECISION OF THE HONBLE KARNATAKA HIGH COURT. HONBLE KARNATAKA HIGH COURT. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IN THE PRESENT APPEAL IS IN RELATION TO THE LEVY OF PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAD ORIGINALLY FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.82,842/ - . TH EREAFTER, SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AGAINST THE ASSESSEE, IN WHICH, HE MADE A DECLARATION OF ADDITIONAL INCOME OF RS.1.75 CRORES. PURSUANT TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, THE ASSESSEE FURNISHED REVISED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1.2 4 CRORES AND AGRICULTURAL INCOME OF RS.3,26,988/ - . THE ASSESSEE IN THE SAID REVISED RETURN OF INCOME HAD DECLARED DIFFERENT AMOUNT OF RS.1. 2 4 CRORES AS AGAINST THE ORIGINAL DECLARATION OF RS.1.75 CRORES. DURING T HE COURSE OF ASSESSMENT , THE ASSESSING OFFICER ACCEPTED THE SAID ADDITIONAL INCOME DECLARED BY THE ASSESSEE. FURTHER, THE ASSESSING OFFICER MADE 10 ITA NO. 2104 /PN/201 3 TWO ADDITIONS I.E. ONE ON ACCOUNT OF UNEXPLAINED EXPENDITURE BEING UNDISCLOSED SOURCES OF RS.23,01,567/ - AND A NOTHER ADDITION ON ACCOUNT OF THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE, WHERE THE SAID INCOME WAS RESTRICTED BY THE ASSESSING OFFICER AND DIFFERENCE OF RS.1,51,640/ - WAS ADDED AS INCOME FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF TWO ADDITIONS MADE BY HIM AND NOT IN RESPECT OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE PURSUANT TO SURVEY OPERATIONS AT HIS PREMISES. THE ASSESSING OFFICER IN THE PENALTY ORDER PASSE D UNDER SECTION 271(1)(C) OF THE ACT, ONLY CONSIDERED TWO ADDITIONS OF RS.23,01,567/ - AND RS.1,51,640/ - AND LEVIED PENALTY OF RS.7,72,759/ - UNDER SECTION 271(1)(C) OF THE ACT. IN THE APPEAL FILED AGAINST THE SAID PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT, THE CIT(A) DELETED THE PENALTY LEVIED ON ADDITION OF RS.23,01,567/ - AND UPHELD THE LEVY OF PENALTY ON ADDITION OF RS.1,51,640/ - , AGAINST WHICH THE RESPECTIVE DEPARTMENT OR THE ASSESSEE ARE NOT IN APPEAL. 14. ANOTHER ASPECT NOTED BY THE CIT(A) WAS THE UNDISCLOSED INCOME OF RS.1.24 CRORES. THE CIT(A) NOTED THAT THE ASSESSING OFFICER HAD FAILED TO INITIATE AND LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE SAID UNDISCLOSED INCOME OF RS.1.24 CRORES. CONSEQUENTLY, THE CIT(A) PROPOSED TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE AFORESAID UNDISCLOSED INCOME OF RS.1.24 CRORES . I N VIEW OF THE PROVISIONS OF CLAUSE (B) OF SECTION 251(1) OF THE ACT , T HE CIT(A) WAS OF THE VIEW THAT THOUGH THE ASSESSING OFFICER HAD NOT INITIATED PENA LTY PROCEEDINGS ON THE UNDISCLOSED INCOME OF RS.1.24 CRORES, BUT IN VIEW OF CLEAR - CUT PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THE CIT(A) OBSERVED THAT WHERE HE IS SATISFIED THAT ANY PERSON HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, THE CIT(A) IS EMPOWERED TO INITIATE AND LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, THE CIT(A) HELD THAT THE ASSESSEE HAD CONCEALED INCOME OF RS.1.24 CRORES AND HENCE, LIABLE FOR LEVY OF PENALTY UNDER 11 ITA NO. 2104 /PN/201 3 SECTION 271 (1)(C) OF THE ACT ON THE SAID CONCEALED INCOME OF RS.1.24 CRORES AND LEVIED PENALTY OF RS.39,23,895/ - . 15. THE ISSUE ARISING BEFORE US IS WHETHER WHERE THE ASSESSING OFFICER HAD NOT INITIATED AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ADDITIONAL INCOME FURNISHED BY THE ASSESSEE AT RS.1.24 CRORES, IS THE CIT(A) AUTHORIZED TO INITIATE AND LEVY THE PENALTY ON THE SAID UNDISCLOSED INCOME OF RS.1.24 CRORES. ADMITTEDLY, IN THE FACTS OF THE PRESENT CASE, DURING THE COURSE OF SURVEY UNDER SECT ION 133 OF THE ACT, THE ASSESSEE HAD MADE A DECLARATION OF RS.1.75 CRORES. HOWEVER, IN THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE, THE TOTAL INCOME WAS DECLARED AT RS.1.24 CRORES ALONG WITH AGRICULTURAL INCOME OF RS.3,26,988/ - . THE ASSESSING OFFI CER NOTED THAT IN THE SAID REVISED RETURN OF INCOME, THE ASSESSEE HAD DECLARED THE ADDITIONAL INCOME AT RS.1.42 CRORES AS AGAINST THE ORIGINAL DECLARATION OF RS.1.75 CRORES. HOWEVER, THE DECLARATION MADE BY THE ASSESSEE AT RS.1.42 CRORES WAS ACCEPTED BY T HE ASSESSING OFFICER. THE PERUSAL OF THE ASSESSMENT ORDER REFLECTS THAT NO PENALTY PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER IN RESPECT OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER INITIATED THE PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE OTHER TWO ADDITIONS MADE BY IT. AS REFERRED TO BY US IN THE PARAS HEREINABOVE, OUT OF THE SAID TWO ADDITIONS, PENALTY RELATED TO ONE ADDITION HAS BEEN DELETED BY THE CIT(A) AND IN RESPECT OF THE OTHER ADDITION, THE PENALTY FOR CONCEALMENT HAS BEEN UPHELD. THERE WAS NO APPEAL AGAINST THE QUANTUM PROCEEDINGS PENDING BEFORE THE CIT(A) . B UT THE CIT(A) WHILE DECIDING THE APPEAL AGAINST THE ORDER PASSED LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE A CT , WAS OF THE VIEW THAT THE ASSESSING OFFICER HAD FAILED TO INITIATE THE PENALTY PROCEEDINGS FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT ON THE SAID ADDITIONAL INCOME OF RS.1.24 CRORES AND THE CIT(A) HELD THE ASSESSEE TO BE LIABLE FOR THE SAID LEVY OF PENALTY FOR CONCEALMENT. 12 ITA NO. 2104 /PN/201 3 16. THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND ITS APPLICATION HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF KARNATAKA IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) VIDE ITS JUDGMENT DATED 13.12.20 12 . THE HONBLE HIGH COURT HAS ELABORATELY CONSIDERED THE VARIOUS PRINCIPLES RELATING TO LEVY OF PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT. THE PERUSAL OF THE SAID JUDGMENT REVEALS THAT WHILE DELIBERATING UPON THE STATUTORY PROVISIONS OF INCOME - TAX ACT WITH SPECIAL REFERENCE TO SECTION 271, THE HONBLE HIGH COURT HELD THAT SECTION 271 IS A SPECIFIC PROVISION PROVIDING FOR IMPOSITION OF PENALTIES, AND IS A COMPLETE C ODE IN ITSELF, REGULATING THE PROCEDURE FOR THE IMPOSITION OF PENALTIES PR ESCRIBED . THE PROCEEDINGS HAVE, THEREFORE, TO BE CONDUCTED IN ACCORDANCE THEREWITH, SUBJECT ALWAYS TO THE RULES OF NATURAL JUSTICE. THE PROVISIONS FOR THE ASSESSMENT AND LEVY OF TAX WILL NOT APPLY AS SUCH FOR THE IMPOSITION OF PENALTY. IN SUCH A SITUATION , I.E., WHEN THERE IS A SPECIFIC PROVISION, PROCEEDINGS SHOULD BE TAKEN ONLY THEREUNDER AND NOT UNDER ANY OTHER PROVISION. SECTION 271 ALONE, THEREFORE, GOVERNS THE IMPOSITION OF PENALTIES FOR CONCEALMENT OF INCOME OR FOR THEREFORE, GOVERNS THE IMPOSITION OF PENALTIES FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. THE VALIDITY OF PENALTY PROCEEDINGS WILL HAVE TO BE TESTED ONLY FROM THE PERSPECTIVE OF SECTION 271. 17. THE HONBLE HIGH COURT FURTHER OBSERVED THAT FROM THE SECTION, IT IS CLEAR THAT THE SAID PROVISION IS ATTRACTED ONLY WHEN THE CONDIT ION S STIPULATED IN SECTION 271(1)(C) OF THE ACT ARE ATTRACTED. IN CASE THE CONDITIONS ARE NOT FULFILLED, THERE IS NO QUESTION OF EXERCISING POWER UNDER THE SAID PROVISION TO IMPOSE PENALTY. THE HONBLE HIGH COURT THEREAFTER, DELIBERATED UPON THE CONDITIO NS WHICH MUST EXIST BEFORE INITIATING THE PROCEEDINGS UNDER SECTION 271 OF THE ACT. THE HONBLE HIGH COURT WAS OF THE VIEW THAT LEVY OF PENALTY IS NOT A MATTER OF COURSE, IT HAS BEEN FOUND THAT THE ASSESSEE CONCEALED ANY INCOME. WHERE THERE IS NO CONCEAL MENT, OR NO MATERIAL FOR CONCEALMENT, NO PENALTY CAN BE IMPOSED ., THE MERE ADDITION TO THE TAXABLE INCOME WOULD NOT AUTOMATICALLY LEAD TO AN ORDER OF PENALTY. FURTHER, THE 13 ITA NO. 2104 /PN/201 3 LEVY OF PENALTY IS NOT AN AUTOMATIC CONCOMITANT OF THE ASSESSMENT. THEREFORE, SA FEGUARDS HAVE BEEN PROVIDED FOR IN THE ACT ITSELF TO SEE THAT THE PENALTIES ARE LEVIED ONLY IN APPROPRIATE CASES. REFERENCE WAS MADE TO THE RATIO LAID DOWN BY THE LEVIED ONLY IN APPROPRIATE CASES. REFERENCE WAS MADE TO THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 ( SC ) , WHEREIN IT WAS HELD THAT THE HIGHER INCOME OFFERED AFTER SEARCH WOULD NOT LEAD TO LEVY OF PENALTY AUTOMATICALLY. THEREAFTER, THE HONBLE HIGH COURT CONSIDERED THE VARIOUS FACETS OF THE TERMS USED IN THE SECTION 271(1)(C) OF THE ACT AND ALSO THE EXPLANATION THEREUNDER A ND REFERENCE WAS MADE TO THE WORDS OF EXPLANATION (1) , WHICH MAKES IT CLEAR THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION WHICH MAKES IT CLEAR THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME OF ANY PERSON UNDER THIS ACT, SUCH PERSONS FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHI CH IS FOUND TO BE FALSE OR OFFERS AN EXPLANATION, WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE, THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF, WHICH FOR THE PURPOSE OF CLAUSE (C) OF THIS SUB - SECTION DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS THIS SUB - SECTION DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THE HONBLE HIGH COURT FURTHER HELD THAT FROM THE SAID PROVISION, IT WAS CLEAR THAT A NOTE ALONE IN THE ASSESSMENT ORDER DOES NO T SATISFY THE REQUIREMENT OF INVOKING JURISDICTION IN LAW IN RESPECT OF INITIATION OF PENALTY PROCEEDINGS. SATISFACTION SHOULD BE IN THE ASSESSMENT ORDER . REFERRING TO THE PROVISIONS OF SECTION 271(1 B ) OF THE ACT , THE HONBLE HIGH COURT OBSERVED THAT THE LEGISLATURE BY INSERTING THE SAID PROVISIONS HAD CREATED A LEGAL FICTION AND WHEN THE ASSESSMENT ORDER CONTAINS DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS, SUCH ORDER SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT FURTHER OBSERVED AS UNDER: - THE QUESTION IS, WHETHER SUCH SATISFACTION SHOULD BE IN WRITING. AS THE SATISFACTION HAS TO BE IN THE COURSE OF ANY PROCEEDINGS AND IT IS AT THE TIME OF COMPUTATION OF THE TOTAL INCOME OF ANY PERSON AND AS IT RESULTS IN AN ASSESSMENT ORDER WHICH HAS TO BE MANDATORILY IN WRITING, THE SATISFACTION SHOULD BE FOUND IN THE SAID ORDER. MANDATORILY IN WRITING, THE SATISFACTION SHOULD BE FOUND IN THE SAID ORDER. [UNDERLINED FOR EMPHASIS BY THE UNDERSIGNED] 14 ITA NO. 2104 /PN/201 3 18. THE HONBLE HIGH COURT FURTHER HELD AS UNDER: - THIS PROVISION IS ATTRACTED ONCE IN ANY SUCH ASSESSMENT ORDERS, A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB - SECTION (1) IS MADE. THEREBY, IT MEANS EVEN IF THE ORDER DOES NOT CONTAIN A SPECIFIC FI NDING THAT THE ASSESSEE HAS CONCEALED INCOME OR HE IS DEEMED TO HAVE CONCEALED INCOME BECAUSE OF THE EXISTENCE OF FACTS WHICH ARE SET OUT IN EXPLANATION 1, IF A MERE DIRECTION TO INITIATE PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB - SECTION (1) IS FOUND IN THE SAID ORDER, BY LEGAL FICTION, IT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C). THE SAID PROVISION CAME UP FOR INTERPRETATION BY THE DELHI HIGH COURT IN THE CASE OF M S. MADHUSHREE GUPTA REPORTED IN [2009] 317 ITR 1 07 (DELHI), WHEREIN THE DELHI HIGH COURT HELD THAT THE SATISFACTION SHOULD BE DISCERNIBLE IN THE ASSESSMENT ORDER. POSITION POST AMENDMENT IS NOT IN MUCH VARIANCE WITH PRE AMENDMENT. THEY HELD THAT PROVISIONS WILL FALL FOUL OF ARTICLE 14 OF THE CONSTITUTION IF THE SAME IS NOT READ IN THE MANNER IT HAS READ AND IN FACT HAS READ DOWN THE PROVISIONS TO HOLD IT CONSTITUTIONAL. THEREFORE, ACCORDING TO THE DELHI HIGH COURT, IN POS T AMENDMENT AND PRE AMENDMENT THERE IS NOT MUCH DIFFERENCE AND THE SATISFACTION IS REQUIRED TO BE ARRIVED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SHOULD BE DISCERNIBLE IN THE ASSESSMENT ORDER. THEREFORE, THIS PROVISION MAKES IT ABUNDANTLY CLEAR THAT SA TISFACTION OF THE ASSESSING OFFICER BEFORE INITIATION OF PENALTY PROCEEDINGS IS A MUST. THE SATISFACTION SHOULD BE THAT HE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND EVEN IN THE ABSENCE OF THOSE EXPRE SSED WORDS OR FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS, IF A DIRECTION AS AFORESAID IS MENTIONED, IT CONSTITUTES SATISFACTION OF THE ASSESSING OFFICER. 19. THE HONBLE HIGH COURT STRESSED THAT THE ASSESSMENT ORDER ITSELF , SHOULD CONTAIN A DIRECTIO N FOR INITIATION OF PENALTY PROCEEDINGS AND IN THIS REGARD, IT WAS CONTAIN A DIRECTIO N FOR INITIATION OF PENALTY PROCEEDINGS AND IN THIS REGARD, IT WAS OBSERVED BY THE HONBLE HIGH COURT AS UNDER: - DIRECTION 50. A READING OF SECTION CLEARLY INDICATES THAT THE ASSESSMENT ORDER SHOULD CONTAIN A DIRECTION FOR INITIATION OF PENALTY PROCEEDING S. THE MEANING OF THE WORD 'DIRECTION' IS OF IMPORTANCE. MERELY SAYING THAT PENALTY PROCEEDINGS ARE BEING INITIATED WILL NOT SATISFY THE REQUIREMENT. THE DIRECTION TO INITIATE PROCEEDINGS SHOULD BE CLEAR AND NOT BE AMBIGUOUS. IT IS WELL SETTLED LAW THAT FI SCAL STATUTES ARE TO BE CONSTRUED STRICTLY AND MORE SO THE DEEMING PROVISIONS BY WAY OF LEGAL FICTION ARE TO BE CONSTRUED MORE STRICTLY. THEY HAVE TO BE INTERPRETED ONLY FOR THE SAID ISSUE FOR WHICH IT HAS DEEMED AND THE MANNER IN WHICH THE DEEMING HAS BEE N CONTEMPLATED TO BE RESTRICTED IN THE MANNER SOUGHT TO BE DEEMED. AS THE WORDS USED IN THE LEGAL FICTION OR THE DEEMING PROVISIONS OF SECTION 271(1B) IS DIRECTION, IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIRECTION. THE USE OF THE PHRASES LIK E (A) PENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY, AND (B) PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED SEPARATELY, DO NOT COMPLY WITH THE MEANING OF THE WORD 'DIRECTION' AS CONTEMPLATED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECT ION SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. THE WORD 'DIRECTION' HAS BEEN INTERPRETED BY THE DECISION OF THE APEX COURT IN THE CASE OF RAJINDER NATH V. CIT REPORTED IN [1979] 120 ITR 1 4 (SC), WHERE IT HAS BEEN HELD THAT IN ANY EVENT WHATEVER ELSE IT MAY AMOUNT TO, ON ITS VERY TERMS THE OBSERVATION THAT THE INCOME - TAX OFFICER IS FREE TO TAKE ACTION, TO ASSESS THE EXCESS IN THE HANDS OF THE CO - OWNERS CANNOT BE DESCRIBED AS A DIRECTION. A DIRECTION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING POSITIVE COMPLIANCE. WHEN IT IS LEFT TO THE OPTION AND DISCRETION OF THE INCOME - TAX OFFICER WHETHER OR NOT TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. 15 ITA NO. 2104 /PN/201 3 20. THE HONBLE HIGH COURT FURTHER OBSERVED THAT UNDER THE SCHEME OF SECTION 271(1)(C) OF THE ACT , THE PERSONS WHO ARE AUTHORIZED TO COMPUTE INCOME AS WELL AS INITIATE THE PROCEEDINGS ARE THE ASSESSING OFFICER, CIT(A) OR COMMISSIONER IN THE COURSE OF REVISIONARY JURISDICTION. IT WAS CLARIFIED BY THE HONBLE HIGH COURT THAT EXPLANATION (1) APPLIES TO ALL THESE THREE OFFICERS, WHEREAS THE DEEMING PROVISION OF SUB - SECTION 1(B) REFERS ONLY TO THE ASSESSING OFFICER. WHERE THE ORDER OF ASSESSMENT IS PASSED BY THE CIT(A) OR THE COM MISSIONER, THEN IN THE COURSE OF THE SAID PROCEEDINGS, IF THEY ARE SATISFIED THAT THERE IS ANY CONCEALMENT OF PARTICULARS OF INCOME, THEN THE SAID SATISFACTION MUST BE STATED IN THE SAID ORDER. IT IS ALSO IN THIS FACTS THE DEEMING PROVISIONS AND EXPLANATI ON (1) WOU LD APPLY AND THEREAFTER, THE AUTHORITY WAS ENTITLED TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT ALSO HELD THAT DEEMING PROVISION PROVIDED IN SUB - SECTION (1B) WAS CONFI N ED ONLY TO THE ASSESSING OFFIC ER. THE HONBLE HIGH COURT OBSERVED AS UNDER: - OBSERVED AS UNDER: - WHEN DEEMING PROVISION NOT APPLICABLE 52. SUB - SECTION (1B) ONLY DEALS WITH SATISFACTION OF THE ASSESSING OFFICER. HOWEVER, UNDER THE SCHEME OF SECTION 271, THE PERSONS WHO ARE AUTHORISED TO COMPUTE INCOME A S WELL AS INITIATE THE PROCEEDINGS OR THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME - TAX (APPEALS) OR THE COMMISSIONER IN THE COURSE OF REVISIONAL JURISDICTION, EXPLANATION 1 APPLIES TO ALL THESE THREE OFFICERS WHEREAS THE DEEMING PROVISION OF SUB - SEC TION (1B) REFERS ONLY TO THE ASSESSING OFFICER. THEREFORE, IF AN ORDER OF ASSESSMENT IS PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) OR THE COMMISSIONER IN THE COURSE OF THE SAID PROCEEDINGS, IF THEY ARE SATISFIED THAT THERE IS ANY CONCEALMENT OF PAR TICULARS OF HIS INCOME OR HE HAS FURNISHED INACCURATE PARTICULARS OF INCOME THE SAID SATISFACTION MUST BE EXPRESSLY STATED IN THE SAID ORDER. IF THAT IS NOT STATED, AT LEAST, THE ORDER SHOULD STATE WHAT IS MENTIONED IN EXPLANATION 1. IT IS ONLY IF THOSE FA CTS ARE SET OUT IN THE ORDER, THEN THE DEEMING PROVISION IN EXPLANATION 1 APPLIES AND THE CONCEALMENT OF INCOME COULD BE PRESUMED AND THEN THEY ARE ENTITLED TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271. IF THE SAID ORDER DO NOT DISCLOSE THE FACTS SET OUT IN EXPLANATION 1, THEY ARE NOT ENTITLED TO THE BENEFIT OF DEEMING PROVISION CONTAINED IN THE PROVISION OF SUB - SECTION (1B). THE SAID DEEMING PROVISION IS CONFINED ONLY TO THE ASSESSING OFFICER. 53. FROM THESE DISCUSSION, IT IS CLEAR THAT THE CONDITION PRECEDENT FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) IS EXISTENCE OF CONDITION REFERRED TO IN THE SAID SECTION. THE PERSON INITIATING PENALTY PROCEEDINGS SHOULD BE SATISFIED ABOUT THE EXISTENCE OF THE SAID CONDITIONS WHICH SHOULD BE REFL ECTED IN THE ASSESSMENT ORDERS PASSED BY THEM. IN A GIVEN CASE, AFTER APPRECIATING THE ENTIRE RECORDS, THE OFFICER PASSING THE ORDER MAY CATEGORICALLY STATE THAT HE IS SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME. ONCE SUCH A FINDING IS RECORDED THAT I S SUFFICIENT 16 ITA NO. 2104 /PN/201 3 TO INITIATE PENALTY PROCEEDINGS. ASSUMING SUCH A CATEGORICAL FINDING IS NOT RECORDED IN THE ORDER, AT LEAST, HE HAS TO RECORD FACTS AS CONTEMPLATED IN EXPLANATION 1. IF THESE FACTS ARE DISCERNIBLE FROM THE ASSESSMENT ORDER, THE DEEMING CLAUSE IN EXPLANATION 1 IS ATTRACTED AND THE INCOME IS DEEMED TO HAVE BEEN CONCEALED. THAT GIVES THE JURISDICTION TO THE OFFICER PASSING THE ORDER TO INITIATE THE PENALTY PROCEEDINGS. IF THE OFFICER PASSING THE ASSESSMENT ORDER IS THE ASSESSING OFFICER, IN THE SA ID ORDER, THE AFORESAID FACTS ARE NOT DISCERNIBLE, AT LEAST HE MUST DIRECT INITIATION OF PROCEEDINGS UNDER SECTION 271(1)(C). THEN SECTION (1B) IS ATTRACTED AND THESE CONDITIONS DEEMED TO EXIST WHICH CONFERS JURISDICTION ON HIM TO INITIATE PENALTY PROCEEDI NGS. SUB - SECTION (1B) HAS NO APPLICATION TO AN ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) OR THE COMMISSIONER. 21. IT WAS CATEGORICALLY LAID DOWN BY THE HONBLE HIGH COURT THAT THE PERSON INITIATING PENALTY PROCEEDINGS SHOULD BE SATISFIED A BOUT THE EXISTENCE OF THE SAID CONDITIONS IN THE ASSESSMENT ORDER PASSED BY THEM. THE ONUS WAS ON THE OFFICER PASSING THE ORDER TO CATEGORICALLY STATE THAT HE WAS SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME AND ONCE SUCH A FINDING IS RECORDED, THEN I T IS SUFFICIENT TO INITIATE PENALTY PROCEEDINGS. IN OTHER WORDS, IF THE OFFICER PASSING THE ASSESSMENT ORDER DOES NOT DIRECT INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, THEN NO SUCH PROCEEDINGS CAN BE INITIATED IN RESPECT OF ADDI TIONAL INCOME, IF ANY ASSESSED IN THE HANDS OF ASSESSEE. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE ASSESSED IN THE HANDS OF ASSESSEE. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA (SUPRA) AND APPLYING THE SAID RATIO TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE ASSESSMENT IN THE PRESENT CASE WAS COMPLE TED BY THE ASSESSING OFFICER, WHO CONSCIOUSLY DID NOT INITIATE ANY PENALTY PROCEEDINGS IN RESPECT OF THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE. HOWEVER, PENALTY PROCEEDINGS WERE INITIATED AND LEVIED BY THE CIT(A) DURING THE COURSE OF HEARING THE APPEA L AGAINST THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT PROCEEDINGS. THE INITIATION OF THE PENALTY PROCEEDINGS HAS TO BE DURING THE COURSE OF ASSESSMENT, WHICH ADMITTEDLY, IS A SEPARATE AND DISTINCT PROCEEDING. THEREAFTER, THE REQUIREMENT OF THE ACT IS TO ISSUE SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY PENALTY FOR CONCEALMENT SHOULD NOT BE LEVIED AGAINST THE ASSESSEE. THE PROVISIONS OF SECTION 271(1)(C ) OF THE ACT IS CODE IN ITSELF AND THE SAME HAVE TO BE APPLIED FOR DECIDING THE WHETHER THE ASSESSEE HAS CONCEALED PARTICULARS OF ITS INCOME OR 17 ITA NO. 2104 /PN/201 3 FURNISHED INACCURATE PARTICULARS OF INCOME . B UT BEFORE APPLYING THE PROVISIONS OF SECTION 271(1) OF THE ACT, TH E SAT ISFACTION MUST BE RECORDED BY THE PERSON COMPLETING ASSESSMENT IN THE HANDS OF ASSESSEE AS TO THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY THE PERSON WHO IS BEING ASSESSED BY THE SAID OFFICER. UNDOUBTEDLY, THE JURISD ICTION TO ASSESS A PERSON LIES WITH THE ASSESSING OFFICER AND ALSO WITH THE CIT(A) OR THE COMMISSIONER IN HIS REVISION JURISDICTION , BUT THE EXERCISE OF POWER TO RECORD SATISFACTION THAT THE PERSON HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULA RS OF INCOME AND THEREAFTER, INITIATE THE PENALTY PROCEEDINGS AGAINST SUCH PERSON, HAS TO BE EXERCISED IN A SSESSMENT PROCEEDING ITSELF I.E. DURING THE COMPLETION OF THE ASSESSMENT OF THE INCOME IN THE HANDS OF ASSESSEE. THE POWER WHICH HAS BEEN ENSHRINED ON THE CIT(A) OR THE COMMISSIONER , IN THE COURSE OF ANY PROCEEDINGS , IS IN RELATION TO THE ASSESSMENT PROCEEDINGS BEING CARRIED ON BY THE SAID PERSON. THERE ARE TWO STAGES BEFORE THE PENALTY FOR CONCEALMENT CAN BE LEVIED AGAINST ANY PERSON. THE FIRST STA GE IS THE INITIATION OF PROCEEDINGS WHICH HAS TO BE DONE DURING PERSON. THE FIRST STA GE IS THE INITIATION OF PROCEEDINGS WHICH HAS TO BE DONE DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, WHICH ADMITTEDLY IS A SEPARATE STAGE. AFTER SUCH SATISFACTION HAS BEEN RECORDED, THEN THE ASSESSEE IS TO BE SHOW CAUSED AS TO WHY PENALTY FOR CONCEALMENT SHOULD NOT BE LEVIED AND THIS POWER IS ENSHRINED IN SECTION 271 (1) OF THE AC T , UNDER WHICH, BEFORE IMPOSING ANY PENALTY, SHOW CAUSE NOTICE IS AGAIN TO BE GIVEN TO THE ASSESSEE WITHIN TIME FRAME PROVIDED UNDER THE ACT IN SECTION 275 OF THE ACT. THE HONBL E HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) ALSO ADJUDICATED ON THE ISSUE AND HELD AS UNDER : - WHO INITIATES PENALTY PROCEEDINGS 54. AS IS CLEAR FROM THE WORDS IN SECTION 271, IF THE ASSESSING OFFICER OR THE COMMISSIONER OF INCOME - TAX (APPEALS) OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME, HE MAY DIRECT THAT SUCH PERSON SHALL PAY B Y WAY OF PENALTY THE AMOUNT MENTIONED THEREIN. THEREFORE, THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE PERSON WHO IS SATISFIED ABOUT THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF 18 ITA NO. 2104 /PN/201 3 INCOME IN THE COURSE OF ANY PROCEEDINGS UNDER T HIS ACT. IN A GIVEN CASE IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL OR IN REVISION, THE AUTHORITY IS SATISFIED REGARDING CONCEALMENT AND FURNISHING OF INACCURATE PAR TICULARS, THEN IT IS THAT AUTHORITY WHICH IS SATISFIED ABOUT THE SAID CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS HAS TO INITIATE PENALTY PROCEEDINGS AND THEN PASS ORDERS IN RESPECT OF THE PENALTY TO BE IMPOSED. THE IMPOSITION OF PENALTY MAY BE DON E AT THE STAGE OF ASSESSMENT OR AT THE STAGE OF AN APPEAL. AT THE ASSESSMENT STAGE, THE ASSESSING OFFICER HAS TO ISSUE A NOTICE TO THE ASSESSEE TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOSED AND THIS NOTICE HAS TO BE ISSUED IN THE COURSE OF THE ASSESSME NT PROCEEDINGS. THE IMPOSITION OF PENALTY HAS ALSO TO BE DONE BY THE ASSESSING OFFICER BUT THIS CAN BE DONE WITHIN THE TIME PRESCRIBED IN SECTION 275. 55. IN THE CASE OF INITIATION OF PENALTY PROCEEDINGS DURING THE COURSE OF APPEAL OR REVISION PROCEEDINGS, THE AUTHORITY WHO HAS TO BE SATISFIED IS THE AUTHORITY IN WHOSE PROCEEDINGS THE ISSUE IS EXAMINED AND NOT ANY OTHER AUTHORITY. THE LEVY OF PENALTY HAS ALSO TO BE DONE BY THE SAME OFFICER AS THE LANGUAGE USED IN THE LATER PART OF SECTION 271 IS THAT : 'HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY'. THE AUTHORITY IN WHICH PROCEEDINGS, THERE IS SATISFACTION OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME ALONE CAN LEVY THE PENALTY AND NOT ANY OTHER AUTHORITY. IF THE COMMISSIONER (A PPEALS) IN THE COURSE OF APPEAL PROCEEDINGS IS SATISFIED THEN IT IS THE COMMISSIONER (APPEALS) WHO HAVE TO INITIATE THE PENALTY PROCEEDINGS AND ALSO COMPLETE THE SAME BY LEVYING THE PENALTY. HE CANNOT PERMIT THE ASSESSING AUTHORITY TO LEVY PENALTY. 22. T HE HONBLE HIGH COURT VERY CLEARLY LAID DOWN THAT THE LEVY OF PENALTY CAN BE TWO STAGES I.E. DURING THE COURSE OF ASSESSMENT BY THE ASSESSING OFFICER OR DURING THE COURSE OF APPEAL OR REVISION PROCEEDINGS, WHERE IF THE AUTHORITY IS SATISFIED THE COURSE OF APPEAL OR REVISION PROCEEDINGS, WHERE IF THE AUTHORITY IS SATISFIED RE GARDING CONC EALMENT AND FURNISHING OF INACCURATE PARTICULARS, IT IS THEN THAT AUTHORITY, WHICH IS SATISFIED, HAS TO INITIATE PENALTY PROCEEDINGS AND THEREAFTER PASS ORDERS IN RESPECT OF THE PENALTY TO BE IMPOSED. THE HONBLE HIGH COURT ALSO ELABORATED THAT THE IMPOSI TION OF PENALTY MAY BE DONE AT THE STAGE OF ASSESSMENT OR AT THE STAGE OF AN APPEAL. AT THE ASSESSMENT STAGE, THE ASSESSING OFFICER HAS TO ISSUE NOTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED AND THIS NOTICE HAS TO BE ISSUED I N THE COURSE OF ASSESSMENT PROCEEDINGS. THEREAFTER, THE IMPOSITION OF PENALTY HAS ALSO TO BE DONE BY THE ASSESSING OFFICER WITHIN PRESCRIBED TIME. WHERE THE PENALTY PROCEEDINGS ARE INITIATED DURING THE COURSE OF APPEAL OR REVISION PROCEEDINGS, THE AUTHOR ITY WHO HAS TO BE SATISFIED IS THE AUTHORITY IN WHOSE PROCEEDINGS, THE ISSUE IS EXAMINED AND NOT ANY OTHER AUTHORITY. FURTHER, LEVY OF PENALTY HAS ALSO TO BE DONE BY THE SAME AUTHORITY , BUT BY DIFFERENT PROCEEDINGS . THE HONBLE HIGH COURT VERY CLEARLY HE LD THE AUTHORITY IN 19 ITA NO. 2104 /PN/201 3 WH OSE PROCEEDINGS, THERE IS SATISFACTION OF CONCEALMENT OR FURNISHING INACCURATE PARTICULARS OF INCOME ALONE , CAN LEVY THE PENALTY AND NOT ANY OTHER AUTHORITY. APPLYING THE ABOVE SAID PRINCIPLES LAID DOWN BY THE HONBLE HIGH COURT OF K ARNATAKA (SUPRA) , IT IS CLEAR THAT THERE ARE TWO STAGES I.E. FIRST STAGE OF INITIATION OF PENALTY PROCEEDINGS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND / OR APPEAL OR REVISION PROCEEDINGS, AS THE CASE MAY BE AND THEREAFTER, LEVY OF PENALTY FOR CONCEA LMENT BY A SEPARATE ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT . THE PERSON WHO IS MAKING THE ASSESSMENT IN THE HANDS OF A PERSON , IS THE PERSON AUTHORIZED TO GIVE THE SATISFACTION AS TO WHETHER THE ADDITION MADE IN THE HANDS OF THE SAID ASSESSEE JUST IFIES INITIATION OF PENALTY PROCEEDINGS. THE EXERCISE OF INITIATION OF PENALTY PROCEEDINGS IS AT THE STAGE OF ASSESSMENT BY THE ASSESSING OFFICER OR AT THE STAGE OF AN APPEAL AGAINST THE QUANTUM APPEAL, BY THE CIT(A) OR IN THE REVISION PROCEEDINGS. THERE AFTER, THE PERSON WHO HAS INITIATED THE PENALTY PROCEEDINGS IS ONLY THE COMPETENT PERSON TO LEVY THE PENALTY PROCEEDINGS AND NOT ANY OTHER AUTHORITY. ANY OTHER AUTHORITY. 23. VISITIN G THE FACTS OF THE PRESENT CASE, THE ASSESSMENT IN THE CASE OF THE ASSESSEE BEFORE US WAS CO MPLETED BY THE ASSESSING OFFICER, WHO DID NOT RECORD ANY SATISFACTION FOR INITIATING THE PENALTY PROCEEDINGS IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF DIFFERENTIAL AMOUNT OF RS.1.24 CRORES. THE PENALTY ORDER FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT WAS ALSO PASSED BY THE SAID ASSESSING OFFICER WITHOUT LEVYING ANY PENALTY ON ACCOUNT OF ADDITIONAL INCOME. HOWEVER, THE CIT(A) WHILE DECIDING THE APPEAL AGAINST THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS OF THE VIEW THAT THE PENALTY FOR CONCEALMENT IS ALSO LEVIABLE ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN ITS RETURN OF INCOME PURSUANT TO SURVEY ACTION. WE FIND NO MERIT IN THE EXERCISE OF JURISDICTION BY THE CIT(A) IN THE PRESENT CASE, WHERE THE ASSESSMENT PROCEEDIN GS WERE COMPLETED BY THE ASSESSING OFFICER AND THEREAFTER, NO APPEAL WAS FILED BEFORE THE 20 ITA NO. 2104 /PN/201 3 CIT(A) AGAINST THE QUANTUM ADDITION AND THERE WERE NO PROCEEDINGS BEFORE THE CIT(A) VIS - - VIS THE QUANTUM ADDITIONS. THE ASSESSING OFFICER LEVIED PENALTY ON TWO ACCO UNTS AND DID NOT LEVY ANY PENALTY ON ACCOUNT OF ADDITIONAL INCOME OFFERED BY THE ASSESSEE. THE CIT(A) WHILE DISPOSING OFF THE APPEAL AGAINST THE ORDER OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAD NO JURISDICTION TO INITIATE THE PENALTY PROCEE DINGS AND THEREAFTER, ALSO COMPLETE THE SAME. THE ORDER INITIATING THE PENALTY PROCEEDINGS HAS TO BE A DIFFERENT ORDER AND HAS TO BE PASSED BY THE PERSON, WHO HAS MADE THE ADDITION / ASSESSMENT IN THE HANDS OF THE ASSESSEE. IN CASE THE SAID PERSON IS CIT (A) , THEN HE IS COMPETENT TO INITIATE THE PENALTY PROCEEDINGS AND ALSO COMPETENT TO LEVY THE PENALTY BY PASSING A SEPARATE ORDER, BUT THE CIT(A) IS NOT COMPETENT TO INITIATE AND LEVY THE PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT BY THE SAM E ORDER WHILE DECIDING THE APPEAL AGAINST THE ORDER LEVYING PENALTY FOR CONCEALMENT PASSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE ACT. THE CIT(A) IN THE PRESENT CASE HAS EXCEEDED THE JURISDICTION AND WE FIND NO MERIT IN THE ORDER PASSED B Y THE CIT(A). THE JURISDICTION AND WE FIND NO MERIT IN THE ORDER PASSED B Y THE CIT(A). 24. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE BEFORE US HAS STRESSED THAT THE HONBLE HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) HAD LAID DOWN THE PROPOSITION THAT WHERE THE CIT(A) DURING THE COUR SE OF APPELLATE PROCEEDINGS, HAD INITIATED THE PENALTY PROCEEDINGS, THEN HE HAD TO COMPLETE THE SAME BY LEVYING THE PENALTY. WE FIND AN ERROR IN THE SAID PROPOSITION PROPOSED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE . A DMITTEDLY, WHERE TH E CIT(A) HAS COMPLETED THE ASSESSMENT DURING THE COURSE OF APPELLATE PROCEEDINGS AND HE I S SATISFIED THAT THERE IS A CASE OF CONCEALMENT AND FURNISHING OF IN ACCURATE PARTICULARS OF INCOME, THEN HE CAN INITIATE THE PENALTY PROCEEDINGS. THEREAFTER, THE CIT( A) IS ONLY COMPETENT TO ISSUE SHOW CAUSE NOTICE TO THE ASSESSEE BEFORE LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THEREAFTER, LEVY THE PENALTY FOR CONCEALMENT , IF THE FACTS OF THE CASE SO DESIRE. IN 21 ITA NO. 2104 /PN/201 3 THE FACTS OF THE PRESENT CASE BEFORE US, THIS IS NOT THE POSITION. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER , WHO HAD NOT RECORDED ANY SATISFACTION FOR INITIATING THE PENALTY FOR CONCEALMENT UNDER SECTION 271(1)(C) OF THE ACT , WITH REGARD TO THE ADDITIONAL INCOME OFFERED. THEREAFTE R, IN THE ORDER LEVYING PENALTY ALSO, THE ASSESSING OFFICER HAD NOT LEVIED ANY PENALTY. THE CIT(A) WHILE DECIDING THE APPEAL AGAINST THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS ONLY ABREST OF THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AND WHILE DECIDING THE SAID APPEAL, HE HAD NO JURISDICTION TO INITIATE AND LEVY PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON AN ISSUE AGAINST WHICH, THE ASSESSMENT WAS MADE BY THE ASSESSING OFFICER. 25. BEFORE THE HON BLE HIGH COURT, THERE WERE SERIES OF APPEALS AND AFTER LAYING DOWN THE PROPOSITION WITH REGARD TO THE INITIATION AND LEVYING OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT, THE HONBLE HIGH COURT WHILE DECIDING ITA NOS. 2564 AND 2565 OF 2005 OBSERVED AS UNDER: - 64. IN THE LIGHT OF W HAT WE HAVE STATED ABOVE, IT IS CLEAR THAT MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND ACCORDINGLY ASSESSMENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION AND WHEN THE ASSESSEE HAS PAID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF ANY MATER IAL ON RECORD TO SHOW THE CONCEALMENT OF INCOME, IT CANNOT BE INFERRED THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT. MOREOVER, THE ASSESSEE HAS OFFERED THE EXPLANATION. THE SAID EXPLANATION IS NOT FOUND TO BE FALSE. ON THE CONTRARY, IT IS HELD TO BE BONA FIDE. IN FACT IN THE ASSESSMENT PROCEEDINGS THERE IS NO WHISPER ABOUT THESE CONCEALMENT. UNDER THESE CIRCUMSTANCES, THE ENTRY FOUND IN THE ROUGH CASH BOOK COULD HAVE BEEN REFLECTED IN THE ACCOUNTS FOR THE SAID FINANCIAL YEAR IN WHICH THE SURVEY TOOK PLACE AS THE LAST DATE FOR CLOSING THE ACCOUNT WAS STILL NOT OVER. THE VERY FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER, IT IS CLEAR THE CONDUCT OF THE ASSESSEE CANNOT BE CONSTRUED AS MALA FIDE. THEREFORE, THE TRIBUN AL WAS JUSTIFIED IN SETTING ASIDE THE ORDERS PASSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AUTHORITY. 65. IN SO FAR AS THE IMPOSITION OF PENALTY IS CONCERNED, IT IS NOT IN ACCORDANCE WITH LAW. NO FAULT COULD BE FOUND WITH THE TRIBUNAL FOR DEL ETING THE PENALTY. THUS, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 2 6 . THE FACTS AND ISSUES BEFORE THE US ARE IDENTICAL TO THE FACTS AND ISSUES BEFORE THE HONBLE HIGH COURT OF KARNATAKA IN CIT & ANR. VS . MANJUNATH CO TTON AND GINNING FACTORY (SUPRA) AND FOLLOWING THE RATIO LAID DOWN BY THE HONBLE HIGH COURT, 22 ITA NO. 2104 /PN/201 3 WE HOLD THAT THERE IS NO MERIT IN THE JURISDICTION EXERCISED BY THE CIT(A) FOR INITIATING AND LEVYING PENALTY FOR CONCEALMENT OF INCOME AND FURNISHI NG INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 2 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF OCTO BER , 2015. SD/ - SD/ - ( PRADIP KUMAR KEDIA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER PUNE ; DATED : 30 TH OCTO BER , 2015. / GCVSR / COPY OF THE O RDER IS FORWARDED TO : / 1 ) THE ASSESSEE; 2 ) THE DEPARTMENT; 3 ) THE CIT(A) , AURANGABAD ; 4 ) THE CIT , AURANGABAD ; 5 ) THE DR A BENCH, I.T.A.T., PUNE; 6 ) GUARD FILE. / BY ORDER , //TRUE COPY// / SR. PRIVATE SECRETARY , / ITAT, PUNE