RAJHANS METALS P.LTD, MUMBAI V. DCIT 9(3), MUMBAI

ITA 2260/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7991 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 12-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESH
• Assessee Lawyers: K K VED
• Keywords: Gross profit estimation; Unexplained cash credit; Search and seizure; Principle of natural justice; Wrong claim
• Section: 143(3); 142(1); 68; 144

Judgement Text

P A G E | 1 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE SHRI P.K. BANSAL , VICE PRESIDENT AND SHRI RAVISH SOOD, JM ITA NO. 2260 /MUM/201 3 ( / ASSESSMENT YEAR: 2007 - 08 ) M/S RAJHANS METALS PVT. LTD., SHILEY INDUSTRIAL ESTATE, UDYOG NAGAR, OFF S.V. ROAD, GOREGAON (WEST), MUMBAI - 400 0 62 / VS. D CIT, 9(3), MUMBAI . ./ ./ PAN NO. AAACR5424Q ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI K.K. VED , A.R / RESPONDENT BY : SHRI SAURABH DESHPANDE , D.R / DATE OF HEARING : 29.11.2017 / DATE OF PRONOUNCEMENT : 2 0 .1 2 .2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE COMPANY IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A) - 20 , MUMBAI, DATED 23.01.2013 WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 144 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 16.12.2009 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL : - P A G E | 2 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AS WELL AS ON THE FACTS IN IMPOSING PENALTY OF RS. 69,60,041/ - U/S. 271(1)(C) ON ACCOUNT OF ADDITION MADE IN RESPECT OF LOW GROSS PROFIT ON ESTIMATED BASIS. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE IT. THE APPELLAN T CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR WITHDRAW ONE OR MORE GROUNDS OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF EXTRUDED BRASS RODS AND TRADING IN BRASS SCRAP HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2007 - 08 ON 25.10.2007 , DECLARING TOTAL INCOME OF RS. 1,92,97,450 / - . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) . 3 . THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSEE DESPITE BEING AFFORDED SUFFICIENT OPPORTUNITY, HOWEVER, DID NOT FULLY COMPLY WITH THE DIRECTIONS OF THE A.O AND AS SUCH FAILED TO PLACE ON RECORD THE REQUISITE INFORMATION AS WAS SO CALLED FOR BY HIM. THE A.O OBSERVED THAT THE ASSESSEE INSTEAD OF FURNISHING THE INFORMATION CALLED FOR , RATHER ADOPTED AN EVASIVE APPROACH, AS A RESULT WHEREOF HE NEITHER PRODUCE D THE BOOKS OF ACCOUNTS, BILLS, VOUCHERS, BANK STATEMENT ETC., BUT RATHER AVERRED TH AT AS THE REQUISITE INFORMATION WAS BEING MAINTAINED AT HIS OFFICE AT JAMNAGAR, WHICH WAS AT A FAR OF DISTANCE , THEREFORE, THE SPECIFIC DETAILS WHICH WERE REQUIRED FOR ASCERTAINING THE CORRECTNESS OF THE RETURN OF INCOME MAY THEREIN BE INTIMATED TO HIM. TH E A.O OBSERVED THAT THE APPROACH OF THE ASSESSEE WHEREIN HE HAD CATEGORICALLY STATED THAT IT WAS NOT POSSIBLE FOR HIM TO FULLY COMPLY WITH THE INFORMATION CALLED FOR U/S 142(1) OF THE ACT, THUS SMACKED OF DEFIANCE AND SPIRIT OF UNWILLINGNESS TO COOPERATE IN THE DUE PROCESS OF LAW. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS, THEREIN REALIZING THAT THE ASSESSEE WAS ABSOLUTELY NON COOPERATIVE AND THE ASSESSMENT IN ITS CASE WAS GETTING BARRED BY P A G E | 3 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) LIMITATION ON 31.12.2009, THEREFORE, PROCEEDED WITH AND COMPLETE D THE ASSESSMENT TO THE BEST OF HIS JUDGMENT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD U/S 144 OF THE ACT. THE A.O IN THE COURSE OF FRAMING OF THE BEST JUDGMENT ASSESSMENT, OBSERVING THAT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESS EE WERE NOT OPEN FOR VERIFICATION, THEREFORE, REJECTED THE BOOK RESULTS U/S 145(3) OF THE ACT AND TOOK RECOURSE TO ESTIMATION OF THE BOOK PROFITS . THE A.O DELIBERATING ON THE PROFIT AS WAS REVEALED FROM THE PROFIT AND LOSS ACCOUNT FURNISHED BY THE ASSESSEE ALONGWITH ITS RETURN OF INCOME, THEREIN OBSERVE D THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN GROSS PROFIT RATIO OF 7.43%. THE A.O TAKING COGNIZANCE OF THE GROSS PROFIT RATES SHOWN BY THE ASSESSEE IN THE PRECEDING TWO ASSESSMENT YEARS, VIZ. A.Y. 2006 - 07 (G.P. RATE OF 9.16%) AND A.Y. 2005 - 06 (G.P. RATE 10.40%), THEREIN WORKED OUT THE AVERAGE OF THE GROSS PROFIT RATE OF THE SAID LAST TWO ASSESSMENT YEARS AT 9.78%. THE A.O BY REFERRING TO THE AVERAGE G.P. RATE OF 9.78% THEREIN ESTIMATED THE TURNOVER OF THE ASSESSEE AT RS. 135,31,60,078/ - AS AGAINST THE TURNOVER OF RS. 131,88,08,493/ - AS SHOWN BY THE ASSESSEE, AND ON THE SAID BASIS WORKED OUT THE SUPPRESSED SALES IN THE HANDS OF TH E ASSESSEE AT RS. 3,43,51,585/ - AND MADE AN ADDITION OF THE SA ME TO THE RETURNED INCOME OF THE ASSESSEE. THE A.O FURTHER DELIBERATING ON THE DETAILS OF THE UNSECURED LOANS AGGREGATING TO RS. 4,09,53,611/ - AS HAD BEEN CLAIM ED BY THE ASSESSEE IN ITS BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION, BEING OF THE VIEW THAT AS THE GENUINENESS OF THE SAME WERE NOT OPEN FOR VERIFICATION, THER EFORE, ADDED THE SAME AS AN UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE U/S 68 OF THE ACT. THE A.O FURTHER OBSERVED THAT THE INDIRECT EXPENSES DEBITED BY THE ASSESSEE UNDER V ARIOUS HEADS IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION WERE FOUND TO BE EXCESSIVE AS I N COMPARISON TO THOSE FOR THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2006 - 07, P A G E | 4 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) THEREFORE, ON THE BASIS OF HIS SAID CONVICTION , AFTER CARRYING OUT A CO MPARATIVE ANALYSIS OF THE SAID EXPENSES FURTHER DISALLOWED AN AMOUNT OF RS. 2,00,34,510/ - . THE A.O INTER ALIA MADE CERTAIN OTHER ADDITIONS/DISALLOWANCES, VIZ. (I) ADDITION TO THE VALUE OF THE CLOSING STOCK (RS. 41,95,452/ - ); (II) DISALLOWANCE OF PENALTY PA ID BY THE ASSESSEE UNDER THE CUSTOM ACT (RS. 1,52,500/ - ); (III) SUPPRESSED CONTRACT RECEIPTS (RS. 1,10,48,829/ - ); (IV) DISALLOWANCE U/S 40(A) OF PAYMENTS MADE TO CONTRACTORS (RS. 50,512/ - ); AND (V) DELAY IN DEPOSIT OF P.F. DUES (RS. 63,098/ - ). THE A.O ON T HE BASIS OF HIS AFORESAID DELIBERATIONS ASSESSED THE INCOME OF THE ASSESSEE COMPANY U/S 144, VIDE HIS ORDER DATED 16.12.2009 AT RS. 13,01,47,550/ - . 4. AGGRIEVED, THE ASSESSEE ASSAILED THE ASSESSMENT FRAMED BY THE A.O BEFORE THE CIT(A). THE CIT(A) AFTER D ELIBERATING ON THE CONTENTION S OF THE ASSESSEE IN THE BACKDROP OF THE FACTS OF THE CASE WAS THOUGH PERSUADED TO CONCLUDE THAT NOW WHEN THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND THE RELEVANT RECORDS BEFORE THE A.O , THEREFORE , THE LATTER W AS LEFT WITH NO OTHER ALTERNATIVE BUT TO FRAME THE ASSESSMENT TO THE BEST OF HIS JUDGMENT WHICH WOULD INVOLVE CERTAIN DEGREE OF GUESS WORK , BUT HOWEVER, CONCLUDED THAT THE ADOPTION OF THE G.P RATE BY THE A.O AT 9.78% WHICH WAS HIGHER THAN THE RATE OF 9.16% OF THE IMMEDIATE PRECEDING YEAR, DESPITE THE FACT THAT THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2007 - 08 HAD WITNESSED A COMPARATIVE INCREASE A TURNOVER BY RS. 50.83 CRORES, THUS CLEARLY SUFFERED FROM THE VICE OF ARBITRARINESS AND AS SUCH COULD NOT BE ACCEP TED. THE CIT(A) WHILE FOR DELETED THE SEVEN ADDITIONS/DISALLOWANCES WHICH WERE MADE BY THE A.O, AS WELL AS RESTRICTED THE ESTIMATION OF THE G.P RATE DURING THE YEAR UNDER CONSIDERATION TO 9%, AS A RESULT WHEREOF THE ADDITION OF RS. 3,43,51,585/ - MADE BY TH E A.O ON THE SAID COUNT WAS SCALED DOWN BY P A G E | 5 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) HIM TO RS. 2,06,77,484/ - , RESULTING TO A CONSEQUENTIAL RELIEF OF RS. 1,36,74,101/ - . 5. THAT BOTH THE ASSESSEE AND THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL AFTER DELIBERATING ON THE CONTENTION S OF BOTH THE PARTIES IN THE BACKDROP OF THE FACTS OF THE CASE DID NOT FIND FAVOUR WITH THE SAME AND DISMISSED BOTH THE APPEALS. 6. THE ASSESSEE BEING AGGR IEVED WITH THE ORDER OF THE TRIBUNAL WHICH HAD UPHELD THE ESTIMATION OF THE G.P RATE BY THE CIT(A) @ 9%, AS A RESULT WHEREOF AN ADDITION TO THE EXTENT OF RS. 2,06,77,484/ - WAS SUSTAINED, THEREIN CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE HIGH COURT OF BOMBAY. THE HIGH COURT VIDE ITS ORDER PASSED IN ITA NO. 449 OF 2015, DATED 12.09.2017 , BEING OF THE VIEW THAT THE TRIBUNAL AFTER DELIBERATING ON THE FACT THAT THE ASSESSEE HAD FAILED TO AVAIL MORE THAN ADEQUATE AND SUFFICIENT OPPORTUNITY GIVEN IN THE COUR SE OF THE ASSESSMENT PROCEEDINGS TO PRODUCE THE RECORDS BEFORE THE A.O, THEREFORE , CONCLUDED THAT THE ESTIMATION OF THE GROSS PROFIT IN THE HANDS OF THE ASSESSEE WHO WAS NOT COOPERATING WAS RIGHTLY MADE . THE HONBLE HIGH COURT BEING OF THE VIEW THAT NO PER VERSITY DID EMERGE FROM THE ORDER OF THE TRIBUNAL WHICH HAD TAKEN AN IMMINENTLY POSSIBLE VIEW, THEREFORE, DISMISSED THE APPEAL OF THE ASSESSEE. 7. THE A.O AFTER THE CULMINATION OF THE PROCEEDINGS BEFORE THE CIT(A), WHEREIN THE ADDITION MADE BY THE A.O IN THE HANDS OF THE ASSESSEE WAS SCALED DOWN FROM 9.78% TO 9%, THEREIN CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) MAY NOT BE IMPOSED ON IT AS REGARDS THE GROSS PROFIT ADDITION OF RS. 2,06,77,484/ - SUSTAINED BY THE CIT(A). THE A.O AFTER DELIBERATING ON THE EXPLANATION P A G E | 6 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) OF THE ASSESSEE THAT NO PENALTY U/S 271(1)(C) WAS LIABLE TO BE IMPOSED IN ITS CASE, THEREIN DID NOT FIND FAVOUR WITH THE SAME , AND BEING OF THE VIEW THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME IMPOSED A PENALTY OF RS. 69,60,041/ - . 8. THE ASSESSEE BEING AGGRIEVED WITH THE PENALTY IMPOSED BY THE A.O U/S 271(1)(C) CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). T HE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE WHICH WERE ADVANCED ON MERITS TO IMPRESS UPON HIM THAT NO PENALTY WAS CALLED FOR IN ITS HANDS, WAS HOWEVER NOT PERSUADED TO SUBSCRIBE TO THE SAME . THE CIT(A) BEING OF THE VIEW THAT THERE WAS A COMPLETE LACK OF PRODUCTION OF RELIABLE EVIDENCES BY THE ASSESSEE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THEREFORE, IT WAS NOT A CASE OF AN ESTIMATION OF INCOME IN SIMPLICITER , BUT RATHER , REVEALED CLEAR CONCEALMENT OF INCOME ON ITS PART . THE CI T(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS HOLDING A STRONG CONVICTION THAT THE ASSESSEE COULD NOT JUSTIFYING THE GROSS PROFIT OF 7.43% DURING THE YEAR UNDER CONSIDERATION ON BEING PITTED AS AGAINST THE AVERAGE GROSS PROFIT OF 9.78% OF THE IMMEDIATELY LAST TWO PRECEDING YEARS, THEREIN CONCLUDED THAT THE IMPOSITION OF PENALTY U/S 271(1)(C) BY THE A.O WAS WELL IN ORDER. THE CIT(A) ALSO DID NOT FIND FAVOUR WITH THE CONTENTION O F THE ASSESSEE THAT AS ITS CASES WERE BEING REGULARLY ASSESSED U/S 143(3) FOR A LMOST PAST 10 YEARS INCLUDING 6 CONSECUTIVE SCRUTINY ASSESSMENTS , WHEREIN THE BOOKS AND ACCOUNTS AND METHOD OF ACCOUN TING ADOPTED BY IT WAS ACCEPTED , THEREFORE, ITS BOOKS OF ACCOUNTS AND THE BOOK RESULTS WERE NOT LIABLE TO BE REJECTED. THE CIT(A) OBSERVED THAT THE SAID CONTENTION OF THE ASSESSEE WAS OF NO AVAIL , BECAUSE IF IT HAD PRODUCE D ALL THE RECORDS IN THE SAID PRECEDING YEARS BEFORE THE THEN A.OS, THEY COULD HAVE ACCEPTED THE SAME, BUT THAT WOULD IN NO WAY JUSTIFY NON PRODUCTION OF RECORDS DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) P A G E | 7 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) OBSERVED THAT IN THE ABSENCE OF BOOKS OF ACCOUNT AND ALL THE RELEVANT MATERIAL LIKE SALE BILLS, RELEVANT REGISTERS, PURCHASE BILLS AND OTHER DOCUMENTS, THE A.O COULD NOT BE PRESUMED TO BE SATISFIED WITH THE DISCLOSED GROSS PROFIT MERELY ON THE BASIS OF THE AUDIT REPORT FILED BY THE ASSESSEE . IT WAS OBSERVED BY THE CIT(A) THAT THE AUDIT REPORT WAS BASED ON T HE FIGURES GIVEN TO THE AUDITOR ALONG WITH THE BOOKS OF ACCOUNTS, BUT THE AUDITOR WAS NOT CONCERNED WITH THE GENUI NENESS OF THE DOCUMENTS OR FURTHER IMPLICATION OF DOCTORED DOCUMENTS OR SELF CREATED EVIDENCES, WHICH ONLY ON BEING PRODUCED BEFORE THE A.O COULD BE VERIFIED BY HIM AS BEING GENUINE AND NON FABRICATED ONE. THE CIT(A) ALSO WAS NOT IMPRESS ED BY THE CONTENTIO N OF THE ASSESSEE THAT NO PENALTY COULD BE LEVIED ON MERE ESTIMATION OF INCOME, BECAUSE AS THERE WAS A COMPLETE LACK OF PRODUCTION OF RELIABLE EVIDENCES AND BOOKS OF ACCOUNTS BY THE ASSESSEE , THEREFORE, THE GROSS PROFIT DISCLOSE D BY THE ASSESSEE COULD NOT BE ACCEPTED AND THE BOOKS RESULTS WERE LIABLE TO BE REJECTED BY APPLYING SEC. 145(3) . THE CIT(A) IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS CONCLUDED THAT IN THE CASE OF THE ASSESSEE THE CONCEALMENT OF INCOME WAS VERY CLEARLY VISIBLE, AND IT WAS FOR THE SAID REASON THAT THE PENALTY U/S 271(1)(C) WAS IMPOSED BY THE A.O. THE CIT(A) ON THE BASIS OF HIS AFORESAID OBSERVATIONS, THEREIN UPHELD THE PENALTY IMPOSED BY THE A.O U/S 271(1)(C) AND DISMISSED THE APPEAL OF THE ASSESSEE. 9. THE ASSESSEE BEING AGGRIEVE D WITH THE ORDER OF THE CIT(A) UPHOLDING THE PENALTY OF RS. 69,60,041/ - IMPOSED BY THE A.O U/S 271(1)(C), HAD THEREIN CARRIED THE MATTER IN APPEAL BEFORE US. THAT AT THE VERY OUTSET OF THE HEARING OF THE APPEAL THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SH ORT A.R) FOR THE ASSESSEE DREW OUR ATTENTION TO THE NOTICE ISSUED BY THE A.O UNDER SECTION 274 R.W.S. 271 OF THE INCOME TAX ACT, 1961 , DATED 16.12.2009. THE LD. A.R. TAKING US P A G E | 8 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) THROUGH THE SAID NOTICE THEREIN AVERRED THAT THE A.O HAD IN THE BODY OF THE NO TICE BY FAILING TO POINT OUT THE DEFAULT FOR WHICH THE ASSESSEE WAS BEING CALLED UPON TO SHOW CAUSE AS TO WHY NO PENALTY U/S 271(1)(C) MAY BE IMPOSED IN ITS HANDS, HAD THUS AS A MATTER OF FACT ISSUED THE NOTICE IN THE STANDARD PR O FORMA WITHOUT STRIKING OF F THE IRRELEVANT PORTION. IT WAS SUBMITTED BY THE ASSESSEE THAT THERE WAS A CLEAR NON APPLICATIO N OF MIND BY THE A.O WHILE ISSUING THE AFORESAID NOTICE. THE LD. A.R VEHEMENTLY SUBMITTED THAT THE PENAL PROVISION CONTEMPLATED U/S 271(1)(C) POSTULATES THAT PEN ALTY PRESCRIBED THEREIN CAN BE LEVIED IN THE EXISTENCE OF ANY OF THE TWO SITUATIONS, VIZ. (I) CONCEALMENT OF PARTICULARS OF INCOME; OR (II) FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. THE LD. A.R. SUBMITTED THAT IT WAS JUDICIALLY WELL UNDERSTOOD THAT CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME REFER RED TO IN SEC. 271(1)(C) OF THE ACT DENOTE TWO DIFFERENT CONNOTATIONS. THE LD. A.R SUBMITTED THAT NOW WHEN THE A.O HAD NOT SPECIFIED THE CHARGE AGAINST THE AS SESSEE FOR WHICH PENALTY WAS PROPOSED TO BE IMPOSED BY HIM, THEREFORE , THE SAME WAS CLEARLY VIOLATIVE OF THE PRINCIPLES OF NATURE JUSTICE AS THE ASSESSEE WAS IN NO POSITION TO PUT UP HIS DEFENCE APPROPRIATELY. THE LD. A.R IN ORDER TO DRIVE HOME HIS CONTENT ION RELIED ON THE FOLLOWING CASE LAWS : 1. ACIT VS. DIPESH M. PANJWANI (ITA NO. 6330/MUM/2012) DATED 18 MARCH 2016. 2. BUILDBYTE.COM (INDIA) PVT. LTD. VS. ACIT (ITA NO. 7350/MUM/2013) DATED 13 SEPTEMBER 2017. 3. ORBIT ENTERPRISES VS. ITO (ITA NO. 1596/MUM/2014) DATED 01 SEPTEMBER 2017. 4. PBA INFRASTRUCTURE LTD. VS. ACIT (ITA NO. 4188/MUM/2014) DATED 16 JUNE 2017. P A G E | 9 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) 5. M.V. LOGISTICS PVT. LTD VS. ITA (ITA NO. 2662/DEL/2017) DATED 13 SEPTEMBER 2017. THE LD. A.R FURTHER ADVERTING TO THE MERITS OF THE CASE AVERRED THAT NO W WHEN THE GROSS PROFIT ADDITION WAS MADE BY THE A.O BY MERELY ESTIMATING THE G.P @ 9.78%, WHICH THEREAFTER ON APPEAL WAS SCALED DOWN BY THE CIT(A) TO 9%, THEREFORE , THE CONSEQUENTIAL ADDITION OF RS. 2,06,77,484/ - AS SO REMAINED IN THE HANDS OF THE ASSESSE E WAS BACKED BY A PROCESS OF ESTIMATION, AS A RESULT WHEREOF IN THE ABSENCE OF ANY CONCRETE EVIDENCE SUBSTANTIATING THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME [ AS ALLEGED BY THE A.O IN THE PENALTY ORDER ] , NO PENALTY U/S 271(1)(C) COULD HAVE BEEN IMPOSED. PER CONTRA , THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R.) RELIED ON THE ORDER OF THE CIT(A). IT WAS SUBMITTED BY THE LD. D.R THAT A MERE NON STRIKING OF THE IRRELEVANT PORTION OF DEFAULT , BEING MERELY IN THE NATURE OF A TECHNICAL DEFAULT, COULD IN NO WAY INVALIDATE THE PENALTY IMPOSED BY THE A.O AFTER DELIBERATING ON THE FACTS OF THE CASE ON MERITS. THE LD. D.R FURTHER SUBMITTED THAT EVEN ON MERITS AS IT WAS A CLEAR CASE WHERE THE ASSESSEE HAD WITHHELD THE PRODUCTION OF BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC. AS A RESULT WHEREOF THE GENUINENESS AND VERACITY OF THE BOOK RESULTS OF THE ASSESSEE WERE NOT OPEN FOR VERIFICATION, THEREFORE, THE A.O AFTER PITTING THE TRADING RESULTS OF THE ASSESSE E FOR THE YEAR UNDER CONSIDERATION , AS AGAINST THE AVERAGE G.P RATE OF THE LAST TWO PRECEDING YEARS WHICH WORKED OUT AT 9.78 %, HAD THUS BY APPLYING THE SAME MADE THE ADDITION IN THE HANDS OF THE ASSESSEE. IT WAS AVERRED BY THE LD. D.R THAT THOUGH THE G.P R ATE ADOPTED BY THE A.O WAS SCALED DOWN BY THE CIT(A) TO 9%, HOWEVER, THE FACT OF THE CONCEALMENT OF PARTICULARS OF INCOME WHICH STOOD SUBSTANTIALLY PROVED, REMAINED AS SUCH. THE LD. D.R THUS SUBMITTED P A G E | 10 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) THAT THE APPEAL OF THE ASSESSEE WAS DEVOID OF ANY FORCE AND AS SUCH WAS LIABLE TO BE DISMISSED. 10. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GONE THOROUGH THE SHOW CAUSE NOTICE ISSUED BY THE A .O U/S 274 R.W.S. 271 OF THE ACT, DATED 16.12.2009. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE CONTENTION OF THE LD. A.R. THAT THE A.O WHILE CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) MAY NOT BE IMPOSED , HAD HOWEVER FAILED TO SPECIFY THE CHARGE FOR WHICH THE PENALTY WAS PROPOSED TO BE IMPOSED ON THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83 ITR 26 (SC) THAT PENALTY PROCEED INGS ARE NOTHING SHORT OF QUASI CRIMINAL PROCEEDINGS, THEREFORE , IN THE BACKDROP OF THE FACT THAT THE A.O PR O POSED TO IMPOSE PENALTY U/S 271(1)(C) , THUS REMAIN ED UNDER A STATUTORY OBLIGATION TO HAVE CLEARLY SPECIFIED IN THE SAID SHOW CAUSE NOTICE THE CHARG E FOR WHICH HE WAS PROCEEDING WITH TO IMPOSE PENALTY UNDER THE AFORESAID STATUTORY PROVISION I N THE HANDS OF THE ASSESSEE. WE ARE ABSOLUTELY NOT AT ALL IMPRESSED BY THE CONTENTION OF THE LD. D.R THAT NON STRIKING OF THE IRRELEVANT DEFAULT IN THE SHOW CAUSE NOTICE WAS MERELY A TECHNICAL DEFAULT WHICH WOULD IN NO WAY LEAD TO INVALIDATING OF THE PENALTY IMPOSED BY THE A.O AFTER DELIBERATING AT LENGTH ON THE MERITS OF THE CASE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ISSUE BEFORE US AND ARE OF THE CONSI DERED VIEW THAT IT IS SETTLED BEYOND ANY SCOPE OF DOUBT THAT THE TWO DEFAULTS CONTEMPLATED U/S 271(1)(C) OF THE ACT, VIZ. (I) CONCEALMENT OF PARTICULARS OF INCOME; AND (II) FURNISHING INACCURATE PARTICULARS OF SUCH INCOME ARE NOT MERELY TWO SEPARATE CONNOTATIONS, BUT RATHER, ARE SEPARATE DEFAULTS , BOTH OF WHICH OPERATE IN THEIR SEPARATE INDEPENDENT P A G E | 11 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) FIELDS AND ARE IN NO WAY OVERLAPPING IN NATURE . WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW THAT THE NON SPECIFYING OF THE CHARGE FOR WHICH THE ASSESSEE IS CALLED UPON TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) MAY NOT BE IMPOSED IN HIS HANDS WOULD BE FATAL TO THE VERY ASSUMPTION OF JURISDICTION BY THE A.O FOR PROCEEDING WITH AND IMPOSING SUCH PENALTY IN THE HANDS OF T HE ASSESSEE. WE ARE FURTHER OF THE CONSIDERED VIEW THAT IF THE NON SPECIFYING OF THE CHARGE FOR WHICH THE A.O PROPOSES TO IMPOSE PENALTY IN THE HANDS OF THE ASSESSEE U/S 271(1)(C) IS TO BE CHARACTERISED AS MERELY BEING IN THE NATURE OF A TECHNICAL DEFAULT, THEN WE ARE AFRAID THAT THE VERY PURPOSE OF PUTTING THE ASSESSEE TO NOTICE AND ISSUING A SHOW CAUSE NOTICE TO HIM U/S 274 R.W.S. 271 OF THE ACT, AS IS MANDATORILY REQUIRED AS PER SEC. 274(1) OF THE ACT , WOULD BE RENDERED AS REDUNDANT AND OTIOSE, AS THE AS SESSEE WOULD HAVE NO OPPORTUNITY IN THE ABSENCE OF THE SPECIFIC CHARGE TO DEFEND HIS CASE. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID VIEW OF THE LD. D.R., AND RATHER FIND THAT AS AVERRED BY THE LD. A.R. THE ISSUE AS REGARDS THE VALI DITY OF THE ORDER PASSED U/S 271(1)(C) IN T HE ABSENCE OF NON STRIKING OF THE IRRELEVANT CLAUSE IN THE SHOW CAUSE NOTICE U/S 274 R.W.S. 271 IS SQUARELY COVERED BY VARIOUS ORDER S OF THE COORDINATE BENCHES OF THE ITAT, MUMBAI. WE FIND THAT THE ISSUE HAD BEEN DELIBERATED AT LENGTH BY THE ITAT C BENCH, MUMBAI IN THE CASE OF PBA INFRASTRUCTURE LTD. VS. ACIT, CENTRAL CIRCLE - 36, MUMBAI IN ITA(S) NO. 4188, 4189 AND 4190/MUM/2014, DATED 16.06.2017, WHEREIN IT WAS HELD AS UNDER : 9. WE HAVE GIVEN A THOUGHTFUL CON SIDERATION TO THE CONTENTIONS OF THE AUTHORIZED REPRESENTATIVES BEFORE US, AND ARE OF THE CONSIDERED VIEW THAT A SIMILAR PROPOSITION HAD CAME UP BEFORE THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS (73 TAXMANN.COM P A G E | 12 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) 241)(KAR), WHEREIN THE HONBLE HIGH COURT FOLLOWING ITS EARLIER ORDER PASSED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565 (KAR) , HAD THEREIN HELD THAT WHERE THE NOTICE ISSUED BY THE A.O UNDER SEC. 274 R.W SEC. 271(1)(C) DOES NOT SPECIFY THE LIMB OF SEC. 271(1)(C) FOR WHICH THE PENALTY PROCEEDINGS HAD BEEN INITIATED, I.E WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, THE SAME HAD TO HELD AS BAD IN LAW. THE SPECIAL LEAVE PETI TION (SLP) FILED BY THE REVENUE AGAINST THE AFORESAID ORDER OF THE HONBLE KARNATAKA HIGH COURT HAD THEREAFTER BEEN DISMISSED BY THE HONBLE SUPREME COURT IN CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 248 (SC). WE FURTHER FIND THAT A SIMILAR VIE W HAD RECENTLY BEEN TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. SAMSON PERINCHERY (ITA NO. 1154 OF 2014; DT. 05.01.2017)(BOM). 10 . WE FURTHER FIND THAT AS AVERRED BY THE LD. A.R., THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MEHERJEE CASSINATH HOLDINGS PVT. LTD. (SUPRA), WHEREIN THE TRIBUNAL AFTER DELIBERATING AT LENGTH ON THE ISSUE UNDER CONSIDERATION, IN THE BACKDROP OF VARIOUS JUDICIAL PRONOUNCEMENTS, HAD THEREIN CONCLUDED THAT THE NON STRIKING OFF OF THE IRRELEVANT CHARGE IN THE NOTICE CLEARLY REFLECTS THE NON APPLICATION OF MIND BY THE A.O, AND IN THE BACKDROP OF THE SAID SERIOUS INFIRMITY, THEREIN RENDERS THE ORDER PASSED BY THE A.O U/S 271(1)(C) AS INVALID AND VOID AB INITIO. THE TRIBUNAL IN ITS AFORESAID ORDER IN THE CASE OF MEHERJEE CASSINATH HOLDINGS PVT. LTD.(SUPRA) HAD OBSERVED AS UNDER: - 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SEC. 271(1)(C) OF THE ACT EMPOWERS THE ASSESSING OFFICER TO IMPOSE PENALTY TO THE EXTENT SPECIFIED IF, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, HE IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULAR S OF SUCH INCOME. IN OTHER WORDS, WHAT SEC. 271(1)(C) OF THE ACT POSTULATES IS THAT THE PENALTY CAN BE LEVIED ON THE EXISTENCE OF ANY OF THE TWO SITUATIONS, NAMELY, FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, IT IS OBVIOUS FROM THE PHRASEOLOGY OF SEC. 271(1)(C) OF P A G E | 13 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) THE ACT THAT THE IMPOSITION OF PENALTY IS INVITED ONLY WHEN THE CONDITIONS PRESCRIBED U/S 271(1)(C) OF THE ACT EXIST. IT IS ALSO A WELL ACCEPTED PROPOSITION THAT 'CON CEALMENT OF THE PARTICULARS OF INCOME' AND 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' REFERRED TO IN SEC. 271(1)(C) OF THE ACT DENOTE DIFFERENT CONNOTATIONS. IN FACT, THIS DISTINCTION HAS BEEN APPRECIATED EVEN AT THE LEVEL OF HONBLE SUPREME COURT NO T ONLY IN THE CASE OF DILIP N. SHROFF (SUPRA) BUT ALSO IN THE CASE T. ASHOK PAI, 292 ITR 11 (SC). THEREFORE, IF THE TWO EXPRESSIONS NAMELY 'CONCEALMENT OF THE PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME' HAVE DIFFERENT CONNOTATIONS, IT IS IMPERATIVE FOR THE ASSESSEE TO BE MADE AWARE AS TO WHICH OF THE TWO IS BEING PUT AGAINST HIM FOR THE PURPOSE OF LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, SO THAT THE ASSESSEE CAN DEFEND A CCORDINGLY. IT IS IN THIS BACKGROUND THAT ONE HAS TO APPRECIATE THE PRELIMINARY PLEA OF ASSESSEE WHICH IS BASED ON THE MANNER IN WHICH THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10.12.2010 HAS BEEN ISSUED TO THE ASSESSEE COMPANY. A COPY OF THE SA ID NOTICE HAS BEEN PLACED ON RECORD AND THE LEARNED REPRESENTATIVE CANVASSED THAT THE SAME HAS BEEN ISSUED BY THE ASSESSING OFFICER IN A STANDARD PROFORMA, WITHOUT STRIKING OUT THE IRRELEVANT CLAUSE. IN OTHER WORDS, THE NOTICE REFERS TO BOTH THE LIMBS OF S EC. 271(1)(C) OF THE ACT, NAMELY CONCEALMENT OF THE PARTICULARS OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. QUITE CLEARLY, NON - STRIKING - OFF OF THE IRRELEVANT LIMB IN THE SAID NOTICE DOES NOT CONVEY TO THE ASSESSEE AS TO WHICH OF TH E TWO CHARGES IT HAS TO RESPOND. THE AFORESAID INFIRMITY IN THE NOTICE HAS BEEN SOUGHT TO BE DEMONSTRATED AS A REFLECTION OF NON - APPLICATION OF MIND BY THE ASSESSING OFFICER, AND IN SUPPORT, REFERENCE HAS BEEN MADE TO THE FOLLOWING SPECIFIC DISCUSSION IN THE ORDER OF HON'BLE SUPREME COURT IN THE CASE OF P A G E | 14 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) DILIP N. SHROFF (SUPRA): - '83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE FACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGRAPHS WERE TO BE DELETED, BUT THE SOME HAD NOT BEEN DONE. THUS, THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOME OR HE HAD FURNISH ED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS. 84. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON - APPLICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. (SEE MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 2 SCC 718]' 9. FACTUALLY SPEAKING, THE AFORESAID PLEA OF ASSESSEE IS BORNE OUT OF RECORD AND HAVING REGARD TO THE PARITY OF REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF DI LIP N. SHROFF (SUPRA), THE NOTICE IN THE INSTANT CASE DOES SUFFER FROM THE VICE OF NON - APPLICATION OF MIND BY THE ASSESSING OFFICER. IN FACT, A SIMI LAR PROPOSITION WAS ALSO ENUNCIATED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S. SSA'S EMERALD MEADOWS (SUPRA) AND AGAINST SUCH A JUDGMENT, THE SPECIAL LEAVE PETITION FILED BY THE REVENUE HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT VID E ORDER DATED 5.8.2016, A COPY OF WHICH IS ALSO PLACED ON RECORD. 10. IN FACT, AT THE TIME OF HEARING, THE ID. CIT - DR HAS NOT DISPUTED THE FACTUAL MATRIX, BUT SOUGHT TO POINT OUT THAT THERE IS DUE APPLICATION OF MIND BY THE ASSESSING OFFICER WHICH CAN BE DEMONSTRATED FROM THE DISCUSSION IN THE ASSESSMENT ORDER, WHEREIN AFTER DISCUSSING THE REASONS FOR THE DISALLOWANCE, HE HAS RECORDED A SATISFACTION THAT PENALTY PROCEEDINGS ARE INITIATED U/S271(1)(C) OF THE ACT FO R FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN OUR CONSIDERED OPINION, THE ATTEMPT OF THE ID. CIT - DR TO DEMONSTRATE P A G E | 15 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) APPLICATION OF MIND BY THE ASSESSING OFFICER IS NO DEFENCE INASMUCH AS THE HON'BLE SUPREME COURT HAS APPROVED THE FACTUM OF NON - STRIKI NG OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE AS REFLECTIVE OF NON - APPLICATION OF MIND BY THE ASSESSING OFFICER. SINCE THE FACTUAL MATRIX IN THE PRESENT CASE CONFORMS TO THE PROPOSITION LAID DOWN BY THE HON'BLE SUPREME COURT, WE PROCEED TO REJECT THE ARGUMENTS ADVANCED BY THE ID. CIT - DR BASED ON THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. FURTHER, IT IS ALSO NOTICEABLE THAT SUCH PROPOSITION HAS BEEN CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT ALSO IN THE CASE OF SHRI S AMSON PERINCHERY, ITA NOS. 1154, 953, 1097& 1126 OF 2014 DATED 5.1.2017 (SUPRA) AND THE DECISION OF THE TRIBUNAL HOLDING LEVY OF PENALTY IN SUCH CIRCUMSTANCE BEING BAD, HAS BEEN APPROVED. 11. APART FROM THE AFORESAID, THE ID. CIT - DR MADE AN ARGUMENT BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA & OTHERS, 216 ITR 660 (BORN.) TO CANVASS SUPPORT FOR HIS PLEA THAT NON - STRIKING OFF OF THE IRRELEVANT PORTION OF NOTICE WOULD NOT INVALIDATE THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. WE HAVE CAREFULLY CONSIDERED THE SAID ARGUMENT SET - UP BY THE ID. CIT - DR AND FIND THAT A SIMILAR ISSUE HAD COME UP BEFORE OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA). OU R COORDINATE BENCH, AFTER CONSIDERING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. KAUSHALYA & ORS., (SUPRA) AS ALSO THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA) AND DHARMENDRA TEXTILE PROCESSORS, 306 ITR 277 (SC) DEDUCED AS UNDER: - 12 A COMBINED READING OF THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT. B KAUSHALYA AND OTHERS (SUPRA) AND THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF DILIP N SHROFF (SUPRA) WOULD MAKE IT CLEAR THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. IN THE CASE OF LAKHDIR LAIJI (SUPRA), THE AO ISSUED NOTICE U/S 274 FOR CONCEALMENT OF PARTICULARS OF INCOME BUT LEVIED PENALTY FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE GUJARAT HIGH COURT P A G E | 16 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) QUASHED THE PENALTY SINCE THE BASIS FOR THE PENALTY PROCEEDINGS DISAPPEARED WHEN IT WAS HELD THAT THERE WAS NO SUPPRESSION OF INCOME. THE HON'BLE KERA LA HIGH COURT HAS STRUCK DOWN THE PENALTY IMPOSED IN THE CASE OF N.N.SUBRAMANIA LYER VS. UNION OF INDIA (SUPRA), WHEN THERE IS NO INDICATION IN THE NOTICE FOR WHAT CONTRAVENTION THE PETITIONER WAS CALLED UPON TO SHOW CAUSE WHY A PENALTY SHOULD NOT BE IMPOS ED. IN THE INSTANT CASE, THE AO DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WERE INITIATED AND FURTHER HE HAS ISSUED A NOTICE MEANT FOR CALLING THE ASSESSEE TO FURNISH THE RETURN OF INCOME. HENCE, IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS WERE INITIATED AND ALSO ISSUED AN INCORRECT NOTICE. BOTH THE ACTS OF THE AO, IN OUR VIEW, CLEARLY SHOW THAT THE AO DID NOT APPLY HIS MIND WHEN HE ISSUED NOTICE TO THE ASSESSEE AND HE WAS NOT SURE AS TO WHAT PURPOSE THE NOTICE WAS ISSUED. THE HONBLE BOMBAY HIGH COURT HAS DISCUSSED ABOUT NON - APPLICATION OF MIND IN THE CASE OF KAUSHALYA (SUPRA) AND OBSERVED AS UNDER: - THE NOTICE CLEARLY DEMONSTRATED NON - APPLICATION OF MIND ON THE PART OF THE INSPECTING ASSISTANT COMMISSIONER. THE VAGUENESS AND AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTUNITY OF THE ASSESSEE SINCE HE DID NOT KNOW WHAT EXACT CHARGE HE HAD TO FACE. IN THIS BACK GROUND, QUASHING OF TH E PENALTY PROCEEDINGS FOR THE ASSESSMENT YEAR 1967 - 68 SEEMS TO BE FULLY JUSTIFIED.' IN THE INSTANT CASE ALSO, WE ARE OF THE VIEW THAT THE AO HAS ISSUED A NOTICE, THAT TOO INCORRECT ONE, IN A ROUTINE MANNER. FURTHER THE NOTICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. HENCE, IN OUR VIEW, THE AO HAS FAILED TO APPLY HIS MIND AT THE TIME OF ISSUING PENALTY NOTICE TO THE ASSESSEE.' 12. THE AFORESAID DISCUSSION CLEARLY BRINGS OUT AS TO THE REASONS WHY THE PARITY OF REASONING LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA ) IS TO PREVAIL. FOLLOWING THE DECISION OF OUR COORDINATE BENCH IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA ), WE HEREBY REJECT THE AFORESAID ARGUMENT OF THE ID. CIT - DR. P A G E | 17 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) 13. APART FROM THE AFORESAID DISCUSSION, WE MAY ALSO REFER TO THE ONE MORE SEMINAL FEATURE OF THIS CASE WHICH WOULD DEMONSTRATE THE IMPORTANCE OF NON - STRIKING OFF OF IRRELEVANT CLAUSE IN THE NOTICE BY THE ASSESSING OFFICER. AS NOTED EARLIER, IN THE ASS ESSMENT ORDER DATED 10.12.2010 THE ASSESSING OFFICER RECORDS THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE TO BE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT OF EVEN DATE, BOTH THE LIMBS OF SEC. 271(1)(C) OF THE ACT ARE REPRODUCED IN THE PROFORMA NOTICE AND THE IRRELEVANT CLAUSE HAS NOT BEEN STRUCK - OFF. QUITE CLEARLY, THE OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE CLEARLY BRINGS OUT THE DIFFIDENCE ON THE PART OF ASSESSING OFFICER AND THERE IS NO CLEAR AND CRYSTALLISED CHARGE BEING CONVEYED TO THE ASSESSEE U/S 271(1)(C), WHICH HAS TO BE MET BY HIM. AS NOTED BY THE H ON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF (SUPRA), THE QUASI - CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE, AND IN THE PRESENT CASE, CONSIDERING THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALONGSIDE HIS ACTION OF NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE SHOWS THAT THE CHARGE BEING MADE AGAINST THE ASSESSEE QUA SEC. 271(1)(C) OF THE ACT IS NOT FIRM AN D, THEREFORE, THE PROCEEDINGS SUFFER FROM NON - COMPLIANCE WITH PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE ASSESSING OFFICER IS HIMSELF UNSURE AND ASSESSEE IS NOT MADE AWARE AS TO WHICH OF THE TWO LIMBS OF SEC. 271(1)(C) OF THE ACT HE HAS TO RESPOND. 14. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 10.12.2010 IS UNTENABLE AS IT SUFFERS FROM THE VICE OF NON - APPLICATION OF MIND HAVING REGARD TO THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DI LIP N. SHROFF (SUPRA) AS WELL AS THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA ). THUS, ON THIS COUNT ITSELF THE PENALTY IMPOSED U/S 271(1)(C) OF THE ACT IS P A G E | 18 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) LIABLE TO BE DELETED. WE HOLD SO. SINCE THE PENALTY HAS BEEN DELETED ON THE PRELIMINARY POINT, THE OTHER ARGUMENTS RAISED BY THE APPELLANT ARE NOT BEING DEALT WITH. WE ARE OF THE CONSIDERED VIEW THAT AS THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MEHIR JEE CHASSINATH PVT. LTD.(SUPRA) , AND IS ALSO NO MORE RES INTEGRA IN LIGHT OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, WE THER EFORE RESPECTFULLY FOLLOW THE SAME. WE THUS SET ASIDE THE ORDER OF THE CIT(A) CONFIRMING THE PENALTY IMPOSED BY THE A.O U/S. 271(1)(C) IN THE HANDS OF THE ASSESSEE AND QUASH THE PENALTY OF RS. 16,73,217/ - IMPOSED BY THE A.O. WE MAY HEREIN OBSERVE THAT SINC E THE PENALTY HAD BEEN QUASHED ON THE PRELIMINARY POINT, THEREFORE THE OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS BEFORE US HAVING BEEN RENDERED AS ACADEMIC, ARE THUS NOT BEING DEALT WITH. WE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, FINDIN G OURSELVES AS BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE COORDINATE BENCHES OF THE TRIBUNAL, THUS ARE OF THE CONSIDERED VIEW THAT THE A.O HAD WRONGLY ASSUMED JURISDICTION AND IMPOSED PENALTY U/S 271(1)(C) OF RS. 69,60,041/ - , THEREFORE , SET ASIDE THE OR DER OF THE CIT(A) WHO HAD SUSTAINED THE AFORESAID ORDER AND QUASH THE PENALTY IMPOSED BY THE A.O. 11. WE HAVE FURTHER DELIBERATED ON THE FACTS OF THE CASE AT LENGTH AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE VALIDITY OF THE PENALTY IMPOSED BY THE A. O ON MERITS U/S 271(1)(C) IN THE HANDS OF THE ASSESSEE. WE FIND THAT IT REMAINS AS A MATTER OF FACT THAT THE ASSESSEE HAD REMAINED NON COOPERATIVE BEFORE THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT S, BILLS, VOUCHERS ETC, AS A RESULT WHEREOF THE A.O COULD NOT VERIFY THE GENUINENESS AND VERACITY THE BOOK RESULTS OF THE ASSESSEE. WE ARE PERSUADED TO BE IN AGREEMENT WITH THE LOWER AUTHORITIES THAT IN THE ABSENCE OF THE RELEVANT DETAILS BEFORE HIM, THE A .O WAS LEFT WITH NO P A G E | 19 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) OTHER ALTERNATIVE BUT TO PROCEED WITH AND FRAME THE ASSESSMENT TO THE BEST OF HIS JUDGMENT U/S 144 OF THE ACT. WE FIND THAT THE ESTIMATION OF THE G.P RATE BY THE A.O BY WORKING OUT THE AVERAGE OF THE PRECEDING TWO YEARS, VIZ. A.Y. 2006 - 07 (9.16%) AND A.Y. 2005 - 06 (10.40%) , WHICH WORKED OUT TO 9.78% WAS THE REAFTER IN ALL FAIRNESS, IN THE BACKDROP OF THE FACT THAT THE SALES OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2007 - 08 HAD WITNESSED AN INCREASE OF 50.83 CRORE AS IN COMPARISON TO THAT IN THE IMMEDIATELY PRECEDING YEAR, VIZ. A.Y. 2006 - 07 , WHEREIN THE ASSESSEE HAD SHOWN A G.P RATE OF 9.16%, HAD THUS FAIRLY ESTIMATED THE G.P RATE AT 9% FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2007 - 08 WHICH THEREAFTER HAD BEEN UPHELD BY THE TRIBUNAL AND HAD FINALLY ATTAINED FINALITY PURSUANT TO THE ORDER OF THE HONBLE HIGH COURT. 12. WE FIND THAT THE A.O IN THE PROCESS OF ESTIMATING THE INCOME OF THE ASSESSEE AFTER ADOPTING THE AVERAGE G.P RATE OF 9.78% FOR THE LAST TWO PRECEDING YEA RS, THEREIN WORKED OUT THE ADDITION TOWARDS UNDISCLOSED SALES IN THE HANDS OF THE ASSESSEE AT RS. 3,43,51,585/ - . THE AFORESAID ADDITION AFTER NECESSARY DELIBERATION BY THE CIT(A) WAS SCALED DOWN TO RS. 2,06,77,484/ - ON APPEAL BY ADOPTING A G.P RATE AT 9% . WE FIND THAT THE ASSESSEE BY ADOPTING AN EVASIVE APPROACH HAD WITHHELD ITS BOOKS OF ACCOUNTS AND OTHER RELEVANT RECORDS FOR BEING SCRUTINIZED BY THE A.O, AS A RESULT WHEREOF ANY FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE FELL BEYOND THE REALM OF THE VERIFICATIONS ON THE PART OF THE A.O. WE THOUGH ARE CONVERSANT OF THE FACT THAT THE ADDITION IN THE HANDS OF THE ASSESSEE IS MERELY BACKED BY AN ESTIMATION , WHICH UNDER NORMAL CIRCUMSTANCES IN A CASE WHERE SUCH EST IMATION IS RESORTED TO BY THE A.O AFTER DELIBERATING AT LENGTH ON THE RECORDS OF THE ASSESSEE BEFORE HIM, WOULD NORMALLY NOT LEAD TO IMPOSITION OF PENALTY U/S P A G E | 20 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) 271(1)(C) IN THE ABSENCE OF ANY EVIDENCE FROM WHERE IT COULD SAFELY BE CONCLUDED THAT THE ASSESSE E HAD EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. HOWEVER, IN THE PRESENT CASE BEFORE US THE ASSESSEE HAD PURPOSIVELY DESPITE BEING AFFORDED ADEQUATE AND SUFFICIENT OPPORTUNITY WITHHELD HIS RECORDS FROM BEING PRODUCED BEFORE TH E A.O FOR NECESSARY VERIFICATION. THAT THE CONDUCT OF THE ASSESSEE IN NOT PRODUCING THE BOOKS OF ACCOUNTS AND THE OTHER RELEVANT RECORDS FOR VERIFICATION BEFORE THE A.O, CAN SAFELY BE RELATED WITH THE ULTERIOR MOTIVE OF AVOIDING FROM BEING CORNERED WITH A WRONG OR FALSE CLAIM RAISED BY HIM IN ITS RETURN OF INCOME . WE ARE OF THE CONSIDERED VIEW THAT IF IN A CASE THE A.O IS PROMPTED TO TAKE RECOURSE TO ESTIMATION OF THE INCOME OF THE ASSESSEE BECAUSE OF THE DELIBERATE FAILURE ON THE PART OF THE ASSESSEE TO PR ODUCE THE BOOKS OF ACCOUNTS AND THE RELEVANT RECORDS FOR NECESSARY VERIFICATION BEFORE THE A.O, DESPITE BEING IN POSSESSION OF THE SAME , IS ALLOWED TO ESCAPE FROM THE LEVY OF PENALTY U/S 271(1)(C), THEN THE SAME WOULD BECOME A PRECEDENT FOR THE OTHERS TO F OLLOW TO EVADE IMPOSITION OF PENALTY U/S 271(1)(C) BY NOT PRODUCING THE BOOKS OF ACCOUNTS AND THE RELEVANT RECORDS IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, AS A RESULT WHEREOF A FALSE AND A WRONG CLAIM RAISED IN THE RETURN OF INCOME WOULD ONLY SUFFER T HE TAXES, AND AS SUCH WOULD EASILY ESCAPE THE RIGOURS O F THE PENAL CONSEQUENCES WHICH THE LEGISLATURE IN ALL ITS WISDOM HAD PROVIDED TO DISCOURAGE RAISING OF FALSE AND WRONG CLAIMS BY THE ASSESSES IN THEIR RETURN OF INCOME. WE ARE OF THE CONSIDERED VIEW TH AT NOT ONLY THE CONDUCT OF THE ASSESSEE IN NOT COOPERATING DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND WITHHOLDING THE PRODUCTION OF THE RELEVANT BOOKS OF ACCOUNTS AND THE OTHER RELEVANT RECORDS, DESPITE SPECIFIC DIRECTIONS ON THE PART OF THE A.O , RAISE S SERIOUS DOUBTS AS REGARDS THE VERY GENUINENESS AND VERACITY OF THE INCOME RETURNED BY IT, BUT RATHER , THE FACT THAT EVERYTHING WAS NOT RIGHT WITH THE P A G E | 21 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) ACCOUNTS /RECORDS OF THE ASSESSEE IS FORTIFIED FROM THE VERY FACT THAT THE ASSESSEE EVEN IN THE COU RSE OF THE PENALTY PROCEEDINGS U/S 271(1)(C) HAD NOT EVEN MADE AN ATTEMPT TO PROVE THAT ITS GROSS PROFIT RATE OF 7.43% FOR THE YEAR UNDER CONSIDERATION WAS WELL IN ORDER AND THE ADOPTION OF THE SAME AT 9% WAS WRONGLY DONE. WE THUS IN THE BACKDROP OF THE AF ORESAID PECULIAR FACTS INVOLVED IN THE CASE OF THE ASSESSEE BEFORE US, HAD AFTER GIVING A TH OUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE ARE PERSUADED TO BE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) WHO HAD SUSTAINED THE LEVY OF PENALTY U/S 271(1)( C) AFTER DELIBERATING ON THE MERITS OF THE CASE . 13. WE THOUGH ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) AS REGARDS THE IMPOSITION OF PENALTY U/S 271(1)(C) BY THE A.O, ON MERITS, HOWEVER, AS OBSERVE D BY US HEREINABOVE , AS THE VERY ASSUMPTIO N OF JURISDICTION BY THE A.O FOR IMPOSITION OF PENALTY U/S 271(1)(C) HAS BEEN HELD BY US AS BEING BAD IN LAW, THEREFORE, THE PENALTY IMPOSED U/S 271(1)(C) IN THE BACKDROP OF THE JURISDICTIONAL DEFECT STANDS QUASHED . 14 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS . ORDER PRONOU NCED IN THE OPEN COURT ON 20. 12 .2017 SD/ - SD/ - ( P.K. BANSAL ) ( RAVISH SOOD ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; 20 .1 2 .2017 PS. ROHIT KUMAR P A G E | 22 ITA NO. 2260 /MUM/201 3 AY: 20 07 - 08 RAJHANS METALS PVT. LTD. VS. DCIT - 9(3) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI